Chapter 99: Property, Confidence, Stocks and Money

This is an extract from the ebook How to Really Buy a Property.

The capitalist system is built on surprisingly fragile foundations. We believe if we go to the bank we can take out out money but if everyone tried at the same time it would not be possible. Most of it is imaginary, not even existing in printed form.

Even if all the pounds and dollars were there much is on loan to others and so could not be made available to every account holder immediately. And when it comes down to it the paper it is printed on is not tied to anything except confidence. We all have to believe, otherwise it is worth nothing and society would stop functioning.

Stocks and shares have a similar story. Companies are only worth what someone is prepared to pay and much of this value is also confidence. There is a problem with oil and airline shares move down. The oil crises finishes and airline shares move up. Nothing in the companies operations or assetts have changed, only people's confidence.

But noone has ever thought to add all the values of stocks and shares together and then say they are over valued compared to the money people have. They don't because stocks and shares are bought and sold on a global stage and so it would be too difficult to calculate.

Now property is increasingly becoming a worldwide commodity but there are those who cannot let go of the idea that real estate values are anchored on the wealth of those who live in a country.
The truth is property prices are held up by, and increase because of confidence. But then so are the stock exchanges, the banks and the whole of the capitalist system.

It is little wonder that Russian socialists during the Cold War thought the West would fall apart before they did.