If you are talking about monetary stimulus/low interest rates, you have a point, but if you are talking about expanded unemployment or Berniebucks, that's been gone from the economy for quite some time.
What are “Berniebucks”? A cursory google search suggests that they are either Safari Ltd’s reward program or Bernie Sanders fundraising for his 2016 run for President, but neither of those seem germane to this conversation.
Is the notion that Bernie Sanders is somehow responsible for all of the economic stimulus given to US citizens during the pandemic?
Given the context, they seem to be using it to refer to direct-to-the-people stimulus payments, because Sanders is a Socialist and advocates for more such payments. (Though oddly non-pejoratively, based on their phrasing.)
Berniebucks refers to the greatly expanded unemployment insurance distributed during the pandemic, which resulted from an amendment by Bernie Sanders. Bernie heavily criticized the unamended bill, especially the bipartisan giveaways to Wall Street, and refused to support it without his amendment.
You run through it by having it move to the top, where it sits. $100 in the bank account of someone who only has $200 will be far more active in the economy than someone who has $2,000,000. Or $2B.
> A more intriguing possibility concerns the labour force. According to our estimates the rich world is “missing” 10m workers, or roughly 1.5% of the total workforce, relative to pre-pandemic trends (see chart 3). In Britain and Italy the workforce has actually shrunk. Early retirements and an increasingly elderly population explain some of the deficit. Covid may have pushed people to reassess their priorities, prompting them to drop out. Some even speculate that long covid is forcing people to stay on the economic sidelines. Whatever the explanation, falling participation has wreaked havoc with companies’ plans. Many fired staff when the pandemic struck, only to struggle to rehire them in 2021. That year vacancies across the oecd hit an all-time high of 30m.
COVID has killed hundreds of thousands, but overwhelmingly older or weaker folks, the kinds who are retired, semi-retired, or on disability. This would have had an impact, but not 10 million
I would think that the older folks that died from Covid had some money to leave to their children or grandchildren, who use that to either take an extended vacation, or sabbatical or whatever. Just because they are old and weren't working doesn't mean their early death didn't have a monetary affect.
So the trouble is, there's a lot more than 10m people outside the labor force of the relevant countries - that's true even if you only consider people who are actually in those countries, let alone the people who live in other countries who have not migrated there. The trick is figuring out which 10 million of those people are the ones who would have been participating in that labor force.
Will HR permit hiring someone who was downsized or it not currently working in that role with that job title? Its all about risk minimization, not workforce maximization.
Not really, going economically inactive is a rejection of the state of affairs.
But some patterns or modus operandi have been going on for thousands of years, albeit reacting more quickly now a days due to improved forms of communication.
>At airports people are employed to straighten suitcases after they tumble onto the baggage carousel.
People need to recognise slavery and not be treated like a dog.
The 1st world has its problems, but the planet has its problems, people need to look at things with a global perspective as well as a national perspective and read between the lines.
The days of a job for life are over, the days of working in one country all your life are over. The need to retrain and remain up to date is a form of cutting the fat, a variation of survival of the fittest, but still survival of the fittest.
Becoming cynical can be healthy a healthy attribute to have.
The over aching desire to get people worshipping money couldnt be more on display that ever before.
People need to make sure their lives are not stolen, because when you realise whats been done to you, its hard to recover from that. And as long as people continue to get away with stealing from others in legal ways, the fraud will continue.
- how felony records, addiction to opiates, lack of citizenship paperwork, etc have made so many people undesirable hires
- how so many people have moved onto disability insurance
- how certain populations are opting to play video games, watch porn, and live at home with parents
- young women were squeezed out of the workforce during the pandemic and have yet to return in large numbers
- medical bankruptcy (a mostly US specific issue)
- inefficiency in hiring funnels (“the resume firewall”)
We are asking them. We just don’t have solutions to help them re-engage. Many Western countries put too much onus on individual responsibility and don’t have a functional social system for optimizing retraining and unemployment-hiring matching.
I wonder when rich countries (excluding Japan due to their culture) will start to agressively complete with each other for middle or high skilled foreign labour to plug vital gaps. Offering not only green cards or EU blue cards, but eventual citizenship, university tenureship, guarantee minimum salaries and more goodies, without caps on the numbers per year. Kind of like how Dubai or Australia does for nurses today, but for all sectors of the economy.
They already are (and are in trouble for that). The problem is not their refusal to accept foreigners but rather they are not fixing the real problem (low birth rates). You can fix the problem by increasing supply, creating new cities or satellite cities, etc… and they are not having superb growth either. The solution can be easily fixed.
Most of Western cities are in a “failed state”. The US is a prime example of that. Japan, while quite functional, is also quite expensive to have kids in. I think Japan will be the Western state that fared the best out of all the Western countries. The US is definitively the worst: Being quite expensive while also quite dysfunctional, and with a bonus: high crime rate.
> The problem is not their refusal to accept foreigners but rather they are not fixing the real problem (low birth rates).
How can you fix low birth rates once the process is in decline? Are there any successful examples of a country that has gotten rich, or is getting rich, that has done it succesfully? Every example I've read says no, regardless of geography or culture. It seems an impossible problem to fix.
In South Korea for example, I've read they've tried a veriety of incentives, and none work. The pressure to climb into or stay in the middle class, squeezes families or would-be mothers to work more, leading inevitably to lower birth rates as wages have stagnated over the past few decades (oversimplyifing but this applies everywhere).
It does not seem impossible to me: once there is a falling population, the house price pressure should ease. And no country has really pushed for paying people to have children.
While I don't deny housing costs are a contributing factor in some (many?) cases, the strongest correlate seems to be legal and cultural female equality. I don't mean this judgmentally; it's simply by my crude observation the overwhelming factor. Childbearing requirements and expectations on the female just doesn't seem compatible with post-industrial era career aspirations.
No country has pushed for paying people to have children... er what? This is simply false.
Plenty of countries have monthly child benefit payments, just a few examples I know of [1], [2] [3] [4]. You can easily google "child benefits [country]" to find loads more examples. There are direct government payments and/or tax breaks in many countries. Countries with decent social welfare systems usually have some form of financial support during parental leave, for both mothers and fathers too.
These efforts don't really have much of an impact to raise birth rates.
We have gone from a zero interest rate economy to a high interest one within months. Whoever claims to accurately predict what's going to happen in the next few years is talking out of their ass. We know inflation should start decreasing within a year or so, but you cannot predict how millions of people will react to suddenly not being able to afford stuff.
I trust the ECB to miss their targets. It is part of the job description setup. You are trying to control a chaotic system with one knob and you have to follow a manual that gets rewritten with past learnings:
a) if the issue reoccurs, the learnings are ineffective
b) if the issue is new, how can you tell how to move the knob without pissing a lot of people and losing your job.
The ECB problem is that they have to run a collective of wildly varying economies. What's good for the Netherlands would destroy Italy.
The genius solution that they came up with is transfering billions of taxpayer money from the North to the South- which is not very popular among voters.
Inflation is looking at the previous 12 months. We know that inflation in the last few months was lower than that nearly a year ago, thus for inflation not to fall would require it to balloon in the next few months, which seems very unlikely.
Not only it's not high compared to historical rates but worse I think is that Fed's real interest rate is still in the negative territory: January CPI report headline came at 6.3% YoY and core at 5.3% YoY (it's negative with current rates even if you use the PCE index as a baseline, which is the Fed's favorite index to measure inflation).
seems the consensus is "a little more inflation" is better than "a bigger recession" which is probably true. People are still trying to get on their feet, and inflation is "felt" a lot less than losing your job (and not being able to find a new one for a long time).
Not sure whose consensus that is, but I don’t think it’s central bankers’.
Their ability to fight inflation is tied up in market participants believing they will do what it takes to do so even in the face of harsh costs. If that reputation comes into doubt, we could end up with the worst of both worlds.
Claiming that "a little more inflation" is preferred to "a bigger recession" is an opinion, I'm really not sure it's a consensus, though even if it is a consensus, it's not a good argument for or against it. I think it comes down to whether we soon realize we're near hard landing (recession) or no landing (ongoing inflation). As far as I know (though I'm really not well educated when it comes to economy), in the entire Fed's history, inflation has never just disappeared by itself without restrictive financial conditions. I think it wouldn't be hard to argue why a no landing scenario could be worse than recession.
As to the soft landing scenario, sure, it might happen but based on what followed past inflation, it seems unlikely (if I'm not mistaken soft landing was only achieved once in the mid 90's and with a much lower inflation than we see now.
I am starting to doubt that interest rates are the best lever against inflation.
Rising prices are supply not meeting demand. It feels like improving productivity would be an equally powerful tool with less human cost. Granted that is a harder thing to control quarter over quarter.
The mainstream economists are wringing their hands over full employment and rising wages, the first time in decades that we might see the middle class grow, because production isn't sufficiently meeting demand.
We should be producing more stuff - especially housing - instead of trying to keep people from earning more.
At least you guys can have the bona fide real feudalism. We others have to pretend the Lords are just accomplished citizens, only a bit more equal than others.
Raising interest rates on its own doesn't do anything about inflation at all, actually. When you raise interest rates you are decreasing demand for borrowing but even that on its own doesn't decrease inflation. Inflation slows down as people pay off their debts as this destroys money that was previously created through loans. It's basically a side effect, not the main effect.
If you have a bankrupt government that can't afford interest payments, then raising interest rates will just lead to borrowing more money to pay the interest in a vicious cycle until hyperinflation sets in.
If you can limit borrowing and speed up payback of debts through any means other than raising interest rates you achieve the same effect much sooner.
This conversation needs someone fiddling in the background.
No one had a normal economic life for several years. It’s a miracle that these levers have been adjusted to the point that everyone is like “well no one going to work for three years had no impact! What over-reactionaries!”
It’s important to keep the distinction in mind. We can’t forget that the hardship we imposed on ourselves was a choice, and that we could have chosen differently.
A friend worked for Royal Caribbean in their entertainment division onboard. No work, no unemployment, a bit of stimulus, and had to crash at one of my homes so they weren’t homeless. Because no one rents to you when you have no assets and volatile income during a pandemic. Exhausted their emergency savings and modest retirement account.
This is one of many of my associates in the service industry that had substantial employment challenges.
If you had regular job, you were eligible for unemployment there was also PUP enabled due to pandemic, so if you were self employed you could request unemployment under that. In addition there were also short periods of time where you could get extra $600/week (as it is impossible to survive for long on the usual unemployment amount)
They tend to work as contractors on a limited term contract and international maritime labor laws are unlikely to require it. Note also the country of registry for the ships may have more lax labor laws too.
> Regulation 2.6 – Seafarer compensation for the ship’s loss or foundering
> Purpose: To ensure that seafarers are compensated when a ship is lost or has foundered
> 1. Seafarers are entitled to adequate compensation in the case of injury, loss or unemployment arising from the ship’s loss or foundering.
This very specifically deals with ships sinking. Not "ok, no work everyone off."
A delicate balance: The seafarers’ employment agreement, the system of the Maritime Labour Convention, 2006 and the role of flag States - https://hal.science/hal-01470314/document also touches on unemployment (there's a single mention of it).
I know two that previously worked as waitresses, and were let go immediately once emergency was declared. Fortunately for them they used the time and money from unemployment to return to school and will be soon graduate with much better careers.
Yeah, we need to stop talking about the pandemic experience like it affected people in any way similarily.
Tech worked their fingers to the bone— 50 hour weeks and isolatng heads down grind. Everyone made money but it crushed their souls. Hospitality and entertainment stayed home and starved. Essential workers went in every day under crushing conditions, fear and literal death.
We were all subject to one master. But under a different punishment.
I find the idea that there's a "normal" period somewhat baffling. Conditions have been constantly changing for hundreds of years, from interest rates to investment strategies to technology to globalization etc.
I don’t disagree, but it also seems possible to identify periods that are more unusual compared to their neighboring periods, and useful to talk about them.
It depends on a person's financial situation, from my understanding: if you have a lot of debt(which the average USA household does), you benefit greatly the more inflation goes up. If you have money sitting in the bank, you're basically getting eaten alive. If you have assets, they typically should be tracking inflation somewhat(real estate, some stock categories, TIPS, etc...).
People will be in between any of the above situation simultaneously, but between having to get fired and seeing costs go up a little at a time, I imagine most people will defer the gut punch and take the erosion of spending power.
There's also one big winner in an inflationary environment: the US federal government, who happens to owe a LOT of debt.
Inflation shrinks the present value of that debt, without requiring the government to cut spending to pay it down, which would have serious economic consequences (see: austerity).
Because inflation was still anywhere from 6-9% on average, but was higher than that for things like housing, healthcare, education, food, and transportation. Holding cash is not "paying" anything, even though you can't see it happen, the purchase power of that cash has deteriorated massively in the past 3 years.
I personally have a hard time going out to a restaurant and getting a 2 person meal for less than say 30-40$. Car market is absolutely through the roof. Housing market, although cooling slightly, is still through the roof. Our base rent went up 15% last year. Gas is now double in my area.
To parallel the other comment with a wiki leak, the short version is the risk-free interest rate (e.g. treasury bills) minus the rate of inflation.
So if you have 6% inflation, and the return on e.g. the 1 year t bill is 4.75%, you have -1.25% "real" interest rates, because your money at the end of your year of investment will be worth ~1.23% less than it was at the beginning of the year.
I'm not sure I completely agree that the result is actually as bad as that, since stuffing your money in the mattress would put you -5.5% in the hole by comparison, but still.
"Real" is a term of art for something inflation-adjusted, as opposed to nominal. That's it. Scare quotes and metaphysical discussion of realness are inferring deeper meaning that isn't there. Of course you can have expectations about real interest rates: if expected real and nominal interest rates are about equal, you'd tend to feel that keeping your money under your mattress is about as attractive as keeping your money in treasuries.
I think the best "real" interest rate we have is the current interest rate minus inflation expectations. Central banks try to influence credit demand, and the real cost of credit is the current interest rate minus the inflation rate over some future period.
Annualized inflation in last quarter was just 3.1% and Core was 4.6%. The peak in Q2 was 10.5% and 6.6%. So looking just at the YoY figure is problematic cause it’s a strongly lagging indicator. Of course it depends if the current trend continues. It starting going back up in January so it might not (then again certain components in CPI like housing generally tend to lag more than others).
Before I answer that I’d be interested to know if you have ever met any people? And secondly, do you have any compassion? Because it seems like the answer to one or the other might be “no”, in which case you’re going to struggle to understand any answer I can provide.
I think you’re right - and I appreciate the answers (including Dang’s) — had they won big on their gamble they would be putting it down to luck.
I feel that people taking out variable loans at 1% and hoping it won’t go to 4% aren’t as reckless as a gambler, and in hindsight it’s pretty easy to lecture them, but I don’t take any joy in it.
But are the publicised rates correct - theyre based on a basket of goods, of which my understanding is, many standard items are not included. I think petrol might have been one?
I’ve seen online estimates recently 3 or 4x what you’ve stated and it wouldn’t surprise me if those were correct but we’ll never know.
For reference, my mortgage from 13 years ago was 4.85%, the one I got 6 months ago was 4.25%, about 1.5 years ago we got 2%. When I was born in the early 80's, my parents were doing 12%. Of course, housing prices adapt so that banks always extract a nice, steady amount from the people. Even more nowadays, when there's more to extract because more women started working. More to the daycare, more to the banks, the American (and European now as well) dream of barely making it!
Maybe a hot take but I feel like high(er) interest rates for homes should be the standard. This allows for demand to be modulated, and puts up a barrier to rent seekers from flooding the market. The problem is that over the past 5-10 years a lot of property has already been snapped up by investors at minimal interest rates, so as long as rents stay somewhat stable, they investors will be raking in the returns. I guess at the end of the day the money still flows to a third party rather than the homeowner that is trying to stay in one place for long term.
How does it put up a barrier to rent seekers, it makes homes less affordable, which impacts the poorer people more. The rich can but the homes. The poor still need somewhere to live and so tent the homes, they're paying more just they're helping wealth move to the bankers more as well as the property owners.
Allowing ownership of houses as an investment is just wrong. (The usual response to this is that you need investors or housing won't be built. The idea no-one would pay for a house to be built is silly, but we also have not-for profit housing associations.)
Higher rates mean lower property values - and lower property values mean the rent/mortgage trade off pushes rents lower. It’s instructive to look up how much those SFHs rent for and compare it to local apartment complexes. There’s a huge premium.
(And it’s of note that dealing with renting a SFH is possibly a worse experience than renting from a complex. Large enough complexes have maintenance staff and professional management. Someone renting a SFH might well have just that unit to rent - amateur hour. Or they could be a corporation but because you’re just one unit in probably a more spread out population of properties the renter might well experience lowered services from the property management.)
I do agree the investment activity we’ve seen in simply hoarding up SFH properties for investment is deeply problematic. There are all sorts of ways to push the market back towards owner occupiers.
It’d also be nice if it was a standard thing for working people to be able to make it to public local government meetings. Those tend to be timed when working people are at work. That could help something’s, but there’s probably still be a lot of NIMBYism…
Right, the average American lives in a home for something like 7 years and probably decides to move because of things unrelated to interest rates (life events, mood). But the investors are living in the financial world. They’ve not traditionally swamped the SFH market which suggests it’s not a natural choice.
If you are looking to rental properties as an investment, the interest rate is a large part of the cost of doing business. If you think that you can make 10% renting out a property but the interest rate is 8%, that is a pretty slim margin for something with so much overhead. If you think you can make 10% and the rate is 2%, that a bit more juicy.
Because high interest rates can reduce demand, in a vacuum you would also see a reduction in the price of the property, making them more affordable. Of course this price is also impacted by countless other things, builder velocity being one of them, so in the real world it takes time to sort out.
The 70s, 80s, 90s had relatively stable home ownership rates despite very high interest rates. In 2016 the US reached a bottom in home ownership at 62.9 despite historically low rates.
BTW I was not referring to rich people living in their homes that they got with high interest rates, the comment was specifically towards investment property. Definitely agree that hoarding properties is out of hand.
The easiest ways to put up barriers to rapacious landlords are:
- prevent corporations from owning residential property
- tax property rental income at a substantially higher rate than income and exempt it from other deductions
- tax residential property which is empty for more than de minimis periods at an eye-watering rate (perhaps 5-6x standard property taxes).
None of this requires higher interest rates, but it will result in a transfer of wealth away from aging boomers and corporations, which apparently must be avoided at all costs.
Japan also has a weirdly deflationary housing market because of some financing and cultural quirks. I.e. homes begin depreciating as soon as you buy them.
Interpreting interest rates linearly is a fallacy.
As we have seen the asset markets have adapted to low rates by increasing assets prices. Thus an increase in interest rates to what historically has been low does not offer a great way to analyze its effect.
The question we should rather answer is by how much the assets will lose in value and what are the options of people depending on this value (retirement, disability funds etc...) and for people indebted, did they forecast and are they able to stomach an increase in interest spending of roughly an order of magnitude?
> Whoever claims to accurately predict what's going to happen in the next few years is talking out of their ass.
That's true regardless of the interest rate situation...
> We have gone from a zero interest rate economy to a high interest one within months.
IIUC, even the Fed's pretend "Natural Rate of Interest" is higher than current rates - meaning even they seem to believe they're still stimulating the economy somewhat with their policies.
Current interest rates are still arguably low. And AFAIK, no major central bank is even considering an interest rate - ever - that would actually be "high" or even positive in REAL terms.
This isn't a high interest rate ecconomy, this is normal interest rates. Rates have been absurdily low for a while so you may not remember it, but history provides a record.
Historians in 500 years will stare in wonder at the stunning evidence we did not, in fact, build ALL the infrastructure, physical and otherwise, during the last ~25 years of absurdly cheap money.
Well, maybe in 500 years people will have an explanation for why people don't create fundamental things in low-interest times. Lasting investment seems to be very strongly and positively correlated with rates.
Here's a theory for you: the increased cost of capital doesn't cause people to stop seeking or loaning out capital, it just directs that capital toward shorter-term projects. A bridge or a skyscraper pays off a lot faster than a startup.
Well, that's why basically nobody builds them in places like New York or SF. Even so, I think you're underestimating how long it takes to make it to a net profit as a startup. Even in one of these cities, the planning-to-profit timeline is under 5 years.
Even 432 Park Avenue, the new huge luxury tower in NYC, took 3 years. A random startup takes a lot longer to get to the money.
How do you define "fundamental thing"? Are we talking primary production here? Or do you mean a stretch of asphalt road for automobiles? Or a steam turbine for thermal electricity generation? a 3nm silicon chip; the factory that makes 3nm silicon chips; the factories that make those factories; a rocket engine; a mRNA vaccine; an office building; a mathematical proof; an astronomical observation; a tank; a nuclear warhead; a computer algorithm; a song; a child?
Some investment just keep adding to society's wealth, while others have a return and then go away. The first kind is really important because it enables new investment on things that depend on it, the second one doesn't.
Well, good luck trying to attribute an specific value for a child. But for your other examples the classification is mostly straightforward.
The low interest rate environment was certainly responsible for the fracking boom in the US.
Because one cannot talk about the recent low interest rate environment without also talking about the quantitative easing environment which pumped trillions of dollars into Banks who figured they had should do something with some of it
There will be no wonder -- as long as they have a list of F500 companies it will not be hard to understand.
Much like we have records of Chinese warlords or Byzantine princes engaging in rent seeking and breaking the system to cater to their needs, so to is their plain evidence of what and why things played out they way they did.
WTF does "normal interest rates" even mean when public debt to GDP[1] is over 120%, and servicing interest on that debt alone[2] costs taxpayers more than the entire FY23 defense budget[3]??
Is the norm really that home loans are unaffordable even to first-time-buyer DINKs with good-to-decent six figure jobs who just want a place to live? (not an investment property) Currently the mortgage rates are the highest ever since 1989.
Have you personally already purchased your first home? Without family assistance, it would be absolutely brutal and untenable for my children to enter into in this domain at present.
The people at the bottom are getting a remarkably harsh and bad deal these days, even in instances where they have been exceedingly fiscally responsible their entire life. Is this the future the youngsters deserve? My kids are still solidly upper middle class, imagine what this translates to for the lower end of socio economic status.
This seems severely suboptimal. At what point is a serious systemic correction warranted? What is the current generation supposed to tell their children? At some point people's motivation to participate in the system and play by the rules will be negatively impacted. What happens then?
I'm involved in housing politics where I live. I go to hearings, pay attention to what's coming through the planning department. I see what causes housing to not be built. It's NIMBYs. My neighbors. Not some far-off bad guys. The reason big companies got into the housing market is because there are good returns, because it's difficult to build housing. Why? NIMBYs. The best way to stick it to the big companies is to build enough housing.
Institutional investors represent less than 10% of home sales. Even still, they're buying houses because they realize there aren't enough of them. If we had enough houses it wouldn't be profitable for them to buy them.
Seems like a pretty risky investment. Especially as fewer and fewer people will have anything to gain from the NIMBY policies artificially increasing prices.
Historically speaking, investing in property/land has never turned out risky. Initial cost has little significance in total profit calculation as long as you can seek rent indefinitely.
> Is the norm really that home loans are unaffordable even to first-time-buyer DINKs with good-to-decent six figure jobs who just want a place to live?
The home loans are unaffordable because the house prices are too high. The median house price in 1989 was around $95K ($230K adjusted for inflation). Today it's about $400K.
If the housing stock is too expensive for the population there can be many causes, and higher quality or larger size housing is just another cause. The causes of the high prices don’t matter to buyers, all they know is they can’t afford to buy. What use is it to them that the homes they can’t afford are better quality?
The improvements in home construction have diminishing returns. For example my county now requires residential fire sprinkler systems. Such systems aren’t cheap but also don’t provide any real payoff to homeowner on average.
Improved insulation and air sealing is nice, but you’re not going to see anything close to $200k in energy savings over the building’s life vs just blasting your furnace to a comfortable temperature.
Given that the median age of a home in 2019 was 39, that puts half of today's housing stock as being built in 1980 or before. So most of "today's houses" are literally the same houses that were present in 1989, just with three decades of additional depreciation. This is even worse in older, populous parts of the country like California and the Northeast that haven't built as many new homes as in the Southeast. In California and New York, for instance, people are squabbling to pay $1m+ for 43-60 year-old homes. People today are paying more, and getting less for their money.
> Have you personally already purchased your first home? Without family assistance, it would be absolutely brutal and untenable for my children to enter into in this domain at present.
I haven't, but I'm not a DINK, and have never broken six figures.
The right credit union will make a home loan with no money down, which might help your kids and their spouses. I'm currently paying $3k/month for rent. Zillow says that this could afford a $350,965 home with a 30-year 6.833% fixed rate, including 1.2% taxes at $351/month and $800/year in homeowner's insurance at $67/month, and mortgage insurance at $287/month. Not possible in this area, but possible elsewhere.
I mentioned to my Dad that I was lucky to be able to buy a house for the first time just before rates went up. He told me the story of how he bought his first house in 1977 - the house I grew up in. The rate was 19%, and he was only able to get a loan because he knew a guy who knew a guy at the bank. He had masters degree and a good job, but all the banks turned him down until he found the right strings to pull.
Our long term family home, bought in 1981, was done as a land contract at 16%. Apparently was tough to refinance down to 10% - original owner moved across the country, and was dragging their feet on signing papers, pushing back, etc. They were about to lose a 16% return and delayed for close to a year.
Interest rates have been falling for hundreds of years, so anything you consider "normal" by historical standards is probably high by current standards.
> We know inflation should start decreasing within a year or so, but you cannot predict how millions of people will react to suddenly not being able to afford stuff.
If people in aggregate are suddenly unable to "afford" things, then you're not talking about inflation. People (again, in aggregate) have more money (not wealth) than they did a few years ago, which is what "inflation" means. On average, it's a rescaling, nothing changes.
Now, individuals may be hurt or helped[1] by this aggregate rescaling. But it remains a rescaling, and if you try to interpret it the way you just did you're going to get your predictions wrong every single time.
[1] FWIW: if you hold a mortage or any other large non-inflation-indexed loan, you should be cheering for inflation to dilute your debt. Most US homeowners are coming out ahead. They don't explain this well on the news networks though.
It’s not just rescaling, overall production is not constant and is dependent on interest rates/economic activity/etc. eg after COVID there was all kinds of weird price dynamics due to supply/demand mismatches.
Again, that's wrong. Inflation is by definition the scale-dependent part of price changes. You're right that prices can go up because of a reduction in supply too, but that's measures as part of numbers like GDP; which, importantly, are routinely expressed using inflation-adjusted numbers to avoid precisely the conflation you and the grandparent are making.
So, sure, if you want to rephrase and lament that people are unable to afford stuff because of the recent drop in supply (or increase in demand) for the products they want, that would be logically consistent. But it would be factually wrong, as in fact in aggregate[1] world GDP is doing pretty well right now.
[1] As above, specific products and markets are always moving. Something is always more expensive than it should be and there's always a glut in something else. People were complaining about eggs last week, IIRC.
Well, monetary changes maintain the mean purchase power. But people being able to buy necessities is more about median purchase power, or really the details of its distribution.
The mean purchase power has a very small impact on society.
And I say a third time: if you want to have a discussion about unfair distribution of monetary effects on specific populations, you need to have that discussion and not just shout "inflation!". Because while your point is true, it's specious. Changes are always happening (c.f. eggs, mentioned upthread). The question isn't whether things are changing, it's about what is changing and what to do about it.
Still "elevated inflation disrupts the purchase power of most of the population" is a perfectly real phenomenon. It's not an "specific population", unless you think "almost everyone" is "specific".
And yes, the disruption tends to pass after the inflation goes away. But none of that makes the argument specious.
"Elevated inflation reduces the impact of credit card and mortgage debt" is an equally real phenomenon, though. Without numbers your argument is specious. There are winners and losers. Whose losing and by how much? I'll give you a few losers: retirees on fixed incomes, and investment employees working on commission. And a few winners: homeowners, and young professionals with significant credit debt. There are lots of others. Feel free to advocate for the policies you think are appropriate. Just please stop with the "Inflation!" nonsense as a shorthand argument.
> "Elevated inflation reduces the impact of credit card and mortgage debt" is an equally real phenomenon, though.
Yes, and it has a different temporal behavior from the impact on the purchase power. The same person can be affected by both.
As a rule, inflation infuriates people because almost everyone jut wakes up some day and discover they are much poorer than they used to be. You can't dismiss this by pointing that their net-worth improved. (But yes, the net-worth of a lot of people improves.)
I'll certainly grant this, not the least because they get terrible information about it from media and online sources.
> almost everyone jut wakes up some day and discover they are much poorer than they used to be
Like this. This is not true. This is a lie. You need to stop saying this.
People are "much poorer" post-inflation only in the sense that they were "much richer" post-pandemic, due to the huge savings boom. If you aren't willing to look at the latter, then you're not doing the analysis correctly.
At most, "some" people are "much poorer" due to asymmetric effects. But you're just wrong here if you try to extend that to "almost everyone". Please stop.
Do you mean the early 1970s when the US moved off the gold standard and there was a massive oil shock?
Or the late 1970s when inflation made an attempt for a runaway spiral?
> get lower and things resume as normal
The last few years (2008-present) have been anything but “normal”.
The Fed has been full throttle on the lowest interest rate for years and Quantitative Easing / asset purchase programs. Stocks and VCs have been juiced with cheap money causing massive distortions in many markets.
Normal would involve checking and savings accounts paying a non-trivial interest rate. It would involve actual due diligence in VC, not rubber stamping FOMO. Your “normal” probably needs some recalibration.
Offering a reply as it seems my comment was perceived incorrectly and I can not unfortunately edit it. My wording was perhaps a bit too nuanced.
(Again this is my opinion, and I might be wrong. I appreciate your opinion. (And other readers' opinion.))
a) You assume that me saying "best case" if we continue as is, is a good case scenario -- from my point of view it is not. Which is what I am expressing.
We both agree here we are not in a good situation. Even if we "recover" GDP wise the buying power of the middle and lower classes is taking a serious hit.
This is one of the results of Volcker's policy (to remind he set the Fed policy in '70s) which we are following or asked to follow by some segment of the banking world today (cf. https://econreview.berkeley.edu/then-and-now-the-crisis-of-t...)
Thus, my '70s reference.
b) Already economists do not consider 2008 crisis as over. But we are arguably in a continuation of that crisis. Again, this is how an economist historian is going to treat the 2000s. Normal could be before that and sure I could recalibrate my normal, but do you think we should expect magical times?
The view that Fed is using too much QE and too much free money is political and moral. I offer no opinion and definitely did not try to include it in my 3 line opinion.
Disclaimer: I do not abide in the market efficiency camp. I think history proves that markets are inefficient.
> Normal would involve checking and savings accounts paying a non-trivial interest rate.
Even now that the fed fund rate has increased, the savings rate offered is low. Why? Because the business model and flows of banks has changed. They don't need to ask for your money. They are going to get it in the U.S. even indirectly. Perhaps they still care if you are a high value individual that can give them a few millions and give them a few percentages of fees annually.
They are also now allowed to treat checking and savings the same, thus able to issue more loans. (U.S. detail.) Namely, Regulation D has changed and thus the definition of M1 money also.
Job data trails rate increases by many months. So do recessions.
If the fed levels off interest rates within the next year or so, we have a very good chance of avoiding a recession. I am young/old enough to remember the last time interest rates were this high, and we were BOOMING.
If the fed pushes the gas on interest rates, it will likely push us into a mild recession.
Thanks (covid!) to millions retiring along with remote work, it would take a black swan event to really push things into the red. Note that we have a few possibilities for that setup, but so far, nothing has pushed every button as of yet.
I predict a sideways trend for the near future. A really good event unrelated to employment will pull us up, a really bad event will drag us down.
Hogwash. How do you know in advance this prediction will be "accurate"? Please don't spread ChatGPT-level certainty about an inherently uncertain future, it is a disservice and insult to all.
Otherwise, please share the magic crystal ball sources.
We've had more than a decade for businesses to get used to being able to borrow on short timeframes of ~2 years with extremely low interest rates.
Increasing those interest rates will cause zombie business interests to go broke by increasing their borrowing costs.
This will probably look something like a meltdown in the office and retail commercial MBS for a start (I have no idea who else is out there ready to join the party once it gets started, but that's a good start).
Already sales of CMBS have fallen 85% from where they should be this year:
Those interest rates also go into everyone's Discounted Cash Flow models, which affects the prices of assets across the board, once people start to adjust to the fact that higher interest rates are going to stick (until the Fed blows up the economy, which of course means the beta value in those models needs to increase).
Once the unemployment rate climbs back to 6-8% or higher then the Fed will probably cut interest rates back down to zero again due to the recession that they will have created. With more slack in the labor force then when they do that inflation will not reemerge. The recovery won't be V-shaped like the pandemic recession because businesses will be allowed to go bust without any kind of government support -- the recession may be particularly bad since the Republicans in the House will want to hang the recession on Biden (a situation which didn't happen in the 2001/2008/2020 recessions since there were Republicans in the WH and cooperative Democrats).
> we have a very good chance of avoiding a recession
Not sure that's the case, I work in RV, which is a leading indicator for recession and recovery. RV volumes have been getting hammered for the last 8 months. OEM mfg numbers are down over 50% year on year. [1] Sure it's just one small segment of the overall economy, but things are getting strange out there.
You are correct that COVID was responsible for a huge boom in RV. In fact, 2021 was biggest year ever for RV. The numbers speak for themselves. [1]
However volumes this year are projected to be in the low 300k range. [2] Also these projections seem to be getting revised lower every month. These are numbers the industry hasn't seen since 2014. So we're not returning to pre-COVID levels (record shipments in 500k range in 2017 and 2018).
The industry is being cut in half (at least) right now. And the drop is predicted to be long (we're already 6 months in, and the articles are saying this will last until at least the end of 2023). There's something deeper going on here. I think that something deeper is a recession.
Not saying I have all the answers. But from the angle I'm sitting at this looks a lot like the decline seen after the housing bubble and 2008 crisis.
Inflation has already decreased. A lot of articles talk about year-over-year inflation which isn't a useful measure. Seasonally adjusted, month-over-month, is what you want to look at.
Whether this decrease is sustainable is indeed an open question.
Yes. For the longest time everyone was saying there’s no way the fed can raise rates above 2% without completely crashing the economy because the entire world was “addicted to low rates”. Whatever happened to the crash?
Recessions usually follow at least 6 months after the Fed hits their terminal rate.
The lag is also easy to understand since interest rates don't immediately hit businesses borrowing cheap money short, until their loans rollover and readjust on a roughly 1-2 year schedule. The economy can also absorb the first waves of those failures and it just takes awhile for the volume to build up.
It's quite incredible seeing these two statements right next to each other:
> Whoever claims to accurately predict what's going to happen in the next few years is talking out of their ass.
> We know inflation should start decreasing within a year or so,
We don't know that. In fact, it's actually a pretty commonly discussed possibility that inflation could stay high (>5%) for the next decade due to retiring baby boomers and other reasons
There has been a lot of argument over whether the inflation was transitory or not, and the theory that it was caused by the massive energy price spike in Europe caused by sanctioning Russian gas seems to have won. And the rate spikes were relatively modest.
(Energy prices were much less affected in the US, but the economies are linked by trade)
> We know inflation should start decreasing within a year or so
That is assuming the Russians eventually pull out of Ukraine, are completely beaten militarily and their assets will be used to fund Ukrainian reconstruction, and it assumes that China does not increase tensions with Taiwan or, heaven forbid, actually invade.
Should the war drag on, the situation will grow completely unpredictable - eventually, governments (no matter their political orientation or prior campaign promises) will have to raise taxes to pay for Ukraine aid and especially new arms projects, which means price hikes for the masses as companies will just pass through tax increases instead of accepting lower dividends for the capitalist owner class.
> but you cannot predict how millions of people will react to suddenly not being able to afford stuff.
IMO: Riots are inevitable IMO unless politicians invest money into at least filling the gaps for the lowest rungs of the societal ladder, the French are blazing the trail here - and it's only a matter of time until at least the UK population has enough of empty supermarket shelves. In the US, it depends if Biden will be able to secure a second term.
Support for funding the war could just as easily become an electoral liability in the west, in which case Ukraine loses some territory and the rest of the world moves on as they did when Russia seized Crimea. Either outcome is better for global economic stability than a protracted multi year war.
> Either outcome is better for global economic stability than a protracted multi year war.
The problem is the political implications... for one, it would send a signal to China that a land-grab against Taiwan will yield a bit of trouble but nothing too serious. That's the worst case and I seriously hope that that alone (and the economic devastation associated with TSMC blowing up their fabs to prevent them from falling into Chinese hands) is enough to keep the support going.
The other factor is that it might lead to a complete fracture of the NATO - Finland, the Baltic nations and Poland will not accept any kind of Russian success out of that war. They're all no big economic players in the EU/NATO, but a major internal dissatisfaction in NATO may entice other players in the world to play rough again as well, not just China.
I'm sorry but I'm not entirely sure who or what you are responding to with this. Could you explain a little bit of the context so that we can understand the point that is being made?
Seriously, this feels like reading leftist madlibs. Maybe I'm out of the loop, but half of the words in that specific order make no sense to me. It's all inside references to... something?
I think it can but I wouldn't call it a miracle. The "boomer bulge" in the workforce is in the process of entering retirement en masse. The generations replacing them are smaller. This will contribute to higher inflation (lots of money that was sitting in real estate and 401ks being withdrawn to compete over a limited supply of basic goods and services like healthcare), and also to lower unemployment.
It doesn't necessarily mean we are experiencing a miracle and will have higher living standards, I promise it is quite possible for a nation to banish unemployment but still have a majority of people struggling to get by.
That being said, I think we haven't seen the full effect of higher interest rates yet, we are just getting started with that.
> I promise it is quite possible for a nation to banish unemployment but still have a majority of people struggling to get by.
You can always end up having a bunch of low paying jobs that don't allow for a good standard of living. Everyone will be employed but I'm sure no one will end up enjoying that.
> You can always end up having a bunch of low paying jobs that don't allow for a good standard of living.
Indeed, but this will gradually kill all but the most essential industries. "Consumers" won't have the funds to "consume" and the 21M US citizens with a net worth of $1M or more won't pick up the slack. 21M people don't purchase 15 Gameboys each when they go to the store.
If it gets bad enough, then the risk is that mutual aid networks will enable "opting out" en masse like during the depression: tents and washboards by the river.
Once things at that point, getting the opt-outs back to play the game requires big promises ala The New Deal.
I think what we’re seeing is that the NAIRU (non-accelerating inflation rate of unemployment) model continues to be correct in some cases but fall apart in others. This model has traditionally been based more on empirical data than a strong theoretical basis (although anybody could tell you that is reasonable for low unemployment to lead to wage inflation) and, most notably, is an aggregate measure.
Certainly you can argue that Japan proves an exception to this rule, or that the current low unemployment is simply a lagging indicator of our previously dovish monetary policy that will eventually normalize. But I think that NAIRU simply needs to be refined: wage inflation occurs not during low unemployment but during times of increasing employment. That is to say, an economy may arrive at a steady state of employment at a variety of employment rates, which needn’t cause wage inflation, but when employers in aggregate are creating new jobs and attempting to fill them even if they have to raise compensation, you do get wage inflation. This also doesn’t necessarily need to be done in aggregate: you can argue that wage inflation in the technology industry during the 2010s is partially what created the localized inflation in the Bay Area during that time, while in the rest of the country without heavy tech presence, this didn’t happen.
There are of course many other wrinkles: for example, the size of the workforce has a degree of elasticity, where higher wages or lower hiring standards may draw some people not considering participating to again participate. There is also elasticity to hiring: depending on any individual employer’s demand for workers they may be more or less willing to raise compensation vs only partially meeting hiring goals. And of course there is stickiness to employment on both the employer and employed. The elasticity and stickiness of these things seems like it can have tons of factors that influence their magnitude: from culture norms (like in Japan where job hopping is less common), to employment regulations (how hard is it to hire-fire), ageism and other *isms (if a culture discriminates against X group, they may be more inclined to drop out of the labor force, but happy to rejoin it if employers need to hire so badly that discrimination gets lessened), to the size of the social safety net.
Plus, unemployment is a very coarse metric for skilled workers. Skilled workers are less likely to simply become “unemployed” and more likely to switch directly from one job to the other. During a broad hiring binge you could see large wage growth with little change in unemployment.
Anyway, I think basically economics has the tools to explain everything we are seeing already - it’s only perplexing when reasoning based on very simplified models like NAIRU.
My theory is that bullshit jobs are one of the mechanisms by which large corporations maintain a protective anti-competitive moat around their businesses; instead of letting unused labor roam freely in the markets to potentially compete against their interests, corporations provide as many jobs as required in order to keep as many people's time fully occupied in order to minimize the number of people who can compete against them.
These jobs are of extremely marginal (or even sometimes slightly negative) value to the corporation in terms of profitably servicing customers, but their value in anti-competitive moat-making justifies the costs. Of course, this only works at scale if most big corporations act in unison.
As corporations find other, more effective ways to maintain their oligopolies, the reliance on this strategy diminishes... That may explain recent layoffs in the US? Maybe we've reached such point due to media monopolization and regulatory capture providing a more robust moat? The ability of free labor to compete against corporate interests is now so insignificant (odds are so bad for indie startups) that it no longer poses a threat to corporate interests, even in large numbers.
I think this theory may also explain why larger companies often appear to hold people down instead of trying to grow them. Beyond a certain threshold of monopolization, the primary role of the mega-corporation may be to deplete talent (e.g. employee burnout, disillusionment, overspecialization in proprietary tools and processes leading to a career dead end) in order to neutralize its future competitive potential, more so than to leverage its immediate productive potential for their own immediate use.
I can't believe this theory is so widespread. There's no high level conspiracy to hire people to keep them away from competitors, such a thing could not be kept secret, and it's a ridiculously expensive thing to do (even for a FAANG) for extremely dubious value that might be realized a decade down the road and no real way to know if it's working.
Bullshit jobs exist because mid level managers are very averse to killing projects or firing low performers, because that would shrink their fiefdom. That basically only ever happens when there is extreme pressure (e.g. layoffs).
Layoffs happen in clusters because even a few layoffs greatly increase the leverage employers have, and as soon as they have a little leverage, a layoff looks better than it would otherwise, so it's a positive feedback loop.
This is a much, much simpler and realistic explanation than "a grand conspiracy of media monopolies and regulatory capture is cheaper than hungry hungry hippoing all the engineers".
I don't think it requires explicit conspiring. I don't think the corporate executives who make decisions are necessarily aware of this effect. For the most part, it's probably a case of "this strategy seems to have been working so far, or at least it's not a problem, so let's keep doing it... And the people over at McKinsey insist this is the right way."
>it's a ridiculously expensive thing to do (even for a FAANG)
If you can raise (or borrow at 0% interest) Billions of dollars, it makes sense, and is a dirt cheap thing to do. It keeps all the people you've hired from becoming your competitors, and you might even profit from their work in the mean while.
Agree. I've never heard a manager say "we should keep this person because otherwise they'll go and create a competitor who will cause us problems".
I have heard lots of managers say "yeah, I know they're not performing well, but I don't want to reduce headcount right before budget allocation, can we manage around them?" (or something to that effect).
In my MBA course we even talked about this as a thing - that mid-level managers create fiefdoms, and the effects that has on the organisation culture. There are lots of other effects on the organisation from this, too.
Rates are still well below what we had leading up to the dotcom bust. And corporate leverage is still conservative. It’s a very similar backdrop with AI leading the narrative this time around.
I thought this was a bizarre (OK, I'll be honest, shitty) article. The beginning starts out by seemingly making the point that Japan has low unemployment because it has a lot of inefficient, "make-work" jobs, e.g. "smartly dressed women help you use the lifts" (subtext being who needs help using an elevator) and "a team of four people was involved in the preparation of your correspondent’s gin martini".
OK, fair enough. But then it starts making the argument that employment in the West is going to look more like Japan. Except places where I'm aware where there are acute labor shortages (e.g. businesses like restaurants, child care, nursing, home services like plumber, electrician, etc.) look nothing like the picture the author tried to paint with his Japan vignettes. I.e. there aren't tons of spare waiters standing around waiting to make your drink where I live. More like you're happy just to get seated in the first place because places are so understaffed.
The current and coming labor shortages in the West are not a surprise - it's simple demographics, with nearly every 1st world country having a fertility rate that is well below replacement level. I think the pandemic did cause some folks to re-evaluate their priorities, but I think even there a lot of explanations are given for people "re-evaluating their priorities", but the reality is that labor shortages are causing some people to leave the workforce because the value of their "labor at home" is now relatively much more. For example, childcare in the US in many urban areas is extremely expensive. It's expensive to the point where if one member of a couple has a relatively low earning potential, it makes more sense for them to stay at home to raise their kids, rather than putting them in childcare, because the economics of it are no longer that favorable.
I agree with most of this, but birth rates are not relevant. Note that Japan has had a very low fertility rate for years but still has folks for all those make-work jobs.
In the U.S. what changed over the past 5 years is legal immigration: it was drastically cut and has not been restored.
So as citizens and existing long-term residents pursue better jobs or time at home, there are far fewer new residents eager for lower paying jobs. If you talk to businesses that have traditionally employed these newly arrived folks—food service, agriculture, construction, childcare, etc—they will be crystal clear about the impact they are seeing.
Places with desirable standards of living don’t need replacement level births. They just need the right levels of immigration. People will come, ready to work on day one.
Yes, but in Japan a lot of people doing the pointless jobs are old.
As they pass away, there will be less need for the pointless jobs but there is no one to replace the old people who are also doing the important jobs like farming, which is not highly automated, so there is little chance Japan is on the brink of any real employment crisis. If anything more and more jobs are coming online everyday, with less people to fill them.
Sometimes I know we worry about AI taking our jobs but I’m wondering if we will be able to survive without it ?
The decline in legal immigration is almost entirely due to USCIS’s drastically decreased productivity during covid. Illegal immigration is still at all-time highs in the US. Why only consider legal immigration? Those industries you mentioned are all big employers of illegal immigrants.
Immigration is a method of wage suppression. The issue is that the businesses don't want to cut into their profits to raise wages to attract native/local workers.
The government can of course "attract native/local workers" and curb this immigration via means such as raising the minimum wage. When the state doesn't want to, it means that the state and business are working together on this against such native workers. It's of course never as simple as "Immigration is this". You might as well say that "low minimum wage" is the sole root cause.
Immigration can be used to suppress wages, if there are way more workers than jobs.
The other end of that balance produces high inflation, as employers have to continuously raise wages to recruit from competitors, and continuously raise prices to cover increasing wage expense.
Maybe a rule that says "Companies can only hire non-native workers if their profit is below XX%." (I realise this is a game-able statistic so would need to be a bit more complicated than that).
Of course, the other option that companies can take is to increase productivity by investing in automation, training etc so each worker provides more output to justify their higher cost.
The issue is people aren't willing to pay for services when they have to employ native workers with high salary expectations. If childcare can't find cheap workers the price will go up and many people will decide to quit and raise their kids themselves.
To be honest make-work type jobs are shitty examples anyway unless their existence is mandated through governance (looking at you Oregon gas stations). Otherwise, whether those jobs seem important or necessary or neither, their existence is a cultural one that's at least as significant as any job related to entertainment or hospitality.
I'd wonder how true it is in Japan, either; all feels a bit anecdotal.
My impression was that Japan had ~0 unemployment largely due to an increasingly small number of people of working age; per-employee productivity is actually pretty high in Japan.
And yeah, certainly around here a lot of stuff is just reducing hours because they can't staff at previous levels.
Pointless comparing Japan to the west at all. The work ethic is completely different, may as well be another planet. Impossible to replicate in the west so pointless to compare economies.
There's never been any kind of labor shortage in the West, just an unwillingness to pay sustainable salaries for work delivered. Young men and women working in Western countries are horribly squeezed by the massive amount of people demanding to live on their labour. Immense taxes, profits, pensions, rent, fines, mortgages all add up to an unsustainable situation, and people check out. You can't build a future in places like Western Europe without either gaming the system, having luck with inheritance and such, or making a wild shot at some unusual pursuit that could render profit if successful. That means a young person can not afford to spend time working in dead-end jobs such as sadly, almost all traditional jobs are now for people entering the work force.
I deeply regret all the years working hard in a traditional job, because it brought me no closer to having a career, a family, a place to call my own, or respect. Why should I ever expect any young person to do the same, when things are much worse for them now.
Not to mention all the customers and people who will tell you that you’re a piece of crap because you work such a job. (Part of why I go out of my way to be kind to people (and tip) is my experience working retail right out of college.)
It's difficult to take serious any article that tries to apply Japanese customs to other western (Euro/US/Aus/NZ) cultures. We are deeply entangled, but JP is a different beast. Aside from the aging population and low birth rate, it's still a distinctly different culture than say, New York or London.
What the author describes are long term artifacts of Japanese culture. It's a service culture (dunno if that's a term) in which I mean extra levels of service are given to guests and customers. Again, sorry if "service culture" is incorrect. I highly respect JP culture.
So, I'm not sure how that pertains to jobs in the rest of the western world.
The difference is that people in Japan feel like it is normal to work hard (and long) for a pittance.
People in Europe feel like their boss is being unreasonable if they ask them to come in 35 hours a week. And think 4 days, or even better, 3 days is optimal.
Then since they’re not being paid a lot, they feel it’s fair to just not give a rats ass about anything they’re doing.
I think there might be some balance in between that I’d like best.
As a European this is just as dumb a comment as me saying Americans expect a work lunch consisting of cheeseburgers and will shoot up a place if it runs out of cheese.
It's the opposite. If the US keeps raising rates and other countries don't (like it appears Canada will do), then USD will appreciate in value. Smart to be holding USD right now.
The US has been subsidizing global trade for the better part of a century, while not actually getting all that much out of it economically - geopolitically, sure, it's been great, but economically it mostly just decimated domestic low-end manufacturing and resource extraction.
Let's see how happy you'll be once the US turns entirely inwards and the rest of the world has to secure their global trade routes. The US will be fine. It can be largely self sufficient, despite the hysteria over our inability to manufacture things, we can redevelop the low end stuff fairly easily, and we're re-shoring the ultra-high end with even TSMC making chip plants here. It'll be a bumpy road, but all indicators are that the US is re-shoring manufacturing, developing energy independence, and turning inwards.
Not really. Outsourced manufacturing to China provides cheap stuff and zero environmental cost. All the rich who got rich bcz of the manufacturing industry move their wealth to the west mostly USA and UK.
UK provides safe and smooth system for ultra rich to get their money out of developing nations. Even dirty money is welcomed.
USA has golden visas, who do you think they created those for?
I supported Trump on taking manufacturing back bcz it's good for developing world to protect their environment.
Americans who think it's the developing world that took your jobs. Remember the real culprits are the riches in your country and those imigrated riches.
Btw no one in their right mind thinks America's debt will ever be repaid. Again developing nations will have to foot the bill.
Ah the Peter Zeihan theory. Sounds plausible but at the same time, it clashes with the Chris Hedges theory: the argument that capitalism is an inherently destructive force that rots and ruins every arena of American life.
The corporate state that presides over this destructive capitalist economic system is ruthless and relentless. “It practices only the politics of vengeance. It uses coercion, fear, violence, police terror and mass incarceration as forms of social control while it cannibalizes the nation and the globe for profits.”
This scourge is all-consuming. Once-liberal institutions, including “the press, labor unions, political third parties, civic and church groups, public broadcasting, well-funded public universities, and a liberal wing of the Democratic Party,” have all “collapsed under sustained assault during the past forty years of corporate power.” Today, there are “no institutions left in America that can authentically be called democratic.”
It is terminal. “Short of a sudden and widespread popular revolt, the death spiral appears unstoppable, meaning the United States as we know it will no longer exist within a decade or, at most, two.”
And it is worldwide. “The malaise that infects Americans is global.” Global capitalism is responsible for all misery and the metastasizing of violent rage from many different sides, from jihadists and neofascists to far-right militias and antifa.
I somewhat noncommittally also agree with Hedges here. I think that we have serious problems as described by Hedges and other neo-marxist theorists, but I also think that Zeihan is pretty spot on in terms of the geopolitics of the situation. It's unclear to what extent these competing variables will contribute to the situation as things go forward.
On the optimistic side, I'd like to think that the oligarch class in the US relents before revolution and decimation of the country and economy that is their cash cow. Certainly it would be better to reap merely some fraction of their disgustingly obscene profits than none of it, and the US is well positioned a la Zeihan in the coming global crisis years.
But yes, on the pessimistic side, the proletariat cannot be squeezed indefinitely. Too much pressure and it will explode, with disastrous consequences all around.
Overall, I'm hopeful that continually declining birth rates (though much stronger than the rest of the developed world) and the recent decimation of the labor force will continue to bolster labor power, leading to a recession in oligarchical power that will prevent the worst consequences of of their rapacious excess.
Before the pandemic, after Bernie was crushed for a second time by the oligarchs, I often wondered where the oligarchs would run away to once the people have had enough. Some thoughts were China, Switzerland, Israel, New Zealand, or Mars. Post pandemic all of these places seem to have issues that prevent them from being a one stop destination for all of the worlds wealth hoarders. There is still the theory that the US becomes more like Brazil: Large amounts of poverty with secure enclaves of the extremely rich. I know this is a stretch but we are already seeing shadows of it in the pop culture with the popularity of films like the purge.
Zeihan does talk about the US going through a political reshuffling right now that will take 10-20 years. I guess on that timeframe we will find out what happens.
Nobody wants to admit it but Trump’s immigration policies, which Biden continued, actually had the intended effect. Inflation was a predictable consequence of ramping down on the influx of cheap workers, but that’s fine. Americans don’t need cheap stuff as much as they need workers to have bargaining power.
No, because we had low interest rates before Trump and didn’t have the same low end job growth. “Good for the economy” isn’t the relevant concept. Immigration can grow the economy overall, while putting lower end workers in a relatively worse position.
The job numbers got that good because of an uninterrupted rate of job growth from 2008 on. JPowell helped by keeping rates low instead of sticking to the previous NAIRU wisdom which says the correct interest rate is the one that reproduces the unemployment rate of 2008.
> Immigration can grow the economy overall, while putting lower end workers in a relatively worse position.
They don't really do that either! Immigrants mainly compete with each other.
It’s not the job numbers. It’s the labor shortage and wage growth at the bottom end. My local Dunkin’ Donuts is staffed with teenagers and was paying $16 in 2020 (exurban MD). Immigrants compete with those low end workers.
Efficient market theory predicts that in a free market, all labor will be utilized, irrespective of demand dips due to interest rate hikes.
With the gig economy providing a route around regulatory regimentation of the labor market and inflation having driven down the real minimum wage to below the market value of the vast majority of labor, the labor market has been able to adjust to every economic turn and produce effectively full employment.
Going even further out in a limb: I think in a sense, political gridlock has prevented the government from instituting disastrous measures that in the 1930s produced so much unnecessary unemployment, like the FDR Administration trying to fight deflation by imposing very high industry-specific minimum wages that caused the unemployment rate to exceed 20 percent.
Credibility of the author is out the door when they are using strawman comparisons with Japan (Tokyo) indicative of someone who spent a week there as a tourist and had to shoehorn this experience in. It's like a foreigner traveling to America, and by that I mean LA or NYC, and talk about how fashionable people in SoHo were or how vibrant Time Square is, meanwhile 99% of Americans aren't in this way of life. I'm almost certain "in one of Tokyo’s best bars, a team of four people was involved in the preparation of your correspondent’s gin martini" refers to The SG Club, an overpriced tourist trap for tourists who want to feel refined, sophisticated, edgy.
As economists say, there are four types of economies: developed, undeveloped, Argentina, and Japan. Not having a permanent place to be during the 9-5PM, whether that is school or work, is a badge of shame in Japanese society. If you read crime reports in Japan, they will almost always mention the persons state of employment. Even the tragedy of the commons / prisoner's dilemma is thwarted in Japan, atleast in a public context. On microeconomics, people are not making decisions that would be deemed economically optimal or even rational from an American lens.
The example with the airport and malls being overstaffed. The first part is that both the government and people would rather that people work, rather than rely on government/society, even if it means the enterprise is not operating optimally. This is one reason why, quantitatively atleast, Japan has one of the lowest productivity rates of developed countries. Everyone has to appear working diligently, regardless if they've past the point of productivity or not. For the second part, the mall, in this time and age you can order stuff online. The value proposition of retail is that people want and value human services. Especially if it for higher end products and luxury products, where the retail and customer experience is part of the purchase, which is likely the case for a mall in Japan. Even Uniqlo is a splurge for people to be honest. Furthermore, Japanese people trust humans not computers, and there is an expectation that service be 1:1 and available. Just wait into the author sees the staff ratio in the electronics store, especially in the appliance section. They are dozens of tables where they go through a step by step process with customers, explaining the appliance, delivery process, etc. Part of this is also a desire for human interaction which is relatively limited compared to America where you have no shortage of small talk with randos.
> Not having a permanent place to be during the 9-5PM, whether that is school or work, is a badge of shame in Japanese society.
…in some social classes. What are the freeters and retirees doing? Night workers?
> This is one reason why, quantitatively atleast, Japan has one of the lowest productivity rates of developer countries. Everyone has to appear working diligently, regardless if they've past the point of productivity or not.
This has been changing, it's not as true of newer companies and startups.
Do you mean nightshift workers or mizu shobai workers? If you are talking about nightshift workers, then that's just a matter of semantics (9-5PM == full time employment, even if that means two part time jobs ).
As for mizu shobai workers, I think would it be disingenous to suggest this is somehow more honorable and respected by society and older generations/parents than saying being a certified professional. Sure, the male hosts in Shinjuku are making multiples more than a FANG employee in the states, but part of the pay is the judgement by societal at large. Yes, in some social classes being a suit-wearing office worker with a stable income is respected, and in Kabukicho circles drinking with lonely and emotionally vulnerable clients until you cough up blood is respected.
Japan's most recent revision to the visas allowed tech workers who make over 20 million yen (~$150k usd) a year to skip the regular lines at the airport, and use the line reserved for government diplomats and ambassadors. The other requirement is that you have a masters degree. Point being, there is a strong emphasis on pedigree in Japan.
A subset of this will wear it as a badge of honor, but another subset can't get hired. One reason for not being able to get hired is that Japanese companies want to hirer young, straight out of school, and invest in the long term. Freeters are excluded from this cohort, and also because employers feel this is a red flag.
Even from Wikipedia, the negative perception from Mass Media and society is clearly laid out, so bringing up freeters and attitudes towards them only furthers my claims. https://en.wikipedia.org/wiki/Freeter. The ones that are subsidized by their parents are referred to as "Parasite Singles" by the Japanese.
> This has been changing, it's not as true of newer companies and startups.
Not as true, but still true.
White collar workers still have to clock in and clock out.
I will believe this when people Wordpress dominance starts trending down and people stop holding meetups in every city. There are even consultancies for Squarespace. Meanwhile, less developed countries in the region such as Indonesia has an order of magnitude healthier startup ecosystem, including more unicorns. Banks and traditional industries have begun their DX (digital transformation) but it's long way to go when the most foreigner friendly bank's website goes down for a day of maintanence every month, and require strange login rules such as usernames having to have no more than 3 consecutives alphabetic or numbers. Meanwhile, passwords can't have special characters.
> Do you mean nightshift workers or mizu shobai workers? If you are talking about nightshift workers, then that's just a matter of semantics (9-5PM == full time employment, even if that means two part time jobs ).
Yes, I meant literally night workers. They might sleep through the day but don't always, so they can look unemployed.
I don't know any fuzoku workers to ask them about it. I do know several bar owners and freelancers, so that's what I was mostly thinking about.
> Even from Wikipedia, the negative perception from Mass Media and society is clearly laid out, so bringing up freeters and attitudes towards them only furthers my claims.
Well my question was more like, what do _they_ think about each other? I agree the media judges them.
> The example with the airport and malls being overstaffed. The first part is that both the government and people would rather that people work, rather than rely on government/society, even if it means the enterprise is not operating optimally.
This. In many EU countries, airports are currently severely -under-staffed. So much so that in several airports scheduled flights had to be canceled.
Whatever the cause for low unemployment in Western countries is, it is definitely not the abundance of 'nonsense jobs' like in Japan.
I think the honest reality is that the game is rigged and dependent on a perpetual 7% growth type cycle. We have indebted future generations so much that it's going to crumble or the next 200 years of western civilization will be held to debt service. Millennials in western countries aren't having kids, and are stuck paying student loans (and other debt) while a 2 bedroom home in some suburbs that doesn't have a rotten foundation is $400k.
How does the western world grow 7% (or whatever rate needed after taxes, inflation, and profit) perpetually with stagnating birth rates, lowering carbon footprints, and shrinking real wages?
But the cost structure could very widely when there are different motivators. I suspect this is what is really happening. Colleges in the US are 5 star resorts wheres in Europe they are either old beautiful relics or just old boring buildings with no real amenities and a lot less staff needed to run the operations.
You make it sound like its a black and white thing. I disagree. If you can get your costs under control, that debt accrued now becomes an investment that should pay off the debt in the aggregate long run. After all this is not just money spent on a consumable. This is money spent on a resource(education) that generates more money(in the aggregate) in the form of productivity. The problem is that this is an extremely difficult problem given a large population. Because when you have a large population there ends up being graft that pulls value away and in the worst case scenario(the situation in Communist Russia) the majority of the value is stripped away leaving nothing but the debt. However, that does not mean it can't be made to work well. It seems like many European nations can somewhat get more value than investment (so far).
Your thinking seems to be a bit muddled. You seem to be mixing up nominal concepts (basically, money and accounting and debt) and real concepts (capital goods / investing etc).
Unfortunately, they're also becoming an "American export". E.g. Netherlands granted a study grant to all students up until 2015, when it was converted to a student loan [1]. The required amount is still lower and the terms are better than US, but the ball has started rolling. We are now waiting for the next wave of neoliberal policies to see average student debt surging.
Why would you guys even allow this poison to infect your culture? We never had these benefits in the US so there was nothing to take away and many Americans are too poor to ever travel overseas and don't realize how things are done elsewhere. In fact even conservatives fight to maintain what we do have (eg. Social Security, Medicare) But Europe? You guys already have the benefits, aren't you going to get pissed off if they get taken away?
The starting points between Europe and USA may be different, but the methodology to contain reactions is the same: The boiling frog method [1], and playing the long game.
If the introduced change is subtle enough, only people directly affected will protest. In this case, students did protest for years, and they still do. But because the change is so subtle, it is easy to convincingly brand anyone protesting as unreasonable/reactionary/self-entitled/spoiled. E.g. "Do you complain about paying 20EUR/month for your DUO [2] loan, all while you can even skip payments with no repercussions when unemployed? An entitled lazy brat you are!".
Then, several years later, you can stage an audit on DUO to find out that it's "bleeding money". Now you have a free rein to shut it down and let the private sector to hand the student loans. All to save taxpayers' money, of course!
I think this is worse… because the price is being hidden and also the real cost/payment for such an education.
Your country, during that time, has incurred debt which you’ll have to pay as a form of extra taxes. The path of least resistance in this case is to not pay as individual and leave it to the rest of community (or country).
Does this explain to you why young people are leaving Italy? It’s a form of arbitrage that’s being played on a global scale.
There are lags in the system. A massive amount of people for example have locked in mortgages at super low rates and until those reset will not be hit with the full effect of the inflation on their monthly payments.
297 comments
[ 2.9 ms ] story [ 247 ms ] threadIs the notion that Bernie Sanders is somehow responsible for all of the economic stimulus given to US citizens during the pandemic?
https://en.wikipedia.org/wiki/Helicopter_money
But you are right that eventually the economy would grow enough to “soak up” the extra money and it wouldnt be so inflationary.
Why not ask them?
The missing 10m?
Might be hard. What with them being ‘missing’.
https://www.worldometers.info/coronavirus/coronavirus-death-...
The Economist puts excess deaths at 20m
https://www.economist.com/graphic-detail/coronavirus-excess-...
Keep in mind we got some of the first ever basic human rights because there weren’t enough peasants after the black plague.
There's still the other half, but that's not nothing.
But some patterns or modus operandi have been going on for thousands of years, albeit reacting more quickly now a days due to improved forms of communication.
>At airports people are employed to straighten suitcases after they tumble onto the baggage carousel.
People need to recognise slavery and not be treated like a dog.
The 1st world has its problems, but the planet has its problems, people need to look at things with a global perspective as well as a national perspective and read between the lines.
The days of a job for life are over, the days of working in one country all your life are over. The need to retrain and remain up to date is a form of cutting the fat, a variation of survival of the fittest, but still survival of the fittest.
Becoming cynical can be healthy a healthy attribute to have. The over aching desire to get people worshipping money couldnt be more on display that ever before.
https://www.scmp.com/business/economy/article/1524064/sex-an...
People need to make sure their lives are not stolen, because when you realise whats been done to you, its hard to recover from that. And as long as people continue to get away with stealing from others in legal ways, the fraud will continue.
https://www.cbp.gov/newsroom/stats/southwest-land-border-enc...
The Fed uses the term "slowing": https://www.frbsf.org/economic-research/publications/economi...
"More recent data show immigration has rebounded strongly, helping to close the shortfall in foreign-born labor and ease tight labor markets."
Most of Western cities are in a “failed state”. The US is a prime example of that. Japan, while quite functional, is also quite expensive to have kids in. I think Japan will be the Western state that fared the best out of all the Western countries. The US is definitively the worst: Being quite expensive while also quite dysfunctional, and with a bonus: high crime rate.
How can you fix low birth rates once the process is in decline? Are there any successful examples of a country that has gotten rich, or is getting rich, that has done it succesfully? Every example I've read says no, regardless of geography or culture. It seems an impossible problem to fix.
In South Korea for example, I've read they've tried a veriety of incentives, and none work. The pressure to climb into or stay in the middle class, squeezes families or would-be mothers to work more, leading inevitably to lower birth rates as wages have stagnated over the past few decades (oversimplyifing but this applies everywhere).
Plenty of countries have monthly child benefit payments, just a few examples I know of [1], [2] [3] [4]. You can easily google "child benefits [country]" to find loads more examples. There are direct government payments and/or tax breaks in many countries. Countries with decent social welfare systems usually have some form of financial support during parental leave, for both mothers and fathers too.
These efforts don't really have much of an impact to raise birth rates.
[1] https://www.citizensinformation.ie/en/social_welfare/social_...
[2] https://www.iamexpat.de/expat-info/social-security/child-ben...
[3] https://www.citizensadvice.org.uk/benefits/child-benefit/bef...
[4] https://edition.cnn.com/2022/12/03/asia/south-korea-worlds-l...
Especially since the same was true (financial experts were talking out of their ass) for the whole easier to predict zero interest rate period too!
> We know inflation should start decreasing within a year or so
Indeed
a) if the issue reoccurs, the learnings are ineffective b) if the issue is new, how can you tell how to move the knob without pissing a lot of people and losing your job.
It is a lose-lose game.
The balance sheet is used to direct effective interest rates intramarket -- not a separate knob.
The genius solution that they came up with is transfering billions of taxpayer money from the North to the South- which is not very popular among voters.
We're at 4.50–4.75, no?
That's not low, but it's not high either. https://en.m.wikipedia.org/wiki/Federal_funds_rate#Historica...
Their ability to fight inflation is tied up in market participants believing they will do what it takes to do so even in the face of harsh costs. If that reputation comes into doubt, we could end up with the worst of both worlds.
As to the soft landing scenario, sure, it might happen but based on what followed past inflation, it seems unlikely (if I'm not mistaken soft landing was only achieved once in the mid 90's and with a much lower inflation than we see now.
Rising prices are supply not meeting demand. It feels like improving productivity would be an equally powerful tool with less human cost. Granted that is a harder thing to control quarter over quarter.
Consider this analysis that intetest rates may in some cases raise prices. https://economicsfromthetopdown.com/2023/02/04/do-high-inter...
And more links along that line from the pluralistic blog. https://pluralistic.net/2023/02/04/if-i-was-a-horse/#friedma...
Does anybody else hear talk of productivity in talk of inflation?
The mainstream economists are wringing their hands over full employment and rising wages, the first time in decades that we might see the middle class grow, because production isn't sufficiently meeting demand.
We should be producing more stuff - especially housing - instead of trying to keep people from earning more.
Housing costs thus increase to suck all income.
It’s a great way to return to feudalism.
If you have a bankrupt government that can't afford interest payments, then raising interest rates will just lead to borrowing more money to pay the interest in a vicious cycle until hyperinflation sets in.
If you can limit borrowing and speed up payback of debts through any means other than raising interest rates you achieve the same effect much sooner.
No one had a normal economic life for several years. It’s a miracle that these levers have been adjusted to the point that everyone is like “well no one going to work for three years had no impact! What over-reactionaries!”
Where did this happen?
This is one of many of my associates in the service industry that had substantial employment challenges.
If you had regular job, you were eligible for unemployment there was also PUP enabled due to pandemic, so if you were self employed you could request unemployment under that. In addition there were also short periods of time where you could get extra $600/week (as it is impossible to survive for long on the usual unemployment amount)
They tend to work as contractors on a limited term contract and international maritime labor laws are unlikely to require it. Note also the country of registry for the ships may have more lax labor laws too.
(edit)
The only instance of unemployment being mentioned in international maritime labor laws I've found is https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:91:0::NO::...
> Regulation 2.6 – Seafarer compensation for the ship’s loss or foundering
> Purpose: To ensure that seafarers are compensated when a ship is lost or has foundered
> 1. Seafarers are entitled to adequate compensation in the case of injury, loss or unemployment arising from the ship’s loss or foundering.
This very specifically deals with ships sinking. Not "ok, no work everyone off."
A delicate balance: The seafarers’ employment agreement, the system of the Maritime Labour Convention, 2006 and the role of flag States - https://hal.science/hal-01470314/document also touches on unemployment (there's a single mention of it).
We were all subject to one master. But under a different punishment.
This may have been your experience but it was nowhere near mine. I think talking about “tech” as a whole is generalizing too broadly.
Nobody has a magic crystal ball for what's next.
People will be in between any of the above situation simultaneously, but between having to get fired and seeing costs go up a little at a time, I imagine most people will defer the gut punch and take the erosion of spending power.
Inflation shrinks the present value of that debt, without requiring the government to cut spending to pay it down, which would have serious economic consequences (see: austerity).
holding cash is paying something for the first time in more than a decade
Park your cash in a 5% instrument for a year and you can still afford 3-4% less stuff than you could at the beginning of the year.
That's fine for me with a mortgage, but less retirement headroom for many older people.
I personally have a hard time going out to a restaurant and getting a 2 person meal for less than say 30-40$. Car market is absolutely through the roof. Housing market, although cooling slightly, is still through the roof. Our base rent went up 15% last year. Gas is now double in my area.
So if you have 6% inflation, and the return on e.g. the 1 year t bill is 4.75%, you have -1.25% "real" interest rates, because your money at the end of your year of investment will be worth ~1.23% less than it was at the beginning of the year.
I'm not sure I completely agree that the result is actually as bad as that, since stuffing your money in the mattress would put you -5.5% in the hole by comparison, but still.
this is just about making a prediction of the future.
if you believe that inflation will decrease then your guaranteed rate of return from interest rates is great.
if you believe that inflation will increase or stay the same, then yes we have "negative interest rates"
I don't think it's reasonable to call it a "real" interest rate, because I can't buy T bills against it and it has no guarantees
[1] https://fred.stlouisfed.org/series/TERMCBCCINTNS
If it came up red they would be telling me they were a financial genius who had unlocked the secret to riches.
https://news.ycombinator.com/newsguidelines.html
I feel that people taking out variable loans at 1% and hoping it won’t go to 4% aren’t as reckless as a gambler, and in hindsight it’s pretty easy to lecture them, but I don’t take any joy in it.
https://news.ycombinator.com/newsguidelines.html
I’ve seen online estimates recently 3 or 4x what you’ve stated and it wouldn’t surprise me if those were correct but we’ll never know.
Allowing ownership of houses as an investment is just wrong. (The usual response to this is that you need investors or housing won't be built. The idea no-one would pay for a house to be built is silly, but we also have not-for profit housing associations.)
(And it’s of note that dealing with renting a SFH is possibly a worse experience than renting from a complex. Large enough complexes have maintenance staff and professional management. Someone renting a SFH might well have just that unit to rent - amateur hour. Or they could be a corporation but because you’re just one unit in probably a more spread out population of properties the renter might well experience lowered services from the property management.)
I do agree the investment activity we’ve seen in simply hoarding up SFH properties for investment is deeply problematic. There are all sorts of ways to push the market back towards owner occupiers.
It’d also be nice if it was a standard thing for working people to be able to make it to public local government meetings. Those tend to be timed when working people are at work. That could help something’s, but there’s probably still be a lot of NIMBYism…
It's harder for both to purchase, but investors are also heavily leveraged and fighting investment alternatives in a higher-rate environment.
Because high interest rates can reduce demand, in a vacuum you would also see a reduction in the price of the property, making them more affordable. Of course this price is also impacted by countless other things, builder velocity being one of them, so in the real world it takes time to sort out.
The 70s, 80s, 90s had relatively stable home ownership rates despite very high interest rates. In 2016 the US reached a bottom in home ownership at 62.9 despite historically low rates.
BTW I was not referring to rich people living in their homes that they got with high interest rates, the comment was specifically towards investment property. Definitely agree that hoarding properties is out of hand.
Rent-seeking is an activity where the perpetrator creates legal barriers that result in them collecting money without providing anything of value.
Many people hate on landlords, but unless they’re also actively restricting new supply, they’re not rent-seeking as the term is defined.
But I agree with your point.
- prevent corporations from owning residential property
- tax property rental income at a substantially higher rate than income and exempt it from other deductions
- tax residential property which is empty for more than de minimis periods at an eye-watering rate (perhaps 5-6x standard property taxes).
None of this requires higher interest rates, but it will result in a transfer of wealth away from aging boomers and corporations, which apparently must be avoided at all costs.
As we have seen the asset markets have adapted to low rates by increasing assets prices. Thus an increase in interest rates to what historically has been low does not offer a great way to analyze its effect.
The question we should rather answer is by how much the assets will lose in value and what are the options of people depending on this value (retirement, disability funds etc...) and for people indebted, did they forecast and are they able to stomach an increase in interest spending of roughly an order of magnitude?
That's true regardless of the interest rate situation...
> We have gone from a zero interest rate economy to a high interest one within months.
IIUC, even the Fed's pretend "Natural Rate of Interest" is higher than current rates - meaning even they seem to believe they're still stimulating the economy somewhat with their policies.
Current interest rates are still arguably low. And AFAIK, no major central bank is even considering an interest rate - ever - that would actually be "high" or even positive in REAL terms.
Even 432 Park Avenue, the new huge luxury tower in NYC, took 3 years. A random startup takes a lot longer to get to the money.
Some investment just keep adding to society's wealth, while others have a return and then go away. The first kind is really important because it enables new investment on things that depend on it, the second one doesn't.
Well, good luck trying to attribute an specific value for a child. But for your other examples the classification is mostly straightforward.
Because one cannot talk about the recent low interest rate environment without also talking about the quantitative easing environment which pumped trillions of dollars into Banks who figured they had should do something with some of it
Much like we have records of Chinese warlords or Byzantine princes engaging in rent seeking and breaking the system to cater to their needs, so to is their plain evidence of what and why things played out they way they did.
[1] https://fred.stlouisfed.org/series/GFDEGDQ188S
[2] https://fred.stlouisfed.org/series/A091RC1Q027SBEA
[3] https://www.defense.gov/News/News-Stories/Article/Article/32...
Have you personally already purchased your first home? Without family assistance, it would be absolutely brutal and untenable for my children to enter into in this domain at present.
The people at the bottom are getting a remarkably harsh and bad deal these days, even in instances where they have been exceedingly fiscally responsible their entire life. Is this the future the youngsters deserve? My kids are still solidly upper middle class, imagine what this translates to for the lower end of socio economic status.
This seems severely suboptimal. At what point is a serious systemic correction warranted? What is the current generation supposed to tell their children? At some point people's motivation to participate in the system and play by the rules will be negatively impacted. What happens then?
https://en.wikipedia.org/wiki/DINK
https://www.npr.org/2022/07/14/1109345201/theres-a-massive-h...
Worryingly, the higher interest rates are making it more difficult to construct the housing we so desperately need in so many places.
Mom & Pop trying to get a couple of AirBnB's ain't helping either.
https://www.theatlantic.com/ideas/archive/2023/01/housing-cr...
If DINKs can't afford it, what does that tell you about the direction housing prices will go?
Elites and wealthy boomers will keep soaking up resources, then prices may become volatile in a southward direction.
In the meantime, the current generation is frozen in place, unable to progress in a rigged game.
The ones with capital will buy them, and you will be renting.
And if you look at the capital buying up houses, it's a tiny fraction of all available housing out there.
The correct answer is - just like when housing prices went up with low interest rates, they'll go down with high interest rates.
Or $1600/month? This has a nursery so they can fix the dink: https://www.redfin.com/MD/Pasadena/3500K-Lochearn-Ct-21122/u...
The home loans are unaffordable because the house prices are too high. The median house price in 1989 was around $95K ($230K adjusted for inflation). Today it's about $400K.
If the housing stock is too expensive for the population there can be many causes, and higher quality or larger size housing is just another cause. The causes of the high prices don’t matter to buyers, all they know is they can’t afford to buy. What use is it to them that the homes they can’t afford are better quality?
Improved insulation and air sealing is nice, but you’re not going to see anything close to $200k in energy savings over the building’s life vs just blasting your furnace to a comfortable temperature.
Houses certainly have increased in size though.
https://eyeonhousing.org/2021/03/age-of-housing-stock-by-sta...
I haven't, but I'm not a DINK, and have never broken six figures.
The right credit union will make a home loan with no money down, which might help your kids and their spouses. I'm currently paying $3k/month for rent. Zillow says that this could afford a $350,965 home with a 30-year 6.833% fixed rate, including 1.2% taxes at $351/month and $800/year in homeowner's insurance at $67/month, and mortgage insurance at $287/month. Not possible in this area, but possible elsewhere.
Unfortunately it is for the people who have gotten their mortgages at those lower rates. It's a ticking bomb for many of them.
If people in aggregate are suddenly unable to "afford" things, then you're not talking about inflation. People (again, in aggregate) have more money (not wealth) than they did a few years ago, which is what "inflation" means. On average, it's a rescaling, nothing changes.
Now, individuals may be hurt or helped[1] by this aggregate rescaling. But it remains a rescaling, and if you try to interpret it the way you just did you're going to get your predictions wrong every single time.
[1] FWIW: if you hold a mortage or any other large non-inflation-indexed loan, you should be cheering for inflation to dilute your debt. Most US homeowners are coming out ahead. They don't explain this well on the news networks though.
So, sure, if you want to rephrase and lament that people are unable to afford stuff because of the recent drop in supply (or increase in demand) for the products they want, that would be logically consistent. But it would be factually wrong, as in fact in aggregate[1] world GDP is doing pretty well right now.
[1] As above, specific products and markets are always moving. Something is always more expensive than it should be and there's always a glut in something else. People were complaining about eggs last week, IIRC.
The mean purchase power has a very small impact on society.
And yes, the disruption tends to pass after the inflation goes away. But none of that makes the argument specious.
Yes, and it has a different temporal behavior from the impact on the purchase power. The same person can be affected by both.
As a rule, inflation infuriates people because almost everyone jut wakes up some day and discover they are much poorer than they used to be. You can't dismiss this by pointing that their net-worth improved. (But yes, the net-worth of a lot of people improves.)
I'll certainly grant this, not the least because they get terrible information about it from media and online sources.
> almost everyone jut wakes up some day and discover they are much poorer than they used to be
Like this. This is not true. This is a lie. You need to stop saying this. People are "much poorer" post-inflation only in the sense that they were "much richer" post-pandemic, due to the huge savings boom. If you aren't willing to look at the latter, then you're not doing the analysis correctly.
At most, "some" people are "much poorer" due to asymmetric effects. But you're just wrong here if you try to extend that to "almost everyone". Please stop.
https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_the...
Can't predict really as you said. You can bound expectations though.
Best outcome is perhaps interest rates get lower and things resume as normal assuming there is no other lockdown say.
Do you mean the early 1970s when the US moved off the gold standard and there was a massive oil shock?
Or the late 1970s when inflation made an attempt for a runaway spiral?
> get lower and things resume as normal
The last few years (2008-present) have been anything but “normal”.
The Fed has been full throttle on the lowest interest rate for years and Quantitative Easing / asset purchase programs. Stocks and VCs have been juiced with cheap money causing massive distortions in many markets.
Normal would involve checking and savings accounts paying a non-trivial interest rate. It would involve actual due diligence in VC, not rubber stamping FOMO. Your “normal” probably needs some recalibration.
a) You assume that me saying "best case" if we continue as is, is a good case scenario -- from my point of view it is not. Which is what I am expressing.
We both agree here we are not in a good situation. Even if we "recover" GDP wise the buying power of the middle and lower classes is taking a serious hit.
This is one of the results of Volcker's policy (to remind he set the Fed policy in '70s) which we are following or asked to follow by some segment of the banking world today (cf. https://econreview.berkeley.edu/then-and-now-the-crisis-of-t...) Thus, my '70s reference.
b) Already economists do not consider 2008 crisis as over. But we are arguably in a continuation of that crisis. Again, this is how an economist historian is going to treat the 2000s. Normal could be before that and sure I could recalibrate my normal, but do you think we should expect magical times?
The view that Fed is using too much QE and too much free money is political and moral. I offer no opinion and definitely did not try to include it in my 3 line opinion.
Disclaimer: I do not abide in the market efficiency camp. I think history proves that markets are inefficient.
> Normal would involve checking and savings accounts paying a non-trivial interest rate.
Even now that the fed fund rate has increased, the savings rate offered is low. Why? Because the business model and flows of banks has changed. They don't need to ask for your money. They are going to get it in the U.S. even indirectly. Perhaps they still care if you are a high value individual that can give them a few millions and give them a few percentages of fees annually.
They are also now allowed to treat checking and savings the same, thus able to issue more loans. (U.S. detail.) Namely, Regulation D has changed and thus the definition of M1 money also.
[0]https://www.federalreserve.gov/boarddocs/supmanual/cch/int_d... [1] https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...
Those times are over for the foreseeable future, unless U.S. or E.U. enters an unprecedented recession that stirs the banking world fundamentally.
Job data trails rate increases by many months. So do recessions.
If the fed levels off interest rates within the next year or so, we have a very good chance of avoiding a recession. I am young/old enough to remember the last time interest rates were this high, and we were BOOMING.
If the fed pushes the gas on interest rates, it will likely push us into a mild recession.
Thanks (covid!) to millions retiring along with remote work, it would take a black swan event to really push things into the red. Note that we have a few possibilities for that setup, but so far, nothing has pushed every button as of yet.
I predict a sideways trend for the near future. A really good event unrelated to employment will pull us up, a really bad event will drag us down.
Otherwise, please share the magic crystal ball sources.
Increasing those interest rates will cause zombie business interests to go broke by increasing their borrowing costs.
This will probably look something like a meltdown in the office and retail commercial MBS for a start (I have no idea who else is out there ready to join the party once it gets started, but that's a good start).
Already sales of CMBS have fallen 85% from where they should be this year:
https://www.bloomberg.com/news/articles/2023-02-17/sales-of-...
Those interest rates also go into everyone's Discounted Cash Flow models, which affects the prices of assets across the board, once people start to adjust to the fact that higher interest rates are going to stick (until the Fed blows up the economy, which of course means the beta value in those models needs to increase).
Once the unemployment rate climbs back to 6-8% or higher then the Fed will probably cut interest rates back down to zero again due to the recession that they will have created. With more slack in the labor force then when they do that inflation will not reemerge. The recovery won't be V-shaped like the pandemic recession because businesses will be allowed to go bust without any kind of government support -- the recession may be particularly bad since the Republicans in the House will want to hang the recession on Biden (a situation which didn't happen in the 2001/2008/2020 recessions since there were Republicans in the WH and cooperative Democrats).
Not sure that's the case, I work in RV, which is a leading indicator for recession and recovery. RV volumes have been getting hammered for the last 8 months. OEM mfg numbers are down over 50% year on year. [1] Sure it's just one small segment of the overall economy, but things are getting strange out there.
[1] https://rv-pro.com/wp-content/uploads/2023/01/Shipments2.png
However volumes this year are projected to be in the low 300k range. [2] Also these projections seem to be getting revised lower every month. These are numbers the industry hasn't seen since 2014. So we're not returning to pre-COVID levels (record shipments in 500k range in 2017 and 2018).
The industry is being cut in half (at least) right now. And the drop is predicted to be long (we're already 6 months in, and the articles are saying this will last until at least the end of 2023). There's something deeper going on here. I think that something deeper is a recession.
Not saying I have all the answers. But from the angle I'm sitting at this looks a lot like the decline seen after the housing bubble and 2008 crisis.
YMMV
[1] https://www.rvia.org/historical-rv-data
[2] https://www.rvia.org/rv-roadsigns-quarterly-forecast
Right, of course. Election time.
Whether this decrease is sustainable is indeed an open question.
The lag is also easy to understand since interest rates don't immediately hit businesses borrowing cheap money short, until their loans rollover and readjust on a roughly 1-2 year schedule. The economy can also absorb the first waves of those failures and it just takes awhile for the volume to build up.
> Whoever claims to accurately predict what's going to happen in the next few years is talking out of their ass.
> We know inflation should start decreasing within a year or so,
We don't know that. In fact, it's actually a pretty commonly discussed possibility that inflation could stay high (>5%) for the next decade due to retiring baby boomers and other reasons
(Energy prices were much less affected in the US, but the economies are linked by trade)
That is assuming the Russians eventually pull out of Ukraine, are completely beaten militarily and their assets will be used to fund Ukrainian reconstruction, and it assumes that China does not increase tensions with Taiwan or, heaven forbid, actually invade.
Should the war drag on, the situation will grow completely unpredictable - eventually, governments (no matter their political orientation or prior campaign promises) will have to raise taxes to pay for Ukraine aid and especially new arms projects, which means price hikes for the masses as companies will just pass through tax increases instead of accepting lower dividends for the capitalist owner class.
> but you cannot predict how millions of people will react to suddenly not being able to afford stuff.
IMO: Riots are inevitable IMO unless politicians invest money into at least filling the gaps for the lowest rungs of the societal ladder, the French are blazing the trail here - and it's only a matter of time until at least the UK population has enough of empty supermarket shelves. In the US, it depends if Biden will be able to secure a second term.
The problem is the political implications... for one, it would send a signal to China that a land-grab against Taiwan will yield a bit of trouble but nothing too serious. That's the worst case and I seriously hope that that alone (and the economic devastation associated with TSMC blowing up their fabs to prevent them from falling into Chinese hands) is enough to keep the support going.
The other factor is that it might lead to a complete fracture of the NATO - Finland, the Baltic nations and Poland will not accept any kind of Russian success out of that war. They're all no big economic players in the EU/NATO, but a major internal dissatisfaction in NATO may entice other players in the world to play rough again as well, not just China.
Ukraine gave up their nuclear weapons and long strike weapons in exchange for a promise to not be invaded.
After Russia broke that promise who would ever make that same deal again?.
It doesn't necessarily mean we are experiencing a miracle and will have higher living standards, I promise it is quite possible for a nation to banish unemployment but still have a majority of people struggling to get by.
That being said, I think we haven't seen the full effect of higher interest rates yet, we are just getting started with that.
You can always end up having a bunch of low paying jobs that don't allow for a good standard of living. Everyone will be employed but I'm sure no one will end up enjoying that.
Indeed, but this will gradually kill all but the most essential industries. "Consumers" won't have the funds to "consume" and the 21M US citizens with a net worth of $1M or more won't pick up the slack. 21M people don't purchase 15 Gameboys each when they go to the store.
If it gets bad enough, then the risk is that mutual aid networks will enable "opting out" en masse like during the depression: tents and washboards by the river.
Once things at that point, getting the opt-outs back to play the game requires big promises ala The New Deal.
Certainly you can argue that Japan proves an exception to this rule, or that the current low unemployment is simply a lagging indicator of our previously dovish monetary policy that will eventually normalize. But I think that NAIRU simply needs to be refined: wage inflation occurs not during low unemployment but during times of increasing employment. That is to say, an economy may arrive at a steady state of employment at a variety of employment rates, which needn’t cause wage inflation, but when employers in aggregate are creating new jobs and attempting to fill them even if they have to raise compensation, you do get wage inflation. This also doesn’t necessarily need to be done in aggregate: you can argue that wage inflation in the technology industry during the 2010s is partially what created the localized inflation in the Bay Area during that time, while in the rest of the country without heavy tech presence, this didn’t happen.
There are of course many other wrinkles: for example, the size of the workforce has a degree of elasticity, where higher wages or lower hiring standards may draw some people not considering participating to again participate. There is also elasticity to hiring: depending on any individual employer’s demand for workers they may be more or less willing to raise compensation vs only partially meeting hiring goals. And of course there is stickiness to employment on both the employer and employed. The elasticity and stickiness of these things seems like it can have tons of factors that influence their magnitude: from culture norms (like in Japan where job hopping is less common), to employment regulations (how hard is it to hire-fire), ageism and other *isms (if a culture discriminates against X group, they may be more inclined to drop out of the labor force, but happy to rejoin it if employers need to hire so badly that discrimination gets lessened), to the size of the social safety net.
Plus, unemployment is a very coarse metric for skilled workers. Skilled workers are less likely to simply become “unemployed” and more likely to switch directly from one job to the other. During a broad hiring binge you could see large wage growth with little change in unemployment.
Anyway, I think basically economics has the tools to explain everything we are seeing already - it’s only perplexing when reasoning based on very simplified models like NAIRU.
https://en.m.wikipedia.org/wiki/NAIRU
These jobs are of extremely marginal (or even sometimes slightly negative) value to the corporation in terms of profitably servicing customers, but their value in anti-competitive moat-making justifies the costs. Of course, this only works at scale if most big corporations act in unison.
As corporations find other, more effective ways to maintain their oligopolies, the reliance on this strategy diminishes... That may explain recent layoffs in the US? Maybe we've reached such point due to media monopolization and regulatory capture providing a more robust moat? The ability of free labor to compete against corporate interests is now so insignificant (odds are so bad for indie startups) that it no longer poses a threat to corporate interests, even in large numbers.
Bullshit jobs exist because mid level managers are very averse to killing projects or firing low performers, because that would shrink their fiefdom. That basically only ever happens when there is extreme pressure (e.g. layoffs).
Layoffs happen in clusters because even a few layoffs greatly increase the leverage employers have, and as soon as they have a little leverage, a layoff looks better than it would otherwise, so it's a positive feedback loop.
This is a much, much simpler and realistic explanation than "a grand conspiracy of media monopolies and regulatory capture is cheaper than hungry hungry hippoing all the engineers".
If you can raise (or borrow at 0% interest) Billions of dollars, it makes sense, and is a dirt cheap thing to do. It keeps all the people you've hired from becoming your competitors, and you might even profit from their work in the mean while.
I have heard lots of managers say "yeah, I know they're not performing well, but I don't want to reduce headcount right before budget allocation, can we manage around them?" (or something to that effect).
In my MBA course we even talked about this as a thing - that mid-level managers create fiefdoms, and the effects that has on the organisation culture. There are lots of other effects on the organisation from this, too.
OK, fair enough. But then it starts making the argument that employment in the West is going to look more like Japan. Except places where I'm aware where there are acute labor shortages (e.g. businesses like restaurants, child care, nursing, home services like plumber, electrician, etc.) look nothing like the picture the author tried to paint with his Japan vignettes. I.e. there aren't tons of spare waiters standing around waiting to make your drink where I live. More like you're happy just to get seated in the first place because places are so understaffed.
The current and coming labor shortages in the West are not a surprise - it's simple demographics, with nearly every 1st world country having a fertility rate that is well below replacement level. I think the pandemic did cause some folks to re-evaluate their priorities, but I think even there a lot of explanations are given for people "re-evaluating their priorities", but the reality is that labor shortages are causing some people to leave the workforce because the value of their "labor at home" is now relatively much more. For example, childcare in the US in many urban areas is extremely expensive. It's expensive to the point where if one member of a couple has a relatively low earning potential, it makes more sense for them to stay at home to raise their kids, rather than putting them in childcare, because the economics of it are no longer that favorable.
In the U.S. what changed over the past 5 years is legal immigration: it was drastically cut and has not been restored.
So as citizens and existing long-term residents pursue better jobs or time at home, there are far fewer new residents eager for lower paying jobs. If you talk to businesses that have traditionally employed these newly arrived folks—food service, agriculture, construction, childcare, etc—they will be crystal clear about the impact they are seeing.
Places with desirable standards of living don’t need replacement level births. They just need the right levels of immigration. People will come, ready to work on day one.
As they pass away, there will be less need for the pointless jobs but there is no one to replace the old people who are also doing the important jobs like farming, which is not highly automated, so there is little chance Japan is on the brink of any real employment crisis. If anything more and more jobs are coming online everyday, with less people to fill them.
Sometimes I know we worry about AI taking our jobs but I’m wondering if we will be able to survive without it ?
The other end of that balance produces high inflation, as employers have to continuously raise wages to recruit from competitors, and continuously raise prices to cover increasing wage expense.
Of course, the other option that companies can take is to increase productivity by investing in automation, training etc so each worker provides more output to justify their higher cost.
My impression was that Japan had ~0 unemployment largely due to an increasingly small number of people of working age; per-employee productivity is actually pretty high in Japan.
And yeah, certainly around here a lot of stuff is just reducing hours because they can't staff at previous levels.
I deeply regret all the years working hard in a traditional job, because it brought me no closer to having a career, a family, a place to call my own, or respect. Why should I ever expect any young person to do the same, when things are much worse for them now.
What the author describes are long term artifacts of Japanese culture. It's a service culture (dunno if that's a term) in which I mean extra levels of service are given to guests and customers. Again, sorry if "service culture" is incorrect. I highly respect JP culture.
So, I'm not sure how that pertains to jobs in the rest of the western world.
Also, the article is behind a paywall. So boo.
People in Europe feel like their boss is being unreasonable if they ask them to come in 35 hours a week. And think 4 days, or even better, 3 days is optimal.
Then since they’re not being paid a lot, they feel it’s fair to just not give a rats ass about anything they’re doing.
I think there might be some balance in between that I’d like best.
High interest rates is once in a decade thing btw.
America printed 4 trillon dollars since COVID. I am not finding America at fault or anything like that. Everyone puts their interests first after all
Let's see how happy you'll be once the US turns entirely inwards and the rest of the world has to secure their global trade routes. The US will be fine. It can be largely self sufficient, despite the hysteria over our inability to manufacture things, we can redevelop the low end stuff fairly easily, and we're re-shoring the ultra-high end with even TSMC making chip plants here. It'll be a bumpy road, but all indicators are that the US is re-shoring manufacturing, developing energy independence, and turning inwards.
UK provides safe and smooth system for ultra rich to get their money out of developing nations. Even dirty money is welcomed.
USA has golden visas, who do you think they created those for?
I supported Trump on taking manufacturing back bcz it's good for developing world to protect their environment.
Americans who think it's the developing world that took your jobs. Remember the real culprits are the riches in your country and those imigrated riches.
Btw no one in their right mind thinks America's debt will ever be repaid. Again developing nations will have to foot the bill.
PS: thanks for the service sector jobs though
The corporate state that presides over this destructive capitalist economic system is ruthless and relentless. “It practices only the politics of vengeance. It uses coercion, fear, violence, police terror and mass incarceration as forms of social control while it cannibalizes the nation and the globe for profits.”
This scourge is all-consuming. Once-liberal institutions, including “the press, labor unions, political third parties, civic and church groups, public broadcasting, well-funded public universities, and a liberal wing of the Democratic Party,” have all “collapsed under sustained assault during the past forty years of corporate power.” Today, there are “no institutions left in America that can authentically be called democratic.”
It is terminal. “Short of a sudden and widespread popular revolt, the death spiral appears unstoppable, meaning the United States as we know it will no longer exist within a decade or, at most, two.”
And it is worldwide. “The malaise that infects Americans is global.” Global capitalism is responsible for all misery and the metastasizing of violent rage from many different sides, from jihadists and neofascists to far-right militias and antifa.
On the optimistic side, I'd like to think that the oligarch class in the US relents before revolution and decimation of the country and economy that is their cash cow. Certainly it would be better to reap merely some fraction of their disgustingly obscene profits than none of it, and the US is well positioned a la Zeihan in the coming global crisis years.
But yes, on the pessimistic side, the proletariat cannot be squeezed indefinitely. Too much pressure and it will explode, with disastrous consequences all around.
Overall, I'm hopeful that continually declining birth rates (though much stronger than the rest of the developed world) and the recent decimation of the labor force will continue to bolster labor power, leading to a recession in oligarchical power that will prevent the worst consequences of of their rapacious excess.
Zeihan does talk about the US going through a political reshuffling right now that will take 10-20 years. I guess on that timeframe we will find out what happens.
Immigrants are good for the economy and good for workers. They are your customers! Don't be a Malthusian.
> Immigration can grow the economy overall, while putting lower end workers in a relatively worse position.
They don't really do that either! Immigrants mainly compete with each other.
Efficient market theory predicts that in a free market, all labor will be utilized, irrespective of demand dips due to interest rate hikes.
With the gig economy providing a route around regulatory regimentation of the labor market and inflation having driven down the real minimum wage to below the market value of the vast majority of labor, the labor market has been able to adjust to every economic turn and produce effectively full employment.
Going even further out in a limb: I think in a sense, political gridlock has prevented the government from instituting disastrous measures that in the 1930s produced so much unnecessary unemployment, like the FDR Administration trying to fight deflation by imposing very high industry-specific minimum wages that caused the unemployment rate to exceed 20 percent.
If only there was a way for people to emigrate to opportunity.
As economists say, there are four types of economies: developed, undeveloped, Argentina, and Japan. Not having a permanent place to be during the 9-5PM, whether that is school or work, is a badge of shame in Japanese society. If you read crime reports in Japan, they will almost always mention the persons state of employment. Even the tragedy of the commons / prisoner's dilemma is thwarted in Japan, atleast in a public context. On microeconomics, people are not making decisions that would be deemed economically optimal or even rational from an American lens.
The example with the airport and malls being overstaffed. The first part is that both the government and people would rather that people work, rather than rely on government/society, even if it means the enterprise is not operating optimally. This is one reason why, quantitatively atleast, Japan has one of the lowest productivity rates of developed countries. Everyone has to appear working diligently, regardless if they've past the point of productivity or not. For the second part, the mall, in this time and age you can order stuff online. The value proposition of retail is that people want and value human services. Especially if it for higher end products and luxury products, where the retail and customer experience is part of the purchase, which is likely the case for a mall in Japan. Even Uniqlo is a splurge for people to be honest. Furthermore, Japanese people trust humans not computers, and there is an expectation that service be 1:1 and available. Just wait into the author sees the staff ratio in the electronics store, especially in the appliance section. They are dozens of tables where they go through a step by step process with customers, explaining the appliance, delivery process, etc. Part of this is also a desire for human interaction which is relatively limited compared to America where you have no shortage of small talk with randos.
…in some social classes. What are the freeters and retirees doing? Night workers?
> This is one reason why, quantitatively atleast, Japan has one of the lowest productivity rates of developer countries. Everyone has to appear working diligently, regardless if they've past the point of productivity or not.
This has been changing, it's not as true of newer companies and startups.
Do you mean nightshift workers or mizu shobai workers? If you are talking about nightshift workers, then that's just a matter of semantics (9-5PM == full time employment, even if that means two part time jobs ).
As for mizu shobai workers, I think would it be disingenous to suggest this is somehow more honorable and respected by society and older generations/parents than saying being a certified professional. Sure, the male hosts in Shinjuku are making multiples more than a FANG employee in the states, but part of the pay is the judgement by societal at large. Yes, in some social classes being a suit-wearing office worker with a stable income is respected, and in Kabukicho circles drinking with lonely and emotionally vulnerable clients until you cough up blood is respected.
Japan's most recent revision to the visas allowed tech workers who make over 20 million yen (~$150k usd) a year to skip the regular lines at the airport, and use the line reserved for government diplomats and ambassadors. The other requirement is that you have a masters degree. Point being, there is a strong emphasis on pedigree in Japan.
https://www.japantimes.co.jp/news/2023/02/17/national/new-vi...
> retirees
Retired. But if you're talking about elderly people, Japan also has a larger percentage of the elderly working. https://www.jil.go.jp/english/jli/documents/2022/039-04.pdf
> freeters
A subset of this will wear it as a badge of honor, but another subset can't get hired. One reason for not being able to get hired is that Japanese companies want to hirer young, straight out of school, and invest in the long term. Freeters are excluded from this cohort, and also because employers feel this is a red flag.
Even from Wikipedia, the negative perception from Mass Media and society is clearly laid out, so bringing up freeters and attitudes towards them only furthers my claims. https://en.wikipedia.org/wiki/Freeter. The ones that are subsidized by their parents are referred to as "Parasite Singles" by the Japanese.
> This has been changing, it's not as true of newer companies and startups.
Not as true, but still true.
White collar workers still have to clock in and clock out.
I will believe this when people Wordpress dominance starts trending down and people stop holding meetups in every city. There are even consultancies for Squarespace. Meanwhile, less developed countries in the region such as Indonesia has an order of magnitude healthier startup ecosystem, including more unicorns. Banks and traditional industries have begun their DX (digital transformation) but it's long way to go when the most foreigner friendly bank's website goes down for a day of maintanence every month, and require strange login rules such as usernames having to have no more than 3 consecutives alphabetic or numbers. Meanwhile, passwords can't have special characters.
Yes, I meant literally night workers. They might sleep through the day but don't always, so they can look unemployed.
I don't know any fuzoku workers to ask them about it. I do know several bar owners and freelancers, so that's what I was mostly thinking about.
> Even from Wikipedia, the negative perception from Mass Media and society is clearly laid out, so bringing up freeters and attitudes towards them only furthers my claims.
Well my question was more like, what do _they_ think about each other? I agree the media judges them.
This. In many EU countries, airports are currently severely -under-staffed. So much so that in several airports scheduled flights had to be canceled. Whatever the cause for low unemployment in Western countries is, it is definitely not the abundance of 'nonsense jobs' like in Japan.
How does the western world grow 7% (or whatever rate needed after taxes, inflation, and profit) perpetually with stagnating birth rates, lowering carbon footprints, and shrinking real wages?
I'm not sure it can.
Wealth might be distributed unequally, but debt over all is still a zero sum thing.
I agree that many people in many countries spend too many resources on education. Especially students' time. See Bryan Caplan's book The Case Against Education. See eg https://www.reddit.com/r/slatestarcodex/comments/7t59x1/revi... for a review.
I paid 500€s/year to graduate in chemistry in Italy and have not incurred any debt.
Unfortunately, they're also becoming an "American export". E.g. Netherlands granted a study grant to all students up until 2015, when it was converted to a student loan [1]. The required amount is still lower and the terms are better than US, but the ball has started rolling. We are now waiting for the next wave of neoliberal policies to see average student debt surging.
[1] https://www.wittenborg.eu/new-dutch-student-loans-system-sta...
If the introduced change is subtle enough, only people directly affected will protest. In this case, students did protest for years, and they still do. But because the change is so subtle, it is easy to convincingly brand anyone protesting as unreasonable/reactionary/self-entitled/spoiled. E.g. "Do you complain about paying 20EUR/month for your DUO [2] loan, all while you can even skip payments with no repercussions when unemployed? An entitled lazy brat you are!".
Then, several years later, you can stage an audit on DUO to find out that it's "bleeding money". Now you have a free rein to shut it down and let the private sector to hand the student loans. All to save taxpayers' money, of course!
[1] https://en.wikipedia.org/wiki/Boiling_frog [2] https://duo.nl/particulier/international-visitor/
Your country, during that time, has incurred debt which you’ll have to pay as a form of extra taxes. The path of least resistance in this case is to not pay as individual and leave it to the rest of community (or country).
Does this explain to you why young people are leaving Italy? It’s a form of arbitrage that’s being played on a global scale.
I plain despise arguments like yours, they lead nowhere but a more unjust, poorer and more dangerous society.
> an extraordinary event manifesting divine intervention in human affairs
OR
> an extremely outstanding or unusual event, thing, or accomplishment
'miracle' from an economist:
> Something slightly unexpected happened.
They really do overuse the term shamelessly.