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Comment by Analemma_ | Hacker News Reader

> It's reasonable to assume USD is losing 8-10% of its value every year from 2020 onwards, thanks to Fed policies

Are you willing to bet money on this claim? Because I will happily take the other side of that wager. It is absurd.

Houses around here have been going up in price 5-10% year over year around here since, like, 2012 or 2013. Foreclosures aside (now long gone, but widely available for a few years), they never dropped all that far from their '08 peak, really, either. I'm in probably a third- or two-and-a-halfth-tier US city, so this isn't NY or SF or CHI or LA or even Austin or Denver. New housing is going up fast and everywhere, and has been non-stop aside from a very brief period after the '08 bubble. 2020 happened, and the prices went up even faster, and everywhere in the city, not just in certain areas.

WTF is going on, if not inflation? (serious question, I'd like to know what other explanation there could be)

don’t think so. look at canada’s housing market, look at NZ. those markets are truly insane compared to the US, and they’re not printing a ton of money or experiencing major inflation. housing has become a good investment simply because the supply isn’t great enough in desirable areas, and people with money recognize it. inflation is up, but not on the scale you claim.

Right, but, all other assets seem to be doing exactly the same thing.

Canada's M1 is up 27%, M2 up 20% over the last 12 months. They aren't printing nearly as much as the US but it's still dramatic vs prior years.

I dunno about NZ, but Canada printed pretty hard for COVID relief[0,1].

Regarding inflation, anecdotally food etc prices in Toronto seem much higher this year than last, and did last year too, but the CPI data doesn't share my opinion.

0 - https://betterdwelling.com/canadas-money-supply-is-growing-a...

1 - https://economics.bmo.com/en/publications/detail/76f0b0ca-c0...

Our groceries seem to be at least 2x what they were in '05. Meanwhile, if anything, our tastes have gotten cheaper and we're better at bargain-shopping.

US CPI tells me they should only be 35% higher. LOL. Bullshit.

Maybe Toronto will reach peak crane?

https://i1.wp.com/www.denverpost.com/wp-content/uploads/2021...

Money laundering raising comps and everyone else then using those comps to justify prices. Incredibly cheap money, and everyone wanting to live in a house instead of condo/apartment. Demand is >> supply - limited supply means the prices rise. Doesn't explain everything but certainly points to some of the what I will say is insanity in the market.

Isn't that the question the article tries to answer?

Yeah, and I'm trying really hard not to read it as "it's inflation but for some reason we're going to not use that word once in this whole article", but can't. They write about a bunch of things that sure seem inflationary ("borrowing money is basically free"—OK, right, so why would that be, and why would it stay so cheap so long, and what effect does that have?), and then also write about how middle-class folks are pulling lots of money out of the stock & bond market to buy houses, so that's why houses are getting more expensive... but the market's gone up like crazy over the last year! It's not like it even had a normal year, despite, you know, a pandemic, and all this supposed shifting of money from it to housing. Crypo's booming. Approximately all asset prices are booming.

If all assets are going up, seemingly nonsensically, what is that? It's a really, really broad-based bubble, or it's the leading edge of an initially-unbalanced-but-surely-it-won't-stay-that-way inflationary wave, no?

It's probably not going up quickly in the suburbs or other less desirable areas. The problem that happens in pretty much every city is that the local government prevents development. And now that cities are becoming more desirable you have an ever growing number of buyers chasing a relatively fixed number of homes.

It's not inflation. It's classic supply and demand.

> It's probably not going up quickly in the suburbs or other less desirable areas.

I assure you, they are. Also you're way out-of-touch with common sentiment if you think the suburbs aren't desirable, if for public school quality if nothing else (for the record: I hate the 'burbs). Source: I've bought several houses in my city (serially, I'm [sadly, in the current market] not a property investor or landlord) since the '08 crash, all in the 'burbs, keep up with a couple real estate agents, and have had many friends and family buy all over the city over the same time period, including within the last year. There's been non-stop, extensive housing construction for damn near a decade now, and prices are still doing this. People are being bid out by over-asking cash offers on day two of a property being on the market in very mediocre areas. Lots are selling over-asking in the same manner. It's nuts.

Also, if it's not inflation and is "classic supply and demand": what's up with all other assets then? If demand for all assets is up, such that prices are all way up, even and especially through 2020, what do you call that? Housing was just an example.

You are referring to a very specific asset market in which essentially millions of people participate in legal, open, price-fixing conspiracies. There are potentially whole armies of people whose job is to keep those prices high, and to raise them higher. Year-over-year price increases in these asset classes (housing and stocks) may be baked into our whole economic model at this point. If the graph ever flatlines, it would trigger our slumbering debt crisis to go nuclear again, because of the way things are structured.

There is an entire segment of our economy (the FIRE sector) which is based on running these operations as ponzi schemes, and they are both funded and then bailed out by massive acts of private debt-as-money creation - it is like a recurring Marshall Plan, which guarantees the major players can always outrun the ever-looming debt crisis which is engulfing we, the little people.

The point is that we never have to actually fix the debt crisis or solve the problem of stagnant wages and decreasing demand, if balance sheets can always be corrected with fresh currency injections at the highest levels. Maybe you saw the gent on here who posted the Atlantic article about private firms owning 1 in every 5 American houses.

Yet your analysis would seek to use these (home) prices as an innocent, quasi scientific marker of the purchasing power of the dollar. I get the motivation there - housing is a key basis of human experience. But there is so much market manipulation going on in these asset classes that using them as a measurement of the value of the dollar is IMO not correct. The most powerful corporations around have chosen to backstop some of these assets, and that has supported a speculative boom on the part of anyone who can get bank money to 'invest' in bidding up property prices. Price discovery does not happen in that scenario, because everyone is buying things with the Bank's money, not their own. And if they don't buy it - guess what? The Bank will. Through a shell company, basically. These are some reasons not to measure the dollar's purchasing power by looking at the price of housing in America.

Yes! Housing on its own would be one thing. Might just be housing being housing (though... way more than it usually is, so, there's that). Now. How are other assets doing?

People who want to tell the old Austrian story about money will always find supporting evidence to do this. If you are seeking to view everything as a nascent currency crisis, because thats the only economic narrative that appeals, then there will be things that tie into that.

A modern iPhone, price converted into 1970s equivalent technology, has many millions of dollars of 1970s technology on it [see YT link below]. Now available for 600 dollars. An older gentleman I was speaking with yesterday told me about how nickels and dimes had become worthless.. indicating a decrease in value of the American currency. On his lap he was holding, what would have been for the era he had in mind (60s), a sleek, miniaturized supercomputer. These are now available for less than 1000 dollars with a monthly operating cost less than 100 dollars, including power. The same 10 dollar bill that in the past might have bought more food, now buys an unending amount of technical gadgets and do-dads mass-produced from the Chinese market, which can be shipped to one's doorstep for either free or an additional 5 dollars. Those products and markets didn't exist or were not open in this golden age of nickels and dimes he was referring to.

I may have misread your comment, but if you are leading me down a primrose path to speculate on the relative worthlessness of the dollar, because some asset prices have increased - I'm not going there. I've seen people parroting these arguments for 20 years now online. Stocks and housing are special cases. Cars are actually also weirdly price-fixed to support the auto industry. Everything else is getting relatively cheaper. This guy has some worthwhile thoughts on it: https://www.youtube.com/watch?v=dSw41MqPFoM

I am betting money on this claim, 90% of my net worth is in equities and BTC/ETH.

It’s too much risk. It may work out, but unless you know something the rest don’t, it is just gambling.

I understand how it can look that way. But from my perspective, being long USD is a much more dangerous gamble. I'm young and have a high risk tolerance, we will see.

Choosing to allocate most of your net worth in, e.g. cash, is a gamble too.

Holding cash is worse than a gamble, it’s a guaranteed loss.

It seems like equities do not (long term) perform well relative to currency in inflationary markets because companies' costs also rise. Apple, e.g. would be spending more per unit iPhone and would eat margin or require a price increase, which leads to fewer sales etc.

There are exceptions, like energy companies, for example. IIRC Exxon went up in the 1970s while the market as a whole stayed flat and lost value relative to the USD.

At the extreme, in the Weimar republic, the stock market did what the US is doing today... until the stocks flatlined relative to the currency[1].

[1] - Haven't read it but sources that claim this point to this book (I just bought it though, it's only $3): https://www.goodreads.com/book/show/8567383-when-money-dies

Thanks for the link, looking forward to reading it. I agree, I think we will see SPY do just fine for the next few years. Then, it won't be fine.

In the long term, everyone with more debt than assets is on the other side of that wager.

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