There was talk about renaming the Krugman thread for this purpose, but that seems to be going nowhere. Besides which, I feel the Krugman thread should be left to discuss Krugman while this thread can be used for more general economic discussion.
Discuss:
- The merits of competing theories.
- The role of the government in managing the economy.
- The causes of and solutions to our current economic woes.
- Comparisons between the economic systems of different countries.
- Theoretical and existing alternatives to our current market system.
edited 17th Dec '12 10:58:52 AM by Topazan
Doesn't the stock market usually take a tumble early in an Administration?
Tell Me, Have You Seen the Yellow Sign?
Soaring home prices are starting to alarm policymakers
Home prices in January — typically a slow month for the market — were up 14 percent over the same month the previous year, while sales jumped 24 percent, despite an unemployment rate that was almost twice as high. Demand for existing homes is so strong that the average residence is on the market for just three weeks, and inventory is at a record low after seeing its steepest drop last year since the data was first tracked in 1999.
It all threatens to freeze broad swaths of the population out of the market, leaving millions of Americans in a less secure financial position, widening the racial wealth gap and forcing millennials, already lagging previous generations in building wealth and forming families, to fall even further behind.
“The dream of homeownership is out of reach for so many working people,” said Senate Banking Chair Sherrod Brown (D-Ohio). “Rising home prices and flat wages means that many families, especially families of color, may never be able to afford their first home.”
...
The median price for a home in San Jose, Calif., was $1.4 million in the fourth quarter, a 12.4 percent surge from the same period a year earlier. But some of the largest increases have occurred outside of the most expensive cities, as residents fled crowded urban centers during the pandemic. Prices in Phoenix rose 14.4 percent in December from the same month the previous year, while Seattle saw gains of 13.6 percent, according to the Case-Shiller Index.
How has the housing market thrived during one of the deepest economic slumps in U.S. history?
For one thing, the crisis is unusually lopsided: White-collar employees who can work remotely have for the most part emerged unscathed, with many actually adding to their savings while reaping the benefits of higher stock prices. Historically low mortgage rates — a result of the Federal Reserve’s easy-money policy response to the crisis — nudged some of those buyers off the fence to buy a first or second home, according to analysts.
Meanwhile, a glut of millennials — the largest generational cohort in the country consisting of those born from the early 1980s to the mid-1990s — is reaching the prime age for buying first homes, and regional data suggests the pandemic spurred plenty of them to pick up stakes and head for the suburbs.
But there are simply not enough houses to meet the demographic demand, driving up the price of those houses that are for sale and potentially delaying many other millennials’ ability to become homeowners, the primary way Americans build wealth.
...
If there aren’t enough homes to meet that demand, though, the largest generation in the country won’t be able to start building equity, which will in turn delay other financial decisions. Despite making up over a third of the workforce, millennials own less than 6 percent of all U.S. wealth, according to Federal Reserve data.
The delays will have long-term societal impacts. Even before the pandemic struck, more than 1 in 5 millennials — 21.9 percent in 2019 — lived with their parents, up from 11.7 percent in 2001, according to a Zillow analysis of census data. Partially as a result, millennials are significantly behind previous generations in forming families.
And Black and Latino Americans — who are twice as likely to rent as whites and more than twice as likely to report being behind on housing payments during the pandemic — could see the barriers to homeownership increase in the wake of the crisis. Renters behind on payments will face hits to their credit scores and potential eviction once the crisis passes — making it more difficult to rent their next home and more expensive to eventually buy one.
Excerpts from the article.
Look with century eyes... With our backs to the arch And the wreck of our kind We will stare straight ahead For the rest of our lives
Lost in Space
Well, we can't keep expanding the suburbs indefinitely. We need a serious push for more city housing.
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
But letting all those poor people have a place to stay would make my home less valuable. We can't have that! NIMBY!
Anka Aquila
More seriously, trying to expand housing within cities is only going to solve the problem at short term, going forward what will happen is that the prices are going to also join in the escalation due to housing speculation.
The long term solution would be to straight up plan new cities to ease pressure on the old ones and lower prices overall.
Instead of focusing on relatives that divide us, we should find the absolutes that tie us.
A procrastination in of itself
You can expand supply a lot if you improve public transport and consider the type of housing you build. Apartments, condos or terraced houses are much more space efficient then big detached houses.
That’s before we look at how much space can be saved in other ways, public transport improvement not only lets you extend the city out it also lets you turn carpark land into residential land.
“And the Bunny nails it!” ~ Gabrael “If the UN can get through a day without everyone strangling everyone else so can we.” ~ Cyran
Like reflections in the glass!
All things considered unless they're planning on stack-able houses or terraforming is suddenly viable. planning new cities and thus new apartment complexes would be better than making new suburban sprawl on all accounts.
Or we could go the "living in a vehicle" route.
Edited by MorningStar1337 on Mar 10th 2021 at 3:09:12 AM
The number one thing that needs to be done about the housing market (I’m thinking Canada, but this also goes for the US) is to deal with speculation and absentee ownership. Housing prices in Vancouver, as one of the most expensive markets, have beeen very thorougly analyzed, and demographic changes (e.g. movement in and out of the city) don’t come remotely close to explaining the magnitude of the increases.
It’s people buying properties as investments, or as Air B&B, or to sublet.
What we need is a law saying that 1) non-residents of the countey cannot own property there (New Zealand already has that) and 2) you can own, at most, 1 home within an urban area and 1 home outside it (because people with summer homes would howl otherwise). Beyond that, you pay massive taxes on the property value of the house (50% of assessed value per year?), enough to make speculation outright uneconomic.
We don’t have a serious shortage, or even a serious imbalance between supply of and demand for housing. We have a problem with housing being treated as an investment commodity by people who don’t live in it, and THAT is what we need to address.
Building more condos hasn’t worked - building more condos has even made things worse in some cases like Toronto - because they’re one of the easiest investment properties to pick up (less maintenance than a house) and the type of property most likely to be left empty.
Edited by Galadriel on Mar 10th 2021 at 6:14:22 AM
I own and rent about 10 houses all within 10 miles of where I live. I'm not driving up house prices and I'm not depriving anyone of housing, in fact I'm providing it.
Maybe being a landlord could be licensed? Like, pay some fee (presumably small enough to just cover administration costs) and be in compliance for this that and the other thing like actually renting (or making good-faith effort to rent out) the property?
Can anyone here give me a quick rundown on Friedrich Hayek or Milton Friedman? My new econ. professor seem to like them, but I don't know much about them (or economics, really).
Oh, bother.
Look up the Austrian School (Hayek) and the Chicago School (Friedman) of Economics.
Then run screaming for the hills.
To vastly oversimplify things, the Austrian School is all "Muh Free Market" and the Chicago School is..."Government only needs to control money supply" + "Muh Free Market".
Sounds like your econ professor is a big fan of the free market.
Edited by M84 on Mar 12th 2021 at 4:08:23 AM
Disgusted, but not surprised
![[up]](https://static.tvtropes.org/pmwiki/pub/smiles/arrow_up.png "[up]"){kind=icon}
Thanks for the explanation. "Muh Free Market"... This is gonna be whatever the opposite of fun is.
Edited by nova92 on Mar 11th 2021 at 12:27:13 PM
Oh, bother.
Just keep your head down, do the coursework to get a decent grade, then try to un-learn everything you learned in class afterwards.
Edited by M84 on Mar 12th 2021 at 4:46:58 AM
Disgusted, but not surprised
Not personally, I'm sure, but the fact that houses can be used as money farms does drive up the prizes significantly. People now have to buy both the house and the potential profits that the current owner could make from renting it.
Redmess
So now that most countries are running up massive debts in Covid relief, what will happen to that debt afterwards? What would be the impact on the world economy?
Optimism is a duty.
Lost in Space
Mostly none, since sovereign debt is not generally harmful to an economy. It only matters if you're borrowing in currency that you do not control. For example, if France goes into euro debt to fund COVID-19 stimulus, that's a problem because France can't make more euros. However, Japan can make more yen any time it wants.
Oh, bother.
One of the ways the euro doesn't really make much sense. Not being able to print more euros also fucked over Greece.
Disgusted, but not surprised
Friedman's actually worth reading, even if some of his ideas are plain stupid. He's a rare case of a right-winger who was actually committed to his principles even if they get results that wouldn't benefit big corporations. I.e. he was committed to the free market, therefore he opposed right-to-work laws, because they're government restraints on the workers' right to collectively bargain. Also, he was one of the first to suggest a minimum basic income.
I rather wish that we could find that kind of integrity in the Republican Party.
Edited by Ramidel on Mar 11th 2021 at 3:48:58 AM
Anka Aquila
@ Redmess
In all seriousness, the COVID situation is pretty much showing that the state can't just let the Free Market run by itself and has to step in to either restart the economy, prevent foreign takeovers or to reign in the worst excesses of some enterprises, so this might be the point of no return for neoliberalism overall (and good riddance).
Going forward, I don't know, maybe we will see some sort of neomercantilism model emerge? I mean this situation has lead to a lot of "Fuck you, got mine" situations across the globe, especially amongst the Third World countries. Not to mention that the matter of the PRC being the main guilty party on letting this debacle happen is going to make people in charge wary of putting all their eggs in the chinese basket, no matter how cheap that is.
Instead of focusing on relatives that divide us, we should find the absolutes that tie us.
Redmess
Oh, I absolutely agree the state needs to step in. But what I'm wondering is what will happen to all that debt. It has to come out from somewhere, right? And even when you can just print more money, that must have some effect on the economy, especially if basically every country is doing so.
Optimism is a duty.
Yeah, might have to do this. Hopefully the first class was a fluke.
Hmm, sounds interesting. I feel like it might be easier to read about him than to read his works directly, though.
Edited by nova92 on Mar 11th 2021 at 10:12:29 AM
Lost in Space
Most of the great economic thinkers were intellectually honest to the extent that they genuinely tried to promote human interests with their ideas. For example, Adam Smith, long held as the father of unrestrained free market capitalism, was quite clear about the need to regulate monopolies and provide welfare. Of course, that didn't stop their followers from cherry-picking the parts of their work that justified their own beliefs.
Friedman's disciples have turned particularly awful, even for the field of economics. That mentality is behind a lot of cryptocurrencies.
Edited by Fighteer on Mar 11th 2021 at 1:32:49 PM
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Anka Aquila
@ Redmess
See, I have been thinking that one or two countries might try to make a lawsuit to the PRC in order to get that money and not run into the fate of Zimbabwe.
This sounds sort of crazy but if main culpability can be traced back to the PRC for the majority of losses and debts countries across the world have accrued due to the pandemic then you could, theoretically speaking, make a case to La Hague's court that the costs should be covered by the country that caused them by keeping its mouth shut.
And unlike most international disputes, this is a matter that has affected every single country in the world so China is not exactly in a position to dismiss it.
Instead of focusing on relatives that divide us, we should find the absolutes that tie us.
Anything the democrats do is likely to cause them some level of inconvenience (they're not likely to loosen regulation even further, at least with the current political climate). As long as there's no ongoing government shutdown or an end to all federal contracts, then they're going to view it as beneficial. They could react poorly if it seems like the COVID relief isn't going to be passed, but it doesn't seem like that.
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