Rolling US Economy Into The Shitbin Thread

excellent post, ty

different subject but:
http://www.deptofnumbers.com/affordability/us/

this lends support to one of my pet issues/theories about the economy, i.e. that we are still overinflating housing with QE and low rates, and that we should be allowing home prices to fall back to affordability

http://tinyurl.com/c6ogwsy

sorry, that's the "home price to income index ratio" with green being case-shiller, blue being fhfa, and 100 being set at january 2000 levels

I happen to agree with you, but the difficulty is that monetary policy (QE and low rates) cannot control the particular uses to which an increased money supply is put. A financial policy (gov spending or capital controls) could direct money into other economic sectors, but Congress is controlled by idealogues who will not use financial policy in this way, because that would entail 'interference with markets'.

I actually think they are quite deliberately "interfering" in the housing market, for misguided reasons. I mean, it's sort of a case of bailing out one group of homeowners (those who bought during the runup to the crisis especially) on the backs of another (people trying to buy homes now). The people entering the market now are facing either (1) higher prices coupled with lower future price appreciation (as rates will eventually increase) or (2) inflated rents as more people than usual are in the rental market, since they can't buy. A much preferable, but hard to work alternative imo would have been greater efforts at haircutting existing mortgages and/or forcing short sales -- make the banks/lenders/mortgageholders take the hit. A third option would be just letting more people default, -- a harsh option to be sure, but I wonder if it would inflict less pain in the long run, especially in non-recourse states (i.e. the borrower loses his home but gets a clean slate). But there are also all the residual effects of foreclosures and whatnot, so IDK. Maybe they picked the best of bad options.

not gonna argue this again, but the whole point of QE is you do it when you can't drive rates any lower, so i really don't think its been driving up housing prices.

mainly i suspect the banks are just sitting on supply.

and low rates in housing also aren't necc an artifact of govt intervention, even though they were a stated goal.

and furthermore its hard to argue that low rates cut against homeownership, since on their own they make owning more affordable, not less.

Hmm, realize only after posting my rant has little to do with the US economy. We should maybe have a rolling medicine and society thread?

and furthermore its hard to argue that low rates cut against homeownership, since on their own they make owning more affordable, not less.

― s.clover, Thursday, April 4, 2013 6:04 PM Bookmark Flag Post Permalink

Home affordability is determined by monthly ownership cost. Low rates mean you can afford "more house" in dollar value, but the result is that they're likely to exert upward pressure on prices -- the monthly amount someone can afford hasn't actually changed. OTOH, this shouldn't necessarily make housing less affordable either, I suppose, except by pushing up the amount of down payment needed (although low down payment loans like FHA should be taking care of some of this).

maybe putting lazy freeloading kids to work will fix the economy?

http://www.rawstory.com/rs/2013/04/04/school-forces-25-hungry-students-to-throw-away-lunches-when-they-couldnt-pay/

MA, bastion of liberal thought

maybe to deal with the crisis, we need monetary and fiscal stimulus, to induce those who aren’t too deeply indebted to spend more while the debtors are cutting back?

http://www.nytimes.com/2013/04/05/opinion/Krugman-The-Urge-To-Purge.html?ref=opinion&_r=0

The Locust Economy
http://www.ribbonfarm.com/2013/04/03/the-locust-economy/

from the comments:

...Work tends to fall into one of two categories. Concave work means that the input/output curve– the relationship between factors like talent, skill, effort, morale, and wage level; and productivity– is concave, so the difference between noncompliance and mediocrity is large but that between mediocrity and excellence is insubstantial. It’s low-risk, mundane work where mediocrity is acceptable. Concave work built the large middle class of 1925-2000. Convex labor’s the opposite: the difference between mediocrity and excellence is huge (“10x programmer”) and that between mediocrity and noncompliance is small. It means you probably shouldn’t show up to work if you’re going to be mediocre; you probably won’t get a job in the first place. The implications for job security, education, and employment are *vast* and I really think that Convexity is *the* economic problem of the 21st century. It’s *why* we will never again see a society where everyone between 18 and 65 can get paid work at a living wage. (We’ll need to implement basic income at some point, but I wouldn’t hold my breath, given the US political climate.)

Software isn’t eating “the world”. It’s eating the concave commodity work that just happened to be 90+ percent of paid wage work in the industrial era, and 99+ percent of the work for where there’s *regular* pay. (Convex work is highly sensitive to small differences in performance that the concave world could ignore.) It comes down to this. Convex labor is work where the “saturation point” is so far out that no one has found it yet. It’s so far away to the right that the logistic (“S-curve” in what they call it in Econ 1o1 to avoid scaring future investment bankers with math, but that’s what it is– a logistic) looks like an exponential curve. The work is very hard, but if you do it well, the rewards are extreme, and no one knows yet what the upper limit is. With concave work, we know what perfect completion is. If we know perfect completion, we can specify it. If we can specify it, we’re either able to program it, or it’s a field of active machine learning research. Software isn’t eating “the World”. There will be plenty of World left. It’s just eating all of the concave labor on which the risk-intolerant middle class (who fall into poverty if a few paychecks fail) relies. We can’t compete with machines. We thought *cab driving* (concave labor that required humans until recently) would always be done by people. We’d have said the same thing about sorting mail (optical character recognition) in 1985. Yeah, about that…

what is the point of progress when progress means fewer and fewer people can afford to live?

that dude's comment is a lot better than the ribbonfarm blog itself, which is mostly just fluff

That's an excellent comment, but it leaves something out -- it's not just a matter of mediocrity and excellence, but one of access. There will continue to be jobs of the executive sort where mediocre people can thrive, but in order to have a shot at those jobs you have to have the kind of background and millieu that gives you access to them. Broadening inequality, skyrocketing education costs, etc. are raising the barriers for anyone not from a wealthy, well-connected background. The "mediocre" children of "excellent" software entrepreneurs will continue to be fine.

Also, just a question that lingers for me -- doesn't classical economics tell us that all the extra "value" generated by all that labor-saving software will ultimately create other work opportunities for less skilled people, i.e isn't all the extra money supposed to "find something for people to do" as it were? Why is this different? Is the pace of change too fast for labor to catch up? Is technology really so advanced that EVERYTHING can be done better and cheaper by it?

many economists believe that's the case, but there's not really much more behind that logic beyond 'well, that's how things have happened in the past'

yeah I'm as skeptical of that kind of claim as anyone, but otoh wouldn't part of the logic be "well what are the rich going to do with all their newfound money otherwise?" I guess they can just sell paintings and hamptons homes back and forth among themselves.

maybe the value of having all that money becomes the fact that everyone else doesn't/can't have it. as in, it represents less what you can buy with it, and more the power/position in society it gives you against what everyone else doesn't have.

that is a sad and probably insightful post

money = opportunity. that is how american nepotism functions. too bad the blue stockings suck more and more at running things the more they consolidate money/opportunity

I forget if it was this thread or another but this http://www.eastbayexpress.com/oakland/the-bacon-wrapped-economy/Content?oid=3494301 article provides some good examples of how contemporary rich people consumption can create jobs w/o really creating a healthy middle class or even really 'jobs'

ie their money can go into zoning-inflated $4m 3br houses in silicon valley and to people on taskrabbit working for $4 an hour

it's the middle class who support the middle class. the wealthy aren't going to pay Joe "Sixpack" and his contracting company to build their new luxury palaces, it's going to be designed by Armando® and be built by non-union laborers. as the middle class shrinks from the top down, it's also going to shrink from the horizontal, too.

Yeah one of my big Thoughts About The Economy I Have Had is that today it takes an education from a pretty good university just to understand the cultural millieu of the wealthy well enough to cater to them. I mean maybe that was always true. But if you want to sell prodcuts/services to the very rich, you need a lot of cultural capital.

Like you pointed out upthread, it's no longer the education per se, it's the access that an education grants. Getting into, say, Stanford is arguably more valuable than the grades you get while attending.

This thread is depressing.

yep that's also related to why more access to higher education isn't the panacea that people want it to be - the vast majority of people going to university are not going to a stanford

"Getting into, say, Stanford is arguably more valuable than the grades you get while attending."

didn't realize this was a new thing

By that I mean that the internet has greatly lowered the barrier to entry for knowledge i.e. you don't have to be a student to have access to much of the knowledge that higher learning possess. That hasn't always been the case.

eh you didn't have to be a student to buy an intro anthro textbook 20 years ago either. it's the changes that are happening w/ credentialing that really matter, not the advances in 'showing a video of a guy talking / reminders to read your textbook'

interesting points. those online academies are touted as changing the face of education, but if the value of education is more about networking and class signifiers, then what value do they really have? seems like another way to protect the status quo by shifting the responsibility from the current system and onto the individuals struggling under it.

their value is mostly in that they allow people to save tens of thousands of dollars on their useless credentials

well, the value of that I guess is the value an employer gives to seeing "Khan Academy" on someone's resume.

if someone cracks the code to successful vocational training via online classes, i think that would be a genuine boon that has nothing to do with credentials.

an employer isn't gonna give any more value to khan academy than they are to south west virginia state university - but that's kinda the point, there's an opportunity for the colleges that have strong brands to cash in on them

for tech stuff, i feel like github contributions might have more of an influence on hiring than most college stamps anyway.

what is the point of progress when progress means fewer and fewer people can afford to live?

― reggie (qualmsley), Monday, April 8, 2013 4:32 AM (13 hours ago) Bookmark Flag Post Permalink

start paying them not to work, jeez, it's so easy

But when you draw back the lens, you see that this week's stock market/labor market schism isn't a new story, at all. Here's the 40-year look at the growth of corporate profits vs. GDP vs. income that goes to workers, rich and poor. I mean, holy wow.

http://www.theatlantic.com/business/archive/2013/04/the-economic-story-of-the-year-the-stock-market-vs-the-labor-market/274698/

http://video.pbs.org/video/2296684923/

Yay team!

More Than 101 Million Working Age Americans Do Not Have A Job

In other words, the Obama administration is getting unemployment to go down by pretending that millions upon millions of unemployed Americans simply do not want jobs anymore.

lol, you mean just like every administration does, because that's how the unemployment number is calculated?

Submitted by Tyler Durden on 04/08/2013 13:36 -0400

yeah it's zero hedge

lol @ calling yourself 'tyler durden' in this or any decade

tyler durden 1835-1872 rolling in his grave.

for tech stuff, i feel like github contributions might have more of an influence on hiring than most college stamps anyway.

I've filled out several job apps with a "please list your GitHub address" already.

if someone cracks the code to successful vocational training via online classes, i think that would be a genuine boon that has nothing to do with credentials.

― Philip Nunez, 08 April 2013

this imo

we have gone through the third level/college boom here, it's essentially free (or at least affordable to the vast majority) through grants. it's just led to the cheapening of the standard in and currency of a college education, now you need a phd. we have a lot of shitty third level institutions, the better ones seem to be just as elite as before.

https://threesixty360.wordpress.com/2013/03/29/third-derivatives-in-the-news-again/

http://www.investopedia.com/terms/b/biflation.asp

^ even if this were true, can someone explain to me why the price of food would go up? on one obv if gas goes up food prices will also rise, but i understood that food is heavily regulated by the government and if prices rise can't the government just allow more food to enter the market to somewhat stabilize the price?