Economics

[Eunos_Cosmo]

One thing that I've been thinking about lately (with the background of a pretty crazy stock market and massive government stimulus) is what will happen if/when there is a large (>40%) stock market crash. What happens in any stock market crash? Isn't it essentially a redistribution of wealth from the people who didn't get out in time to the people who cashed in at the peak? While valuations are destroyed, valuations only exist on paper...the cash that went into the system is preserved, is it not? So if a few people come out of the stock market mania with enormous wealth, while most probably lose than what happens to the broader economy? Too many dollars chasing too few products results in inflation. That's a common refrain. But can many many dollars exist that do not chase products/services? I doubt many billionaires hold much of their cash in savings accounts...but if they did, doesn't that effectively remote it from the system? As wealth inequality continues to soar is liquidity and money velocity decreasing? If it is, that would lead me to believe that inflation won't happen.

 

[Danoff]

One thing that I've been thinking about lately (with the background of a pretty crazy stock market and massive government stimulus) is what will happen if/when there is a large (>40%) stock market crash. What happens in any stock market crash? Isn't it essentially a redistribution of wealth from the people who didn't get out in time to the people who cashed in at the peak? While valuations are destroyed, valuations only exist on paper...the cash that went into the system is preserved, is it not? So if a few people come out of the stock market mania with enormous wealth, while most probably lose than what happens to the broader economy? Too many dollars chasing too few products results in inflation. That's a common refrain. But can many many dollars exist that do not chase products/services? I doubt many billionaires hold much of their cash in savings accounts...but if they did, doesn't that effectively remote it from the system? As wealth inequality continues to soar is liquidity and money velocity decreasing? If it is, that would lead me to believe that inflation won't happen.

There's no currency "in" the stock market. It's out of the stock market doing other things, buying stuff, being loaned out, velocitizing. Theoretically, if called, the cash in circulation needs to be capable of buying the stock in the stock market at the price it is in the stock market. When the stock value goes down, the cash in circulation doesn't need to buy as much stock. This means the amount of cash, compared to what it has to buy, is higher, not lower. That's inflation. It used to be that it took $10T (or whatever, totally made up) to buy the stock in the stock market, now it takes $6T, that means that we have $4T extra dollars that are no longer spread across the market.

I feel like we've talked about this before.

The money already changed hands prior to this crash event you're predicting. That money is where it's going to be. The crash is just people who have stock that was worth one thing one day, now having stock that is worth less the next day. It's not re-distributive, it's a loss of value. That loss of value is particularly held among people that are heavily invested in stock. It would not generally be assumed to be a transfer of wealth from the poor to the rich, but rather the rich losing something of value, and the money in circulation no longer needing to account for it.

 

[Keef]

Economics is dope. It works like this: If you're born to a rich family, you just screw around for a few decades until your dad dies and then you get all his money! And you stay rich! You can either run his old company or just snort cocaine on the yacht you inherited, it's fine!

Or we could raise inheritance taxes to where they used to be to make sure that every new generation of people actually has to work and create and earn. Maybe funnel that revenue to charities, or science, or fund public education with it, or universal healthcare, or increased access to college for the poorest families who have no inheritance at all. Cut off elite nepotism at the bud and allow poorer and less connected people to actually gain skills and compete at higher levels. Another trick of economics is that not everybody can win, that's just a fact, but as it sits the rules on who will or won't win are already written. No wonder so many Americans feel like they have no say in what happens. They don't.

 

[Danoff]

Economics is dope. It works like this: If you're born to a rich family, you just screw around for a few decades until your dad dies and then you get all his money! And you stay rich! You can either run his old company or just snort cocaine on the yacht you inherited, it's fine!

In the US, even extreme wealth is gone in 3 generations. How old do you think people typically are when their parents die?

Or we could raise inheritance taxes to where they used to be to make sure that every new generation of people actually has to work and create and earn.

So the goal is to knock people down? Usually the goal is to lift people up.

Maybe funnel that revenue to charities, or science, or fund public education with it, or universal healthcare, or increased access to college for the poorest families who have no inheritance at all.

...which is the vast majority. And rich people, especially at the end of life, funnel lots of money into chairty.

Cut off elite nepotism at the bud

Nepotism? I thought we were talking about inheritance.

Another trick of economics is that not everybody can win, that's just a fact,

Explain to me how "economics" has rule that says not everyone can win. Support your "fact".

 

[Eunos_Cosmo]

This is somewhat related to above, but mostly just a venting exercise. My experience in California (as well as some lingering Randism) leaves me to conclude that any intervention into the natural course of economics at the structural level should be very, very carefully considered. Many people are aware of the crises/struggles/failures/challenges that California is currently facing. And the more I think about it, the more it's hard to look past just two laws enacted in the 1970s that have built a moat around the beneficiary group at the literal expense of everyone else.

1. Proposition 13
2. CEQA

Proposition 13 - very simple:

Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.

The proposition decreased property taxes by assessing values at their 1976 value and restricted annual increases of assessed value to an inflation factor, not to exceed 2% per year. It prohibits reassessment of a new base year value except in cases of (a) change in ownership, or (b) completion of new construction. These rules apply equally to all real estate, residential and commercial—whether owned by individuals or corporations.

Sounds great, right? Your property taxes can only go up 2% per year as long as you own your house. It's hard not to see this as a tremendous benefit to existing home owners...and it is. They have been enjoying that gravy train for 45 years now. But here are the unintended consequences:

Real property values are grossly out of sync with the tax revenue collected. People are still paying 1% tax against 1976 homes values. Meaning there are people, especially in the Bay Area who are paying a 1% tax on assessed values of around $100,000 against property that actually has a market value 10x or more higher. Want to know why I have to pay some much income tax? Because the state has to have high income taxes to make up for the property tax shortfalls. It's why schools are underfunded.

Not only that, but the specific wording of the law "except in cases of (a) change in ownership" hugely incentives people to not sell their home, ever!,...because if they get a new one, they lose their enormous tax benefit. This is why an enormous bulk of "starter" homes in California are occupied by people who have been there for 40-50 years. It was their starter home! They never moved because the tax law incentivized them not to. The existing housing inventory is severely constrained by people aging in place. It's shocking the amount of trust/probate sales that take place in the Bay Area versus homes being sold by a living owner - that is to say, a significant portion of the inventory is reliant on people dying in their homes to become available. People looking to buy starter homes are literally on waiting for people to die. (California has just passed a modification of prop13 that allows people to shift their tax benefit to a new home...meaning they can move and keep their benefit. While in theory this should help to get old people the **** out of the bay area, I'm afraid that they will just bring the distortion/problem to other areas and drive up the values there - at best.)

Just to give a particularly egregious example of this, consider the Los Angeles Country club, which should be mentioned is a private club. The estimated real value of the property it sits on is $10 BILLION (it is 300 acres in Beverly Hills). If you took the standard ad-valorem property tax rate, the club would pay $100,000,000 (that's one hundred million dollars) in property tax a year. They actually pay $200,000 a year in property tax. That works out to a 0.002% rate or 0.2% of what they actually should be paying. I'm sure the state of California and the city of Los Angeles make up this $99,800,000 deficit with higher taxes for everyone else. So I am subsidizing the LA country club's tax bill through income tax.

Ah yes, but what about new construction! That surely gets around the economic distortions of Prop 13. Yes it does, that's where CEQA comes in.

CEQA is far more complex but here is the basic explanation:

The California Environmental Quality Act (CEQA) is a California statute passed in 1970 and signed in to law by then-Governor Ronald Reagan,[1][2] shortly after the United States federal government passed the National Environmental Policy Act (NEPA), to institute a statewide policy of environmental protection. CEQA does not directly regulate land uses, but instead requires state and local agencies within California to follow a protocol of analysis and public disclosure of environmental impacts of proposed projects and, in a departure from NEPA, adopt all feasible measures to mitigate those impacts.[3] CEQA makes environmental protection a mandatory part of every California state and local (public) agency's decision making process. It has also become the basis for numerous lawsuits concerning public and private projects.

Now it's fair to say that CEQA is well intentioned and that protecting the environment is an important consideration. The kind of limitless junkspace sprawl of DFW or Houston or Phoenix is not good use of land. However, there is a component of CEQA that has utterly weaponized it against all development. That's because almost anyone can sue to stop the development of a construction project, any construction project, under the pretense of environmental concern. It has become the favored bludgeoning tool of NIMBYists and union extortionists. They often do not succeed, but they can almost always delay - and delays are a pretty serious outcome for developers. Just the threat of CEQA intervention is a chilling factor for them. There is a housing project near me that has been going through litigation for 15 years because the residents of the area simply do not want the project to be built.

Or how about a construction union, bizarrely, suing to stop the construction of a 1,000-unit residential construction project because there may be bird collisions. Yeah, a construction union. That sure sounds like good faith...just to be clear, there are a myriad of ways to prevent bird strikes of glass buildings, it is typical for Audubon societies to present recommendations. It is not typical for construction unions to sue over that issue. And also, just to be clear, CEQA can stop a project that has been approved (even unanimously approved!) by the planning entity having jurisdiction. This particular project may be delayed years for this one suit.

So proposition 13 strangles the liquidity of the existing housing market (and state tax revenue, which they make up for by billing me more) while CEQA belabors, at best, the construction of anything new. Taken together, Prop13 and CEQA represent enormous supply-side distortions in the economy of California that predictably result in sky-high property values and a housing crisis. Thanks, Ronald.

It's outside the scope of this post, but I'd like to make special mention of unions because they, too, have distorted the economics in California to the breaking point. Union demands and the teeth that they have recently killed a 13,000-unit housing project in east bay because the developer would have taken a loss on the project if they had met the union pay demands. The city council sided with the union and voted to stop the project. So instead of 13,000 units of housing during a housing crisis, and jobs during an economic catastrophe, that 5,000 acre site remains vacant and useless. I absolutely love the reaction from the head of the construction trades council:

“We look at this as a victory,” he said. “We also look at it as an opportunity to get back to building this project by finding a master developer that will play by the rules the city of Concord has put in place. We are not going to sit on our thumbs. The Building Trades Council and the city will be working on finding a replacement for Lennar.”

Sure, buddy. I'm sure developers will look at this process and think, oh yeah I want some of that!

Before you start feeling sympathy for little guys making up the unions, I've met bay area union electricians who make $200,000/year without overtime. That is above what electrical engineers make in the bay area..

 

[Keef]

In the US, even extreme wealth is gone in 3 generations. How old do you think people typically are when their parents die?

Three generations, or over 100 years of economic and political dominance centered on maintaining that generational wealth.

So the goal is to knock people down? Usually the goal is to lift people up.

The goal of the hyper-wealthy is to maintain their wealth and control at any cost, including actively holding down the poor majority. They don't give a **** about lifting people up, and they laugh to the bank as they write books teaching us how to invest and how to get rich. It is legally impossible for the majority of Americans to get rich. We can't even day trade penny stocks to pass the time! The people who were already rich made wealth inaccessible, they wrote the system, and then they wrote the self-help books to troll us.

...which is the vast majority. And rich people, especially at the end of life, funnel lots of money into chairty.

Rich people funnel miniscule proportions of their wealth into charity, and that's before we factor in the purchasing power of their wealth. If I funnel 10% of my annual pay to charity that's a whopping $4,000. That's five months of rent! That's a reliable used car! That's my entire multi-engine rating needed to advance my career! That's an entire semester at Ohio State! That's a chunk of the medical bills sitting on my desk! That's a dumptruck of money and I've got way more important things to use it for than giving it to charity. I cannot afford to donate that to charity.

But if somebody worth $400 million gives $40 million to charity? That seems like a lot of money but actually it's just one of their several investment mansions, all of which are skyrocketing in value. That's just a portion of their stock portfolio which fluctuates by millions from week to week. Literally losing $40 million in the trash will not put them at risk of a medical bill going to collections, or being able to study that semester, or saving for that downpayment on their first house. They don't worry about their credit score. The $360 million they have left is still more than an airline pilot could save in a dozen lifetimes, and they could maintain a roof over their head in my $700 apartment for...514,285 months. 42,857 years. Or it could pay for 535 people to have a $700 roof over their head for an entire 80 year lifetime. That's ****ing insane, vomit-inducing wealth. Just a ballpark number I'm pulling from down-under here, but for somebody worth $400 million to donate as much as that $4,000 matters to me, they'd have to donate, like, $350 million. If I donated $4,000 once in a decade which is probably all I could manage, they'd still have $50 million to invest for a decade and see where it goes. Elon Musk and Jeff Bezos certainly would've turned that back into another $350 million donation within a decade. I feel like you either never did or have lost grasp of the actual value of money, and how much a few small number of people control the will of hundreds of millions of people via their world-dominating wealth.

Nepotism? I thought we were talking about inheritance.

Nepotism is the natural consequence of generational wealth, where family members, children, grand children, all happily stumble into positions of tremendous power through the connections they had no choice but to make as a toddler. You know this. The practice is despicable, and the people who engage in it are evil.

Explain to me how "economics" has rule that says not everyone can win. Support your "fact".

My facts are the entirety of human history, where at ever moment of our entire history there were winners and there were losers, and the finishing (and starting) positions were almost universally decided by the people who had already won.

 

[Danoff]

Three generations, or over 100 years of economic and political dominance centered on maintaining that generational wealth.

Probably not over 100 years. Depends on how you count, but it's almost certainly less than 100. And it's not "economic and political dominance", especially by the 3rd generation. It's more like maybe the first one is "economic dominance" and the next one is "powerful" and the next one is "kinda muscular" and then "normal".

The goal of the hyper-wealthy is to maintain their wealth and control at any cost, including actively holding down the poor majority.

Such class warfare. Nobody needs to hold anyone down (in America) to "maintain their wealth".

They don't give a **** about lifting people up, and they laugh to the bank as they write books teaching us how to invest and how to get rich.

You're so full of demonization for people you don't seem to understand.

It is legally impossible for the majority of Americans to get rich.

Citation needed.

The people who were already rich made wealth inaccessible, they wrote the system, and then they wrote the self-help books to troll us.

Inaccessible? How? Remember, wealth is created. It is not a zero sum game. You do not need to swindle someone out of theirs to have some of yours. You can create it by yourself.

Rich people funnel miniscule proportions of their wealth into charity, and that's before we factor in the purchasing power of their wealth. If I funnel 10% of my annual pay to charity that's a whopping $4,000. That's five months of rent! That's a reliable used car! That's my entire multi-engine rating needed to advance my career! That's an entire semester at Ohio State! That's a chunk of the medical bills sitting on my desk! That's a dumptruck of money and I've got way more important things to use it for than giving it to charity. I cannot afford to donate that to charity.

But if somebody worth $400 million gives $40 million to charity? That seems like a lot of money but actually it's just one of their several investment mansions, all of which are skyrocketing in value. That's just a portion of their stock portfolio which fluctuates by millions from week to week. Literally losing $40 million in the trash will not put them at risk of a medical bill going to collections, or being able to study that semester, or saving for that downpayment on their first house. They don't worry about their credit score. The $360 million they have left is still more than an airline pilot could save in a dozen lifetimes, and they could maintain a roof over their head in my $700 apartment for...514,285 months. 42,857 years. Or it could pay for 535 people to have a $700 roof over their head for an entire 80 year lifetime. That's ****ing insane, vomit-inducing wealth. Just a ballpark number I'm pulling from down-under here, but for somebody worth $400 million to donate as much as that $4,000 matters to me, they'd have to donate, like, $350 million. If I donated $4,000 once in a decade which is probably all I could manage, they'd still have $50 million to invest for a decade and see where it goes. Elon Musk and Jeff Bezos certainly would've turned that back into another $350 million donation within a decade. I feel like you either never did or have lost grasp of the actual value of money, and how much a few small number of people control the will of hundreds of millions of people via their world-dominating wealth.

First of all, you just seemed to try hard to demonstrate the opposite of what you were saying. So you came into this saying rich people donate very little, and then kinda made a case for why you donate little, but rich people can actually donate a lot!

Then you kinda went nuts over values. I think you're failing to understand how people like Musk and Bezos are "rich". They own a lot of stock in a single company. And they can't even liquidate big portions of that without tanking the stock price. If musk started trying to cash out his stock, it would send prices down hard. So he has to just sit on it. You say it makes money, but only if Tesla goes up, or Amazon. If not, it loses money... millions... in a single day. It's not nearly the same calculus that you're talking about. You can sit here and pretend that it goes nowhere but up, but that's not the truth of it. And in fact it's highly volatile, plummets, and is very difficult to access.

Now sure, if they need a few million, they can cash it out. No problem (and pay lots of tax). But it's not like they have 100 billion in an interest bearing savings account. They also don't "dominate" the world. World domination looks a lot more like what Trump attempted (badly) a short few weeks ago, and less like what Musk does.

Nepotism is the natural consequence of generational wealth, where family members, children, grand children, all happily stumble into positions of tremendous power through the connections they had no choice but to make as a toddler. You know this. The practice is despicable, and the people who engage in it are evil.

What? No, Nepotism is not a natural consequence of generational wealth. Nepotism is its own thing.

My facts are the entirety of human history, where at ever moment of our entire history there were winners and there were losers, and the finishing (and starting) positions were almost universally decided by the people who had already won.

It's not a game. There aren't winners and losers. I wish you could understand this. There's just life... yours, mine, Elon Musk's. And we're spending it. Money can make you more comfortable, less stressed, and even give you some interesting choices. But it doesn't fundamentally change your life unless you're scraping at the edge - which in America, is unlikely. I have lived on part time minimum wage, and I have very different means now. And I've experienced most of what is in between.

The greatest thing that made my life amazing when I was making minimum wage was my wife (girlfriend at the time), who got very nervous for me once when we were at the grocery store and I bought $30 of groceries and wasn't entirely sure whether my debit card could ring it. These days, I'm far from worry about anything like that. What's the greatest thing that makes my life amazing today? My wife.

I think if you understood how rich I am compared to some of these billionaires, you might start thinking that relationship inequality is where class warfare should really happen.

 

[GranTurNismo]

Thoughts on this?

I also made sure that those numbers are corrected before posting.

 

[Eunos_Cosmo]

Ceo pay as proportion of typical worker pay during:

Reagan: 32x
Trump: 320x

(It must be said that it was almost 400x at the height of the dotcom bubble, under Clinton)

 

[Keef]

Sitting on cash describes what I'm doing perfectly. And paying off debts rapidly describes exactly what I'll do when I start getting paid again, eventually, maybe, hopefully. And engaging in various activities to improve my credit score which has been absolutely demolished during this pandemic, but hey, I won't be able to afford a house for years and don't want one anyway so I don't really care.

Edit: Except that student loan. My minimum is hilariously cheap so that bastard is going to the grave with me.

 

[DK]

Same here (apart from the paying off debts part, kinda hard to do that without any ), but it's more of a case of not really needing to buy anything rather than worrying about job security. There's no point buying a car when I don't have a licence, I've got a ton of jumpers and jackets that aren't in tatters, really the only thing I'm splurging on is buying lunch every day and some cans of craft beer.

 

[Dotini]

For the first time in years, US quarterly GDP has slipped into negative growth territory, minus 1.4%.
Experts are sure this is temporary, and growth will resume for the remainder of the year. However, these same experts are forecasting a full-on recession for next year.

 

[Keef]

For the first time in years, US quarterly GDP has slipped into negative growth territory, minus 1.4%.
Experts are sure this is temporary, and growth will resume for the remainder of the year. However, these same experts are forecasting a full-on recession for next year.

So we can thank China and Russia for ruining the 2020s? Who woulda thought.

 

[Dotini]

Suddenly there is a global debt crisis affecting over 100 developing countries. What's in your wallet?

 

[GranTurNismo]

This is a pretty dystopian read from the New York Times, highlighting how more and more companies are adopting a strategy called "premiumization". In essence, market existing products as increasingly "premium" or upmarket, produce less, charge more for said product, make even fatter profits, and effectively shut out lower-income buyers from the market. I'm sure we're all well aware of this occurring in the auto market, but this shift is happening in many other sectors. Even WD-40 is offering a "premium" can now with an adjustable nozzle.

The effects of this on inflation in both the short and long term are worrisome, to say the least. Artificially higher prices and lower production will inevitably lead to consumers spending more and more for the same goods (or slightly premium-ified versions of them not proportional to the price hike), prolonging inflation to begin with. In the case of the auto market, for example, even when spending cools, lower income and middle class buyers will be forced to pay more for used cars to account for lower vehicle production and an influx of higher-end models as opposed to compact/economy cars.

We cannot forget that corporate greed also plays an instrumental role in inflation, in addition to the obvious (supply chain woes, post-pandemic spending surge, and the invasion of Ukraine). Markets simply aren't self-regulatory. Corporations' constant, by-design thirst for ever-increasing growth will inevitably push them to hyper short-term, unsustainable, anti-competitive behavior, especially in the absence of sufficient governmental regulation. It's really no secret that many corporations, across sectors, have recorded record profits driven by the surge in inflation since 2021, and its particularly disturbing that these trends are here to stay. It seems more and more obvious that corporations' need short-term gains simply cannot be rectified with the health and longevity of the overall economy.

Is the Entire Economy Gentrifying?

Companies are trying to maintain fat profits as the economy changes, making “premiumization” their new favorite buzzword.

www.nytimes.com

 

[Danoff]

This is a pretty dystopian read from the New York Times, highlighting how more and more companies are adopting a strategy called "premiumization". In essence, market existing products as increasingly "premium" or upmarket, produce less, charge more for said product, make even fatter profits, and effectively shut out lower-income buyers from the market.

...all that does is generate space in the market for another product.

 

[Joey D]

We cannot forget that corporate greed also plays an instrumental role in inflation, in addition to the obvious (supply chain woes, post-pandemic spending surge, and the invasion of Ukraine).

Most of the inflation is just corporate greed. If everything were truly more expensive, companies wouldn't be making record profits, they'd be maintaining roughly the same growth rate.

I don't think the supply chain thing really is a thing either, it's just a manufactured shortage to keep supply low when demand is high so companies can charge more. I mean, GM has already paused the production of its trucks to keep "optimal inventory." Never mind that dealers still don't have an inventory like they once had. There are two Chevy dealers within 25 miles of where I live and in total, they have 33 Silverados available in all configurations. None of them are work trucks and the cheapest one is $53,000 despite the base MSRP for a Silverado 1500 is $36,000. I get not having one that cheap on the lot, but not having something in the low $40k's? That seems suspect.

Unfortunately, our government is so bought that they fight tooth and nail to prevent a start-up to foster competition. Cars are a bad example since making vehicles is difficult, but take anything from clothes to bookshelves. Everything is rigged against competition and the politicians don't care because they're collecting their bribes donations to keep passing laws to stifle competition.

A truly free market would allow competition to come along and undercut these companies making "premium" products and charging and arm and a leg. I don't think that's possible though unless someone has a ton of capital to start their own business.

 

[Keef]

Most of the inflation is just corporate greed. If everything were truly more expensive, companies wouldn't be making record profits, they'd be maintaining roughly the same growth rate.

I don't think the supply chain thing really is a thing either, it's just a manufactured shortage to keep supply low when demand is high so companies can charge more. I mean, GM has already paused the production of its trucks to keep "optimal inventory." Never mind that dealers still don't have an inventory like they once had. There are two Chevy dealers within 25 miles of where I live and in total, they have 33 Silverados available in all configurations. None of them are work trucks and the cheapest one is $53,000 despite the base MSRP for a Silverado 1500 is $36,000. I get not having one that cheap on the lot, but not having something in the low $40k's? That seems suspect.

Unfortunately, our government is so bought that they fight tooth and nail to prevent a start-up to foster competition. Cars are a bad example since making vehicles is difficult, but take anything from clothes to bookshelves. Everything is rigged against competition and the politicians don't care because they're collecting their bribes donations to keep passing laws to stifle competition.

A truly free market would allow competition to come along and undercut these companies making "premium" products and charging and arm and a leg. I don't think that's possible though unless someone has a ton of capital to start their own business.

The proof is just in the pudding. Profit rateshave skyrocketed above anything else, totally out of line with other indicators. I'd say the corporations, with their market study departments et al, are absolutely the drivers of inflation in the form of greed, and the rest is just people trying to make sense of it and keep up. Just like how corporate landlords and developers are the primary drivers of real estate price trends while private sellers lag behind, following price trends from months ago.

A wonderful example is my own apartment complex which recently switched management companies. New management immediately doubled the price of carports. Why? Not sure because they were barely 50% full to begin with. If they can't fill carports at $30 a month they sure as hell aren't going to fill them at $70 a month.

 

[Danoff]

I don't think the supply chain thing really is a thing either,

It has been 100% a thing. It's not a vast conspiracy, supply chain problems (due to covid) have lingered, especially in products that rely on Chinese manufacturing of some sort.

I mean, GM has already paused the production of its trucks to keep "optimal inventory." Never mind that dealers still don't have an inventory like they once had. There are two Chevy dealers within 25 miles of where I live and in total, they have 33 Silverados available in all configurations. None of them are work trucks and the cheapest one is $53,000 despite the base MSRP for a Silverado 1500 is $36,000. I get not having one that cheap on the lot, but not having something in the low $40k's? That seems suspect.

That kind of thing is only possible until someone undercuts it.

Unfortunately, our government is so bought that they fight tooth and nail to prevent a start-up to foster competition. Cars are a bad example since making vehicles is difficult, but take anything from clothes to bookshelves. Everything is rigged against competition and the politicians don't care because they're collecting their bribes donations to keep passing laws to stifle competition.

Crony capitalism is a thing, for sure. It's not exactly new, and I can't think of new legislation that can be pointed to for the types of supply chain problems we've seen contribute to overall inflation. I'm not saying it doesn't exist, more that I don't think it lines up nicely with this particular complaint.

The proof is just in the pudding. Profit rateshave skyrocketed above anything else, totally out of line with other indicators.

Inflation has provided a transitional opportunity that some have jumped on. But it's not stable.

 

[Joey D]

It has been 100% a thing. It's not a vast conspiracy, supply chain problems (due to covid) have lingered, especially in products that rely on Chinese manufacturing of some sort.

My fault for that, I meant to type "not a thing anymore." There are still some lingering supply chain issues, but it's much less of an issue than it was with probably the weak point being truck drivers (at least in America anyway).

That kind of thing is only possible until someone undercuts it.

Unfortunately, nothing will undercut it because there's no reason to. With cars, they're just offering longer and longer term loans while charging more and more for the vehicle. Basically, undercutting at a dealership now means paying MSRP instead of a grossly overinflated "market adjustment." The obvious answer would be to buy something used, but for a reason unknown to me, used vehicle inventories are way lower than they one were.

Crony capitalism is a thing, for sure. It's not exactly new, and I can't think of new legislation that can be pointed to for the types of supply chain problems we've seen contribute to overall inflation. I'm not saying it doesn't exist, more that I don't think it lines up nicely with this particular complaint.

I don't see it at the federal level, but it's very much a thing at the state and local levels. If someone wants to open a new business around where I live, you need politicians to sign off on it and they won't do it unless you grease the wheels. It's corruption and it's acceptable to enough people where corrupt people keep getting voted in or running "unopposed."

In Utah, lobbying made it impossible for certain things to happen too. The real estate market was the biggest thing where landowners bought so many politicians that there was practically zero competition in the rental market and thus, prices were way overinflated. Had competition been allowed, people wouldn't be spending $3,000 for a mediocre apartment. The LDS Church put its fingers in everything as well and used religion to strong-arm politicians to get their way, so it was not only corrupt, but it was also a lightweight theocracy.

I think most of the time, the government is responsible for screwing up the market by attempting to interfere with it. While some regulation is definitely needed, if those regulations are just based on what lobbyists want instead of what's actually beneficial, it doesn't really help anything. Unfortunately, the government has inserted itself into the economy so much that you can't really pull the two apart without completely tanking things.

 

[ROAD_DOGG33J]

On the used car market, one of the things I read is that less people are leasing cars now. And given the new car shortage, it makes sense that the used car market would be affected as well as it will cost more for somebody to part with their car.

 

[Danoff]

I think most of the time, the government is responsible for screwing up the market by attempting to interfere with it. While some regulation is definitely needed, if those regulations are just based on what lobbyists want instead of what's actually beneficial, it doesn't really help anything. Unfortunately, the government has inserted itself into the economy so much that you can't really pull the two apart without completely tanking things.

Much of the inflation that we're feeling now the sting of covid monetary policy (across Trump and Biden), and a little bit of fed mismanagement following that. A lot of people are complaining about inflation, but one thing that I basically never hear anywhere, by anyone, is that this inflation period may be far preferable to the collapse that might have happened without that easy money that occurred during covid.

I don't know why this is an unacceptable message to everyone, but I think it's an important one to consider. Much of what's happening now is the price we pay for massive assistance during the pandemic.

Corporate profits are transitional.

Here's Jon Stewart arguing with an economist over this very subject:

 

[Eunos_Cosmo]

Much of the inflation that we're feeling now the sting of covid monetary policy (across Trump and Biden), and a little bit of fed mismanagement following that. A lot of people are complaining about inflation, but one thing that I basically never hear anywhere, by anyone, is that this inflation period may be far preferable to the collapse that might have happened without that easy money that occurred during covid.

I don't know why this is an unacceptable message to everyone, but I think it's an important one to consider. Much of what's happening now is the price we pay for massive assistance during the pandemic.

Corporate profits are transitional.

Here's Jon Stewart arguing with an economist over this very subject:

What worries me more than inflation (which doesn't bother me that much) is the complete collapse of the ZIRP economic model...which seems worryingly and increasingly possible. Basically the economic paradigm we've been living in since the early 80s and especially post 2008 appears to be ending. It could be a painful transition that sees asset values across the board drop substantially and remain depressed for quite a while. We got used to cheap & easy money.

 

[Danoff]

What worries me more than inflation (which doesn't bother me that much) is the complete collapse of the ZIRP economic model...which seems worryingly and increasingly possible. Basically the economic paradigm we've been living in since the early 80s and especially post 2008 appears to be ending. It could be a painful transition that sees asset values across the board drop substantially and remain depressed for quite a while. We got used to cheap & easy money.

Deflation? I'm not sure I expect to see asset values drop very much, especially across the board. The federal government benefits too much from a stable inflation rate to just eliminate it (which would be painful anyway). I'd expect to continue to see asset values rise with inflation, and for inflation to remain higher than 2% for a while. That's my guess anyway, but what do I know?

 

[GranTurNismo]

Populism versus elitism in a nutshell:
WARNING: profanity



(They're both wrong, btw)

 

[Danoff]

Populism versus elitism in a nutshell:
WARNING: profanity



(They're both wrong, btw)

Guy is just all over the place. That's just not a coherent argument. I get that he doesn't like the stock market, fine, me neither. But make your points there, why muddy the waters with military spending.

 

[CTznOfTime]

Sadly no one on trump side will be listening to anyone outside their party...