More cash because everyone with half a brain knows this money printing won't hold the market up forever, and they're terrified of runaway inflation.
The insane market speculation going on is also a symptom of this. It's reasonable to assume USD is losing 8-10% of its value every year from 2020 onwards, thanks to Fed policies. I know about their bullshit CPI numbers, and anyone who is gullible enough to believe "there is no inflation" deserves what's coming.
I do agree the CPI vastly undercounts inflation but we loose credibility when we through out numbers so far off from reality. 8-10% is realistic for real estate over the last year or two. But, we need to look at longer term trends to establish inflation as a huge problem.
Even 4% actual inflation would be very very high, as that would be 2% per year over CPI, which would compound to 80% over the CPI in just 30 years or so.
Let's take a look at some actual values:
- the big mac index shows inflation at about 4% for the last 20 years.
- Cape shiller housing index for US has been showing inflation at about 4% over the last 20 years. This is a real problem that will affect rents as well because the rent to own ratio spread can't continue to increase forever.
- housing of course is now 10%+ over the last year.
And yes, those quality adjustments made by the boys in the labor department are very questionable: I don't know how they sleep at night.
Pundits have been making this argument since 2010 about runaway inflation and about prices being unsustainable. Yet prices keep going up and inflation remains low. Maybe it is best to just ignore those people. There is no evidence either of USD decline either. Foreign currencies, especially currencies of emerging markets, have fallen considerably against the dollar in recent years.
If there is runaway inflation, real estate would be a good hedge. Inflation is not really a concern for Americans because all global wealth tends to be measured in US dollars anyway. It's not like Americans become poorer due to inflation, because all their wealth is denominated in dollars.
We need more data on what prices really are. things like the big mac index, that measure prices independently and actually report just the prices, without quality adjustments. This will give us a good upper bound on what inflation actually is, instead of having to rely on the CPI's questionable "adjustments"
These numbers don’t seem plausible. Compared to nominal GDP statistics, they would imply negative real growth since 1980. This is incompatible with some periods of low unemployment that occurred since 1980 (eg. the late 90s). It implies that the US has constantly been in a recession for decades. Also conflicts with other hard-to fake stats like increased power generation and freight shipping since 1980.
Edit: found this quote from the creator of Shadowstats that they don’t actually calculate their own inflation numbers, but instead add a fudge factor to the official numbers. http://econbrowser.com/archives/2008/10/shadowstats_res
Technological improvements make this so hard to measure, even if we ignore the temptation to game the numbers.
New products, better products, many old products replaced by new ones... it’s so much more complicated than the classical economics textbook case of guns & butter.
> Yet prices keep going up and inflation remains low.
I’m struggling a bit with this. Isn’t “inflation” defined as the state where prices for the same good keep going up?
It seems to me you’re focused quite narrowly on currency inflation, which like you point out isn’t that much of a concern for the average American. What they care about is inflating prices of the things necessary for a decent living: food, housing, utilities, clothing, etc. “I have to do more work to afford the same things”. Colloquially, that’s the fear most people are referring to when they discuss “inflation”. Maybe people who have actually lived through inflationary spirals think of it differently though.
I think there's some disagreement on whether the CPI is really an accurate representation. For example, healthcare can vary wildly and can be very expensive.
On what do you base that opinion? To hear the Chinese government you'd think Belt-and-Road is next to perfection in terms of infrastructure, while oppositional organizations tend to portray it as a relatively hastily rolled out, poorly constructed shambles. The truth is likely in between. And regardless, you still have to show how that might cleave petro from USD.
Definitions: There are two sources of demand for USD. One is the ability to purchase oil, and the other is organized international crime. I would consider crime a fair-weather investor, so the big demand for USD is really based on the ability to purchase oil.
First, examine the history of shipping tonnage [1]. Observe how quickly Chinese ports have come to dominate all world shipping. This is representative of the general trend of global supply chains coming under the centralized control of the Chinese government. Nothing presently happening in the US will improve our trade balance in the near term.
Second, examine the beneficiaries of belt-and-road [2]. All of these countries will have an incentive to have reserves of CNY. Some of these countries are significant oil exporters. If oil exporters start hoarding and regularly trading in CNY, then it's a small stretch for, at least some of them, to start trading oil for CNY.
Third, since oil is fungible, any nations trading oil for CNY will peg oil to the Yuan in addition to the Dollar.
Fourth, the governments of some nations, notably Iran, publicly believe that petro-dollars have motivated the government of the US to engage in warfare in and near their countries. They are furthermore publicly opposed to this, and publicly supportive of China ousting US hegemony.
Then, my argument. Belt-and-road gives a large number of nations a reason to hold and trade in CNY. It's a small stretch for some of those nations to start trading CNY for oil as well. Belt-and-road nations will have an expanded connection to the Chinese military, and success of belt-and-road is a face-saving issue for the Chinese government. That means efforts to oppose it could spark military tensions with the Chinese. This makes it plausible that wars to preserve petro-dollars are unlikely to succeed in belt-and-road nations.
There is almost no international demand for USD to acquire US produced goods or labor. This means USD is unlikely to succeed in an environment where it has to compete with CNY as a reserve currency for oil.
The US has a higher nominal export value of any country except China. Both economies are not highly dependent on exports, but their economies are so huge that they still dwarf the next highest countries on the list.
This is possible only because of the general demand for dollars. If the demand for trade with the US was based only on our goods and services, then we couldn't import as much as we do. If demand for dollars dried up, then our spending would be constrained and our quality of life would drop. So I think, anyway.
“Yet prices keep going up and inflation remains low” <- this is logically impossible.
Also, fiat currencies can fluctuate against each other and still go down as a group. The Dollar can get “stronger” by losing value slower than other currencies. From a straight-forward point of view, wealth is denominated in dollars. But in reality, it’s denominated in value, in good things you can buy.
By this definion, we’re all richer than Crassus in some ways, affording things like global connectivity and vaccines with ease. In land, gold, and influence old Crassus was still in a league of his own, however.
The survey actually states,
"Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money." https://www.federalreserve.gov/publications/2018-economic-we...
Nevertheless, that doesn't strike me as having wealth.
The key point is that most of the people "borrowing money" have the means to pay cash but choose not to. It is a question of how they could pay, not if they could pay.
I borrow money all the time when I could easily pay cash. Credit is more convenient and doesn't cost me anything. Similarly, I have a car loan even though I could have paid cash for the car. It is sensible finance.
borrowing money right now to buy something is not a bad idea... (i think) If they have just printed a ton of cash (they did) that means at some point it will correct. Meaning you in the long term might beat the interest rate if inflation gets higher than that. just an idea.
a loan (with interest?), on a depreciating "asset", which obligates higher risk-premium (ie:insurance) does not seem sensible to me (and never has when I run the numbers).
It absolutely makes sense as a matter of elementary finance to use a loan when interest rates are low rather than paying cash -- I was buying a car regardless. The interest rate on the loan is far below my average rate of return investing the same amount of cash. The profit on the invested cash exceeds the loss from loan interest; I get to keep the remainder.
Similarly, I put all of my daily expenses on credit. I pay off all of that credit at the end of the month. I am still borrowing money but I am paying no interest on it.
What the survey _actually_ says (and what the politifact fact-check does not dig into) is that if you ask people how they would deal with an unexpected $400 expense, given them a list of possible options, and tell them to select all options that would apply 40% select at least one of the "selling or borrowing" options. Note that if you add up the percentages for all the options in that survey, it adds up to 143%, because you can select more than one option.
The problem is that it's impossible to tell what's actually going on due to this survey design. For example: what is the overlap between the set of people who check "just pay it out of checking/savings" (50%) and the set of people who check "charge it and pay off in full at the end of the month" (36%)? I would rate both answers as "these people have the $400 on hand". The fraction of people who checked at least one of these options is somewhere between 50% and 86%, depending on how much overlap there is. And you can't tell, from this survey, where it lies in that range.
Similarly, you can't actually conclude the "Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money" thing from these numbers, so the executive summary is rather misleading. Politifact takes that summary as an accurate summary of the survey results, but it doesn't seem to be. As far as I can tell, that 40% comes from adding up non-mutually-exclusive percentages. It's the equivalent of claiming that 86% of people would just pay it off based on the above 50% and 36% numbers.
I should also note that the survey included full-time students under "adults", and if I had an unexpected $400 expense at various points as a student I would have absolutely had to borrow money to cover it. Looking around briefly, there are ~20 million full-time college students in the US as of 2020, which is ~6% of adults. While it would obviously better if college students had larger cash cushions, a college student borrowing money from parents to pay $400 is not the mental image most people have when reading the executive summary here...
Now the fact that no matter how you slice these survey results no fewer than 8%, and maybe up to 50% of non-college-student adults don't have $400 on hand if they need it is still a significant problem from my point of view. Especially because I really doubt it's as low as the 8% option. But I am also quite certain it's nowhere close to 40%....
> what is the overlap between the set of people who check "just pay it out of checking/savings" (50%) and the set of people who check "charge it and pay off in full at the end of the month" (36%)?
The report plainly states:
> When faced with a hypothetical expense of only $400, 59 percent of adults in 2017 say they could easily cover it, using entirely cash, savings, or a credit card paid off at the next statement (referred to, altogether, as "cash or its equivalent") https://www.federalreserve.gov/publications/2018-economic-we...
The 4 in 10 comes from the very next paragraph of the report:
From this data, it is reasonable to conclude that "Four in 10 adults would not use 'cash, savings, or a credit card paid off at the next statement' to cover such an expense."
Now it's possible that there is additional data that they have but are not presenting in the appendix but are using to generate their conclusions, including data like how many people marked both "pay with cash" and "pay with credit card now, pay off at next statement". If that's the case, I wish that data were actually available.
For example, given the "could easily cover it, using entirely cash, savings, or a credit card paid off at the next statement" phrasing it's not clear to me how they code someone who checks both "pay cash" and "borrow from family". Are they included in the 41% or the 59%? Or were there just 0 such respondents so this is irrelevant?
I would love to trust that people are drawing the right conclusions from their data, but would really prefer that raw data were published so the conclusions can be indepedently verified...
I think it is interesting that the writer of that article pointed out that the total adds up to 143% because multiple choices were allowed, but then argues that the real number [of people who can actually afford $400] is 86% by adding two of the choices. The entirety of the 36% could potentially be included in the 50%.
> It's reasonable to assume USD is losing 8-10% of its value every year from 2020 onwards, thanks to Fed policies.
Since dollar prices of final goods and services can be tracked, and don’t show that trend, its not reasonable at all; nominal price levels of goods and services haven’t generally increased by about ~2.5× over the past decade.
> I know about their bullshit CPI numbers,
CPI is BLS, not the Fed. And its a whole lot less bullshit than what you’re spreading right here.
> and anyone who is gullible enough to believe "there is no inflation" deserves what's coming.
The idea that inflation might be coming at some indefinite point in the future is, of course, unfalsifiable, and its been a constant refrain from the same segment of society for as long as I've been alive.
The claim that there has been massive inflation since 2010, OTOH, is both falsifiable and false.
>The claim that there has been massive inflation since 2010, OTOH, is both falsifiable and false.
Depends where you live and what lifestyle you live. If I took the total amount spent on all the things and services I have purchased over the years and compared them to their price in 2010, I would have spent far less in 2010. Spending on land, healthcare, retirement savings, taxes and education eclipse the total spent for everything else.
Is that not inflation (for me, at least)? All I know is that to buy the things I need or want to buy in the future, I need to ensure I am earning more and more because I am betting the price will be higher in the future. At least it's been true during my adult life of ~15 years.
> Spending on land, healthcare, retirement savings, taxes and education eclipse the total spent for everything else.
buying land as an asset is not spending - it's investing.
Healthcare+education - i agree, it has become more expensive overtime.
Taxes - you earn more, hence pay more taxes. It's not due to inflation.
Retirement savings - ditto with land, it's an investment, not spending. And you choose how much to invest here, and the increase is not due to inflation (but expectation of inflation might affect your decision, but that's not a causal relationship to inflation).
My comment is in the context of trying to figure out how much you need to earn to accomplish your goals or what kind of quality of life you can expect from your earnings.
>buying land as an asset is not spending - it's investing.
It's an expense for people. They need to spend money to purchase land to live. If the land you're interested in living on goes up 100%, you need come up with the extra money you're going to need to spend in order to purchase it. It has to be factored into your budget. You can model it as an investment for some purposes, but when I need to figure out how much money I need to come up with, it's clearly spending.
>Taxes - you earn more, hence pay more taxes. It's not due to inflation.
Tax rates can (and have) gone up for me.
>Retirement savings - ditto with land, it's an investment, not spending. And you choose how much to invest here, and the increase is not due to inflation (but expectation of inflation might affect your decision, but that's not a causal relationship to inflation).
If you predict you will need to $5M at your retirement date rather than $4M, then you need to spend more of your income on your retirement savings, but the important point is you will have less money for other things. What is raising the retirement age, if not inflation?
Benefits have continuously been reduced since I was a child, and I see no reason for that to not continue. There will be more and more means testing, which means if you have something that can be taken, and you can't politically defend it (I estimate roughly for those in the 80th to 95th percentiles), you should expect to pay more.
If the numbers were really that off in the past wouldn't quality of living be much less than it is for most people in the US? I am skeptical of inflation staying low in the future, and I think they do sometimes make questionable quality adjustments in the inflation data, but if inflation was actually much greater than they've claimed you would see a gradual immiseration of the population.
> If the numbers were really that off in the past wouldn't quality of living be much less than it is for most people in the US?
Yes. Absolutely. I saw an interview of someone who talked about living in the 60s. He was saying how a painter could own a home, afford a wife and six kids with no problem without the wife even working a 2nd job. Today, a single painter could barely afford himself, let alone a family of six and a house. I know it's anecdotle, but the difference is so vast and stark, I think it's obvious there's been a huge difference in quality of life over the last 60 years.
I understand this argument, and I am somewhat in agreement with it. But here's where I'm skeptical. Where I live, there are some homes from this time period. They are very small, around ~1000sq ft. Maybe slightly bigger. Now people want much larger homes. They tend to have at least two cars and possibly more if they have kids. They go out to eat much more frequently and spend a lot more on entertainment.
Obviously, some of that you can't avoid. No one is making 1000 sq ft brick homes anymore for new homeowners, so you don't have an option of a small, cheap home in many areas. You only have the option of the bigger, more expensive home. But some of it is a personal choice. I think there is something to the argument you're making, but I also think people are underestimating the frugality of people in the past.
> No one is making 1000 sq ft brick homes anymore for new homeowners, so you don't have an option of a small, cheap home in many areas. You only have the option of the bigger, more expensive home
The bigger home is inherently cheaper, though. (At least, in the US).
A ~1800sqft new home (the average new low-end build out here in the midwest) takes way less resources and labour to construct than that old 1000sqft brick home did. Houses today are made out of the cheapest plastic and twigs (many don't even have a single piece of real wood in them anymore). Houses back then used bricks and real-wood timber (expensive to purchase, expensive to move, expensive to lay, etc). Your old brick house probably had expensive copper pipes, new builds use plastic PEX straws so cheap they're practically disposable, and so on.
Homes built today are made using far less labour, less materials, and far cheaper materials than before. If land and asset valuations had stayed consistent, homes today would be drastically cheaper than before. Yes, homes are "bigger", but those extra open empty spaces cost practically nothing extra, the fixed costs are mostly fixed and the variable costs are trivial.
Houses in my neighborhood have to be built strong enough to survive hurricane strength winds. The homes back in the day weren’t that much better. The ones you see survive to this day we’re either exceptionally well built or well maintained. But there is still plenty of trash with fresh paint being bought and sold everywhere.
You're getting cause and effect backwards. New construction small homes don't exist because they aren't as profitable for developers to build not because there isn't demand for them.
I can guarantee you there are effectively zero millennials living with their parents or with roommates in a small apartment who would turn down the chance to own an affordable small home.
"Frugality of people in the past". Or, looked at from the other side, "extravagance of people today".
Or, more neutrally, our standards and expectations have changed from the 1960s. If you want the 2020 life on the kind of job that got you the 1960 life, you're in for a disappointment.
I'm in the process of moving (new job), and so I'm looking for houses. There are 1000sqf houses that aren't trashed for $100,000. I'm expecting to spend $500,000 for a 2500sqft house anyway, and only part of that is houses close to work are bigger. (there was a 1200sq ft house near work for $250k - not that I would have bought something that small)
> No one is making 1000 sq ft brick homes anymore for new homeowners
Well, the single-family detached suburban California home I bought as new (not complete when we signed) construction in 2006 was 997 sq. ft. on 0.1 acres, so other than “brick” that was certainly possible to find new not that long ago.
Yes, average home size has increased, but that's mainly for NEW homes, not existing homes.
You have to remember, those new homes are only bought up by about 1% of the population. So, to say that 1% can afford much larger homes is not saying much about the other 99%.
Which is precisely what's been happening. Just take a walk around any major urban center in the U.S. There is misery in the streets. The opioid crisis is another manifestation of the same despair. Historic civil unrest, "eat the rich" / "billionaires shouldn't exist" rhetoric heating up. Etc. etc.
Interesting -- "immiseration", as far as I know, originates with 19th century socialist theory regarding rising misery among the working class due to relatively lower wages as capitalists accumulate wealth and subjugate them[0,1]. Granted, the term is obscure and jargonesque enough that in modern use it does generally mean, specifically, "impoverishment". Which in other words could be called misery from economic causes.
Please, allow at least a little breadth in the scope of rhetorical wordplay: immiseration is fundamentally about misery, and the links I gave are examples of the broad misery felt by the average American. That misery is not sourceless: my entire point is that that misery is due to the increasing relative impoverishment of the average person.
On the surface it is just misery, but when you think about the causes, it is apparent that it is immiseration, in the jargon sense: the people are poorer than they have ever been, and they are visibly angrier and more upset because of it.
The George Floyd protest and the Capitol Riot are each outpourings of rage, directed at "the system". One was directed at the ongoing and increasing seeming criminalization of simply being Black in America, and one was directed at what the people involved thought was an unfair and stolen election, designed to take from them what little they have. Different people, different plights, different ideas: same root cause.
Happy, wealthy, comfortable, safe people who believe a bright future is in store do not take to the streets, burn buildings down, and get into large scale fights with their local police force. They don't throw bricks through coffee shop windows, hang out in tear gas clouds, or crowd up during a pandemic.
Their willingness to do so, over clearly expressed feelings of hopelessness and loss of control or participation in the system, over a feeling that they are losing out overall, it's coming from a place of desperation. It is coming from a place of misery. You've got to be pretty miserable if you think fighting the cops sounds good.
I'm sorry that you see very little connection there. It may unfortunately be that you see very little overall, or that you're intentionally looking away.
Ignoring your gratuitous insults in the last paragraph...
> Happy, wealthy, comfortable, safe people who believe a bright future is in store do not take to the streets, burn buildings down, and get into large scale fights with their local police force. They don't throw bricks through coffee shop windows, hang out in tear gas clouds, or crowd up during a pandemic.
Yeah, see, they could be wealthy, and still not safe because of skin color. That's the point of the George Floyd protests. If you see people like yourself getting shot by police for reasons that seem absurd, over and over, you don't feel safe. You don't believe in a bright future. You aren't happy. And economics has very little to do with it.
27 unarmed black men were shot by police in the US 2020. Most liberals think the number is 1,000+, and a large portion think it's 10,000+ [1]. Maybe you should factor this in to your analysis?
I tried to be careful in how I worded what I said. If I were black (I'm not), and I saw news accounts over and over about police shooting blacks for what (at first report) seemed to be trivial reasons, I would not feel safe. The number doesn't have to be statistically significant; the reasons can be better than they appeared at first report. None of that matters. What matters is that the media is beating into my head that this is going on, so I think I'm not safe. Doesn't matter whether I am or not. If I think I am unsafe, everything I said in my post follows. (Including the main point - that this isn't about economics.)
We were never talking about policy, so I don't know why you bring that up. We were talking about the George Floyd protests, and whether it was caused by peoples' poverty.
One doesn't have to be black to feel unsafe. We also have to define the term unsafe. It depends on how often the issue is occurring and what that individual's risk tolerance is.
I'm sorry. I didn't mean to be _gratuitous_, nor particularly insulting to you.
I wanted to acknowledge the possibility that our respective political beliefs, whatever they may be, might lead us to look for different types of issues in different places as root causes.
My own beliefs lead me to characterize choosing to believe that economic inequality is not integral to the Black experience in America as tantamount to wilfully ignoring a root component of the problems people face. If that belief is insulting to you, we may tragically be living in different worlds of experience, and might not ever have a meeting of the minds. That's what I was going for.
Despite that concern, from what you said, it seems like we might actually agree on a lot -- as you put it,
> If you see people like yourself getting shot by police for reasons that seem absurd, over and over, you don't feel safe. You don't believe in a bright future. You aren't happy.
That sounds spot on to me, and I absolutely agree that the fear of violence affects wealthy Black Americans too.
Regardless, the outpouring of rage from the community certainly transcended just the fear of violence from police. Violence is one particularly horrifying aspect of how the system hurts people, but people are being crushed all over, and people are mad about all of it.
Here is one quick example[1] of this being stated, sourced in one of the Wikipedia pages I originally linked (which explicitly lists "inequality and racism" as a cause of the George Floyd protests). This article is an interview with the Surgeon General of America, and says:
> The surgeon general pointed to Covid-19 disparities and other health care gaps among communities of color including maternal mortality rates and the opioid crisis, saying these issues and the frustration surfacing across the country are intermingled.
> “It's on the top of my mind as a black man, as a father, as a brother, as a son,” Adams said.
The brutality of the police is certainly the salient, focusing point of the protests, but the overall causes and broad outpouring are larger than that. The protestors have often called out the broad systemic aspects of racism, like healthcare access, home ownership rates, debt levels, access to quality education, and investment in communities of colour. Those sorts of things impact Black people's lives daily on scales far greater than police brutality, and they are economic issues at heart.
Police violence is uniquely horrific in its instances, and is the central igniting issue here, but the issues as a whole are much bigger than it alone.
Had a look at those. I see a lot of political discourse, which is certainly related to economic prosperity, but only vaguely... Has the quality of life declined in the US? Have future prospects generally declined? If either of those is yes, we could be in big trouble..
On a zoom call with a group of ~12 friends from undergraduate school, there was an awkward moment where one of the friends jokingly congratulated 2 of the 12 on being able to afford a homes (recently purchased) and start families.
In mid 30s, all women, all have bachelors and have been employed long term, 3 of the 12 are married, 2 of the 12 have children, another 4 are paired up with long time partners, but there was a palpable unease and underlying depression about the future income prospects and lack of security about where they would be able to live.
Let me guess, they all want to live in a major urban center?
There are plenty of places in the US where housing is still affordable. Sure, maybe it’s not your first choice and maybe you won’t be keeping up with the Jones’.
Places like Austin, Denver/Boulder hell, even Seattle were affordable not that long ago. But they weren’t cool (which is why they were affordable). Suddenly they become desirable, housing prices go up and people complain they can afford to buy where everyone else is buying.
Yes, no one wants the tradeoffs of moving east of the Rockies, and everyone wants to be within 45min of an airport. But that's the awkwardness I'm talking about, caused by the gap in the group of friends of those who can afford to continue living where they want to live without making tradeoffs that the others would have to.
Years ago, buying a home seemed like something you can easily share and celebrate with acquaintances. Recently buying a home in the Bay Area, I felt that's passed and I try not to bring it up. I don't feel any satisfaction from celebrating or bringing up something that 20 people in a gathering have very dim prospects of ever affording, and questions about it make me feel uneasy about their possible uneasiness.
I agree, because it's expensive. But a modest American home was never that expensive for most adults, hence "house warming parties", and thus I'm fairly sure was socially acceptable.
I mean, I went to house warming parties 5 years ago when housing was not a lot cheaper in the Bay Area. As long as you don’t throw it in peoples faces you’re probably fine.
And “can never afford” seems like an extrapolation of the last ten years ignoring corrections that came before that.
For those of us who lived through 2008 it’s amazing how quickly we went from “i’ve never over pay for a house again” to “housing only goes up”.
Some people are so lucky, but let's say you each have university debt, and you have 2 kids, and you need to pay for childcare, and you have 2 cars so you can each get to your jobs, and your 3-4br apartment rent is 2-3k/month -- good luck saving 20k/year on ~70k take-home!
And that's all if you can live in a small-town-enough place where homes "only" cost 400k -- in many cities in the last 5 years (i.e. places where there are easy jobs to find), that's just not a realistic house price anymore.
I was a brick/stone-layer's labourer back around 2005, and we built a home that cost ~400k at the time, on the edge of a mid-sized town in southern Ontario. It was a mansion. Stonework, 4-car garage, big lot, 3 stories tall, 5 bedrooms, 3+ baths, the works. Today, I think that house we built could sell for ~1.5-2M.
Having 2 kids by 30 without being financial stable is kind of bad planning. They deserve to get crunched.
Where would you need cars and have to pay 2-3k for an apartment?
Prob like 1.5K/month, two economical cars. Pay off debt and build a nest egg, married at 30, kids at 32. Cook cheap and healthy meals. Outdoors for fun. No big drinking or expensive hobbies.
They can easily make it happen if they do the above.
It’s not my fault that people can’t prioritize and strap down.
Because they're not willing to make the tradeoffs that come with a $200k to $400k house. I don't even think there are houses for $400k though, even before 2020.
The numbers below are one year commodity price gains, as of today rounded to the nearest tick (view the individual graphs, 1 year timeframe as % gain):
Who should I believe, a government agency conducting a methodical survey of the country's economy, or some guy with a list of numbers that's possibly cherry picked?
But I don't because it literally takes an entire government agency to do it right. The incentives might be misaligned, but the BLS is a large enough entity that if there really were problems with their methodology, it would be publicized. Short of that, I'm more inclined to believe the BLS over a random commenter.
> But I don't because it literally takes an entire government agency to do it right.
It doesn't really. If you track your expenses consistently over the years (gnucash et.al.) you can trivially plot the increase in cost of living and the acceleration of that increase last handful of years.
That's fraught will all sorts of biases. What if your shopping habits changed? eg. you started becoming more health-conscious and started buying healthier (and more expensive) foods. The BLS accounts for all of that by measuring the price of a fixed basket of goods, which mitigates those effects. The same can't be said of your budgeting spreadsheet. Or maybe your area is undergoing gentrification and the discount supermarket got replaced with a whole foods. Your grocery spending might have went up 50%, but that doesn't mean it's a meaningful representation of what's happening across the country.
They're also anonymous, so you should assume the worst. This is especially true when the supporting evidence is suspect (ie. a bunch of arbitrary picked numbers). On the other hand the BLS's methodology is documented (https://www.bls.gov/opub/hom/cpi/), so I'm willing to give them a pass even though their incentives might be skewed.
>(what would it be?)
their beliefs? "agenda" here doesn't have to be something nefarious. an anti-vaxxer's agenda is anti-vaccine, but that doesn't mean they're scheming to get everyone infected.
Your statements are contradictory. If there will be 8-10% inflation then people will park their money in assets like stocks, thus keeping the market up.
Houses around here have been going up in price 5-10% year over year around here since, like, 2012 or 2013. Foreclosures aside (now long gone, but widely available for a few years), they never dropped all that far from their '08 peak, really, either. I'm in probably a third- or two-and-a-halfth-tier US city, so this isn't NY or SF or CHI or LA or even Austin or Denver. New housing is going up fast and everywhere, and has been non-stop aside from a very brief period after the '08 bubble. 2020 happened, and the prices went up even faster, and everywhere in the city, not just in certain areas.
WTF is going on, if not inflation? (serious question, I'd like to know what other explanation there could be)
don’t think so. look at canada’s housing market, look at NZ. those markets are truly insane compared to the US, and they’re not printing a ton of money or experiencing major inflation. housing has become a good investment simply because the supply isn’t great enough in desirable areas, and people with money recognize it. inflation is up, but not on the scale you claim.
I dunno about NZ, but Canada printed pretty hard for COVID relief[0,1].
Regarding inflation, anecdotally food etc prices in Toronto seem much higher this year than last, and did last year too, but the CPI data doesn't share my opinion.
Our groceries seem to be at least 2x what they were in '05. Meanwhile, if anything, our tastes have gotten cheaper and we're better at bargain-shopping.
US CPI tells me they should only be 35% higher. LOL. Bullshit.
Money laundering raising comps and everyone else then using those comps to justify prices. Incredibly cheap money, and everyone wanting to live in a house instead of condo/apartment. Demand is >> supply - limited supply means the prices rise. Doesn't explain everything but certainly points to some of the what I will say is insanity in the market.
You are referring to a very specific asset market in which essentially millions of people participate in legal, open, price-fixing conspiracies. There are potentially whole armies of people whose job is to keep those prices high, and to raise them higher. Year-over-year price increases in these asset classes (housing and stocks) may be baked into our whole economic model at this point. If the graph ever flatlines, it would trigger our slumbering debt crisis to go nuclear again, because of the way things are structured.
There is an entire segment of our economy (the FIRE sector) which is based on running these operations as ponzi schemes, and they are both funded and then bailed out by massive acts of private debt-as-money creation - it is like a recurring Marshall Plan, which guarantees the major players can always outrun the ever-looming debt crisis which is engulfing we, the little people.
The point is that we never have to actually fix the debt crisis or solve the problem of stagnant wages and decreasing demand, if balance sheets can always be corrected with fresh currency injections at the highest levels. Maybe you saw the gent on here who posted the Atlantic article about private firms owning 1 in every 5 American houses.
Yet your analysis would seek to use these (home) prices as an innocent, quasi scientific marker of the purchasing power of the dollar. I get the motivation there - housing is a key basis of human experience. But there is so much market manipulation going on in these asset classes that using them as a measurement of the value of the dollar is IMO not correct. The most powerful corporations around have chosen to backstop some of these assets, and that has supported a speculative boom on the part of anyone who can get bank money to 'invest' in bidding up property prices. Price discovery does not happen in that scenario, because everyone is buying things with the Bank's money, not their own. And if they don't buy it - guess what? The Bank will. Through a shell company, basically. These are some reasons not to measure the dollar's purchasing power by looking at the price of housing in America.
Yes! Housing on its own would be one thing. Might just be housing being housing (though... way more than it usually is, so, there's that). Now. How are other assets doing?
People who want to tell the old Austrian story about money will always find supporting evidence to do this. If you are seeking to view everything as a nascent currency crisis, because thats the only economic narrative that appeals, then there will be things that tie into that.
A modern iPhone, price converted into 1970s equivalent technology, has many millions of dollars of 1970s technology on it [see YT link below]. Now available for 600 dollars. An older gentleman I was speaking with yesterday told me about how nickels and dimes had become worthless.. indicating a decrease in value of the American currency. On his lap he was holding, what would have been for the era he had in mind (60s), a sleek, miniaturized supercomputer. These are now available for less than 1000 dollars with a monthly operating cost less than 100 dollars, including power. The same 10 dollar bill that in the past might have bought more food, now buys an unending amount of technical gadgets and do-dads mass-produced from the Chinese market, which can be shipped to one's doorstep for either free or an additional 5 dollars. Those products and markets didn't exist or were not open in this golden age of nickels and dimes he was referring to.
I may have misread your comment, but if you are leading me down a primrose path to speculate on the relative worthlessness of the dollar, because some asset prices have increased - I'm not going there. I've seen people parroting these arguments for 20 years now online. Stocks and housing are special cases. Cars are actually also weirdly price-fixed to support the auto industry. Everything else is getting relatively cheaper. This guy has some worthwhile thoughts on it: https://www.youtube.com/watch?v=dSw41MqPFoM
It's probably not going up quickly in the suburbs or other less desirable areas. The problem that happens in pretty much every city is that the local government prevents development. And now that cities are becoming more desirable you have an ever growing number of buyers chasing a relatively fixed number of homes.
It's not inflation. It's classic supply and demand.
> It's probably not going up quickly in the suburbs or other less desirable areas.
I assure you, they are. Also you're way out-of-touch with common sentiment if you think the suburbs aren't desirable, if for public school quality if nothing else (for the record: I hate the 'burbs). Source: I've bought several houses in my city (serially, I'm [sadly, in the current market] not a property investor or landlord) since the '08 crash, all in the 'burbs, keep up with a couple real estate agents, and have had many friends and family buy all over the city over the same time period, including within the last year. There's been non-stop, extensive housing construction for damn near a decade now, and prices are still doing this. People are being bid out by over-asking cash offers on day two of a property being on the market in very mediocre areas. Lots are selling over-asking in the same manner. It's nuts.
Also, if it's not inflation and is "classic supply and demand": what's up with all other assets then? If demand for all assets is up, such that prices are all way up, even and especially through 2020, what do you call that? Housing was just an example.
Yeah, and I'm trying really hard not to read it as "it's inflation but for some reason we're going to not use that word once in this whole article", but can't. They write about a bunch of things that sure seem inflationary ("borrowing money is basically free"—OK, right, so why would that be, and why would it stay so cheap so long, and what effect does that have?), and then also write about how middle-class folks are pulling lots of money out of the stock & bond market to buy houses, so that's why houses are getting more expensive... but the market's gone up like crazy over the last year! It's not like it even had a normal year, despite, you know, a pandemic, and all this supposed shifting of money from it to housing. Crypo's booming. Approximately all asset prices are booming.
If all assets are going up, seemingly nonsensically, what is that? It's a really, really broad-based bubble, or it's the leading edge of an initially-unbalanced-but-surely-it-won't-stay-that-way inflationary wave, no?
It seems like equities do not (long term) perform well relative to currency in inflationary markets because companies' costs also rise. Apple, e.g. would be spending more per unit iPhone and would eat margin or require a price increase, which leads to fewer sales etc.
There are exceptions, like energy companies, for example. IIRC Exxon went up in the 1970s while the market as a whole stayed flat and lost value relative to the USD.
At the extreme, in the Weimar republic, the stock market did what the US is doing today... until the stocks flatlined relative to the currency[1].
I understand how it can look that way. But from my perspective, being long USD is a much more dangerous gamble. I'm young and have a high risk tolerance, we will see.
The insane market speculation going on is also a symptom of this. It's reasonable to assume USD is losing 8-10% of its value every year from 2020 onwards, thanks to Fed policies. I know about their bullshit CPI numbers, and anyone who is gullible enough to believe "there is no inflation" deserves what's coming.