Everything depends on wages

The fact that wage growth is slow results in low nominal interest rates and low inflation. The Fisher relationship is then satisfied with both low real interest rates and low inflation. Because interest rates are low, fiscal policies are expansionary and stimulate demand. Because real interest rates are low and demand is stimulated, asset prices (equities, real estate, etc.) rise rapidly. All these developments therefore stem from the low wage growth. If wage growth became strong, inflation would rise, nominal and real interest rates would rise, fiscal policy would become restrictive, demand would slow and asset prices would fall. It follows that w age growth is the crucial variable to watch.