Priced out of home ownership

Because most of the freshly printed money wasn't immediately used to increase the demand for consumer goods. Instead, it only kept consumer goods demand about neutral, until the summer of 2022.

Without inflation in consumer goods, most businesses don't have increased profits, and no incentive to try to hire more people, which kept wages down.

Instead, the extra money found it's way into assets, pumping up the stock market and housing market.

That started changing in 2022, as inflation hit (which SHOULD have surprised nobody). But the inflation was kept in check by increasing the interest rate.

The increase in the interest rate stopped the amount of money from continuing to grow and even fall slightly. But not nearly enough to reach pre-covid levels.

That means that there is still a lot of excess money in the system slushing around. As long as the real interest rate on bank deposits is still low, people are not tempted to keep them as deposits. So the money stays in assets, maintaining the high price.

> Why would money printing postpone its effect on prices until after interest rates increased?

I'm assuming you mean consumer prices here, not housing prices. Consumer prices stayed low during the pandemic, since people generally reduced their consumption, especially the consumption of services (restaurants, entertainment, etc). A lot of "regular" people paid down credit card debt or increased the size of their savings account.

In 2022, that changed. "Regular people" started to spend more of their savings again, and this caused inflation to rise. As inflation was going up, the fed (and other central banks) slowly increased the interest rate, but not quickly enough to stop the sharp rise in aggregate demand. (And war in Ukraine and continued lockdown in China didn't help either, nor did various initiatives to re-shore production of anything from microchips to ventilators, or for that matter the huge investments of capital currently going into AI infrastructure).

And as demand pushed inflation up, that lead to some increase in the demand for labor. So even if the salaries haven't kept up with inflation, inflation definitely has been increased by the increase in salaries.

Naively, one might expect that the inflationary pressure will cease once aggregate inflation reaches 25% relative to 2020.

And if you wonder why wages haven't kept up. I think this can be explained by a weakening of the demand side of consumer goods, driven by various inefficiencies in how capital allocation, due to the cost of building new and robust supply chains, due to the situation in Ukraine/Russia and China and AI investments etc (as listed above, too).

In fact, the price is "purely determined" by supply/demand in the scenario you gave. The monopolist is using their monopoly position to create artificial scarcity, thus driving up prices. This is consistent with the law of supply and demand.

> would that indicate the world has a water shortage?

Impossible to say without more information. What is happening around the 2L for sale? Are you rejecting the sale based on price (i.e. preventing price from rising), instead selecting who gets it using some non-priced-based mechanism, such as a lottery or first-come, first-served? If yes, then that indicates that there is a shortage. If it is sold using a price-based mechanism, then clearly not. That is a "normally functioning" market.

Once the water is all used up and there is no remaining water supply, where no amount of money can buy more (i.e. preventing from rising), then perhaps you might say that there is a shortage. However, in the real world, absent of some other factor (e.g. price gouging laws), price will keep rising until you are compelled to make more of that water available, so that still wouldn't be a shortage situation.

For the Netherlands: While it differs per bank, legally you're allowed to pay up to 10% of your mortgage extra per year (some banks offer higher rates, I can do 20% for example) without extra costs. When the rate changes (due to going from fixed to variable, or variable with a large change in a year) you're allowed to pay back as much as you want, without extra costs.

If you want to pay back more/faster, the bank calculates a fee ("loss of income due to lost interest payments") that you have to pay, which is still cheaper than just doing your regular payments.

The above statement also applies if you want to refinance if, for example, your home went up in value. They can and will drop your rate but you have to pay a fine. That being said, in the past, when rate drops were really large, you could go to a different bank, have them take over your mortgage pay the fine for you just so they can get you to come to them (though I'm assuming they're no longer so keen on that).

https://www.youtube.com/watch?v=kNUNR2NZvFM

It posits that the high prices are caused by rich people parking their money in houses. It explains many problems with a few variables.

While it's not the whole picture, it explains why the middle class is getting squeezed out of house ownership. And why stimulus package didn't much help.

https://migrationobservatory.ox.ac.uk/resources/briefings/mi...

I agree with you about the reforms but basically Brits live beyond their means and need to lower expectations or face a very uncertain future. The NHS is a good example. Demand is literally infinite. We're all going to die and likely suffer an ailment demanding treatment so how can a health service which fails to match that hard reality, survive. As you say, we can use stick and carrot to attenuate demand but it's finally going to crack IMO as was prophetically illustrated so tragically in the pandemic.