Why do asset prices keep going up?

In this episode, Gary analyzes the curious rise in asset prices, particularly in the US and other global markets, despite ongoing economic downturns triggered by events like wars and COVID-19. He emphasizes that stock markets, along with gold and silver prices, have reached all-time highs during crises, contradicting the conventional belief that poor economic performance leads to falling asset prices.

Drawing from historical contexts, Gary recounts that previous economic crises (2008, 2011, and COVID-19) resulted in considerable interest rate cuts, which theoretically should push asset prices up as lower rates make real assets comparatively more attractive. Interestingly, even as interest rates have recently risen, including during the ongoing Iran war, asset prices have continued to soar.

Gary then introduces a critical insight: the underlying driver of this trend appears to be the extensive government deficits created to stabilize economies during crises. These deficits lead to wealth accumulation in the hands of the rich, who tend to invest in assets rather than increasing their consumption. This trend perpetuates rising asset prices while eroding average living standards. He argues that the consistent pattern of transferring wealth to the affluent during crises is creating a systemic inequality that may threaten economic stability.

Gary concludes that the challenges posed by increasing asset prices and inequality are solvable through equitable taxation and wealth redistribution. He advocates for systemic changes to ensure that asset prices don’t continuously indicate a strong economy, as they often reflect deepening economic problems for the average person.