The risk is without the correction you end up like many EU countries whos main GDP growth is real estate which only takes you a few generations to fall apart.
Its an abberation. This is a failure of GDP as a measurement tool. Growth in realestate prices makes us poorer
This is like saying that economy has geown because food got more expensive, so people can lo longer save.
its like saying that when I give poor people mt used clothes, I am damaging the economy because they no longer have to buyt clothes, so gdp will go down.
We need a better measuring stick.
If existing home prices go up 4% - that should be discounted from REAL growth.
If land prices go up 4%, that should also be discounted from REAL growth.
> Here's another arresting thought. None of this really matters because GDP is in any case a perfectly useless measurement All that it is, literally, is a crude measure of national income - 'the dollar value of finished goods and services', as the textbooks put it - over a given period.
> Any kind of economic activity adds to the gross domestic product. It doesn't matter whether its a good activity or a had one It has been estimated, for instance that the O.J. Simpson trial added $200 million to America's GDP through lawyers' fees, court costs, hotel bills for the press and so on, but I don't think many people would argue that the whole costly spectacle made America a noticeably greater, nobler place.
> In fact, bad activities often generate more GDP than good activities. I was recently in Pennsylvania at the site of a zinc factory whose airborne wastes were formerly so laden with pollutants that they denuded an entire mountainside. From the factory fence to the top of the mountain there was not a single scrap of growing vegetation to be seen. From a GDP perspective however, this was wonderful. First there was the gain to the economy from all the zinc the factory had refined and sold over the years. Then there was the gain from the tens of millions of dollars the government must spend to clean up the site and restore the mountain. Finally, there will be a continuing gain from medical treatments for workers and townspeople made chronically ill by living amid all those contaminants.
> In terms of conventional economic measurement, all of this is gain, not loss. So too is overfishing of lakes and seas. So too is deforestation. In short, the more tirelessly we use up natural resources, the more the GDP grows.
> As the economist Herman Daly once put it, 'the current national accounting system treats the earth as a business in liquidation.' Or as three other leading economists dryly observed in an article in the Atlantic Monthly last year 'By the curious standard of the GDP, the nation's economic hero is a terminal cancer patient who is going through a costly divorce.'
> So why do we persist with this preposterous gauge of economic performance? Because it's the best thing that economists have come up with yet. Now you know why they call it the dismal science
Pure economics does not incentivize stability.
I disagree.
Periodic recessions and repricings would be good for the economy - just as periodic small fires are healthy for forests.
But we snuffed out all of the recessions in the same way we snuffed out all of the small fires - and now we have accumulated so much "fuel load" that the inevitable fire will be an uncontrollable catastrophe.
(I love this analogy, by the way)
So it will occur but it won't be good or healthy. A large number of otherwise healthy business firms and otherwise reasonably employed people will all get burned while they would have survived a series of smaller recessions.
What is an example country whose main GDP growth stems from real estate? The EU economy as a whole is driven mostly by the services sector, which accounted for 70% of value added in 2020. https://www.visualcapitalist.com/16-trillion-european-union-...