Fundamentally, if you boil any growth based asset down its going to be a “ponzi scheme” in architecture but not in intent.

Growth is natural, given that there are more people born, more money is printed and the economy expands to add jobs to meet those needs.

So yes, if tomorrow, no one else was born, a lot of systems would fall apart. Because growth would stall and liquidity would soon disappear as the last sellers find the last buyers.

There are disincentives around divesting your retirement funds because at that age you probably won’t have the physical capacity to work anymore. So encouraging investment into a vehicle that has shown generational abilities to generate growth and returns and beat deflationary effects seems only logical. The government creates this behavior by agreeing not to tax some income if you invest in your retirement.

However, this isn’t scarcity, stock markets are probably one of the most liquid assets on the planet besides literal cash.

If an economy is inherently inflationary then asset prices will literally always have to increase. In my mind this is less about house prices rising and more about the centralization of well paying jobs within specific economic hubs. There are millions of homes and hundreds of thousands of acres of lands that are practically worthless, but aren’t actually viable candidates because until recently you had to commute and the land lacked investment into the necessary infrastructure to support those jobs.

I’ve seen some arguments that no one wants live in small towns. And I don’t necessarily disagree, because the centralization of talent, competition and investment is often what makes large cities attractive. However, I would be remiss if I didn’t recognize the fundamental aspect that all large cities were once small towns.

If companies or individuals aren’t willing to take a risk and move to underdeveloped areas, then it seems only logical that scarcity will be created in centralized pockets and prices will be driven up doesn’t it?

Lastly, this idea that an object that for most people will be the most expensive purchase they ever make should be a static or deflationary asset is not something I understand. Home ownership isn’t cheap between maintenance and property taxes. Ideally those costs should be recouped somehow.

> I’ve seen some arguments that no one wants live in small towns. And I don’t necessarily disagree, because the centralization of talent, competition and investment is often what makes large cities attractive.

I prefer small town life, and I'm sure many others do too. One upside of the pandemic is that with more companies getting comfortable with remote work, centralization of talent is not quite as big a deal as before.

Its a great point, I wasn't taking a pot shot at small town life. :)

Just if everyone wanted to live in a small town, there would be a ton of medium size towns instead.

There are a lot of newly medium-sized towns, they're just in suburbs proximate to Salt Lake City, DFW, Jacksonville ... that don't frequently intersect with the HN interest space.

Good comment. Also, density of people makes a very big difference in quality of life. If you upzone the popular western US cities to fit everyone in the world that wanted to live there, it would inherently change the quality of life. Obviously, whether or not people that already own land there should have some type of priority on deciding who and how many people get to live there is a political problem probably as old as the human race.

Denser cities seem to be even more expensive than less dense cities (eg New York, Shanghai, Singapore, Tokyo, Hong Kong, Melbourne, etc…). So my guess is that denser cities already provide higher quality of life that people are bidding up.

Eventually the government can only intervene with middle class public housing (eg in Singapore and a lesser extent Hong Kong).

It is more nuanced than simple denser cities are more expensive than less dense. Some parts and some dwellings of denser cities are more expensive, but it also depends on other available options for the population.

Ya, the slums of Manila and Mexico City are pretty affordable compared to the formal housing market. But I’m not sure that we s a good thing. Most developed countries also don’t allow for such places (anymore?).

If they own their land they have a massive amount of control in regards to what gets done on that land

Obviously. But they also have an interest in controlling how many people they run into on their trails and how long the lines are for the ski lifts at Tahoe.

They have an interest in the same way that people that are trying to move there do

Yes, which is why I said giving them political priority on distributing this limited resource is a very old political problem.

> Growth is natural, given that there are more people born, more money is printed and the economy expands to add jobs to meet those needs.

Yes and no. Does that mean houses have to get bigger? Cars more "luxurious" and complicated (read: expensive)? Or higher education - for the same degree - also disproportionately more expensive?

Or are all these "givens" simply bad assumptions that have been nomalized?

Houses/Condos are actually getting smaller in most cities to accommodate newer entrants and add density. Yet prices keep rising.

Honda and Toyota built an absolutely massive market building low cost, reliable cars that have sold by the millions. Low end cars get more complex, because we find ways to make them safer which requires more technology.

You won't find an argument from me on education. I'm a firm believer in public education and that education is a cornerstone to providing economic mobility in any society. I wish our public universities were the crown jewels of the country and provided a low cost tuition to any student.

My only push back on the first two, is that it's not just growth in terms of the absolute size or quantity. It's just growth in terms of the monetary system which results in "growth" of the asset price.

>... a vehicle that has shown generational abilities to generate growth and returns and beat deflationary effects ...

The stock market? "Appears to show" - FIFY. I'm reminded of the periodic 401(k) presentations at our company before I retired; the pitchperson would always put up the same, tired, old, vague graph of the stock market rising at a 45-degree angle from the Great Depression to the present time. But that's not really true, is it? Indexes like the DJIA are mathematical models that get reformulated periodically and the suite of companies included in an index also changes over time. I believe this is called cherry-picking the data.

Actual investors in individual stocks or mutual funds have no guarantee of generational growth, of course. In NYT's Justin Fox's book about the stock market, IIRC, he said that equity mutual funds had an annual average growth rate a little above 2% between 1984 and the early 2000s, while the S&P 500's annual growth rate averaged about 12%. (Dates and growth rates are approximate as I don't have the book at hand). 401(k)ers didn't exactly make out like bandits.

> he said that equity mutual funds had an annual average growth rate a little above 2% between 1984 and the early 2000s, while the S&P 500's annual growth rate averaged about 12%

That certainly sounds wrong, but even if it isnt, its a weird comment. Pretty much every 401k or other investment program will have the option to invest in a SP500 fund, or some other broad market US equity fund. If you want the returns of SP500, you can buy SP500. Maybe it was more complicated than that in 1984, but its not now.

Oh, wait, you are claiming that the retirement bubble is correlated with the stock market bubble, and you are making a pretty good point for it.

That's scary.

Did someone say ponzi scheme?

https://news.ycombinator.com/item?id=27585207

Interesting point! And in fact, since you can pass along most assets to your heirs without taxation, even your death won’t prompt a sale.