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the reason bubbles form is because investors have no alternative (TINA - there is nothing else). In times of extremely high inflation (5% - 10%), you can't be
by throw8383833jj 5y ago
the reason bubbles form is because investors have no alternative (TINA - there is nothing else). In times of extremely high inflation (5% - 10%), you can't be in bonds or cash. So, this forces everyone into equities. Even at just 10% inflation, you'd loose half your cash in just 7 years.
and the CPI figures underestimate inflation by at least 2-3% with all their hedonistic adjustments. it used to be that economists would get a basket of goods to measure inflation. there's hardly any need for that anymore. Now that housing makes up 60%+ of everyone's (at least the latest generation of house buyers/renters) expenses, you just use housing as a proxy for inflation.
- ahtihn 5y ago> Now that housing makes up 60%+ of everyone's (at least the latest generation of house buyers/renters) expenses Is that actually true for the median US resident? I have a really hard time believing it. I can believe it's the case in SF and some other big cities maybe.
- throw8383833jj 5y agonot the median. But, the average person buying in at today's prices, is going to be pretty close to that. I saw one statistic that said 25% of millenials were living at home. and those that weren't, were spending 40% to 50% on housing. of course someone buying now, is even worse of than that 40% to 50%. I think a better measure might be # of hours worked to afford 1 sq ft. (1970 vs 2022)
- imtringued 5y agoI find it amusing that nobody really cares about inflation and only about the artificially induced housing shortage which has nothing to do with economics and instead is all about urban planning. People used to build cities like NYC but now they refuse to do that.