Decline in Real Estate

[Rob L]

"Speculators" fill a vital economic function in a market economy. They provide liquidity. That is to say, when everyone else wants to sell, speculators will be there to buy. When everybody else wants to buy, they will be there to sell. Why do they do this? Because when everyone wants to sell prices will go down and when everyone wants to buy, prices will be high. If it were not for speculators, price swings would be much more exaggerated. It is true that sometimes speculators over shoot the medium to long term market price and drive prices up. When they do this they have paid too much and they will lose money. So, this kind of speculator (stupid ones) are driven out of business. We can complain about high prices, but the economic reality is that more people want to live in Puna, and that, not the speculators is driving up prices in the medium and long term. (PS I am not a speculator; I'm bought for myself and intend to hold on. But, Econ 101 should not be ignored completely in these postings.)
Aloha,
Rob L (in post communist Mongolia)
PPS John, did you ever drive a dial car for me when I worked at Skadden Arps in New York?

Edited by - Rob L on 08/17/2006 15:07:15