The idea that rent money is “dead” money has been around a long time.

What is not said so often is that interest money is dead money too. This is not realized because people are under the mistaken notion that you can recover interest that you’ve paid, but you cannot recover rent that you’ve paid. It’s a mistaken notion because this is true only in an appreciating market. In other words, you can “recover” interest only if prices rise. And when prices don’t rise, or don’t rise enough, you won’t recover all or some of the interest you’ve paid.

Imagine this: you rent a house for 25 years and pay the rent on time. The landlord pays off his home with your rental money. At the end of 25 years you do not own the house; you merely walk away when you go and leave the asset to its owner.

When you buy a home, however, you might pay double the price over 25 years because of interest. Let’s say a $200,000 home, and after 25 years you’ve paid $400,000. Now if property values were to double over those 25 years, you could sell your home for $400,000 and recover all the interest you’ve paid as well.

But what would happen if you could only sell your home for its original $200,000 purchase price? Why, the interest you paid would be “dead money” – just as dead as if you rented through those 25 years. Why is it dead money? Because you could not “recover” it in the sale price of your home.

Now there’s a view that says property prices never fall. But the history of housing prices tells another story. Even recent history in a city such as Detroit, tells a different story. There, according to recent research undertaken at MSU, housing prices in the lowest 20% of the market, fell to an average of sixty-seven cents. Even the next lowest quintile came in at under $1,000. So if you think housing prices are always going to rise, you might want to rethink your strategy.

Here’s the important observation, however. Once you borrow, you join all borrowers and now you have a vested interest (pun intended) in price increases in the housing market. You don’t want to “lose” money and not recover everything that you’ve paid, including the interest. If you buy today, in 25 years from now, you’ll anticipate selling your home at least at its current price plus interest.

When you rent, however, the exact opposite is true. You retain a strong desire for lower prices. You don’t want prices to rise. A price increase is no advantage to you, for home prices will rise, rents will rise, and you’ll have to pay more for a home irrespective of whether you rent or buy.

Now the housing market is used time and time again by politicians to crank up the economy. Why? Because home-loan lending is one of the major avenues for banks to put into practice what they have been designed to do: expand the money supply through fractional reserve practices. The expanded money supply (in any form) allows prices to rise, if the expansion of goods and services is slower than the expansion of the money. (A little technicality that makes it difficult to determine precisely how much money values are distorted by monetary inflation.)

But, hey, who’s interested in technicalities. So long as we are not out of pocket personally, we’ll tolerate devaluing of the value of money through expansion of the supply of money.

Now you say you’re in favor of “hard” money. You say you want to end inflation and its bad effects, then sell your home at pre-inflation prices. Sell your home at its purchase price, without the interest.

In other words, take a loss. If you’re not ready to do this, you’re not ready for the economy to unwind its years of inflation. If you think interest money should not be dead money, and you want to recover the interest you’ve paid through higher prices, you’re not really serious about ending the charade that allows politicians to “milk” the population through inflation.

And if you’re not ready, willing and able to take the loss, what makes you think you’re neighbor’s willing to be the fall guy and lose money on his house just to stop inflation?

When you understand the “love of money” that is rooted in the heart of man, you will understand why it is easier for a camel to pass through the eye of a needle than it is for a rich man to enter into the kingdom of God, taking steps to halt the devaluing of money through inflation on the way.

But by some strange coincidence, we don’t seem to think this description given by the Messiah applies to ourselves. It is always other people who have the love of money problem.