For as long as I can remember, we have lived in an inflationary economy. You could pretty much bet that over time wages and prices would go up. So real estate and investments in like kinds of fixed assets made a lot of sense. If you bought in at a reasonable price and held on, it was money in the bank.
But … since 2008 there are hints that some things are changing. I do not just refer to the bust in housing prices that devastated the sub-prime housing market. More generally, inflation has been very, very low. There has been no huge bounce back to “normal” times. Some argue that recessions caused by financial collapse are like this. And I have bought into that argument.
But I think more is going on. The cost structure for many industries is changing with critical component costs falling. And it may be that costs in a number of areas will continue to fall. This would have long term implications. Not deflation across the board — some prices will go up. But n “auto inflation”. A more mixed bag.
Fred Wilson discusses this in his blog and I think he is onto something. We may be headed into a new era when it comes to pricing.