Items that cannot be imported show the true monetary inflation
A reader asked the following question:
Why does the costs of rent continue to rise more than inflation?
Here is my answer:
There are a number of items that cannot be imported or exported freely. There are certain factors of life and production that cannot move freely across borders from high-cost to low-cost countries. Obviously, the price of rent cannot be arbitraged. Moreover, the price of rent cannot be arbitraged between less expensive areas of a nation and more expensive areas. Imagine if we could pay the rent of Columbus, OH, while living in New York City.
We can take this further. While technology is assisting in keeping the costs of healthcare down (some healthcare jobs have been off-shored to low-cost nations and some operations and dental work can be performed in Mexico), for the most part the costs of healthcare are generally isolated to each country.
House prices reflect this sad reality and so do the costs of higher education.
Thus, the government tends to subsidize these sectors heavily in an attempt to hide their transgressions of hyper monetary printing. It is the government and the central banks that are directly to blame and it does not matter who is in office. As the printing spirals further, the government seeks to control more and more aspects of our lives. This will continue until the government controls just about every factor of life.
To make matters worse, whenever the government subsidizes a sector such as healthcare, it distorts the supply/demand equation. This only helps to restrict supply, stimulate demand, and drive up costs further. Just look at the chart. Even if a nation has universal healthcare, the costs bleed out somewhere else. They almost always result in higher taxes and real estate prices.
Contemplate what the heavily subsidized mortgage market in the U.S. has done to house prices. This is the government’s attempt to help keep the true costs of real estate down. There are nothing but market distortions. Before long, we become addicted to these mortgages and their low interest rates.
Indeed, the government is our worst enemy, but we allow it to happen. We freely embrace these government “benefits,” which only helps in accelerating the process. Before long, we become hopelessly dependent on the government for a sundry list of services. It seems like one huge case of the Stockholm Syndrome.
Those who still cling to the traditional mindset of pursuing a college degree and finding a well-paying job will fall further behind. This is not the “American dream,” this is the American myth.