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Poor people are making _nominal_ income gains. Their real income is actually declining because wage gains aren't keeping up with inflation despite a red hot lab

Poor people are making _nominal_ income gains. Their real income is actually declining because wage gains aren't keeping up with inflation despite a red hot labor market. It's almost like rents rise to match incomes unless you build more housing. Rent control just means that the costs get offloaded to other things like the security deposit, application fees, and deferred maintenance. You can't regulate the market out of existence.

lumost 5y ago
Except, with higher interest rates the nominal price of housing falls relative to wages. A worker can reasonably hope to buy there way out of rents at some point in the future (assuming the price of the house is set as a multiple of it's rental equivalent cash flow discounted over time)
- deleted 5y ago
  [deleted]
- HarryHirsch 5y ago
  You are discussing the theory. The practice is that housing has been severely underproduced since 2008. Since the GFC, the state of Massachusetts has been adding on average 15000 units/year. You can't buy what doesn't exist, and with the present shortages you can't even build. It's a long-standing policy problem, but not a monetary policy problem.
  - danaris 5y ago
    I don't know about anyone else, but a figure like that (15000 units/year) is meaningless to me without context. What's the change in demand year on year? What was the rate of adding new units before 2008? We're not all experts in Massachusetts' housing market, so it would be helpful to include information that makes your numbers meaningful.
    - HarryHirsch 5y ago
      It's not hard to discover that the population of MA went from 6.54 million in 2008 to 6.89 million in 2019. Just one look at the housing price indices is enough to tell that there's a severe shortage. (Anecdotally, around here (Western MA), ruins of type as-is-where-is that no bank will give you a mortgage on sell for > 125 USD/sqft.) Anyone who disagrees should be cheery about the shortage of automobile parts and make sure it continues. Nowadays you pay more for a 3-year used car than you used to pay for a new one three years ago! Finally, you can invest in a car!
- lamontcg 5y ago
  And the real value of debts fall, including student loan debt, housing debt and even consumer credit. I think we're going to hit a wall soon where we either need to forgive or inflate debts away. The alternative is likely to be a crushing depression and fiscal austerity that is much less than any of the downsides of inflation. If you're a largely debt free upper-mid to upper class tech person then the your personal viewpoint will be that inflation is all bad with no upside, because you have no crushing debts and you just think everyone should pay their debts and its a moral problem. Economically in the broad economy, though, your businesses are likely to be crippled by debt deflation when it really hits the bulk of the population.
  - jibe 5y ago
    The lowest poorest 20% have the highest credit card debt to income ration (almost 25%). Inflation will crush them. Cost of debt will go up, cost of living will go up. Inflation is the worst for poor people.
  - jbay808 5y ago
    Housing debt is mainly held by the wealthier half of society. Credit card interest rates, as well as other unsecured consumer lines of credit, are so incredibly high that inflation is far from reducing the value of those debts, it merely slightly slows their rate of growth. If you think inflation's impact on debt favours the poor, you have to look at the interest rates available for borrowing. Poor people get loans without collateral, so their interest rates price in inflation and then some. Wealthy people get collateralized loans at interest rates below inflation -- for an extreme example, look at how billionaires borrow against their stock holdings rather than sell stocks for cash.
    - lamontcg 5y ago
      I never mentioned the poor. I'm considering mostly the bulk of middle-class Millennials who went to college with crushing student loan debt who can't save up enough to buy a house.
  - int_19h 5y ago
    Periodic forgiveness of debts was fairly common in ancient societies - that's what the Jubilee originally was about, for example - so there's certainly precedent for it.
Spooky23 5y ago
Every student debtor is 7.5% less in debt in real terms than they were last year. Many of the poor working people have made substantial gains. Dishwashers and line cooks in my area are making $30/hr in some cases now. Nurses are a while other universe. My friends are taking a year off after one of them banked almost $400k as a visiting nurse. Our local hospital has 90% turnover in nursing and is almost exclusively agency nurses. Professional workers are getting slower increases, but the dirty secret is that they are more productive and less needed. Even in technology roles, many areas are operated at bare minimum as hyperscale clouds absorb more and more workloads.
- watersb 5y ago
  > Every student debtor is 7.5% less in debt in real terms than they were last year. Because Federal Student Loan payments were deferred last year, interest free. Such loans can also be forgiven -- canceled and considered paid in full -- for borrowers which qualify for certain programs. One of the most widespread are programs for Public Service job holders, Teachers, and National Guard members. These borrowers are credited as paid in full after holding a qualifying job and making payments for ten years. The student loan payment deferral due to COVID-19 relief did not extend the terms of such borrowers; they are credited with the year of service, even though payments were not required. Then there are a constellation of programs to have student loan debt reorganized and in some cases reduced. You can settle on monthly payments of no more than 15% of your current income, and if you can make every payment without fail for some time (is it also 10 years? I think longer) then the remaining balance can be forgiven. Global, blanket cancellation of a student loan debts is not yet a thing, and may never be. All this is Federal debt. Private debt is another world... but private debt can be reorganized, renegotiated, or discharged (canceled) via bankruptcy.
  - Spooky23 5y ago
    The point is, instead of giving investors risk free returns, inflation is effectively a tax on the people and entities hoarding wealth with no productive purpose, and it benefits debtors. We’ve had a carnival ride of cheap debt forever, which has powered and established many really dumb businesses. IMO, we’d benefit from a few years of 5-10% inflation.

lumost 5y ago

Except, with higher interest rates the nominal price of housing falls relative to wages. A worker can reasonably hope to buy there way out of rents at some point in the future (assuming the price of the house is set as a multiple of it's rental equivalent cash flow discounted over time)

deleted 5y ago
[deleted]
HarryHirsch 5y ago
You are discussing the theory. The practice is that housing has been severely underproduced since 2008. Since the GFC, the state of Massachusetts has been adding on average 15000 units/year. You can't buy what doesn't exist, and with the present shortages you can't even build. It's a long-standing policy problem, but not a monetary policy problem.
- danaris 5y ago
  I don't know about anyone else, but a figure like that (15000 units/year) is meaningless to me without context. What's the change in demand year on year? What was the rate of adding new units before 2008? We're not all experts in Massachusetts' housing market, so it would be helpful to include information that makes your numbers meaningful.
  - HarryHirsch 5y ago
    It's not hard to discover that the population of MA went from 6.54 million in 2008 to 6.89 million in 2019. Just one look at the housing price indices is enough to tell that there's a severe shortage. (Anecdotally, around here (Western MA), ruins of type as-is-where-is that no bank will give you a mortgage on sell for > 125 USD/sqft.) Anyone who disagrees should be cheery about the shortage of automobile parts and make sure it continues. Nowadays you pay more for a 3-year used car than you used to pay for a new one three years ago! Finally, you can invest in a car!
lamontcg 5y ago
And the real value of debts fall, including student loan debt, housing debt and even consumer credit. I think we're going to hit a wall soon where we either need to forgive or inflate debts away. The alternative is likely to be a crushing depression and fiscal austerity that is much less than any of the downsides of inflation. If you're a largely debt free upper-mid to upper class tech person then the your personal viewpoint will be that inflation is all bad with no upside, because you have no crushing debts and you just think everyone should pay their debts and its a moral problem. Economically in the broad economy, though, your businesses are likely to be crippled by debt deflation when it really hits the bulk of the population.
- jibe 5y ago
  The lowest poorest 20% have the highest credit card debt to income ration (almost 25%). Inflation will crush them. Cost of debt will go up, cost of living will go up. Inflation is the worst for poor people.
- jbay808 5y ago
  Housing debt is mainly held by the wealthier half of society. Credit card interest rates, as well as other unsecured consumer lines of credit, are so incredibly high that inflation is far from reducing the value of those debts, it merely slightly slows their rate of growth. If you think inflation's impact on debt favours the poor, you have to look at the interest rates available for borrowing. Poor people get loans without collateral, so their interest rates price in inflation and then some. Wealthy people get collateralized loans at interest rates below inflation -- for an extreme example, look at how billionaires borrow against their stock holdings rather than sell stocks for cash.
  - lamontcg 5y ago
    I never mentioned the poor. I'm considering mostly the bulk of middle-class Millennials who went to college with crushing student loan debt who can't save up enough to buy a house.
- int_19h 5y ago
  Periodic forgiveness of debts was fairly common in ancient societies - that's what the Jubilee originally was about, for example - so there's certainly precedent for it.

Spooky23 5y ago

Every student debtor is 7.5% less in debt in real terms than they were last year. Many of the poor working people have made substantial gains. Dishwashers and line cooks in my area are making $30/hr in some cases now. Nurses are a while other universe. My friends are taking a year off after one of them banked almost $400k as a visiting nurse. Our local hospital has 90% turnover in nursing and is almost exclusively agency nurses. Professional workers are getting slower increases, but the dirty secret is that they are more productive and less needed. Even in technology roles, many areas are operated at bare minimum as hyperscale clouds absorb more and more workloads.

watersb 5y ago
> Every student debtor is 7.5% less in debt in real terms than they were last year. Because Federal Student Loan payments were deferred last year, interest free. Such loans can also be forgiven -- canceled and considered paid in full -- for borrowers which qualify for certain programs. One of the most widespread are programs for Public Service job holders, Teachers, and National Guard members. These borrowers are credited as paid in full after holding a qualifying job and making payments for ten years. The student loan payment deferral due to COVID-19 relief did not extend the terms of such borrowers; they are credited with the year of service, even though payments were not required. Then there are a constellation of programs to have student loan debt reorganized and in some cases reduced. You can settle on monthly payments of no more than 15% of your current income, and if you can make every payment without fail for some time (is it also 10 years? I think longer) then the remaining balance can be forgiven. Global, blanket cancellation of a student loan debts is not yet a thing, and may never be. All this is Federal debt. Private debt is another world... but private debt can be reorganized, renegotiated, or discharged (canceled) via bankruptcy.
- Spooky23 5y ago
  The point is, instead of giving investors risk free returns, inflation is effectively a tax on the people and entities hoarding wealth with no productive purpose, and it benefits debtors. We’ve had a carnival ride of cheap debt forever, which has powered and established many really dumb businesses. IMO, we’d benefit from a few years of 5-10% inflation.