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Speaker 1: Hello everyone, and welcome to the latest episode from the

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Speaker 1: midweek edition of the coin Bureau podcast. Every week, I

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Speaker 1: pick out two of my favorite videos from coin Bureau's

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Speaker 1: YouTube channel to present to you in podcast form. The

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Speaker 1: audio you're about to hear is from those videos I've

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Speaker 1: chosen this week. Many of you have been in touch

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Speaker 1: to ask whether it's possible to listen to our videos

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Speaker 1: in podcast form, and so your wish is my command.

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Speaker 1: This week, I've selected our videos on what makes the

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Speaker 1: perfect cryptocurrency and why we might be about to witness

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Speaker 1: a housing market crash. Now, despite what the fan boys

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Speaker 1: of many a crypto project will tell you, the perfect

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Speaker 1: cryptocurrency doesn't yet exist, however hard the developers try it.

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Speaker 1: There's always a weakness to be found in the architecture

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Speaker 1: of any cryptocurrency, be it too great a degree of centralization,

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Speaker 1: an inequitable distribution of tokens, or one of many other

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Speaker 1: possible failings. And lurking constantly in the background is the

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Speaker 1: specter of the blockchain tri lemma, the idea that no

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Speaker 1: crypto has appeared yet that is decentralized, secure, and scalable.

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Speaker 1: One aspect, at least always has to be sacrificed. So

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Speaker 1: in this video we set out to explore what the

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Speaker 1: perfect cryptocurrency might look like and what obstacles it would

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Speaker 1: have to overcome. It doesn't exist yet, but perhaps perhaps

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Speaker 1: it will one day. Then onto concerns of a more

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Speaker 1: tangible nature. As the world's economy lurches into recession, house

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Speaker 1: prices in many developed countries have held up reasonably well

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Speaker 1: and in many cases exploded. While the pandemic lockdowns were

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Speaker 1: catastrophic for many sectors of the economy, housing just seemed

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Speaker 1: to keep on booming as millions of people sought to

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Speaker 1: relocate in search of a better life. As unprecedented as

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Speaker 1: all this was, however, the housing market in many countries

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Speaker 1: has been running hot for a long time. Now, as

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Speaker 1: interest rates rise and fears for the health of the

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Speaker 1: global economy grow, the boom could be about to shift

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Speaker 1: to bust. Housing markets are facing some headwinds that could

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Speaker 1: blow them off course. So could all those people struggling

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Speaker 1: to get on the property ladder finally be about to

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Speaker 1: get their chance, or will a housing market crash be

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Speaker 1: a disaster for us all. This video seeks to find

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Speaker 1: some answers to those questions, and many more so I

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Speaker 1: hope you enjoy listening to these videos, which were as

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Speaker 1: always a pleasure to make. I'll be back talking crypto

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Speaker 1: with Mike very soon, so be sure to stay tuned,

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Speaker 1: and if you want even more content from coin Bureau,

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Speaker 1: be sure to subscribe to our YouTube channel and visit

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Speaker 1: us on social media too. The purpose of cryptocurrency is

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Speaker 1: to replace the sisting financial system. This means replacing the money,

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Speaker 1: which Bitcoin is doing, and replacing the payment rails which

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Speaker 1: Ethereum and others are doing. However, this also means replacing

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Speaker 1: the currency that's used for day to day transactions, and

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Speaker 1: the quest for the crypto that's actually a currency continues

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Speaker 1: with many contenders, including feat stable coins. That's why today

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Speaker 1: I'm going to tell you what characteristics the crypto that

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Speaker 1: is used as a currency should have, so that you'll

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Speaker 1: know what a perfect cryptocurrency looks like when it eventually

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Speaker 1: comes around. I suppose I should start by clarifying what

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Speaker 1: I meant in the introduction, As some of you will know,

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Speaker 1: money and currency are not the same thing. For the

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Speaker 1: sake of simplicity, you can think of money as being

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Speaker 1: something that's held onto as a store of value, whereas

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Speaker 1: a currency is used for standard financial transactions. Once upon

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Speaker 1: a time, theat currencies, which are of course used for

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Speaker 1: everyday transactions, were backed by gold, which is of course

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Speaker 1: not used for day to day transactions. Today, fiat currencies

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Speaker 1: are backed by nothing, and it's part of the reason

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Speaker 1: why there's been so much inflation and part of the

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Speaker 1: reason why crypto was created in the first place. Now,

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Speaker 1: as I mentioned in the introduction, Bitcoin's BTC is slowly

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Speaker 1: but surely taking the role of money i the store

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Speaker 1: of value in the rapidly expanding crypto economy. Note that

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Speaker 1: this is up for debate, as some would argue that

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Speaker 1: BTC can also be used as a currency thanks to

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Speaker 1: the Lightning Network. More on that later. For the purposes

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Speaker 1: of this video, BTC is assumed to be money and

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Speaker 1: nothing more, meaning that the role of an actual currency

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Speaker 1: has yet to be filled in the crypto industry. As

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Speaker 1: I also mentioned in the introduction, this is a role

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Speaker 1: that stable coins and even payment cryptocurrencies like light Coins

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Speaker 1: LTC are trying to fill. The problem with stable coins

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Speaker 1: is that most of them are centralized. This not only

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Speaker 1: goes against the ethos of cryptocurrency, but it leaves such

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Speaker 1: stable coins vulnerable to all sorts of issues, especially since

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Speaker 1: many of them are backed by various forms of government

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Speaker 1: and corporate debt. There are also decentralized stable coins, but

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Speaker 1: as we've seen, they have all sorts of issues of

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Speaker 1: their own, namely limits on growth due to the volatile

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Speaker 1: collateral that's used to mint them. Now, even payment cryptocurrencies

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Speaker 1: like LTC have limitations that prevent them from being adopted

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Speaker 1: as actual payment methods, namely scalability. I eat speed. On

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Speaker 1: that note, you can learn about the fastest cryptocurrencies using

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Speaker 1: the link in the description. Now, as you'll soon see,

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Speaker 1: there are many cryptocurrencies that have some characteristics of a

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Speaker 1: perfect payments coin or token, and I reckon it's only

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Speaker 1: a matter of time before someone somewhere puts the characteristics

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Speaker 1: together and creates a new crypto project that will be

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Speaker 1: an actual crypto currency. You can consider this video as

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Speaker 1: being my small contribution to this new crypto project, which,

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Speaker 1: to be clear, does not exist. It's an idealistic look

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Speaker 1: at what the perfect cryptocurrency would look like if someone

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Speaker 1: were to develop it. So, the first characteristic of a

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Speaker 1: perfect cryptocurrency is an equitable initial distribution of the coin

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Speaker 1: or token, and there's really no shortage of roots you

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Speaker 1: could take. In this regard that said, it would be

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Speaker 1: wise to avoid conducting an i c oh if possible.

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Speaker 1: This is because crypto projects that have conducted i c

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Speaker 1: o s are at risk of regulatory scrutiny and the

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Speaker 1: initial distribution of the coin or token will likely be

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Speaker 1: skewed towards early investors and the team, which is neither

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Speaker 1: equitable nor desirable for a crypto that's supposed to be

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Speaker 1: used for payments by everyone. This leaves to other options

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Speaker 1: for an initial token distribution, and that's a fair launch

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Speaker 1: or an air drop. Now, as many of you will know,

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Speaker 1: a fair launch is how Bitcoin, light, cooin, dogecoin, Minero,

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Speaker 1: and a handful of other cryptocurrencies got off the ground. Basically,

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Speaker 1: someone posted on a forum saying they were going to

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Speaker 1: create this cryptocurrency on this date and time and invited

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Speaker 1: everyone to come and mind it from zero. Now, fair

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Speaker 1: launched cryptos are extremely rare these days, and as far

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Speaker 1: as I can tell, that's simply because they're incredibly difficult

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Speaker 1: to do in this day and age. There are just

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Speaker 1: too many bad actors eager to make a quick buck,

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Speaker 1: and it's hard to bootstrap an ecosystem with no initial

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Speaker 1: funding or team allocation. One solution to this issue would

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Speaker 1: be to do a variation of what are we've did,

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Speaker 1: which is to take a portion of all block rewards

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Speaker 1: and or transaction fees and have them accumulate in a

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Speaker 1: special wallet which the community can decide how to spend.

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Speaker 1: This ties into crypto governance, which I'll come back to

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Speaker 1: later on. Now, another way to distribute a coin or

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Speaker 1: token in an equitable manner is to conduct an air

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Speaker 1: drop to active while it's on specific blockchains. This is

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Speaker 1: exactly what life peer did with its LPT token, and

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Speaker 1: it's something that's frequently done by crypto projects in the

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Speaker 1: Cosmos ecosystem. Ideally, these air drops would be paired with

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Speaker 1: some sort of decentralized identity mechanism so that a single

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Speaker 1: entity controlling multiple while it's doesn't end up with an

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Speaker 1: abnormally large share of the initial supply, as was the

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Speaker 1: case with Juno. If you're wondering where you can find

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Speaker 1: crypto airdrops, I'll leave a link to my video about

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Speaker 1: that in the description. Anyways, conducting an air drop is

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Speaker 1: probably the way to go if the cryptocurrency will use

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Speaker 1: proof of steak, as its consensus mechanism, and this brings

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Speaker 1: me to the second characteristic of the perfect cryptocurrency. So

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Speaker 1: the second characteristic of the perfect cryptocurrency is it has

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Speaker 1: a robust consensus mechanism. Now, there's a lot of debate

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Speaker 1: out there as to what is the best consensus mechanism,

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Speaker 1: and they all inevitably have pros and cons from scaling

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Speaker 1: to security to decentralization. Indeed, my portfolio has a wide

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Speaker 1: variety of all coins with varying consensus mechanisms, precisely because

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Speaker 1: no cryptocurrency right now has the perfect consensus mechanism. However,

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Speaker 1: if you were to ask me what mechanism the ideal

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Speaker 1: crypto would have, it would be some form of proof

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Speaker 1: of work, a completely novel version of it. Now, this

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Speaker 1: is because a proof of steake system could be easier

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Speaker 1: to corrupt, as all you need is lots of capital

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Speaker 1: to acquire enough steak to change the rules of the game.

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Speaker 1: This is something big investors could do quite easily, and

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Speaker 1: something governments can do with even greater ease since they're

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Speaker 1: the ones with the money printers. However, this doesn't mean

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Speaker 1: that the perfect cryptocurrency should use the same proof of

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Speaker 1: work consensus mechanism as Bitcoin or light cooin, and I

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Speaker 1: would go as far as to say that it shouldn't

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Speaker 1: because it would eventually make mining inaccessible to the average person,

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Speaker 1: as is the case with BTC, LTC and others. One

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Speaker 1: solution could be to use an asic resistant proof of

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Speaker 1: work consensus mechanism like Manero, meaning that you could mind

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Speaker 1: this perfect cryptocurrency using a regular computer. Even then, though

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Speaker 1: you'd probably need to buy a pretty expensive rig to

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Speaker 1: make mining worth it. And don't get me started on

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Speaker 1: the electricity bills. Trust me. I know. This is why

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Speaker 1: I emphasized the word novel a few moments ago. If

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Speaker 1: you think about it, the whole point of a crypto

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Speaker 1: consensus mechanism is to process crypto transactions accurately, i e. Securely.

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Speaker 1: The reason why proof of work is so secure is

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Speaker 1: ultimately because it's hard for a single entity or group

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Speaker 1: of entities to manipulate crypto transactions, as we've seen with

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Speaker 1: cryptos like Ethereum class Sick. However, this can still happen

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Speaker 1: if someone is able to acquire the computer power required

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Speaker 1: to do so. As such, the ideal proof of work

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Speaker 1: consensus mechanism should involve a type of work that's difficult,

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Speaker 1: if not impossible, to corrupt with sufficient capital, and a

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Speaker 1: type of work that the average person could easily do

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Speaker 1: with technology that's widely available. Ideally, whatever hardware is required

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Speaker 1: to participate in consensus would be possible to build from scratch,

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Speaker 1: and the instructions would be open source for anyone to see,

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Speaker 1: as is the case with Helium's hotspots. Now, this might

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Speaker 1: sound crazy, but it's possible that physical movement could play

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Speaker 1: a role in this proof of work consensus mechanism, especially

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Speaker 1: since smart watches are commonplace. Microsoft is actually working on

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Speaker 1: a similar kind of proof of work mechanism, albeit for

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Speaker 1: advertising purposes. Now, if you want more ideas for what

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Speaker 1: a novel proof of work consensus mechanism could look like,

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Speaker 1: you can check out our video about crypto consensus using

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Speaker 1: the link in the description. Now, the third characteristic of

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Speaker 1: the perfect cryptocurrency is the token omics that are aligned

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Speaker 1: with the coin or token's role as a payment's currency.

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Speaker 1: This is where things get quite complicated, but also very interesting,

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Speaker 1: so listen closely. The reason why many believe that BTC

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Speaker 1: can't play the role of a currency is because of

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Speaker 1: its token omics. BTC has a maximum supply of twenty

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Speaker 1: one million. This supply increases at a slower and slower

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Speaker 1: pace as per bitcoin's harving cycles, which is why it

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Speaker 1: might take around another one hundred years to mind the

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Speaker 1: last three million or so BTC. As basic economics dictates,

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Speaker 1: if the demand for an asset stays the same or

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Speaker 1: increases while the new supply of said asset continues to decline,

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Speaker 1: its price will rise. This is essentially the economics of

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Speaker 1: BTC and many other cryptocurrencies, hence why their prices have

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Speaker 1: all exploded over the last decade. There's only one problem, though,

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Speaker 1: and that's that this dynamic means the average person will

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Speaker 1: eventually not want to spend their BTC, and some would

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Speaker 1: say this is already the case today, after all, why

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Speaker 1: would you spend something today that's going to be worth

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Speaker 1: more in the future. This unwillingness to spend would eventually

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Speaker 1: lead to what's called a deflationary death spiral, where debt

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Speaker 1: becomes more expensive, risk taking stops, and innovation slows to

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Speaker 1: a crawl. Obviously, that's not ideal, and it's a situation

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Speaker 1: that many debt burdened individuals and institutions want to avoid

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Speaker 1: at all costs. To be honest, I'm not entirely convinced

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Speaker 1: that this deflationary death spiral would actually occur, given the

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Speaker 1: vested interests of the entities of fighting against it, but

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Speaker 1: the reasoning is admittedly sound, and it consequently could disqualify

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Speaker 1: cryptocurrencies like bitcoin from ever being actual currencies. So what

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Speaker 1: would the tokenomics of the perfect cryptocurrency look like. Well,

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Speaker 1: we know that a fixed or inelastic supply is no

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Speaker 1: good because it leads to deflation, and we also know

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Speaker 1: that an infamite or extremely elastic supply is no good

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Speaker 1: because it leads to inflation. This leaves only one option,

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Speaker 1: and that's token omics, which automatically adjust a coin or

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Speaker 1: token supply based on demand to ensure its price remains

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Speaker 1: relatively stable while simultaneously preserving the purchasing power of all

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Speaker 1: its holders. This is exactly how Ample fourths tokenomics were designed.

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Speaker 1: But the problem there is that AMPLE supply adjustment is

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Speaker 1: an instant which leads to lots of volatility. Ample is

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Speaker 1: also pegged to the US dollar, which is again not ideal,

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Speaker 1: even though it's pegged specifically to the twenty nineteen U

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Speaker 1: S Dollar. Ideally, the perfect cryptocurrency would instantly adjust its

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Speaker 1: supply based on demand, and target a peg to a

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Speaker 1: relatively stable asset that everyone recognizes, and that's not a

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Speaker 1: theat currency. This could be gold, and it could eventually

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Speaker 1: be BTC. Heck, there might even be a way for

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Speaker 1: this perfect cryptocurrency to be backed by and redeemable four btc.

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Speaker 1: But this opens a whole can of worms about minting,

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Speaker 1: burning liquidations, and runs on the bank. I reckon there's

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Speaker 1: a way you could avoid many of these worms by

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Speaker 1: allowing self minting, involving locking BTC in a special multi

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Speaker 1: sick wallet. But it's safe to say that this kind

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Speaker 1: of crypto architecture is above my pay grade. It's also

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Speaker 1: hard to conceptualize how an elastic currency could be backed

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Speaker 1: by an inelastic money. In any case, if you're curious

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Speaker 1: about what happens to Bitcoin when the last BTC is mind,

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Speaker 1: you can find out using the link in lost descript

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Speaker 1: the onith. Anyhow, the fifth characteristic of the perfect cryptocurrency

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Speaker 1: is the ability to directly or indirectly solve the block

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Speaker 1: chain trial lemma. If you watched our aforementioned video about

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Speaker 1: the fastest cryptocurrencies, you'll know that the blockchain trilemma was

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Speaker 1: defined by Ethereum Creator Vitality by Terran, and it states

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Speaker 1: that a cryptocurrency cannot be decentralized, scalable, and secure. It

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Speaker 1: can only do two of these three things effectively. Although

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Speaker 1: there are many cryptocurrencies which have claimed to solve the

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Speaker 1: blockchain trilemma, I have yet to find one that isn't

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Speaker 1: centralized under the bonnet. Not only that, but the faster

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Speaker 1: a cryptocurrency is, the faster its transaction history will grow.

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Speaker 1: This rapid growth in transaction history means a smaller and

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Speaker 1: smaller number of nodes will be able to store the

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Speaker 1: full blockchain history, which will lead to centralization down the line.

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Speaker 1: That said, the rapid growth of transaction history may not

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Speaker 1: be an immediate issue if our hypothetical perfect cryptocurrency only

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Speaker 1: supports simple transactions and has limited smart contract functionality. Even then,

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Speaker 1: though it's only a matter of time before this does

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Speaker 1: become an issue. Now, given these facts, it's unlikely that

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Speaker 1: any cryptocurrency will be able to directly solve the blockchain

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Speaker 1: trial lemma anytime soon, if ever, and this means that

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Speaker 1: the only option is to solve the blockchain trial lemma indirectly. Ideally,

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Speaker 1: the perfect cryptocurrency would leverage multiple decentralized storage solutions for

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Speaker 1: its long term blockchain history to ensure that this history

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Speaker 1: can always be retrieved. This could potentially be done in

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Speaker 1: house by using a portion of block rewards or transaction

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Speaker 1: fees to compensate storage nodes. Now, as for scalability, ideally

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Speaker 1: the perfect cryptocurrency would focus on decentralization and security at

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Speaker 1: the base layer like Bitcoin does, and rely on novel

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Speaker 1: layer to scaling solutions like the Lightning Network for speed,

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Speaker 1: like bit coin also does. According to block streams most

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Speaker 1: recent estimates, the Lightning Network can currently process around forty

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Speaker 1: million transactions per second with the current number of nodes

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Speaker 1: on its network, and this scalability will only increase as

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Speaker 1: the number of nodes increases. If you watched our video

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Speaker 1: about the Lightning Network, you'll know that the only real

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Speaker 1: issue is that it requires nodes to lock up large

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Speaker 1: amounts of BTC in multi sig wallets to ensure they

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Speaker 1: stay honest, and that the absence of sufficient BTC collateral

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Speaker 1: at certain junctions means large transactions don't go through. Moreover,

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Speaker 1: having a handful of Lightning Network nodes process most transactions

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Speaker 1: is really not all that different from the current financial

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Speaker 1: system and could also create a single point of failure,

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Speaker 1: i e. Result in centralization. This is an issue that

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Speaker 1: the perfect cryptocurrency would ideally solve with some other incentive

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Speaker 1: mechanism like on chain reputation or the ability to use

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Speaker 1: other cyptocurrencies and possibly even real world assets as node

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Speaker 1: collateral on this hypothetically perfect lightning network. Plato would be proud.

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Speaker 1: Philosophy jokes aside. The sixth characteristic of a perfect cryptocurrency

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Speaker 1: is twofold, and that's privacy and interoperability. If you watched

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Speaker 1: our video about the worst case for cryptocurrency, you'll know

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Speaker 1: that privacy is a prerequisite for financial freedom. This is

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Speaker 1: because if transactions are completely transparent, the people sending and

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Speaker 1: receiving those transactions can still be coerced and punished, even

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Speaker 1: though the transactions these oppressed people are sending are technically unstoppable.

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Speaker 1: This isn't some conspiracy theory either. Blockchain analytics companies like

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Speaker 1: chain Analysis are tracking just about every crypto transaction, and

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Speaker 1: they are actively sharing this data with governments around the world.

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Speaker 1: This opens the door to some seriously dystopian stuff if

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Speaker 1: privacy is not somehow preserved at the same time, there

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Speaker 1: are legitimate concerns that criminals could take advantage of this

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Speaker 1: privacy to engage in an unprecedented amount of illicit activity,

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Speaker 1: which begs the question of where to draw the line

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Speaker 1: on privacy. To my mind, the perfect cryptocurrency would ideally

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Speaker 1: keep all transactions private by default, but provide a tool

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Speaker 1: that allows you to reveal your transaction history to authorities

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Speaker 1: for compliance purposes. Alternatively, it could make it possible to

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Speaker 1: attach a payment I D to transactions like on Haven protocol.

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Speaker 1: In terms of interoperability, the perfect cryptocurrency would need to

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Speaker 1: be seamlessly interoperable with most major cryptocurrencies, and ideally be

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Speaker 1: interoperable with other payment systems as well. Crypto interoperability could

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Speaker 1: be achieved by integrating with the Cosmos IBC, but seamless

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Speaker 1: transactions with the Cosmos IBC are only possible for proof

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Speaker 1: of stake cryptocurrencies. Alternatively, the perfect cryptocurrency could simply integrate

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Speaker 1: with the next generation decentralized exchange like thought chain that

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Speaker 1: allows for native coin and token swaps between and within

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Speaker 1: different cryptocurrency blockchains. More about thought Chain in the description. Now.

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Speaker 1: As for interoperability with other payment systems, I can't say

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Speaker 1: I know of any existing solutions, but the closest would

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Speaker 1: probably be the Flexi network with its AMP token. External

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Speaker 1: interoperability would probably be very difficult to achieve in a

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Speaker 1: decentralized way due to regulations, and funnily enough, the AMP

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Speaker 1: token is facing regulatory scrutiny from the SEC, and you

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Speaker 1: can learn more about that using the link down there.

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Speaker 1: Any who, the final characteristic of a perfect cryptocurrency would

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Speaker 1: be either an effective governance structure or the absence of

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Speaker 1: any governance structure. Now, I'll explain why the absence of

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Speaker 1: a government structure it is ideal in just a second. First,

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Speaker 1: I need to explain why crypto governance is currently ineffective

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Speaker 1: for starters. Most crypto governance follows a one token equals

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Speaker 1: one vote model, which really isn't all that different from

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Speaker 1: proof of stake. This means that a handful of token

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Speaker 1: holders have the power to pass whatever proposals they want,

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Speaker 1: and this issue was recently confirmed as endemic by chain analysis. Moreover,

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Speaker 1: most crypto government structures are on chain versions of democratic processes,

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Speaker 1: which we know to be inherently centralizing. Look no further

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Speaker 1: than the capital city of your country. If you need evidence,

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Speaker 1: all the important decisions are made in Washington, d C,

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Speaker 1: in London, in Ottawa, etcetera. We're starting to see the

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Speaker 1: same sort of centralization emerge in supposedly decentralized autonomous organizations,

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Speaker 1: with important decision making powers being delegated to small groups

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Speaker 1: of community elected representatives or council members, which are a

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Speaker 1: n put in place via token vote. Personnel from crypto

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Speaker 1: vcs are often the ones who occupy these positions of power,

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Speaker 1: and I've seen them argue that this centralization is necessary

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Speaker 1: because in crypto there are many cases where decisions need

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Speaker 1: to be made quickly, say in the case of a hack,

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Speaker 1: which makes sense, and I completely agree. This is why

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Speaker 1: the perfect cryptocurrency should ideally have a government structure that's

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Speaker 1: akin to an on chain monarchy. This is because it's

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Speaker 1: almost exactly how all cryptocurrency consensus mechanisms work today, regardless

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Speaker 1: of whether their proof of work, proof of steak, or

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Speaker 1: something else. By some process usually pseudo random based on

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Speaker 1: steak or hash power, a single node is selected to

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Speaker 1: produce a block and earn a block reward. This node

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Speaker 1: is often referred to as a leader in crypto project documentation,

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Speaker 1: and this leader is typically in power for a single

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Speaker 1: block while it's being produced, so why not modify this

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Speaker 1: mechanism to be suitable for governance. A leader is pseudo

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Speaker 1: randomly or even randomly selected from the community to govern

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Speaker 1: the crypto project for a short period of time, during

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Speaker 1: which they can table proposals for community vote and decide

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Speaker 1: how money is being spent from the treasury. For extra security,

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Speaker 1: a cancel consisting of developers and vcs could have the

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Speaker 1: power to veto any malicious proposals coming from the crypto

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Speaker 1: projects intoim ruler. It stands insane on paper, but I

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Speaker 1: really think this could work in practice, and the proof

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Speaker 1: is again in the crypto consensus mechanisms themselves. The best

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Speaker 1: part is that it would create a massive incentive for

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Speaker 1: the users of this perfect cryptocurrency to participate in governance

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Speaker 1: because doing so would give them a chance of becoming

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Speaker 1: the king or queen of a global payment system for

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Speaker 1: a short period of time, and heck, maybe they could

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Speaker 1: even be compensated. Now. As amazing as this may sound,

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Speaker 1: the sad reality is we're a long way away from

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Speaker 1: these kinds of novel government structures, and this is why

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Speaker 1: the ideal government structure for the perfect cryptocurrency might have

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Speaker 1: to be no government structure at all, as we've also

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Speaker 1: seen with the government structures of the world's governments. It's

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Speaker 1: easy to influence politicians if you have enough capital, and

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Speaker 1: the inability to do so for cryptocurrencies like bitcoin due

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Speaker 1: to the absence of a government structure is apparently driving

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Speaker 1: some institutional investors mad. You can find out more about

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Speaker 1: that by watching our video about e s G using

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Speaker 1: the link in the description. Asset markets around the world

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Speaker 1: have been crashing ever since central banks started raising interest rates,

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Speaker 1: and it looks like the last domino is finally starting

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Speaker 1: to fall. I am, of course referring to the housing market,

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Speaker 1: where prices have been through the roof and till recently,

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Speaker 1: and this has many prospective homeowners wondering if a buying

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Speaker 1: opportunity is approaching at last. So today I'm going to

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Speaker 1: take you through a few of the indicators that suggest

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Speaker 1: the housing market is starting to soften, tell you why

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Speaker 1: prices could still go higher in some places, and when

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Speaker 1: the big crash could come. Over the last two years,

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Speaker 1: the cost of housing has been accelerating at an unprecedented pace.

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Speaker 1: In most countries, housing has been increasing by double digit

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Speaker 1: percentages on an annual basis, with the United States seeing

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Speaker 1: an almost increase in median house prices. Since this is

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Speaker 1: for a few reasons for starters, many central banks around

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Speaker 1: the world dropped interest rates to zero and in some

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Speaker 1: cases below zero when the markets collapsed at the beginning

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Speaker 1: of the pandemic in March. This made mortgages more affordable

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Speaker 1: in most places, which made it easier for people to

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Speaker 1: buy homes. Not only that, but many existing homeowners took

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Speaker 1: these low mortgage rates as an opportunity to buy a

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Speaker 1: second property for investment purposes, with Redfin finding that the

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Speaker 1: demand for second homes doubled compared to pre pandemic levels

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Speaker 1: in the United States. Asset managers like black Rock and

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Speaker 1: megabanks like JP Morgan also accelerated their acquisitions of single

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Speaker 1: family homes, but it's important to note the involvement of

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Speaker 1: institutional investors in the housing market is still at historical lows,

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Speaker 1: and these investors only own around three percent of single

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Speaker 1: family homes in the US now. In regions where interest

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Speaker 1: rates had already been at or below zero prior to

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Speaker 1: the pandemic, such as in Europe, you can clearly see

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Speaker 1: that housing prices had already been rapidly rising for years,

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Speaker 1: starting from when interest rates had hit those low levels.

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Speaker 1: The pandemic rate cuts just made this trend much work us.

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Speaker 1: The pandemic lockdowns also increased the cost of housing because

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Speaker 1: of how many people started working from home. According to

434
00:28:08,440 --> 00:28:11,720
Speaker 1: Pew research, around sixty percent of jobs that can be

435
00:28:11,840 --> 00:28:14,320
Speaker 1: done from home are still being done from home in

436
00:28:14,400 --> 00:28:18,200
Speaker 1: the United States, not far off from the peak in

437
00:28:18,320 --> 00:28:22,479
Speaker 1: late It didn't take long for the people working these

438
00:28:22,560 --> 00:28:25,400
Speaker 1: remote jobs to realize that they didn't have to live

439
00:28:25,480 --> 00:28:27,920
Speaker 1: in a small apartment in the city, and many of

440
00:28:28,000 --> 00:28:31,199
Speaker 1: them decided to move to less populated areas where they

441
00:28:31,240 --> 00:28:35,400
Speaker 1: could afford a much larger apartment or even a house. Logically,

442
00:28:35,640 --> 00:28:39,240
Speaker 1: such moves caused prices there to go up. At the

443
00:28:39,280 --> 00:28:43,480
Speaker 1: same time, pandemic restrictions, supply chain issues, labor shortages, and

444
00:28:43,720 --> 00:28:47,480
Speaker 1: high commodity prices caused home builders to hit the brakes,

445
00:28:47,840 --> 00:28:50,520
Speaker 1: limiting the supply of new homes coming onto the market

446
00:28:50,640 --> 00:28:54,719
Speaker 1: until fairly recently. More on that in a moment now.

447
00:28:54,840 --> 00:28:57,720
Speaker 1: Another housing demand driver is one I mentioned in my

448
00:28:57,880 --> 00:29:01,600
Speaker 1: previous video about the housing market. That's that millennials, those

449
00:29:01,640 --> 00:29:07,640
Speaker 1: born between one and are entering their peak home buying age,

450
00:29:07,720 --> 00:29:10,280
Speaker 1: basically the period of their life when they're all looking

451
00:29:10,360 --> 00:29:13,480
Speaker 1: for a place to settle down. So in some low

452
00:29:13,560 --> 00:29:17,560
Speaker 1: interest rates, changes in living and working habits, supply chain issues,

453
00:29:17,880 --> 00:29:21,080
Speaker 1: and the emergence of a well capitalized demographic looking to

454
00:29:21,160 --> 00:29:24,400
Speaker 1: buy homes is why the cost of housing has been

455
00:29:24,560 --> 00:29:29,000
Speaker 1: off the charts. However, this is slowly starting to change,

456
00:29:29,160 --> 00:29:33,600
Speaker 1: both on the supply and the demand side. Because of

457
00:29:33,680 --> 00:29:37,000
Speaker 1: the insane demand for housing, home builders around the world

458
00:29:37,080 --> 00:29:40,040
Speaker 1: have been putting up new units as quickly as they can.

459
00:29:40,480 --> 00:29:43,600
Speaker 1: As you can see, the monthly supply of new houses

460
00:29:43,680 --> 00:29:46,360
Speaker 1: in the United States looks like a meme stock and

461
00:29:46,600 --> 00:29:49,240
Speaker 1: it's at the highest level it's been since the housing

462
00:29:49,280 --> 00:29:52,000
Speaker 1: bubble back in two thousand and eight. Now I can

463
00:29:52,040 --> 00:29:55,320
Speaker 1: already hear all the real estate agents coping in the comments.

464
00:29:55,800 --> 00:29:58,959
Speaker 1: But guy, the supply of single family homes hasn't been

465
00:29:59,080 --> 00:30:01,680
Speaker 1: rising as quickly, and the still a shortage of single

466
00:30:01,720 --> 00:30:05,400
Speaker 1: family homes. Well to that, I say, the supply of

467
00:30:05,520 --> 00:30:08,960
Speaker 1: single family homes has also been rising rapidly, and if

468
00:30:09,000 --> 00:30:13,360
Speaker 1: you need more proof, consider this. Back in September, media

469
00:30:13,400 --> 00:30:16,600
Speaker 1: outlets were reporting that the United States is short over

470
00:30:16,760 --> 00:30:21,120
Speaker 1: five point one million single family homes. The same media

471
00:30:21,200 --> 00:30:24,440
Speaker 1: outlets reported just last month that the US is now

472
00:30:24,600 --> 00:30:28,640
Speaker 1: short just three point eight million single family homes. That's

473
00:30:28,880 --> 00:30:32,040
Speaker 1: one point three million homes built in less than a year.

474
00:30:32,360 --> 00:30:35,240
Speaker 1: And that's not all. Some of you may recall that

475
00:30:35,360 --> 00:30:38,840
Speaker 1: the price of lumber had exploded during the pandemic due

476
00:30:38,880 --> 00:30:41,200
Speaker 1: to the demand for housing. In case you didn't know,

477
00:30:41,640 --> 00:30:44,040
Speaker 1: most houses aren't made of wood, at least in the

478
00:30:44,160 --> 00:30:48,680
Speaker 1: United States. This is why many analysts see lumber prices

479
00:30:48,760 --> 00:30:52,320
Speaker 1: as a leading indicator of what's coming for housing. Over

480
00:30:52,400 --> 00:30:55,800
Speaker 1: the last few months, the price of lumber has plummeted,

481
00:30:55,920 --> 00:30:59,800
Speaker 1: which tells us two things. First, that the demand for

482
00:31:00,000 --> 00:31:02,760
Speaker 1: housing is starting to slow down, and that the profit

483
00:31:02,880 --> 00:31:06,280
Speaker 1: margin for builders has gone up, which means that they're

484
00:31:06,360 --> 00:31:09,640
Speaker 1: likely to continue building even if the sticker price of

485
00:31:09,680 --> 00:31:12,920
Speaker 1: the house is going down. As it so happens, the

486
00:31:13,080 --> 00:31:16,000
Speaker 1: median price of newly built homes in the United States

487
00:31:16,200 --> 00:31:18,840
Speaker 1: recently fell off a cliff, and by a cliff, I

488
00:31:18,920 --> 00:31:23,360
Speaker 1: mean more than ten percent. This downward trend is more

489
00:31:23,480 --> 00:31:26,160
Speaker 1: than likely to continue, and that's because of the primary

490
00:31:26,200 --> 00:31:30,120
Speaker 1: demand driver we identified earlier, which is of course, interest rates.

491
00:31:30,840 --> 00:31:33,240
Speaker 1: As some of you may have seen. Mortgage rates in

492
00:31:33,280 --> 00:31:36,720
Speaker 1: the United States recently hit a fourteen year high of

493
00:31:36,840 --> 00:31:41,000
Speaker 1: almost six percent. The last time mortgage rates were at

494
00:31:41,040 --> 00:31:44,120
Speaker 1: this level was during the two thousand and eight financial crisis,

495
00:31:44,200 --> 00:31:47,920
Speaker 1: which was again caused by the housing bubble. I'll explain

496
00:31:48,040 --> 00:31:50,640
Speaker 1: why we may not see the pop just yet in

497
00:31:50,720 --> 00:31:53,600
Speaker 1: a moment. Now. If you've watched any of our recent

498
00:31:53,720 --> 00:31:56,840
Speaker 1: videos about the Federal Reserve, you'll know that mortgage rates

499
00:31:56,880 --> 00:32:01,400
Speaker 1: are strongly correlated to longer term types of debt, specifically

500
00:32:01,560 --> 00:32:04,680
Speaker 1: the ten year Treasury. You'll also know that the FED

501
00:32:04,880 --> 00:32:08,719
Speaker 1: holds trillions of dollars of treasuries and mortgage backed securities.

502
00:32:09,360 --> 00:32:13,080
Speaker 1: This is extremely important because the FED is slowly shrinking

503
00:32:13,200 --> 00:32:16,720
Speaker 1: its massive balance sheet by selling these assets, and will

504
00:32:16,760 --> 00:32:20,400
Speaker 1: apparently be accelerating this sell off come September, as per

505
00:32:20,560 --> 00:32:25,400
Speaker 1: Chairman Jerome Pale's recent comments. Because the interest rates on

506
00:32:25,520 --> 00:32:29,760
Speaker 1: treasuries and mortgage backed securities increase when their prices decline,

507
00:32:30,040 --> 00:32:33,560
Speaker 1: the FED cell pressure should theoretically cause interest rates for

508
00:32:33,640 --> 00:32:37,560
Speaker 1: both treasuries and mortgage backed securities to rise, which should

509
00:32:37,640 --> 00:32:40,960
Speaker 1: cause mortgage rates to rise and housing prices to fall.

510
00:32:41,960 --> 00:32:45,000
Speaker 1: It's a similar story in Europe, where the European Central

511
00:32:45,040 --> 00:32:48,440
Speaker 1: Bank is expected to raise interest rates into positive territory

512
00:32:48,640 --> 00:32:51,600
Speaker 1: for the first time in over a decade. It's safe

513
00:32:51,680 --> 00:32:54,600
Speaker 1: to say that all the over leveraged investors in that

514
00:32:54,800 --> 00:32:58,080
Speaker 1: market expanding their air B and B empires are about

515
00:32:58,160 --> 00:33:02,280
Speaker 1: to get wrecked and good riddance. Now. There's just one

516
00:33:02,440 --> 00:33:06,120
Speaker 1: problem with this narrative, and that's that housing costs continue

517
00:33:06,200 --> 00:33:10,000
Speaker 1: to climb in many places despite an increase in interest rates,

518
00:33:10,280 --> 00:33:14,600
Speaker 1: and even despite the ongoing inflation, asset market crashes, and

519
00:33:14,880 --> 00:33:18,600
Speaker 1: general economic weakness which should be sucking all investors dry.

520
00:33:19,280 --> 00:33:24,440
Speaker 1: So what gives well To understand why housing costs haven't

521
00:33:24,520 --> 00:33:26,920
Speaker 1: come down in some countries and cities, we need to

522
00:33:26,960 --> 00:33:29,880
Speaker 1: take a step back and ask a simple question, why

523
00:33:30,200 --> 00:33:33,640
Speaker 1: do people buy houses? Well, the first reason should be

524
00:33:33,680 --> 00:33:37,000
Speaker 1: obvious to everyone, and that's for living in Obviously, everyone

525
00:33:37,200 --> 00:33:41,000
Speaker 1: needs somewhere to live, and according to Wikipedia, homeownership rates

526
00:33:41,080 --> 00:33:44,440
Speaker 1: are higher than sevent in most of the world, with

527
00:33:44,760 --> 00:33:49,880
Speaker 1: Romania taking the top spot at over now. As amazing

528
00:33:49,960 --> 00:33:52,560
Speaker 1: as these statistics are, there are also a double edged

529
00:33:52,600 --> 00:33:55,640
Speaker 1: sword in the context of the housing market. You'd think

530
00:33:55,920 --> 00:33:59,240
Speaker 1: that rising housing costs would create a huge incentive for

531
00:33:59,440 --> 00:34:03,280
Speaker 1: existing homeowners to sell, and in some cases it certainly does,

532
00:34:03,520 --> 00:34:06,480
Speaker 1: such as with older folks who want to retire somewhere else.

533
00:34:07,360 --> 00:34:11,080
Speaker 1: In most cases, however, rising housing costs actually create an

534
00:34:11,120 --> 00:34:15,200
Speaker 1: incentive for existing homeowners to hold, especially if there's not

535
00:34:15,400 --> 00:34:18,680
Speaker 1: enough supply of new houses coming onto the market, as

536
00:34:18,880 --> 00:34:21,120
Speaker 1: was the case in the earlier part of the pandemic.

537
00:34:21,880 --> 00:34:25,439
Speaker 1: That's because every person who's selling a house still needs

538
00:34:25,480 --> 00:34:27,839
Speaker 1: a house to live in, and if they can't find

539
00:34:27,920 --> 00:34:30,560
Speaker 1: a new house to live in that's affordable, then they're

540
00:34:30,600 --> 00:34:33,359
Speaker 1: not going to sell their existing house, no matter how

541
00:34:33,520 --> 00:34:38,880
Speaker 1: high prices go. Logically, this further restricts supply, which causes

542
00:34:38,920 --> 00:34:42,880
Speaker 1: housing prices to rise even further. This is consistent with

543
00:34:42,960 --> 00:34:46,120
Speaker 1: the relatively low trading volume of houses which accompanied the

544
00:34:46,160 --> 00:34:49,560
Speaker 1: pandemic price pump, and it's also consistent with the much

545
00:34:49,680 --> 00:34:54,560
Speaker 1: longer trend to hoddle homes. The average homeownership duration is

546
00:34:54,600 --> 00:34:57,400
Speaker 1: almost triple what it was in the early two thousands

547
00:34:57,520 --> 00:35:01,480
Speaker 1: and currently sits at ten to thirt in years now.

548
00:35:01,560 --> 00:35:05,120
Speaker 1: The second reason why people buy houses should be equally obvious,

549
00:35:05,239 --> 00:35:09,640
Speaker 1: and that's investment purposes. This can include anything from renting

550
00:35:09,680 --> 00:35:12,759
Speaker 1: out to long term tenants, turning the house into an airbnb,

551
00:35:13,160 --> 00:35:16,920
Speaker 1: and even turning the house into a hotel, hostel, or restaurant.

552
00:35:17,920 --> 00:35:21,480
Speaker 1: This is where things get interesting, because even though housing

553
00:35:21,600 --> 00:35:24,840
Speaker 1: costs are starting to come down, the cost of rent

554
00:35:25,120 --> 00:35:28,719
Speaker 1: continues to increase in many places, the most notable being

555
00:35:28,840 --> 00:35:32,200
Speaker 1: the New York City borough of Manhattan, where average rents

556
00:35:32,360 --> 00:35:37,160
Speaker 1: recently hit a record high of five thousand dollars per month.

557
00:35:37,880 --> 00:35:42,400
Speaker 1: Totally worth it, jokes aside. The answer to this mystery

558
00:35:42,640 --> 00:35:45,399
Speaker 1: lies in the second reason why people buy houses, which

559
00:35:45,480 --> 00:35:49,600
Speaker 1: is again for investment purposes. Although we're still technically in

560
00:35:49,640 --> 00:35:54,040
Speaker 1: a pandemic, leisure travel has reportedly returned to pre pandemic

561
00:35:54,160 --> 00:35:56,799
Speaker 1: levels and it looks like we won't be seeing any

562
00:35:56,880 --> 00:36:06,080
Speaker 1: more lockdowns, we hope. As such, there are probably many

563
00:36:06,280 --> 00:36:10,160
Speaker 1: real estate investors who continue to acquire properties to convert

564
00:36:10,280 --> 00:36:12,320
Speaker 1: into air b and b s. For all the folks

565
00:36:12,360 --> 00:36:15,200
Speaker 1: who are finally able to use their holiday days after

566
00:36:15,320 --> 00:36:17,600
Speaker 1: being sat at home for two summers on the bounds,

567
00:36:18,440 --> 00:36:22,600
Speaker 1: these acquisitions are probably well worth it, even with much

568
00:36:22,680 --> 00:36:26,759
Speaker 1: higher interest rates. Now, the issue is that this mass

569
00:36:26,880 --> 00:36:30,640
Speaker 1: acquisition of investment properties is probably starting to squeeze the

570
00:36:30,719 --> 00:36:34,239
Speaker 1: supply of housing, especially in those cities which see the

571
00:36:34,360 --> 00:36:39,200
Speaker 1: most tourists. This housing shortage not only makes regular rents

572
00:36:39,239 --> 00:36:42,280
Speaker 1: in these places more expensive, but it also makes housing

573
00:36:42,360 --> 00:36:47,000
Speaker 1: prices more expensive. Now, you'd think that this housing problem

574
00:36:47,080 --> 00:36:50,360
Speaker 1: would be contained to the cities that see the most tourists,

575
00:36:50,400 --> 00:36:54,600
Speaker 1: but I suspect this is not the case in many countries. Indeed,

576
00:36:54,840 --> 00:36:58,080
Speaker 1: here in the UK, the explosion of the holiday rental

577
00:36:58,160 --> 00:37:00,680
Speaker 1: sector has turned some of the more pitch yourresque parts

578
00:37:00,719 --> 00:37:03,600
Speaker 1: of the country, notably large parts of the West Country

579
00:37:03,719 --> 00:37:08,400
Speaker 1: and many seaside towns into tourists only enclaves, with locals

580
00:37:08,480 --> 00:37:12,800
Speaker 1: priced out and often forced to rent elsewhere. Come the

581
00:37:12,880 --> 00:37:16,600
Speaker 1: off season, when the tourists go home, these hotspots become

582
00:37:16,840 --> 00:37:21,239
Speaker 1: virtual ghost towns. Now. All this is because anyone who

583
00:37:21,400 --> 00:37:24,800
Speaker 1: owns a property in the city or tourist honeypot is

584
00:37:24,880 --> 00:37:28,880
Speaker 1: probably seeing the value of their property increase and simultaneously

585
00:37:29,200 --> 00:37:32,879
Speaker 1: seeing that housing prices are starting to slide elsewhere due

586
00:37:32,960 --> 00:37:35,359
Speaker 1: to the fundamental factors I mentioned a few moments ago,

587
00:37:35,560 --> 00:37:39,520
Speaker 1: you know, mortgage rates, lumber prices. Any rational actor in

588
00:37:39,600 --> 00:37:42,320
Speaker 1: this situation would sell their city home and buy a

589
00:37:42,400 --> 00:37:46,000
Speaker 1: bigger home outside the city. This, in turn causes the

590
00:37:46,040 --> 00:37:49,320
Speaker 1: price of housing outside the city to increase, which prolongs

591
00:37:49,560 --> 00:37:53,800
Speaker 1: the housing price pump. It's literally the exact same effect

592
00:37:53,880 --> 00:37:58,359
Speaker 1: as all the remote workers relocating, just a different reason. Now,

593
00:37:58,440 --> 00:38:01,360
Speaker 1: the final factor in this Asian is one that seems

594
00:38:01,360 --> 00:38:06,000
Speaker 1: to have been overlooked, and that's demographics. Populations have been

595
00:38:06,080 --> 00:38:09,120
Speaker 1: on the decline in most developed countries, and you'd think

596
00:38:09,440 --> 00:38:12,480
Speaker 1: that this would eventually translate to cheaper home prices as

597
00:38:12,560 --> 00:38:16,400
Speaker 1: the boomers, well shall we say, retire from life and

598
00:38:16,680 --> 00:38:19,640
Speaker 1: all their houses go up for sale. Besides the fact

599
00:38:19,760 --> 00:38:22,239
Speaker 1: that the populations in these places are just growing at

600
00:38:22,280 --> 00:38:26,759
Speaker 1: a much slower pace, official population statistics don't count all

601
00:38:26,880 --> 00:38:30,799
Speaker 1: the undocumented migration that's been occurring in many countries, nor

602
00:38:30,880 --> 00:38:33,440
Speaker 1: do they count all the refugees that have been fleeing

603
00:38:33,560 --> 00:38:37,879
Speaker 1: from places like Ukraine. Consider this, it's estimated that there

604
00:38:37,920 --> 00:38:41,480
Speaker 1: are between ten and twelve million undocumented migrants in the

605
00:38:41,600 --> 00:38:44,680
Speaker 1: United States, but this figure is probably much higher, given

606
00:38:44,760 --> 00:38:48,560
Speaker 1: that US border authorities have encountered over four million undocumented

607
00:38:48,600 --> 00:38:52,839
Speaker 1: migrants since January one, eight hundred thousand of whom were

608
00:38:52,960 --> 00:38:57,600
Speaker 1: not apprehended. Meanwhile, in Europe, it's estimated that over six

609
00:38:57,719 --> 00:39:01,480
Speaker 1: point four million Ukrainian refugees have fled the country since

610
00:39:01,560 --> 00:39:05,080
Speaker 1: Russia invaded in February, with Poland alone taking in over

611
00:39:05,200 --> 00:39:08,000
Speaker 1: one point two million. This is not to mention all

612
00:39:08,080 --> 00:39:10,959
Speaker 1: the refugees and migrants that have entered the EU since

613
00:39:11,000 --> 00:39:15,600
Speaker 1: twift now. Regardless of your political views on immigration, the

614
00:39:15,680 --> 00:39:18,879
Speaker 1: fact of the matter is that migrants and refugees need

615
00:39:19,080 --> 00:39:21,960
Speaker 1: some place to live, and because most of them can't

616
00:39:22,040 --> 00:39:24,880
Speaker 1: buy or can't afford to buy, the only option is

617
00:39:24,960 --> 00:39:27,600
Speaker 1: to rent, and in some countries the government has even

618
00:39:27,680 --> 00:39:32,760
Speaker 1: been subsidizing these rents. As basic economics dictates, if demand

619
00:39:32,880 --> 00:39:35,839
Speaker 1: for something increases while its supply stays the same, then

620
00:39:35,920 --> 00:39:39,480
Speaker 1: its price goes up. In this case, the demand for

621
00:39:39,560 --> 00:39:43,080
Speaker 1: rent coming from migrants and refugees gives real estate investors

622
00:39:43,160 --> 00:39:47,279
Speaker 1: the cash flow they need to continue acquiring properties, regardless

623
00:39:47,560 --> 00:39:51,880
Speaker 1: of rising interest rates. Now, even with all the factors

624
00:39:51,960 --> 00:39:55,640
Speaker 1: that are continuing to force housing costs higher in some places,

625
00:39:56,000 --> 00:39:59,200
Speaker 1: it's only a matter of time before that big crash comes.

626
00:39:59,520 --> 00:40:02,880
Speaker 1: And even it probably won't happen everywhere at once, it

627
00:40:03,000 --> 00:40:06,160
Speaker 1: will almost certainly be a global phenomenon. And this is

628
00:40:06,239 --> 00:40:09,520
Speaker 1: for a few reasons. For starters. Central banks around the

629
00:40:09,600 --> 00:40:13,040
Speaker 1: world have started aggressively raising interest rates in a response

630
00:40:13,080 --> 00:40:15,960
Speaker 1: to inflation, and some of them have been explicit in

631
00:40:16,040 --> 00:40:20,560
Speaker 1: their intentions to raise rates until inflation comes down, regardless

632
00:40:20,920 --> 00:40:25,480
Speaker 1: of the economic consequences. This list includes the Federal Reserve,

633
00:40:25,600 --> 00:40:28,440
Speaker 1: which put the U S economy into a technical recession

634
00:40:28,640 --> 00:40:31,680
Speaker 1: with its rate hikes, which it plans to continue until

635
00:40:31,719 --> 00:40:35,520
Speaker 1: it's confident that inflation is headed for the institution's two

636
00:40:35,640 --> 00:40:39,120
Speaker 1: percent target. And let's just say this means the recession

637
00:40:39,520 --> 00:40:42,719
Speaker 1: is about to get a lot less technical. If you

638
00:40:42,760 --> 00:40:45,480
Speaker 1: watched our video about how to beat inflation, you'll know

639
00:40:45,719 --> 00:40:48,920
Speaker 1: that there's only so much central banks can do because

640
00:40:48,960 --> 00:40:51,680
Speaker 1: in many places, most of the inflation is coming from

641
00:40:51,800 --> 00:40:55,480
Speaker 1: supply side factors that are completely outside of their control.

642
00:40:56,239 --> 00:40:58,759
Speaker 1: To be blunt, it looks like inflation is going to

643
00:40:58,880 --> 00:41:02,280
Speaker 1: stick around for a while, especially in regions like Europe,

644
00:41:02,520 --> 00:41:05,880
Speaker 1: where most countries are expected to see energy prices triple

645
00:41:06,200 --> 00:41:09,960
Speaker 1: as winter approaches. This will force the e c B

646
00:41:10,239 --> 00:41:13,920
Speaker 1: and other central banks in similar situations to raise interest

647
00:41:14,000 --> 00:41:17,600
Speaker 1: rates to try and minimize the demand. As interest rates

648
00:41:17,680 --> 00:41:21,120
Speaker 1: continue to rise, so too will the cost of most debts.

649
00:41:22,120 --> 00:41:25,560
Speaker 1: This means asset markets will continue to crash as people

650
00:41:25,640 --> 00:41:29,720
Speaker 1: sell off their assets to meet their debt obligations. Mortgage

651
00:41:29,800 --> 00:41:32,479
Speaker 1: rates will continue to climb to and this will cause

652
00:41:32,560 --> 00:41:35,560
Speaker 1: the cost of new housing to continue its current fall.

653
00:41:36,400 --> 00:41:39,840
Speaker 1: At some point, all the people who purchased extra properties

654
00:41:39,880 --> 00:41:43,040
Speaker 1: for investment purposes will start to wonder whether it makes

655
00:41:43,120 --> 00:41:46,160
Speaker 1: more sense to sell, and some of them probably will

656
00:41:46,400 --> 00:41:50,120
Speaker 1: if the value of their other assets has collapsed. Note

657
00:41:50,280 --> 00:41:53,439
Speaker 1: that pension funds have lots of money in the stock

658
00:41:53,520 --> 00:41:57,840
Speaker 1: market now. As quarterly earnings reports continue to come in,

659
00:41:57,920 --> 00:42:00,919
Speaker 1: short companies will accelerate the eight at which they're laying

660
00:42:00,960 --> 00:42:06,440
Speaker 1: off employees and likely begin cutting salaries, starting with top executives.

661
00:42:07,560 --> 00:42:10,799
Speaker 1: This will result in less leisure and business travel, which

662
00:42:10,800 --> 00:42:14,959
Speaker 1: will mean lower profits for all those airbnb owners. Many

663
00:42:15,040 --> 00:42:18,439
Speaker 1: companies will also probably ditch their office spaces to cut

664
00:42:18,560 --> 00:42:21,239
Speaker 1: costs if they know their employees can work from home,

665
00:42:21,640 --> 00:42:24,400
Speaker 1: and this will lead to a huge increase in available

666
00:42:24,480 --> 00:42:27,880
Speaker 1: real estate in you guessed it, the busiest parts of

667
00:42:28,040 --> 00:42:32,280
Speaker 1: the busiest cities. Some of these commercial units will probably

668
00:42:32,320 --> 00:42:35,600
Speaker 1: be purchased and turned into long term rental properties, which

669
00:42:35,640 --> 00:42:39,000
Speaker 1: will cause rents to drop, squeezing more conservative real estate

670
00:42:39,080 --> 00:42:42,239
Speaker 1: investors who prefer to rent long term tenants rather than

671
00:42:42,320 --> 00:42:47,360
Speaker 1: temporary tourists. Many of these investors will probably sell. Some

672
00:42:47,560 --> 00:42:50,360
Speaker 1: of these commercial units will probably be purchased and turned

673
00:42:50,360 --> 00:42:53,279
Speaker 1: into short term rental properties that will compete with air

674
00:42:53,400 --> 00:42:56,120
Speaker 1: b and b s, causing short term rental costs to collapse,

675
00:42:56,320 --> 00:43:00,000
Speaker 1: squeezing all those Airbnb owners who took on too much leverage.

676
00:43:00,680 --> 00:43:05,120
Speaker 1: Many of these investors will probably sell at the same time.

677
00:43:05,280 --> 00:43:08,759
Speaker 1: Populism will continue to grow as the recession deepens, which

678
00:43:08,760 --> 00:43:11,840
Speaker 1: will leave the average citizen looking for someone to blame.

679
00:43:12,400 --> 00:43:15,200
Speaker 1: Fingers will be pointed at the rich, and taxes will

680
00:43:15,239 --> 00:43:18,080
Speaker 1: be raised on the kinds of individuals and institutions that

681
00:43:18,280 --> 00:43:22,520
Speaker 1: buy up properties for investment purposes. In some cities, laws

682
00:43:22,560 --> 00:43:25,200
Speaker 1: will be put in place to prevent excessive ownership of

683
00:43:25,239 --> 00:43:27,800
Speaker 1: properties that are left vacant for too long or not

684
00:43:28,120 --> 00:43:32,120
Speaker 1: used as a primary residence. Some cities have already begun

685
00:43:32,280 --> 00:43:35,719
Speaker 1: putting limits on air B and b's, namely Amsterdam, which

686
00:43:35,800 --> 00:43:38,840
Speaker 1: put a limit of thirty days per year per airbnb

687
00:43:39,040 --> 00:43:44,480
Speaker 1: property in eighteen. Unfortunately, fingers will also be pointed at

688
00:43:44,600 --> 00:43:48,600
Speaker 1: migrants and refugees, which will result in stricter immigration policies

689
00:43:48,880 --> 00:43:52,719
Speaker 1: and more border controls. This will further dampen the overlooked

690
00:43:52,760 --> 00:43:55,280
Speaker 1: factor on the demand side of the equation, for better

691
00:43:55,520 --> 00:43:58,960
Speaker 1: or for worse. With some luck, conflicts like the war

692
00:43:59,080 --> 00:44:01,919
Speaker 1: in Ukraine will be resolved, which will result in many

693
00:44:02,040 --> 00:44:06,240
Speaker 1: migrants and refugees returning to their homes, further reducing demand

694
00:44:06,320 --> 00:44:08,680
Speaker 1: for rents in the area as they stayed in during

695
00:44:08,760 --> 00:44:12,520
Speaker 1: the conflict. And last, but not least, all the houses

696
00:44:12,600 --> 00:44:15,000
Speaker 1: that home builders are working on will hit the market,

697
00:44:15,080 --> 00:44:18,520
Speaker 1: which will increase housing supply even more. Right as the

698
00:44:18,600 --> 00:44:22,040
Speaker 1: demand for housing is falling through the floor in some

699
00:44:22,440 --> 00:44:25,759
Speaker 1: will see the same process that's causing housing costs to

700
00:44:25,880 --> 00:44:29,200
Speaker 1: continue to rise in some places completely reverse in the

701
00:44:29,280 --> 00:44:32,400
Speaker 1: coming months, and depending on the depth of the recession,

702
00:44:32,640 --> 00:44:36,359
Speaker 1: the housing crash could be as unprecedented as the appreciation

703
00:44:36,440 --> 00:44:39,960
Speaker 1: of housing during the pandemic. Now, I must stress that

704
00:44:40,160 --> 00:44:44,080
Speaker 1: all this assumes that central banks won't change course and

705
00:44:44,280 --> 00:44:48,440
Speaker 1: drop interest rates again, which is a very real possibility. However,

706
00:44:48,680 --> 00:44:51,399
Speaker 1: I don't see it happening, and that's because Black Rock

707
00:44:51,560 --> 00:44:54,640
Speaker 1: is getting its billions ready to buy the housing dip.

708
00:44:55,280 --> 00:44:59,320
Speaker 1: As the saying goes, follow the money. Thank you so

709
00:44:59,480 --> 00:45:01,960
Speaker 1: much for listen. Link to the Coin Bureau podcast if

710
00:45:01,960 --> 00:45:04,759
Speaker 1: you'd like to learn more about cryptocurrency. You can visit

711
00:45:04,800 --> 00:45:08,560
Speaker 1: our YouTube channel at YouTube dot com forward slash coin Bureau.

712
00:45:09,000 --> 00:45:10,960
Speaker 1: You can also go to coin bureau dot com for

713
00:45:11,080 --> 00:45:14,280
Speaker 1: loads more information about all things crypto. You can follow

714
00:45:14,320 --> 00:45:16,600
Speaker 1: me on Twitter and at coin bureau or one word,

715
00:45:16,719 --> 00:45:19,719
Speaker 1: and I'm also active on TikTok and Instagram as well