Comment by treis
1 day ago
It points out a problem but ignores the obvious solution. We want the nominal value of stocks, houses, and essentially everything to continually increase. The escape hatch is that these can increase in value slower than inflation and thus be reduced in real value.
Everybody assumes that correction will happen via crash. And perhaps that's the case for stock market prices. But while we have had housing price crashes in the past, that's very much the exception. House prices are very sticky, people are irrationally unwilling to sell their houses for a loss. I've seen several markets where real estate nominal prices stayed roughly flat for a couple decades, moving the market from "overpriced" to "underpriced" without anybody really noticing.
"Just build more houses" is the fix for many (but not all) of the US economy problems. Not sure about the UK, but I wouldn't be surprised if it applies there too.
Home building is indeed the solution, but it can never outrun the printing presses. Ultimately there is a bare minimum cost of a house too. If people are too poor to pay for that, the home building pipeline will have to stall. People need to be productive and competitive enough in the economy to be able to pay for all the new houses being built.
People want absolute values to be ever increasing too, but they'd settle for nominal values to be ever increasing. This violates the law of supply and demand, and common sense about depreciation and changing demographics. We should experience falling prices as material wealth increases in the world. Governments and money lenders hate this because they want to print off as much money as they possibly can get away with (as if they know how much that amount even is). They can't stand the idea of someone being rewarded for conserving their own resources, when those resources could be siphoned off for some other bullshit.