5 ms·

It's a bit confusing what he's arguing against. But his 2nd-last graph is the good one, [1]. That's only 20 years but [2] is the same thing since 1950. Some th

by iguy 6y ago

It's a bit confusing what he's arguing against. But his 2nd-last graph is the good one, [1]. That's only 20 years but [2] is the same thing since 1950. Some things have become much cheaper, other things have become more expensive. Attempting to summarize that in one number seems like it hides more than it exposes, no matter what number you pick. [1] https://awealthofcommonsense.com/wp-content/uploads/2021/01/Screenshot-2021-01-04-211959.jpg https://awealthofcommonsense.com/wp-content/uploads/2021/01/... [2] https://marginalrevolution.com/marginalrevolution/2019/05/why-are-the-prices-so-dmn-high.html https://marginalrevolution.com/marginalrevolution/2019/05/wh...

mlthoughts2018 6y ago
The final graph on median home mortgage payments is misleading too. That can be propped up by REITs and increasing institutional ownership of consumer homes. There’s also the issue of more millennials living with parents and relatives, unable to afford their own homes, which can be hidden in that. Definitely can’t conclude from it that wages and purchasing power have kept up with mortgage costs.
- coredog64 6y ago
  Millennials can live at home because average home size has increased. My first house, built in the late 19th/early 20th century had indoor plumbing retrofitted and would fit in the garage of my current house.
  - mlthoughts2018 6y ago
    Even if that was purely true, that doesn’t say anything about relative purchasing power to afford mortgage costs though. Home sizes increasing doesn’t mean home prices, relative to purchasing power and technology changes, have stayed consistent with real wages. And it’s likely not purely true. Home sizes being larger is also a function of REITs and corporate ownership of more consumer real estate, as well as boomers using soaring retirement fund profits to finance remodels, etc. It’s way more complex than to draw any conclusion that this means purchasing power of homes has stayed close to wages. It hasn’t.
throw0101a 6y ago
Probably some key paragraphs: > Unfortunately, the pandemic has permanently broken every economic chart in existence. > But if we take away the outlier 2020 data points, the average real annual GDP growth from 2010-2019 was 2.3%. The inflation rate in that time averaged roughly 1.8% per year. > If you’re one of the conspiracy people who believe inflation has actually been running at 5-6% per year, that would assume the economy has been contracting by 1-3% per year over the past 10 years. > And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year[fn2], that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value. > This is absurd and patently false but that’s the claim you’re making if you really think inflation is this high. [fn2] then points to a tweet: * https://twitter.com/tanayj/status/1345080274107785216?s=20 https://twitter.com/tanayj/status/1345080274107785216?s=20 Which has inflation at 10-12%, per: * https://chapwoodindex.com/ https://chapwoodindex.com/ The creator of this report is Ed Butowsky: * https://chapwoodindex.com/contact-us/ https://chapwoodindex.com/contact-us/ His connection to reality seems to be tenuous in some aspects: > In June 2018, Butowsky filed a defamation lawsuit in U.S. federal court seeking $57 million in damages from NPR and one of its reporters, David Folkenflik. Butowsky accused Folkenflik of pushing a "false narrative" of Butowsky's involvement in a now-retracted Fox News story alleging that the murder of Democratic National Committee staffer Seth Rich was connected to the 2016 leak of DNC emails to WikiLeaks. Butowsky also alleged that Folkenflik conspired with an attorney to extort money from Fox. Butowsky told Courthouse News Service that he still believes the Fox News story was accurate.[12] The case is scheduled to go to trial in mid-2021.[13] > By August 2020, Butowsky still insisted that the retracted Fox News story was accurate.[2] He claimed without evidence that the Seth Rich family were "not innocent bystanders" and that they were "in possession of material evidence indicating that Seth Rich downloaded the DNC emails, sent them to Wikileaks, and requested payment."[2] * https://en.wikipedia.org/wiki/Ed_Butowsky#Murder_of_Seth_Rich_conspiracy_theories https://en.wikipedia.org/wiki/Ed_Butowsky#Murder_of_Seth_Ric... So if the GDP grew "only" ~2.5%, then any inflation above that (as the 'truthers' claim), would mean were actually in a recession/depression for the last decade... which makes no sense. If inflation is >5% (per the truthers), then the economic growth would have had to been on top of that, for a nominal growth rate of >7%.
throwaway2245 6y ago
I find it interesting to look at this graph against Maslow's hierarchy of needs. First layer, shelter and food, have increased almost perfectly in line with wages. That's reasonable. Second layer, security - including healthcare in the US - "feels like it’s experienced hyperinflation", according to the author. And, as you age, your healthcare needs increase. So if you're low in this hierarchy, being relatively poor, then inflation might feel much more punishing to you. As a poor person, you might have experienced inflation as averaging 6% over these 20 years, even if the underlying figure averages 2%.
- iguy 6y ago
  You can also make almost the opposite point. We used to spend a lot on basic needs like food and shelter, 3/4 of the average income on food, and more money on bread alone than on housing (IIRC, 19thC rich countries). As growth/technology made these cheaper, or if you prefer, made us so rich that they can be had for a tiny fraction of our income, we spend it on other things. Many of these are status competitions -- it's the location of your house that's expensive, not the drywall, and that's an auction against others who also want it. Education in these graphs is arguably like that too -- what's expensive is a top name, rare connections; the actual knowledge is very close to free. Healthcare isn't a status competition. But it does increasingly seem like it's possible to spend an unlimited amount of money on it -- why not try a million-dollar cancer treatment if you can (somehow) afford it? None existed in Maslow's time partly because the science hadn't advanced, but also because there were too few potential customers. As a society, it isn't crazy to think that this should be a growing proportion of what we buy. If you think it should be a decreasing slice of the pie, then what exactly should be increasing, over the next 50 years? (Although obviously I'm aware of the ways in which how we buy it is deeply broken.)
  - leereeves 6y ago
    According to [1], the average cost of education has risen significantly faster than the CPI, not only the cost of top name universities with rare connections. > [Since 2001], in-state tuition and fees at public National Universities have grown the most, increasing 212%. while > The total consumer price index inflation increased by around 50% from August 2000 to August 2020, according to the U.S. Bureau of Labor Statistics. 1: https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities https://www.usnews.com/education/best-colleges/paying-for-co...
saurik 6y ago
These lines cluster in interesting ways. Is this a mere coincidence? Is this a weird selection bias in how the graph was created? Is this an actual correlation in where these prices come from?
jfengel 6y ago
The thing he's arguing against is the Chicago/Austrian school of economics, whose response to just about every monetary policy measure is "But inflation!" UBI would cause inflation; raising the minimum wage would cause inflation; worker protections would cause inflation; government borrowing causes inflation. That kind of economics gained popularity in the 1970s, when inflation caused genuine hardship. It left a kind of economic PTSD -- especially among people who have money, because inflation erodes the value of savings. The response is a trickle-down economics, where the best way to help the poor is to ensure that the rich have lots of money so that they can give poor people jobs. So the Internet is full of "But inflation!" and often "But hyperinflation!", usually based on an argument from the first two weeks of economics class where you're shown supply and demand curves. But economics classes go past two weeks. There's a lot more to it than that, and the data simply don't support that argument. The fact is that consumer inflation is very low, and has been for a long time, despite intensive intervention from the central banks. It is more complicated, and there has been inflation -- most notably in the stock market, and to a lesser degree in other assets (including real estate and cryptocurrency). The stock market has inflated to ludicrous levels, not just in tech assets but as a whole. But not at the consumer level, for a variety of reasons -- a lot of things have become cheaper to produce, and despite tax cuts for the wealthy wages haven't gone up. The wealthy don't eat more or live in more houses with that money, so they're not competing all that much for regular consumer goods. They take all that extra money and buy stocks -- trading them to each other rather than actually starting new businesses. Anyway, that's what he's arguing against. It should shortcut a whole line of knee-jerk "but inflation!" arguments. But it's been true for decades, and this isn't a new observation, so it doesn't really change anything.
- caeril 6y ago
  > especially among people who have money, because inflation erodes the value of savings. What? Wealthy people don't buy CDs. They tend to invest heavily in assets. Often, these are leveraged assets like real estate or equities in a margin account. NOTHING makes the rich richer like inflation. Reducing the burden of low-interest mortgage or margin debt whilst boosting earnings in equities. Meanwhile, the poor still pay 20%+ on credit cards used to buy food that gets more expensive every year, and see annual rent increases from their landlord. There's a reason that CNBC cheerleaders absolutely love ZIRP, and it's not because it helps the downtrodden poor.

by iguy 6y ago

mlthoughts2018 6y ago

The final graph on median home mortgage payments is misleading too. That can be propped up by REITs and increasing institutional ownership of consumer homes. There’s also the issue of more millennials living with parents and relatives, unable to afford their own homes, which can be hidden in that. Definitely can’t conclude from it that wages and purchasing power have kept up with mortgage costs.

coredog64 6y ago
Millennials can live at home because average home size has increased. My first house, built in the late 19th/early 20th century had indoor plumbing retrofitted and would fit in the garage of my current house.
- mlthoughts2018 6y ago
  Even if that was purely true, that doesn’t say anything about relative purchasing power to afford mortgage costs though. Home sizes increasing doesn’t mean home prices, relative to purchasing power and technology changes, have stayed consistent with real wages. And it’s likely not purely true. Home sizes being larger is also a function of REITs and corporate ownership of more consumer real estate, as well as boomers using soaring retirement fund profits to finance remodels, etc. It’s way more complex than to draw any conclusion that this means purchasing power of homes has stayed close to wages. It hasn’t.

throw0101a 6y ago

Probably some key paragraphs: > Unfortunately, the pandemic has permanently broken every economic chart in existence. > But if we take away the outlier 2020 data points, the average real annual GDP growth from 2010-2019 was 2.3%. The inflation rate in that time averaged roughly 1.8% per year. > If you’re one of the conspiracy people who believe inflation has actually been running at 5-6% per year, that would assume the economy has been contracting by 1-3% per year over the past 10 years. > And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year[fn2], that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value. > This is absurd and patently false but that’s the claim you’re making if you really think inflation is this high. [fn2] then points to a tweet: * https://twitter.com/tanayj/status/1345080274107785216?s=20 https://twitter.com/tanayj/status/1345080274107785216?s=20 Which has inflation at 10-12%, per: * https://chapwoodindex.com/ https://chapwoodindex.com/ The creator of this report is Ed Butowsky: * https://chapwoodindex.com/contact-us/ https://chapwoodindex.com/contact-us/ His connection to reality seems to be tenuous in some aspects: > In June 2018, Butowsky filed a defamation lawsuit in U.S. federal court seeking $57 million in damages from NPR and one of its reporters, David Folkenflik. Butowsky accused Folkenflik of pushing a "false narrative" of Butowsky's involvement in a now-retracted Fox News story alleging that the murder of Democratic National Committee staffer Seth Rich was connected to the 2016 leak of DNC emails to WikiLeaks. Butowsky also alleged that Folkenflik conspired with an attorney to extort money from Fox. Butowsky told Courthouse News Service that he still believes the Fox News story was accurate.[12] The case is scheduled to go to trial in mid-2021.[13] > By August 2020, Butowsky still insisted that the retracted Fox News story was accurate.[2] He claimed without evidence that the Seth Rich family were "not innocent bystanders" and that they were "in possession of material evidence indicating that Seth Rich downloaded the DNC emails, sent them to Wikileaks, and requested payment."[2] * https://en.wikipedia.org/wiki/Ed_Butowsky#Murder_of_Seth_Rich_conspiracy_theories https://en.wikipedia.org/wiki/Ed_Butowsky#Murder_of_Seth_Ric... So if the GDP grew "only" ~2.5%, then any inflation above that (as the 'truthers' claim), would mean were actually in a recession/depression for the last decade... which makes no sense. If inflation is >5% (per the truthers), then the economic growth would have had to been on top of that, for a nominal growth rate of >7%.

throwaway2245 6y ago

I find it interesting to look at this graph against Maslow's hierarchy of needs. First layer, shelter and food, have increased almost perfectly in line with wages. That's reasonable. Second layer, security - including healthcare in the US - "feels like it’s experienced hyperinflation", according to the author. And, as you age, your healthcare needs increase. So if you're low in this hierarchy, being relatively poor, then inflation might feel much more punishing to you. As a poor person, you might have experienced inflation as averaging 6% over these 20 years, even if the underlying figure averages 2%.

iguy 6y ago
You can also make almost the opposite point. We used to spend a lot on basic needs like food and shelter, 3/4 of the average income on food, and more money on bread alone than on housing (IIRC, 19thC rich countries). As growth/technology made these cheaper, or if you prefer, made us so rich that they can be had for a tiny fraction of our income, we spend it on other things. Many of these are status competitions -- it's the location of your house that's expensive, not the drywall, and that's an auction against others who also want it. Education in these graphs is arguably like that too -- what's expensive is a top name, rare connections; the actual knowledge is very close to free. Healthcare isn't a status competition. But it does increasingly seem like it's possible to spend an unlimited amount of money on it -- why not try a million-dollar cancer treatment if you can (somehow) afford it? None existed in Maslow's time partly because the science hadn't advanced, but also because there were too few potential customers. As a society, it isn't crazy to think that this should be a growing proportion of what we buy. If you think it should be a decreasing slice of the pie, then what exactly should be increasing, over the next 50 years? (Although obviously I'm aware of the ways in which how we buy it is deeply broken.)
- leereeves 6y ago
  According to [1], the average cost of education has risen significantly faster than the CPI, not only the cost of top name universities with rare connections. > [Since 2001], in-state tuition and fees at public National Universities have grown the most, increasing 212%. while > The total consumer price index inflation increased by around 50% from August 2000 to August 2020, according to the U.S. Bureau of Labor Statistics. 1: https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities https://www.usnews.com/education/best-colleges/paying-for-co...

saurik 6y ago

These lines cluster in interesting ways. Is this a mere coincidence? Is this a weird selection bias in how the graph was created? Is this an actual correlation in where these prices come from?

jfengel 6y ago

The thing he's arguing against is the Chicago/Austrian school of economics, whose response to just about every monetary policy measure is "But inflation!" UBI would cause inflation; raising the minimum wage would cause inflation; worker protections would cause inflation; government borrowing causes inflation. That kind of economics gained popularity in the 1970s, when inflation caused genuine hardship. It left a kind of economic PTSD -- especially among people who have money, because inflation erodes the value of savings. The response is a trickle-down economics, where the best way to help the poor is to ensure that the rich have lots of money so that they can give poor people jobs. So the Internet is full of "But inflation!" and often "But hyperinflation!", usually based on an argument from the first two weeks of economics class where you're shown supply and demand curves. But economics classes go past two weeks. There's a lot more to it than that, and the data simply don't support that argument. The fact is that consumer inflation is very low, and has been for a long time, despite intensive intervention from the central banks. It is more complicated, and there has been inflation -- most notably in the stock market, and to a lesser degree in other assets (including real estate and cryptocurrency). The stock market has inflated to ludicrous levels, not just in tech assets but as a whole. But not at the consumer level, for a variety of reasons -- a lot of things have become cheaper to produce, and despite tax cuts for the wealthy wages haven't gone up. The wealthy don't eat more or live in more houses with that money, so they're not competing all that much for regular consumer goods. They take all that extra money and buy stocks -- trading them to each other rather than actually starting new businesses. Anyway, that's what he's arguing against. It should shortcut a whole line of knee-jerk "but inflation!" arguments. But it's been true for decades, and this isn't a new observation, so it doesn't really change anything.

caeril 6y ago
> especially among people who have money, because inflation erodes the value of savings. What? Wealthy people don't buy CDs. They tend to invest heavily in assets. Often, these are leveraged assets like real estate or equities in a margin account. NOTHING makes the rich richer like inflation. Reducing the burden of low-interest mortgage or margin debt whilst boosting earnings in equities. Meanwhile, the poor still pay 20%+ on credit cards used to buy food that gets more expensive every year, and see annual rent increases from their landlord. There's a reason that CNBC cheerleaders absolutely love ZIRP, and it's not because it helps the downtrodden poor.