Jacob (yak_boy) wrote,

Ever heard of a volcano?

I just switched on the TV for a sec, and saw Oprah talking to Donald Trump.
They started talking about how they both like investing in real estate because it is a physical asset, as opposed to the "piece of paper" you get with stocks.

Then Oprah said she liked investing in land because "God's not making any more", that beach-front land in Hawaii is a great investment because "God's not making any more". Okay, in financial terms she's pretty well correct, at least assuming a normal human life-span. However, it is highly amusing that she chose Hawaii as her example.

The Hawaiian islands are a chain of islands formed by a sub-oceanic volcano. Basically, the continental plate is moving over a pocket of magma, and from time to time this magma explodes, spewing lava into the sea. This lava cools to form rock, becoming an island. Because of the movement of the continental plate, the island moves away from the magma, and the next time it explodes a new island is formed. That's how you get a chain of islands like Hawaii.

Therefore God (or if you are an atheist, the Earth) is making more land in Hawaii. It's an ongoing process. When you think in geological time-spans instead of measly human life-spans, the world is an ever shifting place, with islands, and even continents, being created and destroyed.

I guess that doesn't have too much impact on real estate prices. Except of course for the threat of volcanic cataclysm looming over the Hawaiian islands.
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