4 ms·

This is also what I believe. If you look at the US QEs there is a tight correlation to the stock market. This most likely did not happen by chance. Inflation h

This is also what I believe. If you look at the US QEs there is a tight correlation to the stock market. This most likely did not happen by chance. Inflation has simply been confined to some select assets. It's all going to come back into the mainstream economy unless the next recession/depression ends up being extremely deflationary before that happens.

sonnyblarney 8y ago
I think the hope is that companies eventually really start to hire more and pay better wages, and then we'll see some actual inflation, and then the Fed will feel safer tightening up. Currently, we are hitting very low unemployment so wages have nowhere to go but up. The weird one is housing: as rates stay low, people take on bigger and bigger mortgages leading to 'housing inflation' ... but it's generally not measured as inflation so it's kind another form of stealth inflation.
- starbugs 8y ago
  What confuses me is that low unemployment obviously doesn't lead to real wage increases (currently). There seems to be something wrong either with the unemployment stats or something else is not quite right. As long as the money that is confined in housing assets doesn't reach the "lower" market of people who actually need to spend that money, it's perfectly logical to me that it doesn't appear as price inflation in the general economy.
  - Terr_ 8y ago
    I suspect that's because the nature of "not-unemployed" is changing. Long ago it usually meant either being out of the workforce (retired, student, homemaker) or a full-time job with benefits. Nowadays we're seeing a decrease in the last category, and an increase in "underemployment" and people holding multiple low-quality jobs to make ends meet. They aren't "unemployed", but they're not in a strong negotiating position either.
- sjg007 8y ago
  You can only "afford" so much house until your wages increase or your equity affords a refinance/sale... unless you can generate side income some way. I am not actually positive on wages increasing. I feel like there is enough information asymmetry in the market that wages will stay depressed.

sonnyblarney 8y ago

I think the hope is that companies eventually really start to hire more and pay better wages, and then we'll see some actual inflation, and then the Fed will feel safer tightening up. Currently, we are hitting very low unemployment so wages have nowhere to go but up. The weird one is housing: as rates stay low, people take on bigger and bigger mortgages leading to 'housing inflation' ... but it's generally not measured as inflation so it's kind another form of stealth inflation.

starbugs 8y ago
What confuses me is that low unemployment obviously doesn't lead to real wage increases (currently). There seems to be something wrong either with the unemployment stats or something else is not quite right. As long as the money that is confined in housing assets doesn't reach the "lower" market of people who actually need to spend that money, it's perfectly logical to me that it doesn't appear as price inflation in the general economy.
- Terr_ 8y ago
  I suspect that's because the nature of "not-unemployed" is changing. Long ago it usually meant either being out of the workforce (retired, student, homemaker) or a full-time job with benefits. Nowadays we're seeing a decrease in the last category, and an increase in "underemployment" and people holding multiple low-quality jobs to make ends meet. They aren't "unemployed", but they're not in a strong negotiating position either.
sjg007 8y ago
You can only "afford" so much house until your wages increase or your equity affords a refinance/sale... unless you can generate side income some way. I am not actually positive on wages increasing. I feel like there is enough information asymmetry in the market that wages will stay depressed.