’m No Professor, But I Think This Might Be a Bad Idea…

This week I’m talking about a topic that isn’t necessarily real estate related, but it definitely has a tie-in: inflation. Here in California, we are hearing a lot about our state government working on a $400 giveaway for everybody because gas prices are high.

How Inflation Affects Real Estate

So, how does this tie into real estate? One of the things that is having a big impact right now is inflation. Since inflation is high, it’s driving interest rates up – which is obviously impacting affordability for many clients.

Considering the circumstances, it’s interesting to see how the California government wants to handle the situation of high gas prices. Instead of shelving some taxes and bringing the price of gas down (which has a deflationary effect), they are proposing a handout of $400 (which will have an inflationary effect).

I don’t know all the details behind this situation. But it seems obvious that this isn’t a good idea. My opinion is that we need to focus on bringing gas prices down. It’s easy, we can just holiday some of the taxes in California – we have the most expensive gas in the nation and there are plenty of gas taxes that could be adjusted. There are probably plenty of other possibilities to consider as well.

ECON 101: Free Money and Inflation

$400 isn’t that much. But if you do the math based on the number of people in California, it all adds up. When money is pumped into the economy, then it causes inflation.

That is part of our current inflation problem right now: the Fed’s have pumped so much money into the economy – it’s ECON 101.

I’m not trying to make this political. But regardless of your political persuasion, consider saying no to the extra $400 proposal if you get the opportunity. We need to look at alternatives instead, with the goal of bringing the price of gas down. It should net the same thing for the state government, and we can minimize the effects of inflation.

If you have a different perspective on this topic, please share. Also, I’m always here to help you find the best mortgage solutions in an ever-changing economic environment. Reach out any time.