Investors love rising prices. They make us (feel) wealthier and they (can) point to a bright future. However, today I want to explore some exceptions to this rule: commodity prices and house prices, both of which are booming.

Let’s start with commodities.

Rising commodity prices can be a sign of boom times to come, and they can make investors wealthier. But they can also mean trouble, as commodities are inputs to the cost of doing business and the cost of living.

We don’t value commodities for their intrinsic value, but for what they give us: heat, energy, a roof over our heads, cables, pipes, and hot water. When the price of commodities rises, those things get more expensive.

Some projects are flat-out no longer viable at higher commodity prices.

While energy companies drop like flies in the UK, Australian construction companies are going under, Dutch greenhouses are going dark and German factories are shutting down.

Consider the converse to highlight my point. If commodity prices are getting lower, that’s a good thing. Our technology might be improving extraction costs, for example.

The effect is that more economic activity becomes viable because the cost inputs are cheaper. We can build more, do more, go more and enjoy more.

Because of these effects, deflation was the norm during some of our most prosperous periods in history, such as the Industrial Revolution. Likely much to the chagrin of today’s inflation-targeting central bankers, I might add.

But the point is that cheaper commodities can encourage and trigger economic development. And so it’s easy to see how the converse is also true. Higher commodity prices constrain economic development.

Of course, higher commodity prices from high demand as the economy booms can also lead to higher commodity prices. And so increased commodity prices can sometimes signal a booming economy.

So, what’s the distinction? The explanation lies in supply. If supply is somehow artificially constrained, then a booming economy can’t make available the commodities that the economy needs.

Normally, steeper prices make more supply more viable. Farmers can grow more if agricultural futures prices are higher, uranium miners can mine more if their long-term contracts are selling at higher prices. More exploration projects can be funded for all sorts of commodities and the cut-off price for mines worth developing can rise.

But there’s a problem with all this. A problem called “the government”, which has other ideas.

Governments like to claim that they own the resources in the ground, for some reason. And they demand a cut of the profits from mining them. This adds a cost of doing business, and thereby raises commodity prices and reduces our economic potential.

Governments also like to limit who can mine where over issues such as climate change, the environment and cultural landmarks. Issues that go out the window remarkably quickly when the government is busy conducting business of its own, such as war.

Speaking of which, governments like to get involved in other nations’ business with dangerous alliances, sanctions and wars. Many are fought over resource access. Both Germany and Japan used this excuse for World War II.

And governments like to impose all sorts of social-engineering requirements on resource extractors, such as employment among the local population, female workforces and engagement with locals.

Whether all this is a good idea or not isn’t my point. My point is that it drives up the cost of commodities, and thus reduces the economic activity we can undertake.

Right now, commodity prices are spiking and plunging all over the place as a result of all the interventions by governments.

This is making economic activity very difficult to plan, which will in turn reduce our economic prosperity significantly over time.

The good news is that investors can offset these effects by investing in the commodity space. Heck, they might not be able to afford not to if commodity prices continue to upend our world.

That’s why my friend James Allen is launching his Energy Reckoning project now. It’s about how investors can actually profit from our upended energy system (rather than just complaining about it like I do in Fortune & Freedom).

But let’s move on to the second example of rising prices being dangerous – and that’s property prices.

Just as commodities are a cost, space is a cost of living and doing business too. Therefore, when property costs rise, the cost of everything rises.

This is most dramatic in Australia, which has an exorbitant cost of living because property prices are so high. The cost of space is factored into everything.

In Japan, outside of Tokyo, you can find the opposite phenomenon. The cost of living is outrageously cheap, because the price of property is. Apart from restrictions on imports – another government interference – Japan has the highest cost-adjusted quality of life by far from all the places I’ve lived (Germany, England, Ireland, Scotland, Austria, Thailand, Australia and Japan).

Similarly, the divergent cost of living for people in London and Edinburgh compared with the rest of the UK can be explained by divergent property prices.

So, the lesson is that high property prices act as a drag on the economy by imposing artificially high costs on any economic activity.

But there are some aspects of high and rising property prices that make them even more interesting.

An increase in property prices amounts to a redistribution of wealth from the renter to the owner, from the first-time buyer to the seller, and from the borrower to the bank. None of these are healthy redistributions because the underlying asset, the property, hasn’t changed. Getting more money for the same thing is a zero-sum game.

In fact, in Japan, people see houses as a depreciating asset, like a car. And not just because Japanese houses are pre-fab, single-glazed, insulation-less boxes without any heating except in the toilet seat. Japan has seen deflation in all prices over the years.

This creates its own problems in the property sector, such as restricting labour mobility because people can’t easily sell their house and move for a better job elsewhere – one of the key requirements for prosperity. If they sell and move, they book a loss on their house price.

But back to rising property prices. When this happens for an existing property, requiring a person to borrow more money to buy it, it is ultimately the bank that collects the benefit of the higher price. The seller must buy or rent somewhere, after all. The net gain goes in higher levels of interest to the bank.

Remember, the house itself hasn’t changed – living standards haven’t gone up. But more of our income goes to the bank as house prices rise.

That’s not healthy.

Normally, housing supply should correct this phenomenon. But you’ll never guess who stands guard over house supply…

Studies of the 2007 house-price crash in the US looked into the role that zoning laws and restrictions on home building played in the housing bubble. The result was simple. Where governments had restricted new housing supply less, house prices hadn’t boomed and busted as dramatically. Supply simply adjusted.

Of course, governments don’t stop there. They also impact the cost of building houses by mandating all sorts of requirements. But let’s give that a rest.

My point is that commodity and property price booms are not necessarily healthy things. And we have both on our hands right now.

We’ll feel the impact for… well, forever. Redistributions of wealth, economic activity foregone, the potential for another crash in property prices to come and plenty more.

The much-maligned Skyscraper Index, or Skyscraper Curse, is an example of all this logic at play. Record skyscrapers only make sense in certain economic conditions. And so record-setting skyscrapers can signal that something is wrong. You can find out more about that here.

Nick Hubble
Editor, Fortune & Freedom