Financial anxiety: The alarming side effect of inflation
bbc.com
bbc.com
It's one thing to feel financially tight. It's another thing to have endless news articles and publications and posts warning of how bad the global economy is and how inflation is running out of control.
Not only does this constant negative message directly cause stress on the viewers, but it can cause fear in business which can lead to "precautionary" retractions... which can exacerbate the actual market problems.
Decision-makers in companies will make harsh short term decisions either to look responsible to shareholders or to cover their asses from upper management, and these decisions can have negative long term consequences to the company, employees (especially those laid off), and the market in general.
How often do we see news of mass layoffs, and a month or two later we see a big hiring round from the same companies? This is grossly inefficient for the companies, and it's obviously very harmful to those let go.
If the media didn't jump on every potential disaster with such fervor, we would all be better off. But promoting fear gets attention, and attention is potential revenue... or votes.
Also, worth remembering, the median American income is $40,480 /yr., while median household is $74,580 /yr. Half of Americans make less than that per year. 20th percentile income, by median, says that 1/5th of American households make less than $28,000/yr (no law of averages with high earners skewing the result here). One glance at the housing market, or inflation, and I think they have every right to feel angry.
Edit: Or is it 80th percentile?
I will say though on inflation we should shoot the messenger. Inflation is a disease; it describes a symptom (increased prices). The word inflation does not describe at all why prices increased. Did oil get more expensive so the cost of revenue increased? Did a company realize they were charging below market rate? The news can be do a tiny bit of investigation before reporting on it for hours on end.
https://www.census.gov/library/publications/2023/demo/p60-27...
What about it is relieving? Prices haven't gone down, prices aren't going down, we're supposed to feel relieved that prices are still going up, just slower?
I honestly dare the bankers on the Federal Reserve, and frankly, all of Congress, to live on a 20th percentile income. They'd be all over inflation in seconds once reality set in.
Edit: I might mean 80th, I'm struggling to remember which end is lower (20th or 80th).
For instance, student loan forgiveness and the pause on interest payments are almost certainly a major driver of inflation.
Would you say canceling forgiveness and resuming payments for all borrowers in order to cull inflation is a position that will win elections?
https://twitter.com/fermatslibrary/status/117538523116095897...
This should statistically account for at least ~25% of it, according to the numbers:
If money supply increases and money demand increases then the price of money doesn't change.
The figures you cited are real median income, meaning the effect of inflation has been backed out.
The C-CPI-U was around 8% in 2022. If the Census report says that real incomes (what your paycheck can buy) decreased 2.3%, that means that nominal incomes (the numbers on your paycheck) increased by a little over 5%. The unlabeled table on page 14 shows that they used 7.8% as the deflator for 2022.
Do not repeat the nonsense that "not only has your [real] income decreased, but inflation has made things more expensive". That may or may not be the case, but if you're going to cite both, you should be citing nominal income, not real income. (In particular in 2022, this was not the case and this error leads the reader to an incorrect conclusion.)
I think a portion of people who say things like this don't know what they're talking about. Another portion knows exactly what they're talking about but realizes that other people won't and is able to spin misleading messages out of that gap in understanding. (Make no mistake, there are actual problems facing the median income American, but there is also a lot of mis-speak about them, some of which is intentional.)
Non-Sequiter. That isn't a quote of something I wrote.
The thing I actually wrote is "so not only do you get less for your money you also have less money!". Which is accurate. Shrinkflation means when you go out to buy detergent you only get 15.5 oz instead of 16oz so you're getting less for your money. Real income decreasing by 2.3% means you have less money. "so not only do you get less for your money you also have less money!"
People really aren't going to care that their income is up 5% if the rent is up 8% ... The real value is noticed.
You still appear to not understand.
You have MORE money in your paycheck (if you were a median income earner in both 2021 and 2022). That money just has less purchasing power by a greater amount than the increase in money.
More money (nominal income is up), but less purchasing power (real income is down).
https://www.epi.org/publication/swa-wages-2022/
> Between 2019 and 2022, hourly wage growth was strongest at the bottom of the wage distribution. The 10th-percentile real hourly wage grew 9.0% over the three-year period. When we look across the wage distribution, we see wage growth declining for each successive wage group until we reach the high-wage group. Compared with the 9.0% wage growth at the bottom, growth was less than half as fast for lower-middle-wage workers (3.9%) and less than one-third as fast for middle-wage workers (2.4%) between 2019 and 2022. Upper-middle wages grew even more slowly at 1.8% over the three-year period, while the 90th-percentile wage grew 4.9%—faster than the middle wages, but not as fast as the 10th-percentile wage.
And this is from EPI, a left-leaning think tank.
> The 10th-percentile wage in 2022 was $12.57, or $26,145 annually for a full-time worker.
9.0% real wage growth is still not remotely close to livable.
I know you were responding to a comment about raises but seeing "done the best" in any context for the lowest earning workers feels odd.
Inflation is absolutely decimating the lower half of the country. Your numbers are sophistry.
> While our analysis finds fast wage growth at the 10th percentile and wage compression within the bottom 90% of the wage distribution, highly unequal wage growth has led the very top to amass a greater share of the overall earnings distribution, contributing to worsening inequality.
Maybe a Democratic Party partisan outlet would say it is just a Republican talking point but the average news media outlet I have seen has had something negative to say about the economy every week for the past few years.
It's also a bit strange to see you view media as a completely separate entity from "decision-makers in companies". My experience has been that most decision makers in companies get most of their ideas entirely from the board and major investors. I recently left a publicly traded company, and pretty much every time our "leaders" met with the border and major investors they would come back singing a very different tune then they went in.
But these same major investors and board members also have relationships with people running major media companies (which are also just companies), in many cases they may even be the same people.
There's this trend I've seen on HN to just dismiss anything that seems wrong with the world, no matter the evidence, with "media sensationalism", as though we are living in fantastic times if it were for that pesky media distorting our views.
I'd also add that the statistics can be misleading: of the jobs added, many are in food services and front-line healthcare. For the former, the positions don't provide hours and pay poorly. Not a great area to be adding jobs in amidst high inflation and depressed lending.
Thank you for saying this, it's exactly what was going through my head while reading that post.
The very idea that money problems are in people's heads, while it can be true, people are panicking not because the media told them to but because they can see for themselves that they don't make enough money.
If you've never been through it you may not understand. When we hit the recession in the early 90's my family quite literally did not make enough money to afford everything month to month (stepfather worked at a grocery store). We were slowly going into debt just to survive (bills, housing, food, gas).
As a software developer based in the UK, the inflation mentioned in the article is felt very deeply by myself. The article cited 7.2% as the price inflation rate, which is close to the rate of 7.6% calculated by the Office for National Statistics based on my household spending[1] and is consistent with my personal experience.
On top of that, the UK Treasury adjusted the personal tax threshold policy back in April this year, basically freezing the tax bands to no longer rise with the inflation, which caused a direct 3.3% hit on my income. This freeze is estimated to be the largest over 50 years according to BBC[2], but since we are discussing media sensationalism, so maybe that's not something that would convince you.
Anyway, maybe the situation is different elsewhere, but I do find this article more truthful than not from where I stand.
[1]: https://www.ons.gov.uk/economy/inflationandpriceindices/arti... [2]: https://www.bbc.co.uk/news/business-67031930
Do you know if those figures factor in non-consumables like housing and insurance?
Asking because many US areas are seeing 20-100% jumps (or higher), year over year over year. When your largest expenses skyrocket, single digit increase stats don't reflect reality well.
Some of those old tenants joined the ranks of homeless people with savings, because there was nowhere to go. My sister may be one (diff state). We'll know more tomorrow.
Insurance stores are even more dire.
You can directly view by kind on ONS as well[1]. It states CPIH over 12 months rate in July 2023 is 5.4 for housing and 9.0 for health.
[1]: https://www.ons.gov.uk/economy/inflationandpriceindices/bull...
In my experience it's "how will i pay for rent and food the next two months".
As far as I can tell, the mainstream media is working overtime to _downplay_ the actual state of things.
I'm a computer programmer with an advanced degree and three decades of experience and until about a year ago, I got a dozen unsolicited job offers a month. Now I can't recall the last time I saw any. Reddit's /r/cscareerquestions used to be flooded with people complaining about persistent recruiters, now it's flooded with credentialed people who've been looking for a job for months with no success.
My wife and I both make good salaries in a relatively low cost of living area and we're suddenly finding ourselves cutting back drastically just to keep from falling behind. I track my finances pretty carefully and I can compare what I spent on groceries and gas and medical expenses later year vs. this year (against the 0% pay raise we've both gotten for the past few years) and it's quite a bit.
I'm in a good position since I bought a house a long time ago at a fixed mortgage rate and am still employed, but I can't even imagine how people even a little worse off than me are doing... all while the network news and the places on the internet that haven't been shadowbanned are insisting that we're just exaggerating the scope of this financial crisis.
I remember 2000 and 2008, and neither seem like anything compared to this.
Thing I learned a long time ago from an experience[1]. Managers often place more trust in what they read in rags like the NYT and the WSJ than they do their in house experts. Which is crazy because the guys that scribble for those outfits are relative buffoons with a knack for writing and nothing else. And relying on third hand bullshit most of the time.
[1] VP said we were idiots because what were were saying didn't line up with an article he read in Inc Magazine.
Everybody prefers to be paid in dollars, and if you're getting paid in cash, why pay taxes? I had an Argentinian tell me that I could pay ~25% of the list price if I paid in USD instead of credit card, because the unofficial exchange rate and not paying taxes on it would save that much. Money requires trust that you can exchange it for goods and services, which are provided by other members of society, so debasing the money supply like this is killing society in the lovely country of Argentina.
It won’t change until we have actual hard money that can’t be debased by leaders/bankers/politicians.
That creates other issues. Volatility, for one.
Not one mention that inflation is caused by the government and central banks expanding the money supply.
Inflation is just a word that we have for changes between the costs of various goods and services and the amount of money that people are being paid for the work they do (averaged across various parameters to make communication simple). Those changes happen for many reasons, because people aren't making enough money... because people are hording money... because the govt et al increase the supply of money to counteract those phenomena... because the economic chain of supply has shifted... and for some massive combination of all those things and more. The economy is a complex machination that you're deeply oversimplifying with this two sentence comment. Although the government trying to predict such things and get involved can be deeply flawed, the alternative is the crushing burden of unemployment and crumbling structures.
As such, pointing the finger strongly at big government and saying "how dare you get involved" is myopic and heavy handed. We could also easily point the finger at the financiers and real-estate moguls who have brought us into a world where the average worker has little income and extreme "expenses" that filter into the coffers of wall street.
This is a little overstated, no?
I agree the economy is more complicated than simply money supply, but subscribe to Hayek’s view of the pretence of knowledge - that the central bank can possibly manage the economy better than the economy can manage itself. The problem with a small elite managing the money supply is that it isn’t predictable. We see them saying rates will be low for the foreseeable future and then a few quarters later start jacking up interest rates at the fastest rate in 40 years. Well, I guess it just sucks to be anyone that listened to the “low for long” guidance. But this uncertainty has a cooling effect on economic activity. If anything we should trust money supply to a predictable, simple equation rather than the whims of men behind closed doors.
The recent inflation is more because of unfettered capitalism. Supply chain issues? Ok let's just keep on raising prices as much as we can. Things back under control? Ok, well we are still going to claim we have issues and just keep on raising prices.
Workers want more money? Ok instead of us shareholders taking the hit, we are going to pass on every bit of that (and more) to the consumer because "we can".
Want to go to a football game? A concert? Disney world? Cool- we are just going to keep increasing prices like crazy because there is a large enough people in the top 10% that will pay because that increase doesn't really matter.
Prices are being driven the fuck up because of greed and income divide.
That glut of new money took a flight to quality in banks and things like tech companies. Such firms, and all the people that contract with them or are employed by them as downstream from this money thus had a warped cost to capital compared to everyone else.
It wouldn’t make sense to operate a business and not choose the customer who can support a higher price point over the lower one with an identical cost, and with such a large delta, increasing margin as a matter of price increase made fundamentally more sense than investing in cost reductions.
The fact is that Central Banks had the largest role to play here assuming that choosing to make more money over less money by simply raising prices is not inherently evil.
> Prices are being driven the fuck up because of greed and income divide.
Maybe...it's both? Could it actually be that the government and central banks collude to prop up the housing and stock markets and print money (through debt creation) in order to make sure that the upper quintile keeps getting paid and the reset squabble about it?
If the houses aren’t sitting on the market, people can afford them. I think what actually happened is people realized that housing was underpriced. Which is insane in terms of the raw numbers, but it’s the truth: lack of supply along with increasing numbers of buyers means that the market really is that hot.
Sucks to be late to this party.
HouseCoin if you will.
> There are shoddy houses in my area that were sold in 2021 for $100k that are now on the market for $250k in 2023.
Does not imply this:
> We're in a bubble.
“‘Cause your dollar ain’t shit and it’s taxed to no end”
NPR's mostly neutral take on it: https://www.npr.org/transcripts/1197954458
privatise profits and socialise losses.
the truth is that for anxiety to be relieved, we need higher wages, much more time off, good healthcare and less rising costs.
economic "uncertainty" and inflation are not natural disasters. they are the outcomes of rational and incentivised behaviour.
I'm genuinely curious about that professional help.
A this point it seems the general advice is "just accept to be poor", which doesn't seem to go in line with wealth accumulation over time.
From my observation, most people rightfully assume their incomes aren’t going to rise very fast, if at all. We’re in a world where some people would call a 3% annual raise “generous”.
The correct and only way to get by inflation without getting pinched is to make sure your income raises to match cost of living increase. But a lot of people don’t live in the rat race so this might not be obvious and certainly doesn’t feel desirable.
As someone living in the urban rat race, inflation doesn’t feel like a big deal. In the 2010s amidst “low inflation” I saw rents rise in my city astronomically. In the same time period I worked / negotiated to increase my own pay astronomically. Prices go up, income goes up, life goes on.
On the other hand, those with some debt need the financial wisdom to use their spiraling wages to pay down debt principal and not let the debt spiral due to increasing interest rates.
So, high inflation can be a kind of continuous cash debt/savings jubilee, resetting small-time debtors and savers to living hand-to-mouth as it erases their cash history. But it can accelerate the gap between the worst debtors and the biggest investors who are on opposite sides of the spiral...
Just spend like there's no tomorrow?