When Emotions and Ignorance Blind Us

Colmar, November 12, 2026. It is 9:24 PM. You, my dears, have just turned off the light in your room. Laura, you are being quiet so that you can fall asleep as quickly as possible, and Luca, you are fighting with a boob full of milk. Why exactly you are fighting with it, I couldn't tell you. You probably haven't realized yet that it is yours alone. As I write these lines a few steps away from you, I hear battle cries... "huuu"... I can't tell whether mommy is watching William Wallace or not.

Laura, my dear, this evening you told me about one of your classmates at kindergarten and how he probably wants to marry you. As you explained to me, it will be his job to explain to me exactly what he has in mind, and you have come to the conclusion that it would be better for him to do it as soon as possible. It was an incredible evening with the two of you, exactly what I needed after a long week. As I have mentioned before, I have been working quite a lot over the past few months. Sometimes I feel as though I leave home on Monday morning and return on Friday morning. Luckily, your mother manages to keep you afloat and make sure that you lack nothing. Lately, I have been thinking more and more about moving my job to France. Perhaps having a medical practice in Colmar would allow me to spend more time with you, my dears. Although right now this might seem like an incredibly good idea to you, I am very curious what your position will be in 15 years. I would love for you to grow up close to your parents and for us to maintain a close relationship even when you become adults. For that, we probably need to surround you with all the love in the world.

Today I had a strange experience at work, and I decided to tell you about it. I always try to explain the world around you, especially economics and finance. I don't do this because I believe I am the best in the field, but because I regret having had a different education while growing up. Financial knowledge was what I lacked the most as a teenager growing up, and for this reason, it seems logical to me to try to stuff you with as much of it as possible. Let me tell you what happened today.

Towards the end of my consultations, a patient a little over 60 years old came in. The reason she came to see me was a somewhat chronic respiratory infection. Ever since I have known her, she has always been sick, catches a cold every few days, abuses cortisone tablets, and smokes nonstop. I don't even bother asking her to quit smoking anymore because I know that energy could be directed towards more realistic causes, such as abolishing world hunger. During today's consultation, she confessed to me that she wants to return to Italy, her native country, and that she is in the process of selling her house in Germany. Unfortunately, selling the house has not proved simple enough, and she mentioned that she has an offer she is still unhappy with. Somehow, a buyer offered her 550,000 euros for a house of 150 square meters and a total plot of land of 700 square meters. She already has a clear offer, but the price offered discourages her. At the same time, she feels tied to the sale of the house before she can move to Italy. Today's lesson is a double one, my dears, and I will let you discover for yourselves what it is.

In my interactions with patients, I tend to talk far beyond the scope and purpose of the medical consultation. It is my way of establishing a connection. So I didn't wait long before telling her that I was not giving her financial advice and that she had to decide for herself, but that I would sell the house. I drew her attention to the reality in which we live. The European Central Bank's interest rate is currently around 2.5%, which means that banks offer loans starting at around 3%. Just before the COVID pandemic, most of us were getting loans with interest rates close to 1%. The difference is, as I hope you know, quite large. So I encouraged her to sell the house, mentioning that "cash is king," but she looked at me distrustfully, as if I were lying to her or hiding something from her.

Seeing the distrust in her eyes, I continued my train of thought. Because of the wars in Iran and Ukraine, we have been experiencing persistent inflation for several years now. This causes the cost of living to rise continuously. The general impoverishment of the population will cause, or in fact has already caused, fewer and fewer people to be able to afford to buy things, and this situation has also forced banks to carefully choose those to whom they grant loans. So if five years ago we had three buyers for every one seller, today we are in a situation where we have one buyer for every three sellers. I drew her attention to the inflation coming from Iran that has not yet entered the financial system, and I explained why the next 6 to 12 months will be dire. The world is still licking its wounds after COVID, and in my opinion, it will not be prepared for a new shock. In most countries, the companies that went bankrupt during COVID are companies that no longer pay taxes today, reducing the government's revenue. Insufficient revenue will only create new inflationary pressure and perhaps the appeal of printing more money, and if the governments do not want to print money, then they somehow have to borrow it from somewhere. But where from? Where can a government obtain money? If we look at traditional treasure chests such as Japan and China, we see that investors' money is becoming increasingly scarce. We see how US bonds are collapsing.

So, in other words, the population is becoming poorer, the cost of living is higher than ever, there are constant signals that the entire planet is running short of money, and governments have record budget deficits while receiving less revenue in the form of taxes. What do you think will happen? Do you think they will somehow be able to reduce costs? No, not at all. And so the only responsible policy is to raise interest rates. I explained to her how it could be possible that the inflation coming from Iran will gradually appear over the coming months, and how central bank interest rates will most likely rise to 3.5% or 4%. A central bank interest rate of 4% brings consumer interest rates of 5% or 5.5%. I therefore explained how I believe this is a chain reaction that cannot be avoided, and how interest rates of 5% will make more and more people who bought houses at interest rates of 1% unable to afford them anymore, potentially leading to a flood of houses for sale next year.

I went even further with my analysis and said that the situation could even become differentiated, with the prices of expensive houses and properties falling because fewer and fewer people can afford to buy such properties, and because they become unaffordable at higher interest rates. After all, a large house is most often bought by a single family with only a few sources of income. At the opposite end, it could be possible that all these people selling houses would want to remain homeowners and would turn towards apartments, where prices are lower and more affordable. In my reasoning, the high inflation that we cannot yet see will lead to an increase in interest rates, a decrease in the prices of large and expensive houses and properties, and an increase in the prices of small and medium-sized homes.

From there, I explained to her that a buyer she has today is worth gold. But I went one step further. I recommended that she sell the house if she has a buyer and move into a rented home in Italy for six months. A modest rent of 500 euros per month for six months would cost her 3,000 euros. That is her cost of "staying in business." By moving into a rented home, she gives the market time to react, gives the Italian central bank time to raise interest rates, and thus forces as many Italians as possible to sell their expensive houses. At that moment, armed with capital and a "cash is king" banner, she could make aggressive offers.

I drew on a piece of paper how a house worth 350,000 euros today in Italy might be worth 300,000 next year and how she could make an offer of 270,000. In this way, she could exchange her house and perhaps even buy one or two small apartments to rent out and provide herself with a lifeline for future storms. In my mind, everything was clear, but in her eyes, I could clearly see that she did not understand anything. I encouraged her to analyze everything carefully and to keep in mind that this was not financial advice, but merely my personal opinion about what I would do in her situation.

When I got home, I tried to put into writing what she had told me. 150 square meters on a plot of 700 square meters for 550,000 euros returns an average of more than 3,500 euros per square meter. The current average price for the region is between 2,600 and 3,100. And yet she refused this offer. This evening, I spent five minutes talking to her about her bronchitis and about 15 minutes talking about economics.

If we think about it, it is clear she was unable to realize that the offered price was not actually that low. Her personal desires and expectations about how much her house should be worth or the profit she deserves prevent her from seeing reality. Even my recommendation to make multiple offers below market price, explaining to her that profit is not made when selling but when buying, was not taken seriously. It seems more logical to me to offer below market price than to wait for someone to offer you above market price.

I sat trying to understand the mistakes she is making. First of all, she does not realize what the average market price is, nor how the asking price differs from the actual selling price. Even so, her property is at the upper end of the range. Besides that, she fails to see that a buyer today is worth ten potential buyers in an imaginary future. Although she lives in the same reality as I do, she fails to anticipate that the financial situation of most of us will deteriorate because inflation has not yet reached end consumers. So most of us will have increasingly higher expenses in the coming period. And if expenses increase, how will we be able to afford houses?

Besides us consumers suffering, governments are suffering too, and so are banks. Interest rates will undoubtedly rise, and the tragedy is that this will reduce the number of potential buyers. If she is complaining now about not having any buyers, why would she have more in the future? Even if the war in Iran ended next week, we would most likely have an oil shortage for the next ten years. Just think about how many cargo ships have been destroyed in recent months and how many years it takes to build a single ship. You can divide the resulting number by the number of shipyards in the world capable of building such ships, and you will get something close to zero. And finally, the fact that she currently owns her house makes the idea of living in a rented home, even for six months, terrifying to her. I saw in her eyes how she rejected this idea.

So why do I see an opportunity where she sees a barrier? Three weeks ago, we also went to the bank and inquired about lending conditions. Your mother's and my reasoning is to wait a little longer. As I explained to the bank adviser, interest rates are not high enough yet to buy something. Only when people are forced to sell houses they could not afford in the first place will they reduce the price significantly. Some will even accept offers below market price, simply happy to get rid of their loans. An increase in interest rates from 3.5% to 5% is less harmful to the loan taker if the price falls from 400,000 to 330,000.

At the beginning, I promised you two life lessons, my dears. Have you managed to understand them on your own? First of all, you must not become emotionally attached to your possessions. Whatever you own, you must never become emotional slaves to it. That will prevent you from seeing the real opportunities in life. The second lesson is not to be ignorant of what is happening around you. You must always be curious and try to understand what happens in the global economy and, even more importantly, why it happens. What I tried to do today is merely an exception, an epileptic episode, if you like. In reality, nobody is going to take the time to explain to you how the world works, and if you do not understand, most likely, even if someone explains it to you, you will not be able to understand.