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".
What is your explanation for the explosion in asset prices over the last year, if not inflation? Do you think the assets have become fundamentally more valuable?
> What is your explanation for the explosion in asset prices over the last year, if not inflation?
Well, a few ideas immediately spring to mind:
a) Historically low interest rates are causing people to chase gains elsewhere. Again, people end up looking to the markets. This has been an ongoing trend exacerbated by...
b) For folks not on the margins, discretionary spending was severely curtailed last year. They had to do something with that extra cash. Many people, during a time of tumult, chose to save. This is only exacerbated a trend that started way back in 2008 due to similar post-disaster psychological scarring. Where did people put the money? Into the markets.
c) Wealth concentration means a huge amount of the cash floating around has landed in the coffers of the largest institutions and individuals. Those institutions aren't using that cash to buy chips at the 7/11. They're either i) saving it, which means putting it into the market, or ii) using it to buy up assets (e.g. acquisitions) which itself bids up prices.
In short: What's going on the market probably has absolutely nothing to do with what's going on on mainstreet.
Of course, that's been true for the last 10 years as folks on the fringes continued to predict hyperinflation post-2008. But, the great thing about disaster predictions is you can always just move the goalposts out...
1) Bonds and bank accounts are paying less than inflation, so to not lose money you need to invest in stock. That doesn't mean inflation is high rather bank accounts stink.
2) People figured out based on recent fed action that the U.S. has a policy of privatizing the gains and socializing the losses. Therefore stocks appear to not be risky, so people bought them up. The only reason you'd put money in a bank account rather than stock is stock can go down, but if you think the government will intervene to prevent stock going down, you might hold a greater amount of assets in stock, bidding up the price.
Tell-tales are all over the place. From explosion in asset prices world wide and cross-industry to micro-signals, such as goods coming in smaller packaging (for the same price) or slightly increasing grocery prices[0].
In my bubble, its mostly tinfoil-hat-wearing crypto-enthusiasts pointing at examples of how toiletpaper comes in smaller packages-for-the-same-price, so my view is skewed.
But its safe to consider all these as datapoints that indicate possible worldwide inflation is building up.
Slow inflation is the norm. Because if you have whole generations working and aren't experiencing growth things are deeply wrong. Not just "corporate lobbyists or those connected to officals have disproportionate influence" wrong but "masses of people working cannot improve their skills, processes, or products at all".
That is a very hard state to get even as a paranoid police state or literal aristocracy which views a minority of small farmer able to sustain their own plot as an existential threat. It is deeply unnatural in the "low probability" sense like your cat walking back and forth across a keyboard or swatting at it and writing passages of famous authors low.
One explanation is to look at the wood market. COVID restrictions have severely constrained supply and the wood suppliers are unable to keep up with demand.
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.
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?
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.
65.8 percent of americans own a home according to an internet search. (An asset). If you want to discuss wealth inequality, I don't think a term like "asset inflation" is necessarily the right way to go about it. Can't we just use terms like home affordability?
I just think reinventing the term inflation encourages sloppy fringe conspiracy thinking.
It's my understanding if the government didn't intervene in markets we'd get events like the great depression returning periodically, which probably are in nobody's interest.
We should really be discussing the right government policies or the wrong one, but I doubt the answer to the problems of our time is zero policy.
When you need to pony up an extra $100k for a down payment and your monthly payment goes up $300 for the next 30 years because real estate prices rise, is that not impairing your ability to consume other things?
It stinks that housing prices have gone up, but fortunately you can rent instead, which is accounted for in CPI measures of inflation.
I would think we could discuss the affordabity or unaffordability of homeownership without making up terms like "asset inflation" and falling into alternative fact rabbit holes about the collapse of U.S. currency.
Renting is not owning, and I question the utility of CPI’s method of measuring it that way.
My contention is increased real estate prices are affecting people’s lives in various ways, such as delaying families, not having families, moving people away from their networks, and at least allowing for a smaller portion of spending on other things in life due to a larger portion going into real estate.
Personally, I would label this asset inflation, but I don't know about the whole currency collapse thing.
I don't disagree with your main points but we have terms like Housing Affordability Index we can use to discuss this. We don't need to use imprecise terms like "asset inflation" which can mean different things to different people.
I wouldn't call some random person howling at the moon a fire alarm.
Never mind that online people have been predicting super inflation since at least 2009. I remember a Youtuber in 2009 that knew economics more than President Obama's advisors because Duck Tales did an episode on inflation.
But I guess by defining inflation as "stocks going up" the Duck Tales expert could have made it categorically impossible to be proven wrong since stocks tend to go up, further removing Duck Tales guy from the mainstream.
