Wednesday, July 7, 2010

social pressure

Paul Andrews wrote:
"Lenny I agree. I also note with interest that prices at Aldi have not increased in the three years I have been shopping there. I really think Steve and other Minskians have it right – we have plateaued at the top of a huge inflation curve, about to head into deflation. People don’t understand because they all grew up with seemingly permanent inflation. People generally don’t think for themselves but act in accordance with the herd. People just don’t have the time to look into everything empirically (if they did, no other work would get done). I don’t think you can even blame them for taking on more and more debt because the social pressure to own is enormous. Renters are looked down upon, and most people just can’t bear losing face. They do not understand the underlying dynamics, and the distinct possibility that they will they will need to work many more years than they expect to pay off their mortgages. After all, their parents had the luxury of always having their loan balances eroded by asset inflation.

People generally think heuristically, not empirically. The main heuristic is to do what the people around you do, and to believe what they believe.

It’s a lot of fun not doing that, if you have the inclination, and don’t care about the ridicule. I’m sure Steve would agree with that."

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