This confuses”nominal” or “projected” price with an actual price, which is only known at time of sale. And you seem to believe that paper wealth (which may or may not EVER be converted into goods and services) is the same as purchasing power.
This seems like a mere technicality. Since Mr. McDuck can use the projected price as collateral for a loan, it gives him purchasing power without the need to actually sell anything. And for people who don’t own an apartment, increases in nominal price have a major economic impact: they pay more rent.
The median American worker can buy a pocket computer for less than a week’s labor which is literally thousands of times more powerful than they’d have gotten 30 years ago for over a month’s work.
It’s standard practice in economic analysis to exclude the electronics sector, because it’s so unrepresentative of the economy as a whole. If you have an example that isn’t electronics or something closely linked to electronics, it’s worth bringing into the conversation.
If you use a house as a collateral, there is a probability you will lose your house, if I am not confused about collaterals. As such, someone accepting your house as a collateral is almost the same as them playing a lottery where with some percent chance they are forced to buy your house. So I think we should consider that transaction to be in the same category as selling the house.
It’s worth noting that projected prices play a significant role in decision-making, since decision-making is all about evaluating counterfactuals. Suppose Scrooge ties his purchasing decisions to his paper net worth; then his effective purchasing power changes even though he isn’t getting an income stream directly from the apartment. (Cases where he takes out a loan on the apartment, as jimrandomh suggests, do seem somewhat different.) That is, if his home is increasing in value, that means he doesn’t need to convert other income streams into savings as much, and so can convert them into consumption instead. Or he might make riskier financial decisions with other asset classes, trusting that the more valuable house could better offset losses elsewhere.
You could take a loan with your house as collateral if you are more certain than your loan-giver that you will not default. If a bank tries to give people loans based on the probability they determine that you default, some of the population will happen to know their probability of defaulting to be underestimated, and take a loan at a profit. The bank would rather have their “fraudulent customers” be the ones that pay back loans more often than expected.
No, the whole point of using a house as collateral is that the bank only loses money if you default and the asset depreciates by more than the (loan size/house value) ratio.
This seems like a mere technicality. Since Mr. McDuck can use the projected price as collateral for a loan, it gives him purchasing power without the need to actually sell anything. And for people who don’t own an apartment, increases in nominal price have a major economic impact: they pay more rent.
It’s standard practice in economic analysis to exclude the electronics sector, because it’s so unrepresentative of the economy as a whole. If you have an example that isn’t electronics or something closely linked to electronics, it’s worth bringing into the conversation.
If you use a house as a collateral, there is a probability you will lose your house, if I am not confused about collaterals. As such, someone accepting your house as a collateral is almost the same as them playing a lottery where with some percent chance they are forced to buy your house. So I think we should consider that transaction to be in the same category as selling the house.
It’s worth noting that projected prices play a significant role in decision-making, since decision-making is all about evaluating counterfactuals. Suppose Scrooge ties his purchasing decisions to his paper net worth; then his effective purchasing power changes even though he isn’t getting an income stream directly from the apartment. (Cases where he takes out a loan on the apartment, as jimrandomh suggests, do seem somewhat different.) That is, if his home is increasing in value, that means he doesn’t need to convert other income streams into savings as much, and so can convert them into consumption instead. Or he might make riskier financial decisions with other asset classes, trusting that the more valuable house could better offset losses elsewhere.
Edit: Epistomological status: armchair reasoning
You could take a loan with your house as collateral if you are more certain than your loan-giver that you will not default. If a bank tries to give people loans based on the probability they determine that you default, some of the population will happen to know their probability of defaulting to be underestimated, and take a loan at a profit. The bank would rather have their “fraudulent customers” be the ones that pay back loans more often than expected.
No, the whole point of using a house as collateral is that the bank only loses money if you default and the asset depreciates by more than the (loan size/house value) ratio.