Mmmm…. Yes and no? Inflation refers to a general increase in costs and devaluation of currency. Let’s look at the housing market- the cornerstone of American wealth and credit. The value of homes has risen drastically in a short period of time- we saw it before the “financial crash” and covid 19 drive up prices- in some places by hundreds of thousands of dollars, and the insane costs of real estate in primary desirable markets drove an unprecedented increase in emerging housing markets in places traditionally less desirable as remote workers with higher earning moved to places with lower costs of living with their salaries and or assets and savings.
Similarly the price of new and used vehicles skyrocketed. While there has been inflation- almost always is- and we’ve seen normal inflation along with inflation from things like the Ukraine invasion- the value of currency in the US hasn’t really dropped so much as prices in key areas like homes have shot up.
In fact compared to foreign currency, the USD has been doing favorably on the whole- US travelers have found that most of Asia, much of Europe, and many other places around the globe represent great values for travel and commerce right now. Domestically US wages have somewhat stagnated- following a long standing trend of 40 odd years where income for certain positions and for wealthy too earners has increased while “rank and file” workers have remained static by and large save for occasional minimum wage boosts which help keep the lowest earners just as poor (thanks to inflation) but don’t usually result in boosts to mid tier earners. So at the lowest income there have been increases that largely keep equilibrium and highest earners have seen increases while those in between are still better generally than the lowest earners but are not quite able to keep up.
Housing is critical in this equation because ideally, less than 30% of income would go to housing, but in competitive markets even those making $60-90k a year can have trouble finding housing for below 40-60% of their income. In less desirable markets the earning potential and average wage is lower, but housing affordability is still an issue. Most places with sizable populations have found themselves facing increasingly visible and numerous homelessness. That isn’t a coincidence. Increasing housing costs place ownership further from the reach of many who must have the down payment, credit, and finances to buy homes that have increased on average by $100k or more over a short period across the board. Stock wealth and other booms along with foreign buyers and property investors push “cash sales” and bidding wars which makes things more difficult. What results is a rental market where to pay costs of ownership and upkeep and make any profits, land lords must charge higher rents.
Now consider the economics on a personal level- if a home costs $100,000- this home will generally be fairly small and likely in a rural or otherwise more isolated environment. A minimum down would be 10%- $10,000, but that would also potentially make the loan harder to secure and require the costs of mortgage insurance on top of other costs. But ignore that right now. So $10k going in plus the need to have enough savings to float the loan if you enter hardship. You will need an average around 6% for closing costs and all in you may need 12-16% of the purchase price to get into your home on top of a 10% down since there may be inspections and other costs. Ideally your down will be 25% or more. You’ll also want those savings for any expenses to your new home, and then you’ll want home owners insurance and of course there are bills and likely annual property tax.
But let’s say the home is $100k and you’re getting at a not lowest but not highest possible $13k including moving costs. And let’s just make it easy and say 0% interest and you’re paying $500 a month out of pocket on the home payment. Ok. Now if you rent that house out- you’re probably going to want to rend it for more that $500 a month. Other than the desire to not be losing money so someone can live in a house you bought- you still probably have property tax, you’ll need to include that in the rent. Houses need things over time so you have to calculate an amount that allows you to save for an eventual roof or water heater etc. renting is a liability. Your remnants will use toilets and doors and such- and things wear down and break even if the tenants take care of things- and more so if they don’t. So you need to budget for that along with various insurance and legal fees and possibly management weeds and taxes that can come with renting. You also may want a little bit of money…
.. for if there is a total disaster or a lawsuit (such as a tenant gets hurt on your property etc..) and things like that. Ok. And then you probably want profits. So a house you are paying a $500 note a month on might need to rent for $800+ a month on the low side.
Sooo… if your Tennant can pay $800 a month, and $800 is bigger than $500… why are they renting…? Sometimes it makes a lot of sense to rent- you move a lot or whatever. But… most often it’s because they can’t afford to buy. How can they not afford to buy if they pay $800 in rent and you’re paying $500 to own? Well… they need the credit and savings and such to get the loan. They need the cash for the down and upfront costs. They need the debt to income ratio and savings to get a loan. If your renter makes $1400 a month, that $800 leaves them with $600 a month cash. They need to commute to work (most likely) and buy clothes and household items with that. Pay utilities, likely they own a car so may have a car payment which..
In the US average is $700+ new car and $500 used. Generally it is recommended one doesn’t spend more than 10% of their monthly income on a car- at $1400 that’s $140 a month- which doesn’t go far. A car costing $140 a month will likely need more upkeep and have a shorter service life as well- other expenses. It is also the case that the fuel mileage is likely to be lower as that usually represents an older less efficient vehicle. A difference of a few MPG can add up to over $700 a year for the average driver who travels 10,000 miles a year. Oh. Don’t forget insurance- and with a loan you’ll need full coverage. Depending on age and driving record and zip- that’s can be average $100-500 a month. You still need to eat. You may want or need basic healthcare or emergency care at some point. If we ignore retirement savings, we still don’t end up with much money to use towards things like investing- in education and training, health and wellness, or things like stocks etc. to try to “dig out.”
So a person who could make the monthly payment towards owning a house is paying more than the cost to own the house to live in it while paying for someone else to own it, and that really doesn’t leave a lot of money to save towards being able to buy a house. And those calculations didn’t even include any budget for personal enjoyment or lord forbid- a person with that situation and dependents like children,
Or existing debts. Ouch.
So that is certainly an affordability crises. One in which even purchasing a car to have a means to transport oneself to economic and life opportunities can be out of reach, and a home is not only further from reach but cad payments are a major method to utilize the credit to build up to being accepted for home ownership. As many “welfare critics” will point out- “poor” people often have iPads and iPhones and- how dare they- perhaps toys for the children or some nice clothes. Even those with very little money can afford these, and outside of Atlas Shrugged fantasy land- these incremental purchases generally won’t take the slightest bite out of something like a home- especially in markets where homes start at $500k+ or more than 10x the average yearly wage for a person. A big ass Tv was $500 or less 10 years ago and is $500 or less today. Trendy sneakers have averaged $100-200 retail since the 90’s and still are. The inflation isn’t really there in appreciable amounts across the board.
Certain critical goods or services like real estate and transportation and educations and day care have skyrocketed in price disproportionate to the market and these are things that are all but necessary for the vast majority of people, especially those who hope to improve their lot in life. While paying the astronomically disproportionate prices for those things and the somewhat normal prices for other goods and services, one finds themselves in an affordability crisis.
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deleted
· 1 year ago
This has nothing to do with inflation, it's about redistribution of wealth from bottom to the top. The top few percent have increased their wealth astronomically and the top, say, 15-20 percent significantly. Basically everybody living on salaries has lost, what these people gained. Loss and gain are to be seen in relation to the growth of the entire economy, that means the rich people's share of that total gain has increased. A lot. As general economic growth has decreased and inflation on basic needs has risen, the fragility of this system of distribution is becoming more and more visible to the average Joe. It's just too late to adjust that I'm afraid.
I don’t know why this got a DV let alone why whoever did it doesn’t seem to have anything constructive or of substance to say. Wealth disparity is a major driving force behind many major economic issues.
Supply chain and distribution are fragile systems and…. In ye Olden days a bit of advice was always to consider wether you wanted a stock that paid dividends. Getting a little bit of money on a successful quarter is a good feeling, but the theory went that companies that didn’t pay dividends reinvested that money into building the business- good for the market and good for your stock value. In theory.
But…. Well… one guy made enough money off his company bonuses that he bought a leading global telecom company for the cost of the gdp of some countries. An existing company his purchase added no value to other than arguably “leadership” and a bunch of lost jobs and the halo effect.
Can we imagine for a moment what might have been done with that money had that company not paid it in bonuses and instead reinvested it in themselves? Created jobs? Invested in more robust supply and distribution? I mean- automakers were hit hard by supply line issues- tens of billions of dollars could have gone a good ways to creating internally controlled and resistant supply lines for example. Or perhaps investing in employees- pensions, training and education budgets, raises or bonuses for those doing the work and so forth. I can think of quite a few uses personally a business like that could put such a sum to… but it went to one guy, who used it on a vanity project that likely caused more economic harm than good.
I just don’t think people understand the level of wealth disparity- people making $20-50k a year will make around $1-2 million in a lifetime. That means most people in developed countries will earn 1 to MAYBE 5 million dollars in their lives. $30 billion dollars is the life earnings of over 3,000 relatively high paid people. Two big take aways there. The first is that is a HUGE disparity. The second is is that if you put that $30 billion to subsidizing the lives of individuals, you could t even keep a small, rural town cared for a single generation. So of course the answer isn’t “eat the rich,” the net impact of their combined wealth spread out is not actually that huge, and once a generation of people have eaten and drank and consumed most of that money- those resources are gone. We do need to make sure money gets invested into the sort of large scale projects that generate long term benefits and lead to the availability of new resources and support a growing population.
But it ends up in a place where what we see isn’t that a small group holding all the wealth is inclined or even motivated to spend that wealth in ways that are socially or economically beneficial to anyone but themselves or a small group of people. There is a bit of a loop- efficiency in terms of resources and capital as well as logistics and such is generally best achieved through monolithic design. We don’t need or necessarily benefit from having multiple people duplicate work, especially when that work requires costly overhead or large areas to set up production facilities to create goods which can be produced at existing facilities which aren’t operating near full capacity. In simple terms- you and your spouse don’t both need to drive your 7 passenger cars to go to the same bar to have drinks with the two of you. It wastes fuel and other resources and arguably you don’t even both need a vehicle to begin with as you’re duplicating existing costly machinery. In the processes…
.. of centralizing things for efficiency though, we tend to start to build fragility into the system as an issue impacting a centralized unit will stop or reduce most or all product of that type. Inertia kicks in and as we scale up the costs often increase astronomically for things- an issue US automakers were broken by (along with poor management and culture) and foreign makers have faced as well as they grew on the world stage. Centralization also generally means centralized ownership- which generally places large amounts of wealth back into the hands of a small number of entities who must then be trusted to use that wealth to create responsibility. I dislike the idea of corporations as people but, we can use the concept here to illustrate that it doesn’t particularly matter if the majority of wealth exists with 10 people in their private funds or 10 corporations in theirs. Either way the same 10 or whatever people are probably making the decisions,
as the same people who hold large personal wealth tend to be the same people who sit atop both private and public corporations in positions of high influence, and those people are often many the same people who sit in government or hold influence there. The officials tasked with regulating and policing corporations and business and commerce are often personally and deeply involved in those same industries or literally the exact entities they are watchdogs for. That’s before we get in to who pays for campaigns and such.
What I will say is that wealth disparity as a cause isn’t quite accurate in my mind. Wealth disparity today is generally a side effect of another issue- finance and commerce and infrastructure and business and government are incestuous. They share so much DNA that the World Wide Web could be a description for their toes.
I don’t have Ana answer but I certainly have some ideas. One of which being- while I don’t favor limiting what a person can earn (though it’s ultimately pragmatic), perhaps requirements on what percent of one’s wealth can be from what categories. In other words, something like:
- up to 100% of one’s wealth can come from money paid directly for production of non abstract resources and services. The wording would be tricky- we don’t want to put certain “thinking” professions like accountants out of business or stop digital payments processing but the idea is that if you work a “real honest job” you can make 100% of your income that way with your own hands.
Then the rest is broken down on percents with certain exceptions and such- the main ideas being to allow people to make as much as they like and to invest- but to have to spread wealth around and be dynamic. Entrenchment is a major issue as at a certain point money prints money in a way you have to be rather foolish or exceptionally unlucky to endanger your wealth. So power tends to consolidate along with wealth with creates a cycle of incest between power and wealth. It’s history- it’s basically always been such- dynasties and institutions which gain such dominance that they no longer need to be “the best,” they are simply so big or so entrenched that there isn’t a reasonable competition and thusly they can stagnate and focus entirely on self enrichment. I like the idea of capitalism as a motivator and the freedom to have a choice of lifestyle and wealth- but the two aren’t indexed.
Being wealthy is not linked to one’s value or output in society, we link your value to your wealth. I don’t have a problem if some people would rather or must do simpler jobs, more flexible schedules, less work, etc. and they are ok without yachts and mansions. But when people can do less work than the ones actually producing something and make thousands of times more than those productive folks will make in their lives- and do so in perhaps a few years- that’s a perversion of capitalism. That isn’t a market that rewards betterment but one that rewards exploitation and clever tricks.
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deleted
· 1 year ago
Yap. In lack of any argument there's always the thumbs down button.
I kinda enjoy it. It’s like being told you have hit the truth but someone doesn’t like it on some reflexes level but can’t articulate that dislike. While it is disappointing in that it reminds me of how toddlers throw tantrums because they lack the words or comprehension to communicate, there is this aspect of silent defeat- someone who can’t stand on merit and is upset slinking off knowing they are beaten before they try, but wanting some sense of satisfaction that they aren’t completely impotent just because their ideas are. The downvote is just an upvote for people who don’t agree to point out how damaging your words are to their delusions. That’s always my take anyway.
Yeah between lizard people and communism I just don’t know who to blame. Still, everyone before us is arguably MORE to blame than us
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deleted
· 1 year ago
This is how this works. We've spent way too much time looking at the wrong problems, cause media (on both sides) keep pointing at them. This is cause there is a free debate in western countries like nowhere else, but on a strictly limited number of subjects. You can criticize everything and everyone but not question the ongoing and acceleration of said redistribution of wealth in favour of the real elite, which are not liberal Hollywood stars advocating for gender equality. Just pointing on whose business went thru the roof the last couple years makes you a communist, so "the liberals" rather focus on how far Joe Rogan went too far.
For sure. There are some real issues that get attention but so much of this “culture war” and wether some conservative used to be a drag queen or some liberal vapes in the bathtub or these mouth pieces who no one ever heard of until some news or social media decided the crazy things they say would get people angry or scared is just distraction or manipulation. Using “culture wars” to influence who you may vote for or what you buy- people buy tickets to shows or not, shoes and even cars to make a statement on where they stand, and brands are well aware. You don’t see a lot of gun ads aimed at liberals- they know their market and it is not to their advantage to try and win everyone over, having a loyal customer base and not alienating the people most likely to be your “customer” is key- you don’t generally need to worry about the people who would probably never vote for you or buy your product anyway, or the people who basically have no choice.
It’s hilarious but sad because the well known and mocked “Team Edward” “Team Jacob” thing defines modern marketing and politics (one and the same they really are..) and while tired and cheesy when used so bluntly as “are you team Pineapple on Pizza or Team No?” Or such- that’s all this stuff is. Brands- corporate or human- are aware that we have reverted to this primitive team mentality. With us and against us, you are an ally or an enemy, etc. the “enemies” are mostly people who probably wouldn’t be your supporter even if they weren’t your enemy. Turns out that ambivalence doesn’t usually translate into business, strong positive or negative emotions guide sales and votes.
The dark joke is that by controlling our behavior and not reacting on emotion we could upend the whole thing, but that requires people to use discipline and self awareness.
Similarly the price of new and used vehicles skyrocketed. While there has been inflation- almost always is- and we’ve seen normal inflation along with inflation from things like the Ukraine invasion- the value of currency in the US hasn’t really dropped so much as prices in key areas like homes have shot up.
Sooo… if your Tennant can pay $800 a month, and $800 is bigger than $500… why are they renting…? Sometimes it makes a lot of sense to rent- you move a lot or whatever. But… most often it’s because they can’t afford to buy. How can they not afford to buy if they pay $800 in rent and you’re paying $500 to own? Well… they need the credit and savings and such to get the loan. They need the cash for the down and upfront costs. They need the debt to income ratio and savings to get a loan. If your renter makes $1400 a month, that $800 leaves them with $600 a month cash. They need to commute to work (most likely) and buy clothes and household items with that. Pay utilities, likely they own a car so may have a car payment which..
Or existing debts. Ouch.
Supply chain and distribution are fragile systems and…. In ye Olden days a bit of advice was always to consider wether you wanted a stock that paid dividends. Getting a little bit of money on a successful quarter is a good feeling, but the theory went that companies that didn’t pay dividends reinvested that money into building the business- good for the market and good for your stock value. In theory.
But…. Well… one guy made enough money off his company bonuses that he bought a leading global telecom company for the cost of the gdp of some countries. An existing company his purchase added no value to other than arguably “leadership” and a bunch of lost jobs and the halo effect.
I don’t have Ana answer but I certainly have some ideas. One of which being- while I don’t favor limiting what a person can earn (though it’s ultimately pragmatic), perhaps requirements on what percent of one’s wealth can be from what categories. In other words, something like:
- up to 100% of one’s wealth can come from money paid directly for production of non abstract resources and services. The wording would be tricky- we don’t want to put certain “thinking” professions like accountants out of business or stop digital payments processing but the idea is that if you work a “real honest job” you can make 100% of your income that way with your own hands.
The dark joke is that by controlling our behavior and not reacting on emotion we could upend the whole thing, but that requires people to use discipline and self awareness.