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.
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...