Wolf Richter as guest on the HoweStreet.com podcast, recorded June 16. Ah yes, and you’ll hear the first tidbit about the soon-to-be-infamous WOLF STREET beer-mug shortage.
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Please god just make the FED stop manipulating the housing market. Nobody can afford to raise a family because of the FED’s manipulation. And when they unwind their manipulation it’s going to cause another burst bubble that will crush home prices and result in retirees not being able to find their retirements as they expected.
Home prices that bubble and burst are the worst thing for everyone and here the FED just keeps buying mortgages and manipulating for no reason!
My wife and I live in Seattle. We rent, trying to save money. House prices have gone up over 20% in 6 months. If that’s not hyperinflation, what is?
We have a baby coming in 6 months. Supposed to be the best time of our lives. Instead, we’re terrified of falling permanently behind economically. We cry regularly.
Meanwhile everyone else is buying new Porsches and living carefree. It’s tough to keep trying every day.
Unless you and your wife are forced to live and buy in Seattle, it sounds a tad bit entitled to expect home ownership as a right to be worth crying over
Oh for Pete’s sake, grow up. Yes, it is entitled to expect home ownership to be a right per se. But it is NOT entitled to expect to be able to buy things priced based on market forces and not government manipulation that benefits no one other than people who currently own assets. I suspect you already own your home, as your attitude seems very prevalent among people who are the beneficiaries of the Fed’s nonsense.
“As long as I have mine, who cares about everyone else?”
It also entitled to expect the market to behave in a way you prefer for various reasons
Being houseless in Seattle, and every major metropolitan in NA is the norm, not the exception
I can’t wait till property taxes force seniors out of their housing bought decades ago at a quarter of current prices.
Millenials will be the first to remind seniors that they aren’t entitled to live anwhere.
@Same boat: “It also entitled to expect the market to behave in a way you prefer for various reasons”
That seems to be a straw dog diversion response to RightNYer’s statement “But it is NOT entitled to expect to be able to buy things priced based on market forces and not government manipulation.”
In other words, “Same boat” seems to think that objecting to government manipulation that benefits people in a certain asset class is being “entitled.”
So just accept it. Just like people do in communism and oligarchies.
Is it entitled to expect that someone not steal your money at gunpoint?
Nothing like wishing that government takes folk’s home, who have lived there for decades/raised their kids there/have poured their sweat and blood into taking care of the place, because…
Envy.
“I can’t wait till property taxes force seniors out of their housing bought decades ago at a quarter of current prices.”
Seriously cold dude. You replied to one post but you’re really speaking to tens of millions of your fellow citizens who are being crushed financially by their own government’s policies.
Eventually the hungry mobs over-run whatever fortified position you’re living in.
Same boat, me thinks you got yours entitlements backwards ands upsides downs.
I can’t wait for millenials to own a home. Oh, wait…. they will be seniors when they ‘really’ own it! Lack of perspective is a common failure among most of us. After all, there are 3 sides to a coin!
In 1999 and 2006, our last blasts of inflation, inflation that was lower than now…..30yr mortgages were 6%!!
Now 3%. Why? Well, this time the Fed pumps $40 Billion plus into the mortgage market each month! Why? Is there a housing slump?
No. In fact the Fed has locked up the housing market….
1. Those with homes know this inflation is making their homes worth more and is likely their only inflation hedge.
2. Those seeking homes know the 30yr mortgage is STILL 2% below posted inflation levels, so they want to take advantage.
Result, a locked up market. Supply pulls away, bidders searching.
Central Bankers eventually must deal with reality….they think they know better than a free market allowed to operate….they don’t.
“Nothing like wishing that government takes folk’s home, who have lived there for decades/raised their kids there/have poured their sweat and blood into taking care of the place, because…
Envy.”
Sorry, but these people want their cake and to have it too. They don’t seem all that concerned with the fact that they paid a paltry amount into Medicare and Social Security and will draw multiples of that out, even adjusting for inflation.
Older generations are riding the gravy train while the younger generations are getting stuck with the debt bomb bc the older generations feel entitled to rob from the futures of their offspring.
@ Same boat –
Why shouldn’t PNWGUY be entitled to own a home in Seattle?
Some people hope for interest rate to rise thinking it will increase purchasing power because housing prices will drop.
Just remember interest rates doesn’t change your purchasing power. Only your income does.
If and when housing prices drop because of higher interest rate, your monthly mortgage payment per comparable home doesn’t change because you are paying more towards interest.
You won’t same any money by waiting, unless your income rises dramatically over the same period.
@cb
They can feel entitled to own a house in one of the most expensive cities in NA all they want, even to the point of crying about it.
It doesn’t mean they will be able to afford it.
@drifterprof
I don’t know bro. Start a 3rd party revolution or something because neither parties seem willing to fck with this bubble
To Fromks ..
On Australian media .. we get an attitude towards seniors who will not downsize .. that greedy & selfish seniors are hogging large houses preventing young couples from owning a home ..
Albeit there is no appropriate housing to downsize to ..
And most real estate in Australia is owned by property investor elements .. last month I saw much real estate up for sale that was sold only 6 – 12 months age .. this has got to be property investors trying to ratchet up the prices under false pretences.
If you want to purchase an old home you are competing with cashed up developers who will outbid you every time.
Same boat
Jun 20, 2021 at 11:54 pm
@cb
They can feel entitled to own a house in one of the most expensive cities in NA all they want, even to the point of crying about it.
It doesn’t mean they will be able to afford it.
_________________________________
and that is PNWGUY’s point. A working family who lives in Seattle has little chance to ever afford a house there. Why?
1, because a group of lenders get to digitize money from nothing and loan it
2, because the FED foments debt slavery
3. government institutions like Fannie Mae and Freddie Mac
4. because of private equity.
5. because of laws that all foreigners to buy real houses in America
6. because of laws which favor debt creation and a rentier society such as interest deductions and depreciation
etc.
Expensive housing isn’t only a squeeze in Seattle; it’s over much of the USA and the developed world (I recently read that in Romania 98% of people own their houses outright)
Precisely the reason so many young are looking away from “Capitalists” values and toward AOC (Alexandria Occasio Cortez) and Bernie Sanders values
The biggest threat to free markets is concentrated wealth and power …………………..
This is not the case in only Seattle
What you are describing is downward economic mobility. I expect a lot of it going forward as most people become noticeably poorer. It’s taken the greatest mania in history just to keep the median income essentially flat over the last two decades, using official statistics adjusted for price changes.
What’s going to happen when the financial levitation act ends and most of this fake wealth disappears?
Reading conventional economic commentary, it’s supposed to be a mystery why even so many of the affluent lack the expected confidence.
But will the fake wealth disappear ??
It seems to be coming in real handy.
I read an article where farmers in the US are being refused water where water is more than abundant.
The farmers are saying that the tactics are to destabilise food production .. what is the hidden agenda here ??
Today we have IMPOSSIBLE food .. FAKE burgers .. to replace meat .. the plant based meat product is based on soy & potato protein .. someone called it ‘concentration camp food’ ??
Is it that this over abundance of money is buying change ??
Making dreams come true for futuristic enthusiasts ??
Dreamers for a better world tomorrow ??
Feeding Bill Gates a Fake Burger (to save the world) Youtube.
i
This video gave me a chance to know what I was missing.
I do think that if the bubbles could be continued, hyperinflation like in Zimbabwe would inevitably follow due to the banksters’ “Federal” Reserve’s crazy, undisciplined money printing to steal Americans’ wealth to bail out its banksters, e.g., by continuing to buy since 2019 over $2 TRILLIONS in garbage, uncollectible, mortgage-backed securities. However, an iceberg is drifting closer.
More and more people are realizing that we are in a crazy, 1929 style bubble but of everything, including stocks and real estate. Imagine that those “investors” using debt were unable soon to service or roll over their margin debt.
Any significant price decreases will prompt panicked margin calls that in turn will cause panicked sales of massive numbers of the stocks bought on margin by the stockbrokers to mitigate their losses. Thus, it will only take one disaster to panic people into a financial collapse with this level of margin debt.
Already, the poor prospects for increases in the future incomes of most companies mean that most stock price increases are because the “dumb” money is jumping into the inflated market, like in the late 1920s. Thus, maybe this inflation will truly be “transitory,” just like the coal-burning problems suffered by the Titanic were ultimately transitory: once the ship sank all of the coal fires went out. Once our and then the world’s economy does likewise, current, rising inflation may also be viewed as “transitory” by historians. I sure hope the “sea bottom” is not deep around here.
PNWGUY – “everyone else is buying new Porsches and living carefree.”
Take it from someone who has owned and rented many houses. “Renting” is “living carefree”. Owning a house is like a second career if it is a large structure in a nice community with strict rules and other costly unnecessary “Stuff”. For example, how about being forced to irrigate drinking quality water on a huge lot at the cost of thousands a year, in an area with 90-100 degree summers for over 100 days. Talk about insane, suburbia folks are forced to put chlorinated and fluoridated drinking water on their green lawns in near desert environments, and it is HOA law that if you violate, you will absolutely lose your house in a court of law. Perhaps that is why the water bill rates went up 63% this year alone…it is getting hotter out each year and we are running out of cheap water, so lets pump 80% of what remains of our water on the Bermuda “Grass/WEED” (it is actually a weed that we treat as grass). Yet we allocate 80% of our suburbia drinking water to weeds…brilliant…and we wonder why the UFO’s never land…HAHAHA
Yet I regress, but you see the point, “owning” is not “carefree”, as you might be forced to treat each blade of grass as if it has a soul…Ha
To be honest my most carefree housing time ever was renting a mini-mansion after the housing bust, where a near bankrupt developer wanted me to just pay the property tax on one of his mansions. Nothing to upgrade, nothing to fix, nothing to worry about…it was amazing and all I had to do was pay the property tax monthly. It was on the water, three stories with full decks, and the entry hallway was so big that I put a 10 foot trampoline inside the hallway for the kids to use indoors.
God I miss the Fed allowing recession so the responsible people on Earth can rent and buy things on recession sale when many people extend beyond their means…yet the Fed seems to never want to allow the business cycle to clear out the underbrush. Thus we have to wait for the entire forest to burn once the underbrush becomes to dense and an unexpected monetary lightning strike hits at some point in the future…the timing of which is as unpredictable as lightning itself…
Houses are consumables, and thus a lot of time and money…they can suck the life out of you. Don’t buy the housing hype…enjoy your carefree renting lifestyle, as I know I will be soon enough…
Good luck in all your investments…as you attempt to avoid the negative consequences of our transitory omnipotent psycho Fed..
Good rant. Not being married throughout early adulthood and middle life, I was easily able to live a tumbleweed, thrifty, and modest income lifestyle.
I noticed that most people who got married (especially with children) had serious deep changes in their beliefs and lifestyle. I didn’t think such profound changes were necessary, but admit that I probably would have been similar if I had been good “marriage material.”
If you are Nutz enough to buy anything with an HOA, Condo Board, etc. you won’t get any sympathy from me!
For the love of the Flying Spaghetti Monster, man!
Any sentient human being should know better than to give the HOA or Condo Board BUFFOONS power over their lives.
Me? I make lots of mistake and dumb decisions, but HOAs and Condo Boards are a bridge too far for this moe-ron!!! :)
Good summary Yort, but you forgot one very important item:
Folks really and truly NEVER actually OWN their house,,,
Either they co-own with the bank and rent from the GUV MINT,,, or just rent from the Guv Mint if they are fortunate enough, ( lucky, maybe? ) ,,, to have been able to pay off any mortgage, etc.
Even in states that limit property tax INCREASES, especially as folks age out of the ability to work,,, those property taxes usually have grown faster than SS and pensions.
And then there are the absolutely mandated ”utilities” including water, sewer, storm sewer, trash, street cleaning, etc., etc., etc….
Those costs grow by much more than SS, etc., every year,,, as do the costs of electricity, gas, phone, internets access.
Folks that think a home is the best choice also usually forget about the repairs and other maintenance that can consume the rest of anyone’s paycheck. A friend who was careful about maintenance of his many rentals, years ago, told me he figured 10 per cent per year to take proper care not to make them slums…
I have to agree about the most carefree times, though renting a geodesic dome on 40 acres, when I could drive to a phone
( back in the day, eh ) and call the LL if something needed fixing, would be my choice!!
True.I love carefree renting in New York.Only 1450 $ for 750 sq f.,paying only electricity.2 blocks from subway,40min to the Times Square.3 blocks from a Atlantic ocean boardwalk,Verrizzano bridge view and a park and a mall plaza.A nice backyard with bushes and flowers. I do not pay for grass cutting.Just one block from a busy shopping street with nice italian and asian restaurants,not expensive.Never ,ever wanted to buy a house or appt,which i would loose in a devorce anyway.
RE: HOA’s
Just got my notice for our semi-annual meeting, 7-10. Holding it in someone’s barn.
Says; Please bring a chair: NO FIREARMS
I own a house, 35 years now, I worked hard & payed it off in 15 years & saved a packet in interest, at 50 I became ill & could not renovate, today it is a dump & I want to buy another house further away from town .. eg.
24 Falcon Drive Melton.
7 Corella Avenue Melton.
“You don’t need such a big house”
But a unit is only $100k cheaper half the size & a thereby waste of money.
With solar panels & storage batteries I should save $40 per week on power bills & I will hire a gardener , thereby creating employment.
Yort said: “Take it from someone who has owned and rented many houses. “Renting” is “living carefree”.
______________________________________
That depends on the cost of renting relative to ones income. Housing costs, rather monthly payments or rent, as a % of household income has been rising steadily in many parts of America, thanks to policies that favor a debt based rentier society and squeeze guys like PNWGUY.
I suspect PNWGUY would prefer to live the “burdened” Landlord lifestyle rather than the “carefree” rent payer life style.
PNWGUY – same thing is happening here in Bend. Every house that sells here has a Porsche with Cali plates in the driveway, or a Mercedes with WA plates… or whatever. Hardly any of these houses have Oregon plates.
To the A-holes asking if you really have anything to cry over, they don’t get it. My wife (RN) and I (tech) have been saving and saving for years and it’s hard to save 20% of x when x grows so damn fast. Throw in the cost of health care, student loans… the target just gets further away for college educated, working, savers. No wonder homelessness is out of control.
Just quit Oregon and move to an affordable state.
SOL,
I have this dream that one day when the markets and crypto crash, and the internet gives up the ghost the folks you are talking about in Bend are left so broke they can’t even afford enough gas to put in their Range Rovers and get out of town. Then the cowboys will roll in from Burns and Baker City and Madras and round up everyone who came to Deschutes county over the last 20 years and herd them to the California border like an old fashioned cattle drive.
Are you kidding? Entitled? We’re all working so hard and can’t keep up with the cost of living. I still save and still middle class screwed.
I believe the unconscionable increase in prices is designed to crush the middle. They have to know that’s happening but everything they do only helps the 1% or the dependency classes. Stop voting for incumbents.
Most everybody has posted good points here. But it appears that collectively we have lost the bubble that we are all pretty much in the same boat and the fighting between generations, races, and classes is promoted on purpose by the group that gets billions in free money and will eventually wind up owning everything if we all keep squabbling.
The people that run public opinion know the best strategy to get groups to do what they want is to foster pugilistic contests between groups. Strengthen bonds within groups and weaken bonds between groups to promote us vs them. Most of the inflammatory stuff on both the left and right and young and old is purposely and emotionally inflammatory but piffle compared to the big grand theft going on that will result in you all owning nothing, eating bugs and being happy (so they promise). Or may be it is they who will be happy.
I for one would like to start seeing some common ground develop between the suffering left and right groups to work out some common strategy without the involvement of the moneyed power groups.
Read Edward Bernay’s book, Crystallizing Public Opinion or Col Linebarger’s book Psychological Warfare for primers on techniques that are being used against you. Both written many years ago they are still relevant and more important now as social media and MSN become more efficient conduits for propaganda.
We visited B 20 years ago, then took a short trip there two summers ago. Shocking change. It had been so idyllic, gorgeous high desert, spectacular scenery, etc. Still beautiful, but the development seems out of control.
Joe 2-
Unamused (once even more of an institution here than M Engels, with an as yet totally unmatched wit….and BIG pile of knowledge, too) turned many on to Bernay. It is amazing what he did and how easy it is to do it.
Worth looking up if you haven’t yet….BERNAY…..just the Wikipedia article will give you the picture of this guy. I’d like to hate him, but he simply did things that worked, for money.
you need to buy something thats undervalued .. a lot
obviously isnt housing
silver ide get some this week
basel 3 and us are implementing NSFR so the paper shorters have to buy back gold silver expected to rise a LOT. may take several yrs
then when when housing crashes it will then u exchangebyr gold and silver for a house or apt
try a little crypto shiba inu 0.000011 /$1000 and wait
Bitcoin and ether not going to crash,other shitcoins most likely crash.25k is a concrete floor for BTC.
New trend for bitcoin in El Salvador- bitcoin declared legal tender. Now everyone has to accept it and govt can get a complete history of every transaction and a list of all your customers.
Govt planners are eagerly watching the results of this trial!
Does this strengthen or weaken your assertion that bitcoin cannot go below $25k?
Bitcoin was designed as a Ponzi scheme… Err, my mistake ‘store of value’. BTC transactions are relatively slow (allowing market manipulation where some whales are given preference on when their trades are executed vs the plebs at the mercy of whale speculators…. Which is a big reason why BTC ETF’s can’t get approval) and are being subsidized by the huge number of miners who process transactions… The transaction cost is artificially low compared to where it will be after the last BTC is mined. Once that happens millions of miners WILL switch over to other crypto, creating higher transaction prices when there are fewer miners… but not high enough to bring those miners back. So that’s one problem.
Another related problem is the 51% problem, China (unofficially), NK, Iran, have invested heavily in BTC mining. There is grave danger of market manipulation when one group gains control of BTC transaction processing…
Next up we have Quantum hacking… It is a matter of WHEN not if Quantum computing cracks crypto… The FBI recovering the BTC payment on the pipeline hack should be a huge red-flag to BTC investors. When the NSA, China, Iran, NK, or Mossad crack crypto they are not going to advertise to the world it is no longer safe… They are going to sit on the technology for as long as they can reading every encrypted message in the world, and even manipulating the crypto market… How? Well start by cracking into dormant wallets as a start… slowly start to empty them out to preserve their value as long as they can… Or maybe they want to cause global chaos, by cracking those wallets then dumping them all at once.
As far as El Salvador, it’s an early win for BTC… but, it is a very risky. If El Salvador has an Economic collapse, BTC will be blamed; if they thrive… the world powers will say it was inconsequential in size to prove viability.
Don’t get me wrong I believe in Tech, I have worked in the industry for over 20 years… Crypto will have a future, but it will not be this generation of blockchain crypto. I believe it will need to be quantum based, and will at least by government backed at first. To get their we will need to have a spectacular failure to force the will to change.
For my money, Silver is one of the few assets I see remaining with a high up side, under-valued, and relatively low risk due to it’s intrinsic value for industry, currency, and jewelry.
Joe2, above, nails it. Foment intra-class conflict to take the focus off the real culprit. CRT is the latest tactic.
El Salvador making bitcoin LEGAL TENDER is a win for who LoL!!!
BTC believers gotta believe
Not everyone is buying Porches & eating gold leaf covered chocolate.
They would like us to believe that but most people are doing it tough.
Tax free Monte Carlo is just a bit of land hanging on to the edge of France & it only has 50 billionaires & 2,000 millionaires, they say.
Apartments are tiny & extravagantly expensive & young females come from all over the EU to catch themselves a sugar daddy.
It’s a superficial life style where the discarded wives have nothing to do all day & the Jones’s all compete with each other buy buying ever bigger boats & in several numbers & different colours.
There is so much to do in the world if you have money & you just sit around doing nothing & worthwhile things to make happen with your money & you spend it on mindless junk.
We have an image of the filthy rich being active & full of adventurous happenings & in reality they just sit around all day.
I watched Pier Morgan in Monte Carlo Youtube
Hobbies for the filthy rich:
1. Bigger, tighter mouse maze experiment youtube.
2. Backyard Squirrel Maze 1.0- Ninja Warrior Course youtube.
There is so much to do in the world if you have money…
Really? What would you do if you had 1 million, 10 million or 100 million?
The question “what would you do if you had a million dollars?” was addressed in a scene in the movie Office Space.
Hi easter bunny,
When I was 15 we wish’s for 1 million .. today it is chicken feed ..
I have a million if I sell my house & add savings & 1 million is still chicken feed only that I’m good with money.
10 million is not much better, but you’re offering 100 million.
Okay .. I would still buy the house etc .. see above ^
I paint, work with clay & I have all the tools, paints, brushes –
Something else .. if I was young & no kids I would climb rocks etc. I tried it & loved it.
I want to dance .. sing .. sail/there is something called a Moth ..
I would like to have & run an art facility for kids .. I helped out at my kids school & I loved it.
I want a conservatory to grow stuff & food all year round.
I’d like to brew beer / make wine / cook .. gosh I ran out of money.
Hi Shiloh1,
I watched the clip .. sex with 2 chicks at the same time.
full service price for 1 hour $180 X 3 = $540?
More times .. $540 X 10 = $5,400 ??
Are you sure ??
Here we go again .. $540 X 100 = $54,000
Change of 1 million = what ??
Margo Hayes
Julia Chanourdie
Youtube
I did not do anything like this but I envy these 2 young ladies.
I’m also in Seattle. You might also look at how existing homeowners have blocked any meaningful reform of zoning in Seattle, thereby keeping 70% of the land locked away as single family only while the population surges. Huge increase in demand, little increase in supply of housing = huge prices increases in not only single family homes but also condos and apartments. The fed has supercharged drastic housing inflation that was already going on.
Financially owning a home is not a slam dunk, it’s more of a lifestyle. If you put 10% down you are highly leveraged. That’s 10% you don’t have to invest in other ways. Bad decisions can be made when you feel like you are missing out. Leverage has worked well the last decade, but it can bankrupt you quickly when tide goes out.
Yes, few people realise that owning a home is often a highly leveraged bet. Who would buy the S&P500 at current valuation with 90% borrowed money?
Of course “the Fed will never let the market drop”… as if the Fed could backstop everything forever.
PNWGUY
I’ll cut you some slack wanting a house, even if it is in one of the most expensive places in the US, but if you’re standard really is baby, Porsche, house, you are probably going to have a long and uncomfortable relationship with reality:
o 1 US adult in 3,250 bought a Porsche in 2020
o 30%+ of Porsches sold in US were Cayennes (SUVs starting at $61,500; around the cost of a full-size pick-em-up truck)
Actually a good marketing move…you quoted base price, but when the papers are signed, some idiots just paid $40-50K for LOGOs. Kinda like high fashion.
Be interesting to see which “super car” company cracks first for these very easy “look at me” dollars….more and more rich around every day.
But I think if Ferrari did full SUV, Enzo would rise from the grave and make life pure hell in Maranello.
As a man I would recommend not crying with your wife over this. Let her cry, but be the shoulder she cries on. She will lose respect for you if you cry with her. Not a good look.
Good grief. I can’t even imagine living with this much buried anxiety.
Heuristics like this are no substitute for inter personal skills.
Crying because you can’t purchase something is something a child would do. Can you imagine if the leader on a battlefield started crying? Men are supposed to be strong, and lead in times of trouble.
We are in a similar situation. We just had our baby and have been looking for the last year to purchase. We were ready to buy a while ago, took a break with searching during initial lockdowns in March 2020 because of uncertain times. Fully regret it. In the meantime home prices in our area (LA) have gone up at least 35-40% yoy. Very low inventory- homes being listed are the worst in terms of location (near freeways, have back alleys with homeless encampments, etc) it’s obvious sellers are trying to offload shitty properties. Despite this we are repeatedly outbid by all cash buyers for a home in the 1.1-1.25M range (mind you these are small 1300-1400sq ft homes). These exact homes were selling under 900k prepandemic. The fed has truly manipulated the market and has made it difficult for young families to gain any sort of economic stability. We worked hard to save up for our sizable down payment (and responsibly paid off all our student loans) only to have our dreams of owning a home evaporate within months because of fed policy and greedy speculation. This has nothing to do with entitlement.
“You will own nothing and be happy.” Klaus Schwab of the WEF said this and he meant it.
A huge problem I have not seen mentioned in these comments regarding renting vs buying…
Is risk.
I moved to South Orange County California in 2014. I landed a 2 Bed, 3 bath 1600′ townhouse in a gated community in Irvine, CA for only $2100 a month. 3 months later… my property manger let me know they would let me out of my lease without penalty (and would return my entire security deposit, Plus give me $1k) if I agreed to move out ASAP… since their research showed they could get a renter for $2600 immediately. We had moved in during a high demand time for rentals so we figured we might get a better deal now that it was winter… WRONG, we couldn’t find another rental of comparable size and safety for under $2600.
We ended up buying a small condo in South OC, because we saw the writing on the wall that rents were only continue to go up astronomically and better to control of living arrangements then be at the mercy of the rental market.
Two years ago, a new residential building was put up blocks from my old condo…. When I bought my condo in 2014 estimated rent on it was $2100 a month for 2br 2ba… In 2019 the new building was asking $3k a month for a 2br 2ba apartment. On top of that, a big hidden cost of renting is the high cost of moving every time your landlord tries to squeeze you or sell out from under you.
You might be thinking, South OC is not representative of the entire US… You’d be right in part. The ‘Irvine Company’ owns over 30% of the rental market in SouthOC they set the prices and are a large part of why things are so expensive… So yes right now you probably aren’t living under the thumb of the Irvine Company…
However if you have been following the rental market in this latest housing boom… You know that the big financial houses like Black Rock, Berkshire, and others are literally going BIG on rent seeking, they are trying to set themselves up as the Irvine Company all over the US. They know if they can turn the single family home market into their rental market… they will mint money; and be able to set whatever ‘market price’ they can dream of in their cornered market.
Get into something if you can… But it’s probably too late…
You don’t have to live in LA. You can live in the suburbs further out or commute in or find an apartment. That’s what people who live in reality limited by income and budgets and savings do.
It’s entitled to feel like you must be able to buy where you want. Don’t we all feel that way? Don’t we all want a nice house next to the beach and no commute? But there’s too many people, not enough houses, poor zoning and laws, and a general sense of got-mine-protecting-investment mindset.
Nothing you do in life meant you’d get anything. This is such a strange way of thinking. Hard-working? Do you think you really work harder than some in the service industry actively exploited? I’d say based on that, they deserve to be in the city more than you given the sacrifices. But nope, even slimmer chance of being able to contemplate buying a house. Rent is due and money is tight, day by day.
Firstly, my sympathies.
My mother reminded me yesterday that she and dad lived in an RV at the back of a coal yard for four years, lighting a fire under the standpipe in the yard to get water in the winter. They’d scraped up enough for a deposit on a house when I was due. No heating except in the main room though, my nursery was below freezing often that winter. Then after the oil crisis, with three kids and my dad unemployed, there was just potato soup for dinner some nights, and we collected wild berries for dessert. And now there are four kids all grown up, and we all own our own homes, and are professionals and, have five degrees between us.
And if you go five generations back, which is our limit of oral memory, each generation told similar stories.
1. Life is hard sometimes. Discover cheap pleasures.
2. Life is not fair. Some undeserving scum you wouldn’t let in the house is always buying a Porsche, probably with a solid gold steering wheel. But they aren’t happy ;)
3. Get the best education you can, for you and your kids. Encourage them to pursue their passions, whatever they are. It can come in real useful to have expertise in every area of life in the family. In our case that includes a biowarfare instructor, so we were all ready for Covid.
4. Don’t spend more than you have. If you need to save, spend even less. Take more jobs. Start your own business. Do all of these at once if necessary.
5. Never, ever, trust the government or the media. My great grandfather used to yell “Propaganda!” at the radio in the 1930s. You must assess the economy, society, etc yourself, with the help of friends and relatives. I recall as a kid all of my relatives spending hours each day reading and having serious talks. It does take time, but it means you are never caught out when the government mucks up.
6. Be prepared to move across the country, work abroad, or emigrate. Both sides of my family have had that in mind since the late 1800s at least, and we now have family all over the country and all over the world. And they are all doing well.
Best of luck!
This comment is a great public service.
Sailor, thanks for the reality lesson.
You life story is parallel to my family’s start in the U.S. They were Lithuanian immigrants (1890’s) to Pennsylvania and worked the coal mines. Both grandfathers died in their 40’s of black lung or alcoholism.
My Dad quit the coal mines in 1943 to go into WWII since he felt he was safer there, and I was raised with my only living grandmother and my mother in a “coal house” with no indoor plumbing and a kitchen coal stove for heat between 1943 and 1946 or so. Grandma raised a few chickens and that’s what we ate. I never saw an indoor toilet until I was 4 years old.
When I went to 1st grade after the War, I could not speak English (spoke only Lithuanian). My two sisters and a few cousins never went past high school and the ones still living are scraping by in this life. I saw the “light” during my military stint and went to college after Viet Nam on the G.I. Bill ($222/month) and became reasonably successful. Dodging bullets to get college money! What a concept!
Now at 77 and a paid off house in Texas, we will be selling in a few years as the expenses are growing and we will use the payout to cover long term care, if necessary.
To PNWGUY, you may have to think “outside the box” and maybe move to a part of the country where you can afford a home. A lot of folks are doing just that these days.
Thank you, Tom.
Anthony, your dad was right about mining! All of my relatives, in both world wars, who volunteered for military service were denied, because their jobs were either essential (e.g. aircraft manufacture), or already more dangerous than front line service – mostly deep sea fishermen. Some of them went to a different recruiting office the next day and lied to get in.
the only one of my three grandfathers who didn’t serve in WWII did so because (i was always told) being a coal miner in PA was essential to the war effort. i always considered him lucky. one grandfather ended up in a german POW camp, the other got shot in the a$$ on okinawa.
S
When I see a guy in a ‘Bentley’, I say there’s a guy that doesn’t have £250.000 that he used to have.
Move. You are in an area that you cannot afford.
Do you think anyone is changing their minds based on this irrelevant nonsense?
your username is itself operating outside the commenting guidelines for this site. i’m a republican and i liked trump. i miss him.
the thing is with all of this fed stuff, interest rates, money printing, blah blah blah… us conservatives – we don’t care anymore. print you dummies, print! we’ve given up. after the tea party, we just said screw it. we already own the guns and farm land and gold.
we want to defund the crazies, but since even the fed has gone woke, that will never happen. so now we cheer the death of your currency. hoping that will slow you down for a couple hundred years.
Bill Maher’s Progressive Phobia. Very good stuff
FED bondage=misery
How to minimize and eventually eliminate the Feds influence over your life?
Signing a mortgage is NOT a way to do this.
somethings gotta give with this comment filter, Wolf. my comment, where i complain of ndrl’s violation of commenting guidelines, is in moderation. while his gets the green light. even his username is a troll.
If you complain about moderation in a comment, the comment goes into moderation. If you have a problem with moderation, send me an email.
We felt that way for 8 years living in Pleasanton, CA. I refused to buy crap shacks for 700k and wife and I fought every weekend after a house hunting trip where she tried to get me to consider said crap shack. Realtor was doing her thing telling us how a 100-150k remodel would spruce up the place. Completely out or touch or straight up sleazy, hard to tell.We finally packed up and left for Arizona on 23rd Dec 2019. Felt like a weight lifted off of my shoulders when we crossed into Arizona that night. Haven’t looked back. It’s not easy and we miss the weather and family. But now looking back, I see that we made the right choice. AZ house prices are exploding as well. The whole house of cards might stand or might blow, but life’s passing by. Look for alternatives.
Move out of Seattle for Christ’s sake! What is so hard to comprehend about that?
If you’re a grown man and you literally cry with your wife about real estate maybe you haven’t got a handle on what your real problem is and perhaps you should book a single one way ticket to San Francisco.
It’s pure insanity. The Fed is entirely responsible for taking home ownership and retirement away from younger generations. Then, the Fed pretends there is no problem, in order to cover up its mistakes. It is a huge abuse of power, by people who are not elected.
As long as both political parties enjoy money printing, they both are supporting extreme wealth concentration, generational theft, low productivity, low wage growth, and general economic misery for a significant portion of the population. Time for a grass roots effort to kick both parties out of Washington. Neither party has the guts to make hard decisions or even play fair.
There is no solution to this problem, not in the sense that most people think of solutions.
The question most are asking is, how can the country extricate itself from this fake economy and artificial prosperity without a decline or crash landing in the typical American’s standard of living?
The answer?
There isn’t one. The majority of Americans are destined to become poorer or a lot poorer, no matter who gets elected. It took a long to get to this point and there is going to be a lot more pain than just some short if brief sharp recession to resolve it. The distortions are worse than any prior point in American history, by a long shot.
There is a solution. Quit voting the same idiots in or at least get a term limits movement going in the States and Congress.
The best solution would be for the US Government to have the interest rates increase on their bonds so that this fiasco can come to an end. Unfortunately, a lot of people are going to suffer should this happen.
The ‘storming of the capitol-insurrection’ should have been in January 2009. Bring an extra pretzel.
Jk
“The best solution would be for the US Government to have the interest rates increase on their bonds so that this fiasco can come to an end. ”!!!
You’re NOT serious JK, are you?!
You’re asking for the government to increase the Taxes on every American man, woman and child?
Well, the good news( for the government that is) , is they will, when more average folks like you start begging for more taxes on them!
It is a real travesty of this whole debacle, which is a direct result of ;
( voting for these two self interested parties that take turns in screwing the average citizens that soon will be asking for more,
more taxes, more screwing and another wholesale country devastation)!
As Shiloh1 alluded to in his brief comment, the solution have being missed, when a real correction was possible with less cost, less headache, less damage to the country!
That “solution” is still VIABLE, and a must.
Throughout history, corrections are required to bring balance to the lives of majority of a people of any country.
When that opportunity is missed, the pressure on population increases and expands to a more explosive potency.
The result is , as it always was throughout history , the overturning of the old and corrupt system to a new social contract that brings more balance to the lives of the majority of population.
And this cycle continues.
as the wise archdruid says, “problems have solutions. predicaments have outcomes.” and what we currently have is a predicament, not a problem.
and Shiloh1, the eccles building is what needs to be stormed, not so much the capitol.
Psycho-Fed is destroying home ownership for both young and old, through artificial low interest rates which creates much of the housing inflation, which then leads to long term, compounding inflated housing costs such as property taxes, insurance, etc…that never really deflate…
I knew the world was catching on when Bloomberg ran an article on June 4th discussing how property tax increases are crushing the Texan middle class, which includes the young AND the old…
Per Bloomberg:
Property Taxes
The growth comes with headaches. Traffic is getting worse and public transportation is limited. The influx of people is driving up housing prices, forcing up the cost of living by boosting property taxes. Given high levies on real estate and the state sales tax, the fiscal burden on middle-class people is higher in Texas than in California, at least according to the Institute on Taxation and Economic Policy.
File under “Why no one believes the experts anymore.”
“the fiscal burden on middle-class people is higher in Texas than in California, at least according to the Institute on Taxation and Economic Policy.”
The Texas middle class???
How about the many Texas seniors that are on fixed incomes and can’t find work at 65 – 70+ years old (no one will hire us) to pay the same tax increases? And are faced with the same inflation.
Unless your property valuation increases more than the average for your taxing district, your property taxes will not go up just because your property valuation went up. Property taxes only increase overall when the taxing authority increases their budget.
Property taxes are frozen for 65+ in Texas.
There is no income tax in Texas.
Apple, the only part of property tax in Texas that is held constant is the tax rate on schools if you are over 65. My property tax here has been going up every year and this year it will go much higher as the reassessment went up 20%.
Yes – beware of “frozen” property taxes for 65, older or anyone. In my town in Massachusetts, the city council and many other city councils constantly tell us our tax DECLINED because tax rate declined from previous year. They evade any conversation about skyrocketing property assessments jacking the actual amount of the tax much higher. Then they roll their eyes because we stupid peasant can’t understand math, and the media promotes this spin.
The middle class is moving to TX because of plentiful jobs and relatively low housing prices, pure and simple.
The “fiscal burden” of taxes is a little more for someone making 70K in TX than someone making 70K is CA, but that’s totally irrelevant, you can’t afford even a studio apartment in SF on that income, and you can afford a small house in the outer suburbs of Dallas. By the time you have enough income to buy a home in SF, you are also paying more in taxes than if you lived in TX, because you need 300K + of income to buy a starter home. So the taxes aren’t what is driving the middle class to TX. It’s jobs and cost of a traditional middle class lifestyle.
For the majority of US history the government gave land to citizens, especially veterans, by the acre!
Becausee Americans viewed every citizen being a land owners to be a critical element to a functioning democracy.
90% of Americans from the past would be aghast at the very idea of a “central bank” buying $40 billion of mortgages every month and driving up the cost of homes so only the bankers and billionaires can have them and the average voting citizen is left houseless.
Tax the rich.
The fact is, the Federal Government is prohibited from owning property except for specific purpose, like military installations, or ports. The millions of acres it owns under the guise of “National Parks” is 100% unconstitutional. In the past, the Federal Government could only hold land in trust until it dispersed it to its legal owners, who are the American people….
Environmental lawyer James M. Auslander: “the national parks and national wildlife refuges system are pursuant to statutes enacted by Congress.” And statutes enacted by Congress are, you guessed it, inherently constitutional. There is not, says Auslander, “a bona fide legal claim that I’ve seen raised in this instance.”
Elizabeth Wydra, chief counsel of the non-profit Constitutional Accountability Center: “the Constitution clearly provides for federal authority ‘to dispose of and make all needful Rules and Regulations respecting the territory or other Property belonging to the United States’ (US Constitution Article IV, Section 3). Dedicating federal land a wildlife refuge, as Teddy Roosevelt did for the Malheur Refuge in 1908, plainly falls within that constitutional authority.”
try again
Statutes enacted by Congress are NOT inherently constitutional. Congress only has the powers prescribed in Article I, Section 8. A law that does things outside of those powers is unconstitutional.
Didn’t think I’d see someone arguing for abolishing national parks to deal with a housing bubble concentrated in desirable areas, or did I miss something?
If you want wilderness living and a house, plenty of states for that!
The five largest land managing agencies of the federal government are BLM, FS, FWS, NPS, and DOD. They control 27% of the land area of the USA. There are four states where they effectively own more than 60% of the land: 80% of Nevada, 63% of Utah, 62% of Idaho, and 61% of Alaska. There are 11 coterminous states in the West where these five agencies control 46% of the territory. This counts only these five agencies, many other agencies own smaller amounts of land.
This is a big political issue in the West, where many voters in those 11 states wonder why their state governments don’t have any control over almost half of their collective territory. It isn’t all pristine national parkland, and sometimes the land has been set aside by left-leaning national-level politicians against the will of the people who live there.
Type “Congressional Research Service Federal Land Ownership Overview and Data 2020” into a search engine and look at Table 1 on pages 7 and 8 for details.
BTW, I’ve found that direct hypertext links tend to get posts tied up in limbo until Wolf reviews them, so I’d recommend making very specific references to a search engine instead. It should make life a bit easier on Wolf and speed up the discussion of facts.
It may be unconstitutional but isn’t this a minor issue? The president has waged war without a congressional declaration of war, droned American citizens without due process, and spied on all American citizens(and may still be doing it) without probable cause. And now the President will decide who a “domestic terrorist” is. White House lawyers shredded the constitution long ago.
The U.S, Constitution is like your grandfather’s birth certificate. Has all the dates and facts, but no one looks at it anymore.
Jeffrey, property tax will go up because the value of most non residential property has gone down. No possibility of the taxing authority reducing it’s budget. It will increase by at least inflation and they will have cost increases from modifying things for virus. Yes the feds gave my state a pile of money but it’s probably stolen by now
The Constitution is the document that created the Federal Government. It is a contract between the Federal Government and the States, and if one party is not abiding by the contract then it can either be forced to do so, or the contract can be deemed null and void. The Constitution clearly states the powers given to the Federal Government and retains what ever powers not specifically given to be retained by the States and the people. In the case where the the Federal Government is found to be willfully not abiding by the Constitution, it would be found to be in breech of the contract which created it, and would not legally exist, and the States would be free to form a new union… or declare independence.
Drifterprof:
As of 2014, the United States Supreme Court has held 176 Acts of the U.S. Congress unconstitutional. In the period 1960–2019, the Supreme Court has held 483 laws unconstitutional in whole or in part.
Statutes enacted by Congress are inherently constitutional until the Supreme court decides they violate the Constitution.
The Supreme Court has not determined that National Parks or other federally managed lands are unconstitutional. Until that time, a biased commentator is just blowing hot air.
My base case is asset prices (both stocks and real estate) will revisit close to 2009 levels. Real economy hasn’t grown much since then and eventually real economy will have to support asset prices. I think ZIRP can inflate the asset, but not sure it can make them stay there as ZIRP is destructive to real economy.
True. ZIRP was started more than 10 years old in Japan before the U.S. started ZIRP. Japan has still not ended ZIRP. They can keep ZIRP going for a much longer time?
What real economy do we have apart from food and petroleum and spyware?
True,democrats are socialists and republicansjust want half price working slaves.J.Stalin was building a perfect society(not communist btw) from 1924 to 1953(he was poisoned in march 1953) And after 1953 covert,closet trotskist Khruschev began destroying SSSR ,which was collapsed by Gorbachev in 1991(he still lives in Swissland despised by alk russians.Solzhenizen was a total lier about Gulag.If one not lazy in Russia,u can built a house at 10% of US cost.But 80% of russians became lazy and spoilt by the West liberals.IF the West crashes,Russia could be a good place to move(IF west controled Putin looses power)But for now i prefer NYC.
As Charle de Gol told,J.Stalin belongs to the future.Somehow 80% of 50+ yo russians like Stalin.He turned an agri Russia to a space nation within 30 years(1924-1959)Chamberlen quote
Forget the grassroots stuff.
All of History shows that the average citizen will NOT break the mould of status quo politics, whether that be God-Kings or two-party-politics, until they are either starving or faced with capricious and common executions.
So you, as a thinking citzen, believing we are on the Highway To Hell, have only two options.
1. Step up to the plate and try to change the system from within.
2. Put yourself in the situation where the average citizen reaches breaking point before you do. Then be ready to contribute to the revolution.
I’ve tried 1., and failed. Having an incredibly huge ego, I believe it’s no longer possible for anyone to change the system from within ;)) So, I’m now at 2.
It’s not the worst thing for everyone at all there will be lots of people who will do well .everyone know this is a deliberate FED induced bubble and when the fed is READY they will burst it by disgn to create a crisis to bring in there digital dollar. So stay out of debt. The fed is trying to create inflation by buying and selling debt amongst other things
I understand your frustration, same sentiment here. Everytime I see Weimar Powell’s picture on TV or online, makes me want to punch a hole through my screen or monitor. These people have crossed the rubico of moral failure. Not that these clowns give 2 F about it, they got masters they have to serve, neither will people that got a house when the market was more normal back in the days. As long as I get mine, who gives a flying F about future generation or people that simply want a decent house without overpaying to raise a family…entire country runs on strong NIMBYism, so as long as I have my house that will continue to go up in value, not going to question what the FED is doing to destroy the middle class and we’ll just shame you for missing out riding the wave up.
For no reason?
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.” – Thomas Jefferson
They warned us, because they had seen it all before. There is nothing new about central banking and the slavery that results from it….
The rent v. buy decision is very skewed now. In my neighborhood, there is a slightly run down home $1.7M home that rents for $3200/mo. in a great neighborhood. The value of the home was just confirmed by several new comparables. Let’s do quick math on that.
The payments to own are $340,000 down plus $5000/mo., while the payment to rent is only $3200/mo. That represents a huge premium to own the property and receive any future appreciation.
I’d say renting makes much more sense in this situation, and it provides the buyer with a tremendous wealth building opportunity when the markets come back to Earth, and 100% of history says they will. Those who lock up a huge amount of wealth in a depreciating illiquid asset will likely not do well.
Put your trust in patience, not FOMO.
Not to mention repair costs, insurance, etc.
Burst Bubbles are the best thing for people who buy those bubbles once they burst… for them, its the thing wealth is made of.
Some say FED is the God & the Banks are its Churches!
I guess you could say that given that confidence in the Fed has become a religion to those who have faith…. and a poor knowledge of history.
I feel for you. You need to accept reality and learn to go with the flow. You cannot fight the Fed. You need to use the opportunities afforded by the Fed. In the last 13 years, the Fed has greatly favored borrowers, with low interest rates and a boatload of available cash. That is called Quantitative Easing, Stimulus, etc., really just Government Graft. Basically, you need to be a borrower to take advantage of the low interest rates and available money. This makes you an investor, with real estate being the best opportunity for great returns and relatively low risk.
Yes, I think you’re correct . They are in total control of the bond market and think they control the Goldilocks economy. But, they’re always missing something . They will sell off bonds they own to potentially make rates go higher . But , not too high .
The PTB are going to blame energy costs for inflation. Just watch crude oil continue its unlikely rise…
I sensed a bit of unease with Powell and his own tight labor hypothesis. (be careful what you wish for) If China cuts exports and the US labor market snaps tight? The markets are blowing off Powell’s trepidation. But then promoting the notion of a slowdown in economic growth is political suicide. I think the Fed chief got caught whistling past the graveyard. We are going to slow down.
Oh yes I agree and assumed that was obvious but maybe it’s not. We’ve had our rebound. Now we’re in gridlock and no more stimulus. I expect CPI declining (not to suggest inflation declines because WTF does CPI have to do with inflation?). The Fed will jump on declining CPI as reason to continue ZIRP and QE…. forever.
American business turned everybody into a gig worker and those workers seem to have taken the hint.
I walked into what I thought was a hair salon/spa and was surprised to find a collection of “studios” where health and beauty professionals rent and work. I only saw one side of the building and there were easily 30 of these studios. These are people working for themselves doing hair, nails, yoga, etc. These workers are out of the official workforce but still working.
Petunia, we have two shops like that near us with about 50 booths going full blast all day (hair, nails, facials, etc). My wife uses one for her nails and haircuts. That’s been the trend here in Texas near us for a decade or amybe more. All the “workers” are independent contractors.
The newer shops are all owned and staffed by Vietnamese women.
re: “The newer shops are all owned and staffed by Vietnamese women.”
There is a historical reason for this. Key “why are nail salons owned by Vietnamese women” into your preferred search machine. Wikipedia has a good write-up (Hint: Tippi Hedren was a genius).
Tippi Hedrin’s a genius depending on who you ask. she imported pocket-sized cheap talent to carry around with her like a purse and she drove down the wages of working class american salon owners and it became a mill.
the same kind of thinking that had us in Viet Nam in the first place, screwing over them as well as our own working class who didn’t go to college. / then we import the nail salon schools and families and undermine our own citizens yet again.
all so american women will always have someone willing to rip the wax off their vaginas.
a genius, huh? it’s the way of things and why we cannot afford our own homes in america and how someone here can have the temerity to tell PNW guy that he’s uppity and self entitled for his audacity in wanting to afford his own house in the united states.
x
So before modern graphics were available, how did they get all those real crows (ravens) to sit still and scare hell out of Tippi in Bodega Bay?
They glued black cut up ping pong balls on their heads….can’t see, won’t fly.
You folks are really feeding off each other, sorry for off thread interruption.
Please continue, I’m gonna read it all….sociology studies.
RE: NBAY. The best actress in that film was killed off in the second act. Suzanne Pleshette. Hitch has his reasons, his characters are rarely good people. A Mob Lawyer and the Paris Hilton of her day. Really cutting work.
NBAY:
“They glued black cut up ping pong balls on their heads….can’t see, won’t fly.”
that didn’t feel “off-thread” at all; it felt like a Micheal Engels’ type of clue or metaphor for where we’re all at as a people: a movie starring the paris hilton of the time, and suzanne pleshette’s brilliant life’s work denouement happens decades later in the ’80s as Bob Newhart’s big finale wake-up-wife punchline for the future irrelevant TV history docs.
x
My mother and then worked in a salon. The majority in that business are gig workers. They essentially rent a station and bring most of their own tools.
Chinese staffs a lot of those in Sweden. It must be some kind of money export and/or money laundering setup.
I don’t see a vast market for their services and it’s not scalable – one person can just do so much work.
My stepson’s wife works as a Cosmetologist at a shop near us. On a good day with her “grown” customer base, she can gross $1,000 or higher if there are more expensive haircuts and color jobs . Women pay up for these services.
Gig economy, from what I understand, has been a long-time customary part of overall labor force, particularly for lower to middle income workers.
Gig workers, whether contract, freelance, or whatever, work outside the traditional employer-employee relationship of full-time permanent employment (and without benefits).
They may work irregularly or occasionally, dependent on whenever work is available so their income can be inconsistent throughout year.
Unfortunately, I predict gig work may replace many traditional permanent white collar jobs as a consequence of WFHA remote work experiment stemming from pandemic.
It’s unlikely that those who work in a workplace will be the first to be contractors. In many places an employee is classified as someone who is provided a workplace.
But the WFH type? Especially if they’re not indispensable or really even that useful overall? Contract. Gig. Take it or leave it if you want the “perks”. Not every profession has room to negotiate and there’s a ton of short-term thinking. A decentralized workplace basically eliminates any sort of talk of organizing or even discussing workplace issues. Keep’em siloed and indifferent and just a screen or username.
Labor in this country has never been strong. WFH isn’t in favor of workers. Oh, but isn’t work the devil and no one should do it? I won’t cover that delusion seeing as the world’s happiest nations still partake in gainful employment.
The rate of inflation has always fluctuated and will at some point back down, but the price increases will remain.
That only now someone at the FED comes out and states that they ‘might’ need to think about stopping MBS’s is insane. In a half functioning society the media would have been a over them a year ago asking why they are still buying them when housing is raging. But, the media’s silence has become a god awful scream over the last decade.
And, wolf… you made me laugh with your pre-emptive mug shortage call.
You had better preemptively double the price due to the upcoming shortage!!!
I wrote my comment before listening, so my beer mug comment doesn’t make much sense.
About the supply chain blockages, my sceptical mind is seeing a few that make me wonder if they are not by design?
We might get a few more of those pesky ruskies sabotaging things???
“In a half functioning society the media…” It must supremely galling to our American Media folk that they had to report on a leader who is highly intelligent, educated, sane, rational, judicious, compationate, and who often quotes Tolstoy to an electorate who knows who Tolstoy is.
sad-sarc
There’s an excellent article on product shortages and global supply chains over at Eand.co. It’s probably one of the most insightful articles on the topic I’ve read in a while.
“The Future of the Economy is Even More Dystopian Than You Think” by Umair Haque on June 19, 21.
Reading Umair on a daily basis is about as depressing as it gets America is horrible, the worse, it’s all Trump’s fault etc. Such a conplainer. I’ve done a decent amount of travelling over years, including a summer in the USSR back in ’81. We have a slew of problems for sure but we are not unique as far as that goes.
Jacob Hunt,
I was smart enough to try to re-order the mugs a few months before the out-of-mug date. So I still have enough mugs for a few months. But I wasn’t smart enough to re-order 8 months before the out-of-mug date :-]
And not smart enough to figure out a way to exploit the opportunity when you spotted a trend ;-) Where’s your glass recycling business?
I don’t know yet what the actual problems are. I have an interview scheduled with the guy that owns the company that is printing the mugs, and I will find out hopefully what the issues are.
Their mug supplier is producing some mugs (the blanks), but only the high-volume mugs, not the special 16 oz mugs that we use.
Once I have all of this pieced together, I will post an article about it. I think this is in a microcosm what is happening all over the place.
Love this site Wolf
Speaking of long lead times, my industry, swimming pool manufacturing and distribution is seeing the craziest shortages and longest lead times I could ever imagine. I am now asked to plan out purchasing 6- 8 MONTHS in advance when we historically planned out 6-8 WEEKs for most purchasing.
And this is while I am looking at a warehouse completely OUT of our biggest selling items and this is June when I am typically flush with product. We are talking pumps, filters, automation panels, heaters, various plastic goods with which you can’t build a pool, chlorine, plaster, and many many replacement repair parts.
Would love to hear from other in similar situation so I know we are not being picked on.
Ocean shipping from China for us is up 200%, therefore triple the 2020 covid prices. And that’s only for the companies still willing to bid on new shipments as they’re backlogged. Add in several weeks of delays due to congested ports in China and you have chaos. Some shippers don’t even want to ship inland anymore as that’ll block off rare containers for a few extra weeks.
The budget deficits put us at risk of inflation. We are seeing near record high Federal debt levels.
My home value has risen this year. No fear of the landlord wants to raise the rent again.
Household income is rising. People bid up the prices of homes.
Household income rising for rich people
It is not just the Fed affecting housing supply. The articles I’ve read recently about Blackrock being one of the largest landlords in America. I knew about this after the 2008 crisis that the hedge funds, investment funds, etc were getting in on this action.
There should be laws with restrictions or fair play rules against large property owners such as these buying a zillion homes
More than a year ago, I wanted to buy this fixer from HUD. I have rentals. The house needed work and I thought overpriced at 210,000. I live in Central Valley, CA. Well, my offer was considered too low (180,000) and then there was some investor restriction for 14 days or so that I couldn’t buy it. Had to be primary owner those 14 days. It sold. No big deal. I was ok with it.
The homes right now are WAY OVERPRICED in a number of areas, but the market says this is as it should be. I will wait it out. I have enough and am content.
There should be heavy taxes and other fees to greatly discourage corporate real estate ownership. Houses are shelter for workers, not speculative assets for pigmen to corner the market on.
Workers still shelter in them regardless of who owns them.
The Atlantic did a good article on black rock and the supposed corporate america take over of single family housing. Blackrock iirc was the biggest and only had 80,000 homes. Blackrock and institutional landlords isn’t the problem if you research the data.
Most people haven’t bought a home in the past year. The problem with the housing market is fomo mania and the average American being able to finance ungodly mortgages for basically no interest. And most of the cash buyers we hear about are people moving from ungodly costly states to cheaper states. Add too that nearly no new housing supply for over a year and you have what we see today.
Single family housing is insanely costly and complicated to manage. It’s a terrible performing investment usually and in a massive headache to manage. You also can’t buy and hold housing as it falls apart without care in little time. It is very unlikely institutional investors will ever take over the sfh market.
“Single family housing is insanely costly and complicated to manage.”
“It is very unlikely institutional investors will ever take over the sfh market.”
Appreciate your sentiment but it is debatable.
Bear in mind that non-institutional landlords (mom and pops) still own almost all the single family rental (SFR) properties.
They have managed a good income from these properties, and seem to be quite able to maintain their cash-flow rental properties.
I would seem to think that large corporations could do even better than individual landlords at managing and maintaining huge fleets of SFRs because of their immense resources, financial clout and economies of scale.
It will be interesting to see if the big guys (institutional investors) will really cause a huge change of SFR ownership across country.
Bring some hot buttered popcorn …
I really doubt it. The investment just sucks from a logistical standpoint and in returns gained. Let’s compare to just a blue chip stock.
Single family housing accrues annual taxes.
A stock doesn’t. It’s a one and done tax deal when you cash out.
SFH has tenants who can destroy a property in a matter of hours. When a house is left in a disaster, you the owner will have to fix it.
Stocks can collapse but usually don’t. And if they do, there is no liability beyond what the initial investment is. You can walk away.
SFH has tenants that must be kept happy. And legally you’re obligated to manage issues as the landlord for the tenant.
A stock sits in a computer somewhere with your name on it and needs nothing.
SFH is terribly inefficient. It isn’t scalable like apartments such as having one massive reliable water heater system. You have one small residential grade deal. This is the case for everything in SFH. You’re responsible for it.
Stocks don’t have this.
SFH is hard to cash out of on the spot. Timing the market is a lot harder and a bad dip in the real estate market can last for years. Longer if you bought at the peak. Even then, the annualized gains suck compared to stocks.
Stocks can be sold in a matter of seconds if you’re a big enough company.
Tenants can just not pay bills and you have to get them evicted.
Some stocks pay dividends.
There is money to be made in being a landlord but you need to be a ground level small time player to actually manage it well. It’s also a bit of a messy game to be in and complicated. That is the reason mom n pop deals are so prolific. It isn’t a place for big money when stocks are so much easier and more profitable.
If I have 100 mil to play with, the margins on the stock market are far more profitable and easy to manage. If I have 2 mil, I probably still need to work but I can buy and manage 2-3 cheap properties and generate a small passive income while some chumps pay most of a mortgage with no equity. If you actually do the math on home ownership, you’re probably just breaking even in the long run between taxes, maintenance, and mortgage interest. SFH is a terrible investment. There is a reason apartments are so common. The logistics are just much more sound and far more profitable. SFH is terribly inefficient and costly. Especially the chrome kitchened mcmansions.
I doubt corporate america will take over SFH. Everything that has been a market sector for more than 20 minutes and is also profitable has been taken over already. If the big players aren’t throttling the little guys to death, it’s because it’s not profitable.
I do not think anyone could deny that the political policies of the past year have amounted to a war on mom and pop landlords and small business owners. And if you do not think it was done on purpose, remember this quote.
“In politics, nothing happens by accident. If it happens, you can bet it was planned that way”. Franklin D. Roosevelt …
They won’t, but they are major players nonetheless.
The mega landlords are concentrated in certain areas where they own a disproportionate number of homes. They may own 10,000 homes in a city like Miami, Ft. Lauderdale, or Phoenix, then you see the distortion that takes place in these communities. The ownership is concentrated for economies of scale and maximization of political clout. Those are the places that become unaffordable for normal home buyers.
30yr mortgages 2% below inflation due to Fed purchases creating sharply higher residential prices. Blackrock “one of the largest landlords” with all that real estate that has risen sharply in value due to the low rates from the Fed. Fed policies have done well for Blackrock.
What percent of the houses in America does Blackrock own? I doubt that they own enough to control the market.
See Trucker guy’s post two posts above yours for the answer.
They might have enough clout to influence a city here or there, but nationwide, they are not a factor.
I studied reports of Chinese housing bubbles through the years. Once a Chinese billionaire was convinced the home price to median household income ratio in China was too high and sold his real estate. The Chinese printed more money and the price of a home rose again. Recently Chinese housing prices have been rising about 5%/year.
I own a home in Qingdao, but we have been stuck in the US since last July. We are waiting for China to open up to outsiders. Only people with work visas like engineers and teachers are allowed in now. The only bright side to the whole thing is that our home went up $80,000 US in value in the last year. Life has been pretty much back to normal for over a year there. Young people are getting married and their families are buying them homes. Others are moving up or downsizing with retirement. New homes are being built and sold at a fast pace.
My son is an engineer with Dow Chemical in Freeport, the largest plant integrated chem plant in the nation. They are back to 100% production, so shortage of raw plastic materials is over.
The freeze was not what shut down the plant, totally, the main culprit was the failure of the nitrogen supply line across the gulf coast. No petrochem plant can run without nitrogen, and, apparently the nation has just one line supplying all the plants along the gulf, from Miss through Texas.
While it can be trucked in the amount needed is way beyond the ability.
When valves and meters freeze and fail, the line goes down. I find the whole thing rather amazing. What a target for sabotage.
The fragility of our entire country is astounding. I was shocked during 911 to see we had two fighter pilots protecting our entire country, considering the military budget then, a total security and leadership failure.
Living in the south I see the fragility in the infrastructure as well. It’s amazing we have critical plants, some the size of small cities, vulnerable to floods and wind, on a continual basis.
The invisible hand of the Free Market ® at work.
“Living in the south I see the fragility in the infrastructure as well.”
Look up information on the *critical* pumping stations in the City of New Orleans…
“The electrical system that powers these older pumps, however, is a different matter. Older pumps, installed before the 1970s, run on 25-cycle power, which has long fallen out of use in favor of 60 Hz electricity. To make 25-cycle electricity, New Orleans is still running decades-old steam boiler turbines that require specially trained machinists to maintain them. When the turbines need repairs, the city often has to either order a bespoke part from an outside company or have it made specially, in-house. As the people who know how to keep these turbines running have retired, they’ve been hard to replace, and inadequate staffing has forced employees to work overtime.”
They wasted $1B given to upgrade the sewer system after Katrina on crap and didn’t use it to upgrade the system. They didn’t even bother cleaning up the canals and water pipes until a couple of years ago. Their problem isn’t old equipment, it’s corruption and incompetence.
Petunia ” I was shocked during 911 to see we had two fighter pilots protecting our entire country, ”
Probably not. Probably just 2 jets assigned to that area or circumstance. Journalists are constantly getting things wrong, especially when in a hurry for a story.
How is it the responsibility of the Air Force to prepare for an attack from inside the country. Why would fighter aircraft operate a standing patrol over the US, at around 30K per hour. How were Airforce radar to know normal airline traffic had been hijacked. The radar tracking the plane doesn’t report on its intentions.
Any Russian etc. planes approaching US airspace are detected by radar and then closely escorted before reaching US airspace. Obviously where US and Russian airspaces border each other at the Bering Strait (where Sarah can see Russia) there will be closer encounters, where there are probably more than two US aircraft available for a rapid reaction. That is the Air Force’s job. Preventing civil airliners from being hijacked is not its job.
We can’t afford modern infrastructure, we have to keep giving tax breaks to millionaires, billionaires and massive corporations and don’t forget funding the Military-Industrial Complex!
Even if most Americans are homeless and starving, the GQP sycophants bow in unison to their corporate masters.
As my 95 yr old friend, Fred, who just passed away once told me:
“In my entire life, I’ve never seen the GOP propose legislation that helped the average person a single time. And every single piece of legislation proposed by a Democrat or Independent that DID help average people….the GOP opposed every single bill.”
The man summed it up perfectly.
Why some of you vote for people who are slitting your throat isn’t a mystery. You got sucked into the “Culture War” vortex (Guns, God, Gays, picking on immigrants, racial animus, etc.).
The Democrats’ legislation doesn’t “help” the average person. They just borrow and spend us into penury. The best way to “help” is for government to get out of the way.
They stay WAY out of the way in Somalia…..totally free market!
The truth matters and democrats lie about everything. The republicans tell you to your face they don’t care about you. I’m more comfortable with the truth.
They are the same, just different cloaks
There is no such thing as legislation that helps the average person.
Government helps nothing. It is a institution of graft and corruption that exploits the people and steals their rights and freedoms.
Government creates problems, and then claims to be the answer to the problems they create. The only thing government can do to help people is stay out of their lives.
Anyone who actually believes that government has ever helped the average person is suffering from cognitive dissidence.
Bingo.
“Anyone who actually believes that government has ever helped the average person is suffering from COGNITIVE DISSIDENCE”.
…..and then a BINGO! response…….
LMAO
i’m starting to come around to this whole “cognitive dissidence” thing you have going on.
nicely done.
How simple minded must somebody be to believe the opposing political party is 100% evil?
Wolf, please don’t take it down, it IS part of the answer to Jeff’s good question.
NBay,
I took the link down. I should have taken the whole thread down. This is way too partisan bickering, and has no place here. This needs to stop.
No way in heck am I going to send 500 people to that website and not even get paid for it :-]
Didn’t realize it was a whole website, just wanted his quote. But yeah, that quote is partisan as hell, especially considering his political position.
Like I said before, I couldn’t moderate this website, glad someone can.
Talk radio has three full generations under it’s belt, now….born and RAISED under it’s umbrella.
Best thing the Mercer types ever did…..from their point of view.
Grew up in the right-wing talk radio umbrella. Listened actively into college, then finally grew up. Learned a lot over the years, but had to unlearn a lot too.
Didn’t swing the “other way”…just gradually came to the realization that life isn’t that black and white.
“Common sense is a collection of prejudices, usually collected by about age 18” -Albert Einstein
Cheers to those who can handle retaining grey areas!
Hang in there PN Guy. Hang in there, get some paper out and make a plan to leave would be my suggestion.
It is like all west coast cities…..if you didn’t get established years ago it will be impossible going forward. There are many fine alternatives and your skills are portable. After Covid there will be many job openings in other locales.
I have a few friends who got in to the market in Victoria BC 30-35 years ago. They have beautiful homes. Now? They would be lucky to land a townhouse in a suburb. They are all planning to sell up and move before retirement, while winter refugees buy those newly vacated homes as they migrate west to a better climate.
What will happen when people start leaving the southwest in droves as it dries up? Even more pressure will be exerted on decent places to live.
Regardless, good luck you two.
We build oil pipelines that stretch 1000s of miles. They were going to build a pipeline starting in Canada that would be 2600 miles long
Why don’t they build a water pipeline from the great lakes that store 30% of the worlds fresh water?
The states that border those lakes are not willing to let the other states take their resources without a fight. The people who don’t want oil pipelines in their backyards will resist water pipelines too.
There are also practical reasons – to get enough water across the Rocky Mountains to the driest parts of the West, a *huge* amount of electricity would be needed to pump megatons of water thousands of miles horizontally and thousands of feet vertically. Desalination plants on the Pacific Coast or Texas coast might be more cost effective.
I used to fly engineers and surveyors for our Fed agency we simply called Water Survey. They monitored and graphed all water in Canada, then the biologists are consulted about diversions, dams, etc before it even gets political or project minded. Picture a float plane landing on some river in the middle of nowhere while the surveyors calculate stream flows etc in cubic meters per second. (I fished and watched out for bears while they worked)
Anyway, there is a perfect straight valley that runs from the Yukon border all the may to Mexico called the Rocky Mountain Trench. Actually, it is interrupted by the Liard Plain and then continues on towards the arctic. Straight as an arrow. Decades ago there was a cockanamy plan to divert all north flowing water in northern BC, down through the trench to Colorado. It was laughable. Then, in the ’80s and Cali started drying up, US companies wanted to export Canadian water to the southern part of that state. Canada then banned ALL bulk water exports as even back then Climate Change was apparent. (I’ve watched receding coastal glaciers for 50+ years.)
As to the Great Lakes transfer, it isn’t just your water. All water exits through the the St Lawrence river through Canada. There are vast shipping concerns involved that would affect that entire region of the US and Canada. Those industrial concerns dwarf the farming, ranching, and tourist needs of the parched west.
You could pump out the Mississippi and fight internally. Closer too. Or maybe move from the deserts where vast numbers of people are not meant to live. People have fought over western water rights for hundreds of years.
A national water grid would make a lot of sense, from a logistical perspective. Politics is a whole different thing, and would be a major impediment.
There are areas of the US that flood fairly regularly that would benefit greatly from a grid that could pump the flood water out of flooded areas. It would save billions in property damage alone.
That water could be used to replenish lakes and reservoirs that are low in other parts of the country.
There are several so called third world countries that have national water grids, but I guess it is too much to ask from our dysfunctional Federal Government…
Jdog-i’m confused, why bother to suggest ‘a national water grid’ (admittedly, an intiguing WPA-type project concept as long as the water holds out in any given area, something one can NEVER guarantee) when a priori you never seem to give the concept of ANY government succeeding at ANYTHING? (BTW-before being submerged by sheer human population numbers and climate changing declines in average annual Western snowpacks, the government water programs in CA did a fair job. In fact, in making the massive public availability of water to citizens, agriculture, and private enterprise at bargain-basement prices was the source of the eventual population increase and its current overdemand for the available water resources…).
may we all find a better day.
While far from efficient, the Federal and State governments are the entities in charge when it comes to interstate projects, due to eminent domain and other issues. A national water grid could conceivably be done for probably a lot less than the cost of one of the governments war against (fill in the gap) which they will do if they have nothing better to do with our money…. Just being realistic..
You never answered 91B20’s question…..didn’t even offer some compromise.
You just said, “Look over here”…..think I know another well known person who did a lot of that.
Google “Sam Kinison World Hunger” on Youtube.
If I lived near the Great Lakes, why would I let some idiot in Phoenix take my water to waste on his yard and local golf course?
I wouldn’t.
Neither would you.
Water Wars is the next big thing. It’s starting already and all those people who tried to make the environment a priority are being proven correct.
It’s the buffoons who just want to rape/pillage the planet w/no common sense who are your enemy.
Govt isn’t and never was the enemy, no matter what Ronnie “my own son said I had dementia in my 1st term” Reagan’s speechwriters said.
BAD Govt is like everything else. You fix it. You don’t destroy it.
BAD car engine? Fix it.
BAD plumbing? Fix it.
All the people who complain about the Federal Govt. are the very ones to cry like babies for their help when a natural disaster hits.
Ex. FL Panhandle after the big hurricane.
What did they get for their tears? A photo-op visit by Don and the incompetent Ron.
Reminds me of Gov. “Jeb!” rolling up his sleeves to hand out bottled water for 5 mins. “Got the picture? OK, let’s get out of here!”
What Paulo said. For decades, they have already been taking more water out of the Great Lakes than is considered sustainable or healthy. On the Canadian side, there are various communities that would love a big pipe from the lakes up to their home communities but they have been told that it will never happen. It’s a big problem considering that they want large growing populations but don’t have the water to support it. The supply has long been considered max’d out so don’t count on the Great Lakes saving any other states if they can’t save the communities that can directly see the lakes.
There is a reason that water is called Blue Gold. Unless there are drastic changes, I would be surprised if wars weren’t started over access to it. The only way to avoid that is to acknowledge the realities and change the system so that it doesn’t require infinite growth including of the population. Everyone needs to bring their population into line with their water resources but particularly water restricted areas such as Cali, Nevada, Texas, Arizona, et all. Yes, I do know what that means but access to sufficient water is not negotiable.
Current severe megadrought in SW US is certainly getting the attention of a lot of observers.
Reservoirs in SW are drying out rapidly, and Lake Mead in particular is flashing warning signs of water levels approaching a crisis level– water levels could drop so low this year that feds would have to declare the first-ever official water shortage in Arizona and Nevada. Hydroelectric power generation at Hoover Dam is down now, and if water level gets to a certain level that source of electric power is kaput.
They say that through prehistory and historically over centuries the southwest US area has witnessed repeated cycles of mega-droughts, some lasting decades. Nature repeats herself, and no, man-made CO2 is not behind these cycles.
Perhaps later in this century, Las Vegas will be a prime tourist destination still– but this time as an archeological site showing how a large city lived extravagantly for a while in an arid desert.
Food for thought.
No one’s building water pipelines from the east to the SW. There are much better ways to handle the drought in the west. Water transfers between CA and other states, with desal plants on the coast, Direct Potable Reuse,…. but it’s a big fat NO for massive transmission lines from the east or the PNW
How about it it looks sorta like a border wall? Could call it the “Line of last defense project” and get rid of all that nasty flood water from that hot Gulf? The railroads already worked out all the best level routes, and plenty of wind, solar for pumping. ICE atv’s could drive on top of it, lots of sensors, etc.
Everyone is happy.
Nbay: It seems like you might have been kidding, but there’s a lot of sense in your idea.
Here’s a riff on it: use windmills or solar in south TX to pump the water up over a low, southern pass in the Rockies. Let the water flow downhill from there, and pass it thru turbines every mile or so (100′ or more of head) to extract the electricity, and sell it locally. If we dammed a few canyons at high elevations, and stored water there, the system becomes a battery, a source of irrigation, a means to distribute population to very remote,dry, low-cost areas….etc.
Dig some big, shallow ponds along the Alabama, Louisiana and TX coast line and use them to hold the water when the hurricanes and storms come.
Run the pumps when the wind blows and the sun shines.
Nbay: one more twist. Run the system backwards (water flows “back” from the high elevations, using the canyon-stored water, to provide hydro-power to the low elevations “when the wind doesn’t blow, and the sun doesn’t shine”.
TX, for one, could get some real benefit from a mechanism that fills in for the wind-turbines when they’re not running.
Tom-
Would be an excellent part of Green New Industry and Conservation Program.
But I wouldn’t count on the “free market” getting around to it anytime soon. That is what Government is for…..the common good. We have enough stupid trinkets, time to build serious infrastructure for all to use.
There was a plan floated back in the 60’s to build a water pipeline from BC Canada to Southern California to ensure all the reservoirs and lakes could be kept full. The plan was killed by the water companies. They spent millions defeating it. Bottom line, you cannot charge premium prices for something unless you can create scarcity…
Jdog-Canadian water isn’t U.S. water., as Paulo indicated above. (Also, check ’60’s population numbers vs. current…). (oh, Wait, maybe we could JUST ‘buy Greenland’ and pipe the glacier melt from there? Not for sale, or scalable, if it was…). Heinz-keep whistling past that graveyard, you may think your freshwater’s inexhaustible where you live, but advise investigating who’s currently attempting to acquire control of it-if inexhaustible, then WHY? (Moche or Indus civilizations and their struggles in rapidly-changing climates make for thoughtful reading…).
may we all find a better day.
There is more water in BC that could ever be used by anyone, and much of the land is unusable. The water simply flows into the Pacific Ocean and benefits no one.
Jdog-except for the ecosystems built over eons that are sustained by them (a very basic point-as freshwater river flows in estuaries and valleys decrease, saltwater intrusion from the oceans increases along them, playing havoc with local ecosystems established on a more-or-less standard level of salinity-it may not be YOUR problem, but it will be for the folks in areas that that water is diverted from…). Anthropocentricity re: water never gives credit or a sensible-business outlook on the need to understand/maintain/reinvest in the planetary systems that ultimately provide for our species survival…
(BTW, are there any natural resources in your area that Canadians might put a claim on?).
may we all find a better day.
This has already been outlawed by the Great Lakes Compact.
Climate is changing for sure.Summers will be more hot and dry,winters much more cold.South West turn into Mongolian desert Gohbi by 2030.SE and may be NE will be a good place to live.
Climate has always changed, and it always will. Everything has a cycle, and it has all happened before. The problem is not the cycles, it is the massive over population of the world, and the massive increase in the need for recourses.
It’s BOTH.
But dealing with climate change is a hell of a lot less sticky problem than ZPG.
Let’s take the ducks first, eh?
Have to admit I stayed in Sonoma/Mendocino counties for the good weather, and lack of monetary ambition (not work ethic, there is a difference). But just like where I grew up on the coast, no way I could afford to live there, now. Besides, two of the immediate family are within 3 mi of me.
My friends in Black Creek have some sort of derogatory/sad name for everything south of them…forgot it. When they were trying to get me to move I said “I wanna live where the grapes grow”. He laughed and said, “Just keep sending them up in little bottles”.
But that was my choice, not looking forward to fire season, etc, but ready to go down with the ship here, whatever form it takes.
You and your family are in a good spot to stay a jump ahead of it all, as are many of my friends and families from HS up there.
Good Luck.
NBay-highly appreciate the philosophical observation of ‘…lack of monetary ambition (not work ethic, there is a difference)…’ . Money is very useful stuff, but not every, or even most, of our personal and species’ vexing issues can be ameliorated by money alone. Human input, cooperation, will and effort still appear to be required at this point in our history…
may we all find a better day.
Here is what could happen..
The inflation rate will continue to exceed the short term interest rates set by the Fed. Those in cash losse.
The meager interest rate increases intended to quell inflation, will be mostly for show, BUT enough to weigh on the stock market. Those in the stock market will begin to lose also.
In cash…losing
In stock ….losing
Where’s the exit door to this crazy house the Fed has created? And they did create this mess…making water run up hill, holding the beach ball under water, making lenders slave to the borrower….the past 12 years have been a bizzaro world.
Asset correlation seems very high. No where to hide. An extreme case might help to ‘level the playing field’ as we will all be broke….
In the series “The Titans” JP Morgan was talking to the guy who ran GM, who was complaining he couldn’t sell cars as cheap as Ford. Morgan said, “Everyone who walks out of my bank thinks they got money for free, little do they know they will owe me for the rest of their lives”. GMAC was born.
Gold and silver.
What you are seeing is a convergence of several poor decisions. First was just in time inventory, which does not allow for any fluctuations in supply.
Then you have the consistent juicing of the economy by artificially lowering interest rates and easing credit. Then add to that the completely asinine decision to pay people more to sit on their backsides than they ever made working and you have everything you need to drive inflation into double digit territory. Stupid decisions result in catastrophes. The problem is these stupid decisions are making money for a small minority of people, who happen to be bribing your Congressman and your Senator. The final stupid decisions, are yours, because you keep putting those same Congressmen, and Senators back in power so the can continue to screw you.
JD
You forgot to add, outsourcing high paying manufacturing and critical infrastructure jobs, chip manufacturing, and medical supplies to China and other third world countries.
Add in demographic changes. Increasing aging population. Falling birth rate. Declining 17 to 54 working population, etc..
Add in, let in vast numbers of unskilled, uneducated, no English language, which maybe humanitarian but add essential nothing economically except additional dole to feds expenses.
Add in SAT scores continue to decrease. University of Cal no longer uses achievement, test scores for admission. In Cal now no more advanced math classes in HS. Examples of the dumbing down.
Add in attitude changes in society, why work? Many younger age people just waiting till it all collapses and will cheer.
There is no real growth, only a Potemkin sham village, manipulated by a wizard. DC the modern Oz, with the munchkins cheering. Only a downward spiral, hidden behind a green curtain. Faster people come to recognize and adjust the better. Too old now to expect to see it change for the better, what ever that might be.
Jdog…
well said.
Thank you Jdog!
1) Ultimately, all of “this” is owned by the US Public.
2) Bribing 535 members of Congress isn’t that expensive. When you read about corruption, it’s always astonishing to me how cheap they are.
You can get an investigation dropped for $30K, like when Don gave a “campaign contribution” to the FL AG (some blonde bimbo who probably her own show on Fox by now) and COINCIDENTALLY, she dropped her investigation into Trump “University” fraud immediately.
All of her constituents, who were robbed by this fake “college”….she didn’t give a damn about them. The $25,000,000.00 settlement that was eventually secured paid the victims back about half or less of what was stolen from them.
The moral of the story? Running the fake “college” was a WIN for Covid Don. He made money (even after paying lawyers fees and $25M fine), didn’t go to prison, and can cry to his low info cult members about another “witch-hunt”.
I was Double Major at Trump U: “Got a BA in Grifting and a BS in Lying to Rubes, minored in Vainglorious Narcissism.”
If you put manufacturing optimizations in context, these were thought of as good things because, early on, they allowed us to compete with the Japanese who were taking our ideas and beating us economically with them. Statistical Quality Control, Material Requirements Planning, Just In Time( JIT) and supply chain optimization were logical evolutions (not a point in time decision) enabled by increasing computer power and then the internet, allowing for easier business to business integration. This is the free market in operation, implicitly deciding that lower customer costs trump other concerns and so, … good for society? Maybe not? JIT is fairly mundane, if society ignored the obvious possible bad outcomes of JIT you should really be worried about the absolutely unforeseeable implications of a massive human experiment in progress on society known as Artificial Intelligence. I don’t mean this in the sense of robots taking over the planet, I mean it in the sense of business reshaping society, implicitly by the daily entrepreneurial decisions to use AI in ways that will have bad societal outcomes. AI is computerized fissionable material, it can be a nuclear power plant or a nuclear weapon.
Sounds EXACTLY like a savior’s line…..came from some stable genius, perhaps?
Wolf mentions in the podcast that he’d prefer a zero inflation target versus the Fed’s current 2% target. I couldn’t agree more. Since when does the Fed’s mandate to maintain “stable prices” mean targeting a 2% increase every year. Stable means neither increasing nor decreasing. They should structure their policies to target zero inflation/deflation and let the chips fall where they may.
I heard that as well and was a bit surprised that Wolf said it. I completely disagree. 2% as the Fed target is what prevents simple variation from creating temporary DEFLATION.
And deflation has a number of bad side effects. For instance, most people expect their income to rise steadily… how happy would you be to hear your boss is decreasing your salary by 1% this year because that was the amount of deflation in the past year? If you would be unhappy… imagine the effect on the elderly who saw their Social Security checks go DOWN rather than up.
Or the oil industry… how much profit has been destroyed in the fracking business because the price of oil dropped? It is not that the frackers (and bankers who loan them money for their operations) are stupid. It is that they made business decisions based on an expectation of mild inflation rather than that the King of Saudi Arabia was going to open the spigots and plunge the price of oil. (Granted the oil price is not true “inflation” in that it didn’t happen because of a loss of value of the dollar… but it shows the economic effects of price declines.)
Real estate market… try to get a loan on a house when the comps for the second half of the year are lower than the comps for the first half… or last year. Are prices going down permanently or is this just a blip? Bankers and underwriters are normally cautious enough already. Imagine what that would do to their thinking.
A Fed target of 2 to 4% allows for a basic steady state where rational financial decisions can be made by governments, businesses, and individuals. It has worked so well for so long that as Wolf said the current inflation is the worst we have seen in decades. We have two to three generations of Americans who have never even had to factor inflation into their decision making.
For my children and grandchildren’s sake I hope you’re right. As long as the FED can keep printing and Public and Private debt can keep increasing with no consequence we’re good. I can’t believe the world works like this but if proven wrong I’ll be happy.
In any robust economy, price indexes for some products and services will rise over time, while others will fall…that can’t be avoided, short of price controls (which are not a good idea). Targeting a 0% inflation rate versus 2% doesn’t change that dynamic. You mention Social Security. This past year’s inflation adjustment was 1.3%, some of which was eaten up by an increase in Medicare Part D premiums. That’s all in the face of high single digit inflation rates for the big four…housing, autos, education and healthcare. And it’s further in the face of knocking the return on retirees’ bank savings to near zero. So retirees on relatively fixed incomes are getting the short end of both sides of the stick. Targeting 2% versus 0% inflation has done nothing to alleviate that situation.
*Part B premiums
SpencerG,
First things first: The 2% inflation target that the Fed now has is new. It was formalized in 2012. There is nothing magic about it.
Both inflation and deflation have “a number of bad side effects.” Not just deflation. It just depends on whose side you’re on. Even small amounts inflation have long-term devastating side effects for many people. It’s just that we’ve gotten used to those side effects and the misery they cause.
True price stability means periods of mild inflation are followed by periods of mild deflation, and over time it averages out to where the purchasing power of the currency remains roughly stable.
This keeps everyone a little more honest. Two examples where it matters a lot:
1. You get a raise if you are more productive, not because the purchasing power of your labor dollar declined, which makes you think you got a raise when in fact you didn’t, and the additional money might not even keep up with price increases – and this is what has been happening at the lower levels of employment.
2. Debtors can’t rely on inflation to make their debt payments easier over time, but will have to rely on the economic benefits of their investments.
Outta the park, again, Wolf! Many, many thanks…
may we all find a better day.
Imagine for a moment that instead of politicians and lawyers and economists running the United States of America, a bunch of engineers were placed in charge of the money supply.
The engineers would know almost instinctively that the cost of producing most goods and services decreases every year as technological innovation and creative entrepreneurship create more stuff and better ways of doing things every year.
Economists try to describe this phenomena as an “increase in per capita productivity”. In engineering terms, there’s Moore’s Law, which states that the number of transistors used for digital electronic chips doubles about every 18 months, or about a 40% annual increase.
That’s an extreme case, but on average the overall economy can ideally manage a low single-digit increase in production every year on top of any increase from population growth. This used to be so normal that it was just assumed that it would continue forever.
If this is accounted for, then an absolutely stable and unchanging supply of money would cause price deflation, as there would be more goods and services per person per year. This was more or less what happened in the US during the last few decades of the 19th century when there was still a true gold standard, although paying off the debt from the Civil War distorted things a bit.
To keep prices stable – a 0% average rate of inflation or deflation – there would need to be an increase in the money supply every year equal to the increase in production per person, with all other things being held equal in this thought experiment.
In practice, there would be some statistical noise from the usual chaos of life on Earth, so some years would have a bit of overall inflation and some a bit of overall deflation, even if every effort was made to keep the money supply matched exactly with per-person productivity growth.
This means that in real life, the Fed is not only pushing for 2% inflation in nominal terms, they also want to cancel out any growth in per person productivity. Their real goal, if properly stated, is to increase the money supply by about the rate of productivity growth PLUS 2% per year.
That’s actually even more sneaky than most economists are willing to acknowledge – the bankers want to effectively print enough money to capture all the productivity growth, plus 2% of the output of the economy, every year, in perpetuity.
The irony is that they are killing the golden goose, as per capita productivity growth seems to be flatlining at close to 0% , precisely because the bankers are squeezing too many golden eggs out of an ever-skinnier goose.
2% over time can become an astronomical increase.
Isn’t there something about the Widow’s Mite now being worth more than all the money in the world if she had deposited at 2% compound?
I
Think of it as doubling roughly every 50yrs and then you get the scale of it better I think.
You’re not accounting for advances in automation and AI. Humans aren’t solely responsible for growth any more.
humans will be held accountable for their irresponsible growth one way or another.
Growth for growth’s sake is the ideology of a cancer cell.
Inflation targeting is done with the best interests of the banks in mind.
0% inflation would be the best scenario for the people, because their pay would maintain its value, and they would have more incentive to save and less incentive to go in debt.
Banks on the other hand make money loaning money. They prefer an environment where the consumer is pressured to go into debt and borrow money, as the more debt, the more interest being paid to them.
While low inflation works in their favor, high inflation creates a huge problem for banks as higher inflation rates compound, and make the money they are repaid worth much less that the money they initially loaned.
The likes of Jim Rickard and Steven Van Metre is stating an interesting case on deflation rather than inflation. The M2 velocity and its effect on how this can turn things to deflation, is one that not too many are advocating. Wonder what’s your take on their view Wolf?
There have only been a few quarters of consumer price deflation in my life. The rest was consumer price inflation, some of it in the double digits.
I have no idea how people think that this sort of fiscal stimulus and monetary stimulus will produce consumer price deflation.
M2 velocity has become a completely meaningless data set. No one pays attention to it anymore. It’s just useless. The financial world has changed, and the metric has not kept up with it.
Krugman now says the inflation panic died. Both inflation stories are wrong, and both rely on the Feds mistake. QE is not going anywhere. So far the markets reaction post FOMC is backing his view up.
Krugman is a political hack masquerading as an economist.
Deflation doesn’t happen often, but once it gets started it’s very damaging and hard to stop. A depression is simply runaway deflation.
The reason we don’t have deflation now is because the rate of money creation is greater than the rate of deflation caused by productivity increases or globalized access to cheap labor.
So to say “deflation hasn’t happened” is an incomplete answer. A more complete answer might be “there was more inflation than deflation” over X period of time”. More money was created than was destroyed.
And if the banking system / Fed / Gov’t stops creating these astronomical amounts of money, we will indeed be seeing deflation.
Preventing this deflation is exactly _why_ we are printing so much new money.
While M2 velocity is not a great index of the tension between inflation and deflation, there certainly is a tension, and it is expressed as the change in buying power of the dollar.
During the recent Covid disruptions, money supply skyrocketed while production dropped. Hence inflation – it smacked us right in the face.
There are always massive deflationary forces at work. Automation and globalization are two such forces. If, somehow – and I don’t predict this any time soon – the firehose of new money creation is interrupted, there will be a third, much more sizeable deflationary force – and that’ll be the destruction of debt cascading defaults (money destruction) across the financial system.
That’s when the next depression will start. And nobody knows when that’ll be.
In the meantime, it’ll be continued money creation, interest rate repression, etc.
“I have no idea how people think that this sort of fiscal stimulus and monetary stimulus will produce consumer price deflation.”
Because excess capacity leads to gluts which leads to massive price declines. Not saying that’s my position, just sayin’.
It is not the fiscal or monetary stimulus that will cause deflation. It is the recession that will result from high inflation, that will cause deflation.
When you have to shell out $200 to fill your gas tank to commute to work there is not much left over for discretionary spending.
As it sits now, it is $175 to fill the tank on my truck if I am on empty. It’s a 35 gallon tank.
Probably a hybrid, though, right?
Because the household budget isn’t increasing (or enough) so as certain critical commodities (ie. property taxes, food, fuel, etc) increase in price there is less room in the budget for other items causing a collapse in other asset prices such as RE and other consumables. The result being a deflation followed at some point by inflation (maybe with an “H”?). Wolf – if this isn’t correct where does it go wrong?
I don’t have a view one way or the other but, so far as I can understand it, I think the deflationists are mainly arguing that massive stimulation like we’ve had cannot be continued forever and, when it stops, demand will tank and there will be no powder left to avoid deflation.
This is all based on the argument that borrowing cannot increase for ever which has been covered many times on The Street and I think has been disproved by history. A trillion of debt couldn’t even be imagined 20yrs ago and yet we have more than that. Imagine a Carzillion in another 20yrs and we might have the picture. We can only wait and see.
Phoenix,
I listen to Jim R., Steven M., Lacy Hunt, Gary Shilling all saying long term treasury still hasn’t bottom due to too much debt.
Then I listen to Steven Hanke say he is certain inflation is going to be about 6% two years out.
I am trying to be a survivor by having a short duration portfolio to try to survive either scenario even though I could slowly bleed out if status quo sticks around 25 years.
I listen to Lacy Hunt as well. He tends to focus on the deflationary forces in the economy while dismissing the will of central banks to create monetary inflation. His deflationary outlook make sense in a world where the Fed actually fights inflation.
I tend to agree more with Peter Schiff, who is not as erudite but much more practical. He says the Fed cannot raise rates because it would lead to a massive recession. Therefore, the Fed will continue pretending there is no inflation (or calling it transitory), printing money, etc., until there is a huge financial crisis that overpowers the Fed.
I think all the evidence we’ve seen the past 20 years favors Schiff’s outlook. The Fed will keep pumping asset prices until it can’t.
That said, both outlooks look reasonable at this point in time. You have to plan for both, which requires diversification. The level of uncertainty and instability the Fed has created is astounding.
Always nice to put your voice back to the words you type. So the glass mugs, paint and boxes are elusive to even WolfStreet.com! Just in time manufacturing will return as you predicted in due time. But just maybe another positive coming out of this globalization might be a replacement like AI-In-Time.
Cheers to successfully getting your message out to more people. Hopefully we get some new voices to the conversations
– This video makes a good case why the are shortages. But as – bit by bit – the bottlenecks are removed those shortages will fade away. Yes, the inflationary pressures are “transitory”. And when prices are too high consumers simply will stop spending. The drop of 3% in Retail sales proves that.
– When I read the comments above then it convinces me more and more than Deflation will be rearing its ugly head much much sooner than many people anticipate.
1) The “Fatherhood Deflation” started in the sixties. Sixty from the sixties.
2) Most babies don’t have a father. Our babies are mugged !!
3) There is growing inflation of stepfathers.
4) There is a chronic shortage of real fathers. The gap between
real fathers and inflated fathers is growing.
5) The most dominant inflated father is the “Father Gov”. It’s in deep bubble territory, though it’s hard to recognize a bubble.
6) Happy father’s day “Father Gov”. The shingle moms will send u a gift on election day.
7) Happy father’s day to every father.
8) Preempt the “Father Gov” bubble, before the bust.
Somewhere in there we stopped having mothers and fathers and now we just have parents. I feel blessed that I grew up in that time and I had a chance to be a son.
There is no historical evidence that a bit of deflation in consumer prices leads to negative economic outcomes. The BIS published some interesting research about that some years ago where they looked at many deflationary episodes in history in many countries.
The myth that CPI deflation is bad stems mainly from the experience of The Great Depression. People get it ass backwards: when asset bubbles burst and the banking system goes bust, CPI deflation can be a symptom of that. But is is not the cause of the crisis.
The take away from The Great Depression is that central banks should prevent asset bubbles from developing, because when they burst the damage is much greater than any (perceived) advantage on the way up.
Our problem might be as simple as a system depending on continuous loan growth doesn’t work when demography turns against it. In other words, baby boomers have ended their debt expansion phase and are destroying money as loans are paid off.
The other ting is that many people have just stopped mindless buying because they don’t want or need anymore stuff. My kids came for an early fathers day weekend. We were sitting out on the deck talking about this stuff for awhile. My 41 year old daughter said even ‘they’ were starting to get rid of stuff. It isn’t just boomers, and I’m a mid boomer smack dab in the middle. I have asked myself for years do I need before I buy?
I was going to replace a bunch of tools with high end stuff. Nope, won’t bother…don’t need it. Add in some stagnant wages and no returns on anything, and people will start limiting what they buy before they even have to.
I just mended a small hole in my favorite house dress. I could have thrown it out, but I paid $40 for it six months ago and a new one now costs $100. I’ll wear it until I can replace it, hopefully the 50% off end of summer sale.
I’m finding that when low end tools break, Except for drills, it’s usually some stupid little $3 part or switch rather than the motor. Just rerouted water lines on a really crappy cheap tile saw because the tiny water splitter/feeder broke. Will be finding a way to align the tray feeder next, even if I have to rebuild it. The motor has cut through quite a bit of thick granite and is still going strong.
Of course I’m not a contractor..
And now I will have to figure out fixing the start button on a digital faced =air conditioner. Unit works fine- IF you can turn the thing on..
The problem is, they really are not paying off loans, and are still deep in debt.
Boomer average debt:
Total credit card debt: This generation carries an average of $7,550 in total credit card debt per person, the second-highest amount among five generations, according to Shift Processing.
Retail credit card debt: On average, their retail credit card debt is $2,100, according to Experian’s 2020 State of Credit report.
Mortgage debt: Baby boomers hold an average mortgage debt of $159,517, according to Experian.
Total non-mortgage loan debt: They owe an average non-mortgage debt of $25,812, according to Experian.
Student loan debt: The federal student loan average balance per borrower for people 62 and older (so baby boomers and older) is $37,739.13, according to the 2020 U.S. Department of Education’s Federal Student Aid report. Forbes reports that this is likely due to Parents PLUS loans secured for their children.
Auto loan debt: Baby boomers who carry an auto loan balance owe an average of $16,850, according to LendingTree’s Q3 data for 2020.
The Baby Boomer cohort started turning 65 years old at a rate of 10k people per day in 2011 (1946 + 65 years), and will continue at this daily rate through 2029. Studies show at least a quarter of these people are ill-equipped financially to retire without a major downgrade to their standard-of-living. Some of these people will continue to work, while others will retire to a downgraded standard-of-living. That downgraded standard-of-living will impact not only the retirees themselves, but it will have knock-on effects on our entire society. It’s just another one of the notorious cans that continue to be kicked down the road…until the can gets too big to kick. And all of the extreme efforts of the current Fed to deliberately stoke price inflation is not helping the situation.
Baby boomers are actually 2 generations financially. Marketing professionals divide them into Baby Boomers and the last part into the “Jones” generation. The Jones generation does not hold nearly as much as the older BBs. Each is marketed to differently.
I believe Mises covered that rather nicely.
1) UPS dots : the horizontal distance between Apr 2018 and
Apr 2021 is about equal to vertical rise to 2021 high.
2) UPS is down for month and a half, on it’s way to close open gaps.
3) Higher wages and energy cost pricked UPS bubble.
4) UPS was infected by the AMZN disease.
5) CCL is sailing on rolling waves, reached a Lazer coming down
from Jan 2018 high.
6) The cruz bubble was deflated 4 years ago, before the MAX’s bust .
7) CCL might converted their Micky’s cruise ships to fancy prisons, because Guantanamo is too small.
A most interesting thread. Mostly fighting over the deck chairs on the Titanic with Captain Powell at the helm. Some of us were lucky enough to have families with stories about living through the Great Depression. How they would laugh at all of this. We live in a era of techno affluence that is sure to come crashing down one way or another. Grandfathers biggest concern was his families next meal, everything else was superfluous. Good luck to us all. If Captain Powell is lucky he can keep her afloat until his deployment ends in a few months.
Many of those Depression folks got to enjoy the go-go years of the Fifties and Sixties, though. And housing was far more affordable. The Fed’s been a complete disaster over the past 25 years, ever since the Nonsense to Save the World and Greenspan’s abolishment of the business cycle. The disaster is political, entire generations kept away from stable housing and therefore any stake in responsible capitalism. Congress sat on their thumbs for the entire journey.
The Fifties and the first half of the Sixties were the peak of America, which had gotten rich with WWII and the rebuilding of Europe and Asia afterwards. Cash flowed back to the US. Once Japan and Germany rebuilt their manufacturing infrastructure, they started selling cars, electronics, and machinery to Americans, and the cash flow reversed. Since then the money has flown out of America.
roddy6667- yes.
The silly academics and their minions in the government (all our betters!!), have been trying to fit their models the whole time.
It’s amazing how bad they really are at economics – which is not an easy “discipline”.
Many think that the data prior to 1945 are useless. Long waves of inflation and other trends last many decades. They are still trying to figure out why interest rates went up after WWII, and then started down in the ’80’s.
All the globalizing, monetary policy, MMT, etc., are attempts at over-simplifying economic activity.
The academic economists think their models are useful everywhere all the time. Fundamentals change and the no one model can respond to all those changes- so far.
“Economics is a lot more complex than it seems for academics sitting in their chairs with their toy models.”-David J. Merkel
“Congress sat on their thumbs for the entire journey.”
Yeah, because an apathetic and ignorant US public made horrible decisions in choosing elected officials.
I guess when your house burns down and you realize you hired the Village Idiot to re-wire the house, it’s a real “A-Ha” moment.
Unless you’re too dumb to realize it was your fault.
Taking responsibility for one’s own actions is not a widely occurring phenomenon in our culture.
It’s not Congress or the Fed who is at fault: It’s US.
As this empire crumbles, the blame game, grifting and lies will continue.
Congress has the obligation to stop the Fed when it does not deal with the instructions, agreements, mandates that allow its existence.
But Congress loved the free money……here a Trillion there a Trillion…..
AND THAT IS THE GREAT FLAW in our system. Those who are supposed to care instead enjoy the non compliance of the Fed.
Because there are so many good options to choose from when the elections are held…Bad people rule for a reason — Democracy encourages the worst to rise to the top…every once in awhile you get a principled person like Ron Paul, but they are the extreme exception…
Realize, Government is by definition an inherently inefficient, wasteful, and coercive territorial monopolist of ultimate decisionmaking & violence that is controlled by Globalist Kleptocrats that use the coercive power of gov to grant themselves subsidies & privileges. There is NO ONE to go to for help – Judges are part of the monopoly and part of the problem! There is no one for “US” to go to for help, and no good options when you are given a choice…
Bead,
Back in the 1980’s I worked for guys that had lost their shirts in the stock market of the 60’s and 70’s. Some due to a market downturn and some due to incredible frauds that occurred during the period.
Yes, housing was cheaper back then, but housing and the stock market weren’t being subsidized, like they are now. I suspect if they stop subsidizing housing and the stock market, we will have cheaper housing once again.
The podcast discussion went into temporary vs “permanent” inflation. Without venturing too much out into the weeds I’d like to remind everyone that nothing is permanent.
I’ve been saying all along that people confuse monetary/fiscal (or government-induced) inflation and supply/demand inflation. Beer mugs and lumber will sort themselves out. Monetary and fiscal idiocy will not. If you keep mixing the two phenomena together as “inflation” you will never find solutions because the causes are different.
Timber costs a lot because of demand-pull. Free markets can heal this. Beer mugs have not risen in price but if shortages cause acquisition cost increases this could be passed along to the consumer. Wolf is a charitable man but Wolfstreet.com is a business. Note that this is up to Wolf. It requires no government intervention.
Using beer mugs as an example let’s look at how government policy could make mugs even more scarce. Suppose Wolf gets some mugs (and cardboard boxes). Due to the increased cost of those materials mugs are selling for $100. People are screaming for “someone” to do something. They can’t afford to drink their beer. The government enacts price controls on Wolfstreet mugs, limiting them to $50. Wolf’s cost is $75. He stops selling mugs. Now the only way to get a mug is a used one on eBay. They’re going for $100 but the government quickly throws those people in jail for violation of the price controls. Meanwhile, Wolf accepts an offer to sell his remaining mugs privately to someone for $75. That someone turns them around on the black market for $150.
Did that government policy help? That’s Venezuela since Hugo Chavez.
The dollar loses general purchasing power because someone pulling the levers allows circulating money supply to grow faster than productivity in goods and services. Free markets can’t heal this.
The current price inflation is “lumpy” because much of it is not due to fiscal/monetary policy. Some is. I consider stimulus checks to be vastly more dangerous than the Fed. The Fed didn’t cause generalized price inflation. It tried desperately but all that monetization of trillions of dollars barely moved the needle. That’s because the Fed’s monetization mechanism stuffs cash into reserves. It’s like printing money and stashing it in the closet. QE lowered interest rates. The decrease in borrowing costs led to money creation by borrowing but that money went into certain areas of the economy but not others. That doesn’t look like a generalized process.
Lately we’ve seen consumer price inflation. IMHO that’s due to both supply disruption (a non-financial process) and fiscal action whereby Congress really did do a helicopter drop. That is the stuff of Zimbabwe and Weimar, now currently being touted as the great new economic philosophy known as the Magic Money Tree, or MMT. Even worse, MMT puts control of the money supply into the hands of politicians. They will decide when to expand or contract liquidity. So before you burn down the Fed consider its replacement, unless you think the Soviet Union’s 5 year plans and Mao’s Great Leap Forward are blueprints for successs.
SocialJim took a beating recently for suggesting that what’s going on in assets isn’t inflation . In the strict sense of the word he might be right. Monetary inflation is a tide that raises all boats, but asset inflation was more like a bulge in one sector of the economy. Stocks may have gone way up in 2020 but not eggs and milk. Gasoline has gone way up but from depressed quarantine prices.
There was also mention of durable goods vs services. I mentioned an anomaly in the recent economic data a while back: durable goods shot way up from the depressed CPI pandemic levels and is now merely back to its long-term trend line, whereas services, which usually comprise 70% of the economy, were blah. I think durables will come down if the government will stop interfering in the economy with stimulus checks, which are also causing a labor shortage despite huge numbers of job openings. Recently we were worried about AI and robotics destroying jobs. Now we’re upset that people aren’t returning to work. Make up your minds.
Paradoxically this could kill services if restaurants can’t find wait staff. Despite our aggressive re-opening in Texas I’m seeing restaurants fail due to increased costs of inputs (food scarcity, demand-pull) and labor (a fiscal, therefore government-induced) problem.
Given the high cost of food and the lousy service rendered by over-extended and/or under-trained staff, the fun of dining out has dropped off significantly for me. I’m just not going out as much. Small portions served poorly is not fun.
Renting vs buying a place to live. Some people here have lauded the freedom of renting. There is also the frustration of loss of control. I have been both a residential and commercial tenant. Landlords can be a nightmare. When your hot water goes out you just get it fixed if you own the house. If you rent, you are at the mercy of the landlord, who doesn’t consider your need for hot water to be a pressing problem. Landlords turn a profit off of you. That’s your price for the “freedom”. When my partners and I owned our office building we charged ourselves fair market rent for our offices. We got a lot of that rent back as partnership distributions.
That’s why I own not only my house but when working I co-owned my office building with 3 others. Rent if you want to be at someone else’s mercy and pay a premium for your “freedom”. Buy if you want control.
But there’s a new element in rent vs own now. Well, not new, but expanding rapidly. That’s a lifestyle where you know you’re going to be on the move a lot. Entire developments are being built for houses to be rented. We have a gig economy, work from home, and delayed family formation. I have two Millennial kids and I couldn’t even begin to see the time horizon for either to settle down and buy a house. Just because of career trajectories not only will my older daughter not be ready to buy a house, but she and her husband will be living in different cities for at least two years. He’s finishing his postdoc and she’s got an offer for 2 years at the NBER. He’s in Berkeley. She’s headed for Boston. No house purchases for them anytime soon.
Apparently there are a lot of people deferring buying right now – enough to attract billions in investment. We’ve seen this movie before when individual houses were being bought up after the mortgage debacle. This is a whole new level. Those who want to see Millennials kicked in the teeth might have to wait.
Unless and until we can parse out what’s non-financial price inflation vs financial monetary/fiscal inflation policy-making is just so much mental masturbation.
Wishing a Happy Father’s Day to those of you who admit paternity and pay your child support.
That was an awesome post that kept me reading. Your points are reasonable, affable and consumable. Happy Father’s Day to Michael Gorback
I believe Friedman got it right and parsed inflation into its essence without any nuances or problematic qualifications:
“Inflation is always and everywhere a monetary phenomenon .”
He was known for many witty economic quotes. I believe it was Friedman who said that there is nothing so permanent as a temporary government program.
“nothing is permanent”
Except the decline in purchasing power of fiat like the USD… Sound money & free markets do not exist (ergo, capitalism does not exist).
Fiscal spending of what is by definition an inherently inefficient, wasteful & coercive monopolist will
check out Lacy Hunt’s recent talk or quarterly letter…
Housing: supply had been declining before the pandemic. The pandemic provided people enough time to want a new home, shop for one, and with extra money from not traveling, and stock market, buy one. First half of 2021 has been pure greed in house buying, again I credit stock market gains. The logging and lumber industry made an economic decision—the pandemic would increase unemployment and housing would be flat to down—sound economics, but failed to consider a consumer who finally had time and extra money for first time in 10 years.
The same consumer is now dining out more over grocery spending, back to vacations, and lumber and copper are falling rapidly. Give industries time to catch up, the auto industry has been having crazy inventory swings for decades, and other industries will do same this time.
In fairness, the industries didn’t think Congress would dump $6 trillion into the economy to replace $1.5 trillion in lost economic activity.
Industry asked for the money.
Not sure I agree. I believe the .gov decided we needed to put a ton of money to work to stabilize and bridge the gap. They very much on purpose spent more than would be required. This gave them an opportunity to have a new play in the book of solutions for world problems. Sure mistakes were made. But how often does one this gargantuan get an opportunity to experiment with world financial affairs other than world wars.
Answer: almost never as you see we based all BIG models on actual world wars and the conflict in Vietnam/Korea.
This inflation is either of the Argentinian mode or is having an initial spike of 20-40% and then will crash with over supply due to the second coming of Covid-19 (do note the MSM was referring to this …. as going to be a Spanish Flu)..
Sociopaths and Psychopaths like to ‘show their work’ …
For centuries up until the 18th society consisted of the rich and powerful, and peasants, no in between, no middle class, the rich and powerful imposed their will on the peasants by various means including force.
After centuries, if not thousands of years, the pendulum swung in favour of the peasants and some of them clawed their way to middle class. Now the pendulum is swinging back to what was for a very long time the norm, a few rich and powerful and peasants, get used ti it your children WILL be peasants, stop whining, it is just the way it is and for most of human history the norm.
Yawn
Another conservative “realist”.
Official figures from the Fed, read it and weep peasants.
In other words, inflation affects Americans disproportionately and only contributes to an already unsupportable wealth gap.
Unsettlingly, the top 10% own roughly 85% of all wealth, while the top 1% own more than half of the financial wealth in the U.S.
I cant copy and paste the official fed chart but you can go look it it up.
Let them eat inflaton…j Powell
The big fight will be when the 1% attempt to take that last half and crush the professional classes just underneath them on the ladder.
Maintaining a private army will be one of the number one priorities for each family in the 1%, as society sinks back into a dystopian high tech feudalism.
If they are smart they will slowly squeeze the 10% while keeping them employed. They’ll need a Mandarin class to provide a minimal level of service.
Quis custodiet ipsos custodes?
I’m no student of history, but I’ve heard offhand references to the effect that ‘revolution ‘ never comes from the lower classes, the “proletariat “, but from the 10%, the PMC or bourgeoisie, whichever— who once thought themselves seated at the table only to see their lunch being eaten right in front of them.
You’re right about the slow boil but I wonder if recent events haven’t turned the heat up too fast…
Just read an article on Disney’s “aggressive” new pricing strategy for its themeparks. We are talking about 100 dollars sandwiches for example. It’s interesting to know that people who can afford them the least (people earning 75K and below) are also the ones who are most excited about paying up.
That’s why there’s lots of poor people in this country.
Truth in that… Not all, but MANY poor people spend a lot of time and money planning ways to make themselves poor… Imagine if they put out the same effort making themselves a little richer…
The “greatest generation” or the WW2 generation accumulated the greatest amount of wealth of any generation ever. They did it partly because the lived in a time of prosperity, but I would argue that prosperity has been higher in the past 20 years.
The biggest difference between then and now, was that 0% inflation and living through the depression encouraged their savings habits.
As the WW@ generation died off, their children inherited the greatest amount of wealth of any generation ever, and yet they have failed to grow that wealth, or in most cases, even maintain it.
Instead, they drive around in 6 figure RV’s with bumper stickers bragging they are spending their kids inheritance…
A few poor families I know live in multi-generational households. The grandparents + one income cover all the bills, the next income is used to give the kids an upper middle class upbringing.
This includes the trendiest clothes, music – dance -summer camps – math tutors – and trips to Disney Land. How the current 10 yr olds will fair in the future is anyone’s guess.
You can’t judge someone unless you are them. You may get to own a a car or a home one day. For MANY, the height of their lives is going to disneyland. They will never make themselves ‘richer’, they can’t. unpossible. Disney is not why there are poor folks.
I read a book about dynasties a long time ago, in which it discussed the difference between the philosophy of dynasty families, and how their children are taught from an earl age that the family money when passed on does not become their money, they are only the stewards of the money. Their responsibility is to grow the money and to pass it on to the next generation.
Kind of seemed like common sense to me. I could not figure out why everyone did not think that way.
Owning stuff doesn’t inherently make life better. You just own crap that may be worth something one day or sellable in a pinch, that’s it. Perhaps one might envy the Disneyland family, who rents by will or limited means, can enjoy something for like $300 and be content for the year or a few years?
That’s closer to true happiness than owning stuff.
The $100 sandwich feeds 6-8 people. Calm down.
I never said it’s for one or two people. Not even Michellin starred restaurants would charge 100 dollars for a sandwich meant for two people.
The thing is, there’s nothing special about this sandwich except for the size (Disney admitted as much). I mean you can get an extra large pizza for 8 people that would cost a lot less.
Quote from Marketwatch: “According to Disney, it’s not what’s in the sandwich that makes it cost so much, it’s because it’s meant to serve six to eight people.”
Still too much….???????
Inflation is going to go ballistic.
On the truck driver shortage, some Pueblo, CO gas stations have no gasoline because so many tanker truck drivers went to work for Amazon.
I want to buy a great new 3D printer from one of the best known manufacturers, a model “released” a few months ago, to replace my current [personal, not business] printer. It has been “out of stock” everywhere including at the manufacturers direct purchase site from day one and I suspect that’s due to the chip shortage. It’s the first time I have ever seen that for one of their products.
My distance second choice printer has “a limited production run of 3000,” the first time I have ever seen that from any mainstream electronic gizmo manufacturer. And, no, it’s not some kind of “special edition.”
NASDAQ: Intel reiterates chip supply shortages could last several years – 30 May 2021
American Petroleum Institute: Is The World About To See An Oil Shortage? – 24 Feb 2021
“Based on projected rising demand, the natural production decline from existing wells and decreases in drilling activity and industry investment – especially in the U.S. – the world’s oil needs could outpace production in 2022. An undersupply potentially could put upward pressure on costs, impacting consumers, manufacturers and, generally, any process that utilizes oil.”
American Shipper: No relief – Global container shortage likely to last until 2022 – 30 Apr 2021
Port Congestion Continues to Throttle the World’s Supply Chains – 12 Apr 2021
Journal of Commerce: Truck Driver Shortage – 20 Jun 2021
Yeah I am seeing sold out notices on a lot of web sites I visit. Even really basic stuff for Ham Radio is out of stock and can’t be supplied. We are talking basic components here like wire, toroids, enclosures, patch cables etc. It’s also interesting to walk through the stores and see empty shelves where there were never shortages before.
I am kinda thinking that supply chain disruptions are the new normal, and we’ll never return to just having everything be available all the time from this point forward.
Certainly happened as a result of the oil shortages and price increases in the late ’70s and 80s bcpdx:
Obscure glass types – for baths, etc., available in the SF bay area went from about 50 to 5, with ”special orders” of large quantity available for another 5.
Other, similar construction and remodel stuff/materials disappeared around the same time, never came back either.
Wine somewhat similar as in formerly available decent $1/gallon — in your bottle/jug- at some wineries of Napa area, gone for eva as the price of energy went ballistic…
I think the proximate cause of any gasoline shortage in CO may be a bit more complex than just a bunch of drivers leaving to work for Amazon.
As a life long trucker (45+ yrs.) who worked as a fuel hauler for about a year until I was laid off due to COVID I can say with great certainty that any decent fuel driver who changed their employment to Amazon or almost anything else will be right back hauling fuel at the first opportunity. Fuel haulers are very near the apex of the truck driving hierarchy and their compensation reflects that.
Full scale fuel haulers in the Bay Area are at about $40.00 per hour and will see plenty of overtime with a 50-60 hour work week the norm. Most companies also offer some sort of safety/performance incentive which for me was another $3-400 per month.
To the best of my knowledge Amazon doesn’t have any company trucks or drivers and they are notoriously cheap paying their o/o’s and outside carriers.
I’ll wager a dollar to a donut that there’s more to the story.
I agree. The point is that it’s an indirect (and fairly bizarre) confirmation of a driver shortage.
And as far as the wisdom of training to become a driver to fill the increased demand which some may be considering, one risks the same issue faced by manufacturers: if moves are made to increase manufacturing capabilities during a demand surge due to pent up demand caused by a year long world shut down, that increased capability will most likely lay idle when the surge is over.
On the other hand, maybe it would be wise to train to become a driver, especially a tanker truck driver:
The National Tank Truck Carriers, the industry’s trade group, reported back in April between 20% and 25% of tank trucks were parked due to a lack of qualified drivers. Compared to only 10% of trucks being parked at the same time in 2019.
“We’ve been dealing with a driver shortage for a while, but the pandemic took that issue and metastasized it,” said Ryan Streblow, the executive vice president of the NTTC. “It certainly has grown exponentially.”
Holly McCormick, vice president in charge of driver recruitment and retention at Groendyke Transport, said some aging drivers who were working pre-pandemic chose to retire instead of returning to work.
According to NTTC, the pandemic also shut down many driver schools early, hindering new drivers from becoming certified. Driving a tanker truck requires special certification and even weeks of training after being hired.
In Iran, (the enemy of the USA and a third world toilet), currently suffering what is very close to hyperinflation, second hand vehicles actually appreciate in price, far from being a depreciating asset they are a savings vehicle, does that sound familiar to anyone in the greatest country in the world?, did i not read that second hand vehicles in the USA are increasing in price?, hmnnn I wonder what it means when it is happening in Iran and the USA.
Just in case you weren’t kidding, may I remind you that Iran isn’t the enemy of the U.S. people. It is the declared and manufactured enemy of the U.S. Government.
As we have learned so many times, and with such pain…our government doesn’t always do what’s in the citizenry’s best interests.
Iran is also a highly cultivated civilization many centuries older than ours is.
Remember to ask yourself this question: “who decides who our enemies are, and why?”
Iran is a highly cultivated and beautiful country with peaceful people. It’s government is a bunch of criminal Islamist thugs.
We had two Iranian cousins on our VB team for a couple years. Nice guys and really good players. Guess the sport is played a lot there.
1) All commercial banks deposits are going ballistic, taking off vertically to :
$17T, more than twice Fed’s total assets.
2) Total loans : deposits = 0.60, the lowest ratio in hundred years.
3) If inflation was real, why put money in the banks. And why the 30Y bond dropped from : 2.45% to 2.01% within three months.
4) Banks constrict lending because they fear defaults.
5) The zero 3M rate started in the 1930’s, stayed flat for 30 years,
until the 50’s, before rising in the 70’s and the 80’s.
6) It took 60 years to create a bubble.
7) We are 30 years beyond peak, hugging zero for seven years, trying, pumping up & down for 7 years, since 2015, before a round trip was completed to zero.
8) Inflation : not according to the weekly DOW & SPX MCD & PMO.
9) The gov borrowing cornered, choked the market.
10) Most co share holders equities : total assets and retained earnings
are in the danger zone.
11) It’s not fair, but private co cannot compete with the gov piling debt. When they reach their stall altitude they spin out of control and crash.
YEAH!
Maybe NO!
Geez. It’s a jungle out there. Who wodda thunk.
I have Wolf coffee* mugs for sale at $1000 each. Stockup.
* Wolf calls them beer mugs but that’s exaggerated advertising. You want a beer mug i have a few Mas from Octoberfest.
Micheal Engel, there is a big difference compared to the 1930’s to 1950’s. The US is now a debtor nation before it was a creditor, saver nation. The US debt is growing way faster than inflation, population any measure you want to use. Also, the appeal for the US dollar as a strong reserve currency is losing every year and getting close to 60% usage worldwide. Once it hits 50% and below then that will be when things are going to get much worse.