[AlexandrB]

I don't think it's going to be painless. There are asset bubbles in multiple sectors ranging from real estate to collectibles. Either these will pop and many will be left holding the bag or more serious inflation is on the way.

[antihipocrat]

Assets have increased in value because interest rates are close to zero per cent. Other investment classes (like bonds and cash savings) have a similar return on investment to the interest rate i.e. close to zero. In this scenario it makes sense to go for assets like property and shares because the opportunity cost is favorable.

One of the most straightforward ways the asset bubble will pop is if interest rates rise. For interest rates to rise there needs to be inflation at high levels for at least a couple of quarters. If we see another few months of inflation above 4% the fed will need to signal shift toward increasing the interest rate, only then will we start to see a rebalancing of investments away from assets and back into cash.

[bob33212]

Not necessarily. Just look a crypto, these people are not selling. Just being a crypto millionaire on paper is good enough of a reward. They have no desire to sell it all and buy a bunch of retail goods. Housing is unaffordable to average workers in many places, but consumer goods are not going to inflate like crazy until there is a higher demand for them.

[dalbasal]

I think there's a mirror to this in the real economy too.

"Capital" isn't consumed by much of the tech industry in the same way as it was/is by manufacturing. If you're a toaster startup, you'll need a factory, steel, etc. Actual, physical capital that needs to come from somewhere. When your toaster startup goes viral and scales, you'll need more of that physical capital. For every toaster you sell, you'll need to buy more parts and materials.

A tech startup needs riskable money to figure out what they're making, but once it's profitable, they're not sitting across from bankers discussing finance. Also, when covid hits and demand for movies skyrockets, amazon prime or netflix can sell as much as people will by. There's no need for prices to go up. Marginal costs don't exist.

They're pretty much insulated from both real and monetary shock. All they care about is demand. There will not be a shortage of steaming content services' supply chain. A netflix is limited in how much it can invent, but it isn't limited in how much it can produce. Doubling the number of subscriptions or viewing times is trivial. They don't owe on loans.

[bob33212]

Under that scenario inflation could hit A list entertainer salaries. Chapelle could say his next 1 hour special is going to be licensed for 800 million dollars to whoever wants it.