I try to see it positive. With the AI bubble, I finally habe a tangible example to point to when I say that GDP growth is a bad indicator for economic success
You could have used the example of Ireland before. They score extremely well on GDP, and yet the quality of life of an average Irish person is on par with the rest of the Western Europe, with the costs of housing pressuring everything else.
Yeah, but everyone knows why. The IMF has called out that 40% of Ireland’s GDP isn’t real because it flows into and back out (back to the US mostly) due to tax schemes.
Unless you can demonstrate that there is in fact an AI bubble, that is simply begging the question.
Notice how the term “housing bubble” is used much less frequently today than 10 years ago? That’s because that so-called bubble has been ballooning in size for three decades now, and almost nobody still believes that it will “burst” in any meaningful sense. The Dotcom bubble was in many ways an outlier.
The longer it takes to burst, the worse the outcome.
Housing is being propped up by the governments of the west because it was already so problematic if it fails that millions of people would be severely impacted.
Even the housing backed mortgage crisis of 2008 was as large a shock as the great depression, the reason we’re not all using money as toilet paper is due to government intervention. Rightly or wrongly. Some people believe that this intervention makes something worse bound to happen later- and based on the cost of housing I tend to believe them. It is not sustainable to keep housing at its current cost, and the financial model requires that they continue to increase in price. If house prices fall it is a disaster for millions.
There are a few noticeable differences between housing as an asset and AI datacenters. Beyond the obvious difference that a house has a depreciation in the order of decades, whereas AI GPUs are a few years.
Then there is the fact that housing is a fundamental human need whereas AI, as frequently demonstrated, isn‘t even a want by many people.
I am not saying that AI cannot demonstrate todays value 20 years into the future. But there is zero reason to believe the short to medium term payoffs on AI investment will be proportional to the investment we‘ve seen over the past few years
> That’s because that so-called bubble has been ballooning in size for three decades now, and almost nobody still believes that it will “burst” in any meaningful sense.
That's because Boomers live far longer than prior generations thanks to medical advances. The housing bubble will collapse (at least outside of the megalopolises) once the Boomers finally start to die en masse due to their over-representation in demographics.
But before that, the pension systems will crash hard. For people in systems with redistributions (like most of Europe), there simply aren't enough working age people contributing payments for the pensioners, and for people in stonk-based systems (e.g. US 401k), they will run into the issue that someone has to buy the stocks that the pensioners sell off to fund their retirement, and ain't no one of my generation buying stocks, thanks to us having to spend insane amounts of rent.
The book the 'Growth Delusion' has some great examples on this as well. To quote the FTs[1] review of the book.
"The official protocols define the scope of GDP as measuring all monetised activity between willing parties in a given period. It is a pragmatic definition, but leads to some counterintuitive results. The sale of stolen goods for cash contributes positively to GDP, for example — so theft is good for growth. A parent’s housework and childcare, however, being unpaid, are excluded — resulting, by one recent evaluation, in a $3.8 trillion underestimate of the size of the US economy."
I vaguely remember a similar one around traffic jams as well.
The UK is just starting official statistics that include the value of household self supply. I do not know whether there is good enough historical data to compare it with.
bojan|1 month ago
refurb|1 month ago
p-e-w|1 month ago
Notice how the term “housing bubble” is used much less frequently today than 10 years ago? That’s because that so-called bubble has been ballooning in size for three decades now, and almost nobody still believes that it will “burst” in any meaningful sense. The Dotcom bubble was in many ways an outlier.
Epa095|1 month ago
dijit|1 month ago
Housing is being propped up by the governments of the west because it was already so problematic if it fails that millions of people would be severely impacted.
Even the housing backed mortgage crisis of 2008 was as large a shock as the great depression, the reason we’re not all using money as toilet paper is due to government intervention. Rightly or wrongly. Some people believe that this intervention makes something worse bound to happen later- and based on the cost of housing I tend to believe them. It is not sustainable to keep housing at its current cost, and the financial model requires that they continue to increase in price. If house prices fall it is a disaster for millions.
p0pularopinion|1 month ago
Then there is the fact that housing is a fundamental human need whereas AI, as frequently demonstrated, isn‘t even a want by many people.
I am not saying that AI cannot demonstrate todays value 20 years into the future. But there is zero reason to believe the short to medium term payoffs on AI investment will be proportional to the investment we‘ve seen over the past few years
Tade0|1 month ago
https://tradingeconomics.com/china/housing-index
Unsuccessfully, I might add.
mschuster91|1 month ago
That's because Boomers live far longer than prior generations thanks to medical advances. The housing bubble will collapse (at least outside of the megalopolises) once the Boomers finally start to die en masse due to their over-representation in demographics.
But before that, the pension systems will crash hard. For people in systems with redistributions (like most of Europe), there simply aren't enough working age people contributing payments for the pensioners, and for people in stonk-based systems (e.g. US 401k), they will run into the issue that someone has to buy the stocks that the pensioners sell off to fund their retirement, and ain't no one of my generation buying stocks, thanks to us having to spend insane amounts of rent.
watwut|1 month ago
People dont talk about housing bubble as much, because it is history at this point. Not something that would go on now.
And no, housing being expensive is not the same thing as a bubble. We dont have bubble in housing now.
theozaurus|1 month ago
"The official protocols define the scope of GDP as measuring all monetised activity between willing parties in a given period. It is a pragmatic definition, but leads to some counterintuitive results. The sale of stolen goods for cash contributes positively to GDP, for example — so theft is good for growth. A parent’s housework and childcare, however, being unpaid, are excluded — resulting, by one recent evaluation, in a $3.8 trillion underestimate of the size of the US economy."
I vaguely remember a similar one around traffic jams as well.
[1] https://www.ft.com/content/b6182440-f21e-11e7-bb7d-c3edfe974...
BrenBarn|1 month ago
graemep|1 month ago