I'm not convinced that the drop in interest rates at the start of the pandemic was necessary or wise. The economic contraction was due to governments instructing people to shut their businesses down and simply lifting those was all that was necessary to revive the economy. It wasn't a recession situation where consumer spending needed to be stimulated.
> The economic contraction was due to governments instructing people to shut their businesses down and simply lifting those was all that was necessary to revive the economy.
Governments told people they couldn't go to work. Two thirds of the country live paycheck to paycheck. In order to keep food on the table and a roof over their heads many had to go deep into debt and/or eat into their savings which weren't always so great to start with since around 25% of Americans have no savings at all.
Forcing a great number of people into huge amounts of debt and desperation was bound to slow spending long after the bars reopened, and to add to that you had many households where breadwinners were suddenly dead or unable to go back to work either due to illness or unexpected childcare expenses since schools weren't able to perform their role as babysitter while parents worked all day.
Some financial support was (and still is) needed for families who suffered heavy economic losses because of the pandemic and the restrictions it necessitated. Consumer spending was doomed to suffer for a whole lot of Americans. Even after the restrictions were lifted it's pretty hard to stimulate consumer spending when people are trying to dig themselves out of a hole and avoid eviction. All of that was at least somewhat offset by the desperation of the wealthy to get back to spending on the goods and services they were denied while the nation was locked down though. People who were able to stay employed and had large sums of money in the bank throughout the pandemic were very quick to get back to spending. Unfortunately, most Americans didn't come out of the situation in such great shape. After all of the emotional trauma they were every bit as desperate for some familiar comforts and a return to normalcy but they were forced further into debt to get them.
Totally agree. I think it's still worth reminding everyone that over a million Americans died from Covid-19 (and counting), and the response was way better than the response to the last major economic crisis. Overheating the economy vs starting a depression in the middle of a pandemic? I'll take the current course every time. Inflation isn't the end of the world, and benefits indebted actors (anybody with substantial fixed-rate debt).
Deaths attributed to covid were almost entirely "with covid" and not "from covid". The average age of the fatalities was at or above the average age at which people ordinarily passed pre-covid and nearly all suffered from multiple serious comorbidities that would have been sufficient in themselves to precipitate one of any number of individual health crises that would have led to their passing.
Much of the government response, particularly at the federal level, was aimed at terrorizing the public and, when they came online, coercing mostly low-risk people into submitting to experimental, liability-free vaccines that don't prevent spread and so do nothing to protect genuinely high-risk people. The government also financially incentivized refusal to treat covid in its early stages (allowing the patients to either recover on their own or, for elderly and already chronically ill, to become sicker), place patients on ventilators, and prescribe dangerous experimental treatments like Remdesivir that contributed to the death tallies.
The federal government's meddling in some states' distribution of monoclonal antibody treatments was especially pernicious. Lawsuits targeting hospitals, local and state governments, and the federal governments for their conduct (everything from propagandizing to causing or contributing to deaths as in the use of Remdesivir) during the pandemic are in process throughout the United States now.
1.5m excess deaths in the US alone. "from COVID" or "with COVID," however you want to slice it. The obvious factor is the global pandemic from a novel airborne virus.
The conspiracy thinking assuming some sinister ulterior motive from government actions is just a harmful trope, and wrong.
Setting the injections aside for a moment, let's consider other pandemic-era government actions, like the non-pharmaceutical interventions.
None of them worked and it was clear from the beginning that they were not going to ameliorate covid's impact. Loose-fitting surgical masks do not meaningfully impede the spread of aerosol-borne viruses. Even N95s have been found to show no additional benefit compared to surgical masks in pre-covid research that compared influenza rates among procedure-mask-wearing healthcare workers and healthcare workers wearing N95s. People seem to forget that the uselessness of masks against covid was known early on, then experts were trotted out to hypothesize (incorrectly but authoritatively) that covid was actually droplet-borne so that the mask-orders being imposed would have some air of legitimacy. Many deluded people still believe that surgical masks are useful against covid.
Then there were the capacity limits for businesses and forced closures of non-megacorp businesses.
And the stickers on the floor at arbitrary, pointless intervals. Pointless because covid is, as we knew from the beginning, pretended to forget for a while when "experts" falsely asserted the droplet nonsense, and know once more... aerosol-borne. Replication-competent covid virions can linger in the air for literally hours.
And the contact-tracing charade. And forced quarantine (not a thing in the USA but did happen in many other nations that were supposedly following "the science"), sometimes simply for alleged exposure to a PCR-positive "case".
During the covid pandemic, most citizens of nations that actively tried to "fight" the pandemic were deceived and abused relentlessly and shamelessly by those in authority, abetted by many experts. Those who dissented were falsely labeled kooks, deplatformed, and targeted for destruction.
I cannot read the minds of government officials in every country that imposed these sorts of unscientific and harmful alleged public health measures on their populations and tell you why they did it but I can tell you that it was obvious to many with relevant expertise or a rational mind and a willingness to look into what was being done and compare it to most nations' preexisting response plans for epidemics of viral respiratory illnesses and with the published literature with an open mind, even at the time when some were panicking, and know that they did not make sense and would not help.
Do you have any actual evidence for masks being ineffective? You keep saying they're ineffective, but you're not providing any evidence for that claim. Or for any of your other claims that non-pharmaceutical interventions are ineffective. Those are quite the extraordinary claims, in opposition to epidemiologists. You do know what extraordinary claims require, correct?
That report contradicts your claims of ineffectiveness ("uselessness of masks" etc.) as well as the relative effectiveness of various types of masks.
On top of the lack of evidence for any of your claims, you accuse people of being deluded if they disagree. You call contact-tracing a charade, in opposition to epidemiologists. Those are just two examples among multiple others. So. Is there a reason for this incendiary rhetoric and gish-galloping in your posts?
You've lived through the past several years and seen the complete failure of all of the NPIs. Are you just refusing to acknowledge it? Clinging to a covidian version of the "stabbed in the back" myth where if some people had just masked harder or gotten injected sooner, covid could have been extinguished?
Did you even search for any peer-reviewed papers about surgical mask effectiveness against covid?
Here's a model study that aligns closely with what we've all observed in real life (i.e. rooms full of masked people spreading and getting covid):
"IMPORTANCE Airborne simulation experiments showed that cotton masks, surgical masks, and N95 masks provide some protection from the transmission of infective SARS-CoV-2 droplets/aerosols; however, medical masks (surgical masks and even N95 masks) could not completely block the transmission of virus droplets/aerosols even when sealed."
Here's the clinical study that found no difference between N95s and surgical masks:
"Among outpatient health care personnel, N95 respirators vs medical masks as worn by participants in this trial resulted in no significant difference in the incidence of laboratory-confirmed influenza."
Now, how many replication-competent virions need to make it around, through, etc. a face covering in order to initiate an infection? The answer is one.
And you're aware that covid infections can be initiated via the exposed regions of mucous membrane around your eyes (ocular mucous membrane), right? Have you been wearing a full-facepiece respirator with N100 filters installed when you went outdoors?
No, I know. You think that stopping some virions, 60% or even 30%, must be useful. And we'll all pretend that eyes aren't a significant route of infection because we can't get the rubes to all wear ski goggles everywhere all the time.
As the saying goes, it's much easier to con someone than to get them to admit later that they've been conned.
Thank you for the links. Let's examine them in order.
1. Paper [1] is a simulation from Oct 2020 - we have had better real-life data since that time, reflected in the CDC graph of relative effectiveness of mask types [2].
Also, further in that ASM paper [1], they state "Our airborne simulation experiments showed that cotton masks, surgical masks, and N95 masks had a protective effect with respect to the transmission of infective droplets/aerosols and that the protective efficiency was higher when masks were worn by the virus spreader. Considerable viral loads have been detected in the nasal and throat swabs of asymptomatic and minimally symptomatic patients, as well as those of symptomatic patients, which suggests transmission potential (4). Accordingly, it is desirable for individuals to wear masks in public spaces. Importantly, medical masks (surgical masks and even N95 masks) were not able to completely block the transmission of virus droplets/aerosols even when fully sealed under the conditions that we tested. In this study, infectious SARS-CoV-2 was exhaled as droplets/aerosols and mask efficacy was examined. To allow quantification, we conducted our studies by using a relatively high dose of virus, and under these conditions, it is possible that the protective capacity of the masks was exceeded. Although the efficiency of detecting infectious virus was reduced when the amount of exhaled virus was reduced, viral RNA was detected regardless of the type of mask used. These results indicate that it is difficult to completely block this virus even with a properly fitted N95 mask. However, it remains unknown whether the small amount of virus that was able to pass through the N95 masks would result in illness."
So they conclude that (a) there is a protective effect (b) which is better if the spreader is wearing the mask (c) people should wear masks in public spaces (d) some virus does get through, but (e) it is unknown (circa Oct 2020) whether the amount getting through results in illness and (f) their process of forcing high doses of virions through is a lab situation and may have exceeded the capacity of the masks to prevent virions getting through.
For the point (e), this study [3] estimates 300-2000 virions (not 1) are needed to cause an infection. For point (f) methinks that maybe masks are ineffective if someone coughs in your face 1 foot away; we'd have to compare viral loads there with those in the study. I didn't research it in that detail, maybe we depend on the scientists to do that and develop some guidance on the topic.
2. Let's look at your second link [4]
This study is saying that "Among outpatient health care personnel, N95 respirators vs medical masks as worn by participants in this trial resulted in no significant difference in the incidence of laboratory-confirmed influenza." This is a 2019 pre-covid study. And that is not the same conclusion as that "medical masks and N95 masks are ineffective" or that "medical masks and N95 masks are ineffective in the general population" or that "medical masks and N95 masks are equally ineffective in the general population" or that "medical masks and N95 masks are ineffective for covid". Paper [1] examines this last point for covid.
It simply says that for health care personnel, there's no difference in transmission rates for influenza for either type of mask, so we can extrapolate that these (trained) people will see equal effectiveness from either type of mask. To see if the masks are effective is a different study, though there is a clue in this study - 8.2% infections in an outpatient setting. To get a real understanding of effectiveness, one would have to compare that 8.2% infection rate to what the infection rate would be if those healthcare personnel were not wearing masks (I freely and unknowledgeably speculate that would be upwards of 80%-90% depending on their immune system).
Yes, you are right that covid infections can occur through the eyes. For that glasses can cut down the infection rates. Goggles are probably better, but glasses work somewhat [5]. Also [6]. The mechanism appears to be unclear - whether it is by preventing touching the eyes, or by actually blocking virions landing on the eyes.
Overall, neither of these links appears to imply that masks are completely ineffective, and I'm confused about how any reasonable tech/science-savvy person could read those papers and come to the conclusion that masks are completely ineffective. There is also [2]. Wearing glasses appears to convey additional protection.
<rant on> All those surgeons and doctors and nurses wearing masks in hospitals and operating rooms before covid must have been idiots, eh? Semmelweis [7] must have been a moron to start the trend of hand washing in hospitals to reduce infections, yes? I mean, why even bother with medicine or science, we can just pray the virus away, right? We can eat dirt and uncooked and unwashed food and drink raw milk and suck on the pus from an infection without consequences!!! After all humanity has been around for thousands of years and science only for a few hundred! Why even bother with clean rooms in chip factories, it's not like viruses can infect chips!!
<rant off/>
It's accurate and factual to state that getting all low-risk people vaccinated with covid with the current set of available leaky, quickly-waning vaccines does nothing to protect genuinely high-risk people.
The cited values for time post-shot to peak efficacy and the subsequent time from there to whatever threshold of efficacy you choose (and on to negative efficacy after that) are based on studies of groups of individuals. For some of the individuals, the shots were more or less effective than the mean/median/this-many-standard-devs value in preventing infection and then, as their jabs' effects weakened, in reducing viral load and symptoms that are relevant to onwards transmission.
In the absence of any widely-enforced way of measuring an individual's viral load at any given moment, many people who believe themselves to be under a covid shot's umbrella of protection are actually infected with covid and spreading it. Covid is aerosol-borne and can linger in the air for hours.
For high-risk people not living in a one-person habitat at the bottom of the ocean or on the Moon, there is no avoiding covid, even if everyone around them gets a booster every three months.
There are reasons that effective vaccines for the viruses that cause the common cold (rhinoviruses, coronaviruses, et al.) and for influenza have never been developed. And everyone should have been very skeptical of authorities' "If you get this (or that) shot, you won't get or spread covid!" claims about a bunch of experimental vaccines (some since withdrawn or abandoned due to lack of uptake in the face of adverse effects or realizations about the mildness of this disease for most people) churned out in a matter of months.
> It's accurate and factual to state that getting all low-risk people vaccinated with covid with the current set of available leaky, quickly-waning vaccines does nothing to protect genuinely high-risk people.
It's neither accurate or factual. Genuinely high-risk people who are vaccinated but get covid have much better outcomes than genuinely high-risk people who are not vaccinated. The vaccine can literally protect them from death. You'd have to be crazy to conclude that the vaccine "does nothing to protect" them.
You've placed the goal posts on roller skates and are hoping I don't point it out.
From my original comment: "coercing mostly low-risk people into submitting to experimental, liability-free vaccines that don't prevent spread and so do nothing to protect genuinely high-risk people"
You are now citing an alleged benefit of lowered odds of severe illness and death to high-risk individuals from receiving the experimental vaccines themselves.
I am decrying the government coercion/disinfo efforts that bribed, bullied, shamed, and frightened low-risk persons (non-elderly, exhibiting none of the known risk factors for serious disease, in apparent good health) into getting any of these shots on the (false) pretext that doing so would prevent truly high-risk persons from contracting covid.
> From my original comment: "coercing mostly low-risk people into submitting to experimental, liability-free vaccines that don't prevent spread and so do nothing to protect genuinely high-risk people"
The "and so do nothing to protect genuinely high-risk people" is still a lie.
What you didn't say is "coercing mostly low-risk people into submitting to experimental, liability-free vaccines that don't prevent spread and so do nothing to protect genuinely high-risk people from ever getting infected"
which would still be a lie, but much much closer to the truth. Instead you misleadingly stated what you said in such a way that it made the vaccines sound like they weren't protecting genuinely high-risk people at all which is, again, a lie.
The vaccines do protect genuinely high-risk people. It also helps prevent the spread of the virus, but at this point only a little. Against early strains of the virus the vaccines were very effective at preventing infection, but we've allowed the virus to evolve so now that's no longer the case. This wasn't a government conspiracy, it was a complex and changing situation and the CDC was very quick to inform the public once the data showed that the vaccines were not protecting against infection as well as they used to, and were also very clear about the fact that the vaccines are still (so far) highly effective at keeping people from dying and getting seriously ill.
Not enough people in the given category to give statistically sound figures. There isn't enough vaccinated or unvaccinated people getting hospitalised or dying to draw significant results.
How much constantly-waning reduction of viral load and symptoms do you think would be necessary to coerce a healthy person not exhibiting any risk factors for severe covid-related illness into subjecting themselves to experimental vaccines with admitted 1 in 20k (or higher) risks for certain severe adverse effects up to an including death?
When vaccine efficacy goes negative (you're more vulnerable to infection and become as or more symptomatic and carry as high or higher a viral load than unvaccinated) after a few months, you have to get a booster and subject yourself to the same or greater low, but non-negligible risk of known serious/fatal adverse effects in order to fingers crossed buy a few more months of protection you don't personally need but which you hope will reduce truly high-risk persons' chances of contracting covid. There may also be other, as-yet-unknown adverse effects.
How long are you willing to keep running back and forth across a minefield?
Everyone keeps saying "experimental vaccines" like we're just injecting ourselves with random shit, but we have a very good general understanding of how vaccines work. The COVID vaccines were not invented by frat boys playing with random chemistry...
Given the situation a full run of trials would have taken far too much time.
There is no long-term safety data on "boosting". That is what he's referring to, I think. There's also no long-term safety data on mRNA injections in general.
It was misinformation the vaccine prevents spread, misinformation spread by the governments. You still get sick during each wave, you still spread the virus. The only thing it does is reduce the amount of symptoms.
But we also know the CDC's original position was false.
More importantly, all social media platforms universally censored the scientist who discovered the mrna vaccine because he said... they dont prevent spread.
If you actually read that link, note that it supports the correct information I gave you. The vaccines reduced spread - not completely but meaningfully - but effectiveness has dropped in the face of different variants. This is not a secret but something scientists and public health officials have been concerned with since the beginning: the retail business lobby wanted to say that you could go back to 2019 as soon as you were vaccinated but that was because of the money they weren’t getting from indoor dining/drinking when people were staying masked - and while some politicians wanted that to be true, too, anyone following the scientific consensus knew that was wishful thinking.
Can you share the data on the reduction in spread the vaccines offered across different variants to back up your claim? I've never seen the data so I'd be curious to see what you're referring to.
Do note that neither the Pfizer nor Moderna vaccines actually tested risk of infection or transmission. You can download the clinical trial protocols and read what the clinical trials actually measured. Patients in the trial were only tested upon symptoms and the endpoint measured was severity of disease.
I believe it was only the J&J vaccine that actually regularly tested patients to see if there was a difference in protection against acquiring Covid. They did not test protection against transmission.
Those studies pretty consistently found benefits in the 40-60% range against the original strain. Unfortunately, we had political opportunists discouraging adoption and then Delta and Omicron evolved so the scenario public health experts had been worried about happened.
Regarding the claim that Pfizer and Moderna didn’t test for transmission, this has been muddied substantially by its popularity as a talking point for antivax activists and right-wing pundits trying to present it as a conspiracy of some sort. In reality, Pfizer and Moderna worked with the FDA to design the phase 3 trials and they all decided to focus on protection against serious outcomes, but that doesn’t mean that they didn’t look for signals in the data or that other studies weren’t in progress. All of this was clearly communicated at the time, too, so I would question the motives of anyone who tries to say it was buried – at the very least, that’s saying they get their news from untrustworthy sources.
The two studies you reference have significant limitations (same author, different time periods) which are stated in the papers.
"We estimated a VET of 71% among household contacts of fully vaccinated index cases. Harris et al. found a VET of 40–50% for unvaccinated households contacts". They estimated it, and if using the 40-50% figure, their study found higher transmission rats among vaccinated.
It was also self-reported data they explicitly state was not collected for research purposes, "As our study used data not primarily collected for research purposes, it has some important limitations. Our data do not contain information on negative tests among contacts, therefore we do not know if contacts did not get infected or did not seek testing."
I would be careful in making any sweeping conclusions from an observational study using self-reported income.
In reality, Pfizer and Moderna worked with the FDA to design the phase 3 trials and they all decided to focus on protection against serious outcomes, but that doesn’t mean that they didn’t look for signals in the data or that other studies weren’t in progress.
I agree - Pfizer and Moderna never claimed they reduced infection rates because they never tested it. Generally it was politicians who were saying "get vaccinated to protect others" based on some theoretical benefit.
Like I said, look at the Phase 3 clinical trial designs, they are public documents. Risk of infection/transmission was not captured.
"While vaccines do not offer 100% protection against COVID-19 infection, they can still partially defend against infection. Vaccines remain effective at protecting from COVID-19-caused serious illness, hospitalization and death."
You will see that there is a great deal of variation in the number of aerosol-sized particles emitted by the individuals in this small clinical study and note that the variation between individuals is greater than the difference, for a single individual, between a person's aerosol output when ill vs. after recovery.
You can also find studies confirming that ordinary breathing constantly generates aerosols. They aren't just something produced when someone coughs or sneezes.
If you were extremely socially isolated, perhaps on a farm or in a cabin somewhere and only going into town once a month to buy some supplies or pick up your mail from a one-man post office or something, slight reductions in other persons' viral load and very conscientious use of a properly-fitted respirator and eye protection might buy you a little more time before you got infection.
But living normally, going out most days and interacting with many people and entering environments with non-negligible foot traffic from other people who have made their own respiratory contributions to the ambient air? With surgical masks or cute cloth masks and everyone having gotten some combination of the currently-available covid shots? No.
You know what datasets we have very good statistics for? Deaths. We know, to the person, how many people have died. We have that information year-in and year-out for decades. We know, for a fact, that in excess of 1 million Americans died during the pandemic than would have been expected.
Also, please stop waving away these deaths as "comorbidities" and act like Covid wasn't involved in these deaths. If these people hadn't had a Covid infection then they wouldn't be dead. Period end. That's why 1 million more Americans than expected died. There are millions of Americans successfully managing their heart disease and diabetes who otherwise can expect to live long lives. Covid cut those lives short.
Doesn't matter, as long as it keeps people out of the hospital. Dying of delayed cancer treatment because hospital staff is busy dealing with unvaxxed Covid patients isn't great.
If you are reasonably healthy and not elderly, your chances of being hospitalized with covid have always been extremely low. You get none of the alleged benefits, but take on all the risks of adverse effects, including sudden death months later.
The amount of effort being expended even on a niche forum like this one to police the narrative and carry out a sort of rearguard action while "the science" around covid and covid-related pharma products and interventions continues to evolve towards what some conspiracy theorists have claimed all along is fascinating to behold.
The amnesty they're already starting to beg for isn't going to be forthcoming if they keep fresh in everyone's minds what petty dictators they have been.
And the ones most responsible largely remain in their positions of authority and reserve the right to try to impose the same techno-fascistic abuse schemes again in the future.
Fear. We were pounded with flashing scroller death counts and stories of overrun ER's from every corner of earth for what, two years? I made a comment in a running forum about the outdoors being the safest place to be and to please leave the mask at home because of the risk of low blood-oxygen levels and I was downvoted into oblivion.
Whenever I've shared this link ("U.S. Field Hospitals Stand Down, Most Without Treating Any COVID-19 Patients" https://www.npr.org/2020/05/07/851712311/u-s-field-hospitals...) with members of the hospitals-overrun-youll-die-from-an-infected-papercut crowd, they usually want to change the subject. Same when I remind them of the demands for hospital ships which then weren't used.
Republicans (who tend to be older) encouraging their voters to get infected, avoid going to hospitals, and demand ineffective treatments seemed like a strange move to me, and research suggests that people in counties that voted for trump were many times more likely to die from the virus than people in places that voted for democrats. At times I've wondered if GOP leadership was actively trying to cut away some of the crazy in their base or if they expected the virus would be much worse for minorities in urban areas than for republicans in rural areas and miscalculated when sacrificing their own voters in order to promote spreading the virus.
There are two datapoints with a 500,000-750,000 jump so yes the chart shows over 1,000,0000. And that doesn’t take into account the drop in normal deaths from lockdowns and wfh but anyways.
That’s why the feds backstopped unemployment and airdropped stimulus checks. Dropping the interest rate was unnecessary and caused more harm to vulnerable class than good by increasing inflation. This recession caused raising interest rate will wipe out the vunerable class once again while upper income classes won’t even notice except in their portfolios. We see this currently with luxury spending still elevated while other sectors are seeing softening demand.
The short answer is discipline, which at this point might need to be imposed by regulating debt to be more difficult to come by, or by forcing further savings via payroll deductions or something along those lines (like Singapore).
If you want to build a financially resilient population it requires top down solutions - it won’t just arise.
As is always the devil is in the details, but regulating debt to be more difficult to come by or forcing savings seems like it would be broadly politically unpopular and would likely have significant unintended economic consequences.
This is surely a challenging problem.
Then this leads me to wonder if interest rates are too coarse-grained for what would have helped folks the most. I don’t know what would have been a finer-grained approach, but universally lowering interest rates had a huge effect on other areas (like home purchases) which were not in dire straights like “keeping food on the table and a roof over their heads”
The actual reality is that the vast majority of people kept working but didn’t have enough ways to spend their money. Then the Congress started mailing massive checks to people regardless of need and the Fed cut rates.
Surprise surprise… people spent every last dollar they had saved and borrowed 7x their income. On houses. On new and used cars. On electronics. On home improvement. On anything and everything they could find.
And that all caused inflation. Unemployment was transitory and mostly recovered by the end of 2020.
Majority? By the end of 2020 the unemployment rate had dropped to 7.5%. Evictions were illegal. Unemployment benefits were padded an extra $500 PER WEEK. Stimulus checks were sent.
Almost no one was struggling to pay bills by the end of 2020. This is a made up sob story that didn't play out at all in reality.
Wealthy people did alright during the pandemic because they couldn't spend the money they had. They had no choice but to save it and savings went up. Poor people were just plain screwed by the pandemic and are still recovering. In fact we haven't even seen the full fallout of that because evictions were delayed (not made illegal), and we still face a looming eviction/homelessness crisis which isn't what you'd expect if everyone was rolling in money thanks to the pandemic. (https://www.nytimes.com/2021/11/07/us/evictions-crisis-us.ht...) In fact homelessness is already on the rise which disproves that practically no one is struggling to pay their bills. (https://www.pbs.org/newshour/nation/homelessness-surging-in-...)
How the pandemic played in out in reality was very different for the wealthy than it was for many many others.
You’re comically cherry picking facts straight out of headlines, but without even reading the articles.
1/3 of workers lost or switched jobs. Who cares about job switchers?
As for the rest I already sent you the literal underlying fed data. Unemployment went down as fast as it went up. Savings rates blew up. Old debt decreased. Food insecurity went down. It was illegal to evict people for nonpayment.
Your assertion of mass struggle did not exist in this reality, or any reality.
Anyone who owned ANY assets practically doubled their net worth within 2 years. If you owned a house, you likely also refinanced for under 3%. At the same time, wages increased.
How can there be a drop in demand if your house is now worth 50-100%, your 401k is 50% higher, and your wages are 20% higher?
Sure, this doesn’t describe everyone - the bottom 50%ile might not own any assets at all. But it does describe enough Americans that demand can’t crater anytime soon.
It was a massive handout to existing homeowners. If you rent, you got nothing. If you were paying $6000/mth on your mortgage, you could refinance and find yourself paying $3500/mth. Now, until the end of the loan, you find you have an extra $2500/mth extra to spend. No wonder we have inflation
It was pretty much a "screw you" to young people. Home ownership rates for 65+ year olds is nearly 80%. For 45-54 year olds, its 70%.
Statistically, if you were 45 years old, you likely benefited a great deal from the pandemic.
My brother is in that age group. He bought his house for 380k. It's now valued at 750k. He works in tech so his salary increased from 120k to 180k. He refinanced his mortgage at 2.5% and pays iirc ~1100/month. It's the same story for all of his friends.
If you're ascribing that level of intent to the Fed, then what do you say about the current situation? As someone trying to sell my home right now, I can tell that the massive bull run in equity is almost gone already. We issued massive fiscal and monetary stimulus in the face of the steepest recession in history and successfully forestalled economic catastrophe. With the cost being a wild ride for assets and prices that will certainly taper off in the near future. Small price to pay if you ask me. As someone who's lost a ton of (purely notional) net worth in the last year, I think policy makers are doing a really good job.
If you look at the alternative. The ones who said let's keep schools and businesses open during a pandemic and let people die to keep the economy humming along, I'd say we took the right path.
I agree with you, but we had been incredibly lucky with the way covid mutated into much weaker omicron so quickly (no, we didn't get permanent antibodies that can handle it all from now on forever, most folks have almost 0 of those now if they only got vaccines and no real infections).
If it mutates back into more morbidity, we will be in much worse position since I don't think we will have a realistic option to repeat that stimulus without plunging whole world into (not only) economic chaos.
When rates fall, prices for assets like homes tend to rise in proportion shortly after, such that the cost to borrowers is approximately constant. The benefit of falling rates goes more to homeowners than new borrowers, even if they don't have mortgages.
But of course if you refinance to take equity out, now you're back to having a monthly mortage payment again. If you do it today, it will be a high interest mortage. If you're over 65 (as OP mentioned) you're probably soon retiring, so this would be a very bad financial move.
A cash-out refinance (what people would most commonly do in this circumstance) is just a regular refinance, so terms could be anything a refinance can have. Usually fixed rate 30yr.
A reverse mortgage is a different thing, IMO always a bad deal but I guess could be ok in some cases.
That may be a contributory factor in the US, but inflation is global. As a homeowner in the UK, my house did not appreciate in value more than usual, our salaries have not risen by anywhere near inflation, and our pensions have fallen!
Yes, Americans tend to focus on the monetary side, completely forgetting there's a whole other world outside of their country that had wide varieties of policies to combat Covid, and everyone is experiencing inflation, including Sweden (at 10% annually as of September 2022) that didn't shut down and didn't spend anywhere close to the money spent by other EU countries to prop up jobs and the economy.
Many people, especially Americans, forget the supply side - a pandemic which wrecked global supply lines, and a war which is impacting some of the most important resources (food and energy), globally. No idea why, maybe because they can't blame a politician/party for that part.
In any case, inflation has many complex causes, is global, and may take quite some time to get reigned in. There's no quick fixes to the supply problems nor for the monetary (supply) problems, and if perceptions are that inflation will continue, it will continue regardless of underlying metrics.
> There's no quick fixes to the supply problems nor for the monetary (supply) problems, and if perceptions are that inflation will continue, it will continue regardless of underlying metrics.
Perhaps it is a supply of cheap labor problem that Covid shutdowns allowed a sufficient disruption to low paying labor markets to cause a “phase change”.
Even before Covid, labor prices were trending up (maybe since birthrates have been dramatically falling for a long time), but the sudden, rapid shake up gave people en masse time and excuse to change things up for themselves, causing a chain reaction from the lowest paid labor being harder to fill.
Ok, renters got $1500/mth for 2 years, maybe, if they decided not to pay rent (almost all my friends are renters and none of them stopped paying rent).
> How can there be a drop in demand if your house is now worth 50-100%
Note that house value increase (paper value) doesn't generate any disposable cash to the owner.
They could go and refinance (at a higher rate now) to get some equity cash out, but anyone doing that to spend the money on consumables is doing a bad decision.
Seeing your networth double, even if its on paper, has an impact on your spending patterns. Especially smaller, “feel good” purchases, such as ordering takeout or buying an extra drink at the bar.
You might objectively know that you can’t sell your $1M house for its current zillow estimate, but when you’re out at the bar, its easy to justify in your head that you can “afford” that extra drink. After all, didn’t you just become a millionaire?
There is a huge psychological component to money that’s somehow never talked about.
> Seeing your networth double, even if its on paper, has an impact on your spending patterns. Especially smaller, “feel good” purchases, such as ordering takeout or buying an extra drink at the bar.
Do you know of research showing this behavior?
I haven't seen research one way or the other, but anecdotally this seems very unlikely. I don't know of anyone who feels that way and we're in silicon valley so everyone we know has houses that have appreciated quite a bit.
But everyone knows both objectively and emotionally that zillow zestimates are not money that can be spent. It might be money a number of decades in the future after retirement and selling the house to move, but that's way too far in time and uncertainty to have any impact on behavior today.
They all went and bought vacation houses (read: what would have been somebody else's starter house) in flyover states. The money spent on goods is just a figment of them spending all the stuff they need to kit out their extra house.
Agreed. The markets plunged so the Fed airdropped a ton of assistance to the 1%. I mean my portfolio went up, but I was also sitting on a lot of cash in anticipation of a prolonged market downturn. Clearly there's no reward for being financially responsible. Instead people hate on poor college grads getting $10k off their overpriced educations.
I'm having a hard time hating that much on 18-year olds who were encouraged to borrow recklessly by their parents, college counselors, and other advisors to pursue an education. The amount of digital ink spilled on criticizing them seems to vastly outweigh how much hate the propping up of the market in March 2020 gets.
Obviously, but the only solution to this is someone has to suffer. Who is punished for all the bad ideas and bad advice you describe in your statement? Now they get bailed out, so what changes exactly?
In this case, the colleges running the scam (charging astronomical prices for worthless paper credentials, and the administrators feeding at this trough) are the biggest winners.
Even the counselors and advisors are part of this pipeline of moral hazard if you think about it. What is their purpose, and are they fulfilling it? Does bailing out their bad advice change anything?
You're right, but this is exactly what I mean about pointless hate. Where's the anger about the other bailout - of the financial markets? Where are the lawsuits against that? Why isn't there any legislation in the works to cap the cost of college or reduce predatory lending to teenagers? Why not allow student debt to be dischargeable in bankruptcy so that it's priced correctly by the market?
People can be upset at two things at once. It makes perfect sense that part of fighting bailouts is preventing new ones.
Try looking at it this way.
If I am already struggling with someone is robbing me, I would still try to fight if someone new wants to start robbing me too.
Just because there is a real and significant problem with existing corporate bailouts, that doesn't mean that other new bailouts should be encouraged as long they aren't as big.
That said, congressional bailouts are usually legal, and therefore hard to challenge.
One major problem is that congress prone to make legislative decisions based on corporate interests opposed to their other constituents. This is a hard problem to solve, but many people still care about it and try.
It is an election issue for many, primarily fiscal conservatives from either side of of the isle.
Another challenge is that fiscal conservatives are generally ostracized from either party. Parties draw votes along culture war.
At the end of the day, most people who object to student bailouts also object to corporate bailouts. If we could solve only one, I think most people would pick the latter, recognizing it is a bigger problem.
Well in the base case of no debt forgiveness, the borrower suffers (though I think if it goes on long enough the exorbitant fees colleges are raking in would go down too, solving the other side of the problem).
In the case of bailout/forgiveness, there is the perception that every taxpayer...those who paid their debts for college or those that didn't even go to college, are paying for other's mistakes. So on one hand, the disinterest is on account of the issue not being seen as affecting some people while the bailout brings them into it.
i.e. the anger is "now you're making it my problem, to fix your problem."
In any case, to your point about punishing the colleges, I think is absolutely necessary. It's just that bailing out the debtors does not do that whatsoever, in fact in ingrains the moral hazard and keeps the colleges money train flowing (maybe, unless the government has some common sense to know they have to address the other end of the pipeline).
> those who paid their debts for college or those that didn't even go to college, are paying for other's mistakes
that's how society works though. I didn't have kids and my taxes still go to help support childhood nutrition and education programs, etc. I don't get a choice about funding the military, etc. Societally these are things that we have determined are important and deserve funding.
Everyone benefits from having a highly educated populace, not least because of the prolific lack of critical thinking the public displays in the political sphere. Want less "jewish space lasers" nonsense? Build a society with a good tertiary education pipeline that doesn't leave people horribly in debt, and increase the amount of the populace that has access. In many ways we are suffering the pain of that 80s/90s/00s neoliberal consensus on reduced education funding and privatization right now, this is what you get with 30 years of public secondary education being terrible and tertiary education being too expensive for a large portion of the population to access.
But people really just think about me, me, me. MY taxes. And this is the society you get with that.
>that's how society works though... Societally these are things that we have determined are important and deserve funding.
I always found this to be a non-compelling answer. Society can mean any number of things and changes all the time. You can say the same thing about anything you want.
Obviously "Society" had decided that individuals were responsible for the college debt that they took on until this last year, and then it changed. Never mind the fact that neither society at large or their elected representatives voted on it, just a single individual via executive action.
If you strip away the appeal to "society", it is just an argument that more redistribution is better than less.
Maybe I'm more conspiracy theory minded. But it seems like there's a definite propaganda push to demonize student debt relief to distract everyone from the much bigger thievery that's happened to everyone.
Even your response to my comment focused only on student debt relief, though I also asked about stock market relief. Every taxpayer - those who were still paying college loans, those who paid off their college loans, and those who never went to college - paid for that in higher inflation and asset prices. And unlike student debt relief, every non-taxpayer also paid for it!
Perhaps we should raise the age where we consider someone an adult.
IMO the real problem is that we just created a new entitlement program out of thin air. And unlike the other programs that have more broad appeal, this one is just for a small portion of the citizenry. And nobody is having a serious conversation about how we're going to fund it going forward.
22m applicants doesn't sound like a "small portion" to me. It'll benefit them and their families - those who are supporting them, as well as those they support.
> IMO the real problem is that we just created a new entitlement program out of thin air.
Would it sound better if you called it a "tax break" or "tax credit"? What's the difference?
Like I said here https://news.ycombinator.com/item?id=33438628, we can eliminate 40% of those 310M on the basis that they don't pay federal taxes. So they aren't paying for student debt relief. Of the rest, a good proportion are related to the 22M who are getting the relief. We're talking about parents who are financially supporting their adult children. Or kids whose parents are paying off student debt. It's way more than just 22M.
And it's certainly way more than the number that benefited from propping up the stock market in 2020.
Picture two white collar professionals sitting at a bar, clinking their glasses to celebrate college debt relief, inches away from the blue collar bartender whose taxes will pay for that relief.
I agree I don't think it's fair to "hate" on the college-indebted, but I can also see an element of unfairness to debt relief and can understand why someone like that bartender would not be so happy about it.
And yet all the propaganda directs hate towards "blue-haired baristas/bartenders with worthless degrees in women's studies". I don't think it's as simple as "blue collar" vs "white collar". People who took loans to go to trade schools should also be eligible.
And all 3 of those people's tax dollars are going to pay for their bosses' stock portfolios.
Clearly there's no reward for being financially responsible.
It's called Moral Hazard. A lot of us learned this in 2007/2008. For me I had a friend in 2005/2006 that would go to Toll Brothers developments with 2 friends because they only "allowed" you to buy 3 houses per person. So together they'd buy 9 houses, sit on them for 6 months and flip them making hundreds of thousands of dollars.
I thought he was insane and that it was inevitable to blow up spectacularly. Which it did. Which the government almost completely bailed him out of and there were almost no consequences, financial or otherwise.
40% of households (out of 123m) don't pay federal taxes, so it's not their pockets being picked. 22m people have signed up for relief. Maybe you could say "a majority of taxpayers" but even that's not certain, since we don't know the distribution of those people. A lot of those taxpayers are parents of indebted students who may be supporting or housing them due to their children's financial struggles.
In any case, 22m people benefiting is far more people than the top 1% who benefited in March 2020. But compare the relative outrage.
Having the government debt finance a giveaway to people who do not need assistance if pretty much theft from everyone. As debt service surpasses 9% of the federal budget it will begin to crowd out other spending. Furthermore, piling onto inflationary policies definitely hurt people who don't make enough money to pay federal taxes.
Dropping rates doesn't really affect spending that much (but can contribute to increasing asset prices, like houses and stocks).
The whole thing is basically a cargo-cult kind of thing at this point. Need to stimulate? Drop rates. Inflation too high? Raise rates. But the theory doesn't actually match the real world, and it never actually does any good.
At this point, they'll keep raising rates either until some unrelated factor happens to moderate inflation, or their rate-raising unnecessarily causes a crash and big recession (which will reduce inflation, but really not in a good way).
> A recent GOBankingRates survey found that 30% of Americans have between $1,001 and $5,000 in credit card debt, 15% have $5,001 or more in credit card debt and about 6% have more than $10,000 in credit card debt. Although 6% may seem like a small amount, that means that based on the survey results, 14 million Americans have over $10,000 of credit card debt.
The change to the rates increases the amount of interest paid on holding credit card debt. That directly does impact spending for a significant portion of the population.
---
The awkward part is that the fed's tools for managing the economy are rather blunt and take time to cause a change. Monetary policy vs Fiscal policy.
However, fiscal policy is tied to the gridlock in congress and so all the responsibility for managing the rate of inflation and jobs has been pushed onto the central bank... and this is what you get.
Dropping rates and raising rates are the tools that they have until a majority of elected politicians want to take the responsibility for making a decision that impacts people's finances.
macroeconomics is complex, but at least this part is not that complex. in monetary policy there's one lever, the money supply expansion rate.
as long as there's a sufficiently large part of the economy infused with debt (banks rolling over short term debts, large companies using credit to fund payroll, any new investment compared to "risk free rate" of central banks, etc) the lever has some effect.
of course it's a blunt instrument. fiscal policy is needed to pick up the slack. but that's mostly bludgeoned to death long ago by polarization of politics.
I don't know, I think a lot of people changed their behaviors to avoid the virus, whether or not businesses were open. Check how quickly and how far Personal Consumption Expenditures dropped:
They wanted to induce more spending elsewhere in the economy to make up for the lack of spending in shut down businesses. I think as businesses reopened gradually they should obviously have done the reverse (Quantitative tightening), but they didn’t. And then we ended up with high inflation.
Lowering interest rates wasn't to encourage consumer spending. It was to prevent businesses from going bankrupt. If you owned a perfectly sustainable business pre-pandemic that happened to owe debt, you'd be completely screwed when your revenue plunged during the pandemic. The only way to stay operational is to take on more debt, but that may not be possible if interest rates are too high.
Lowering interest rates during a pandemic makes sense. What doesn't make sense is lowering interest rates when the economy was perfectly healthy in 2019.
Weren't PPP loans meant, in part, to prevent businesses from going bankrupt?
Why lower interest rates instead of doing direct cash transfers through unemployment insurance and other assistance? If a business is making $0 due to the pandemic, why would a bank be more likely to lend to them at a 1% interest rate rather than a 4% interest rate?
> What doesn't make sense is lowering interest rates when the economy was perfectly healthy in 2019.
Err, "perfectly healthy" may be a bit of a mischaracterization.
Quoting from the July 2019 FOMC statement[1] (my emphasis):
>> Although growth of household spending has picked up from earlier in the year, growth of business fixed investment has been soft.
...then the following September statement[2]:
>> Although household spending has been rising at a strong pace, business fixed investment and exports have weakened.
...and still the following October statement[3]:
>> Although household spending has been rising at a strong pace, business fixed investment and exports remain weak.
Look at the Fed Funds Effective Rate[4] circa 2019, then compare that to the Fed's balance sheet[5] around the same time.
I understand that little ~$500 billion bump in the 6 months prior to the start of COVID is the Fed averting crisis in a bond market that was approaching dangerously close to the sort of illiquidity levels which get sovereign nations into a lot of trouble.
I also understand that banks were supposed to be part of the machine that provide that liquidity, except regulations coming out of the Great Financial Crisis that imposed things like Liquidity Coverage Ratio and Supplementary Leverage Ratio requirements created an unintended incentive for banks to drop low-yield bonds from their now constrained balance sheets to optimize profits.
So the flow of capital towards "business fixed investments" tightened, capital which originates in the form of loans from banks, and interest rates is a knob the Fed can tweak...or something like that.
To be sure, I'm neither a banker nor an economist.
Also worth noting that the S&P 500 went through a -18% correction starting the end of September 2018 and didn't recover until May 2019.
The suppression of government bond yields and money creation via quantitative easing were needed if states were to pay people's salaries during lockdowns. Governments would not have been able to raise that much money on the open market without central bank intervention.
Let us not forget why we went from an elemental money (gold) to a money that is printable: price stability. We collectively decided that we wanted a few people to have control over the money supply so that they could turn the knobs to ensure price stability.
During the pandemic, knobs were turned. They continue to be turned. Where's the price stability?
> During the pandemic, knobs were turned. They continue to be turned. Where's the price stability?
well, it kinda turns out the market is so highly consolidated and inefficient (in a market sense) that a couple oligopolists control most markets, and they pretty much all colluded to increase margins at the same time.
the only knob the fed really has to put a stop to that is to hurt the economy so badly that people can't afford to pay it.
BTW, while that may seem doubtful on the face of it, consider this: a single baby formula plant shutting down precipitated a national crisis because one or two plants basically make the whole supply for the entire country. Most food markets and most dry-goods (even tech markets specifically) are not any less concentrated than that. Smithfield and Hormel basically run almost the entire meat market, they control a supermajority share (and not a "technical" one either, we're probably talking >90% share) of the entire US production between two companies.
What would happen if both Intel and AMD decided to raise prices? Well, you'd pay more, maybe in the long term you'd see a push away to ARM or RISC-V but that's always been a pipe dream in practice, x86 domination of the desktop market has never been cracked. And oops, turns out ARM went bad just recently too, so, time to start over again, better luck next time suckas!
Hindsight is 2020 as it were. But so is our response to covid. There's an article from a covidian calling for pandemic amensty because it was unreasonable for her to wear a mask in the forest or call for mass terminations of antivaxxers.
Turns out the response to covid was completely unreasonable and we have some extremely severe consequences to deal with now.
The people responsible for these severe consequences will need to be punished.
Not in the article: a common sense explanation why rising interest rates, which haven’t been combating inflation, are supposed to reduce the price of food and gas (CPI) and clothes, furniture, cars, toys, electronics, and other junk (core CPI).
One common explanation is that inflation is a self-fulfilling prophecy. Let's say, you have $1000 today that can buy you a certain gadget. You know that you won't need it until the next year, but in a year that same gadget will cost $1200 due to inflation. So you buy it right now for $1000, even though you could get by for another year. This increases the amount of money bidding for a limited supply of gadgets, so the seller can easily rise the price to $1100 right away, speeding up inflation even further.
To combat this, the interest rate is raised to the point where you could put your $1000 to the bank, get $1200 in a year, and still buy that gadget. Fewer people are competing for it right now, so if the seller raises the asking price for $1100, many people would rather overpay right away.
In reality, we have been printing money like crazy ever since 2008 [0], but rather than immediately raising the price of bread and beef, it went into speculative investments (VC bubble, crypto), assets (housing), bullshit jobs (exponentially growing number of bureaucrat jobs), etc. Now the Ukrainian war and Chinese COVID policies have disrupted some supply chain mechanisms that worked out of inertia, and it turns out we might have killed the mechanisms that would otherwise kick in and redistribute the weight. Nobody wants to step up and produce more stuff - we got too used that we can just print more money and have someone else accept is for payment. Except now we are running out of eager participants, so more and more money is being pulled out of that hip dog spa startup and is bidding up the prices of bread and rice.
I don't think the rates will fix the inflation overnight, but they may start a long and painful process of incentivizing more productive work, rather than asking for a bailout in the loudest way. And we desperately need to do this because just printing more money without "printing" more oil, chips, foods and everything else will inevitably result in Venezuela-style hyperinflation, destroying the rest of the economy. You do not want to live through it, really.
That article specifically says that onshoring, reshoring, and nearshoring are NOT what is going on. I mean it's the second paragraph of the article.
(Also, it's the NYT, which famously has been criticized, lost readership, and responded recently by replacing editorial staff, for trending towards conspicuous Democratic Party propaganda, in the same way Fox News correlates with Republican Party propaganda. Both situations quite sad.)
You're right about the article not being about onshoring etc, I linked to the wrong one and now I can't edit it. Anyway, the data is out there. No comment on the political biases of the media.
But a little too late still. It's not nearly massive enough -- even the most crude mental exercise: China has ~4x the population of the US, so the US needs to 4x current onshore output levels while keeping prices low to meet demand to prevent inflation.
> the US needs to 4x current onshore output levels
No it doesn’t. Firstly, it’s not just the US but Mexico and Canada also which is another roughly 170 million people. Secondly, the North American system only needs to produce enough for itself and perhaps its allies. Supporting the whole globe in the way China does is not going to happen, i.e. in a (even by US standards) hyper-financed fashion while ignoring profit and basic sustainability.
I think part of the problem, is in order to truly combat inflation (not just the CPI) the cost of borrowing needs to be higher than the actual inflation rate itself. So, if inflation is 10% right now, interest rates need to be above 10% to create a real negative pressure on the inflation rate itself. Otherwise, it is simply warning shots, and a hope that people will change their behaviour voluntarily.
To remove money supply from circulation; saving that money must be more beneficial than borrowing it.
At this point in the cycle, it is still cheaper to borrow money vs save it. Inflation is... 8.2% let say, so... I can save that money at get 4-5% return for instance, so I'm still losing 3-4% per year in that simple scenario. Or, I can continue to spend, and borrow at a rate less than the 8.2% inflation rate.
It's a bit dishonest that many economists, and experts suggest that interest rates will peak soon. Truth is, they will not until they are higher than the real inflation rate.
> in order to truly combat inflation (not just the CPI) the cost of borrowing needs to be higher than the actual inflation rate itself. So, if inflation is 10% right now, interest rates need to be above 10% to create a real negative pressure on the inflation rate itself.
Yes, but it’s not the interest rate today that needs to be higher than today’s inflation rate, it’s the expected interest that needs be higher than the expected inflation over the typical loan period. As interest rates increase the inflation rate will come down and the two will cross somewhere in the middle.
The thesis is that there is more demand than supply of basically everything (not least oil) causing a positive feedback loop on prices.
Crush asset prices, reduce labor bargaining power, induce layoffs - this all reduces demand for everything back to what we can supply today, which will cause lower prices in time. Prices have already stopped going up month over month in aggregate.
They don’t say it because it sucks.
Focusing on the supply side would have been far more palatable but there fed was backed into a corner where it needed to be seen to be acting, and they only have one tool to use. The fed can’t build oil wells.
Yeah, and it's crazy because there isn't much evidence of demand induced inflation in any of the advanced economies... Here in Australia we have massive inflation in the cost of energy (for obvious reasons given world events), but at the same time, the mining, oil & gas companies all have spiraling profits too, making massive windfall profits on the increases (they still manage to structure their businesses to pay almost no tax though...) Meanwhile, real wages, which have been fairly stagnant compared to profits over the last decades, are now down.
This is a major cause of inflation but it's mostly a local zoning issue, not a monetary policy issue. These countries straight up refuse to build supply enough to meet demand.
(1) many folks have convinced themselves housing can be both a good investment and affordable when these are antithetical goals and...
(2) they've also convinced themselves that this is the one market in the history of time where supply and demand magically don't exist, and that increasing supply simply won't reduce prices for some reason.
it's crazy because there isn't much evidence of demand induced inflation
There are two fundamental components to inflation. Supply and demand. The mere fact that we have inflation means that either supply is too low or demand is too high.
Your statement seems to be saying, "there is evidence that 100% of the inflation we are experiencing is from supply side".
That obviously isn't true.
Meanwhile, real wages, which have been fairly stagnant compared to profits over the last decades, are now down.
In the U.S., this is meaningless because at the low-salary end we had direct stimulus and tax rebates. In the mid salary end we had direct stimulus, tax rebates and modest asset (home/stock) appreciation. In the high salary end we had PPP loans (direct stimulus on steroids) and huge asset appreciation.
All of this leads to more money available which increases demand.
Near me, beach rentals have gotten up to $25,000 per week for a house. A ridiculous sum of money to stay at a house for a week! But if you're "making" $25,000 per month in the stock market? Doesn't seem so crazy anymore and it's why rentals have gotten up that high.
The really pedestrian explanation is that the Fed just crashes the economy into a wall. It doesn't really have a magic wand, it just creates a recession (and I've definitely argued with people on here who think the Fed has the magical ability to steer us around inflation and recessions without causing any kind of crisis--but I'm old enough to have heard all that about Alan Greenspan back in 1999).
But then to completely switch gears and get even more technical about how raising interest rates results in a slowdown--the higher interest rates immediately raises borrowing costs for stuff like cars and houses and makes them more expensive. But at the same time there's a lot of bad business investment on the margins that rolls over their loans on a 1-2 year period (similar to an ARM on a house). Those loans are going to start refinancing at higher rates. When you look at stuff like the vacancy rate of commercial real estate in SF and Portland, those are going to have loans like this behind them which are only being propped up by low rates. As rates rise, the firms behind those properties risk going bankrupt and the ones at the margins will, which turns into losses for the creditor banks, tightening all kinds of appetite for risk and availability of credit. Those effects wash over the system creating layoffs and reducing demand for goods in a positive feedback loop--things like advertising spends also decline, hitting companies like Google and Meta.
That's the actual cause-and-effect that creates the slowdown going from raising the cost of borrowing to financial problems at FAANGs. Of course the current round of layoffs is mostly anticipatory. They aren't really hurting yet, although they're certainly seeing their growth numbers start to turn down.
> Inflation is caused by a river of money poured into the economy. Supply&Demand forces then devalue the money, i.e. inflation.
Inflation isn't a purely monetary phenomenon. You can have price increases resulting in inflation due to supply and demand issues in various products, and especially more so when the issues in question are a pandemic that disrupted supply lines and a war impacting energy and food exporters and thus prices. Combine that with the increased monetary supply and you have problems.
> Inflation is a general price increase. That doesn't happen with disrupted supply lines
Yes it does. If the supply lines impacted are critical (e.g. food or energy) every other product and service's prices will also increase because they're based on it.
> The proof of this is prices under inflation ratchet upwards - they don't come back down after the crisis is over.
That is usually true, but usually there is a general price readjustment - inflation ends at a certain place, but deflation isn't welcome so it never gets to that, monetary value and prices just stay at the new, stabilised normal.
And we have zero support on any of those topics from the current administration, which is solely focused on NOT supplying BTUs to the market. Some see this as a good thing, so welcome to the outcomes they’ve been wanting. Time will tell if Americans actually prefer this.
> current administration, which is solely focused on NOT supplying BTUs to the market
What? Did you somehow miss that huge climate bill, which drastically increased the subsidies for solar and other forms of energy independence?
It seems like the bickering is over the form of "BTUs". I myself would have been happier if the climate bill didn't prematurely end the consumer biomass subsidies (eg for wood stoves, etc). But your blanket characterization is a bit ridiculous.
Like it or not, better for the climate or not, but solar and "other forms of energy independence" subsidies will not power a Caterpillar D9. The world still needs diesel right now, and we're discussing inflation that is happening right now. When we've successfully build construction & transportation equipment that can use electrons, then we can discuss their utility.
Solar/storage will certainly power a geothermal heat pump, replacing an oil burner that would otherwise burn ~diesel. Or a car that would otherwise burn gasoline (modulo the long timeline of capex).
Yes, there are definitely fundamental engineering constraints when it comes to renewable energy sources. Which is exactly why it makes sense to encourage tackling all of the low hanging fruit we can, rather than continuing to waste limited dinosaur juice out of convenience or inertia.
Politically, it's awfully hard to separate past government action and actions by mutually-acting companies, from current government policies. Biden got politically pinned with the price inflation that happened due to all the monetary inflation of the Trump administration. The brazen consumer price inflation that started happening a year+ ago seems to have been kicked off by a bunch of news articles announcing it, etc. The narrative about approving new drilling leases seems like it has nothing to do with current extraction rates, and everything to do with fossil fuel companies wanting to title up the public commons now, for use in the future.
First, the heat pumps and wood stoves people have installed for this winter will most certainly cause less oil and gas to be used this winter.
Second, what immediate energy sources are you referring to, specifically? The main thing I've heard about is not approving new drilling permits on public land, which also won't have much immediate effect.
Personally I am in favor of high gas prices in order to incentivize switching away from fossil fuels. However, it does require the government meaningfully invest in a replacement (nuclear, other renewables, etc) - and that the government shouldn't allow a transient spike to derail the longer trend. More supply of oil is needed now in order to support the long-term transition away. IMO ofc.
Because obviously increasing borrowing costs will raise the cost of doing business, which will mean businesses will pass that on by raising prices. Oh, wait, that's pro-inflationary...
Well, I guess there is the bit that businesses striving to be efficient will try and trim the fat and lay off a bunch of employees, and those now unemployed will therefore be poorer and won't be able to afford to buy much. That, and making people give much more of their incomes to banks to service home loans will mean they don't have as much to spend. Funny how that works really, really well for bank shareholders...
Ah, a conspiracy theorist who fancies themselves an economist, but doesn’t have a firm grasp on simple concepts like how increasing the cost of money quells demand. The world definitely needs more people like you.
Not a conspiracy - the economists at central banks are just incompetent and beholden to junk theory, not intentionally malicious or controlling. There aren't "simple concepts like how increasing the cost of money quells demand" - that's linear, static thinking when the economy is a complex dynamic system.
Just because "brakes slow a car down" is a prediction of a simple theory of an idealized car, doesn't mean that a more complete and nuanced theory will give a different prediction.
Furthermore, interest rate policy is basically a single lever with "up" or "down" positions. There's not a lot of room for nuance in the policy, regardless of whether the theory that recommends that policy is simple or nuanced.
Well, the theory is that prices go up and consumers either refuse to spend or the money they spend goes into savings accounts via interest.
In a hypothetical scenario where the Fed does QE and raising the interest rate it is actually possible for runaway (hyper)inflation to occur if the interest payments are made with borrowed money. That is how some hyperinflations happened in poorer countries.
I have seen a paper where higher interest rates actually cause inflation under a variety of mathematic economic models which is kind of weird.
Businesses can only successfully pass on the higher cost of inputs if there are more dollars available to bid after the higher prices. Each economic good is different in this regard but if capital is made more expensive then fewer dollars are chasing after those goods which is deflationary.
For one thing, it directly makes cars less affordable if you’re borrowing to do it, making it less likely people will want to buy or lease a new car. If demand falls, auto manufacturers will eventually need to do something to keep selling.
And recent data should make one question why, when remaining inflation is mostly from rent, would this inflation be reduced by increased interest rates.
Isn’t it obvious? The price of rent is linked to the price of the asset that is being rented, which is linked to how cheaply leverage can be purchased in the acquisition of the asset.
That aside, rent has always made up a larger portion of normal inflation well before 2020. It only makes sense that this holds true now as well.
I'm not sure that's true. Wouldn't it be indirectly related? Landlords often set prices based on what they think is the market rate. Other landlords who bought their properties at higher prices will tend to raise rents, bringing up the average.
Also, someone buying a property might choose to live there instead of renting it out. Not sure how it all shakes out.
If it were arbitrary, the landlord would exceed the price the market would bear and the home would sit vacant.
Otherwise, if you think the price is "too high" then the demand exceeds the supply. If you want the practice to fall, either demand must shrink, or supply must increase. Demand can shrink if more people live with roommates or family, or the local population declines.
Supply can increase if we build more houses.
Inflation means the landlord has to pay more for repairs and upkeep (both in labor and supplies). So, if the deal was "fair" before the increase in expenses, it sounds fair after the increase.
Because the rent addition to inflation lags by nearly a year, the Fed is, in part, fighting last year's war for that.
(If I recall correctly, there is still plenty of inflation outside of rent in the current mix.
The Fed is fighting last year's war on the other inflations now because for some reason inflation wasn't a trouble until Powell's reconfirmation hearing this year.
The old saying of a stitch in time saves nine comes to mind...
Rising rates means rents will likely be increased and then reduce in the medium term. Conversely, rate cuts would likely induce rents to reduce temporarily and then increase in the long term.
There doesn't seem to be any easy solution other than raising rates and then getting over the hill.
Addressing inflation when it shows up instead of claiming baselessly that it's transitory would have been much easier than what they're trying to do now.
There is an argument that what the Fed does is mostly irrelevant anyway until the supply chain problems are fixed. Volcker may have done the right thing back in 1981, and he may have been aided greatly by The oil shock being completely absorbed by higher efficiency and more production
Absolutely they should have moved sooner, and it would have been much less painful. But I don't think there's any irrelevance to what they are doing now. Especially where shelter is concerned.
Yes, that's the theory. And it's honestly ridiculous to believe that such a simple, static model could work in the actual, real-world economy, which is a complex dynamic system... (The simplistic theories also assume everything is priced in the way fungible commodities are, which is not how much of the world works)
> are supposed to reduce the price of food and gas (CPI) and clothes, furniture, cars, toys, electronics, and other junk (core CPI).
Rising interest rates strongly support the currency, as you might see now with the USD and have far it has outperformed every other because bond rates are great in the US so all the cash starts flooding in.
The prices of all those things you mentioned (sans food for the US) are mostly valued in other currencies.
That's just the average transaction price right? Anecdotally, what happened in my area is not that prices dropped, it's that a whole bunch of houses just went off the market and aren't for sale now. Hard to see the loss in value because they did not sell for any price, and aren't reflected in the average transaction price at all.
A drop in volume is in no way the same thing as a drop in prices.
A valuation is a prediction of a (possibly very short term) future price, as such it does influence the price, but it isn't the same thing as the price.
A drop in valuations might have happened but I don't think there's good data on that and doesn't seem to align with the prices things are actually selling for very well if MSPUS is still going up.
Oh it absolutely can, it has in the past and if interest rates get too high you will see deflation. Higher interest rates and quantitative tightening reduce the supply of money. However that is not the goal. That would be a policy failure.
Yes it's pushed by those people, but does inflation really benefit them? I mean whether a currency deflates or inflates, it's not like it matters to the guys who have the money printer, as after all, they can at any time, make themselves more or less money, inflation/deflation be damned. Additionally, supposedly at some level the currency would be abandoned by the markets, if either inflation or deflation became too bad, so they actually don't benefit from too much inflation, but instead from a stable value which creates a need for their currency.
Anyhow, as far as I can see, inflation mainly benefits those who own assets, and disadvantages those who don't (ie people hoarding cash or the young & working poor who have few assets). Deflation is the opposite. It advantages those who hoard cash and those who have few assets, and disadvantages people who own many assets.
> Yes it's pushed by those people, but does inflation really benefit them?
The inflation is a side effect of the benefit they get by printing money to spend. In effect, the value that others see as inflation is the value the printer gets by printing it.
Counterfeiting works the same way.
Inflation benefits people who have borrowed money at fixed rates. Owning assets does not inure one against inflation, because one gets to pay capital gains tax on the inflated value of the asset. (Another reason the government loves inflation, as we get to pay taxes on illusory "capital gains".)
This is why the government tries so hard to blame inflation on Putin, greedy corporations, supply chain disruptions, anything but the real cause. It always does this, remember Gerald Ford with his WIN buttons (Whip Inflation Now), where he pushed the complete nonsense that inflation could be stopped if merchants would just stop raising prices?
Do you look at what the Fed actually spends their printed money on? Almost all of it is financial contracts which simply yield them their money back, which if defaulted on, have no repercussions on them since they own a money printer that makes what the contracts yield in the first place. So to say they're benefiting in some way by printing and spending money on such things, is kind of like saying, a car manufacturer benefits when they manufacture a car, lend it out for someone to use, simply in exchange for getting their car back in the future. I mean I guess, but not really since they could also save themselves some hassle, by manufacturing themselves the thing and not lending it out in the first place?
But sure, the people at the Fed also pay themselves a nice wage which they spend in exchange for personal goods and services and to live and stuff, but to the extent they do is not anything like you think it is. Heck, there are people elsewhere which make more money. And considering it takes work to manufacture dollars, and lend it to other in need of having some stable metric to do trade with, do they not deserve a wage in exchange for the work involved for doing such a service?
> Inflation benefits people who have borrowed money at fixed rates
Agreed, such as everyone who has borrowed money from the Fed, and almost all money is borrowed from the Fed. (Now do you see why they might push the argument that inflation is good for the economy?)
> Owning assets does not inure one against inflation, because one gets to pay capital gains tax on the inflated value of the asset
The problem with this argument, is twofold. One is in assuming taxes completely negate gains on capital. Obviously taxes are a drag on gains, but it is a fractional amount of the gains. Meaning, you still make some gains. So in this sense, it still does insure you from inflation, just not completely. But the second and real issue, is that you don't have to realize gains and incur taxes to benefit from owning assets during inflation. If you already own and still need, say a truck, and inflation has caused trucks to appreciate in value, you simply benefit from not needing to purchase another truck at now inflated prices.
Nah, not that. New supply is necessary to maintain price stability in a growing economy. If you stop adding supply you get a deflationary spiral. Similarly the ability to contract supply is necessary to maintain stability in a contracting economy. Honestly even Austrians generally agree with that statement. Their theory is inflation is a result of increasing supply in excess of productivity and that it shouldn't under any circumstances be measured. Which is stilly and rejected in favor of actually measuring price change, but I digress.
The theory you're espousing there, the 'cantillon effect' has to my knowledge never once been quantified. Nobody seems to have any idea to what extent it actually exists, and if it exists, what the magnitude of its impact is. If you have a peer-reviewed study I'd love to see it but I sure haven't found one.
That’s not actually when inflation happens. Every dollar in the fiat system is fully collateralized by the obligation to repay the debt that created it and the social infrastructure (courts, etc) which enforces that.
The first part is correct but only part of the story. Demand for loans and repayment is controlled by interest rate which is how central banks control the supply and hence inflation.
This title serves to illustrate that HN’s unnecessary (to me) policy of culling leading conjunctions such as how and why can lead to misleading titles such as this one.
My first instinct was, even before skimming the actual article, to comment a snarky “well, yes that’s kind of the point.” But then I decided to click on the link and see that the actual title of the article is “__HOW__ Rate Hikes Are Affecting the Economy,” which actually makes sense and denotes something completely different than it does when the “how” is omitted.
Can anyone explain why HN’s submission script does this? Because IMO it is more of a nuisance than having any perceived benefits. I understand that it is perhaps just a mechanism to shorten titles, but I think the feature should be removed (no pun intended!)
We do it because leading hows are most often linkbait. It works well on balance.
However, literally all the attention goes to the failure cases. When successes aren't counted and failures are, it's unsurprising that a system seems not to work well. This is a problem with title edits in general.
Maybe it would help if we built software for users to suggest title edits.
Probaby just a simple way to renove standard clickbait formats; I think in this case "The effect of rate hikes on the economy" would be the desired title.
In my circle; its still as strong as its ever been. Local VC-backed companies are still looking for people. Local VCs are still investing in tech companies (maybe at a slower rate, but its not obvious to me this is the case). My company (publicly listed Big Tech) froze hiring in engineering throughout Q3, but our org just got approval for 100+ engineering hires (around 10% org growth) for Q1.
Doesn’t feel like any real change. If the intention was to scare away VC money, it isn’t working. There is no real fear yet.
For one, no one believes that they’ll keep raising the rates. Strong belief that the Fed will “pivot” soon. Even the Fed keeps whispering about it.
Honestly, the economy just can’t work anymore without QE. Investors know this. The Fed knows this. It’s completely unsustainable, but they’re all fine as long as they don’t have to clear the mess.
Recruiting activity seems as strong as ever but the pipeline is clogged, apparently from FOHI (Fear Of Hiring Incorrectly), so everyone is churning through tons of candidates looking for unicorns. Perhaps this is due to worries that hiring freezes are coming and if you hire wrong, you'll be stuck with a worthless resource that can't be replaced with a good one. Then again, if they wait too long, the freeze might come anyway before they have someone in place.
Yeah, about a 1-1.5 years ago, I was getting recruiter emails that were approaching straight-up scams (like, we comp you only in our monopoly money crypto tokens). Those have vanished completely in the last six months.
Cognitive automation allows "increased efficiency" by firing staff whose tasks could be automated away using ML (imagine QA folks manually checking output of some industrial process which could be replaced by a bunch of cameras and a ML model). Companies that were reluctant to do that while they had plenty of money might be more willing to do it during recession.
Average Joe needs some pain so he and all his little worker friends stay in their jobs and come back to the office. Can’t have them getting too much power.
The world’s ten richest men more than doubled their fortunes from $700 billion to $1.5 trillion —at a rate of $15,000 per second or $1.3 billion a day— during the first two years of a pandemic that has seen the incomes of 99 percent of humanity fall and over 160 million more people forced into poverty.
While inflation hurts we need some of these crazy money and valuations to come down to realistic levels . I don’t want Elon Musk to become the next Rupert Murdoch.
Yeh Elon is buying up all the milk that’s why it’s $6 for a gallon now.
Billionaires are bad because they have way too much power and influence over our democracy but their wealth doesn’t actually reflect some hoard of basic goods that we could be giving to poor people. If we decided to strip Bezos of all his money and use it to give everyone $200 of groceries it would just mean barren store shelves for a couple weeks.
Is there a new CTA popup rolling out today or something?
I swear this is the 3rd HN submission to pop up today where I had to click the 'fuck off and let me read' button. All of the sites were custom domains (not wordpress.com/substack.com/medium.com domains)
"Please don't complain about tangential annoyances—things like article or website formats, name collisions, or back-button breakage. They're too common to be interesting."
I really hate any popup that pesters me for my email address. I'm already reading your article, I don't want you to email it to me.
What is it about email newsletters that gives companies such a boner? Do they actually work? They annoy the hell out of me. I switched coffee company because the previous one had a popup asking for newsletter signup on every visit, and it was annoying difficult to get out of on a mobile screen when I was trying to order coffee beans. And worse, I was already signed up to the newsletter!
I usually don't complain about these and maybe it's just me but something in the wording or how it appears on the new one left me with a strong desire to leave the sites. I've never read any posts from any of these authors of course I wouldn't sign up before I read at least one of their posts.
Between these and GDRP cookie crap plus all the different kinds of ads these days, the internet is the least usable it's ever been. Even with AdGuard Home DNS servers, UBlock Origin, and aggressive blocklists, it's still not great.
Yeah, it's definitely being A/B tested into some sort of horrifying local maximum (or minimum, really). Eventually it'll just be pop-ups all the way down.
A couple years ago, I changed my uBlock Origin settings to disable JS by default on every site. I only re-enable JS when necessary on a per-site basis.
I find myself having to do it a little more often these days, but it's still made everyday web surfing so much more pleasant — and secure, too.
When I get these popovers, I assume the publisher thinks I should be doing something other than read the article. I take their advice and move on to something else.
I had 7 "Type your Email: [____]" boxes when I scrolled down; I just immediately closed the tab. I don't need to know about whatever this guy is writing enough to be assaulted by requests for private information.
