5 ms·

There was one obvious reason: too much money was printed, for decades. Virtually unlimited supply of cheap money not only push up asset prices but also make it

by mrjin 4y ago

There was one obvious reason: too much money was printed, for decades. Virtually unlimited supply of cheap money not only push up asset prices but also make it super easy to blindly take loans to invest in assets and make tones of money. Once you tasted the easy money, you want more and earn from hard working would look super stupid. Properties are the most accessible way of getting involved, so people flock in. It's not only America, it's virtually everywhere. Look around the globe, for how long have all central banks been doing nothing but printing money? Printing money to economy just like adrenaline injection to body, it for sure helps in some scenarios but it also kills if you don't know when to stop. All the central banks delayed the crisis by printing money and got away by manipulating the data to make CPI looking low. It would be probably okay if they did that only one time or two. So here we are.

nemo44x 4y ago
Falling interest rates for 40 years wasn’t the problem. If anything there has been less demand for money which is why rates fall. Things are far less capital intensive than they used to be in many cases. Falling interest rates have been great for people as more people own homes than at any other point in history. But printing trillions more last year was a flaw. At least got physical proof that MMT doesn’t work.
- epistasis 4y ago
  MMT is the idea that inflation is the result of government spending, rather than "bankruptcy" or people being unwilling to buy US government bonds. And in particular that limited productive capacity will cause inflation. So if anything the past years show that MMT was exactly right all along.
  - nemo44x 4y ago
    Nah just look at Sri Lanka. Another exhibit of MMT and how it destroys economies.
    - epistasis 4y ago
      How does Sri Lanka correspond to MMT more than what the proponents of MMT say? Can you be a bit more specific? Edit: for example, Sri Lanka's outcomes are exactly what have been predicted by MMTers, and Sri Lanka took exactly the opposite of what MMTers have been recommending forever: https://twitter.com/fadhelkaboub/status/1516630826896744451?s=21&t=hI5LXwn36XAFNch5G5_LYw https://twitter.com/fadhelkaboub/status/1516630826896744451?... I don't know what it is about MMT but it always seems like people are intentionally not listening to what people say, and then inserting other words in their mouth. Marxists like Henwood are particularly prone to doing that, for example. Critiques of MMT seem to be based on intentional misunderstanding and misrepresentation.
- yvan-eht-nioj 4y ago
  "...more people own homes than at any other point in history..." I'm not sure about elsewhere, but rates of home ownership in Australia have declined since the 1980's [1], neatly coinciding with a decline of interest rates [2] and a rise in house prices as a proportion of income [3]. [1]https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook46p/HomeOwnership https://www.aph.gov.au/About_Parliament/Parliamentary_Depart... [2]https://www.rba.gov.au/statistics/historical-data.html https://www.rba.gov.au/statistics/historical-data.html [3]https://www.aph.gov.au/about_parliament/parliamentary_departments/parliamentary_library/pubs/briefingbook45p/housingaffordability https://www.aph.gov.au/about_parliament/parliamentary_depart...
  - nemo44x 4y ago
    Look at total numbers.
    - deleted 4y ago
      [deleted]
    - llampx 4y ago
      Care to elaborate why absolute values are better than rates here?
      - nemo44x 4y ago
        Because western countries import a lot of people that rely on urban rentals. Also younger people tend to favor starting a family later in life as they develop their careers (and are more interested in urban life) meaning apartment life is preferred.
- HWR_14 4y ago
  >more people own homes than at any other point in history. Not in the US, and this article is about Americans.
  - nemo44x 4y ago
    As a total amount, yes. Percentages aren’t relevant especially as you consider the high rates of immigration and that many younger people make the lifestyle choice to rent in urban centers until they’re older and want a home in the suburbs.
    - HWR_14 4y ago
      I mean, if you're not using percentages than it's all meaningless. More people own homes. More people rent. There are more Republicans. There are more Democrats. Seriously, you seem to think there's something profound about "total population numbers go up, all the numbers go up"?
epistasis 4y ago
Every modern bank loan is "printing money" because there is no amount of corresponding money that the bank is actually loaning out. The bank must survive stress tests, but not have actual deposits on hand for the amount loaned out. However, even if the bank needed to have deposits or collateral on hand, to stop the "printing money" aspect of new loans, this same thing could happen because homes are collateral on mortgage. Really I think it mostly driven by the supply demand mismatch, and in particular a belief that local governments will not allow the supply to meet demand. There's a great recent Fed paper that shows the absolute huge correlation between prices and the supply/demand mismatch. It further shows that demand volatility has been higher than supply volatility so recent effects are explained by that demand volatility. The only way to solve this is to out build demand and shock prices down. IMHO.
- arminiusreturns 4y ago
  This is called the fractional reserve rate and is a vital part of controlling monetary policy in a fiat system. The reserve rate was taken to 0 during covid...
- Retric 4y ago
  Banks do need cash on hand to hand out loans, they don't need cash on hand for deposits. However, they can sell old loans to get money for new loans. Really there is nothing magic about loans. Handing a bank 1,000$ and thinking you still have that money rather the the bank owing you 1,000$ is how money is created.
  - ljlolel 4y ago
    Actually during 2020 they removed reserve requirement to 0%. Yes really
    - KallDrexx 4y ago
      Which isn't that crazy when bank reserves are at record highs, and was at relative highs when the rule was put into place. https://fred.stlouisfed.org/series/TOTRESNS https://fred.stlouisfed.org/series/TOTRESNS Banks did not want to lend out money and lowering the reserve percentage is one of the few tools they have to try to encourage banks making loans. It just so happens that it didn't do cause an uptick in loans

by mrjin 4y ago

nemo44x 4y ago

Falling interest rates for 40 years wasn’t the problem. If anything there has been less demand for money which is why rates fall. Things are far less capital intensive than they used to be in many cases. Falling interest rates have been great for people as more people own homes than at any other point in history. But printing trillions more last year was a flaw. At least got physical proof that MMT doesn’t work.

epistasis 4y ago
MMT is the idea that inflation is the result of government spending, rather than "bankruptcy" or people being unwilling to buy US government bonds. And in particular that limited productive capacity will cause inflation. So if anything the past years show that MMT was exactly right all along.
- nemo44x 4y ago
  Nah just look at Sri Lanka. Another exhibit of MMT and how it destroys economies.
  - epistasis 4y ago
    How does Sri Lanka correspond to MMT more than what the proponents of MMT say? Can you be a bit more specific? Edit: for example, Sri Lanka's outcomes are exactly what have been predicted by MMTers, and Sri Lanka took exactly the opposite of what MMTers have been recommending forever: https://twitter.com/fadhelkaboub/status/1516630826896744451?s=21&t=hI5LXwn36XAFNch5G5_LYw https://twitter.com/fadhelkaboub/status/1516630826896744451?... I don't know what it is about MMT but it always seems like people are intentionally not listening to what people say, and then inserting other words in their mouth. Marxists like Henwood are particularly prone to doing that, for example. Critiques of MMT seem to be based on intentional misunderstanding and misrepresentation.
yvan-eht-nioj 4y ago
"...more people own homes than at any other point in history..." I'm not sure about elsewhere, but rates of home ownership in Australia have declined since the 1980's [1], neatly coinciding with a decline of interest rates [2] and a rise in house prices as a proportion of income [3]. [1]https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook46p/HomeOwnership https://www.aph.gov.au/About_Parliament/Parliamentary_Depart... [2]https://www.rba.gov.au/statistics/historical-data.html https://www.rba.gov.au/statistics/historical-data.html [3]https://www.aph.gov.au/about_parliament/parliamentary_departments/parliamentary_library/pubs/briefingbook45p/housingaffordability https://www.aph.gov.au/about_parliament/parliamentary_depart...
- nemo44x 4y ago
  Look at total numbers.
  - deleted 4y ago
    [deleted]
  - llampx 4y ago
    Care to elaborate why absolute values are better than rates here?
    - nemo44x 4y ago
      Because western countries import a lot of people that rely on urban rentals. Also younger people tend to favor starting a family later in life as they develop their careers (and are more interested in urban life) meaning apartment life is preferred.
HWR_14 4y ago
>more people own homes than at any other point in history. Not in the US, and this article is about Americans.
- nemo44x 4y ago
  As a total amount, yes. Percentages aren’t relevant especially as you consider the high rates of immigration and that many younger people make the lifestyle choice to rent in urban centers until they’re older and want a home in the suburbs.
  - HWR_14 4y ago
    I mean, if you're not using percentages than it's all meaningless. More people own homes. More people rent. There are more Republicans. There are more Democrats. Seriously, you seem to think there's something profound about "total population numbers go up, all the numbers go up"?

epistasis 4y ago

Every modern bank loan is "printing money" because there is no amount of corresponding money that the bank is actually loaning out. The bank must survive stress tests, but not have actual deposits on hand for the amount loaned out. However, even if the bank needed to have deposits or collateral on hand, to stop the "printing money" aspect of new loans, this same thing could happen because homes are collateral on mortgage. Really I think it mostly driven by the supply demand mismatch, and in particular a belief that local governments will not allow the supply to meet demand. There's a great recent Fed paper that shows the absolute huge correlation between prices and the supply/demand mismatch. It further shows that demand volatility has been higher than supply volatility so recent effects are explained by that demand volatility. The only way to solve this is to out build demand and shock prices down. IMHO.

arminiusreturns 4y ago
This is called the fractional reserve rate and is a vital part of controlling monetary policy in a fiat system. The reserve rate was taken to 0 during covid...
Retric 4y ago
Banks do need cash on hand to hand out loans, they don't need cash on hand for deposits. However, they can sell old loans to get money for new loans. Really there is nothing magic about loans. Handing a bank 1,000$ and thinking you still have that money rather the the bank owing you 1,000$ is how money is created.
- ljlolel 4y ago
  Actually during 2020 they removed reserve requirement to 0%. Yes really
  - KallDrexx 4y ago
    Which isn't that crazy when bank reserves are at record highs, and was at relative highs when the rule was put into place. https://fred.stlouisfed.org/series/TOTRESNS https://fred.stlouisfed.org/series/TOTRESNS Banks did not want to lend out money and lowering the reserve percentage is one of the few tools they have to try to encourage banks making loans. It just so happens that it didn't do cause an uptick in loans