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Comment by take_a_breath | Hacker News Reader

There is a reasonable argument that we do have inflation, it’s just being shown in assets prices, not commodity prices. Things like education, housing, stocks, art, startup valuations, and more have signs of inflation even if oil and food prices don’t.

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I would agree to this but this isn't necessarily a blanket monetary policy of spending too much money across the board and is a result of political capture by the wealthy where it's used to keep fueling the infinite growth machine for the already wealthy.

I mean housing policy in itself is entirely political: weaponized zoning laws and the lack of new construction to match the growth of the country are a direct result of this infinite growth machine. Housing being considered "an investment" will further perpetuate this price inflation because there is a vested interest in not allowing property values to decrease which is what happens when you can build to match demand.

The housing situation is one giant prisoners dilemma loose-loose, nobody wants to loose out. I've long believed that houses/land are overpriced but I've recently (Just prior to Covid) become a home owner because I needed somewhere to live and the mortgage repayments are cheaper than rent here. It could have been a spectacularly bad move.

Well, it's not a lose lose situation to the people that don't own property yet. They would greatly benefit from housing costs dropping, since they could afford to buy their own house or pay less in rent. The problem is that the people who don't own property tend to have less political power and influence than property owners.

I agree that the basic human need of shelter should be more affordable. I remember 10 years ago, when prices dropped after the financial crisis, people were saying "this is it" but it is politcally untenable to allow prices to drop. So those that didn't own eventually got tired of waiting and then when they have bought they don't want a drop, because who wants to burn money?

> I agree that the basic human need of shelter should be more affordable.

Affordable where? In West Texas or in Paris? Today, Paris' population is ~2M and the residential buildings cannot be taller than 50m by law. If 10M people want to live there, is it a "basic human right" to build 10M homes for them by replacing existing Parisian building by skyscrapers? What will that do to the existing fabric/culture of the city, and who gets to decide what is allowed? Existing residents or the would-be residents?

Perhaps the question isn't where but when.

40 years ago my parents were able to buy a large modern home for about 3 times times one of their salaries. For young people today it is more like 6 - 10 times the combined salaries of two people.

Where did your parents live? In mid-west or in suburbs or in Manhattan? Where are young people living today and are those similar locations as their parents?

It could be a bad move overall, but there is a floor to the loss, because you get a secure roof over your head that you can become attached to. That has value, especially with a family and community nearby.

Yes there is so much mental gymnastics involved in "basket of goods"

My dad bought a house and had a kid in London aged 27. He didn't even have a degree and was an immigrant arriving with all the money he had scrounged in his hand.

Compare that with the London of today where £200k buys you a 80sqft squat:

https://www.dailymail.co.uk/news/article-8541513/Micro-studi...

But you know, house prices and rent aren't a good so there's no inflation so there's no problem right? /s

All that extra liquidity is going straight to capital assets. People think deflationary assets are a good thing (for themselves), but they tend to promote stagnation.

This is correct based on data I've looked at. In fact if you are okay choosing non-capacity constrained housing and education, even those are not having much inflation. If you are okay with community college or even better self motivated to learn online it is very much affordable. If you are ok not living where every else is, the cost of a house is inflating by cost of lumber and local labor costs versus infinite inflation for houses which face land/NIMBY/zoning constraints.

Education, housing(rent, not the price of a house), and medical care. Are all included in the CPI. Education and medical care are going up due to reasons unrelated to inflation. Shelter is going up at 3% due to supply constraints.

The prices of houses, stocks, art, and startups are not. The reason is that assets prices are very heavily affected by interest rates.

Imagine a house that costs $100,000 but rents out for 10,000 a year in profit because interest rate are 10%. Now imagine interest rates drop to 1%. Arbitrage will mean that individuals will borrow money at 1% and buy the house and collect 10%. This drives up the price until the return on the house matches the return of other investments, or basically until the house is worth $1,000,000. Now the cost of rent hasn't changed, but the price of the house has gone up 1,000%.

Did the economy experience 1,000% inflation? No because the cost of living hasn't changed.

Assets experienced a 1,000% inflation. People can still scrape by being consumers and renters (cost-of-living), but owning assets moves farther and farther out of reach.

Since our economic system is built on assets (they appreciate, you can borrow against them, etc.), the inequality gap keeps growing.

Housing and education are both represented in the CPI. Housing alone is almost a third of it.

I haven't dug in recently to the CPI, but I wouldn't be surprised to find underlying flaws in the CPI's representation of different groups of people such as people who live in urban areas, people who are in a specific income bracket, etc. The CPI may reflect those things, but if those proportions are off it can significantly affect the inflation number it spits out.

I'm not an economic expert but it baffles me that people pay attention to a single CPI and don't look at many at once when analyzing economic policy. A single CPI optimization is inherently going to cater towards the effects on one group, but without study we don't even know what that group is.

Agreeing with what you have said here, but you might have to leave food prices out of the argument soon. I don’t know what numbers economists look at for this, but just as naive consumers we are noticing that food prices are going up.

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