Rolling US Economy Into The Shitbin Thread

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.

I took home economics my senior year just to fuck around, and I don't think we actually talked about home economics once.. we learned to make frosting though

Which is a marketable skill.

I only remember because it seemed less than optimal (8th grade?!) and probably was sponsored by Junior Achievement or something similar. Which, while not a credit card company, is a business community thing aimed at making entrepreneurs

iirc my peers had financial literacy as part of an economics class in high school, which I believe was a quarter of a school year. no clue if it was any better, as I took the AP class where we mostly made fun of Alan Greenspan

We had consumer ed in high school. Taught us the various scams! Bait and switch etc. Pretty useful!

I don’t think ‘financial literacy’ is a panacea - “don’t buy toys on a 27.99% credit card,” yeah okay but credit is how you get to have toys, treats and vacations at all when your rent is 40% of your income.

The economy didn’t become what it is because we bought shit on credit, we bought shit on credit because the economy is what it is.

we had a business class in 5th grade that taught us about how to be entrepreneurs and how the assembly line worked, and we basically were shown how to assemble a pen, then put into groups of 5 that competed against each other with a disassembled pen, and first asked to assemble as many pens as we could each individually in something like 2-3 minutes time, then to use the assembly line method with our group in the same timeframe, which was supposed to illustrate to us how much faster and more productive that was.

for each competition, they counted how many working pens each group assembled and crowned the winner. except the demonstration backfired when one group got zero working pens with the assembly line method because the kid at the end of the line was a doofus and put his piece in upside down for all of the pens.

then the frustrated instructor said "that's business, baby!" and promptly leaped out the window

The real business class is coming up with the idea to put one of the non-working pens in each package of working pens so that it's not found until it's too late to return the whole box.

My kids both had a high school financial literacy requirement. But we've also both been very good about teaching them good habits, advice I'm not sure most kids get.

Very good advice, but we still have this problem, which will not be overcome with all the financial literacy in the world:

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

This kind of economy how the all-volunteer military fills its quotas.

agreed however it is fun to talk about the bizarrely shitty financial education americans get. my economics class was taught by the PE/driver's Ed teacher and all we did for weeks was pick stocks out of the newspaper and see if they went up or down, and keep track of how much money we'd "made" or "lost". for one day only, near the end of the term, there was a stilted lesson on "Other economic models" which included "command and control" as one of the types

I don’t think ‘financial literacy’ is a panacea

Agree with this wholeheartedly, but I think we can impart knowledge about just how fucking predatory our economic system really is, and how to navigate it while keeping your head somewhat above water... like, if you see a 'rent to own' sign, just walk the other way

Also: timeshare properties!

I have never heard anyone say, "Man, I'm glad we got that timeshare!"

Rent to own is predatory and also the only way he had non-curb find furniture when I was a kid is the problem.

One of the best pieces of financial advice I ever heard came from Lemmy; I asked him at the end of an interview if he had any advice for young bands (not even specifying financial advice) and he said, "If the record label gives you the name of a lawyer you can have look over the contract, laugh in their face, get up and walk out."

I don’t think ‘financial literacy’ is a panacea - “don’t buy toys on a 27.99% credit card,” yeah okay but credit is how you get to have toys, treats and vacations at all when your rent is 40% of your income.

― papal hotwife (milo z), Friday, January 5, 2024 6:47 PM (yesterday) bookmarkflaglink

if you could afford to pay off the credit debt plus interest, you could’ve just saved the same amount and ended up with more money. unless you meant you’d file for bankruptcy?

In a couple of years saving up you could definitely get that toy or weeklong vacation - if your alternator doesn't die or your pet doesn't get sick or etc..

I don't believe people generally take on credit card debt because they're morons who can't figure out that compound interest is bad - if not an actual necessity (vet bill, mechanic, my current credit card debt is for a root canal and cap because Obamacare dental plans are all a joke), it's the option for making life a little more bearable.

I've always wondered if there was a way to estimate what percentage of people taking personal austerity measures and getting debt-free becomes unsustainable because it tanks the overall economy.

The germans seem to do fine

I always got the impression that german austerity measures were a bad recipe (though I guess that's more macro than personal household policy)