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Sorry if this is a stupid question/thought... but wouldn't a mass run to asset classes itself cause inflation? Like some self fulfilling prophecy?

wayoutthere 5y ago
The cause of the problem is that companies are claiming an outsized share of productivity growth such that the house is simply worth more to them. There’s more money in the investment class than there is among homebuyers, and the investment class needs somewhere to put their money that won’t depreciate. This is what happens when real wages stagnate for 20 years but the economy keeps growing and consolidating. Eventually it catches up to you and you end up with a decade of stagflation while the imbalance corrects itself and a competitive market is re-established. Unchecked free-market capitalism has its drawbacks in the long term; we fucked around and we’re about to find out.
whimsicalism 5y ago
Can we please stop using the term inflation to mean rising asset prices?
- silisili 5y ago
  The two are often intrinsically linked, especially in the case of housing. It's not that one sees house prices rising and says 'inflation!', but more where it would naturally lead. Or another way...a rise in house prices means a rise in rents which means rise in renter wages which means rise in prices. Over the course of some time, naturally.
  - whimsicalism 5y ago
    They are often linked, but they are not intrinsically linked. I'd argue that "often intrinsically" is oxymoronic anyways. A rise in the specific asset class of housing lowers the dollars ability to purchase housing, I'll give you that. But asset prices hiking in general are not inflationary. It could be because people are chasing yields (probably inflationary) or it could be that there is new information/discoveries making it so that the expected productivity of these assets is going to be much greater, which is not inflationary.
webinvest 5y ago
Yes!

wayoutthere 5y ago

The cause of the problem is that companies are claiming an outsized share of productivity growth such that the house is simply worth more to them. There’s more money in the investment class than there is among homebuyers, and the investment class needs somewhere to put their money that won’t depreciate. This is what happens when real wages stagnate for 20 years but the economy keeps growing and consolidating. Eventually it catches up to you and you end up with a decade of stagflation while the imbalance corrects itself and a competitive market is re-established. Unchecked free-market capitalism has its drawbacks in the long term; we fucked around and we’re about to find out.

whimsicalism 5y ago

Can we please stop using the term inflation to mean rising asset prices?

silisili 5y ago
The two are often intrinsically linked, especially in the case of housing. It's not that one sees house prices rising and says 'inflation!', but more where it would naturally lead. Or another way...a rise in house prices means a rise in rents which means rise in renter wages which means rise in prices. Over the course of some time, naturally.
- whimsicalism 5y ago
  They are often linked, but they are not intrinsically linked. I'd argue that "often intrinsically" is oxymoronic anyways. A rise in the specific asset class of housing lowers the dollars ability to purchase housing, I'll give you that. But asset prices hiking in general are not inflationary. It could be because people are chasing yields (probably inflationary) or it could be that there is new information/discoveries making it so that the expected productivity of these assets is going to be much greater, which is not inflationary.

webinvest 5y ago

Yes!