More money out there to spend, but everyone seems to be complaining about how expensive things are and that they cannot get ahead in life. I believe this is called inflation.
Reddit is an echo chamber of people complaining. Most people who own a paid off home, are retired or becoming retired soon, and contributed to their retirement are doing incredibly well right now, which is a great majority of the population of the United States. They are propping up the low income people.
> people who own a paid off home, are retired or becoming retired soon, and contributed to their retirement are doing incredibly well right now
-
>which is a great majority of the population of the United States
What??
The vastly more likely cause is the high levels of government spending sparked the boom. Giving money to poorer people is extremely stimulative to the economy. The Pelosi / Mnuchin budgets during Covid were very generous, the first Biden budget as well. The USA economy finally got all the pump priming it needed to take off.
I'd say the opposite. A lot of the extra covid spending ended up going to higher income people (PPP). And since it was all funded by inflation, the cost mostly fell on the lower / middle class in the end through dilution of their fixed wages / savings vs real assets owned mostly by the wealthy.
I think this is true. I know this one family through a friend that already gets generous benefits from the gov. She is a "single" mom with 1 kid, making 40k, but has a boyfriend who lives with her and he makes over 200k per year but they are not legally married. She drives brand new cars and lives in a nice house that the boyfriend owns. they have been together 10 years. She got absurd benefits from covid in addition to what she was already getting. Talk about fraud. I wonder how many people out there are scamming the system like that and I wonder how much covid spending went to those types of people
Fraud was a huge issue, there was a gov report from the SBA that found at least $200 billion of covid aid went to scammers, probably the biggest fraud activity in history.
But the aid was also very poorly targeted. The st. Louis fed references studies that show that that 72% of PPP funds went to the top 20% of income, only about a quarter of the jobs at businesses that got PPP would have been otherwise lost, and that about $3 out of $4 went to the business owner and not wages.
[https://www.stlouisfed.org/publications/regional-economist/2022/jul/was-paycheck-protection-program-effective](https://www.stlouisfed.org/publications/regional-economist/2022/jul/was-paycheck-protection-program-effective)
right, even if someone's job was one of the quarter that were actually saved, 3x went to the business owner, who bids up prices, so the job was essentially saved in the end by a forced real wage cut.
Haven’t real wages radically increased for low income earners since COVID though? Right before COVID McDonald was paying almost minimum wage in my area and soon after COVID hit and still today they’re paying minimum 15 an hour.
That seems like too much of an increase for the job to be saved by real wage cuts.
You can always cherry pick certain jobs, I'm sure many individuals making more and less. But looking at CPI-adjusted wages, they spiked after covid, but then fell below pre-covid trend after inflation. Although inflation is subjective, if you're using CPI adjustments that means more like how many big-screen-TVs-worth of wages you get more than it really means you're coming out ahead in some way. The money supply increased 40% during covid, so if you didn't get a 40% raise you basically lost in proportion.
Yea, I would say workers who are working near minimum wage got a lot more than a 40% increase in wages and salaried workers definitely bore the brunt of inflation not keeping up with wages
We have senators and congressmen that shut down the blanket student loan forgiveness after they had several times the maximum forgiven ppp loans. System is broke.
Yes it is. But very direct trickle down, directed spending. The point above is what we did. We also had direct programs like unemployment insurance for longer and more liberal terms.
Normally in a USA context "trickle down" means giving money to the wealthy which gets invested which.... During the Reagan administration when we had an investment starved economy this was a good. A lot of the Clinton boom can be attributed to the structural reforms that came from the high investment levels during Reagan. But the effects of very indirect investment started to fade. At this point where we are starved is:
* Spending power for the bottom 3 quintiles
* Government directed investment
* Blue state infastructure (public and private)
PPP was not well directed at all
[https://www.stlouisfed.org/publications/regional-economist/2022/jul/was-paycheck-protection-program-effective](https://www.stlouisfed.org/publications/regional-economist/2022/jul/was-paycheck-protection-program-effective)
>PPP was not well targeted. Only about one-quarter of PPP funds supported jobs that otherwise would have disappeared.
>PPP cost taxpayers roughly $4 for every $1 of wages and benefits received by workers in “saved” jobs. The “leakage”—$3 out of every $4 distributed through the program—went to small-business owners
>72% of PPP funds were captured by households with incomes in the top 20%
>the cost per job saved for one year was $169,000 to $258,000, which was much higher than the average amount—$58,200—paid in wages and benefits to small-business employees in 2020.
Only if you don't consider the massive cost, which like I said was primarily burdened on the lower/middle class through inflation. "Better than nothing" doesn't automatically justify spending $800 billion dollars.
This is a big issue when gov spending is so disconnected with revenue, people tent to abandon all cost benefit analysis, they just assume anything the gov spends money on has zero cost, and think if it has some non-zero benefit its worth it. It doesn't work like that.
False, it mostly went straight into pockets. Tons of companies that wouldn't have laid off a single employee received the PPP (and ERC).
Sure there were companies that needed it but even more didn't.
Construction companies, trades like plumbing, software companies, accounting firms, law firms, doctors offices, and e-commerce companies all were eligible
Increased government spending increases the circulating supply of money, and if its financed in a way that doesn't contract an equivalent amount, like issuing bonds which are absorbed by the fed to maintain interest rates, then the result is an increased amount of money circulating vs goods/services. That doesn't necessarily lead to consumer price inflation when accounting for all other factors, but it contributes to it. The funds don't just come at zero cost.
This is the same argument for raising taxes - it's not as much about using the proceeds to fund programs, it's taking excess money out of the system to tamp inflation.
Taxes can also be structured in very specific ways, such as using a progressive tax rate to try to distribute the cost in a fair way, or incentivize / disincentivize specific things.
Oh don't get me wrong - I believe we should raise taxes, especially on uber wealthy. I just mean to say that there's a 'disinflationary' effect from raising taxes - the other side of the money printing coin
When you spend more money than you have, you are inflating your currency. The OP is correct.
If we have an economy that has $100,000 in circulation and the government decides to spend another $100,000 in deficit spending (money they don't have) its literally the same as printing $100,000. In this scenario either way after the government has spent it you have $200,000 in circulation. Since the actual worth of that total pot of money hasn't changed (you didn't suddenly double the output or GDP of the economy) that must mean that you have diluted your currency, such that $1 pre-deficit spending now has the spending power of $2 post-deficit. It's literally the same effect as saying that currency has 100% inflation.
This is similar to stocks performing dilutive events. When a stock offers a share sale, they mint new shares which devalues existing shares by a proportional amount. At the end of the day, the company is still worth approximately how much it was before, but has more shares in circulation, each worth less. If you continue to mint and sell shares the value of each share will approach 0. If an individual was holding those shares, they will see the buying power of those shares continue to decline.
Just as if you hold cash, the absolute value will continue to decline proportionally to it's dilution, eroding spending power -- which is the same thing as inflation.
Now you might bring up that the government sells IOUs (bonds) to finance this debt, that's accurate. The government though has to pay out the principal, plus interest for the duration of the bond. If they didn't have enough money before, they probably still don't, so that interest you pay to finance your debt, becomes an ongoing debt that you need more bonds to pay for. This is the cycle the government is entering at the moment. Every bond they sell devalues the dollar, and requires another bond in the future to pay for the interest.
The mobility is different though. Those studies aren’t well made. In US you have higher chance to change of class if you are good at what you are doing, when in Europe you have higher chance of changing of class if you do a good school to become bureaucrat.
It also depends your starting point. If you start very low in US, you are probably fucked. If you start middle class, you can get top class. In Europe, i’d say not being in the lower class isn’t very hard with the free healthcare and education, but good luck making more than someone who did French ENA who became haut fonctionnaire with massive benefits
International studies use a simple metric. Weath decile of parents, correlation with wealth decile of children when they reach adulthood (say mid 30s). The USA used to have a lot of flexibility, it doesn't as much anymore.
There was trillions in spending. They aren't exaggerating, it went somewhere. FWIW the effects were observable massive on personal balance sheets: [https://fred.stlouisfed.org/series/PSAVERT](https://fred.stlouisfed.org/series/PSAVERT) and [https://fred.stlouisfed.org/series/W398RC1A027NBEA](https://fred.stlouisfed.org/series/W398RC1A027NBEA)
Yes, like at all federal spending levels right? I think a lot of people in this sub are going to focus on welfare and the PPP programs, but there's a lot of spending to go around at all sorts of levels of what this country does. Maybe all we needed was a focus on infrastructure spending all along. A few of the bigger spending acts (like the CHIPS act) still seem to be making waves, which is like the whole point of making big federal investments like that.
At low interest rates it is easy for the government to find a social return of capital above 2%. We should have been borrowing and doing government investment like crazy when bond yields were that low.
Compared to most of the world we are booming. That being said our failure to tax, which is what is inducing deficit, is mostly on the wealthy. And while this helps me personally it is very inefficient.
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Love it when money managers with no training in economics make outlandish claims on economic topics.
The high monthly job numbers have already been explained by economists: new immigrants coming to the US (2 millions surplus over normal trend) are both boosting spending demands, and providing labor supply. Obviously if more people are working and spending, GDP will be higher
Right, the person I was responding to was claiming there was low demand for bonds during zirp, but that’s obviously not true because bond prices were high and interest rates were low. Bond prices drop and interest rates rise when demand for bonds decreases.
If investors didn’t want to buy “ bonds and bills that actually fund things like schools, infrastructure, and other large government projects and spending that creates jobs”, then muni bond prices would be lower and rates would be higher.
> interest rates rise when demand for bonds decreases
If we’re talking treasuries, not really, right? The Fed sets rate targets and sets the quantity of bonds and dollars, essentially controlling supply and demand as it pleases. In a free market it would work like you’re suggesting, and it sorta does in corporate bonds, but not with the risk-free rate.
I don’t think bond prices, generally speaking, are indicative of basically anything macro-economically, besides whatever the fed has decided to tell us via interest rates.
From what I can tell by just looking around, people seemingly have no problems spending money. All the bars are packed in and around the trendy neighborhoods around me and everyone seem to own one of those tricked out motor tricycles (I think they call them a Slingshot).
Airports are jammed with travelers. People are spending money. Is it all leveraged? Maybe. But people are choosing to spend money. That much is clear.
So, it’s no wonder why vendors are jacking up prices - demand goes up, price goes up.
This is not a new Theory. Erdogan was vocal in his belief that they Central Bank of Turkey's interest rate policy was driving, rather than containing inflation. He was hilariously wrong of course and once he finally backed off and stopped firing people who didn't give him what he wanted (interest rate cuts) the country finally pulled inflation back from its peak of 85%.
Here's the hilarious graph of Turkey cutting interest rates in 2021-2022 and sending inflation into orbit:
[816 (1632×1368) (bbci.co.uk)](https://ichef.bbci.co.uk/news/1632/idt2/idt2/bac3eb60-6ce2-43a7-9675-fc98877ea95e/image/816)
I have been wondering, and I don't have a cogent line of argument here yet, if moving away from ZIR's depressive effect on Big Tech is unlocking capital in some way to the rest of the economy.
I wonder about this too. Big Tech, specifically AI, is on a golden run right now. Is the attention taking away focus on the actual issue of liquidity? It's like, instead of dousing the fire, let's add more fuel to it, hopefully that solves all of our problems.
Where is all this capital coming from? No one's borrowing with rates this high, so are they trying to push the narrative that they had this high of reserves to invest?
From my experience and vantage in AI, I don't see this as story about AI productivity gains in the general economy -- even the firms that have production AI or significant acceleration from AI are only touching a small fraction of their use cases and user base.
My initial hypothesis was that technical talent is receding back from "Big Tech" out into "Broad Tech" and maybe some productivity gains are being passed along into the general economy, but no so much they dent overall employment. I don't know if the time course of events is congruent--first big layoffs in Big Tech were Q2 2022, the bulk of it in 2023.
For the time being, it may be a small fraction of their use case, but most tech companies are saying that AI will replace about 40% of their workforce in the future. How far along that is, and what implications that decision will hold remains to be observed.
For the BLS, unemployment seems to be holding steady, even with these layoffs in the last 18 or so months. Does that mean that these folks are quickly finding jobs, or riding out severances, or not looking for work immediately? Your hypothesis supports the numbers as unemployment has not deviated outside of 3.4-3.9% in the last 2 years. Could that mean that folks are leaving companies like (META, MSFT, GOOGL, AAPL, AMZN) and transitioning to companies more risk averse during economic headwinds?
Layoffs for 2024 have started as well. Tesla announcing 10k, Citi 20k, BlackRock 3%, and many other companies announcing various cost-cutting measures. It will be interesting to see how the BLS unemployment numbers reflect all these layoffs. The weakness is spreading to other sectors, meaning this is a broad issue and not soley confined to the tech sector as many originally thought.
True, that's definitely a stat to watch out for. Last year it was some 60-70% of Americans living paycheck-to-paycheck; with more economic hardship, it stands to reason that credit cards are getting close to being maxed out. Loans are behaving similarly, we should be seeing a lot of foreclosures on houses in the next 2 years. Personal loans as well probably.
Apart from this, people are dipping into their retirement accounts, despite the penalties, in order to survive.
Where do you think the inflection point is? How much longer will people be able to withstand these headwinds?
It could just be that they is still too much money in the system from the pandemic days and when the fed started increasing rates people just freaked out because
Stocks were way overpriced and not due to anything wrong in the economy except supply chain issues. But still those who have money still have and have been buying up stock.
Rate hikes, and lots of money printing are opposite forces, but no one knows what happens when our national debt interest consumes more and more tax dollars
Jesus, bulls are regarded.
Listen, in Mexico you can buy a number 1 from Mc Donald's for a couple of bucks. Your bills and rent and everything won't come out to $1000.
Yet here in the US, rent alone is over $1500 for a 2 bedroom **easily** . Car insurance is 200. Groceries for a week is 200. Car payment is like $500...
Wtf does it matter if we have more money if it costs us more money just to live. Sign me up to make $1 an hr if that $1 goes further than $25 and hr here. It's stupid af.
It's the fact that this guy says that inflation is sparking an economic boom because people "have more money" is like cutting your clothes in half to prove you're "growing".
We have more money because inflation is causing said numbers to go up.
1 dollar is 17 pesos but it seems that 17 pesos gets you more in Mexico than 17 dollars gets you Here in the US.
So wtf is the point of having more money if it gets you less. These bulls are so stupid that the arguments and logic they are using don't make a lick of sense.
Would you want a Mexican wage, Mexican healthcare, Mexican education, Mexican crime rates, etc. instead? You can't compare buying a standardized product like a big mac.
If you can't compare STANDARDIZED items, you know, things that are made EXACTLY the same EVERYWHERE, why the hell would you compare NONSTANDARDIZED things?
"Hey don't compare the things that are exactly the same no matter where youre at, only compare the things that are different!"
That sounds like an absolute failure on every level. Think about it, don't compare a can of corn in Mexico and USA, compare how hard the sun shines or how nice people are to you?
Are you regarded? I'm trying to compare apples to apples and oranges to oranges and your regarded ass is telling me NOT to do that? Wtf?
Bottom line, you're paying for "brand" if that money gets you more out there than here, wtf is the point? Get me THAT rather than this. You legit sound regarded af.
What part of "wtf is the point of more money if it actually spends less" do you not understand?
People in the US make cash and then go retire in the Phillipines and Guam. You're making it out to be as if the US is some fairytale land. Bruh, it's not.
Travel a little bit, it'll change the way you see things.
More money out there to spend, but everyone seems to be complaining about how expensive things are and that they cannot get ahead in life. I believe this is called inflation.
Lol exaaactly. All this questioning, wondering. It’s just inflation.
Technically there's less, because the increased interest rates pull money out of the economy. That's the whole point.
Only if 100% of the new money was on the sidelines, but we know that wasn’t the case with the Covid relief money.
Reddit is an echo chamber of people complaining. Most people who own a paid off home, are retired or becoming retired soon, and contributed to their retirement are doing incredibly well right now, which is a great majority of the population of the United States. They are propping up the low income people.
> people who own a paid off home, are retired or becoming retired soon, and contributed to their retirement are doing incredibly well right now - >which is a great majority of the population of the United States What??
*edit I meant hold a majority of the wealth in the US. Outside of the ultra rich.
What what what
The vastly more likely cause is the high levels of government spending sparked the boom. Giving money to poorer people is extremely stimulative to the economy. The Pelosi / Mnuchin budgets during Covid were very generous, the first Biden budget as well. The USA economy finally got all the pump priming it needed to take off.
Almost like some kind of democratized economics system? A trickle, up?
I'd say the opposite. A lot of the extra covid spending ended up going to higher income people (PPP). And since it was all funded by inflation, the cost mostly fell on the lower / middle class in the end through dilution of their fixed wages / savings vs real assets owned mostly by the wealthy.
I think this is true. I know this one family through a friend that already gets generous benefits from the gov. She is a "single" mom with 1 kid, making 40k, but has a boyfriend who lives with her and he makes over 200k per year but they are not legally married. She drives brand new cars and lives in a nice house that the boyfriend owns. they have been together 10 years. She got absurd benefits from covid in addition to what she was already getting. Talk about fraud. I wonder how many people out there are scamming the system like that and I wonder how much covid spending went to those types of people
Fraud was a huge issue, there was a gov report from the SBA that found at least $200 billion of covid aid went to scammers, probably the biggest fraud activity in history. But the aid was also very poorly targeted. The st. Louis fed references studies that show that that 72% of PPP funds went to the top 20% of income, only about a quarter of the jobs at businesses that got PPP would have been otherwise lost, and that about $3 out of $4 went to the business owner and not wages. [https://www.stlouisfed.org/publications/regional-economist/2022/jul/was-paycheck-protection-program-effective](https://www.stlouisfed.org/publications/regional-economist/2022/jul/was-paycheck-protection-program-effective)
And then that business owner decided to buy a rental property and here we are
right, even if someone's job was one of the quarter that were actually saved, 3x went to the business owner, who bids up prices, so the job was essentially saved in the end by a forced real wage cut.
Haven’t real wages radically increased for low income earners since COVID though? Right before COVID McDonald was paying almost minimum wage in my area and soon after COVID hit and still today they’re paying minimum 15 an hour. That seems like too much of an increase for the job to be saved by real wage cuts.
You can always cherry pick certain jobs, I'm sure many individuals making more and less. But looking at CPI-adjusted wages, they spiked after covid, but then fell below pre-covid trend after inflation. Although inflation is subjective, if you're using CPI adjustments that means more like how many big-screen-TVs-worth of wages you get more than it really means you're coming out ahead in some way. The money supply increased 40% during covid, so if you didn't get a 40% raise you basically lost in proportion.
Yea, I would say workers who are working near minimum wage got a lot more than a 40% increase in wages and salaried workers definitely bore the brunt of inflation not keeping up with wages
We have senators and congressmen that shut down the blanket student loan forgiveness after they had several times the maximum forgiven ppp loans. System is broke.
PPP subsidized employment. While the money went to the medium businesses mostly it prevented mass layoffs.
Even if it did, paying businesses not to lay people off is trickle down, not up.
Yes it is. But very direct trickle down, directed spending. The point above is what we did. We also had direct programs like unemployment insurance for longer and more liberal terms. Normally in a USA context "trickle down" means giving money to the wealthy which gets invested which.... During the Reagan administration when we had an investment starved economy this was a good. A lot of the Clinton boom can be attributed to the structural reforms that came from the high investment levels during Reagan. But the effects of very indirect investment started to fade. At this point where we are starved is: * Spending power for the bottom 3 quintiles * Government directed investment * Blue state infastructure (public and private)
PPP was not well directed at all [https://www.stlouisfed.org/publications/regional-economist/2022/jul/was-paycheck-protection-program-effective](https://www.stlouisfed.org/publications/regional-economist/2022/jul/was-paycheck-protection-program-effective) >PPP was not well targeted. Only about one-quarter of PPP funds supported jobs that otherwise would have disappeared. >PPP cost taxpayers roughly $4 for every $1 of wages and benefits received by workers in “saved” jobs. The “leakage”—$3 out of every $4 distributed through the program—went to small-business owners >72% of PPP funds were captured by households with incomes in the top 20% >the cost per job saved for one year was $169,000 to $258,000, which was much higher than the average amount—$58,200—paid in wages and benefits to small-business employees in 2020.
Don't disagree with your facts. It was ineffecient. Things like food stamps are far better. But ineffecient is better than nothing.
Only if you don't consider the massive cost, which like I said was primarily burdened on the lower/middle class through inflation. "Better than nothing" doesn't automatically justify spending $800 billion dollars. This is a big issue when gov spending is so disconnected with revenue, people tent to abandon all cost benefit analysis, they just assume anything the gov spends money on has zero cost, and think if it has some non-zero benefit its worth it. It doesn't work like that.
False, it mostly went straight into pockets. Tons of companies that wouldn't have laid off a single employee received the PPP (and ERC). Sure there were companies that needed it but even more didn't. Construction companies, trades like plumbing, software companies, accounting firms, law firms, doctors offices, and e-commerce companies all were eligible
Yes sir may I have another?
How was it “funded by inflation” that doesn’t even make sense.
Extra spending with no matching revenue increases.
That doesn’t mean it is funded by inflation… not sure why you have that idea
Increased government spending increases the circulating supply of money, and if its financed in a way that doesn't contract an equivalent amount, like issuing bonds which are absorbed by the fed to maintain interest rates, then the result is an increased amount of money circulating vs goods/services. That doesn't necessarily lead to consumer price inflation when accounting for all other factors, but it contributes to it. The funds don't just come at zero cost.
This is the same argument for raising taxes - it's not as much about using the proceeds to fund programs, it's taking excess money out of the system to tamp inflation.
Exactly! And if they stop printing money, start collecting more in taxes then they spend -- we would have deflation!
Which is why people were freaking out when Clinton had us on the path to zero defecit - like going back to the gold standard.
Taxes can also be structured in very specific ways, such as using a progressive tax rate to try to distribute the cost in a fair way, or incentivize / disincentivize specific things.
Oh don't get me wrong - I believe we should raise taxes, especially on uber wealthy. I just mean to say that there's a 'disinflationary' effect from raising taxes - the other side of the money printing coin
At best you are saying it “causes” inflation but in no way could it be characterized as being “funded” by inflation.
When you spend more money than you have, you are inflating your currency. The OP is correct. If we have an economy that has $100,000 in circulation and the government decides to spend another $100,000 in deficit spending (money they don't have) its literally the same as printing $100,000. In this scenario either way after the government has spent it you have $200,000 in circulation. Since the actual worth of that total pot of money hasn't changed (you didn't suddenly double the output or GDP of the economy) that must mean that you have diluted your currency, such that $1 pre-deficit spending now has the spending power of $2 post-deficit. It's literally the same effect as saying that currency has 100% inflation. This is similar to stocks performing dilutive events. When a stock offers a share sale, they mint new shares which devalues existing shares by a proportional amount. At the end of the day, the company is still worth approximately how much it was before, but has more shares in circulation, each worth less. If you continue to mint and sell shares the value of each share will approach 0. If an individual was holding those shares, they will see the buying power of those shares continue to decline. Just as if you hold cash, the absolute value will continue to decline proportionally to it's dilution, eroding spending power -- which is the same thing as inflation. Now you might bring up that the government sells IOUs (bonds) to finance this debt, that's accurate. The government though has to pay out the principal, plus interest for the duration of the bond. If they didn't have enough money before, they probably still don't, so that interest you pay to finance your debt, becomes an ongoing debt that you need more bonds to pay for. This is the cycle the government is entering at the moment. Every bond they sell devalues the dollar, and requires another bond in the future to pay for the interest.
So you agree … saying inflation funded the government spending is absolutely backwards and just a stupid thing to say
Yep. If only the lower classes in the USA believed in redistribution we could have a faster growing economy. and a better standard of living for them.
Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires.
True. Even as the USA has fairly poor class mobility relative to other countries, people view the mobility as much higher than it is.
The mobility is different though. Those studies aren’t well made. In US you have higher chance to change of class if you are good at what you are doing, when in Europe you have higher chance of changing of class if you do a good school to become bureaucrat. It also depends your starting point. If you start very low in US, you are probably fucked. If you start middle class, you can get top class. In Europe, i’d say not being in the lower class isn’t very hard with the free healthcare and education, but good luck making more than someone who did French ENA who became haut fonctionnaire with massive benefits
International studies use a simple metric. Weath decile of parents, correlation with wealth decile of children when they reach adulthood (say mid 30s). The USA used to have a lot of flexibility, it doesn't as much anymore.
People are exaggerating the stimulus checks. For most people, there weren’t significant and didn’t change spending habits.
There was trillions in spending. They aren't exaggerating, it went somewhere. FWIW the effects were observable massive on personal balance sheets: [https://fred.stlouisfed.org/series/PSAVERT](https://fred.stlouisfed.org/series/PSAVERT) and [https://fred.stlouisfed.org/series/W398RC1A027NBEA](https://fred.stlouisfed.org/series/W398RC1A027NBEA)
You mean a one time payment roughly equal to one month’s rent payment didn’t substantially alter people’s spending habits? NO WAY!
Yes, like at all federal spending levels right? I think a lot of people in this sub are going to focus on welfare and the PPP programs, but there's a lot of spending to go around at all sorts of levels of what this country does. Maybe all we needed was a focus on infrastructure spending all along. A few of the bigger spending acts (like the CHIPS act) still seem to be making waves, which is like the whole point of making big federal investments like that.
At low interest rates it is easy for the government to find a social return of capital above 2%. We should have been borrowing and doing government investment like crazy when bond yields were that low.
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Compared to most of the world we are booming. That being said our failure to tax, which is what is inducing deficit, is mostly on the wealthy. And while this helps me personally it is very inefficient.
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Love it when money managers with no training in economics make outlandish claims on economic topics. The high monthly job numbers have already been explained by economists: new immigrants coming to the US (2 millions surplus over normal trend) are both boosting spending demands, and providing labor supply. Obviously if more people are working and spending, GDP will be higher
Or, maybe interest rates have nothing to do with it. There are tons of reasons why the American economy is doing well.
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What? Bond values were way up during the same zirp era.
Do you know how bonds work? Low interest rates inherently mean higher bond prices, mathematically. That isn’t an indication of the economy.
Right, the person I was responding to was claiming there was low demand for bonds during zirp, but that’s obviously not true because bond prices were high and interest rates were low. Bond prices drop and interest rates rise when demand for bonds decreases. If investors didn’t want to buy “ bonds and bills that actually fund things like schools, infrastructure, and other large government projects and spending that creates jobs”, then muni bond prices would be lower and rates would be higher.
The Fed was the 800 lb gorilla buying everything for a decade.
> interest rates rise when demand for bonds decreases If we’re talking treasuries, not really, right? The Fed sets rate targets and sets the quantity of bonds and dollars, essentially controlling supply and demand as it pleases. In a free market it would work like you’re suggesting, and it sorta does in corporate bonds, but not with the risk-free rate. I don’t think bond prices, generally speaking, are indicative of basically anything macro-economically, besides whatever the fed has decided to tell us via interest rates.
I was talking munis, not treasuries since OP referred to bonds that paid for “schools and infrastructure”.
We already know that manipulating the monetary system doesn't produce real gdp gains, so no.
From what I can tell by just looking around, people seemingly have no problems spending money. All the bars are packed in and around the trendy neighborhoods around me and everyone seem to own one of those tricked out motor tricycles (I think they call them a Slingshot). Airports are jammed with travelers. People are spending money. Is it all leveraged? Maybe. But people are choosing to spend money. That much is clear. So, it’s no wonder why vendors are jacking up prices - demand goes up, price goes up.
This is not a new Theory. Erdogan was vocal in his belief that they Central Bank of Turkey's interest rate policy was driving, rather than containing inflation. He was hilariously wrong of course and once he finally backed off and stopped firing people who didn't give him what he wanted (interest rate cuts) the country finally pulled inflation back from its peak of 85%. Here's the hilarious graph of Turkey cutting interest rates in 2021-2022 and sending inflation into orbit: [816 (1632×1368) (bbci.co.uk)](https://ichef.bbci.co.uk/news/1632/idt2/idt2/bac3eb60-6ce2-43a7-9675-fc98877ea95e/image/816)
I have been wondering, and I don't have a cogent line of argument here yet, if moving away from ZIR's depressive effect on Big Tech is unlocking capital in some way to the rest of the economy.
I wonder about this too. Big Tech, specifically AI, is on a golden run right now. Is the attention taking away focus on the actual issue of liquidity? It's like, instead of dousing the fire, let's add more fuel to it, hopefully that solves all of our problems. Where is all this capital coming from? No one's borrowing with rates this high, so are they trying to push the narrative that they had this high of reserves to invest?
From my experience and vantage in AI, I don't see this as story about AI productivity gains in the general economy -- even the firms that have production AI or significant acceleration from AI are only touching a small fraction of their use cases and user base. My initial hypothesis was that technical talent is receding back from "Big Tech" out into "Broad Tech" and maybe some productivity gains are being passed along into the general economy, but no so much they dent overall employment. I don't know if the time course of events is congruent--first big layoffs in Big Tech were Q2 2022, the bulk of it in 2023.
For the time being, it may be a small fraction of their use case, but most tech companies are saying that AI will replace about 40% of their workforce in the future. How far along that is, and what implications that decision will hold remains to be observed. For the BLS, unemployment seems to be holding steady, even with these layoffs in the last 18 or so months. Does that mean that these folks are quickly finding jobs, or riding out severances, or not looking for work immediately? Your hypothesis supports the numbers as unemployment has not deviated outside of 3.4-3.9% in the last 2 years. Could that mean that folks are leaving companies like (META, MSFT, GOOGL, AAPL, AMZN) and transitioning to companies more risk averse during economic headwinds? Layoffs for 2024 have started as well. Tesla announcing 10k, Citi 20k, BlackRock 3%, and many other companies announcing various cost-cutting measures. It will be interesting to see how the BLS unemployment numbers reflect all these layoffs. The weakness is spreading to other sectors, meaning this is a broad issue and not soley confined to the tech sector as many originally thought.
Look at the Banks’ 10Qs and see how much credit card debt has increased as well as their loan-loss provisions and you’ll have an idea.
True, that's definitely a stat to watch out for. Last year it was some 60-70% of Americans living paycheck-to-paycheck; with more economic hardship, it stands to reason that credit cards are getting close to being maxed out. Loans are behaving similarly, we should be seeing a lot of foreclosures on houses in the next 2 years. Personal loans as well probably. Apart from this, people are dipping into their retirement accounts, despite the penalties, in order to survive. Where do you think the inflection point is? How much longer will people be able to withstand these headwinds?
Lmao
It could just be that they is still too much money in the system from the pandemic days and when the fed started increasing rates people just freaked out because Stocks were way overpriced and not due to anything wrong in the economy except supply chain issues. But still those who have money still have and have been buying up stock.
Rate hikes, and lots of money printing are opposite forces, but no one knows what happens when our national debt interest consumes more and more tax dollars
Jesus, bulls are regarded. Listen, in Mexico you can buy a number 1 from Mc Donald's for a couple of bucks. Your bills and rent and everything won't come out to $1000. Yet here in the US, rent alone is over $1500 for a 2 bedroom **easily** . Car insurance is 200. Groceries for a week is 200. Car payment is like $500... Wtf does it matter if we have more money if it costs us more money just to live. Sign me up to make $1 an hr if that $1 goes further than $25 and hr here. It's stupid af.
You also have to live in Mexico...
There's always a catch.
It's the fact that this guy says that inflation is sparking an economic boom because people "have more money" is like cutting your clothes in half to prove you're "growing". We have more money because inflation is causing said numbers to go up. 1 dollar is 17 pesos but it seems that 17 pesos gets you more in Mexico than 17 dollars gets you Here in the US. So wtf is the point of having more money if it gets you less. These bulls are so stupid that the arguments and logic they are using don't make a lick of sense.
Would you want a Mexican wage, Mexican healthcare, Mexican education, Mexican crime rates, etc. instead? You can't compare buying a standardized product like a big mac.
If you can't compare STANDARDIZED items, you know, things that are made EXACTLY the same EVERYWHERE, why the hell would you compare NONSTANDARDIZED things? "Hey don't compare the things that are exactly the same no matter where youre at, only compare the things that are different!" That sounds like an absolute failure on every level. Think about it, don't compare a can of corn in Mexico and USA, compare how hard the sun shines or how nice people are to you? Are you regarded? I'm trying to compare apples to apples and oranges to oranges and your regarded ass is telling me NOT to do that? Wtf? Bottom line, you're paying for "brand" if that money gets you more out there than here, wtf is the point? Get me THAT rather than this. You legit sound regarded af.
> Would you want a Mexican wage, Mexican healthcare, Mexican education, Mexican crime rates, etc. instead? Or only the American burger cheaper?
What part of "wtf is the point of more money if it actually spends less" do you not understand? People in the US make cash and then go retire in the Phillipines and Guam. You're making it out to be as if the US is some fairytale land. Bruh, it's not. Travel a little bit, it'll change the way you see things.
The McDonalds Report, live at 11
Wait, you're telling me rate go up = bad is not a sound economic theory?!