Reply to Mark In Mayenne

Mark In Mayenne left a new comment on Surprisingly astute comment in The Daily Mail...

Help me out here Mark please.

If I have spare cash that I wish to invest, how is buying a house to rent out less productive than buying shares or gold or putting it in a bank account or whatever to store my wealth while I don't need it?

Thanks, Mark

If an "asset" already exists, then one person selling it to another (with the intention of collecting rent or capital gains*) does not add to the sum total value of human wealth by one penny, does it? And if you pack in your job (stop creating wealth) and become a BTL landlord (just collecting rents), then the total amount of wealth created goes down.  It's only people creating new stuff and exchanging it with other people's output that creates or adds to wealth.

So for that matter, buying shares or gold is not "productive" either. If you buy £20,000 of Volkswagen shares, then no wealth is created or added. If you want to spend your £20,000 on a new Volkswagen, then £20,000's worth of wealth will be created in response to that demand (the new car). Bank accounts are meaningless, it all depends on what the bank does with the money (do they use it for productive or unproductive lending?).

* Of course, part of the rent relates to actual services provided (maintaining and insuring the house, bearing certain risks such as damage or non-payment) and a capital gain might partly relate to improvement expenditure. That is not rent or capital gain for these purposes.