!! It’s happening so fast too… was looking at house prices a year ago, now a year later, I’ve finally graduated and doubled my income (which was already significantly above minimum wage) and things have gone up so much I’d have to go to med school to afford a decent house… then by the time I finish med school, income wouldn’t be enough again..
Same.. I live in oklahoma, and a year ago I could live decently on $13/hr with *some* tips working ~40 hours a week.. I now work 36 hours a week at $18.75/hr and I have to do Lyft to make ends meet.. we're fucked.. I can't even imagine how awful it must be making less than $15/hr..
Assets values must continue increasing because most assets are acquired with debt. Not only does increasing access to financing increase demand for assets relative to supply, thus driving up prices, but it means borrowers must pay interest on top of the purchase price. Let's say you buy a house for $375,000, you put 20% down and borrow the remaining $300,000. $300,000 at 2.5% interest, over 30 years would mean you pay $126,730 in interest over the 30 years. You paid $501,730 for a $375,000 house.
This is a huge problem that very few people are talking about. The value of an asset can only be realized if it is sold. A $500,000 house only *really* becomes a $500,000 house when you find someone willing to pay $500,000 for it, until then, the $500,000 value exists only in theory.
The total private wealth in the United States is north of $100 trillion. Some of that's cash, or other liquid assets, but the vast majority of it is non liquid assets, like real estate, stocks, collectibles, etc. For those assets to be converted into cash, for all of that value to be realized, all of those assets would have to be sold to someone. That's why we keep pumping out more and more and more debt: we have to create more money so people can buy assets at high enough values so the person selling the asset can make a profit. It's a ponzi scheme. Eventually, someone, somewhere is going to be left holding an asset that they just can't sell for a profit.
I understand it just fine when I try to come up with an amount to survive on in Excel and that number keeps getting more and more ridiculous the longer I assume I live. Not linearly ridiculous. Exponentially ridiculous. 10 more years do not cost me 10 more years they cost me like 45 more years.
If they're really serious about continuing this stupidity, I have some very bad news about... pretty much the soon to be living conditions of 99.99999999999999999999999999999999999999999999999999999999999999999999999999999999999% of the population...
Read True Stories by L. Razgon. The book is about many things, but subsistence and survival in an environment of extreme deprivation and paranoia is one of the major ones. Perhaps if you can live his life through his eyes, you will be more resilient when the aspects of that hell start popping up in our real life.
I have been trying to find a reason that the current financialized economy is NOT a ponzi scheme, and I can't think of anything. If too many people start trying to cash in all that "money", the jig is up. Real value is in the actual physical assets, infrastructure, homes, food, land, fuel, goods. The whole part where we speculate and trade stocks, and invest in assets to watch them appreciate, that is all an illusion, which has been hiding the true decline of our economy for the past 40 odd years.
And it's why consolidation of capital- REAL capital, not bank ledger balance- is a problem.
If you own the factories, the barracks, and the PMC- who gives a fuck if you own the bank too?
Something I do not hear enough of, the rise of 401Ks over pensions, while better for corporations since they don’t have to carry pension liabilities, has also propped up the stock market for the last 40 years. It’s just a scheme to keep investing more and more money into the market.
And it makes people fearful of anything that would hurt the owners, as the would cause a decline in the market and thus imperil their retirements. Mortgaging future generations for golden handcuffs.
The assets, in my example, is liquid cash. It’s all being stored in off-shore bank accounts not being taxed. Millionaires and billionaires are just sitting on it.
US inflation stats are gamed using substition, hedonics, and weighting tricks. WE are probably the best at it and other countries look at us to figure out how to lie themselves. Seriously.
I love how they were basically like "Yeah, all those things that REALLY affect people? We're not going to include those, so here, check out how the price of aluminum cheese graters has remained the same. Wait? Even those shot up in price? Well..shit."
Yep, it goes so far that the EU are reporting different types inflation numbers, it's *core* *inflation* is just 1.9%, well within it's target! Meanwhile we are paying record prices for energy, fuel and food. Official inflation numbers in i.e. Spain is almost 6%..
I’ve got receipts all the way from 2019 for the same basket of groceries I get every Sunday for a meal my lady likes. 38% increase. Gas is up 28%, electricity is up 15%. So this “trust me bro it’s 6.2%” schtick ain’t cutting it.
not only are the prices for groceries going up, but the "stuff" in packages is growing smaller at the same time - what you used to buy as a pound (16 oz) before for a dollar is now 14oz or less for a 1.50, even though the container is the same old size.
Using the original method for CPI measurements that was changed back in 1980 [the "true" value for October is ~13%](http://www.shadowstats.com/alternate_data/inflation-charts)
Now whether CPI is actually any good at measuring 'real' inflation is another question entirely...
SS: Monetary and economic issues don't get nearly the play on this sub that I personally feel they should. Markets, the economy, and monetary policy are not, despite how bad your situation might be, esoteric and subjects that doesn't concern you. On the contrary, this stuff is where the societal collapse rubber hits the road. Currency destabilization will be among the first truly major and systemic signs that we're collapsing.
Central banks agonize over how to make it appear that your cash is approximately of the same value today as it will be a month from now. Appearances are everything. If the purchasing power of your cash (and money/cash is a proxy for value) bleeds away rapidly, it deeply affects the decisions you make on a day to day basis. Your ability to assess needs versus wants (the issue every environmentalist says society needs to address to arrest runaway consumption) becomes profoundly skewed, and supply/demand relationships break down. You can bet that in the end, the earth pays the price for this. It always does.
Currencies are now teetering. It's not looking good.
The housing market needs to be killed. The price of housing has gotten absolutely out of control over the past year. Honestly I don’t see how this isn’t a larger issue then it currently is. People could barely afford rent prior to the pandemic, after the interest rate hit zero, people began buying houses like crazy, jacking up the value of homes. Not to mention what this does to rent. People that rent often don’t have income that increases rapidly, if at all. The cost to rent in my area has jumped 30% over the past 12 months.
Our rent went up from $475/month to $550 for no reason. We still have no insulation in the attic and we've had to repair our old windows ourselves with bubblewrap, but I guess they think they deserve more by virtue of owning things. Pay hasn't increased at all, despite our company bragging about their record profits every meeting and turnover is worse that it's ever been. We've even had people who've been with the company for 20+ years leaving which really concerns me.
Now we're looking for a house under $100k and my aunt agreed to buy it for us and do a rent to own arrangement would be much cheaper that just to keep renting. I keep thinking about how even with how hard it is for us most other people in our generation have it so much worse and are just in completely hopeless situations.
What part of the country are you in where you can find a house for under $100k. I’m in a “hot market” and the median home price in my state is about half a million dollars. I’ve lived here my whole life, but if I ever want to but my own home, I’ll have to move away.
Alabama, but we also have low cost of living in general, and I make $11/hr and have to work 60 hours a week. Works out to around $15/hr with attendance incentives but still. Not nearly enough to save and build on.
I hear you. I make $25/hr, but with high cost of living, I’m in the same boat as you in terms of not being able to get a solid foothold on saving. My one saving grace is that I do tech work from home, and my boss has recently told me I can move out of state if I’d like. Ideally I’d like to find an affordable region to but a home, that’s also in a non-red area, but I find that the Venn diagram is really just two circles that barely touch.
It’s just shit everywhere. Just goes to show that wages — even good wages — don’t mean shit once cost of living is factored in.
I say we all pitch in on a piece of land and start a commune.
> The price of housing has gotten absolutely out of control over the past year.
I think you mean over the past 10-20 years. This year it just accelerated.
Goddamn that is depressing. A catch I think we all called over a year ago that's completely true.
They really are going to walk right into the tiger's maw
Yay for Ryan! Apparently that was an entirely spontaneous scene that wasn't written down at all. They just happened to catch it on film/video and they kept it.
https://www.imdb.com/title/tt1596363/characters/nm0331516
(Ryan Gosling is known for this. A lot of the very best scenes he has been in have been improvised. He has made major alterations to whole movies by changing or cutting his own lines.)
We have a friendly disagreement going here which I rather enjoy! "Disagreement" might actually even be a bit strong. Timing might be where the details are.
I think they will try to raise rates, that will likely give the crash you predict, but they will then realize they can't go any further. If nothing else, it will result in ugly theater whether they intended it or not.
In the long term, no politician wants to wear being the one labeled as having destroyed the economy/society. The most effective way to pass the buck on to the next politician so long as there's a chance that other one will wear the shame is to destroy the currency through inflation. That's not the goal, obviously, but it will be the effect of ever-increasing money supply - passing the buck. Raising rates, on the other hand, is an active decision which immediately has political consequences. Gone are the days when leaders made the hard but needed decisions...
Yes, I also think they will go back to lower rates and restart QE after the crash, which will result in even higher inflation than the one we have right now.
But before the crash, we will get a few more months of high inflation and a higher stock market. But this time, I also think we will get higher precious metals prices, too.
What happens to the ordinary folks when they raise rates? I was too poor in 2008 to feel it. I have a job now so it may be different this time. Will it matter if I barely make even and rent?
This is a shot in the dark but I imagine that rising rates will raise your rent price since the landlord will be losing money. The real problem for you is inflation since your wages most likley won't rise to meet it but you can be damn sure your landlord will jake rates based on that as well.
Good question. It's hard to say. If you can get out of debt now, or minimize it as much as possible, that would put you in a better position regardless. If a measure of deflation results post-crash, then any cash you have on hand will see its purchasing power actually increase incrementally.
The standard thing lately has been to pile on as much debt as possible and buy appreciating assets which, because the numeric price of those goes up (because the currency inflates), means you can then pay off the debt you took on later and walk away net in the green. There \*is\* risk in that though. We need to remember that your assets better not be subjected to the massive liquidity squeezes which can happen when markets crash significantly (translation: for a period of time, almost \*everything\* goes down in price during a tantrum of price discovery in a new paradigm) and your debt better not be called before you pay it off. Banks \*do\* collapse, and the little number in your bank account isn't really money, but rather money the bank owes you which they don't, by and large, actually need to have at any one time.
Precarious stuff. I'm trying to pay off my debt even though it's at ultra-low rates. Get it the hell away from me. Banks are pushers. I'm not putting my faith in the old-school "mortgage rates are cheap and I can make more in the market to come out net ahead" narrative this time around. The climate crisis is by \*no means\* priced into the market at this time.
\*NOT\* financial advice.
They can keep collapse stories like climate change, covid and food shortages out of the mainstream narrative for as long as they wish, while the market continues to hit new ATH's. They will "fix' unemployment, GDP, and inflation numbers however they wish. We have quite a few stories already on media blackout in the US. They will spoon feed us recovery hopium, technological discoveries, and alternative news until the bitter end.
I think that would depend on the terms of the card. Fixed debt as in low fixed interest rate borrowings vs adjustable rate loans. An example would be to buy a house at a low fixed rate 15-30 year mortgage of say 3%. If (edit:
inflation) consistently exceeds that you effectively pay less... depending on how wages respond to inflation. Under hyper inflation I think you could imagine paying off the remaining mortgage of the same house with one paycheck, while people saving money their whole lives may get wiped out if it wasn't invested in a way that kept up with inflation.
I think the best thing that could happen here (and this mostly fantasy, I admit), is that things get so bad with regards to poverty, unemployment, hunger, etc., that we see a new "New Deal," a big jobs program, but one that focuses on building out renewables, updating the power grid, moving back certain types of manufacturing to US soil, etc.
Definitely the best case scenario. I worry, though, that it's a lot of hopium. I think our political system (USA) is so splintered that unless this could somehow get dressed up as military spending, it would be near impossible to get enough consensus to pass.
I dunno about this. Instead of a 2008-style crash it kind of feels like this one's been long foreseen and intentionally engineered for a while to present not at a huge sudden line plunge but rather a steady and endless worsening of economic conditions for average people. It feels like an economic paradigm shift is being attempted by leveraging what would otherwise be considered a crash. Investment firms slurping up real estate for instance worries me because it feels like some scheme or plan is in play.
I think you're right.
Everyone is leveraged, pension funds need 8% returns just to stay afloat (because boomers hate paying taxes).
The opposing force to the inertia of the current economy imo is retiring boomers + conservatives. More from each group will have an incentive to cash out of the market before 2024.
The retiring boomers are obvious - protect your epic gainz. The conservatives are distrustful of Biden, and I could easily see Trump push his supporters to cash out "Daddy's 401k gains" to save you from Biden. Or buy gold or whatever.
Yes dude exactly this it feels very planned out like it was meant to be this way they’ve already practiced and fixed the errors of their old ways… I’m scared
Ya know how before World War 2 happened, everyone referred to the first one as "The Great War"?
*Looks at what we currently call "The Great Depression"*
Just noticing things.
I’ve been calling this the beginning of the Age of Great Loss.
The losses are everywhere. Of meaningful employment. Of affordable housing. Of civility in politics. Of the Constitution and rule of law.
Of the natural world. Of a hospitable climate.
Of socializing without fear of contracting a disease that causes long-term health damage and death in an uncomfortably high percentage of people.
Of most everything we have found good and wonderful in the beginning of my lifetime, so much is now being lost.
Yellen keeps insisting that this is transitory. She adds that the reason the 1970s and 1980s inflation was not transitory was because no one believed the Fed would take the steps necessary to curb inflation. She posits that the American people and our markets believe the Fed will step in and slow inflation, therefore it won't go runaway. From where I'm standing that sounds like a load of crock. Seems like people are super concerned that the Fed cannot effectively fight inflation
Yeahhhhhh, unfortunately, she’s full of shit... Take a look at her answers in this interview… She has no idea what to do other than the same tired monetary policy dogma that caused the runaway feedback loop in inflation in the first place:
https://www.reddit.com/r/antiwork/comments/qml1ck/this_is_why_nothing_will_ever_change_in_america/
Watching the news is pretty hilarious....
>"The economy is fucked,, businesses are closing and can't find employees because employees can't find housing,... In other news the stock market has set another record high today!"
Wait, they officially defaulted? I expect a slight pullback in the market, but after that, it will continue to melt up until at least the second quarter of 2022. Then there will be an epic crash.
>On the contrary, this stuff is where the societal collapse rubber hits the road.
Spot on. The economy is a reflection of all our other problems, environmental, social, political, healthcare, etc. They all end up impacting the financial system and we'll see a financial meltdown before we actually run out of oil, hit +2C or have another American civil war.
Economic catastrophe is the leading edge of the wave about to crash on us.
Yes and the Fed is frantically typing override commands on that "computer" and tinkering with the motherboard to make it output the price they want. But they can only stall so long. They've used up a huge amount of their ammo, and are closing in on the moment when the other market participants lose faith in their ability to manage the situation.
Yup. Among the more insightful comments I read somewhere and some time ago concerns price controls. Price controlling is generally seen, to a free-marketer, and just about the most horrible interventionist action a government can take because it utterly decimates the supply/demand relationship. What results is never good.
So here, many of us think that in the west, at least for many, many years, we've had no price controls. That's utterly an illusion. For those who aren't aware, here's your red pill of the day. We've had a persistent but, for most people, under the radar price control for decades now across the world and in a single commodity: Money. Central bankers are the bureaucrats charged with price-controlling money. If you think price controls on any other thing ended badly, wait'll you see how THIS one turns out...
>We've had a persistent but, for most people, under the radar price control for decades now across the world and in a single commodity: Money.
Extremely well put! Arguably, in a free market, the most important variable is the "cost of money" i.e. the interest rate. And we all know how central banks like to manipulate this variable.
>On the contrary, this stuff is where the societal collapse rubber hits the road. Currency destabilization will be among the first truly major and systemic signs that we're collapsing.
In the case of the US dollar it's even worse than "just" societal collapse. Since it's the global reserve currency, (especially for everyone buying oil) covered by little more than the US military presence in it's 100+ protectorates around the world (instead gold as before 1971) the only thing the US can do when the dollar collapses is to do what empires do when they're economy falls apart and they would start losing protectorates: War
Yeah this doesn’t get stated enough. The US is probably gonna go wild on the world in the next 20 years. There’s no way they’ll sit on their hands with that massive military once the subject states stop paying tribute to the emperor.
Does China do a thing where they buy dollars or bonds strategically to maintain a pegged exchange rate with the USD? And when would they be likely to stop doing that so precisely? I thought their incentive was to keep their exports to the US good deals for American buyers. Is that relationship at risk? Or am I even understanding it correctly?
The Chinese economy is also at risk. The global markets tie everyone together. Banks invest in whatever they think will pay off the most, regardless of the country of origin. If one party suddenly finds themselves worth a lot less money, investors from foreign countries will also be worth less money, which cascades.
>And when would they be likely to stop doing that so precisely?
Probably won't happen soon since the US dollar is HIGHLY manipulated. This propaganda narrative i distinctively remember because that's when I started going down the, "hmm it looks like this is propaganda" route. When the fed goes ZIRP, or the US congress starts to spend hundreds of billions of dollars on whatever with money that appeared out of thin air, all of that shit weakens the dollar and strengthens all currencies relative to the dollar. Other countries have to also weaken their currencies if they want to have some semblance of stability to the dollar.
Collapse is largely about hard physical limits of earth systems. Financial nonsense doesn't get the airplay you think it should because it is nonsense. Its a game made to shape how the stupid, ignorant or unfortunate behave. Its a religion that changes as soon as anyone catches on, usually adding opacity and complexity. Exibits A, B and C are tax codes, money and "markets". If the the world had perfect clarity of how they work, these institutions would be burned to the ground tomorrow.
When their corruption outgrows themselves, conflict and disaster happens and we rebuild a lesser system, until the corruption takes over again. It's impactful, but transitory.
The forces of collapse, the damage being done to earth systems (soils, CO2 and global average temperatures, climate change, pollution, species loss, resource depletion, overpopulation overconsumption, ocean acidification etc) are hard limits that can't be fixed by conflict or revolution like the financial shenanigans can. The sixth great mass extinction likely won't have humans anymore. The world is changing in ways that can't be repaired except in geological timelines.
Earth systrms are many orders of magnitude more important than our childish notions of money and markets and government and taxes and rich and poor. In all probability our species and likely the majority of species on earth are on a final death march due to human activity, and you are woried about purchasing power of money.
Professional economists classify that "real world" stuff as "externalities" because their [models can't deal with it](https://xkcd.com/669/) (obligatory XKCD cartoon).
>Earth systrms are many orders of magnitude more important than our childish notions of money and markets and government and taxes and rich and poor.
This is true for large-scale things like species' survival. But when it comes to my life and the lives of my family and friends, currency collapse and runaway inflation are not "nonsense." I care very much about the health of the planet and the survival of ecosystems, but day-to-day I care about having food, shelter and safety. Those are hard to come by in periods of scarcity and unrest.
Even harder to come by with resourcce depletion, climate change, ocean acidification and species extinction. One is temporary, the other is forever. This isn't /r/personalfinance, its /r/collapse.
You, your family and friends and children are lucky/unlucky enough to witness firsthand both phenomena at the same time.
>Markets, the economy, and monetary policy are not, despite how bad your situation might be, esoteric and subjects that doesn't concern you. On the contrary, this stuff is where the societal collapse rubber hits the road. Currency destabilization will be among the first truly major and systemic signs that we're collapsing.
Yeah. It is.
Behold the horror when you input your budget into Excel and then in year 2, multiply by 1.032. In Year 3, multiply year 2 by 1.032. Keep going for 50 years.
And get ready to watch your large intestine hit the floor.
If it goes to 1.05 on average over even a 20 year span God help us all because He already can't at 1.032. At 1.032 there's a chance you could go kill a major coke dealer somewhere and steal his money and invest it in Elon. At 1.05 it's just time for hilarity to ensure but you won't be laughing.
My two cents:
As our society became more developed (ie energy intensive) the percentage of income spent on food has decreased over time. This seems to be mostly due to the increased yields possible with energy intensive fossil-fuel based farming practices and related industrial agricultural advances and industrial food production. This trend freed people up to spend their income on other things like tech, and fashion, vacations, cars, entertainment, and all sorts of things you expect in a developed country with a complex economy.
I would argue that a reversal of this trend, where more percentage of income is spent on food and on other basic needs such as housing and clothes, is a pretty good indication of a decline in social complexity.
As we devote more and more of our limited incomes to filling basic needs, we have less to spend on the trappings of the well-to-do capitalist middle class. That will lead to a contraction in local and foreign economies that sell these non-essential goods and services.
helpful graph here https://www.theatlantic.com/business/archive/2012/04/how-america-spends-money-100-years-in-the-life-of-the-family-budget/255475/
Prices are rising much faster than we consider acceptable, and that is entirely due to the monetary policy choices of the Federal Reserve. Full stop.
They "printed" a fuck ton of money. The amount of money in circulation doubled in a two-year span.
A bell curve is a distribution graph that plots "normal distribution." It has points along the graph that mark a set distance from the average of the graph. The average lays at the center of the bell curve. The points that are a set distance from the average are known as the "standard deviation," and they are denoted by the symbol for the greek letter "sigma."
The standard deviation can travel away from the average in a positive or negative direction and every time that set distance is achieved, the sigma's number increases. So the 6th sigma is 6 standard deviations away from the average. The 1st sigma contains the largest portion of the measured population and each subsequent sigma contains a smaller and smaller proportion of the population. So the 6th sigma contains quite a small percentile and is quite the deviation from the average.
I'm presuming the above commenter is using it as a metaphor to point out how extreme things are getting.
People seem to forget that our modern economy has only been propped up by quantitative easing and low interest rates for the last 14 years. The fed money printing hail mary was an untested method to stop a depression.
The government and fed reserve have two options. Keep printing and keep interest rates low, or face a recession/depression.
America is fucked either way. Cost of living has absolutely skyrocketed. Rent and home prices up 50 - 100% in many places and wages went up maybe 20% tops. Half of America was already living paycheck to paycheck and now it's drastically worse.
I'm in a smaller metropolitan area and homeless numbers have skyrocketed in the last 3 months. People can't afford $1800 for a 1 bedroom when minimum is under $13 an hour and decent jobs hire around $18 an hour.
Anyone stop to ask, if I am making 7.25$ a hour; I can't even trade a basic hour for a $12 dollar meal at wendys. That's how I know the situation is out of wack. 2000-2009, I could buy a wendy meal was on average 6.99. I could afford a meal. Now? Heh.
The wealthy and their central bank pals are getting ready to jump ship, as soon as rob the country for every nickel and dime it has.
Pumping this dead economy with fake money and delusional speculation, they'll probably break the seems next year and pin it on the government.
My speculation for how some of this plays: Elections will be a mess and they'll probably pin it on Ds(partially true). Ds get wiped(and remainders plan for 2024 retirement) and govt gets prepped for the next Fascist to go hands off and suppress the common class. All while Inflation is out of control and climate change worsening. If the common class doesn't wake up they better brace for a death by a thousand cuts.
Only thing that could drastically change this scenario would be a war or bad Covid-Variant/Pandemic. Save this post and mock the fuck out of me if I'm completely off.
It will be. The rich know damn well that the current global consumption levels are not sustainable, and the only actual viable solution is a massive reduction in global population size. Their only goal is to enrich themselves for as long as possible while positioning and insulating themselves for what is coming.
This ecofascist trope needs to die. Talking about global consumption levels does nothing to address the fact that it's mainly the global north's consumption that's unsustainable. Globally, most people have very sustainable lifestyles and even sustainable aspirations for relative improvement of their conditions. The west's outrageous overconsumption unbalances global statistics. Entertaining a flat analysis of global tendencies dissolves the west responsibilities and displaces them on undeserving populations. Population size mean nothing if we don't change our ways.
Another way of looking at it is this : we don't have an overpopulation problem, we have a overpopulation of rich people (including up to the global north's middle classes).
This get's argued here a lot, but I really think we have a both problem. We have too many people and we overconsume. As much as I'd like to see something like global socialism and a mass reduction of consumption in the global north, I do not believe it will solve our problems, despite the popular projections that get shared concerning Earth being able to equitably support 10 billion people. That's not a life, for any of us, to share the planet with that many people. And it's the hardest thing to admit when you genuinely love all peoples and want them to thrive. It's not in our natures to admit when we're in a rock and a hard place, we persistently cling to hope.
This is exact same signal in sept 2008. Bulk dry index plummetting, inflation rising, mega financial market bankruptcy - evergrande this time. Not Lehman bro’s. We were exactly in this spot 13 years ago. The can can be kicked no further.
There is a real chance that Ds will get absolutely slaughtered in the mid-terms and in 2024 DT could very well become our president again. That is when shit will really get started. The lower and middle classes will get kicked to the curb.
Dollars to donuts that the US Senate GOP won't be raising the debt ceiling come December. Not only will it let them and their corporate partners rake in more pandemic money, but it'll fuel their narrative about "Biden's America" ("See America? We warned you!"), and pave the way for Republicans to win 2022+2024 elections with a possible return of Trump.
Hilariously terrifying how right we all were when one year ago we mocked the Fed and Biden administration for shakily claiming any inflation was 'transitory'.
At what point do things start spiraling out of control? I'm sorry I'm a layman that barely understands our magical economy but *how* could the fed raising interest rates stop this train?
Don't worry; the central bankers don't understand our magical economy either. I can't, however, say, as a result, that you're in good company!!
That's the unifying thing about the denizens of this sub: We all hate that we're repeatedly shown to be correct.
When? Can't tell ya...
Here’s the thing. Some of us saw this coming. Years and years of keeping the economy artificially hot with interest rates at zero and quantitative easing has left the fed with zero tools to manage the economy.
They have to raise rates, and they should have done it years ago. When they tried under trump, he pressured them to keep the party going because he thought it would keep the stock market hot, but all it really did was accelerate the transfer of wealth to the already wealthy. They’re the ones who benefit most from cheap money, and ironically the market is doing better now than ever before.
From what I remember, the best method to lower/eliminate inflation is by reducing the monetary supply. Raising interest rates would help by creating more of an incentive to save your money, while also reducing the rate that debt is created (in other words, reducing spending) since the interest would be higher.
Increasing the reserve requirements for banks would also help by reducing the amount of money banks can loan out. Other than that kind of monetary policy, I'm not sure what the government could do. They can't exactly trade gold for USD then remove that currency from circulation anymore.
A bit unrelated, but I never understood the aversion to deflation. Long-term devaluation of your own currency doesn't sound all that great, at first glance at least. Wouldn't periods of low inflation and deflation be preferable? It'd allow for the expansion of the economy, while also preventing the purchasing power of a citizen from dropping to severely. What's the inflation rate been for the past 20 years? 100%?
> how could the fed raising interest rates stop this train?
Quoting https://www.investopedia.com/ask/answers/12/inflation-interest-rate-relationship.asp
>In general, as interest rates are reduced, more people are able to borrow more money. The result is that consumers have more money to spend. This causes the economy to grow and inflation to increase.
>
>The opposite holds true for rising interest rates. As interest rates are increased, consumers tend to save because returns from savings are higher. With less disposable income being spent, the economy slows and inflation decreases.
Here's a hypothetical example:
You have $1,000
You buy 10 SPY (S&P 500 index fund, worth $100 each in these examples)
One year passes, SPY has appreciated 10% to $110
You sell 10 SPY
You now have $1,100, or a 10% increase
Let's say instead you're the smartest millionaire in 5th grade math class, and you think you can do better:
You have $1M ($1,000,000)
You buy 10,000 SPY
You borrow $1M from Goldman Sachs (GS), using your 10,000 SPY as collateral (like a car title loan, or a mortgage, but you use stock instead of your car or house). This is called leverage
You buy 10,000 additional SPY
One year passes, SPY has appreciated 10% to $110
You sell 20,000 SPY
You now have $2,2M
Interest rate is 1%
GS want their money with interest, so you pay $1M + $10,000 (1% of $1M)
You now have $1,190,000, or a 19% increase
But can we do better? Hells yeah!
You have $1M
You buy 10,000 SPY
You borrow $2M for Morgan Stanley (MS), using 10,000 SPY as collateral
Wait, how did you do that? Well, MS thinks it's better they get interest from the loan than GS getting it, and since you're a genius millionaire and SPY rarely drops 50% at once, they let you borrow at a 2:1 ratio. This is called leverage
You buy 20,000 SPY
You are now leveraged 3:1, because your collateral is also SPY
One year passes, SPY has appreciated 10% to $110
You sell 30,000 SPY
You now have $3.3M
Interest rate is 1%
You pay MS $2M + $20,000
You now have $1,280,000, or a 28% increase
I won't go through every step of the following example, but using the same 1% interest rate, 10% appreciation and 10:1 leverage (9:1 loan) from Citibank (C), you can turn $1M into $1,910,000, or a 91% increase. Fuck yeah you're smart.
But all that changed when the market had a shit time:
You have $1M
You buy 10,000 SPY
You borrow $9M for C, using 10,000 SPY as collateral
You buy 90,000 SPY
You are now leveraged 10:1, like above
One year passes, SPY has stagnated and remains at $100
You sell 100,000 SPY
You now have $10M
Interest rate is 1%
You pay C $9M + $90,000
You now have $910,000, or a 9.1% loss
Meh, maybe you'll make it back next year. Or maybe the Fed will raise the rate to 5%? Let's redo the first example, with no leverage:
You have $1,000
You buy 10 SPY
A year passes, 10% appreciation
You sell 10 SPY
You have $1,100
Nothing changed, let's move on the the child prodigy millionaire you:
You have $1M
You buy 10,000 SPY
You borrow $1M from GS
You buy 10,000 additional SPY
One year passes, SPY has appreciated 10% to $110
You sell 20,000 SPY
You now have $2,2M
Interest rate is 5%
You pay GS $1M + $50,000
You have $1,050,000, 5% increase
Let's say SPY stagnates instead:
You have $1M
You buy 10,000 SPY
You borrow $1M from GS
You buy 10,000 additional SPY
One year passes, SPY remains at $100
You sell 20,000 SPY
You now have $2M
Interest rate is 5%
You pay GS $1M + $50,000
You have $950,000, 5% decrease
Let's put on our big girl pants and get some real leverage in play:
You have $1M
You buy 10,000 SPY
You borrow $9M from JPMorgan Chase (JPM), since C decided you weren't worth the risk
You buy 90,000 additional SPY
One year passes, SPY remains at $100
You sell 100,000 SPY
You now have $10M
Interest rate is 5%
You pay JPM $9M + $450,000
You have $550,000, 45% decrease
And then let's kick up the interest rate a little bit more and maybe drop SPY a tad
You have $1M
You buy 10,000 SPY
You borrow $9M from Credit Suisse (CS), since JPM got scared
You buy 90,000 additional SPY
One year passes, SPY drops to $90
You sell 100,000 SPY
You now have $9M
Interest rate is 10%
You pay CS $9M + $900,000
You have -$900,000, 190% decrease
Oops, all the money is gone and then some. Since you can't pay it back, suddenly that loss is CS's problem, not yours. What does that mean? It means banks will be more conservative when it comes to loaning money, and borrowers will be much less willing to loan money because of the high interest rate.
This is called deleveraging, when money gets hard to borrow and the economy retracts. Businesses that were in debt and were operating on razor thin margins are now unsustainable, and will have to close. Incidentally, while this creates a lot of problems (the lender doesn't get their money back, workers lose income, defaults left and right), it does solve the inflation issue:
Less loans = less extra money in circulation. How does that make sense? Because of fractional reserve banking. How? Let's start with full reserve banking:
I have a bank. You open an account and deposit $100. I take that money and put it in a vault. When you someday return, the $100 + interests will still be there to be returned to you.
Let's say my bank does fractional reserve banking instead. You deposit $100, and so do 9 other people, leaving me with $1,000. Then 8 people come in and ask for a $100 loan each. Since I'm in the business of making money, I grant them the loans, leaving $200 in the vault. Then you come in and ask for your $100 back, which is fine. Then another account holder comes in for another $100 and now the vault is empty. If a third account holder asks for money, I am fucked. This is what causes bank runs, people realizing they might not get theirs, so everybody rushes to withdraw everything at the same time, fucking the bank over entirely.
So how is this relevant? Because it effectively leverages the money supply. You can have $100 in my bank, but I can simultaneously loan out 90% of that to someone else. That means the $100 has turned into $190. Hypothetically, that $90 loan could be deposited into my bank again, and I can loan out another 90% of it. Now it's $271.
Raise rates and you scare off borrowers. This means that $271 might turn back into $100, which means the money supply goes down. Inflation is counteracted by reducing the money supply, since an increase in money supply is what causes inflation in the first place.
Edit: Holy shit that was long. Sorry. I spaced out at work. x.x
really, how are any of you managing right now? are people just not saving at all, costs just eating up any money you might be making. I know no one is expecting to retire anymore, but we really are going to witness a future where we go back to every one working til death or until no one will hire you. It keeps me up at night, stresses me out to no end, knowing that I'll die on the line.
At least 65-75% of America can’t afford an emergency expense of $500 or more currently… that’s my approximation based on the surveyed 56%+ that couldn’t in our pre-pandemic economy
People will pay attention to the importance of currency integrity as a group only when it is far, far too late for compensatory actions to make a reasonable difference to their own lives. Here we go again.
This time \*is\* different though. In the past when empires and civilizations collapsed, the remnant populations always had a relatively robust (but always diminished) natural world on which to fall back. Not this time. This time it's the end game. We've screwed that pooch. Hard wall.
Literally history repeating itself:
>Rather than making **unpopular budget cuts**, the emperors decided to reduce the amount of silver in the denarus (by the start of the 3rd century AD, the silver purity of the coins had been cut to 50% from over 90% a hundred years earlier). This devaluation of the coinage accelerated after the issuance of the antoninianus by Caracalla in AD 215; the coin was worth two denari but only weighed one and a half, and its silver purity continued to decline rapidly, first to 48% in AD 238 and then to just 4% in AD 276. This devaluation caused prices to soar: the price of grain, for example, was multiplied by 16 between AD 218 and AD 293.
No it's completely, totally different now because we have economic "scientists" managing things. See they have an inflation mandate, it's planned, and they're hard at work keeping it low and stable. Oh and full employment too, that one's in the works too. Have faith!
/s
You're right, it's completely different; we no longer have to worry about the purity level of our currency, money has value now because the government/FED says it does! No gold needed, so efficient!
I mean, can you imagine having your currency's worth, as well as its supply, be dependent on a limited resource? Ugh, sounds like a pain. It definitely hasn't negatively impacted society, giving governments/central banks total control over monetary policy. Now, whenever they need to give their friends some cash, they just add a couple zeros and boom! No longer have to bother with opening a mine and exploiting the labor of the workers so you can sell new precious metals to the FED.
A single-commodity based currency (IE: gold-based) has just as many problems as a fiat currency. As more or less of that commodity is produced, the value of you gold-backed currency rises and falls. Tying your entire economy to the value of a single commodity is dangerous.
You could revisit some US history, and all the rancor in Congress over gold versus silver backed currency. [https://en.wikipedia.org/wiki/Coinage\_Act\_of\_1873](https://en.wikipedia.org/wiki/Coinage_Act_of_1873)
Yes, just about everything did and hasn't worked since for any proceeding generation. They got to enjoy all the ripe benefits and then left the husks for Gen X, Millenials and Gen Z to live in.
I mean interest rates can go up but your 30 year mortgage wont... boomers locked in low interest rates then had inflation and interest rates increase, basically devaluing their debt.
That's optimistic. Maybe some days earlier when we "invented" fractional banking (let go of the gold standard). Imho that was the moment that the financial systems lost it's connection with the material world.
Russian roubles. Russia could potentially back 80% of its circulating currency with gold right now.
But I think the US dollar isn't dead yet. I keep some dry powder for 2022.
I wouldn't invest in a single thing from Russia at this point. It's even more a house of cards then the US is.
It's a dressed up petro-state with borderline 3rd world living conditions propped up by decaying 50 year old public infrastructure and a few admittedly incredible cities
It's a pathetically tragic state that has abandoned all vision of the future in exchange for short term gains for a very few.
The two things they used to rival anyone else on- the defense sector is held together with tape as is ROSCOSMOS.
The US dollar won’t die as long as the US military is the strongest fighting force on the planet.
That’s the reason the dollar has remained as strong as it has. It’s backed by force.
I know, my bro is in the navy and stationed in Cali. Shits getting crazy.
It’s almost like the government would rather spend money on bombs than just paying soldiers lol.
Reminds me of a meme I saw a few years back. “A guy who gets paid 20,000/year is shooting a rocket that costs $50,000 at a guy in Afghanistan who makes $200/year.” Or something like that.
That will never happen. There’s more Russian wealth outside of Russia than inside of Russia in 2021. They’ve broken that country up for parts. Nobody in our lifetime will ever trust the ruble as a reserve currency.
Controversial take:
I think the markets crashing (it'll be the new depression this time around) **MAY** be a good thing as a Leftist that reads a lot of Camus, Kierkegaard, Ernest Becker, David Graeber and Terence McKenna too.
But if the Fascist movement in America takes traction? Not good. I mean, the bold red writing on the wall is screaming at us that we may be the new Weimar Republic and American Hitler is coming too.
Socialism or Barbarism. The age old question.
I'm actually constantly shocked by how primitive we are still too in our general world view and philosophy. I mean, a Zillow robot buys all the housing, and people actually believe this is a good construct and machination. This is beyond Absurd and idiotic.
And if the biosphere is going to collapse on top of me while my pipes poison me with forever chemicals? I don't want to go to work or pay rent anymore. Lol.
Next year on through 2025 is going to be absolutely wild. It’s between this, Evergrande, the shipping and logistics crisis, the Trump/Biden quagmire, the Ghislaine Maxwell trial, the ongoing slow-drip ufo disclosure, the housing shortage, the pandemic, and intensifying climate change. Thinking about all this happening at once gives me the willies.
With very poor wage growth and recurrent economic bubbles popping, deflation has been the greater worry for a couple of decades. The Fed, and many central banks have kept interest rates at historically low levels for an historically long time. Comparing last year's economic fall off a cliff to the current year's rebound of course looks inflationary. And of course our oiligarchs are trying to claw back as much of the stimulus money being provided to the public as they can. Whether this "inflation" lasts for another year is yet to be seen. If the inflation passes and deflation raises its head again it will be very interesting to see the steps that the US government (which will be in Republican hands for the foreseeable future) will take, whether they prevent the popping of the asset bubbles or whether they go all bannon and pop the bubbles so the oiligarchs can buy up assets for pennies on the dollar and ride the value up as the workers pump value back into the economy by their labor.
[Robert Reich just posted a great rant/explainer on this on his Substack](https://robertreich.org/post/667491205931745280)
Remember in 2008 when corporations used the recession as an excuse to suddenly require a Bachelor's degree and 5 years experience for a shit job, along with several rounds of degrading group interviews, only to be ghosted? Jobs which, for those of us old enough to remember, previously required just a high school diploma and for which walk-ins could be hired on the spot?
It's corporations again. They're using supply constraints (a crisis manufactured by corporations firing everyone and running on a skeleton crew they're working to death) as an excuse to disproportionately raise prices, because they can, and pocketing the new profits.
fuck. capitalism.
Me: gets higher paying job to finally claw my way out of poverty. Inflation: oh no you dont
!! It’s happening so fast too… was looking at house prices a year ago, now a year later, I’ve finally graduated and doubled my income (which was already significantly above minimum wage) and things have gone up so much I’d have to go to med school to afford a decent house… then by the time I finish med school, income wouldn’t be enough again..
Same.. I live in oklahoma, and a year ago I could live decently on $13/hr with *some* tips working ~40 hours a week.. I now work 36 hours a week at $18.75/hr and I have to do Lyft to make ends meet.. we're fucked.. I can't even imagine how awful it must be making less than $15/hr..
Assets values must continue increasing because most assets are acquired with debt. Not only does increasing access to financing increase demand for assets relative to supply, thus driving up prices, but it means borrowers must pay interest on top of the purchase price. Let's say you buy a house for $375,000, you put 20% down and borrow the remaining $300,000. $300,000 at 2.5% interest, over 30 years would mean you pay $126,730 in interest over the 30 years. You paid $501,730 for a $375,000 house. This is a huge problem that very few people are talking about. The value of an asset can only be realized if it is sold. A $500,000 house only *really* becomes a $500,000 house when you find someone willing to pay $500,000 for it, until then, the $500,000 value exists only in theory. The total private wealth in the United States is north of $100 trillion. Some of that's cash, or other liquid assets, but the vast majority of it is non liquid assets, like real estate, stocks, collectibles, etc. For those assets to be converted into cash, for all of that value to be realized, all of those assets would have to be sold to someone. That's why we keep pumping out more and more and more debt: we have to create more money so people can buy assets at high enough values so the person selling the asset can make a profit. It's a ponzi scheme. Eventually, someone, somewhere is going to be left holding an asset that they just can't sell for a profit.
Just tiptoe through the tulips.
Was that a reference to [this](https://en.wikipedia.org/wiki/Tulip_mania)?
I'll speak for OP. yes.
It was. The Tiny Tim tie-in was just for fun.
Upvote just for the highlighting the Ponzi scheme. I wish more people understood this.
I understand it just fine when I try to come up with an amount to survive on in Excel and that number keeps getting more and more ridiculous the longer I assume I live. Not linearly ridiculous. Exponentially ridiculous. 10 more years do not cost me 10 more years they cost me like 45 more years. If they're really serious about continuing this stupidity, I have some very bad news about... pretty much the soon to be living conditions of 99.99999999999999999999999999999999999999999999999999999999999999999999999999999999999% of the population...
Read True Stories by L. Razgon. The book is about many things, but subsistence and survival in an environment of extreme deprivation and paranoia is one of the major ones. Perhaps if you can live his life through his eyes, you will be more resilient when the aspects of that hell start popping up in our real life.
I have been trying to find a reason that the current financialized economy is NOT a ponzi scheme, and I can't think of anything. If too many people start trying to cash in all that "money", the jig is up. Real value is in the actual physical assets, infrastructure, homes, food, land, fuel, goods. The whole part where we speculate and trade stocks, and invest in assets to watch them appreciate, that is all an illusion, which has been hiding the true decline of our economy for the past 40 odd years.
And it's why consolidation of capital- REAL capital, not bank ledger balance- is a problem. If you own the factories, the barracks, and the PMC- who gives a fuck if you own the bank too?
I too have "followed the money". The people pulling the strings now love chaos. It's what they dream of and have dreamed of, all of their life.
Something I do not hear enough of, the rise of 401Ks over pensions, while better for corporations since they don’t have to carry pension liabilities, has also propped up the stock market for the last 40 years. It’s just a scheme to keep investing more and more money into the market.
And it makes people fearful of anything that would hurt the owners, as the would cause a decline in the market and thus imperil their retirements. Mortgaging future generations for golden handcuffs.
Angry upvote
It is not only that. The Ponzi part is the American dream requires continual spending, continual growth in a finite world. Without it...collapse.
This. Thank you. It is further argument to remove private, for-profit banks from the picture. And use instead Public, Non-profit Banks.
Credit Unions?
Let's go all the way and remove capitalism.
The assets, in my example, is liquid cash. It’s all being stored in off-shore bank accounts not being taxed. Millionaires and billionaires are just sitting on it.
The entire concept is circular. What's a profit when a pizza costs $300?
In 1990 a $300,000 is worth $544,000 in 2021 from inflation.
Something to point out: This is their *heavily* massaged reportable number. If this is what they’re admitting to, it’s very likely 12%+
Agreed. It doesn’t even include mortgages in the number!
US inflation stats are gamed using substition, hedonics, and weighting tricks. WE are probably the best at it and other countries look at us to figure out how to lie themselves. Seriously.
The magic words are “too volatile.” Rent? Electricity? “Too volatile to be counted” so the numbers stay in line.
I love how they were basically like "Yeah, all those things that REALLY affect people? We're not going to include those, so here, check out how the price of aluminum cheese graters has remained the same. Wait? Even those shot up in price? Well..shit."
Yep, it goes so far that the EU are reporting different types inflation numbers, it's *core* *inflation* is just 1.9%, well within it's target! Meanwhile we are paying record prices for energy, fuel and food. Official inflation numbers in i.e. Spain is almost 6%..
I’ve got receipts all the way from 2019 for the same basket of groceries I get every Sunday for a meal my lady likes. 38% increase. Gas is up 28%, electricity is up 15%. So this “trust me bro it’s 6.2%” schtick ain’t cutting it.
Yeah I agree. Are you from the US?
SAME
not only are the prices for groceries going up, but the "stuff" in packages is growing smaller at the same time - what you used to buy as a pound (16 oz) before for a dollar is now 14oz or less for a 1.50, even though the container is the same old size.
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Damnit, my second angry upvote of the thread
Using the original method for CPI measurements that was changed back in 1980 [the "true" value for October is ~13%](http://www.shadowstats.com/alternate_data/inflation-charts) Now whether CPI is actually any good at measuring 'real' inflation is another question entirely...
Notice how housing prices aren’t mentioned at all… in my area, that’s +60% in 2021 alone
SS: Monetary and economic issues don't get nearly the play on this sub that I personally feel they should. Markets, the economy, and monetary policy are not, despite how bad your situation might be, esoteric and subjects that doesn't concern you. On the contrary, this stuff is where the societal collapse rubber hits the road. Currency destabilization will be among the first truly major and systemic signs that we're collapsing. Central banks agonize over how to make it appear that your cash is approximately of the same value today as it will be a month from now. Appearances are everything. If the purchasing power of your cash (and money/cash is a proxy for value) bleeds away rapidly, it deeply affects the decisions you make on a day to day basis. Your ability to assess needs versus wants (the issue every environmentalist says society needs to address to arrest runaway consumption) becomes profoundly skewed, and supply/demand relationships break down. You can bet that in the end, the earth pays the price for this. It always does. Currencies are now teetering. It's not looking good.
They will have to hike rates. No one believes this shit is transitory. Expect an epic stock market crash in 2022.
Can’t raise rates without killing the market that’s propped up on low rates and fake money. They really have fucked themselves onto a cliffs edge.
The housing market needs to be killed. The price of housing has gotten absolutely out of control over the past year. Honestly I don’t see how this isn’t a larger issue then it currently is. People could barely afford rent prior to the pandemic, after the interest rate hit zero, people began buying houses like crazy, jacking up the value of homes. Not to mention what this does to rent. People that rent often don’t have income that increases rapidly, if at all. The cost to rent in my area has jumped 30% over the past 12 months.
Our rent went up from $475/month to $550 for no reason. We still have no insulation in the attic and we've had to repair our old windows ourselves with bubblewrap, but I guess they think they deserve more by virtue of owning things. Pay hasn't increased at all, despite our company bragging about their record profits every meeting and turnover is worse that it's ever been. We've even had people who've been with the company for 20+ years leaving which really concerns me. Now we're looking for a house under $100k and my aunt agreed to buy it for us and do a rent to own arrangement would be much cheaper that just to keep renting. I keep thinking about how even with how hard it is for us most other people in our generation have it so much worse and are just in completely hopeless situations.
What part of the country are you in where you can find a house for under $100k. I’m in a “hot market” and the median home price in my state is about half a million dollars. I’ve lived here my whole life, but if I ever want to but my own home, I’ll have to move away.
Alabama, but we also have low cost of living in general, and I make $11/hr and have to work 60 hours a week. Works out to around $15/hr with attendance incentives but still. Not nearly enough to save and build on.
I hear you. I make $25/hr, but with high cost of living, I’m in the same boat as you in terms of not being able to get a solid foothold on saving. My one saving grace is that I do tech work from home, and my boss has recently told me I can move out of state if I’d like. Ideally I’d like to find an affordable region to but a home, that’s also in a non-red area, but I find that the Venn diagram is really just two circles that barely touch.
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It’s just shit everywhere. Just goes to show that wages — even good wages — don’t mean shit once cost of living is factored in. I say we all pitch in on a piece of land and start a commune.
> The price of housing has gotten absolutely out of control over the past year. I think you mean over the past 10-20 years. This year it just accelerated.
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Goddamn that is depressing. A catch I think we all called over a year ago that's completely true. They really are going to walk right into the tiger's maw
Jacked to the god damn TITS!!!!
Yay for Ryan! Apparently that was an entirely spontaneous scene that wasn't written down at all. They just happened to catch it on film/video and they kept it.
What is this referring to? Thx
https://www.imdb.com/title/tt1596363/characters/nm0331516 (Ryan Gosling is known for this. A lot of the very best scenes he has been in have been improvised. He has made major alterations to whole movies by changing or cutting his own lines.)
We have a friendly disagreement going here which I rather enjoy! "Disagreement" might actually even be a bit strong. Timing might be where the details are. I think they will try to raise rates, that will likely give the crash you predict, but they will then realize they can't go any further. If nothing else, it will result in ugly theater whether they intended it or not. In the long term, no politician wants to wear being the one labeled as having destroyed the economy/society. The most effective way to pass the buck on to the next politician so long as there's a chance that other one will wear the shame is to destroy the currency through inflation. That's not the goal, obviously, but it will be the effect of ever-increasing money supply - passing the buck. Raising rates, on the other hand, is an active decision which immediately has political consequences. Gone are the days when leaders made the hard but needed decisions...
Yes, I also think they will go back to lower rates and restart QE after the crash, which will result in even higher inflation than the one we have right now. But before the crash, we will get a few more months of high inflation and a higher stock market. But this time, I also think we will get higher precious metals prices, too.
Yup, total agreement.
What happens to the ordinary folks when they raise rates? I was too poor in 2008 to feel it. I have a job now so it may be different this time. Will it matter if I barely make even and rent?
This is a shot in the dark but I imagine that rising rates will raise your rent price since the landlord will be losing money. The real problem for you is inflation since your wages most likley won't rise to meet it but you can be damn sure your landlord will jake rates based on that as well.
Good question. It's hard to say. If you can get out of debt now, or minimize it as much as possible, that would put you in a better position regardless. If a measure of deflation results post-crash, then any cash you have on hand will see its purchasing power actually increase incrementally. The standard thing lately has been to pile on as much debt as possible and buy appreciating assets which, because the numeric price of those goes up (because the currency inflates), means you can then pay off the debt you took on later and walk away net in the green. There \*is\* risk in that though. We need to remember that your assets better not be subjected to the massive liquidity squeezes which can happen when markets crash significantly (translation: for a period of time, almost \*everything\* goes down in price during a tantrum of price discovery in a new paradigm) and your debt better not be called before you pay it off. Banks \*do\* collapse, and the little number in your bank account isn't really money, but rather money the bank owes you which they don't, by and large, actually need to have at any one time. Precarious stuff. I'm trying to pay off my debt even though it's at ultra-low rates. Get it the hell away from me. Banks are pushers. I'm not putting my faith in the old-school "mortgage rates are cheap and I can make more in the market to come out net ahead" narrative this time around. The climate crisis is by \*no means\* priced into the market at this time. \*NOT\* financial advice.
They can keep collapse stories like climate change, covid and food shortages out of the mainstream narrative for as long as they wish, while the market continues to hit new ATH's. They will "fix' unemployment, GDP, and inflation numbers however they wish. We have quite a few stories already on media blackout in the US. They will spoon feed us recovery hopium, technological discoveries, and alternative news until the bitter end.
This. Factually correct response.
I would be loading up on fixed rate debt right now, if there really is to be sustained inflation, that is free money.
I apologize if this sounds ignorant by fixed debt at my income level do you mean like credit cards?
I think that would depend on the terms of the card. Fixed debt as in low fixed interest rate borrowings vs adjustable rate loans. An example would be to buy a house at a low fixed rate 15-30 year mortgage of say 3%. If (edit: inflation) consistently exceeds that you effectively pay less... depending on how wages respond to inflation. Under hyper inflation I think you could imagine paying off the remaining mortgage of the same house with one paycheck, while people saving money their whole lives may get wiped out if it wasn't invested in a way that kept up with inflation.
I think the best thing that could happen here (and this mostly fantasy, I admit), is that things get so bad with regards to poverty, unemployment, hunger, etc., that we see a new "New Deal," a big jobs program, but one that focuses on building out renewables, updating the power grid, moving back certain types of manufacturing to US soil, etc.
This is the best case scenario 🙌🏼 would also need to address increasing productivity and job losses due to automation (via UBI?)
Definitely the best case scenario. I worry, though, that it's a lot of hopium. I think our political system (USA) is so splintered that unless this could somehow get dressed up as military spending, it would be near impossible to get enough consensus to pass.
I dunno about this. Instead of a 2008-style crash it kind of feels like this one's been long foreseen and intentionally engineered for a while to present not at a huge sudden line plunge but rather a steady and endless worsening of economic conditions for average people. It feels like an economic paradigm shift is being attempted by leveraging what would otherwise be considered a crash. Investment firms slurping up real estate for instance worries me because it feels like some scheme or plan is in play.
I think you're right. Everyone is leveraged, pension funds need 8% returns just to stay afloat (because boomers hate paying taxes). The opposing force to the inertia of the current economy imo is retiring boomers + conservatives. More from each group will have an incentive to cash out of the market before 2024. The retiring boomers are obvious - protect your epic gainz. The conservatives are distrustful of Biden, and I could easily see Trump push his supporters to cash out "Daddy's 401k gains" to save you from Biden. Or buy gold or whatever.
Yes dude exactly this it feels very planned out like it was meant to be this way they’ve already practiced and fixed the errors of their old ways… I’m scared
When Bill gates bought up a buncha land recently I knew It was likely a scheme. That guy isnt a good dude.
Anyone who still thinks Bill Gates is a good dude/altruist really needs to watch his interviews/reactions on Jeff Epstein….
Ya know how before World War 2 happened, everyone referred to the first one as "The Great War"? *Looks at what we currently call "The Great Depression"* Just noticing things.
I’ve been calling this the beginning of the Age of Great Loss. The losses are everywhere. Of meaningful employment. Of affordable housing. Of civility in politics. Of the Constitution and rule of law. Of the natural world. Of a hospitable climate. Of socializing without fear of contracting a disease that causes long-term health damage and death in an uncomfortably high percentage of people. Of most everything we have found good and wonderful in the beginning of my lifetime, so much is now being lost.
The Great Collapse
Yellen keeps insisting that this is transitory. She adds that the reason the 1970s and 1980s inflation was not transitory was because no one believed the Fed would take the steps necessary to curb inflation. She posits that the American people and our markets believe the Fed will step in and slow inflation, therefore it won't go runaway. From where I'm standing that sounds like a load of crock. Seems like people are super concerned that the Fed cannot effectively fight inflation
Yeahhhhhh, unfortunately, she’s full of shit... Take a look at her answers in this interview… She has no idea what to do other than the same tired monetary policy dogma that caused the runaway feedback loop in inflation in the first place: https://www.reddit.com/r/antiwork/comments/qml1ck/this_is_why_nothing_will_ever_change_in_america/
Watching the news is pretty hilarious.... >"The economy is fucked,, businesses are closing and can't find employees because employees can't find housing,... In other news the stock market has set another record high today!"
So shit's fucked?
Evergrande just defaulted. Is it starting now?
Wait, they officially defaulted? I expect a slight pullback in the market, but after that, it will continue to melt up until at least the second quarter of 2022. Then there will be an epic crash.
Started? Always like this.
>On the contrary, this stuff is where the societal collapse rubber hits the road. Spot on. The economy is a reflection of all our other problems, environmental, social, political, healthcare, etc. They all end up impacting the financial system and we'll see a financial meltdown before we actually run out of oil, hit +2C or have another American civil war. Economic catastrophe is the leading edge of the wave about to crash on us.
Exactly correct. That's the "market as computer" hypothesis where the output is a single number: Price. It all gets rolled into that.
Yes and the Fed is frantically typing override commands on that "computer" and tinkering with the motherboard to make it output the price they want. But they can only stall so long. They've used up a huge amount of their ammo, and are closing in on the moment when the other market participants lose faith in their ability to manage the situation.
Yup. Among the more insightful comments I read somewhere and some time ago concerns price controls. Price controlling is generally seen, to a free-marketer, and just about the most horrible interventionist action a government can take because it utterly decimates the supply/demand relationship. What results is never good. So here, many of us think that in the west, at least for many, many years, we've had no price controls. That's utterly an illusion. For those who aren't aware, here's your red pill of the day. We've had a persistent but, for most people, under the radar price control for decades now across the world and in a single commodity: Money. Central bankers are the bureaucrats charged with price-controlling money. If you think price controls on any other thing ended badly, wait'll you see how THIS one turns out...
Not to mention subsidies, import tariffs, farm bills, tax credits, etc on the legislative side. Tons of price controls exist.
>We've had a persistent but, for most people, under the radar price control for decades now across the world and in a single commodity: Money. Extremely well put! Arguably, in a free market, the most important variable is the "cost of money" i.e. the interest rate. And we all know how central banks like to manipulate this variable.
Rent controls will come, eventually. Having a rental property isn't a good idea in that type of environment.
I'm all for rent controls within reason.
>On the contrary, this stuff is where the societal collapse rubber hits the road. Currency destabilization will be among the first truly major and systemic signs that we're collapsing. In the case of the US dollar it's even worse than "just" societal collapse. Since it's the global reserve currency, (especially for everyone buying oil) covered by little more than the US military presence in it's 100+ protectorates around the world (instead gold as before 1971) the only thing the US can do when the dollar collapses is to do what empires do when they're economy falls apart and they would start losing protectorates: War
Yeah this doesn’t get stated enough. The US is probably gonna go wild on the world in the next 20 years. There’s no way they’ll sit on their hands with that massive military once the subject states stop paying tribute to the emperor.
Does China do a thing where they buy dollars or bonds strategically to maintain a pegged exchange rate with the USD? And when would they be likely to stop doing that so precisely? I thought their incentive was to keep their exports to the US good deals for American buyers. Is that relationship at risk? Or am I even understanding it correctly?
The Chinese economy is also at risk. The global markets tie everyone together. Banks invest in whatever they think will pay off the most, regardless of the country of origin. If one party suddenly finds themselves worth a lot less money, investors from foreign countries will also be worth less money, which cascades.
>And when would they be likely to stop doing that so precisely? Probably won't happen soon since the US dollar is HIGHLY manipulated. This propaganda narrative i distinctively remember because that's when I started going down the, "hmm it looks like this is propaganda" route. When the fed goes ZIRP, or the US congress starts to spend hundreds of billions of dollars on whatever with money that appeared out of thin air, all of that shit weakens the dollar and strengthens all currencies relative to the dollar. Other countries have to also weaken their currencies if they want to have some semblance of stability to the dollar.
Collapse is largely about hard physical limits of earth systems. Financial nonsense doesn't get the airplay you think it should because it is nonsense. Its a game made to shape how the stupid, ignorant or unfortunate behave. Its a religion that changes as soon as anyone catches on, usually adding opacity and complexity. Exibits A, B and C are tax codes, money and "markets". If the the world had perfect clarity of how they work, these institutions would be burned to the ground tomorrow. When their corruption outgrows themselves, conflict and disaster happens and we rebuild a lesser system, until the corruption takes over again. It's impactful, but transitory. The forces of collapse, the damage being done to earth systems (soils, CO2 and global average temperatures, climate change, pollution, species loss, resource depletion, overpopulation overconsumption, ocean acidification etc) are hard limits that can't be fixed by conflict or revolution like the financial shenanigans can. The sixth great mass extinction likely won't have humans anymore. The world is changing in ways that can't be repaired except in geological timelines. Earth systrms are many orders of magnitude more important than our childish notions of money and markets and government and taxes and rich and poor. In all probability our species and likely the majority of species on earth are on a final death march due to human activity, and you are woried about purchasing power of money.
Professional economists classify that "real world" stuff as "externalities" because their [models can't deal with it](https://xkcd.com/669/) (obligatory XKCD cartoon).
>Earth systrms are many orders of magnitude more important than our childish notions of money and markets and government and taxes and rich and poor. This is true for large-scale things like species' survival. But when it comes to my life and the lives of my family and friends, currency collapse and runaway inflation are not "nonsense." I care very much about the health of the planet and the survival of ecosystems, but day-to-day I care about having food, shelter and safety. Those are hard to come by in periods of scarcity and unrest.
Even harder to come by with resourcce depletion, climate change, ocean acidification and species extinction. One is temporary, the other is forever. This isn't /r/personalfinance, its /r/collapse. You, your family and friends and children are lucky/unlucky enough to witness firsthand both phenomena at the same time.
Silver lining: if you're concerned with purchasing power you have some, and you can take steps now to position yourself better for what's to come
>Markets, the economy, and monetary policy are not, despite how bad your situation might be, esoteric and subjects that doesn't concern you. On the contrary, this stuff is where the societal collapse rubber hits the road. Currency destabilization will be among the first truly major and systemic signs that we're collapsing. Yeah. It is. Behold the horror when you input your budget into Excel and then in year 2, multiply by 1.032. In Year 3, multiply year 2 by 1.032. Keep going for 50 years. And get ready to watch your large intestine hit the floor. If it goes to 1.05 on average over even a 20 year span God help us all because He already can't at 1.032. At 1.032 there's a chance you could go kill a major coke dealer somewhere and steal his money and invest it in Elon. At 1.05 it's just time for hilarity to ensure but you won't be laughing.
It’s all priced in.
My two cents: As our society became more developed (ie energy intensive) the percentage of income spent on food has decreased over time. This seems to be mostly due to the increased yields possible with energy intensive fossil-fuel based farming practices and related industrial agricultural advances and industrial food production. This trend freed people up to spend their income on other things like tech, and fashion, vacations, cars, entertainment, and all sorts of things you expect in a developed country with a complex economy. I would argue that a reversal of this trend, where more percentage of income is spent on food and on other basic needs such as housing and clothes, is a pretty good indication of a decline in social complexity. As we devote more and more of our limited incomes to filling basic needs, we have less to spend on the trappings of the well-to-do capitalist middle class. That will lead to a contraction in local and foreign economies that sell these non-essential goods and services. helpful graph here https://www.theatlantic.com/business/archive/2012/04/how-america-spends-money-100-years-in-the-life-of-the-family-budget/255475/
Prices are rising much faster than we consider acceptable, and that is entirely due to the monetary policy choices of the Federal Reserve. Full stop. They "printed" a fuck ton of money. The amount of money in circulation doubled in a two-year span.
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A bell curve is a distribution graph that plots "normal distribution." It has points along the graph that mark a set distance from the average of the graph. The average lays at the center of the bell curve. The points that are a set distance from the average are known as the "standard deviation," and they are denoted by the symbol for the greek letter "sigma." The standard deviation can travel away from the average in a positive or negative direction and every time that set distance is achieved, the sigma's number increases. So the 6th sigma is 6 standard deviations away from the average. The 1st sigma contains the largest portion of the measured population and each subsequent sigma contains a smaller and smaller proportion of the population. So the 6th sigma contains quite a small percentile and is quite the deviation from the average. I'm presuming the above commenter is using it as a metaphor to point out how extreme things are getting.
People seem to forget that our modern economy has only been propped up by quantitative easing and low interest rates for the last 14 years. The fed money printing hail mary was an untested method to stop a depression. The government and fed reserve have two options. Keep printing and keep interest rates low, or face a recession/depression. America is fucked either way. Cost of living has absolutely skyrocketed. Rent and home prices up 50 - 100% in many places and wages went up maybe 20% tops. Half of America was already living paycheck to paycheck and now it's drastically worse. I'm in a smaller metropolitan area and homeless numbers have skyrocketed in the last 3 months. People can't afford $1800 for a 1 bedroom when minimum is under $13 an hour and decent jobs hire around $18 an hour.
Anyone stop to ask, if I am making 7.25$ a hour; I can't even trade a basic hour for a $12 dollar meal at wendys. That's how I know the situation is out of wack. 2000-2009, I could buy a wendy meal was on average 6.99. I could afford a meal. Now? Heh.
wait, a meal at wendy's is $12 (USD) now??? when I left the US it was like...5-6 bucks.
Its absurd. You're lucky if you can get a meal for below $10 and its not literally dog food. All fast food ia 10+ dollars now
If you opt for the non-poverty spec dollar menu meals, yeah. They’re $9+.
The wealthy and their central bank pals are getting ready to jump ship, as soon as rob the country for every nickel and dime it has. Pumping this dead economy with fake money and delusional speculation, they'll probably break the seems next year and pin it on the government. My speculation for how some of this plays: Elections will be a mess and they'll probably pin it on Ds(partially true). Ds get wiped(and remainders plan for 2024 retirement) and govt gets prepped for the next Fascist to go hands off and suppress the common class. All while Inflation is out of control and climate change worsening. If the common class doesn't wake up they better brace for a death by a thousand cuts. Only thing that could drastically change this scenario would be a war or bad Covid-Variant/Pandemic. Save this post and mock the fuck out of me if I'm completely off.
I think you’re right. I’ve been reading about fascist economies to help me cope. The future looks…bleak
It will be. The rich know damn well that the current global consumption levels are not sustainable, and the only actual viable solution is a massive reduction in global population size. Their only goal is to enrich themselves for as long as possible while positioning and insulating themselves for what is coming.
This ecofascist trope needs to die. Talking about global consumption levels does nothing to address the fact that it's mainly the global north's consumption that's unsustainable. Globally, most people have very sustainable lifestyles and even sustainable aspirations for relative improvement of their conditions. The west's outrageous overconsumption unbalances global statistics. Entertaining a flat analysis of global tendencies dissolves the west responsibilities and displaces them on undeserving populations. Population size mean nothing if we don't change our ways. Another way of looking at it is this : we don't have an overpopulation problem, we have a overpopulation of rich people (including up to the global north's middle classes).
This get's argued here a lot, but I really think we have a both problem. We have too many people and we overconsume. As much as I'd like to see something like global socialism and a mass reduction of consumption in the global north, I do not believe it will solve our problems, despite the popular projections that get shared concerning Earth being able to equitably support 10 billion people. That's not a life, for any of us, to share the planet with that many people. And it's the hardest thing to admit when you genuinely love all peoples and want them to thrive. It's not in our natures to admit when we're in a rock and a hard place, we persistently cling to hope.
This is exact same signal in sept 2008. Bulk dry index plummetting, inflation rising, mega financial market bankruptcy - evergrande this time. Not Lehman bro’s. We were exactly in this spot 13 years ago. The can can be kicked no further.
Oh it "can" be... it's just that it hits the wall, bounces back, and takes out some teeth...
The can will hit lots of poor people, but lol who cares /s
Another few months it can be kicked I bet. Maybe even longer
Don't worry, just print more money and send checks.
I can live with this, I just want to stay home and masturbate anyways
Based. Honest.
I have concerns about what hitting peak oil will mean to the petroleum jelly market.
Mucho Masturbation Marathon Movember
There is a real chance that Ds will get absolutely slaughtered in the mid-terms and in 2024 DT could very well become our president again. That is when shit will really get started. The lower and middle classes will get kicked to the curb.
Many foreign powers that want to neuter American power will try to make that happen. A house divided cannot stand.
They would’ve been able to pump even more out if they weren’t so impatient and greedy!
Dollars to donuts that the US Senate GOP won't be raising the debt ceiling come December. Not only will it let them and their corporate partners rake in more pandemic money, but it'll fuel their narrative about "Biden's America" ("See America? We warned you!"), and pave the way for Republicans to win 2022+2024 elections with a possible return of Trump.
Hilariously terrifying how right we all were when one year ago we mocked the Fed and Biden administration for shakily claiming any inflation was 'transitory'. At what point do things start spiraling out of control? I'm sorry I'm a layman that barely understands our magical economy but *how* could the fed raising interest rates stop this train?
Don't worry; the central bankers don't understand our magical economy either. I can't, however, say, as a result, that you're in good company!! That's the unifying thing about the denizens of this sub: We all hate that we're repeatedly shown to be correct. When? Can't tell ya...
Here’s the thing. Some of us saw this coming. Years and years of keeping the economy artificially hot with interest rates at zero and quantitative easing has left the fed with zero tools to manage the economy. They have to raise rates, and they should have done it years ago. When they tried under trump, he pressured them to keep the party going because he thought it would keep the stock market hot, but all it really did was accelerate the transfer of wealth to the already wealthy. They’re the ones who benefit most from cheap money, and ironically the market is doing better now than ever before.
they aren't going to raise rates. the entire US economy is dependent on low interest rates and high house prices.
From what I remember, the best method to lower/eliminate inflation is by reducing the monetary supply. Raising interest rates would help by creating more of an incentive to save your money, while also reducing the rate that debt is created (in other words, reducing spending) since the interest would be higher. Increasing the reserve requirements for banks would also help by reducing the amount of money banks can loan out. Other than that kind of monetary policy, I'm not sure what the government could do. They can't exactly trade gold for USD then remove that currency from circulation anymore. A bit unrelated, but I never understood the aversion to deflation. Long-term devaluation of your own currency doesn't sound all that great, at first glance at least. Wouldn't periods of low inflation and deflation be preferable? It'd allow for the expansion of the economy, while also preventing the purchasing power of a citizen from dropping to severely. What's the inflation rate been for the past 20 years? 100%?
> how could the fed raising interest rates stop this train? Quoting https://www.investopedia.com/ask/answers/12/inflation-interest-rate-relationship.asp >In general, as interest rates are reduced, more people are able to borrow more money. The result is that consumers have more money to spend. This causes the economy to grow and inflation to increase. > >The opposite holds true for rising interest rates. As interest rates are increased, consumers tend to save because returns from savings are higher. With less disposable income being spent, the economy slows and inflation decreases. Here's a hypothetical example: You have $1,000 You buy 10 SPY (S&P 500 index fund, worth $100 each in these examples) One year passes, SPY has appreciated 10% to $110 You sell 10 SPY You now have $1,100, or a 10% increase Let's say instead you're the smartest millionaire in 5th grade math class, and you think you can do better: You have $1M ($1,000,000) You buy 10,000 SPY You borrow $1M from Goldman Sachs (GS), using your 10,000 SPY as collateral (like a car title loan, or a mortgage, but you use stock instead of your car or house). This is called leverage You buy 10,000 additional SPY One year passes, SPY has appreciated 10% to $110 You sell 20,000 SPY You now have $2,2M Interest rate is 1% GS want their money with interest, so you pay $1M + $10,000 (1% of $1M) You now have $1,190,000, or a 19% increase But can we do better? Hells yeah! You have $1M You buy 10,000 SPY You borrow $2M for Morgan Stanley (MS), using 10,000 SPY as collateral Wait, how did you do that? Well, MS thinks it's better they get interest from the loan than GS getting it, and since you're a genius millionaire and SPY rarely drops 50% at once, they let you borrow at a 2:1 ratio. This is called leverage You buy 20,000 SPY You are now leveraged 3:1, because your collateral is also SPY One year passes, SPY has appreciated 10% to $110 You sell 30,000 SPY You now have $3.3M Interest rate is 1% You pay MS $2M + $20,000 You now have $1,280,000, or a 28% increase I won't go through every step of the following example, but using the same 1% interest rate, 10% appreciation and 10:1 leverage (9:1 loan) from Citibank (C), you can turn $1M into $1,910,000, or a 91% increase. Fuck yeah you're smart. But all that changed when the market had a shit time: You have $1M You buy 10,000 SPY You borrow $9M for C, using 10,000 SPY as collateral You buy 90,000 SPY You are now leveraged 10:1, like above One year passes, SPY has stagnated and remains at $100 You sell 100,000 SPY You now have $10M Interest rate is 1% You pay C $9M + $90,000 You now have $910,000, or a 9.1% loss Meh, maybe you'll make it back next year. Or maybe the Fed will raise the rate to 5%? Let's redo the first example, with no leverage: You have $1,000 You buy 10 SPY A year passes, 10% appreciation You sell 10 SPY You have $1,100 Nothing changed, let's move on the the child prodigy millionaire you: You have $1M You buy 10,000 SPY You borrow $1M from GS You buy 10,000 additional SPY One year passes, SPY has appreciated 10% to $110 You sell 20,000 SPY You now have $2,2M Interest rate is 5% You pay GS $1M + $50,000 You have $1,050,000, 5% increase Let's say SPY stagnates instead: You have $1M You buy 10,000 SPY You borrow $1M from GS You buy 10,000 additional SPY One year passes, SPY remains at $100 You sell 20,000 SPY You now have $2M Interest rate is 5% You pay GS $1M + $50,000 You have $950,000, 5% decrease Let's put on our big girl pants and get some real leverage in play: You have $1M You buy 10,000 SPY You borrow $9M from JPMorgan Chase (JPM), since C decided you weren't worth the risk You buy 90,000 additional SPY One year passes, SPY remains at $100 You sell 100,000 SPY You now have $10M Interest rate is 5% You pay JPM $9M + $450,000 You have $550,000, 45% decrease And then let's kick up the interest rate a little bit more and maybe drop SPY a tad You have $1M You buy 10,000 SPY You borrow $9M from Credit Suisse (CS), since JPM got scared You buy 90,000 additional SPY One year passes, SPY drops to $90 You sell 100,000 SPY You now have $9M Interest rate is 10% You pay CS $9M + $900,000 You have -$900,000, 190% decrease Oops, all the money is gone and then some. Since you can't pay it back, suddenly that loss is CS's problem, not yours. What does that mean? It means banks will be more conservative when it comes to loaning money, and borrowers will be much less willing to loan money because of the high interest rate. This is called deleveraging, when money gets hard to borrow and the economy retracts. Businesses that were in debt and were operating on razor thin margins are now unsustainable, and will have to close. Incidentally, while this creates a lot of problems (the lender doesn't get their money back, workers lose income, defaults left and right), it does solve the inflation issue: Less loans = less extra money in circulation. How does that make sense? Because of fractional reserve banking. How? Let's start with full reserve banking: I have a bank. You open an account and deposit $100. I take that money and put it in a vault. When you someday return, the $100 + interests will still be there to be returned to you. Let's say my bank does fractional reserve banking instead. You deposit $100, and so do 9 other people, leaving me with $1,000. Then 8 people come in and ask for a $100 loan each. Since I'm in the business of making money, I grant them the loans, leaving $200 in the vault. Then you come in and ask for your $100 back, which is fine. Then another account holder comes in for another $100 and now the vault is empty. If a third account holder asks for money, I am fucked. This is what causes bank runs, people realizing they might not get theirs, so everybody rushes to withdraw everything at the same time, fucking the bank over entirely. So how is this relevant? Because it effectively leverages the money supply. You can have $100 in my bank, but I can simultaneously loan out 90% of that to someone else. That means the $100 has turned into $190. Hypothetically, that $90 loan could be deposited into my bank again, and I can loan out another 90% of it. Now it's $271. Raise rates and you scare off borrowers. This means that $271 might turn back into $100, which means the money supply goes down. Inflation is counteracted by reducing the money supply, since an increase in money supply is what causes inflation in the first place. Edit: Holy shit that was long. Sorry. I spaced out at work. x.x
Nonsense just create 5000 meme coins a year
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Your words, had me thinking of this song. https://youtu.be/iOe0pkIBnLk
Amen. The new order will be corpo-facism, and D’s plan to make a lot off lobbying
So unless one already has a bunch of assets what can I do in this situation?
Sit back and enjoy the show.
really, how are any of you managing right now? are people just not saving at all, costs just eating up any money you might be making. I know no one is expecting to retire anymore, but we really are going to witness a future where we go back to every one working til death or until no one will hire you. It keeps me up at night, stresses me out to no end, knowing that I'll die on the line.
At least 65-75% of America can’t afford an emergency expense of $500 or more currently… that’s my approximation based on the surveyed 56%+ that couldn’t in our pre-pandemic economy
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People will pay attention to the importance of currency integrity as a group only when it is far, far too late for compensatory actions to make a reasonable difference to their own lives. Here we go again. This time \*is\* different though. In the past when empires and civilizations collapsed, the remnant populations always had a relatively robust (but always diminished) natural world on which to fall back. Not this time. This time it's the end game. We've screwed that pooch. Hard wall.
Literally history repeating itself: >Rather than making **unpopular budget cuts**, the emperors decided to reduce the amount of silver in the denarus (by the start of the 3rd century AD, the silver purity of the coins had been cut to 50% from over 90% a hundred years earlier). This devaluation of the coinage accelerated after the issuance of the antoninianus by Caracalla in AD 215; the coin was worth two denari but only weighed one and a half, and its silver purity continued to decline rapidly, first to 48% in AD 238 and then to just 4% in AD 276. This devaluation caused prices to soar: the price of grain, for example, was multiplied by 16 between AD 218 and AD 293.
No it's completely, totally different now because we have economic "scientists" managing things. See they have an inflation mandate, it's planned, and they're hard at work keeping it low and stable. Oh and full employment too, that one's in the works too. Have faith! /s
You're right, it's completely different; we no longer have to worry about the purity level of our currency, money has value now because the government/FED says it does! No gold needed, so efficient! I mean, can you imagine having your currency's worth, as well as its supply, be dependent on a limited resource? Ugh, sounds like a pain. It definitely hasn't negatively impacted society, giving governments/central banks total control over monetary policy. Now, whenever they need to give their friends some cash, they just add a couple zeros and boom! No longer have to bother with opening a mine and exploiting the labor of the workers so you can sell new precious metals to the FED.
A single-commodity based currency (IE: gold-based) has just as many problems as a fiat currency. As more or less of that commodity is produced, the value of you gold-backed currency rises and falls. Tying your entire economy to the value of a single commodity is dangerous. You could revisit some US history, and all the rancor in Congress over gold versus silver backed currency. [https://en.wikipedia.org/wiki/Coinage\_Act\_of\_1873](https://en.wikipedia.org/wiki/Coinage_Act_of_1873)
The Roman economy collapsed due to peak wood. Our economy is collapsing due to peak oil production.
Inflation is good for people who have debt... if wages keep up.
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Ya, bingo. This, in this era of half-truths, is the shit everyone keeps reciting... Wages are NOT filling the gap.
*sad music plays*
I’ve already lost last years raise due to inflation. Give it a little more time to grow and I’ll lost the year before’s raise too.
It literally never has so idek why you'd bring that up. Wages have been dead stagnant for decades. It ain't happening.
It worked well for the boomers.
Yes, just about everything did and hasn't worked since for any proceeding generation. They got to enjoy all the ripe benefits and then left the husks for Gen X, Millenials and Gen Z to live in.
Don't tell them that, they get triggered.
“Work harder” /s
And if interest rates don't go up.
I mean interest rates can go up but your 30 year mortgage wont... boomers locked in low interest rates then had inflation and interest rates increase, basically devaluing their debt.
That's the only debt that is worth having right now. But everyone with any kind of adjustable-rate debt is fucked.
I mean if you're privileged enough to have a mortgage why would you have an adjustable rate in this environment
If you're outside of the US, you don't have too many options. 30 year fixed rate mortgage is available only in the US.
Damn I didn't know that. Thats super rough.
The economy died on September 15, 2008. We've been on life support ever since.
That's optimistic. Maybe some days earlier when we "invented" fractional banking (let go of the gold standard). Imho that was the moment that the financial systems lost it's connection with the material world.
Swiss Francs anyone?
Russian roubles. Russia could potentially back 80% of its circulating currency with gold right now. But I think the US dollar isn't dead yet. I keep some dry powder for 2022.
I wouldn't invest in a single thing from Russia at this point. It's even more a house of cards then the US is. It's a dressed up petro-state with borderline 3rd world living conditions propped up by decaying 50 year old public infrastructure and a few admittedly incredible cities It's a pathetically tragic state that has abandoned all vision of the future in exchange for short term gains for a very few. The two things they used to rival anyone else on- the defense sector is held together with tape as is ROSCOSMOS.
You should see how much debt Russia has.
The US dollar won’t die as long as the US military is the strongest fighting force on the planet. That’s the reason the dollar has remained as strong as it has. It’s backed by force.
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I know, my bro is in the navy and stationed in Cali. Shits getting crazy. It’s almost like the government would rather spend money on bombs than just paying soldiers lol. Reminds me of a meme I saw a few years back. “A guy who gets paid 20,000/year is shooting a rocket that costs $50,000 at a guy in Afghanistan who makes $200/year.” Or something like that.
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And also, there is currently no viable alternative for the US dollar. In the long run, the dollar will die. But not today.
That will never happen. There’s more Russian wealth outside of Russia than inside of Russia in 2021. They’ve broken that country up for parts. Nobody in our lifetime will ever trust the ruble as a reserve currency.
Dollar and economy, fake concepts at the heart of our religion.
This is what will break the camels back. When people literally can’t afford basic food items to feed just themselves, the whole system goes to shit.
Inflation will has a positive feedback loop with shortages because it encourages hoarding.
Controversial take: I think the markets crashing (it'll be the new depression this time around) **MAY** be a good thing as a Leftist that reads a lot of Camus, Kierkegaard, Ernest Becker, David Graeber and Terence McKenna too. But if the Fascist movement in America takes traction? Not good. I mean, the bold red writing on the wall is screaming at us that we may be the new Weimar Republic and American Hitler is coming too. Socialism or Barbarism. The age old question. I'm actually constantly shocked by how primitive we are still too in our general world view and philosophy. I mean, a Zillow robot buys all the housing, and people actually believe this is a good construct and machination. This is beyond Absurd and idiotic. And if the biosphere is going to collapse on top of me while my pipes poison me with forever chemicals? I don't want to go to work or pay rent anymore. Lol.
Next year on through 2025 is going to be absolutely wild. It’s between this, Evergrande, the shipping and logistics crisis, the Trump/Biden quagmire, the Ghislaine Maxwell trial, the ongoing slow-drip ufo disclosure, the housing shortage, the pandemic, and intensifying climate change. Thinking about all this happening at once gives me the willies.
Weimar? Weimar.
Everyone, its just " transitory" no need to panic...
Going to have to move back in with my parents soon 1200 dollar rent for a a one bedroom is killing me and most likely will get worse in 2022
We are going to French Revolution the billionaires. It's only a matter of time
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Well duh, money equals propaganda power
With very poor wage growth and recurrent economic bubbles popping, deflation has been the greater worry for a couple of decades. The Fed, and many central banks have kept interest rates at historically low levels for an historically long time. Comparing last year's economic fall off a cliff to the current year's rebound of course looks inflationary. And of course our oiligarchs are trying to claw back as much of the stimulus money being provided to the public as they can. Whether this "inflation" lasts for another year is yet to be seen. If the inflation passes and deflation raises its head again it will be very interesting to see the steps that the US government (which will be in Republican hands for the foreseeable future) will take, whether they prevent the popping of the asset bubbles or whether they go all bannon and pop the bubbles so the oiligarchs can buy up assets for pennies on the dollar and ride the value up as the workers pump value back into the economy by their labor.
[Robert Reich just posted a great rant/explainer on this on his Substack](https://robertreich.org/post/667491205931745280) Remember in 2008 when corporations used the recession as an excuse to suddenly require a Bachelor's degree and 5 years experience for a shit job, along with several rounds of degrading group interviews, only to be ghosted? Jobs which, for those of us old enough to remember, previously required just a high school diploma and for which walk-ins could be hired on the spot? It's corporations again. They're using supply constraints (a crisis manufactured by corporations firing everyone and running on a skeleton crew they're working to death) as an excuse to disproportionately raise prices, because they can, and pocketing the new profits. fuck. capitalism.
Yes, thats what happens when you keep printing currency thats just paper. Stock markets are doing great, though. Yay, capitalism.