Could our historically low interest rates and historically high house prices have some other connection besides the obvious one that the former causes the latter? Could they both be driven by some underlying problem with the world economy? (@ATabarrok, @EconTalker?)
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I see it as stemming from historically high concentrations of wealth chasing fewer and fewer good investment vehicles.
That's the sort of thing I mean. A lack of new investments implies an underlying lack of innovation, and that would be worrying.
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Yeah, it worries me. My preferred 'solution' to this puzzle: the sort of innovation we most need right now is not the kind of innovation money can help with all that much. We're in a holding pattern while a new social contract gets written.
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(Or, money can help. But needs to be deployed in ways that require an enormous amount of cooperation to be effective.)
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As wealth concentrates, aggregate demand falls. The rich can never spend as high a proportion of their income as the poor must do. This leads to lower interest rates to stoke demand. Which leads to higher asset prices, and wealth concentration. Which lowers aggregate demand.
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Aggregate demand is a monetary phenomenon completely divorced from wealth concentration. Besides, rich people aren’t sitting on piles of cash. They’re heavily invested. The question is whether they’re investment preferences are high- or low-risk.
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Yesterday someone in the tech space said there is an adjacent "tech media" ecosystem forming That sounds a lot like what happens when it becomes too difficult to innovate/gain an edge Professional talking becomes more popular when doing the thing becomes too crowded/competitive
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The demographics of aging and wealth are risk-averse. More wealth than ever is held by, or on behalf of, retirees with low risk-appetite, regardless of how much innovation there is.
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Great take! But also lack of access to great investments in innovation. And real estate in SF and other hubs is certain to not go to zero which is important for 99% of humans. Its a 'safe bet' long-term on cities which might correlate w innovation and economic progress.
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If you want to grow frontier industries you need to increase the wealth of people on the frontier. We’ve had a decade of industry stimulus, now we need more customer spending power.
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The price of real estate is killing innovation *in the bay area*. If you want a place to live, and you want to work in a startup, you need a spouse to support you, or wealth from prior exits. Who can afford to do a startup when rent is 3K?
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Bay area is a non starter no young people should ever move there. It's wealth transfer from young to old. NIMBYs run the place the tech folk have zero power. Sad really.
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