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Disposable personal income: https://fred.stlouisfed.org/series/DSPI https://fred.stlouisfed.org/series/DSPI > is investment income included in that figure Pro

by MiroF 6y ago

Disposable personal income: https://fred.stlouisfed.org/series/DSPI https://fred.stlouisfed.org/series/DSPI > is investment income included in that figure Probably, but it's not a significant reason behind the recent rise. > unemployment Yes, unemployment is high which is why it is critical that the Fed is doing what it is doing now, while both employment and inflation are very low. > failure to make rent payments are both still abnormally high This metric is not really safe to look at to compare to 2019, given eviction/rent moratoriums.

skohan 6y ago
> given eviction/rent moratoriums. But this is much more of a short-term band-aid than a real solution isn't it? As I understood the eviction moratorium is just a block preventing people from being removed from their homes. It's not rent forgiveness. So when it expires, those renters will still be on the hook for months worth of back rent, and assuming a lot of them are unable to pay because they are unemployed, this just seems like we're inflating a debt bubble to be dealt with later. That's also ignoring the financial obligations of landlords - they might also be running into trouble due to lost revenue and for now I suppose they are just supposed to bear it.
- MiroF 6y ago
  > But this is much more of a short-term band-aid than a real solution isn't it? My point is that you can't compare rent payment rates from when you would get evicted if you didn't pay rent to rent payment rates from an eviction moratorium where there is no penalty for not paying rent. > they might also be running into trouble due to lost revenue and for now I suppose they are just supposed to bear it. The reason that landlords make the profits they do is because they're taking on this kind of risk. They are the party to bear it, and have hopefully hedged in some way. If they are overexposed, then yes, they will fail. Hopefully we don't make the same too big to fail mistake we made last time. I'm not claiming that everything is great with our economy. It's obviously not. But suggesting the Fed stop doing what it is doing would be perhaps the single worst thing you could do to the entire economy. It is good that equity prices remain high and it is good that personal income has risen. We should capitalize on those trends so that people can soon go back to work.
  - skohan 6y ago
    I'm not saying the fed should stop what they're doing, but there are certainly alternatives which might have lead to a better result. For instance, in other countries, more of the government assistance was directed to maintaining payroll and to actually support rent payments rather than just delaying that obligation. It's hard for me to understand why that would not be a better approach to stabilizing the economy compared to what happened in the US. It seems that the actual result of QE has been that a huge percentage of that money has been dumped into equities, driving prices higher. Yes it's better than a total economic collapse, but it's not clear to me that this is actually a good thing, and not just an artificially inflated indicator which is essentially papering over very real risks to the economy which could cause massive issues down the road.
    - MiroF 6y ago
      > the government assistance was directed to maintaining payroll and to actually support rent payments There was substantial action towards both of those ends, more than any other country. Other countries are not really as comparable because we're the only rich developed country to have failed so badly at containing it (early on, in the next few months some of Europe will follow us). > delaying that obligation Delaying the obligation is better because it means that people won't be evicted if they can't meet the payments even with the governmental support. I'll be honest - the landlords aren't my principal concern here. > papering over very real risks to the economy which could cause massive issues down the road. What massive issues? I agree that Fed actions impact equity prices, I disagree that that is a bad thing for the economy. If we had an equity price crash along with what we're experiencing, we would be in deep, deep recession by now.
      - skohan 6y ago
        > There was substantial action towards both of those ends, more than any other country. I just don't think that's true. From what I understand, they payroll support was extremely difficult to get for small businesses, and the majority went to large corporations who had the connections and the bandwidth to deal with the bureaucracy. Even the Cares checks took weeks to arrive in the hands of people without direct deposit. By contrast, I am currently living in Germany, and I have friends who are freelancers and they had support funds in their bank accounts less than a week after the lockdown started. Also there was already legal machinery in place to avoid job losses which was put in place in 2008 and activated almost immediately. > Other countries are not really as comparable because we're the only rich developed country to have failed so badly at containing it (early on, in the next few months some of Europe will follow us). We will have to see, but I'm doubtful this is the case. In Germany for example we still have aggressive contract tracing, and we've already seen containment measures implemented successfully. We have not seen the particular failures in leadership which occurred in the US, and though we may indeed see a second wave, I'm not sure why we should expect that to go worse now that there's improved information and the population has already dealt with this once I'm not sure why we should expect this to go worse the second time. > Delaying the obligation is better because it means that people won't be evicted if they can't meet the payments even with the governmental support Why are these options mutually exclusive? You could provide direct support to tenants and also prevent evictions. This would limit the extent to which you are creating a future financial obligation which out-of-work tenants will have no way of meeting. > I agree that Fed actions impact equity prices, I disagree that that is a bad thing for the economy. I never said rising equity prices were a bad thing for the economy. My concern is that if we optimize the recovery effort for increasing equity prices, but fail to address other risks, like lack of employment and the creation of housing debt, we could be setting ourselves up for failure in the medium term. If we managed to keep people employed and in their homes and also saw rising equity prices I would have no such concern.

by MiroF 6y ago

skohan 6y ago

> given eviction/rent moratoriums. But this is much more of a short-term band-aid than a real solution isn't it? As I understood the eviction moratorium is just a block preventing people from being removed from their homes. It's not rent forgiveness. So when it expires, those renters will still be on the hook for months worth of back rent, and assuming a lot of them are unable to pay because they are unemployed, this just seems like we're inflating a debt bubble to be dealt with later. That's also ignoring the financial obligations of landlords - they might also be running into trouble due to lost revenue and for now I suppose they are just supposed to bear it.

MiroF 6y ago
> But this is much more of a short-term band-aid than a real solution isn't it? My point is that you can't compare rent payment rates from when you would get evicted if you didn't pay rent to rent payment rates from an eviction moratorium where there is no penalty for not paying rent. > they might also be running into trouble due to lost revenue and for now I suppose they are just supposed to bear it. The reason that landlords make the profits they do is because they're taking on this kind of risk. They are the party to bear it, and have hopefully hedged in some way. If they are overexposed, then yes, they will fail. Hopefully we don't make the same too big to fail mistake we made last time. I'm not claiming that everything is great with our economy. It's obviously not. But suggesting the Fed stop doing what it is doing would be perhaps the single worst thing you could do to the entire economy. It is good that equity prices remain high and it is good that personal income has risen. We should capitalize on those trends so that people can soon go back to work.
- skohan 6y ago
  I'm not saying the fed should stop what they're doing, but there are certainly alternatives which might have lead to a better result. For instance, in other countries, more of the government assistance was directed to maintaining payroll and to actually support rent payments rather than just delaying that obligation. It's hard for me to understand why that would not be a better approach to stabilizing the economy compared to what happened in the US. It seems that the actual result of QE has been that a huge percentage of that money has been dumped into equities, driving prices higher. Yes it's better than a total economic collapse, but it's not clear to me that this is actually a good thing, and not just an artificially inflated indicator which is essentially papering over very real risks to the economy which could cause massive issues down the road.
  - MiroF 6y ago
    > the government assistance was directed to maintaining payroll and to actually support rent payments There was substantial action towards both of those ends, more than any other country. Other countries are not really as comparable because we're the only rich developed country to have failed so badly at containing it (early on, in the next few months some of Europe will follow us). > delaying that obligation Delaying the obligation is better because it means that people won't be evicted if they can't meet the payments even with the governmental support. I'll be honest - the landlords aren't my principal concern here. > papering over very real risks to the economy which could cause massive issues down the road. What massive issues? I agree that Fed actions impact equity prices, I disagree that that is a bad thing for the economy. If we had an equity price crash along with what we're experiencing, we would be in deep, deep recession by now.
    - skohan 6y ago
      > There was substantial action towards both of those ends, more than any other country. I just don't think that's true. From what I understand, they payroll support was extremely difficult to get for small businesses, and the majority went to large corporations who had the connections and the bandwidth to deal with the bureaucracy. Even the Cares checks took weeks to arrive in the hands of people without direct deposit. By contrast, I am currently living in Germany, and I have friends who are freelancers and they had support funds in their bank accounts less than a week after the lockdown started. Also there was already legal machinery in place to avoid job losses which was put in place in 2008 and activated almost immediately. > Other countries are not really as comparable because we're the only rich developed country to have failed so badly at containing it (early on, in the next few months some of Europe will follow us). We will have to see, but I'm doubtful this is the case. In Germany for example we still have aggressive contract tracing, and we've already seen containment measures implemented successfully. We have not seen the particular failures in leadership which occurred in the US, and though we may indeed see a second wave, I'm not sure why we should expect that to go worse now that there's improved information and the population has already dealt with this once I'm not sure why we should expect this to go worse the second time. > Delaying the obligation is better because it means that people won't be evicted if they can't meet the payments even with the governmental support Why are these options mutually exclusive? You could provide direct support to tenants and also prevent evictions. This would limit the extent to which you are creating a future financial obligation which out-of-work tenants will have no way of meeting. > I agree that Fed actions impact equity prices, I disagree that that is a bad thing for the economy. I never said rising equity prices were a bad thing for the economy. My concern is that if we optimize the recovery effort for increasing equity prices, but fail to address other risks, like lack of employment and the creation of housing debt, we could be setting ourselves up for failure in the medium term. If we managed to keep people employed and in their homes and also saw rising equity prices I would have no such concern.