6 ms·

Instead of seeing as high returns, you can also look at it as money losing value due to excessive printing of last year.

sojournerc 5y ago
Exactly. Same with housing. They are not more valuable, the dollar is less valuable relative to them and likely will only get worse as equities and real estate are the good hedges against inflation, causing a positive feedback loop. Higher interest rates would create an incentive for traditional savings, but would destroy companies (and gov) holding big debts.
- TheHypnotist 5y ago
  I'm not sure where you are but housing over the last year is a real supply/demand market condition. They aren't arbitrarily being overbid 10%+ because the dollar is worth less suddenly.
  - sojournerc 5y ago
    Sure, but supply is limited in part because of the wealthy folks buying properties they will not use as a residence to hedge against inflation. That real-estate is the least risky manner to protect wealth is a result of low interests rates and inflationary monetary policy. Printing as many dollars in the last year as there were in existence before, has perturbed a "normal" real-estate market. More dollars flying around means overbidding 10% is possible, especially since the additional interest is relatively negligible (wealthy folks will still take a loan in such conditions since rates are at rock-bottom).
    - jonfw 5y ago
      Supply is mostly limited because demand is up among millennials and material shortages have increased costs and delayed construction.
      - sojournerc 5y ago
        I'll agree there is natural price pressure upward, but the recent acceleration is concerning, both in equities and real estate values. Millennials were buying houses before all this too (I am and have) without this level of inflated prices (depending on where you are and how "free" the market is).
        TheHypnotist 5y ago
        Well that's exactly it. In my area, inventory is scarce because of an influx of people who are used to paying an arm and a leg to live. In certain counties, prices are up 20-30% simply due to demand. Speaking with my own realtor, competition bidding is very common now. Rarely do you see a house go for asking or below asking.
staticman2 5y ago
Except measuring the value of money as something other than the ability to provide consumption (the ability to buy things you consume, rather than investments) doesn't make sense, regardless of how fashionable it is on this site to throw around the term "asset inflation".
- nocommentguy 5y ago
  Actually, measuring the value of money as something other than the measuring stick to compare capital assets doesn’t make sense, regardless of how fashionable it is to defend money printing by verysmart internet economists. See what I did there? It’s not an argument.
  - staticman2 5y ago
    Okay, let's phrase this another way. If your ability to consume food, water, shelter, and entertainment has not been impaired but you are complaining about "asset inflation" because you learned economics from message boards perhaps you are being haunted by nonexistent boogeymen and need to chill out?
    - roenxi 5y ago
      There has been a big leap in technology over my lifetime. "Not impaired" isn't the target, if all the wealth gains weren't being directed to asset owners by asset price inflation then the people who were working to create them would be getting a bigger share. I've done the obvious thing and bought assets, but it keeps getting harder and at some point maybe all the people who are working hard might notice that they are doing all the work and people with assets are getting all the benefits. The government should be more neutral on whether asset owners or workers get the benefits of work - the market is naturally slanted enough without it being further tipped towards asset owners. You might be happy in stasis. But this is an age of wonders and the people who do the work to bring it about should be compensated roughly in line with their contribution. As would be happening if the government didn't keep leaning in with monetary policy to prop up asset prices relative to wages. As a bonus, if the government did leave the market alone, people would probably work harder and there'd be more stuff to go around, even ignoring the fact that more of it would be distributed to the sort of people who work hard.
imtringued 5y ago
Consider that the Fed increases the money supply through debt. This means that for the money supply to increase, there needs to be an increasing amount of debt because eventually people pay back their debts and most of the money the Fed introduced into the economy disappears.

sojournerc 5y ago

Exactly. Same with housing. They are not more valuable, the dollar is less valuable relative to them and likely will only get worse as equities and real estate are the good hedges against inflation, causing a positive feedback loop. Higher interest rates would create an incentive for traditional savings, but would destroy companies (and gov) holding big debts.

TheHypnotist 5y ago
I'm not sure where you are but housing over the last year is a real supply/demand market condition. They aren't arbitrarily being overbid 10%+ because the dollar is worth less suddenly.
- sojournerc 5y ago
  Sure, but supply is limited in part because of the wealthy folks buying properties they will not use as a residence to hedge against inflation. That real-estate is the least risky manner to protect wealth is a result of low interests rates and inflationary monetary policy. Printing as many dollars in the last year as there were in existence before, has perturbed a "normal" real-estate market. More dollars flying around means overbidding 10% is possible, especially since the additional interest is relatively negligible (wealthy folks will still take a loan in such conditions since rates are at rock-bottom).
  - jonfw 5y ago
    Supply is mostly limited because demand is up among millennials and material shortages have increased costs and delayed construction.
    - sojournerc 5y ago
      I'll agree there is natural price pressure upward, but the recent acceleration is concerning, both in equities and real estate values. Millennials were buying houses before all this too (I am and have) without this level of inflated prices (depending on where you are and how "free" the market is).
      - TheHypnotist 5y ago
        Well that's exactly it. In my area, inventory is scarce because of an influx of people who are used to paying an arm and a leg to live. In certain counties, prices are up 20-30% simply due to demand. Speaking with my own realtor, competition bidding is very common now. Rarely do you see a house go for asking or below asking.

staticman2 5y ago

Except measuring the value of money as something other than the ability to provide consumption (the ability to buy things you consume, rather than investments) doesn't make sense, regardless of how fashionable it is on this site to throw around the term "asset inflation".

nocommentguy 5y ago
Actually, measuring the value of money as something other than the measuring stick to compare capital assets doesn’t make sense, regardless of how fashionable it is to defend money printing by verysmart internet economists. See what I did there? It’s not an argument.
- staticman2 5y ago
  Okay, let's phrase this another way. If your ability to consume food, water, shelter, and entertainment has not been impaired but you are complaining about "asset inflation" because you learned economics from message boards perhaps you are being haunted by nonexistent boogeymen and need to chill out?
  - roenxi 5y ago
    There has been a big leap in technology over my lifetime. "Not impaired" isn't the target, if all the wealth gains weren't being directed to asset owners by asset price inflation then the people who were working to create them would be getting a bigger share. I've done the obvious thing and bought assets, but it keeps getting harder and at some point maybe all the people who are working hard might notice that they are doing all the work and people with assets are getting all the benefits. The government should be more neutral on whether asset owners or workers get the benefits of work - the market is naturally slanted enough without it being further tipped towards asset owners. You might be happy in stasis. But this is an age of wonders and the people who do the work to bring it about should be compensated roughly in line with their contribution. As would be happening if the government didn't keep leaning in with monetary policy to prop up asset prices relative to wages. As a bonus, if the government did leave the market alone, people would probably work harder and there'd be more stuff to go around, even ignoring the fact that more of it would be distributed to the sort of people who work hard.

imtringued 5y ago

Consider that the Fed increases the money supply through debt. This means that for the money supply to increase, there needs to be an increasing amount of debt because eventually people pay back their debts and most of the money the Fed introduced into the economy disappears.