How is the US economy right now?

[Jack V Savage]

Well, this thread continues to deliver lol.

A musing some may find interesting.... I'm still reading this book (i'm not a fast reader) that raised an interesting point around WATER. Basically stating that in a privatizing or commodifying water, it's theoretically possible that private ownership could put the distribution of water into just a few hands. Doing so, would basically mean a dramatic increase to GDP by profit maximizing corporations charging oligopoly or monopoly type prices for what would traditionally be considered an abundant resource. And this would price out the poorest people in the world, possibly creating massive human suffering for the most destitute.

It's interesting that something that could possible be so damaging to humanity, could be portrayed in GDP statistics as economic growth to be celebrated. Though I suppose for people who would be part of a water distribution cabal, they could indeed be celebrating their riches even if it means devastating a vastly bigger population.

Sigh. No.

 

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[Mr Holmes]

Costs are up and salaries and wealth are up even more. I know that infuriates hacks, but there is nothing I can do about it. The facts are the facts.

Come on, salaries aren't up 30% to cover the new cost of groceries or the 40% for gas.

 

[Goutfather]

Come on, salaries aren't up 30% to cover the new cost of groceries or the 40% for gas.

you can’t reason with jack savage. he’s always ready with a statistic to justify why wrong is right, down is up, good is bad, etc. when reality cuts against his worldview, he gets busy collecting data on why reality is wrong. his posts in this thread demonstrate how disconnected he is. fuck him.

 

[idrankyourbeer]

my word. i havent read his posts just yet, but it appears as if the intellectual jack savage has been taking you guys to school in here.

take notes.

 

[brothir]

Come on, salaries aren't up 30% to cover the new cost of groceries or the 40% for gas.

But inflation hasn't been 30-40%.

 

[brothir]

Housing prices are temporarily lowered due to low demand caused by high interest rates. At the current rates far less people can afford to purchase a house with a mortgage. Due to this, the cost of houses are artificially low and once interest rates start decreasing there is going to be a surge of buyers into the market causing a spike in prices. This is in effect interest rates hiding inflation.

No, manipulating interest doesn't "hide" inflation, it mechanically affects the direction of it and the economy at large. High interest isn't a rug that you pull over something to hide it temporarily. Besides, what solutions are you suggesting?

 

[Mr Holmes]

But inflation hasn't been 30-40%.

What would you put the cost of groceries as compared to pre-pandemic prices?

 

[Scheme]

No, manipulating interest doesn't "hide" inflation, it mechanically affects the direction of it and the economy at large. High interest isn't a rug that you pull over something to hide it temporarily. Besides, what solutions are you suggesting?

I didn't say high interest rates were bad or unnecessary. Just that there's two scenarios:
1) Interest rates stay high, mortgages stay expensive forever, i.e. the OER should include the fact that interest rates are high and not view it as a temporary condition. Therefore housing prices should be closer to 33% more expensive instead of the laughable 2% from 2021 to 2023.
2) Interest rates drop, demand for mortgages goes up as buyers who were waiting to buy houses now have access to the housing market. For each point interest goes down, the mortgage costs go down. However additional demand will also lead to rising house prices, which means the cost of the house goes up. So while you save on interest payments, the actual asset price will spike on top of that which will balance out the mortgage cost. On top of that, property taxes will be re-evaluated based on the cost of the house, not the amount of interest you are paying off for your mortgage.

In either scenario, in the long run the cost of housing is up way more than just the laughable 2% from 2021 to 2023 that the PCE uses for inflation calculation. Their stated real GDP numbers use that 2% number, which makes real GDP growth, real wages, etc. look like it's much higher than it actually is.

 

[Jack V Savage]

you can’t reason with jack savage. he’s always ready with a statistic to justify why wrong is right, down is up, good is bad, etc. when reality cuts against his worldview, he gets busy collecting data on why reality is wrong. his posts in this thread demonstrate how disconnected he is. fuck him.

Well, no. You can reason with me, but "Jack is a bad person for trusting evidence over partisan narratives" is not actually "reasoning."

 

[Jack V Savage]

What would you put the cost of groceries as compared to pre-pandemic prices?

We can just look at wages adjusted for inflation (real wages). They're up since the pre-pandemic era (and higher than at any time before that too).

 

[Rod1]

What would you put the cost of groceries as compared to pre-pandemic prices?

Americans spend on average 11% of their income on groceries.

 

[Jack V Savage]

In either scenario, in the long run the cost of housing is up way more than just the laughable 2% from 2021 to 2023 that the PCE uses for inflation calculation. Their stated real GDP numbers use that 2% number, which makes real GDP growth, real wages, etc. look like it's much higher than it actually is.

Where are you getting that 2% claim?

 

[brothir]

I didn't say high interest rates were bad or unnecessary. Just that there's two scenarios:
1) Interest rates stay high, mortgages stay expensive forever, i.e. the OER should include the fact that interest rates are high and not view it as a temporary condition. Therefore housing prices should be closer to 33% more expensive instead of the laughable 2% from 2021 to 2023.
2) Interest rates drop, demand for mortgages goes up as buyers who were waiting to buy houses now have access to the housing market. For each point interest goes down, the mortgage costs go down. However additional demand will also lead to rising house prices, which means the cost of the house goes up. So while you save on interest payments, the actual asset price will spike on top of that which will balance out the mortgage cost. On top of that, property taxes will be re-evaluated based on the cost of the house, not the amount of interest you are paying off for your mortgage.

In either scenario, in the long run the cost of housing is up way more than just the laughable 2% from 2021 to 2023 that the PCE uses for inflation calculation. Their stated real GDP numbers use that 2% number, which makes real GDP growth, real wages, etc. look like it's much higher than it actually is.

Price of housing will always go up if population growth exceeds the building of new housing, so there's no other option than building substantially more if you want lower prices. That's not got much to with inflation or interest. Same with property tax. Besides, you're missing the holistic picture in that raising interest will indeed have people spending more on debt, being the exact point of it in trying to slow the economy down broadly. Chalking that up to increased housing prices is missing the forest for the trees. Don't know who's claiming the 2% increase, as it seems somewhat low.

 

[Mr Holmes]

Americans spend on average 11% of their income on groceries.

That wasn't the question.

 

[Scheme]

Except? Real wages go up during times of high unemployment because of composition effects (people with lower pay are more likely to keep their jobs) and then comes down during recoveries (as lower-paid workers regain jobs). But the current level is higher than any pre-pandemic level, and growth has been extremely strong for the past year. Again, look at everything.

Um, that's because when growth is strong, there is more inflationary pressure. Inflation is partly a sign of a strong economy.


Prime-age LFP is at the highest level since 2001, near the all-time high.


Yes, but it's higher than at any previous time.


Quit rates are off their peak, but higher than at any time pre-pandemic since it's been measured.


Higher than at any previous time, though.

And near an all-time high.

Consumer debt service hit an all-time low in the pandemic era but is currently lower than at any time before the pandemic.

Again, the totality of the data paint a very clear picture. The economy was strong in 2019, but it's stronger now. This is the best time ever to be an American worker.

Real wages are down 2% the past 4 years, you simply can't spin that as a good thing. That isn't a sign that we have a booming economy or it being the "best time ever". At best you can say it is a sign of a stagnant economy, at worst you can say slightly declining. And again, that's assuming you believe that housing cost inflation is only 2% from 2021-2023, which I've laid out reasons why and you have agreed is undercounted.

Prime age LFP is a subset of total LFP, not sure why you are concentrating on that over the overall metric. Also it's been relatively the same for the past 4 decades, within 1-2% for the entire span since 1985, not sure why you are using a measurement that has stayed static for 5 decades as evidence that the economy is great? Especially when it's only a subset of a larger metric that is actually down?

Household wealth should always increase, it's basically always increased for all of time except for brief periods during recession. If you think about how wealth works, over time it would make sense that it would increase if you save more than you spend. And again, it's tightly coupled to the stock market and housing market which are highly volatile and can change quickly, but not necessarily indicative of how the average person is affected by the economy. The fact that it hasn't continuously increased and remains stagnant over the past few years is a sign that the economy is not going in the right direction.

Quit rates are about the same as they've always been since the metric has been counted and decreased since the pandemic. Not a sign of going in a good direction.

Consumer debt is at an all time high (it decreased from 2008 to 2016) and more importantly, interest payments on the debt is even higher due to high interest rates. Despite the fact that there are less mortgages being taken out which account for the overall majority of consumer debt. So there is more non-mortgage debt being taken and higher interest rates to pay for that debt.

Household Debt and Credit Report

Unique data and insight into the credit conditions and activity of U.S. households

www.newyorkfed.org

The picture is clear, if you actually interpret the data. The economy is stagnant at best the past 5 years if you believe that the PCE accurately reflects housing price changes of 2% from 2021 to 2023. However in reality, consumers are taking on huge amounts of debt at high interest rates to pay for lesser amounts of housing. That implies they are spending more money on essentials like food. The people who are getting rich are the banks and bond holders, as they are getting lofty interest payments for providing less goods and services.

 

[Mr Holmes]

We can just look at wages adjusted for inflation (real wages). They're up since the pre-pandemic era (and higher than at any time before that too).

And thats more than the increased cost on essentials? I believe I heard wages are up 15% on a podcast I listened to.

 

[Jack V Savage]

And thats more than the increased cost on essentials? I believe I heard wages are up 15% on a podcast I listened to.

Real wages are on top of inflation. Relative price changes are a different issue, though I don't think there's any evidence that food costs are more burdensome than normal.

 

[Scheme]

Price of housing will always go up if population growth exceeds the building of new housing, so there's no other option than building substantially more if you want lower prices. That's not got much to with inflation or interest. Same with property tax. Besides, you're missing the holistic picture in that raising interest will indeed have people spending more on debt, being the exact point of it in trying to slow the economy down broadly. Chalking that up to increased housing prices is missing the forest for the trees. Don't know who's claiming the 2% increase, as it seems somewhat low.

Interest rates have a huge impact on housing. If people can't afford mortgages they can't afford to buy a house, because the vast majority of people buy houses on mortgage loans. Mortgage rates are tied to interest rates.

The 2% increase from 2021 to 2023 is the official PCE statistic of what they calculate official inflation numbers as, which affects real wages, real GDP, etc. https://fred.stlouisfed.org/series/DOWNRX1A020NBEA

 

[Rod1]

That wasn't the question.

But you claim that 30-40% increase in groceries can't be off-set by a lower marginal increase in wages.

If Americans spend 11% of their wages in groceries that means an increase of 30-40% of groceries would mean that you would require a wage increase of 3.3%-4.4% to offset that.

Because 30%-40% of 11% is 3.3% -4.4%.