The article that this thread is based off of is literally the opposite take from my original post. The article claims that America's 1% is responsible for the wealth inequality. That is why I posted my comment. My opinion, and the "majority" opinion according to you, is that wealth inequality is because of Fed policies, not the 1% boogey-man.
The people protesting are not protesting the Fed. No institution (i.e. media, grassroots, journalists) criticizes the Fed - it's always the 1%.
But, I guess you wouldn't understand, since you make baseless assumptions about internet strangers. How would you know my net worth - do you think there aren't billionaires that share my "mainstream" opinion?
Your fallacious logic and personal attacks against me do not diminish my argument. In fact, since you cannot attack the substance of my argument, you have already admitted defeat.
I have nothing against you personally. I'm just refuting your idea that Fed actions from the 2010s are responsible for wealth inequality that has been rising since the 1970s.
So how do you explain everything that happened on the wealth inequality front from the 1970s up to the financial crisis of 2009?
I don't agree with everything in the original article either, but many of the points it made are correct.
> how do you explain everything that happened on the wealth inequality front from the 1970s up to the financial crisis of 2009?
In one word: computers. In tsunami after tsunami from 1975 to the present, computers have revolutionized everything we do. I remember one tsunami in 1975, when slide rules in September were $125 and by December they were $5 and in January they disappeared. The calculator had arrived. In 1980 at Boeing you could hear the roar of the tsunami coming in the form of CAD. Then spreadsheets, word processing, on and on.
It's no coincidence that the biggest companies in the world are all American, and all computer companies.
The big increase in wealth was created by the computer companies, and accrued to the people working in them and those smart enough to have invested in them.
BTW, according to Google: "The top 1 percent of taxpayers paid roughly $616 billion, or 38.5 percent of all income taxes, while the bottom 90 percent paid about $479 billion, or 29.9 percent of all income taxes."
> The top 1 percent of taxpayers paid roughly $616 billion, or 38.5 percent of all income taxes
What's that as a percentage of their annual increase in wealth? By my calculation, with a wealth increase of "$2.5 trillion a year" (from the article), that income tax amount works out as a flat 25% rate.
I think the headline is misleading. Only 12 percent flatly said they couldn't pay for the expense. The 40 percent includes everyone who would take on debt and pay it off over time (i.e. not immediately in the next cc statement), or else sell something. People who choose to live right at their level of income would included, regardless how high that income is, and even when it is possible for them to make adjustments when surprises come along.
The survey also found 75 percent of people responded they were living comfortably or "doing ok".
The thing is there are were a lot of dot coms back then and no one really knew which one would have been the next Amazon. The entire push behind diversifying one's income is to ensure that people who don't have lots of $1000's to spare don't lose $1000s investing it behind few stocks.
If you know the future. Tells us a few stocks where investing $1000 today would give you a million in 2 decades.
I feel as if this opportunity is past us. Any company with the potential for that amount of growth is going to get bought out by multi-billion $ corps to further increase their already out of reach stock prices.
Robinhood has conclusively shown in the last month that ordinary Americans, even poor ones, have access to investing in stocks. This includes access to margin and sophisticated options trading.
I didn't say they should invest in GME. I said it was proved they could invest in stocks.
> new money speculating in the equities market often doesn't go well.
It goes better than lottery tickets, which target the poor and the mathematically challenged. Stocks at least have an upward bias, while lottery tickets have a strong downward bias.
BTW, wealthy people lose money in the stock market, too. Stocks do not come with guarantees for anybody.
> So how do you explain everything that happened on the wealth inequality front from the 1970s up to the financial crisis of 2009?
Of course there's never a single thing that explains a complex issue, but the root of the current Fed's monetary policy goes back to Greenspan, so the poster's argument could easily be extended to that iteration of the Fed.
Also, the 1980s is when (modern) wealth inequality really started to take off. And it's much worse today.
Fed/government actions from the 1970s are responsible for the inequality that has been rising since the 1970s...unpegging the USD from the gold standard in 1971, and the creation of the derivative market at the same time. Money used to have gravity, but now it is created magically at will -- especially in terms of derivatives. The world's money supply now doubles faster than Moore's law.
No, the oil shocks of the 1970s were short term disruptions which unsettled things, but the big durable change was the major tax burden shift under Reagan.
> The people protesting are not protesting the Fed
The Fed is not the problem. Congress is the problem. The Fed seems like the problem sometimes because Congressional nonfeasance leaves the Fed, which has a narrow role and a narrow set of controls, the only player doing anything to deal with adverse economic conditions. But Congress’ nonfeasance is the problem.
Correction: The Fed's policies have taken $50T of wealth from the Bottom 90%.
When you bail out irresponsibly over-leveraged and nearly bankrupted banks and corporations, and pay for those bailouts with tax-payer money, you steal from the poor and give to the rich.
Most importantly, when the Fed decides to print money ad nauseam, they create massive asset inflation, which steals from the poor and gives to the rich. This is because those dollars that are printed go directly into bonds, equities, and assets that only a small amount of the population owns a significant amount of. When money is "printed" the Fed actually injects money into financial markets through buying assets. This asset inflation caused by money printing gives more money to the rich to buy more assets, thus driving up the prices of financial products, real estate, and all other valued assets in society. Thus, cost of living skyrockets, but only the rich are actually increasing their net worth (which is increasing exponentially). All of this happens while minimum wage, and most wages, are stagnant.
Wealth inequality and social unrest in America is DIRECTLY related to corrupt and/or incompetent (you choose) Fed policies. It amazes me why most people do not grasp this. I think it is lack of education.
Yep. The fed is an engine, whose purpose is to move wealth silently from the masses to the powerful monied few, via time-asymmetric inflation. (Mostly Inflation of assets presently)
The resulting data looks like corporations have used their power to directly disenfranchise/disempower workers, and so the mass clamber for protective laws. More laws will be enacted by those in power. The time is certainly right for it. The laws will be constructed such that they will entrench the existing power structures, and meanwhile the fed will motor on, unaffected. Nothing changes for the good while this engine continues to run. And it will run at ever increasing rates, because it has to, in order to continue to do its work of supercharging the economy from the top down. Get on the train (Ride the coat-tails of the great and powerful as best you can by investing) or be left behind in a wake of generally stagnant wages (stagnant for lots of reasons), and mildly rising prices. Meanwhile housing prices (housing costs to you) and stocks are off on a rocket-ship to the stars.
The Fed is stabilizing the price of the USD because of the coronavirus pandemic. If it were not printing money, then there would likely be a deflationary spiral that would cause a depression.
That's one of the reasons why the Great Depression was so bad: the US was on the gold standard at the beginning. The US can't create gold out of thin air, so the USD started deflating, people stopped spending, and capital stopped flowing. Companies went bankrupt, people lost jobs — all because much needed dollars were stuffed in people's mattresses instead of being spent.
The Fed is increasing the money supply by purchasing bonds because corporations need cheaper capital to pay their workers and their bills. When the pandemic is over, it will sell back these bonds the banks it bought them from. Without the Fed's intervention, this recession and pandemic would have been far, far worse.
Of course, helping corporations also helps the people who own the corporations: the rich. That's a distributional issue, and the main solution is tax policy. We need to raise income and estate taxes on the rich, increase the tax on capital gains, and institute a wealth tax.
The Fed is like an engine. But engines are a tool. Tools can cause good things and bad things. Right now, the Fed is causing good things by providing liquidity, which has the side effect of causing bad things because it lets the rich accumulate wealth.
If the Fed is like an engine, then it serves to move a train — the economy. If the train is runaway — if the economy benefits the rich far more than normal people — that doesn't mean engines are bad. It means we need to stop the train, fix it, and start the engine again.
If we restructure our economy, the Fed will still continue to do good things, with fewer negative side effects. That would be, on net, good. So the problem isn't with the Fed, it's with the economy. And claiming that the Fed is the root of all our problems misses the bigger picture.
> The Fed is stabilizing the price of the USD because of the coronavirus pandemic. If it were not printing money, then there would likely be a deflationary spiral that would cause a depression.
And by doing that, we have the Cantillon Effect [0].
> The Cantillon Effect refers to the change in relative prices resulting from a change in money supply. The change in relative prices occurs because the change in money supply has a specific injection point and therefore a specific flow path through the economy. *The first recipient of the new supply of money is in the convenient position of being able to spend extra dollars before prices have increased. But whoever is last in line receives his share of new dollars after prices have increased*. This is why when the Treasury’s deficit is monetized, inflation is referred to as a non-legislated tax. In these cases, the government has seized purchasing power (rather than physical bills) from its citizens without congressional approval.
My own personal favorite notion of a hedge for this is wages. Boost wages to match the money supply, and most of those wages will get spent across the economy as well as providing for the wage earners. Of course, this is what many more economically-educated people than I warn against.
Employees can't control their own wage increases though..but it explains why job hopping is prevalent and understandable nowadays as the only realistic way to keep up.
Increasing minimum wage would definitely increase money spent throughout the economy, but I think business owners would offset that cost by creatively reducing/stagnating pay and benefits for middle-class type roles. And the resulting extra demand (without extra supply) would prob lead to higher prices for common goods/services (even more inflation), therefore compounding the issue we are discussing now. On top of that, a big chunk of the extra minimum-wage money spent (by the employees) will end up in the pockets of the richest as they "reinvest profits back into the business". IMO this is essentially transferring wealth from the middle-class to the upper-class via extra money paid to the lower-class.
My personal favorite way for boosting wages would be a job guarantee. Hand-wavy explanation: Having the government hire people who can't find work elsewhere puts a floor on both unemployment and on the minimum that other entities have to provide in a job. More detail in this interview [0] of Pavlina Tcherneva, author of 'The Case for a Job Guarantee' by Mark Blyth (the most entertaining political economist, IMO.)
IMO the way to decide that follows from questions like: What does the Fed buy? Second question: What do the sellers to the Fed buy (where do they spend the proceeds?), and wherever the spending chain goes from there. To my eye, stocks and real estate, at least right now.
There are differences of opinion on what is the cause and the effect [1]. There were deeper reasons for the deflation and by cutting production and preventing deflation, it made it much more difficult for small businesses and individuals to buy food or continue business. That benefited large corporations at the expense of the smaller ones. The government taxed the poor, then subsidized farmers to stop producing, which made the food more expensive which further hobbled the poor.
The Fed benefits banks and the wealthy. Inflation and increasing money supply makes labor cheaper for businesses and hurts those on fixed salary or wage by decreasing the real value of wages over time.
> When the pandemic is over, it will sell back these bonds the banks it bought them from.
This remains to be seen, the market had an absolute fit when they said QE was tapering in 2013, and also had an absolute fit when Powell was raising rates in 2018, particularly in December.
The Fed may have painted themselves into a corner here, nothing is certain with regards to unwinding QE or raising rates.
I've heard (from finance professionals) that big elephant in the room is corporate debt. Corporations need to roll over their debt when it comes due, and a fair amount of it is short-term paper. If interest rates rise, that debt will become a lot more expensive, which will make many of the more marginal companies insolvent. Not software companies, which are sitting on hoards of cash, but all of the ordinary manufacturing/retail/service/financial companies that employ millions of Americans. If they go bankrupt we'll see unemployment worse than the COVID lockdown, but moving up the income ladder into what's left of the middle class. This was why the Fed flinched in 2018.
To me (and this is a minority viewpoint - my finance industry friends disagreed), the way this plays out is both obvious and terrible. The Fed knows that if they raise interest rates, very large American institutions are going to go bankrupt and millions of Americans will be thrown out of work. The Fed's primary mandate is full employment (adjusted last year from a dual mandate of "full employment and low inflation"). Therefore, the Fed is not going to raise interest rates. We'll see this first as a massive asset bubble during the early 2020s, and then as rising inflation in the later 2020s, and then finally as hyperinflation. When it gets to the hyperinflation stage the Fed will take notice and raise rates, but it's too late by then. Hyperinflation is characterized as a sharp increase in the velocity of money, which makes traditional monetary policy tools ineffective for curbing it. You have to ditch the currency and start over with a new one.
large institutions going bankrupt doesn't mean millions of americans will be thrown out of work. that's a boogeyman used by economists to short-circuit that line of thinking because it threatens moneyed interests. the value of those businesses remains and they'll be quickly bought up and revitalized by excess capital looking for returns (part of the problem is concentrated wealth that doesn’t know what to do with itself). let that excess capital be unleashed rather than sitting sidelined. we need more bankruptcies at the unproductive top-heavy end of the economy.
So true. The Fed is essentially a dam built to stop the existing machinations of capitalism from flowing as they were intended. The longer it remains in place, the harder it will be to prevent these forces from occurring until eventually (like now) the economy no longer resembles a capitalist system.
which is highly dangerous to the general stability of society.
When economic policy results in massive finanicial instability for the common worker (thanks to hyperinflation and insane asset prices) it creates a power vacuum which can be filled by those promising to fix the problem quickly and swiftly.
Yes. But hyperinflation and insane asset prices aren't required. You simply need a highly dissatisfied and highly motivated "fringe group" to set off a chain reaction. We're flirting with that now. The next POTUS election is the one to watch. 2020 was overrated in terms of significance. The next vacuum filler(s) will have intent and focus. They've seen what's possible without out really trying. The market hasn't improved; the "competition" remains blind and/or in denial. There's still plenty of opportunity.
Yeah, interest rate risk and increased debt service costs bankrupting companies is a bigger issue than slowing or stopping QE. I hope the Fed can figure a way out of this without hyperinflation, but it’s a distinct possibility. I agree that they’ll wait to raise rates until inflation really starts cooking above 3%.
I don't like loan-forgiveness for all the reasons brobdingnagians mentioned. Also, it introduces moral hazard into the economy: companies assume further loan-forgiveness is coming, so they think nothing about taking on unsustainable levels of debt. (To a large extent, this is what's happening now: after the 2009 bailouts companies figured they were too big to fail.)
The root cause of this is that our economy has become hyper-optimized around monetary policy that's unsustainable. With markets trending toward efficiency, all major companies that exist today build in the assumption of 0% interest rates into the cost & capital structures of the business. Many activities they engage in would probably become unprofitable at higher interest rates, which means mass layoffs, restructurings, different business processes, possibly adoption of different technologies, products & services going away, etc. Change the monetary environment and you get different companies, different technologies, different supply chains. But the current monetary environment means that whenever there's a demand shock, the Fed has nowhere to drop rates, and whenever there's a supply shock, there's a potential inflationary price spiral.
The Fed, to their credit, recognizes this predicament. That's why they're targeting > 2% inflation, so there's room to raise rates. They've also said that any increase in rates will be well-telegraphed, to give companies time to adjust.
But I have doubts that this'll work. Simply because this isn't a tweak now, this is an existential change to how companies structure their operations. And any company that prepares for it before the Fed actually raises rates will be outcompeted by companies that do nothing, so no company is going to take the mere warning seriously.
It occurs to me that post-Volcker monetary & government policy has basically served to weld the economy & government together so that it's impossible for one part to fail without it all failing. We used to have recessions every 5-10 years; these would clear away uncompetitive businesses so the capital could be recycled into new ones. In trying to "smooth over" these recessions, and then outright bailing them out in 2009, and then failing to raise rates in 2013/2015/2018, we've coupled the whole economy's fortunes together, and then coupled it to the government. As a result, we can't sweep away companies that are doing the wrong thing without widespread civil unrest.
The issue with loan forgiveness is that it is a massive wealth transfer from creditors to debtors. People who made bad bets by getting deeply in debt are rewarded, while people who saved and loaned money get shafted. That unbalances the economy and misallocates resources. Which could do even more damage. There isn't really a clean way out. If businesses started preparing & managed their money better while paying off their debts, that would probably be the safest way out.
Why would you prepare and manage your money better when you can always just get another loan at a great rate? It makes no sense to save when borrowing is more profitable.
I'm starting to think that it's time to let the unproductive businesses that have blossomed over the last 12 years go bankrupt and be removed from the system. Unfortunately a lot of productive businesses that are temporarily unproductive had been using their cash for stock buybacks and using easy corp debt to run operations, and so with the pandemic, those wold get washed out too. Maybe the laws banning stock buybacks prior to Reagan weren't such a bad idea?
On the other hand how can the fed buy bonds from the "good" companies worth saving, and not from the "bad" companies that can freeride until "eventual" profitability?
I suppose you let the market decide - let the bonds float, and anything worth saving should be bought back up by the people enriched by the buybacks, right? Isn't that what efficient markets and capitalism are all about?
Save the people (using unemployment) and ditch the hollow husks of marginal companies that have rotted from within?
Dumb idea: maybe if you had a published interest rate schedule that planned out 10 years, 15 years, whatever. So everyone knew what the bond/loan base interest rates would look like for the next 15 years.
years 0 - 7: base interest rate ramps up from 3% now to 10%
years 8 - 15: base interest rate ramps down from 10% to 3%
years 16-21: repeat
years 22-28: repeat
Downside I'm sure is that people who come of age during high-interest-rate periods can't get car loans or education loans that don't eat them alive...
This seems sort of like what the Fed intends to do now, only with maybe lower rates overall - 0 for a few years, ramping to a target of 2 or 3, but I guess no real guidance after that. Unfortunately the Fed has pretty blunt tools, even after their upgrade back in March 2020. Using some of the surplus wealth from the asset holding class (top half of the K) to implement UBI, healthcare education, for the class that has most of it's wealth tied up in future wages (bottom half of the K). This would take congress though, and I'm not confident that we'll see anything recurring after the next round of stimulus.
There is risk here though - bottom up stimulus comes with it's own moral hazard issues, but then again I don't know what the net drag / benefit is compared to zombie companies getting infinite credit moral hazard we have now. I suspect UBI for individuals leads to fewer systemic risk sorts of issues, but I really don't know, it's very hard to envision what actually ends up happening due to lack of having ever experienced anything like that in my lifetime.
It would be nice if we could try it out - but there's probably a momentum term hidden in there somewhere - give an inch take a mile sort of thinking. Is UBI like corporate debt backstopping? Once you get a taste you can never go back?
I really don't see any good answers here other than "try to be on the top half of the K, and also try not to get eaten".
The 30 year rate has been dropping at 2% every decade for the last 5 decades at a steady rate[0]. If the fed attempts to taper inflation by increasing the interest rate above the 30 year, we will hit a yield curve inversion and trigger another recession, just like every previous recession in the past 50 years. So no, we can't go back to 2 or 3. And by 2030, we can't even stay at 0.
The big problem with bottom up is that you need a lot of it to continue the money supply expansion, and money created that is given to spenders as opposed to savers triggers inflation at drastically higher rates.
Yeah, that's sort of the conclusion I keep coming to. If I understand correctly, I'm assuming that when you say that bottom up triggers inflation, you're referring to price inflation / core CPI / any of the other 20 measures of inflation in physical consumable goods required for survival. Whereas top down (as we have been doing because fed and treasury can't seem to work together) tends to keep price levels for core CPI constant, but does lead to monetary expansion, or the multiplier between higher M's like M3 M4 and total assets over base money to grow, putting most of the price inflation into financial assets instead (My house is up 30% compared to bread this year from pre-pandemic prices, my 401(k) is up 80% investing in "low risk equities" compared to the same).
What are other alternatives? More of the same and hope technological multipliers for productivity continue to outpace CPI inflation so that there aren't bread lines? Charity? I suppose you can keep doing monetary stimulus without fiscal, and then increase taxes, and spend it on infrastructure that improves everyones lives?
You don't just have to watch out for CPI inflation to be outpaced by productivity. The money supply needs to also outpace productivity if you want the same status quo.
I've built up an intuition that the money supply should match changes in productivity, and that if it doesn't it will eventually lead to problems. But it's also notable that the trend is extremely important. If you do match, everything should be fine and this can last forever. If the money supply rises faster than productivity, you see what we've seen these past 50 years since we've been off the gold standard, a huge surge in asset prices. And if productivity rises faster than the money supply, people flee assets and into money. This is called a Deflationary Spiral. But the opposite state is basically an Inflationary Spiral, with people unwilling to spend their assets.
Dalio in his "Explaining the Economic Machine" video talks about a "Beautiful Deleveraging". My thought currently is that such a thing isn't possible. If you wait for the debt to get so bad that you have to do something, you can't match productivity anymore. Therefore the only thing you are left to do is grow the money supply less than productivity. And that changes everything. Suddenly the trend is to money. And once the money managers work that out, they all rush out of assets and into cash. This triggers a crash. So it's the trend that dominates, and there is no way to balance the deleveraging.
So the way I see this going is in any of these scenarios
1. Negative rates. All pretext is lost.
2. Repeat of Japan. Government ends up owning half of the stock market.
3. Mild to extreme bottom-up during a planned crash of assets. In this path you will see the stock market crash at the same time inflation soars.
Number three is the hardest but also the one that will end up with the best productivity. When you see stories like Bill Gates being the largest private farmowner[0], you might see it as an ominous warning that the rich are hedging this possibility and are making sure they end up okay.
> The Fed is stabilizing the price of the USD because of the coronavirus pandemic.
The pandemic is a case of exactly when the gov. should step in. Unfortunately the gov. is slow and takes so much time to do anything.
> That's a distributional issue, and the main solution is tax policy.
Exactly. I think a better argument could have been made by looking at the tax cuts a couple of years ago. Companies didn't go on hiring sprees or even keep any money in the bank. They did stock buy backs, paid bonuses, etc...so that when the pandemic did hit they had nothing to fall back on (see the airlines).
CEO bonuses, not always a good thing. Buybacks are not always good (because stock-compensated corporate managers sometimes abuse them to increase the stock price), but for airlines, buying stock was the right choice. You can read Matt Levine's argument, but basically:
If airlines didn't spend money on buying back stock, they could have:
1. Invested it in growth. But if they had invested it in all the normal things an airline might invest in, they would still suffering because of the pandemic.
2. Saved it for a rainy day.
You're arguing (2) should have happened. But an important thing to remember is that companies' savings are not like your savings — companies have far more reliable future cash flow, which means that they can borrow at much lower rates than you can through the equity markets.
If airlines had saved their earnings, maybe they would have grown at bond rates (investing the company's savings in the stock market is too risky and unorthodox for corporate finance officers). That's not good for investors who are looking for 1) return on capital and 2) higher exposure to travel. By returning the capital to investors, airlines increased their exposure to airline-adjacent things and their return on capital. That's a good thing for investors because it gives them more choice! If an investor wants a safer investment, they can create their own basket of bonds and airline stonks.
Similarly, now that the coronavirus has hit, investors know that airlines' fundamentals haven't changed — they're just hitting temporary turbulence. So, to raise capital, airlines can issue stocks and bonds to temporarily get them through 12-24 months. And that's exactly what they did last May: https://www.wsj.com/articles/aviation-industry-races-for-cas...
Basically: corporate finance is not like personal finance, and it's a mistake to think that companies need "rainy day funds." They don't: that's what the equity markets are for.
Not exactly, because share buybacks are optional. A shareholder can decline to participate, increasing their stake in the company (meaning the investor believes that the net present value of the shares is higher than the price offered under the buyback).
It’s not common, though (and for the purposes of the comment you responded to, the distinction isn’t relevant). If management are saying “we can’t think of anything to do with this money”, most investors won’t disagree with them.
Only if the company allows them to (or is simultaneously raising capital). Also I believe (though not 100% sure, depending on where you are) that income tax is paid on dividends, irrespective of whether you subsequently reinvest.
Basic financial planning. Unstable cash flow (for example the cyclical airline industry) requires cash reserves and ideally a cost structure that emphasizes variable costs tied to actual units (passengers) to lessen impact of up/down cycles. Bailouts short-circuit this type of healthy planning.
I appreciate your counter argument and am familiar with it. I disagree about the Great Depression and pretty much everything else you’ve said, but I mean no disrespect, only contend that there is a whole body of economic thought that agrees with me, and that mainstream Econ (recognizing the plurality of schools of thought here) has swept under the rug, because it’s inconvenient. I know “my side” is unpopular and “discredited”. I think it happens to mainly be right, simpler, and generally disabling to the status quo, which I’d characterize as built to enable active interventions. I’ve said nothing about what to Actually do to fix this all, because that is more complex, and not addressed properly, in the main, by anybody. I think one has to recognize the pain that unwinding all of this must cause, and not just “switch it all out”. Heck of a mess!
I’ll be happy to get my (Of course discredited) books out and recite the counter case about the Great Depression if anybody really wants me to later. Basically the fed and various policies caused what should have been a short sharp correction/stock-crash (at the end of a runaway fed built stock market streak) to extend into a long drawn out mess. Forgetting innumerable details I am sure. But yeah, I know you don’t agree. I do not find your case compelling.
While I have a chance, here is a good book on the Austrian case against the status quo narrative on the great depression:
This is, in the main, what I allude to on that one point (caveat, I am not a gold bug and of course Rothbard is. I think focusing on specific instances of "the way to implement an idea" allows people to laugh at the specific to forget/discredit the greater idea itself. Similar issues arise with Austrian rejection of stats and involved mathematical analysis.). I do not subscribe to those ideas, but find the bulk of the economic analysis itself compelling.
If you're talking Austrian economists, who are the primary proponent of the "fed is the bad buy, bring back the gold standard" argument, they explicitly reject any attempt at modeling or mathematical analysis. They are only interested in arguments based on "self evident" axioms.
I've read many of the books you're talking about, and there's a reason they are "unpopular" and “discredited".
There is no need to throw out the baby with the bathwater here.
Who cares about gold? Who cares about avoiding math? Not me. I guess I am no Austrian for those reasons. I do care, however, about restraining the inflationary tendencies of governments because I believe they are an engine of wealth redistribution from the poor to the rich and powerful. And sure, I suppose I do care about avoiding mathematical naval gazing, or statistical hackery. But those are side-issues.
But where's your evidence? For any economic school of thought to be a good approximation of truth, it needs to be able to make models that both describe what has happened, and predict what will happen. Any economist that can't do that is ultimately a quack.
Where are the Austrian models that describe and predict accurately?
I think local predictions are hard for any school to make accurately in economics, but broad swath stuff is doable. So, to have a decent shot at a good theory, you need to figure out what the most important drivers are in your situation of interest. In business cycle theory, I think it is the action of the interest rate over time which is the most important thing that gets short shrift in the main, and which drives the dynamics I speak about above.
I can make a regression say anything, but I predict the fed continues to operate, and the status quo of wealth flow from poor to rich continues. Now it can be modified by laws, and certainly will change with time, but the dynamics are there. You can superimpose other things on top and the results will vary. You can then make a model that focuses on one thing or another, and evaluate it statistically, and again, results will vary. This is some of how we ended up with a pluralist economics today.
I wrote up some other stuff about my anecdotal experience with modeling and searching for "good governance" in grad school, and how I disagreed with methodology of the papers I was reading, before abandoning the enterprise for a return to physical engineering, but I guess this is my chief point. Methodology designs in what you want to see. Economics is not a controlled science (I mean mostly the studies can have no actual control group), and therein festers a great rub. Good fun learning the statistical analysis methods though.
>Who cares about gold? Who cares about avoiding math? Not me. I guess I am no Austrian for those reasons.
The people who wrote those books that you said would support your argument certainly do.
>I’ll be happy to get my (Of course discredited) books out and recite the counter case about the Great Depression if anybody really wants me to later
>I do care, however, about restraining the inflationary tendencies of governments because I believe they are an engine of wealth redistribution from the poor to the rich and powerful.
Are you basing this belief on anything other than gut feelings and the work of Austrian economists who's books you've read? von Mises is an absolute crackpot, but he does a very good job of making you "feel" that his arguments are valid.
>And sure, I suppose I do care about avoiding mathematical naval gazing, or statistical hackery.
That's different than the Austrian position that mathematical analysis is impossible and harmful. Without accepting the basic premise of Austrian economics that "no measurement is possible" and everything can be derived from the first principle of "humans acting with purpose", the rest of their "proofs" are worthless. You can't just accept (and cite) their arguments while also acknowledging the fundamental flaws with the axioms they use to reach their conclusions.
I think their main point is that mathematical models, without connection to reality and logically tracing out the fundamentals of how and why people act, are dangerous in isolation. Statistics is useful, but statistics can lie. Having a conceptual framework of why people do things is valuable. Then add the mathematical models on top.
Sure, but having a conceptual framework of why people do things, with models on top [theoretical and empirical] is how mainstream economics works. Pointing out conceptual flaws in each others' models and how that leads to prediction error is how economists debate.
The Austrian School on the other hand, is centred on Mises, whose magnum opus insisted that all his conclusions were logically deduced from the premise "humans act with purpose" and therefore unfalsifiable, stated that "no measurement is possible" in the field of economic activity (!) and who later described econometrics as "childish play with figures". That's a very different position from the many other mainstream and non-mainstream economists who simply think other economists' models are insufficiently connected to reality .
The problem is that mainstream economics fails to accept that the choice of metric to perform their analyses encodes biases. Ivory tower economists don't really grok what affects the working class. (I can't say I totally do myself, but at least I drove for Lyft full time for a year and a half).
Mainstream economics says that monetary intervention is necessary to "stabilize" the economy, as measured by metric X Y or Z. Who benefits from that stability?
I would say mostly the upper echelon status quo. And what is the social cost of the stability? Mainstream economics also measures the widening wealth gap but it's incredibly infuriating that they can't fucking put two and two together and understand that the gap is the social cost of their stability measures. Especially so since there is a clear straight line mechanism for that to be the case.
> Mainstream economics also measures the widening wealth gap but it's incredibly infuriating that they can't fucking put two and two together and understand that the gap is the social cost of their stability measures.
Because it's not. It's the cost of fiscal policy decisions made overtly to aid “job creators” in the supposed hope that the wealth they drink in will trickle down as a golden shower for the rest of society.
And yet [ceteris paribus] a wage rise for a proportion of workers literally is inflation.
It is difficult to paint the alternative of artificially restricting the money supply to a level where the private sector [as a whole] must reduce some employees' nominal wages or fire them every time it offers pay rises to its most in-demand staff as more pro-labour. It doesn't sound any more pro-labour when people preferring that arrangement argue that recessions are a more appropriate mechanism to hold down wages, and acknowledge the purpose of zero inflation [and acceptance of economic downturns] is to allow wealth to be preserved for years or even generations without the need for it to be used in job creation.
Yes, it makes real wage cuts instead of catastrophic job cuts more practical when particular forms of work lose market value, which also reduces the degree to which future risk of decline needs to be built in up-front to wages.
But it's a blunt instrument. Providing tools to aid those workers adversely affected by those market shifts, whether by declining real wages or lost jobs, is the role of fiscal, not monetary policy.
It's really presumptuous to say that it's better to cheat the labor class out of its earnings than have them deal with job losses (which you don't even know would happen).
> Mainstream economics says that monetary intervention is necessary to "stabilize" the economy, as measured by metric X Y or Z. Who benefits from that stability?
The people who lose absolutely everything they've ever worked for in the event of a sustained recession. They tend not to be rich, nor comfortable with the rival Austrian solution of waiting it out because if wages drop low enough the rich might eventually deign to act by unburying their gold and investing in capital formation and job creation again.
> it's incredibly infuriating that they can't fucking put two and two together and understand that the gap is the social cost of their stability measures
It's incredibly frustrating when the school of economics most founded by a man who stormed out of a meeting of the right wing Mont Pelerin society screaming "you're all a bunch of socialists" for discussing possible solutions to income equality masquerades as egalitarian. Other economists can and do discuss causes of and solutions to inequality, including establishing the fact "the rich get richer" was a truism when gold standards were everywhere. Austrian economics doesn't even acknowledge the possibility of "social cost", rejects the possibility of making meaningful claims about some people needing a dollar more than others and wants to set a floor on how much of the future economy the 1% control by ensuring their 'sound money' is still good for that share of future economic growth even if they impede that growth by withdrawing it from circulation.
But yes, it's very good at scapegoating the Fed as the root of all evil as its oil baron funded adherents join often successful lobbying efforts against every single policy that might make working class people's lives less uncomfortable.
You don't have to be an austrian to acknowledge that some of what they say is sensible. Discarding a theory in toto because it's adherents are odious is exactly the sort of hubristic political bullshit that results in you fucking everyone over.
Sure, but you don't have to take any notice whatsoever of Austrian economics to critique the biases encoded in an economic model (indeed not being overtly hostile to the concept of economic modelling per se leads to much more parsimonious critiques of models and explicit identification of second order effects). I'm not really sure that Austrian economics has much to say that is sensible beyond illustrating basic microeconomic concepts and noting that inflation can [sometimes] be bad, business cycles are a thing and the predictive power of equilibrium models is limited, and you get all that in a mainstream undergrad textbook.
Not being an Austrian helps you conclude that their arguments that economics isn't quantitative, positivism isn't useful and reducing income inequality is actually a goal a government might wish to consider wrong though. :)
I'm not austrian (for example, I believe that the velocity theory of monetary value is partially true). You're the one that boxed me into that category. Only about 20% of what they say is any good, but those parts are definitely not being said by anyone else.
I didn't say you were an Austrian, though I must admit I'm intrigued by what you think they are saying that is useful and nobody else says (even arguments favouring gold standards are not unique to Austrians; a priori praxeology, perhaps, but I would have difficulty concluding their a priori praxeology was "any good"). At a stretch, maybe Hayek's free banking, but then others have described natural experiments with free banking but just reached somewhat different conclusions...
This is an inaccurate narrative. The more wealth inequality there is in a nation, the less that increases in the money supply effect the economy. This is why we have no inflation with trillions injected. The rich simply store the money in assets like stocks and houses and it never touches consumption.
The only thing that needed to happen to keep the economy afloat was the Congress passing their bills.
> The rich simply store the money in assets like stocks and houses and it never touches consumption.
But these do affect consumption.
1) Stonks going up means that companies have more capital (through stock issuances and equity raises). Companies use this capital to buy things and pay workers, so the dollars end up recirculating through the economy just like if a regular person spent it.
2) Buying houses is consumption. And increases in housing prices causes more building of houses. Which leads to people getting paid for building houses and creating materials which leads to money circulating.
Wealth inequality is bad, and Congress should have done more to help the American people. But the populist "rich people hoard money in stonks and houses so it doesn't recirculate" is also a complete misunderstanding.
1. When the money supply is increasing at a rate faster than stuff, the best use of capital is to hoard it. Can you show me examples of major companies issuing stock right now? Looks to me like they are all buying back their stock, which has the opposite effect.
2. Buying houses is an investment and is specifically carved out in the CPI. Consumption is Owner's Equivalent Rent, buying is not.
Housing is an investment in the CPI because most people don’t buy houses as consumption. The CPI aims to create a basket of consumption for normal people. Rich people do consume houses, and their consumption leads to money circulating.
Should rich people be rich enough to buy houses willy-nilly? That’s a different question. Maybe they shouldn’t, to the current degree.
> highest-profile recent example of borrowing for buybacks: > Apple (ticker: AAPL). The tech giant sold $14 billion in bonds this month, and said it would use at least part of the proceeds on buybacks and dividends.[0]
Kinda problematic when one large company doing buybacks dominates over thousands doing issuing reversing your entire narrative. Taking out bonds to give to shareholders is not something that helps main street.
Within ten years a film will come out about the next economic disaster and everyone will be saying "how could we be so stupid to allow firms to buy their own stock with debt?" much like the housing crisis.
why not? What's wrong with altering a company's capital structure to be more efficient?
Stocks have a cost (aka, cost of equity), just like debt. Sometimes, cost of equity is higher than cost of debt (aka, the interest rate). Sometimes, the cost of debt is higher than cost of equity. This is determined by the general market conditions and economic environment.
A company may find itself in a situation where the cost of equity is very high, and cost of debt is very low. In this case, it makes a lot of sense for the company to borrow to reduce the amount of outstanding equity on the market. There is an equalizing point, where the total cost of capital is lowest, and that is where the company's money source is most efficient.
There is absolutely nothing wrong with company buying back stocks, if this is the case. The only problem, really, is that buybacks gives capital gains for stockholders, and this is taxed lower than normal income. This is a question of taxation policy, not stock buybacks. Is it fair that capital gains are taxed less than earned income?
If the firm instead took out loans to pay out dividends would you feel differently? Now what if they did it every year at a increasing pace to the point where it's expected that firms take on debt to support ever larger dividends? That bubble pops eventually and is what I see happening with buybacks.
taking out debt to pay out dividends does not make any change to the capital structure of a company (i.e., the debt load increased, but the equity structure stayed the same). This basically means the company is losing that money paid out, and thus, the equity's price would drop by that equivelent amount, and then added a debt obligation (so an even more loss).
This, no shareholder controlled board would ever authorize taking out debt to pay dividends, unless there's some special circumstances for which this makes sense (i can't think of any atm).
The difference with buybacks using debt is that buybacks changes the capital structure. I suppose if the debt is artificially cheap (say, the gov't is forcing interest rates down to lower than what the market rate _would_ be), then it makes sense from a financial perspective, to borrow money, and pay (to the shareholders) the difference between the "real" market rate and the artificial rate. But this predicates that the real rate is much higher (transactional costs, and other overheads might easily dwarf this difference in rate).
> This, no shareholder controlled board would ever authorize taking out debt to pay dividends, unless there's some special circumstances
Energy (oil & gas) companies certainly did last year. Those stocks are a little different than the broader market, in that investors in them generally aren't looking for appreciation in share price, they want consistently high dividends. Exxon is a good example of this.
“... taking out debt to pay out dividends does not make any change to the capital structure of a company (i.e., the debt load increased, but the equity structure stayed the same)”
Sorry, but this is nonsense. Increasing debt and giving the proceeds away to shareholders definitely alters the debt ratio of a company ... basic financial accounting concept.
I am pretty sophisticated in terms of my acceptance of modern finance but I am a heels-dug-in naysayer when it comes to buybacks. I hate them and I think they are evil. But what can you do
You're right: even though $2 trillion of bonds have been issued by US companies, one $14 billion ($0.014 trillion) issue to buyback stocks completely reverses my entire narrative.
The pandemic has not hit Apple as hard as other industries, and they're taking advantage of low interest rates by issuing debt.
And there's nothing wrong with buying back stock. It's bad when managers use it to boost their personal compensation. That's not happening in Apple's case; they are just returning capital to investors because Apple is doing well and is sitting on a huge balance sheet.
One company(like Apple) negates thousands of small companies. There are many large companies like Apple. The Market Cap of the S&P 500 is up $4 trillion. All of those bonds went straight into the market.
Why not just show me the increased consumption? Show me these increased workers. Show me the raises.
CPI is up 1.5%, due directly to Congress, not the Fed. Unemployment is at 10%. The money supply is up 25%. The velocity of the M2 is down 21%. Straight into assets.
There's nothing wrong with using debt to buyback stock because the environment is corrupted. That's the problem. Fix the environment.
Apple is kind of a poor example here because they're borrowing money at extremely low interest rates and the collateral is all the money they have overseas. They took advantage of that one time 15.5 percent rate after the TCJA passed but they didn't stop earning gobs of money overseas. They're not taking on actual debt to finance buybacks, they're just creatively getting around tax laws.
Stock prices only directly impact companies when they actually sell stock. So, propping up the market has zero long term impact as the value of future cash flows is unchanged. It’s simple a handoff of money from the government to people selling stocks over a short period.
It’s popular because it keeps highly leveraged investments viable.
It has a huge long term impact. There's been hundreds of near dead companies that have had their stock prices pumped and have raised loads of money through an at the market offering or secondary offering which would've been impossible a year ago.
AMC is the most public example, where they dumped their at the market offering into retail investors. But there's hundreds of other examples.
Big caps: CCL, TSLA both with multi billion at the markets with little dilution thanks to stock price being propped.
Small caps: Literally hundreds of names, check DilutionTracker on Twitter.
The parent post is correct in that an increase in the stock price in the secondary market has a material impact on the prospects of the company, especially if it's struggling. Raising money isn't the only mechanism, employee retention is another. In this sense, Soros' positive reflexivity has some merit.
They get the same amount of money from issuing bonds independent of the interest rates they pay. Injecting money into the bond market reduces their costs, but doesn’t directly hand them more money any more than a home loan at a lower interest rate does.
In terms of stock issuances that’s surprisingly nuanced. Delta Airlines for example has 2.7% fewer outstanding shares in Dec 31 2020 vs Dec 31 2019.
> And claiming that the Fed is the root of all our problems misses the bigger picture.
I think you are missing the bigger picture here, When Fed steps in to bail out failed companies, it increases the moral hazard, there is no reason to be responsible when you know the Fed will bail you out.
How about proportionally? Stock trading apps now make it easy enough for Joe 6 pack to invest in the market at any income level. I could see a x% higher tax if you're buying 10,000 shares of Amazon, but it seems to me like putting < $1,000 in the market a month should be somewhat painless.
Capital gains is still a percentage of earnings and currently caps out at 26%. Hold your stock for a year, and it drops to 13%. Increasing cap gains could be as simple as taxing it the same as regular income.
Agreed. The problem is that the Fed only has the power to inject dollars at the top of the economy, yet sales taxes and the IRS drain dollars from a broad base of the economy.
I think an MMO designer would suggest two options:
A. Nerf the Fed, which would have the problems you note.
B. A balancing mechanic -- Some more universally-accessable way to inject income at the base of the economy.
B. I've been contemplating a mechanism based on mandatory minimum paid vacation days per year - fed provides free access to the money, corps borrow it or whatever to earn some interest -- but corps must pay employees a minimum days off per year (a large amount -- like 1-2 months per year)
The value of currency and debt has diverged too far from quality of life concerns -- days off seem a direct way to inject quality of life capital into the system and, I think, could prove an investment able to unearth very new and effective social transformation capabilities ... as well as a new shared basis from which to renegotiate and rebalance our social contracts.
5.3 Trillion in stimulus divided by 150 million people who pay income tax in the US is actually $35.3k USD. The final stimulus toll may be higher and taxes come from a variety of places so that may be high for the final burden per person, but I think it will be close by the time all is said and done.
The stimulus checks, unemployment benefits, at least 85% of PPP money, and education funding all solely benefit regular taxpayers. Large corporations got the equivalent to subsidized loans. Let's say that random pork projects benefit both groups equally. I don't see how regular taxpayers are losing out here.
This is risky, because if the fed accidentally injects too much money by buying back too many bonds, they can always un-inject it by selling the bonds back (and banks are compelled to buy). This lets the fed be more aggressive because it knows that if it goes too far and starts seeing more inflation than it intended, it can always walk back its decision. But there's no realistic way to do that after having given $1000 to every adult.
The Fed printing money isn't the engine, it's the throttle. The engine is powered by a treadmill that requires everyone to run, i.e. being consummate consumers. Throttling up requires running faster, thereby increasingly consuming more.
This is one of the worst takes I've read in awhile.
First off, there is no general consensus about the exact cause of the Great Depression and the cause of the recovery. If you're going to make an attempt at a history lesson, at least get it right. We know that the stock market crash and banking panics played a large role in the contraction of economic activity, but there is absolutely no general consensus for the exact causes. Your theory, that was portrayed as a fact, is solely an opinion that is disputed by many economists and historians. Academics are split as to the exact cause of the great depression and stopping deflation made possible by the gold standard is not an accepted fact in any economics or history debate. [1]
Secondly, the Fed providing liquidity is not "stabilizing the price of the USD", as you say. Printing money out of thin air at extreme rates (22% of all dollars were printed in 2020) is massively devaluing the USD and is borrowing against the future of the country, thus ultimately destabilizing the USD. Just like how many things that feel good in the short term are unhealthy for us, providing artificial short term liquidity that ends up destabilizing society long-term is not healthy or intelligent. As we add trillions of dollars of debt to the US balance sheet, we will soon get to a point where the vast majority of federal expenditure will be on interest payments (it is currently less than 10% but increasing exponentially). At that point, the US will either be forced to hike taxes to ridiculous levels to pay down the debt, or will essentially be bankrupted, and the country's assets will be taken over and dissolved to pay back its lenders by some supranational organization.
The only thing you said with a hint of truth was that the Fed is like an engine that serves to move a train. However, the train is off the tracks, not moving the economy forward. The fed is actively destroying the economy by devaluing the USD and destroying the future of this country. Look around you - companies have already started hedging against the dollar and moving into anything that won't surely be devalued at dangerous levels like the USD in the next decade (i.e. Bitcoin). The Fed is being disrupted, similarly to how Amazon disrupted Barnes and Noble, Netflix disrupted BlockBuster, Uber disrupted Taxis, AirBnB disrupted hotels, and so on. The Fed is NOT a not a net positive on society and people are waking up to it. Hence crypto (deflationary in nature) being the highest returning asset in the last decade, appreciating at 200% each year against the dollar, which people are flocking to. The economy will surely be destructured, but it will be away from centralization and the Fed, because it only serves to enrich the monied interests, while putting on a facade that it exists to 'lower unemployment' and 'stabilize the USD'.
I didn’t say the gold standard caused the Depression; I said it exacerbated it. This is well supported by your link and other historical sources.
The point is, without control of the money supply, a government cannot prevent deflationary spirals. Since Fed can print money temporarily, that makes recessions much milder.
You're right, in a sense, that money printing is inflationary. But when money printing happens, it's to avoid a far greater evil: severe deflation.
I disagree with your take, I think its wrong and misleading.
Perhaps the causes of the Great Depression are unknown, but there is consencus that had the Fed stepped in to prevent monetary deflation, the Depression would have been much less severe and ended much earlier.[1]
As for your second point, I would like to point out two things: first, it is indeed possible for the Fed to greatly increase the money supply without causing inflation if the velocity of money decreases, as tends to happen during a pandemic when people cannot go out and buy things in person. Secondly, the US dollar exchange rates have not deviated in a radical manner compared to other currencies, which would imply that things are relatively stable. (besides bitcoin, which I will get to later)
As for the US debt, there is no arguing that it is not a problem, however should the Fed not have acted, it is likely that a Depression would have happened, and the resulting doom loop would have made it impossible to ever pay our current debts, since without stimulus you would never leave the recession.
Now comes the elephant in the room: bitcoin. The only non hedge fund company I know of that actually bought bitcoin is Tesla, which is certainly not a figurehead for other corporations considering how its valuation is larger than the largest carmakers in the world put together despite having a small percent in the market.
Now Im going to be a bit more speculative from here on but I think its an important point.
Bitcoin only proves the supremacy of the dollar, since all people care about is how many dollars they can get from their bitcoin. And indeed, there are no signs bitcoin will actually be used for anything other than speculation, especially since I doubt anyone can tell me how much bitcoin my sandwich would cost.
You're right though about bitcoin being deflationary in nature. Imagine if everyone finally bought into bitcoins incredible returns, and billions of people put their savings into the coin, watching as their wealth grew and grew... except wait a moment, what's this the financial system is hollowed out! Theres no money to make loans with, no money to invest with, not even the most profitable of opportunities? Perhaps people should be lending out bitcoin? But wait we can make more money just sitting on it cant we? After all the less we spend the more money we have?
> but there is absolutely no general consensus for the exact causes
Yeah, in such a complicated system there are so many parties involved that trying to break down one cause seems like an impossibility. All one can do is look at effects and try to speculate backwards from there to see whose incentives may have aligned and who might benefit from the outcomes we got. Maybe nobody, since accidents happen, but in the case of the Great Depression I think it's very interesting to learn how the 1929 stock market crash stemmed the tide of people leaving the south for better-paying industrial jobs in the northeast cities: https://en.wikipedia.org/wiki/Great_Migration_(African_Ameri...
"Between 1910 and 1930, the African-American population increased by about forty percent in Northern states as a result of the migration, mostly in the major cities. The cities of Philadelphia, Detroit, Chicago, Cleveland, Baltimore, and New York City had some of the biggest increases in the early part of the twentieth century. Tens of thousands of blacks were recruited for industrial jobs, such as positions related to the expansion of the Pennsylvania Railroad."
There IS a consensus understanding to what caused the Great Depression, they only folks who disagree tend to be charlatans pushing Gold or other deflationary bubbles such as Bitcoin.
The world is not going to adopt deflationary currency away from central banks - that would be suicidal.
Perhaps, but printing money is effectively a tax. And it's not going to be the ones who are benefitting the most who are going to be paying that tax proportionally. There's no honest and justifiable reason The Feds efforts should be so top heavy.
The Fed doesn't the power to enact a wealth tax. It's powers were delegated to it by Congress. Congress does have the power to enact a wealth tax. But it chooses not to. The way to change that is by voting.
Every indicators point to precisely that. Tax rates are too low. It's extremely unpopular but we have to say it and repeat it. They are far too low for the highest earning quantiles but they are also too low for the rest of the population. They are at their lowest for the last 70 years in most western countries. We need to increase tax.
housing is in a gigantic bubble now, I have owned my house for a few months, I had to go 15% over asking just to get it(against 15 other bidders), and I checked its value recently and it jumped another 8% in the few months I have owned it. (socal location). Another house in my neighborhood sold for a similar amount as the new value so its spot on. With '08 you had housing in a bubble, this time I feel like cars, housing, medical, college, stocks etc are all way overvalued. I don't know how this will end but I think it will be alot worse than the 2008 crash.
It feels like the several times that I have been going very quickly on my bike, then crashed. It feels amazing and thrilling for a few seconds while you are soaring, then there is a moment when you realize that there is only pavement underneath you and there's no way to avoid the pain, but in the moment you are just magically floating.
The Fed only has a certain set of levers it can pull and boosting wages isn't one of them. During the 2007 recession and now the Fed chairs have begged Congress to take the necessary actions that they can't. Now that Yellen runs Treasury we'll see how things work out.
Except this wasn't the federal bailouts. Those are an entirely different beast. It's talking strictly about income stagnation.
The study shows that if wages kept up with productivity (as was the case in the immediate post-WW2 era) the bottom 90% would earn $2.5 trillion per year more.
> We document the cumulative effect of four decades of income growth below the growth of per capita gross national income and estimate that aggregate income for the population below the 90th percentile over this time period would have been $2.5 trillion (67 percent) higher in 2018 had income growth since 1975 remained as equitable as it was in the first two post-War decades. From 1975 to 2018, the difference between the aggregate taxable income for those below the 90th percentile and the equitable growth counterfactual totals $47 trillion.
Why do you think wages haven't kept up with productivity?
The decoupling of wages from productivity started around 1971-1973, which is suspiciously close to the Nixon Shock and beginning of the 1970s inflation. In periods of inflation, firms with high bargaining power (notably monopolistic corporations, corporate executives, and right now, software engineers & quants) can extract the excess money floating around. Firms in highly competitive industries (notably restaurants, family farms, and ordinary workers) get undercut every time they try to raise prices. Therefore all the gains go to the rich.
I’d say it probably has something to do with the collapse in union membership, deregulation and growth of the finance sector, and capture of the political system by those who can afford billions of dollars worth of advertising, but it’s a complicated story. Are you suggesting that wages haven’t kept up with productivity because inflation has been consistently high since the US abolished the gold standard?
Also, the massive rise in economic power of the rest of (western) world around that time.
the US was the only major world power left standing after world war 2 without colossal damage, and rebuilding (western) europe took the better part of 25 years to fully complete.
Yes, mostly. I'd say that high inflation, declining union membership, and growth of the financial system are all consequences of the U.S. dollar's status as a fiat reserve currency.
The causality for the decline in union membership runs [collapse of Bretton Woods system] -> [U.S. dollar becomes global reserve currency] -> [U.S. manufacturing becomes uncompetitive abroad] -> [American manufacturing firms go bankrupt, allowing them to renegotiate or renege on union contracts] -> [decline in union membership]. Step 3 had a lot of help, between poor corporate governance and quality control at American corporations, the rest of the world rebuilding from the ashes of WW2, the collapse of communist systems in China and the eastern bloc, and globalist policies from Washington. But probably the most significant factor is that the dollar is overvalued, which makes American exports overpriced, which makes all but our highest-productivity industries uncompetitive.
The causality for inflation-lowered wages is [U.S. dollar is global reserve currency] -> [U.S. must "print" an excess amount of dollars to satisfy foreign demand - here really referring to interest rates, since physical currency is a minority of foreign trade] -> [excess dollars flood financial markets, causing asset inflation] -> [ordinary workers lack the bargaining power to divert some of these excess dollars to themselves, falling behind in purchasing power]. Note that when ordinary workers do have this bargaining power - like when they work for Goldman Sachs, or when they're paid in Google/Apple/Facebook stock - they actually have shared in this inflated prosperity.
The causality for growth of the financial industry is [U.S. dollar is global reserve currency] -> [a significant number of foreign transactions require trade in dollar-denominated assets] -> [more jobs are needed to manage these money flows] + [manufacturing careers in the U.S. suck, per second paragraph] -> [smart, ambitious people go into finance because it's where the money is, literally].
There is no mathematically sound explanation for that.
It was plain to see Nixon's purpose was to destroy unions at the time.
And it had to be an overwhelming salvo, or there could be no guarantee it would outlast his crooked regime.
Turns out it has lasted longer than anyone would have wanted, so you get nothing but finger-pointing after a few decades, mainly by people who were not even there or into financial math at the time.
It shouldn't be surprising that regular people wages haven't kept up with productivity because they aren't what's driving it. A quant in 2020 is doing completely different work from a quant (or equivalent) in the 70s. The same can't be said for most ordinary workers.
> The study shows that if wages kept up with productivity (as was the case in the immediate post-WW2 era) the bottom 90% would earn $2.5 trillion per year more.
The productivity growth is not a constant number. The productivity of a Machine Learning engineer has increased much more than the productivity of a gas station attendant.
1. The pay line is for the bottom ~80% of workers, while the productivity line is for all workers. If you graph all workers wages vs all workers productivity, then the gap shrinks quite a bit. (Of course, maybe we should redistribute wealth from top workers to all workers, but that's another discussion.)
2. Average hourly wages doesn't take into account workers' increase in benefits.
3. The lines aren't adjusted for inflation in the same way, which makes the gap look worse.
> Average hourly wages doesn't take into account workers' increase in benefits.
There is a pretty good reason for that. Most of the increase in benefits has been in the form of increased healthcare costs, which only somewhat reflect increased value, as much of that value is unrealized due to high deductibles incentivizing people to not use medical services if they can avoid doing so (which preserves an odd form of household rainy day fund dedicated to medical catastrophes).
Meanwhile, the segment of workers that are (precariously, so with litle to no leverage even in aggregate) holding one or more part-time jobs instead of a full time job with benefits has grown as well.
> Average hourly wages doesn't take into account workers' increase in benefits.
I can't help but feel /r/badecon's rebuttal is dishonest. For many people benefits haven't increased, so the fact that it is excluded is a non-issue. E.g. The growing number of workers who are kept below full time hours to avoid being given fulltime benefits as one of many examples I could list.
Regardless, if it is accurate I'm very curious what the growing employer benefits has been.
I guess it's pretty obvious that it's just a collection of graphs from different sources which all basically indicate that something did happen (decouple) in the early to mid 70s.
"Growth in productivity and hourly compensation since 1948"
"Real GDP, Real Wages and Trade Policies in the U.S. (1947-2014)"
"Real family income between 1947 and 2016, as a percentage of 1973 level"
As for the remaining graphs, for a number of them;
>The lines aren't adjusted for inflation in the same way, which makes the gap look worse.
In spite of this discrepancy, the outlooks experienced over these decades are still even worse than they look.
Nixon was quite bent on the effort to remove the potential for building middle-class wealth any more for unionized workers. His people didn't like the way it had already occurred to a good extent before he got there. The objective was to not only stop but reverse the trend.
And unionized workers were paid much more than average plus had some excellent benefits which were so essential to an upward class move that non-union companies had to mostly have similar benefits even while lower average wages prevailed.
So it took them and all average-paid-or-lower workers down by removing cash buying power directly from their earned income & savings. Not just a notch like levying income taxes & instituting the Fed to remove gold from circulation as legal tender, then prohibit its possesion, and the subsequent currency devaluations had done much earlier in the century. Instead was the most devastating thing they could come up with at the time since income tax and central bank had already been done, and they had all the gold in the US under their control. Generations after the safety net of silver had been a lost memory after the Founding Fathers' wise reliance on both silver & gold as the standards when designing US currency to begin with had been compromised leaving only gold.
By 1976 average people had lost half their wealth and with hindsight much more than half their wealth potential, just like it seemed was going to happen back in 1971. While the truly wealthy mostly lost half their dollar-denominated wealth too, but they were still rich and their outlook has done nothing but improve in spite of the devaluation of the dollar.
Everyone else was set back decades and here we are.
Never did it seem like there was any objective other than inequality being preferred over prosperity, even for the top Wall Streeters who numerically lost more millions than any working person to the market crash [0], and inflation which had to be accepted as never-ending at the time, from that point forward until a major reckoning.
Still overdue but the wealth removal from the general population needed to continue without more inflation after a certain point or the graphs would have gotten really revealing much too early for those who had yet to cash out.
Even with income remaining stagnant, the prices for goods and services should have been continually going down due to technology and outsourcing. Price optimization is the fundamental mechanic of any market! For example, when most manufacturing was moving to China the promise was that it would benefit consumers via lower prices. However the Fed's overt policy is to erase these gains by printing money via low interest rates, and injecting it into the nonproductive financial sector. This made sure that the cost of living continued to march upwards, while all those manufacturing jobs still went away.
> Even with income remaining stagnant, the prices for goods and services should have been continually going down due to technology and outsourcing.
The price for goods did go down. Everything from food to toys to tools got much cheaper than it was before.
However, the price for cornerstone needs that govern access to opportunity - i.e. healthcare, housing, education, physical security -
and the percentage of income and average net worth that these consume went up dramatically.
Furthermore, these things became ever more correlated with each other, meaning that if you have bad access to one, you are likely to have bad access to the others, and if you have great access to one, you likely have great access to the others.
But sure, it's never been cheaper to buy random widget X at a big box store.
> The price for some cornerstone needs that govern access to opportunity - i.e. healthcare, housing, education
First, I wholeheartedly agree that this is the major stakes. I mentioned consumer goods prices because they're immediately tangible. The differences in the others are all too easy to handwave away as improvements.
> Everything from food to toys to tools got much cheaper than it was before
I don't know about toys, and they seem hard to compare. Food has gone up over the past few decades (groceries that used to cost $2 now cost $3, $3->$4, etc). From one of the first hits for historical milk price (https://www.in2013dollars.com/Milk/price-inflation): "Between 1997 and 2020: Milk experienced an average inflation rate of 1.73% per year". Note that I'm talking about sticker prices here, not any "but they actually went down with inflation", as the original argument was referencing stationary wages.
Tools are being made much more flimsy and disposable - eg real high speed steel has been replaced by inferior foreign steel with gimmicky coatings to "prolong" its poor wear characteristics. If you look at good quality tool brands today, the prices are higher than what tools cost several decades ago. This goes for appliances as well - take a look at "commercial" offerings that are built to be maintained.
You mention healthcare, housing, education needing governing and those have been "governed" to outrageous prices. Our governing parties have destroyed wealth for the bottom 80% unless those of us with kush tech jobs or anyone who bought a house between 2010 and 2016.
Maybe the reason the price of those cornerstone services is that people had more money left over, thus were willing to pay more? This effect seems to be happening with housing and education.
The price for goods is dramatically down. You can buy a 70" flat panel display for $500 today.
And there's a lot of pseudo-productivity here that is mostly just rising healthcare spending (without commensurate changes in outcomes) and land value. This sort of makes sense since these sectors have massive capture problems.
Because the people who figured that out also figured out the divide-and-conquer strategy. So first you quietly take X% out of everyone's pocket, and then you do massive PR campaign splitting them into identity groups and forcing them to fight over who should be more entitled to a 0.1X% bonus in the name of equity and justice. And you turn a blind eye, and even somewhat encourage people burning each other's businesses and getting each other fired over made-up differences.
And it works, it just works. All the recent equity activism is about raiding the upper middle class and giving to those who openly oppose economic independence and self-reliance. Completely ignoring the fact that it's the corporations and the people controlling them, who are actually behind the economic degradation of the rank-and-file stratum. And calling it out publicly can now cost you your job [0].
So, endless equity fights for the bottom 99% and an unprecedented increase of power for the top 1%. Congratulations, people.
> When you bail out irresponsibly over-leveraged and nearly bankrupted banks and corporations, and pay for those bailouts with tax-payer money, you steal from the poor and give to the rich.
Or, you know, the Fed is not authorized to deal directly with individuals via the Federal Reserve Act. The Fed's job is monetary and financial stability through credit markets. That's the tools that it has, and it uses them when needed.
If you want to help individuals through taxes/redistribution, social programs, etc, then that's government spending which is controlled by Congress.
It's not the Fed's fault that politicians in the House of Representatives and/or Senate do not wish to pass legislation that authorizes these types of things.
> Or, you know, the Fed is not authorized to deal directly with individuals via the Federal Reserve Act. The Fed's job is monetary and financial stability through credit markets. That's the tools that it has, and it uses them when needed.
Is this really true anymore? At least the past year, the Fed has taken an unprecedented powers to counter the effects of the pandemic. We've all heard of quantitative easing but there's a handful of programs such as SMCCF that allows the Fed to buy debt directly from large corporations.
Corporations aren't people but they're owned by shareholders and controlled largely by the 1%. The amount of money the Fed has directly or indirectly injected into global economy is absurd and surely, if there's a reckoning, the blunt will be taken on by the bottom 90%.
> We've all heard of quantitative easing but there's a handful of programs such as SMCCF that allows the Fed to buy debt directly from large corporations.
I agree that this was questionable. The problem is that elected politicians are becoming increasingly dependent on the Fed to solve mistakes that they caused themselves. It's like a morbidly obese patient giving a surgeon to permission to do more and more invasive surgery. The surgery itself will only ensure that their body will stabilize, but it's up to the patient to actually get healthier.
A lot of magic is happening in your second paragraph.
Inflation reduces debt and wealth at the same time. Wages at the low end rise with the cost of living. Debt and wealth are denominated nominally. The cost of a new car may go up, but the cost of the car you're currently driving (and haven't paid off) is going down.
Printing money doesn't steal from the poor. Printing money and giving it to the rich steals from the poor. Speculation on assets comes with low inflation, not high inflation, because with low inflation comes low interest rates. The only reason this is bad is because when this speculation crashes the economy, the rich will be saved by direct payments from the government.
Nominal asset appreciation due to a rise in the money supply isn't a rise in value, and the poor aren't competing with the rich for assets. It seems like that in housing because it is an extraordinarily safe asset to drive up in value (when interest rates are low) based of the history of the US government bailing out losses in real estate.
Wealth inequality in America is due to direct payments to the wealthy, and the government consistently stepping in as the silent guarantor of last resort behind every asset bubble. If the government were instead the asset buyer of last resort (not at par like after the mortgage crisis, but at market value), crashes of asset bubbles would be a boon for the public, not a boon for the people who participated most in the bubble.
edit: The problem with the Fed is that it focuses on a goal of holding down inflation while not considering employment in enough detail. The quality of jobs, whether jobs are in bubble (or fragile) industries, rate of rise in wages, and the quit rate are ignored in favor of a simple percentage of unemployed, and administrations even narrow that down to the proportion of people currently collecting unemployment instead of the prime-age (25-54) employment rate as would make sense.
> Printing money and giving it to the rich steals from the poor.
Exactly. The participants in our tumor-like financial sector collect a risk premium, without actual risk. They have responded accordingly. It's Moral Hazard 101.
> consistently stepping in as the silent guarantor of last resort
Right again. GP's claims about buying are nonsense, and they're clearly projecting about lack of education. Not counting the exceptional last year, the big issue has not been buying but paying off loans (either their own or bailout beneficiaries') with made-up money. Giving made-up money to regular people is comparatively a lot better, either in itself or as a way to avoid worse kinds of collapses, but still not something to make a habit of.
Yeah I agree with this more, but let's ignore the US for a moment and observe that inflation has been steady and low for decades now in most wealthy countries. And then we observe the same is true in the US.
So whatever the causes of the (I certainly agree) massive transfer of relative wealth to the 1%, I don't see much evidence that it's US government financial institutions that are to blame. As for fixing the problem, in the simplest, most effective way: highly progressive real income and wealth taxation and whatever Picketty thinks the fraction the inheritance tax should be.
The US Government effectively made all currencies fiat by ending gold convertibility of the Bretton Woods agreement. Severing the last remaining link to gold allowed all governments to pursue the same inflationary policy for political gain.
So, all governments are doing the same wealth transfer because they are run by humans with similar incentives and the US Government destroyed the leash.
The fix isn't to add more bandages over the wound. It is to repair the wound by putting government spending back on a leash.
Great points! I disagree with you on this: Wages at the low end rise with the cost of living.
I think this is really an elasticity issue and that we have far too much low skill labor available in the USA (in part because we can import it easily). This means that low end wages have no reason to rise.
> It amazes me why most people do not grasp this. I think it is lack of education.
We should be careful about wording here. The lack of education is a direct consequence of the top "1%" politics and very well thought decisions. They have everything to gain from us plebeians not thinking about these issues.
> (you choose)
It's much more complex than that, especially in America. If you can choose between A and B but the right answer is C you have everything but a choice. Even worse than that, if the entire culture and education of your country is built on making you think only A and B exists, C being the right answer will never even materialise.
We're past the time of blaming "the people", when the entire system is corrupt to the bone we should stop blaming eachother and look up, when all the parties converge to the same point you know you're being played
Pedantic - but QE does not "print money" - which is why we didn't see significant inflation (as measured by CPI) for most of the QE timeline.
If the Federal Government isn't putting out massive amounts of debt (like it is now) then The Federal Reserve buys bonds from banks & pension funds to lower yields.
This is what happened in QE2 & 3 and why we didn't see inflation then (as measured by CPI).
This time, though, the Federal Reserve is almost literally printing money. The Federal Government's massive debt is mostly because it's giving helicopter money to the bottom 50%. This is only possible because the Federal Reserve is "buying" that debt from the Federal Government. The money is coming from nowhere and being handed directly to people. This IS printing money. But it wasn't the case in the past.
That being said - it's hard to argue this is a massive handout for the .1% at the expense or the bottom 90%. The bottom 50% are getting free money! In percentage terms - they're doing the best.
If we must treat this as a zero sum game and go with the pie analogy - then the people with incomes too high to get free money and no assets to get inflated are the ones who got less pie.
It's not a zero sum game, though! We all MASSIVELY benefited by not going through a 2nd great depression.
It's interesting to me, though, that the vast majority of Americans think the way it's working out is fair - that people with high incomes who could keep their jobs should be the ones footing the bill - not people with massive amounts of wealth (especially massive since it was pumped up by The Federal Reserve).
It takes $500 to build a well-diversified portfolio with a roboadvisor, and that portfolio will behave comparably to a larger one (it'll be a bit worse, but also taxed at a lower rate). So, if everyone invested their savings rationally, then when the Fed propped up stock prices, it wouldn't change the distribution of savings across the population.
The real issue is that a larger percentage of the poor's assets are in items that depreciate.
In the '08 crash, a the percentage of people in the US that owned a home dropped from 69% to 63.5%, and is only starting to recover:
The Fed has been keeping mortgage rates low, and that has certainly helped home ownership rebound. So, it's more nuanced than "the fed steals poor people's money".
(Don't get me wrong; the system is rigged to transfer wealth to the rich. I'm just saying there is more than one mechanism at play.)
Except high income earners can choose to invest a much higher percentage of their income.
I can invest 80% or more of my take home pay if I choose to live frugally. Somebody close to minimum wage can probably get somewhere closer to 10%, which would come at greater personal sacrifice.
Agreed that more people should participate in investing and there's an educational/behavioral component, but recent government interventions have been excessive and basically amount to inflation of asset prices.
Dropping interest rates helps people purchase a home "today", but home prices quickly appreciate such that the carrying cost of the home is exactly the same as before, just priced higher and weighted more towards principal payments.
This entire narrative falls apart when you consider credit and why rents exist.
There are people living in London that have been paying rent on the dot for 20 years and still can't get a mortgage because they are not deemed credit worthy. Each month they pay £1,500, they landlord pockets £200 and uses the rest to pay the bank. 30 years later, landlords owns a home worth £300,000 + £72,000 of recurring income, and the family owns nothing. Being self employed or on zero hour contract can do that to you.
But even if you are an upper-middle class homeowner, you still loose against someone who own real assets. They can borrow ridiculous sums against existing assets at near-zero interest rates and invest with leverage, making millions of capital gains while you squirrel away whatever pennies you can spare into your pension and mortgage.
Most Americans don't have disposable income to invest in the stock market.... there is no amount of investing that will turn their "barely making ends meet" wages into a living wage.
The median US household has ~$1000/month in investable cash left over after all ordinary expenses. Per the Bureau of Labor and Statistics (BLS) which tracks in detail how much people actually spend on myriad things in each income decile.
Americans are notoriously poor at actually saving or investing that money compared to their counterparts in other developed countries, but $12,000/year is quite a lot to invest in the stock market. If you saved even half of that you'd have a comfortable retirement.
"You'd have a comfortable retirement" implies stock returns are knowable, which they are not. And the people assuming forward returns will be like past returns seem to be the least knowledgeable on evaluating assets.
12,000 a year is a lot less per year if you are saving for your child's college education.
Who do you think appoints the people who run fed Fed?
If you're looking to cast blame on bad policies, then blame those ultimately responsible: the politicians and the voters who put them there.
Ideally, the United States would have a mechanism that would allow voters to choose politicians with the best policies. What we have instead is a system where voters have to chose between the least worst of two possible options. Both parties are beholden to the top 1%, but the are not equally so.
What I find amazing is the lengths people will go to to blame government bureaucrats while reelecting the people who appointed them in the first place.
> What we have instead is a system where voters have to chose between the least worst of two possible options.
Its worse than that. We have a system where people vote for their team color regardless of changes to the team's positions.
2020 seemed to be a year that more people realized that the party they had been faithful to no longer represented them. The number of "why I'm leaving (republican|democrat) party" posts and videos last year was something I had never seen before. I'm hoping this is a trend that continues. Red or Blue, they don't work for you.
At this point it's really future generations who are being stolen from.
I'm older, own a house, and paid for multiple degrees years ago. Inflation is good for me personally, but destroys young people. Salaries just can't keep up with how fast housing and education (and healthcare) costs have risen.
> I do not think the fed is solely to blame though.
This doesn't get repeated often enough.
People like to blame the fed for everything, but much of the inflation in categories like tuition has been driven by misguided efforts to increase college loans to young people and encourage everyone to attend the most prestigious college they can get into. Colleges have been more than happy to soak up the increased demand with ever-rising tuition costs.
The fastest way to reduce college tuition would be to put an upper limit on federal subsidies and bankruptcy protection for college loans. College tuition would magically drop to match that amount, almost overnight.
Likewise, we need to stop going to such lengths to incentivize everyone to own a home. It started with good intentions, but it turned into an unsustainable arms race. Slow down the federal backing of home loans and let the market sort it out. Renting isn't nearly as bad of a financial choice as many young people think.
To add a bit more to this, from [1]:
“economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.”
And "The bigger spender wins congressional races 91 percent of the time" [2].
Talking about policies without even mentioning who makes them, kind of misses the point. Big money controls everything. It's no wonder that people come out to defend them, when they control much of mass media and shape the narratives to such an extent.
Well, considering how the comment literally says "Wealth inequality and social unrest in America is DIRECTLY related to corrupt and/or incompetent (you choose) Fed policies," you'll forgive me for disagreeing.
You are arguing a minor, irrelevant, and largely incorrect point of semantics.
> Who owns the Federal Reserve?
> The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress.
All they do is regulate the flow of new money, they aren't responsible for tax codes that ensure a widening gap of wealth via the return on capital vs the return on labor.
They affect the inflation rate and inflation should be thought of as a tax. And its a tax that primarily affects middle class people that keep their wealth in cash rather than assets.
They also implicitly affect asset prices which is probably one of the primary causes of wealth inequality.
The Romans literally debased their currency into lead as they hit hyper inflation-- then instituted price controls which led to a booming black market. The particular tricks have changed a little over time, it is just more efficient with digital money now. Ruling classes had the basics figured out millenia ago. And it never works.
The comment implies no such thing. It says that post Alan Greenspan, who started printing money in an unprecedented manner, the Fed saw that it could get away with it and continued the bubble.
Ironically Greenspan also spoke about irrational enthusiasm. Words are cheap.
This narrative is completely contrary to what any economics course or textbook teaches.
It is a popular Internet narrative, but it is also completely false. The Fed’s policies have directly helped the US at being one of the least impacted countries from the Great Recession.
> The Fed's policies have taken $50T of wealth from the Bottom 90%.
When you bail out irresponsibly over-leveraged and nearly bankrupted banks and corporations, and pay for those bailouts with tax-payer money, you steal from the poor and give to the rich.
But...the Fed doesn't do that.
Taxpayer funded [0] bailouts come from Congress’ executed by the Treasury, not the Fed.
Fed operations don't come out of tax funds except in the sense that anyone holding government securities is spending taxpayer money when they spend the proceeds.
[0] to the extent fiscal spending is accurately describes that way, which is less than one might think.
I think he means that the Fed can directly and indirectly increase the money supply, which disproportionately benefits people and corporations leveraged into assets. Hence, increasing the money supply makes the rich even richer.
I agree that the FED is a major contributor, but the SEC and FTC have failed us in the 21st century. Also, given the way PACs and lobbying work, people don't truly grasp that we live in an ever increasing plutocracy. The greatest trick the elite have pulled is to convince the common man that the enemy is your neighbor who isn't red/blue like you. They rob us blind while we stream Netflix and chill. However, our life is still way too good to care. Only people with nothing to lose rise up.
You're trying to convict a gun for the murder, instead of the person who pulled the trigger. The Fed is just a tool in the hands of the <1% who control the economy. If it was against their interests, the Fed would not even exist in the first place. The Fed policies are directed at stealing from the poor/middle class and syphoning the profits to the very upper echelons of capital owners.
In David Graeber's book on money, one detail that I always remember when I read a comment like this is how coinage was created so many times throughout history as a way to support an Army.
King makes money -> gives it to the army -> collects money as a tax from all citizens.
It creates a system where all the people in the kingdom have to contribute to the army in some way.
Now The Fed creates money -> gives it to bankers -> gov't collects taxes in that coin.
So we've created a system where your ability to buy things is a derivative of how much you support banking. It's no wonder why everyone is overleveraged and fragile and needs bailouts all the time.
The Federal Reserve is just one tool used to achieve this. One of the most important ones sure, but to put too much emphasis on it is missing the forest for the trees.
>It amazes me why most people do not grasp this. I think it is lack of education.
I dont think that is the case at all. The concept is simple and easy enough to understand. Most people just dont care and want a single target to blame. And someone decide that target will not be government or Feds.
Not to mention the low interest rates that caused the housing prices to sky-rocket.
Also not to mention this new trend where younger generations prefer to spend their paychecks on vacations, smartphones, fashion as opposed to long-terms investments like a home.
A home isn’t an investment, at best it’s a low interest savings account. That people consider it to be one is part of the reason house prices continue to outpace inflation.
Buy a home to live in it, but don’t expect that you’ll make money from it.
I wouldn't say that the Fed is corrupt or incompetent by intention, rather it is part of a set of policies giving lenience to the financial system written by a generation that doesn't understand the need for strong regulation. Such generations come and go, usually in 50-year cycles as the older policymakers with memories of financial crises like the Great Depression die off.
This lack of regulation is part of the inequality issue. Other factors include a potentially flooded labor market driving down wages, allowing people in control of economic resources to reap more work for the same price. However, some skilled people in labor also use this as an opportunity to move up the ladder. It's complex, ever-changing system with multiple variables and outputs. Read more here:
> Wealth inequality and social unrest in America is DIRECTLY related to corrupt and/or incompetent (you choose) Fed policies. It amazes me why most people do not grasp this. I think it is lack of education.
Who do you think is behind this. Jerome ain't going to lunch with you or me.
The bailouts are tragic as it undermines the natural garbage collection in democracy - bankruptcy. Bankruptcy is an incredible positive because it allows for the safe and sane dismantling of bad organizations.
The question is - how do we apply a mechanism like bankruptcy to government organizations?
>> The question is - how do we apply a mechanism like bankruptcy to government organizations?
Not sure if this is an answer for every government org, but hundreds of municipalities and possibly even states are going to go bankrupt due to obscene pension liabilities. The very difficult "solution" is to let them to bankrupt, and allow them to re-negotiate liabilities.
Unfortunately many municipalities have promised the world to retirees, often with inflation adjustments and often starting at 20yrs of service (that is, age 41 until death). Add in tricks like matching final year salary (which is often packed with overtime) and you have unbearable pension obligations. It isnt the worker's fault. But the local leaders and pension managers are at fault, and citizens are on the hook. Unfortunately the decisions were made by leaders 10 or 20yrs ago, so it may not even be the current leadership.
If the municipalities are bailed out, then it gives a signal to every other municipality to overpay massively because either the state or uncle sam or PBGC will come in and bail everyone out. It is going to be a mess.
What seems that way to you has turned out to not even be as much prosperity as it should have been for those having the most effective inflation-calibrated plans.
There was no other way to even come close to what employers had intended for their people when they granted these benefits in lieu of full market pay. That's how destructive inflation was.
And of course for the vast majority of retirees it has always fallen far short of what could have been since inflation has been calibrated over the years to continually bring the buying power of gains downward the more that accrue regardless.
Exactly. Bankruptcy and insolvency is an immune response to financial illness in markets. However, instead of removing cancerous growths, we bail them out and thus they metastasize and become much larger and more lethal. This inevitably leads to the death of the host.
The host is already beyond recovery for the US dollar to ever again function as designed.
Thos. Jefferson's quote continues:
> I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people to whom it properly belongs.”
Remember the purpose of the US Mint was to convert the silver & gold of any citizen into legal tender for a reasonable fee and return it to them as coins. Printing of bank notes was not on the agenda until politicians having a more predatory agenda got their way.
I don't wish it on you, but imagine that the fed stops propping up the financial markets though QE.
"Irresponsibly over-leveraged and nearly bankrupted banks and corporations", allowed to crash and burn.
If this happens, everybody will be worse off - rich & poor alike, but the poor will pay the brunt of the cost. Except this time it won't be just "taxpayer money" that is on the line.
Consider it is possible for the fed's policy to be unfair AND the right thing to do at the same time.
There is no doubt that financial collapse leads to economic collapse. I find it difficult to claim both to be in favour of the common people, and to argue for a course of action that would set the whole world aflame.
Especially when coupled with the excessive fiscal stimulus.
We should absolutely help those most impacted by the pandemic, but the amount of money being injected amounts to gross negligence.
Why were people who made 6 figures and still employed being given checks, for example? The stock market is on fire, and many businesses are smashing earnings expectations, yet we inject another $2 trillion?
I've got a sizable portfolio, but the government response frankly saddens me. The green we see every day just represents inflation (of assets). Big gains in stonks, but now we have to pay 2 million dollars for a house in a nice part of town.
Really unfortunate for those without significant assets that ever hoped to own a home.
> Why were people who made 6 figures and still employed being given checks, for example?
Because it's easier to do this than to gauge need, and with the paltry amounts handed out it doesn't add up to much compared to the big picture. The real question is why this has become a political talking point, and the answer is to distract from that much larger rapidly-implemented scam of bailing out the bond market that you rightly point out is "Really unfortunate for those without significant assets that ever hoped to own a home". Hiding the large scale theft is much easier when you can distract people into bickering about their financial neighbors.
100% agreed that fed action via bond buying has been excessive as well. In a healthy economic system, there need to be "down" cycles where overleveraged or poorly run businesses fail.
If the government will backstop all investments, then why not leverage up as much as possible and take on excessive risk? Those that have been financially prudent have been punished consistently. I wonder how much of the fiscal/monetary response is really driven by personal bias towards protecting their own portfolios.
Helicopter money is certainly good optics in the short-term, but terrible governance on a longer timescale.
Because it’s impossible to tell who lost their job this year even though they made six figures in 2019. If we don’t like accidentally giving people who don’t need it money, claw it back at tax time.
edit: the stock market is on fire while small businesses collapse. The market isn’t attached to reality.
Exactly, send the money out today, claw it back from those who earned too much in 2020.
Small businesses collapse, but government efforts haven't been towards helping them, largely more towards sending out helicopter money to the people.
Handing money to people will help all businesses of course, but I'd venture to guess it helped large corporations and brokerages the most.
The loan forgiveness program for small businesses was a good step, but it seemed that a lot of smaller businesses chose not to make use of it.
I'd guess that in the long run, the traditional small business (retail) will become non-viable anyway though. There are too many economies of scale to be gained by operating under the umbrella of a larger corporation. e.g. Amazon can only justify its massive distribution network and same day delivery due to its size.
The small business assistance was a pittance compared to what was sent to big business. It was mostly administered by large banks that have "economies of scale" yet were unable to get the money out to small companies. There were also lots of hoops and requirements for the PPP loans, while large corporations got free money without strings.
Much better than that actually, those massive investments of money in the stock market is benefitting people outside the US as well. A lot of foreign interests are heavily invested in the US market because it shows stronger growth than domestic stocks.
I am Canadian with a strong exposure to the US market and all these injection of moneys to keep the market high made for nice returns in 2020.
I've begun to wonder whether short-term economic depression in '08 and maybe '20 would have been preferable to the slow march to endemic corruption and aristocracy that the US is on. If the trend continues one would eventually expect long-term disruption to the US's ability to maintain cohesion.
Do you think the Fed should have not done this and allowed inflation to run below their 2% target (perhaps negative)? Or do you have an alternative suggestion for how to keep inflation steady without printing money?
The fed should use a more comprehensive bundle of goods to measure inflation. Home prices, is a good example.
Once they do that, inflation numbers will read much higher. By some accounts, home prices have increased by over 10% since this time last year.
A healthy society needs room for social/fiscal mobility, which becomes increasingly difficult when asset prices are inflated relative to median income.
The challenge is that the fed isn't the only factor that determines inflation. It also varies based on supply and demand factors, among other things.
Housing prices, college tuition, and medical care dominate inflation measures. All three of those categories have significant government influence well beyond the fed. If we stopped using federal funds to subsidize college and home loans, tuition prices and housing costs would magically stabilize in no time.
Trying to tame tuition or housing inflation from the fed won't work if the other parts of the government are going to great lengths to subsidize those areas.
The reason for the bailouts was to avoid mass unemployment and mass foreclosures. These would have happened had major automakers or major banks went bankrupt.
I think it is due to effective marketing techniques employed by big money interests who benefit from mass acceptance of libertarian narratives, and those like the social media who benefit from volatility / uncertainty in the information network.
>big money interests who benefit from mass acceptance of libertarian narratives
I would say it's every interest who benefits from mass acceptance of completely stupid & misguided narratives from almost all Democrats & Republicans.
Libertarians, especially non-Party members, are the least of my worries.
Besides the fact that what now passes for leadership ability can not even rise high enough to polish the shoes of Dwight Eisenhower or JFK and they weren't good enough either compared to the Founding Fathers.
Corporations worldwide have modeled themselves on this American trend of precipitiously declining competence at or near the top, plenty of money can always be made by Bozos after true leaders have built the money-making machines.
By the time Reagan & Clinton came along it was far too late.
Clinton knew it so well that's why one of his earliest (naturally unfulfilled) campaign promises in 1991 was to give every citizen $5000 if they wanted to start their own business. At the time nothing else could be seen that would allow wage-earners to escape to the prosperity their forefathers had worked for and truly earned up to that point in the 20th century.
Correction: The 1% have manipulated the government to have obviously unfair political policies. They control advertising, media, and the government. I do blaim the rich, and it's from first principles. The only thing that ever puts a dent in it is grass roots efforts like BLM, unions, etc. We tried the gold standard, it is also a failure.
BLM was far from grassroots, Mueller investigation revealed us how it was propped up by Russian trolls. Heck they ran their biggest social media pages.
From what I’ve seen over various parts of the Internet, BLM’s pretty complicated. I’ve come to the conclusion that it’s a combination of actual people fed up with their neighborhood’s policing and wrecking shit up, along with some progressives who wanted the protest to be peaceful and instead hoped for policy-wide changes (through electorialism) from this, along with neoliberal shills (corporations and mainstream politicians) who wanted to co-opt it as a peaceful liberal protest and gain social prestige/status/clout without doing anything substantial. And maybe some Russians thought this was quite hilarious and tried to make the tensions a bit higher (by the way, can you provide a reliable link/source for the BLM Russian involvement thing, since it seems a bit dubious and the liberal establishment has developed a bad habit of blaming everything at Russia?)
Yeah, Ctrl+F shows that there were some investigations of IRA creating activist accounts among the left/rights spectrum, although the details are still censored. But my point is, the Russians are just the cherry on top of the cake for this event, and aren't nearly as substantial as the internal politics going on in the US.
If you believe that Russian interference had a material effect on the amount of support for BLM[0], then presumably you would agree that Russian interference was also enough to change the 2016 election results by 80,000 votes.[1]
> Most importantly, when the Fed decides to print money ad nauseam, they create massive asset inflation, which steals from the poor and gives to the rich
Presumably debtors benefit from inflation since they can pay off their debts with inflated dollars.
Presumably people with cash savings are harmed by inflation since cash loses value.
Blaming the fed is a common libertarian tactic to avoid blaming the capitalists. Oh yes, in a pure anarchocapitalist Austrian utopia, you'd never have capitalists paying workers shit wages, employing child labor, forcing workers into unsafe firetrap buildings, etc
It's a way of averting ye eyes from the real problems with the negative externalities and market failures, and the hard work to come up with policy solutions that patch the holes in capitalism.
The analysis of the OP also ignores the decreasing returns to labor investment and increasing returns to capex because of automation which almost guarantee that the bulk of ROI will accrue to capitalists in the future.
Hire some (temporary) middle class workers to build your robot factory or automated logistics warehouse, fire most of the workers in your old factories/warehouses, and watch as more net income is transferred.
As opposed to having the government do what? Have a great COVID response? Have a coherent industrial policy? Have great fiscal management? Have financial integrity? Grant monopolies to service provides (ahem Comcast) instead of building proper infrastructure? Not building sufficient electrical infrastructure? Enticing poor young people to make terrible money decisions relative to school and then saddling them with non-dischargable loans? Spending money to fight endless wars? In the middle of a pandemic pass a bill that sends millions overseas while Americans can't pay their medical, food or housing bills?
I will take the capitalist over these government clowns any day of the week.
Moderna created a vaccine in less than a day. Even with a year to think about it, my state and county still can't decide where the mass vaccination site should be located.
Our government has coasted for too long and is incompetent. When the world decides to quit paying the dollar tax imposed via Fed printing, it will be a rude awaking for all Americans.
Moderna benefited immensely from decades of publicly funded research as does most of Pharma, as well as direct aid from Emory University, NIAID, etc
Look, if you believe the market works as the best mechanism for allocating goods and services, then you've also got to believe it won't work properly if prices are distorted, otherwise Garbage In, Garbage Out.
If a firm is able to pass off costs onto others, it is a hidden subsidy, a form of market distortion. For example, if I just throw all of my trash and waste into the local lake and hope no one notices, I don't pay the costs for my waste, ergo, my prices and my profits do not reflect the true marginal cost.
"But but but...tort! You can sue if injured by dumping!" Get real, this is a libertarian fantasy and not at all how diffuse stochastic waste works. The same people who tell me that what makes a poison, poison, is the dosage, not the molecule. Well, if you dump an insignificant fraction of pollutant, by itself, it is not harmful, but if 1000 firms dump the same amount, then it can be harmful. Who do you sue?
Property rights only work if you can draw a border around something. There are no property rights to the atmosphere or oceans and hence civil lawsuits can't really be a solution to tracking down and punishing individual violators after they've done the damage, the government must force firms to PRICE IN the costs of pollution, either via an upfront regulation, or an upfront tax.
The same is true for negative social externalities. If a firm, or a new technology, is having a large scale negative effect on society, making people less unhappy, more depressed, more prone to crime or violence, more impoverished, it becomes a cost that is passed off on everyone else.
Who pays the costs? We all do. We pay it at the hospital. We pay for it to the tune of $44,000/yr to house prison inmates. We pay for it in more police and criminal justice, more fear, more suicides.
If your company movies into a small town, puts all of the local shops out of business, and then refuses to raise wages or benefits, what ends up happening is, the other citizens end up paying for the healthcare, retirement, or other benefits that the Walmart, et al, aren't paying.
Acting like we don't live in an interconnected system where negative costs get transferred, or that every deal is win-win-win, is a fantasy. If you don't pay for your neighbor's kids nutrition, early education, or healthcare, you'll pay for police to lock up their kids when they try to rob you.
I'd much rather live in a society where I am "forced" to pay for educated, civilized, happy people to be around, then to live inside of a Fortress, "forced" paying for a bunch of private prisons in a police state, just so I can view the misery of the world from my tower windows.
So if you really believe capitalism is the best system for allocating resources, you should be in favor of correcting market distortions where firms can cost-shift their damages onto others, especially when it comes to diffuse-in-time-and-space mechanisms where there is no easily visible negative feedback mechanism to correct the firm's behavior.
Great post! Thanks for taking the time to write it. It's a shame its so far down the page!
I do believe in capitalism, and I _am_ in favor of strongly policing the system so that it's fair for everybody. Some call it "big government"
a bit off topic, but it really bugs me when people talk about government like its some big external hostile force. It's our collective power, we should take ownership of it. If its not working that's our problem.
Part of libertarian marketing is that if you don’t enjoy the system or see opportunities in destroying it, that is ok. Bitcoin fits into a larger fantasy narrative which is that instead of working together inside the actually closed system in which we all exist, you can endlessly fragment the social space and opt out into smaller and smaller volitional communities. The idea seems intuitive until you start to hit limits, or when collective action is needed in the form of governance. Or when your crypto nationalism runs into the same problems we have been dealing with since the dark ages ended.
I love good government and am not afraid of big government one bit. However, I HATE incompetent government that coasts on the work of others and whenever a problem comes up points fingers at everyone but themselves.
Add to my list above supplying safe drinking water and having an effective hurricane evacuation plan (I am looking at you New Orleans).
Agreed. It was a great post. I tend to think of my self as a "liberal-tarian." With the tenet being to set a goal for a standard of living and social / environment targets that benefits as many as possible, but anything beyond that get out of the way.
In this way I am for socialized health care, significantly stricter regulations or punitive measures regarding the environment. However for most other issues I would rather have a competitive market.
In the end I think some form of UBI may help us get there most efficiently. Ensure the environmental and health sustainability and give people a minimum amount of money to ensure they can reasonably sustain themselves, then let the market consider the rest.
Not really. You could invest in real estate or stocks or gold or just about anything other than cash and also dodge the effects of currency inflation. Remember: Inflation is defined as rising price. If you hold cash, that's a problem. If you hold inflating assets, then it's largely neutral. If you have taken out cash-denominated loans to purchase inflating assets (e.g. a mortgage for a house), you actually benefit from inflation as your assets increase in value relative to your loan amount. (Over-simplified version)
Bitcoin is explicitly deflationary by design, which is different than 0% inflation. If you have the same fixed supply and an ever-increasing demand (new population, new Bitcoin owners) then the currency is deflationary. If your economy is deflationary, you will enter a deflationary spiral which discourages anyone from doing anything other than hoarding the currency. It's no coincidence that HODL is the unofficial motto of Bitcoin proponents.
This creates a different set of problems. If you thought wealth inequality is bad now, just imagine how bad wealth inequality would be if everyone had to buy into Bitcoin, making early adopters orders of magnitude richer. The inequality between early and late adopters would be insane. Early adopters love this idea, of course, because they're at the top of the pyramid. Doesn't work out so well for the late arrivals, though.
If you only spend when it's absolutely necessary because you want to keep as much currency as possible, that's the definition of hoarding.
What would you define as hoarding? Spending so little that you starve to death?
Keep in mind that spending includes things like investing in businesses. If currency itself provides the highest return because it's a race to hoard more than anyone else, investing in businesses becomes less attractive.
Currency should facilitate the economy, not be the economy.
It's somewhat subjective of course. I think there's a healthy balance where you buy things that provide value to you at the moment. I think hoarding means something unhealthy, when you suffer just to keep the money. The money wouldn't provide the highest return - it would grow with the economy, i.e. provide average return.
People don't hoard stocks, index funds or gold. They spend the profits when they want something for themselves. Why not have money that works like that.
I do not think you mean education as in formal education but rather people have not systematically thought about these things. And, I think people will never be educated enough on this topic. Inflation and Climate change in some sense are pretty much alike. Both are some serious market externalities as a consequence of which they do not benefit from market signals (the biggest teacher of them all).
For issues like this the biggest teacher is the market and not books. A lot of climate change deniers have invested in Tesla and Solar companies and a lot of climate change maniacs have purchased Bitcoins and oil stocks. Some of the biggest proponents of climate change hysteria own private jets and ocean front properties. A lot of people call this hypocrisy and assign motives of fraud to these people but I do not think so. When it comes to climate change the market signals are clear that we need to look for an alternatives to our current energy sources and these sources will be more popular while completely rejecting alarmist claims. One might argue that market signals are not correct. But that is irrelevant. The point is people react to market signals FAR FAR better than anything that gets pushed by intellectuals, even those intellectuals who share their own political biases.
Markets signals around bailouts or inflation are missing. As someone like Milton Friedman pointed out, there is simply nothing that an average American can do to prevent government from printing money. If nothing you do will have an impact people wont do anything. The market signals are missing because there is no competition where you can see what works and what does not.
Instead of taking strong ideological positions I think we should work on making market forces operate more freely in this space. Bitcoin is already challenging the dollar in this space. It is a David (USD) vs Goliath right now but at some point people will figure out that a constant inflation for USD would mean higher price for Bitcoin over time.
For bailouts I think we need ot come up with solution that is more market like. Perhaps increase of creating ad-hoc bailouts for large corporations, pass a clear law that describes the terms of bailout well in advance and provide different options to chose from for the corporations and then stick to it.
You will be surprised how quickly people will vote in favor of better bailout policies.
>Wealth inequality and social unrest in America is DIRECTLY related to corrupt and/or incompetent (you choose) Fed policies. It amazes me why most people do not grasp this. I think it is lack of education.
I'd say it is the intended result of education. Why would you expect a school named after a billionaire to teach you how she is stealing from you any more than a school named after Karl Marx to talk about the problems of socialism.
I have been thinking what is the best way to solve inequality. There are two problems one is wealth creation and other is wealth distribution.
- Communism doesn't do a good job of wealth creation.
- Capitalism doesn't do a good job of wealth distribution and causes inequality.
-Increasing the taxes, only gives money to the government and my impression is they are not efficient in using money so overall the wealth of the society doesn't increase.
If we limit how much a rich person can hold in large companies as stock, will it force the rich people to invest in small companies? Now we will have a mechanism of spreading the wealth by the rich person who knows how to use money efficiently. However the rich person will still become richer, not sure yet how to solve it completely. Maybe inheritance law should be changed so that once the person dies all his wealth goes to the employees in some fashion.
Lack of education is the #1 issue here. America's education system emphasizes nationalism and obedience. It doesn't encourage critical thinking or alternative worldviews.
We're so deeply entrenched in the "American Dream" (Capitalism & Trickle Down Economics) that we're unable to challenge the current status quo.
Worse yet, this is driving us towards the defunding of public education, and the further worsening of our problems.
Our collective ignorance manifests itself in a number of ways, from wealthy mainstream journalists blaming economic problems on the poor to their audience of middle-class Americans, to mass-delusions regarding conspiracy theories intended to divide people.
I agree with your assessment of our education system. I would go further and say we intentionally do not teach money management skills as it makes people harder to fleece. We have indoctrinated a whole country that debt is good, rampant consumerism is good, all of which leads to really bad money management.
I am of the opinion that these habits and the ideology that supports it is the biggest reason people who are in the lower income brackets continually stay there. The best path to wealth is to convert your work into capital. If you spend everything you make and more there is no excess to re-invest.
>intentionally do not teach money management skills as it makes people harder to fleece.
Yeah, this is a perfect example of "don't attribute to malice what is equally explainable by incompetence."
I'm not talking about the incompetence of teachers. I'm talking about the incompetence of the system, and it's inflexibility towards change. This is not caused by malice. It's caused by is being completely unable to effectively handle the millions of different perspectives of "what education should be."
You talk about indoctrination of a country, but I don't think it's indoctrination at all. It's people clinging to their views and being completely hostile to the idea that they might not understand important parts of the system. It's people turning to ideology instead of engaging with the actual complexity of the world.
> It's people turning to ideology instead of engaging with the actual complexity of the world.
As predicted in 1970:
'the accelerated rate of technological and social change leaves people disconnected and suffering from "shattering stress and disorientation"—future shocked.'
Most of the time the argument is "if we spend less on military and more on education it would solve X". So I disagree. The people I get into a discussion with on education funding always seems to think the USA spends less than other first world countries.
In general, yes, but the parent poster makes a different claim than usual.
> America's education system emphasizes nationalism and obedience. It doesn't encourage critical thinking or alternative worldviews.
They're not complaining that we're not teaching enough, they're complaining that we're teaching the wrong things; that the same resources could be used for better teaching.
The Fed just implements the monetary policy of the Government in power. The board of governors are appointed by the president. The problem lies with Government and the failed economic policies they stick with through thick and thin i.e. Neo-liberalism.
This entire take is predicated on the idea that the people in power have something to gain from doing this, since it requires the ruling class to do all of these things. It falls completely flat if you think about the logic beyond trying to make it fit your ideological narrative.
Why would the ruling class (which his tweet presupposes is corrupt), who benefit from this status quo, purposefully destroy the systems that make them rich? It just doesn't make sense, the logic implies that a corrupt ruling class would purposefully destroy the systems that allow them to be corrupt in order to achieve "socialism" (which Naval clearly implies is somehow innately corrupt here). Why would they destroy what they benefit from on purpose?
Ruling classes benefit from stability, if people are not starving and live generally decent/free lives they won't search above for answers or be inclined to upheaval.
> destroy savers, and force them into inflated assets.
I don't understand this part, isn't it a broad consensus in the US that savings should not be in cash but instead in a diverse set of assets and bonds? How does inflating assets destroy savers in this case? Every time I hear advice on saving in the US it's basically (take anything above emergency fund savings and invest it in ETFs/index funds/bonds)
Somehow most of the time when there is something bad systematically happening in the US it is almost always associated with government legislation. In my opinion it is largely because of intention based policies as opposed to outcome based policies. We rarely investigate what was the outcome of a policy and just doubling down on failed ones.
For someone to not understand this without a study, I think they would need to be oblivious to the state of the economy, the cost of living in the average metropolitan area where the average American lives, and social dynamics / cultural issues in America.
Also, if you've experienced significantly different levels of salary then this is obvious.
"Money doesn't buy happiness" is also considered obvious common sense. The study is looking for the phase boundary where one obvious statement ceases to apply and the other takes over.
"Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000"
"We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being."
The study states that emotional well-being does not rise with income over 75k. The study also concludes that high income is not correlated to happiness.
This is gaslighting. The internet was designed by CERN to be a network that scientific literature could be sent to and from other scientists. Then the internet became much, much more, and became the most transformational technology of the last century.
Bitcoin may have been designed solely as a currency, per Satoshi's whitepaper, but it has evolved into something much more (and will continue to evolve in the future). Bitcoin is digital gold. That is how it is being used and deployed by top funds and investment managers, as well as average citizens and retail investors. Bitcoin has been the TOP returning investment in the last decade. It will continue to exceed expectations because of the security of the blockchain, the inherit deflationary nature of bitcoin and the hardcoded scarcity, and as a hedge against serious inflationary concerns and geopolitical uncertainty / volatility that will continue in the future.
To say that because it had a 25% correction and is volatile while it is still in its early stages, is like saying that internet stocks (i.e. Amazon) in the year 2000 could never become mega large-cap companies and top-tier investments. Bitcoin may not be suitable to solely be relied on as a currency, but neither may the USD in a few decades from now. Bitcoin will always be able to be used nearly instantaneously at any point in the world. Bitcoin is going nowhere, is akin to digital gold, and could be potentially used a currency with the right use case. Bitcoin will be the top store of value cryptocurrency in an ecosystem of defi and blockchain networks that will be used for everything in society (i.e. wrapped btc in ethereum smart contracts), and so much more.
>Then the internet became much, much more, and became the most transformational technology of the last century.
I realize this is OT, but it'd be a fascinating debate, especially if you define the timeline as 1900-2000. The internal combustion engine, MOSFETs, nuclear tech, radio and information theory, the Haber process, PCR, the list goes on. All massive impacts.
Yes certainly OT. I hesitated before writing that line, but regardless, the internet is one the most transformational technologies humanity has ever created.
I would characterize the last century as the last hundred years, i.e. 1920-2020.
This still has nothing to do with the debate at hand.
You are comparing apples to oranges. Bitcoin cuts out middlemen, like banks. The finance industry and banks are much larger energy consumers than the Bitcoin network. Comparing a world with Bitcoin versus a world without Bitcoin is an invalid comparison. If you'd like to compare energy consumption, do an analysis of companies that incorporate Blockchain-based cryptocurrencies like Bitcoin versus business models that use traditional banks (and look at the energy consumption of those financial transactions).
That's ok. I care about data hygiene. Signal cares about data hygiene. I don't want old data lying around and ready to be used by nefarious third parties at any point in the future. I'm sticking with Signal as long as they stay true to their values. I don't need it to be #1.
I don't either, but a chat app is useless if I can't use it to chat with people and almost nobody I know will consider Signal. It's either WhatsApp, Telegram, or SMS (horrible).
Great write-up. I was highly skeptical of the claims of 95% efficacy. After reading this analysis of the data (and other literature) my suspicions have been confirmed. The public needs the raw trial data. Now.
Regulators are under immense pressure. We need the open-source / scientific community to be able to analyze the efficacy and safety of the vaccine in the raw trial data.
I understand your disdain for their new editor, but it is not required. The great part about Wordpress is the ecosystem of plugins and customizability of the CMS. You can just add the Classic Editor plugin and you can use the old editor - it is that simple.
If the editor is laggy it is because of the server / infrastructure you are using, not the editor. I can guarantee this as a fact.
I wouldn't brush off Wordpress. I've used pretty much every CMS on the market with client work and Wordpress is the one that I prefer the most for websites, hands down. For custom applications, I prefer Contentful for the backend CMS. There is a reason that Wordpress is #1 and has the market share it does. It is not flawless, but it is the best once you get to know it. Especially when you know how to optimize and debug problems.
If you are just doing a pet project and simple blog and you don't want to spend a few minutes to figure things out, then it might not be for you. There are many options for a simple blog. Like any technology worth knowing, in order to maximize its features you need to learn how it works. Best of luck to you.
> You can just add the Classic Editor plugin and you can use the old editor - it is that simple.
This is a terrible take from an ops perspective. "Just install plugins" ignores the fact that you're adding arbitrary executable code to your server, hoping whoever maintains it actually maintains it, actually secures it, and actually doesn't sell the plugin to a nefarious party at a later date.
Which is to say nothing of how many orgs allow management and marketing to choose which plugins to install. Try prying those access rights from their cold dead hands...
You are in a wrong comments thread. This is a post about how popular with is WordPress and it is popular because you install plugins there and have site without completely any programming language. There are no ops (or at least they are not a part of wordpress success), there are people who know how to buy shared hosting and that's it.
> I understand your disdain for their new editor, but it is not required. The great part about Wordpress is the ecosystem of plugins and customizability of the CMS. You can just add the Classic Editor plugin and you can use the old editor - it is that simple.
You can do this if you pay for hosting or an account on wordpress.com. As this was meant to be a pet project, I really didn't want to pay for it, so went with the wordpress.com free account.
> If the editor is laggy it is because of the server / infrastructure you are using, not the editor. I can guarantee this as a fact.
I mean, you'd think that Wordpress's own editor wouldn't lag on their free account/hosting, especially if they're wanting people to upgrade and not leave?
> If you are just doing a pet project and simple blog and you don't want to spend a few minutes to figure things out, then it might not be for you.
I've spent the time trying to figure it out. The bigger issue is I don't want to pay currently, until I'm certain I'm going to stick with this project. Sadly, the only way to fix the problems is by paying.
> You can do this if you pay for hosting or an account on wordpress.com. As this was meant to be a pet project, I really didn't want to pay for it, so went with the wordpress.com free account.
A payment is actually not needed in order to use the Classic Editor with a Free site.
There is also a possibility to edit or create any post or page in WP Admin, which will allow you to use the Classic Editor. Navigate to yoursite.WordPress.com/wp-admin and then click on Posts or Pages in the left sidebar.
Next you can hover over any post or page title and choose the "Classic Editor" link below the title. If you wish to create a new post or page within Classic Editor, then please click the down arrow next to the Add New button at the top and choose Classic Editor.
We are also happy to answer any of your questions and try to understand why the editor is laggy for you if you send us an email via help@WordPress.com. Thank you!
If you want to create a blog without knowledge of code and/or hosting servers then I wouldn't use Wordpress. Something like Wix or Squarespace would be more up your alley. I understand not everyone is in the position to pay money on certain things, but if you don't want to pay then don't expect things to work amazingly well. Hosting servers isn't cheap.
dorchadas, we haven't been able to track down your account, but if you get in touch with help@WordPress.com and link to this thread, would love to debug the slowness with you, and also happy to comp you a 300/year business account which supports plugins and themes for 3 years.
> If the editor is laggy it is because of the server / infrastructure you are using, not the editor. I can guarantee this as a fact.
I would expect that once the editor loads, unless you trigger an option that requires something from the backend, it would just work. Does it actually send data back and forth during the writing process?
When Wordpress is lagging, it is always because of the infrastructure, whether that is client or server side. The editor does not send data to the backend. Without actually having access to the machine, I can almost guarantee that there are issues with the client-side machine or browser which is the reason for the lagging.
I said server or infrastructure, meaning server or client-side machine / browser. Essentially, their hosting or local environment. The code loading in their browser which is causing the lag is the same code for everyone else, and this is not a reproducible issue in the WP community. If this person's account of things is accurate, then any lags in Wordpress would be a local environment issue.
I saw this and found it interesting. As a CS guy and software engineer, I've always wanted to combine that knowledge with actual physical engineering (i.e. mechanical and electrical) in order to build cool stuff and complete my knowledge base as an engineer.
I've always seen his videos and wanted to be able to prototype and engineer actual physical things like him, rather than spending my whole life building software (although software pays the bills - nothing wrong with that). I wonder how far the course would actually be able to take me - it would be interesting to see.
The course seems a bit high priced and I don't have time at the moment, but I'll definitely keep my eye on it and wait to see the reviews.
For people that want to learn "physical engineering", I recommend the same thing I do when people ask people the best way to learn software engineering: you need a project.
Find something in your life that you want to automate, and automate it. Motivation is easier to maintain ("I still want this problem fixed") and you'll learn so much more from failure and iteration than you will following someone else's tutorial about "how to build X".
Any reason you decided on two separate code-bases (iOS & Android) with a small team versus building one in React Native or another hybrid framework. I'd think that the latter would be a better choice but wanted to see what went in to your decision making.
yeah good question, we actually debated quite a bit on this. In the end, we want to build the best UX possible (we realized it's one of the value prop of our product), and we felt that going native would be better mid & long term because at some point, you hit a threshold with those react native/hybrid and it makes more time to polish things out.
Also right when we started (in Feb), we had to implement Apple Sign-in, and the UX around it for React native or Hybrid framework was absolutely terrible.
In the end, I still think it was a good choice: while we compromise and make people wait a bit more for Android, it gave our (small) team a lot more focus. We learn and make mistakes on one platform, iterate faster on it, and once we feel comfortable with what we've done on iOS, we'll roll it out to Android (which we plan to do in Jan/Feb next year).
Cool, thanks for the detailed response. As a dev I'm always curious about the decision making for startups that are choosing between hybrid and native. Seems like the best decision for that is unique to each project.
Glad it helps! If we didn’t put so much focus on UX (i.e: if we were building a “boring” typical B2B education tool), we would most likely have gone with React Native (we also have a lot of expertise with React in the team).
But we talked with people, and realized that they use our app at the same time that they go on IG, Snapchat or TikTok. What that means for us is that our UX needs to be just as good or even better than those big players if we want to compete on “screen time”.
That’s already quite hard to do with a 2 people tech-team, so adding on top of that limitations from cross-platform frameworks would have been shooting ourselves in the foot.
The people protesting are not protesting the Fed. No institution (i.e. media, grassroots, journalists) criticizes the Fed - it's always the 1%.
But, I guess you wouldn't understand, since you make baseless assumptions about internet strangers. How would you know my net worth - do you think there aren't billionaires that share my "mainstream" opinion?
Your fallacious logic and personal attacks against me do not diminish my argument. In fact, since you cannot attack the substance of my argument, you have already admitted defeat.