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- This is the problem. Not that the assets or wealth or wages are up or flat or down, but that the price of required-middle-class-purchases consumes all the wealth you can generate within one or two standard deviations of the mean.
Somewhat all over the place. Some of his examples are San Francisco-specific so aren’t fully generalizable. But hot damn if he isn’t right that it takes hundreds of thousands to millions of dollars to get to $0, or at least a point when you can start to meaningfully acquire wealth by setting aside earnings for investment.
Question: doesn’t economics tell us that some competitor would, seeing all those juicy college tuition or housing profits, come in and outperform/overdeliver or otherwise lower prices for consumers? Why then are all these consumer segments getting more expensive than everything else, for nigh several decades now?
So this is a guy throwing every random statistic he can find without checking any of them and still somehow arriving at Rich Dad, Poor Dad. No, he's not wrong: capital accumulates, labor does not (that one predates Marx & Engels). And no, he's not wrong: it's been a lot harder to be in the middle for a while now and it's getting harder. From a literary standpoint I would have gone with "these are the costs I'm facing" rather than "these are some costs I've googled" because then he wouldn't have gone ballistic bemoaning the $110k/yr cost of a Stanford MBA (average salary $220k/yr 3 years out of school) or harping on the $8k cost of having a baby in hospital when it's actually over $30k (over $100k if you need a c-section). But then he gets to And it seems like it’s true, they did “print a ton of money”: But unlike the prophecies of talking cartoon bears, all this money didn’t drive inflation through the roof and crash the stock market. It doesn’t seem to have really gone…anywhere. It just hit the banks’ deposit reserves and sat there (right-hand graph above). Two trillion dollars, perhaps slowly winding its way down now, in excess of what banks are required by regulations to hold onto. From all appearances, on every metric, any way you can slice the macroeconomic data, this whole process seems to have been managed…if not perfectly, at least as well as any person could have reasonably accomplished. Champagne all round for the people who work there, and I really do mean that. No sarcasm, no cynicism. SO HERE'S THE THING. _____________________________________________________________________________________________________________ Ben Bernanke did his doctoral thesis on the Great Depression. The Great Depression was his thing. It was his hobby, it was his subject, it was his area of expertise. And when Lehman went tits up, Ben Bernanke saw the Great Depression and, because this was all the studying he'd ever done, concluded that what caused it was a liquidity trap. We've gone roundyround about liquidity traps before - very simply put, that means nobody has any money to lend, so nobody has any money to borrow, so nobody has any money. Solution: print money (but not so much that you end up with Weimar deutschemarks burning in the stove or Zimbabwean dollars for sale on eBay). There's that "2 trillion" your boy talks about. It wasn't 2, by the way, it was 12. You can google that shit. "US total quantitative easing". And we had Cash for Clunkers and we had TARP and we had refrigerator rebates and all that shit but we also had extremely low interest rates (something like half the money in the world is currently under negative interest rates, something not seen in the history of banking) which means borrowing money gets cheap. Probably not cheap for you. I mean yeah my in-laws' mortgage was 12-fucking-percent and mine is 2.5 but that's like $100k or some shit. Chump change. But I mean - Do you know what a "bond" is? It's a loan. There are a million complex ways to slice it but fundamentally it's "I would gladly pay you Tuesday for a hamburger today." And there's $12 trillion of extra liquidity floating around. And the bond market is 40 trillion dollars. That thing Bernanke and posse did? They basically made it so that if you were a member of the investment class, you got a 25% bonus on your money so you'd keep spending it. Remember - this is after the investment class blew up the world with subprime and all the rest. American households lost 16 trillion dollars - an average of $70k per house. Investors gained 12 trillion dollars and now HOLY SHIT EVERYTHING IS EXPENSIVE FOR THE MIDDLE CLASS. Let's see that quote again: There's an adage in investing that, like most adages, is unattributed: bear markets return money to its rightful owner. That's exactly the opposite of what happened in the 2008 crash. It had been getting worse for a while but Main Street took it in the ass for 2008 and they still haven't got theirs. So to your question: No. Economics tells you that competitors maximize profits. If the market rate in San Francisco is $8000 for a 1br, and I can build student apartments that cost me $1000 for a 1br, I'm going to make $6999 in profit on every bedroom I have, mutherfucker. More than that, if I charge less than that I'll be throwing money away because if everyone cares only about price they'll do anything to save a buck so if I'll end up with just as many tenants at $7999 than I would have at $1001. As far as college tuition, there's a Frontline for that. That's a broad question. List the sectors you care about and I'll do my best. Warning: I'll probably try to tie it all to the repeal of Glass-Steagall.Now, that seemed strange to me at first because I remember reading a bunch from 2008 to 2013 about Quantitative Easing and how the Fed was “going to print a ton of money.”
Champagne all round for the people who work there, and I really do mean that. No sarcasm, no cynicism.
doesn’t economics tell us that some competitor would, seeing all those juicy college tuition or housing profits, come in and outperform/overdeliver or otherwise lower prices for consumers?
Why then are all these consumer segments getting more expensive than everything else, for nigh several decades now?
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blackbootz · 124 days ago · link ·
What does that mean? Are you referring to the inflation-adjusted interest rates? I'm sort of following but make it explicit for me. The 25% bonus the rich got was from... the Fed buying their toxic assets through QE? Or through $12 trillion in liquidity saving the financial system? As for inflation-prone sectors, I've always been confused by healthcare. While healthcare seems to be an atypical good (people would theoretically pay or take on any amount of debt for good health, so the rise in prices seems natural), I don't see how the insane amount of administrative bloat and regulation naturally follows. _____________________ Also, what do you think about interest on reserves? In an economics class in Korea, I'm being taught that it's a wonderful innovation which gives policymakers another instrument through which to affect interest rates. To my mind, it seems like the banking industry just got a permanent subsidy that no one on Main Street asked for, let alone the fact that we don't know the long term effects of paying interest on reserves are. Doesn't it reduce the efficacy of open market operations? What if we keep having to raise the interest-on-reserves to incentivize banks to not lend out that money since it would create inflation? Ben Bernanke is pretty proud of himself, what with creating a new dimension of central bank influence. (something like half the money in the world is currently under negative interest rates, something not seen in the history of banking)
That thing Bernanke and posse did? They basically made it so that if you were a member of the investment class, you got a 25% bonus on your money so you'd keep spending it.
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"Negative interest rates" means banks charge you to hold onto your money. Suppose you want to borrow money to buy a car. The bank is going to charge you interest. The higher the interest rates, the more it will cost you to buy a car. Now suppose the government wants you to borrow money to buy a car. The bank will still make money charging you lower interest if money is cheaper for the bank to borrow. QE basically meant that businesses and investors had a powerful incentive to borrow money to spend on stocks, equities and capital improvements because the Fed said "we got money at lo lo lo rates!" They did not do this for you, me, or anyone who isn't publicly traded. That's because it's cartelized and because there's a middle-man extracting profits . First off, you aren't going to shop around for health care. You can shop around for insurance, but unless you're a voracious consumer of health care your knowledge of the market is imperfect. Second off, the fact that insurance companies have to maximize profits by keeping as much as they can and paying out as little as they can creates an adversarial relationship between healthcare providers and insurance providers. Example: Rhogam. We have to give it under state law. It costs us $108 a shot to buy. One of our insurance companies pays us $6 for the shot. So that's a $102 loss we're compelled by law to eat. And since we're in this for profit (also known as "a living"), we will absolutely scattershot every possible category of ICD10 code we can come up with so that (A) we can recoup our $102 Rhogam shot (B) we can pay for the rest of our overhead (C) we can take a little money home. We can't negotiate that $6. We can either take that insurance or not. You as the consumer have no ability to control whether we take your insurance and you have no ability to control what your insurance pays us. You're along for the ride. As far as reserve interest rates, sounds lovely. Most of the developed world runs deep deficits. Korea's debt to GDP is 38%; the US is like 112% right now.
I'm sort of following but make it explicit for me. The 25% bonus the rich got was from... the Fed buying their toxic assets through QE? Or through $12 trillion in liquidity saving the financial system?
As for inflation-prone sectors, I've always been confused by healthcare.
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blackbootz · 123 days ago · link ·
That's the nakedly unfair part. When the central bank greases the wheels of the economy, it helps out by purchasing financial assets, the owners of which are almost de facto rich people. My internet sarcasm is tingling. Sounds lovely? I know that government budgeting is unlike a household's, but I just don't know enough to evaluate interests-on-reserves and feel patronized when economists say Now, Now, It's A Good Thing.QE basically meant that businesses and investors had a powerful incentive to borrow money to spend on stocks, equities and capital improvements because the Fed said "we got money at lo lo lo rates!" They did not do this for you, me, or anyone who isn't publicly traded.
As far as reserve interest rates, sounds lovely. Most of the developed world runs deep deficits. Korea's debt to GDP is 38%; the US is like 112% right now.
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Here's the tricky thing about characterizing economics as "unfair" - "fairness" is not a key characteristic of capitalism. From a sociological standpoint you can absolutely advance fairness as a crucial component of society but outside of command economies, "supply & demand" depends on "winners & losers". I wasn't actually being sarcastic. I'm not at all up on Korean economics. I know two things: 1) Korea went from "that shithole you see on MASH reruns" to "that crazy metropolis you see in Psy videos" by going yo dog we herd u leik fascism for just long enough to pull themselves out of the third world at which point they pivoted hard to a market economy. So hard, in fact, that they were held up as "the next Japan" until they had labor riots and an uprising and went pop we're a democracy now. I think if you asked the average American which is older, Die Hard or "Korean Democracy" they'd probably pick the government. 2) One of my favorite "everything you know about economics is wrong" books is by a Korean economist. In fact, I would not turn down any suggestions you get as far as English-language books about Korean history, particularly modern (say 1900-on) Korean history. I would love to find an Asian version of Destiny Disrupted.
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Yeah. So bonds are loans, right? War bonds are money you loan the government so they can beat the Germans and they'll pay you back. Savings bonds are money you loan the government so they can do whatever and they'll pay you back. A municipal bond is money loaned to some city or whoever and they'll pay it back. Really, the difference is a loan is between a bank and a customer while a bond is between an organization and anybody who is qualified to buy the bond. So if I need a car loan, I go to a bank. They look at my credit history, decide how risky I am and offer me terms. I can shop for other banks, who might give me other terms. No matter what, the bank is out the money if i don't pay. They can recoup the car but they're not going to get full price. But if I need a car company I also go to a bank. They talk to their friends, grease the wheels, put together terms, arrange for me to meet with investors and basically put together a deal whereby I get a bond (big pile of money) that investors buy. No matter what, the bank makes money off the top. They lose nothing. All they're doing is skimming off the top. All the risk is with the people buying the bonds. I could be Henry Ford, I could be John DeLorean, I could be Liz Carmichael. The bank makes money, and really faces no legal consequences for "oopsie! introduced you to a scam artist! Too bad, so sad!" As you might imagine, the bank that has your savings account and offers you mortgages operates under very different principles than the bank that writes AT1 convertibles. You've got George Bailey and his savings and loan on the one hand; on the other you've literally got Goldman Sachs. One pools its customers' money and uses it to facilitate the financial transactions of its customers. The other buys bonds, sling moneys around and otherwise attempts to multiply it through fornication. So as the country was picking up the pieces of the Great Depression, one of the fingers pointed was that banks were taking everyone's money and playing the ponies with it. They weren't protecting the savings of their clients, they were buying stocks on margin - in other words, using clients' money for risks the clients didn't authorize. Which is one thing if you're an investor at an investment bank. Quite another if you're a customer at a thrift. So Congress said no more and made it so that if you protect people's money for a living, you can't use it to play the ponies. Graham Leach Blihley blew that shit the fuck and gone out of the water. More than that, the FDIC had been watching over thrifts and the SEC had been watching over investment banks. But thrifts that decided to play the ponies weren't under the purvey of the SEC and the FDIC has no mechanism to determine wither thrifts were playing the ponies in a safe and legal fashion. So while you might think that taking everyone's mortgages, rolling them up into bonds and paying the biggest yields on the ones most likely to fail is counterintuitive and stupid and fuckin' hell nobody should do that, there was no sanctioning body whose job it was to say "hey Washington Mutual stop writing mortgages you expect to fail so that you can get higher yields on the bonds you roll them up in." TL;DR: Glass Steagall separated banks that serve consumers and banks that facilitate investment and regulated them separately. Repealing it gave banks a lot of leeway with customers' money and made no provisions for regulating their behavior. Everything went as expected.
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It's not fair to blame Graham Leach Bliley on Clinton. He's a globalist but two years into his first term we had the Contract with America which meant a solid fucking year of the government shutting down every now and then for days at a time. Make no mistake - he didn't go to the mattresses protecting the integrity of America's thrifts either but the MORE BIGGER BANKS NOW movement definitely came out of Gingrich's camp. Why? Fuckin' benjamins, yo.
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So our reason for thinking that the Blue team will suddenly support putting Glass-Steagall - like protections in place is .... What exactly? Our reason for thinking that the Blue team will reign in the financier class is what exactly? I got lost somewhere along the way.
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Did you just "get" me? Did I just "get got?" Here's the thing, Ben. Most of my Hubski participation for two days was given over to patiently answering your questions. You'll note I didn't rise to the bait of your "Billy boy" goads because I respect you and consider you capable of learning. After all, you plowed through a 25-book geopolitical list (that I also generated for your benefit, remember). And where does that leave us? You standing there, jumping up and down like a toddler that needs to pee, saying "GOTCHA! SIMPSONS DID IT SIMPSONS DID IT!" Have you ever looked at yourself in the mirror while you're sitting there gloating? 'cuz here's the sad thing, Ben. First of all, we're talking about a nineteen year old bill. Second of all, I already explained at length how it was primarily the work of the Gingrich congress. Third of all, the banking act instituted to repair some of the damage is named after two Democrats. And I know that every question you asked was a rhetorical form of "let me shit all over Democrats because I hate them more than Republicans." And I know that every answer I gave was one that you were blithely ignoring because you couldn't wait to say "SIMPSONS DID IT SIMPSONS DID IT" (three whole days - you're either busy or bored). And I know that in your head you're Lucy and the only thing you live for is pulling the fuckin' football before Charlie Brown can kick it. But the fact of the matter is, I'm answering your questions and you just look like a spoiled toddler. You're better than this, and I no longer have the time. So in the future, if you'd just kindly post a picture of Tucker Carlson instead of asking any questions you'll get to make your point ("I'm a spoiled toddler") and I won't waste my time trying to tell you stuff instead of hanging out with my wife, hanging out with my kid or working on my homework. Deal?
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Not at all what I am trying to do. I'm trying to assemble a more internally consistent and less hopeless worldview. A part of that is the willingness to vote blue team and not completely hate myself for doing it. Im trying to understand how these two things can be reconciled. 1. The repeal of Glass-Steagall opened pandora's box of financial fuckery that likely will never be able to be closed. 2. A Democrat president with a Democratic majority in both house and Senate not only allowed it to happen but encouraged and supported it. And these are the people I am supposed to be giving my support to? You already know my opinion of lesser-evilism I am envious of your apparently clean political conscience. I am in pursuit of one for myself.Did you just "get" me? Did I just "get got?"
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This is the lie you tell yourself. The insulting thing is that you think the rest of us are fooled. Not once, not twice but three times you've tried to swing this back to Clinton and his evil ways despite being told not once, not twice but three times that Clinton was tangentially involved at best, that it was a (famously and assiduously) Republican majority that repealed Glass Steagall. What's really stupid is if you were even any good at your Plague On Both Your Houses schtick, you'd fuckin' look up some of those links I sent your way and go but but but it passed 90-8 that proooves they're all eeeeeeeeeevillllllll but you don't even have the conviction of your own bullshit to pay lip service to the debate. Which really just makes you an asshole besides. Senate: 55R-45D. House: 227R-207D. Again, I've said this shit three times yet you sit there sputtering in your moral dudgeon and claim no really! "I'm trying to assemble a more internally consistent and less hopeless worldview." For once and for all, fuck off with that shit. EVERY conversation with you has become "I hear you have some thoughtful discourse... FOR ME TO POOP ON" and I'm fuckin' done.I'm trying to assemble a more internally consistent and less hopeless worldview.
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You're saying that there is no positive case for voting Dem? That the only reason to vote Blue is because they aren't Red? The best part of all of this is that I decided months ago to just vote blue team basically across the board regardless because it's necessary for the elimination of small problems. It also makes me complicit when an all blue majority decides to make another big fucking bad decision like the Glass-Steagall repeal.
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Sure there are positive reasons to vote for Democrats. They don't generally want to put children in cages, prevent anyone who isn't old and white from voting, inject the bible into medicine and education, deregulate all the things even when it is obviously and stupidly self-destructive, ..., but you know all that. The Democrats are inadequate, and it is horrible that they're the best viable option. But they're the best viable option. See about helping out Mutual Aid Disaster Relief or something if you really want to try to change that. But also vote Capitalist Shill over Foaming At The Mouth Barbarian every two years too, because it's not like it's hard and more of the same really is better than outright malice.