Mortgages will absolutely still exist but the price on housing won't be completely inaccessible to the normal person because interest rates will reflect the real cost of money. You may pay 15% interest, but the house price is like 2 cars worth instead of 10 cars worth.
Shorter term mortgages I expect would be more popular also since it actually makes financial sense to pay down the principle.
I guess we’ll see… that was initially where I was at in my paradigm transition, now I’m doubtful. However it is very hard to see a new paradigm from within our existing paradigm.
If a house cost equivalent to 2 years wages (utility value) which was the average house price in 1920. I reckon you’d save up for your house and buy it outright. Particularly if your wages were going to decrease over time as were house prices and house prices would likely decrease faster than wages.
It’s a complete mental shift from everything we’ve known.
I think you're taking it from the perspective of a reasonable bitcoiner. Even with the soundest money in the world, it's not going to stop those who never learned money skills from blowing their paycheck every week. Saving will be a *possible* way to do it, but there's always going to be entities that loan money if they think they can make it back. Credit is a concept that will always exist, it's older than money itself.
Let’s workshop this idea.
Assume we are on a Bitcoin standard. Everyone has realised Bitcoin is the best money in the world and thus will accept nothing else in exchange for their other scarcest asset, time. That time is converted into products or services.
Also assume technology does what technology does under a hard money standard, reduces the cost of everything to the marginal cost of production and increases production output whilst reducing input.
So you want to get a loan (mortgage) to buy a house. That loan is only available in Bitcoin or in something pegged to Bitcoin thus the ‘money’ is ever increasing in purchasing power. Because it realises the technology gains (these are currently being stolen by inflation but will not be on a Bitcoin standard).
Meanwhile the value of the house is going down against Bitcoin (reduces to the marginal cost of production). But is also the collateral that the loan is secured against (hence the term ‘mortgage’)
Who will give you that loan?
Money go up in purchasing power whilst collateral go down against money. As the lender you’d end up with an unsecured or a lowly secured loan. Any lender doing this would very quickly find themselves out of business and any borrower would find themselves in a worse predicament than they are in the current system.
So I would say this is a very true statement for the majority of consumer credit that we see today.
However I believe you're neglecting two aspects that we don't generally see today because of artificial interest rates:
1. The interest rate of the loan would be directly proportional to the risk associated to it.
Because our brains are biologically the same as they were 100k years ago, people will always want more than they truly have. There will always be an opportunity to make and lose money through credit due to this.
The rate of interest would be determined knowing that the value of bitcoin will continue to increase. Let's say by then Bitcoin increases in value relative to everything else ~5% on average YOY. The rate of the loan would need to cover all the expenses+profit to service the loan, plus that 5%. The profit is directly correlated to the risk of the investment.
2. Land has inherent value and always will. Things need places to be. Owning land is the second best asset after Bitcoin. Food needs a place to grow, livestock needs a place to graze. Even waste products need to go somewhere.
The house itself will decrease in value over time, but land is still scarce and has value. Once land's true utility value stabilizes in a deflationary Bitcoin economy, I would expect land value (on average) to keep steady, or slightly lag behind Bitcoin.
That's a long winded way to say that land can still be repossessed and sold as an insurance to secure the loan same as now.
A loan is nothing more than a gamble of the future. And I don't ever expect people to stop gambling. It's the one addiction where the next hit might actually change everything for the better.
We see real-estate as an asset if you are really utilising it to generate, something of value; food, tools, living etc
What’s the ratio of properties being used for utility purposes against how many properties are bought as a piggy bank?
In other words, let’s assume that houses could go back to their utility value. We would say that much more people will own their own house and less people would use real estate as an investment (piggy bank)?
Living in a space is also a utility. We would absolutely see a sharp decline in the amount of debt, and the use of property as investment would decline.
To say we will be rid of debt entirely ignores the human desire to live beyond their means and to desire that which they do not have.
The responsible ones will live debt free, those without restraint and self control will continue to be indebted.
Agreed! 🙏 we think bitcoin is reaching some of us to self control
I think we are forgetting that debt/credit is a 2 way street. As a lender, lending must be both profitable and preferably low risk. The more sound the thing I am lending, the less inclined I will be to risk it on a high risk endeavour. Houses that decline in value over time will be high risk vs the Bitcoin being risked against them.
Lending and credit in a fiat system is much more practical because the ‘money’ you are lending out/borrowing is trash and houses appreciate compared to trash but not compared to sound money (BTC).
It is a challenging paradigm shift.
The wont of man is truly unquenchable and it cannot be swayed by logic. A fool and his money will soon be parted and even the hardest money in the world doesn't change that.
I think we call that the economy, a crazy mix of exact and non exact science, value exists when it has context, there is no such thing as intrinsic value.
I would say a space to occupy has intrinsic value. You can't exist without a space to exist in. The number associated to that value isn't static but it's never zero.
The space you occupy has intrinsic value simply because it allows you to be. Without action, its value might seem neutral, but restriction highlights its worth. Similarly, water in a glass is inherently neutral—its value explodes in the desert but fades by a river. Context transforms neutral existence into profound significance. Value is context-born, not inherent.
I typed out a really long reply but then took a step back and it was more of an argument on the usage of the words and it was boring and not really furthering thought so I'll save you the time, lol.
Fun conversation though!
🙏 thoughtful disagreements are fun thanks to you for making us think deeply 😉☝️
Exactly.
