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Originally Posted by CalledDownLight
If investments in hard assets like real estate, private lending to businesses, and the public markets taper off due to necessary withdrawals to cover expenses due to lower than expected take home income then you will see severe effects in the entire economy. This is just a basic fact of how markets work. If there is less money available for investment then markets necessarily have to go down because there is not enough money to fund those investments at the current prices.
Why is there less money left for investment? Taxes don't burn money, they redistribute it. That money is then either spent, in which case it whirls around the economy and eventually ends up going back through the investment markets, or saved, in which case it ends up back in the investment markets much faster.
It's just a re-allaction from Porsche to Ford. That's not gonna affect private lending to business, it affects WHICH business the lending goes to.
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High end real estate is less liquid than the real estate market as a whole and if people can no longer afford their jumbo mortgages then there could very well be defaults in the area as supply could quickly become saturated.
Cry me a river. How does this negatively affect me again?
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If assets get reallocated to healthcare spending there could absolutely be a bubble in real estate, the stock market, and other financial assets due to a dearth of funds available for investment.
Do you actually understand what a bubble is?
Student loans is a bubble because there is an asset on a sheet that is worth a LOT on that sheet but is worth VERY LITTLE in real life. There is NO corresponding asset on a different sheet that looks VERY LITTLE but is worth a LOT in real life. This is because that money doesn't exist - it's an expectation of future earnings of millions of students that just isn't going to be realized. This wouldn't be a problem if there was a corresponding bet somewhere on student spending, and it turned out that students were actually going to just be spending more but not paying back their debts. Instead, the economy is expecting students to make a lot of money, spend a ton, buy a home, but also pay back their debts. It's not gonna happen.
When the stock market has a bunch of stocks (like Porshe, or YachtCo, or HighEndRealEstate.com) rated highly, and a bunch of other stocks (like Ford, or LowerEndRealEstate.com, or DiabetesMedicationCo) rated poorly, and then those stocks change places, that is not a bubble. It just means some people had a bad day. Same deal with assets. If you give a lot of poor people money, it just means it ends up in the hands of a different business, or different real estate market. You'll see Detroit and Cleveland do better and certain parts of NYC might do worse. Again, cry me a damn river.