Fiat persists due to a cheap & pernicious illusion

I'm not the most concise or poetic storyteller, but I think there's something important here.

When we were young, my friend described her dream life. She wanted to live in a large 5-bedroom house in a small village - not too far from a major city - with a huge garden for her kids & dogs to play in.

She grew up in a poor neighbourhood. Her family never had any money. She learnt how to make ends meet on a tight budget. She excelled at school. She went to university. She got a degree in a sensible, practical, desirable subject. She got a job which pays considerably more than average. She met a man - who is now her husband - and his job also pays more than average.

A decade ago, they bought a small house together. The house cost £180k. It has doubled in value now. They've both been saving diligently too, making sacrifices wherever possible, whilst also raising children. They've amassed >£100k in savings. Both of them did everything right. Or at least, everything they were supposed to do.

A decade ago, my (considerably older) cousin bought a 5-bedroom house in a beautiful village for £750k on an interest-only mortgage (as the sole earner in a family of 5). Having heard all the intricate details of my friend's dream house, I can assure you - this is precisely it! Two weeks ago, my cousin retired early and put his house up for sale for £1.5M.

Meanwhile, my friend is super happy. She has paid down a fair amount of her mortgage, she and her husband have saved earnestly, and she's received a STUNNING bonus £180k from the rising value of her property. Many of the people she grew up with did not buy a house young, nor did they save so carefully. She did everything right. She's winning! She really feels like she is winning! She is winning... right?

She doesn't study the UK housing market particularly closely. If she did, she'd see that that her dream home is actually further out of reach now than it was a decade ago. Despite every late night at work, every holiday she did not go on, every piece of furniture she rejuvenated from Freecycle, all the savings and the sacrifices, her dream home is less obtainable for her than it was 10 years ago.

Here we arrive at the point. Or rather... at a disgracefully inelegant metaphor with which I hope will demonstrate the point...

The fiat world is essentially a rubber ladder with a clamp on it somewhere near the bottom (approx. 20% of the way up). Once the clamp is in place, the fiat gods grip the very top rung of the ladder and then stretch it eternally upwards. 80% of the rungs get elevated upwards. 80% of the rungs feel like they're winning. 70% of the rungs are so fricking happy about how amazingly quickly they're getting elevated that they don't realise the rung above them is rapidly rising faster and further away from them. This is the grand ruse of the money printer. The money printer makes people nominally richer and actually poorer simultaneously. For the lower rungs of the ladder (above the clamp), it creates the illusion that they're winning when they're actually losing.

I realise this is a UK-centric story, but I've had a peek at net wealth per household & it's broadly the same story across the entire western world. Those on the highest rungs of the ladder are engorging themselves on wealth they never truly earnt. They have no reason to complain (nor to produce anything worthwhile - but that's a different story) when their wealth is effortlessly growing so rapidly. Those on the lower rungs of the ladder (above the clamp) are happy to sustain this because they think they're winning too.

One day my friend will realise, despite every effort imaginable, that her dream is truly dead. She will become disillusioned. She will start questioning everything.

For now, she is happy, and we are still early.