Scott Adams asks how giving homebuyers money will cause home prices to rise.
Let me use a real life example to explain how that works. In 2009, Microsoft unveiled a new search engine. To get people to begin using it, they started a promotion. If you used Bing to arrive at a website and made a purchase, any purchase, on that website, you would get a ten percent discount (maximum $100) and you could do this once per day for ten days.
Armed with a new $10,000 credit card that offered zero percent interest and no payments for the first year, I bought 8 one ounce gold Eagle coins from Ebay. They were costing $1000 each, and with the discount, I managed to only pay $900 each for them. Why didn’t I buy ten? Because a lot of other people were doing it, and the coins had risen in price quickly and it was no longer a deal. In les than two weeks’ time, the price of gold Eagles went from $1000 to over $1100, even though the price of gold didn’t move.
Why did that happen? Because the demand side of the supply/demand equation was pressured, while supply remained the same.
The coins: I held on to them for almost a year, sold them for $1800 each, used the proceeds to pay the credit card off, and walked away after doubling my money- well, their money. I made $8k using the credit card’s money.
