Any financial experts here willing to chime in?
USA printed basically 10 trillion (yes with a T). UK about 1 trillion. Germany, France, Spain, South Africa Japan and so on. Maybe 25 trillion? No one seems to have counted.
Under MMT (modern monetary theory) this is fine as long as government takes away the printed token (money) later on in form of tax
But they have not. The money has flowed from waitresses to landlords, to supermarket owners and their landlords and to share owners of supermarkets - basically it went from the poor to the middle class and then to the ultra wealthy.
The ultra wealthy now have an extra 25 trillion dollars. So they “invest”.
Real estate goes to stupid prices (see cost of a 4 bed house in London).
Stock market hits new highs.
But the rest of us have sold our nice middle class homes in suburbs for stupid amounts and moved … somewhere with less amenities.
Or are renting in cities at high rates and food prices going sky high.
The simplest answer is governments only did half the job - the next job is a uber wealth tax - holding of over say 20 million, 30 million, just get taxed, forcing sale of assets and return of assets to the flowing economy and then governments can afford things like welfare and investment again.
We should stop privileging the privileged.
It could surely be a tax focused on ultra-rich, who have benefited from tax cuts by parties in power for years. Corporate and ultra-rich taxes are not insane concepts, what is the real difference in quality of life of $20M vs. $50M? What necessities of life are not met? Corporate taxes are even better, dodge those, issue large stock buy backs which will benefit largest shareholders the most -- Milton Friedman smiles from the shareholder value heavens.
Imagine the economy has a huge MCMC graph, potentially everyone is connected to each other, with edges of varying strength that correspond to possible outflows and inflows of money between people (and perhaps entities/institutions). It becomes clear that some nodes in the graph are connected to other nodes that end up keeping money in few places to "invest" and accumulate wealth, sitting there, doing nothing for anyone else, tremendous capital accruing more capital because that is how this game can work. Other nodes lead to money moving rapidly in the network and having affect on the lives of many nodes. The economy has to be movement of money among individual components of the economy, because money is the meta-resource, so just use that to stand-in for anything.
Minimal.
But people having so much money that they have nothing to spend it on encourages investment in wild ideas like SpaceX or OpenAI. If you tax that money away, who will invest in new ideas?
Quantative tightening just takes money from the fed/bank loop. It is real yes but it’s like thinking interest rates are a lever in the economy anymore.
Anyway the QT on M4 has only dropped M4 by a trillion which basically means 9T still out there on top of everything else
(#) ie they tried to suck it back out of banks but banks don’t have the wealth - the banks customers do.
In short, ultra wealth taxes will stop the ultra wealthy drawing more value out of the economy like a gravity well, and start a flow of wealth through the economy.
Imagine all the blood in your body accumulating in your ankle. Your ankle feels it’s rich in blood but you need transfusion after transfusion to keep everything else going.
Interest rates are absolutely a lever in the economy. It's not a coincidence that the instant the free-money ZIRP spigot was shut off, suddenly investors cared about profitability again and fat bloated tech firms started having layoffs for the first time in decades.
I agree Most tech companies have been spewing capital out the door and funding the lucky RSU / optioned employees for a decade. I guess the weird hiring practises and so on have been hiding that reality. I think shareholders are waking up to it, but zirp is only a small part of the story
And remember that the economy has been growing the whole time. If the economy grows while the money supply stays constant then it is effectively a shrink of the money supply since a constant amount has to spread across more activity.
Also, copyright should be reduced to 10 years, maybe 20 years at the longest.
Very hard to hide acres of Earth.
...good?
We are all temporary stewards of an Earth we did nothing to earn or create.
If we tax the chickens, the wealthiest will have to sell some of the chickens to pay the tax, and then chickens will circulate down through the economy as well as up - circulation not redistribution is the idea
The insight of MMT is that governments get what they have by purchasing it from productive people - and purchasing it using money they just print out of thin air. (The point is not to print too much!)
Do governments make bad decisions - yes. Do they misuse tax incentives and muck up hugely. Yes. But to be fair you should see how bad it is inside fortune 500s and boy some of those start ups are an embarrassment.
Don’t call for the “private sector is great and should take over every branch of government” shtick. That’s the weather app theory of extracting public money for profit. Focus on how to make all organisations more effective
>The point is not to print too much!
It may be possible for this to continue an indefinite amount of time, just like counterfeiting. It is almost exactly state-sponsored counterfeiting.
>But to be fair you should see how bad it is inside fortune 500s and boy some of those start ups are an embarrassment.
This waste is greatly exacerbated by artificial credit bubbles created by MMT shysters. They even got academia thinking this is a good idea, probably by paying them off in freshly printed notes.
>Don’t call for the “private sector is great and should take over every branch of government” shtick.
I would never suggest such a thing. But letting the state spend theoretically unlimited money, and thus pick winners and losers in a "free market" is just bad policy.
Thing are slowing down but the economy is still flush with cash: starting wages are at an all time high, median household income is increasing the fastest it has in 80 years even adjusting for inflation, consumer spending is breaking records.
There are obviously people being left out of this but beware that you are not in a pessimistic information bubble.
I'm inclined to agree with the stats that show things are going well, and that crisis sentiment is just that - sentiment.
On the paper, the numbers look good, but the reality is shit due to underlying inflation because you can spend way less with the same amount of money.
As a result, valuations of companies also soars, not because everything is great, but because the cash is losing value.
That does such a great job of expressing something I’ve intuitively “known” for a long time.
There are the people who do all the talking, and those who are doing - very few who are in both camps. If you’re busy making things happen, you’re less likely to be commenting.
Especially with social media, it's worth asking 'does anybody benefit from this particular doom and gloom being socially established and culturally adopted?'
The last thing you want to do is take such a thing at face value, and it's possible that financial markets might discount some such signals, especially if they're getting other signals that give the lie to the doom signals.
1: https://www.ftc.gov/business-guidance/blog/2024/03/price-fix...
2: https://www.jchs.harvard.edu/americas-rental-housing-2024
And another question - if social media is so harmful, then what of all the people on this site who helped to build it? Are they villains of the modern era, magnifying unhappiness throughout the world?
> And another question - if social media is so harmful, then what of all the people on this site who helped to build it? Are they villains of the modern era, magnifying unhappiness throughout the world?
Does this not describe Zuckerberg? But yeah, I'm here. But I would argue HN in particular gives a much less strong "hit" of dopamine when doomscrolling.
It reminds me of how, depending on the type of person you ask, you'll get conflicting answers on who the 'parasites' are in the movie Parasite.
If you help enshitify the next Big Thing and get paid doing it, are you contributing to society? Or contributing to its growing problems?
I am not sure about that, inflation was quite high during 2022-2023 and prices didn't go down. It is true that inflation is down right now - as this is an election year; however you still have to pay for current prices with what you get as your current salary.
People think about prices in terms of macroeconomic factors, but their own income as the result of individual factors.
So 1. people around here tend to be in the speculative investment bubble and it is worse there than most other places right now and 2. any time there is change like this (esp. when it happens fast) - there are winners and losers and 3. Since 2007/2008 everyone has been trying to be the next Burry or Taleb and call the bubble.
They say so themselves!
https://www.nasdaq.com/articles/the-stock-market-is-not-the-...
* Inflation has been rising for so long that wages would have to eventually follow.
* Unemployment figures can be gamed in various ways, especially in an election year, however the real question is "Are quality jobs being created or do we have a glut of open burger flipping positions"
I don't get this argument. I was flipping burgers in 2008 and we saw an influx of overqualified applicants because people needed the work.
If people are not desperate enough for these jobs as menial as they are, that's still a positive economic sign. Especially when they can't find burger-flippers in our area right now at $21.89 an hour.
Mortgages and cost of living don't go down if you take a lower paying job but you're certainly worse off.
Another commenter in this thread pointed out starting wages have been at an all time high. That might be true, but that doesn’t mean it’s enough to live comfortably. In my City you’d need to make a salary of about 165,000 in order to be able to theoretically afford the median home here. The two largest employers here have very few positions that pay in that range (mostly leadership roles or administrative) whereas most are 15-25/hr range.
So yes the economy is doing great if you’re rich. Never been better. It is in the best interests for news organizations right now to talk about how amazing it is doing in order to help suppress panic and keep afloat spending from the general populace. If the non-rich feel things are tightening (they are, just ask them) and they decide to stop spending that is bad.
Also keep in mind there is an election this year and a healthy economy as reported can equal votes.
The median home price would suggest that the median household income is at least $160k, which seems pretty good.
https://www.epi.org/publication/swa-wages-2022/
https://www.ft.com/content/f32d4927-a182-4d7c-bf2d-dd915ef84...
Low income earners have seen the most wage growth since the pandemic.
If you earned 30k, and spent 25k in 2020, and in 2023 earn 35k and spend 30k, the situation is worse, despite a superior wage inflation (16% over 3 year instead of 10%, for a cost of living inflation of 20% in both case).
And I'm not going into the case of people who don't make enough to save even 5k a year, for them, if the wage increases do not match the cost of living inflation, they have to downsize, and sometimes live in their cars for a while (those are often renters and inflation is worse for renters). Most of the invisible homeless in big cities are in that kind of situation.
You have to pay people enough for them to be able to go to work, so of course the wage inflation for lower salaries has to match the inflation for renters.
Which leads me to believe it is mostly the negative media hype which gets eyeballs. Also, given the election coming up it is good for the challenger to claim the incumbent messed up the economy and they’ll totally fix it if you vote for them.
Unemployment is low and inflation is falling, but consumer sentiment remains depressed. This has confounded economists, who historically rely on these two variables to gauge how consumers feel about the economy. We propose that borrowing costs, which have grown at rates they had not reached in decades, do much to explain this gap. The cost of money is not currently included in traditional price indexes, indicating a disconnect between the measures favored by economists and the effective costs borne by consumers. We show that the lows in US consumer sentiment that cannot be explained by unemployment and official inflation are strongly correlated with borrowing costs and consumer credit supply. Concerns over borrowing costs, which have historically tracked the cost of money, are at their highest levels since the Volcker-era. We then develop alternative measures of inflation that include borrowing costs and can account for almost three quarters of the gap in US consumer sentiment in 2023. Global evidence shows that consumer sentiment gaps across countries are also strongly correlated with changes in interest rates. Proposed U.S.-specific factors do not find much supportive evidence abroad.
https://russellinvestments.com/us/blog/market-concentration-...
https://www.reuters.com/markets/us/peak-us-stock-concentrati...
Late stage bull markets tend to look like this: still going up, but mostly due to a shrinking number of stocks which benefit from mass reallocation out of everything else.
So we are seeing huge gobs of investments/pensions being pulled out of stock markets and being put into bonds or cash.
The expectation is to see a decrease in the amount of money in the stock market but better returns in the money that remains.
1.
In most western countries, salaries of low-skilled workers have grown faster than inflation, but salaries of high-skilled workers have grown only as fast or slower than inflation.
We (HN) live in a high-skilled bubble, and our food delivery is becoming less affordable because our door dasher is making more money.
2.
Journalism is going through a structural crisis because ppl are addicted to TikTok and co.
So jounalists struggle a lot. From their point of view, the economy looks bad. That's what sets the tone in the news.
3.
If you want to get a different president elected, a good economy is not what you want. So Republicans, Russia and China all want Americans to think that the country is going to shit, because then, they will vote in their guy.
Incidentally, the TikTok algorithm is controlled by a company that is controlled by the Chinese party.
When the US deindustrialized, the global poor got richer (manufacturing earns more than subsistence farming) and the rich got richer (it's cheaper to make things overseas), but the lower middle class got poorer. In aggregate it looks like the world got richer, so the Steven Pinkers of the world scold the complainers for not getting that we are living in the best time in human history.
I think the economy is turning against the kind of worker who gets a four year degree and might have a job title like, "data scientist", and everyone is going to tell them they should have known better.
Low-skilled labor in America is basically a temporary way to make money and offers no long term future. That was not the case 40 years ago. You have to use whatever opportunity a low-skilled job provides as a springboard to high skilled labor, otherwise you will tread water at best. In part cause you cannot use it to acquire financial assets (a house, 401k, etc) and the American economy is now built around ensuring financial assets appreciate (inflate in value).
https://en.wikipedia.org/wiki/List_of_cognitive_biases
Also,
>financial markets are doing well
(presumably this means equity prices for shares of publicly listed businesses increasing at a sufficient rate)
and
>depression, people complaining, news
are unrelated things (assuming you mean emotional depression, not economic depression).
The loud protestations of people caught in the correction from overhiring are just drowning out the many many people who are still happily employed and not complaining about it online.
If you're looking at the big brand shares like the FAANGs, or most recently Nvidia, then that is all meaningless nonsense. Never, ever, try to read something into the movement of those shares, its a fools game.
Second, but related to the first, don't forget that the NASDAQ is dragged up and down by the big tech brands, so take NASDAQ movements with a pinch of salt too.
There are also in general many sectors out there where valuations and expectations are unrealistically high. Its not all plain sailing.
Think about who stands to benefit from making you feel bad.
This chart shows (part of) the yield curve, not the Fed funds rate.
Did you mean to show this?
> America is in a funk, and no one seems to know why. Unemployment rates are lower than they’ve been in half a century and the stock market is sky-high, but poll after poll shows that voters are disgruntled. President Joe Biden’s approval rating has been hovering in the high 30s. Americans’ satisfaction with their personal lives—a measure that usually dips in times of economic uncertainty—is at a near-record low, according to Gallup polling. And nearly half of Americans surveyed in January said they were worse off than three years prior.
> Experts have struggled to find a convincing explanation for this era of bad feelings. Maybe it’s the spate of inflation over the past couple of years, the immigration crisis at the border, or the brutal wars in Ukraine and Gaza. But even the people who claim to make sense of the political world acknowledge that these rational factors can’t fully account for America’s national malaise. We believe that’s because they’re overlooking a crucial factor.
> Four years ago, the country was brought to its knees by a world-historic disaster. COVID-19 hospitalized nearly 7 million Americans and killed more than a million; it’s still killing hundreds each week. It shut down schools and forced people into social isolation. Almost overnight, most of the country was thrown into a state of high anxiety—then, soon enough, grief and mourning. But the country has not come together to sufficiently acknowledge the tragedy it endured. As clinical psychiatrists, we see the effects of such emotional turmoil every day, and we know that when it’s not properly processed, it can result in a general sense of unhappiness and anger—exactly the negative emotional state that might lead a nation to misperceive its fortunes.
https://www.theatlantic.com/health/archive/2024/03/covid-gri...
but that would be impossible, right?
Right now there does seem to be some interesting disconnects in some measures of the economy. I'm talking things like business revenues in financial results, compared to the various surveys that are done. One of doom and gloom measures is a survey that asks how people think the economy is doing. But where it get's interesting, is surveys that ask about personal finances appear to be showing fairly strong results. So there seems to be a broad sense that people as individuals are doing pretty good, but perceive the economy as bad for others or in general.
I think another angle and personal bias of mine, is Hacker News is a specific tech community with lots of exposure to only a portion of the economy. So we're seeing layoffs and difficulty in the labor market ourselves, and expect that to be happening across the broad economy, especially compared to 2 years ago. But I think there are a few factors that impact us differently. I think a primary one is going to be interest rates. For startups, which are going to light a pile of money on fire and hope they grow, there are other areas of the economy that are much safer to get those returns with current interest rates. Why fund a speculative startup when I can get 9% on a private loan to a business. Also you look at medium and big tech companies, those bonds (debt) are way more expensive competing for those same interest rates, so the investment into growth and expansion is way down compared to 1 or 2 years ago. And we get to perceive that through the big layoff announcements that seem to keep popping up, as interest rates have risen. So the B2B space, which eventually serves other non-tech companies and consumers, is soft on growth and expansion, which is often rooted back to funding through debt instruments.
But if you look at the broader economy, for the average worker in North America, wages are going up at or faster than the rate of inflation, the unemployment rate is low. We're probably sitting around full employment, which actually can be it's own problem. The inflation took a shock but is trending back towards norms. Consumer spending even with current inflation rates hasn't really stopped, purchases don't seem to be getting deferred all that much. So companies where there was an expectation of a pullback in spending haven't really seen it in their financial results, maintaining their value on the open markets.
Another angle for people to perceive doom and gloom is also affordability factors in some segments of the economy. Where I am housing is a disaster for many reasons, so I'm sure many people see being unable to buy the same quality of living as their parents as part of the doom and gloom. But the overall financial markets aren't reacting to this, because enough people still have those mortgages, and with the rise in interest rates, defaults don't appear to have meaningfully risen. Overall debts are getting paid, even if they're more expensive.
And another angle I want to tread carefully into, is the politics and policy angle. With an election going on, as I understand it one of the most correlated factors to a change in governance is the health of the economy. So there may be some motive to color financial data or results through a lens to try and produce a political outcome. I have no idea what overall impact this might have, but some of those surveys I talked about above when divided by political lines or where people receive their information get very interesting. I'm not trying to have the political discussion or take any side, I'm just saying watch out for motives in your sources of information.
And there are just overall expectations, inflation has been difficult, interest rates have risen, so we just expect things to be bad. Also keep in mind one of the disconnects in the financial markets is where would someone put that wealth instead, what in the current situation would be driving people to exit the market and try and park cash for example?
So this is probably a very long way to say, from what I've seen, when you try and measure peoples perception of the economy, those measures appear to show the economy in poor shape. But when you look at other measures that influence the overall markets, like sales, defaults on debt, consumer spending, those measures don't seem to paint the same picture.
Recessions usually follow the Fed raising interest rates. There's a roughly 6-12 month lag after the fed stops raising interest rates for them to bite. There are short term effects from what the Fed says in public which affect markets on closer to a day-to-day basis which are all emotional (including the FAANG layoffs starting in summer 2022). There are medium term effects from the rate-of-change and absolute levels of actual interest rate hikes which evolve fairly quickly (SVB/FRB). But there are also area-under-the-curve effects which are an integral of the level of the rate hikes which just take time and those are the most punishing.
Most corporate debt hits maturity dates after several years at which point the debt needs to be repaid or else it needs to be paid back. These loans are still considered fixed rate in most reporting but in actuality they're more like an ARM which adjusts. We have a lot of zombie companies and properties which have been financed by cheap debt over the roughly 14 years of ZIRP that are now rolling over into a higher rate environment. We also have a slow rolling commercial real estate disaster caused by online shopping and remote work. That all comes under stress slowly because those businesses which are going to fail will do everything they can to kick the can down the road as far as possible, hoping to survive into the next low-rate environment beyond these rate hikes. It takes time for them to be boxed in by financial realities and fail.
I'd say that the 12 month lag is also just a heuristic and given the quick rate hikes that it won't be surprising that it takes a little longer for the rate hikes to bite this time. The start of the rate hikes also matters and for example they started hiking back in 2004 before the 2008 recession. We also don't know when the rate hikes are done. Everyone expects the Fed to cut in June and do 3 cuts by the end of the year, but with the services inflation readings being up the Fed could also hike again -- which resets the counter on the heuristic.
2. AI Bubble
AI is almost certainly in a bubble right now. That doesn't meant that it is worthless like bitcoin, but that it is like the 1999 pets.com era of the Internet. It is mostly hype combined with a lot of hallucinations and not a lot of profitability (outside of NVDA). The real payoffs right now are going to be in things like medicine which don't involve LLMs and that will stake an enormous amount of capital to develop the drugs and protocols that machine learning helps to design. LLMs are mostly going to be used to put tech support people and relatively unskilled graphic design jobs out of business and flood the internet with bullshit--which won't be good for the human jobs market. At some point we're going to hit the era of LLMs that corresponds to the birth of AWS and the cloud and stuff like that, but that's still in the future and it looks more like the hype bubble is about to pop. At some point everyone will get tired of shipping more of their capital off to NVDA and start using the TPUs that they've got more efficiently.
3. Unemployment is Rising
86% of states have unemployment above their 1-year average, 75% of states have unemployment above their 2 year average, 26% of states have unemployment above their 3 year averages and all those numbers are increasing. Temp employment is off its peak 13%, full employment is of its peak 1.3%. None of this means we're in a recession, but all of it is consistent with a recession on the horizon.
4. Personal Savings has been Drawn Down
There was a massive spike in personal savings due to the pandemic which is the direct cause of the inflation that we saw. People put money in the bank as they weren't taking vacations and spending as much money (the spending for home renovations and lumber during the pandemic when everyone was home didn't make up for it at all). When the pandemic largely ended in 2022 (certainly by people's behavior, which is literally all that matters economically) that money re-entered the economy and naturally bid up prices turning into price inflation. Corporations are pretty much done having confiscated most of that from the bulk of middle class (upper class earners of course still retain a good chunk of it because the rich always get richer). The result though is that we're now seeing a lot more companies starting to cut prices and seeing reduced sales.
Looking at personal savings is much more important to understanding immediate inflation/recession dynamics than looking at the Fed balance sheet and screaming about money printing.
5. Everywhere Else Is In Recession
Economics in Europe and China are bad. Ukraine having hit Russian refineries and stuff like that is rolling over into oil price spikes which should have some inflationary shocks which should hit the markets when they start doing the math on how it it will affect the promise of future rate cuts in the US.
The counterpoints right now:
6. The Fed Is Playing Politics To Not Be Seen As Playing Politics
It is an election year and the Fed is being unusually soft since it doesn't want to be seen as influencing the election, so they are aggressively not giving any fucks about what looks like double bubble in crypto and the stock market. It isn't that they particularly favor Biden, they're all Republicans and would just roll with a Trump 2nd term and discount everything going on in Washington DC as just politics which is beneath their institution. But they don't want to be seen to aggressively pop a bubble in any election year, which is how they play politics in order to not play politics.
7. The Market Always Climbs A Wall Of Worry
All booms/bubbles are characterized by the market shrugging off all the reasons why it can't be going up and going up anyway. This phenomenon of all kinds of bad headlines about the market combined with new all time highs week after week is entirely normal going back decades. And another aspect of this is the saying that perma-bears on the stock market are the "broken clock is right twice a day" kind of people. This always happens.
Summary
I don't think the economy is remotely bad right now, but we're heading for a showdown at some point soon. None of this is sustainable. I didn't quite call this right, I was expecting more of a double-top formation, and it looks more like we're heading into an actual bubble. I'd consider it a very dangerous game to play around with this market, though. The personal savings rate that was all the fuel is gone, and at some point the market is likely to wake up and get very grouchy. Don't fight the Fed.
King: We're winning!
Peasant: But we are so poor!
King: You're losing!
some ancient strip cartoon the name of which I cannot recall
That would be The Wizard of Id
Also you don't know, where the oerson you replied to lives. In many places around the world inflation is rising a lot more, than the wages.
According to fake government stats that have changed drastically over time to sweep problems under the rug. If you believe the labor market is good, I have a bridge to sell you. Also, wages went up significantly for a bit, but nowhere near enough to match inflation.
I'm asking for a measure of unemployment that will stand the test of time, as well as political change. There are many existing measures, and many reasons to criticize each one of them, but this interests me less than knowing what the critics of all of them think we should be measuring.
A lot of Americans are in the labor class and don't own financial assets, what do they have to be cheery about?
If the thing you're measuring value with halves in value, all the measured values will double.
If we take the dollar as an example, there's around twice as many dollars in existence as there were 10 years ago, halving the value it would otherwise be, and so doubling all the dollar-denominated figures.
https://tradingeconomics.com/united-states/money-supply-m2
There's certainly nothing healthy about doubling the money supply - this means that there is double the total debt (the mechanism by which new monetary units are created) - but it will cause figures like GDP, share prices and even wages to a degree to increase, even though they haven't gone up in actual value (in the case of wages they've gone down in value)