Assets grow faster than wages. Thats all you need to know. Either create your own assets (entrepreneurship), put all your money into leveraged! assets (stocks, housing), or prepare to live as a wage slave. This includes highly paid tech employees, you cant escape it. The monetary system works by debasing wages, a secret tax that keeps you working year after year
Me neither because I pay myself. But if I were an employee I would not mine my base automatically indexed to inflation. This of course will wreak havoc in the whole system.
There is nothing new here. In boom years, they always do. In bust years, they come back down to earth.
> Either create your own assets (entrepreneurship), put all your money into leveraged! assets (stocks, housing), or prepare to live as a wage slave.
There is also not much new here either, sadly.
There was a brief time - pretty unique to the US - between WW2 and early 90s where things were different. This is pretty unique globally, and to the US.
Whats new is how drastic it is. Its not a joke, you need to invest with leverage or all the time you spend working will be for nothing. And you need big leverage.
Could you explain what exactly you mean by "leverage" in this context? Does this just mean take out loans? I feel like interest payments really screw you on most loans.
Something to this effect. Use borrowed money to buy more assets.
In reality, this is terrible advice if you can't service the interest. It's a scheme that worked in a low rate environment, but likely will no longer be viable.
Some stock brokerages literally let you trade with a multiple of the actual cash you have deposited. E.g. you have $10,000 in a brokerage account with Fidelity and you apply for margin and they let you trade with $100,000 that you can then invest as you see fit. You multiply your possible returns but also your possible losses. If your losses become large enough you can get Margin Called and be forced to repay all of your losses at once. So if you lost all the 100K they gave you, you are now on the hook for those losses.
How long will this continue though? This can't be sustainable forever.
At one point, you won't have any money to buy any assets if your wages are barely covering your food and shelter, and so we'll go back to feudalism where only those few with inherited wealth owned assets and everyone else was a slave for life.
All the important stuff is already owned by the few. It will just get worse. Eventually will lead to a revolution. That's the end game if it keeps going. There needs to be a jubilee and a 'new new' deal to prevent it. However, people in the USA have to acknowledge they are in an empire that's declining. There will be a lot of pain. Look at the British for what that looks like.
I don't feel like that is accurate at all. The most valuable assets by far are successful companies. While it is true that they are owned in large part by a "few" (relative to the total population), that few changes often. We've seen massive changes in wealth in just the past decade alone, particularly in tech.
The most valuable assets by far - accounting for over half of all wealth - are land in highly desirable locations, because both individuals and companies have to pay rent while the landlord pays basically nothing in upkeep in perpetuity while only facing the unlikely risk that rents might drop to zero if the land becomes undesirable - not very likely if you own part of downtown New York, London or any major city.
The behavior when it doesn't break is actually more informative, though. At first, all aspects of the music experience exponential growth. Once clipping sets in, the growth of the loudest / highest gain frequencies continues, but now at the expense of every other frequency. Eventually one frequency wins and the system devolves into the distorted shriek of a single fundamental frequency and its harmonics.
The idea here is that we can tell where we are between "free growth" vs "starting to clip" by looking to see how well the rising tide is fulfilling its promise of floating all boats.
1) That's why the west are pushing for forms of government surveillance disguised as Covid tracking, or anti-terrorist surveillance, or anti-child-porn surveillance, or whatever flavor of the month the current "enemy" happens to be, to make sure they can see it coming and stamp out any potential public dissidence before it hits the elites.
2) Unlike the French or Soviet revolutions from a couple of hundred years ago, which saw the deaths of the elites, the elites of today can travel to remote places using planes to distance themselves from the angry mobs, and rule their empires remotely using the internet. Huge game changers compared to the past.
Every, and I mean _every_, successful revolution was due to the governments/rulers/aristocrats/elites thinking they could successfully quell a revolution with force and distance themselves from the mobs.
In the French revolution, which took place in Paris, the elites all lived outside the city. The royal family lived in Versailles. No one went into the city for any day to day business. When the revolution happened, the nobility fled, and they directed their armies to seize and starve the city. They were using all their wealth and power to quell and flee. Much good that did them.
Putting the present elite at an even stronger disadvantage, though, is that Western billionaires only have power because the people allow them to -- land, money, stocks, it's all owned on paper. If a revolution is successful, there is no reason a billionaire's wealth or power couldn't be wiped away at the swipe of a pen. Elon Musk does not have enough of a private army nor his wealth in gold to defend his claim to anything.
I should have clarified that these men likely do have very qualified and extensive personal security teams. However, they wouldn't stand a chance against the resources of a sovereign nation.
>Elon Musk does not have a private army nor his wealth in gold to defend his claim to anything.
People like Musk are not the world's ruling elites though. He and other tech billionaires are the richest people who's wealth is in public companies, so that's why they get all the visibility and media attention, but they're not the richest people in absolute terms, nor are they ruling elites, quite far from them.
The ruling elites, the richest and most power people in the world, are the likes of the British monarchy, Vladimir Putin, Saudi family, and other such monarchs and dictators who basically own nearly entire countries in both land and valuable resources and also control militaries to defend their assets and their position. They never appear in Forbes riches people because, unlike tech billionaires, most of their wealth is highly secretive and well hidden from the rabble, and for good reason too.
Putin is estimated to be worth way more than Musk. And he also has an army at his disposal. Same with the Saudi family, they have an army and their wealth could probably make Musk look like he should be put on social security.
> Elon Musk does not have enough of a private army nor his wealth in gold to defend his claim to anything.
In principle you are right, they don't have armies per se. But don't let the
"everyman" persona put on by Musk or even Buffett fool you.
Billionaires must have extensive (and probably armed) security operations protecting them and their families. It would be irrational for them not to have that. Agreed that they might not be able to prevent their factories or other industrial assets from being seized (Just ask the oligarchs who fell afoul of Putin and fled).
Historically, that's when a revolution or regime-change happens. This is something the richest of the rich have either forgotten or mistakenly think they'll be insulated from.
Like the line from Titanic when the extravagantly wealthy Calvert is trying to buy himself onto a lifeboat – "Your money can't save you any more than it can save me."
Depends on the scope of “history”. You could also say that historically that’s when a civilization gets put under a feudal yoke for scores of generations. Successful revolution by “the workers” is more the exception than the norm in the story of humanity, I should think. there are plenty of places in the world that are ruled by truly oppressive regimes, and I think most of the world, most of the time, has looked like that, not like the developed “West”.
The west is like this today (apart from the countries that built themselves up on colonial empires of theft) in part also to a lot of violent and sometimes deadly revolts against the ruling class.
US, UK, France, Italy, Germany, etc. all saw bloody strikes and protests, in order to get fair living conditions. Noting was ever given out of pure generosity, without a fight.
My point was that all the theft from colonialism didn't really improve things much back home for the average folk in those countries later on, as all the stolen wealth ended up in the hands of the few elites, and the working class people were left to sort it out for themselves.
The wealth inequality was absolutely insane. It's not like thanks to colonialism, everyone living in the UK victorian era could afford to prop their feet up, live off free stuff taken from the colonies, and never have to work a day in their lives. Quite the contrary, they were working long hours living in poor conditions.
The working class only saw lifestyle improvements when they fought back for them.
During the industrial revolution life expectancy in UK was among the lowest in the world for the poorest industrial workers. Inequality was incredibly high.
Painting people in a country as being all benefiting (or being harmed) from an external factor is very misleading
War, actually. Inequality in the Victorian era was high, after the early 20th century labor movements and a couple of world wars wages greatly improved.
There have been many periods of high inequality and stagnation in history broken up by war. Since war is not a preferable catalyst in this day and age, we have to opt for organized labor.
>> At one point, you won't have any money to buy any assets if your wages are barely covering your food and shelter, and so we'll go back to feudalism where only those few with inherited wealth owned assets and everyone else was a slave for life.
> Historically, that's when a revolution or regime-change happens. This is something the richest of the rich have either forgotten or mistakenly think they'll be insulated from.
Revolutions aren't always successful. If the rich control the state by corrupting democratic institutions and remove from the peasantry the tools to pursue "politics with other means," they might actually get away with a transition to something like feudalism.
I sort of wonder what you mean by tools to pursue politics by other means. Presumably you mean guns, but the thing is that in the US the plutocrats created their own epistemic ecosystem and got all the people whose identity are wrapped up in guns (and own the majority of them) to buy into it - remember how we're not allowed to call them plutocrats since that's disrespectful; the preferred term is "job-creator". So now anytime the rabble get a bit restless, the job-creators just get another upper income tax cut. So I guess I'm curious when you say tools if you mean guns or information.
This has been a pretty normal state of affairs for many societies throughout history. This whole egalitarian "most wealth is earned" thing is if anything more exceptional - it only really started in WW2.
Sarcasm aside, there doesn't need to be a conspiracy for a privileged group, acting as individuals, to want to discourage changes that would upset their advantaged position in the status quo (and to use their privileged position to maintain it). They don't need to relish the suffering of others so much as maintain the indifference required to justify their own self-preservation. Virtually every member of the uber-rich buys into the gospel of the benefits of inequality and the necessity of a poor underclass, and votes and lobbies accordingly.
> put all your money into leveraged! assets (stocks, housing),
Spoken like someone who has only operated in the recent bull market.
Using a mortgage to buy a reasonable house that you can afford is a good idea.
Using leverage to buy as much real estate and/or stocks as you can get away with is a terrible idea with some significant downside risk. Leveraged stock purchases are notorious for working great until the market turns and blows up your account. Even leveraged funds have significant slippage that isn’t obvious to the casual investor who thinks they’re just going to get a clean 2X return.
One of my most poignant memories from the 2008 crash was watching a few people I knew go from feeling like they were financial geniuses to bankrupt and struggling. The common theme among all of them was that they were leveraged to the hilt in real estate. They thought it was easy money when it felt like the market could only go up. Then it stopped going up and we all know what happened next.
If you remember just one thing, it's that no asset class goes up forever. Some assets tend to trend up overtime more than others, but they all have times where they go down too. Make sure you can survive that.
People buying homes in places that have only gone up in the last 40 years need to consider that that might keep going up for another decade, or they might be cresting the hill before correcting.
Housing has risen some 40% over the last two years, while this is certainly insane. If the trend continues the downside risk either becomes massive - or a mere 30% correction becomes inconsequential to the principal balance.
Homes have been going up in price for far longer than 40 years. The only time they have dropped is the Great Depression and the Great Recession. Otherwise there isn't an asset class that is more reliable over the long haul than real estate.
>Homes have been going up in price for far longer than 40 years.
Homes going up is not the problem though. Yes, they've been going up for longer than 40 years, but back in the 1950's their growth was basically tracking inflation and wage growth, or even going down in value since they were seen an any other depreciable asset, just a place to live in till you die.
It's in the last 40 years that housing massively outgrown wages, as it became a speculatory investment vehicle instead of just being a place to live, plus the introduction of NIMBYISM regulations to restrict supply, and that's where the issue is.
I strongly disagree with this. First off homes fell sharply in value just as recently as 2009. Secondly over time, globally, real estate barely keeps ahead of inflation. About 3% per year. For much of the last century you did about as well parking your money in a savings account. Finally, equities in globally have returned about 6.5% per year. That's much better. Better still in the US where they did more like 10.5%. Real estate as an appreciating asset is a lousy investment. If it's a place to live that's sometimes a different matter. If it's a rental property that's also different.
it's also short-sightedly self-centered. the better solution is moving the economy toward being wage-oriented, with asset income being periphery, rather than our current asset-focused system.
make money by doing stuff rather than having stuff, the latter of which is the epitome of economic rents.
Then what are you advocating for? If people can't parlay wages into assets that can at least perform in the same ballpark as wages then "work until you drop" or "crank out kids like a pre-industrial subsistence farmer" is what you'll get.
It takes roughly a career to amass enough assets to retire on and that's with a slightly reduced standard of living in retirement.
Unless you want to assume population growth forever (seems unwise IMO) you need one average career to generate enough surplus to pay for an average retirement. So far, buying assets (usually a mix of real estate and fractional ownership of financial instruments that are ultimately backed by companies and governments) is the most efficient way we know to accomplish this goal.
no. must everything be taken to an extreme, made tribal and ideological?
note the phrase "asset income being periphery", which implies an optimum. the ability to own one appreciating asset is great. owning two is probably ok in most cases. 90 is highly unlikely to provide a net social good.
Let me run this wild idea by you real quick: What if we, as a society could somehow pool our excess wealth for distribution among the elderly and infirm who are unable to work productively. This would provide everyone with a sense of, you might say, security that benefits society as a whole.
To answer you first question/comment (because you are not as original as you think you are): That is why robust electorate, transparent public governance, and durable anti-corruption institutions are so important.
The obscene rents being in government coffers is somehow magically better than in some billionaire's bank account? You can make bullshit ideological arguments about the intrinsic goodness of one or the other all day but the fact of the matter is that any system of providing for retirement other than literally just saving up resources (which would be horrendously wasteful) and then spending them over retirement is going to necessitate contributions by currently productive members of society. Money has to flow from worker to grandma somehow. And there's always intermediaries. And they always take a cut. Maybe it's you that's not that original.
When the Social Security trust fund runs out you're going to find out really quickly that this "wild idea" doesn't work for the same reason Marxist Communism fails in the real world: you can't get the majority of a population to genuinely and altruistically operate within that system, especially when unexpected or abnormal events occur, like the baby boom or periodic market crashes.
Edit: sorry that was a bit snarky. The point is that there are other ways to ensure people have a reasonable lifestyle once their 'working days' are over. Those schemes are probably best to be tied in some way to contributions, but they certainly don't need to be simply a savings plan, they can be a means to provide social support for those that cannot contribute to the same degree as others.
edit: oops, wasn’t talking to me but will leave the below unedited for posterity (and to show my posterior).
again, that’s a logical leap that i was careful not to make. small-time investing can have positive externalities on an economic system; industrial, mechanized investing, not so much. if we didn’t try to turn everything related to money into a get-rich-quick gambling scheme instead of the (imperfect) accounting mechanism it was originated to be, we’d be much better off, pensions and 401(k)’s included.
Was there a period in humanity, or in the life of any living creature, where they just sort of stopped engaging in productive activity and it was a good thing? Maybe we need to create more meaningful and sustainable work that fits into people’s life cycles, but the idea of working your entire life is not a tragedy. FIRE is a scam.
> Was there a period in humanity, or in the life of any living creature, where they just sort of stopped engaging in productive activity and it was a good thing?
Humanity as a whole? I don't think anyone has advocated that here, just a certain segment of the population in their later years. As for any living creature, I didn't spend any time doing anything productive over the weekend, and I think it was a good thing. In fact, I've been doing that every weekend for a long time, and I plan to keep doing it!
Doing enough work to survive is a fundamental part of life. Technology and society function to either make that work easier or lower the amount of work that needs to be done. Take either of those away and you're going to be spending much less weekends doing "nothing productive".
meta point is that this is why nuanced conversations on the (texted based) internet are a waste of time. You and the person you're quoting are not really talking about the same thing. In a conversation you would go back and forth and figure that out; on the internet that's not required.
> You and the person you're quoting are not really talking about the same thing.
The reason I responded to the parent comment was that it seemed to me like they were misinterpreting the person they were responding to; the original comment that started this thread was that people who only have wage-based income instead of asset-based income would not be able to effectively retire and would have to work for their entire life. The response to this was to argue that if people didn't work, then humanity wouldn't progress. I don't see why "humanity needs productivity to progress" implies "every human needs to be productive for every moment of their entire life", which is why I responded with both a direct answer (i.e. arguing that people should be able to retire is not arguing that people shouldn't be productive _ever_ in their life) and a tongue-in-cheek response (nobody actually is productive every single moment in their life).
there's the story that pre-colonial Hawaiians lived in abundance and basically didn't work for 4 months of the year (see e.g. https://www.hawaii.edu/uhwo/clear/home/HawaiiLaborHistory.ht... ). So that was a system where everyone could stop engaging in productive activity because as a society they agreed that they had "enough" for the year and it would be more fun to have a vacation than to have "more".
With economic rents the dilemma is not simply between doing stuff and having stuff. It's between having something which others can have as well (through reciprocal property rights) vs. claiming to own things which actually belongs to someone else (surplus labor resulting from enclosure of the commons) and then pledging what you don't own as collateral for loans.
The author of the original "Tragedy of the Commons" paper lamented that he did not title it "Tragedy of the Unmanaged Commons", later writing a follow-up by that name: https://pubmed.ncbi.nlm.nih.gov/21236819/
i guess there's one situational intersection, alluded to by @randbox, between the tragedy of the commons and economic rents, which is when someone (illegally) takes control of the commons and literally charging rents for assets they don't actually own.
offhand, i can't think of a practical and contemporary example of this though.
"making money by having stuff" is the basic move of capitalism. The stuff you have is called capital, and our economic system is at its core the "ism" of "having stuff".
I'm not disagreeing with you re. what I'd rather see us move towards, but there's a whole lot of existing money and power entrenched in the idea that having money is a great way to continue having money.
sure, but in the long arc of history, we're past the peak of capitalism, groping for the next iteration to move us forward. to overcome the ossification you describe, it's time to take our positive learnings (assets are ok, wealth concentration not so much) and apply it to a new -ism. the current beneficiaries can come along, stay behind, or we can fight over it, just as in the past. that does mean that this progress likely happens in a different part of the world than "the west".
This is true if the market has it's normal up and down swings. However it's entirely plausible that we no longer live in such an environment.
Saving money is a smart idea unless you live in a communist state or a dictatorship, then your best bet is to spend as fast as you can or secure assets resistant to confiscation.
Maintaining liquidity is a smart idea unless you live in a world where the government decrees asset prices can never fall. In which case throwing everything you have into leverage is the best bet.
It's not an irrational bet that the Fed's hands will be permanently tied to a low interest rate environment. The more people who make that bet the more true it will be.
> This is true if the market has it's normal up and down swings. However it's entirely plausible that we no longer live in such an environment.
How is it plausible? I would say given the historical data, it is extremely unlikely. Not impossible, but near negligible probability.
People saying, “it’s different this time,” right before a economic crash is a cliche for a reason. I suspect that you could use the frequency of utterances to predict impending recessions / asset class corrections with extremely high accuracy.
If we’ve transitioned into a different socioeconomic system from capitalism, then it really could be different this time. It just means that certain assets are no longer traditional “assets” but should be viewed as an annuity etc.
Housing can return 20% per year until the end of time if the Fed wishes it to.
You're certainly not alone in thinking along these lines, but it is another case of "it's right until it isn't." The Fed has said they're going to tighten until inflation eases. Maybe they're wrong about that, but in the past they've been willing to crash the economy to hold down inflation.
Will they this time? Who knows, but it generally pays to hedge a bit.
As someone that worked at a hedge fund that was leveraged approximately 40:1 in 2008, I never wish to go through that again. 40B USD assets under management down to about 7B USD in a few weeks... Amazingly, we still had jobs at the end of that September.
IIRC, it took between 18-24 months for the fund to earn it back, with a significantly reduced leveraged rate. AUM never reached 40B while I was still there due to redemptions, though. The following year was a wild ride, for sure.
Trading on margin is one thing, but leverage is the only way to make significant money. That’s why people who traded options or even crypto made massive amounts of money. 2% return on 10x leverage is 20% return at 1x risk.
>That’s why people who traded options or even crypto made massive amounts of money
All the money "made" from crypto was at the expense of other players(I refuse to call them "investors") who were left holding the bags, or at the expense of the environment (most of the large scale mining operations was done in areas of the world with cheap and dirty energy like China, Russia, Iran, etc.)
I used those examples because they’re easy to understand. But how do you think angel investors like YC make money? An angel investment is also using leverage, banking on either future earnings or fundraising rounds to magnify your initial investment with a convertible note.
That's not how it works. Angel investors and VC firms almost always purchase equity. It's not really possible to purchase pre-IPO stock on margin (although some wealthy investors can take out loans collateralized by their other assets, and then use that cash to invest in other opportunities).
There's no regulatory burden. Pre-IPO equity funding rounds always involve some kind of valuation process and negotiation. The investor is purchasing a certain percentage of the company for a certain number of dollars.
That's not really the same. Investing in some companies adds value to society while "investing" (more like gambling) in crypto does not.
For example, some tech and semiconductor companies, because the whole world benefits from better compute (research for vaccines can be done faster; imaging for medical equipment results in better diagnostics; cars, engines and batteries can be simulated better and made safer and more efficient etc.) The whole world benefits.
"Investing" in crypto on the other hand, added zero value to society, or actually added negative value through the environmental damage being done.
I'm not really an advocate of proof of work crypto like bitcoin. Proof of stake crypto like Algorand have no environmental damage. There are however way more companies that have caused and will continue to cause environmental damage than bitcoin can ever do in a thousand years.
That's not really what is at question here though. It's the concept of a pyramid scheme. The reason the stock market over long periods of time generally trends upwards is because new money keeps being added to it. It's as much of a pyramid as crypto is. That's just how the whole economy is though. Every generation so far has had more people than the last. It will be rather devastating to the stock market and economy whenever that stops being true.
False. Over the long run, successful companies return capital to investors through dividends or stock buy-backs. No one else loses in those transactions. For example, if you purchase shares in an S&P 500 index fund then you'll receive approximately 1.5% dividend yield.
No that's completely wrong. You seem to have misunderstood the basics of DCF valuation. That is literally Finance 101. Irrational investors can create temporary bubbles in the short to medium term, but ultimately over the long term stock values always revert to cash flow.
Crypto is just being used as an example here, the point of the comment is not to debate whether people buying crypto or not are "legitimate" investors.
How does one leverage to buy more real estate? Refinance one house to pay down the next one? I just went through a home loan process and this would never work because they look at total LTV and credit reports...
GSEs (Fannie, Freddie) let you lever up with a lot of real estate borrowing (~10 mortgages per person, with some wiggle room with creativity) before you have to go to a commercial bank to wrap the portfolio with a commercial loan or similar product.
Not quite, but close. Piketty's thesis is that the rate of return on investment is higher than the growth rate and that this drives inequality. Asset prices growing faster than wages is a partial explanation for that.
The annoying part is that there are many changes which federal & state governments can make to the financial system to ensure wage growth better tracks inflation without sacrificing growth. Such as capping federally backed mortgages at 150% of the labor replacement cost of material fixtures whenever that's lower than the comparable sales price. Or replacing federal payroll and income taxes on earnings under $100,000 with a national excess property tax on property comparable sales values minus 50% of fixture labor replacement costs. Or provide local public banks which appraise excess property values separately from labor replacement costs and spending publicly collected interest payments back into circulation on public works.
"Rent seeking" used to be an economic pejorative. Much like "regulatory capture." Now the system is such that those practices which are considered more corrupt, less productive, and less pro-social are the only ways to "make it" let alone make it big. I don't buy into the notion of rebellion by the "wage slaves" though. They're so at each other's throats, divided by arbitrary identity and cultural distinctions to make any cohesive political change impossible, even in nations where they (supposedly) have the ability to do so via elections. You'll own nothing and you'll (pretend to be) happy... or else.
> The monetary system works by debasing wages, a secret tax that keeps you working year after year
No. The monetary system works by encouraging capital to be invested in productive uses by debasing it yearly through inflation. If inflation was 0% or negative, the incentive to risk capital is much much lower.
The political system of Western countries favouring asset owners is separate.
Inflation is not generally not necessary to encourage capital to be invested. Real returns, discounted for risk, encourage capital to be invested.
Monetary stability makes many forms of investment less risky! Low real interest rates (which often co-occur with inflationary episodes) discourage many forms of savings (which banks could use to invest.) The link between inflation and overall amounts of investment is not abundantly clear in the general case and it is an open problem that remains under study.
Market cycles come and go, the fact still remains. 300k isnt the same as it was two years ago, and its certainly not the same as five years ago. The machine marches on
For example if you want to go buy a rental property [classic "passive" income route - and yes loathe are landlords i know) the price at which you would buy the property currently would put pressure on having unsustainably high rental rates such that you have to make a bet on the price of the asset going up significantly over the next twenty years.
Current rental rates (in my city) would require pushing tenants to untenable rates and even then you would only be covering principal payments and maybe property tax. Interest is out of pocket. So you tie up a heavy capital load for twenty years on the hopes of an escalating market. If you end up in a recession you end up holding an overly expensive property that you now have to pay for yourself.
I am not saying feel bad for the land lord - I am pointing out that that assets are very difficult given macro conditions to find that look attractive in the medium to long run at current valuations.
This is why Bitcoin makes so much sense as the base monetary layer. The Fed/Central Banks/Govts printing away to glory will then be like all of us - can't print your problems away and will need to streamline operations to cut graft and inefficiency.
Right at this moment, as rates are rising and the federal reserve is telegraphing that it is going to tank the economy in order to get wage inflation under control, is probably a bad time to start buying up assets.
It’s interesting that fuel prices are literally at the bottom of the list.
Government/poor leadership is 19%.
Inflation, 18%; Economy 12%.
Then we’re in single digits:
Top of single digits is Immigration at 8% - no clarity on what angle but I think everyone can agree it’s a mess, no matter how you want it changed, which probably accounts for its comparatively frequent mention.
Fuel prices are at 3%.
Also of note is that 70%+ of respondents thought economy was getting worse, while 20% thought it was getting better. I wonder what those 20% are comparing to? Depths of Covid lockdowns?
> It’s interesting that fuel prices are literally at the bottom of the list.
Why is it so interesting? The average person's budget is less than 5% gasoline.
The reason gasoline is historically this all important thing is because Exxon and auto manufacturers used to be the biggest, most important companies in the US (and to some extent airlines) - not because gasoline is the stable of the American consumers spending.
I find it interesting because I would not have expected it to rank at the literal bottom of the list. Many people’s relationship to fuel price is pretty inelastic, so it’s an income hit. As another said, fuel prices impact many other costs, particularly for any margin-based business like groceries. That business doesn’t pay the higher fuel bill; you do. I imagine summer may be helping blunt the impact, but gasoline avg itself is $1.60 above last year - not good. So it’s higher visibility with more immediate practical consequences than some of the other items. That’s why it’s interesting to me.
But maybe many people think exactly like you do - a 35% y/y increase to something I spend 5% of my income on directly, how bad can that be?
Wage shortage, not labor shortage. There's more than enough workers, but not everyone wants to take the jobs on offer for the money they'd be paid for doing them.
There’s been a severe talent shortage for many years. When we post jobs, we don’t have a lack of applicants, just a lack of decently qualified applicants, let alone stand-out ones we’d like to hire. People want the job, but are not qualified for the job. That seems more like a labor shortage in that paying more money is only going to rob talent from company A to Company B, but not somehow magic up more workers with the skills needed at both.
I’m not sure I buy the idea that there are immensely qualified people who are choosing to “not work”. If that’s the case - presuming they were paid such inflated numbers that they are basically retiring decades too early, it doesn’t buttress the wage shortage argument either. Now burnout is very real, but I’d argue that what’s driving burnout is lack of talent to spread the load across.
People pay good money for talent - I always say that in America, there’s more money than there is talent. If you want that money, it’s there for you. The barriers are extraordinarily low.
And granted that’s my view from professional services. In the basic service industry you may be right. Reliable labor is not cheap, and on top of that, we (as consumers) are not terribly interested paying more for it. Not sure what the fix for that is. Many answers I’ve heard seem far too simplistic, or come back to a talent shortage on the top end (pay CEO less).
Even if one agrees that that is the most relevant figure of merit (which would imply, among other things, that FIRE, and moving out of the proletariat into the bourgeoisie, petit or haut, more generally, is an adverse social trend—which is not an uncommon position for communists, but rare for anyone else), it seems to have bottomed out, in trend terms, in the mid-2010s (while it did a sudden drop back down with COVID and associated restrictions, it has recovered quickly since that.)
Retiring because you’re rich enough to not work is a great thing. But don’t fool yourself - that’s not why millions of people permanently left the workforce.
Thankfully you’re right and it has seemed to recover a lot of ground since ~2016.
> But don’t fool yourself - that’s not why millions of people permanently left the workforce.
If the working age LFPR drop wasn’t a combination of earlier retirement for both men and women who did well in the strong aggregate economy of the the 90s boom and men doing more higher education, why are the big drops of working age LFPR in the period it was dropping:
(1) A big drop in men at the youngest age bracket included (25-34), that is not reflected a decade later in the 35-44 group, and
(2) A smaller drop in both men and women in the oldest age category of the “working age” group (45-54).
More parents are staying home to take care kids than in 1999. Labor participation numbers don't look at the reason people don't work. I've taken two years off to take care of my kids and my wife works part time.
Hasn't this been the case for the entire pandemic? Yes people think it's getting worse, but it's largely been economically good for the last 24 months besides inflation
From time series looks like it was recovering after the initial shock of the pandemic then started dropping again July 2021 when inflation issues started to become clearer
Consumer sentiment was relatively higher in Spring 2021 and then plummeted to a 10-year low which may have hit bottom in April 2022 or may continue plunging, hard to say.
From a technocentric POV it does feel like a lot of the opportunity has faded. Last decade I built a crypto miner for a few grand and that has made me a crazy return over the years. I posted a hack-a-day project and it got so much attention that I could bootstrap a successful hardware company in the fledgeling home automation market. I started a YouTube channel and bam! thousands of subscribers and checks come in from Google. I taught a few tech lectures and was immediately hired as a consultant from an inbound cold-call even though I was barely competent. Software was "eating the world", find a market space and call it {x}ly.com and you're on your way. There was also an optimistic tide you could ride psychologically to motivate you to pursue a new venture.
I would like to work on something new in software because the IC shortage and dealing with CM's in China has become challenging. But everything that seems like a niche surprisingly has established competition. I could compete with {x}ly.com when they were first starting out but if they have been in business for 10 years it seems like they will have extracted not just the value from their target market but neighboring niche markets as well. Perhaps this isn't true but given the pervasive pessimism it feels like software has already ate the world and picked it clean.
> But everything that seems like a niche surprisingly has established competition. I could compete with {x}ly.com when they were first starting out but if they have been in business for 10 years it seems like they will have extracted not just the value from their target market but neighboring niche markets as well. Perhaps this isn't true but given the pervasive pessimism it feels like software has already ate the world and picked it clean.
In school, I recall a professor listed out (I think) 3 types of successful business as an example. The first type was something along the lines of "strong in a national market," but the second was "strong in a local market." I feel like the second kind is becoming more and more nonviable (with globalization, advanced communications), which consequently leads to a lot less opportunity for individuals (even though it may be more "efficient" in some cold and abstract economic sense).
That's the pessimistic side of the globalization coin (that the article touches on) but on the flip it is that it creates opportunities. New economies, markets, and other demand that has it's own needs for supply that didn't really exist before.
For example, national steel mills put local blacksmiths out of work, but they fueled industrialization, new construction, and entirely new market opportunities.
At least where I lived - you had mom and pop grocery stores in residential areas (small, family owned grocery stores, where you paid a bit more but it was convenient) - now it's been taken over by massive corporations like Wal-Mart and 7-11, etc. who have contracted out silicon valley companies to pay a pittance to contract workers who deliver you your groceries, when you could not that long ago just shop local, not need to drive, etc. etc.
You had many more opportunities to pick which grocer you liked, which butcher you preferred, where to get your fruits and vegetables, but global corporations like (again) - Wal-Mart, Safeway, McDonalds, etc. signing contracts with individual/large farmers - you can't compete as an individual/small business with companies that would be able to pay many times more than you just because of the cost of scale alone.
Globalization was a mistake for a _lot_ of things. The west has had it's manufacturing sector absolutely destroyed over the past half-century or more due to corporate interests/espionage/whatever. We rely on other countries to make our crap and ship it to us - how carbon efficient is that _really_? We'll never know because the corporations that own both the news/media and will tell us that it's okay, not to think about the consequences of actions, and to keep spending. "We're not going head-first into a really bad recession! No way!" (/s)
The west has basically taken all of our (soft? hard?) power and given it away to other countries (to simply save a buck? to intentionally weaken the western economy over decades by malicious actors? who knows?)
I think that opportunity has shifted not necessarily faded. Computers, the internet, and smart phones represented a step change in capability - they allowed people to do things that were just not possible before. The last 50 years has been about finding and developing the most productive / profitable uses of those new capabilities.
If you want to find where the opportunities are look at areas where we have recent technological innovations have resulted in large step changes in capability - where new technologies allow us to do things that were not previously possible. Machine learning and biotech (e.g. CRISPR, sequencing, etc) are two such areas.
Opportunity does fade. In ancient times you would compete with other people in your village. Over time your competition becomes other villages, other kingdoms, other countries/empires, and now we're at a point where competition is global. Mega-corporations like McDonald's, Amazon, Samsung are everywhere.
Maybe it fades, maybe the nature of opportunity changes. A while back I found a reproduction of an old local newspaper from the late 1700s. Lots of interesting stuff, but one of the unexpected things that really hit me was seeing multiple advertisements by shoemakers in a town of maybe a couple thousand people. That small of a town and 2 or 3 folks are focused on making shoes! Of course now the town is much larger and we have 0 shoemakers. But we've got plenty of software engineers working from home, etc. We'll never go back to the days of local shoemakers, just like we'll never go back to the early days of Bitcoin, but something interesting is sure to be around the corner.
The economy is supposed to be a pure meritocracy, where decision making authority is allocated to each person in proportion to the value they produce. Every deviation from this is parasitic to the system.
I disagree, I think there are many tools we could use to quantify it. For example, Reinforcement Learning is primarily about quantifying value. Operations Research also has similar tools for estimating value. And of course, markets themselves estimate value, although a huge portion of our economy is not a market. For example, almost no businesses are internally run as a market.
Fundamentally a market is the aggregate of individual actions to exchange goods at values that seem to make sense based on conditions at the moment of exchange.
What you described is approximately a common aspirational view of what hypothetical ideal markets would achieve, not fundamentally “what a market is”.
> It’s like me saying a sorting algorithm is supposed to produce a sorted set, and you saying ‘“Supposed” by whom?’
If a “sorted set” was not a well-defined, or even practically operationalizable concept, but merely a thing about which people had conflicting intuitions, and instead of an abstract ideal an “algorithm” was a class of real things that exist in the physical universe, and the ones that you named did not, in fact, produce anything that met most intuitions of what the might fit the ill-defined concept of a “sorted set”, your analogy would be spot on.
Claims like this are in general not well-founded. There is no objective way to determine the value of a thing outside of the economy. If there were, and if it were meaningful such that $ value converges to the "real value" economy would be a trivial game. So, really what you propose cannot exist.
re: this Gallup poll: we have an expression in the USA that I think covers this: “no shit Sherlock” - that is, the poll results are obvious and predictable.
This is just my opinion, so take it with a grain of salt: the Federal Reserve made a very big error in only raising interests rates by 50 basis points. They obviously (to me at least) care much more about keeping interest rates as low as possible rather than fighting inflation. Actually, they did not make an error, they are just purposefully being without heart or compassion.
I planned my finances to be relatively immune to massive inflation, but my experience volunteering at a local food bank and getting to know our “customers” has given me at least a little bit of understanding on how vulnerable many people are. So many people I talked with had had solid middle class lifestyles until sometime unexpected happened like a large medical bill.
I believe in equal opportunity but to not enforce equal outcomes for people. To some degree equal opportunity means not enriching the asset class and hurting average people with run-away inflation.
> I believe in equal opportunity but to not enforce equal outcomes for people.
People always say this, but they don't account for how unequitable outcomes of the past have influenced the unequitable opportunities of the present.
For example, we can't hand-wave away the impact that the denial of equal opportunity for home ownership has had on African Americans. It accounts for a huge portion of the black/white wealth gap:
Believing in equality of opportunity vs outcome is a nice sentiment, but without a significant redistribution of resources to actually make it start happening instead of the status quo (massive inequality of opportunity), it's just highlighting and not acting on the perfect while avoiding acting on the imperfect, but good.
I think that you have really misunderstood me. I believe in a social safety net, but a modest one. I also think that a modest universal basic income would be better than what we have now since people can also work and get a combined income. I also don’t know anyone in my family or circle of friends who consistently gives more money to charities (monthly auto payments to three charities). Also, re: unfairness to African Americans in the housing market: absolutely true. I don’t know what I can do about that right now. When I was a teenager I volunteered in a head start teaching program for a year, ensuring that for at least a few kids they had equal chances in school. We all do what we can do, if we are motivated.
A lot of people talk a good game about social justice and fairness, but sit on their asses and don’t actually do anything.
> I think that you have really misunderstood me. I believe in a social safety net, but a modest one. I also think that a modest universal basic income would be better than what we have now since people can also work and get a combined income.
My comment isn't addressed at you as a person (whom I have no way of evaluating), but at the general appeals for "equality of opportunity vs outcome", which seem largely blind to systemic and structural inequalities that actively negate equality of opportunity today. Your (or my) personal efforts are sort of negligible to those larger issues.
> Also, re: unfairness to African Americans in the housing market: absolutely true. I don’t know what I can do about that right now.
That's the point. If the massive injustices whose effects echo through generations aren't addressed, then the marginal and even well-intentioned efforts will have limited effect.
It took something the size of the New Deal to restructure American society in the aftermath of inequities of the Gilded Age and the Great Depression, and I doubt anything short of that type of effort will change the picture today.
In the worst case, we could we end up with a society that relies on charity for its safety net (which at scale often comes with social/cultural/religious conditions attached). I also realize that for many that is a desired outcome, not something to be avoided.
If we do a UBI but then strip other public supports for low and no-income people, it would likely do more harm than good, as there is no politically feasible UBI that is going to provide an acceptable minimum standard of living that includes healthcare, public safety, housing, and education for everyone, regardless of race or ethnicity.
If people are struggling to stay housed and fed - which will likely happen if their benefits are stripped in favor of a UBI - they aren't suddenly going to pursue personal (and national) productivity-increasing self-improvement as proponents of that approach posit. They are going to figure out how to just survive another day, hurting others in their own community if necessary, which is often the case already today.
As far as I can tell, it's the financialization of the economy and the outsourcing of so much manufacturing overseas that's really going doing the most damage... and changing gears would require a vast re-investment of federal dollars in basic public infrastructure, rewriting the trade deals to force sellers who want access to American markets to manufacture their goods within US borders (at US labor prices), and redirecting a significant chunk of the federal military-industrial budget to more productive enterprises (A construction crane, for example, can build other things. A tank, it's just good for blowing stuff up.)
The politicians seem like little more than corporate middle managers in a crumbling Empire, regardless of political ideology. They want jobs for their districts and kickbacks for their inner circles, by and large - and the only federal jobs on offer these days seem to be MIC programs of one kind or another. It's understandable, but they have no vision and are mainly just following the herd. The real centers of power appear to lie within the networks of Gilded Age plutocrats, in finance, tech, energy, pharma, retail, ag... and half of them seem to have plans for fleeing the country if things go really sour.
Add on top of all that, increasing pressure from climate (record California drought for example), breakdowns in global supply chains (imagine if China takes this opportunity to invade Taiwan, nobody in America will be able to get socks and underwear or toothbrushes). Apparently gun sales are at record highs as well.
It's not a very pretty picture. Looks more like sitting on the edge of another 1930s Great Depression than anything else. Much of the younger generation seems to have zero hope of ever buying a home, the largest older generation is all heading for a shaky insecure retirement, and the political leaders are mostly corrupt bumbling incompetents, many of whom should have retired from their jobs over a decade ago. A radical shift in direction is really needed.
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[ 4.4 ms ] story [ 194 ms ] threadI dunno about you, but I'm pretty glad that congress doesn't vote on my wage.
There is nothing new here. In boom years, they always do. In bust years, they come back down to earth.
> Either create your own assets (entrepreneurship), put all your money into leveraged! assets (stocks, housing), or prepare to live as a wage slave.
There is also not much new here either, sadly.
There was a brief time - pretty unique to the US - between WW2 and early 90s where things were different. This is pretty unique globally, and to the US.
In reality, this is terrible advice if you can't service the interest. It's a scheme that worked in a low rate environment, but likely will no longer be viable.
In bust years, they're out of a job.
Having the capital to maintain having capital is a gigantic edge over wage earners.
How long will this continue though? This can't be sustainable forever.
At one point, you won't have any money to buy any assets if your wages are barely covering your food and shelter, and so we'll go back to feudalism where only those few with inherited wealth owned assets and everyone else was a slave for life.
The behavior when it doesn't break is actually more informative, though. At first, all aspects of the music experience exponential growth. Once clipping sets in, the growth of the loudest / highest gain frequencies continues, but now at the expense of every other frequency. Eventually one frequency wins and the system devolves into the distorted shriek of a single fundamental frequency and its harmonics.
The idea here is that we can tell where we are between "free growth" vs "starting to clip" by looking to see how well the rising tide is fulfilling its promise of floating all boats.
I doubt it.
1) That's why the west are pushing for forms of government surveillance disguised as Covid tracking, or anti-terrorist surveillance, or anti-child-porn surveillance, or whatever flavor of the month the current "enemy" happens to be, to make sure they can see it coming and stamp out any potential public dissidence before it hits the elites.
2) Unlike the French or Soviet revolutions from a couple of hundred years ago, which saw the deaths of the elites, the elites of today can travel to remote places using planes to distance themselves from the angry mobs, and rule their empires remotely using the internet. Huge game changers compared to the past.
In the French revolution, which took place in Paris, the elites all lived outside the city. The royal family lived in Versailles. No one went into the city for any day to day business. When the revolution happened, the nobility fled, and they directed their armies to seize and starve the city. They were using all their wealth and power to quell and flee. Much good that did them.
Putting the present elite at an even stronger disadvantage, though, is that Western billionaires only have power because the people allow them to -- land, money, stocks, it's all owned on paper. If a revolution is successful, there is no reason a billionaire's wealth or power couldn't be wiped away at the swipe of a pen. Elon Musk does not have enough of a private army nor his wealth in gold to defend his claim to anything.
https://www.indiatimes.com/amp/technology/news/sergey-brin-s...
People like Musk are not the world's ruling elites though. He and other tech billionaires are the richest people who's wealth is in public companies, so that's why they get all the visibility and media attention, but they're not the richest people in absolute terms, nor are they ruling elites, quite far from them.
The ruling elites, the richest and most power people in the world, are the likes of the British monarchy, Vladimir Putin, Saudi family, and other such monarchs and dictators who basically own nearly entire countries in both land and valuable resources and also control militaries to defend their assets and their position. They never appear in Forbes riches people because, unlike tech billionaires, most of their wealth is highly secretive and well hidden from the rabble, and for good reason too.
Putin is estimated to be worth way more than Musk. And he also has an army at his disposal. Same with the Saudi family, they have an army and their wealth could probably make Musk look like he should be put on social security.
In principle you are right, they don't have armies per se. But don't let the "everyman" persona put on by Musk or even Buffett fool you.
Billionaires must have extensive (and probably armed) security operations protecting them and their families. It would be irrational for them not to have that. Agreed that they might not be able to prevent their factories or other industrial assets from being seized (Just ask the oligarchs who fell afoul of Putin and fled).
Revolution isn't just spontaneous popular protests leading to regime change. It can also be further slides authoritarianism.
Like the line from Titanic when the extravagantly wealthy Calvert is trying to buy himself onto a lifeboat – "Your money can't save you any more than it can save me."
The west is like this today (apart from the countries that built themselves up on colonial empires of theft) in part also to a lot of violent and sometimes deadly revolts against the ruling class.
US, UK, France, Italy, Germany, etc. all saw bloody strikes and protests, in order to get fair living conditions. Noting was ever given out of pure generosity, without a fight.
That's...barely a thing at all.
> US, UK, France, Italy, etc.
If those are your examples, you really don't need the “apart from...”
The wealth inequality was absolutely insane. It's not like thanks to colonialism, everyone living in the UK victorian era could afford to prop their feet up, live off free stuff taken from the colonies, and never have to work a day in their lives. Quite the contrary, they were working long hours living in poor conditions.
The working class only saw lifestyle improvements when they fought back for them.
During the industrial revolution life expectancy in UK was among the lowest in the world for the poorest industrial workers. Inequality was incredibly high.
Painting people in a country as being all benefiting (or being harmed) from an external factor is very misleading
There have been many periods of high inequality and stagnation in history broken up by war. Since war is not a preferable catalyst in this day and age, we have to opt for organized labor.
Excuse me, but where have you been in the past 3 months?
> Historically, that's when a revolution or regime-change happens. This is something the richest of the rich have either forgotten or mistakenly think they'll be insulated from.
Revolutions aren't always successful. If the rich control the state by corrupting democratic institutions and remove from the peasantry the tools to pursue "politics with other means," they might actually get away with a transition to something like feudalism.
https://www.wsj.com/livecoverage/federal-reserve-meeting-inf...
When the government steals from your cash savings, you merely save somewhere else, but the purpose is the same.
Spoken like someone who has only operated in the recent bull market.
Using a mortgage to buy a reasonable house that you can afford is a good idea.
Using leverage to buy as much real estate and/or stocks as you can get away with is a terrible idea with some significant downside risk. Leveraged stock purchases are notorious for working great until the market turns and blows up your account. Even leveraged funds have significant slippage that isn’t obvious to the casual investor who thinks they’re just going to get a clean 2X return.
One of my most poignant memories from the 2008 crash was watching a few people I knew go from feeling like they were financial geniuses to bankrupt and struggling. The common theme among all of them was that they were leveraged to the hilt in real estate. They thought it was easy money when it felt like the market could only go up. Then it stopped going up and we all know what happened next.
People buying homes in places that have only gone up in the last 40 years need to consider that that might keep going up for another decade, or they might be cresting the hill before correcting.
Homes going up is not the problem though. Yes, they've been going up for longer than 40 years, but back in the 1950's their growth was basically tracking inflation and wage growth, or even going down in value since they were seen an any other depreciable asset, just a place to live in till you die.
It's in the last 40 years that housing massively outgrown wages, as it became a speculatory investment vehicle instead of just being a place to live, plus the introduction of NIMBYISM regulations to restrict supply, and that's where the issue is.
make money by doing stuff rather than having stuff, the latter of which is the epitome of economic rents.
It takes roughly a career to amass enough assets to retire on and that's with a slightly reduced standard of living in retirement.
Unless you want to assume population growth forever (seems unwise IMO) you need one average career to generate enough surplus to pay for an average retirement. So far, buying assets (usually a mix of real estate and fractional ownership of financial instruments that are ultimately backed by companies and governments) is the most efficient way we know to accomplish this goal.
note the phrase "asset income being periphery", which implies an optimum. the ability to own one appreciating asset is great. owning two is probably ok in most cases. 90 is highly unlikely to provide a net social good.
To answer you first question/comment (because you are not as original as you think you are): That is why robust electorate, transparent public governance, and durable anti-corruption institutions are so important.
That is the point.
> And there's always intermediaries. And they always take a cut.
Should they not be compensated for their productive work?
> Maybe it's you that's not that original.
That is the point.
Edit: sorry that was a bit snarky. The point is that there are other ways to ensure people have a reasonable lifestyle once their 'working days' are over. Those schemes are probably best to be tied in some way to contributions, but they certainly don't need to be simply a savings plan, they can be a means to provide social support for those that cannot contribute to the same degree as others.
again, that’s a logical leap that i was careful not to make. small-time investing can have positive externalities on an economic system; industrial, mechanized investing, not so much. if we didn’t try to turn everything related to money into a get-rich-quick gambling scheme instead of the (imperfect) accounting mechanism it was originated to be, we’d be much better off, pensions and 401(k)’s included.
Humanity as a whole? I don't think anyone has advocated that here, just a certain segment of the population in their later years. As for any living creature, I didn't spend any time doing anything productive over the weekend, and I think it was a good thing. In fact, I've been doing that every weekend for a long time, and I plan to keep doing it!
Doing enough work to survive is a fundamental part of life. Technology and society function to either make that work easier or lower the amount of work that needs to be done. Take either of those away and you're going to be spending much less weekends doing "nothing productive".
meta point is that this is why nuanced conversations on the (texted based) internet are a waste of time. You and the person you're quoting are not really talking about the same thing. In a conversation you would go back and forth and figure that out; on the internet that's not required.
The reason I responded to the parent comment was that it seemed to me like they were misinterpreting the person they were responding to; the original comment that started this thread was that people who only have wage-based income instead of asset-based income would not be able to effectively retire and would have to work for their entire life. The response to this was to argue that if people didn't work, then humanity wouldn't progress. I don't see why "humanity needs productivity to progress" implies "every human needs to be productive for every moment of their entire life", which is why I responded with both a direct answer (i.e. arguing that people should be able to retire is not arguing that people shouldn't be productive _ever_ in their life) and a tongue-in-cheek response (nobody actually is productive every single moment in their life).
And Elinor Ostrom won the Nobel in economics for her work describing the mechanisms used by real-world communities to effectively self-manage Commons: https://www.onthecommons.org/magazine/elinor-ostroms-8-princ...
offhand, i can't think of a practical and contemporary example of this though.
I'm not disagreeing with you re. what I'd rather see us move towards, but there's a whole lot of existing money and power entrenched in the idea that having money is a great way to continue having money.
Saving money is a smart idea unless you live in a communist state or a dictatorship, then your best bet is to spend as fast as you can or secure assets resistant to confiscation.
Maintaining liquidity is a smart idea unless you live in a world where the government decrees asset prices can never fall. In which case throwing everything you have into leverage is the best bet.
It's not an irrational bet that the Fed's hands will be permanently tied to a low interest rate environment. The more people who make that bet the more true it will be.
How is it plausible? I would say given the historical data, it is extremely unlikely. Not impossible, but near negligible probability.
People saying, “it’s different this time,” right before a economic crash is a cliche for a reason. I suspect that you could use the frequency of utterances to predict impending recessions / asset class corrections with extremely high accuracy.
Housing can return 20% per year until the end of time if the Fed wishes it to.
Will they this time? Who knows, but it generally pays to hedge a bit.
All the money "made" from crypto was at the expense of other players(I refuse to call them "investors") who were left holding the bags, or at the expense of the environment (most of the large scale mining operations was done in areas of the world with cheap and dirty energy like China, Russia, Iran, etc.)
For example, some tech and semiconductor companies, because the whole world benefits from better compute (research for vaccines can be done faster; imaging for medical equipment results in better diagnostics; cars, engines and batteries can be simulated better and made safer and more efficient etc.) The whole world benefits.
"Investing" in crypto on the other hand, added zero value to society, or actually added negative value through the environmental damage being done.
That's not really what is at question here though. It's the concept of a pyramid scheme. The reason the stock market over long periods of time generally trends upwards is because new money keeps being added to it. It's as much of a pyramid as crypto is. That's just how the whole economy is though. Every generation so far has had more people than the last. It will be rather devastating to the stock market and economy whenever that stops being true.
Iron Law: During recessions capital always takes care of it's own and foists the losses onto the working class.
How does one leverage to buy more real estate? Refinance one house to pay down the next one? I just went through a home loan process and this would never work because they look at total LTV and credit reports...
GSEs (Fannie, Freddie) let you lever up with a lot of real estate borrowing (~10 mortgages per person, with some wiggle room with creativity) before you have to go to a commercial bank to wrap the portfolio with a commercial loan or similar product.
This is the central theme of Piketty's "Capital" book, for anybody interested in exploring this further. This is also a good start: https://hbr.org/2014/04/pikettys-capital-in-a-lot-less-than-...
EDIT FOR TYPO
No. The monetary system works by encouraging capital to be invested in productive uses by debasing it yearly through inflation. If inflation was 0% or negative, the incentive to risk capital is much much lower.
The political system of Western countries favouring asset owners is separate.
Monetary stability makes many forms of investment less risky! Low real interest rates (which often co-occur with inflationary episodes) discourage many forms of savings (which banks could use to invest.) The link between inflation and overall amounts of investment is not abundantly clear in the general case and it is an open problem that remains under study.
Current rental rates (in my city) would require pushing tenants to untenable rates and even then you would only be covering principal payments and maybe property tax. Interest is out of pocket. So you tie up a heavy capital load for twenty years on the hopes of an escalating market. If you end up in a recession you end up holding an overly expensive property that you now have to pay for yourself.
I am not saying feel bad for the land lord - I am pointing out that that assets are very difficult given macro conditions to find that look attractive in the medium to long run at current valuations.
Sure thing, NIKKEI & NASDAQ investors know this better than anybody else.
In the USA over the last 50 years that is true. But it isn't generally true.
Government/poor leadership is 19%.
Inflation, 18%; Economy 12%.
Then we’re in single digits: Top of single digits is Immigration at 8% - no clarity on what angle but I think everyone can agree it’s a mess, no matter how you want it changed, which probably accounts for its comparatively frequent mention.
Fuel prices are at 3%.
Also of note is that 70%+ of respondents thought economy was getting worse, while 20% thought it was getting better. I wonder what those 20% are comparing to? Depths of Covid lockdowns?
Why is it so interesting? The average person's budget is less than 5% gasoline.
The reason gasoline is historically this all important thing is because Exxon and auto manufacturers used to be the biggest, most important companies in the US (and to some extent airlines) - not because gasoline is the stable of the American consumers spending.
But maybe many people think exactly like you do - a 35% y/y increase to something I spend 5% of my income on directly, how bad can that be?
There’s been a severe talent shortage for many years. When we post jobs, we don’t have a lack of applicants, just a lack of decently qualified applicants, let alone stand-out ones we’d like to hire. People want the job, but are not qualified for the job. That seems more like a labor shortage in that paying more money is only going to rob talent from company A to Company B, but not somehow magic up more workers with the skills needed at both.
I’m not sure I buy the idea that there are immensely qualified people who are choosing to “not work”. If that’s the case - presuming they were paid such inflated numbers that they are basically retiring decades too early, it doesn’t buttress the wage shortage argument either. Now burnout is very real, but I’d argue that what’s driving burnout is lack of talent to spread the load across.
People pay good money for talent - I always say that in America, there’s more money than there is talent. If you want that money, it’s there for you. The barriers are extraordinarily low.
And granted that’s my view from professional services. In the basic service industry you may be right. Reliable labor is not cheap, and on top of that, we (as consumers) are not terribly interested paying more for it. Not sure what the fix for that is. Many answers I’ve heard seem far too simplistic, or come back to a talent shortage on the top end (pay CEO less).
https://fred.stlouisfed.org/series/LNS11300060
Thankfully you’re right and it has seemed to recover a lot of ground since ~2016.
If the working age LFPR drop wasn’t a combination of earlier retirement for both men and women who did well in the strong aggregate economy of the the 90s boom and men doing more higher education, why are the big drops of working age LFPR in the period it was dropping:
(1) A big drop in men at the youngest age bracket included (25-34), that is not reflected a decade later in the 35-44 group, and
(2) A smaller drop in both men and women in the oldest age category of the “working age” group (45-54).
https://www.pewresearch.org/fact-tank/2018/09/24/stay-at-hom...
https://www.nytimes.com/2021/08/11/business/economy/july-202...
Consumer sentiment was relatively higher in Spring 2021 and then plummeted to a 10-year low which may have hit bottom in April 2022 or may continue plunging, hard to say.
https://www.history.com/topics/21st-century/great-recession-...
I would like to work on something new in software because the IC shortage and dealing with CM's in China has become challenging. But everything that seems like a niche surprisingly has established competition. I could compete with {x}ly.com when they were first starting out but if they have been in business for 10 years it seems like they will have extracted not just the value from their target market but neighboring niche markets as well. Perhaps this isn't true but given the pervasive pessimism it feels like software has already ate the world and picked it clean.
In school, I recall a professor listed out (I think) 3 types of successful business as an example. The first type was something along the lines of "strong in a national market," but the second was "strong in a local market." I feel like the second kind is becoming more and more nonviable (with globalization, advanced communications), which consequently leads to a lot less opportunity for individuals (even though it may be more "efficient" in some cold and abstract economic sense).
For example, national steel mills put local blacksmiths out of work, but they fueled industrialization, new construction, and entirely new market opportunities.
At least where I lived - you had mom and pop grocery stores in residential areas (small, family owned grocery stores, where you paid a bit more but it was convenient) - now it's been taken over by massive corporations like Wal-Mart and 7-11, etc. who have contracted out silicon valley companies to pay a pittance to contract workers who deliver you your groceries, when you could not that long ago just shop local, not need to drive, etc. etc.
You had many more opportunities to pick which grocer you liked, which butcher you preferred, where to get your fruits and vegetables, but global corporations like (again) - Wal-Mart, Safeway, McDonalds, etc. signing contracts with individual/large farmers - you can't compete as an individual/small business with companies that would be able to pay many times more than you just because of the cost of scale alone.
Globalization was a mistake for a _lot_ of things. The west has had it's manufacturing sector absolutely destroyed over the past half-century or more due to corporate interests/espionage/whatever. We rely on other countries to make our crap and ship it to us - how carbon efficient is that _really_? We'll never know because the corporations that own both the news/media and will tell us that it's okay, not to think about the consequences of actions, and to keep spending. "We're not going head-first into a really bad recession! No way!" (/s)
The west has basically taken all of our (soft? hard?) power and given it away to other countries (to simply save a buck? to intentionally weaken the western economy over decades by malicious actors? who knows?)
If you want to find where the opportunities are look at areas where we have recent technological innovations have resulted in large step changes in capability - where new technologies allow us to do things that were not previously possible. Machine learning and biotech (e.g. CRISPR, sequencing, etc) are two such areas.
“Supposed” by whom?
> where decision making authority is allocated to each person in proportion to the value they produce
Seems like a bad idea; if I create a lot of value, all of it for myself, I also get more power to make decisions for others?
It’s fundamentally what a market is.
It’s like me saying a sorting algorithm is supposed to produce a sorted set, and you saying ‘“Supposed” by whom?’
No, it's not.
Fundamentally a market is the aggregate of individual actions to exchange goods at values that seem to make sense based on conditions at the moment of exchange.
What you described is approximately a common aspirational view of what hypothetical ideal markets would achieve, not fundamentally “what a market is”.
> It’s like me saying a sorting algorithm is supposed to produce a sorted set, and you saying ‘“Supposed” by whom?’
If a “sorted set” was not a well-defined, or even practically operationalizable concept, but merely a thing about which people had conflicting intuitions, and instead of an abstract ideal an “algorithm” was a class of real things that exist in the physical universe, and the ones that you named did not, in fact, produce anything that met most intuitions of what the might fit the ill-defined concept of a “sorted set”, your analogy would be spot on.
Claims like this are in general not well-founded.
https://en.wikipedia.org/wiki/Temporal_difference_learning
This is just my opinion, so take it with a grain of salt: the Federal Reserve made a very big error in only raising interests rates by 50 basis points. They obviously (to me at least) care much more about keeping interest rates as low as possible rather than fighting inflation. Actually, they did not make an error, they are just purposefully being without heart or compassion.
I planned my finances to be relatively immune to massive inflation, but my experience volunteering at a local food bank and getting to know our “customers” has given me at least a little bit of understanding on how vulnerable many people are. So many people I talked with had had solid middle class lifestyles until sometime unexpected happened like a large medical bill.
I believe in equal opportunity but to not enforce equal outcomes for people. To some degree equal opportunity means not enriching the asset class and hurting average people with run-away inflation.
People always say this, but they don't account for how unequitable outcomes of the past have influenced the unequitable opportunities of the present.
For example, we can't hand-wave away the impact that the denial of equal opportunity for home ownership has had on African Americans. It accounts for a huge portion of the black/white wealth gap:
https://www.brookings.edu/essay/homeownership-racial-segrega...
Believing in equality of opportunity vs outcome is a nice sentiment, but without a significant redistribution of resources to actually make it start happening instead of the status quo (massive inequality of opportunity), it's just highlighting and not acting on the perfect while avoiding acting on the imperfect, but good.
A lot of people talk a good game about social justice and fairness, but sit on their asses and don’t actually do anything.
My comment isn't addressed at you as a person (whom I have no way of evaluating), but at the general appeals for "equality of opportunity vs outcome", which seem largely blind to systemic and structural inequalities that actively negate equality of opportunity today. Your (or my) personal efforts are sort of negligible to those larger issues.
> Also, re: unfairness to African Americans in the housing market: absolutely true. I don’t know what I can do about that right now.
That's the point. If the massive injustices whose effects echo through generations aren't addressed, then the marginal and even well-intentioned efforts will have limited effect.
It took something the size of the New Deal to restructure American society in the aftermath of inequities of the Gilded Age and the Great Depression, and I doubt anything short of that type of effort will change the picture today.
In the worst case, we could we end up with a society that relies on charity for its safety net (which at scale often comes with social/cultural/religious conditions attached). I also realize that for many that is a desired outcome, not something to be avoided.
If we do a UBI but then strip other public supports for low and no-income people, it would likely do more harm than good, as there is no politically feasible UBI that is going to provide an acceptable minimum standard of living that includes healthcare, public safety, housing, and education for everyone, regardless of race or ethnicity.
If people are struggling to stay housed and fed - which will likely happen if their benefits are stripped in favor of a UBI - they aren't suddenly going to pursue personal (and national) productivity-increasing self-improvement as proponents of that approach posit. They are going to figure out how to just survive another day, hurting others in their own community if necessary, which is often the case already today.
Opportunities are just the forward-looking effects of outcomes.
The politicians seem like little more than corporate middle managers in a crumbling Empire, regardless of political ideology. They want jobs for their districts and kickbacks for their inner circles, by and large - and the only federal jobs on offer these days seem to be MIC programs of one kind or another. It's understandable, but they have no vision and are mainly just following the herd. The real centers of power appear to lie within the networks of Gilded Age plutocrats, in finance, tech, energy, pharma, retail, ag... and half of them seem to have plans for fleeing the country if things go really sour.
Add on top of all that, increasing pressure from climate (record California drought for example), breakdowns in global supply chains (imagine if China takes this opportunity to invade Taiwan, nobody in America will be able to get socks and underwear or toothbrushes). Apparently gun sales are at record highs as well.
It's not a very pretty picture. Looks more like sitting on the edge of another 1930s Great Depression than anything else. Much of the younger generation seems to have zero hope of ever buying a home, the largest older generation is all heading for a shaky insecure retirement, and the political leaders are mostly corrupt bumbling incompetents, many of whom should have retired from their jobs over a decade ago. A radical shift in direction is really needed.