Economic value is a political illusion often enough and particularly now. How for instance, is it that when the median household income declines, the percentages of workers with jobs declines, the middle class shrinks, the more rewarding jobs are exported or offered to cheaper aliens while the cost of living trends upward, we nevertheless see both real estate and stocks setting ever higher price records?
Simple enough: The price of a stock or of a house in dollars reflects both the value of the stock or house and the value of the dollar. The Federal Reserve has been dumping unearned dollars out of the air into real estate and through banks and others into the stock market for a long time, bidding up the respective prices without respect for any underlying, real world economic value.
That says: Those stocks and homes aren’t worth more; rather, those dollars trading them are worth less. Ad so, the next time the economy crashes and resets, we should expect both stocks and real estate to come out with significantly lower values that reflect the underlying economic ventures or property rather than gamed money. That is why some observers refer to present stock and real estate values as a bubble … Any observer who can explain why this is not so, will leave us feeling much better.