Try and think of our global system as an engine that's purpose is to make fuel for itself. It needs to keep it's input above the output in order to keep powered on. As soon as the input drops below output the machine starts to slow down and can no longer sustain itself. The engine is not designed to slow down so it very quickly breaks down
At a macro scale, the biggest benefit of some inflation is that it also devalues debt while it devalues currency. In a deflationary spiral, the real value with debt compounds with deflation in addition to interest, so the velocity of money grinds to a halt. No investment means no jobs, bread lines, and a complete collapse of the consumer economy, resulting in a corresponding collapse of the government's tax base. This is literally the entire basis of Keynesian economics - that the government must engage in deficit spending to combat deflationary pressures during recessions, because there is basically no other option.
The prices only go down when people don't have enough money to buy things.
isn't that where we are now? I mean kids aren't moving out of their parents house. And everyone has either multiple roommates or multiple jobs. Tech is laying off, and no one is hiring.
There's a penalty for hanging on to money. Banks would essentially be fined for not loaning money out, so the net result is insanely low-to-zero interest for borrowers.
The problem is, of course, if the downturn is that bad, you have to weigh having money in reserve that takes a penalty versus loaning it out and losing it all.
"You're thinking of this place all wrong. As if I had the money back in a safe. The money's not here. Well your money's in Joe's house. That's right next to yours and in the Kennedy house and Mrs Melan's house and... and a hundred others."
Yup. Even decades later the system is the same. If I went to my local bank to withdrawal all my money, it's extremely unlikely they'd have enough to cover it unless it was a prominent bank in a fairly large urban center. And that's just one person. Hell, most banks don't have liquid assets to cover all their customers cash if they all start pulling it out.
As soon a they said that this scene popped into my head. I've seen this movie hundreds of times. It's my dad's favorite. He'll watch it any time of year.
Possibly and probably for those who understand what ZIRP or negative real rates implies.
Having money in a savings account would be silly. The value of a dollar today would be more valuable than the value of a dollar tomorrow in such a situation.
No, WEEEE wouldn't see negative interest rates, billionaires who need to constantly move commas around a spread sheet would. WEEEEEEEEEEE would still be getting fucked over.
Which, incidentally, would also materially bandaid the US debt crisis for a few years without changing spending policies. The US would refinance a bunch of expensive / high interest treasuries with near 0% rates and let the money printer keep going.
It's funny because I think the regimes goal was to drive UP inflation to reduce the cost of servicing the existing debt and THEN collapse the economy to lower rates. The might have failed at part 1, but perhaps were successful with part 2.
Deflation will happen when boomers start to retire enmasse and pur imaginary stock prices dont have the liquidity behind them for people retiring... only magically for more circular investment between the same 6 companies.
I doubt it'll be a sudden change though. At least not until it hits a breaking point and the public gets wise and tries to get what they can from it.
Oh it'll SEEM sudden, but there will have been thousands of economists ringing alarm bells well in advance while the politicians pull the curtain closed and say everything is fine, right up until the whole thing crashes. And then it'll be a "Who could have seen this coming? It's not our fault!"
Sometimes people need some number to understand what happens when deflation happens. There’s 2% deflation and that seems close to zero or healthy inflation. Doing some google fu I found out that profit margins on wheat farms are in the 1-4% profit margin. At -2% inflation all the farms in the 1% profit margin can now double their profits by not farming. As someone without the means to grow my own wheat this is a problem for me.
Too many people have not studied how bad the depression was. There’s a reason granny kept a ham in her deep freezer from 10 years before you were born.
I don't know if I'd say I'm doomsday prepper level about it but I've got enough non-perishable food to last a couple years in the event that the cost of food either becomes prohibitively expensive or just isn't there to buy. In this fantasy scenario though the water needs to still be running because I have at best a couple months of water.
Except the prices keep going up anyway and that seems to be just as big of a problem. Basically it just sounds like the entire system as it is is meant to fuck us no matter what. Either the great machine can continue to pumping out more bullshit and we can keep buying it with the ever-increasing prices that they want to put on them or we can't afford it and then we all end up without jobs and in a death spiral. Perhaps the problem is the machine.
Don’t forget these people kept telling us that paying people would cause inflation. Except that cost of living and corporate profits have outstripped worker income for decades.
Now people can’t afford to buy shit and we are being blamed for deflation as well. Basically any non capitalist will be blamed for he state of the economy no matter what.
One of the hurdles of affordability in housing is that no matter what you do it will hurt someone.
A lot of people who own their homes have them leveraged at their current value. If we make housing more affordable that means the value of their house goes down while their debt stays the same.
I personally (as a person who own their home) think we need to be making housing more affordable, but as a country we’re really bad about explaining and preparing for the negative impacts of positive progress and housing is just one example out of thousands when deflation hits the economy.
One thing is people need to think. Buying a house that is historical like $320K for $670K, a house thats doubled in value in 6 years. Its not smart. Like I get housing is needed but at the same time you need to have sense as a buyer. On no planet is that house a good investment. Youre umderwater the day you buy.
I just see houses in my parents development going or being asked for ludicrous prices. I know people that bleed money buying overpriced houses before the 08 crash. It'll happen again. People are so leveraged and likely have loans out for like 50 years.
I think the problem is buying a house as if it were an investment in general. I bought mine in 2022. No one can tell me whether the housing market will go up or down in the next 10,15 or 30 years.
So the decision on how much to spend is based on how much I like the place and what I can afford. I don’t take HELOCs or use my house as collateral on anything. And when I asked the bank to pre-approve me for $300k so I was ready to buy at $250k and they told me they could get me more I declined because I knew $250k is what I could afford no matter what the bank told me.
It’s my house, not my investment. I have a 401k for investing and I just don’t touch that shit. If my home value drops $100k in the next ten years my mortgage stays the same, unless I refinance for a lower rate and I can live with that.
While true there depends on the house and your life status. Like a starter rancher is going for over $400K. A lot of the model was buy a starter then sell that and buy a bigger house. With the insane prices at least where I am, you'll never make out. That rancher is underwater, so when it crashes back towards it actual price you'll be unable to afford or sell for a bigger house.
A lot of what happened in 2008 is going to happen again. A friend of my dad's bought a house in like 2006 in an ok area but at a price way too inflated and the second the market crashed, he had kids and wanted to move to a better area. He took a bath on that house, but was lucky him and his wife were dentists and had their own practice and worked for a university.
It's more the point when you reach the point you want to trade up or down, its just insane to. Either you cant afford the bigger house or in my parents case its like why bother? To buy a smaller house at $400K to sell the home they've been in 31 years? So there's a big family house that will never touch the market. There are quite a lot of similar people to them too.
How the housing market is here is completely unsustainable. The prices are way to high for what should be cheaper property for younger people. That leads to the why downsize crowd, so those houses just sit, then to upgrade is even more inflated. It's going to implode. Covid and the price gouging is doomed. When? I don't know, but I'm hesitant to sell my place, a small condo in a major city's downtown and buy some overpriced junk that's bigger but not my final home.
Like your case and my brothers is well I got the house raise a family there etc. So you'll be there 20+ years. The prices or crashing won't do much but for others looking to move up or down its a time bomb.
That kind of gets at my point of it not being an investment vehicle. I think it still makes more sense than renting, especially since in my area rental prices are still going up while home prices are stabilizing or even dropping.
My overall pint is that as a society we agree that affordable housing is important to a stable, healthy economy and those of us who own now need to accept that fixing the housing problem will have a negative impact on us individually.
I think the juice is worth the squeeze, but not everyone thinks like me.
No, you're wrong. If a house historically cost about 320k, the reason it finally hit 600k+ is because the market was finally set free so now that house can keep shooting up in price forever just like supply side Jesus intended.
You're not thinking of this properly. As people's wages stagnate and the gap between COL and wages increases steadily, the increase in value of your home is like a perpetual acceleration machine that's only byproduct is shooting out extra cash forever. Duh
People still have money because debt. Debt is the highest it's ever been across the board, and the interest rates on that debt is also the highest it's ever been. But people don't care, they keep getting more debt.
Only because it is allowed and businesses use it as incentive for consumers. Back in the 50s and 60s you couldn’t finance stuff as easily as you can now nor did you need to. I still have a #7 supersized I’m paying off with Klarna.
It's not just that most people don't have money and stop buying things. People who do have money slow or stop economic activity because their inert savings will be worth more over time. The incentive to take on risk with investments or growth dissipates. The economy seizes like a brick.
As awful a treadmill as inflation can be, it at least encourages money to move.
And people are still financing $100,000 trucks for 10 years and happily paying those, maxing out their credit cards, buying Pokémon cards or goop or whatever other bullshit that fits on a shelf for top dollar and stores can’t possibly stock it fast enough. To the economy, shit is booming. Those same people will never own shit that actually matters, but the economy doesn’t care about that.
actual economic measures today are far better than what we experience day-to-day. there’s a lot written about this phenomenon, but the data indicates that we have excess spending available, and to assume everyone is X is a subjective assumption. true that hiring is down, but unemployment is low. rent is trending downwards in some areas (midwest, colorado). yes there are affordability issues, but it is largely narrative. the data tells us otherwise with this economy. which is super weird.
I'm sure data says one thing, but i've never paid this much for gas and food at the same time. I'm 49, so i remember the 2008 hit.
I get that inflation is spread across the whole of the economy; Food and housing is only a portion of that. But A LOT of us are only buying food, gas, and rent. For THOSE people, it doesn't matter that a TV or boat costs less. They aren't buying those things. And the things they ARE buying are going up a lot more than just 2-3%. Making A skillet of hamburger helper at home is now over $10. something has to give.
Edit: i also own my home. I'd love to sell it and get something closer to work. But I don't see spending a half million dollars on a house (older than I am), at 7% interest. I'll stay in the one i bought prior to covid.
It's harder to buy a house now, than during the Great Depression. Rent is through the roof. College is obscenely expensive. Wages have stagnated for decades.
The check engine light is on, and the temp gauge is in the red. Something has to give.
Seriously.. All that gives, is corporations and rich people trying to put the blame on everyone else. The money printing only works for so long without actually addressing any problems for the people
Whats nuts about this specifically is those that own a house and have owned for 30 years (So either assume paid off or refied low at some point that isnt recent) and are an empty nester just renting out 2 or 3 of their 4 bedrooms....
AT THE GOING RATE OF OTHER RENTALS!
Like... $950 for a room because an apt studio nearby is $1250.
Should be fuckin laws against this shit, but of course there isnt because "Capitalisim" and "They dont have to rent so they can rent at what they want"
The week or so ebt wasn’t funded. My local Walmart had food items clearanced for under $1. Filled up my cart for $90, hadn’t done that in years. Multiple reasons why. AI orders everything for those stores now days, so trucks were coming to deliver more food. EBT is a massive subsidy for Walmart to fuel their greed. People need it to not starve. Corp knows that so they charge extra, I suspect. Like with student loans and tuition increases. We like to solve problems by creating new problems in this country🤣
I’m aware. Those where we have to move product NOW prices. Nearest Walmart has the highest markup in this area, if I drove 30min prob not as dramatic. Middle class majority white, theft has almost put nearest WM out of business. Still might. Bored white women steal as a hobby here. It’s unsustainable. I filled that cart with junk food, fresh produce, baking mixes, and frozen food. Was not the healthiest cart. I buy meat from a meat locker. Of course I would never steal from WM. Secret shopper is my shadow.
My understanding was that people don't spend money as the thing might be cheaper the next week. It would get all the unnecessary crap out of shops and people would just buy essentials. I think that would be good for everyone.
Prices go down for tech products (relatively speaking) since years.
Look at prices for TVs for example.
Still people buy TVs and don’t wait until forever because prices go down.
Inflation however is one of the main drivers of the „forever growth spiral“, where the buying power of workers continuously declines whole asset inflation leads to more and more wealth concentration.
Billionaires are one symptom of a system that systematically concentrates wealth.
One problem is that wages keep going up. If prices go down, but wages don't... how are companies going to make enough money to keep paying employees what they already make, let alone offer future raises/ keep up with minimum wage increases by the govt? It's not common (or ethical?) for companies to lower wages to current employees.
Economy is funky. If you win in one area, you get a loss somewhere else. Add greed into the mix, and you get a whole new problem where something COULD work, but if the millionaires aren't happy, they can afford to push changes that the rest of us just trying to eat won't be able to survive on.
tldr; there's never going to be a situation where everybody wins.
Not before the US implodes into financial ruin or explodes into civil war, I don’t think. Maybe from the ashes of the American Empire, but look at the federal government and tell me you see a path to a better future for any but the well off in our lifetimes.
The world is on the brink of collapse financially, militarily, and climaticly.
Truly, I envy your optimism, and mourn the loss of my own a long time ago.
That wasn’t me being optimistic hah, that was just explaining a route that could benefit the poor while making the rich less rich.
However, I do think Trump has royally fucked up any possible way the US stays at the top. The distrust across the world in America is at all time highs.
In practice, what it means is it will be the rich people from other countries who will benefit from this situation. They will bail out governments and companies, but they will have to sell them assets, and if it is not enough, sell monopolies, exclusive rights
But you can be sure rich people will be bailed out.
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u/IrksomFlotsom 7h ago
Try and think of our global system as an engine that's purpose is to make fuel for itself. It needs to keep it's input above the output in order to keep powered on. As soon as the input drops below output the machine starts to slow down and can no longer sustain itself. The engine is not designed to slow down so it very quickly breaks down