Two Worlds: So Much Prosperity, So Much Skepticism
collaborativefund.com
collaborativefund.com
Some average (mean) economic indicators are up.
The bottom several deciles of income are doing very poorly, and unemployment is up.
I think the "visibility" problem actually mostly goes one way though. As one of the people WFH with simply reduced expenses, all I ever hear on the news are about the people who have been adversely affected, other than obvious winners like Zoom. Of course, "average savings rate is up" may not even be newsworthy, but I had no idea until recently this was the case.
Also having talked to a few people adversely affected by the pandemic, I think a lot of people don't understand how not everybody is hurting. Everybody lives in their own bubble.
Contrary to the author, I don't think the internet really demonstrates the vast swathes of white collar careers (nor blue collar, really) in a remotely representative way. So to a server, with lots of other young friends in the service industry, this is Armageddon itself, except for random ecelebs on instagram. To a tech worker, friends with mostly other techies or graduates of "good" colleges, this is a great opportunity to Work From Hawaii for everybody except the guy at the grocery store. Mai Tais anyone?
[1]. https://thumbor.forbes.com/thumbor/1280x868/https%3A%2F%2Fbl...
[1]. https://www.brookings.edu/research/productivity-in-the-servi...
As almost everyone knows, GDP doesn't correlate particularly well with productive activity.
A + B + C = 0
So that if A goes to A+1, with the sum still zero; then B,C must reduce.
This thinking is mistaken as applied to an economy. The stability of this mean (ie., that the rate of change of the mean is zero) does not imply that anyone is loosing out.
It is entire possibly, and likely, that the effect is caused by different rates of loss and gain that are not competing with each other at all.
It's not even that good, because the indicators the article is using don't take into account that all of this new money that came with the stimulus, for example, was newly printed money. No actual wealth was created.
It is true that the way the stimulus payments were made amounted to a wealth transfer to people less well off, so that (plus the fact that much of it was used to pay off debt) does represent an actual reduction in wealth inequality. But I think it's hardly the rosy picture the article paints, all things considered.
One thing I'd like to make it clear is that although I am one of the lucky ones to hold a job in this pandemic economy and work from home, I'm actually spending more now than before on monthly expenses (for food, for example).
Where major savings come from are from lack of travel expenses but I wouldn't consider not being able to spend money on travel as being a net positive, it's a tradeoff between unique life experience and some extra money, not really a great tradeoff for many people I imagine (and a tradeoff that would have been possible even before the pandemic, the pandemic just removed the choice now which is not great). And it's not like most people that can save some travel money now will invest it well, I would imagine most simply end up spending on stuff they wouldn't have bought otherwise (see the super high demand for latest PC hardware, high Amazon sales, etc).
Would it be so hard to use Gini coefficient, standard deviations, or... anything other than "average"?
Typical bad faith response to simple observation of growing inequity is "Well, ya, but average income hasn't budged!!" As though 99/10 is morally and quantitatively equivalent to 50/50.
Is innumeracy the kryptonite to rational discourse?
If there's a more effective rebuttal, a better phrase, someone please share it.
The development of the middle class was the best thing to happen for American capitalism. A billionaire won’t buy 5,000 pairs of jeans, but 500 middle class households would. Capitalism, as we know it doesn’t exist without a middle class buying goods and services at scale.
What happens when the purchasing power of these households is curtailed and the middle class shrinks? What are the long-term effects on the sustainability of a vibrant economy?
The American middle class has slid down to the level of the global middle class, and the American upper class harvests profits from the entire world outside of America's borders.
Which is not true. The average American earns more than the average European, let alone the average global citizen. Heck, even construction workers in the US make way more than in Germany or Denmark.
Americans still have the highest purchasing power in the world and, most importantly, the highest economic mobility in the world.
Whether that leads to a higher quality of life is up to the individual but Americans are still some of the most priviledged workers worldwide.
https://en.wikipedia.org/wiki/Global_Social_Mobility_Index'
As someone who has gone from the bottom to top quintile, I think this is a very interesting and sad aspect of American life. Especially how it is perceived vs the reality.
Are you in the US? Because only there you have such high mobility. Good luck getting in the top quintile in Europe if you were born in the bottom. That is what real economic mobility looks like.
Sure, Europe does better in these statistics, but in the real world, US gives its workers way better odds at getting to the top and that's coming from an European.
This quote screams brainwashing by American media to me. Americans (and those that consume their media) are told from childhood that they are the only country where it is possible to move from the bottom to the top. Outside observers can clearly see that this is not the case, but when presented with hard evidence to the contrary it is simply dismissed as some untruth without any critical thought.
I don’t love that WEF study and I could spend a lot of time picking nits with its methodology, but for the sake of argument, let’s accept it as broadly true.
Why do Americans believe what we do? It is partial brainwashing by the media. But it is also a very real national story of immigration for economic activity.
The foreign born population of the United States is currently around 40-50 million the majority of whom are citizens or permanent residents. That’s a lot.
New York is a representative gateway city. The percent of the population of New York City which is foreign born was 36% in 1900. It was also 36% in 2000. These are people who came here for economic opportunity. Their lived experience is that the US afforded this opportunity. Now certainly the US isn’t the only country that offers such an opportunity, but we’ve been doing it for a while. We’ve had waves of immigration come from Eastern Europe, Southern Europe, Ireland and the U.K., East Asia, South Asia and Mexico, Central America and the Caribbean.
My grandmother came as an immigrant from Germany, off a farm with a grade school education and worked as a nanny on the Upper West Side of Manhattan. I now live on the Upper West Side and my kids nanny from Guyana got her citizenship about five years ago. (And she literally lives on the same block in Queens my Scottish grandmother did when her family came over.) And there’s nothing special about my story. It’s fairly typical.
That report cited in the parent shows a statistic that it would take on average 5 generations to move from the lowest income group to the median. I have no reason to doubt it. But I believe that largely is a story of slavery, racism, Jim Crow and the economic backwardness (until they 1970’s) of the American south. It’s shameful. You can understand why we might not want to celebrate it, preferring to look at the voluntary immigrant story.
And another observation that makes this obvious to me is the sheer amount of options/companies here for every little product and service vs back in Europe. Which was quite overwhelming when moving to the US but it is a good problem to have, more options and choices is always good IMO.
If you are hard-working and talented, this might skew your view about mobility in the US/EU.
Just because statistics say you shouldn't be poor doesn't mean you can't be poor. Just because statistically there is no racism in your area doesn't mean you won't get discriminated and deprived of opportunities.
Because the when certain metrics are used to compile a formula that leads to any ranking, then those parameters are subject to gaming in order to meet an expected result so those statistics are meaningless at the end of the day when you can't move past a certain wage/social class due to the artificial barriers set by a feudal leadership.
Statistically, the unemployment rate in my country should be about 2% while realistically it's much higher since the government doesn't count certain classes of people in odder to make the numbers look god in statistics for the EU.
Anecdotally, my acquaintances who emigrated from the former soviet bloc to North Ameriac and Australia ended up with much more wealth to their name including their own houses vs the ones who moved to Western Europe who basically ended up as serfs to be renters for life.
Do you see the problem with statistics as evidence? They don't tell the whole story.
Take the bottom 50% (or whatever) in generation A. Count what percentage of their children end up in the top 30% (or whatever). Thats' mobility. And it's highest in Northern Europe, by any reasonable standard.
Except that this isn't true. You are basing this assertion on mobility indexes which account for more than this raw mobility. It's the reverse. By raw mobility, the US does outperform Europe. But, importantly, and accounted for by the indexes are referenced in the follow-up comment to your other respondent, people in Europe do not backslide between generations the way they do in the US. Europe has higher economic stability, but lower mobility, due to broader social support systems and much more heavily progressive taxation.
Any study that goes back before WW2 shows a different story in the US, and that's partly because post-WW2 was a major economic shift between the US and Europe, and also because the US has to account for its (relatively short) history of discrimination affecting economic mobility, especially in the South.
A more honest take is that economic mobility is different in both places based on various demographic factors /other/ than economics. If you're college educated and white or college educated and an immigrant your economic mobility in the US is very high, if you are not college educated or not white (but a non-immigrant) your economic mobility in the US is very low. In the EU there is less disparity, but less overall mobility, which can be accounted for partly by the broader parts of society receiving higher education, and partly by the more progressive taxation which prevents massive jumps in wealth accumulation and is used to ensure a higher minimal standard of living for the poorest in society.
In Australia, laws are very biased to the landlord (despite the opinions of Australian landlords). It's an absolute pain in the arse to rent there.
In Germany, laws are very biased to the tenant. Renting is a totally viable option, people can and do rent their entire lives.
I've lived in both, and seen people trapped in shitty mortgages in Australia because they didn't want to rent, spending half their lives commuting to work. And people paying tiny rents in Berlin because they started the rental contract 10 years ago and the landlord can't raise the rent.
My awesome German GF just got us a new 3-room apartment at 900/month in Wedding. I was paying roughly that for a 1-room shitty flat in Perth a few years ago during the "rental boom".
It's difficult to generalize the wealth of Europe, so this is not strictly wrong, but it's not strictly correct, either.
Northern countries (at the end of the spectrum, Scandinavian nations) are typically far richer and with more stable job positions than the eastern/southern.
Rich country != rich citizens.
Look at Germany, it's the country and the mega conglomerates with their executives that are rich. The median wealth of Germans is among the lowest in EU:
https://www.piie.com/sites/default/files/images/f/kirkegaard...
If you can't afford a home, it means your income is not as high as you thought.
Although I checked the data here: https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe... and it agrees more or less with that graph.
That's so weird and totally non-intuitive. I wonder what the cause is?
EDIT: It seems income inequality isn't so bad, but wealth inequality is. https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...
I guess this is due to low rates of home ownership in Germany causing wealth to be concentrated among relatively few landlords?
I know what you mean, it's harder to get "rich" in Europe, but in terms of going from lower class to middle or upper middle class I think that's easier to achieve in Europe compared to the US.
At that point why compare to the US though? If the comparisons exclude former communist Europe and poor Mediterranean Europe from then why not exclude rust belt American and Appalachia from comparisons?
I disagree. Italy is typically included everywhere - it's a G7/G8 country, with a GDP bigger than Canada or Australia, and trumps Spain on pretty much any indicator (let alone Greece). It has its problems but it's not a poor or bankrupt country by any means.
> At that point why compare to the US though? If the comparisons exclude former communist Europe and poor Mediterranean Europe
In terms of population, the EU as a whole is 30% larger than the US. It's somewhat inevitable that there will be some pruning when trying to compare apples to apples. It's just a fact that Eastern Europe is not representative of the larger Union any more than, say, Mississipi, Oklahoma or Alaska are fundamentally representative of the whole US.
This has happened many times and continues to happen. I know a number of people who have done exactly this, and a few of them now own multiple properties. They also send money back to their families in their home countries.
Good luck trying to do the same in the US. If the rents in white collar areas don't kill you, the healthcare costs will.
Also, all bureaucratic issues with the banks and local authorities for setting up a business if you're self employed are also not done in English but in the local language.
Try getting a blue collar job in Germany, and I don't mean a barista in a hip touristic district where all clients are foreigners. You're expected to pick up the local language yesterday.
The US having English as the default language everywhere means much less friction for everyone including foreigners be them employees or entrepreneurs.
There's certainly less language friction in the US.
But there is far, far more economic and class friction.
And most people can pick up the basics of a language.
Edit: In general, I won't disagree with you that language is a real barrier for employment in EU.
What you said is true about tech but a plumber or electrician that crosses borders will start at square 1. They will have to fulfill the licensing requirements in their new jurisdiction. These requirements almost always include requirements that add up to where one must work under person holding level V license before taking test W and then work X years before obtaining license Y which lets them be responsible for work type Z and there will be a corresponding requirement that all job Zs be performed by a party with license Y.
Professional licensing requirements like this are why you have experienced oral surgeons from Taiwan slapping braces on teenagers in California and expert boiler welders from Vietnam building hand railings in London.
Not as true as you might think. I’m from the UK originally, live in Berlin now, and while I can do a lot with English, there are doors closed to me by not being C1/C2-level German.
(I have of course been doing online language courses for ages, but as the locals say: Deutsche Sprache, schwere Sprache.)
But that's - what - the top 5% of jobs?
Why do think, then, that there are so many homeless people in the US? They aren’t all mentally ill or drug addicts.
If you're not mentally ill or a drug addict, good luck getting someone to think otherwise and give you a job.
I remember this story of this homeless man with an amazing voice. Some radio host gave him a job, it looked like a success story and after a few months he lost everything again due to his addiction
But your chance of success is basically none in half of the EU. Even homeless people in the US have a much better chance, because they have access to the US market.
This part stopped being true at some point in the 21st century. The slowly shrinking disconnect between reality and this belief is imo the most powerful political force of our day.
https://en.m.wikipedia.org/wiki/Socioeconomic_mobility_in_th...
https://www.nytimes.com/2012/01/05/us/harder-for-americans-t...
Of course, besides convincing people that it's possible you need to have an economy that makes it possible. So that would be the second step.
The difference is that citizens of the EU don't die when the money stops flowing because there are multiple social insurances in place.
So at least the reduction of income that is insurance should be considered a wrong measurement, because it's taken off before taxes.
I totally agree with you there. Here in Germany, most homeless people could not even start to work because you need a legal residence to get a bank account (getting paid in cash or via check is illegal in Germany), so they cannot accept the Arbeitslosengeld (Hartz IV).
There are some initiatives in larger cities though where they provide shelters so that homeless people can have a legal postal address to get back on their feet.
That's incorrect. You can collect Arbeitslosengeld II ("Hartz IV") in cash at the local job center, no bank account required.
First off, that's not the default. So statistically this isn't true.
Second: The Finanzamt and the GwG would have a different opinion about that, see [1] and [2] (pp. 10 and pp. 11) regarding that.
I personally know somebody who did collect it in cash in the past, got sued by the Finanzamt, and lost in front of the court (ironically with a Bargeldstrafe).
Also note that even the SGB 2 and 3 make this very clear, without room for interpretation, that you need a bank account [3] (pp. 43). The only theoretical exception would be if the costs for a bank account would require more than 100 bucks that you are legible to get in advance per month [4] (pp. 43a) but that's pretty much impossible to prove without having a bank account in the first place.
[1] https://www.gesetze-im-internet.de/gwg_2017/__10.html
[2] https://www.gesetze-im-internet.de/gwg_2017/__11.html
This is not specific of Germany/EU, and it's actually a principle of pretty much of any society. Countries can't just give away residence and money for free. If one belongs to EU, getting residence is easy; if not, the visa conditions apply. Therefore, you're talking about illegals (and/or refugees), which is a different matter.
It's actually funny (in a tragic way) that countries like Germany or France took the highest number of refugees during the crisis (official stats: https://ec.europa.eu/eurostat/statistics-explained/index.php...), and citizens still complain.
In other words, ironically, countries may as well block entrance to asylum seekers, or throw homeless away out of the borders, and the public opinion will be negative regardless.
Those people that lost their home and would theoretically be willing to work still cannot; hence because they don't have a postal address which is required to get a bank account.
Since the new Zahlungskontengesetz was established, all people that have a German citizenship have a right to get a Basiskonto [1] and banks must comply.
Though the legal loophole here is that getting a bank account still requires a postal address.
Bulgaria is very poor (average yearly wage USD3600/year), but they still have: Universal Health care (though there is a fee of USD 0,62 per visit), children under 16 are free. Maternity allowance, with extras for e.g. twins, disabled children and mothers currently studying. Social benefits like guaranteed minimum income (though very low) and unemployment benefits. And state pensions.
¹ (in Romanian) https://www.cursvalutar.ro/blog/ajutorul-de-somaj-ce-este-cu...
Unfortunately, this is incorrect. If we are to believe the OECD [0], the US have near the lowest economic mobility of any developed country.
[0] http://www.oecd.org/unitedstates/social-mobility-2018-USA-EN...
Is this based on data or a is it a generalized assumption?
A short time ago, on HN, there was debate about the exactly opposite argument - that the purchasing power significantly decreased¹.
[¹]: The Life in The Simpsons Is No Longer Attainable, https://news.ycombinator.com/item?id=25570611.
https://dqydj.com/average-median-top-household-income-percen...
So... you are correct?
Regardless, my skew is apparently more off the mark than I recalled as another poster pointed out.
[1] https://www.diw.de/documents/publikationen/73/diw_01.c.53312...
EDIT: The publication isn't the newest, being from 2016.
So even if they are making more money, I don't feel like it adds to their wealth or their lifestyle, which was kind of the point of making more money isn't it?
It's mostly worked for us since there's plenty of profit to be had by satisfying human needs and charging for it. But, if people run out of needs or money, then the capitalist system will find some other way to grow, whether or not that involves doing anything helpful to anyone.
I could see the capitalistic economy continuing to function despite a shrinking middle class if this consumption inequality grows.
Going with the jeans example, the 500 middle class families buying 5,000 pairs of jeans at $40 each ($200,000 total) may be replaced by 50 upper middle class families buying 1,000 pairs of jeans at $200 a pair.
I'm certainly not endorsing nor condoning such growing inequalities.
[0] https://twitter.com/adam_tooze/status/1308013103855087618
Well, it can and that is the fundamental problem. If you are a share holder in a public company you can earn more money from doing nothing productive than from actively doing productive work. The central bank stimulus enters the asset markets first.
It's like having an oil funded authoritarian government. It doesn't have to care about what the rest of the population thinks. It can exist in isolation and benefit from the suffering of it's population because it provides a cheap and desperate workforce.
That's the whole problem: if everything is just labor arbitrage and owners take all the surplus we wind up in a world with excess capital (which encourages malinvestment) and consumers without money to spend. Business don't hire or expand as a result of tax cuts. They hire when the marginal return is positive - aka when you have more customers with money to spend so hiring another employee leads to more sales or more profit. A billionaire isn't going to buy more widgets if they pay $200m less in taxes this year. They don't need the capital to expand or hire either - money is extremely cheap right now. That $200m will be invested in capital markets already awash with cheap money.
I wonder if paradoxically we'd all be better off if wages were higher (and offshoring / labor arbitrage were mitigated). Labor would certainly have more dollars to spend across the board. That would give businesses more dollars to spend in turn.
People hate on CPI inflation because they simply don't understand supply and demand in the labor market.
CPI inflation low = low demand for workers
CPI inflation high = high demand for workers
You want CPI inflation to be at least 2% and a small 5% spike for a year doesn't hurt if you have been stuck in a liquidity trap. Runaway inflation is extremely unlikely because we have spent a decade perfecting our economic deflation skills.
CPI inflation generally reduces inequality because the price of goods is rising faster than the value of assets because the money is arriving in consumer goods first and only businesses that are productively investing into providing more goods or services are actually getting the inflation money. At current valuations you are hard pressed to find companies that can justify their current market cap let alone further growth that would track CPI inflation.
If your wages rise from $15/hr to $30/hr the only one who is hurting is someone who owns a million dollars in stocks because their purchasing power just dropped by half.
The answer? Demand side stimulus. This is nothing new. Just get your government to spend money on domestic industries. Renewables, electric cars, road maintenance, electric grid upgrades are the new Keynesian gold digging. No one is losing money except those who have too much of it already.
"Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments"
So in theory those people are hiring?
Yes inequality ii's something that needs to be kept low but I don't think we have hit the point that we will see our current economic system fail.
This is no longer the case for an increasingly large swathe of the population. What are they to do once what they have to offer is no longer enough to get them to survive? For now, a lot of these people go homeless. But this trend is not sustainable, or conducive to societal stability.
Isn’t this the elephant in the room?
I’m assuming that the cost of housing is the single largest outgoing for most people.
The low cost of debt (mortgage repayments) seems to continue to push the dollar value of homes exponentially higher so in real terms dollars are exponentially loosing value.
So even if we have more savings and our investments are in good shape the actual value in real terms is actually declining rapidly.
Young far left wingers really should know that it’s not Jeff bezos who is taking all your money or inequality that’s the issue, it’s the low interest rates set by government, subsidized loans, and banks pushing up home prices as a result.
Rising home prices are not a good thing, and are a symptom of a hugely distorted financial system. Which gets rescued whenever it fucks up. But again, it’s the government doing that, not “the rich”. With the exception of crooked bankers of course, who should rightly be in jail but aren’t.
[1] https://www.bls.gov/cpi/tables/relative-importance/2019.txt
[2] https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
But it's misleading. As the OP showed, median housing prices is determined by the amount the median income can afford a house based on the interest rates. This means that to the CPI, a $500k house is equivalent to a $210k house was in 1990 as they both have the same payment. They will therefore have the same owner equivalent rents. And therefore even if prices have more than doubled in 30 years, the CPI will not show it.
And so we can reframe the argument from above as:
When the government calculates inflation, they look at prices of common goods, but not housing. Housing is based on monthly payment. That's why inflation is artificially low.
[0] https://www.bls.gov/cpi/tables/relative-importance/1990.txt
Please read how the shelter part of CPI is actually calculated, rather than using your imagination. The rental component of shelter is based on surveying renters how much rent they actually pay. Owner equivalent rents (OER) components is based on surveying owners how much rent they think their house would rent for. It's simply answering the question "If someone were to rent your home today, how much do you think it would rent for monthly?". There are no house prices, no interests rates, no house payments in there at all; they only affect CPI as far as it unfluences house owner estimates of rents.
The OER component of CPI would be "artificially low" if you believe owners systematically understate how much their own house would rent for (or if you believe the BLS folks are lying). Your $500k house would be equivalent to the $210k 1990 house in the CPI calculation if its owner believes it would rent for the same amount today as in 1990.
Looks like you're right, interest is not considered consumption.
What is included is rent, or for owner-occupied residences, the "owners’ equivalent rent" - the figure which would be charged if the owner rented it out?
In other words, real estate is a great way to preserve wealth.
2021 marks the end of the 50 year interest rate dropping cycle starting in 1971 with the end of the gold standard, now that FED rates have hit 0%. If home prices are going to continue to rise, it's going to have to do that through an increasing money supply through increased government spending alone, which is farther away so they will either benefit less or not benefit at all.
If the money supply is constantly increasing like it has the past 50 years, you have an inflationary spiral where your goal is to spend as little as possible and squirrel away as much as you can in assets.
On the flip side, if the money supply is constantly decreasing, you want to get out of assets as much as possible and into cash for a deflationary spiral.
If interest rates begin to rise, the money supply might begin to shrink. That flips the incentives, and suddenly asset prices dive much faster than the interest rate would have you believe. You could have a $400k mortgage on a home worth $210k or less.
I don’t disagree, and I concede the increase in home prices is not exponential but it is certainly a long way from tracking the 2% inflation rate.
The point I’m making is that the ever increasing cost of housing as a percentage of disposable income means that in real terms most people are getting poorer.
Not compared to a low cost broad market index fund, for people outside of hot urban markets or popular outdoor recreational areas.
There are vast swaths of land in the US that are depreciating in real terms, especially with foreseeable increases in property tax.
Isn't this only true with the caveat that home prices remain relatively stable?
Low interest prices are likely to spur second home buying among people who already own.
Your premise does not justify this point. The "real value" of a home has very little to do with its building material but with the actual demand of the home, i.e. what people are willing to pay to live in this actual home in this actual location. The increasing purchasing power has increased what prices the market is willing to pay in aggregate. This is literal wealth creation for property owners or developers, and has absolutely zero devaluing impact on the dollar.
now look where we are.
meanwhile, some individual members of the wealthiest class have seen their fortune grow an order of magnitude over the last year. you can't convince me that any particular ceo or investor has done much work every month since the beginning of the pandemic as they did in their entire previous life. you have to understand we've simply allocated them that money.
at some point, everyone will realize we need to realign our economic priorities. i only wonder who is going to actually do that work, who will be dragged along, and who will be left behind.
Were that divided evenly among adults in the US, that would work out to something like a $12,000 check per person.
To throw this out would destroy an economy and have drastic impacts on actual quality of life.
As a matter of fact, what if you were ask to build things using a measuring tape with graduations that are increasingly far apart over time?
I'd wager you would be a little upset and quickly ask for a proper measuring tape so you could do your job properly.
Sounds reasonable, right?
However, the exact same thing is happening in economics: everything is measured with a measuring stick whose length changes all the time.
And this does not seem to worry anyone: economists merrily keep on measuring things like household debt in USD and everyone seem to agree it's the right way to work.
A good and proper shared hallucination.
Worse, the length of the measuring stick is changed, not in a random fashion, but in a way that makes the power that be look good on TV.
Once in a while, people try to do the right thing and present inflation-corrected numbers, but that's far from being the norm.
The most used measuring stick is the CPI, which (1) does not include e.g. assets, and (2) whose definition also changes significantly over time.
So it arguably does not even measure total inflation, and on top of that is not really the same metric every year.
So not only does your measuring stick shrink and expand, it is not even possible to measure by how much.
Why does this matter? If your cost of living stays the same but TSLA/BTC jump up 10x why should that count as inflation?
When scarcity comes into play, well, then it does not matter whether the dollars you are competing with come from the "real economy" or bitcoin. Prices will shoot up.
> Consumers are in the best shape they’ve been in, ever.
> A huge portion of consumers think that’s bogus because they’re in the worst shape they’ve been in, ever.
> Both are true.
They're not. Workers, whether they've materially done well through the pandemic, or not, are sufficiently lucid to see that this all has to be paid for. And they're the ones who will pay for it.
Unlike the author, who is blindsighted by, and even marvels at, the "huge" numbers, unable to see more than a few months down the line.
A worker may be in a house that's booming in value with a tech salary and buying lots of nice things from Amazon and deliveroo but he can see the world outside.
Workers aren't atoms spread apart in a vacuum. They know people friends and family who aren't doing as well as themselves, or vice versa.
So there is no contradiction in terms. Things are bad full stop.
A few months down the line literally all of the economic issues will be better off as quarantines are lightened, as things reopen and new businesses are created to replace the old. The actual issue is going to be what society does with our national debt one day including the 3T we assumed as part of our stimulus for this one pandemic. This is not a "few months away" problem but a few decades away problem.
That's manifestly untrue. Aggregate measures of debt are at an all time high, measuring across government, households and non-financials [1]. Household savings have gone up but that has to be placed in the context of massive state intervention. Essentially you're not only taking money from one hand and giving to the other but a massive mortgage has been taken out too, to come due on future generations at the expense of future GDP.
[1]: https://www.fitchratings.com/research/sovereigns/us-non-fina...
but looking at my small window in the midwest, it's not about economic desperation. most have actually voted against their own ideals economically. it's a perceived cultural war on "conservative" ideals from the "evil" liberal machine. i don't know what the solution is to bridge that divide.
That narrative was 20 years in the making, at least. My father stopped working in 2002, at 52. He was essentially force retired, as the glass plant he was a technician at moved to India, but he had no retirement planning that accounted for starting retirement at 52. And, for the record, they're okay today, but it was in no small part to my own sacrifice, in my 20s, to help them keep their home and get back on their feet. The fact remains, he was simply unable to find work. And he had a health condition, to make matters worse. His story isn't unique, at least not to the places I am speaking about.
I've heard this "voting against their own interests" rhetoric my entire life. It's misguided. These people have voted their entire lives and where did it get them? Broke and unemployed, forced to scrape by however they could.
Trump won specifically because he was a vote AGAINST the status quo, which had stopped working for these people decades ago... Nothing more, nothing less.
But as it turned out, a vote for Trump was not a vote against the status quo after all. He got elected, had a cooperative congress, and then... what policies did he enact to help rural Americans like your father? Nothing! All he managed to achieve were (surprise,surprise) tax cuts for the wealthy.
Maybe he could have done much for rural America economically, but he didn’t. And then they still voted for him! I don’t buy the narrative either. Nobody is voting for trump in 2020 because they really think he is going to help rural America economically. His actions have never matched his rhetoric.
i know fb isn't representative of a person's total views, but like the majority of my circle that leans conservative (i grew up smaller city, church goer blah blah, moved to coasts) just share the same stuff over and over. evil democrats doing xyz and we'll have socialism/communism, attack on "christian" ideals, all wrapped up in some religious/nationalistic garb.
some might be economically struggling but it doesn't come out that way, or at least that doesn't appear to be their main thought. i feel perhaps in 2016 people did vote that way to have Trump shake things up, but after 4 years of seeing how he is... that they would do it again, actually, even MORE people would? not sure how to reconcile that.
While examining the important differences between the plans in the chart towards the middle of the page, it is important to remember that this is the difference democrats bring to the table in terms of actual lived experiences for working people. The table highlights wonky specifics and continuations of the current system that all look the same in the wash. For working Americans, it is very difficult to see any substantial difference between the two parties. However, there are very large culture differences between the two which conveniently keeps the working class divided.
In fact, the only big legislation I recall Republicans passing in my lifetime is lowering taxes for some people and the Patriot Act/Homeland Security nonsense.
I do think the parties are good at delivering cultural signals. Neither of us can readily point to substantial policy differences, but we know deeply the cultural difference between truck nuts and vegan lattes, for example. We also know, without being told, the difference between welfare queens and cis white males. I think the parties offer this kind of "satisfaction" for their voters.
Democrats are at least not outright denying climate change. Investments in green technology could bootstrap an industry for unskilled workers that cannot be offshored to foreign countries. Even if you are not employed by these industries you would still see the general benefits of hitting 2% inflation targets which decreases inequality in the long run.
I'm from the coast and live in the city. When taking a road trip through the Midwest, it hit me that people from the rust belt and rural areas had to vote for his message. Honestly it was depressing to see the decaying factories and poverty stricken areas. He was giving them hope and was going to fight for them. Anyway, I may be wrong but that's just my perspective.
Someone posted this video here yesterday with Steve Bannon explaining the populist movement and how Trump came to be president. There are multiple parts and this video is over two hours long but worth the watch. I'm not normally one to watch a video over half an hour and especially not Steve Bannon, but it's quite fascinating to hear this story and perspective.
I am familiar with rural, depressed regions of America, in particular in the Rust Belt (and the South). We need to figure out a way to address the lack of upward mobility, the lack of a social safety net, etc... People want some pretty basic things here. Like healthcare, affordable housing, decent schools, and jobs that pay a living wage. Nothing crazy. These things were the bedrock of the Sanders campaign, both times.
From their perspective (and from mine, too, though today I live in a place where _most_ of these things are being met)... If the Government won't ensure these needs can be met than what purpose does the Government serve?
The white people who can no longer consider themselves middle class (and above the bottom rungs) are now seeking change. But still not change for everyone, just enough change to help them maintain “class” superiority”.
President Lyndon B. Johnson once said, "If you can convince the lowest white man he's better than the best colored man, he won't notice you're picking his pocket. Hell, give him somebody to look down on, and he'll empty his pockets for you."
Edit: This probably doesn’t have anything specifically to do with white people, but it’s a tribal mechanic that exists everywhere, especially when the relative positions of power are changing. No one likes losing power.
You don’t see this though when the whole pie is increasing in size, and everyone’s share is increasing, and relative positions are maintained. But I would say automation and outsourcing are, at the least, reconfiguring the relative positions of various tribes.
The hard one is jobs, it seems like acceptance that jobs aren't coming back might be the only solution. The worldwide trend for many decades has been people moving from rural to large urban areas with less and less people involved with primary production. It's really hard to see an end to that trend anytime soon.
I don't know what form that acceptance will take, but I doubt Trump voters will be keen on UBI.
> The hard one is jobs, it seems like acceptance that jobs aren't coming back might be the only solution.
> I don't know what form that acceptance will take, but I doubt Trump voters will be keen on UBI.
Is UBI some sort of admission then that people just will not have jobs that pay a living wage?
To these folks, you're telling them that their kids are forbidden from earning a living the way that they did. That's not a tough sell, it's a non starter. They believe that their way of life is being attacked and has been taken from them. And a lot of them understand just enough to know that it's been / is being driven by politicians. So, essentially, it's being done by the same people who they would also be told to trust with their futures.
That's rough.
None, that's what I'm getting at. These areas are in a long term terminal decline and there is no fixing it. It's an international economic trend, nothing US politicians do will make a difference.
> That's not a tough sell, it's a non starter.
The best you can do is manage the decline, anyone promising anything more is lying. All the last 4 years have done is squander the power they have as a political block, this is also waning.
That does not mean no poor person ever vote for Trump.
If you look at 2020 exit polls, people making under $50k and $50k up to $100k lean Biden, people making $100k and up lean Trump.
“Class” is more complicated, because within a socioeconomic class, income varies considerably by age. And Biden won younger voters (depending on the categories mused, up through 30-44 or 40-49), while Trump won older voters.
If you look at education, (which also varies a bit by age, but is tied to class and less age variable than income), Biden won every education level except No college degree (and if you combine white/non-white with education level, he won every combination except whites with no college degree.)
War novels often involve the privileged finally meeting the poor for the first time in their lives, as commissioned officers. And finally respecting them. It's a trope I'm sure there was a lot of truth to. A lieutenant in WWI had it a bit better than a private, but not that much better (he might even have had a higher chance of death). He still had to live in the same hole in the ground. Classes which were entirely separated were brought together (as JFK must have been). Social media is not like that. There's nothing shared about it, nothing we go through together that could generate a fellow feeling.
Reference: https://slate.com/news-and-politics/2017/08/the-warrior-cast...
For example the stimulus money was used to buy stocks or pay off debt. Wealthy people get richer. People with college degrees are doing well financially. Water is wet. The Fed has been pursuing this strategy for more than a decade. Drive treasury yields down, people are desperate for investments. Everyone joins the stock market. If the less wealthy (middle class with good jobs) are joining the stock market you should be skeptical because that means even they don't know what to spend the money on.
What we really wanted to see is people spend that money on consumer goods to drive underemployment down. Inflation is a very good indicator for underemployment. If it's slightly above 2% that means lots of people are employed and looking for even better employment opportunities. Inflation did recover from the crash to 0% but it's still only back at 1.2%.
The only good news is that the economy doesn't have to care about viruses. Inequality is unsolved and still rising or at least staying the same.
I.e $100k a year in NYC = lower middle class. $100k a year in Kentucky = upper middle class.
I wonder if economic skepticism skews upward the closer you live to an urban area.
One definition of the middle class is the 30 percentiles around the median (i.e. 20th to 80th percentile, or start-of-3rd to end-of-8th decile). In NYC, that would be 10k-82k (2016). $100k in NYC would be upper middle class by this definition.
If these numbers are surprising to you, they should be! with a not-uncommon tech salary of 140k+ of nominal income, you are above the 90th percentile in NYC.
It's kind of hard for our bubble to imagine that people survive on minimum wage (30k/year in NYC 2021), and yet literally 1.9 million did in 2016.
source for 2016 data: https://www.bloomberg.com/news/articles/2018-10-16/snapshot-...
It’s easy to “survive”. It’s not possible to properly save for emergency expenses, retirement, and have access to routine dental care, or plan an upward path for your family.
The net effect this has had over time is those who are really good at using leverage in a decreasing interest rate environment end up with exponential growth, and use that to buy more assets, which allows them to lever more...
This leads to a bifurcation between the people who make money through labor and those who make money through ownership of assets. The greater the wealth inequality in a population, the bigger a percentage of this new money goes to an increase of assets as opposed to day-to-day expenses. This shrinks CPI inflation for an equal amount of money supply expansion, which in turn allows the money supply to expand ever faster and inequality to grow further.
The opposite of anger is not calmness, it's empathy.
> If you don’t have any empathy, does that mean you are angry?
I'm not sure how to answer that, except to acknowledge that it isn't directly the case. It's certainly possible to have zero empathy and be perfectly free of anger. In fact, a sustained state of bliss might necessarily involve an absence of empathy...
Perhaps what I was trying to say would be better said by substituting "antidote" for "opposite".
Personally I have little empathy but I don’t think I’m angry. But maybe I am and don’t realize it.
It's the ugly side of empathy. It can bring people together, and it can sadly reinforce that which splits us apart when communication and trust break down.
That sounds more like frustration from wanting the other person to think or act a different way. Empathy would involve setting aside your own feelings and wants for a time so you could experience what the other person is feeling. To do so, you would try to take account of the factors that have lead the other person to this point.
For example, if you saw a mother scold a child unfairly in the supermarket, you might consider factors such as the mother's income or lack thereof, and how difficult it might be for her to have to admit to herself that she can't provide what she thinks her child needs at that point in time. Her frustration gets displaced as anger directed towards the child, but that's not because she has ill will towards the child - its because she has no other way to dissipate the energy at that point.
That's one possible example, but perhaps I'm just not getting what you are saying. Could you give an example of what you mean?
I am not sure where you was aiming at, but this sort of logic actually makes people not to intervene in clearly abusive situations. It is also sort of logic that people use to pressure abuse victim to stay in abusive relationships. It is also what makes victims stay in abusive relationship.
The fact is, parent not having ill will deep down is not what is affecting the child. The child is affected by the unfair scolding. Your example is asking for empathy for someone who made you angry (unfair mom), but does not ask empathy for child. Unfair scolding is not end of world nor is it CPS worthy verbal abuse. But the principle is the same.
Empathy with someone will likely make you less angry at them, but often will make you more (potentially much more) angry at someone else; the world is full of grievous injustices where empathy implies anger, and calmness is only possible either through ignorance (willful or not) and cynicism.
I got angry more. Sometimes you are in fact taken advantage of.
I’d expect all of these metrics to not improve post covid. No more help from the government to increase income, no extra money to decrease debt (lower income, higher ability to spend discretionary), and same for savings.
Oh, the wonders of what you can do in low inflation environments, at least for a few decades
I wish there was an established way on HN to mark titles which sound like they are general but actually only care about USA, at least for social and economic analyses.
But for some reason “inequality” gets glossed as “skepticism”. It’s apparently all in their heads—comparing themselves to others on social media—even though getting laid off and having no short-term prospects as long as the pandemic is going on is something to worry about in absolute terms, not just in relative terms.
I think that it’s good that we worry about how the economy is doing for all of us, not just the fictious average person.
Easy to save money when you aren't paying your biggest bill.
>...what happens to that money once there’s widespread vaccination and the vacations, weddings, and mall trips that have been delayed are suddenly unshackled.
It goes to paying down rent thats been placed on credit cards and payment plans. the article doesnt mention the fact that in most major cities in America, Americans arent being evicted. Once things go back to normal, the landlord gets their cut, and the average american household goes back to being...average. Banks have also allowed customers to stretch their credit until the pandemic ends, in some cases belaying interest by months. These pipers will be paid first, not to mention the student loan collection thaw.
Its also worth noting that tens of thousands of pubs, clubs, bars and restaurants effectively no longer exist. They have been entirely foreclosed due to rampant mismanagement of government lending programs and the mass exodus of service workers from major cities like Los Angeles, San Francisco, and New York.
>Student debt is still rising, though at the slowest rate in over a decade.
Zoomers saw what happened to Millennials during the 2008 collapse. Even if they can afford college, few are excited to repeat the prospects of their predecessors given eerily similar "once in a lifetime" financial events.
>Rising home prices have priced young buyers out because they require a growing and often insurmountable downpayment.
The articles bold prediction of a roaring twenties full of homeless zoomers and opulent boomers is...frankly disgusting. Its the same garbage we've endured for the past ten years after the collapse of 08, so the author just flogs the sex appeal of untenably large mortgages which (surprise) landed us in the 2008 housing collapse.
As the article states, there are two worlds, and they don't really overlap. The amount of total household savings has greatly increased at the same time as most households are running out of savings; and it's not about the 0.1% magnates - as the 2/3 poorer households are becoming poorer, the 1/3 wealthier households are becoming even more wealthier. As the numbers show, one world has an unprecedented amount of available money, and they are going to spend it, kickstarting the economy - all while while the "other world" is experiencing all the things you describe. But since the gap between them is so large, it's counterproductive to talk about "the average american household" as in this bimodal distribution talking about the average is just as meaningful as saying that the average american has one testicle and one breast.