Rolling US Economy Into The Shitbin Thread

this thread has been calling the next financial crisis as just around the corner for over a decade. one day it will be right

― flopson, Tuesday, October 11, 2022 1:47 PM (two months ago) bookmarkflaglink

it’s here

― Tracer Hand, Tuesday, October 11, 2022 3:05 PM (two months ago) bookmarkflaglink

two months pass...

Maybe we're a lobster who only slowly realizes he's in a shitbin.

yeah i mean we’re not doing so bad, exxonmobil and chevron will make an estimated 100bn in profit between them for instance

This ghoul

Larry Summers reclining on a tropical island and instructing the proles that "there's going to need to be increases in unemployment to contain inflation" ☠️pic.twitter.com/t1ONYePsUZ

— David Adler (@davidrkadler) January 6, 2023

everyone keeps saying this but it seems like inflation is easing and employment is still high, the big tech layoffs can be considered basically fake

Yeah, at the service-sector level at least the problem around here continues to be that nobody can get enough workers. I think Larry et al partly have this Biblical vengeance notion that somehow somebody has to suffer for the pandemic-era profligacy. (Somebody who isn't them or anyone they know, obv.)

the big tech layoffs are tiny relative to the economy. it's maybe 100k total, and most of those people have or will find new work quickly.

Hang on, I've just calculated the unemployment rate to extra decimal places, and December's rate of 3.468% is a new 50 YEAR LOW, the lowest rate since 1969.

— Justin Wolfers (@JustinWolfers) January 6, 2023

the big tech layoffs are tiny relative to the economy. it's maybe 100k total, and most of those people have or will find new work quickly.

― 𝔠𝔞𝔢𝔨 (caek), Friday, January 6, 2023 2:13 PM (one minute ago)

as user lagoon pointed out it's not in a tech company's nature to shrink, these are PR layoffs

yup, otm. also this guy puts it well

Amazon joining Salesforce today in laying off staff. Every single tech company has the air cover for layoffs

Even if they’re not “needed” it’s a free pass to restructure and clear out bottom performers

Expect layoffs to accelerate

— Bucco Capital (@buccocapital) January 4, 2023

It's kind of like growth companies issuing stock in 2020-2021 - if you don't do a re-org/lay-off in 2023, investors are going to think you're stupid. You don't want to be stupid, do you?

— Bucco Capital (@buccocapital) January 6, 2023

my roth IRA, not big by any means anyway, lost more than 15% of its value this year lol

New coin coming.

I asked @rohangrey & @NathanTankus — 2 of the leading theorists behind the “Mint the $1 Trillion Coin” idea — about some of the concerns I’d been hearing from those close to the White House about their plan Their responses, shared w/ permission, are worth reading pic.twitter.com/7HijRiohXp

— Jeff Stein (@JStein_WaPo) January 20, 2023

More importantly, where are you going to find someone to break a trillion dollar coin on laundry day?

the economy will boom from all the heist movies made about stealing the coin

Starting today’s econChat with Walmart talk https://www.youtube.com/watch?v=Xrd3_JGR60s

Two Snoop Dogg snippets from Milken today. I was sitting up front, and the whole thing was bananas.

First, Snoop Dogg on streaming media pricing: "If you can get a billion streams, why can't you get a million dollars? Who the f**k run the streaming industry? Are you in here?" pic.twitter.com/e6czGzDS84

— Paul Kedrosky (@pkedrosky) May 4, 2023

i.. don't understand how that's bananas

So, big freakout in online finance nerd land over bond yields and the danger of long-term high interest rates. I don't understand all the factors but I guess could lead to Fed easing off on inflation OR continuing to push at it and drive interest rates higher? Both potentially bad?

inflation's basically over, annualized month-over-month core pce was under 2% in august

Well that's about the best inflation print ever. Core PCE has a monthly value below 2 percent annualized (the Fed's target) for the first time since the lockdowns.

But under the hood it's even better - it's all in the right directions. Let's dive in. /1 pic.twitter.com/PXkUMzRKsw

— Mike Konczal (@mtkonczal) September 29, 2023

the fed's now signalling that they're trying to achieve a soft landing by keeping rates high for longer rather than pushing them up. i think we'll only see rates go up significantly again if inflation spikes

the fed only really controls short-term rates, long term rates are determined by the market. the fed can still influence these indirectly through expectations, so forward guidance that the fed funds rate still say high for long increases long term rates. but that all works through beliefs and expectations. the weird thing going on right now is that long term rates aren't high because the market believes inflation will be persistent (breakeven rates are stable around 2-2.5%). this implies the market things the long term real rate (the "natural rate") is increasing

and it's not just the market, fomc projections reveal there's a contingent (still a small minority) at the fed who also think the natural rate is increasing. they're the higher purple bar in this figure:

https://substackcdn.com/image/fetch/w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fb53022e7-3a60-4247-b2da-550842552cca_2886x1843.png

there's long been a consensus that the natural rate is low for structural reasons (aging global population, slowing population growth, falling working-age population, low productivity growth), so if it does turn out to be higher that would be a big change. but it's not clear why, since all the structural factors pushing down rates are still there. it would be very consequential for fiscal policy if it were true though

Thanks! That helps me conceptualize it. Of course I think part of what's going on on Twitter is right-wing economists pumping up fear in concert with the doomsday debt caucus that wants to shut down the government to force massive spending cuts.

inflation's basically over, annualized month-over-month core pce was under 2% in august

i know it's not your wheelhouse, but how "over" do you think it is as a politically salient issue?

What I've seen over time is that politically speaking, core inflation is not a salient political issue. Voters eat and drive cars every single day. Those expenses drive voter perceptions of inflation and core inflation specifically excludes those.

The GOP is clearly going to keep talking about INFLATION from now til next November regardless of what the actual inflation rate is, because to most people it just registers as "Stuff costs a lot more," which will remain true relative to a few years ago even if year-over-year inflation goes to zero.

But what they really want and have been banking on is a recession they can hang around Biden's neck. They have gotten frustrated waiting for it, so now they're trying to conjure it out of the bond market. I also think it's a significant part of the flirtation with shutting down the government or defaulting on debt, sufficient to tip an uncertain economy into a downturn.

i know it's not your wheelhouse, but how "over" do you think it is as a politically salient issue?

― 𝔠𝔞𝔢𝔨 (caek), Wednesday, October 4, 2023 12:10 PM (ten hours ago) bookmarkflaglink

current rate of inflation: not salient at all

cumulative price level increase over the last 2 years: most salient issue of all

importance of pcies/inflation may be decreasing. share in pew polls listing "High Cost of Living/Inflation" as the most important problem has decreased from 12% to 9% in the last 6 months. but the share answering "economy in general" is up over the same period https://news.gallup.com/poll/1675/most-important-problem.aspx

imo when people answer the question in that poll, they're mostly thinking about the price level. americans think about prices in levels. in large part due to living through 4 decades of stable inflation. in like argentina people have adapted mental accounting models that can help them perceive the difference between 15% and 12% and 8% inflation. they have little heuristics to help them do calculations involving future prices. whereas americans are just like A Big Mac Costs Five Bucks

it's not just money illusion though; real wage growth was negative from about jan 2021 to summer 2022. that just pissed a lot of people off and even though it's been back to positive now and real income levels are back to pre-2020 trends that memory will still sting

the other thing that could become politically salient soon is rising mortgage rates. again people just got used to low rates and higher rates will create some winners some losers but it'll be a bit more salient for the the losers who will be extra pissed. econometrically this analysis makes my eyes bleed but that doesn't mean its conclusion is wrong:

Since it's Sunday and I'm bored, I figured I would finally, definitively answer the question of "why do people think the economic is bad (and is that the case?)". This is because it is easy to answer, and the answer is funny and will make many people mad. https://t.co/T7CkRUzNBp

— Quantian (@quantian1) August 7, 2023

But what they really want and have been banking on is a recession they can hang around Biden's neck. They have gotten frustrated waiting for it, so now they're trying to conjure it out of the bond market.

i think the degree of irrationality on the part of bond market participants this assumes (namely, that their beliefs on the future path of interest rates can be swayed by republicans in congress) is implausible

What I've seen over time is that politically speaking, core inflation is not a salient political issue. Voters eat and drive cars every single day. Those expenses drive voter perceptions of inflation and core inflation specifically excludes those.

gasoline is 4% of income, food is 6%. you can argue that because they're bought more frequently the prices are more salient, but the fact is that core is 90% of income

is that regionally adjusted? the electoral college in the USA, etc

thank you!

“ in like argentina people have adapted mental accounting models that can help them perceive the difference between 15% and 12% and 8% inflation”

how does this work?!

everything is priced through crypto

Blockbuster GDP report shows real GDP grew at an annual rate of 4.9% in Q3, blowing even optimistic expectations out of the water.

This economy is going gangbusters, and it's time for the doomers to apologize for being consistently wrong for two years. pic.twitter.com/tUYhjOUoSs

— Justin Wolfers (@JustinWolfers) October 26, 2023

Inflation now! Inflation forever!

The core PCE price index, which excludes food and energy, rose at a 2.4% annual rate in Q3, down from 3.7% in Q2. However, a closer look shows that core prices were tame only because prices for core goods, like autos, cell phones and apparel, fell at a 2.1% annual rate.

https://www.investors.com/news/economy/gdp-sizzled-in-q3-but-fed-key-inflation-rate-was-tame-sp-500-futures-pare-losses/

Inflation now! Inflation forever!

― Dwigt Rortugal (Eric H.), Thursday, October 26, 2023 11:55 AM (seventeen minutes ago) bookmarkflaglink

nope!

The focus on the GDP report will be on the big 4.9% advance in the third quarter, but don't overlook the big slowdown in inflation as measured by core PCE pic.twitter.com/d1El9D58vV

— Robert Burgess (@BobOnMarkets) October 26, 2023

chart says good

Amazing! Increasing the overall wealth of the bottom half of US households by raising the minimum wage and handing out increased child tax credits in cash every month somehow turned out to be a good thing after all.

Thread

Last month, I wrote a piece for @NatCounterPunch about the recent deluge of "why don't these dummies love the economy??" articles. I want to talk a little bit about our current economic context - and explain why people might feel so down right now. (1/)https://t.co/UNRyyt25F2

— john teufel (@JohnTeufelNYC) January 5, 2024

Nobody who is logged out of Twitter (everybody) can read a Twitter thread anymore so hopefully these guys can get a blog or whatever

Full thread. TL;DR: nothing you haven't read on ILX or in a dozen other places a thousand times over.

*****

Last month, I wrote a piece for CounterPunch about the recent deluge of "why don't these dummies love the economy??" articles. I want to talk a little bit about our current economic context - and explain why people might feel so down right now.

Part of the problem here is - what do we mean when we say an economy is "good"? Are we talking about lines on a chart? Or are we trying to get at some larger truth about whether most people can afford necessities with a little left over for fun and savings? The "good life".

If it's the latter, then of course the economy is terrible. Because nearly every indicator we have points to widespread inability to afford the basics, much less the occasional luxury. All evidence in front of us indicates that capitalism has stopped working in America...for most

Let's look at an easy one: housing. Rent has outpaced wage growth *every year since 1980*. That means every year for 44 years, housing has become less affordable. The average American is now "rent burdened" - paying more than 30% of income toward rent.

Wanna buy a home? From 1970 to today, home prices have outpaced wage growth by *150%*. Since 2000 alone, home prices have gone up *160%*. Last 3 years? 42%! As a result, millennials are buying homes at lower rates than previous generations.

Let's move on to college. From 1985 to 2017, the cost of college went up, wait for it, *497%*. That's twice the rate of inflation. This hits both parents trying to come up with the money, and students burdened by massive debt.

(One more on this. Between 2006 and 2023, total student loan debt went up by *267%*. That is a crisis.)

Healthcare costs have outpaced overall inflation for decades. 2022 saw the highest healthcare costs on record. This is a problem we cannot seem to solve.

Childcare? Oh boy! Since 2000, that's gone up 41% more than overall inflation. The average annual childcare cost is now over $10,000.

All of this has happened in the context of stagnant wages, which (adjusted for inflation) grew only 17% from 1979 to 2021. Even the most optimistic Biden charts show middle class wage stagnation over the last few years. And poor people saw a bump...but in dollars, it's small!

One thing people don't consider enough - we've also seen retirement get harder. In 1960, HALF of private sector workers were enrolled in pension plans. Now? 15%. 32% of Americans have zero retirement savings. Avg retirement savings is just $65k. How many years will that last?

A whopping 68% of Americans say they would not be able to cover one month of expenses if they lost their job. That is a wildly depressing statistic, and one that is not found in the "inflation" and "wage" charts that regularly get bandied about.

Yes, the job market is good right now. But it seems Americans want more from life than clocking in and clocking out. They want stability. And this is an economy that, by and large, cannot give that to them. This is an economy of the strong preying on the weak.

Do I blame Biden? Not really (although he hasn't helped). This is a natural function of American-style thunderdome capitalism, with a threadbare social safety net. This is decades of policy choices and two political parties who have mostly called detente on economic issues.

This debate has real consequences. If we can't admit that the economy is bad bc we want to protect Biden, we can't properly identify and address the serious problems with our economic system. We aren't having the debate we should be having. We're just playing politics.

People aren't brainwashed. People aren't dumb. Far from being a "good economy," we've got an economy that has crushed the middle class, hasn't raised up the poor, and has funnelled our money to the top few percent. It doesn't work. It hasn't worked in years. It's bad. End thread.

The author has accurately described the evolution of the American political and economic landscape since the 1970s.

A whopping 68% of Americans say they would not be able to cover one month of expenses if they lost their job

Here's another fun factoid from last month: Nearly half (49%) of consumers say they couldn't cover the cost of a $1,000 emergency expense using only cash or funds from their checking or savings accounts.

this was true of me until a week or two ago until my amended tax refunds showed up. had forgotten how stressful that feeling was.

I don't want to jump on the 'blame the victim' thing (we're ALL victims of thunderdome capitalism in one way or another), but I do feel that most Americans leave school with bare to middling financial literacy as well.. how compound interest works, credit cards, mortgages etc.

My older sister seems to constantly go out of her way to make poor financial decisions, and has done this her entire adult life

Absolutely. There should be some kind of mandatory financial literacy class at the high-school or college level. Just a full day devoted to it, or whatever works best. Maybe get a certificate after.

yeah it is kind of nuts that people are just expected to be able to manage their finances, despite all of the increasing complexities that can entail. it's not an easy skill.

There are financial literacy sessions or classes in nearly every school system in the US! It's just that it's not particularly relevant to kids at the time they're taught, and retention of knowledge from high school is notoriously low

I was in a different course track but I remember we had a recurring financial literacy thing in my 8th grade civics class, including how to write a check, differences between checking and savings, what fees are, etc.

The course materials in the new era are often sponsored by credit card and loan companies as cover. They don't prey on people -- they just want them to be financially literate and make their own choices! Note that their efforts don't extend to support of the law that would have made clear language, concise terms for their products mandatory

fwiw a lot of this is mentioned in the If Books Could Kill podcast that covered Rich Dad, Poor Dad (which does not have good financial advice)

well, now we have Temu and you can buy new sneakers for $1.26, so...

This is a little off topic, but I taught a Junior Achievement class for one of my kids' fourth (?) grade class years ago. That course focused on financial literacy from the standpoint of business: profit, loss, etc.

Fast forward a few years later, JA opens some kind of space for slightly older kids downtown. I thought, Great, this will be really interesting, teaching these kids more advanced ideas. Well, yes and no. It primarily taught them how to buy shit. Which is, I suppose, a good representation of the American economy as a whole.

(which does not have good financial advice)

"Pay yourself first" is great financial advice LOL

There are financial literacy sessions or classes in nearly every school system in the US! It's just that it's not particularly relevant to kids at the time they're taught, and retention of knowledge from high school is notoriously low

I was in a different course track but I remember we had a recurring financial literacy thing in my 8th grade civics class, including how to write a check, differences between checking and savings, what fees are, etc.

This is 100% news to me, and was certainly not the case in the 80s (I graduated high school in 1990). We DID get to carry sacks of flour around and pretend they were babies, though.