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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

TheyCallMeTomu Since: Jan, 2001 Relationship Status: Anime is my true love
#23626: Jul 31st 2022 at 3:36:58 PM

If you think in terms of supply and demand graphs, remember that the demand curve is just "how much people are willing to pay for this thing." Which is now and has always been self-referential. People pay based on how much money they have, and how much they expect a thing to cost. That whole "entrenched inflation" thing. So the cost of durable goods may have less to do with the supply of them, and more to do with people feeling like, given high inflation everywhere, it's not unreasonable for the cost of those goods to be up, so people are willing to spend money on those goods.

Of course, in a perfectly competitive market you'd expect sellers to compete on price, bringing the price down, but my amazing theory is, that just basically doesn't happen. Sellers are very hesitant to compete on price.

Silasw A procrastination in of itself from A handcart to hell (4 Score & 7 Years Ago) Relationship Status: And they all lived happily ever after <3
A procrastination in of itself
#23627: Jul 31st 2022 at 3:38:34 PM

We’ve got number for labour force participation. It’s at 62.2% now, down from 63.4% before COVID hit, but up from a rock bottom of 60.2% from around April 2020.

Historically it seems to have peaked around the year 2,000 with 67% participation. In the ‘60s and ‘70s it ran between 58% and 61%. [1][2]

Edited by Silasw on Jul 31st 2022 at 11:39:03 AM

“And the Bunny nails it!” ~ Gabrael “If the UN can get through a day without everyone strangling everyone else so can we.” ~ Cyran
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#23628: Jul 31st 2022 at 3:54:28 PM

So LFP is not crazily down (or up) from earlier numbers. This means that it's not a matter of "there just aren't enough people looking for jobs".

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
megarockman from The Sixth Borough (Experienced Trainee)
#23629: Jul 31st 2022 at 4:15:01 PM

I think it at least partially is "not enough workers" if we're still only halfway back to pre-pandemic levels of LFP and we're already pretty much back to pre-pandemic levels of employment in terms of number of jobs per CES (at least in the private sector — government jobs are still down from Feb 2020 levels and have only gone back to about halfway as of now). My instinct is that part of it is Baby Boomers getting laid off due to the early lockdowns and thinking "screw this Imma retire", along with people in sectors like retail and health care coming under way too much pressure and also deciding screw it and leaving.

The damned queen and the relentless knight.
M84 Oh, bother. from Our little blue planet Since: Jun, 2010 Relationship Status: Chocolate!
Oh, bother.
#23630: Jul 31st 2022 at 4:56:24 PM

The difference between the lottery and the stock market is you can get a lottery ticket for five bucks, and no one invests five bucks in the stock market.

(And also that lottery tickets don’t cause recessions and economic collapses.)

Except the people who buy lottery tickets usually don't only buy one lottery ticket.

There's a very real risk of them spending all of their savings on lottery tickets. Because it's gambling, and some people are prone to gambling addiction. And again, it's run by the state. The government essentially preys on its own citizens by enabling gambling addiction.

Edited by M84 on Jul 31st 2022 at 7:58:46 PM

Disgusted, but not surprised
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#23631: Jul 31st 2022 at 6:50:25 PM

Yeah, the problem isn't people who buy $5 worth of tickets when the jackpot goes over $1 billion or the people who go to the casino twice a year and drop $20 in a slot machine because why not. If that were how most people gamble, it would be out of business overnight.

It's designed — deliberately and maliciously — to prey on the destitute, the desperate, and the addicted.

Edited by Fighteer on Jul 31st 2022 at 9:50:48 AM

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Galadriel Since: Feb, 2015
#23632: Jul 31st 2022 at 8:23:02 PM

I knew casino gambling worked that way and had serious addiction issues, but I wasn’t aware that many people played the lottery more than casually, so that’s useful to know.

Mullon Since: Jan, 2001 Relationship Status: And here's to you, Mrs. Robinson
#23633: Aug 1st 2022 at 2:23:58 PM

My portfolio has to stop plummeting someday, right?

Never trust anyone who uses "degenerate" as an insult.
TheyCallMeTomu Since: Jan, 2001 Relationship Status: Anime is my true love
#23634: Aug 1st 2022 at 3:04:07 PM

Well, the S&P 500 is up from where it was a month ago-in fact, it's about back to where it was two months ago.

Granted, it's down 10% from where it was SIX months ago, but that's just a timing issue.

Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#23635: Aug 1st 2022 at 3:11:32 PM

There are competing problems with the stock market. On the one hand, there is far too much money involved in it that could be going to more productive uses. Shaking that out would necessarily cause a significant crash in the markets.

On the other hand, a lot of people have a lot of their personal savings in the stock market and they don't want to lose those savings. It is difficult to see the point in sucking a ton of money out if we're just going to give it back to them so they'll turn around and save it somewhere else.

There's a similar problem with housing. Home prices are too high for many people to afford, but forcing them to go down would wipe out a lot of equity for existing owners. There would have to be a corresponding cram-down of debt so that millions of homeowners aren't suddenly underwater.

Then we go back to the inflation problem: if we drive money out of these savings vehicles (stocks, real estate), where is it going to go? If it goes into consumption, we've just pushed demand way up, so things will just get more expensive. If it goes to paying off secured debt, then lenders will find themselves sitting on Croesus-like hoards of cash with nothing to spend it on.

Our economic system is a finely tuned, high-speed engine. Trying to change it impulsively is like throwing a rock into that engine.

Edited by Fighteer on Aug 1st 2022 at 6:13:03 AM

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
SeptimusHeap from Switzerland (Edited uphill both ways) Relationship Status: Mu
#23636: Aug 1st 2022 at 3:18:50 PM

Home prices are too high for many people to afford, but forcing them to go down would wipe out a lot of equity for existing owners. There would have to be a corresponding cram-down of debt so that millions of homeowners aren't suddenly underwater.

You know, what value does this equity have? Houses are something you use and need, not something that can simply be turned into money at the drop of a hat. It's not like stocks, whose main purpose is to be converted to money and back.

"For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled." - Richard Feynman
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#23637: Aug 1st 2022 at 3:24:02 PM

It's the good old American Dream. Homes are a stable source of value for millions of people, representing social and economic stability. For a lot of people, their home equity is their primary source of savings. Even if it's not liquid, it represents an asset that contributes to their net worth. That's the why.

However, the why is not strictly relevant to the question of how we fix the problem. It's enough to know that if we force home prices down (somehow), a lot of net worth for middle-class households will be obliterated.

This happened in 2006 and it led directly to the Great Recession. I have personal experience with it: it took my wife and me fourteen years to dig ourselves out of that hole and finally sell the house we bought in 2001.

Edited by Fighteer on Aug 1st 2022 at 6:25:19 AM

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
M84 Oh, bother. from Our little blue planet Since: Jun, 2010 Relationship Status: Chocolate!
Oh, bother.
#23638: Aug 1st 2022 at 3:27:47 PM

Something similar is starting to happen in mainland China but even worse.

In the USA at least, the houses with the mortgages were already built.

Disgusted, but not surprised
SeptimusHeap from Switzerland (Edited uphill both ways) Relationship Status: Mu
#23639: Aug 1st 2022 at 3:31:13 PM

Frankly, I think it would be better if folks stopped treating houses as an asset. There are way too many problems that result from this practice (from unpayable housing to bubbles), and I don't see e.g cars get misused in this manner.

"For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled." - Richard Feynman
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#23640: Aug 1st 2022 at 3:40:59 PM

What would we replace it with? All housing is owned by the government and rented to private individuals and families? All housing is owned by giant corporations and rented out? I don't see how that could go wrong.

Edited by Fighteer on Aug 1st 2022 at 6:41:29 AM

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Protagonist506 from Oregon Since: Dec, 2013 Relationship Status: Chocolate!
#23641: Aug 1st 2022 at 3:42:18 PM

I recall I was helping my brother move into a (rather nice) place. As I was doing so, he was bringing up all his plans for the house. Ultimately, he was talking about how much he thinks he can resell the place for.

I expressed my bewilderment that, having just moved into a very nice house, he was already thinking about reselling it.

Leviticus 19:34
SeptimusHeap from Switzerland (Edited uphill both ways) Relationship Status: Mu
#23642: Aug 1st 2022 at 3:43:10 PM

? Cars aren't owned by governments or corporations last I checked...

"For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled." - Richard Feynman
Silasw A procrastination in of itself from A handcart to hell (4 Score & 7 Years Ago) Relationship Status: And they all lived happily ever after <3
A procrastination in of itself
#23643: Aug 1st 2022 at 4:02:02 PM

Yeah, houses can move from being assets used to accrue wealth to being possessions that are used for life (or until no longer for for purpose), without them being taken away from private ownership. I don’t understand where that weird jump came from.

If we want to be example I guess the conversion would be from them being speculative assets to being possessions, but the intent was pretty clear.

Edited by Silasw on Aug 1st 2022 at 12:03:14 PM

“And the Bunny nails it!” ~ Gabrael “If the UN can get through a day without everyone strangling everyone else so can we.” ~ Cyran
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#23644: Aug 1st 2022 at 4:19:21 PM

Sorry, I genuinely didn't grasp the intent of what Septimus said. To go from "asset" to "possession" is a highly semantic change. If you can buy and sell a home for money, it's by definition an asset. So are we talking about banning private sales? Putting strict price controls on real estate? Some houses have more value than others, so how does any given person "move up"?

I don't see how a house cannot be a store of value without fundamentally changing how we handle ownership of land and property.

Cars aren't an equivalent situation because they are, with a few exceptions, depreciating assets. Most privately owned cars are financial losses over their lifetimes, so there is no point to investing in one for its inherent value. You can use it to generate income, but it's still an expense.

Edited by Fighteer on Aug 1st 2022 at 7:21:21 AM

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Silasw A procrastination in of itself from A handcart to hell (4 Score & 7 Years Ago) Relationship Status: And they all lived happily ever after <3
A procrastination in of itself
#23645: Aug 1st 2022 at 4:29:50 PM

It’s about a cultural shift, move home ownership away from being a thing you do to make money to being a thing you do because it feels appropriate to do.

For how you bring it about in practical terms? You expand the supply to the extent that people who want homes and are in anything but abject poverty are able to afford them. To compare with cars, the reason they decrease in value is because there are enough cars for everyone, if you don’t own a car it’s either a personal choice or due to you being at the very bottom of the pile financially. The supply of cars is great enough that you can’t just buy up all the cars in an area and then run a massive car rentals company that people have to go to because they can’t afford to outbid you for actually buying a car.

We can actually see where the car market has moved in the opposite direction, with the supply of E Vs being so limited that they are speculative assets which generally go up in value. This has resulted in people buying them up in bulk to try and profiteer from them rather than to use them for their intended purpose.

So how do we expand the supply? The easiest way is to build more houses, be that via easier planning processes or by direct government programs. But we can also limit the holding of land assets for profiteering. That can be extra taxes on additional homes, outright bans on multiple home ownership, guaranteed sales of second homes to the government for people who want to sell but can’t, increased regulation and taxation of the landlord sector (so as to incentivise landlords to sell), banning/limiting the resale of government build housing, or forcing property developers to actually use land they purchase that is cleared for development (in the U.K. a lot of developers own land they could build on but don’t build houses there because they want to keep prices high).

Edited by Silasw on Aug 1st 2022 at 12:31:37 PM

“And the Bunny nails it!” ~ Gabrael “If the UN can get through a day without everyone strangling everyone else so can we.” ~ Cyran
Zendervai Since: Oct, 2009
#23646: Aug 1st 2022 at 4:57:02 PM

[up] There's a thing you get in some cities where giant companies will buy up most of the houses and apartments for rental, and will then proceed to take up to 20% of those houses out of the market entirely to justify increasing rents for the others. That should just be flat illegal. Sometimes they do really half-assed "renovations" to justify it, but a lot of the time, they don't even do that.

Edited by Zendervai on Aug 1st 2022 at 7:57:12 AM

raziel365 Anka Aquila from South of the Far West (Veteran) Relationship Status: I've been dreaming of True Love's Kiss
Anka Aquila
#23647: Aug 1st 2022 at 5:05:39 PM

I would suggest that another technique that will help to lower prices is if the government built public projects for housing at a low price in the most expensive areas of the cities. The idea would be that doing this would force the market prices of these expensive places down and, like a domino effect, it could also lower the price of housing in general in other districts.

Instead of focusing on relatives that divide us, we should find the absolutes that tie us.
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#23648: Aug 1st 2022 at 5:09:08 PM

[up][up][up] Pardon me, but I really don't think you appreciate the problem with depreciating homes as assets. You're talking tens, even hundreds of millions of people who will be financially harmed by this, most of them middle-class. This is why attempts to build more housing in dense areas frequently fail. You aren't just working against the interests of a privileged wealthy class; you are working against the interests of a vast segment of the population, many of whom are economically left of center.

"I'm going to pass this law that will cut the value of your home in half." "Like hell you will."

the reason they decrease in value is because there are enough cars for everyone

Umm, no, the reason they depreciate is because cars wear out over time, needing increasingly costly repairs until they are no longer economical to maintain. Even when operated for business purposes they get depreciated as expenses.

Houses do also wear out, but on a much longer time scale and land always appreciates in value over time unless it gets damaged by a natural or manmade disaster. This has been the case since basically forever.

Edited by Fighteer on Aug 1st 2022 at 8:09:53 AM

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Silasw A procrastination in of itself from A handcart to hell (4 Score & 7 Years Ago) Relationship Status: And they all lived happily ever after <3
A procrastination in of itself
#23649: Aug 1st 2022 at 6:00:57 PM

Sure, any attempt to do this has to account for the fact that loans tied to property (and used to get property) won’t naturally decrease alongside house prices, we need a way to address that fact. But if we can solve the debt problem then people won’t actually be loosing out financially if we crash house prices. Sure they’ll loose theoretically value, but they’ll still have an incredibly useful and handy possession, and will find it easier to change that possession for another.

You aren't just working against the interests of a privileged wealthy class; you are working against the interests of a vast segment of the population, many of whom are economically left of center.

That depends upon the politics of the country we are talking about. “House prices must go up, no matter the human cost” is at the heart of right-wing sentiment in the UK. It is one of the key weapons used by older generations to enrich themselves at the cost of younger generations.

35% of home owners in England are over the age of 65, despite them making up 18.5% of the population. This is only going to get worse as time progresses on, as fewer young people are able to buy (generally the way they get a home is inheritance (directly or by selling an inherited house and using the money for a deposit) or by having family able & willing to provide them a rent-free home for an extended period) and the middle-aged people who’ve bought get older.

It’s a huge divide, 70%+ of people born before 1969 own their home, but for people born 1970-74 that’s flattened out at 65%, 1975-79 flattened at around 58%, 1980-84 looks to be flattering at 45%. The younger groups haven’t flattened out yet, but it’s clear that we’ve gone from a majority of a generation owning a home in their 20s, to it being a line that might get crossed in their 30s-40s, if ever.

Home owners are very much on their way to being “a privileged wealthy class”, we need to do something about it.

land always appreciates in value over time unless it gets damaged by a natural or manmade disaster.

Land appreciates in value over time because the demand for land (due to increasing population) has almost always gone up rather than down (due to either decreasing population, increasing usable land or increasing efficiency of land use). But, that doesn’t have to be an internet thing. The value of land can go down, if we make better use of the land we have.

Edited by Silasw on Aug 1st 2022 at 2:06:42 PM

“And the Bunny nails it!” ~ Gabrael “If the UN can get through a day without everyone strangling everyone else so can we.” ~ Cyran
M84 Oh, bother. from Our little blue planet Since: Jun, 2010 Relationship Status: Chocolate!
Oh, bother.
#23650: Aug 1st 2022 at 6:07:08 PM

And like I said before, if you think it's bad in the US or the UK (and it is), it's become so much worse in mainland China.

You think paying a mortgage is bad? Try paying a mortgage on a house that isn't even built yet and likely never will be built at this rate. Meaning you will never get a chance to re-sell it or even live in it.

Mainland China's real estate scene is kind of fucked up, is what I'm saying.

Edited by M84 on Aug 1st 2022 at 9:09:09 PM

Disgusted, but not surprised

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