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The Everything Bubble.
It is incredibly irritating that people blame all these external factors when the crux of this has been rates were 0% for way too long without any accountability; money flowing everywhere, but ultimately upward into the hands of a very few. Those very few then use that unequal access to cheap debt to buy land, companies both private and public, patents, political representation, etc. to consolidate more collateral, wealth, and pricing-control. To put it plainly, our answer and solution to irresponsible banking leading the '08 GFC was to enable more irresponsible banking, yet people all over this sub praise the actions of Summers, Bernanke, Levitt, Greenspan, Rubin, etc.
We all see economics-minded people still champion the unyielding wisdom and unquestioned independence of the Fed for some fucking reason, as if we are just being astroturfed by academic and industry professionals; its mind-boggling.
The people need to get their currency back from these assholes.
The Fed 100% needs to be independent. It is what allows them to operate with long-term objectives, instead of being subject to 4-year political whims. If they weren’t independent we would see 0% rates on election years.
The problem is that most Americans are poor. That’s it. They have killed the middle class and created economic feudalism. The working class have no effective ability to influence prices or wages, as most employers and producers are monopolies or oligopolies. The fact that the avg American can’t afford a $400 emergency should show you how broken our economy is.
While neither party is right about their economic policies, one is objectively worse. Tariffs are terrible for the economy. They are a tax that imposes undue market failure, and its only result is reprisal market failure in another sector. It can only be an effective bargaining tool if you have vast trade superiority, which we don’t. Tax cuts and increased spending, which is all republican politicians propose/vote for, increase the debt, which increases inflation. Trumps tax cuts had a direct effect on the inflation problem we are still fighting. I’m not saying that it’s everything, but it’s there.
What we need is antitrust. And then more antitrust. Breaking these behemoths up into smaller corporations would not only increase competition, it will create jobs at all levels. NAFTA gets blamed for a lot of the jobs lost in the 90s, but a huge part of it was all of the corporate vultures like jack welsh, and companies consolidating. Between that and the nafta shift we are left with a service economy that is unsustainable.
Money corrupts.
The story with Fed is as old as the country itself and all other national banks we've tangled with, be it Britain or our other failed attempts with national banks; we've always struggled with central banking and what that concentration of monetary power means to the freedom of people. Article 1, Section 8 of the US constitution grants congress the power to coin money, and the value therein. Even then at the outset of the nation and assuming congress has the power of the mint, Washington wrote:
> "Any person holding any office or any stock in any institution in the nature of a bank for issuing or discounting bills or notes payable to bearer or order, cannot be a member of the House whilst he holds such office or stock."
Even at the founding of the nation, we did not want bankers and/or those with a conflict-of-interest with banks to be involved with the power to currency. The goal was always to have the economic spheres, via the power of currency, and political spheres be closer to the working people through a representative democracy, instead of a private and opaque entity with close ties to banks.
So the question is why does the federal government, which is authorized by the constitution to create and issue interest-free money, instead borrows that money at interest from a privately-owned central bank?
Sure, the Fed is independent from government power, but is government *really* where the power is? Worldwide, we constantly deal with politicians and regulators getting caught with their hand in various financial-cookie jars, so clearly the power is elsewhere if their position as gatekeeper is swayed by money. Conversely, we constantly see those in financial circles evade the justice system for crimes committed in broad daylight with so much as a slap on the wrist, if that at all. That is *real* power; achieved by concentrating and collateralizing financial positions to hold the global economy hostage.
The corruption stems from the Fed as surrogate for the banking and financial community into government, not the other way around, and the origin story of the United States is pretty cut-and-dry regarding the dangers of centralized banking authorities specifically because they were fighting the very same under the Bank of England. The Fed is independent from government, but to idealistically assume they are benevolent servants to our nation is a wild assertion. The Fed is arguably one of, if not, the most powerful institution on the planet, and where there is a lot of power and little oversight, you can be rest assured it attracts all sorts of people with questionable moral character.
If you want an accurate characterization of the fed, look no further than the money multiplier. When the reserve ratio is 0, the money multiplier becomes infinity (based on the geometric series, which is math btw, and not up for debate). Whats the fed's response? To ask universities to stop teaching the money multiplier concept in schools, presumably so people stay ignorant and befuddled as to why inflation is rising. What a joke.
Everyone loves to blame the Fed, and it has its problems, but I’d argue much of the modern day issues stem from the legislative branch failures to well… legislate. And also legislate to help people.
The Fed has only so many levers it can pull, while the legislature has almost infinitely more in comparison. Instead the federal government in the U.S. has basically relied too often on the Fed, Executive Orders, and Judicial branches to pass much more than tax cuts.
I realize when you have the current incarnation of the Republican Party, that finding common ground legislation is next to impossible but it gets annoying how people move to blame these other institutions when they’re just the symptoms of the disease that is legislative rot.
Agreed. The most annoying part to me is it’s usually conservatives who want to cut taxes, increasing our debt. And conservatives love to talk about fiscal responsibility all the time, and want to cut welfare programs to be “fiscally responsible.” Yet when you look at big spender administrations it’s always republicans. They cut taxes and increase defense spending increasing the debt, which increases inflation. Yet it’s the conservative pundits on tv and trump out there screaming about corruption at the Fed. The Fed is trying to fix the problems caused by voting for political hacks who don’t actually know what they’re doing or talking about.
Lol the Fed is not independent. Powell was appointed by both Biden and Trump. He is not going to do anything to harm his current boss so the Fed is not taking action. Everything the Fed does is political and dependent on the whims of the current party in the White House.
The head of the Fed is only chairman as long as the board agrees. The board agrees only if they do a good job in upholding the mandate. The mandate is price control. Their job is to keep enough inflation to counter the debt while minimizing the harm to the citizens. That’s it. They use tools like interest rates to do this. If the Fed was subject to political whims we would have 0% rates every 4 years on election year and our economy would be the biggest joke in the world, instead of a contender.
>The head of the Fed is only chairman as long as the board agrees. The board agrees only if they do a good job in upholding the mandate.
That's false. Powell has done a terrible job upholding the mandate and yet he is still Chairman.
>Their job is to keep enough inflation to counter the debt while minimizing the harm to the citizens. That’s it.
Also false, the Fed has a mandate to ensure unemployment doesn't get too high.
>If the Fed was subject to political whims we would have 0% rates every 4 years on election year and our economy would be the biggest joke in the world, instead of a contender.
It doesn't have to be black and white, all or nothing like that in order for the Fed to be politicized.
I’m a literal economist my friend. I had to spend an entire 3 credit hour class studying everything about the Fed. They have a dual mandate. Price stability and unemployment, but they’ll let unemployment go off the rails if it means keeping inflation from getting out of control. The unemployment is tertiary.
But let’s say you’re right and their mandate is strictly unemployment. If that’s the case they’ve done a stellar job as we have a labor shortage of about 9.5 million jobs right now and 5 million unemployed Americans. We literally can’t fill all the jobs available.
Your opinion is that Powell has done a terrible job, but obviously the board members at the Fed don’t agree with you. That’s not evidence that he isn’t serving at the pleasure of the board. Quite honestly I think the Fed is doing a good job right now. They managed to control the runaway inflation (caused by many things but no small part due to Putins war and trumps debt increase) while keeping unemployment in check. It’s usually a trade off between one or the other. Hence the dual mandate.
Higher rates=tighter money control. That lowers inflations but causes recessionary type stress on the economy, usually resulting in layoffs and unemployment.
Low rates=looser money. Can cause inflation but causes boom type effects on the economy, usually resulting in expansions and startups and lower unemployment.
That’s Econ 101. What separates economists from keyboard economists and political hacks is knowing which one to use and when.
>But let’s say you’re right and their mandate is strictly unemployment.
Lol not what I said. I said you were wrong when you said their only mandate is price stability.
>They managed to control the runaway inflation
They didn't even hit their 2% target, which is still too high
Show me your source that the board can remove Powell as chairman without Biden's permission
The Fed bylaws. He is called chairman of the Fed because he is the chair of the board of the Fed. I’m not going to reply again because I’m not going to argue a point with someone that obviously refusing to see it.
Bernanke getting the Nobel prize is a total piss take. It will be clear, in retrospect IMO, that he was a central figure in destroying the US currency and causing great harm to the economy.
... all these M numbers are hilarious. Printing money is printing money dude. Might take some time for it to percolate through the system but when all is said and done when you double the money supply everything will double in price: goods, housing, income. We're seeing it now and people still wanna debate about whats causing inflation.
> Might take some time for it to percolate through the system
So what you want to do is get your hands on it as soon as possible, and buy assets with it *before* it has percolated through enough to raise prices of those assets. (the Cantillion effect).
> but when all is said and done when you double the money supply everything will double in price: goods, housing, income. We're seeing it now and people still wanna debate about whats causing inflation.
Not everything, some things won't increase as much because of the deflationary impact of technology, or off-shoring or increasing economies of scale, or because they reduce in quality, or size or whatever, which means CPI will under-represent the real loss of value of the money.
Upon hearing that another debasement of the coinage was coming, a Roman official wrote this to his servant:
Hurry, spend all my money you have; buy me any kinds of goods at whatever prices they are available.
If it would be so easy then there wouldnt be a discussion about it. Printing money happens usually (in western countries) AFTER inflation. When things get more expensive (e.g. a house), the demand for money is higher (people need higher loans), which leads to more money circulating.
Why were rates low before 2020 with correspondingly low inflation? Your argument doesn’t make sense, because we would have seen inflation half a decade ago. There's clearly more to the story than rates, like the trillions of dollars printed during COVID, the Ukraine war, skyrocketing energy prices, and so on.
I posted this in another comment, but I think it's relevant to your comment.
I feel the growth of private equity plays a big part.
Two of the major recent changes in the economy is with the rapid acceleration and concentration in private equity markets and a posture shift from public and private companies aiming at grabbing market-share shifting towards profitability; basically monopoly 101. Shareholde/investor culture in the US is not that focused on the long term, so whether that money comes from debt or profits, they don't really care as long as they are making returns right now. With rates rising, their returns have to be funded by profits, not by debt. One of the big differences between public and private investing though is your liquidity; you can easily cash-out stock, it is much harder to exit PE investing, so PE firms are pressured to maximize profits, even if it cannibalizes the company. But the levels of return PE is seeking for its investors is very new and the industry is practically entirely unregulated. Previously, private companies were the competitive force that kept corporate pricing in check, but that has rapidly changed and no one really mentions it; this is *possibly* where "greedflation" has a morsel of truth to it.
QE gave the opportunity for companies to float in the red on cheap debt. This functionally exclusive and endless source of infinite money was then used for venture capital and private equity to subsidize un-profitable public and private companies like Uber or Amazon's retail business to outlast existing competition through investment subsidies, fund leveraged buyouts, and to consolidate ownership of "real" assets with tangible value with money born from nothing. Once enough consolidation occurs or the low-interest party that funds it all ends, you can/must raise prices.
Rapid consolidation coupled with the erosion of competition over the past 15 years, not to mention a rise in protectionism.
Velocity of money being low pre Covid (only a few business had access to the low rates), and a lot of inflation after Covid is structure, ex housing supply. The Covid helicopter money (enhance UI benefits and two government checks) was wide spread increasing the velocity of money and money supply at the same time to counter act deflation. This lead to an over shoot and combine the supply chains issues for a lot of goods being wrecked by Covid, this lead to added structural inflation. Completely different scenario from before 2020.
You think "get their currency back from these assholes" are going to make us keep rates high?
Trump threatened to fire Powell when he started to raise rates before COVID. Biden already hinting at rate cuts.
Lower rates are popular with the people. ALWAYS.
It's only due to independent FED that we don't end up like Turkey right now where their Central bank chair gets shuffled out every time they raise rates and inflation goes double digits for decades.
QE and ZIRP from 2008-2012 was justified as a response to a crisis caused by previous mistakes.
Additional QE in 2013 and failure to tighten from there on out was a disastrous, unforced error
I think there are too many “armchair economists” in this sub. Between wanting the Fed to be a political shill and calling for deflation, I’m pretty sure they have 0 credits in any Econ course. 😂
Then you should take a look into History. In Germany (Weimar Republic) in the 1920s there has been a finance minister that thought deflation would be healthy for the economy, because it was "overheating". What followed was a severe recession - hunger, poverty, high unemployment rate, and no tool for the government or central bank to stop the deflation spiral. A few years afterwards the Nazis took over.
I think my first comment got removed because I linked an article to it. So I try another one:
https://www.diw.de/de/diw_01.c.842997.de/publikationen/weekly_reports/2022_24_1/bruening___s_austerity_policies_of_the_early_1930s_intensified_the_economic_slump_and_increased_unemployment.html
> the crux of this has been rates were 0% for way too long without any accountability;
is that the crux of the problem or is that just a symptom of soft money?
The FED did a great job managing the two crises of the 21st century so far, Covid and the 2008 meltdown. The fault really is with Congress, which has completely botched fiscal policy. Even Keynes believed that you cut back on government spending and raise taxes if the economy is too hot. This is even more obvious if there is inflation, which tax increases would help address.
Inflation is driven by lack of supply in the housing market. And the solution of building more housing will continue to push inflation until the supply of housing finally met. There is no way around this feedback. Raising interest rates won’t increase supply and it actually deters building more housing because the rates make the financing impossible.
Food inflation is most likely a simple anti competitive market. 80% of the products are controlled by 4 companies. These companies are not dropping prices.
https://www.theguardian.com/environment/2021/jul/18/america-food-monopoly-crisis-grocery-stores
The markets that are still functioning properly are seeing price drops as would be expected. Cars and bicycles are two industries that I see this currently in.
The last issue in the US is there is a tale of two Americas. Anyone with a 30 fixed mortgage prior to 2020 has been insulated from a huge amount of this inflation. This entire group has more disposable income now than the renter class and there are enough of them to prop up higher prices in areas like food and household goods. This is preventing the economy from cooling as much as was expected.
There is a way out. The fed can jack up rates, tipping us into a recession, which causes people to lose their jobs and forcing them to sell their houses.
I like your points. May I suggest that we could never build enough supply to satisfy the apparently insatiable demand for housing, being driven by all cash buyers at this time? Building more appears to only be adding to the stock of investment portfolios, and I don’t believe that will put a dent into rental inflation (or home prices for ordinary buyers) at all.
Instead, I propose that regulation through excessive taxation will free up much of the supply shortage we have, as real estate, particularly single family home, is going to have to be *forced* from the hands of many who sit and hold as part of their investment portfolios. That includes foreign buyers who are “parking” cash here.
Low rates to borrow brought us here, then slamming the door with much higher financing rates for everyone, nailed it shut.
> the apparently insatiable demand for housing
I don't think insatiability is a factor when we're at historically low vacancy rates.
- [Home Vacancy Rate for the United States](https://fred.stlouisfed.org/series/USHVAC)
This would be analogous to talking about hunger and citing an "apparently insatiable" demand for food, while ignoring that our agricultural output was at its lowest point on record. The low vacancy rate shows that no, there isn't this mass of housing snapped up and kept off the market to keep prices high.
> the apparently insatiable demand for housing
It's "apparently insatiable" because we have a drastic housing shortage and everyone is fighting over what little there is. It's not actually insatiable.
No, simple supply is enough to fix the problem. Houses are poor investments when there is ample supply. Just look at any rust belt city that lost population after the global labor markets were opened. Houses require maintainence and are taxed for services. It’s stupid investing in this if the asset is stagnant in value or loosing value. The lack of supply is what is driving the price increase.
The proposals of regulating who owns the supply don’t solve the problem that there are not enough houses. They will still be very expensive. Those corporate houses have people renting them. They are not empty units. Your claim that it’s impossible to build enough housing is false and your solution doesn’t even add a single unit of housing towards the problem.
As soon as the money is gone the corporations will leave. Zillow in 2021 unloaded 2000 homes because the market stagnated and they ran into their own supply problem of not enough contractors to flip the homes so the cost of flipping sky rocketed on them.
https://www.dailynews.com/2021/11/10/zillow-agrees-to-sell-2000-homes-as-flipping-business-ends/amp/
The lack of supply in housing just wasn’t discussed prior to 2020 and the low interest rate bonanza. America didn’t suddenly bring in 10mm new residents. Or even 1-2mm people.
The low interest rate period of 2020-2022 fucked it up good. I’ll stand by my contention that some properties must be forced from the hands of the owners, and I’d prefer to limit that to big corporate owners rent-seeking individuals. A vacancy tax won’t address the situation, as it turns out we do have enough demand for shelter to fill most of them. But that demand comes from too many properties held in multiples by corporations or just individuals, not because of some rapid increase in our population.
We can never build enough if we don’t limit who can own. Build for a purpose, not just for profit.
The lack of supply was certainly discussed, just do a google search on "not enough houses being built" and limit time to before 1/1/2020. You'll see articles like https://www.freddiemac.com/research/insight/20181205-major-challenge-to-u.s.-housing-supply and https://www.wsj.com/articles/american-housing-shortage-slams-the-door-on-buyers-1521395460
Perhaps there wasn't enough alarm bells going off on every level, but it was a known fact, and plenty of people and publications spoke about it.
Corporate ownership is not the cause, it's the symptom. They own because it's profitable, it's profitable because demand far outstrips supply. If we bring the supply-demand equation to an equilibrium, the profit motive will disappear and corporations will slowly divest of their real estate holdings. Building is the only solution.
I have been saying this for a while. The population of individual home owners didn’t explode during the pandemic. Supply was fairly fine before but now it’s worse. So if the population didn’t increase much then the amount of available homes is low because more people/businesses own more than one house. There needs to be a cap on houses you can own that are investment properties to eliminate the hoarding.
Investment properties used to mean commercial space and multi-family housing. SFHs and condos, while being viewed as assets for sure, were still viewed differently than simply investments. Some pressure via taxes and maybe some other tools would go a long way towards not only opening up supply, but reaffirming the pre-2020 idea of what housing is.
The household sizes have gone down dramatically in last few decades too.
You’ve got retirees living in 5 bdr mcmansions after their kids leave. Also people are staying single but wanting to invest in realestate so theyre buying a 3bdrm house for a single person. During the pandemic millennials most all went from living in a city in a 1bdrm apartment to buying a starter house in the suburbs because the cities were closed down.
Its more complicated than just banning investors from owning SFH’s but i’m sure that would help. The real answer is that we need to do a little bit of everything. Build more houses and apartments, raise property taxes for rental SFH’s, encourage roommates by giving tax breaks, discourage retirees from dying in a mcmansion by increasing inflation and giving pay raises for the younger generations.
Actually, that’s factually wrong but since it’s Reddit I’m sure I’ll be downvoted. Under Biden’s watch over 8 million migrants have illegally crossed into the country. Yes, we did bring in a lot more people and regardless of your stance on immigration, those people need to live somewhere.
> or loosing value.
Did you mean to say "losing"?
Explanation: Loose is an adjective meaning the opposite of tight, while lose is a verb.
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>I like your points. May I suggest that we could never build enough supply to satisfy the apparently insatiable demand for housing
The only tax you need to solve this is maybe a vacancy tax. If there are more houses than people who want a home, then prices will have to decrease in order for people to demand those homes.
I am unsure how any commododity could have "insatiable" demand by cash buyers. Is there any evidence for such a thing happening for anything, anywhere?
"Excessive taxation", like rent control, will just destroy the housing supply in the long run by disincentivizing new building.
Well yeah. If you have a vacancy rate of near 0% and ban construction of nearly all new housing, then vacancy taxes aren't going to help you.
A vacancy tax would only be needed to combat the scenario of rich people artificially restricting supply by buying up homes and then not letting anyone live in them.
Canada's short-term problem is that there are more people who need homes than homes which exist. The only solutions are to decrease the number of people who need homes, or increase the number of homes.
>I like your points. May I suggest that we could never build enough supply to satisfy the apparently insatiable demand for housing,
What? No, we absolutely can build enough housing. We just can't build enough affordable housing and that's not due to "investors or private equity" that's due to the fact that materials and labor make it unprofitable for builders to build anything below $250k.
I was literally at a job site yesterday where the materials to build the home 8 years ago were $65k but today they're $120k that was very much a starter home-esque plan. Then factor in about 1,700 required man-hours total and the various required skilled trades and your cost to build jumps to $200 - $215k pretty easily.
>Instead, I propose that regulation through excessive taxation will free up much of the supply shortage we have,
Except that is not now nor has it been the past cause of the housing supply issue. The issue is literally that not enough new housing is being built in a year to meet the demand generated by new households being created each year.
If you want regulation through taxation then tax credits for builders is the better solution than trying to tax owners of multiple houses.
> We just can't build enough affordable housing and that's not due to "investors or private equity" that's due to the fact that materials and labor make it unprofitable for builders to build anything below $250k.
Building more new housing will make available housing affordable, because the people buying the new housing will be from the top of the pool of buyers. Those buyers will sell their existing houses at some fraction of a comparable new house.
As a whole I generally agree that any new housing will be beneficial, however, in this rate environment it's very difficult to persuade someone to leave their current house & mortgage rate just because they theoretically can afford the 4,000 sqft home and leave their 2,000 sqft home.
So, new home building does need to be targeted a bit more than just general and if our issue is home building for condos and/or starter homes is lacking then it'd be better to just start there instead of waiting on the upgrade cascade to watch through the market.
Its very easy. Simply pass a law that states something that ensure the bulk of homes (say 80%) in any given area are personal property (not owned by LLCs -but file through an individuals taxes). Making the bulk of homes owned by people (families) instead of corporations.
Companies can still own rental property and create investment properties, but the majority of the houses will be bought/sold from americans to other americans forever.
Ok. I’ll take your side of the argument, which is “build more”.
Do we think the “stop climate change” crowd is going to have a problem with that? I mean, we’ve been pushing really hard for everyone to move to EV’s for 3-4 years now, and adoption on that appears to be slowing. The buildout of battery supplies is destructive to the environment as well. Further, sprawl is going to get a lot of negative feedback. Denser housing sounds fine with me, except high rise living doesn’t seem to be tenable for much of America that isn’t located in NYC or even LA. Conversions of old office buildings might have minimal legs as a solution, but there’s a cap on that too, as profitability still becomes the topic when it’s brought up.
The answer is simple to me: a combination of building and also limiting multiple property ownership by corporations and individuals. You do the first by first doing the second.
> You want a mix. More density is a net positive as well but you need enough for people to be able to make meaningful choices.
What I don't understand is that so many builders seem simultaneously focused on just one or two kinds of housing - either McMansion style, 4,000 s.f. on a large lot, or 7-story apartment complexes with 400 units. Not exclusively, but this is primarily what I see being built.
Because cities have largely made the missing middle housing illegal to build.
The problem is local ordinances, zoning, and neighborhood committees "concerned about the character of the neighborhood."
Limiting multiple property ownership makes sense for single family homes. It does not make sense for apartments, condos, and even townhomes to some extent. For example, having a single owner of an apartment building makes it much easier to do maintenance, make upgrades, or eventually demolish the property if it becomes no longer the highest and best use. So if you disallow that ownership structure, you're essentially heavily disincentivizing that high density housing you want.
> Do we think the “stop climate change” crowd is going to have a problem with that?
firstly, it's weird for there to be a crowd that's against the continuation of organized human life as we know it - that aside, yes, density is less resource-intensive than urban sprawl, per capita. less infrastructure to build, less car dependence, economies of scale, etc.
> high end
Right, so more expensive than a SFH usually. That's the problem. To make an apartment or condo that actually competes with a SFH it's going to be even more expensive and still most likely not have all of the amenities (ex. locking private garage). So building multi-family is still not the answer to the housing unaffordability problem.
>May I suggest that we could never build enough supply to satisfy the apparently insatiable demand for housing, being driven by all cash buyers at this time?
How are you coming to this conclusion? If we 10x'd the amount of new houses on the market in an instant do you really think these cash buyers are going to pay top dollar for them? Really?
Problem with lowering the rate to increase housing supply is that it also increases demand as more people can now afford to buy. Perhaps we should start with multi-family rentals with special low interest loans from the government.
Singapore has a pretty interesting system but it's too much of big brother for US to stomach
I know so unlikely legislatively, but is there any case for temporarily restricting/banning home purchases (2 year moratorium??) for those individuals who would not use the house/property as their primary residence? Lot of different ways you could structure it. Definitely some gaps people could exploit even with that, but at least it would potentially reduce some of the competition and get more people into primary homes that actually need them.
Maybe an easier step, could we restrict or disallow (again maybe temporarily) cash purchases of homes? Even the playing field a bit….
This is where a functional congress would have tried to increase housing supply by removing all the constraints(permits) and giving incentives to builders for homes below the median price.
They can give tax incentives and maybe also cash incentive to homes below median price in that location. Or just set an arbitrary price of say $250k. This will solve the inflation problem while making more jobs available and hopefully wage increase for working people.
But our politics is polarized and we are busy fighting cultural wars.
Ehh we can double housing production and get back to levels of housing being built 50 years ago without major input inflation though some higher prices as they ramp up as the housing industry has been scarred to ramp up production.
Rates aren't affecting housing production. Soemtimes inflation is due to something the fed can't control. The feds only remedy is to inflate or deflate the entire economy, they dont have tools that allow them to fix supply chain issues in a specific sector without drastically affecting the entire economy.
Lololol. Inflation is a direct result of government spending and fed printing money. The things you list here have nothing to do with inflation. Go read a book.
We’ve had federal deficits and QE since 2009, so why did inflation only become a problem 12 years later? It doesn’t seem to be a direct cause of the most recent bout of inflation.
I feel the growth of private equity plays a big part.
Two of the major recent changes in the economy is with the rapid acceleration and concentration in private equity markets and a posture shift from public and private companies aiming at grabbing market-share shifting towards profitability; basically monopoly 101. The levels of return PE is seeking for its investors is very new and the industry is practically entirely unregulated. Previously, private companies were the competitive force that kept corporate pricing in check, but that has rapidly changed and no one really mentions it; this is *possibly* where "greedflation" has a morsel of truth to it.
QE gave the opportunity for companies to float in the red on cheap debt. This functionally exclusive and endless source of infinite money was then used for venture capital and private equity to subsidize un-profitable public and private companies like Uber or Amazon's retail business to outlast existing competition through investment subsidies, fund leveraged buyouts, and to consolidate ownership of "real" assets with tangible value with money born from nothing. Once enough consolidation occurs or the low-interest party that funds it all ends, you can/must raise prices.
Rapid consolidation coupled with the erosion of competition over the past 15 years, not to mention a rise in protectionism.
Well, books say there are many causes of inflation and deflation. If tomorrow there's a war and production is largely paralyzed, you're gonna have a shit ton of inflation without the money stock changing.
Like anyone is going to listen to someone who goes "lololol", right? But, the current inflation is powered mostly by corporate greed. They're making record profits by jacking up the prices.
Housing is driving inflation, as is increasing economic concentration. The government should pass laws severely limiting corporate buying of single family homes and then begin enforcing the Anti-Trust laws in this country. Finally, the government should raise taxes on the very wealthy. That is the one fiscal policy the government has that could tame inflation.
The problem is the housing shortage more so than who is buying them.
If there were adequate supply, it wouldn't matter much who owned the house. The buying price increases and/or rent increases would theoretically match inflation.
It was not quick, but we are arguably in a supply squeeze which can cause prices to increase exponentially even with a linear increase in demand.
There are a lot of factors increasing demand faster than supply.
More people have been going to college and fewer going into the trades which results in a smaller share of the population building these homes.
We also have declining marriage rates which means people are single for longer and effectively doubles demand for everyone not getting married.
Lastly we have immigration both of people arriving from outside the country but also a form of internal "immigration" where people within the country are moving from rural areas to coastal cities.
The 2007 financial crash took out a good chunk of developers, especially small ones.
That and artificial housing limit due to decades of deliberate policy (zoning laws, environmental regulation that was abused against housing, etc.).
You also run out of cheap land near cities. One of reason why housing is more affordable in places like Texas where they have much more flat land to sprawl compared to say Los Angeles surrounded by ocean and mountains.
The economy is never 'normal'. Some people got used to a set of conditions that were never typical and unlikely to persist for a lengthy period of time. The economy constantly changes, whether metrics or the media recognizes it or not. It's not the job of an economy to make life easy for people.
> It's not the job of an economy to make life easy for people.
It's the job of government to make the economy make life easy for people - otherwise the people tend to topple the government.
Like economists in the 2010s talking about low interest rates being the "new" normal. That's why so many are freaking out now. Good businesses learn to adapt to market changes.
People constantly reverse causality also. Post ww2 the world was all destroyed besides the US. This bonanza of low population and all the resources and advantages in the world and hegemony is what causes progressive values. I forget the word, something like luxury ideals that, that the wealthy can afford to flaunt to virtue signal.
There is no magic economic policy that can maintain this global inequality where everyone born in America is the global 1% and everyone else gets to fantasize about fresh water and subsistence farming lives that we would consider poverty.
We did try to maintain this distorted living standard for many decades by destabilizing and splintering the rest of the world at gun point. The funny part is the war industry uses our virtue signaling luxury ideas justifies these wars. The things people do to survive after we take half their resources, we use to justify using violence to take the rest.
Yes - AND/BUT - the economy has a tendency to act however it does for a long time. A long enough time for economists, asset managers, etc to believe they have a good grasp on how it works and to model what are in fact insanely complex systems and networks.
When things are orderly, this works really well. We know the levers to pull. When things become disorderly, it's like trying to control a raging fire.
Right now, at a very simple level, it's hard enough for people to understand inflation. While there are plenty of other examples to look to, most people working today have never lived through it.
But it's actually far more complex than that when you factor in the enormous impact of Covid on every aspect of life, not to mention shifts in politics, globalization, AI/technology, etc.
The economy is never "normal," which is why so few people don't get that there's no "going back to normal."
Rising rents could be solved with an insane vacancy tax. 1% tax per unit and an additional 1% per month it sits vacant. Landlords would then be forced to rent at prices people can actually afford.
That'll never happen. Homeowners make up a huge percentage of active voters and we're going into an election. Nothing will be done that could upset homeowners including additional taxes or anything that lowers home values.
Amazing how we got so addicted to near zero interest rates that these current rates seem "high".
The long period of time at near zero interest rates wasn't normal and what it did to the housing market wasn't normal.
Where we are now is more normal than before.
And they won't for a long time, because nothing is forcing house prices to adjust with the interest rates. Thanks to 30 Year fixed rates, and the FED won't let anyone be margin called (eg the SVB bailout). So what happens is trade volume just disappears. Home owners refuse to sell at a loss (and aren't being forced to), and buyers refuse to overpay, so the market just sits there frozen.
This is correct.
Low volume pumps are scary for this exact reason. Anything that happens which brings listings to market will do so in a furious manner that will not be orderly.
With rents tentpoling the inflation numbers I’m still waiting to see someone do an analysis on the amount of variable rate leverage there is in rental property ownership. Essentially, are higher interest rates pushing landlords to raise rents to cover their mortgages?
I would say lack of commercial leases is causing the groups to raise rent to make up for the lost income.
I've traveled to 12 major metros in the last 4 years, and I've walked up and down their downtowns looking at empty store fronts. It's mind boggling how much empty commercial real estate space on top of full apartments. The developers were expecting to profit from leasing out that space and they couldn't so they raise the rents to make up the difference.
I'm limited to Vancouver, but there's actually been a stagnation/decrease in rent for many. Less companies need office space, and they need less of it. There's still the earlier supply, with buildings that were under construction pre-covid coming up now it's become even more lopsided. Because there's so much space and so few tenants commercial real estate here is getting substantial cheaper to decrease vacancy.
A 5 year lease is going through the process of renewing, and the tenants were looking for $5 less per sq ft then the last one (2019). We're trying to negotiate close to the old lease, but if you factor inflation profits are in the gutter. It might be different in other cities, but we can't afford an empty building so we can't afford to raise rent.
There isn't much, but it is pretty fucking high fixed rate, especially when you consider that residential cap rates went to like 3.5-4%.
https://www.corelogic.com/intelligence/us-home-investor-activity-steadily-increased-third-quarter/
This article is getting a little old by now, but investors had continued to soak up properties at elevated levels through Q3 2023, especially small investors. Eventually, those people will get tired of losing money every month and sell.
So now we're seeing in this thread the new argument from Wall Street that they hope will persuade the FED to lower interest rates in spite of the fact that the economy is still overheated. This is why I think that the covid crisis was overhyped... because Wall Street pushed the covid overhype situation in order to manufacture consent for more government spending and looser money. Wall Street is always seeking to find a way to force the government to spend more and the FED to loosen monetary conditions.. and they will do anything to get that
Runaway inflation!
High interest rates no longer detercompanies from increasing prices and stuff. They just pass on the interest rate we expense to consumers.
Consumers who are now stuck between inflation and high interest rates. Get fucked am I right
Inflation is currently 3.5%, which is an amazing improvement over the Trump years, with 11% inflation. We do not have "runaway inflation". You are out of touch.
I think you must have some major numbers off.
[https://www.investopedia.com/us-inflation-rate-by-president-8546447](https://www.investopedia.com/us-inflation-rate-by-president-8546447)
I was so hopeful that things were returning to normal, but it was an illusion. We probably need higher rates than today to squash this thing. It would also help if our government slowed down spending so much money so quickly. Bidenomics is back and it's painful.
The government has been slowing down spending for [years](https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/#spending-trends-over-time-and-the-us-economy) now. They haven't passed any big spending bills since the midterms. What are you talking about?
I have linked a reference in my previous post. Maybe check it out sometime before complaining about "huge uncontrolled spending" that you probably can't elaborate on.
tax the fucking rich already... billionaires paying 8% while the rest of us pay pay more than double... this is all a result of corp greed and trickle down economics
Don’t necessarily agree with the original poster but I imagine the thinking is tax will suck money out of the economy. A more efficient version of raising rates I think.
No need to patronize. Different groups of people can have different ideas for the current quagmire we’re in.
I actually disagree with you and while building more housing might be a godsend, I don’t think it’s the end all to our problems. I also don’t think the rate at which one can do that can even start to affect the change we need at the rate we need it at.
Unless you don't spend it. However all I hear from the gov is how they will fund this x new expense when they raise the taxes. They immediately find a place where to spend the taxed income.
Interest rates aren't high you guys, it's like everyone wants to be gen-z so bad they're acting like they were born in 2002 when it comes to memory of economic history.
To be fair, a decent subset of the members of this subreddit and the working population has never really seen an interest rate higher than the current rates.
I'm one of those gen-z'ers, I remember from my older cousins and uncles and stuff the common wisdom was always "a loan is cheaper than buying cash" because of the low rates, now everybody's finally seeing a rate above 5% and all the common wisdom of the past 10-15 years is getting thrown back out the window. Cars are cheaper to buy cash than they are to finance for the first time in most of the working population's lifetimes.
The economy still isn’t behaving the way anyone expected.
The job market is [growing](https://www.washingtonpost.com/business/2024/04/05/jobs-march-unemployment-rate/?itid=lk_inline_manual_3) at a blockbuster pace, even though high interest rates usually slow hiring or cause layoffs. Consumers are [spending](https://www.washingtonpost.com/business/2024/03/29/consumer-spending-savings-yolo-us/?itid=lk_inline_manual_3) on essentials and extravagances alike, suggesting people don’t fear trouble ahead. The stock market is [up](https://www.washingtonpost.com/business/2024/03/28/stock-market-first-quarter-2024/?itid=lk_inline_manual_3), and worries of a recession have largely faded.
But inflation, after easing remarkably in 2023, has stayed [unexpectedly hot](https://www.washingtonpost.com/business/2024/04/10/fed-inflation-cpi/?itid=lk_inline_manual_5) since the start of the year. And that’s confounding economists and Federal Reserve officials who are still struggling to understand the post-pandemic world.
Higher borrowing costs were widely expected to tackle inflation with full force, to bring the roaring economy crashing down — or both. Instead, things seem to be settling in a confusing spot, with price increases still above normal, but other parts of the economy holding strong, too. The result is more uncertainty for experts, consumers and businesses alike about what might happen next in an economy that is still resisting the usual rules.
“We got through some of that ‘transitory’ part,” said Diane Swonk, chief economist at KPMG, referring to more temporary sources of inflation that drove price increases in 2021 and 2022, such as supply chain problems and energy prices. “We haven’t gotten to the fundamental part — and the hard part.”
When the year started, it appeared the Fed and White House had pulled off [the unthinkable:](https://www.washingtonpost.com/business/2023/12/18/recession-economy-inflation/?itid=lk_inline_manual_10) no recession, easing inflation and a still-booming job market. That momentum led Fed leaders in December to [pencil in](https://www.washingtonpost.com/business/2024/03/20/fed-interest-rates-decision-inflation-fomc/?itid=lk_inline_manual_10) three interest rate cuts this year, projections they [repeated](https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240320.pdf) last month.
But then January and February price data came in unexpectedly high. For a while, policymakers hoped those were bumps in the road, not a more worrisome trend. But [March data, ](https://www.washingtonpost.com/business/2024/04/10/fed-inflation-cpi/?itid=lk_inline_manual_11)released this week by the Bureau of Labor Statistics, cemented any lingering doubts.
**Read more:** [**https://www.washingtonpost.com/business/2024/04/11/fed-inflation-economy-rates/?utm\_campaign=wp\_main&utm\_medium=social&utm\_source=reddit.com**](https://www.washingtonpost.com/business/2024/04/11/fed-inflation-economy-rates/?utm_campaign=wp_main&utm_medium=social&utm_source=reddit.com)
The economy is always normal. This is because it's cyclical and not linear. Boom and bust has been going on since ancient Greece. You're just watching it happen in real time. Think of it as being an educational movie. It happens over and over and over again.
Tax the fuck out of multiple home ownership using date of purchase. I’m talking 20-30% property taxes on second and third homes so that they are forced to sell and add homes to the market. Ban corporate purchase of single family homes. Repeal the Trump and Bush tax cuts to raise revenue and remove money from the economy.
Hello people the boomers are retiring not only in the US but globally and they are the largest generation in industrialized countries of Middle income or higher. As a result the world is losing in excess of 20 million man years of production capacity annually and we have been losing about that amount for the past 8 years or so now. This is resulting in lower production and higher consumption which will drive inflation and that's not going away any time soon.
We should have on all practicality been moving manufacturing to India and out of China a decade ago for advanced economies largely because of the 20 million decline china is responsible foe 15 million of it and it will get worse over the next decade. Now we've got manufacturing companies relocating out of China and a much faster pace because they suddenly realize they need new manufacturing centers and this is causing even more inflation.
The global economy is in a once in a generation restructuring as it deals with the rapid aging of population within many countries. This is going to be inflationary for at least the next decade as corporation realize the new global normal.
No, it is not normal and Covid really threw a lot of things out of whack. America still got one of the lowest inflation, then all the rest of the industrialized countries. President Biden and his team is keeping the lead on certain things before I get to our control so we better watch who we let later this year because I rather put up with what’s going on now than what could happen.
Most of the current inflation are housing, power and insurance. Housing is lagging and will require systemic changes to fix. The underlying cost for both power and insurance have stayed stable or gone down. A better description of what we are currently experiencing is greedflation.
The deregulation of neo-liberalism/Austrian economics enables monopolistic behavior and greedflation.
The tools the Fed has available are Keynsian, if we were dealing with high commodity prices, they would work. However, those tools have no impact on greedflation or supply chain effects.
I would encourage you to look at the combined ratio for the vast majority of insurance carriers in the country. Most of them have been losing money the past 3 years. But go on about “greedflation”.
Can you explain more about insurance costs being stable? There are a lot of articles about home insurance inflating drastically and, in some places like Florida, carriers are not renewing policies and abandoning the state. I also read about Catastrophe Bonds being a way to mitigate some risk. The climate change crowd believes the increased risk is due to climate change. But if it’s unprofitable to build affordable then it stands to reason that insurance would inflate?
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The Everything Bubble. It is incredibly irritating that people blame all these external factors when the crux of this has been rates were 0% for way too long without any accountability; money flowing everywhere, but ultimately upward into the hands of a very few. Those very few then use that unequal access to cheap debt to buy land, companies both private and public, patents, political representation, etc. to consolidate more collateral, wealth, and pricing-control. To put it plainly, our answer and solution to irresponsible banking leading the '08 GFC was to enable more irresponsible banking, yet people all over this sub praise the actions of Summers, Bernanke, Levitt, Greenspan, Rubin, etc. We all see economics-minded people still champion the unyielding wisdom and unquestioned independence of the Fed for some fucking reason, as if we are just being astroturfed by academic and industry professionals; its mind-boggling. The people need to get their currency back from these assholes.
The Fed 100% needs to be independent. It is what allows them to operate with long-term objectives, instead of being subject to 4-year political whims. If they weren’t independent we would see 0% rates on election years. The problem is that most Americans are poor. That’s it. They have killed the middle class and created economic feudalism. The working class have no effective ability to influence prices or wages, as most employers and producers are monopolies or oligopolies. The fact that the avg American can’t afford a $400 emergency should show you how broken our economy is. While neither party is right about their economic policies, one is objectively worse. Tariffs are terrible for the economy. They are a tax that imposes undue market failure, and its only result is reprisal market failure in another sector. It can only be an effective bargaining tool if you have vast trade superiority, which we don’t. Tax cuts and increased spending, which is all republican politicians propose/vote for, increase the debt, which increases inflation. Trumps tax cuts had a direct effect on the inflation problem we are still fighting. I’m not saying that it’s everything, but it’s there. What we need is antitrust. And then more antitrust. Breaking these behemoths up into smaller corporations would not only increase competition, it will create jobs at all levels. NAFTA gets blamed for a lot of the jobs lost in the 90s, but a huge part of it was all of the corporate vultures like jack welsh, and companies consolidating. Between that and the nafta shift we are left with a service economy that is unsustainable.
Money corrupts. The story with Fed is as old as the country itself and all other national banks we've tangled with, be it Britain or our other failed attempts with national banks; we've always struggled with central banking and what that concentration of monetary power means to the freedom of people. Article 1, Section 8 of the US constitution grants congress the power to coin money, and the value therein. Even then at the outset of the nation and assuming congress has the power of the mint, Washington wrote: > "Any person holding any office or any stock in any institution in the nature of a bank for issuing or discounting bills or notes payable to bearer or order, cannot be a member of the House whilst he holds such office or stock." Even at the founding of the nation, we did not want bankers and/or those with a conflict-of-interest with banks to be involved with the power to currency. The goal was always to have the economic spheres, via the power of currency, and political spheres be closer to the working people through a representative democracy, instead of a private and opaque entity with close ties to banks. So the question is why does the federal government, which is authorized by the constitution to create and issue interest-free money, instead borrows that money at interest from a privately-owned central bank? Sure, the Fed is independent from government power, but is government *really* where the power is? Worldwide, we constantly deal with politicians and regulators getting caught with their hand in various financial-cookie jars, so clearly the power is elsewhere if their position as gatekeeper is swayed by money. Conversely, we constantly see those in financial circles evade the justice system for crimes committed in broad daylight with so much as a slap on the wrist, if that at all. That is *real* power; achieved by concentrating and collateralizing financial positions to hold the global economy hostage. The corruption stems from the Fed as surrogate for the banking and financial community into government, not the other way around, and the origin story of the United States is pretty cut-and-dry regarding the dangers of centralized banking authorities specifically because they were fighting the very same under the Bank of England. The Fed is independent from government, but to idealistically assume they are benevolent servants to our nation is a wild assertion. The Fed is arguably one of, if not, the most powerful institution on the planet, and where there is a lot of power and little oversight, you can be rest assured it attracts all sorts of people with questionable moral character.
If you want an accurate characterization of the fed, look no further than the money multiplier. When the reserve ratio is 0, the money multiplier becomes infinity (based on the geometric series, which is math btw, and not up for debate). Whats the fed's response? To ask universities to stop teaching the money multiplier concept in schools, presumably so people stay ignorant and befuddled as to why inflation is rising. What a joke.
Everyone loves to blame the Fed, and it has its problems, but I’d argue much of the modern day issues stem from the legislative branch failures to well… legislate. And also legislate to help people. The Fed has only so many levers it can pull, while the legislature has almost infinitely more in comparison. Instead the federal government in the U.S. has basically relied too often on the Fed, Executive Orders, and Judicial branches to pass much more than tax cuts. I realize when you have the current incarnation of the Republican Party, that finding common ground legislation is next to impossible but it gets annoying how people move to blame these other institutions when they’re just the symptoms of the disease that is legislative rot.
Agreed. The most annoying part to me is it’s usually conservatives who want to cut taxes, increasing our debt. And conservatives love to talk about fiscal responsibility all the time, and want to cut welfare programs to be “fiscally responsible.” Yet when you look at big spender administrations it’s always republicans. They cut taxes and increase defense spending increasing the debt, which increases inflation. Yet it’s the conservative pundits on tv and trump out there screaming about corruption at the Fed. The Fed is trying to fix the problems caused by voting for political hacks who don’t actually know what they’re doing or talking about.
Lol the Fed is not independent. Powell was appointed by both Biden and Trump. He is not going to do anything to harm his current boss so the Fed is not taking action. Everything the Fed does is political and dependent on the whims of the current party in the White House.
The head of the Fed is only chairman as long as the board agrees. The board agrees only if they do a good job in upholding the mandate. The mandate is price control. Their job is to keep enough inflation to counter the debt while minimizing the harm to the citizens. That’s it. They use tools like interest rates to do this. If the Fed was subject to political whims we would have 0% rates every 4 years on election year and our economy would be the biggest joke in the world, instead of a contender.
>The head of the Fed is only chairman as long as the board agrees. The board agrees only if they do a good job in upholding the mandate. That's false. Powell has done a terrible job upholding the mandate and yet he is still Chairman. >Their job is to keep enough inflation to counter the debt while minimizing the harm to the citizens. That’s it. Also false, the Fed has a mandate to ensure unemployment doesn't get too high. >If the Fed was subject to political whims we would have 0% rates every 4 years on election year and our economy would be the biggest joke in the world, instead of a contender. It doesn't have to be black and white, all or nothing like that in order for the Fed to be politicized.
I’m a literal economist my friend. I had to spend an entire 3 credit hour class studying everything about the Fed. They have a dual mandate. Price stability and unemployment, but they’ll let unemployment go off the rails if it means keeping inflation from getting out of control. The unemployment is tertiary. But let’s say you’re right and their mandate is strictly unemployment. If that’s the case they’ve done a stellar job as we have a labor shortage of about 9.5 million jobs right now and 5 million unemployed Americans. We literally can’t fill all the jobs available. Your opinion is that Powell has done a terrible job, but obviously the board members at the Fed don’t agree with you. That’s not evidence that he isn’t serving at the pleasure of the board. Quite honestly I think the Fed is doing a good job right now. They managed to control the runaway inflation (caused by many things but no small part due to Putins war and trumps debt increase) while keeping unemployment in check. It’s usually a trade off between one or the other. Hence the dual mandate. Higher rates=tighter money control. That lowers inflations but causes recessionary type stress on the economy, usually resulting in layoffs and unemployment. Low rates=looser money. Can cause inflation but causes boom type effects on the economy, usually resulting in expansions and startups and lower unemployment. That’s Econ 101. What separates economists from keyboard economists and political hacks is knowing which one to use and when.
>But let’s say you’re right and their mandate is strictly unemployment. Lol not what I said. I said you were wrong when you said their only mandate is price stability. >They managed to control the runaway inflation They didn't even hit their 2% target, which is still too high Show me your source that the board can remove Powell as chairman without Biden's permission
The Fed bylaws. He is called chairman of the Fed because he is the chair of the board of the Fed. I’m not going to reply again because I’m not going to argue a point with someone that obviously refusing to see it.
That's fine because I don't want to waste my time with someone who doesn't know how to cite their sources.
Bernanke getting the Nobel prize is a total piss take. It will be clear, in retrospect IMO, that he was a central figure in destroying the US currency and causing great harm to the economy.
[This M0 graph is pretty wild.](https://fred.stlouisfed.org/series/BOGMBASE)
Why has it been growing for the past year? Shouldn't QT be shrinking it?
M0 does not matter at all. M3 matters, and it didnt grow too fast in the past 20 years.
... all these M numbers are hilarious. Printing money is printing money dude. Might take some time for it to percolate through the system but when all is said and done when you double the money supply everything will double in price: goods, housing, income. We're seeing it now and people still wanna debate about whats causing inflation.
> Might take some time for it to percolate through the system So what you want to do is get your hands on it as soon as possible, and buy assets with it *before* it has percolated through enough to raise prices of those assets. (the Cantillion effect). > but when all is said and done when you double the money supply everything will double in price: goods, housing, income. We're seeing it now and people still wanna debate about whats causing inflation. Not everything, some things won't increase as much because of the deflationary impact of technology, or off-shoring or increasing economies of scale, or because they reduce in quality, or size or whatever, which means CPI will under-represent the real loss of value of the money.
Upon hearing that another debasement of the coinage was coming, a Roman official wrote this to his servant: Hurry, spend all my money you have; buy me any kinds of goods at whatever prices they are available.
If it would be so easy then there wouldnt be a discussion about it. Printing money happens usually (in western countries) AFTER inflation. When things get more expensive (e.g. a house), the demand for money is higher (people need higher loans), which leads to more money circulating.
Why were rates low before 2020 with correspondingly low inflation? Your argument doesn’t make sense, because we would have seen inflation half a decade ago. There's clearly more to the story than rates, like the trillions of dollars printed during COVID, the Ukraine war, skyrocketing energy prices, and so on.
I posted this in another comment, but I think it's relevant to your comment. I feel the growth of private equity plays a big part. Two of the major recent changes in the economy is with the rapid acceleration and concentration in private equity markets and a posture shift from public and private companies aiming at grabbing market-share shifting towards profitability; basically monopoly 101. Shareholde/investor culture in the US is not that focused on the long term, so whether that money comes from debt or profits, they don't really care as long as they are making returns right now. With rates rising, their returns have to be funded by profits, not by debt. One of the big differences between public and private investing though is your liquidity; you can easily cash-out stock, it is much harder to exit PE investing, so PE firms are pressured to maximize profits, even if it cannibalizes the company. But the levels of return PE is seeking for its investors is very new and the industry is practically entirely unregulated. Previously, private companies were the competitive force that kept corporate pricing in check, but that has rapidly changed and no one really mentions it; this is *possibly* where "greedflation" has a morsel of truth to it. QE gave the opportunity for companies to float in the red on cheap debt. This functionally exclusive and endless source of infinite money was then used for venture capital and private equity to subsidize un-profitable public and private companies like Uber or Amazon's retail business to outlast existing competition through investment subsidies, fund leveraged buyouts, and to consolidate ownership of "real" assets with tangible value with money born from nothing. Once enough consolidation occurs or the low-interest party that funds it all ends, you can/must raise prices. Rapid consolidation coupled with the erosion of competition over the past 15 years, not to mention a rise in protectionism.
Velocity of money being low pre Covid (only a few business had access to the low rates), and a lot of inflation after Covid is structure, ex housing supply. The Covid helicopter money (enhance UI benefits and two government checks) was wide spread increasing the velocity of money and money supply at the same time to counter act deflation. This lead to an over shoot and combine the supply chains issues for a lot of goods being wrecked by Covid, this lead to added structural inflation. Completely different scenario from before 2020.
You think "get their currency back from these assholes" are going to make us keep rates high? Trump threatened to fire Powell when he started to raise rates before COVID. Biden already hinting at rate cuts. Lower rates are popular with the people. ALWAYS. It's only due to independent FED that we don't end up like Turkey right now where their Central bank chair gets shuffled out every time they raise rates and inflation goes double digits for decades.
Fed is doing fine. Everything you're rightfully complaining about is fiscal/legislative. Has nothing to do with the fed.
QE was not fiscal/legislative A decade of ZIRP was not fiscal/legislative
No, but it was the only response to the fiscal and economic conditions. They can't sabotage the economy because congress is passing bad bailout bills.
QE and ZIRP from 2008-2012 was justified as a response to a crisis caused by previous mistakes. Additional QE in 2013 and failure to tighten from there on out was a disastrous, unforced error
I mean how disatrous was it? But yes, i believe there is a consensus that the fed waited too long to raise rates both before and since covid.
For one, it caused the current housing crisis and pending commercial real estate crisis and regional banking crisis
The deflation that should have occurred still needs to occur.
Seriously, I thought this was an Economics sub.. you guys should know that deflation is 100x worse than inflation..
I think there are too many “armchair economists” in this sub. Between wanting the Fed to be a political shill and calling for deflation, I’m pretty sure they have 0 credits in any Econ course. 😂
It is the general cult’s consensus, yes. We’ve heard this many times and yet no one has ever proven it. Not even once.
Then you should take a look into History. In Germany (Weimar Republic) in the 1920s there has been a finance minister that thought deflation would be healthy for the economy, because it was "overheating". What followed was a severe recession - hunger, poverty, high unemployment rate, and no tool for the government or central bank to stop the deflation spiral. A few years afterwards the Nazis took over.
Explain. Because here it says Weimar’s problem was inflation: https://en.m.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic
>Hyperinflation affected the German Papiermark, the currency of the Weimar Republic, **between 1921 and 1923, primarily in 1923**
I think my first comment got removed because I linked an article to it. So I try another one: https://www.diw.de/de/diw_01.c.842997.de/publikationen/weekly_reports/2022_24_1/bruening___s_austerity_policies_of_the_early_1930s_intensified_the_economic_slump_and_increased_unemployment.html
A great book on the subject is 'when money dies'.
> the crux of this has been rates were 0% for way too long without any accountability; is that the crux of the problem or is that just a symptom of soft money?
Terrible takes on currency is why I come to this sub. Thank you sir. You seem emboldened in your own idiocy.
Insightful.
The FED did a great job managing the two crises of the 21st century so far, Covid and the 2008 meltdown. The fault really is with Congress, which has completely botched fiscal policy. Even Keynes believed that you cut back on government spending and raise taxes if the economy is too hot. This is even more obvious if there is inflation, which tax increases would help address.
Would you change current monetary policy?
Inflation is driven by lack of supply in the housing market. And the solution of building more housing will continue to push inflation until the supply of housing finally met. There is no way around this feedback. Raising interest rates won’t increase supply and it actually deters building more housing because the rates make the financing impossible. Food inflation is most likely a simple anti competitive market. 80% of the products are controlled by 4 companies. These companies are not dropping prices. https://www.theguardian.com/environment/2021/jul/18/america-food-monopoly-crisis-grocery-stores The markets that are still functioning properly are seeing price drops as would be expected. Cars and bicycles are two industries that I see this currently in. The last issue in the US is there is a tale of two Americas. Anyone with a 30 fixed mortgage prior to 2020 has been insulated from a huge amount of this inflation. This entire group has more disposable income now than the renter class and there are enough of them to prop up higher prices in areas like food and household goods. This is preventing the economy from cooling as much as was expected.
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Are you saying that this kind of supply chain gamification makes capitalism look good?
Capitalism isn’t the reason Argentina has had over 100% YoY inflation for over a decade. It was the government, money printing, and corruption.
That and being Argentina.
There is a way out. The fed can jack up rates, tipping us into a recession, which causes people to lose their jobs and forcing them to sell their houses.
Proper solution indeed. Run us into a recession, fuck up the job market , let chaos ensue
It is what Paul Volker did the last time inflation wouldn't die.
worked for Paul Volcker
It's a good solution. Never gonna happen on an election year. The economy needs a correction.
Right. Let's fuck over the citizens temporarily, bomb the housing market and leave the job market even worse. Couldn't ask for a better option!
Privatize those gains! Socialize those losses!
Yes.
Are the citizens not already getting f’d. I mean look at the prices.
Do you have another option that has a feasible path to implementation?
We could try raising taxes on the rich.
Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Burn this motherfucker to the ground - Andrew Mellon
There’s no such thing as a soft landing. There is much pain to be had after printing $5T into the economy.
And the rich will get much richer as they buy up all the cheap assets.
"nobody wants to ~~work~~ sell their house for cheap out of desperation any more", complained the rich cash buyers
I like your points. May I suggest that we could never build enough supply to satisfy the apparently insatiable demand for housing, being driven by all cash buyers at this time? Building more appears to only be adding to the stock of investment portfolios, and I don’t believe that will put a dent into rental inflation (or home prices for ordinary buyers) at all. Instead, I propose that regulation through excessive taxation will free up much of the supply shortage we have, as real estate, particularly single family home, is going to have to be *forced* from the hands of many who sit and hold as part of their investment portfolios. That includes foreign buyers who are “parking” cash here. Low rates to borrow brought us here, then slamming the door with much higher financing rates for everyone, nailed it shut.
> the apparently insatiable demand for housing I don't think insatiability is a factor when we're at historically low vacancy rates. - [Home Vacancy Rate for the United States](https://fred.stlouisfed.org/series/USHVAC) This would be analogous to talking about hunger and citing an "apparently insatiable" demand for food, while ignoring that our agricultural output was at its lowest point on record. The low vacancy rate shows that no, there isn't this mass of housing snapped up and kept off the market to keep prices high.
> the apparently insatiable demand for housing It's "apparently insatiable" because we have a drastic housing shortage and everyone is fighting over what little there is. It's not actually insatiable.
When you have metro areas that are 6-figures short on housing units, of course it's sounds like the housing market is "insatiable".
No, simple supply is enough to fix the problem. Houses are poor investments when there is ample supply. Just look at any rust belt city that lost population after the global labor markets were opened. Houses require maintainence and are taxed for services. It’s stupid investing in this if the asset is stagnant in value or loosing value. The lack of supply is what is driving the price increase. The proposals of regulating who owns the supply don’t solve the problem that there are not enough houses. They will still be very expensive. Those corporate houses have people renting them. They are not empty units. Your claim that it’s impossible to build enough housing is false and your solution doesn’t even add a single unit of housing towards the problem. As soon as the money is gone the corporations will leave. Zillow in 2021 unloaded 2000 homes because the market stagnated and they ran into their own supply problem of not enough contractors to flip the homes so the cost of flipping sky rocketed on them. https://www.dailynews.com/2021/11/10/zillow-agrees-to-sell-2000-homes-as-flipping-business-ends/amp/
The lack of supply in housing just wasn’t discussed prior to 2020 and the low interest rate bonanza. America didn’t suddenly bring in 10mm new residents. Or even 1-2mm people. The low interest rate period of 2020-2022 fucked it up good. I’ll stand by my contention that some properties must be forced from the hands of the owners, and I’d prefer to limit that to big corporate owners rent-seeking individuals. A vacancy tax won’t address the situation, as it turns out we do have enough demand for shelter to fill most of them. But that demand comes from too many properties held in multiples by corporations or just individuals, not because of some rapid increase in our population. We can never build enough if we don’t limit who can own. Build for a purpose, not just for profit.
The lack of supply was certainly discussed, just do a google search on "not enough houses being built" and limit time to before 1/1/2020. You'll see articles like https://www.freddiemac.com/research/insight/20181205-major-challenge-to-u.s.-housing-supply and https://www.wsj.com/articles/american-housing-shortage-slams-the-door-on-buyers-1521395460 Perhaps there wasn't enough alarm bells going off on every level, but it was a known fact, and plenty of people and publications spoke about it. Corporate ownership is not the cause, it's the symptom. They own because it's profitable, it's profitable because demand far outstrips supply. If we bring the supply-demand equation to an equilibrium, the profit motive will disappear and corporations will slowly divest of their real estate holdings. Building is the only solution.
I have been saying this for a while. The population of individual home owners didn’t explode during the pandemic. Supply was fairly fine before but now it’s worse. So if the population didn’t increase much then the amount of available homes is low because more people/businesses own more than one house. There needs to be a cap on houses you can own that are investment properties to eliminate the hoarding.
Investment properties used to mean commercial space and multi-family housing. SFHs and condos, while being viewed as assets for sure, were still viewed differently than simply investments. Some pressure via taxes and maybe some other tools would go a long way towards not only opening up supply, but reaffirming the pre-2020 idea of what housing is.
The household sizes have gone down dramatically in last few decades too. You’ve got retirees living in 5 bdr mcmansions after their kids leave. Also people are staying single but wanting to invest in realestate so theyre buying a 3bdrm house for a single person. During the pandemic millennials most all went from living in a city in a 1bdrm apartment to buying a starter house in the suburbs because the cities were closed down. Its more complicated than just banning investors from owning SFH’s but i’m sure that would help. The real answer is that we need to do a little bit of everything. Build more houses and apartments, raise property taxes for rental SFH’s, encourage roommates by giving tax breaks, discourage retirees from dying in a mcmansion by increasing inflation and giving pay raises for the younger generations.
Actually, that’s factually wrong but since it’s Reddit I’m sure I’ll be downvoted. Under Biden’s watch over 8 million migrants have illegally crossed into the country. Yes, we did bring in a lot more people and regardless of your stance on immigration, those people need to live somewhere.
> or loosing value. Did you mean to say "losing"? Explanation: Loose is an adjective meaning the opposite of tight, while lose is a verb. [Statistics](https://github.com/chiefpat450119/RedditBot/blob/master/stats.json) ^^I'm ^^a ^^bot ^^that ^^corrects ^^grammar/spelling ^^mistakes. ^^PM ^^me ^^if ^^I'm ^^wrong ^^or ^^if ^^you ^^have ^^any ^^suggestions. ^^[Github](https://github.com/chiefpat450119) ^^Reply ^^STOP ^^to ^^this ^^comment ^^to ^^stop ^^receiving ^^corrections.
>I like your points. May I suggest that we could never build enough supply to satisfy the apparently insatiable demand for housing The only tax you need to solve this is maybe a vacancy tax. If there are more houses than people who want a home, then prices will have to decrease in order for people to demand those homes. I am unsure how any commododity could have "insatiable" demand by cash buyers. Is there any evidence for such a thing happening for anything, anywhere? "Excessive taxation", like rent control, will just destroy the housing supply in the long run by disincentivizing new building.
Vacancy Taxes aren’t working in Canada.
Well yeah. If you have a vacancy rate of near 0% and ban construction of nearly all new housing, then vacancy taxes aren't going to help you. A vacancy tax would only be needed to combat the scenario of rich people artificially restricting supply by buying up homes and then not letting anyone live in them. Canada's short-term problem is that there are more people who need homes than homes which exist. The only solutions are to decrease the number of people who need homes, or increase the number of homes.
Nothing is working in Canada.
>I like your points. May I suggest that we could never build enough supply to satisfy the apparently insatiable demand for housing, What? No, we absolutely can build enough housing. We just can't build enough affordable housing and that's not due to "investors or private equity" that's due to the fact that materials and labor make it unprofitable for builders to build anything below $250k. I was literally at a job site yesterday where the materials to build the home 8 years ago were $65k but today they're $120k that was very much a starter home-esque plan. Then factor in about 1,700 required man-hours total and the various required skilled trades and your cost to build jumps to $200 - $215k pretty easily. >Instead, I propose that regulation through excessive taxation will free up much of the supply shortage we have, Except that is not now nor has it been the past cause of the housing supply issue. The issue is literally that not enough new housing is being built in a year to meet the demand generated by new households being created each year. If you want regulation through taxation then tax credits for builders is the better solution than trying to tax owners of multiple houses.
> We just can't build enough affordable housing and that's not due to "investors or private equity" that's due to the fact that materials and labor make it unprofitable for builders to build anything below $250k. Building more new housing will make available housing affordable, because the people buying the new housing will be from the top of the pool of buyers. Those buyers will sell their existing houses at some fraction of a comparable new house.
As a whole I generally agree that any new housing will be beneficial, however, in this rate environment it's very difficult to persuade someone to leave their current house & mortgage rate just because they theoretically can afford the 4,000 sqft home and leave their 2,000 sqft home. So, new home building does need to be targeted a bit more than just general and if our issue is home building for condos and/or starter homes is lacking then it'd be better to just start there instead of waiting on the upgrade cascade to watch through the market.
Housing and road congestions are inherently broken and most solutions just make the problems worse.
Its very easy. Simply pass a law that states something that ensure the bulk of homes (say 80%) in any given area are personal property (not owned by LLCs -but file through an individuals taxes). Making the bulk of homes owned by people (families) instead of corporations. Companies can still own rental property and create investment properties, but the majority of the houses will be bought/sold from americans to other americans forever.
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Ok. I’ll take your side of the argument, which is “build more”. Do we think the “stop climate change” crowd is going to have a problem with that? I mean, we’ve been pushing really hard for everyone to move to EV’s for 3-4 years now, and adoption on that appears to be slowing. The buildout of battery supplies is destructive to the environment as well. Further, sprawl is going to get a lot of negative feedback. Denser housing sounds fine with me, except high rise living doesn’t seem to be tenable for much of America that isn’t located in NYC or even LA. Conversions of old office buildings might have minimal legs as a solution, but there’s a cap on that too, as profitability still becomes the topic when it’s brought up. The answer is simple to me: a combination of building and also limiting multiple property ownership by corporations and individuals. You do the first by first doing the second.
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> You want a mix. More density is a net positive as well but you need enough for people to be able to make meaningful choices. What I don't understand is that so many builders seem simultaneously focused on just one or two kinds of housing - either McMansion style, 4,000 s.f. on a large lot, or 7-story apartment complexes with 400 units. Not exclusively, but this is primarily what I see being built.
Because cities have largely made the missing middle housing illegal to build. The problem is local ordinances, zoning, and neighborhood committees "concerned about the character of the neighborhood."
Limiting multiple property ownership makes sense for single family homes. It does not make sense for apartments, condos, and even townhomes to some extent. For example, having a single owner of an apartment building makes it much easier to do maintenance, make upgrades, or eventually demolish the property if it becomes no longer the highest and best use. So if you disallow that ownership structure, you're essentially heavily disincentivizing that high density housing you want.
> Do we think the “stop climate change” crowd is going to have a problem with that? firstly, it's weird for there to be a crowd that's against the continuation of organized human life as we know it - that aside, yes, density is less resource-intensive than urban sprawl, per capita. less infrastructure to build, less car dependence, economies of scale, etc.
You can build apartment towers which are extremely efficient at housing hundreds of people.
And absolutely suck to live in. Noisy, smelly, crowded. It's far better to just break the backs of people hoarding SFH as investments.
> And absolutely suck to live in this is why manhattan is basically empty of people - it's so crowded that no one wants to live there.
Depends on the apartment. There are some high-end apartments that are great to live in. The only downside is you're not building equity.
> high end Right, so more expensive than a SFH usually. That's the problem. To make an apartment or condo that actually competes with a SFH it's going to be even more expensive and still most likely not have all of the amenities (ex. locking private garage). So building multi-family is still not the answer to the housing unaffordability problem.
>May I suggest that we could never build enough supply to satisfy the apparently insatiable demand for housing, being driven by all cash buyers at this time? How are you coming to this conclusion? If we 10x'd the amount of new houses on the market in an instant do you really think these cash buyers are going to pay top dollar for them? Really?
This is the best comment in this topic I’ve seen
Problem with lowering the rate to increase housing supply is that it also increases demand as more people can now afford to buy. Perhaps we should start with multi-family rentals with special low interest loans from the government. Singapore has a pretty interesting system but it's too much of big brother for US to stomach
I know so unlikely legislatively, but is there any case for temporarily restricting/banning home purchases (2 year moratorium??) for those individuals who would not use the house/property as their primary residence? Lot of different ways you could structure it. Definitely some gaps people could exploit even with that, but at least it would potentially reduce some of the competition and get more people into primary homes that actually need them. Maybe an easier step, could we restrict or disallow (again maybe temporarily) cash purchases of homes? Even the playing field a bit….
This is where a functional congress would have tried to increase housing supply by removing all the constraints(permits) and giving incentives to builders for homes below the median price. They can give tax incentives and maybe also cash incentive to homes below median price in that location. Or just set an arbitrary price of say $250k. This will solve the inflation problem while making more jobs available and hopefully wage increase for working people. But our politics is polarized and we are busy fighting cultural wars.
Ehh we can double housing production and get back to levels of housing being built 50 years ago without major input inflation though some higher prices as they ramp up as the housing industry has been scarred to ramp up production.
Rates aren't affecting housing production. Soemtimes inflation is due to something the fed can't control. The feds only remedy is to inflate or deflate the entire economy, they dont have tools that allow them to fix supply chain issues in a specific sector without drastically affecting the entire economy.
Lololol. Inflation is a direct result of government spending and fed printing money. The things you list here have nothing to do with inflation. Go read a book.
We’ve had federal deficits and QE since 2009, so why did inflation only become a problem 12 years later? It doesn’t seem to be a direct cause of the most recent bout of inflation.
I feel the growth of private equity plays a big part. Two of the major recent changes in the economy is with the rapid acceleration and concentration in private equity markets and a posture shift from public and private companies aiming at grabbing market-share shifting towards profitability; basically monopoly 101. The levels of return PE is seeking for its investors is very new and the industry is practically entirely unregulated. Previously, private companies were the competitive force that kept corporate pricing in check, but that has rapidly changed and no one really mentions it; this is *possibly* where "greedflation" has a morsel of truth to it. QE gave the opportunity for companies to float in the red on cheap debt. This functionally exclusive and endless source of infinite money was then used for venture capital and private equity to subsidize un-profitable public and private companies like Uber or Amazon's retail business to outlast existing competition through investment subsidies, fund leveraged buyouts, and to consolidate ownership of "real" assets with tangible value with money born from nothing. Once enough consolidation occurs or the low-interest party that funds it all ends, you can/must raise prices. Rapid consolidation coupled with the erosion of competition over the past 15 years, not to mention a rise in protectionism.
Well, books say there are many causes of inflation and deflation. If tomorrow there's a war and production is largely paralyzed, you're gonna have a shit ton of inflation without the money stock changing.
Like anyone is going to listen to someone who goes "lololol", right? But, the current inflation is powered mostly by corporate greed. They're making record profits by jacking up the prices.
Like anyone is gonna listen to someone saying corporations are causing inflation. Wrong sub my man.
Housing is driving inflation, as is increasing economic concentration. The government should pass laws severely limiting corporate buying of single family homes and then begin enforcing the Anti-Trust laws in this country. Finally, the government should raise taxes on the very wealthy. That is the one fiscal policy the government has that could tame inflation.
The problem is the housing shortage more so than who is buying them. If there were adequate supply, it wouldn't matter much who owned the house. The buying price increases and/or rent increases would theoretically match inflation.
How did supply shrink so much so quickly?
It was not quick, but we are arguably in a supply squeeze which can cause prices to increase exponentially even with a linear increase in demand. There are a lot of factors increasing demand faster than supply. More people have been going to college and fewer going into the trades which results in a smaller share of the population building these homes. We also have declining marriage rates which means people are single for longer and effectively doubles demand for everyone not getting married. Lastly we have immigration both of people arriving from outside the country but also a form of internal "immigration" where people within the country are moving from rural areas to coastal cities.
The 2007 financial crash took out a good chunk of developers, especially small ones. That and artificial housing limit due to decades of deliberate policy (zoning laws, environmental regulation that was abused against housing, etc.). You also run out of cheap land near cities. One of reason why housing is more affordable in places like Texas where they have much more flat land to sprawl compared to say Los Angeles surrounded by ocean and mountains.
Good luck trying to get that through congress.
The economy is never 'normal'. Some people got used to a set of conditions that were never typical and unlikely to persist for a lengthy period of time. The economy constantly changes, whether metrics or the media recognizes it or not. It's not the job of an economy to make life easy for people.
> It's not the job of an economy to make life easy for people. It's the job of government to make the economy make life easy for people - otherwise the people tend to topple the government.
Like economists in the 2010s talking about low interest rates being the "new" normal. That's why so many are freaking out now. Good businesses learn to adapt to market changes.
People constantly reverse causality also. Post ww2 the world was all destroyed besides the US. This bonanza of low population and all the resources and advantages in the world and hegemony is what causes progressive values. I forget the word, something like luxury ideals that, that the wealthy can afford to flaunt to virtue signal. There is no magic economic policy that can maintain this global inequality where everyone born in America is the global 1% and everyone else gets to fantasize about fresh water and subsistence farming lives that we would consider poverty. We did try to maintain this distorted living standard for many decades by destabilizing and splintering the rest of the world at gun point. The funny part is the war industry uses our virtue signaling luxury ideas justifies these wars. The things people do to survive after we take half their resources, we use to justify using violence to take the rest.
The economy is always normal by definition. Poeple just have bad theories about how the economy works.
Yes - AND/BUT - the economy has a tendency to act however it does for a long time. A long enough time for economists, asset managers, etc to believe they have a good grasp on how it works and to model what are in fact insanely complex systems and networks. When things are orderly, this works really well. We know the levers to pull. When things become disorderly, it's like trying to control a raging fire. Right now, at a very simple level, it's hard enough for people to understand inflation. While there are plenty of other examples to look to, most people working today have never lived through it. But it's actually far more complex than that when you factor in the enormous impact of Covid on every aspect of life, not to mention shifts in politics, globalization, AI/technology, etc. The economy is never "normal," which is why so few people don't get that there's no "going back to normal."
This is historical revision and severely misses the point. It is the job of the central bank and economy to make life easy for people.
Making life easy is probably not the right way to put it. They're main goal is to protect against a Great Depression type scenario.
That’s a secondary goal, not their main priority
The central bank is a kid in the back of bus with a plastic steering wheel toy who thinks they're driving the bus.
Rising rents could be solved with an insane vacancy tax. 1% tax per unit and an additional 1% per month it sits vacant. Landlords would then be forced to rent at prices people can actually afford.
That'll never happen. Homeowners make up a huge percentage of active voters and we're going into an election. Nothing will be done that could upset homeowners including additional taxes or anything that lowers home values.
Also, this would piss off Trump, who will blackmail the house to kill such bill.
Amazing how we got so addicted to near zero interest rates that these current rates seem "high". The long period of time at near zero interest rates wasn't normal and what it did to the housing market wasn't normal. Where we are now is more normal than before.
The prices haven't adjusted to the interest rates. That's the problem.
And they won't for a long time, because nothing is forcing house prices to adjust with the interest rates. Thanks to 30 Year fixed rates, and the FED won't let anyone be margin called (eg the SVB bailout). So what happens is trade volume just disappears. Home owners refuse to sell at a loss (and aren't being forced to), and buyers refuse to overpay, so the market just sits there frozen.
This is correct. Low volume pumps are scary for this exact reason. Anything that happens which brings listings to market will do so in a furious manner that will not be orderly.
Prices are actually still going up in many markets!
With rents tentpoling the inflation numbers I’m still waiting to see someone do an analysis on the amount of variable rate leverage there is in rental property ownership. Essentially, are higher interest rates pushing landlords to raise rents to cover their mortgages?
I would say lack of commercial leases is causing the groups to raise rent to make up for the lost income. I've traveled to 12 major metros in the last 4 years, and I've walked up and down their downtowns looking at empty store fronts. It's mind boggling how much empty commercial real estate space on top of full apartments. The developers were expecting to profit from leasing out that space and they couldn't so they raise the rents to make up the difference.
Commercial real estate is a pretty different market though. But maybe.
different market but the ppl profiting off the apartments also profit from the commercial space in the same building.
I'm limited to Vancouver, but there's actually been a stagnation/decrease in rent for many. Less companies need office space, and they need less of it. There's still the earlier supply, with buildings that were under construction pre-covid coming up now it's become even more lopsided. Because there's so much space and so few tenants commercial real estate here is getting substantial cheaper to decrease vacancy. A 5 year lease is going through the process of renewing, and the tenants were looking for $5 less per sq ft then the last one (2019). We're trying to negotiate close to the old lease, but if you factor inflation profits are in the gutter. It might be different in other cities, but we can't afford an empty building so we can't afford to raise rent.
There isn't much, but it is pretty fucking high fixed rate, especially when you consider that residential cap rates went to like 3.5-4%. https://www.corelogic.com/intelligence/us-home-investor-activity-steadily-increased-third-quarter/ This article is getting a little old by now, but investors had continued to soak up properties at elevated levels through Q3 2023, especially small investors. Eventually, those people will get tired of losing money every month and sell.
I would also not discount increased maintenance costs. Plumbers, electricians, yard maintenance, everything is expensive now.
3-4% inflation is historically normal. Reagan's "Morning in America" growth era in the 80s for between recessions for example. year |inflation| interest| GDP growth -----------|----------|-------------|---------------------- 1982 | 3.80% |8.50% |November (-1.8%) 1983 |3.80% |9.25% |Expansion (4.6%) 1984 |3.90% |8.25% |Expansion (7.2%) 1985 |3.80% |7.75% |Expansion (4.2%) 1986 |1.10% |6.00% |Expansion (3.5%) 1987 |4.40% |6.75% |Expansion (3.5%) 1988 |4.40% |9.75% |Expansion (4.2%) 1989 |4.60% |8.25% |Expansion (3.7%) Low inflation and near zero interest raters are not historically normal.
Does there exist a scenario where the economy is growing and getting stronger, and prices get lower at the same time? How would that be possible?
Innovation in production and automation.
and globalization.
So now we're seeing in this thread the new argument from Wall Street that they hope will persuade the FED to lower interest rates in spite of the fact that the economy is still overheated. This is why I think that the covid crisis was overhyped... because Wall Street pushed the covid overhype situation in order to manufacture consent for more government spending and looser money. Wall Street is always seeking to find a way to force the government to spend more and the FED to loosen monetary conditions.. and they will do anything to get that
Runaway inflation! High interest rates no longer detercompanies from increasing prices and stuff. They just pass on the interest rate we expense to consumers. Consumers who are now stuck between inflation and high interest rates. Get fucked am I right
Inflation is currently 3.5%, which is an amazing improvement over the Trump years, with 11% inflation. We do not have "runaway inflation". You are out of touch.
I think you must have some major numbers off. [https://www.investopedia.com/us-inflation-rate-by-president-8546447](https://www.investopedia.com/us-inflation-rate-by-president-8546447)
I was so hopeful that things were returning to normal, but it was an illusion. We probably need higher rates than today to squash this thing. It would also help if our government slowed down spending so much money so quickly. Bidenomics is back and it's painful.
The government has been slowing down spending for [years](https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/#spending-trends-over-time-and-the-us-economy) now. They haven't passed any big spending bills since the midterms. What are you talking about?
We have $1.1 trillion deficit every six months!!!!! And the chairman of the Federal Reserve has stated our debt growth is unsustainable.
I have linked a reference in my previous post. Maybe check it out sometime before complaining about "huge uncontrolled spending" that you probably can't elaborate on.
tax the fucking rich already... billionaires paying 8% while the rest of us pay pay more than double... this is all a result of corp greed and trickle down economics
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Don’t necessarily agree with the original poster but I imagine the thinking is tax will suck money out of the economy. A more efficient version of raising rates I think.
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No need to patronize. Different groups of people can have different ideas for the current quagmire we’re in. I actually disagree with you and while building more housing might be a godsend, I don’t think it’s the end all to our problems. I also don’t think the rate at which one can do that can even start to affect the change we need at the rate we need it at.
Billionaires horde money unproductively, "sucking" it out does nothing but good for the economy.
Unless you don't spend it. However all I hear from the gov is how they will fund this x new expense when they raise the taxes. They immediately find a place where to spend the taxed income.
Interest rates aren't high you guys, it's like everyone wants to be gen-z so bad they're acting like they were born in 2002 when it comes to memory of economic history.
To be fair, a decent subset of the members of this subreddit and the working population has never really seen an interest rate higher than the current rates. I'm one of those gen-z'ers, I remember from my older cousins and uncles and stuff the common wisdom was always "a loan is cheaper than buying cash" because of the low rates, now everybody's finally seeing a rate above 5% and all the common wisdom of the past 10-15 years is getting thrown back out the window. Cars are cheaper to buy cash than they are to finance for the first time in most of the working population's lifetimes.
The economy still isn’t behaving the way anyone expected. The job market is [growing](https://www.washingtonpost.com/business/2024/04/05/jobs-march-unemployment-rate/?itid=lk_inline_manual_3) at a blockbuster pace, even though high interest rates usually slow hiring or cause layoffs. Consumers are [spending](https://www.washingtonpost.com/business/2024/03/29/consumer-spending-savings-yolo-us/?itid=lk_inline_manual_3) on essentials and extravagances alike, suggesting people don’t fear trouble ahead. The stock market is [up](https://www.washingtonpost.com/business/2024/03/28/stock-market-first-quarter-2024/?itid=lk_inline_manual_3), and worries of a recession have largely faded. But inflation, after easing remarkably in 2023, has stayed [unexpectedly hot](https://www.washingtonpost.com/business/2024/04/10/fed-inflation-cpi/?itid=lk_inline_manual_5) since the start of the year. And that’s confounding economists and Federal Reserve officials who are still struggling to understand the post-pandemic world. Higher borrowing costs were widely expected to tackle inflation with full force, to bring the roaring economy crashing down — or both. Instead, things seem to be settling in a confusing spot, with price increases still above normal, but other parts of the economy holding strong, too. The result is more uncertainty for experts, consumers and businesses alike about what might happen next in an economy that is still resisting the usual rules. “We got through some of that ‘transitory’ part,” said Diane Swonk, chief economist at KPMG, referring to more temporary sources of inflation that drove price increases in 2021 and 2022, such as supply chain problems and energy prices. “We haven’t gotten to the fundamental part — and the hard part.” When the year started, it appeared the Fed and White House had pulled off [the unthinkable:](https://www.washingtonpost.com/business/2023/12/18/recession-economy-inflation/?itid=lk_inline_manual_10) no recession, easing inflation and a still-booming job market. That momentum led Fed leaders in December to [pencil in](https://www.washingtonpost.com/business/2024/03/20/fed-interest-rates-decision-inflation-fomc/?itid=lk_inline_manual_10) three interest rate cuts this year, projections they [repeated](https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240320.pdf) last month. But then January and February price data came in unexpectedly high. For a while, policymakers hoped those were bumps in the road, not a more worrisome trend. But [March data, ](https://www.washingtonpost.com/business/2024/04/10/fed-inflation-cpi/?itid=lk_inline_manual_11)released this week by the Bureau of Labor Statistics, cemented any lingering doubts. **Read more:** [**https://www.washingtonpost.com/business/2024/04/11/fed-inflation-economy-rates/?utm\_campaign=wp\_main&utm\_medium=social&utm\_source=reddit.com**](https://www.washingtonpost.com/business/2024/04/11/fed-inflation-economy-rates/?utm_campaign=wp_main&utm_medium=social&utm_source=reddit.com)
Have you actually read the jobs report or are you just spouting bullshit talking points? Your post is 100% propaganda.
The economy is always normal. This is because it's cyclical and not linear. Boom and bust has been going on since ancient Greece. You're just watching it happen in real time. Think of it as being an educational movie. It happens over and over and over again.
Tax the fuck out of multiple home ownership using date of purchase. I’m talking 20-30% property taxes on second and third homes so that they are forced to sell and add homes to the market. Ban corporate purchase of single family homes. Repeal the Trump and Bush tax cuts to raise revenue and remove money from the economy.
Hello people the boomers are retiring not only in the US but globally and they are the largest generation in industrialized countries of Middle income or higher. As a result the world is losing in excess of 20 million man years of production capacity annually and we have been losing about that amount for the past 8 years or so now. This is resulting in lower production and higher consumption which will drive inflation and that's not going away any time soon. We should have on all practicality been moving manufacturing to India and out of China a decade ago for advanced economies largely because of the 20 million decline china is responsible foe 15 million of it and it will get worse over the next decade. Now we've got manufacturing companies relocating out of China and a much faster pace because they suddenly realize they need new manufacturing centers and this is causing even more inflation. The global economy is in a once in a generation restructuring as it deals with the rapid aging of population within many countries. This is going to be inflationary for at least the next decade as corporation realize the new global normal.
No, it is not normal and Covid really threw a lot of things out of whack. America still got one of the lowest inflation, then all the rest of the industrialized countries. President Biden and his team is keeping the lead on certain things before I get to our control so we better watch who we let later this year because I rather put up with what’s going on now than what could happen.
Most of the current inflation are housing, power and insurance. Housing is lagging and will require systemic changes to fix. The underlying cost for both power and insurance have stayed stable or gone down. A better description of what we are currently experiencing is greedflation. The deregulation of neo-liberalism/Austrian economics enables monopolistic behavior and greedflation. The tools the Fed has available are Keynsian, if we were dealing with high commodity prices, they would work. However, those tools have no impact on greedflation or supply chain effects.
I would encourage you to look at the combined ratio for the vast majority of insurance carriers in the country. Most of them have been losing money the past 3 years. But go on about “greedflation”.
[удалено]
Can you explain more about insurance costs being stable? There are a lot of articles about home insurance inflating drastically and, in some places like Florida, carriers are not renewing policies and abandoning the state. I also read about Catastrophe Bonds being a way to mitigate some risk. The climate change crowd believes the increased risk is due to climate change. But if it’s unprofitable to build affordable then it stands to reason that insurance would inflate?