In the long run, asset prices cannot normally rise faster than goods and services prices: What possible consequences?
In OECD countries since the 1990s, asset prices (financial, real estate, etc.) have risen much faster than goods and services prices, due to the skewing of income distribution in favour of earnings and to highly expansionary monetary policies. I n the long run, however, asset prices and goods and services prices must rise in parallel. If they do not, then the savings of the “young” are no longer sufficient to buy the assets of the “old” who sell them, and there are no longer asset buyers. The question is how this re newed correlation between asset prices and goods and services prices takes place: Via a fall in asset prices, due to a collapse in demand for assets, followed by slow asset price growth? Via a sharp rise in inflation (in goods and services prices), due to a sharp increase in demand for goods and services on the back of wealth effects?