The headline says it wasn’t just the Fed and stimulus. But then the chart shows that in fact large swaths of it were PPP loans, unemployment benefits and stimulus payments. All in a year where apparently (PPP excepted) total pay for employees almost didn’t go down at all.
What this all suggests to me is that to pay for this we should have taxed high earners and not used debt. I say this because I fear inflating markets (stocks, housing, whatever) will actually wind up harming the middle class if/when the bubble bursts. Better just not to have the bubble in the first place, by taxing the money away on the front end.
That would be a death sentence for the current administration. It's always the same game. Whoever is in power does EVERYTHING imaginable to make themselves look good and unload all the fallout into the next term(s), which is often held by the opposing party, and if not, the game of deferring will simply continue... Until at some point it simply can't and we get a big bang.
Why are people still thinking that taxing high earners is an option? The world is ruled by rich people, why would they tax themselves? Doesn't make any sense. Democracy is nice, until all the choices you have, exhibit the same underlying core values that you disagree with.
Normally all successful parties will aim for the middle, where there are most voters. The ones that don't, are marginalized and perhaps have some chance at succeeding during times where voters go astray and just vote some extremists out of sheer frustration (like it happened in Germany a couple of times). But that never lasts. This seriously limits democracy, as you can be sure that some values will never change, because there is no party with enough votes to make these changes.
Instead, what we need is Democracy 2.0, where the people vote on individual packages, not parties. Switzerland may be the only country where that works out quite well.
> Instead, what we need is Democracy 2.0, where the people vote on individual packages, not parties. Switzerland may be the only country where that works out quite well.
This is hard and inefficient in a large country with an underlying population that lacks critical thinking.
We could instead use a multi-party system where multiple voices are raised in the house and senate votes.
The voices actually are raised, in the hearings. You can watch some of them on C-SPAN. The floor of a chamber with 100 or 435 members isn't really suited for debate, but it does happen. The vote is the very tail end of a long deliberative process.
Most people only look at that tail end because the deliberation is dull, but if you want to know what it looks like, much of it is available to the public.
The base asks via their votes. If they re-elect the legislator, the legislator will continue to vote the same way.
Most legislators have high approval ratings among their constituents, and practically unanimous among their party in their district. It's always other people's legislators who are the problem.
> The base asks via their votes. If they re-elect the legislator, the legislator will continue to vote the same way.
No. People are left voting for their representatives from a set of 2. With this, most people vote for one because they hate the other and not because they like their policies.
In terms of representative democracy, American two party system is just infantile.
America fairly recently actually taxed high income earners and companies, so politically it’s very possible. Increasing the AMT by say 5% while raising the minimum threshold to say 500k would have vast popular support and a huge backlash from rich people. Determine who wins that fight is just another political battle.
but politicians play a game of semantics to accomplish nothing and appease their base
in tax contexts, "income" means about 3 different things, but to angry people it means one thing: "everything you earn that year"
the reality is that "income" is a subset of earning types, and the rich people anyone actually cares about do not earn much "income" and are therefore continually exempted from the populist fury
taxing high income earners just hurts the upper middle class and business owners
it is entertaining but disheartening to see so much energy put toward the same result over and over
On that note, Congress has had a rider problem forever. It's unconscionable how legislation get clumped together to a) force a vote on some generally positive thing while b) avoiding accountability and c) sneaking all kinds of evil opposites into the same package.
My counterpoint to Democracy 2.0 is dead simple: If we could buy a car that was $2,000 cheaper (but had no seatbelts), many Americans would.
Humans are bad at some things. Understanding complicated situations where they aren't experts is one of them - Statistics, safety, complicated systems, etc.
Also, reddit is in many ways democracy 2.0 and they upvote literal fake news all the time.
Information overload leads to people seeking succinct information and answers. The upvote/downvote systems ubiquitous today are easily manipulated to spread misinformation, propaganda, and fake news.
We need to do away with upvotes and downvotes. It’s manipulated everywhere it exists.
And even when not explicitly manipulated, the wrongness is baked into the system. At least once a week, I catch myself rewriting a comment not to improve it but to increase my chances of getting upvotes. How many claims do I make, how many positions do I believe, simply because I know somewhere in my subconscious that they'll get upvotes?
It won’t happen. And the reason is: It outsources community curation. A couple of moderators can manage millions of posts, because they only need to pay attention to the outliers. It also allows the moderators to easily fall back on “it’s what the community wants” when the core values change.
Democracy is still majority rules, which means a huge part of the consumers of government are still forced to accept conditions they don't like.
There is also that mafia bit about having to give away part of your earnings or you go to jail.
We need to decentralise the system so that fewer majority votes are needed (ideally, zero) and politicians hold less power (ideally, zero).
Most state functions can be privatised trivially.
Some are more complicated but it doesn't seem like we're moving in this direction at all.
Every year the government spends more of the money stolen from taxpayers and keeps getting bigger and more powerful (and probably more corrupt).
Perhaps my perspective is skewed by living in the Midwest. By virtue of some private interests, I interact with quite a few very conservative people and perhaps the ‘average man on the street’ is already more culturally conservative than on the coasts.
I maintain my position though. I really have never come across a person in conversation who would take an absolutist position that government action is always going to be better than private enterprise, but the opposite absolutist position is somewhat common.
It say it’s an article of faith because the people I’ve spoken to are not up
for discussion about it. They have established their belief and nothing will cast a shadow of doubt upon it.
I also never meet anyone who has such an extreme view on things.
Here in Europe, we believe that certain things should be public: education, roads, health care, social security, basic research, while other things should be private, like smartphones, cars, ...
And I think for most of the things we like public, there is a good evidence that it should be. I.e. Euro style health care systems spend less money per patient while achieving a higher average lifespan when compared to whatever system the US has.
In general, the argument for private systems is that since they have to make a profit, they will be more efficient. In reality, they have to make a profit, which public systems don't have to. Public systems however have the same price pressure than private systems, since people put this pressure up via democracy.
The biggest issues I see is that public systems are less capable of big innovation vs. small process improvements. This can be tackled via the basic research done at public universities + the private sectors work to bring these to market.
Also, if you follow Peter Thiele Line of thought on how every business should strive for monopoly, so they can take monopoly profits and "focus on the product instead of the competition" - a public service that has granted this monopoly by law would be perfect: they have no competition, so they can focus on making the best product, and they don't have to make a profit, which means they can operate at cost.
Now, I don't think it's as easy as that, but in the end, if you stop being an extremist, you can mix and match all kinds of system to use what is best, instead of striving for something that is ideologically pure.
tl;dr: I want my smartphone from private companies competing for the best product, I want my water from a public utility.
Saying what all european think is a bit of a stretch.
I'm European and I think zero things should be public. I absolutely don't like the European Union and where it's going.
The problem is that if you don't have any incentive to make ends meet because you're spending someone else money, slowly but surely you'll have inefficiencies in the system.
Too many employees, someone making sure a public contract goes to a friend for more money than it should, politicians expensing flights right and left, a service being provided which nobody uses (think about some bus lines).
The same happens in large organizations where who's footing the money doesn't have visibility. The government is the ultimate giant corporation - with the added bonus of not having to make a profit!
We can't say for sure how much money we're wasting, but government spending always grows bigger and I don't see public services improving or providing more value over time.
The last pandemic highlighted how much worse public health got in many countries in Europe. How did that happen and where did the money go?
An inefficient government starts eroding public services, spending the same and offering less, until there's a big crash and then there is nothing.
We saw a bit of that in Greece, we'll probably hear more from Italy soon.
I think we're years away from a collapse similar to the one experienced by eastern European countries post Soviet Union.
> I interact with quite a few very conservative people and perhaps the ‘average man on the street’ is already more culturally conservative than on the coasts.
You’re claiming that all these people you’ve met are anarcho-capitalists? Are you under the impression that cultural conservatism means anarcho-capitalism?
> but the opposite absolutist position is somewhat common
You’ve provided no evidence that it is more common. In my experience, the opposite is true.
Read up on SELTIC (the Service, Efficiency, and Lower Taxes for Indianapolis Commission) and how their privatization initiatives dramatically improved Indianapolis.
The cost of public health care is staggering and the quality is abysmal.
If you can afford it, if you have something serious and you don't want to wait for ages or get poor equipment or lack of testing, you'll go private even in Europe.
I'd say private health care in the states is very successful as well (high quality and research) but the prices are ridiculously inflated because of government / insurances.
I grew up in a communist country, everything was state owned, everything was crappy (I mean quality wise) and generally out of stock but hey, it had amazing price (dictated by the state of course), theoretically anyone could afford it. That resulted in huge lines waiting for small stock drops (not unlike the new PC hardware situation with scalpers these days, which is funny) of chicken, electronics, bananas. Of course, it was even better if you knew someone working at those stores, then you'd get a heads up or they'd "reserve" some for you.
So in general I'd say I've seen government fail to run plenty of businesses. A more modern example would be PG&E which is in this weird situation where it's so regulated that it's almost government run but it's technically a private entity. There are also plenty of pure private entities that haven't run well (but at least, such entities end up being bankrupt, a healthy alternative for non-profitable private businesses).
So in my experience, seeing both private and publicly run companies fail, I've started to think that this aspect of it (being privately or publicly controlled) is not what makes the company run well but it's one of the many factors that can contribute to it. I think a more important factor are the interests, skills, will and agenda of those that control it, regardless of whom they answer to (voters or board).
And let's not discard the particularities of each business. Some enjoy a natural monopoly, others face tough competition. These are more important aspects contributing to efficient use of resources than, again, who the CEO answers to.
> Why are people still thinking that taxing high earners is an option? The world is ruled by rich people, why would they tax themselves? Doesn't make any sense. Democracy is nice, until all the choices you have, exhibit the same underlying core values that you disagree with.
for the most part, "high earners" are not rich people; they are the upper-middle class. the richest people make the vast majority of their income from investment returns, and are often able to avoid having it count as "income". the very rich are quite happy to have taxes increased on high salaries in exchange for maintaining the status quo re investments.
> Instead, what we need is Democracy 2.0, where the people vote on individual packages, not parties. Switzerland may be the only country where that works out quite well.
this much I can agree on. why do I have to choose between guns and abortion?
> what we need is Democracy 2.0, where the people vote on individual packages, not parties. Switzerland may be the only country where that works out quite well.
This works terribly in CA, FYI.
I don't think there are any easy solutions to the political equilibrium we're in.
Some of the ballot initiatives have had deleterious effects on California.
Proposition 13 putting a yearly property tax increase cap means that people who have owned property for a long time are basically not paying their fair share of local taxes. That tax advantage can be passed from generation to generation. It also has the perverse incentive to encourage cities to increase commercial and industrial zoning over residential zoning, with the effects on property prices one can see today.
Proposition 47 meant that many crimes under a 950$ threshold were considered misdemeanors instead of felonies. This is one likely factor for the large increase in the amount of car break-ins and shoplifting in some areas, such as San Francisco.
Growing income inequality will lead to authoritarianism and then eventual revolution. We need a win:win situation and taxing the super rich is usually the best option.
I lost my job due to covid but don’t get a “stimulus” — pointing out this means it’s income redistribution not stimulus and not relief for those impacted. That is factually true.
The people being taxed would be the billionares.
Those are by no measure the "productive" members of society, these people are statistical outliers created by chance and luck in an unstable system that sometimes creates self enforcing feedback loops that grow exponentially.
We should recognize these feedback loops as a bug and rectify them.
The fact that you even had a job that you could loose, means that you are NOT in that category, and (statistically speaking) never will be.
How do you plan on taxing unrecognized capital gains? Forcing the sale of equity?
What parameters determine when someone is forced to sell equity? How about equity in non publicly listed assets, which don’t have a deep market or clear price?
If it makes it clearer, suppose the market value of the assets you own increases from $10M to $15M in a year. How would you tax this? Do you start forcing people to sell? What if the asset they own isn’t publicly traded, for example land, or privately owned companies?
It’s not a “gotcha I’m against increasing taxes on wealthier people statement”. It’s a legitimate question on how to operate society when do much of the wealth is simply from increasing asset prices and decreasing currency values.
Force them to sell.
If there isn't actually the demand at that valuation, then then it's a bubble anyways, that should be popped sooner than later.
Also, at that point, you shure as hell diversify your assets, instead of having them all in a single privately held company.
That's why we need a transaction tax on stock combined with tax breaks on stocks that have societal value, together with a ban on all derivatives. Stock markets need to be first order long term srategy crowdfunding again like they were originally invented as. Otherwise computers will just chase the next peofitable microsecond and CEOs will juse try to optimise the next quarter.
How and who do you determine values for assets that aren’t readily traded, such as intellectual property or equity in a private company?
I know how real estate and tangible/intangible asset values are assessed for property taxes purposes, and the problems with that are enormous, not to mention the avenues for fraud and increased paperwork. There are definitely winners and losers there based on your level of influence in society.
How and who determines what “stocks” have societal value?
It’s really easy to say these things, but I have yet to come across someone with even a half baked plan to implement them in a fair way. For example, currently startup employees get screwed with the way taxes work on options, where they owe significant taxes for nebulous gains that they may or may not benefit from.
Oh yeah, you're right. Can't tax those billionaires. I completely forgot the paperwork.
And those invaluable art collections. You just can't put a price tag on those!
There are not enough billionaires to fix the budget, even if we doubled their taxes. There are only 600 their annual income isn't so significant in comparison to the budget.
Take Jeff Bezos, the richest man on earth, for example. His total compensation is 1.7 million and His capital gains from stock sales are about 1-2 billion per year.
The salary is is essentially negligible, and even doubling capital gains would provide an extra 200-400 million. The federal budget for 2020 was 4,790 million dollars.
Ha, doubling it, that's cute.
The top marginal tax rate in the US used to be 92% in the 50s, and that's what was widely considered it's "golden age".
Those 600 people hold $4 Trillion dollar. Which is the federal budged you mentioned (it's not million btw).
The bottom 50% of the us population have 2 Trillion.
Those 4+ trillion federal budget include that ridiculous amount of defense spending, that's essentially welfare for the rich.
Now imagine if you could increase the federal budget by 25% for 4 years, just for science and education, and as a side effect you get a continued plus through the reduced negative effects of massive political influence by a small elite of 600 people.
There would probably a positive societal impact if you took those 4 trillion and burned them. Getting to spend them means, moon colonies, mars missions, broadband internet everywhere, proper healthcare for all, and maybe a shot at surviving the climate and biosphere collapse...
They do not have $4T. They have assets which may be valued at $4T based on the most recent sale price of a small representative piece of the asset.
There is no way that the “$4T” in assets can be converted to $4T cash as selling it all would shift the supply and demand curves causing the price to drop, and hence the valuation.
Your argument is the same as saying "but they don't have any money, they only have 65238 metric tons of gold".
Money doesn't have any intrinsic value either. You might as well say "societal power" instead of "wealth", and you get the same outcome.
These people have a grotesque amount of influence over everything.
As I said, even if you'd just destroy all their wealth/power, you'd still get a better society, because politicians wouldn't constantly try to do the bidding of these people and instead tackle the real problems that we have.
> You might as well say "societal power" instead of "wealth", and you get the same outcome. These people have a grotesque amount of influence over everything.
Yes, I’m not arguing against redistribution of wealth (or power or influence or whatever you want to call it). I’m interested in the details of how it can be accomplished. Money is simply the most technologically advanced way we have of moving “power” around, but exactly how power gets converted to money is a big question, and one that frequently involves winners and losers.
> As I said, even if you'd just destroy all their wealth/power, you'd still get a better society,
I agree, and typically this has been accomplished with violence/war. I’m just trying to see if anyone has any good (and “fair”) ideas on how to accomplish it without violence.
I have an aunt and uncle in SF Bay Area who worked their whole life and saved for retirement, but didn’t assume that the land under their house would be worth $2.5M in their old age. What should happen to them? They certainly don’t have the cash flow to afford a proportionate property tax without having to move away. I don’t know a good answer either, maybe some people just have to end up screwed.
We're not talking about old people here that acidentally stumbled upon something that has really sentimental value to them but is also worth 150 billion.
All I’m asking for is some specifics. Is someone with $999M “worth” of assets not forced to sell than someone with $1B? Is it setup marginally so anyone over $x is forced to sell y%? What are x and y? That is what I’m interested in.
What if the sale price doesn’t match up with the valuation amount? What happens if a majority shareholder is forced to sell and it results in them becoming a minority shareholder? Does that mean one is forced to give up control of their business after a certain size?
Yeah, we all agree extreme income inequality is bad. That’s the easy part.
> further agitate the productive people by taxing them
The people that were most important and productive during the pandemic are the ones on the front-line in healthcare and essential services. We have relied on them potentially exposing themselves in order to keep society going.
On the other hand, your so called “productive people” are sitting on their hands at home watching their assets massively gain in value.
The wealth divide is already accelerating, and the crisis is making it worse. I don’t think we should worry about “agitating” a small percentage of people whom our society seems to undeservedly elevate to god status.
I don't think he literally meant don't use debt as a vehicle; that's not really how government finances work IIUC. The suggestion is tying a funding source to new spending instead of taking on an unfunded liability. Carrying a year of interest at current rates is irrelevant.
Because "the markets" meaning the stock markets is the owners and managers of capital, the wealthy adn the powerful. They did well, large Internet conmerce companies were positioned to take advantage of the pandemic. The markets don't care if lots of people lost their jobs or had an atrocious year. It's all about the quarterly profits.
And the stimulus bill was a huge boon to business. Most of it went to business.
> The money sent to households was largely used to prop up rents mortgages or food/transportation/insurance and other consumer goods.
i.e. it was used by the people it was given to so they could pay their bills. You know, survive. Can you describe how a world would work where you can have one without the other?
> All that money ended up in business coffers.
...and most of it was then promptly paid out as wages to employees.
I made no comment as to whether it was a good or bad thing. I stated a fact.
But the fact that “the Market” has exploded in value while the Federal and State government is making direct payments in order to help a significant portion of the population just survive should be a little concerning, no?
Ah, yes. It appears the banks that collected monies on mortgages and the landlords collecting rents just paid employees! How stupid of me. That must be why home values and the stock market are testing new highs! All those subsistence employees getting paid.
HN has a heavy socialist lean, you are not allowed to have a differing perspective. Just redistribute your money and be quiet like a good little drone.
Very interesting article. Personal anecdote, but I made a gain of 1,100% on investments in 2020. I've positioned for 2021 in leisure, heavily in casinos and sports betting. If savings unwind a bit/spending picks up this year as the article mentions at the end, that should be one of the sectors money flows into.
I thought I was sitting on the sidelines this year, just barely maintaining my finances while being ineligible for PPP or unemployment, but then I found an old position in an account I forgot about.
It’s sad that fake news and manipulation has extended far beyond Trumps Twitter account into everything we do. The blatant wealth transfer since the GFC from the majority of the population to the ultra rich is despicable but looks like we are in an end game scenario of capitalism.
Average Americans barely get 600$ to survive whilst corporates get such huge bailouts. Same thing happened during the GFC and the years since, when the fed printed money and pushed it back into the markets via QE.
This is not a republican or democrat problem, they are both equally complicit in all of this.
I work in Finance, and to see all those around me try and use sophisticated language and models and avoid admitting the glaringly obvious shows the lack of ethics and a morale compass.
We are all getting played by the rich and ultra rich.
Edit: Whats really got me is the role of pension funds in this. Pension funds worldwide are an aggregation of our savings, yet they are pushing capital more and more into markets and increasing our cost of living (especially property prices by doing so). Fund managers and pension managers all along the way get a cut through performance fees, whilst we get stuck with unbearable rent prices and we don’t get much benefit of the investment gain since inflation will reduce the value of the dollar...
I think it is pretty weird that Trump is popular among the middle class and lower strata of society. He is the go to example of a rich asshole billionaire that is only looking out for himself. He is promising the moon like every other politician but it's extremely easy to look behind his words precisely because of his economic background.
Democrats are just as bad when it is about the things that matter but they are not glaringly bad like Trump.
Fixing first world economies is not very difficult if you had a benevolent dictator whose only job was to fix the economy. I'm not advocating against democracy but every time there is a systemic issue the fundamental cause lies in power creep of the wealthy and the difficulty of telling the population to accept a tiny bit of hardship for massive future gains because they are already used to getting screwed over all the time.
I know what you mean. However the one benefit of democracy is that there is at least, well at least meant to be, some rule of law and protection of civilian rights.
If you look at China, super successful, but a dictatorship where they will just kill you if you are not agreeable to them.
Invariably dictatorships devolve into what is in China, and other examples from years past.
This isn’t rocket science. At least 20% of all dollars that have ever existed were created this year. It’s inflation. This is also why Bitcoin is peaking. It’s really interesting to me that media outlets like the NYT continue to obscure this fact.
Inflation is by definition an increase in prices. The amount of money in the economy is called the "money supply". Some economists do argue that the money supply is the primary factor in determining inflation, but that's very different than saying that increases in the money supply are inflation, because the need for money in the economy (usually expressed in terms of the "velocity of money") can vary.
Prices of goods have different dynamics than the prices of assets. If you don’t understand how money supply relates to inflation I simply don’t know how to engage with you on this topic.
Respectfully, I'm not sure there's much point in proposing an uncommon heterodox theory if you can't engage with people who have a conventional understanding of the topic.
Consumer price inflation is a different thing than asset price inflation. The point you seem to be missing is that when you only say "inflation", it's by very widely dominant convention assumed to be consumer price inflation.
> Inflation is by definition an increase in prices.
Sure, I think everyone agrees on that but the CPI only measures a vary narrow range of goods and weights them such that it ends up ignoring some very obvious trends.
Most of the inflation could simply by accounted for by the drastic rise in stock prices, real estate values, etc. Even though the CPI/Fed doesn't care about those segments with regards to inflation does not mean it is not inflation.
The basket of goods used to calculate CPI includes thousands of items covering all categories of consumption by US consumers. It includes housing, energy, education, health care, consumer staples, durable goods, etc.
CPI is such a bullshit measure precisely because of its definition. A lot of items have had their prices go down significantly due to globalization, efficiency in production, Chinese production, regulation or just by going obsolete and inconvenient. At the same time, the measures that matter - Healthcare, education, housing, have all gone up. Not to mention CPI does not account for wage stagnation.
And you listed a lot of other components which pull down the overall CPI drastically, thus averaging out the increases in these categories, making the whole exercise pointless.
For instance, consumer goods, or electronic products, or automobiles, or gasoline, or literally n other products that have suffered from lower or stagnant prices.
When measuring the buying power of the US dollar, it's important to look at a broad based basket of goods that is consistent with how Americans spend their money. Focusing on just a few items that have gotten more expensive will deliver an incorrect result.
And yet they are delivering an incorrect result, since the 3 key goods are enablers of the rest of the basket. Without an college education (and thus a reasonable job these days), adequate healthcare or a proper roof over your head near your employer, you're not going to be buying cars or electronics. And I'm not alone in the economics field for criticizing the CPI, yet somehow a bunch of HNers find the very idea of it repulsive.
Without food, clothing or energy you're not going to be buying cars or electronics either.
At the end of the day, you gotta measure inflation based on where people are actually spending their money. Not on an arbitrary ranking of which goods are "enablers of the rest of the basket."
House prices doubled and the consumer price index shows low inflation for the same period.
I don't care about the price of a smartphone or whether spaghetti became 10 cents more expensive. I care about whether or not I will be able to afford a house through a lifetime of work. And it's looking bad at that front. I'd literally have to pay back debt for longer than I still have to work before retirement.
The consumer price index is an average over an economy with a bunch of heterogenous goods, and a bunch of people who care different amounts about different subsets of them. I tend to agree that cheap housing is more important than cheap spaghetti or cheap iPhones, but that doesn't mean the CPI is wrong; it's just measuring something different than the details of what an optimal household budget ought to look like.
If you believe that inflation is actually much higher than is generally believed by the public/markets you shouldn't care so much about mortgage payments > 10 years from now on a loan with fixed payments.
The huge inflation you expect will mean the real cost of these payments dwindle in size so they will matter very little to you.
The issue is of course that the salaries/wages don't get raised as much as the other costs mentioned by the OP (housing, among others, I'd add education), they haven't done so for quite a long time now.
In order to be able to have "real cost of payments" going down because of inflation you'll still need some down-payment or some basic proof that you'll be able to pay back the loan you're about to get, and those stagnating wages often times are not enough for that.
When a subset of goods are rising in price at a faster rate than other goods you aren't really talking about inflation anymore. You're talking about something else. It's pretty important to recognize the distinction.
This is not a random subset of goods, we're talking about basic things like housing (as also mentioned by someone above) and education. It's not like the diamonds or the yacht markets have gone through the roof while everything else has remained pretty much stable, we're talking about stuff that affects almost everyone in their day-to-day life.
I'm not saying that these price increases don't matter. I'm saying that they aren't caused by inflation and that recognizing the distinction is important.
I think that depends on how you use the word inflation. Some posts up someone defined it in eco science terms. Some people define it via the consumer price index. The consumer price index is what governments and and companies use in salary negotiations. So for people, the consumer price index is what drives their salary. If this consumer price index is not adequately factoring in the price of houses (cost of housing) or stocks (price of saving for retirement), than they are skewed. Salaries will trail behind rising cost aka. my generation is basing social status on smartphones instead of houses, because we can't afford houses.
Now, low interest rates play an important counter role: it is cheaper to finance a house. It due to the increased prices, it takes a lot longer. Combine that with the fact that my generation deals with less worker rights and job safety (they call it flexibility) and the fact that I have now seen two once in a lifetime economic crisis within 12 years ... It's getting quite hard to sign that 40 year finance plan.
There is however a solution to this, which is to leave the cities and move to the countryside, where I can build a house on a plot of land that used to be part of my grandma's farm. Not everybody is that lucky tough and not everybody can a find a job there or work remote. Hell, I'm not sure if I can, given that the internet there is still copper based.
In my opinion the issue is that to much money goes into buying existing things and to little money goes into creating new things. QE and other gov. measures seem to be going mostly into propping up prices of existing values, so the ones who own them don't lose virtual money.
Inflation rate is a measure of how much demand is exceeding supply. Generally central banks focus on inflation on consumer goods because consumer goods and services pay the wages of workers. If consumer inflation is low that means there is little demand for consumer goods and by extension there is little demand for workers.
The point harryh was trying to make is that if consumer inflation is high then you could trivially pay off a low interest mortgage because inflation is constantly reducing the effective principal of the mortgage.
In reality what we see is asset inflation and asset inflation is usually a sign of mild deflation because there is an overabundance of production capacity or labor and therefore consumer goods with no takers.
Your median sale price index compares house prices in some random Southern hell hole in Mississippi to a disaster ravaged area of Puerto Rico with NY and SF or Atlanta and Austin house prices. Places where people can actually go to work.
The middle can shift to the right easily if you exclude houses in some random houses in the middle of nowhere, while retaining exclusive country neighborhoods that people still move to and commute to and from for work.
The nice thing about the median is that it's robust against outliers like the ones you've mentioned. It's over $300k, so we're definitely not talking about some hellhole in MS.
How about median house prices in all major employment zones in the US? I'm sure that would filter out all the small places in the country while also including places in the country used by the old money Brahmans. In either case, you still can't compare house prices in Albany to house prices in NY, which these median measures happen to weight in, even if slightly. Exclude a thousand such places and the median shifts to the right.
Just because prices for some things are up does not mean prices for all or even most things are. And even though prices are up, mortgage rates are down, which may result in a net-zero change to affordability (i.e., your monthly carrying costs end up being the same).
Heck, some Danish mortgage rates went negative in 2019:
There are multiple types of inflation. Asset inflation is what your parent is talking about, which is not well reflected in the CPI.
Any product/service with domestic labor as a primary input (healthcare, education, childcare, construction, professional services) has seen much higher inflation.
It's simpler than that ZIRP simply means the only way to find yield is in assets i.e. to fulfill fiduciary obligations i.e. pensions you have to go further out on the risk curve to produce that yield e.g. buy equities. The equation is simply one of risk adjusted return relative to sharpe and there's currently no yield in US debt.
When markets are the only place to put money that beats inflation, that's where people with money will put it. As more money gets dumped into equities their price goes up. Since those "investors" are just looking to hold the equity until someone else comes along and pays more for it they don't care about fundamentals or dividends.
Some companies have good fundamentals and have done well despite the pandemic. Many more have only gotten by with government handouts. A lot of exuberance today comes from big traders picking up stocks at a huge discount last March. The huge market drops were basically an interest free loan to anyone with enough money to pick up more stocks.
It's a great environment if you've already got money or retired recently with stocks as a large component of your investment portfolio. For everyone else the markets haven't done anything useful, if anything they've convinced low information voters that the economy is doing better than it is.
In theory Bitcoin should perform about as well as gold. Gold did pretty well this year but what Bitcoin did is so insane it is bound to see a correction eventually.
In theory, yes, but similar amounts of inflows to bitcoin/gold will result in different performances since the market cap of bitcoin is so much smaller (supposedly the circulating supply is ~4 million bitcoin, so functionally ~120 billion USD float currently, versus multi-trillion for gold).
In reality a bad year is just a bad year, and many investors are (imo perfectly rationally) expect the market to return to normal soon.
The 'investor class' often gets derided for being short-sighted, but this is nonsense. In reality there are plenty of long-outlook investors who recognize this is a temporary set-back, and even then only in certain industries.
Even companies that had to essentially write '0' for revenue on their last 3 10-Qs are typically only marginally down. [1][2][3].
When stocks go up, the narrative is 'look! all the rich are getting richer!'
When stocks fall it's 'Those greedy millionaires are short sighted, look at what happened to everyone's pension!'
> When stocks go up, the narrative is 'look! all the rich are getting richer!'
> When stocks fall it's 'Those greedy millionaires are short sighted, look at what happened to everyone's pension!'
This hits the nail on the head. When the stock market was down 30% in Q2 and personal income was _up_, nobody was writing breathless articles about how investors were getting screwed while the common man was fine.
It's pretty shocking how unserious coverage of the stock market is, from picking dishonest time windows ("stock market up 10% during pandemic! [counting from after the 30% crash]") to selectively ignoring the difference in time horizons between equity prices and snapshot economic statistics.
A good rule of thumb is that reading mainstream articles harrumphing about the stock market is a waste of one's time, unless you're looking for a cable-news style dose of misinformed outrage for recreational reasons.
So I'm going to hell for this comment but could be a premature death for older, sick people be a good thing for the economy in the long run? Maybe future medical bills would be lower. A redistribution of wealth from older people to younger people with more opportunities for growth. I am not calculating the emotional toll for these deaths. It is not a friendly comment that I bring up easily, but it is something that must be considered. Please convince me that I'm wrong. Let me say that I am not an evil person and do not wish death upon anyone.
More working-age people will be inheriting homes and wealth than in a typical year, as you suggest. If I was one of those people, I would use that as an opportunity to retire (why keep working for someone else if I already own a home and savings?). That means more working people than usual might retire this year, which I think is generally not good for an economy (less production).
Well, the problems with an aging society is that there are less children than parents which means that fewer people are inheriting money. You would expect that a lot of the money goes to the first child and probably only child of a billionaire or millionaire.
The economy is supposed to serve people. Older people are people.
A better question would be to ask if people overall are better off when order people die sooner… but that kind of question is always morally very difficult to answer.
You have to consider that healthcare is a wealth transfer from older people to younger people because young workers are taking care of the old. It's entirely possible that what you propose is a net loss economically.
What this all suggests to me is that to pay for this we should have taxed high earners and not used debt. I say this because I fear inflating markets (stocks, housing, whatever) will actually wind up harming the middle class if/when the bubble bursts. Better just not to have the bubble in the first place, by taxing the money away on the front end.
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