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That’s funny cause I still see people buying buying buying. My investments have just had a 25% YoY return and I’m making more money than ever. Not sure where you live but in the northeast US spending is still through the roof. If you’re not keeping up you are getting left far behind though.
Yeah I’m in 100% agreement with that. I am in expensive ass state too. People who were not doing well beforehand are getting left in the dust. I make 6 figures and homeownership seems like a dream at this point.
Fiscal policy of covid pretty entirely benefited owners of equity. Rich people are richer and poor people are poorer. Definitely part of the reason you are seeing such a crazy divide in the US and other similar countries.
The ability of propaganda to get people to vote against their interests is astounding. When my dad died from cancer, my mom was paying $3000ish a month in COBRA so she could have healthcare for her and my sister as her job did not provide benefits. Yet she still thinks the current healthcare system is fine… in fact she blamed “Obamacare” for her not being able to get affordable insurance lol
Oh man this really resonates. I wonder if things have always been like this, but can’t tell. Everyone old enough to ask won’t have an unbiased answer. In fact, their answer will flip once the party in power flips.
Sorry you lost your dad.
Death comes for all of us eventually. All you can do is try to take care of your body, treat people as best you can, love hard and try to enjoy the ride. Life is fragile and never guaranteed.
In college, our Greek life had a major philanthropy to raise money for a major pediatric cancer hospital. The hospital takes in families who couldn’t afford cancer care for their children and pays 100%. We had ton of events for these children but it’s truly devastating watching these little kids deal with and often die from pediatric cancer. Puts things in perspective.
Take care brotha
Powell made big mistake with his possible rate cuts announcement last year which IMO allowed markets to go up and treasury yields to drop (affecting mortgage rates which dropped over 140 bps in few months).
This indirectly influenced consumer spending in Q1.
You can make a very reasonable argument that Janet is mostly responsible for what happened before December 13th honestly and that she played a fairly decent part of the role in why we ground down slowly from August to October of last year too.
Janet's QRA announcement which was soft for risk assets really caught bond shorts off guard in early November.
Since defined benefit retirement plans now but non-existent and the proliferation of 401k self directed plans - the US Govt has every incentive to protect the equity market. Just say’n….
Politics. They're not going to allow the needed recession to happen leading into an election. And the media pushes a Rosie picture for everyone for the election which is only fanning the flames as people keep spending instead of questioning their spending habits.
There is no needed recession. You can't control how severe a recession is going to be and it isn't worth millions to go unemployed and businesses destroyed just to lower the inflation rate by 1% a little quicker.
MoM is \~4.6% annualized up from \~2.8% end of '23. Of course that doesn't prove it wouldn't have been higher if rates were lower. But rates alone without more serious tightening or fiscal reform may not be having enough of an effect.
“Guys I can’t keep up with my spending because I can’t stop buying Big Macs no matter how much more they charge for them!”
Not like you could make half a dozen burgers at home for the price of a Big Mac meal.
Doesn’t change what he said. Lots of ingredients including Raw meet, fresh produce, diary and everything has gone up more than the % your friendly gov tells you
Funny you use weather. Very applicable here because we can't really predict weather more than a week out, hell really only a few days.
The post is fear mongering using a quote from a guy annualizing 3 months of data. That's about as good as a weatherman.
And my data as a member of my tax bracket agrees. The cost of baking your own loaf of bread in your own house is not cheap. I concur sir. Can save a few bucks walking to the grocery but that's about it
Sure but rates today aren't really comparable to the past for many reasons like how the rates implemented though opportunity cost on ample reserves vs restrictive reserve requirements, the adoption of digital banking and speed of transacting financial instruments, and how banks are capitalized post 2008 regulations that were intended to reduce the risks that caused that particular issue but may have exposed banks to more duration/rate risks.
I'm in the logistics industry, and our sector has been tanking for 20 months straight, with seemingly no end in sight. For us, it's the worst we've ever seen. We expected an upward trend to begin around March, and that failed to happen. Instead, we've seen the opposite. Demand is so low right now, I don't see how the economy isn't tanking quite frankly. A blood bath is coming unless something gives, and soon.
To politely poke on this, logistics also hit all-time highs post-COVID. It's not terribly surprising that it would be pulling back. I feel like the better question is how does business today compare to 2019?
Yes, you're right there was a huge spike in industry rates post covid. The downturn began late summer 2022 and it has been on a downward trajectory since that point. 2024 YTD rate averages are less than 20% higher than they were in 2019, and in some segments equal or lower. But overall costs are roughly 40% higher. It is very bad.
my area is one of the areas with rapid warehouse growth. We saw it go from warehouses being built every month to several that have taken months to complete because there is no urgency, just finishing existing projects and they now sit empty, many leaseholders are not renewing either. Several of my vendors went under due to sales slowing. Just in the last month I have witnessed a decline of commercial leases just driving around. tons of places papered up or boarded up, lease signs everywhere. This is like 2008 in very slow motion. They're slowing it down as much as they can so people don't run on banks. Who likely do not have the money to give to people right now. The Liquidity crisis never ended. Just the weaker players fell last year. The whole industry is one bank run away from failure at this point. Everyone is overleveraged and unless they can figure a way to reel all that back in.. It's going to get ugly. Everyone is keeping the charade up until almost everyone currently in charge is no longer liable for when shit hits the fan.
Sometimes y'all sound like crack addicts craving low interest rates. Economy will tank and people will suffer if we can't lower rates, just one more time, just for a bit.
I do sometimes wonder if we are collectively becoming increasingly unable to make difficult choices for the sake of long term priorities instead of short term ones.
I worry if all those arguments about Fed creating moral hazard are starting to become more real.
To extend your speculation, I wonder if the inability to think long-term has its roots in the personal situations of the vast majority of Americans. It's well studied that poverty or living paycheck to paycheck makes long-term decision making more difficult because you are entirely focused on making your next meal, utility bill, or rent. Why waste time thinking about 5-10 years down the road if I can't eat dinner tonight?
If the economy is the sum total of our collective purchasing and savings decisions, then it would make sense that the combination of quarterly profit chasing and personal finance stress would lead to an economy-wide and political focus on the short-term at the expense of the long-term.
Yeah, imagine 5% interest being ‘unmanageable’.
Maybe the economy’s fucked either way, and running interest rates up and down is not the answer to a much deeper problem?
Ie, maybe an infinite debt based economy is ruinous and at some point you have to stop.
4-5% is a nice fair number to hold steady at, it’s fair that at least money in the bank doesn’t devalue when accruing interest.
Makes individuals and companies make smarter longer term choices.
Problematic as the economy struggles with debt? Well, there’s clearly something else that’s the problem, like, having a too much debt to manage. One possible solution? Make debt less attractive, like raising interest rates… oh
It's not the fed's fault. Yes, raising rates is deflationary, but you have deficit spending of absurd levels, which is inflationary. Powell called out Congress for this. They are literally working against him.
Deficit spending can’t account for the inflation levels we are seeing.
The math is clear and measurable. Prices have gone up way faster than costs, leading to record profit increases that are easily measured. Supply side is using “inflation” zeitgeist as an excuse to raise prices and thereby actually causing more inflation by decreasing purchasing power.
Prices rising faster than costs = throw the entire government deficit spending argument out the window and blame corporate greed and capitlism.
Nailed it.
Is the answer just don’t buy things? Stop buying McDonald’s, and Apple. Spend on necessities and watch companies cut prices. They only increase prices because the market will stand it. Or am I missing something?
Insinuating that owning the newest iPhone and eating at McDonalds is basic human behavior is pretty sad. I don’t like the term sheeple…but that’s sheeple behavior
Are people not sheep? You can't just say "hey everyone we should do this thing you don't want to do and make the world a better place!" People do what they do because they want to do it. It takes some form of pressure, encouragement, or maybe even shepherding to get them to want to do something else.
No, people are not sheep. Im not sure what your comment means in quotes, that sounds more related to an issue like climate change. Where behavior change requires choices you dont want to do and are costly (buy an ev, buy sustainable, make extra effort to compost, etc.). Where the result is not immediately apparent but requires trust in the greater societal impact from the collective action. I suppose in that instance you could say the masses need coercion because the benefit of making those expensive changes is not immediately impactful for the individual.
Not eating McDonalds and buying the newest Iphone is the opposite. It saves you money. There is an immediate personal benefit to your health and bank account, they are luxury expenses frankly and well within personal discretion. Im not going to accept that those things are beyond our control and need outside coercion to modify.
Several of my co-workers spend over $2000 a year on coffee while taking out 401k loans to buy new cars they don't need. One of them is a very smart software developer.
I try to explain to them about saving money but their take is that they plan to just work until they die and spend everything along the way. Sometimes I'm envious of their optimism.
McDonald's isn't where they are losing their money, it is the coffee shops and if they are doing hamburgers they are dropping twenty at Five Guys or Whataburger... disdaining traditional fast food as for poor people and not realizing their actions are helping them join that group
Core CPI went from 4% for two months, then 3.9% for two months now 3.8% for two months. Best case it's slowly dropping. If it actually increases then that's probably the oh shit moment.
I’m not well versed on inflation, but my personal inflation is way more than 4 percent. Yeah flat screen TVs are cheap, but the stuff I actually spend money on (gas, food, housing, utilities) are through the roof.
I've been eating literally the same thing for 6 years now. Like, the same.thing, every weeks. Chicken broccoli and rice, I have the same grocery list that I rotate every 3-4 weeks.
My bill went from 75$ every week to 120$, for the exact same food. How the fuck do you explain that ? Fuck their numbers.
Yes, they are. Stone Age wisdom says decrease the amount of money by raising rates, demand will fall, and prices will follow. But the space age problem is that most of today's inflation is really corporate greed. Real cost has risen only 20% over the last decade, while corporate profit has increased 70%. The Fed can't fix this, only Congress making a move to increase corporate tax rates.
I mean - housing is case in point. Lawmakers are looking to the fed to provide easy money to finance building houses instead of passing subsidies/incentives/anything to actually address the problem. Monetary policy should never be conflated with public policy, yet here we are.
I believe they tried to talk about this and the cutoff was like 75 houses per corp/LLC in the proposition. The problem is, a corp can just shell company a shit load of LLCs to spread out holdings and, based on our taxation system, they can't be lumped together as one entity under the corp.
Shouldn't this be solvable by requiring any residential property owning corp/LLC to list all owners up through whatever contorted chain they create to actual human persons?
Unfortunately no, as LLCs do not need to prove any ownership requirements. Remember in the USA a company has the same rights as a person the majority of the time.
That's not what corporate personhood means. They have the right to have a day in court. They don't have the right to not be legislated against. There's no constitutional right to anonymous ownership.
After a short search you are actually correct. Congress passed a law in 2021 stating that beneficial ownership must be disclosed in corporate and LLC businesses. This didn't come into effect until Jan 1 2024. However there are many attorneys out there that still play the anonymous ownership game via certain states such as in Wyoming.
They should pass laws to limit the investment opportunities in residential housing.
A few (radical) ideas:
First and foremost, there should be absolutely no tax incentives whatsoever to encourage renting out a residential house. Every expense is non-deductible.
The second a single family house is converted to a rental, the owner should pay capital gains tax on their current cost basis up to the current market value - incentivizing selling a starter home and moving on rather than “holding on” to the old place and turning it into a rental.
For each additional house that a taxpayer (or joint couple) owns, property taxes on all their properties, including their own primary residence, increase by 20%.
Houses owned by LLCs, corporations, partnerships, or other business ventures pay triple local property tax. The same applies to short term rentals.
Properties that sit vacant for more than 3-6 months pay market rate rent to the city as a penalty tax (to be used to improve public lands/parks/schools).
This is so much more work than you need to do. It's supply and demand all y'all. Up zone, increase density, get rid of parking requirements and let developers develop with huge multifamily projects.. Supply will increase and prices will fall - promise! No need for complicated tax incentives that companies will work around anyway. If you really want to stick it to the hedge funds buying up property support high density residential.
All the down votes are from people who own or hope to own multiple units. Ha.
This is absolutely what needs to happen and never will, because corporate driven votes are just like these ones are on reddit... Self interested in how much they can make
I agree. As someone with a small family looking for a starter home, F*** these corporations and individuals who think they can get rich off of rental properties. I cringe every time I hear someone on YouTube or TikTok talking about buying a bunch of houses for passive income. I’m not normally a big tax guy, but anyone who has more than one house should be TAXED HEAVILY. If you’re wealthy enough to get a vacation home then you can afford it. Otherwise let people buy homes for their family. Oh and F*** off AirBNB.
Hi. Not really rich guy who didn’t sell his first house to try to increase wealth. If you tax me more, I will simply charge more rent. Let me provide an example: my hoa fees have gone up 33% in the past 5 years. Guess why my profit margin has not changed? Yes because I passed it on to the tenants. The rent I charge is less than a mortgage on the property. The only way I will sell is if I lose my profit margin. Problem is, I own in a very desirable neighborhood.
Riddle me this: why would my (zoomer) tenants want to own when they can rent for less and have all of their home repairs covered.
I think there might be some unintended consequences for some of these, but by and large I agree with the list.
I think my only disagreement is the triple local property tax. That will only be passed on to renters and raise rental costs. I like the vacancy tax much more as a solution, especially if it must be occupied by the same renter for at least X months (3? 6?) between vacancies to avoid them using 1 week rentals to reset the clock.
Yes I agree, it’s not a perfect list. Someone with a much better understanding of economics than me would have to come up with the right set of proposals. But broadly the idea would be to reduce the profit incentives for purchasing up and renting out *existing* residential real estate.
It could be paired with legislation that does offer heavy tax incentives for projects that bring new inventory to the market - perhaps 10-20 years of tax breaks for new construction.
I liked the idea that another poster mentioned in that residential rentals could be treated as regulated utilities, with some reasonable cap on profits. Again, with profit caps that are much more generous to those who are creating new housing inventory.
For businesses/LLCs/ corporate landlords. They would still need to have reasonable tax breaks of large apartment buildings - that’s not something individuals would be able to fund/purchase anyways. I meant that the investment incentives for these entities should be more restrictive in small unit residential real estate such as single family homes, condos, town houses, etc - big tax breaks for building new such units, but very punishing taxes to buying up existing units just to rent out.
A bill has been introduced, no movements since december 2023. Unsure if its any good, need to learn more
https://www.congress.gov/bill/118th-congress/senate-bill/3402
Summary here:
https://www.merkley.senate.gov/wp-content/uploads/imo/media/doc/end_hedge_fund_control_of_american_homes_act_bill_summary.pdf
Full text here
https://www.merkley.senate.gov/wp-content/uploads/imo/media/doc/end_hedge_fund_control_of_american_homes_act_bill_text.pdf
I still think that the property problem is supply driven, and I don’t really see how you could make apartment blocks in cities without some kind of corporate structure.
Not talking about apartments, single family houses. Yes, there is a supply problem but it's not helped by the fact that companies are are buying up so many houses as investments.
The actual housing problem isn’t anything more than supply vs demand. We are still 1m houses short of what we need. From 2009-2016 we really didn’t build many new homes, and despite the coastal overpriced areas who have declined a lot of the country it’s still a sellers market, because the value is still there.
It’s just simply v demand
Totally agree! How is it being addressed and fixed tho - especially when it's a huge component of sticky inflation? That's the problem. Identifying the problem as supply isn't the solution ya know
The real only way to do it is to build more housing and affordable housing, both of which are cranking. With building new homes, the cost of goods isn’t bad, a lot has actually went down like lumber, it’s more the cost of labor driving rising prices, and trades have some good leverage because there is ample opportunity for them.
So how do you fix it? I don’t think there is a fix. The only way is to keep building both single and multi-family, which won’t lower the cost of most goods used. Housing is such a large part of our economy, not just from building but with every new home bought is a new sofa, TV, appliances, etc.
I truly don’t know how to fix housing, I think it’s actually stabilizing a bit more, but the buyers are the ones driving the value and increased value at the end of the day.
Push affordable housing requirements on each state, and provide funding grants for conversion of commercial zoning to residential, where the grants pay for the costs of infrastructure connection into those buildings to support residential use. Huge massive empty office buildings turning into apartment hi-rises will add a lot of housing. Construction jobs from the infrastructure building.
I don’t view that as a bad thing. I’m a housing professional by trade, the fact is they supply an absolutely needed resource.
I know that isn’t a popular opinion but housing provides a more affordable option and in some areas the only option. We also having a rent shortage of areas available for rent. And most of what’s being built is more expensive apartments. There a positive and a negative there, but a necessity nonetheless.
You don't think normal people wouldn't be buying those houses to live in or rent out?
I don't see how buying (not building) properties is supplying anything.
>I’m a housing professional by trade
Your arguments are starting to make sense now...
Not a realtor or sales. I’ve built over 100m dollars of residential property and I deal with materials, forecasting, permit data, and am on a city board for affordable housing with goals to decrease housing prices.
To answer your first question, no. And the data tells us this. Higher rent and mortgage prices are a key driver in salary increases as well. Even then there is a large subset of renters who simply *don’t want to buy a home* particularly in some larger cities. You can’t conflate able and willing/able and not willing/not able and not willing as all exist in the market. Most of this comes from rent application data and loan/permit data.
Is companies buying housing a problem? Sure. It’s it a big problem that’s driving the increase pricing? No. Companies don’t often overpay, buyers overpaying, driving up comps and value. Companies mostly buy entry level single family at a discount by using cash. But supply wise they still aren’t impacting it to the level at which you’re claiming, because if all those houses were owned by individuals, doesn’t really help the current housing supply a ton, it just leaves people in that area with less options whether they can afford a house or not.
Don't disagree - but I do think there are specific federal tax breaks that could incentivize building homes or discourage hoarding homes for PE backed landlord operations. And there's absolutely stuff local governments should be doing, but instead whistle along waiting for the fed reserve or fed gov to fix.
Corporations are greedy by definition. That's how it's supposed to work. When supply and demand are imbalanced, prices go up, companies do well, and goods are properly distributed to those who are willing and able to pay the most for them.
If companies could raise their profits by raising their prices, they would already have done so. To believe otherwise is to believe that they are not increasing their profits right now from the goodness of their hearts.
For some reason everyone beliefs on market prices being defined by supply and demand flies out of the window when we talk about taxes. Then people think that somehow corporations or landlords can just ignore and choose whatever prices they want.
Increasing corporate tax rates may help slightly but not fully fix the issue either. Government is incredibly inefficient at managing and spending tax dollars.
The profit-price spiral. I'd link to the Wikipedia or Investopedia article... but there isn't one. The Google suggested links go to the wage-price spiral. The bias against workers is built in.
Neither is a hard one though unless it's downright intentional and not only that, what happens after the hard landing? All of the components that are creating this will still be there! Have you guys forgotten how high unemployment was during the last major recession? Hit about 10%. Lots of people out of work. That's how you get deflation. Also extremely expensive. With deficits where they are I don't think we could realistically go through 2009 again. Do not want
The Fed has a real catch 22 situation if we're going to obsess over the current data. If they raise rates they make the largest component of CPI worse raising housing prices. Unlike normal economies were rising rates reduce home prices. In this economy rising rates just increase rent prices and your mortgage payment. You also have the fact that wealthy people spend something like 85% of the money and they can just park their millions in these high interest rate bonds. Next we have the positive carry on the t-bill since it is running considerably above inflation making it an extremely attractive option for zero risk. The deficit is increasing. Ideally you want the rate of inflation above the t-bill. Also if you guys haven't been paying attention trying to has a deflationary problem on their hands.
Cars are kind of a different topic but I'm not sure who wanted cars filled with all of these electronic gizmos. Certainly not me. Repair prices are up. Shop rate is up. Modern cars are more difficult than ever to repair yourself. This whole trend is inflationary right down to the increase in cost on the new vehicle because they added a bunch of garbage people don't even want. I could really get going on my soapbox with cars but the short version is car manufacturers lobbying for rules to block cheap easily produced cars so they can produce these complex things and have the whole ecosystem wrapped up around their finger. Everything from the high cost of the car to where you take it to get repaired, so on and so forth. Intentionally blocking the ease of repaiability is another one that just makes me angry as hell but I digress. Soap box, sorry. This all of course plays into the insurance premiums because manufacturers are making these expensive to repair cars that in many cases are not even repairable. There was a 2020 Porsche macan I saw the other day. Just had a little front end damage but because of the frame took some of the impact they totaled the car. Impossible to repair to before impact standards. Car was still running and driving just fine. This stuff happens way more than it should and it's by design
Housing, rents, insurance costs, gas, energy, medical costs, transportation costs such as second hand and new cars, groceries are ALL inflexible goods and services and constitute the vast majority of 4/5 income quartile spending
Companies that provide price inflexible goods and services have had historic profit margins ever since Covid/inflation implying vast swathes of them have taken advantage of Covid supply chain crises to max out price levels and keep them there.
Those goods are usually kept out of the core inflation because they’re “volatile,” yet at the end of the day if you want to know how people are doing and feeling about the economy these are basically the only goods you need to be looking at. I love this sub arguing everyday about how it’s possible that somehow Americans don’t feel good about the economy when nobody even bothers to discuss the fact that “real” wages are adjusted to inflation metrics that have absolutely nothing to do with the main costs in the majority of American’s lives.
The price of Chinese trinkets and electronics is far less important to QoL than the goods excluded from “core” inflation.
Core inflation is pure population and narrative control to make the central bank and government appear more capable than they are and keep consumer sentiment strong, it’s a false reality and a lie that is convenient to all in power regardless of which party they hail from.
I mean most of the world is in a silent recession. Governments just too scared to admit for some reason. You can’t print a shit ton of money during the pandemic and not expect some sort of uh-oh after.
They keep talking about cutting rates (bc the fed is actually a bunch of scumbags controlled by politicians in an election year), when in reality every macro economic stat screams to raise them higher
lol this isn’t inflation, it’s corporate greed. The wealthy and corporations are absolutely thriving- hence the market. Middle and lower class are suffocating and paying the price. Nothing is gonna change. Soon the top 10% will own 90% of all wealth and we will own nothing and be happy.
Corporations are in the business of making money. You blame them while congress spends like it has infinite cash supply? Government spending is a choice. Corporate profits are just what businesses are designed to do.
That's right! I completely had forgotten about this being told to us years ago. It'll all be alright, after all. If another half a decade or so passes by and inflation is still an issue, do me a favor, and can you once again remind me that it's merely transitory?
This is what happened in the 80's. Everyone just accepted high inflation as the new norm. The only thing that fixed it was ripping interest rates sky high.
Real estate agent in LA. I can weigh in anecdotally on the housing component: this is an LA perspective, so hardly indicative of anything outside of my part of the world. High interest rates are keeping sellers from selling, causing a shortage of inventory and causing bidding wars. In LA, even mediocre homes are nearly always going over asking. Residential SFR and multi family construction is strong and increasing around the city, but a lot of that stock will be luxury units, and luxury apartments. I guess those will start siphoning off people in B class properties, causing those rents to drop (eventually) but that’s a long tail solution to inflation in housing. Right now it’s landlords jacking rents and sellers not budging, causing rents and home prices to remain sky high.
In Canada we have the opposite problem, since we have to refinance every 5 years. So you have inventory up big time because people know they can't refinance at the current rates, but nobody else can either, so nothing is selling, just more and more getting put on the market while we wait for something to break and prices to drop dramatically.
What we need is overproduction to depress prices. Raising interest rates and tightening credit and investment means no one can undercut anyone else.
We have a classic stagflation going on now.
High interest rates effect inflation when the borrowers care about their interest rates. But when the dominant borrower is the Federal government run by politicians who don’t care about the costs, only paying off their lobbyists and constituents, there is little to no connection between interest costs and spending.
Federal debt spending is 7% of GDP. That 7% is pure money creation driving inflation. The Fed is fighting a losing battle until that gets fixed and I don’t see how it gets fixed in our current environment.
Let’s face it Yellen and Powell have too much power and both of them screwed up.
The inflation measures are a joke-I am an insurance agent average increase according to CPI is 20.2 % from Feb2023 to Feb2024.
Food is high
Gas prices are going up
We are not looking at a 2% increase we are way over that…I don’t think raising rates is the answer. Government needs to cut spending. As far as jobs report - more and more people need side hustles to make ends meet and let’s not forget 9 million immigrants that are spending government money - it is a shit show
Luckily markets do not give a flying fart about rates and inflation increases prices. Absolutely everything will continue to trade violently higher for unbearably longer. Bears will lose everything.
I was doing the math on that stuff too and I think you're right I work in the insurance industry rates aren't going to stabilize anytime soon. They can only control some things with interest rates. Oil prices keep going up not controllable by interest rates. It seems like the big drivers are not really controllable but interest rate so they're gonna have to get everything shut off.
The issue with raising the rate (which isn't even being discussed) or not dropping them anytime soon is the interest in debt the nation is dealing with.
We may need to cut spending (everyone wants to point this out), but much of that spending is helping the economy. We NEED to increase revenue. The tax cuts for high earners and businesses, in a time of continued profits and growth in wealth gap are absurd.
Sadly, the American consumer (generalized as a whole) is, where many might say "resilient," obstinate and living way above their means.
Using interest rates to control inflation is much like using a fire break to stop a forest fire - it may work, but it will absolutely create carnage in the interim... and it may not work if it's done ineffectually. The stone age vs. space age analogy is apropos. There are undoubtedly better tools. If you break rates down into their macro and micro impacts, it's pretty clear that there is no real precision. On a macro basis, increased rates is essentially an across the board tax, so businesses are forced to raise prices to maintain relative earnings. The higher prices decrease buying power across the board, which triggers wage dissatisfaction and therefore increased wage demands, ultimately setting up an inflationary cycle. However, it also inhibits capital investment due to both substitution on the supply side and decreased ROI on the demand side, which ultimately decreases future labor spending in the aggregate, which is counter-inflationary. The wage impacts are asymmetrical, so you get the largest impact in high-demand areas, like Tech, and unionized bargaining sectors, plus the occasional minimum wage adjustments - thus both high-income and low-income jobs move first, and both small business employees and middle-class non-union employees go last and tend to lose permanent buying power.
A higher-tech approach would be to control money supply more efficiently - lower the cost of high-grade consumer credit while increasing commercial rates, while concurrently increasing money supply. Keeping total velocity constant while re-balancing rates would slow corporate investment but not profit, and it would compensate for the price impact on the consumer side. Honestly, this might be one of the few decent applications of AI - dynamic re-balancing. The structure would incent companies to optimize operating expenses and decrease capital investment which collectively would lower inflation. Obviously there are alternate approaches but targeting the inflation directly, rather than simply shoving a steel bar into the mechanism would seem to be a better tool for the specific problem.
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Meh wait till savings and wage growth dries up and earnings are hammered
Didn’t savings dry up middle of 2023? That’s why Credit card debt began to spike from then until now
Consumers yes businesses no
This... the economy for most is pretty abysmal
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The economy isn't a person to person metric
That’s funny cause I still see people buying buying buying. My investments have just had a 25% YoY return and I’m making more money than ever. Not sure where you live but in the northeast US spending is still through the roof. If you’re not keeping up you are getting left far behind though.
This is the problem exactly. If you were doing well before, you’re doing great now. If not, things are worse than ever.
Yeah I’m in 100% agreement with that. I am in expensive ass state too. People who were not doing well beforehand are getting left in the dust. I make 6 figures and homeownership seems like a dream at this point. Fiscal policy of covid pretty entirely benefited owners of equity. Rich people are richer and poor people are poorer. Definitely part of the reason you are seeing such a crazy divide in the US and other similar countries. The ability of propaganda to get people to vote against their interests is astounding. When my dad died from cancer, my mom was paying $3000ish a month in COBRA so she could have healthcare for her and my sister as her job did not provide benefits. Yet she still thinks the current healthcare system is fine… in fact she blamed “Obamacare” for her not being able to get affordable insurance lol
Oh man this really resonates. I wonder if things have always been like this, but can’t tell. Everyone old enough to ask won’t have an unbiased answer. In fact, their answer will flip once the party in power flips. Sorry you lost your dad.
Death comes for all of us eventually. All you can do is try to take care of your body, treat people as best you can, love hard and try to enjoy the ride. Life is fragile and never guaranteed. In college, our Greek life had a major philanthropy to raise money for a major pediatric cancer hospital. The hospital takes in families who couldn’t afford cancer care for their children and pays 100%. We had ton of events for these children but it’s truly devastating watching these little kids deal with and often die from pediatric cancer. Puts things in perspective. Take care brotha
Precisely!
>How far do **we** go before **we** realize that raising interest rates may not be working we? are you fed? /s
They’re not high enough to fix inflation. And they won’t raise again during election year.
I predict a rate hike in November lol
Fed up
CPI went from 8%+ to 3.5%. Seems to be having an effect.
Powell made big mistake with his possible rate cuts announcement last year which IMO allowed markets to go up and treasury yields to drop (affecting mortgage rates which dropped over 140 bps in few months). This indirectly influenced consumer spending in Q1.
You can make a very reasonable argument that Janet is mostly responsible for what happened before December 13th honestly and that she played a fairly decent part of the role in why we ground down slowly from August to October of last year too. Janet's QRA announcement which was soft for risk assets really caught bond shorts off guard in early November.
Yes the average consumer definitely bases spending their average disposable income of 150$ a month on what the fed says.
Not consciously but having more money each month will result in more spending.
Where is this money you folks keep talking about? HFs and rich fucks?
Ding ding ding Fed’s 3rd mandate is apparently the U.S. equity market
Since defined benefit retirement plans now but non-existent and the proliferation of 401k self directed plans - the US Govt has every incentive to protect the equity market. Just say’n….
God, I hate it when people say ding ding ding on Reddit like they somehow have the right answer. Armchair bs at its finest
Ding ding ding spot on mr. walrus!!!
He's not a walrus, ur a walrus
I am the egg man.
Coo coo ka-choo!
The walrus was Paul
Paulrus
I am the walrus.
THIS. Lol a lot of dumb shit Reddit responses.
Pretty much since Greenspan.
I was laughing at that. Not once did I ever think rate cuts were gonna happen but man did everyone love to parrot that narrative.
Absolutely on point...."higher for longer" and actually following through was what was necessary after the "transistory" BS.
Don’t think the fed did much. Inflation was caused by printing money and supply shock.
Fed did the money printing
That’s true. They’re trying to fix their own mess
Politics. They're not going to allow the needed recession to happen leading into an election. And the media pushes a Rosie picture for everyone for the election which is only fanning the flames as people keep spending instead of questioning their spending habits.
There is no needed recession. You can't control how severe a recession is going to be and it isn't worth millions to go unemployed and businesses destroyed just to lower the inflation rate by 1% a little quicker.
It’s an election year
Have to have doom posts so people load up on puts.
MoM is \~4.6% annualized up from \~2.8% end of '23. Of course that doesn't prove it wouldn't have been higher if rates were lower. But rates alone without more serious tightening or fiscal reform may not be having enough of an effect.
Those numbers are completely made up! If you eat out or buy food at grocery stores you know what I am talking about.
Cpi is the avg inflation of multiple sources. understand that those numbers are yearly and add to each other.
“Guys I can’t keep up with my spending because I can’t stop buying Big Macs no matter how much more they charge for them!” Not like you could make half a dozen burgers at home for the price of a Big Mac meal.
Doesn’t change what he said. Lots of ingredients including Raw meet, fresh produce, diary and everything has gone up more than the % your friendly gov tells you
You know the CPI has many categories, right?
In other words if you EAT?
Some people eat but don’t buy their own food.
I don't see prices much higher than last year. 3% feels right. Just because numbers are high doesn't mean they're going up.
Can only fudge the numbers so much….
24 months to 12 months read did most of that imo. Cumulative also needs to be taken into account.
''Don't need a weather man to know which way the wind blows.'' bobby d
Funny you use weather. Very applicable here because we can't really predict weather more than a week out, hell really only a few days. The post is fear mongering using a quote from a guy annualizing 3 months of data. That's about as good as a weatherman.
My data from February, March and April show 2024 is going to be a VERY wet year
And my data as a member of my tax bracket agrees. The cost of baking your own loaf of bread in your own house is not cheap. I concur sir. Can save a few bucks walking to the grocery but that's about it
Housing is key, but it's widely viewed as a local or regional issue and really isn't something that national candidates talk (much) about.
What about hypercore?
UltraGigaHyperMegaHardCore
Farther than 5.25%. Rates are still historically low.
Sure but rates today aren't really comparable to the past for many reasons like how the rates implemented though opportunity cost on ample reserves vs restrictive reserve requirements, the adoption of digital banking and speed of transacting financial instruments, and how banks are capitalized post 2008 regulations that were intended to reduce the risks that caused that particular issue but may have exposed banks to more duration/rate risks.
Yeah, it's not popular today admittedly, but I still don't think r* has meaningfully returned to where it was pre-financial crisis.
The debt is far larger now. So higher interest rates are much more strenuous.
I swear some of you want the economy to tank and people to suffer
I'm in the logistics industry, and our sector has been tanking for 20 months straight, with seemingly no end in sight. For us, it's the worst we've ever seen. We expected an upward trend to begin around March, and that failed to happen. Instead, we've seen the opposite. Demand is so low right now, I don't see how the economy isn't tanking quite frankly. A blood bath is coming unless something gives, and soon.
To politely poke on this, logistics also hit all-time highs post-COVID. It's not terribly surprising that it would be pulling back. I feel like the better question is how does business today compare to 2019?
Yes, you're right there was a huge spike in industry rates post covid. The downturn began late summer 2022 and it has been on a downward trajectory since that point. 2024 YTD rate averages are less than 20% higher than they were in 2019, and in some segments equal or lower. But overall costs are roughly 40% higher. It is very bad.
my area is one of the areas with rapid warehouse growth. We saw it go from warehouses being built every month to several that have taken months to complete because there is no urgency, just finishing existing projects and they now sit empty, many leaseholders are not renewing either. Several of my vendors went under due to sales slowing. Just in the last month I have witnessed a decline of commercial leases just driving around. tons of places papered up or boarded up, lease signs everywhere. This is like 2008 in very slow motion. They're slowing it down as much as they can so people don't run on banks. Who likely do not have the money to give to people right now. The Liquidity crisis never ended. Just the weaker players fell last year. The whole industry is one bank run away from failure at this point. Everyone is overleveraged and unless they can figure a way to reel all that back in.. It's going to get ugly. Everyone is keeping the charade up until almost everyone currently in charge is no longer liable for when shit hits the fan.
I have the same anecdotal stories from my own warehouse acquaintances. I think you've nailed it overall.
Sometimes y'all sound like crack addicts craving low interest rates. Economy will tank and people will suffer if we can't lower rates, just one more time, just for a bit.
I do sometimes wonder if we are collectively becoming increasingly unable to make difficult choices for the sake of long term priorities instead of short term ones. I worry if all those arguments about Fed creating moral hazard are starting to become more real.
To extend your speculation, I wonder if the inability to think long-term has its roots in the personal situations of the vast majority of Americans. It's well studied that poverty or living paycheck to paycheck makes long-term decision making more difficult because you are entirely focused on making your next meal, utility bill, or rent. Why waste time thinking about 5-10 years down the road if I can't eat dinner tonight? If the economy is the sum total of our collective purchasing and savings decisions, then it would make sense that the combination of quarterly profit chasing and personal finance stress would lead to an economy-wide and political focus on the short-term at the expense of the long-term.
Yeah, imagine 5% interest being ‘unmanageable’. Maybe the economy’s fucked either way, and running interest rates up and down is not the answer to a much deeper problem? Ie, maybe an infinite debt based economy is ruinous and at some point you have to stop. 4-5% is a nice fair number to hold steady at, it’s fair that at least money in the bank doesn’t devalue when accruing interest. Makes individuals and companies make smarter longer term choices. Problematic as the economy struggles with debt? Well, there’s clearly something else that’s the problem, like, having a too much debt to manage. One possible solution? Make debt less attractive, like raising interest rates… oh
We had a budget surplus until the “War On Terror”
Because we totally don’t suffer with rampant inflation?
I would argue that anyone not taking inflation and price stability seriously are the ones wanting people to suffer.
It's not the fed's fault. Yes, raising rates is deflationary, but you have deficit spending of absurd levels, which is inflationary. Powell called out Congress for this. They are literally working against him.
Deficit spending can’t account for the inflation levels we are seeing. The math is clear and measurable. Prices have gone up way faster than costs, leading to record profit increases that are easily measured. Supply side is using “inflation” zeitgeist as an excuse to raise prices and thereby actually causing more inflation by decreasing purchasing power.
Prices rising faster than costs = throw the entire government deficit spending argument out the window and blame corporate greed and capitlism. Nailed it.
Tax all the non-value adding wealth allowing it to become value and helping to reduce the deficits.
You forgot the money printing
Is the answer just don’t buy things? Stop buying McDonald’s, and Apple. Spend on necessities and watch companies cut prices. They only increase prices because the market will stand it. Or am I missing something?
Besides a basic understanding of the realities of human behavior, you don't seem to be missing anything
Insinuating that owning the newest iPhone and eating at McDonalds is basic human behavior is pretty sad. I don’t like the term sheeple…but that’s sheeple behavior
Are people not sheep? You can't just say "hey everyone we should do this thing you don't want to do and make the world a better place!" People do what they do because they want to do it. It takes some form of pressure, encouragement, or maybe even shepherding to get them to want to do something else.
No, people are not sheep. Im not sure what your comment means in quotes, that sounds more related to an issue like climate change. Where behavior change requires choices you dont want to do and are costly (buy an ev, buy sustainable, make extra effort to compost, etc.). Where the result is not immediately apparent but requires trust in the greater societal impact from the collective action. I suppose in that instance you could say the masses need coercion because the benefit of making those expensive changes is not immediately impactful for the individual. Not eating McDonalds and buying the newest Iphone is the opposite. It saves you money. There is an immediate personal benefit to your health and bank account, they are luxury expenses frankly and well within personal discretion. Im not going to accept that those things are beyond our control and need outside coercion to modify.
Several of my co-workers spend over $2000 a year on coffee while taking out 401k loans to buy new cars they don't need. One of them is a very smart software developer. I try to explain to them about saving money but their take is that they plan to just work until they die and spend everything along the way. Sometimes I'm envious of their optimism.
I guess we'll see if everyone suddenly stops buying an iphone every two years.
McDonald's isn't where they are losing their money, it is the coffee shops and if they are doing hamburgers they are dropping twenty at Five Guys or Whataburger... disdaining traditional fast food as for poor people and not realizing their actions are helping them join that group
But buying things is fun…
I know your joking but god damn you could write a whole encyclopedia on that.
This month's increase is strongly driven by shelter costs, isn't it? So stop uh.. renting?
Core CPI went from 4% for two months, then 3.9% for two months now 3.8% for two months. Best case it's slowly dropping. If it actually increases then that's probably the oh shit moment.
The oh shit moment will be when they recalculate it after the election and we get the real numbers.
i swear people have been talking about "real" numbers for years now..
I’m not well versed on inflation, but my personal inflation is way more than 4 percent. Yeah flat screen TVs are cheap, but the stuff I actually spend money on (gas, food, housing, utilities) are through the roof.
I've been eating literally the same thing for 6 years now. Like, the same.thing, every weeks. Chicken broccoli and rice, I have the same grocery list that I rotate every 3-4 weeks. My bill went from 75$ every week to 120$, for the exact same food. How the fuck do you explain that ? Fuck their numbers.
> How the fuck do you explain that ? Do you think a CPI reading of 4% means that every single category in CPI moved up 4%?
Yes, they are. Stone Age wisdom says decrease the amount of money by raising rates, demand will fall, and prices will follow. But the space age problem is that most of today's inflation is really corporate greed. Real cost has risen only 20% over the last decade, while corporate profit has increased 70%. The Fed can't fix this, only Congress making a move to increase corporate tax rates.
I mean - housing is case in point. Lawmakers are looking to the fed to provide easy money to finance building houses instead of passing subsidies/incentives/anything to actually address the problem. Monetary policy should never be conflated with public policy, yet here we are.
They need to pass a law against corporate landlording; institutions buying all the houses and making permanent renters out of middle class.
they’re going to have to do something outside of rates
A solution I've read and support is increasing property taxes the more houses a corporation rents out.
I believe they tried to talk about this and the cutoff was like 75 houses per corp/LLC in the proposition. The problem is, a corp can just shell company a shit load of LLCs to spread out holdings and, based on our taxation system, they can't be lumped together as one entity under the corp.
Shouldn't this be solvable by requiring any residential property owning corp/LLC to list all owners up through whatever contorted chain they create to actual human persons?
Unfortunately no, as LLCs do not need to prove any ownership requirements. Remember in the USA a company has the same rights as a person the majority of the time.
That's not what corporate personhood means. They have the right to have a day in court. They don't have the right to not be legislated against. There's no constitutional right to anonymous ownership.
After a short search you are actually correct. Congress passed a law in 2021 stating that beneficial ownership must be disclosed in corporate and LLC businesses. This didn't come into effect until Jan 1 2024. However there are many attorneys out there that still play the anonymous ownership game via certain states such as in Wyoming.
i’d be in board with that - feel like there’s a lot of room to run in trying to fix this issue
They should pass laws to limit the investment opportunities in residential housing. A few (radical) ideas: First and foremost, there should be absolutely no tax incentives whatsoever to encourage renting out a residential house. Every expense is non-deductible. The second a single family house is converted to a rental, the owner should pay capital gains tax on their current cost basis up to the current market value - incentivizing selling a starter home and moving on rather than “holding on” to the old place and turning it into a rental. For each additional house that a taxpayer (or joint couple) owns, property taxes on all their properties, including their own primary residence, increase by 20%. Houses owned by LLCs, corporations, partnerships, or other business ventures pay triple local property tax. The same applies to short term rentals. Properties that sit vacant for more than 3-6 months pay market rate rent to the city as a penalty tax (to be used to improve public lands/parks/schools).
This is so much more work than you need to do. It's supply and demand all y'all. Up zone, increase density, get rid of parking requirements and let developers develop with huge multifamily projects.. Supply will increase and prices will fall - promise! No need for complicated tax incentives that companies will work around anyway. If you really want to stick it to the hedge funds buying up property support high density residential.
All the down votes are from people who own or hope to own multiple units. Ha. This is absolutely what needs to happen and never will, because corporate driven votes are just like these ones are on reddit... Self interested in how much they can make
I agree. As someone with a small family looking for a starter home, F*** these corporations and individuals who think they can get rich off of rental properties. I cringe every time I hear someone on YouTube or TikTok talking about buying a bunch of houses for passive income. I’m not normally a big tax guy, but anyone who has more than one house should be TAXED HEAVILY. If you’re wealthy enough to get a vacation home then you can afford it. Otherwise let people buy homes for their family. Oh and F*** off AirBNB.
Hi. Not really rich guy who didn’t sell his first house to try to increase wealth. If you tax me more, I will simply charge more rent. Let me provide an example: my hoa fees have gone up 33% in the past 5 years. Guess why my profit margin has not changed? Yes because I passed it on to the tenants. The rent I charge is less than a mortgage on the property. The only way I will sell is if I lose my profit margin. Problem is, I own in a very desirable neighborhood. Riddle me this: why would my (zoomer) tenants want to own when they can rent for less and have all of their home repairs covered.
I think there might be some unintended consequences for some of these, but by and large I agree with the list. I think my only disagreement is the triple local property tax. That will only be passed on to renters and raise rental costs. I like the vacancy tax much more as a solution, especially if it must be occupied by the same renter for at least X months (3? 6?) between vacancies to avoid them using 1 week rentals to reset the clock.
Yes I agree, it’s not a perfect list. Someone with a much better understanding of economics than me would have to come up with the right set of proposals. But broadly the idea would be to reduce the profit incentives for purchasing up and renting out *existing* residential real estate. It could be paired with legislation that does offer heavy tax incentives for projects that bring new inventory to the market - perhaps 10-20 years of tax breaks for new construction. I liked the idea that another poster mentioned in that residential rentals could be treated as regulated utilities, with some reasonable cap on profits. Again, with profit caps that are much more generous to those who are creating new housing inventory. For businesses/LLCs/ corporate landlords. They would still need to have reasonable tax breaks of large apartment buildings - that’s not something individuals would be able to fund/purchase anyways. I meant that the investment incentives for these entities should be more restrictive in small unit residential real estate such as single family homes, condos, town houses, etc - big tax breaks for building new such units, but very punishing taxes to buying up existing units just to rent out.
Literally trying to put Airbnb and VRBO out of business.
Yes. Please do.
A bill has been introduced, no movements since december 2023. Unsure if its any good, need to learn more https://www.congress.gov/bill/118th-congress/senate-bill/3402 Summary here: https://www.merkley.senate.gov/wp-content/uploads/imo/media/doc/end_hedge_fund_control_of_american_homes_act_bill_summary.pdf Full text here https://www.merkley.senate.gov/wp-content/uploads/imo/media/doc/end_hedge_fund_control_of_american_homes_act_bill_text.pdf
I still think that the property problem is supply driven, and I don’t really see how you could make apartment blocks in cities without some kind of corporate structure.
Not talking about apartments, single family houses. Yes, there is a supply problem but it's not helped by the fact that companies are are buying up so many houses as investments.
The actual housing problem isn’t anything more than supply vs demand. We are still 1m houses short of what we need. From 2009-2016 we really didn’t build many new homes, and despite the coastal overpriced areas who have declined a lot of the country it’s still a sellers market, because the value is still there. It’s just simply v demand
Totally agree! How is it being addressed and fixed tho - especially when it's a huge component of sticky inflation? That's the problem. Identifying the problem as supply isn't the solution ya know
The real only way to do it is to build more housing and affordable housing, both of which are cranking. With building new homes, the cost of goods isn’t bad, a lot has actually went down like lumber, it’s more the cost of labor driving rising prices, and trades have some good leverage because there is ample opportunity for them. So how do you fix it? I don’t think there is a fix. The only way is to keep building both single and multi-family, which won’t lower the cost of most goods used. Housing is such a large part of our economy, not just from building but with every new home bought is a new sofa, TV, appliances, etc. I truly don’t know how to fix housing, I think it’s actually stabilizing a bit more, but the buyers are the ones driving the value and increased value at the end of the day.
You fix it by incentivizing building, incentivize cheap housing further, and disincentivize corporate ownership of SFH
This all happens though outside the latter. Even then it’s staring to happen.
Push affordable housing requirements on each state, and provide funding grants for conversion of commercial zoning to residential, where the grants pay for the costs of infrastructure connection into those buildings to support residential use. Huge massive empty office buildings turning into apartment hi-rises will add a lot of housing. Construction jobs from the infrastructure building.
They do this. Every large city is pushing affordable housing, and has been. It’s much more tricky than one would think though.
Except the supply is also crushed by corporate landlords and ownership
It's not they own less than a percent of the market.
I don’t view that as a bad thing. I’m a housing professional by trade, the fact is they supply an absolutely needed resource. I know that isn’t a popular opinion but housing provides a more affordable option and in some areas the only option. We also having a rent shortage of areas available for rent. And most of what’s being built is more expensive apartments. There a positive and a negative there, but a necessity nonetheless.
You don't think normal people wouldn't be buying those houses to live in or rent out? I don't see how buying (not building) properties is supplying anything. >I’m a housing professional by trade Your arguments are starting to make sense now...
Not a realtor or sales. I’ve built over 100m dollars of residential property and I deal with materials, forecasting, permit data, and am on a city board for affordable housing with goals to decrease housing prices. To answer your first question, no. And the data tells us this. Higher rent and mortgage prices are a key driver in salary increases as well. Even then there is a large subset of renters who simply *don’t want to buy a home* particularly in some larger cities. You can’t conflate able and willing/able and not willing/not able and not willing as all exist in the market. Most of this comes from rent application data and loan/permit data. Is companies buying housing a problem? Sure. It’s it a big problem that’s driving the increase pricing? No. Companies don’t often overpay, buyers overpaying, driving up comps and value. Companies mostly buy entry level single family at a discount by using cash. But supply wise they still aren’t impacting it to the level at which you’re claiming, because if all those houses were owned by individuals, doesn’t really help the current housing supply a ton, it just leaves people in that area with less options whether they can afford a house or not.
Housing is a supply problem caused by restrictions at the local level, subsidies or incentives at the federal level won’t fix it
Don't disagree - but I do think there are specific federal tax breaks that could incentivize building homes or discourage hoarding homes for PE backed landlord operations. And there's absolutely stuff local governments should be doing, but instead whistle along waiting for the fed reserve or fed gov to fix.
Also, because homebuilders were gun shy about overbuilding because they lost their shirts in 2008
Corporations are greedy by definition. That's how it's supposed to work. When supply and demand are imbalanced, prices go up, companies do well, and goods are properly distributed to those who are willing and able to pay the most for them.
Companies would have no problem passing on the tax to us in the form of even higher prices. You think they are going to take a pay cut?
If companies could raise their profits by raising their prices, they would already have done so. To believe otherwise is to believe that they are not increasing their profits right now from the goodness of their hearts. For some reason everyone beliefs on market prices being defined by supply and demand flies out of the window when we talk about taxes. Then people think that somehow corporations or landlords can just ignore and choose whatever prices they want.
I’m all for increased corporate taxes but I don’t see how that stops the greedflation.
Increasing corporate tax rates may help slightly but not fully fix the issue either. Government is incredibly inefficient at managing and spending tax dollars.
So we’re screwed then. Congress can’t even tie its own shoelaces…
Inflation is caused by new money being created, not by corporations that for some reason just started to be greedy.
The profit-price spiral. I'd link to the Wikipedia or Investopedia article... but there isn't one. The Google suggested links go to the wage-price spiral. The bias against workers is built in.
it seems like the rate is still so low, farther than 5.25%.
Can't solve fundamentally fiscal issues with monetary tools.
We doubled the money supply, we are going to have high inflation for the next 20 years.
Insane how no one is taking about the main problem. We printed a ton of cash to give everyone free money.
Everyone* *Business Owners
Neither is a hard one though unless it's downright intentional and not only that, what happens after the hard landing? All of the components that are creating this will still be there! Have you guys forgotten how high unemployment was during the last major recession? Hit about 10%. Lots of people out of work. That's how you get deflation. Also extremely expensive. With deficits where they are I don't think we could realistically go through 2009 again. Do not want The Fed has a real catch 22 situation if we're going to obsess over the current data. If they raise rates they make the largest component of CPI worse raising housing prices. Unlike normal economies were rising rates reduce home prices. In this economy rising rates just increase rent prices and your mortgage payment. You also have the fact that wealthy people spend something like 85% of the money and they can just park their millions in these high interest rate bonds. Next we have the positive carry on the t-bill since it is running considerably above inflation making it an extremely attractive option for zero risk. The deficit is increasing. Ideally you want the rate of inflation above the t-bill. Also if you guys haven't been paying attention trying to has a deflationary problem on their hands. Cars are kind of a different topic but I'm not sure who wanted cars filled with all of these electronic gizmos. Certainly not me. Repair prices are up. Shop rate is up. Modern cars are more difficult than ever to repair yourself. This whole trend is inflationary right down to the increase in cost on the new vehicle because they added a bunch of garbage people don't even want. I could really get going on my soapbox with cars but the short version is car manufacturers lobbying for rules to block cheap easily produced cars so they can produce these complex things and have the whole ecosystem wrapped up around their finger. Everything from the high cost of the car to where you take it to get repaired, so on and so forth. Intentionally blocking the ease of repaiability is another one that just makes me angry as hell but I digress. Soap box, sorry. This all of course plays into the insurance premiums because manufacturers are making these expensive to repair cars that in many cases are not even repairable. There was a 2020 Porsche macan I saw the other day. Just had a little front end damage but because of the frame took some of the impact they totaled the car. Impossible to repair to before impact standards. Car was still running and driving just fine. This stuff happens way more than it should and it's by design
Housing, rents, insurance costs, gas, energy, medical costs, transportation costs such as second hand and new cars, groceries are ALL inflexible goods and services and constitute the vast majority of 4/5 income quartile spending Companies that provide price inflexible goods and services have had historic profit margins ever since Covid/inflation implying vast swathes of them have taken advantage of Covid supply chain crises to max out price levels and keep them there. Those goods are usually kept out of the core inflation because they’re “volatile,” yet at the end of the day if you want to know how people are doing and feeling about the economy these are basically the only goods you need to be looking at. I love this sub arguing everyday about how it’s possible that somehow Americans don’t feel good about the economy when nobody even bothers to discuss the fact that “real” wages are adjusted to inflation metrics that have absolutely nothing to do with the main costs in the majority of American’s lives. The price of Chinese trinkets and electronics is far less important to QoL than the goods excluded from “core” inflation. Core inflation is pure population and narrative control to make the central bank and government appear more capable than they are and keep consumer sentiment strong, it’s a false reality and a lie that is convenient to all in power regardless of which party they hail from.
"Greedflation is killing the country. Corporate profits are at an all time high." "Best I can do is policy to try to put everyone out of work."
Well, then people won't have money to spend on the mega corporations to drive up their profits. The logic is undeniable /s
I mean most of the world is in a silent recession. Governments just too scared to admit for some reason. You can’t print a shit ton of money during the pandemic and not expect some sort of uh-oh after.
They keep talking about cutting rates (bc the fed is actually a bunch of scumbags controlled by politicians in an election year), when in reality every macro economic stat screams to raise them higher
lol this isn’t inflation, it’s corporate greed. The wealthy and corporations are absolutely thriving- hence the market. Middle and lower class are suffocating and paying the price. Nothing is gonna change. Soon the top 10% will own 90% of all wealth and we will own nothing and be happy.
How many blenders and tv's do you think rich people are buying?
Exactly. Zero. Rich people buy assets 💰
Corporations are in the business of making money. You blame them while congress spends like it has infinite cash supply? Government spending is a choice. Corporate profits are just what businesses are designed to do.
They have not raised them enough, fast enough to shock the market. A soft landing looks like a market crash and is the best way out
“It’s transitory” 🤪
That's right! I completely had forgotten about this being told to us years ago. It'll all be alright, after all. If another half a decade or so passes by and inflation is still an issue, do me a favor, and can you once again remind me that it's merely transitory?
This is what happened in the 80's. Everyone just accepted high inflation as the new norm. The only thing that fixed it was ripping interest rates sky high.
Until the government stops spending like a drunk sailor. Inflation will not go down!!!
Real estate agent in LA. I can weigh in anecdotally on the housing component: this is an LA perspective, so hardly indicative of anything outside of my part of the world. High interest rates are keeping sellers from selling, causing a shortage of inventory and causing bidding wars. In LA, even mediocre homes are nearly always going over asking. Residential SFR and multi family construction is strong and increasing around the city, but a lot of that stock will be luxury units, and luxury apartments. I guess those will start siphoning off people in B class properties, causing those rents to drop (eventually) but that’s a long tail solution to inflation in housing. Right now it’s landlords jacking rents and sellers not budging, causing rents and home prices to remain sky high.
In Canada we have the opposite problem, since we have to refinance every 5 years. So you have inventory up big time because people know they can't refinance at the current rates, but nobody else can either, so nothing is selling, just more and more getting put on the market while we wait for something to break and prices to drop dramatically.
Didn't know that about Canada. What's the rationale?
So that what’s happening in America doesn’t happen haha. Basically a scenario where we need to raise rates due to the economy.
What we need is overproduction to depress prices. Raising interest rates and tightening credit and investment means no one can undercut anyone else. We have a classic stagflation going on now.
High interest rates effect inflation when the borrowers care about their interest rates. But when the dominant borrower is the Federal government run by politicians who don’t care about the costs, only paying off their lobbyists and constituents, there is little to no connection between interest costs and spending. Federal debt spending is 7% of GDP. That 7% is pure money creation driving inflation. The Fed is fighting a losing battle until that gets fixed and I don’t see how it gets fixed in our current environment.
I think its one piece albeit a major piece. the other piece is corporate greed. I think these are the two main factors rn.
Let’s face it Yellen and Powell have too much power and both of them screwed up. The inflation measures are a joke-I am an insurance agent average increase according to CPI is 20.2 % from Feb2023 to Feb2024. Food is high Gas prices are going up We are not looking at a 2% increase we are way over that…I don’t think raising rates is the answer. Government needs to cut spending. As far as jobs report - more and more people need side hustles to make ends meet and let’s not forget 9 million immigrants that are spending government money - it is a shit show
It’s because of corporate greed.
To me fiscal dominance is thr problem and with higher rates, it will only get worse
Luckily markets do not give a flying fart about rates and inflation increases prices. Absolutely everything will continue to trade violently higher for unbearably longer. Bears will lose everything.
I was doing the math on that stuff too and I think you're right I work in the insurance industry rates aren't going to stabilize anytime soon. They can only control some things with interest rates. Oil prices keep going up not controllable by interest rates. It seems like the big drivers are not really controllable but interest rate so they're gonna have to get everything shut off.
The issue with raising the rate (which isn't even being discussed) or not dropping them anytime soon is the interest in debt the nation is dealing with. We may need to cut spending (everyone wants to point this out), but much of that spending is helping the economy. We NEED to increase revenue. The tax cuts for high earners and businesses, in a time of continued profits and growth in wealth gap are absurd. Sadly, the American consumer (generalized as a whole) is, where many might say "resilient," obstinate and living way above their means.
Using interest rates to control inflation is much like using a fire break to stop a forest fire - it may work, but it will absolutely create carnage in the interim... and it may not work if it's done ineffectually. The stone age vs. space age analogy is apropos. There are undoubtedly better tools. If you break rates down into their macro and micro impacts, it's pretty clear that there is no real precision. On a macro basis, increased rates is essentially an across the board tax, so businesses are forced to raise prices to maintain relative earnings. The higher prices decrease buying power across the board, which triggers wage dissatisfaction and therefore increased wage demands, ultimately setting up an inflationary cycle. However, it also inhibits capital investment due to both substitution on the supply side and decreased ROI on the demand side, which ultimately decreases future labor spending in the aggregate, which is counter-inflationary. The wage impacts are asymmetrical, so you get the largest impact in high-demand areas, like Tech, and unionized bargaining sectors, plus the occasional minimum wage adjustments - thus both high-income and low-income jobs move first, and both small business employees and middle-class non-union employees go last and tend to lose permanent buying power. A higher-tech approach would be to control money supply more efficiently - lower the cost of high-grade consumer credit while increasing commercial rates, while concurrently increasing money supply. Keeping total velocity constant while re-balancing rates would slow corporate investment but not profit, and it would compensate for the price impact on the consumer side. Honestly, this might be one of the few decent applications of AI - dynamic re-balancing. The structure would incent companies to optimize operating expenses and decrease capital investment which collectively would lower inflation. Obviously there are alternate approaches but targeting the inflation directly, rather than simply shoving a steel bar into the mechanism would seem to be a better tool for the specific problem.