The only people who feel good are making over $200k and have large portfolios | Hacker News Reader

The only people who feel good are making over $200k and have large portfolios

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71 pointsdataflow20 comments

Like everyone else who’s observed a discrepancy between how they’re being told the economy is vs how they’re experiencing it, I’ve had my concerns about how CPI is being measured and how the policy decisions are rolled out. One of the things that’s missing is an indicator that cares only about the essentials that are family use frequently. Like falling prices of flatscreen TVs don’t matter as much if home insurance and car payments are skyrocketing.

I came across the ALICE indicator and it does something close to what I wanted. It tells a very different story of how the economy is doing. https://www.unitedforalice.org/essentials-index

ALICE does a great job, but at the end of the day we need the “official” measures to be updated to reflect boots-on-the-ground reality. As soon as someone tries telling anyone of a certain age demographic that making $150k isn’t enough to support a family in any major metro due to cost of housing alone, and they seem to think you’re just a terrible spender who cannot manage money or make wise investments.

It wasn’t until I quite literally started sharing home listings in my area and budget that my own parents finally understood the bleak reality their kids are struggling with. I suspect that’s something we just need to do more of - shame the $650k fire-destroyed homes on Redfin, the vacant lots valued at a million bucks, the Zoning Board blocking yet another multifamily home, the sickening cost of yogurt at the store ($7.50 for a Chobani four-pack!), six-figure SUVs, and a minimum wage that can’t even make rent.

As my friends tell each other (in a sing-song-y voice): “At least we’ll all find out together.”. Difference is, we all know who will be stuck paying the bill.

> but at the end of the day we need the “official” measures to be updated to reflect boots-on-the-ground reality

I agree. The biggest problem I’ve run into trying to explain this to other people who are not experiencing the same issues is that they take it as a partisan criticism. They’ll agree if their favorite guy isn’t running the show, and vehemently argue against it if it’s their favorite guy. This is an everyone problem, and if you’re not affected by it, it’s only a matter of time.

You don’t care that medical school costs half a million because you’re in your 50s and your kids aren’t going to one? Wait until the kid who took on that debt graduates and charges you $5K for renewing your arthritis prescription when you’re 65 and on fixed income.

Since they didn't spell out the number: 14% discrepency between CPI and ALICE baselined between 2007 and now. This and the year before have a dashed line for ALICE and only this year for CPI, I guess that means projected but it isn't labeled.

I'm not sure the baselining makes sense other than showing the divergence from 2007; if ALICE turned out to be lower than CPI lower it would bias it but maybe more likely it started higher which biases it in another way. Baselining at the first year of the great recession might be very misleading, baselining the year before and difference in housing stuff might have made the divergence look very different. Rents ended up increasing through the recession though even if prices didn't.

ALICE is arguably a better measure of for poverty needs, but a worse measure for overall consumer price levels (the latter is true for the same reason as the former.)

There is a very good argument to have different headline measures for those purposes—currently CPI is used for a lot, and the main alternative used for policy by, e.g., the Fed, PCE, while different than CPI in detail isn’t difference in focus (though I'd argue the focus is proper for the Fed’s main use, you wouldn’t want broad monetary policy driven by something with ALICE’s focus when the results significantly diverged from a broader basket measure, though you would probably want poverty-targeted fiscal programs to be.)

Inflation as applicable to different contexts being treated as a scalar rather than a multidimensional vector is a mistake.

> One of the things that’s missing is an indicator that cares only about the essentials that are family use frequently. Like falling prices of flatscreen TVs don’t matter as much if home insurance and car payments are skyrocketing.

I think it's useful for people to remember that the numbers reflect averages.

A bunch of surveys are done asking what they spend money on: and the average of those surveys sets the weights for Shelter, Food, Transportation, etc. It's a model, and as the old saying goes:

* https://en.wikipedia.org/wiki/All_models_are_wrong

StatCan (the folks folks that do Canada's CPI) release the "headline number" that all the papers publish in headlines, but in their release they also breakdown what the CPI is for each province (Chart 4), which recognizes the variance of the metric:

* https://www150.statcan.gc.ca/n1/daily-quotidien/251021/dq251...

StatCan actually also have a page where you can calculate your personal CPI given how much you typically spend on various items:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020cal...

Perhaps the BLS (or some academic) should release a 'personal CPI' tool as well.

Also current homeowners don't care about house prices, since they are locked into fixed mortgage payments - other than how it affects insurance and property taxes. And taxes are mainly affected if your property value rises higher relative to the rest of the community.

> Also current homeowners don't care about house prices, since they are locked into fixed mortgage payments - other than how it affects insurance and property taxes.

They do if they want to refinance, sell the house, or demonstrate favorable asset:debt ratios for other purposes.

> And taxes are mainly affected if your property value rises higher relative to the rest of the community.

Property taxes are usually % of value, so dependent on absolute value changes, not changes relative to the rest of the community.

> Property taxes are usually % of value, so dependent on absolute value changes, not changes relative to the rest of the community.

I may be completely wrong, but this is what I've been told by people I've known in the past that held some local public office (such as a coworker in one case, and a neighbor in another, they were both local aldermen). I've also google searched it, and came up with similar answers.

Typically, a city / county budget is set, and they then need to collect it from the pool of property owners by taking the assessed value and using a multiplier to reach their budget target. Now the budget may increase due to inflation or other factors, but I'm not aware of any local government that suddenly finds itself flush in cash due to doubling of property values. If your elected officials do things differently and look at rising property values as their own windfall, well then you and your neighbors need to vote them out of office real fast.

I've verified this with my own house (both the last one and current one, about 30 years of home ownership). The 2008 - 2009 crash had negative affects on property values, but my property taxes didn't go down, and insurance quadrupled (because the insurance companies lost a lot on investments and had to make up for it). And plotting property tax increases over the last 10 years where my property doubled in value, the taxes were just under 5k when I bought and now are just barely over 5k.

One thing that can happen, is as budgets go up with inflation or new initiatives, absolute dollar amount taxes rise accordingly. And people don't like to pay more taxes, so a lot of people will appeal their tax assessment. And a good attorney can get it lowered to some degree. That means that everyone who hasn't fought (and won) against their tax assessment (the assessed value of their home), will see their taxes increase more as their assessed value is now higher relative to the neighbors who fought their assessment.

I think the K shaped economy she touches on is an interesting idea when it comes to inflation - the service sector, for instance, is not continuous in price, it is discrete - that is, when you look at pricing data you’ll often see two humps, one at the bottom end, one at the top end.

So - if the top hump skews off to the right, and the bottom hump stays put, it looks like inflation across the market, when it’s actually happening mostly at the top end.

Perhaps the pricing datasets need to be filtered and stratified, to present a CPI and a… I don’t know, a CPI+, with one looking at the actual general consumer market around median incomes, and one looking solely at the luxury/wealthy end of the market.

Dunno. Just seems like a poor basket of goods when there isn’t a uniform price distribution.

https://archive.is/dqjA6

The first thing I thought about as reading this: "When a measure becomes a target, it ceases to be a good measure"

We have a big "cost of living" concern in Australia, and it's very ripe to gaming the system through things like energy bill handouts.

I can only talk from the Australian perspective, but I think there's certain elements set up like a Ponzi scheme, and we'll need to correct it and stick to fundamentals, and that is going to break quite a few eggs.

>"When a measure becomes a target, it ceases to be a good measure"

This is what "the economy" has become.

It is supposed to be metrics for quantifying the productivity and prosperity of a nation. It has now become the target for short-sighted bureaucrats, usually at great cost to the nation.

It's much more difficult to quantify happiness, community, harmony, purpose, togetherness, connection to people and soil and history. Can't hit those KPIs.

But you can absolutely destroy a nation trying to boost the next GDP stats in time for the election.

Yeah it always struck me as odd to see the news about inflation going up primarily because the handouts stopped. This feels like nothing fundamental in the economy or the value of a dollar changed. The energy handouts should have never counted as suppressing inflation in the first place.

Depends on where you live.

And whether you already have a paid off house or a sub 3% mortgage.

Part of the issue is that, even though inflation "moderated", prices never actually went down. They just went back to going up slowly instead of explosively (or, rather, retailers and businesses moderated their price increases/shrinkflation). The worst of it happened during the Biden administration, which understood quite well that Americans would not accept the truth that the high rates inflation that were were seeing were a result of their predecessors' policies, and the fear of being blamed lead to a chilling effect: no real willingness to acknowledge and address the problems directly. Now, the current admin is incentivized to focus on the aforementioned moderation of the ramp, even though things never got "better", just "less catastrophic" for people with a limited ability to absorb goods inflation. The people who COULD absorb those rising prices have never not been able to, and essentially make and own so much that they never will (save some massive contraction of the economy, possibly paired with currency devaluation, as such people are also more likely to be able to avail themselves of timely advice to rotate into cash before securities or asset markets tank).

tl;dr Observers have been unable or unwilling to accurately read and acknowledge the circumstances many people are living with. We are firmly in a "extend, pretend, and pray" era.

Why would prices go down? That's what no one wants to tell people. We have have 30 years of low inflation. Nothing becomes cheaper in a fiat money system.

I think Japan has seen them go down in their deflationary period the last few decades. People holding their money waiting for the drop. Rather bad news for the economy and for anybody not holding cash. The system, as previous commenters have mentioned, is designed to trickle upwards.

Because, in a functioning free market, you make what you can, not what you want to. Burn enough value, lock up the printers, and companies will take less money for the same goods in order to continue having some revenue. That's how things become "cheaper" in a fiat money system.

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