Keynes was right: he's dead. Unfortunately, we, and our children, are not.
Household debt to GDP has gone down since the low interest rate environment kicked off in 2010. Same is true for household debt as a percentage of personal income. Although I will note that its debt payments, not absolute amount of debt and obviously lower rates lower the interest portion of debt payments.
I agree there is something troubling going on but it's not a personal debt crisis
- Inflation is at it's highest since the 1970s in the US
- There is a large military conflict in Europe.
- There are shortages of chips, energy, and food on the horizon.
- Unprofitable growth stocks have valuations as high as 100:1 on revenue.
- There is increasing militarized tension on many portions of the global supply chain (Russia:EU, China:US, China:Taiwan).
- Housing has appreciated by up to 40% YoY in major US cities.
- A global pandemic has introduced lockdowns, and potentially permanently changed people's relationship with work. While killing a million people.
- The US legislative branch is utterly paralyzed.
- The US business cycle hasn't seen a recession since ~2010.
I'm sure I missed a few, but the fact that a recession hasn't happened should be more surprising than a recession happening.
https://en.wikipedia.org/wiki/Financialization
Finance industry share going up vs. Real economy output, which could be cause or the consequence of high valuations.
Quoting Asimov's description of Trantor in Foundation.
> This enormous population was devoted almost entirely to the administrative necessities of Empire, and found themselves to be few for the complications of the task.
The ongoing confusion about what this disease's risk factor is worrisome. First I think people have much more distrust in science and government. There is still a deep divide amongst the population and I am concerned about how we will handle another wave of restrictions whilst the economy buckles and a global war is on the horizon.
That said, SARS-CoV-2 is endemic now, with known animal reservoirs. We're not going to stop it with NPIs anymore.
Relatedly: a decrease in debt is exactly what I would expect from an Uberized economy where nobody owns anything anymore. I’m not sure this is such a good measure of economic health.
Stated differently: a small amount of debt is an indication that people are investing in things. That’s usually a good sign.
No. New car sales are currently bottlenecked by supply chain issues, not demand. Housing sale demand is dropping, but still very solid compared to inventory.
At some point, this supply restriction becomes inflationary. If you can buy a new car and resell it a month later for more than you paid, the MSRP is below demand.
Since consumers react poorly to price increases, this is also coupled by reduction in quality or service.
More dead people means fewer competitors for all resources except labor. What that means is fewer people need stuff and there are fewer people to make stuff, so the stuff the dead people had is easy to obtain for the living while employers have to pay more for labor because there is less of it.
As evidence the black plague was considered one of the major events that ended the dark ages and the oppressions (relatively speaking) of the peasant class. Suddenly lord's needed to start giving their peasants rights and things to do or risk losing them to a lord that would give them those things.
It's horrible and callous but it is also a fact, especially when you consider many of those deaths were not among the most productive segments of society.
Think about the networks effects of an economy. An economy of one person has a size of zero units. An economy of two people has a size of one unit, an economy of n people has a max size of n^2 units, or more really nlogn, when you take into account the Gaussian distribution of value between each node of the network.
But, that's the whole gist of our economy: lots of people needing stuff (consumers) and lots people making stuff (labor).
In what proportion?
I'm not sure that's true. Many civilizations, up to and including now, have the cultural practice of the weak and elderly destroying themselves (or being destroyed) when they become a burden on their relative/society. The most obvious example being the concept of east asian (Korean/Japanese) elders "going to the mountain to die".
You have to look very hard for a successful civilization that doesn't do this. Sparta, perhaps?
(This is also not really the point of the original comment.)
Really? The elderly may not be likely to work, but they still consume (they consume lots of medical services in proportion to their numbers, for instance.)
> reducing the burden on the state for such things as retirement and Medicaid.
“the burden on the state for such things as ... Medicaid” is a chunk of economic activity. With taxes the same and that spending gone, alone, the economy shrinks.
To a ruthless cold-blooded optimizer, deleting the elderly should be good for the economy because you save on their maintenance costs and their resources get redistributed to more active investors. This might decrease GDP, but that only reflects on GDP being a problematic metric.
I guess it's true that smashing windows or providing medical care to the elderly would increase the "size of the economy", because it adds entries to the implicit "market's bid/ask order book". And you could measure the size of the economy by the size of that data structure.
Right, and the upthread discussion was about GDP, not some abstract unspecified quality of the economy.
I've seen this thrown about and have to take this with a grain of salt because even the infirmed/elderly/retired are still part of the economy. They consume food and resources, albeit they aren't out buying durable goods and new cars, but they are paying rent/mortgage in their retirement communities, eating food, buying CPGs* (some of which fully rely on an older population).
I'll take the example of my two relatives that died from COVID, neither had underlying conditions: One was a 65 yo former airline mechanic on the verge of retirement with a McMansion in Houston area, he spent a lot of money keeping up that lifestyle, and when he passed my aunt moved back to a small town, and downsized, considerably shrinking her spending. They had planned to spend the next 10 years in an RV that is no longer going to happen. The other is my 46 yo cousin with 4 kids and was a seven figure earner in sales living in Kansas City area. Again, huge amount of spend and now his wife is getting by with a massively reduced house and budget.
* Did the hard candy industry take a nose-dive? Should I be shorting Werther's Original stock?
Only 1 in 20 deaths attributed to COVID-19 were between 0 and ~49.
Abstract models of "productivity" vs age peak close to where the covid death hockey stick turns upwards.
The 50-60 age bracket is where the big losses are, losing 100k-200k people near their prime and 5-15 years of remaining economic contributions. Younger populations saw much fewer losses, older populations mostly left the workforce.
Second, a lot of people retired well before they usually would to stay out of the path of covid or covid-induced craziness. This is a big part of the school bus driver shortage, for instance. A lot of older people drove school buses for a bit of extra cash, and to be around kids. Wisely, a lot of them decided to stop doing that, and might not come back for a while.
So it isn't just deaths that are the reason for a reduced working population, although that has an impact, too.
The big drag in the report is from inventories and trade, which are being impacted by pandemic-related supply chain issues and geopolitics.
Look at mortgage rates for instance. Or just equities indeces.
https://www.cmegroup.com/trading/interest-rates/countdown-to...
they will do what market will allow them to do. One bank can raise rates, but others won't, they will secure pre-hike loans, and win customers because of lower rates.
Also, I am not sure if commenter above referred on loan rates market or maybe stock market..
If people stop borrowing, the interest rate on existing financial capital would fall way below 0% but since cash has a 0% interest rate, it's the working population that get screwed over during deflation through involuntary unemployment (also known as a economic depression).
Eternal money is a farce, it is inherently unstable and can't exist over the long term which is why it constantly collapses and all you can do is delay the collapse as if the economy was a roguelite where you are supposed to get as much progress inbetween runs.
Demurrage currencies allow the economy to represent negative interest rates and therefore eliminate the need for endless borrowing and inflation while simultaneously achieving full employment as predicted by Say's Law, decentralization of jobs, reducing wealth inequality and rewarding long term thinking.
I guess you're saying that Keynesian doesn't work all that well when growth in supply is constrained. This doesn't seem necessarily to be the case, to the extent that people can be convinced to buy things that aren't in short supply? Demand for many essentials is inelastic, though.
That's the opposite of Keynes' meaning. Keynes was satirizing economists who say, 'it might be bad now, but things will work out in the long run'.