Part 6/15:
Supply Constraints and Real Asset Creation
A key part of the discussion centers on credit-driven economic growth, notably in real estate. When banks issue loans, they create deposits, which in turn fund building projects and purchases—this endogenous creation of money supports economic expansion without necessarily triggering inflation if supply keeps pace.
However, supply bottlenecks—like California's regulatory hurdles—induce localized inflation, particularly in real estate. The guest underscores that asset markets' growth may not always reflect fundamental value, raising concerns about bubbles and volatility, especially as asset prices become disconnected from underlying supply and demand fundamentals.