‍☠️➡️➡️
The NFTs of the 1630s: Tulipmania was due to the oversupply in silver currency in Holland, in part because of pirates bringing home Spanish booty, argues this paper (by Doug French, former head of the Mises Institute). The new cash had to go somewhere… why not ? pic.twitter.com/W3Up8chAO9

— Ethan Mollick (@emollick) September 9, 2021

I mean, this is true, but it’s also trivially true. Of course there has to be excess currency for a bubble (or bubble-like) event to occur. That’s just tautological. Knowing the actual cause is interesting but the fact itself that excess currency causes inflation isn’t any kind of insight.

We can see this happening now, in fact. The US Fed has splashed trillions of dollars into the economy and most of it went to the rich. Therefore, housing (and asset) prices have gone through the roof.

That’s what happens when 1 out of 7 homes is purchased by a hedge fund that doesn’t really care how much it costs due to the free money bonanza. The way the housing market works, the last few sales and what happens on the margins matter a whole lot. This is what drives price. All that “free” money dumped into the market — as with the tulip craze — is the enabler.