“Money, money, money makes the world go ‘round.” So says the song writer. In fact, money does much more than just that. It can enrich your life by providing affordable comforts and financial security — and it can also make your world crash down around you when you lose it. The Southern Oregon real estate market, like elsewhere in the country, has had its real estate values traumatized since the bubble burst in 2006. Today, the supply of money is very much in the headlines and a look at money and the market is worthwhile.

Turn back the clock. Herbert Hoover was barley in office for 9 months before Black Tuesday arrived, October 29, 1929, and the stock market crash was heard around the world. President Hoover’s immediate solution to the economic distress was to cut taxes in an attempt to put more money into the system and to encourage spending. However, after two fruitless years of lower taxes, the strategy proved not to work so Hoover switched plans and introduced the Recovery Act which raised taxes. This was a desperate attempt to reduce the deficit, balance the budget, and pull the country out of the depression. “Prosperity,” he promised, “is just around the corner.” In fact, the Recovery Act sucked the money out of the system and out of hands of the people, which only made the problem worse and plunged the country deeper into the Great Depression. By 1932, the masses were searching desperately for any sign of hope. Sound familiar? Upon his election, FDR infused the economy with stimulus money in the form of The New Deal, and for the next 8 years, the country struggled to get back to normal. In 1941 America entered World War II and brought with it a rude ending to the Great Depression.

Our current economic situation is referred to as the Great Recession because of the similarities of consequences between the 1930’s and today. In the housing sector, we’ve been waiting for prosperity to appear “just around the next corner,” but that’s been the hope since 2006, reminiscent of Herbert Hoover’s promise to the American people in 1933. During the Great Depression, the cliche became “losing the family farm” to foreclosure. Today instead of the farmer, Great Recession has the American middle class reeling from the effects of mortgage foreclosures. We’ve elected a new President on the promise of hope, and we all know about the infusion of stimulus money into the economy. As in the days of the Great Depression, the dollar has not collapsed or imploded, and recovery could potentially take as much time for the Great Recession as it did for the Great Depression.

More about prosperity and the effects of money in today’s Great Recession in my next post.

Stay tuned. Michael Masters

A Socially Conscious Real Estate Consultant

     

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