The U.S. Economy Reaches Superstar Status
theatlantic.com
theatlantic.com
> The most recent report found that, from 2019 to 2022, the net worth of the median household increased by 37 percent, from about $141,000 to $192,000, adjusted for inflation.
> An important caveat to the wealth statistics is that much of the recent increase came from the surge in home prices.
These are two sides to the same coin. Rising home values are a zero-sum game. It makes people look wealthier on paper, but there's nothing good that comes from gains in housing prices.
There's also the general problem that the costs of system-legible senior care have shot up to ridiculous levels. I'm currently casually caring for my aunt, who lives by herself in a bona-fide two family. She keeps ideating about "assisted living" but from what I've gathered it would be essentially selling her house to buy in with a large lump payment, and then still paying stiff monthly fees larger than her current expenses (which includes part-time in home help). Essentially the assisted livings have come under control of the same type of economic vampires that have set up shop everywhere else, making it prohibitive for her to move on and consume less housing.
US Home Ownership Rate: 65.6%. It may be a zero sum game (debatable) - but 65% are one side of the coin with a huge pile of cash and 35% are on the other with a lot less.
As a wise man once said - the good of the many outweigh the needs of the few
The truth is that sub-replacement TFR in developed countries is going to lead to problems of varying degrees, and that the inevitable failure of old age entitlements are going to be the least of our problems.
AKA, the tyranny of the majority.
Politicians: Comrades, our living conditions and pay constantly increase.
Citizens: Oh, that's very good for you.
Ah utilitarianism - much like communism, it's a good idea in theory, but bad in practice.
Here in Canada, the young are about to vote conservative(1) over the alternatives for the first time in 40 years for one simple reason: because the entire housing market, either to own or rent, has become completely unaffordable (1 bedrooms in the greater Toronto area rarely go for less than $2500). My first apartment alone in the central part of the city 20 years ago was $700 for a decent one, and starving artists/students/etc could find lesser ones for a lot less.
The home ownership rate by age 30 has gone from well over 50% in 2000 to 36.5% today. The needs of the few are becoming the needs of the majority and they're not in a good mood electorally.
Also, Switzerland has a home ownership rate of barely 40% (in fact if you own a home, you can get taxed on the potential rental income it COULD provide whether you derive said income or not); the result is the Swiss are more mobile for jobs and have more of their wealth tied to other assets and is one of the per capita wealthiest larger economies in the world.
(1) This is not meant to be a pro/anti-conservative statement, merely a point on the sea-change of what can happen when you "protect" the wealth of one group to the detriment of others.
There’s also a more suburban right leaning group who don’t want the “socialist downtowners” to densify their car oriented way of life (Doug Ford comes from this area).
It’s really quite sad and the end result is there are a handful of areas that get super dense development and there’s relatively little midrise.
Cars aren’t going away in North America. Full fucking stop. Pretending they will is an exercise in faux-righteous, virtue-signaling frustration.
They fight townhouses, for christ's sake: https://streetsoftoronto.com/real-estate-home-theatres-baske...
Next, check what a case of Coke costs and come back and tell me sticker shock isn't a thing.
I live in coastal CA and the cheapest eggs at my local market are $3.49/dozen. Trader Joes and Costco are closer to $2.20/dozen if you just want plain white eggs. The moment you go organic, the cheapest is Costco at about $4/dozen.
Edit: Just to be clear, at Costco you buy 2 dozen rather than 1 and I've divided the price to a single dozen.
> Prices for Offerings you order for delivery or pickup through the Online Grocery Ordering Service may be higher than the prices for such Offerings in our physical stores.
Most outlets I've seen (eg. Target) are the same in that they just list a higher price on the website than it costs in-store and they're upfront about this. It takes me 20-25 minutes of in-store picking to shop including checkout for my weekly groceries. Even if that is done by a minimum wage worker (~$17/hr here) that's ~$6-8 of service on top of them bringing it out to the curb. In addition, eggs are usually specially packed in their own bag (frequently with a sticker on the bag labeled "eggs") when they're bought online and curbsided. It seems a bit naive to me to think that all this service would just be included/free.
[1] https://www.albertsonscompanies.com/policies-and-disclosures... (linked from safeway's footer)
I didn't learn about this in the media... I learned about it in school.
I really don't buy this thing about how things are confusing unless you have already experienced them!
Math tricks; mostly loans with long term repayment obligations to a rent seeker, media obfuscation, have been used to hide the deflation of purchase power
We know where it all went. Warren Buffet said the solution is simple, the people need to demand government raise his taxes.
But the public thinks making $200k in 2024 puts them beyond the $60k/yr their parents made in 1990 so it’s cool
I think a good degree of this problem is political as well. People who hold unfavorable views of their leadership are more likely to think of inflation in cumulative terms, as well as ignoring wage growth.
But this isn't higher education level material, is it? Is this not part of the curriculum in high school? I know it's possible to drop out of high school, but most people finish.
Is "what does the word inflation mean?" really not something that it can be assumed everyone has been taught?
If you did, think back on all the kids that were your classmates. Not just the ones in the honors and AP courses you probably took, but all of them. Do you really find it surprising that they didn't learn or retain various bits of seemingly simple information?
If you went to some kind of magnet school with only the smart kids, take my word for it - a huge percentage of 14-17 year olds have absolutely no interest in learning and remembering what inflation is and how it works. Some of them will find some internal curiosity later in life, but plenty will never change much.
This is a minor pet peeve of mine developed from too much time spent reading internet comments years ago where young people would complain "why wasn't XYZ taught in school??". Very often the answer is - It was, but you were a bad student.
There is not some ideal price level that prices fluctuate around such that they are "low" when beneath that level, and "high" when above it. That's just not a thing, it's not how economies work.
So what do you mean when you say "price levels are high"? I think what you and I and most people mean when we say this sort of thing is something like, "I have an estimate anchored in my mind for what the prices of things are, and they are currently noticeably higher than that". But where do those price level "anchors" we all have in our minds come from? From recent experience, pretty much.
But by introducing "recent experience" into this, we now have a time component. And that's where inflation - the change in price levels over time - comes in. This is why people immediately start talking about inflation when you say "price levels are high". It just doesn't make sense to talk about price levels without a baseline to compare to, and that is inevitably a comparison between price levels at different times, so now we're talking about a change over time, which means we're talking about inflation, not just price level.
So what I think people really mean by a statement like "price levels are high" is something like "price levels have increased faster than I have mentally updated the price levels I'm anchored on". That is, there is some rate of inflation that gets lost in the noise of our mental estimates over time, but at some point, it becomes noticeable. (And of course this happens at a different point for different people and those people have difference "noise" tolerance across different things they buy.)
Using everyone's favorite bad example of egg prices, if they cost $3 one year, am I going to notice if they cost a nickel or a dime more the next year? That's about 2% to 3% inflation, and no, I'm probably not going to notice; they still cost about $3. But if inflation is closer to 20% for that year, now they cost $3.60, and that's starting to feel more like $4, which is way more!
Then the other thing is that I think maybe we actually should be reporting inflation in longer time horizons. Something I think I've learned from this period is that people don't update these mental "anchors" for price levels symmetrically; we notice more quickly when prices go up a lot, and take longer than that to "get used to" the new level. So maybe it's a 3 year comparison or even a 5 year comparison that would better reflect how people feel about price levels.
For instance, we could say "the 5-year inflation is at about 23%, which is about 4% annualized", or "3-year inflation is at about 16%, which is about 5% annualized". Importantly, you can't directly compare the 5-year number to the 3-year number, only the annualized rates are comparable, but you can see how the long-range numbers each evolve over time. For instance, the 5-year inflation in 2020 was just 9.2% (using this calculator[0] for all of these), which is only 1.74% annualized! This is a huge difference from the current numbers, and I think that has a lot to do with how people are feeling about price levels.
To complicate it even further, I think how people really anchor things - though this is useless for baseline comparisons over time - is not on a fixed time-range, but instead based on the most recent major event, like the pandemic, or the "great recession" before that, or 9/11 before that, etc. You can see that in most of the current discussions on this, where the word "pandemic" pretty much always comes up. We're coming up on 5 years since that, so I think the 5-year inflation comparison captures it well, but we may still be anchoring on price levels from before the pandemic another three or five years from now if that's still the big event we all have in our minds (and I certainly hope we don't have a new one to dislodge it anytime soon...).
Like, if I bought a house 10 years ago for $50k (which I actually did), paying off $50k with today's dollars seems like no big deal compared to yesterday's dollars. $50k today buys a new car, not a (admittedly on the inexpensive end even at the time) new house.
If the prices of other things are growing a lot faster than the interest rate I got on that house (which I'd think of as the expected time value of that money over the life of the mortgage), it makes sems that the prices are "high" relative to that expectation.
I think something similar happens on the scale of the national debt. Adding a trillion dollars now isn't nearly as big a deal as adding a trillion dollars the first time, because "prices are high" for both labor and goods (income and expenses, from the average citizen's perspective).
My monthly groceries are slightly more expensive than during the pandemic and roughly 3x higher than pre pandemic.
My rent also went way up because the house I’m renting has more than doubled in value over the past few years.
Rent, groceries, and childcare accounts for close to 75% of my post taxes income.
I make well over double the national average, and if I have trouble saving for a house I have no clue how everyone else is managing.
I believe your grocery bill went up that much during the period of inflation, though it's a bit higher than the aggregate inflation data nationwide, it's not too far off.
But that doesn't tell us anything about how quickly prices are rising now, which is what "inflation" is.
Saying "prices are higher now than they were in the past" is not the same as saying "inflation is high right now". And both statements are entirely meaningless without defining the time period being discussed.
We could have massive deflation month to month, and it would still be the case that prices are many times higher than they were in the 50s. It's just an apples to oranges comparison that provides no insight.
Inflation is typically reported on either by looking at the previous 12 months, or by looking at the previous month and "annualizing" it (calculating what the result would be of 12 repetitions of that month's rate).
But clearly people's anchoring on price levels is not all that well aligned with that. I'm also still anchored on what I think things should cost based on what they cost "before the pandemic".
But eventually we'll all get used to the new price levels, and our kids will laugh about how there used to be a whole "dollar menu" at fast food restaurants, just like we laugh about the idea of "nickel and dime stores" and only paying "two bits" (which is a quarter, for some reason) for a shave and a haircut.
But the question of how long this period of getting used to new price levels requires, and why, is fascinating, and I'd like to read a good book about it :)
(Edit to add: I ignored the house and childcare price aspects of this, and I fundamentally agree that it's the "one of these things is not like the others" that explains a lot of the dissatisfaction that people - especially younger people and people with young kids - are feeling.)
https://duckduckgo.com/?q=when+did+the+covid-19+pandemic+end...
...seems to indicate that plenty of authorities considered the pandemic emergency over in the May 2023 time-frame.
Most people only care about having enough money to achieve their life goals. Have a family, own a home, whatever.
People are upset about inflation because costs went way up and salaries stagnated.
Even though inflation is leveling off, many industries are experiencing layoffs, forgoing raises and promotions, etc.
Costs (profits) have gone way up but the average income has not.
I had a thought the other day and HN seems like a good place to ask. And I understand this idea is just straight up out there but I am honestly asking.
What would/might happen if we put a freeze on home prices? Assuming a magic wand could be waved.
You see this dynamic play out exactly with rent control. People are (rationally) very reluctant to leave rent controlled apartments, so rental housing basically sticks with the people who had it at the time rent control was introduced and newcomers are kind of screwed.
I’m holding onto an apartment now exactly because of this so it really hits with me. Thank you!
So landlords are doing great, homeowners get extra paper wealth, and most millennials see their cost of living increase.
And on top of that, we're getting price gouged by grocery cartels.
The real battle is convincing people that none of this has anything to do with inflation.
Some price increases are due to demand alone, but demand also results in at least some improvements to supply. House flippers can do real work on the house.
The housing market serves people with more money. This can be a problem for people who would rather have lower rent than a nicer place.
If a family moves into a $100k house, lives there for five years and sells it for $150k, they might have made $50k. But when they move into a $300k house that was worth $200k five years ago, their situation hasn't improved.
The only people who benefit are the odd ducks who buy in coastal California, then sell to move to Iowa.
Sometimes that's true for a particular house, but why assume that overall, no houses changed? Contractors get paid to do things. People do work on their houses.
Also, the value of a thing is often due to context rather than the thing itself. The neighborhood could really have gotten better over time, even if the house itself didn't change. That counts as a benefit. Maybe not one you wanted, though.
This is oversimplifying. A rise in housing prices should lead the more construction of more housing, if costs stay relatively the same, and indeed the inflation in housing prices has grown far faster than the cost of labor or building materials. We have a zero-sum game because supply is restricted instead of allowing the market to respond by producing more housing. Sometimes this is due to NIMBYism, sometimes just legacy zoning practices. China has the opposite problem right now because their central planning built too much housing. But there's nothing special about housing that makes it a zero-sum game. For sure, land is basically a zero-sum game (you could blast apart mountains or build artificial islands, but that's not usually financially feasible), but most countries have large apartment towers that expand the amount of housing available despite the zero-sum game for land.
And America has so much land compared to most countries. It's not even funny. It's just mostly wasted.
If I substitute the word "stock" for the word "housing", would you still agree with the statement? If not, what differentiates housing-as-an-asset from stocks-as-an-asset from a wealth perspective? It's not like we can't have more of either of them.
The increased value of my stock holdings has resulted in a very nice increase in my quarterly dividend distribution. Thus, I see an increase in stock value the same way I see any other increase in my income.
I could sell my house an pocket those gains, but I'd have to buy another house that has also experienced the same, or even greater price increases. Or rent smaller apartment at 2-3x my monthly mortgage.
In reality, calling housing inflation "zero sum" is being generous. It's pretty much an economic drag on society. Having the price of housing get cheaper over time would probably be better.
> housing-as-an-asset from stocks-as-an-asset
Of course these are both "assets." But stocks are an income producing investment while my house is more akin to my car: it costs me money but provides me with necessary functionality. If I owned rental properties, then I'd call those income producing investments, but I don't own rentals.
But there are masses of companies in the S&P 500 that don't even pay dividends. The dividend yield of the index is like 1.3%.
"The thing I have noticed is when the anecdotes and the data disagree, the anecdotes are usually right. There's something wrong with the way you are measuring it". —[Jeff Bezos](https://sports.yahoo.com/amazon-ceo-jeff-bezos-explains-2123...)
Bingo.
People who argue the economy is doing well based on some coarse high-level numbers are missing a lot, because the numbers are coarse and high-level. The most charitable interpretation is they're confusing the map for the territory.
That said, 1% of one million is ~double 10% of $45,000.
> everyday needs
The cost of a lot of things, dining out in particular, were kept in check for decades because wages for labor were suppressed. The true costs of "everyday needs" were borne by labor to the benefit of the consumer (and arguably, the business owner).
Now that we can't cheaply exploit labor post pandemic, costs for the consumer are going up. The rising incomes at the bottom rungs of the economic ladder, alongside rapidly (and long-running) spiking costs of real estate, are squeezing consumers as they buy groceries, gas, and yes, fast food.
Putting the brakes on the costs of those is probably going to look like squeezing wages on low income workers once more.
Among other things, wages for fast food workers in California went from > 0 to 0 when they all were laid off.
I imagine you make a lot of money.
A broken clock with 12 hands is right 24 times a day.
No one knows EXACTLY when the trend will end - which you generally need to get right to make a lot of money.
But most people with a brain know an unsustainable trend will not last forever.
This is a masterclass in deception. Here's the actual, plain English translation:
"U.S. GDP growth averaged 2.05% during the four year period beginning in 2020."
But 2% GDP growth per year is subpar, and we're trying to make it sound great! Well, folks are familiar with annual GDP stats, so giving them annualized stats makes comparison easy. To prevent this easy comparison, we won't annualize it! Instead we'll say:
"U.S. GDP grew by 8.2% during the four year period beginning in 2020."
But there's still a problem! 8/2 makes for easy mental math. The reader can still easily realize that we're talking about a paltry 2% growth. How do we handle this? Easy! More obfuscation!
"From the end of 2019 to the end of 2023, U.S. GDP grew by 8.2 percent."
Now the readers is two operations away from being able to compare the data!
The greatest trick of all, of course, is that this odd formulation invites misinterpretation. Since we almost always talk about GDP growth in annualized terms, this sentence can easily be misread as saying "U.S. GDP grew at a rate of 8.2 percent from 2019-2023". In my opinion, this misinterpretation is practically demanded by context, as the actual (2%) figure does not fit into the glowing narrative at all.
I think the ultimate problem is that regardless of the system-legible numbers looking great, it's ultimately just a paperclip optimizer that doesn't reflect people's day to day experiences. There's another article on the front page about "economic termites" and I think that doesn't even capture the full extent of the problem because it's still narrowly focused on prices. Whereas what is happening is that every business with a captive market (which is basically every business these days, after decades of mergers running amok and regulatory capture red tape) is spreadsheet-optimizing into an ever-worse customer experience.
Yea, because it is compared to other countries. See the graph immediately after the section you quoted.
It is intentionally deceptive.
> If the United States’ economy were an athlete, right now it would be peak LeBron James. If it were a pop star, it would be peak Taylor Swift. Four years ago, the pandemic temporarily brought much of the world economy to a halt. Since then, America’s economic performance has left other countries in the dust and even broken some of its own records.
They're not saying it's "pretty good during a pandemic", they're literally saying it's the GOAT.
The Ministry of Plenty's forecast had estimated the output of boots for the quarter at 145 million pairs. The actual output was given as sixty-two millions. Winston, however, in rewriting the forecast, marked the figure down to fifty-seven millions, so as to allow for the usual claim that the quota had been overfulfilled. In any case, sixty-two millions was no nearer the truth than fifty-seven millions, or than 145 millions. Very likely no boots had been produced at all. Likelier still, nobody knew how many had been produced, much less cared. All one knew was that every quarter astronomical numbers of boots were produced on paper, while perhaps half the population of Oceania went barefoot.
This is a really bad example because you could try to make the case that per-capita income doesn't accurately capture the difficulty obtaining education/healthcare/housing, but no serious person is contesting we have access to a vast quantity of high-quality consumer goods for peanuts.
No, I wouldn’t rather live in China/russia/medieval Europe/on a desert island/whatever, to cut off any confusion there. I’m just saying “we’re rich comparatively” isn’t very useful in this case
So the metric by which Americans have an improved "access to vast quantity of high quality consumer goods" would be, from the article, the fact that Americans have had their purchasing power increase by 3% relative to other nations, which saw purchasing power of their citizens decrease.
Things like housing and medicine are generally going to be expensive at any point in time (due to supply/demand and cost of development, respectively) but the increase in purchasing power outlined in the article is a pretty good (not perfect) proxy for Americans ability to acquire consumer goods.
It's not like the indicators are in some confusing disagreement. Everything points toward the economy being ridiculously hot.
Of course there's one glaring exception: the people's vibes. Of course, vibes are highly malleable by media, culture, and internet commentators ambiguously gesturing toward the a gargantuan fraud with tens of thousands of individuals quietly acting in concert.
* alot of media and govt sources are reporting the US has a k shaped economy.
The people who are doing well are doing really well.
The people who aren't doing well are doing really bad, and there's a lot of people who aren't doing well.
* The reason immigrants account for so much post-pandemic growth is because immigrants appear to be replacing native born people in job growth.
Lower paid immigrants taking jobs is ultimately an assault on the working class yet the left spins it like it's a good thing.
https://fred.stlouisfed.org/graph/?g=1oPUl
* Gov't spending is out of control and THE INTEREST on our National Debt just surpassed military spending. Which means the fed will have to print money or issue treasury bonds to cover the U.S. massive defecit every year, which will increase inflation continuously.
Lessons to be learned:
1. Inflation is never going down
2. House prices are never going down
3. There is not a healthy job market if you are a native born citizen as there's a war on wages
4. Historically massive inflation has led to war
Someone on HN posited that the models we use for economic performance are overfitted, that they no longer actually gauge the performance of the economy. The economy, after all, is about finding optimal distribution of resources, and ultimately, all resources are produced for the benefit of human beings, so if people's experience on the ground, in reality, is that things are bad, maybe quit telling them they're wrong and go find out what's wrong with your models or measures? Just a wild idea, what do I know.
The basic bargain at the heart of the United States means that you put up with bad urban planning, public infrastructure and a criminal healthcare system in exchange for getting to drive a huge vehicle, cheap food and consumer goods and a detached home with a big yard.
Now you get all the bad stuff, plus expensive food, unaffordable transportation options and a bidding war with Blackrock for your starter home in the midwest.
But hey, the stock market is up!
It’s going to be a fucking disaster of global proportions when the gum dries up.
I stopped reading there. Unending growth on a finite body is called cancer. The world needs less growth.