Return to Piketty
From the monster new NBER paper, The Rate of Return on Everything:
“Our paper introduces, for the first time, a large annual dataset on total rates of return on all major asset classes in the advanced economies since 1870. ...
residential real estate and equities [i.e., risky assets] have shown very similar and high real total gains, on average about 7% per year. Housing outperformed equity before WW2. Since WW2, equities have outperformed housing on average, but only at the cost of much higher volatility and higher synchronicity with the business cycle... housing returns are similar to equity returns, yet considerably less volatile. ….
After WW2, ... across countries equities experienced more frequent and correlated booms and busts. The low covariance of equity and housing returns reveals significant aggregate diversification gains (i.e., for a representative agent) from holding the two asset classes …
It is not just that housing returns seem to be higher on a rough, risk-adjusted basis. It is that, while equity returns have become increasingly correlated across countries over time (specially since WW2), housing returns have remained uncorrelated.”
They have a great summary of the secular stagnation hypothesis: "We are living longer and healthier lives and spending more time in retirement. The relative weight of borrowers and savers is changing and with it the possibility increases that the interest rate will fall by an insufficient amount to balance saving and investment at full employment.” The hypothesis is that the economy can fall into low investment traps. Their evidence is compatible with that view.
Also: “Piketty (2014) argued that, if the return to capital exceeded the rate of economic growth, rentiers would accumulate wealth at a faster rate and thus worsen wealth inequality. Comparing returns to growth, or “r minus g” in Piketty’s notation, we uncover a striking finding. Even calculated from more granular asset price returns data, the same fact reported in Piketty (2014) holds true for more countries and more years, and more dramatically: namely r>>g... In peacetime, r has always been much greater than g."
Sentences in Bloomberg: “Even after the Great Recession, mobile capital continued to concentrate wealth in the hands of a transnational minority ... Much of the success of demagogues such as Trump lies in this minority's ability to redirect public anger onto trade and immigration, while dodging blame for the consequences of financialization."
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