[joe_91]

A great breakdown - thanks for the insight! I often panic when I look at the amount of money printing thats going on but I always forget about the velocity! I think this might be because it's rarely talked about.

What are your thoughts about the rapid asset inflation (stocks/housing) vs the stable consumer goods side of things? Surely they can't stay disconnected forever?

[arcticbull]

These are challenging areas and I'm not an expert on all aspects of this however housing is one I've read a lot into.

Housing on an inflation-adjusted dollars per square foot basis is exactly the same now as it was in the 1970s according to the BLS, on average, across the US. In fact, after the recent drops, it's probably more affordable per square foot. [1] There are some caveats, though!

Housing is at the mercy of local ordinances. In major metros like SF and NY the city councils refuse to allow new construction, but the economies around them have been so strong that demand outstripped supply and prices skyrocketed.

In suburban areas, setback rules, zoning rules, building codes and also tastes, have left houses twice as big on average now as they were in the 1970s [1]. This is a policy issue though, and it is truly problematic, although COVID seems to have been quite the equalizing force in a lot of ways.

[edit] One way of solving it would be national zoning rules, and permitting the construction of housing in any zone (much like Japan does [2]). The other challenge is Americans need to come to terms with the fact that housing cannot be both affordable and an investment. Investments by definition are designed to become less affordable over time.

As for the stock price explosion, I'll try and dig up an article I saw recently that attributed it to, roughly, poor folks are still poor (and so never really invested), but the wealthy and middle class have actually benefitted disproportionately from the COVID situation, PPP, stimulus, etc, and there's a lot more disposable income right now in the market. I'll mark that as a [citation needed] on myself as I try and dig it up.

[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...

[2] http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html

[ivanche]

Not OP, but isn't the whole point of investing in stocks to have returns which beat inflation + tax by a few % each year (on average)? In other words, investors are rewarded for the risk they took and the more time passes, the greater rewards are.