8 ms·

I don't think SVB is the keystone, but things simply don't feel correct right now. * Inflation is unusually high right now * The working/middle class is incre

I don't think SVB is the keystone, but things simply don't feel correct right now. * Inflation is unusually high right now * The working/middle class is increasingly discontent. * Rising interest rates are causing major follow on effects. * Housing prices have been blowing up. Given increasing unemployment and interest rates, it's unclear what's going to happen there. * The pandemic created insanity. Markets have made little sense over the past 3 years. They're just now returning to normal. * Many, large companies are doing layoff. The market as a whole is signaling they don't expect profitability through revenue increase - so they're reducing burn. ----- I have a hypothesis that markets are becoming increasingly optimize - which results in quicker returns, but also more frequent and harder drops/recessions.

vineyardmike 4y ago
I think the issue is way worse than all this, and way harder to solve - we're basically on the edge of the roaring 20s. inflation is high because companies are increase profit margin, and companies are increasing margin because there isn't enough competition. Companies would never voluntarily lower profitability, and are rewarded for short term actions, incl. layoffs, which are gutting long term stability of these companies. People, businesses, governments are increasingly indebted compared to prior generations. Housing in productive cities is way below demands, while there's empty houses in Detroit and Cleveland. Even with remote work (which is being clawed back), this isn't stabilizing and there isn't enough housing (esp. affordably). It takes years before that much housing can be built, assuming we legalize it (YIMBY v NIMBY). We don't have a strong growing population without immigration so there is no future generation big enough in this economic Ponzi scheme. The working class (with housing and all that) are screwed, while the rich get richer. Eventually there's no where left to turn for profitability though - and no more debt Wall Street can issue to keep the spending up. Then what?
- anonyfox 4y ago
  Then finally the 99% screwed people realize that this is where (crony) capitalism is supposed to end up in the long run. Time for a forceful redistribution and system change. Can’t happen soon enough.
  - bhawks 4y ago
    > Time for a forceful redistribution and system change. Can’t happen soon enough. Sadly revolutions have a really bad track record for the 99%. It may feel good in the short term but the people who end up assuming power are usually much worse. OTOH fractional reserve banking and cronyism are really past their expiration dates. It'd be nice to stop kicking the can down the road - we have technological solutions now.
    - anonyfox 4y ago
      My point is that people should not have to serve or suffer for the system, but the system has to work for them. There is more than enough wealth for everyone, it’s only a distribution problem. For that, modern tech surely can help
      - bhawks 4y ago
        The people created the system though - indirectly thru flawed / corrupt leaders but you get what you get. I'd like to understand now why we'd get a better set of leaders if we tear it all down now. I personally don't have any observations indicating why that would be true. Similarly if you redistribute wealth - what's going to prevent it from becoming unequally distributed again? I'd imagine that a small subset of people would quickly game whatever system is devised and we're back at square one again.
        anonyfox 4y ago
        Just for demonstration purposes: imagine we get rid of voting alltogether. Instead, a random representative sample of 1000 people is chosen from the population, for some congress, for a year. They rule during that time. Some rules cannot be overruled, like the 1 year limit, no way to game that. Additionally, all communication of the chosen ones must be recorded and public, without exceptions. This basically eliminates corruption or the rise of a „ruling class“, and lobbyism has a much harder task. I would also argue that this will result in much better overall decisions - they might lack some initial knowledge but that is more than offset by missing corruption and cronyism
- crtified 4y ago
  Several fair points there. The unmentioned element is Environmental / Climate. That is, even if we could instantly magic into completion, all of the affordable housing to meet all global demand, and give it free to all who require it - as in, "hey! problems solved! enjoy your new homes, everybody!" - then the simple environmental load of doing that would put us quite significantly further on the road to ruin, in and of itself. Climate change is here and will increase, so any human strategy involving "speed up! do more stuff! build more stuff!" is also inevitably an Own Goal in some respect. Even some things that we consider to be desperately needed for this or that societal reason.
  - zpeti 4y ago
    First off, the actual scientists, like the ones at the IPCC say climate change will only slow growth, it won’t ruin us. Your point - is basically what most well off (and since you’re on HN I assume you’re better off than 80-90% of the world) are now saying about climate change, screw the poor, they need to have expensive energy, expensive food, and according to you no affordable housing. Why? Because you think the world will be ruined, because that’s what your media is telling you, and you haven’t even looked at the scientific facts on this. You know, maybe you should give up all your possession and live on rice and beans for the next 10 years, knowing you’ve done your bit for the climate, and then see how you feel. Edit: removed personal attack at the end. It was unnecessary.
    - dasil003 4y ago
      I was with you until the last sentence. Why the vitriol? This is fundamentally a hard problem and I have a hard time defining an attitude towards climate change that I feel 100% good about.
    - crtified 4y ago
      That's a whole lot of traits and mindsets you've unfairly assigned to me. And that's part of the perennial problem with discussion nowadays. It's near impossible to speak without being pigeonholed and caricatured : "omg! you dared to tangentially hint that prioritising building comes with some downsides! one of them! you must, therefore, also hold this, this, this, and this unfavourable worldview! how horrid you are!!". It's all a bit silly. And ironic, because I'm actually disabled, and on a really tiny income within the scale of my country. I already make my difference by living a low impact life, practicing what I preach. I'm in my 40's and I've never owned a car, and it's not because I can't drive. I consume so much less than my countrypeople, in general in life. While my friend is earning, and consuming, $150K worth of "whatever" per year, goods, consumables, flights here and there for this and that luxury frivolity, raising his kids rich-person style, I'm living a simple life at home making a lot out of a little. There'll be no kids for me. Screw the poor?? I am one of the poor. Regardless, I still see the basic Occam's reality that our species as it stands (and with massive inertia) is currently saturating this planet's resources in many different ways. And the mindset that we can fix everything by getting busy will always be somewhat paradoxical. Because, as you point out, everything we need is already right there, stockpiled in the hands of a greedy minority.
- christkv 4y ago
  Don't forget that we are entering into a new cold (lukewarm) war over the next couple of years if this keep going which will require a complete re-jig of the entire world economic infrastructure as things are going to have to brought back and produced locally or near-shored to friendly countries. I can't see this not affecting inflation as cost of goods will increase.
  - nyc_data_geek1 4y ago
    I have a hunch this has been happenomg for a while. Less food to go around, for example, as a major fertilizer exporter is currently fighting a land war on their territory.
  - rnk 4y ago
    There will also be many more manufacturing jobs in the west, that will be really good for people that don't have access to a good job today. I wonder what that will do to inflation with more people better employed.
- stephen_g 4y ago
  Go back to the pre-neoliberal tax rates and have the highest income tax brackets go up to 60-70%?
  - QuadmasterXLII 4y ago
    Hell, restore the exact tax code from the end of the Reagan presidency and call it the “Reagan was right bill”. It would still be a massive step towards a balanced budget
    - dantheman 4y ago
      Even better go the spending levels from back then.
      - pibechorro 4y ago
        Ding ding.
      - me_again 4y ago
        It's interesting to play out what it means in more detail. Try one of the many online 'balance the budget" games like https://us.abalancingact.com/2022-federal-budget https://us.abalancingact.com/2022-federal-budget . Total federal outlays in 1989 were $1,143,744M in today's dollars. That's less than is currently spent on Medicare and Medicaid, ignoring everything else in the budget. So you'll have to make some pretty substantial alterations.
        tl 4y ago
        Your tool does not allow for classic federal tax rates. It caps in the high 30s claiming higher taxes "do not work" in spite of the fact tax rates were double that for decades.
        me_again 4y ago
        Interesting, perhaps this isn't the best one. It's more the exercise of trying to tweak revenue and spending that I am recommending than this particular site. Otherwise people seem to imagine that the problem is much easier than it is.
- smmn88 4y ago
  Why don't you all come and join us in Europe? We have what you are looking for: - Universal high quality health care - Free education including high quality universities - Cheap or even free quality childcare - A social system that has everyone's back if shit hits the fan No need to introduce socialism as some here seem to advocate. History has shown that this fails 100 out of 100 times, and it's been tried in every thinkable constellation. Europe IMO has a better approach vs the US - still enough incentives to work hard, but aiming to afford everyone a humane existence. The main threat I see is that the balance is shifted too much to socialism over here, stifling innovation and ultimately destroying the wealth that funds all these goodies.
  - pibechorro 4y ago
    Because its a slippery slope. A little socialism always leads to too much.
    - kelseyfrog 4y ago
      Why call out the fallacy by name when you use it?
  - jhbadger 4y ago
    Part of the problem is that "socialism" is such a vague term, at least in the US. The most prominent self-defined socialist in the US, Bernie Sanders, doesn't want a Bolshevik revolution but basically just move the US to be more like Canada and Western Europe with increased safety nets and universal health care and free/cheap university education. On the other hand, yes, there are various fringe groups who are actually into Marx and collective ownership of everything despite the disasters they led to historically.
    - smmn88 4y ago
      Look at comments further below - "forceful redistribution" etc. This is as bad as it gets and I think people don't know what they are talking about. Eastern Germany started this way - "no one is intending to build a wall" they said, until one day, it was there.
- patrick451 4y ago
  > Even with remote work (which is being clawed back), this isn't stabilizing and there isn't enough housing (esp. affordably). It takes years before that much housing can be built, assuming we legalize it (YIMBY v NIMBY). We don't have a strong growing population without immigration so there is no future generation big enough in this economic Ponzi scheme. So stop immigration, let the population contract, and the housing problem takes care of itself.
  - vineyardmike 4y ago
    It'll take time for that many people to die off and free up housing, plus who will work the jobs? Who will buy the stuff? We need more workers (record low unemployment in 2023), and more consumers (to generate more profits without more profit margins), and more tax payers (to cover fixed government costs). We should basically open the borders, and enforce that those entering work fairly against Americans to keep them from driving down wages. This wouldn't be an issue if the business acted respectably.
7speter 4y ago
Unemployment is supposed to go up as interest rates go up. Not all downturns are as extreme as the great recession or the Great Depression
- flanked-evergl 4y ago
  I have always understood it to be the other way round, lower interest rates make for higher employment as money is easier to come by. Here is a source that confirms my understanding : https://homework.study.com/explanation/what-is-the-relationship-between-interest-rates-and-employment.html https://homework.study.com/explanation/what-is-the-relations... Can you explain the reasoning behind your understanding or provide some source to back it up?
  - sseagull 4y ago
    I think that is what the parent said. Interest rates go up, unemployment goes up/employment goes down. The reverse would then be true. (Unless the parent edited their comment)
    - flanked-evergl 4y ago
      Yeah, it does say it, maybe I just misread.
jonny_eh 4y ago
> Given increasing unemployment Hasn't the latest jobs reports shown that unemployment is decreasing? https://www.cnn.com/2023/03/10/economy/february-jobs-report-final/index.html https://www.cnn.com/2023/03/10/economy/february-jobs-report-...
- SkyPuncher 4y ago
  Sorry, I probably should have labelled this "increasing layoffs". You're right that numbers as a whole are going up.
icelancer 4y ago
Savings and Loan Crisis had similar issues. Volcker raised interest rates extremely fast to combat inflation, which put a bunch of banks' assets during ZIRP underwater. Regulations have controlled a lot of the serious problems back then, but there is no getting away from the fundamentals. Also, during QE, the Fed bought tons of overpriced MBS assets, and they're losing money right now for the first time in a long time. This doesn't really matter since they can't become insolvent; they just print money. But that has inflationary effects itself. This is a much more complicated (probably worse) situation than most want to admit.
- pas 4y ago
  can you please elaborate on how the Fed is losing money now? thanks!
coffeebeqn 4y ago
This all really reflects on the fed strategy. They are raising interest until… something breaks. And things are now starting to break

vineyardmike 4y ago

I think the issue is way worse than all this, and way harder to solve - we're basically on the edge of the roaring 20s. inflation is high because companies are increase profit margin, and companies are increasing margin because there isn't enough competition. Companies would never voluntarily lower profitability, and are rewarded for short term actions, incl. layoffs, which are gutting long term stability of these companies. People, businesses, governments are increasingly indebted compared to prior generations. Housing in productive cities is way below demands, while there's empty houses in Detroit and Cleveland. Even with remote work (which is being clawed back), this isn't stabilizing and there isn't enough housing (esp. affordably). It takes years before that much housing can be built, assuming we legalize it (YIMBY v NIMBY). We don't have a strong growing population without immigration so there is no future generation big enough in this economic Ponzi scheme. The working class (with housing and all that) are screwed, while the rich get richer. Eventually there's no where left to turn for profitability though - and no more debt Wall Street can issue to keep the spending up. Then what?

anonyfox 4y ago
Then finally the 99% screwed people realize that this is where (crony) capitalism is supposed to end up in the long run. Time for a forceful redistribution and system change. Can’t happen soon enough.
- bhawks 4y ago
  > Time for a forceful redistribution and system change. Can’t happen soon enough. Sadly revolutions have a really bad track record for the 99%. It may feel good in the short term but the people who end up assuming power are usually much worse. OTOH fractional reserve banking and cronyism are really past their expiration dates. It'd be nice to stop kicking the can down the road - we have technological solutions now.
  - anonyfox 4y ago
    My point is that people should not have to serve or suffer for the system, but the system has to work for them. There is more than enough wealth for everyone, it’s only a distribution problem. For that, modern tech surely can help
    - bhawks 4y ago
      The people created the system though - indirectly thru flawed / corrupt leaders but you get what you get. I'd like to understand now why we'd get a better set of leaders if we tear it all down now. I personally don't have any observations indicating why that would be true. Similarly if you redistribute wealth - what's going to prevent it from becoming unequally distributed again? I'd imagine that a small subset of people would quickly game whatever system is devised and we're back at square one again.
      - anonyfox 4y ago
        Just for demonstration purposes: imagine we get rid of voting alltogether. Instead, a random representative sample of 1000 people is chosen from the population, for some congress, for a year. They rule during that time. Some rules cannot be overruled, like the 1 year limit, no way to game that. Additionally, all communication of the chosen ones must be recorded and public, without exceptions. This basically eliminates corruption or the rise of a „ruling class“, and lobbyism has a much harder task. I would also argue that this will result in much better overall decisions - they might lack some initial knowledge but that is more than offset by missing corruption and cronyism
crtified 4y ago
Several fair points there. The unmentioned element is Environmental / Climate. That is, even if we could instantly magic into completion, all of the affordable housing to meet all global demand, and give it free to all who require it - as in, "hey! problems solved! enjoy your new homes, everybody!" - then the simple environmental load of doing that would put us quite significantly further on the road to ruin, in and of itself. Climate change is here and will increase, so any human strategy involving "speed up! do more stuff! build more stuff!" is also inevitably an Own Goal in some respect. Even some things that we consider to be desperately needed for this or that societal reason.
- zpeti 4y ago
  First off, the actual scientists, like the ones at the IPCC say climate change will only slow growth, it won’t ruin us. Your point - is basically what most well off (and since you’re on HN I assume you’re better off than 80-90% of the world) are now saying about climate change, screw the poor, they need to have expensive energy, expensive food, and according to you no affordable housing. Why? Because you think the world will be ruined, because that’s what your media is telling you, and you haven’t even looked at the scientific facts on this. You know, maybe you should give up all your possession and live on rice and beans for the next 10 years, knowing you’ve done your bit for the climate, and then see how you feel. Edit: removed personal attack at the end. It was unnecessary.
  - dasil003 4y ago
    I was with you until the last sentence. Why the vitriol? This is fundamentally a hard problem and I have a hard time defining an attitude towards climate change that I feel 100% good about.
  - crtified 4y ago
    That's a whole lot of traits and mindsets you've unfairly assigned to me. And that's part of the perennial problem with discussion nowadays. It's near impossible to speak without being pigeonholed and caricatured : "omg! you dared to tangentially hint that prioritising building comes with some downsides! one of them! you must, therefore, also hold this, this, this, and this unfavourable worldview! how horrid you are!!". It's all a bit silly. And ironic, because I'm actually disabled, and on a really tiny income within the scale of my country. I already make my difference by living a low impact life, practicing what I preach. I'm in my 40's and I've never owned a car, and it's not because I can't drive. I consume so much less than my countrypeople, in general in life. While my friend is earning, and consuming, $150K worth of "whatever" per year, goods, consumables, flights here and there for this and that luxury frivolity, raising his kids rich-person style, I'm living a simple life at home making a lot out of a little. There'll be no kids for me. Screw the poor?? I am one of the poor. Regardless, I still see the basic Occam's reality that our species as it stands (and with massive inertia) is currently saturating this planet's resources in many different ways. And the mindset that we can fix everything by getting busy will always be somewhat paradoxical. Because, as you point out, everything we need is already right there, stockpiled in the hands of a greedy minority.
christkv 4y ago
Don't forget that we are entering into a new cold (lukewarm) war over the next couple of years if this keep going which will require a complete re-jig of the entire world economic infrastructure as things are going to have to brought back and produced locally or near-shored to friendly countries. I can't see this not affecting inflation as cost of goods will increase.
- nyc_data_geek1 4y ago
  I have a hunch this has been happenomg for a while. Less food to go around, for example, as a major fertilizer exporter is currently fighting a land war on their territory.
- rnk 4y ago
  There will also be many more manufacturing jobs in the west, that will be really good for people that don't have access to a good job today. I wonder what that will do to inflation with more people better employed.
stephen_g 4y ago
Go back to the pre-neoliberal tax rates and have the highest income tax brackets go up to 60-70%?
- QuadmasterXLII 4y ago
  Hell, restore the exact tax code from the end of the Reagan presidency and call it the “Reagan was right bill”. It would still be a massive step towards a balanced budget
  - dantheman 4y ago
    Even better go the spending levels from back then.
    - pibechorro 4y ago
      Ding ding.
    - me_again 4y ago
      It's interesting to play out what it means in more detail. Try one of the many online 'balance the budget" games like https://us.abalancingact.com/2022-federal-budget https://us.abalancingact.com/2022-federal-budget . Total federal outlays in 1989 were $1,143,744M in today's dollars. That's less than is currently spent on Medicare and Medicaid, ignoring everything else in the budget. So you'll have to make some pretty substantial alterations.
      - tl 4y ago
        Your tool does not allow for classic federal tax rates. It caps in the high 30s claiming higher taxes "do not work" in spite of the fact tax rates were double that for decades.
        me_again 4y ago
        Interesting, perhaps this isn't the best one. It's more the exercise of trying to tweak revenue and spending that I am recommending than this particular site. Otherwise people seem to imagine that the problem is much easier than it is.
smmn88 4y ago
Why don't you all come and join us in Europe? We have what you are looking for: - Universal high quality health care - Free education including high quality universities - Cheap or even free quality childcare - A social system that has everyone's back if shit hits the fan No need to introduce socialism as some here seem to advocate. History has shown that this fails 100 out of 100 times, and it's been tried in every thinkable constellation. Europe IMO has a better approach vs the US - still enough incentives to work hard, but aiming to afford everyone a humane existence. The main threat I see is that the balance is shifted too much to socialism over here, stifling innovation and ultimately destroying the wealth that funds all these goodies.
- pibechorro 4y ago
  Because its a slippery slope. A little socialism always leads to too much.
  - kelseyfrog 4y ago
    Why call out the fallacy by name when you use it?
- jhbadger 4y ago
  Part of the problem is that "socialism" is such a vague term, at least in the US. The most prominent self-defined socialist in the US, Bernie Sanders, doesn't want a Bolshevik revolution but basically just move the US to be more like Canada and Western Europe with increased safety nets and universal health care and free/cheap university education. On the other hand, yes, there are various fringe groups who are actually into Marx and collective ownership of everything despite the disasters they led to historically.
  - smmn88 4y ago
    Look at comments further below - "forceful redistribution" etc. This is as bad as it gets and I think people don't know what they are talking about. Eastern Germany started this way - "no one is intending to build a wall" they said, until one day, it was there.
patrick451 4y ago
> Even with remote work (which is being clawed back), this isn't stabilizing and there isn't enough housing (esp. affordably). It takes years before that much housing can be built, assuming we legalize it (YIMBY v NIMBY). We don't have a strong growing population without immigration so there is no future generation big enough in this economic Ponzi scheme. So stop immigration, let the population contract, and the housing problem takes care of itself.
- vineyardmike 4y ago
  It'll take time for that many people to die off and free up housing, plus who will work the jobs? Who will buy the stuff? We need more workers (record low unemployment in 2023), and more consumers (to generate more profits without more profit margins), and more tax payers (to cover fixed government costs). We should basically open the borders, and enforce that those entering work fairly against Americans to keep them from driving down wages. This wouldn't be an issue if the business acted respectably.

7speter 4y ago

Unemployment is supposed to go up as interest rates go up. Not all downturns are as extreme as the great recession or the Great Depression

flanked-evergl 4y ago
I have always understood it to be the other way round, lower interest rates make for higher employment as money is easier to come by. Here is a source that confirms my understanding : https://homework.study.com/explanation/what-is-the-relationship-between-interest-rates-and-employment.html https://homework.study.com/explanation/what-is-the-relations... Can you explain the reasoning behind your understanding or provide some source to back it up?
- sseagull 4y ago
  I think that is what the parent said. Interest rates go up, unemployment goes up/employment goes down. The reverse would then be true. (Unless the parent edited their comment)
  - flanked-evergl 4y ago
    Yeah, it does say it, maybe I just misread.

jonny_eh 4y ago

> Given increasing unemployment Hasn't the latest jobs reports shown that unemployment is decreasing? https://www.cnn.com/2023/03/10/economy/february-jobs-report-final/index.html https://www.cnn.com/2023/03/10/economy/february-jobs-report-...

SkyPuncher 4y ago
Sorry, I probably should have labelled this "increasing layoffs". You're right that numbers as a whole are going up.

icelancer 4y ago

Savings and Loan Crisis had similar issues. Volcker raised interest rates extremely fast to combat inflation, which put a bunch of banks' assets during ZIRP underwater. Regulations have controlled a lot of the serious problems back then, but there is no getting away from the fundamentals. Also, during QE, the Fed bought tons of overpriced MBS assets, and they're losing money right now for the first time in a long time. This doesn't really matter since they can't become insolvent; they just print money. But that has inflationary effects itself. This is a much more complicated (probably worse) situation than most want to admit.

pas 4y ago
can you please elaborate on how the Fed is losing money now? thanks!

coffeebeqn 4y ago

This all really reflects on the fed strategy. They are raising interest until… something breaks. And things are now starting to break