, Columnist
New York Fed Inflation Gauge is Bad News for Bulls
Real and financial asset values have become unhinged, rising markedly faster than the growth in nominal income.
The dollar doesn't buy as much as it used to.
Photographer: Adrian DennisThis article is for subscribers only.
U.S. financial markets have in the last 20 years experienced three unprecedented booms in asset prices and two busts. During this span, the market value of real and financial assets held by households has increased more than $70 trillion, an astounding amount on its own, but even more so when one considers the huge losses following the dot-com and housing bubbles.
What’s behind the huge asset gains and losses? What role, if any, has monetary policy played in the asset cycles? Given that the prior two asset cycles ended with huge losses, will the current cycle end the same way? The answer to that last question may lie in a novel new inflation gauge devised by the Federal Reserve Bank of New York.