[quote=FlyerInHi]Spd, good point. Ideally, all else being equal, populations in developed economies should be saving more to lend to developing economies where there is more demand.
Problem is it doesn’t work that way because of political risks so investors will seek safe heavens. Of course, you also have herd mentality and animal spirits which cause places like NYC and London to become increasingly expensive.[/quote]
People aren’t investing in riskier markets and more productive activities because the risk premium has been artificially suppressed. Because of this, investors are forced to speculate on price changes of existing assets because it’s safer than taking a risk on more productive (but riskier) investments.
