It has been propped up for a decade with QE money and it had to crash at some point, especially after covid. They can only delay so much, no one wants these properties.
I want some. Just waiting for the price to finally adjust so I can buy something before QE inevitably resumes. We're in good shape now to restart QE and invest massively in giant infrastructure projects nationwide. I'm betting they're going to reduce interest rates a lot again after another round or two of small increases. Seems like most of the excess money supply from pandemic emergency measures has finally been sucked up with their rate increases, and now we can get back to solid growth since all the fundamentals are still rock solid.
There's so much potential to invest in large productive infrastructure projects at the local, city, and state levels across the entire country. They could probably pump $1 trillion per state into the global economy starting with the local economy for real productivity gains and infrastructure gains everywhere. Brand new office buildings, brand new roadways, restoring nature as much as possible, investing heavily in building more housing, so on and so forth.
Do you have any sources for "seems like most of the excess money supply from pandemic emergency measures has finally been sucked up"? Or just commentary on stock prices leveling out etc?
Stock prices leveling out, most common advice nowadays being to wait on car purchases or large purchases, mortgage demand slowing down not because of actual demand issues...but because of supply issues which means the interest rates for new construction are too high. They will have to come down just because we actually need a lot more construction.
People think that commercial property is in danger - nope, we don't have enough of it. We don't have enough skyscrapers, giant cities with modern advanced everything, advanced transportation that rivals anything else, etc. We need a lot of investment. If there were excess funds in the system still, they'd already be finding their way into these types of projects.
You risk hyperinflation if new debt is covered by extreme price inflation. Which is what we still have. Demand or supply does not matter, stock prices do not matter, M2 money supply does not matter, they are all signals but the core is that cpi inflation must reach 2-3% before even considering reducing interest rate.
There is huge demand for more of everything. There are productive people eager to innovate and build. We just lack the easy movement of currency to facilitate moving more commodities and establishing more services.
We need to be building more skyscrapers, giant cities with advanced transportation. And preparing to settle the Moon, Mars, checking out Venus and Europa along the way to Pluto to verify if it is or isn't a planet.
These activities will produce many quality jobs and intelligent people for a strong reproductive base moving forward into the next 50 years.
There is no chance of hyperinflation even if they pump $50 trillion into economic activity, gradually over the next 10 years. Everything would compound from a productivity and efficiency point of view so much that it would just pay for itself.
As long as it actually goes to building better bridges and better roads and a modern electrical grid that is EMP-proof and completely clean and renewable and self-healing and advanced in every way. And space projects. You only risk hyperinflation if you're issuing debt that never does anything productive and thus your dollars lose their value reputation and it takes more for someone to part with a physical good or time locally or internationally.
American dollars aren't going anywhere because we're going to lead the next wave of tech innovation yet again, with a strong reproductive base compared with the competition. Plus we're already the leaders in space. Europe isn't going anywhere. Glad that our buddy Macron finally seems to have gotten through to our buddy Xi a little bit, maybe he'll finally make an actual honest effort to tell his buddy Putin to sit down and relax a little bit in earnest so that their currencies continue to be relevant, because at the rate we're going it's American tech innovation that's going to make the markets productive again to the order of an order of magnitude in new needed currency flooding the world's coffers in all denominations. Currency primarily backed by America yet again, and that's exactly how it should be considering the rate at which our competition seems to be pursuing nonsensical violence and wanton war instead of more innovation in renewables and space exploration and more.
It's not hyperinflation - it's gonna be hyper-financial-domination that's about to happen because everyone is going to want American dollars and American property and American business. With all the instability that war talk brings, nobody in China or Russia will want to reproduce at this rate. Even their existing reproductive base will shrink while the United States and Europe and Australia and India and Vietnam and Singapore and Taiwan and Japan and the Philippines absorb Brain Drain to scoop up the talented people who can leave. Our reproductive base can be recovered still, whereas the competition will have a much harder time.
American dollars are not at risk of hyperinflation. Neither are Euros. They should aggressively invest in infrastructure projects and anything else they need now because their currencies are going to become even more sought after. More dollars and more Euro right now would be a colossal tide lifting all the other boats at the expense of the competition that is losing its currency stability and reproductive base stability the longer it tries to saber rattle over stupid human ideas instead of pursuing higher order thinking objectives.
All of these are self owns by bad govt management. We don't need people managing all of this, they can't possibly have enough information to do well. Markets do much better...
We don't have a great track record of converting "money supply" into the things we need, particularly if there's a long event horizon.
If you give investors free cash, will they build the tens of thousands of kilometres of high-speed rail we deserve so we can have a coherent multi-mode transport network, which leads to realignment of urban planning on a decades-to-centuries scale, and has no chance of turning a dime of profit until 2060 at least, or do we toss at into some crypto/AI/buzzword-du-jour sizzle reel that promises 500% returns in six months?
We actually need state-level thinking and intervention, because they're the ones who can say "we're thinking beyond the next fiscal quarter" without a stockholder riot.
The question you've just posed is a critical juncture, I am convinced, between a crash that takes the economy (and stock market for what it's worth) down with it, and another round of kicking the can down the road. there's enormous fear of toxic debt waiting nervously on the sidelines.
It's not a lot of debt. It's actually a small amount of debt, considering the enormity of existing American assets and revenue. America has very strong fundamentals. A rising tide here will lift all boats. They could invest $50 trillion into mobilizing efforts towards fusion/nuclear/renewable energy across the board and American infrastructure and it would not even register as a dent in our massive reserves 50 years from now, because of the huge efficiency and productivity gains from successfully deploying renewables across the board, electrifying the entire grid, EMP-proofing the entire grid, establishing space superiority in the journey to Moon and Mars and Venus and Europa and etc...so many great jobs will come from this effort.
We should be good to resume QE sometime soon. It would be happening alongside real increases in the movement of commodities and labor productivity improvements across the board, and we would get the benefits of a massive rocket fuel boost to American innovation and American muscle once again by unblocking the huge middle class again so it can launch the next wave of new products and services.
There won't be a crash. We're just getting started.
It makes sense to balance the expense stream with the lifetime (use) of the asset. Companies do this all the time and so do people (with their houses, and sometimes with their cars).
Future generations get the benefit of the asset too, either directly, by driving over a bridge, or indirectly by growing up in an environment of greater GDP. So purchasing the asset out of direct taxes during the years it was built is foolish.
Also the macroeconomic implications of government debt are quite different from the microeconomic impacts of personal or corporate debt. For example foreign governments are pretty much obliged to buy US sovereign debt and in exchange the Fed is pretty much obligated to issue it. That ripples through all sorts of things but in general is quite favorable to the US.
Of course the second paragraph requires good choices for investment, i.e. more nuclear weapons is probably a bad choice, but bad choices like that are frequently made.
For the really big infrastructure projects that will have compounding benefits over the next 50 years, yes. Because then they will have paid for themselves in less than that time and then it's just free joy.
If it's a wise investment, yes. If it's invested into a bridge that increases a community's throughput such that tax revenue increases because of increases in activity and production as a result of more efficient infrastructure, the yield is greater than the investment.
Bankruptcies happen all the time. Silicon Valley Bank and Signature Bank are great examples. In 2008, Lehman Brothers too, and Merrill Lynch, and hundreds of smaller banks and mortgage originators.
Inflation is terrible for credit card debt as the card rate increases with inflation.
It’s great for fixed rate things on stuff that appreciates with inflation (eg, mortgages) but inflation is going to super hose people that have variable rate loans on nothing tangible.
Moderate inflation doesn’t devalue savings only liquidity. Coca-Cola doesn’t care about 5% inflation long term, they are going to sell for whatever inflation adjusted prices work.
It’s always worth remembering that future cash flows aren’t guaranteed. The idea you can leverage fractions of a percent returns between loans and cash flows creates a great deal of fictional wealth that’s going to collapse at some point. Adding some real volatility to the financial system is critical for long term stability just as testing backup systems when you aren’t in a middle of a crisis.
Because wages will increase more to account for higher productivity and booming business across the board. America's fundamentals are rock solid still. We are poised for considerable growth.
Inflation would cheapen debt. Since wages have not caught up to productivity yet, we can see increased wages alongside the inflation which makes the real amount of consumer debt lower than it seems.
It works out in the long run because we're behind on productivity gains affecting wages in many sectors, but that has been improving especially since 2020.
They have to because otherwise there's no more fuel for the ground floor of critical operations in every org. There have to be reliable people on the ground floor or all the profit gets lost.
Most orgs hold debt, too. A rising tide would lift all boats in this case.
Why do you say most orgs hold debt?
Apple and other big tech firms have tons of savings invested.
And regarding people, in the US anyway, many hold debt, but many hold savings.
If i'm understanding your description, it incentivizes holding debt?
Earnings can adjust fast to compensate for hyperinflation meanwhile the fraction of the population that have worthwhile savings has been steadily declining for a long time.
For a massive amount of Americans significant devaluing of debt would be life changing in a positive way. Little to lose and lots to gain.
Right now, wages in the US are much higher than most other parts of the world, but the fundamentals behind that are quickly disappearing. If I can hire equivalent talent in the US for $100k, EU for $50K, and Asia for $10k, that's a market friction. It's slowly levelling out.
As that's happening, and cheap goods / services from outside the US are no longer cheap, our purchasing power goes down.
