> It's almost impossible to avoid this once the values are already ridiculous, but what the article suggests can mitigate it somewhat: Sustained moderate inflation combined with a large increase in the housing supply, so that real values come down even though nominal values are stable.

I'm having trouble understanding what inflation means in this context.

From the article:

> There is a way out, but it’s not a pleasant one. The economically unpleasant period of the mid-1970s, when GDP fell sharply and inflation rose to 25%, was relatively short-lived, largely because the inflation bailed out the housing market, which had already become overblown in 1973. Only a similar but more prolonged period of inflation, which will depress real house prices even as nominal house prices decline less, bailing out the mortgage market, will enable the British economy to avoid the truly disastrous situation of mass mortgage default.

> Provided the inflation takes place as required, the young will manage to navigate this situation successfully. They will be able to negotiate salary increases, as we were in the 1970s, so that their living standards keep up, more or less, although they may feel pinched. The declining real value of homes will bring more and more possible house purchases into their view, although they may find the landscape very short of mortgage lenders. Since the period of price decline is only beginning, the luckiest will be those too young to have got themselves on the housing ladder at inflated prices, not the silly Millennials, but post-Millennials.

If we're speaking about price inflation, isn't that literally what a massive housing bubble is, the mother of all price inflation scenarios (setting aside the fact that government statisticians cook the books in various ways in order to show shelter costs are perfectly inline with other prices, completely regardless of what prices are really doing, because it's abnormal)?

And if we're speaking about monetary inflation,well, where did all the money come from in the first place to make housing so expensive? Yes I know, when one house sells in a neighborhood or city everything is revalued, but when you've been at it for 10++ years and have had significant turnover of the entire inventory, this excuse begins to run thin after a while. If GDP growth is more or less flat, and there isn't negative growth in other areas like consumer spending, where is all the money coming from to execute the transactions?

Is anyone aware of any articles that try to mathematically reconcile this on a macro basis, because it makes completely no sense to me. At least in Canada it appears to be almost pure magic that at most will only take a periodic breather before the relentless upward march resumes (see the slight dip during the 2008 global meltdown, the devastating crash in oil prices that only caused a flatline in oil-rich Calgary, or real estate capital gains in Vancouver being larger than earned income). As silly as it sounds, I am starting to believe that we're somehow mis-measuring something fundamental somewhere in the system, and that this time really is different. If it isn't, then how can this be quantitatively explained? Sure, it's easy to handwave it away with "the market can stay irrational longer than you can stay solvent", but can one reconcile that with the actual reported numbers? Does what's happening add up?