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U.S. personal income posts first drop in over three years (reuters.com)
227 points by SolaceQuantum 19 days ago | hide | past | web | favorite | 229 comments

The drop coincides with the market tanking at the end of last year, due to the Fed badly miscalculating their rate hike policy.

TFA omits this context, and glaringly doubles down on the omission when they state;

“The report from the Commerce Department on Friday also showed inflation pressures remaining tame, which together with slowing domestic and global economic growth gave more credence to the Federal Reserve’s “patient” stance towards raising interest rates further this year.

The Fed caused tremendous damage at the end of Q4 with their breakneck rate hikes in the face of record-low inflation. They sucked over a trillion dollars out of the economy which is why the numbers are down.

To write that this gives credence to the Fed’s “patient” stance is wallpapering over the real story, and it smells politically motivated.

If anything, I would say that the markets are out of control. Many large companies are gorged with debt and are afraid of what higher interest rates would mean for that debt, and thus the market panicked at the end of Q4 which slowed down the Fed.

We've been in a low interest rate environment for all of my adult life, at some point the crows will come to roost and these companies will need to pay the price for their strategy of taking on debt + share buybacks and come back to earth. I'm extremely dissapointed that the Fed was spooked out of performing their duty by Wall St.

Economists call this the “narrowing corridor.” The lower the cut rates, the less room you have to maneuver. The fed needs to increase rates by like 5x in order to get us back on stable footing. My wife always likes to make the analogy of the economy being a bathtub.

When the government sells bonds or lowers rates or prints money, the bathtub gets filled up. When the government buys bonds or increases rates, the water line lowers. The size of the bathtub increases along with real growth in the economy. Inflation is when the water rises faster than the size of the bathtub, deflation when the water isn’t rising fast enough.

>...When the government sells bonds or lowers rates or prints money,

I think you have that backwards. The common consensus is that the Fed selling bonds has the opposite effect:

>...f the Fed buys bonds in the open market, it increases the money supply in the economy by swapping out bonds in exchange for cash to the general public. Conversely, if the Fed sells bonds, it decreases the money supply by removing cash from the economy in exchange for bonds. Therefore, OMO has a direct effect on money supply. OMO also affects interest rates because if the Fed buys bonds, prices are pushed higher and interest rates decrease; if the Fed sells bonds, it pushes prices down and rates increase.


Yes you are right, I’m sorry. By selling the bonds the fed is decreasing the money supply, by buying bonds they are increasing the money supply.

Thanks for pointing that out! I deserve downvotes for the original comment if anyone wants to give me one!

How is the analogy helpful? Am I supposed to be afraid of the bathtub emptying or overflowing?

You want to take a nice comfortable bath with enough water but not overflowing onto your carpeted bathroom floor

Yes, you are. The water is the economy.

How was it miscalculated? We can't sit there and leave interests rates low forever. It's a mitigating tactic, not a tenable one. We've been doing this for _years_. It's long, long, long over due for fed interest rates to come back up. Because right now all it's really doing is building a credit bubble.

Real wages and real purchasing power must keep going up. And for that to happen the upper 1% are going to have to take a nice hit for the economy to truly correct. Both effectively need to happen at the same time. The FED is essentially signalling to policy makers that the time to up minimum wage is... was, yesterday.

I want to challenge you to really dive into your perspective and defend why you think the fed miscalculated here, and why you think leaving interest rates low isn't going to have extremely negative effects if we don't start changing course now. If not now, when?

"We can't sit there and leave interests rates low forever" ...says who? What force dictates that the equilibrium for rates must be higher? Yes that's historically been the case but that doesn't mean that's the right path for us now and in the future. I would argue that low interest rates will be and need to be the new normal.

Interest is the ultimate rent seeking activity. The fed funds rate is a form of price fixing for banks whereby they collectively decide how much interest they can extract from the economy without killing it. Why must this be the case, the economy should be allowed to run much hotter for much longer.

Inflation is less of a risk now because of technology + globalization, right now we are experiencing significant deflationary pressure as products and labor converge towards global pricing/wages.

Our economy and government will be in very serious trouble if we have to pay higher interest on our significant national debt, so the government has a big interest (pun intended) in keeping rates low to protect its own financial solvency.

Finally, high interest rates imply money is scarce and that's far from the case now. Having large sums of money is not what it used to be, you're competing against a lot of other people and organizations seeking to deploy that money productively for a return. This generates downward pressure on market interest rates as evidenced by European Central banks going below zero to negative rates.

> "We can't sit there and leave interests rates low forever" ...says who?

Certainly it can be done, but if 2008 proved anything it was the theory that lowering interest rates would provide Keynesian stimulus and mitigate the impact of a recession. One of the perks of controlling the interest rate is that you can use it to apply counterpressure to the business cycle, pushing down bubbles and pulling out of recessions. If the interest rate is stuck near 0, you can't really do that, so it's in the interest of economic stability to bring it back up again.

Lowering the interest rates was not the primary band aid on the 2008 financial crisis.

The fed and other banks didn't just help the credit market grow (via lowering interest rates), they quite literally bought it to keep money flow up. There was a substantial credit freeze, and many parts of the financial system were on death's door. So governments and banks quite literally just went "take this huge wad of cash, please stay in business." And by huge wad of cash, we're talking about $12 trillion dollars of bailouts, stimulus packages, debt bonds, etc. Twelve. Trillion. In one year. The entire GDP of the U.S in 2017 was about $20 trillion.

Wages at the time were too low (oh, imagine that) to mitigate any kind of credit stasis on the monetary system. It would have had a compounding effect. No credit, no consumption, no consumption, no economy.

We "fixed" two of those. But we did it in a manner that requires us to pay for it at some point. So here we are.

Bring wages up. Allow the credit to be repaid. And not just consumer credit, corporate credit as well. Allow the federal reserve to finally increase interest rates. Make the economy truly robust again, instead of just "letting the good times roll" and creating another crisis.

Companies have to start paying workers more for us to get out of this mess.

The fact that somehow just giving banks money at near-zero interest and letting them loan it at higher interest to speculators that drive up home and asset prices is 'good policy' but god forbid we give money to people that actually spend it on things made by other people... that's bad/socialism/some scary word.

We have socialized risks and privatized profits.

It occurs to me that the tight labor market is forcing wages higher naturally. Additionally, the recent tax cuts have helped inject cash into the economy.

> Additionally, the recent tax cuts have helped inject cash into the economy.

Source? Typically this doesn't actually happen. In fact there is very little evidence for tax cuts "injecting" (whatever this actually means) cash into the economy.

>It occurs to me that the tight labor market is forcing wages higher naturally.

It's a well understood fact that labor markets actually don't equalize in a supply/demand fashion. I want to know why you think this is the case?

Common sense. Lets say you previously was paying 30% taxes on your (e.g.) 10k annual income - $3000. Taxes get reduced to 25%. So, the next year you have an extra $500 in your pocket and not in the goverment treasury.

Where does that $500 go? One or two places. You either 1) spend it on something or 2) invest it in something (which will result in that getting spent by the entity "borrowing" it).

> I want to know why you think this is the case?

I have had to raise the wages paid by my business to retain employees due to other businesses in my industry raising their wages.

No research needed for these two thoughts. Direct observation and application of logic.

Additionally, I do not consider the federal treasury a part of the national economy.

"Keynesian stimulus" is provided by fiscal policy, not monetary policy.

2008 was more a consequence of lowering lending qualification standards (or just ignoring them altogether) than it was low rates. Doesn't matter so much what the interest rate is, if you are lending money to people who can't pay it back.

I believe OP was talking about the stimulus/recovery, not the cause of the crash.

That's a massive oversimplification.

My favorite piece about this issue was from This American Life and NPR News: https://www.thisamericanlife.org/355/the-giant-pool-of-money

Aren't those pretty tightly connected?

>What force dictates that the equilibrium for rates must be higher?

Because that violates a big part of the dual mandate of the federal reserve. Lowering interest rates indefinitely makes borrowing money super easy, and you essentially cause a credit cascade. At certain levels, borrowing money means the fed is able to print more money. But if no one can really pay that money back, that bubble pops. And if you keep lowering interest rates to correct for that you'll get inflation. Lots of inflation. To the point where the money becomes useless.

>Inflation is less of a risk now because of technology + globalization

I have quite literally never heard this thought before, and at face value it doesn't make a lick of sense. you can't just vaguely pay lipservice to two very broad terms and act like it's going to make inflation irrelevant? What?

>Finally, high interest rates imply money is scarce and that's far from the case now.

No it means that the economy shouldn't/isn't/can't really borrow more. The first one tends to be the primary reason for increasing interest rates. You can't just keep borrowing indefinitely. Because again, that makes money useless.

We're already in a bit of a pickle at the moment. And we're seeing signs that the economy is starting to slip -- but we can still reverse and put an end to these signs. Consumer and corporate credit is at an all time high. Just last quarter, the number of people that are delinquent on their car loans spiked. Car payments are something people typically let slip during a financial squeeze, because it's hard for the bank to recoup it in a timely manner. But not paying your credit card or electric bill, those kind of services get shut off immediately.

Lower interest rates allowed the current credit spike we're seeing. But at some point it has to be paid back. But if people don't have the real wages to pay back those loans AND keep spending money, you're going to see a squeeze on the service sector. And that's not going to be good for the American economy.

> "I have quite literally never heard this thought before"

I don't mean this to sound harsh, but then you haven't been listening.

Its a well known established fact that technology causes 'good' deflation. The number one cited example of this is the printing press, but honestly the internet has probably been a bigger effect.

globalization has also been very commonly cited as a source of lower inflation / deflation. you may disagree with it, but you should have heard about it.

>Its a well known established fact that technology causes 'good' deflation. The number one cited example of this is the printing press,

I'm just going to be nice and tell you that you are severely conflating multiple issues here. Technological advancements have played literally no part in the monetary policy of the last decade. Monetary policies have largely been focused on making sure cash flow is first and foremost, present, and secondly consistent.

I don't know what you think I could be conflating. the original post was that inflation is not as much of a risk as it use to be due to technology. ("Inflation is less of a risk now because of technology + globalization")

if monetary policy is implemented by a magic 8 ball, that remains true.

>I don't know what you think I could be conflating.

The motivations and effects of monetary policy? To sit there and say that a fiat system isn't subject to inflationary pressures, or even are less burdened by them, brought about changes in interest rates because of technological advancements is a hilariously misplaced idea and thing to bring up.

I feel like I want to call this economic bike shedding? The tiniest detail has no sway on anything when you're talking about policies actively affecting trillions of dollars of cash and credit. We're talking in a time scale of a year, not half a century.

The lower rates are, the less room the fed has to maneuver. What if a terrible recession happened? The fed would have their hands tied behind their back at the current rates.

I always hated this argument. Its sort of like saying you need to take poison, so that if you ever get sick you can stop taking poison and possibly get better.

2ndly, interest rates were not very effective in these last recessions, the common metaphor is that its like pushing rope. So maybe its better for the fed to fight recessions with QE (or something else) and leave interest rates to 'fight' inflation.

Doesn't that rather imply that we haven't recovered from the last time we needed to bring interest rates low?

It's not an implication. It's a reality. We've been propped up by credit. We've borrowed. We have to start paying it back at some point.

And with debt now is better than later.

> We can't sit there and leave interests rates low forever.

I very much agree on this.

To me, it seems like the Fed left rates too low for too long coming out of the recession in 2000, which set up the bubble of 2008. They don't want to do it again.

And when 2008 hit, they wound up against the "zero bound" of interest rates, where they couldn't lower any further, and they don't want to do that again, either. If they want some distance away from the zero bound, they have to raise rates sometime.

"But we can't raise them now! The economy is too fragile!" Yeah, we've been hearing that for a decade. And, as the parent said, we can't sit there and leave interest rates low forever.

Just because we've been hearing it for a decade, doesn't mean it can't be true. Japan has been in a low interest rate environment for even longer and their economy isn't exactly overheating.

Maybe low interest rates are the new normal, they've been on an overall downward path for decades so it's not entirely a recent thing.

I don't really get raising interest rates to have more ammunition in a recession either. Sure, you have more room to cut later, but raising interest rates itself slows the economy down. Unless the stimulating power you get from cutting is more than slowing effect from raising, it doesn't seem like it gets you anywhere, since you're just digging a deeper hole that you need to get out of.

It's another thing if it's in conjunction with fiscal policy (looser fiscal policy, which then leads to raising rates, after which there's more room to cut in a recession). But then I think that's mainly an argument for having different fiscal policy and not just about raising rates.

Central bankers seem to be aware that not being able to lower interest rates is going to be problematic in the next recession (along with diminished QE effectiveness etc.). They aren't completely out of options to fight deflation (there's always helicopter money etc.) but we do seem to be in uncharted territory.

I agree. Looking at the overall inflation rate as a guide to monetary policy is misguided. There is nothing that says that inflation has to be widely spread, rather than just concentrated in smaller segments as we saw in the bubble you mention.

If you keep inflating the balloon, it's going to bulge out somewhere. And last time was bad.

Yellin promised us 4 rate hikes in 2016 and only did one. And it came after the election. Huge blunder imho.

>...The FED is essentially signalling to policy makers that the time to up minimum wage is... was, yesterday.

I don't think there is any evidence at all that the Fed raising (or not raising) the interest rates is an attempt to dictate the minimum wage level. The Fed's mandate from Congress is to aim for three goals: "...maximum sustainable employment, stable prices, and moderate long-term interest rates."


Let's not use Fed policy in trying to achieve their mandates as a pretext for some other policy someone wants to promote.

The problem is that markets are so overtuned nowadays. Every trader is just hanging on to every last dot of the fed. The fed should have raised rates a long time ago.

Like, rates in the 70s used to be around 20%. And now, the fed doesn’t have the balls to raise it 500 bips. It’s ridiculous.

> Real wages and real purchasing power must keep going up.

Yes and yes - but how? The interest rate is only monetary policy, not fiscal. Traditionally, low rates were expansionary. Maybe we need lower rates?

Thinking out loud here... for real wages to go up, real prices for services and goods must go up, else companies go out of business. Rising interest rates discourage companies from making capital purchases on credit (which they all do). To service higher debt, companies need to raise prices for services and goods. Which reduces purchasing power... And people who miss basic economic understanding scream for higher real wages and increases in purchasing power. On another note, are student loans typically fixed or variable interest rates?

>real prices for services and goods must go up, else companies go out of business.

That's not true at all. There is no dataset that supports this position. And we have data against it. Mainly every time we've forcefully increased the minimum wage.

Are we assuming that margins don't exist and returns on invested capital are fixed for this thought experiment?

Increasing minimum wage, and essentially workers across the board need to start demanding higher wages.

Maybe if there was a way to band together and seek a unified compensation policy on a company/industry basis.

> Maybe if there was a way to band together and seek a unified compensation policy on a company/industry basis.

I don't think the problem is that people haven't considered unionizing, nor because of constraints put on union due collection.

Productivity up, population up. That will have an impact on wages for sure.

Workers have been “demanding” higher wages for quite some time. I’m not sure why it would work any better this time.

Outside of technology workers are still looked at as replaceable and expendable. I’m not sure what is going to break the ceiling in this climate.

> Outside of technology workers are still looked at as replaceable and expendable

I know HN users tend to have 'high horse' syndrome, but this is incredibly naiive. There are plenty of skilled jobs where workers are not easily replaced/expended. Physicians, RNs, higher education teachers/professors, many jobs related to architecture design, construction, etc.

> I’m not sure what is going to break the ceiling in this climate.

There's been recent success in the old school technique of 'striking'.

I can see how this comes across as naive or elitist, but it wasn't meant that way.

My past experience is from working in farming, then manual labor, then skilled labor, then engineering, then hospitality, then technology. In none of the fields other than technology did I feel that myself or my colleagues were viewed as anything other than a source of costs by management. Even when our contributions were praised by customers as the reason why they continued their business with the company, we were barely rewarded with more than a pat on the back. Perfection was assumed as the standard, however it was not rewarded as such.

It was not until I taught myself to program, with the help of a great number of people, and jumped over to working in the tech industry that my managers looked at me as a source of value in the company, as the reason why the company made money, and as less than disposable.

That is not to say that my experience is everyone's experience, and I didn't mean to imply such an extreme position as "only in technology can you be valued as a worker". If you work in healthcare, or law, or the sciences, or manufacturing, or construction, or education and your organization values you then I applaud you and efforts.

With that said I still feel that it's a tough road ahead to get the compensation you deserve. Even when the economy is strong, it is hard to get a raise, and people have been waiting on those raises for a long time. I sure hope they can get them.

Most of those jobs are being asked to do more work with less staffing so that profiteers at the top can take a bigger cut.

>There's been recent success in the old school technique of 'striking'.

All of those skilled jobs you speak of are full of people who don't understand what good a union does. Literally complaining that a union is worthless while reaping the benefits and job stability that only a union can provide. I don't know if it's a matter of education or if people are really just going to have to experience for themselves how horrible the working world is/will become when there are no unions to protect them...

The market protects those who produce value. Unions are only of use to people who fail to produce increasing value and want to be paid for their stagnation.

>The market protects those who produce value.

This is a ridiculously juvenile view of how the world works. You need not look further than insert fortune 500 company who lays off highly paid sr. technical staff and replace them with jr. Claiming they provide no value to the company is asinine.

There is absolutely zero evidence of this historically or presently.

I make more money than a waitress. We both don't have unions. That's pretty good evidence, no?

For a moment, it seemed like maybe you were suggesting... a union.~

That might have worked 15 years ago, but I think it's going to take unions and government, working along near-parallel vectors, to bring the economy back into a sustainable power-balance among its various institutions.

Corporate management and moneyed elites have erected a nice little fortress full of positive feedback loops for themselves, and have been steadily plugging the holes in it for 40 solid years now. They're working on mindless, robotic slave labor in an effort to defeat the labor unions forever, but they're also still relatively open to attack by government, as buying it off with corruption has so far been sufficient to keep it at bay.

Parent is talking about unions, people, and it's a good idea.

There's no more effective way for labor to throw its weight around than collectivizing in bite-sized (i.e. company-sized) bargaining units; history tells us this is so and evidence gives us no reason to think it won't work again.

They're not perfect (no democratic organization is), but the only thing more corrupt than a union is management.

During the shutdown, the administration was more than happy to compromise security by letting TSA employees go unpaid. Once workers started striking and airports started shutting down? Immediate response. There is power in a union.

I don't know why your comment's downvotes into gray, striking has gotten serious results several times already this year.

Taft-Hartley banned wildcat strikes, but I think if we saw more of those (despite their present-day illegality) we'd see a ton more actions favorable to workers taking place.

Of course, we should roll back the labor-hostile parts of Taft-Hartley (like the bans on wildcat strikes and the restrictions on speech surrounding union organizing), but that'll take more time.

> We can't sit there and leave interests rates low forever.

Well, then can sit there for as long as we aren't seeing the negative effects of low interest rates. IE, inflation. Which we aren't seeing.

> If not now, when?

When inflation starts happening. That's when. But that is not happening now, so we are good.

It's really that simple. The whole point of raising inflation rates is to prevent high inflation. But if there isn't any high inflation then there isn't any problem!

Concur, but with reservations.

> the Fed badly miscalculating their rate hike policy

There is a mis-frame in politics that the current status quo is always good and should be preserved. I strongly disagree with that, and think we would get much better results if market leaders weer replaced when it is evident that they don't understand how to create real wealth. The idea that allowing the market to fall is 'miscalculation' is in itself a political topic.

Personally, after the evidence of something like 2008, it seems a reasonable theory that the current leaders in the US economic system - particularly bankers and money managers - are mismanaging (potentially even reducing) real wealth and America simply started from a very strong position so taking a long time for that to become obvious and unchangeable. I havn't heard good reports about the infrastructure situation in the States, and they are starting to lose military dominance to the Chinese.

Nailed it.

Plus tariffs are voluntary taxes drawing from funds from importers. The economy will slow down as it adjusts to re-industrialization with higher prices paid out as wages to USA workers.

I disagree. Tariffs are the culprit here, rate hikes were needed and long announced. Really, the 2018Q4 expenditure, mostly unfunded due to the tax changes, hit at the same time as the full Fed rate impact landed.

Fiscal hamfist refuses to acknowledge the monetary hand.

Tariffs are paid by the consumers of imported goods, not by the importers themselves. Costs are simply passed down as higher prices. The idea that an importer would absorb the tariffs doesn’t hold water.

No, the cost of a tax on trade is always split. The way it is split is determined by elasticity of demand and elasticity of supply. In this particular case, Chinese suppliers have been paying about 83% of the tariff.

If I recall correctly from an economics class yay days ago, it doesn't matter if the seller pays the tax or the buyer -- the effective cost is shared (fewer buyers too).

Incorrect. There was a recent study done on tariffs effects. The study found negligible effects on consumer good prices. Turns out most tariff costs were eaten by manufacturers in China. (The importers forced them to eat the costs) Which prompted them to either shut down or move overseas

That can only ork in the short term though. If they go bust prices will go up for consumers due to constrained supply. If they move abroad to avoid the tariffs, we’ll presumably the reason they didn’t already do that was higher manufacturing costs abroad, so again increased costs for consumers, even if less than the tariffs.

You can put it off for a while, but not indefinitely. After all the justification given for the tariffs was to make less efficient local production more viable. Higher consumer prices are an explicit part of that calculation.

It could also mean the demand for these items is very elastic, so manufacturers will have to eat the tax or higher manufacturing costs.

That assumes that manufacturers can reduce their margins without going out of business. That will not generally be true in a competitive market, however, since economic profit (which includes opportunity costs) tends toward zero.

That might be true for US tariffs, but what about retaliatory tariffs enacted by China?

Can you share a link to this study?

I recall seeing it, but I can't seem to track it down at the moment. It was a study done by Europeans, concluding that China was eating about 83% of the tariff cost. The remaining 17% hits the US consumers.

Of course, that 17% can sort of be returned to the American consumers via reduced taxes or increased federal spending. The jobs are nice too.

This study reached a different conclusion: http://www.princeton.edu/~reddings/papers/CEPR-DP13564.pdf

Steel tariffs (for example) are great for US steel producing jobs but terrible for US steel consuming jobs (auto makers, etc). From a jobs perspective (ignoring any retaliation) it would make more sense to have tariffs on consumer goods instead of intermediate goods, but that's more politically difficult since obviously consumers are going to notice tariffs on consumer goods more.

I'm very skeptical that even without retaliation, tariffs on China will lead to much USA manufacturing jobs (as opposed to automated US manufacturing, or manufacturing shifting from China to Vietnam, Thailand etc.

Of course certain industries will be big winners or losers though.

Actually, tariffs seem to me to just another consumer tax.

Does the Fed really set interest rates or do the credit card companies and bond markets? The Fed funds rate is 2.5%, the average credit card rate is 15.6%, the average mortgage rate is 4.67% which historically is quite anemic.

Does the FED really control the economy? The money supply per the FRED graph at the Saint Louis FED is nearly double what it was in 2009 yet spending is down.


Considering the fed rate effects the prime rate, and credit card interest (for example) is set as prime + X%, yes they do have an effect.

Where are you getting this average credit card rate from?

I am an expert at google-fu ;-)

"...CreditCards.com releases the national average APR, which is made up of 100 of the most popular credit cards in the country. According to their June 21, 2017, release, the national average credit card rate across all types of cards was 15.96 percent. — Jan 2, 2019"

I don't doubt your honesty here, but a link would be helpful

June 2017 was quite a while ago in terms of fed funds rate hikes. I would bet $100 the average APR is greater than 15.96% now. More likely between 17-18%, I have a source too but would need to dig it up.

The link I referenced is here:


Doing more research I found this which states it has jumped to 17.64%:


Wages up, investment income down?

This sounds like cause for average people to celebrate. Wonder why the headline is focused on the negative aspect...

US wage is growing though. Money is flowing into US at an unprecedented rate due to:

a.) Fed raising interest rates to a normal level. Government bonds are now earning close to some of the faster developing countries, without the risks.

b.) Brexit impacting the growth of EU. Germany narrowly avoids recession....for now. But grew only 1.5% in 2018. There's still the matter of a possible US tariff on EU automobiles. And Italy/Greece/Spain debts are still a thing.

c.) Chinese economy is crumbling. GM dropped crashed 15% in China in 2018. Ford dropped 36%. iPhone sales dropped 13%. Louis Vuitton dropped 20%. Overall car sales dropped 13%. Stock market dropped 22%. Real estate sales in January 2019 dropped 44%.

d.) Asian countries impacted by China's fall. South Korea's export to China dropped 14% in 2018. Japan dropped 8%. Taiwan dropped 10%. Singapore dropped 8%.

e.) Uncertainties and high debt ratio in developing countries, prompting money to seek safe harbor. Tariff and protectionism impacts.

f.) lastly, US is growing at a healthy 3% in 2018

How does the Fed interest raise helps with more money flowing into the US?

I mean okay, money flows into US "saving accounts", but due to higher interest rate a lot of investments will be put on hold, no?

The Fed raised the target federal funds rate, which is the rate of the interbank overnight repo market, which is basically the "back office" clearing house between the accounts of creditors and debtors. And all of this means that the NY Fed's trading desk does a lot of open market transactions to reach that goal. (It converts cash in banks' reserve accounts into US Treasury bonds, thus forcing banks to increase their reserves - to meet requirements, hence forcing banks to loan reserves from other banks, which pushes up the overnight repo rate.)

How does this effect the US Treasury bond auction rate? (In theory banks [and other primary dealers that participate in the auction] just use loans (excess reserve) to buy bonds, so if excess reserve is less, then fewer banks are able/willing to buy bonds, so yes, that pushes up rates, but the target-FFR increase only affected US banks, and US T-bills are bought by a lot of foreign entities.)

I'm not an economist but here's how I see it.

Money flows into US treasury bonds, directly. People and corporations literally have direct accounts with the treasury.

The US has large fiscal deficits and needs to borrow dollars. The FED set a good interest rate. It's causing owners of dollars to lend money to US Govt in hopes of safe interest gains.

This large deficit happened because of large tax cuts in the first place. Which means, citizens have more dollars in their hands (at the expense of future interest payments). This is driving up spending and thus investment to satisfy that spending.

The yield curve is flattening because of this as more and more people think that long term, the interest payments on today's spending will weigh on economy. Thus, it will ultimately cause FED to lower interest rates. Get in on risk free money while you can.

All of the above is domestic US. Internationally, the dollars that could've helped other countries came back to US in the form of lending. So those countries don't have dollars to invest, causing drops in asset prices and deflation and debt overhang.

* This large deficit happened because of large tax cuts in the first place.*

Tax cuts can't directly cause deficits, only spending can. Spending money you don't have offsetting revenue for causes the deficit. Cutting taxes without cutting spending is a problem. Tax revenue is not down, even with the tax cuts, but spending is growing much more quickly.

>> Tax cuts can't directly cause deficits, only spending can. Spending money you don't have offsetting revenue for causes the deficit. Cutting taxes without cutting spending is a problem. Tax revenue is not down, even with the tax cuts, but spending is growing much more quickly.

That's a political debate. Economically, an entity needs to have equal inflow and outflow of money to be balanced. The govt needs enough revenue to offset its expenses (a lot of which is interest on debt taken years before, military and entitlements.)

If you think about it, generations before partied hard on the credit card with low taxes && still getting social security, medicare etc. Today's generation gets to pick either low taxes or social security/medicare. Tomorrow's generation might not even have the choice.

> Tax cuts can't directly cause deficits, only spending can.

This is a very tortured use of the word cause that the rest of the world disagrees with.

> Tax revenue is not down

We're only now doing taxes for 2018 which was the first year affected by the Tax Act, of course it hasn't changed tax revenue yet.

all I know is they raise interest rates, it absorbs up the money supply in circulation due to the attractive yields on the Ts

also the whole trope about 'China owning most of US T-bills' is actually false, there is apparently T-bills that are specifically sold to foreign nations, and then there are the real T-bills that not many countries own. The other one is an IOU and may not be honored, say during wartime.

They raise the rates indirectly, by selling T-bills on the secondary market, which simply sucks money out of the circulation. (Which makes simply makes debt more expensive, and that leads to T-rate increase.)

> also the whole trope about 'China owning most of US T-bills' is actually false,

They are just the largest foreign holder, and it was noteworthy because of the rapid rise in the distribution of foreign debt holders.

Anyway, my thought process was that even if the US money supply drops, it should not influence T-bill auctions, because the whole world likes it (due to being the least risky investment). But it's very likely that the T-rate was low because banks and other investors exploited the low FFR. Now that's gone, the system settled in a higher equilibrium (as foreign and other investors had no real reason to change their behavior).

This seems to break down who owns what: https://www.thebalance.com/who-owns-the-u-s-national-debt-33...

The single largest holder of government debt is the Social Security Trust Fund.

I feel like the stats of how American companies are selling in China is not an indicator of the growth of the Chinese economy, of course the market and real estate indicators are still valid.

Louis Vuitton is a French company. Also, Burberry, am English company, had 8% drop in sales

Better said: it's not clear that foreign company crashes in China are a sign that the Chinese economy is "crumbling". One of the largest pieces of their current economic plan is "Made in China 2025": a shift from being a contract manufacturing base to instead be building and manufacturing Chinese designed and branded goods.



1.) made in 2025 was announced in 2015. Crash happened last year in a sudden fashion across all luxury goods

2.) brand loyalty doesn’t work like an immediate switch easily levered by a government.

3.) average Chinese citizens prefer foreign brands still, due to food and vaccine poisoning cases from local firms


>1.) made in 2025 was announced in 2015. Crash happened last year in a sudden fashion across all luxury goods

Which is neither here nor there. Something can be announced in 2015 and be put in effect "last year", or have some significant component on it put in effect last year, or see the first major results of the overall thing a few years later.

>2.) brand loyalty doesn’t work like an immediate switch easily levered by a government.

Extra tariffs and support for local made products ("buy patriotic"), however does.

>3.) average Chinese citizens prefer foreign brands still, due to food and vaccine poisoning cases from local firms

Which is irrelevant to things that are not foods.

Dongfeng motors dropped 17%. BAIC motors dropped 11%. Great Wall motors dropped 40% alone in November.

Not to mention how they swept quarterly GDP growth under the rug. GDPnow was expecting 1.8, and it instead was 2.6.

Wasn't the GDP number a bit of BS due to so much of it being inventory?

Why would I want to celebrate someone else making less money?

Because that money comes from someone.

If wages are up and investment income is down, money is being transferred from the 1% to the 99% for a change.

Wealth isn't a zero sum game.

Further, that money is being transferred voluntarily. People buy things like iPhones because they think it enriches their life more than having the $600 it costs. Hundreds of millions of people believe this, so Apple has a ton of money. There were no victims in the transactions.

Wealth may not be a complete 0-sum game, but for at least a couple decades virtually all the economic gains in the US have gone to the top 10%. So when people are cheering that wealth is (finally) starting to flow from the investor-class to the wage-earning class, it feels disingenuous to me, or at least willfully naive, to blithely argue "why are you rooting for someone else's income to go down?"

Just because one went up when the other went doesn't mean that there's a causal relationship.

If we assume it is causal and the trend continues, you can expect belts to start tightening. I don't know if you've ever worked at a company that wasn't turning a profit (and isn't living on the borrowed time of VC money), but I have, and it sucks. Hiring freezes, wage freezes, wage reductions, staffing reductions. All kinds of fun.

Just to show that the example doesn't prove much: millions of people voluntarily spent money on narcotics too. Entertainment products aren't making consumers richer in the long run.

Correcting income and wealth inequality will help ensure the long term health of the economy, and once that's done, we can have another debt-financed consumption binge, but the current binge can't last forever without consequences.

Wealth inequality is productivity inequality, not having-less of a fixed amount.

"Fixing" wealth inequality by decreasing the productivity of the wealthy is madness.

"Inequality" is a feature of exchange and production, it cant be "fixed". The lives of those who suffer most can be improved by helping them be more productive. Not by hobbling everyone else. That fails to improve anything.

EDIT: To clarify, the inequality is in what you can do with your total current assets: including time/effort, but CURRENT WEALTH.

Yes, Jeff Bezos can do more with $100B than you can with $100. And yes, you with 100$ can do more than a person with 1$.

People in poor countries produce things at a rate and with such general demand that their current assets (including their time/effort) arent very productive.

Bezos can make another billion without taking it from anyone, just by deploying his assets better than you cna.

>"Fixing" wealth inequality by decreasing the productivity of the wealthy is madness.

Really? Because the system itself is fixed guaranteeing Capital of the rich is much more productive than wages of the poor, through taxation. That is an employee of Company abc has their wages taxed to a much greater extent than the company owners profits are taxed.

It’s definately not “hobbling” everyone else if we “fixed” the system such that workers wages were taxed less than the capital profits of business owners. In fact the current system is so unfairly weighted only a small percentage benefit from capital gains taxes whereas the masses of the working class are hobbled by greater taxes on their wages making up the difference. Ever wonder why it’s pretty easy to find CEO’s taking a $1 salary (it’s because they take the rest in capital so they are taxed less than their own workers).

Those who suffer the most don’t need to be more productive, they working class is already more productive than anytime through history it’s time their wages reflect that fact and for good measure it’s time wages become more productive by flipping the wage/capital tax paradigm.

I think your comment is consistent with mine.

You are advocating getting the state out of the way of its citizens productivity by redressing the ways by which most people are taxed.

That's exactly the sort of thing i'm talking about.

If you want people in the developing world to improve their lot, get rid of authoritarian gov.s holding them back.

People wish to do things for other people, and wish to provide for themselves. It is institutions, and esp. states, which almost-everywhere and almost-everywhen have got in the way of that.

Fixing institutions is exactly the sort of thing which will help people who suffer needlessly.

But it won't change inequality: the distribution of productivity is necessarily unequal by the nature of productivity (those a little better off now will be able to multiply faster, exponentially).

The US has the most productive workers in the world. You cannot feasibly make them more productive without harming our ability to be disruptive. The fact that they've been as productive as they've been for years, through massive economic changes and yet the gap between the top .01 percent of Americans and the entire rest of the country has still grown. Supply side economics are a laughable farce. Just because wealthy people have more money doesn't mean that they invest or spend it in any way that helps the economy, what is provable though is that it harms democracy by limiting the voices of the middle class, and has created a poor class that has become nearly impossible to get out of as economic ladder climbing is effectively nil.

The only way to save our democracy is by putting in policies that will harm the wealthy aristocracy of the US. The other alternative is war and death that impacts the wealthy, as history has shown time and again. Blood or money, it's their choice.

Yeah our democracy is just fine. Evidenced by the fact that the lower classes were able to elect a president that the upper middle and upper classes most definitely did not want elected. It may not be a popular choice among the elite but it is evidence of a healthy democratic society where decisions aren't being made exclusively by the wealthy.

> Evidenced by the fact that the lower classes were able to elect a president that the upper middle and upper classes most definitely did not want elected.

Those who earned more than $50k a year were more likely to vote for Trump[1].

There's also this[2]:

> During the primaries, Trump supporters were mostly affluent people.

> Trump voters weren’t majority working class in the general election, either.

[1] https://www.statista.com/statistics/631244/voter-turnout-of-...

[2] https://www.washingtonpost.com/news/monkey-cage/wp/2017/06/0...

There is more to class than just income. A plumber can out earn a journalist for instance. If you look at the education numbers you can see that the highly educated greatly favored Clinton. You can also look at media influence, technology influence...

This is a more in depth look at the numbers:


There are huge problems with that data. It equates a degree in physics with a degree in romance novels. I feel strongly that the physicist is far more educated. Somebody with a pilot's license or a welding certification is considered to be less educated ("non-college") than a person with a college degree of negative market value. What the data actually counts is years spent in a bookish classroom.

Class is more than just individual earning potential. I think a lot of people here (myself included) know that the scientist is more educated than the romance novel degree holder. The part we don't talk about though is that the people with degrees of "negative market value" often have those degrees because their families are rich enough that they don't have to work for a living and can do things like pay to study romcoms.

This is one of the arguments people make against unpaid internships in media and fashion industries. Only rich kids can live in NY for peanuts so these internships effectively filter out poor people (as they were designed to do).

In the US, we don't have any other social stratifications that would justify your response. Typically when we speak of class in the US we are talking exclusively about economic class. The problem with your argument is that our democratic institutions aren't fine. (Sure, sure Representative Republic). For instance in nearly every single state we have a group of people that are underrepresented by their electorate. In blue states it's typically conservative viewpoints and in red states it's liberal voices. Because of gerrymandering, in some cases unlawful, we've lost most of our moderate representatives that have led to the gridlock and partisanship we have today.

Proportional voting or a move to a parliamentary type of electorate would help these issues and allow for more voices to be heard. There's also the fact that more populous states have less representation in the House than do less populous states due to the limits imposed on the number of Representatives due to space requirements. This is problematic. Add to that the Citizen's United verdict that lifted campaign contribution limits on corporations while still enforcing them on individuals and I think I've made my point that our Democracy is in trouble without even touching the malfeasance by the actual political actors of either party.

The real problem though is that the middle class, the foundational aspect of a functional democratic process is being hollowed out.

When you look at the fact that money is considered speech and the top .001 of the US makes as much every year as the bottom 80% of the country there is no way that even the amalgamated voices of the bottom 80% could hope to have the same political sway as those with money and this divide is only getting worse.

Education is a poor classification of Americans, except for the fact that it generally correlates that the higher education you achieve the more likely you are to have higher income. Obviously your position of negative value degrees are the exception, however I'd be less likely to think that the wealthy are getting these poor degrees as are the poor. The wealthy can just write/ghost write their books and have them immediately be New York Times bestsellers without a single person other than themselves buying the book.In fact this is a common trick. The poor are generally less educated than the wealthy and this leads to an information imbalance that would prevent people from going into poor degrees instead of fields in demand like nursing, math, computer science, etc.

I'm sure many people on this board know someone stuck in a poorly paid IT helpdesk job because they got a Bachelors in IT or something else that didn't lead to money.

"In the US, we don't have any other social stratifications that would justify your response."

We do have this. Have you ever tried to raise money or interacted with VCs? Or dealt with the CEO of a large company? There is definitely a class divide. Look at all of the high end liberal arts students that monopolize the media industries. These aren't people from the trailer park.

"When you look at the fact that money is considered speech and the top .001 of the US makes as much every year as the bottom 80% of the country there is no way that even the amalgamated voices of the bottom 80% could hope to have the same political sway as those with money and this divide is only getting worse"

Except they were able to do this as per my example with Trump. Your theory sounds very valid, but the reality of it was the upper classes and all of their media empires couldn't stop someone from being elected. I think we can thank the internet for giving voice to those who historically wouldn't have it.

First of all let me just say, I love HN because of these conversations. It's so rare that we can have a place for rational discourse. This has been a great conversation.

Dealing with VCs/CEOs typically involves having the money in the first place. You have numerous cases of people without degrees at all getting VC money and building platforms. I deal with CEOs of large companies on a fairly regular basis. While the Alma Mater matters it's typically a stand in for economic class. People who can afford to not work for a few years to go the HBS aren't typically in the lower echelons. Also workplaces are more conducive to taking time out of your regular schedule for educational advancement the higher up you go, especially since you're usually always working. So the degrees come back to money.

Of the people who voted for President Trump almost all of that lies with white, male voters and that was regardless of whether they were college educate or not, and most of that was in the South. Take from that what you will as neither candidate was a PoC so race wouldn't apply as a divisor. What might have had an impact was the border security discussion. The President's election was as much a fluke as a response to disaffected Sanders voters as a weak Democratic candidate.

I'd argue that any characteristics beyond income and accumulated wealth are secondary when we are talking about economic class.

I'd argue that income and wealth are two very different things. Your numbers didn't say anything about wealth, just income. Again, the plumber earns a lot but the journalist inherits wealth far beyond the earnings of the plumber. There are a lot of other things to take into account such as access to network, parental influence, ability to mingle with upper class people... Blue collar roles can out earn white collar but blue collar people can't be upper or even upper middle class as the upper classes have many effective gating mechanisms to keep them out.

Pedigree and social class aren't economic class. Just because you won't be let into someone's club despite having considerable wealth does not mean the two of you are in different economic classes.

If I earn 300k a year maybe I can pay for club membership (if they let me in) but I would in no way have comparable wealth to members that were going to inherit 100M from their families. You're very focused on income, but people in the upper classes are not. In fact, high earning professions are often looked down upon because when you have family money, it's seen as gauche to work hard for what would be scraps compared to the real family fortune.

It seems to me that worker productivity gains come primarily from better technology and processes - from business investments - rather than from workers themselves. The rewards flow accordingly. Workers who enhance their own productivity actually do provide more value and hence gain a competitive advantage. Plenty of individuals could improve their productivity and value.

I've never understood the claim that higher productivity somehow entitles workers to the surplus. The key component of actually being substantially responsible for productivity gains is missing.

Jeff Bezos isn't a a billion times more productive than an average person. He's leeching off the productivity of amazon's workers.

Amazon wouldn’t exist without Bezos. It’s kind of a stretch to say he’s leeching off his employees when his vision and drive literally gave rise to Amazon.

Also I’m pretty sure Bezos doesn’t collect much salary. His wealth is tied to how much Amazon is worth. He’s essentially taking nothing from his workers because his net worth is based pretty much entirely on how much someone else is willing to pay for his shares.

Amazon also wouldn't exist in their current capacity without all their warehouse workers. I think the idea is that Bezos could have either sold some of Amazon stock over the years and paid his warehouse workers a better wage or he could have put some of his shares into an options pool for his warehouse workers. If he did that maybe he would only have $10B in wealth today, but many warehouse workers would be better off.

Instead, he kept all those shares and has more money than he could ever spend and many warehouse workers have worked incredibly hard and been unable to build any wealth over the years.

This myth of "more money than can spend" is pretty pathological.

It's not true. He uses his money to fund space flight initiatives, and many other things besides.

Billionaires use their billions to make more billions. If it was wasted on unproductive spending, the future would be poorer than the present.

Is it unproductive spending? What makes you think that workers who want to live a decent life are spending unproductively? Why is it more productive to spend money on space flight initiatives?

> I think the idea is that Bezos could have either sold some of Amazon stock over the years and paid his warehouse workers a better wage or he could have put some of his shares into an options pool for his warehouse workers.

The board of directors can allocate stock to warehouse workers and/or pay them more. For that matter, you could send your money to these warehouse workers and yet you don't. This idea that Bezos should personally give up his fortune to increase warehouse worker compensation is a bit absurd. Amazon isn't a charity and its employees are not a registered 503c, either.

Yes, the board could have absolutely done that. And Bezos could have asked the board to do that as well, but chose no to. If the company did that, I argue it would have been just as successful (if not more) and many of their low wage workers would be more loyal and would have more wealth. The primary difference would be Jeff Bezos having a smaller fortune.

For profit companies can pay their workers better and still prosper. No one is suggesting Amazon should have been a non-profit. The suggestion is just that their CEO could have shared the wealth more with his workers. Workers who helped him build his fortune.

Microsoft wouldn't exist without Bill Gates, but that doesn't mean he's entitled to any and all benefit derived therein to divide up between his employees. It's funny how justifications for the wealth of these people usually fall to unquantifiable metrics like "vision" rather than concrete labour, which is the sole standard ordinary workers are judged by.

To use a metaphor, a slave owner having the "vision" for a palaestra including all its designs does not mean that he does not exploit the slaves (who, remember, wouldn't have a job if it weren't for him, nor would the palaestra exist). In the philosophy of exploitation, exploitation can occur even in mutually beneficial relationships.

I don't think anyone proposes that Bezos is "entitled to any and all benefit" that Amazon produces, either. Indeed his wealth is tied merely to his initial ownership with almost no additional wealth flowing to him in terms of cash or stock from Amazon. Whether or not warehouse workers should get paid more seems to be a very different issue than whether Bezos deserves to continue to own the stock he literally created.

Also your metaphor sucks. If you think that wage workers are on par with slaves, I suggest you look a bit more into what slavery actually is.

The metaphor is not formally equating wage labourers to slaves, it's an illustration of the principle of exploitation in relationships where, in a technical sense, both parties benefit. That's why it's a metaphor, not a simile.

You’re defending your absurd metaphor by turning to pedantry about definitions.

You metaphor still sucks because it doesn’t say anything useful. It’s purely an emotional appeal. You could apply your metaphor to literally any employment relationship and it’s no different. The CEO is (over)compensated for vision and so everyone else is exploited, from the Executive Vice Presidents down to the receptionists.

>The CEO is (over)compensated for vision and so everyone else is exploited, from the Executive Vice Presidents down to the receptionists.

The argument is not that employees are exploited because the CEO is over-compensated for vision, but rather that it follows naturally for such relationships to work at scale. Nevertheless, it's useful as a thought experiment, since it ought to make people consider the nature of modern work and life in capitalism. Indeed, some philosophers do apply this to all employment relationships[0], the most extreme argue that they are exploitative, the less extreme only inquire to the nature of our desires in the employment relationship[1].

If that's where the argument leads then that's where it goes.

[0] John Roemer, Yoshihara and Veneziani, Marx

[1] Frederic Lordon's Spinozist anthropology

The argument doesn't lead there. You started it there. Your initial premise is that wage work is akin to slavery. I disagree, and your response is "well, that's where the argument leads". No, not at all.

I'm a bit confused by your statement that "it [exploitation] follows naturally for such relationships to work at scale". If this is how it naturally works, then is there a viable alternative? I also don't agree that this is (necessarily) exploitative. Perhaps we have differing opinions of what "exploitation" means. If we have a business partnership that is mutually beneficial, but you profit from it more than me, is that exploitative?

I'd argue this is how it "naturally" works for the current epoch with the current division of productive resources, that is to say, it is a historically conditioned state of affairs, and like any historical period it is overcome. As in, the current distribution of property is to blame, but it's not clear that simply switching to a different model of distribution would overcome exploitation at large.

I think that exploitation can, in general, be defined as when A exploits B, A takes "unfair" advantage of B. In order for this to be the case, there must be some mechanism by which A has the ability to exploit B, which I see as defined by the distribution of productive assets necessary to live. It gets more complex speaking of how we define productive assets, and whether exploitation exists as a matter of class (neo-Marxian sense) or as a matter of profit (the Marxian sense).

> Microsoft wouldn't exist without Bill Gates, but that doesn't mean he's entitled to any and all benefit derived therein to divide up between his employees.

More people have become millionaires by being Microsoft employees than by any other mechanism. Via stock options, Microsoft very much shared the gains with their employees.

This is HN - home of wannabe Bezoses. It's a hard sell to try to tell a forum of founders and hopefuls that they aren't special and instead largely a result of circumstance and opportunity.

You're conflating: effort, productivity and net worth.

Net worth is a terrible measure of anything. You have a networth 100s times a person in a developing country but you're not "100x" anything.

Jeff Bezos can invest the rewards of his lifetime effort, yes, billions of times better than you can.

Elon musk invested his paypal-productivity into making space/car/etc. companies. His actions here eclipse yours.


Jeff Bezos takes a salary and his income isn't tied to stock.

> Wealth inequality is productivity inequality

No, it's not.

Income inequality would be, in an idealized state where you both had a perfect market (with all the ideal rational choice theory attributes like perfect information and perfect utility maximization) andp erfectly equal initial distribution of wealth. Or, at least, the instantaneous income differential at the first moment would be, as well as the resulting wealth inequality; once you are past that you have wealth inequality which means that differences in market clearing price even in a perfect market no longer perfectly reflect differences in utility produced, because the interests of the wealthier participants are favored, so neither income inequality nor it's resulting wealth inequality reflect productivity, and with mortality and inheritances wealth inequality is even farther from a reflection of income inequality after the first generation.

Being born a Trump—or even a member of the first world middle class—puts you pretty high on the world distribution of wealth from day one, and your personal productivity has no contribution to that.

Could jeff bezos really be a million times more productive than an average american if he was alone by himself in an alternative universe?

> Wealth isn't a zero sum game.

Wealth isn't something that be quantified objectively, so at some point you need to put hard parameters on what qualifies wealth or thresholds of wealth. At some level, "money" (which is the representation of wealth) is at any given point finite. This makes it inherently a zero sum game.

The "any given point" allows us to avoid arguments about fiat and monetary policy. At any given point if I get $1, that value comes from someone else (or elses) down the chain.

You are confusing money for wealth. If I gave you back 3000 years in a time machine with a trillion dollars worth of gold (gold being money 3000 years ago) you would be much poorer than you are today despite having most of the world's money in your new era. Someone taking a log and turning it into a chair increases the world's wealth even if no money changes hands. Someone who prints money (via inflation or counterfeiting) has changed the amount of money in the world but has not changed the amount of wealth.

> You are confusing money for wealth

I was trying specifically to not do so; I was expressing money as the point-in-time measurement of wealth.

That's the point though, it's inaccurate to do so. Money is a finite resource, but its value constantly fluctuates. It's just a unit of exchange that exists for convenience. The total supply of money does not correlate to the amount of 'wealth' in the world, such as it is.

I know this makes it a pain in the ass for you to make / explain your point, because there's no unit of measurement for wealth (hence why you used money at any given point in time). It just doesn't work that way though.

If you create a new good or or perform a service, you have created new wealth. (building a log cabin created wealth) wealth is not zero sum.

Even money is not zero sum. Anytime someone creates credit, new money is created and the money supply is expanded. And money is not representation of wealth. It is a unit of account and transfer.

>Wealth isn't a zero sum game.

That's the fairy tale they sell to suckers.

In real life, it can be very much zero sum, and that's regardless of whether the slice is "growing or not".

The victims are the employees of Apple who receive a tiny percentage of the value they create, while a huge percentage of it goes to the corporate owners.

Edit: by extension, all the consumers are likely in the same position. Employees are all exploited by their employers, who steal most of the value created which they had little to no hand in.

|Employees are all exploited by their employers, who steal most of the value created which they had little to no hand in.

I'm sorry, but this is bog-standard communist clap-trap. Even if you don't like the current arrangement, the use of the word steal is absurd. Individual wealth, regardless of which income quintile you're in, has risen exponentially since the industrial revolution. There's lots of room for criticism of the world as it stands (crony capitalism and printing a sea of money being favorites of mine), but words like exploit and steal are crazy. And to say that an employer had little hand in the value of the products created is just silly. Even if we ignore everything else, you can't just disregard the massive capital expenses that go into building the infrastructure to make an iPhone. Somebody had to come up with that money to even make the company possible, long before the profits started rolling in.

I've had the dubious pleasure of working for companies that were posting little or no profit vs others that were making lots of money. Personally, I'd be happy to be 'exploited' by the wages Apple pays.

Well I am a communist, so that makes sense. Crony capitalism is just capitalism, by the way. It's designed to work that way.

In Apple's case, the "massive capital expenses" have been paid for many times over in profit; when does the compensation shift back to the people creating the day-to-day value? Never, I guess?

And by the way, I'm not talking about the $300k engineers in Cupertino. I'm talking about the people who were throwing themselves of factory roofs until they set up nets to take even that measure of freedom away.

Wow, an actual communist. OK, I need to ask you a few questions.

Why should we risk it? You might say that previous attempts were "not real communism", but that is what we end up with when we try. We've killed 160 million people trying to implement communism, or at least following leaders who tell us they will implement communism. It doesn't seem wise to try again, does it? Why would things go down differently? It's awfully risky to take the gamble, don't you think?

What motivation would there be for start-up founders? If that just isn't needed because the state owns all business, how do we ensure that unproductive business doesn't uselessly stay funded while productive business is never initiated?

If there is no legitimate way to obtain great wealth, don't you think people might turn to methods that are not legitimate, such as the corruption? History shows that communism quickly turns the culture toward corruption, and that this dissipates very slowly once communism is removed.


Your complaints about capitalism can mostly be handled without giving up all the benefits. Poverty exists everywhere, especially under communism, but right now a good deal of the source is competition from immigrants and outsourcing, both of which can simply be restricted. The fact that corporate profits skyrocket isn't something for most people to directly care about (jealousy is a nasty emotion) but FWIW this goes away if anti-monopoly laws are enforced and if corporations are prohibited from becoming huge.

Before you blame climate change on capitalism, please note the coal mines in North Korea and in China.

Nothing could be more equitable than people keeping whatever share of the pie they have earned.

I also truly do not give a fuck about start up founders... but if they aren't well-rewarded then they won't bother. What replaces them? Do you think that instead the government would operate all businesses? Without the possibility of bankruptcy, bad businesses (operating as government agencies) will continue sucking up subsidies. New ones will not be created unless the dictator is convinced that they would be useful to him.

The corruption problem we now have with politicians is indeed bad, but clearly this hasn't become universal throughout our culture. In a communist society, one might pay the store clerk a bit of extra cash to have him hide a bit of meat in order to save it for you. It all becomes totally habitual with all of the ordinary people you interact with every day. It's not just a matter of politicians.

I agree that the situation in the Scandanavian countries is unsustainable. Freeloaders are an increasing problem. The workload (taxes) have reduced the birthrate, and the low birthrate means that fewer workers will be sharing the load of supporting the old, each problem leading to the other problem and thus these countries are in a death spiral.

|Employees are all exploited by their employers, who steal most of the value created which they had little to no hand in.

Didn't that turn out to be bullshit? Like, years ago. Pretty sure that guy made the story up. Also, those people weren't employees of Apple.

And I'll take crony capitalism and wealth inequality over gulags and the tens of millions of people who have been killed by their communist overlords (who were also hoarding all the wealth).

I'm sorry, this is bog-standard capitalist clap-trap. Capitalism has killed many more, and will continue to kill millions and millions as the effects of climate change worsen, than the concept of equitable distribution of wealth.

|Capitalism has killed many more

Please support that claim.

|will continue to kill millions and millions as the effects of climate change worsen

Communist countries, past and present, hardly have a sterling reputation when it comes to environmental considerations.

Edit: Oh, and you ignored that the Foxconn thing was manufactured. Unless that's what you're calling clap-trap, but I assume not.

If their revenue is coming at your expense. Due to say, stronger consumer or environmental protections.

You have no proof that any of that is the cause. So at the very least, celebration is probably premature.

Just an observation, but I've noticed that Reuters is not a fan of the current administration.

Are real wages really up when inflation and cost of living, healthcare rises are factored in?

Everything I've read suggests real wages have been stagnant since the 70's.

The article says "wages up .3%"

So, a negligible amount?

That is not a negligible amount of growth for a single month.

It's a nice amount for a month, but the monthly figure is very noisy so it's hard to be all that excited about it.

How much do you expect wages to rise in a month?

Read the rest of my post.

The question stands, because the article doesn't specify whether it is talking about wages or wages in real terms.

Someone mind explaining what these downvotes are for? All I asked was a question.

This place is becoming like Stack Overflow.

Those numbers are always inflation adjusted.

Good to know, but I wasn't aware.

New year + tax return tends to lead people to spend a bit more. Anecdotally I'd expect the downward spending trend to continue. Majority of the customers I interact with (barista programmer checking in) I know are asking themselves "do I need this?" before they buy. Most have cancelled their Amazon Prime subscription and stopped buying there altogether, which for many was the equivalent of an online shopping spree.

Just personally, I'm piling money into savings because I'm concerned about layoffs, etc, once the economy slows down.

For people who have only known 200k kubernetes remote jobs, you should be prepared for everything to turn on a dime..

Saw this happen in Houston in 2014. Engineers that had started their careers just after the housing crisis bounced back were sitting cozy on their 150k/year (in Houston that's gobs) roles, not really putting much into savings because "there's always Wells to drill."

When prices dropped from 90$ to 44$ a barrel, I saw candidates do some pretty stupid shit. Nuked the reminder of their savings on a new f150 was a classic drama played out over 2 weeks that my whole team was involved trying to talk him down in. Others had to move in with their parents, take roles in deer Park that were something like 2.5hr commutes one way, drop everything for a Saudi role and move out there... Their freedom of choice was essentially yanked away.

The only one that seemed to be handling it well was a fresh 3 years in engineer. No girlfriend, kids, house, and buckets of savings. He moved to Vietnam and weathered the storm on a beach, taking tiny sips of his savings.

This was a time when rates dropped from 160, 150/hr to 60, sometimes lower. Some people had to take rate cuts to keep their roll (I didn't even know that was a thing. I assumed layoffs was the only tool in the belt-tightening toolkit).

Somehow a big Operator (think shell, Exxon) got a new project out for a refinery once, which resulted in something like 50 different engineering and design rolls, of which my agency locked down iirc 10? We had, in the city alone, 600 applicants, about half a good fit for the job (and the other half decent just not the exact fit).

I don't know if the same thing could happen in my new life as a web dev, but the lesson stuck with me. When I hop on LinkedIn and see 1000 new frontend roles, it seems hopping out here in the bay area. But I also watched hack reactor crank out 60 more kids 6 weeks after my batch, and 60 more 6 weeks after that... So maybe I got lucky, got in while the getting is still hot.

Anyway, save your money.

>I don't know if the same thing could happen in my new life as a web dev

Anyone who lived through the dot-com bust in 2000 knows very well that it can happen. Many tech companies went under and almost all had massive layoffs. If you were one of the unfortunate, there were no jobs to be had. Most people I worked with during that time went into a completely different career field because they simply couldn't find work. It was all rainbows and roses until it wasn't.

My experience in the 2000 bust was that there were too many programmers. The market was flooded with dead weight who should have been in sales or management or baristas, but there just happened to be roles to fill.

My experience in 2000 was that experienced, hard-core coders and systems guys ended up dumped on the market with a ton of HTMLgrammer chum and simultaneously all of the big employers had instituted hiring freezes. Good people on the street for 6+ months, not just the pretenders.

>> I don't know if the same thing could happen in my new life as a web dev,

Doubtful TBH

"Front-end dev" here in the Midwest. Even when the economy tanked in 2008, I barely noticed and I was working as a contractor. I still had recruiters calling for contract work. We had a lot more people come into the industry via the banks and small businesses who went under in the crash, but even then, it wasn't a huge deal.

I'm always hedging my bets the bottom will fall out eventually. Even when people thought our roles would drop off, whoosh suddenly everybody wanted to convert all their stuff to Javascript apps and everything took off again.

Right now, more back-en devs are getting into the JS scene and "full stack" development is back in vogue. I still concentrate heavily on the UI/UX side and have been picking up JS work more and more. There's such a shortage of good JS developers that if you're a mid to senior level JS developer, you're going to have tons of options and a solid future.

If you don't want to do contract work, land a stable role at a large corporation and hunker down for a few years and see which way the wind blows then.

>> "Even when people thought our roles would drop off, whoosh suddenly everybody wanted to convert all their stuff to Javascript apps and everything took off again."

Prediction: the next one will snap back on people looking to turn everything into WASM apps.

2008 was not a tech crash.

(I'm in Spring, north of Houston)

I didn't really see that, but I wasn't as involved in the community at that time. Of course, the company I work for is in no way tied to the economy of Houston (and outside of that, I've done a lot of remote in my career)

Two nights ago at work a co-worker was asking me why I seem unafraid to take risks; after all I am the sole income earner for my household.

I explained that I’ve mostly lived my life with the theory that “they fire everyone eventually” and so when, not long after graduation in mid-1999, I experienced the dotcom implosion, 9/11, the extreme rise of offshoring (and the endless lies from management that their goals were not, at the time, to offshore all engineering for cost), and so on, the world was living up to my expectations. While I’ve never been fired or laid off, I knew people - very good people - who did and went 6 to 18 months unable to find a new job in a different Silicon Valley - one of layoffs and hiring freezes that didn’t thaw for years, one where startup investment plummeted and the stock gains evaporated. I spent a great deal of time in my pre-CS degree days involved in the rise and crash of Japan in the nineties and the US recession around that time; I’d seen it before and so I lived my life assuming I’d need to weather it.

Wealth, security and opportunity evaporated at once. They are not unrelated.

Co-worker is young. He noted that when he went to a startup some years ago, and people asked him why he would risk it, his answer was he’d just find another job or come back.

I am unafraid because I know in my bones that the world can change on a dime so I’ve always been conservative and prepared; practices (professional and financial), frugality and savings.

He is unafraid because he’s never known the job market that wasn’t hot in the Bay Area. He graduated in 2009.

At least I resolved a mystery for him. In the 2000s when he was in high school, he told his counselor that he wanted to do computers. The counselor said, “Are you crazy? All of that’s going to be done in India.” Until our conversation he didn’t understand that exchange.

All of this is a very long way of saying that yes, the world you know can turn on a dime and the invariants aren’t.

sorry for a weird question but how does one decide to be a barista programmer? is it because you like being barista or is it because programming doesn't pay enough?

Maybe he is programming baristas. Like Westworld style.

That explains the name recognition.

"Could I get your name?" "Bob." "Sorry, I can't help with that!"

Burn out and tired of writing CRUD all day in an office.

Honest question. Is being a barrista better, or just different?

oh I get you... I've been writting CRUD applications for past 2 years. It gets boring some times, but also quite challenging quite sometimes... Been wondering how would it be to work another proffesion. Like now I work as a programmer and don't have any hobies outside of computers but I could be working something else and do programming as a hobby... definitely worse for future money wise...

+1. Noticed this trend as well

This coincides with Marie Kondo's arrival

Her book has been out since 2014, I couldn't stomach the show it was too "cute" and slow paced. Book is excellent though.

I think her show is the most viral thing I've heard people talking about at work (and my wife's work) since GOT

But the meme lasted for a few weeks tops. I never hear people reference the “does it bring you joy” thing anymore.

Would make a good South Park episode

Wasn't that basically the episode about the 2008 economic crash, where Randy leads the town in a drive towards simplicity by wearing sheets and such?

She applied a basic rule for which I buy anything that isn't essential. It might seem like a dumb rule, but discovering that buying stuff doesn't make you happy, and finding a way to break the buying stuff addiction, is really fantastic to me, especially because I believe that contentment and happiness are essential measures of economic success.

I hope it spreads quickly. I think it will help a lot of people who own too much stuff, and find themselves exhausted due to it.

Could you provide some context? Why is she important for US incomes? Arrival of what kind? Where from / to?

It was humor. She advocates asking whether or not an object "brings you joy" before deciding whether or not to buy or keep it. A very popular person on the topic of keeping your home organized.

Millenials generally speaking are broke, inundated with loans, and the resulting zeitgeist is antimaterialism. Marie Kondo’s popularity is a symptom of this trend. People don’t want to buy crap anymore.

That’s why instagram is full of travel pictures not of “I bought a house/car/etc” pictures. Us millenials don’t see possessions as a status symbol anymore but almost as a liability.

The classic embodiment of this was A Twitter trend months ago of people posting pics of the "room of couches you aren't allowed to sit on" in their parents houses, or "cupboard full of dishes we never used."

was the "room of couches..." trend immediately after an episode of The Goldebergs aired with exactly that scenario? (except the 80's version)

also the "stuff we never use" is probably mostly just parents fed up with their kids breaking stuff just by looking at it and they'd like to emerge from parenthood with at least some sentimental items still intact. (source: a parent with 7 and 2 y/o energetic, clumsy boys who I'd very much love to share my own personal memories with lest they be destroyed on contact with one of the whirlwinds of destruction...)

This is so very true. I've got an 8- and 6-year old, and we've resorted to using mostly disposable Ikea furniture because it's a lost cause. Even so, in a few years I'm going to have to do a light remodel of the house to fix all the damage.

Anecdotal counterpoint: my friends and I are slowly being given all that stuff we weren't allowed to touch, by our parents who preserved it to "pass it down"....and it's mostly stuff we have no space or need for. A china set? Antique clock? None of us wants it.

That I get. I have no desire to keep my parents crap but I also don't want my kids destroying my stuff while I can still enjoy it. There is no expectation for them to "inherit" it just respect that I want to keep it. If they actually want any of it great but I'm not forcing anything on them

When the student is ready, the teacher appears :-D

"Income was weighed down by decreases in dividend, farm proprietors’ and interest income. Wages increased 0.3 percent in January after rising 0.5 percent in December."

I have no education in economics, but does this imply that it is becoming less lucrative to invest money? (Also, later in the article, it says that purchasing dropped sharply in December. How is it that wages are growing, job market is hungry for more labor, but consuming is dropping?)

The Personal Consumption Expenditures number from the Federal Reserve is seasonally adjusted. A decline in a seasonally adjusted number can actually a lower than expected increase.

There could be time lags between those indicators.

Waiting on the trickles of the "trickle down" economics. I bet CEO salaries are doing just fine.

"U.S. personal income fell for the first time in more than three years in January as dividends and interest payments dropped"

It hit the people with stocks and money in the bank the most.

Or you know people with pension funds

And people who buy from the rest of us

Actually CEOs make the bulk of their money as capital gains, not wages, since they are compensated in stock options. Per the article wages are up 0.3%, which means normal people on a salary or hourly with no/insignificant investments have more money in their pockets. So this actually is money trickling down.

> So this actually is money trickling down.

Isn't this actually just money trickling up less quickly than before?

The source says wages went up while dividend/interest income went down.

I thought real wages had already posted drops. The numerical drop might be expected w/ real wages as a leader.

Do these measurements consider inflation?

Tax rates in high income states went up (limits on deductions for housing and state income taxes); no surprise.

Tax rates and deductions have nothing to do these income and wage numbers.

If you read the article, you'd know that the commerce department was talking about disposable personal income, which is post tax. Pre-tax, personal income went up.



Please don't post troll comments here. Respondents: please remember the age-old rule of the internet.





He's not wrong.

Yeah, say what you want but economically we are doing pretty good, relatively.

Relative to what?

Obama's economy.

Like I said above, economic reforms aren't really felt until at least a term after they were enacted. Obama's first term was feeling the effects of George W. Bush's administration (and later a financial crash to deal with, resulting from decades of regulation loosening by administrations from both parties).

To address your other trollish and deliberately antagonistic reply above, I would be a sore loser if I had any skin in the game, but I'm not American, so I don't particularly care which plutocrats you guys want to put into office.

If you want to go on a political rant to someone, you're better directing it another American.

Actually, he is.

By what measure?

The effects of economic policies of one president typically aren't felt until the term of the next president.

The (specific and limited) growths you are seeing are a result of Obama-era policies.

Trumps will start to show after he's left office most likely.

Objective ones. It's popular to try and start measuring from the moment he was elected, which is obviously disingenuous. But if you want to have any shot at objectivity, you look one year after he took office, or put another way, when his first budget takes effect. You might also give him credit for any legislation he signed, regardless of when it took effect (e.g. stimulus legislation signed shortly after taking office to try and respond to the 2008 crash). Objectively, Obama's years were great.

Also, if you feel tempted to use GDP as some measure of Trump's success, remember that the impending tariffs bumped inventory purchasing up dramatically, which artificially increases short-term GDP at the expense of long-term. That's a trap to avoid.

If everyone were being honest, congress has more control over the budget than anyone else, and the greater economy kinda works on it's own schedule rather than a president's, so I would be hesitant to over-attribute success or failure to any one president. That said, Democratic administrations of the last few decades tend to do better fiscally, primarily because an ongoing GOP priority is to use public debt to transfer wealth to high net worth individuals.

The growth is due to cuts in regulations and taxes.

Both of which Trump spear-headed.

How do you explain away the record breaking employment statistics?

The growth and employment numbers were already rising when Trump became president, so how would his tax cuts be responsible for this?

Plus, cuts in taxes for the wealthy have been tried numerous times before and not produced economic growth, so why would these ones be different?


The corporate tax cuts and de-regulation allow businesses to expand. This results in higher employment and wages.

And it wasn't just a tax cut for the wealthy, most Americans received a lower tax rate, the exception being some deductions like state tax (which was arguably unfair to states that don't have an income tax). The corporate tax cut put us on a fair playing field with the rest of the world, allowing businesses to come back home (that and the one time tax on bringing money overseas back).


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