The Rate of Return on Everything, 1870–2015 (2019)

I don&#x27;t understand how housing can increase in cost in a stable steady manner, as a fraction of household income over long periods of time like more than 100 years. It seems to defy logic, so it makes me suspect how it is being calculated when people claim that housing costs have gone up by massive amounts.<p>Since only a small increase would price a large number of people out of the market- it seems logical that housing can&#x27;t really increase in cost&#x2F;value over long time spans, but must track the overall economy almost exactly.

A few of the links to the 5 other times this has been posted:<p><a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=16078059">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=16078059</a> on Jan 5, 2018<p><a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=19817584">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=19817584</a> on May 5, 2019

&gt; In fact, the long decline observed in the past few decades is reminiscent of the secular decline that took place from 1870 to World War I.<p>&gt; The fact that returns to wealth have remained fairly high and stable while aggregate wealth increased rapidly since the 1970s suggests that capital accumulation may have contributed to the decline in the labor share of income over the recent decades (Karabarbounis and Neiman 2014).<p>Predicted here:<p>Piketty, T. (2014). Capital in the twenty-first century. Harvard University Press.<p>&gt; In terms of total returns, residential real estate and equities have shown very similar and high real total gains, on average about 7% a year.<p>&gt; Housing, equity, bonds, and bills make up over half of all investable assets in the advanced economies today, and nearly two-thirds if deposits are included.<p>Interesting, Housing is marked as &quot;risky&quot;, and yet heavily invested. Investors are over leveraged in risky investments. They probably do it because controlling housing nets them power above and beyond normal returns. I wonder if this part of the reason for the &quot;boom and bust&quot; of market economies in the West when proper government regulation is removed. The riskiness of much of the investment of most investors may lead to sudden losses and shifts in risk, which may result in them withdrawing capital to &quot;safer&quot; investments, thus triggering a &quot;bust&quot;.<p>And `r ≫ g` shows why the wealthy can wield so much power. Holding capital hostage to regulate economic growth and control it is very powerful, and why they can exercise the kind of control they can.

I shall continue to quote 7% as the acceptable long term rate of return in aggregate and look at apple, telsa, Nvidia, Google askance, wondering when they will return to baseline.

How can an entire economy have a growth rate? Is it not measuring how much &quot;new money&quot; was put into the system?

Doesn’t this contradict Robert Shiller who shows that housing returns are flat in the long term?

If anyone wants to download the data, it&#x27;s available at:<p>&gt; <i>The Jordà-Schularick-Taylor Macrohistory Database is the result of an extensive data collection effort over several years. In one place it brings together macroeconomic data that previously had been dispersed across a variety of sources. On this website, we provide convenient no-cost open access under a license to the most extensive long-run macro-financial dataset to date. Under the Terms of Use and Licence Terms below, the data is made freely available, expressly forbidding commercial data providers from integrating, in addition to any existing data they may already provide, all or parts of the dataset into their services, or to sell the data.</i><p>* <a href="https:&#x2F;&#x2F;www.macrohistory.net&#x2F;database&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.macrohistory.net&#x2F;database&#x2F;</a><p>See also perhaps &quot;Historical Returns on [US] Stocks, Bonds and Bills: 1928-2023&quot; (updated annually AFAICT):<p>* <a href="https:&#x2F;&#x2F;pages.stern.nyu.edu&#x2F;~adamodar&#x2F;New_Home_Page&#x2F;datafile&#x2F;histretSP.html" rel="nofollow">https:&#x2F;&#x2F;pages.stern.nyu.edu&#x2F;~adamodar&#x2F;New_Home_Page&#x2F;datafile...</a><p>There&#x27;s also the <i>The Credit Suisse Global Investment Returns Yearbook</i>:<p>&gt; <i>The Credit Suisse Global Investment Returns Yearbook is the authoritative guide to historical long-run returns. Published by the Credit Suisse Research Institute in collaboration with London Business School, it covers all the main asset categories in 35 countries. Most of these markets, as well as the world index have 123 years of data since 1900.</i><p>* <a href="https:&#x2F;&#x2F;www.credit-suisse.com&#x2F;about-us-news&#x2F;en&#x2F;articles&#x2F;media-releases&#x2F;credit-suisse-global-investment-returns-yearbook-2023-202302.html" rel="nofollow">https:&#x2F;&#x2F;www.credit-suisse.com&#x2F;about-us-news&#x2F;en&#x2F;articles&#x2F;medi...</a><p>* <a href="https:&#x2F;&#x2F;www.credit-suisse.com&#x2F;about-us&#x2F;en&#x2F;reports-research&#x2F;studies-publications.html" rel="nofollow">https:&#x2F;&#x2F;www.credit-suisse.com&#x2F;about-us&#x2F;en&#x2F;reports-research&#x2F;s...</a><p>As well as:<p>&gt; <i>The Global Investment Returns Yearbook, an authoritative guide to historical long-run returns, launched by UBS Investment Bank Research and UBS Global Wealth Management’s Chief Investment Office. This edition demonstrates the combined strength of UBS and Credit Suisse as the integration of the two banks progresses, and also marks the continuity of a longstanding relationship with the authors, Professor Paul Marsh and Dr Mike Staunton of London Business School and Professor Elroy Dimson of Cambridge University.</i><p>* <a href="https:&#x2F;&#x2F;www.ubs.com&#x2F;global&#x2F;en&#x2F;investment-bank&#x2F;in-focus&#x2F;2024&#x2F;global-investment-returns-yearbook.html" rel="nofollow">https:&#x2F;&#x2F;www.ubs.com&#x2F;global&#x2F;en&#x2F;investment-bank&#x2F;in-focus&#x2F;2024&#x2F;...</a>

“the only exceptions to that rule happen in the years in or around wartime. In peacetime, r has always been much greater than g”<p>This explains the enduring link between populism and war mongering.

So basically, housing is the best investment vehicle based on all the numbers.