Comment by dangerface | Hacker News Reader

Comment by dangerface | Hacker News Reader

What a stupid article.

> Everybody is busy, burned out, swamped, overwhelmed.

Because money has been depreciating in value by 2-3% every year since the 70s while wages have stayed the same and the value they produce has increased.

This is fairly simple maths, the rich are enslaving the working class with debt through inflation.

Rather than face this cold reality some people would rather blame that new fangled technology, "things where better when there was no technology and I was a naive kid".

It's easy to blame technology as it gives you a simple solution to your problems, get rid of it, but you can never get back your naivety and that truth is much harder to accept.

Some other bad takes

> Better technology means higher expectations

Does it? based on what? I have higher expectations for a coffee made by a hipster barista than a coffee machine.

> A lot of modern overwork is class and status maintenance > structural forces makes it so hard for Americans to find more time, even in an economy that is becoming ever more rich

The rich may becoming ever more rich, but the average American in the working class is getting poorer.

https://www.cnbc.com/2018/07/19/income-inequality-continues-...

> Americans tend to use new productivity and technology to buy a better life rather than to enjoy more downtime in inferior conditions.

This may be true of some tech like phones and tv, tech focused on entertainment, but most technology is focused on freeing up time and reducing effort like lights, washing machines, dish washers, cookers, microwaves, cars, power tools the list goes on you don't need me to list them as most people take them for granted, I think the author is too.

Real, inflation-adjusted wages have been growing.

https://fred.stlouisfed.org/series/LES1252881600Q

If you think this federal reserve data is false, tell me more about why and how.

I am not OP, but upvote for the source.

Just a note: graph does not start from zero, so growth is exaggerated.

Current value compared to worst: 360$ (2019) versus 309$ (1981) - 16.5% increase in 38 years. Taking first value of the graph in 1979 of 335$ gives - 7.5% increase in 40 years. IMHO it's abysmal result.

I hope this positive trend will continue, because if there will be some kind of downward correction - we will be back in 1979.

This is the relevant data:

https://www.advisorperspectives.com/dshort/updates/2019/11/2...

Median doesn't tell enough of the story for what most of the population is experiencing.

That doesn't seem adjusted by the household size. Households can be earning less, despite people earning more.

Possibly, but I can’t find any data that would adjust for household size. Either way, you can see the top two deciles running away with the fruits of the past few decades.

No, I can't; if the lower income households have been splitting their earnings into a greater number of households, a growth per person would be masked by a drop in total income per household.

To use figurative numbers, if a couple earns $30k each, then they split but both get a raise of $20k, the household average drops from $60k to $50k despite the large salary raises.

If that is true for 80% of the population, then that is similarly a cause for concern.

While you are correct that change in household size could be muddying the income numbers, I would say that the difference in behavior between top 20% and bottom 80% must reflect something driving the two apart.

Average household income is simply average per capita income multiplied by average household size. (This would not be true for median, but I wanted to illustrate how simple it is).

Household size has been decreasing over the last 50 years (less people per family unit), and household income is therefore growing more slowly than per capita income. It's still growing though.

All this is available from FRED data.

You will find plenty of people that do no accept the US inflation numbers, if I understood it correctly, because it excludes mid-class expenses like housing and education.

CPI includes both housing and education. If there's any argument to make it is around how they are calculated and the degree to which they are weighted in various inflation calculations.

CPI doesn't include food or energy, I believe.

Use the GDP deflator as your measure of inflation to get around those issues.

You still have to worry about hedonic adjustments, though.

> If you think this federal reserve data is false, tell me more about why and how.

I don't think it's false, I just don't think it reflects anything realistic. My critique is with how they measure inflation, which is calculated in a way that ignores anything remotely volatile (meaning anything that has its prices adjusted to reflect reality) and was designed by someone who had incentives to make sure inflation was always low.

There is no need for me to re-write what is already written so I'll just link Investopedia's summary: https://www.investopedia.com/articles/07/consumerpriceindex....

Alternative measures of inflation put us anywhere from 6% to 8%, which seems to reflect reality much more than the official number. The concern about this is that high inflation is usually met with social unrest, political extremism, and declining standards of living. If inflation truly is understated, we should know because we'll begin seeing these things in the next couple of years. It will metaphorically be a case of bankers and policy makers saying "but inflation is below 2% - you guys should be happy" as a raging mob assembles a guillotine.

Which alternative measures are you talking about?

The GDP deflator is the most solid alternative measure of inflation I am aware of. It uses the whole GDP as the basket https://fred.stlouisfed.org/graph/?g=nNsE and is nowhere near 6%.

See also https://en.wikipedia.org/wiki/GDP_deflator

Use of the median rather than the mean is extremely misleading here – wage increases have been concentrated in the top 10% of wage earners.

A more representative view of the same data is shown here: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...

Median means what the 50th percentile earns; mean is the total earned divided by the number of earners. In right-skewed distributions (like wage data) the median is less than the mean. In other words, your critique is already answered by the parent.

The basket of goods they use to adjust for inflation does not usually include house prices, which have sky-rocketed in the last few decades.

In those kinds of debates about whether labour is more or less 'exploited' than they used to be, it's easiest to just ignore inflation:

Look at the fraction of GDP that goes to labour, capital and land at any point in time. No need to adjust for inflation this way.

Or viewed another way: you are adjusting for inflation, but your basket is the entire GDP, which you arbitrarily set to 1.

https://www.census.gov/library/publications/1971/demo/p60-78...

Gives the median salary in 1970 as $9,870 accounting for inflation the median salary should be $67,662.84 but currently its $56,516. So median wages have not tracked inflation since 1970.

But thats only half the battle the other side of the problem is runaway inflation.

https://www.census.gov/const/uspriceann.pdf https://www.census.gov/construction/nrs/pdf/uspricemon.pdf

In 1970 the median for a house is $23,400 accounting for inflation that should be $160,416.45 today, but the median price is $300,000. So the inflation reported by banks is not real.

It's important to separate value from $$$ as inflation generates $$$ but does not generate value.

A house is a good metric for real inflation, as it is a good store of value, every one needs a house or they will die from exposure so every one values a house, once the house is built the value does not increase.

In other words a house built in 1970 has the same value today as it did in 1970, but the price has increased a lot more than the reported inflation or the inflation of wages. Like I said this is fairly simple maths but it adds up for most other stores of value like gold.

> This is fairly simple maths, the rich are enslaving the working class with debt through inflation.

I often wonder where this baloney comes from. The notion does seem pretty tightly coupled to the rise of Bitcoin hubbub, which spawned a small army of armchair economists. Inflation primarily benefits the non-rich in two main ways:

1. It inflates away savings, which the rich definitionally have more of than the poor.

2. It inflates away debts, which the poor definitionally have more of than the rich.

Inflation is one of a small set of tools that protects an economy from rampant inequality. Another tool is progressive taxation, which has its own astroturfed opposition in "taxation is theft" and "flat tax" enthusiasts who aggressively call for the removal of things that directly protect them.

> 2. It inflates away debts, which the poor definitionally have more of than the rich.

No, they don't. Generally, the more wealthy you are, the more debt you have.

The reason why this is should be easy to understand: Rich people have a lot of assets that can be used to secure loans, and are generally safer investements to the lenders, so they pay less interest, and can take on more debt to use as leverage for investment.

Anything that reduces debt helps the wealthiest segments of population way more than they help the poorer ones, and monetary policy where rates are held below inflation is a wealth transfer from the poor to the rich.

Sorry, I should have clarified net debts. The size of your gross debt is irrelevant because the asset side is also being inflated away. Net is all that matters.

(Yes, there are asset classes that're historically good at being protected against inflation. But they typically represent a small part of a portfolio)

There is no conspiracy here. The implication that the Fed works to enrich the richest is a really dangerous and ignorant thing to perpetuate. The Fed is one of the very few things that offers some protection from unrelenting wealth inequality. It's hardly perfect, or immune from criticism. But attacking inflation itself as some conspiracy to enrich the already-wealthy is absolutely ludicrous.

> (Yes, there are asset classes that're historically good at being protected against inflation. But they typically represent a small part of a portfolio)

Isn't it the other way round? If you invest in shares, real estate or even gold, you don't need to care about inflation? Only fixed income like bonds is bothered by inflation.

(By moderate amounts of inflation. If the country you invest in descends into eg hyperinflation, the whole economy is going down, so shares won't hold up to well either.)

> asset side is also being inflated away

The amount of money those assets are worth becomes inflated, and increased not lowered.

I take issue with #1. The rich have very large percentages of their wealth in vehicles that don't get inflated away. Stocks. Interest-bearing debt. Etc. I would argue that Somewhere in the middle class is probably the peak for "% of total net worth in fiat currency". People who have enough money to save, but not enough money that their emergency fund is a trivial % of their net worth. And even then, they probably don't have a ton of money in instruments that yield much more than inflation. It's a lot safer for a CEO to keep 80% of their net worth in stocks because they could live off 1-5% of their net worth for a lifetime (even if they need to scale back their lifestyle a bit - they won't be homeless).

> It inflates away savings, which the rich definitionally have more of than the poor.

The rich do not have savings they have assets that generate income thats not taxed the poor have savings like pensions as they need money to support them if they are unable to work.

> It inflates away debts, which the poor definitionally have more of than the rich.

This is baseless inflation increases debt as the value of the debt has not increased but the amount of money you have to pay back does, because of inflation.

How about a non economical theory:

20th century went from near zero consumer technology to chokeful of it.

    - no fridge
    - no phone
    - no television
    - no computing
    - no kitchen appliance

These filled very basic human needs, and are gut level obvious benefits.

Most new technologies are justified by highly statistical research and never ending p-rating tricks to make you want more. But at one point, only ignorants/immature will run for it.

Proportion of total labour income to GDP has stayed fairly same-ish since the 1970s.

See https://fred.stlouisfed.org/series/LABSHPUSA156NRUG

And what if much of that income is going to proportionally fewer and fewer people?

The distribution of labour income by itself is indeed an interesting topic! That's where the eg median vs average salary considerations come in.

We’ve lost 5%, that’s a lot.

Perhaps. But it's far from "This is fairly simple maths, the rich are enslaving the working class [...]".

You don't want economics where there is no inflation. It would not be nice.

It is not the 2%-3% inflation, which is healthy. It is the stagnation of wages.

Imagine your wages stayed the same or grew but everything else kept decreasing in prices. This was the norm in the United States before the founding of the Federal Reserve.

The US is a pretty bad example. They always had very screwed up monetary policy. Pick Canada or Scotland or Australia as the shining beacon.

See https://www.alt-m.org/2015/07/29/there-was-no-place-like-can...

That's a common misconception.

What's not nice is collapsing total spending (equal to collapsing nominal GDP). In practice, a collapse in total spending often comes with a depression of the price level.

As long as nominal GDP is stable (or alternatively, total nominal wages), prices can drop all they want. We see that eg in the computer sector. Total spending on computers increases, while prices drop thanks to better technology and greater productivity.

See eg https://mises.org/library/less-zero-case-falling-price-level... for some more background.

Before 1970 the manufactured inflation we have today was not a thing. For most of human history economics have worked without it.

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