Naively, if I knew everyone’s salaries were about to double, I’d hope to be holding a fair amount of real estate going into that doubling.
But mainly it is that you would need to remove or decrease benefits for those who do not work in order to have room for higher salaries. That is not a problem for the unemployed because higher salaries means that the only people without work are those who do not want to work. But it is a big problem for those who do not want to work and for example would like to live off their real estate.
The gut reaction to higher salaries is that people would have more money to purchase real estate or pay rent, but I think the downwards effects for real estate are much stronger. And the evidence is that in every country which has seen a period of high salaries for workers, real estate has been cheap during that period for workers to buy.
Real question. Do we have evidence of this from anything except developing economies pulling countries out of poverty? Like a first world country sort of thing. Because to me it seems like higher salaries comes first, and the property would lag for a bit while the market reaches its new level. Does that make sense?
High salaries and cheap housing was the reality in I think every first world country when they developed after WWII.
But since the wealth gap keeps widening, fewer and fewer workers can afford this, as they get priced out of locations that offer good employment. At the same time the rich keep investing their money into higher-margin industries. Consider that for landlords owning enough housing, building more can have a negative RoI, and they all know that they all know this!
If you don't believe me, think about just how quickly the datacenter boom became reality. All that money was waiting around, and evidently could have been turned into a lot of building activity in a short amount of time.
The only answer is to build more housing and have a high property tax in unoccupied housing.
You could build as much more housing as you want, but if those houses only become accessible to purchase for those who already own real estate instead of for those who work, then nothing will change.
It is true that "housing in trollbridge's front yard" is not constrained. If you need a place to live and show up here with a camper, or plans to get one, I can probably set you up for a while. It is not a lifestyle most people are interested in.
I don’t think this is really true. It’s naively true if you just look at the number of homeless people vs the number of empty units, but misses:
1. That markets need some portion of empty units for fluidity.
2. That many people aren’t homeless, but living in situations where they would take more housing if it was available. (Living with roommates, ex-partners, family, etc.)
3. Many places simply don’t have enough housing for everyone who wants to live there. If they did, people would move from other places.
Of course, that also shows the problem: it haircuts pensions as well, since they are a large part of the rent seeking class.
If inflation is too low or doesn’t exist, then there’s less incentive to do anything with your money. If I have bunch a money that I don’t need to spend immediately, and I just want to keep it secure, why would I not keep it in a safe or non-investment account if it’s not losing value over time? What’s my incentive to risk it by lending it out to someone else?
Debt has something of a bad reputation and obviously it can be overused and abused, but it’s also something that helps the efficiency of economies. It maximizes the amount of money actively participating in the economy rather than sitting.
That's not true and repeating it doesn't make it so. Even in deflationary environment, the risk of missed purchases isn't zero and the risk of missing investment profits isn't zero either. From motivational point of view, inflation and deflation aren't different, they're the same thing in a mirror image.
There's a lot more to say about this, but the truth is deflation is naturally limited and much less problematic than inflation. Deflation is rare as hen's teeth and extremely easy to fix.
On the other hand, inflation has ruined numerous economies and has caused wars and large scale destruction. It tends to go out of hand and it's very hard to control, some of that is due to its insurmountable conflicts of interest. At scale, inflation is the most corrupt economic phenomenon by far.
The risk of missed purchases isn't zero and the risk of missing investment profits isn't zero either. From motivational point of view, inflation and deflation aren't different, they're the same thing in a mirror image.
Deflation is rare as hen's teeth, harmless and extremely easy to fix. Inflation, on the other hand, is the most corrupt economic phenomenon by far, it's hard to fix and it has ruined numerous economies, caused wars, destruction and famines.
> Debt has something of a bad reputation and obviously it can be overused and abused, but it’s also something that helps the efficiency of economies.
This is a strawman, nobody said debt as such was bad. However, since you started, let me correct you - as it is, debt not only "can be overused and abused" - it is routinely abused and overused and inflation is a huge part of it.
Could you explain? If you work. You're not renting. You're not on a pension. You're not ... then what is bad about inflation?
Work or no work doesn't matter, inflation steals everyone's savings, wages grow slower than inflation - so they get stolen too, it causes a run on assets, feeds on itself and feeds corruption-driven bubbles, the funds extracted via inflation lead to monopolization and oligarchy-zation, inflation can be used to install Hitlers and manipulate elections, the list goes on.
> You're not renting. You're not on a pension. You're not...
Right, if you're not living, inflation doesn't matter, in all other cases it does. I don't know what you are talking about here here, or rather, I know that you don't know what you're talking about.
It's crystal clear that you have no idea what the role of banks in the economy is and what it's supposed to be. Without that understanding you're going to keep presenting pompously mysterious arguments which are nonsensical even by the low-bar measure of mainstream economics. I cannot type a whole econ 101 course here, you're supposed to figure out on your own why we have banks, how they work and what they're supposed to achieve.
Luckily working people's savings are essentially nothing and you have a wage. Which means it won't affect poor working people. But yes it will destroy savings, which is why it hurts rich people and doesn't hurt poor people: they have savings you and I don't have.
Wages grow slower than inflation - that's the point, the government would shortcut this by overpaying, so that wages would grow at the pace or even faster than inflation.
> to keep presenting pompously mysterious arguments which are nonsensical even by the low-bar measure of mainstream economics ...
Still have my original (1970) economics textbook. This is what it says should be done. Explicitly raising inflation to 10% or so helps poor people by destroying their debt, and it hurts every kind of savings in the economy, which is why rich people don't want it. It equalizes everyone.
Lucky them, due to inflation constantly eroding their incomes, they can't save. I repeat, wage growth trails inflation, see housing and everything else.
> Which means it won't affect poor working people.
Untrue, as I've explained twice already.
> But yes it will destroy savings, which is why it hurts rich people and doesn't hurt poor people: the rich have savings you and I don't have. The rich have savings the state does not have.
Untrue, rich people don't gave savings, they have properties and investments, inflation is how they acquire more of them, the poor are forced to sell cheap to survive, the rich swallow it all.
> Explicitly raising inflation to 10% or so helps poor people by destroying their debt,
More falsehoods from you - poor people borrow small amounts all the time, think payday loans at rates rising with inflation and several times higher than the rates for the rich - inflation does help the rich who borrow large sums at long intervals but it doesn't help the poor at at all, for them, it's more inflation -> more wage erosion -> more (and more expensive) debt. You can't outrun your shadow, do you understand?
> and it hurts every kind of savings in the economy
It doesn't hurt the assets of the rich because they appreciate faster than inflation, especially if you include their siphoning of more assets due to the financially depressed poor.
> which is why rich people don't want it. It equalizes everyone.
The falsehoods are getting out of hand. The rich have vastly more debt than the poor, they borrow against their appreciating assets at vastly better interest rates and longer terms so the more inflation - the less they repay, so they love inflation more than anything - inflation makes the asset-holding rich richer. If you're incapable of understanding my words, hear an authority with experience - by Trump's words: "Inflation made me very rich"
> Still have my original (1970) economics textbook.
Shoddy econ books are dime a dozen. Give me the author and title, I love to make fun of sloppy econ books, there are so many of them, so much fun.
> Besides I don't understand why you're even making this argument... You can't stop it
Finally a sensible argument, kinda, as much as inevitability can be an argument. However, I'm not trying to stop inflation, I'm analyzing its systemic origins with an eye on systemic fixes. If it can't be stopped this time around, we should not allow it to happen again. Besides, I want to explore all options.
Seriously? I mean first of all you must see that on a large timeframe this claim is beyond bullshit. Economists claim that essentially from the beginning of time until 1972, and for a lot of people more like 1990, wages grew faster than inflation.
Second you must understand this can be shortcut. If the government explicitly hires and raises wages, obviously it determines 100% by itself if wages trail inflation or not.
> Untrue, rich people don't have savings, they have properties and investments
No they don't. Look at some properties and check if this is true. Rich people only really directly own private houses and only a few. And the superrich ... maybe a dozen. But that's it. All properties are financial constructions because of the massive liquidity advantages that has: Let's say you're rich, and you need money. If you own a shopping mall, you're screwed. But if the shopping mall is constructed using debt and you get 8% interest on that debt. First, it can be divided amongst ... anyone you like really. Second you can sell 1%, 10%, ... whatever you want to raise money. Or you can have them buy out the debt. Or ... The ability to raise money, to control where money goes is what really makes someone rich, it's what high middle class "climbers" don't have. Most properties work like companies do, except much more debt much less equity. One superrich who (has to) be pretty public with what he owns and how it's structured is the king of England. And while due to his special tax situation it is not 100% typical, it's still very instructive. So look at how it works. He owns companies (just because it's called "duchy of ..." or something like that doesn't mean it's not a company), and they own massive debt in properties that others manage for him.
> More falsehoods from you - poor people, poor on collateral, borrow small amounts all the time ...
There are TWO sides to debt. The person who borrows, and the person who lends money and gets the interest. If you have large inflation, on BOTH sides the numbers "go down" (compared to wages, because wages go up, loan amount don't)
The rest is making the same mistake as you keep making here. High inflation provides a (partial) reset. Existing loans become much easier to pay for, and worth much less. Poor people pay. Rich people receive the interest. Both become less compared to wages. Obviously this helps the poor and fucks over the rich.
Strawman. Nobody claimed there's only one. My explanations considered both sides while you use banalities as distractions.
> The rest is making the same mistake as you keep making here. High inflation provides a (partial) reset.
I'm not making any mistakes, I explained why the poor gain nothing from inflation - because of their high interest rates and frequent borrowing at interest rates rising with inflation. On the other hand, the rich having plenty of collateral, borrow a lot more, locking on low interest rates for long term loans which leads to them gaining significantly from the erosion of the interest they pay. Moreover, the rich have pricing power too, they increase the price of their assets output, including rent, while they suppress wages with their wage-setting power - they control the game.
So if they gain from this purely financial, zero sum scheme, somebody's got to lose and there's nobody else in it besides the the wage earning poor and middle class.
You mistake is to think that you can cure the effects of high cost of living with inflation. But the high cost of living is due to inflation... so you are trying to convince me that we can cure inflation with more inflation. In other words you're a like firefighter who puts out gasoline fires with more gasoline. Nice try.
Apparently you grok neither economics nor logic, so you have to rely on insiders to tell you truth every now and then. I quoted Trump, you skipped that. Here's another rich man who admits everything that I said, applicable to himself and others like him. Don't skip this, look at the video and the comments.
Chamath: I was wrong. The economy is broken: