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The issue is that you are not average, which is what the CPI uses. The average American doesn't live in NY or SF and doesn't pay student loans for an elite ins

The issue is that you are not average, which is what the CPI uses. The average American doesn't live in NY or SF and doesn't pay student loans for an elite institution. Here's the issue I see: the rich cities have decoupled from the rest of the American economy. Rich cities are experiencing very high inflation, while poorer parts of the country experience no inflation, or even deflation. The Fed only has one lever. It cannot make money expensive in SF while making it cheap in Detroit. When I visit family in Idaho, I'm sort of shocked how rich I am. But in Seattle I'm squarely middle class. The divide seems to be growing very quickly.

jseliger 12y ago
When I visit family in Idaho, I'm sort of shocked how rich I am. But in Seattle I'm squarely middle class. The divide seems to be growing very quickly. This is mostly an issue of cities restricting housing supply, especially through height limits and parking minimums: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0078XGJXO http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0.... See also https://marginalrevolution.com/marginalrevolution/2015/03/houston-v-california.html https://marginalrevolution.com/marginalrevolution/2015/03/ho...: Last year authorities in the Houston metropolitan area, with a population of 6.2m, issued permits to build 64,000 homes. The entire state of California, with a population of 39m, issued just 83,000. Want to be rich? Get out of Seattle, California, and New York.
- Domenic_S 12y ago
  Oh look, this comment again. California doesn't need a bunch of new permits yet because since the boom & bust there have been literally entire neighborhoods of unfinished (builder went bankrupt or whatever) residential construction. On top of that you can build pretty much wherever you want east of the 5. It's hilarious that you mention parking minimums; a friend of mine moved his industrial business to Idaho because, hey, cheap real estate. Then found out the building he bought wasn't going to work unless he spent some ridiculous 6 figure sum building more parking spaces, the number of which is determined by building square footage and not the actual number of people. It's definitely not a California-only thing.
nostrademons 12y ago
There's probably a causal relationship between the effects you describe. Because the Fed sees prices as deflating in Idaho or Detroit (flyover country is a large portion of the aggregate stats), they pump more money into the economy. They pump more money in by dealing with financial firms in NYC, who then invest that money in VC firms in Silicon Valley, who fund startups because that seems to be where most of the money congeals. As a result, prices rise dramatically in NYC and the Bay Area, but very little of the money actually gets to the Midwest, South, or Mountain states. "Helicopter" Ben Bernanke was roundly mocked for his comment that the Fed should just throw money out of helicopters, but that would probably be both more equitable and yield faster, more easily controlled effects on the economy.

jseliger 12y ago

When I visit family in Idaho, I'm sort of shocked how rich I am. But in Seattle I'm squarely middle class. The divide seems to be growing very quickly. This is mostly an issue of cities restricting housing supply, especially through height limits and parking minimums: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0078XGJXO http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0.... See also https://marginalrevolution.com/marginalrevolution/2015/03/houston-v-california.html https://marginalrevolution.com/marginalrevolution/2015/03/ho...: Last year authorities in the Houston metropolitan area, with a population of 6.2m, issued permits to build 64,000 homes. The entire state of California, with a population of 39m, issued just 83,000. Want to be rich? Get out of Seattle, California, and New York.

Domenic_S 12y ago
Oh look, this comment again. California doesn't need a bunch of new permits yet because since the boom & bust there have been literally entire neighborhoods of unfinished (builder went bankrupt or whatever) residential construction. On top of that you can build pretty much wherever you want east of the 5. It's hilarious that you mention parking minimums; a friend of mine moved his industrial business to Idaho because, hey, cheap real estate. Then found out the building he bought wasn't going to work unless he spent some ridiculous 6 figure sum building more parking spaces, the number of which is determined by building square footage and not the actual number of people. It's definitely not a California-only thing.

nostrademons 12y ago

There's probably a causal relationship between the effects you describe. Because the Fed sees prices as deflating in Idaho or Detroit (flyover country is a large portion of the aggregate stats), they pump more money into the economy. They pump more money in by dealing with financial firms in NYC, who then invest that money in VC firms in Silicon Valley, who fund startups because that seems to be where most of the money congeals. As a result, prices rise dramatically in NYC and the Bay Area, but very little of the money actually gets to the Midwest, South, or Mountain states. "Helicopter" Ben Bernanke was roundly mocked for his comment that the Fed should just throw money out of helicopters, but that would probably be both more equitable and yield faster, more easily controlled effects on the economy.