Saifedean Ammous explains how inflation (which is caused by governments / banks increasing the money supply by interest credit expansion) which leads to the loss of fiat money’s value, has changed the way people think about housing.

In the past, under a scarce money standard money held its value better, so people could save for the future by simply saving in gold. For example, a gold coin could sit under a mattress for years and still hold its value. You can’t do that today with easily created fiat government money.

Today, with inflation causing money to lose value people need to find other ways to store their wealth / purchasing power. Holding fiat cash or government interest bearing bonds means losing purchasing power in the long term, so many turn to real estate.

Ammous argues that this has led people to treat houses as savings accounts, even though houses are consumer goods, not true investments. A house doesn’t produce anything; it’s something you use, like a car or a washing machine, it just lasts longer.

This change is a direct result of inflation. Since money no longer holds its value, people feel forced to buy houses to protect their savings which they spent time and energy to work for and save. Instead of keeping cash in the bank, they buy a house.

As inflation drives the value of money down, house prices go up in fiat terms. This creates the illusion of making money, but in reality it’s an indication that the money we are forced to use by nation states is losing value every year.

Ammous highlights the impact this has on young people. When someone in their 20s or 30s tries to buy a home, they’re not just competing with others their age. They’re also up against older people or investors who see houses as better options than holding cash.

These investors might be dentists, architects,doctors ,or other professionals who don’t actually want to be landlords but buy homes and rent them out because it’s a way to escape inflation. This pushes house prices even higher, making it harder for young people to afford homes.

Ammous also points out that treating houses as financial assets affects how they’re built. Developers prioritize profit over quality or beauty, leading to homes that lack character or durability. Houses are no longer designed as places to live and enjoy but as tools for storing wealth and beating inflation.

This is a HUGE problem.