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Wow, this really blew my mind. The divergence is striking. Even without words, the article really explains the contemporary social situation in the US. It makes

Wow, this really blew my mind. The divergence is striking. Even without words, the article really explains the contemporary social situation in the US. It makes me wonder if remote-work, high COL in tech hubs, higher-ed cost exhaustion, tech burn-out, and the next recession will reconfigure things. Like the article states, the amount of unbalance here can't be sustainable though "the market can remain irrational longer than you can remain solvent" kind of idea should be kept front and center in this discussion. I am worried a massive wealth transfer coordinated by the government (e.g., single payer healthcare, UBI, basic housing guarantee, free college, etc.) will entrench this divergence. I wish we had let the last recession ('08) actual happen instead of cheap money for a decade allowing us to kick the can down the road. Intervention in the capital markets a la the past decade probably amplified this phenomenon by pulling money from productive, structural capacity increases instead of to loss-leading Unicorns that wouldn't work in an economic system that accurately priced risk (i.e., higher interest rates). A company like Uber, though amazing to me and I use all the time, could only exist with cheap money for a decade. The idea of building a company by losing money for 10 years in order to build your client base is impossible if rates are high. That capital would have looked for more "real" investments that probably would have valued what these areas that lost GDP over the past decade could have provided.

rayiner 7y ago
> what these areas that lost GDP over the past decade could have provided. The data isn’t measuring areas that most GDP over the past decade. It’s measuring the average GDP per capita of areas that voted Democrat/Republican in 2008 and 2016, which is a different set of areas. What it’s showing is the economic sorting that happened in the 2016 election, with higher income suburban areas voting more consistently Democrat, with lower income rural areas voting more consistently Republican. That doesn’t say anything about the incomes of any given place, since the set of places wasn’t held constant.
- hn_throwaway_99 7y ago
  And I think more important than the places not being held constant, the people weren't held constant either. That is, people move. Many of these more rural areas are basically seeing a massive exodus of young people who are moving to cities and other places with more opportunity. The people staying behind are then those who are older or those who find it difficult to move, or those who don't have the ambition to move in the first place. So the self-sorting then only accelerates.
peteretep 7y ago
> I am worried a massive wealth transfer ... e.g., single payer healthcare Only in America is adequate health provision considered "massive wealth transfer"
- rayiner 7y ago
  It is a massive wealth transfer. It may be a good idea, too. Currently 2/3 of non-elderly people have insurance through their employers. If we need to extend coverage to those who don’t have it, those 2/3 will have to pay for the other 1/3. If we are proposing a massive income transfer of $3 trillion a year for the good of the country, we have to be honest about it.
  - Craighead 7y ago
    You are being dishonest. Please do not speak about being honest.
    - rayiner 7y ago
      Help me understand which point you think is incorrect?
      - deleted 7y ago
        [deleted]
    - habnds 7y ago
      language like that just means someone is arguing, not reasoning
  - habnds 7y ago
    There's an additional wealth transfer between the owners of healthcare related stocks and non owners. If the US approached EU type health care costs we could easily give every one health care for free. The cost would come out of healthcare company margins.
    - 7y ago
paulpauper 7y ago
> I wish we had let the last recession ('08) actual happen instead of cheap money for a decade allowing us to kick the can down the road. Intervention in the capital markets a la the past decade probably The recession did happen and it ended, as recessions tend to do. Recessions are always much briefer than expansions. Cheap money is helping but much of the expansion is driven by consumer spending and tech innovation, in America and China especially. Companies such as Facebook, Apple , Disney, Walmart, Google and Microsoft making record profits every quarter and have so much cash they are giving it away in the form of dividends and buybacks. As evidence of how the US economy is not dependent on the fed, when the fed began raising rates in 2015-2017, the market still rallied. I don't see any reason for the era of low rates to end. In spite of the huge rally in stocks over the past decade, there is still an aversion to risk, and that is why capital keeps flowing into low or native yielding debt. Companies such as Ubere are spending a lot of money, but similar to Tesla, they are cashflow positive. The money is spent on outlays and other lagre expenses. When the expenses end, they will be profitable similar to Amazon. People keep predicting that things will eventually have to change, but maybe they won't. I n 2012-2014 there was talk of a tech bubble, but now valuations for FANG stocks is the lowest the have been in a long time. > A company like Uber, though amazing to me and I use all the time, could only exist with cheap money for a decade. The idea of building a company by losing money for 10 years in order to build your client base is impossible if rates are high. Not necessarily true. Tech VC funding for money-losing companies was huge in the late 90s despite high interest rates.
- sverige 7y ago
  > The recession did happen and it ended, as recessions tend to do. Recessions are always much briefer than expansions. I think the part of the recession that didn't happen was the failure and disintegration of at least a couple of very large banks and at least one car company, among other things. There was no fundamental reorganization to clean up a couple of decades of bad decisions, which signalled to the next round of players that high risk is not really high risk. One day the chickens will come home to roost.
  - eclipxe 7y ago
chrisweekly 7y ago
> "I wish we had let the last recession ('08) actual happen " wat. The great recession _did_ happen, and by all accounts came damn-near to devolving into a second Depression. There might be something to your complaints about capital markets' problems, but had to respond to that line...

rayiner 7y ago

> what these areas that lost GDP over the past decade could have provided. The data isn’t measuring areas that most GDP over the past decade. It’s measuring the average GDP per capita of areas that voted Democrat/Republican in 2008 and 2016, which is a different set of areas. What it’s showing is the economic sorting that happened in the 2016 election, with higher income suburban areas voting more consistently Democrat, with lower income rural areas voting more consistently Republican. That doesn’t say anything about the incomes of any given place, since the set of places wasn’t held constant.

hn_throwaway_99 7y ago
And I think more important than the places not being held constant, the people weren't held constant either. That is, people move. Many of these more rural areas are basically seeing a massive exodus of young people who are moving to cities and other places with more opportunity. The people staying behind are then those who are older or those who find it difficult to move, or those who don't have the ambition to move in the first place. So the self-sorting then only accelerates.

peteretep 7y ago

> I am worried a massive wealth transfer ... e.g., single payer healthcare Only in America is adequate health provision considered "massive wealth transfer"

rayiner 7y ago
It is a massive wealth transfer. It may be a good idea, too. Currently 2/3 of non-elderly people have insurance through their employers. If we need to extend coverage to those who don’t have it, those 2/3 will have to pay for the other 1/3. If we are proposing a massive income transfer of $3 trillion a year for the good of the country, we have to be honest about it.
- Craighead 7y ago
  You are being dishonest. Please do not speak about being honest.
  - rayiner 7y ago
    Help me understand which point you think is incorrect?
    - deleted 7y ago
      [deleted]
  - habnds 7y ago
    language like that just means someone is arguing, not reasoning
- habnds 7y ago
  There's an additional wealth transfer between the owners of healthcare related stocks and non owners. If the US approached EU type health care costs we could easily give every one health care for free. The cost would come out of healthcare company margins.
  - 7y ago

paulpauper 7y ago

> I wish we had let the last recession ('08) actual happen instead of cheap money for a decade allowing us to kick the can down the road. Intervention in the capital markets a la the past decade probably The recession did happen and it ended, as recessions tend to do. Recessions are always much briefer than expansions. Cheap money is helping but much of the expansion is driven by consumer spending and tech innovation, in America and China especially. Companies such as Facebook, Apple , Disney, Walmart, Google and Microsoft making record profits every quarter and have so much cash they are giving it away in the form of dividends and buybacks. As evidence of how the US economy is not dependent on the fed, when the fed began raising rates in 2015-2017, the market still rallied. I don't see any reason for the era of low rates to end. In spite of the huge rally in stocks over the past decade, there is still an aversion to risk, and that is why capital keeps flowing into low or native yielding debt. Companies such as Ubere are spending a lot of money, but similar to Tesla, they are cashflow positive. The money is spent on outlays and other lagre expenses. When the expenses end, they will be profitable similar to Amazon. People keep predicting that things will eventually have to change, but maybe they won't. I n 2012-2014 there was talk of a tech bubble, but now valuations for FANG stocks is the lowest the have been in a long time. > A company like Uber, though amazing to me and I use all the time, could only exist with cheap money for a decade. The idea of building a company by losing money for 10 years in order to build your client base is impossible if rates are high. Not necessarily true. Tech VC funding for money-losing companies was huge in the late 90s despite high interest rates.

sverige 7y ago
> The recession did happen and it ended, as recessions tend to do. Recessions are always much briefer than expansions. I think the part of the recession that didn't happen was the failure and disintegration of at least a couple of very large banks and at least one car company, among other things. There was no fundamental reorganization to clean up a couple of decades of bad decisions, which signalled to the next round of players that high risk is not really high risk. One day the chickens will come home to roost.
- eclipxe 7y ago

chrisweekly 7y ago

> "I wish we had let the last recession ('08) actual happen " wat. The great recession _did_ happen, and by all accounts came damn-near to devolving into a second Depression. There might be something to your complaints about capital markets' problems, but had to respond to that line...