This is an opinion edit by Jeremy, an Escape to El Salvador adviser, a community of professionals helping foreigners to obtain residency and citizenship in El Salvador.
Over the past few years, there has been a lot of buzz about so-called “crypto-colonizers” who move to developing countries and take advantage of the affordable housing and other facilities provided by underprivileged locals.Washington Post, Business Insider, and even The New York Times, from Puerto Rico tossed in terms like “gentrification,” describing this new class of wealthy globetrotting entrepreneurs as “utopian,” “idealist,” and slim. “Evangelist”.
Now, I am not here to defend any particular individual or how they made their money or what they plan to do with it. I would like to dig into the very specific basis for the species accusation. That is, price increases are driven by demand. On the surface it is partly true. As anyone who has taken an introductory economics course knows, prices are set by the laws of supply and demand. Each of these can be affected by different factors. For the purposes of this article, I would like to focus entirely on real estate.
Real estate has a supply problem. They didn’t make any more land and all of that has already been said. If you want a place to live, aside from some wacky efforts to pull the island out of the sea, you’ll have to buy or rent it from someone. Sellers decide how much to accept based primarily on location, but also on a variety of factors including usage and quality of improvements. This can be further subdivided into views, jurisdiction, applicable tax regimes, soil quality of the land, ease of access, possibly including rare or useful minerals and other natural resources, and finally: It may be a conservation or historical factor to its rating.
The demand side of the equation has many nuances as well. The buyer considers all of the above plus one additional truth to determine the amount he is willing to pay. Going anywhere isn’t a viable strategy unless the ambiance of a freeway flyover or the distinct smell of a dry patch behind a trash can in a downtown alley really speaks to you. There is another factor weighing heavily on both sellers’ minds, driving property prices higher than any other. It is financialization.
As a thought experiment, imagine what a house would cost if its value was entirely dependent on its usefulness as a home. In other words, how much would you be willing to pay to keep the rain from dripping on your head as you sleep, or to have a safe place to feed your family? How much do materials contribute to its price? Size, aesthetics, etc. are also important, but you would agree that the asking price of most homes far exceeds their utility value. The rest of its price has to do with its usefulness as a financial asset. In fact, in most real estate markets today, it may be the main driver of prices. So how did you get here?
The current global economy is designed on the basis of a simple idea. It stimulates investment and growth by slowing the decline in money value caused by inflation. Easy, isn’t it? The problem is that most people are not savvy enough to invest in complex markets, making real estate investments a proxy for long-term wealth storage. Given the fate of all fiat currencies, they are inherently volatile. Eventually all currency issuers give in to the desire to print ever-expanding amounts of money, leading to hyperinflation. Asset prices rise in line with the money supply, and towards the end of the cycle everything becomes too expensive to buy.
If it is not obvious, we are at the end of the cycle. All prices are setting records, and it’s human nature to want to blame the fact that owning a home, once thought to be an achievable goal, is now a distant illusion. If you look around and the only people who seem to be able to afford the house you wanted are nouveau riches, they may seem convenient to blame – if they are terribly awful people. Even more so. But this is the important part. They are not to blame for price increases. Blaming them for being unaffordable in the market is like blaming them for a baby’s pregnancy. Cheating isn’t a disease, it’s a symptom.
If you’re feeling down, you might be wondering, “What should I do?” The answer is simple, but may seem counterintuitive to underprivileged locals. The answer is to adopt Bitcoin as soon as possible. Switch yourself, your family, your neighborhood, and your country to the Bitcoin standard without delay. Only by taking the ability to print money out of the hands of the ruling classes can we put an end to the hyperinflationary death spiral we are currently experiencing. One of the best ways to get started is to reach out to Bitcoin immigrants you may have immediately denounced. is a great way to get Bitcoin into circulation and understand what adoption is like.
There are no shortcuts here and the transition will be bumpy. But unless we switch to a deflationary currency that creates no incentive to monetize assets such as real estate, things will get worse.
This is a guest post by Jeremy. Opinions expressed are entirely his own and do not necessarily reflect those of his BTC Inc. or Bitcoin Magazine.