Comment by PaulDavisThe1st | Hacker News Reader

Comment by PaulDavisThe1st | Hacker News Reader

PaulDavisThe1st

fragile ... the word is fragile. We've built an insanely fragile economy. Take a look. There's been no war. 100% of the (not so great) US infrastructure that was there before SARS-COV-2 is still there. We've lost about 100k people, which is horrific but in the scheme of things at "USA" scale, and with the skewed demographics, not much of a hit to the economy.

And yet the economy is staggering and it's likely to get worse. Why? Because people have stopped doing things

We've built an entire economy around people doing things they don't really need to do. In and of itself, that's not so bad, but we've also built an economy with so little resilience, so much fragility, so little spare capacity that the mere fact of people stopping doing a bunch of stuff has the potential to cause complete economic disaster for, what 15-20M Americans?

This is utter insanity. It's like claiming that the only vehicle you need is an F1 race car because of course that's all you need: lean, fast, stripped down, powerful and ultimately focused on increasingly one thing. Meanwhile, it's totally obvious to anyone with a pair of eyes that it's a completely unsuitable design for anything except racing on a specially built course, and that the smallest thing is capable of destroying it.

We've built this insane economic system despite the blinding obviousness of calamities like pandemics, wars, storms, unrest, climate change and so on. The "system" will continue to function (very probably), but at what cost and to how many?

Fragile?

We basically locked people in their homes. Shut down every imaginable business except those deemed "essential". Closed all retail and restaurants.

What would you expect to happen?

Buying starbucks, etc. People who work at one cafe spending money at another cafe, etc. is the economic version of busy work. It doesn't really impact the countries ability to produce food and goods. Yet with out it the economy grinds to malaise that may last for years. That is pretty fragile.

You both have valid points; I think OP is talking about the U.S. economy being built on consumerism, materialism, and need to spend for growth. Growth requires the citizen base to continually spend more.

> Growth requires the citizen base to continually spend more.

If the stimulus bill had gone directly to that, then this might have made a lot more sense.

Forget UBI, the trillion dollars in PPP, if it was put into people's checking accounts as a reverse payroll tax might have had a very different (& aligned with consumerist values) economic result.

As in, take the "employee as a cost" out of the employer's books & turn every extra employee just extra hands to work at your business, just paid for by the negative taxes (this punishes the under-the-table payment tax dodges directly).

The fact that they gave PPP, without actually putting money into a paycheck absolutely sucked if your goal was to stop the money from slowing down in the economy.

A dollar I spend turns into many more dollars spent, than a dollar I saved.

But if I know I'm out on the street once that number drops to 0, I won't spend right now, even if it is a necessary purchase.

Fragile, because corporations that have millions or billions in cash flow don't have the kind of savings to keep people staffed and make debt payments. No, we little people are supposed to "save for a rainy day" and flood the stock market with our 401ks while big business gets to grow grow grow, make little to nothing in profit, and bolster stock prices with corporate debt.

This isn't just about big business. Small businesses notoriously operate on very thin margins. Though that's not necessarily because of debt, but because what it takes to run a business today takes a considerable amount of overhead.

I know that the idea of saving money seems cliche, like some obsolete thing your grandpa might say, but we're going to have to wake up to the fact that if we want to finance everything with debt then we're going to be penalized every 10 years when there's an adjustment or a catastrophe that forces one.

The catch 22 there is that using less debt also means less growth, and we've all gotten used to unprecedented amounts of growth.

> No, we little people are supposed to "save for a rainy day"

We really aren't. Between government pension plans, unemployment insurance, and all the welfare programs, I would challenge whether this is a real expectation at this point.

I'd blame the tax code; it makes no sense for corporations to save money. They should aim for zero every year either by investing in growth or paying it out.

With the amount we pay in taxes, the ability to save is sharply limited.

This attitude is another component in why the economy is so fragile. "It makes no sense for corporations to save money" ... as long as you think that "paying the least amount of taxes possible" is a sensible goal for a corporation.

Compared with, say, contributing to the construction of a resilient, humane society in a variety of ways (including paying taxes) and being ready to deal with semi-random catastrophes quite well.

Oh, also: the amount we pay in taxes, as a percentage of personal and corporate income, as well as GDP, is at a (near) historical and cross-country-comparative low.

Doesn’t the personal tax code pretty strongly incentivize saving for individuals? 401ks and IRAs have preferential tax treatment.

> don't have the kind of savings to keep people staffed

When times are good, corporations are essentially making monthly payments to a bunch of local landlords (or banks) for the service of housing their employees.

I do find it a little strange that we didn't try to stick landlords and lenders with more of the bill. It'd be easier for corporations to keep employees staffed if they could reduce their salaries because their rent / mortgage payments were lower.

One thing I've reflected on a little bit recently ... I don't want to take a TV show as an accurate account of historical reality, but given that "Deadwood" did have quite a bit of research behind it ... when two characters in that story wanted to open a hardware store, they had to buy the land and build the store. How many people who open a retail store these days even thinking about owning the property?

Now, it's true that the commercial (retail) real estate "sector" has created a more flexible and dynamic space for retail to operate in. Sign leases for just a year in case the idea doesn't work out etc. etc.

But it has also meant (1) a more encouraging environment for retail ideas that are even more likely to fail than the average (2) when business drops (e.g. covid-19), there's still the rent to pay.

It is true that in the past, the retail store owner-operator probably didn't own the premises outright, so there's still the mortgage payment when business drops. But that was (then) an arrangement with a bank (often local) who were going to be much more likely to see the mutual benefit of finding a way to not reposess the building.

This is just another small contributing factor to the overall fragility.

The fact that the modern day economy is based on usury (aka interest) seems not to be brought up by either the left or right, even though eliminating it would provide huge value for everyone (except the few at the top). It's a form of slavery, but it does the job for those at the top of the hierarchy, so it remains the way it is. That, coupled with a backward and extremely intrusive tax system which also benefits the same group of people, and you see why there's vested interest in keeping the status quo. This combination forms the basis for the fragility of the present day economic system.

Except all retail and restaurants have not closed. I live in a state that has had one of the most aggressive and successful responses to the virus, and people are still out and about in nice weather. The big box stores and groceries were open the whole time. Most restaurants have been open for take-out only, the whole time or most of the time. Smaller retailers are now allowed to re-open. People have been ordering a ton of stuff from online retailers. Commerce has slowed, and if everything somehow went back to normal next week we'd see the effects of just this initial slowdown for years to come. We are a service-based economy that depends on continual consumer growth that will never come back the way it was. The deep systemic impacts of all this have not really started yet.

Well, it would seem that if we close down all the non-essential businesses, and the economy immediately hemmorhages 10s of millions of jobs, that most of what we're doing isn't essential. In some bizarre twist of fate, an enviable hegemonic position has been squandered: where Americans could have cemented their dominance by doing likely anything else, we instead de-industrialized ourselves into a service-based economy specializing in shuffling the same 300$ around between 300 million people while nose-diving off a cliff the second the invisible hand comes knocking.

What state requires you to stay in your home?

I think that it's definitely fragile in the sense that there are a lot of people going through hardship at the moment. When so many people need to rely on friends and relatives to survive, it means that capitalism has already broken down. The system has already failed. Now we just have to wait and see the results of this weird socialist system that we just created.

We've built an entire economy around people doing things they don't really need to do.

Yeah, we've moved beyond subsistence. In fact, we've moved so far beyond subsistence that we can put the entire economy on hold for months and no one is in even remote danger of starving.

>no one is in even remote danger of starving

like do you actually believe this? just because none of your friends are starving doesn't mean there aren't people that are

https://www.washingtonpost.com/opinions/2020/04/22/covid-19-...

I believe he is limiting his comments to the USA.

do you know what the number of people below the poverty line is in the US?

https://www.npr.org/2019/09/10/759512938/u-s-census-bureau-r...

38 million.

12% of households don't reliably eat

https://www.feedingamerica.org/about-us/press-room/new-data

people are getting evicted en masse soon

https://www.nytimes.com/2020/05/27/us/coronavirus-evictions-...

do you really think "no one" is going starve to death in the US in the coming months? or even that many people aren't?

we know all of these things are true. the system is set up to disenfranchise these people. none of it is because of lack of food capacity, and covid did not impact the food supply chain enough to stop the chain.

I don't think that's quite true - food insecurity has significantly increased since the pandemic response has began.

https://www.hamiltonproject.org/blog/the_covid_19_crisis_has...

But that's not because we, as a country, are incapable of providing food security.

It's largely because people—especially the poorest people—have been laid off to protect businesses' balance sheets, and have received a meager attempt at counterbalancing that from the government.

There is absolutely no reason any human needs to starve in the modern world. If we as a society prioritized people's lives and welfare over businesses' profitability—and expressed those priorities consistently through our voting decisions—we could eliminate hunger in America without any kind of serious (or even noticeable) hardship to the rest of us.

But we know from basic economics that if poor people didn't worry about being homeless and starving they wouldn't work at all.

I hope that was missing a "/s"...

So why do rich people work, then?

Power

There have been millions of people working this entire time in food distribution. Lots of hidden workers even under "full lockdown".

Fragile by what measure? The US economy at least appears to be weathering the storm, and many experts expect it to start rallying in the next few months.

I mean...we just faced a complete black swan event where people all had to lock themselves in their homes, and so far we seem to have avoided catastrophe (at least by many expert predictions).

The US is extremely well positioned to avoid many of the negative effects that most countries are going to be seeing.

We are the opposite of fragile, at least compared to other human economies.

https://www.foreignaffairs.com/articles/united-states/2020-0...

https://youtu.be/7IWdNPAOQDE

https://zoom.us/rec/play/uZV8drj9-z83SIDH5QSDAvcoW9XoKK2shHI...

I think it's quite early to say if it weathered the storm, there might be long-term consequences. Also not sure what to say about the experts calling a rally, specially when those 'experts' are politicians.

Which one of the experts I linked here is a politician?

The US State Dept?

One of these are hosted by the US state department, but the person talking is from JP Morgan, which they cover in the introduction. The person moderating is from the state department, but she isn't presenting anything, just moderating questions to the guest speaker, who is not a politician.

The others are Peter Zeihan, and an essay in Foreign Affairs. These are not politicians.

It doesn't help your point since the US State Dept would likely not host content that's in contradiction with the administration. I'm not saying it's staged of course, but there are chances a convenient opinion was presented.

Also, JP Morgan doesn't really count for expert. That's not because they don't know what they are doing but because their incentives are not aligned, they have a stock to defend.

>> Fragile by what measure? The US economy at least appears to be weathering the storm, and many experts expect it to start rallying in the next few months.

There won't be a "V-shaped" recovery. That's just what the administration is hoping for because they understand it will have a massive impact in November.

The best analogy I've heard is that we just had a huge earthquake, and now everyone is waiting for the tsunami of a catastrophic economic crash.

Please see any of the things I linked. None of these people are from the administration.

They're either paywalled or videos. Got any generally-accessible text sources?

Hmm, I guess usually this sort of stuff is paywalled. Yeah I can see why that's a bad thing. I'll look.

> Fragile by what measure? The US economy at least appears to be weathering the storm

I'll turn it back around to you: by what measure? Spiking nearly 40m jobless claims isn't weathering the storm. Spiking nearly 40m jobless claims, while continuing to see 2m+ every report, seems to be the opposite of weathering the storm.

I'd just ask you to read or listen to any of the things I linked here. They're all relatively long, and I'm not going to do a better job of summarizing them than the authors/presenters.

I mean, the gist is: The American economy is incredibly resilient, and it is showing during this. Yes it's true that jobless claims are increasing, but the expectation is that they will peak next week. While we won't be an overall growth year, the expectation is to close out the year at levels comparable to those in 2010.

In addition to that, the US is just incredibly resilient when compared to the rest of the world. The world still trades using our dollars, they still want to buy our bonds, they still want to invest in our companies. All of this stuff ends up benefiting the US job seeker, and the American family because it means that there are jobs, stability, and the ability to pass monetary policy that protects them in times of crisis.

If you want specific details, there is hours of content that I linked that will explain explicitly why. \\

> they still want to invest in our companies.

Who wouldn't when they can't fail?

> All of this stuff ends up benefiting the US job seeker, and the American family

Since the last downturn, roughly half of the jobs created have been approximately gig-economy. An expansion of the precariat isn't helping me, it's not helping my parents, and it's not helping a lot of other Americans. It's actively immiserating people. But, hey, the number went up, so we must be resilient.

> because it means that there are jobs

Unless you're part of the 12% and growing portion of the country that are out of work today, and the 42% of jobs that won't return after.

> stability

Unless you're part of the gig economy workforce or you live in a right-to-work state. So, you know, everyone.

> and the ability to pass monetary policy that protects them in times of crisis.

Nothing protects me like a small business loan that I wouldn't ever qualify for and virtual money printers running full speed.

This is such a deeply ideological take, so i guess it seems in-line with linking to foreignpolicy, but the gist of it is: the American economy is resilient because it has been resilient in the past and we can make this claim by removing the current historical context of the moment.

>Who wouldn't when they can't fail?

Yes, exactly.

>Since the last downturn, roughly half of the jobs created have been approximately gig-economy.

Can you source this?

>This is such a deeply ideological take, so i guess it seems in-line with linking to foreignpolicy

What's wrong with foreign policy?

> US infrastructure that was there before SARS-COV-2 is still there.

The physical buildings and roads are still there. The people who use them are not, which makes it in practice not in place.

Maybe you could spell out how we could create an economy that isn't fragile?

I could, but the margin on this page is too small to contain the proof.

/fiddle with CSS

Seriously? There are dozens or hundreds of amazing books on alternative economics. I wouldn't be the best to make the case, and certainly not the first. Do you actually want some recommendations (most of my own canonical ones are a bit old) ?

You can try this twitter thread from Kate Raworth https://twitter.com/KateRaworth/status/1239596817463103489

The word you're looking for is overoptimization. We built and optimized a system around the "happy path" but in doing so we cut off our fallbacks for less optimistic scenarios.

This is market capitalism unrestrained. Any measures in place to account for "black swan" events get optimized out of existence in the name of short-term efficiency. And why shouldn't they when the government has shown that they will bail out companies over and over?

The over-optimization is a part of it. But millions of people livelihood being dependent on, as someone posted above, "the same $300 moving from one person to another over and over again" is also a big contributor.

We also have so little in the way of economic self-reliance anymore, at almost any scale. Certainly not individual or familial (which might not be a good goal anyway), but also not at neighborhood, community, city, state and to some extent even national scales.

I think this gets at another issue: our economy has a lot of pointless, redundant jobs that only exist because the economy needs to keep people employed. Cheap money policy at the fed was always intended to minimize unemployment, but many of those jobs were unnecessary. Those jobs won't survive the next couple years.

The flip side of cheap money is inflation, and it's been building up in the economy since the 2007 crisis. The inflation has been hidden by stagnant wages and falling commodity prices from globalization, so it's led to "top heavy" inflation -- the value of a dollar has been shrinking as the supply of dollars has increased, but that extra supply of dollars has been almost exclusively concentrated in equity markets. Prices of goods have remained in check because the vast majority of people simply don't have access to most of the new money. See also all the US companies sitting on hundreds of billions in cash, stock buybacks, and corporate debt.

I believe the US has 2 economies: one denominated in dollars, the other denominated in millions of dollars. It wasn't seen as "inflation" because most of the inflation indicators used by the federal reserve target the consumer economy. I think we're about to have a really bad decade as all this starts to unwind. The housing market is the first place this will hit (and we're seeing it already); capital will start to flow into REITs buying up residential properties and we'll see prices stay high even or even rise in an economy when they shouldn't be. All but the wealthiest individuals will be priced out of the market (this is already the case in many cities). That means more renters, higher rents, and zoning laws that prevent new housing starts.

The two economies will start to bleed together in the margins between the millionaire economy and the individual economy -- with disastrous results for the people of the country.

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