Is it just me or does this feel like wishful thinking? I'm on my phone so its hard to dig into sources but the presentation just reeks of misleading by statistics.
I thought the main unemployment number included only people looking for work? If states dropped the LFW requirement from unemployment, that number would drop despite lots of people still on unemployment, no? I assume federal unemployment statistics focuses on other less state dependent metrics.
Similarly the median house price is a farce if, like in the GFC, there's plenty of easy capital available for a land grab at the top. The prices could easily reflect increased competition and asset inflation, not something new about this financial crisis - and it wouldn't really be new, would it?
> Similarly the median house price is a farce if...
Alternatively, what if people have stopped buying/selling cheap housing?
If everyone except millionaires has dropped out of the market (say, due to lockdown restrictions) then the median house price will rise even if the market is dying. Particularly if the wealthy are desperately trying to turn cash into assets in response to the government largess.
I suspect Mr. Carlson fell for Simpson's paradox with that one; it seems unlikely that the property market is booming. That chart isn't enough evidence.
Here are the stats from NAR. The average price has increased, but the volume is off by 10% year over year. The last slide shows sales volume by price. It isn't what I expected. It looks like sales are up around the median price while both the high and low end are way down.
https://www.nar.realtor/sites/default/files/documents/ehs-06...
Over the past few months tens of thousands of high-income workers have been told they can WFH forever, and an above average house in most of the country looks awfully cheap compared to SF house on SV salaries.
What is baffling is how the delinquency rates for credit cards have plummeted. Sure, it's easy to say in hindsight that people are buckling down, and that the stimulus payments are making it easier for those in the low income demographic to pay down credit card debt, but that can't be the complete picture.
The economy was put on pause, and small businesses are being decimated. If people need financing, the status quo was to use credit card debt to keep people/business afloat as the debt is unsecured.
As the article posits, the situation is quite unique and very counterintuitive...
It’s not baffling at all, 600 dollars a week is a huge raise for about 50% of the population. Most of the social and economic problems we have are not because people are making bad choices, we have them because people are poor. You’ll see positive effects from that spending for decades, I wouldn’t be surprised if that 600 per week left a cohort of children who grew up a quarter inch taller than they otherwise would have. People forget that Lyndon Johnson’s welfare programs were not in any way a failure, poverty plummeted when things like food stamps were introduced.
> If people need financing, the status quo was to use credit card debt to keep people/business afloat as the debt is unsecured.
Was it? How much of the total credit debt held in the US was being used to weather short term cash shortfalls like this?
It seems like a more reasonable hypothesis is that "most" credit debt in fact was being used to finance luxury expenditures by the middle class instead, and that when these were suppressed by the pandemic along with everything else credit spending dropped.
Note also that for people in the first category, the very generous UI and stimulus benefits we available to bridge the gap too. We'll see what happens now that most of these are being rolled back or replaced with more regressive measures like the payroll tax suspension (which only benefits people who are employed).
More accurately, a lot of credit card debt was being used to initially finance emergencies and then (after they’re in debt) to finance required purchases. A lot of middle class families are bogged down by a very costly mortgage or apartment rent and likely an expensive student loan (or two), then have an emergency of some kind - for example a medical bill or losing a job. They don’t have the spare savings to pay for the gap, and they have to make up the difference with a loan of some kind, likely a credit card but perhaps a personal loan or a payday loan or a second mortgage. They’re suddenly in more debt but otherwise the same situation as before. They thus have less cash flow, leading to increased exposure to risk leading to the cycle repeating.
Yeah, but that explanation runs afoul of "why is it better during the pandemic?". Those "emergencies of some kind" are in fact no less likely now than they were in January (unemployment is of course much worse!). Yet credit card debt has been going down. It doesn't add up.
My money is still on the "the pandemic shut down vacations and boat purchases" argument. Obviously some people need to float emergencies on cards, but by numbers that's not where the money was actually going.
One part is that while unemployment is up, a number of large costs are down. Obviously, costs like transportation don’t have to be paid for. On too of that, evictions are suspended so rent payments can be leased and many loans (including mortgages) are pausing minimum payments. Since these big costs are temporarily gone, the remaining income can often cover the remaining costs plus pay off existing debt. Of course, when rent payments and mortgage minimum payments resume, that effect will undo itself.
Came here to basically say this - it’s got me scratching my head for sure. I bet not taking on more debt in uncertain times but many folks don’t have a choice. Any idea what could be driving this?
My bet is that some of the biggest categories for personal credit card spending are related to travel and bars/clubs, including the specialized clothing and accessories that surround those activities. Folks may have paid some debt off, but not many were spending for these big activities at all. I imagine there’s a lot of cross-over with demographics that tend to carry more debt or be more impulsive to begin with.
Since interest rates bottomed out, my credit union has been sending twice-a-week promos for $8-$10k personal loans to consolidate and pay off credit card debt. The rates are typically 7-10%, cheap compared to a lot of bad-credit-allowed card issuers, and I've seen some lenders go as far down as 6% on up to $100k over 2-3 year repayment periods.
The loans are probably considered low risk between the combo of stimulus checks, tax refunds (July 15 was the filing deadline so rebate checks are hitting now or soon), juiced-up unemployment benefits, and rent forgiveness/deferral all hitting at once.
So I'd be curious to see if there's any correlation between credit card debt and "personal" (non-mortgage, non-auto) loan balances. It could just be refinancing via consolidation.
From my personal contacts, it seems that those who can afford it are now moving out of the cities or acquiring rural "vacation" homes. The people I know who are buying are all upper managers or higher in salary.
Our Southern California beach city has seen 60% increase in home sales over last year and the median price is on more higher priced homes than is typical. These are almost all single family homes with space. If you have to work from home, it is nice to have an extra bedroom or dedicated office.
My credit cards had been on auto-pay some small amount for a few months. I'm lazy and never logged in and paid the balances. But I had the cash in the bank. So when the crisis hit I paid them off because of the unknowable future.
In short, Covid-19 triggered an economic tsunami, but so far the US federal government has held it at bay:
* Since March, the Federal Reserve has created "out of thin air" approximately $3 trillion dollars in new monetary assets, to support asset prices and prevent another financial crisis. This figure is about 3x greater than the $1 trillion of monetary assets created in all of 2008 and 2009, during the worst of the financial crisis. Source: https://fred.stlouisfed.org/series/WALCL
* In addition to the above monetary intervention, the federal government launched a ~$3 trillion rescue package at the beginning of the pandemic (including all those PPP loans that won't be repaid, all that spending on special unemployment benefits, all sorts of support for states, businesses, etc.), and now the debate is whether to spend an additional ~$1+ trillion (the last figure floated by the US treasury) or an additional ~$3.4 trillion (as proposed by congress). Source: https://www.reuters.com/article/health-coronavirus-usa-congr...
The federal government is supporting the economy in an unprecedented manner to an unprecedented degree, to prevent it from collapsing until the virus is fully under control. All economic statistics reflect this unprecedented massive economic support. They do not reflect the "true underlying state" of the economy. There's nothing counterintuitive about that.
> The federal government is supporting the economy in an unprecedented manner to an unprecedented degree, to prevent it from collapsing until the virus is fully under control. All economic statistics reflect this unprecedented massive economic support.
And while this is true to an extent, it's also important to note that the government is supporting some parts of the economy (corporations, the stock market) significantly more than others (workers, the unemployed), and with the failure of the Republicans to agree to a new stimulus bill that wasn't 99.9% "bail out the wealthy and grant immunity to corporations that force their employees to work without adequate safety measures", that latter part is going to start showing in a big way, real soon.
Not so. The support for unemployed workers has been extraordinarily generous - $600 a week. Household income has not fallen because of the unprecedented state UI support.
Anecdote: in the SF bay area in the last two weeks, I've randomly overheard two business owners talk about how they have lots of work but can't hire back any of their workers. One was a roofer, the other the manager of a hair salon who explicitly said that their staff say why would make $1000 / month less if they came back to work than if they stay at home not working. That suggests that as soon as the financial support falls to a more normal level, the unemployment level may drop significantly.
I apologize for the lack of clarity in my post: I meant that the lion's share of the money the government spent went to corporations.
If the government had paid every American some reasonable sum—something approaching the median cost of living, perhaps?—for the duration of the pandemic, it would have drastically reduced the amount that would have been necessary to support businesses, as expenses for all but essential businesses would have been cut down to infrastructure maintenance.
Also, my main point regarding support for regular workers/unemployed is that now it's ending and things are going to get worse.
We should have a big crash right now because all the stimulus ended, 20 million people don't have jobs and could be kicked out of their apartments and have a shortage of food access. We shouldn't celebrate before we address these larger needs.
I'm not saying everything's good, but those are all very solvable problems in comparison to what we expected. A few months ago, grocery stores were running out of staple items by noon and there were serious concerns of a nationwide meat shortage.
>We should have a big crash right now because all the stimulus ended
It's probably not instantaneous. Other people in this thread mentioned that savings is up, so I'm guessing people have some money saved up, and therefore can probably last a few weeks (or months?) before running out of money.
>could be kicked out of their apartments
Aren't most cities still not processing evictions? Even if they did, the combination of social distancing restrictions (less court capacity) + flood of evictions probably means there's a huge backlog, which means very little people would end up getting evicted.
It's not clear to me that evicting tenants who would ordinarily pay is a good strategy for landlords. Besides being a dick move, they don't have a guarantee that anyone will move in
All the people who just got evicted? Probably a good time to invest in Uhaul.
I agree, seems incredibly short sighted. I’m not a landlord so maybe I misunderstand the thinking.
Is it something like tenants who get evicted then have to find even worse landlords to rent from so by evicting people in tough economic times you gain access to tenants at their lowest rate/most desperate? So effectively any tenant you get in bad economic times is someone who is more likely to be stable and reliable after recovery?
I’m totally making things up at this point. It is truly baffling to me.
If you have tenants in NYC right now who aren't terrible, I think you want to keep them because there are a bunch of empty apts
In NYC if you want a good apartment right now, you can significantly underpay for the next couple of years (if your lease is up), but a lot of people whose leases are up are leaving
You make a good point, though. There will be a large shuffle for the next few months (and probably gradually back in the following years), so whoever "makes shovels" for moving will be in a good position
Costs continue. Mortgage payments continue, heat/water/electric bills must be paid, maintenance continues, legal wrangling over legit evictions (say, trashing the place) is costly. Cutting those costs can stabilize losses. Empty flats can be deducted from taxes as lost income. Other tax & accounting benefits may apply.
Part of the benefit of renting - for both parties - is ease of vacating.
>Empty flats can be deducted from taxes as lost income.
AFAIK there's no "lost income" deduction. Yes, you pay less taxes, but that because you had less income to begin with, not because of some deduction. If a tenant is not paying, then you're not getting income, so you're already paying less taxes.
Depends on the local tax law. Confluence of maintenance costs vs depreciation vs revenue vs other legal accounting issues can result in reducing/eliminating taxes - even if you have a net positive income.
Upshot: evicting non paying tenants can be profitable, while letting them stay on “they’ll come thru, just give them time” grounds can mean losing the property outright. (Strange this must be explained on Ycombinator.com.)
Definitely not a landlord, so forgive the unfamiliarity:
Are you not able to claim rental property losses if you simply have a tenant who is unable to pay?
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My model for dealing with a pandemic-induced economic slow-down is that if you can just jump forward til the end, most things will revert to normal (for airline companies but also tenants who can't pay rent)
It's not clear to me that evicting someone and then needing to cut rates to find a new tenant who can afford to rent is a better deal than keeping someone who has fallen on hard times for very straightforward reasons
In theory I agree, but this isn't an unknown element and therefore I believe most forecasts are either prepared for this to happen or have accounted for it to not happen due to available credit/liquidity.
It just seems to simple to say "when the stimulus is gone, and people can't pay rent, evictions will be huge".
Much worse and possibly catastrophic if the government doesn’t get its shit together on the next stimulus. Now Trump gets to look like a hero with his executive orders, and honestly you can’t blame the administration for taking the easy layup. Hopefully this shames congress into doing its job because it’s unlikely that the critical unemployment benefit will be getting paid out anytime soon via this route.
Is this one of those “there’s good people on both sides” arguments? It’s not House that can’t get their shit together, it is literally the GOP controlled Senate (specifically, Mitch McConnell) who is causing this. People are going to die because of his stonewalling — I bet it’s possible to actually calculate; what wonder how he’ll end up comparing to other psychopaths?
If you've come to the conclusion that the Senate majority leader is deliberately setting out to kill Americans cause he's just evil like that, you've surely made an error somewhere in your reasoning.
He’s deliberately withholding money. Money is cross-fungible with expected life-span. Therefore, the withholding of funds can be equated with loss of years; every lost ~78 years is a lost life. I used to do these analyses at UTMB Galveston when interning in the nosicomia division.
That seems like the source of the error to me. It can't be the case that anyone who ever rejects a proposal to spend money is inflicting a loss of life years.
> It can't be the case that anyone who ever rejects a proposal to spend money is inflicting a loss of life years.
Not all proposals are the same. A man who refuses to buy his child a new video game console is not the same as a man who refuses to pay for his child's life-saving surgery.
Your jump from "refusing to act against a deadly plague" to "refusing any spending proposal at any time" is breathtaking: I'm a little skeptical that this was a pure mistake...
165,000 Americans are dead. Most of them died in agony on a respirator. The vast majority of those deaths were completely avoidable: https://www.statnews.com/2020/06/19/faster-response-prevente... And people of color are hugely overrepresented in this number.
Since the start of the pandemic, McConnell has systematically opposed any rational reaction to it, and strongly supported the psychopathic lies of Donald Trump.
McConnell is not some nice old man who systematically caused tremendous damage to the hundred million poorest and blackest Americans for the last thirty years by mistake and now accidentally killed another hundred thousand, sorry guys!
I strongly hesitate to use the word "evil" in general - but if any human ever has been evil, then McConnell is a profoundly evil man.
What I learned in high school economics is that printing more money means greater inflation. Why isn’t this a problem? Or rather why aren’t people more scared about it being a problem?
High school economics was wrong, inflation is way more complicated than that. Productivity, credit flows, balance of payments, financial flows, investment, wages, inequality, capital/labor bargaining, all of that matters too.
"Inflationary spirals" - as existed in the US in the 1970s, are caused by a wage-price hike cycle. Prices go up, workers demand more money, prices go up more.
The US "fixed" that problem by squashing the ability of workers to demand more money - starting with Reagan in the 80s and extending all the way 'till now. The problem is that increased prices just meant a lower standard of living and more people more precarious. By the time Covid hit, a large precentage of people were living pay check to paycheck. 28% of renters didn't paid rent in July and 30% won't be able to this month. That printed money has essentially had devastating consequences.
Sure, but wages are only component of total compensation. You can't ignore everything else.
Total compensation as a percentage of national income has remained pretty steady, which means productivity growth is being passed on to employees.[1] Not necessarily as wages thought.
I haven't looked very closely at the NBER paper's methodology but the conclusion flies in the face of the raw data on total compensation as a share of GDP/GDI from the BEA[1] and other sources[2]. The NBER paper bases its conclusion on a suggestion that GDP figures are not accurately estimated; this seems like somewhat of a strange position but I am not qualified to evaluate it on merits.
The raw data indicate that total compensation as a percentage of GDP/GDI has been falling since at least the early 1970s. These percentages are derived by comparing nominal dollar values within the same year (e.g. 2018 total compensation divided by 2018 GDP, both in 2018 nominal dollars). Unlike estimates of long-term real wages, these percentages are not dependent on inflation assumptions. The long term trend paints a clear picture that people who earn most of their income (including benefits) from wage labor have been losing ground economically for decades.
Even without metrics, this conclusion is supported by living memory history. In 1970, a single middle-class full-time income could support a comfortable lifestyle for a family of four. In 2020, a single middle-class full time income can't support housing costs in most (possibly all?) urban centers.
"Total compensation as a percentage of national income has remained pretty steady, which means productivity growth is being passed on to employees.[1] Not necessarily as wages thought."
Considering that wages is the main income of lower incomes this means that most growth has gone to higher incomes.
Monetary policy to "get inflation under control" is the same thing as "squashing the ability of workers to demand more money." Higher interest rates slow investment, employment drops, workers lose bargaining power. That was the point!
You have a point. The main thing is they all go together. Tracing chains of causation is in economics is the hardest and least useful process of analysis.
Shadow banking system. US dollars are now used to fund overseas banks through the Eurodollar system, and it has a virtually unlimited capacity to siphon up excess dollars without any noticeable inflation in the US. Mainly because those dollars can fund development in countries with cheap labor that actually lowers the price of our consumer goods (since we don’t make them here anyway).
Just to drive the point home, observe that goods and services which can’t be produced elsewhere have experienced massive inflation: healthcare, housing, education.
One really interesting thing I had never though about is that eurodollar lending increases the money supply in ways that are potentially totally opaque to the fed or treasury meaning we don't really know how many dollars exist and this unknown amount is very likely substantial.
There is a whole fascinating YouTube series on the eurodollar that goes extremely in depth:
- Treasury makes bonds and sells them into the market. The market impact of this tends to increase interest rates (cost of bonds relative to dollars) a bit.
- The government uses the money raised to buy goods and services. This causes the price of goods and services (relative to dollars) to go up a bit.
- The Fed makes dollars and buys bonds. This pushes interest rates down and is roughly the inverse of step 1.
Netting the Fed and Treasury actions (which people never do, mostly because they vary independently according to independent policy), the effect of recent fiscal and monetary policy is "the government" making cash and buying things with it (as well as giving it out to people who need it.)
I guess it's the Fed's job to worry about price stability, but the above does make me think that the fiscal policy is just as relevant to inflation -- if govt spending as a proportion of the economy changes, it gets easier/harder for others to buy things. I guess interest rates mostly change behaviour, and have a less direct (though maybe no less real?) impact on scarcity.
yes, federal reserve monetary policy is much more focused on the supply side of money (m2,m3,m4) - making sure banks are well capitalized and can lend to one another smoothly in order to make loans and keep liquidity high - but this doesn't get directly translated into inflation because a lot of the "printed" liquidity isn't directly circulating in the economy (low velocity)
government fiscal policy has a much more direct effect on m0, m1 through stimulus and other direct lending and spending efforts, which have a high velocity and directly impact inflation
now...what happens if the assets on the feds balance sheet start to default?
Technically the Fed cannot own “impaired” debt; it can only buy US government securities or government-backed securities like Fannie Mae mortgages. They are starting to push the bounds of this constraint though, by (for example) making arrangements with the Treasury to hold corporate bonds where the Treasury has to take all the write-downs if the loans go bad.
I think there has been a reasonably large amount of inflation in terms of the real value of many assets at a national level. It has been counterbalanced in part by the deflationary pressure of the US being the global reserve currency that everyone wants to have their money stored in during trying times, and reduced spending.
However, I think that national inflation often doesn't give a complete picture, and the more significant effects of inflation are often localized closer to the money. A lot of the insane COL in the Bay Area is an example of this. Exactly where is closest to the money in this instance is difficult to say.
Inflation is an increase in (printed) money chasing the same amount of goods and services. But consumer spending has dropped despite the stimulus. The lockdown has eliminated many options for discretionary spending and people have been dropping their extra unemployment money into paying down credit cards instead of trying to buy more stuff on Amazon. Basically, the economy is down despite the stimulus. To have inflation, we would need to see a rise in demand from free money and that’s not what’s happening.
Economics recognizes two types of inflation: cost-push inflation and demand-pull inflation. Demand-pull inflation follows the process you described, namely prices rise because too much money is pursuing too few goods.
The other type of inflation, cost-push, happens when the cost of goods rises independent of demand. Abuse of monopoly power can cause cost-push inflation (hello, business software pricing) but so can increased costs of labor.
On balance, cost-push inflation is a more probable outcome of the pandemic. It's physically harder to Do Stuff because workers need to stay further apart and because many will get sick and be unable to work. This will drive up prices to an extent, but price rises will be constrained by slack demand caused by reduced employment.
Exactly, private banks create money by issuing debt and if consumers are using the printed money to pay down debt then no inflation (just a transfer of debt from private balance sheets to the government).
$600/week/person over any reasonable period is hardly enough to trigger serious inflation worries in the short or medium term. Even if you apply that to everyone in the US, you're looking at $180 billion a week, against a GDP of $20.54 trillion.
It's hard to even figure out what a "10% unemployment rate" means. I recall unemployment rate calculations involved something like "of the people actively looking for work (according to the most recent definition), X percent can't find it". Looking at ostensibly more objective "Labor force participation rate", it seems work decline precipitously at the start of the lockdown and has now, indeed, shot back up by 1/2 or 1/3 the amount.
But what it all means is hard to gauge. For example, the long increase from 1970 to 1990 involved the (re)entry of women into the workforce. The present a labor force participation rate now equal to that of 1973 might not involve the re-emergence of the happy homemaker.
Yeah, kind of like what I except but with ascii graphics.
But my implicit point is "people actively looking for work" has been a quantity whose definition shifts and who method of measurement shifts and which is inherently difficult to measure.
Lots of people missing the core thing here: savings rate.
When the propensity to save increases it reduces consumption. Falling credit card debt, reductions in mortgage delinquency, those are all trailing results of the increase in savings.
People are spending less with most people's income staying steady. This money is flowing into assets and reducing debt.
In normal times this would be a welcomed reversal of the American trend. Yet this effect is temporary and instead will only serve to hurt the velocity of money.
"Why is there no inflation despite massive printing?" is also a common refrain. Here to the savings rate is to blame. With less consumption the velocity of money has shrunk and the effective money supply shrank with it. Thus the FED's insane money printing is in part only there to counter act the deflationary pressure. Again: everything comes back to the savings rate.
I think the lockdown is a large reason why it looks like this. There are simply less things to spend money on at home, and all the free time at home means people are looking over their economy. And speculating/investing.
Simply put, people have stopped buying stuff they don't need. They've changed their spending patterns and found that they have extra cash to pay their bills, invest, etc.
Gee, if only they'd have been encouraged to do that earlier.
This kind of feels like a test run of Modern Monetary Theory. I guess once we have a vaccine, and the full effect of all this stimulus settles, we might find out if our fears are warranted or not.
looking at the markets makes it more apparent that performance madness is largely driven by 2008's quantitative easing having never been put through cessation. It was tried once with disasterous effects, and we entered this recession with the same debt still on the balance sheets. Wolfgang Streeck does a great job of explaining it in his book 'how capitalism will end'
Essentially through regulatory capture, capitalists have commoditized things you shouldnt, like labor and currency. As this progressed through the past decade the markets began to drift further and further from any meaningful ties to labor or consumer confidence and spending. Markets began to perform simply due to the fact that they were a market in most cases, and so we see in 2020 though the US suffers nearly 40% unemployment and a service economy that has a failure rate of nearly 50%, markets that float along with easy access to low interest or negative interest credit as a function of the post 2008 recession are nearly entirely divorced from reality. They no longer serve as a barometer for the overall state of a nation at all.
And now we enter the 2020 tax season next january with a promise that somehow this burden will be deferred yet enforced for the average citizen, which could honestly only be maintained with evermore low or negative interest loans this time issued directly citizens instead of major multinational corporations as part of a personal shift of public service (competent taxation policy in this case) to personal responsibility that began in 1993 with the US exit from the public sphere of education and ambulance services in the form of charter schools and ambulance bills. this was enhanced with the transition from low wages and savings to personal lines of low interest credit that inevitably wracked the market in 2008.
Was the above post AI generated? The statistics are made up - unemployment is not 40%. It is not the case that "now we enter the 2020 tax season next january." And I have no idea what "commoditization of currency" or "deferred yet enforced" means.
I don't feel this article focused enough on the primary driver - deferments. Credit card, mortgage, auto, rent payments were all deferred the same time money was handed out. At the same time, the ability to spend money to travel, go out to eat, etc all evaporated.
This let people pay off debt, save, or invest. All of which is probably good considering...
There are multiple super scary looming issues:
* Commercial real estate is about to collapse
* Renters are about to have to start paying again (although, with Trumps executive order, maybe not?)
* Auto repos are about to pick back up
* Those who are required to use credit cards to finance their lives are about to be cut off (banks are limiting increases)
* Wave two of the virus is going to increase
* Civil unrest from elections, pandemic, racism, etc. are going to [probably] continue to escalate
* Inflation will start to hit (we can already see it in the stock market and some food prices). This will effectively reduce any stop-gap mechanism.
* Unemployment insurance is going to start dropping off for people (who did apply). States typically have 12 - 24 weeks[1], plus the additional 13 weeks from the CARES Act.
* Although unemployment is dropping, part of that is their counting mechanism. Many left the job market (my parents just retired), job openings are dropping (we will see Junes tomorrow[2]), a second pseudo-lockdown will likely continue through the end of the year.
* Many small businesses haven't really "recovered" and are still running red. Many will be out of business by the end of the year.
* Oil prices are stagnant, but any kind of lockdown will cause this to drive down further.[3]
* Airlines aren't expecting a recovery any-time soon. [4]
I agree, the article feels cherry picked. Look at the entire picture not just what's going well.
The S&P 500 is performing well, because it's being driven by big tech stocks that were largely unaffected by the pandemic.
There is a flood of retail investors enabled by mobile apps, many of them are inexperienced. There is stock mania, trading without looking at fundamentals.
Everything is great except for the 30M unemployed.
People aren’t paying rent and entire industries are truly and completely fucked. The conjecture here is baffling for a website that supposedly is rich in common sense.
A recession is labeled by the NBER and has a modestly strict definition of: A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.
Even if we’re to take this arbitrary definition from this small private organization, the article of this thread states that GDI is the highest and debt is the lowest since 2014. While GDP is 1% from the highest.
Record job numbers were posted in May.
There’s absolutely no evidence that any sector other than the social entertainment sector has been negatively impacted. Even REITs are doing well. Traversing economic damage across sectors is a key ontological definition which the NBER and monetarists agree on. Which is what I mean by systemic.
Most major central banks, including the Fed hold the monetarist parallax of where a recession is endogenous as the other commenter notes—-where all recessions are caused by monetary policy failures.
Indeed the surprising facts of this article are instead predicted by the monetarist, perhaps it’s only the NBER acolytes and Keynesians who are left confused with their certain ontological stubbornness.
I don't care how many references you have claiming that a recession defined only by statistical data points, you're wrong. A coherent definition of a recession involves the stipulation that it is an endogenous crisis. Exogenous effects showing the same data points still can't be the same.
Uhhh that’s a completely different argument. A recession is a recession. Economists, bankers, and policy makers all but unanimously agree that a recession is defined by the NBER.
A recession need not be an endogenous crisis. I don’t know where that’s coming from, but there have been plenty of exogenous induced recessions. 9/11 being one of them. (I know you don’t like references, so I’ll leave that up to you)
There’s nothing less scientific than defining some phenomenon as some authority’s whimsical arbitration. It’s a deeply mistaken view that all economic analysis is incontrovertibly decided by some coterie, and that somehow that is the unspoken agreement.
When there is exogenous disruption, the Fed is responsible and capable of preventing a then endogenous recession. For instance, this is the first time the money stock has been raised proportionally to the extent as the money velocity has dropped—-a correct measure as described by the monetarists.
> The real estate market has been red hot after an initial slowdown during quarantine:
The spike here coincides with the riots and "defund the police", not the recession or pandemic/quarantine. It's likely people moving away from the hotspots.
The chart in the article shows the median price of homes sold. Nothing about total real estate transaction volume which is what you’d need to look at to say that the market is “red hot”. Common sense would dictate that the only people spending money on real estate right now have excess wealth and are playing around with more expensive properties.
Anecdotally, I live in a less popular region of Canada - our version of flyover country if you like - and our real estate has been on fire despite the rioting over here being fairly muted. I think a lot of homeowners in large urban centres are getting out due to fears of the pandemic and in some cases, being able to work remotely. So they're selling their condos in trendy cities like Toronto and Vancouver and buying single family homes in places like Halifax.
Not sure whom they're selling to though, investors maybe...
There is no such thing as a free lunch. Money is not created out of "thin air", all that is happening is that the present generation is borrowing from the future generation and generations that are yet to be born. The young and unborn subsidize the old.
The way this kind of borrowing shows up in society is in low marriage rates and smaller families and eventually lower birth rates as people cannot find the stability or financial ability to start families or even to establish stable relationships, which eventually leads to low consumption as your demographic basis simply needs less of everything.
As long as you have political will you can keep kicking the can down the road at the cost of a declining population. In liberal western societies this is partially made up by immigration from developing countries, but that creates another host of issues and tensions between recent arrivals and natives.
Money is free, but it is not a lunch. You can't eat it. It doesn't actually do anything at all by itself, which is why you CAN create it out of thin air!
What matters is real productive capacity. Factories that build stuff, fields that grow crops, people learning skills. If next year, we have shuttered factories and fallow fields and a less skilled workforce - then the future has paid the price!
Perhaps the government saves the future by borrowing today. The Fed issues bonds, Jeff Bezos buys them, and in 50 years Jeff Bezos's kids own bonds, that yours and my children pay for through taxes. But that is a wealth transfer between people in the future, not a transfer from the future to today.
I thought the main unemployment number included only people looking for work? If states dropped the LFW requirement from unemployment, that number would drop despite lots of people still on unemployment, no? I assume federal unemployment statistics focuses on other less state dependent metrics.
Similarly the median house price is a farce if, like in the GFC, there's plenty of easy capital available for a land grab at the top. The prices could easily reflect increased competition and asset inflation, not something new about this financial crisis - and it wouldn't really be new, would it?