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Comment by nus07 | Hacker News Reader

The last few years of zero interest rates has meant that a lot of people made a shitload of money . There is plenty of cash and liquidity around.28 year old FAANG engineers with 600k in savings and a house (as an oldie I am in awe). Inflation is here to stay for the next 5 years at least no matter what the Fed does about it . Plenty of people sitting on cash and multiple houses at 2.x% mortgages . They have plenty to splurge on that trip to Aruba.

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Yeah I'm in my 40s and I don't have that much in savings. Of course, working in failed tiny startups without 401k plans for most of my 20s didn't help. I've been doing my best to make up for lost time the past few years, but I've still got quite a ways to go before I get to that point.

But 600k in the bank is still not the norm for Americans, only a small percentage of them. Most are really struggling right now.

Having it as debt instead of in the bank sounds even better as inflation eats your debt away.

Only if your wages go up as well

Who keeps 600k in the bank? I could have it in stocks and be making around $16k/year in dividends right now (that's just me picking a stock at its current price and dividend, I'm sure it would have been over time otherwise), while riding out the recession.

If you believe that the stock market is going to go downhill as well, investing in a stock is only worthwhile if it loses less than it pays in dividends.

I guess that a lot of people are on the fence about whether they should short stocks since "everything is going down" or just sit on their cash reserves, eat the inflation and hope to buy in again once the bottom has been reached.

Or you can stop trying to time the market and keep buying through the downturn. Might make less money that way, but you also don't risk totally mistiming the bottom, like a lot of people likely did back in March 2020 during what ended up being the shortest recession ever.

Granted I think this recession is likely going to be significantly worse and longer than that one. I'm still taking advantage of the the 25% discount on stocks and buying, though.

Also I suspect we're in for some terrible shit in the next 5-15 years with the way the environment is heading (the physical environment, i.e. lack of water, topsoil, ocean acidification, etc), but I also suspect we're in for at least one more solid bull run before that happens.

What if stocks will go down for the next 30 years, like it happened in Japan?

If it lasts for multiple decades, then that flies in the face of the entire history of the US stock market and we're probably in for a US collapse at that point (especially considering most of the biggest companies in the US are multinational) and keeping money in dollars in a bank is probably equally foolish.

I've lived through crypto winters before that have lasted 2+ years. If I had bought a little bitcoin every week during that time I would easily be retired now. I plan to do the same during this downturn, but focused more on stocks (also getting a small amount of crypto). I didn't have the spare cash back in 2008 during the Great Recession, or I would have done extremely well for myself then too.

If for some reason the stock market stays fucked for decades, then I am acquiring other assets too, like precious metals. Also guns and ammo and goods to barter with might not be a bad idea in that case.

> If I had bought a little bitcoin every week during that time I would easily be retired now.

Problem is that bitcoin is a ponzi and doesn't have any revenue/profits but just FOMO.

If you bought tulips at the bottom and sold at the top...

Oh it's a ponzi you say? Well if only someone on the internet had mentioned that sooner I wouldn't have wasted my time with bitcoin then. Let me just sell everything real quick...done. /s

Thanks for being casually insulting. I know Hacker News is full of those comments so I'm used to it, but I'm not sure how you expected me to respond to your comment there, or what benefit it would add.

Your comment comes off to me as if I said something like "Oh look, I just got a pet mouse!" and you responded "Mice are crappy pets. It's going to bite you and give you the plague."

For the record, I said buy every week (as in DCA, or just buy no matter the price, all the way up until now), and I'd be retired now. That's not 'buy at the bottom, sell at the top'. It's currently $20,000, and that's not "at the top", the top was ~$69,000 in Nov 2021, so now is nowhere near the top right now.

First crypto winter I held bitcoin through, the price was hovering around $200 every week for two years, so I could and should have been buying more that entire time, instead of checking the price every couple of months to see if anything changed and buying nothing.

But I probably could have accumulated at least 40 coins potentially based on my income then, with a few sacrifices (by that I mean less going out to eat and buying a bunch of random video games that I'd often play once or twice and never again...still a problem I have today, it just makes up a smaller percent of my paycheck now). I was excited in bitcoin even then, but I was also a lot poorer, making about 15-20% what I'm making now, and I also wasn't prioritizing it as much as I could have been.

Even still, I'm not dumping all my earnings into this stuff. I put far more into my 401k/stocks than I do crypto.

Note: I mined bitcoin when the price was ~$300 knowing full well it was a ponzi.

If you DCAd on tulips and sold at the top you'd be set for generations.

You are talking with too much feelings. I understand. But it's ponzi all the way down.

> I put far more into my 401k/stocks than I do crypto.

Every single $1 you put is every single $1 into a ponzi. I'm sorry. I wish I too had generational wealth and did fancy art fulltime.

If you want something more real life and high risk/return, check out TQQQ & HFEA. I do those.

This has never really made sense to me. Maybe if you're a big player somewhere, but the average person didn't get a 9% raise in June, inflation isn't really affecting their debt at all

And with the economy cooling off, workers shouldn't expect to get raises anywhere close to the official rate of inflation anytime soon.

>>Having it as debt instead of in the bank sounds even better as inflation eats your debt away.

This is a crazy hack, in countries like India where a home/rent-income is a defacto investment, being in debt is cleverest way you can can have your investments subsidised by the economy(general public).

One of the biggest things you can learn as an adult is to be comfortable with manageable levels of debt.

Others are discussing that the 28 yo FAANG engineer is such a small population that it's not relevant to the larger picture, which may be true, but misses the larger point that _lots_ of people had extra money of which the FAANG engineer is just one example. Home owners refinanced. Parents got the child tax credit. Federal and state-level stimulus checks. And businesses took 75% of PPP dollars for purposes other than wages.

https://www.stlouisfed.org/publications/regional-economist/2...

It may be "a lot of people" in an absolute sense, but it's still only a small fraction of the population. Specifically, the fraction that was already very wealthy.

The poor are getting worse off, with wages not rising nearly fast enough to keep pace with inflation (not to mention being basically sacrificed to keep the great money machine running during COVID).

And they're already starting to do something about it: the unionization push is accelerating (I saw several weeks ago a figure that at the beginning of the year, there were zero unionized Starbucks, and at the time of that posting, they had just unionized the 150th), and if inflation continues at this rate—or higher—without some significant changes in wages, etc, we might start to see bigger problems before long.

> 28 year old FAANG engineers with 600k in savings and a house

This is truly such an exxagerated strawman. It’s such a minuscule number of people, and they’re definitely not 28. Plus, the sky high salaries are for senior engineers, not juniors.

600k in savings, not a 600k salary which I agree would be exceptionally rare and not the norm for 28 year olds (but definitely possible in the finance world for the top performers)

A FAANG engineer that joined just out of school (~22 years old) and spent 6 years getting regular promotions, awards, maybe a move into management, etc. and all of their initial stock awards vested could very well have 600k saved over that time. Doubly so if they're married and their spouse is in the same situation.

Lowest level Facebook managers are in the 550-600k TC range[0]. Not sure though how that compares to other FAANGs, or how likely it is to get there in your 20s. Honestly I'd expect it to be easier to get to M1 at FB than to get into the upper upper echelons of the technical ladder.

[0] https://www.levels.fyi/company/Facebook/salaries/Software-En...

Yes, I read savings not salary.

I still disagree, there’s so much in income/other taxes that are applied. They spend on exorbitant rents and overpriced goods. Most such people are not frugal by any stretch.

If you could link any survey/study/statistics on the number of such 600k saving individuals, I’d love to see it. Until then, it’s a strawman.

I know plenty of folks who this describes? FAANG workers who got in at 20, no kids, own homes and have hundreds of thousands in the bank.

Plenty == affect the global/USA economy? Have you considered you live in a bubble?

FAANG don’t even employ enough people for this to make a dent on anything other than housing prices in FAANG commute localities.

The FAANG example was exaggerated, but the core point still stands. Across the board, labor in US has seen sharp income increases the last couple years, and families have had elevated savings rate for a lot longer. Plus, nobody was spending anything in the beginning of COVID. That latent spending power of households is now being deployed, and huge contributor to inflation.

I don't see how Covid savings would increase the price of butter and meat really. Inflation is all over the board and escalated in January (?).

It is just Fed printing money like there is no tomorrow.

I find this disappointing because it basically says "anyone who works for a W2 will cause inflation if they are successful"

That shows to me that capitalism is broken if success means inflation. We should be able to swim in cash reserves and safety and not be penalized for it.

> it basically says "anyone who works for a W2 will cause inflation if they are successful"

Then take comfort in that armchair analysis being wrong. If it were true, if FAANG employees’ pay were driving inflation, we’d expect to see local inflation correlate with FAANG employment.

It does not. In fact, almost the opposite is true, with inflation in the interior outpacing that on the coasts [1][2]. (Shipping.)

[1] https://www.bloomberg.com/news/articles/2021-11-11/inflation...

[2] https://www.jec.senate.gov/public/index.cfm/republicans/anal...

My armchair analysis is that we have heavy inflation in what were low-mid CoL cities as the big money remote workers cash out of the coasts for cheaper locales

Or in other words, the rest of the country catching up to the big cities

No idea if this is the truth of course

> we have heavy inflation in what were low-mid CoL cities as the big money remote workers cash out of the coasts for cheaper locales

Internal migration is too slow and too small to explain the interior’s price shocks. Also, it’s not like the coasts are withering away. Real GDP growth in California and New York was better than the national trend in Q1 2022; the interior saw the worst of the real economic shock [1].

[1] https://www.bea.gov/news/2022/gross-domestic-product-state-1...

>Internal migration is too slow and too small to explain the interior’s price shocks.

As anyone who paid any attention to the housing market in the past 2yr knows, if you have 10 houses and 11 buyers...

>the interior saw the worst of the real economic shock

That places that have economies that are more dependent on physical goods, services that cannot be performed remotely and high volume low margin types of business (which are heavily affected by supply chain stuff and commodity prices) should not surprise anyone.

How does any of this relate to testing the hypothesis of FAANG employees driving inflation?

My primary point was that the extra demand caused by FAANG driven monopoly money suddenly sloshing into these other markets could easily cause prices to increase far beyond what the dollar values and number of people would make you think because supply for all sorts of things is not elastic enough over a short enough time period.

At least in housing, this seems to be the case... In cities like Seattle, the DMV area, etc., I hear about price decreases and homes sitting on the market for weeks.

Where I'm located(east coast LCOL area), we still compete with ~15 bidders for every house, and they're still reliably selling within 2-3 days for 10% over asking, all cash, with inspections waived.

Obviously part of this is a supply issue, but, I have a strong suspicion the rise of remote work is a contributor to price increases near us. We live a short distance(~1-2 hrs) from several major metros, and with the flexibility to go into the office only a few days a month, It's feasible to take a much higher paying job in somewhere like NYC and commute. Local wages for engineers here are/were also much lower than what was offered for typical remote roles, so I'm sure that's causing an additional upward pressure

Isn’t this a result of inflation in the interior finally catching up to the ridiculous pace that the coasts have had as coastal money flees inward due to WFH and unaffordable housing prices?

That is not at all what is going on here…it’s not the people with all the money, it’s the underlying monetary policy(little to no interest rates for a decade combined with money printing) that led to those people having that money. If a tech company couldn’t borrow cheap money early on, they couldn’t afford those wonderful compensation packages.

Google’s profits have vastly outstripped the money invested into it. They could have borrowed at 20% and still been wildly profitable.

The argument is that without cheap money, Google/FB's customers wouldn't have the cash to plow into ads.

Apple, Netflix, Amazon, and Microsoft aren’t advertising supported and while Google does profiting from cheap money Google’s margins are insane. So, they can take a significant reduction in revenue without changing their business model.

I keep getting YouTube adds for the same kind of things I have seen on TV. Tide pods, dish soap, toilet paper etc alongside Door Dash’s attempt to recruit workers. They would definitely make less money without door dash but not enough to matter. Much like how startups keep splurging on Super Bowl commercials but the Super Bowl would still make lots of money without them.

I would not describe it as broken.

It could simply be a consequence of the parameters of nature not offering humans unlimited energy and resources.

While I agree with the premise of finite energy and resources here, I don't agree that current systems are an inherent consequence of it. It's the way we as societies have allowed things to be structured. They don't have to be structured in such a way. Energy and resources have various allocation models that can be adopted, we just seem to be moving right back to the darwinistic models more and more which makes me question the stability of societies in general, especially as allocation systems tend to deviate away from natural allocation systems yet remain darwinistic.

If we continue along competitive models for allocation to the end, we're right back where humans started before forming societies except in an articicial darwinistic model which I'd say people are increasingly rejecting, so we need to start thinking a bit more about more equitable allocation systems than we currently have. Right now, I'd say the general population is pretty fed up with existing allocation systems.

> If we continue along competitive models for allocation to the end

Competition is a very strong motivator for progress. Even if you didn’t embed it formally within a society, I bet it would very quickly arise and build upon itself.

Anti-competitive practices are the cornerstone of unregulated societies (via mafias), but it certainly would in the (theoretical) absence of that. It's a fundamental property of entities that try to achieve things, of which humans are the prime example.

You can still have competition and create competitive forces that drive and motivate people, they don't have to be tightly coupled to fundamental energy and material resources needed for survival, or, they can follow classic models that assume necessary baselines for enjoyable survival levels for everyone and then provide luxury allocations for competitive successes. There's all sorts of options out there instead of directly mirroring natural selection in abstract human created systems.

> While I agree with the premise of finite energy and resources here, I don't agree that current systems are an inherent consequence of it. It's the way we as societies have allowed things to be structured. They don't have to be structured in such a way.

Yes, I do not see a problem with capitalism coexisting with a wealth transfer mechanism to constantly “reset” the game a little bit to prevent extreme disparities. Well, other than the fact that humans would have to allow it to occur.

Any attempts to do that generally end-up with the smaller business owners being "reset" by the .1%, while the W2 class drink kool-aid

Since when capitalism is defined as a system where governments intevene into the market forces to bail out losers by unbacked printed money?

The argument is about zero interest rates, not success or capitalism.

But perhaps those are somehow related.

Oh, they are perfectly related.

as opposed to China's economy, by example?

The moment a centralised institution controls interest rates, and has the ability to buy government debt (in other words finance government spending without the market buying bonds), you are NOT talking about capitalism, but about government controlled markets.

> finance government spending without the market buying bonds

According to https://www.thebalance.com/who-owns-the-u-s-national-debt-33...:

“The public holds over $22 trillion of the national debt. 3 Foreign governments hold a large portion of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and holders of savings bonds.”

> The public holds over $22 trillion of the national debt.

This is amazing. A very few seem to realise that it says the public buys and holds a promise on a future productive capacity of that same public. It's as if I paid another person for the privilege of promising myself to behave and work for that person overtime in the future.

Ok, but the fed bought bonds on the market and artificially drove down interest rates doing so. And also financed part of government debt.

I don’t see how the holdings of it matter, that’s completely different to the bonds being sold on the open market, which the fed was buying

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