The last I checked regarding Q3, was that most of the growth was due to consumption, but most of that consumption was fueled by debt. The prior Q2 consumption was suppressed, and it seems that everyone was forced to restart consumption in Q3.
This is good news but to sustain (or even increase) this growth, the US needs to address the housing crisis. The housing shortage is best viewed not so much as too few homes overall nationally, but too few homes in job-rich regions where people want to work and live. Hsieh and Morrietti estimated the resulting spatial misallocation of labor lowered aggregate GDP growth by 50% between 1964 and 2009:
That is, businesses can’t find the needed local workers to expand, and workers lack access to good paying jobs. Remote work is helping, but still, the problem is estimated to have gotten much worse recently with the surge in home prices over the last 15 years.
TLDR: fix the housing problem, and the economy will be able to sustain higher growth.
Additionally, there's the problem of home ownership trending in the direction of exacerbating income disparities, by shifting rental income and property value gains to investors instead of new homeowners.
No need to outlaw the 30 year mortgage; it's the creation of government policy in the first place. Just stop Fannie Mae and Freddie Mac from insuring mortgages.
The problem with housing is that people view it as an investment. And it is, but that same mindset tends to drive people to pay as much as they can possibly afford, loans included. This drives housing prices up. Reducing the max mortgage will not reduce demand in the least, but it would reduce the maximum price people could pay. This would drive housing costs sharply downward.
For this very reason, this stands exactly 0 chance of ever being passed, but it almost certainly a viable solution. It's not like people would just endlessly sit on vacant houses on a large scale.
People speculate on housing mainly because it makes sense tax-wise. Georgist LVT is the best policy for preventing this. In many cities people endlessly sit on vacant blocks waiting for the market to move in their favour, with no disincentives to do so.
Your policy would just result in houses being owned by richer people, and more people paying rent. It would reduce house prices, but only the riches people would be buying them and receiving the benefits.
It would fail in a similar way to rent-control. Sure, it makes things cheaper in the short term, but harms everyone in the long term.
In many cities people sit in very limited areas on a very limited number of houses, while continuing to pay taxes on those buildings. This is why I said specifically at scale. And it's nothing about speculation, which I'd say has the connotation of making a profit. Housing is quite similar to education. People are led to believe that the value of their house will endlessly appreciate (in the same way that education is supposed to lead to imminent wealth), so what's the fair price for a house or an education? Literally anything, because it'll be worth more 10 years from now.
But of course this is a fallacy because the value of a house is strictly finite. So we are stuck in an endless loop of bubbles. People buy houses on debt they can't afford until that debt eventually explodes at some point, and the housing market crashes. Then we start pumping it up again. This is also the reason housing prices (as well as education) have skyrocketed far ahead of inflation. The availability of exceptionally high amounts of debt, relative to what people have, seems to be a recurring theme in breaking economic systems on a micro scale. And perhaps we might see such happen on a rather macro scale as well, in the not so distant future.
Purchasing assets under the expectation that values will increase _is_ speculation. The solution in LVT is staring you in the face, I don’t understand why you reflexively ignore it and reach for worse policies.
Read “Progress and Poverty.” It explains in detail why the cycles you describe would be dampened by a LVT.
Are people "speculating" when they pursue higher education? People, overwhelmingly, are not purchasing houses to make a profit, but rather using the perception of endless appreciation as a misguided justification for taking on increasingly absurd levels of debt. And that is the core problem that needs to be solved. You can try to change perceptions, or you can change the ability to take on unreasonably high levels of debt. Same with higher education.
As for LVT, you can't expect me to go read a book to appreciate your argument. And I'm vastly more inclined to read than average. Owing to that I did at least check out the Wiki on the book. The excerpts section [1] seems to offer an argument that is either false or highly outdated. Any look at San Francisco, NYC, and other places will clearly show that the areas with the highest level of economic development also offer the highest wages, by an overwhelmingly wide margin.
What drives the prices up is not some conniving and far-sighted bourgeois, but rather economic development driving defacto unlimited levels of demand. In a place like San Francisco you can earn $70k for labor that would pay $30k in a less developed area. Because of this you will never have affordable housing, because that $40k delta would otherwise drive everybody over to hoover it up. This is the scenario literally everywhere in the world.
When you look at what few exceptions there are, they tend to not be exceptions. For instance Tokyo is often cited, yet it seems most people still have an obsolete image of Japain in their minds. They've gone through a 30 year period of stagflation, have a shrinking population, and a declining economy. So housing seems cheap in Tokyo by Western standards, but it's extremely expensive by Japanese standards which is where the overwhelming majority of the demand, and thus the price equilibrium, comes from.
I don’t think that excerpt is false, or a good summary of the book really. My point is unless you understand the Georgist argument well, it is misguided to think there are better policies to prevent rent seeking causing housing crisis. When both heterodox and orthodox economists agree on the soundness of a policy such as the LVT, you at least have to compare it to your novel proposal or have a good reason for why so many smart people are wrong.
I agree with most of what you say about more developed areas having higher wages. But this is predicted in Progress and Poverty: as a society progresses in terms of increasing land value and increasing productivity (in wages and efficiency of land use) poverty arises because the rents tend to eat up all value so that wages become just enough to survive. The best way to reverse this is to tax the unimproved rents. This encourages housing development (efficient use of land) and discourages speculative land bubbles (since you lose money if you do not use the land or let others use it).
Do you mean 7 years of down payment time? If so, how would that help? I feel it only would favor those already owning, would be impossible for a new family to get into the market.
Here in Norway the the general rule is that you can't have more debt than 5x your income, with room for some exceptions. Kinda creates a ceiling for the prices of normal houses / apartments.
Btw curious: I often see sellers in the US preferring to sell to someone that pays cash vs a loan. Why does that matter? Here at least I don't care where the money comes from, I get paid the same.
The reason to prefer cash is that there are far fewer things to hold up or tank the deal. When the deal is dependent on a loan, it also becomes dependent on all the conditions for that loan (and the timeline to get it approved).
Ah, here you get your loan amount approved before you start looking at houses. And when bidding you provide your bank contact, which confirms to the realtor that your bid is ok.
But I guess things are just very different. As a buyer you wouldn't have a realtor here either, one for the seller is enough. Quite stringent rules on how the bidding process works, the seller needs to pay for an inspection before putting the house up for sale etc.
land value tax is an efficient tax. No need to arbitrarily ban people from using debt. if by build smaller houses you mean make it legal and easy to do, yeah. also if the government is directly building them and selling them. but don't throw yet more requirements at developers.
7 years isn’t arbitrary? Jubilees are 50 years, which is also arbitrary.
I don’t like the culture of huge debt either, but pretending solutions like this aren’t arbitrary is ridiculous. We have bankruptcy to prevent debt slavery (except for student loans in the US). We have LVT to prevent speculative bubbles, we just need to implement it.
I don’t class a person who inherits land as ‘the poorest.’ In reality, truly poor people are forced to pay income tax which I think is immoral. Most parts of the world had long periods where income taxes where nonexistent. We can do the same with LVT and get the added benefits of less property speculation! Not to mention reducing distortionary effects of income taxes.
I agree no one would make a loan longer than 7 years under that policy, but I don’t think that would be good for anyone but the richest in society.
In our system already the poorest pay no income tax.
If their father gives them a piece of land, now they have to “pay to own” it, what about the recipients who are barely making it?
Agreed that income tax is bad, but not just for the poor; but also land tax is bad. Tariffs or some sort of luxury sales tax would be better. Also reducing the size and scope of govt, but that’s another can of worms. In any case, it’s been nice but I’ll leave the last word to you.
I’m not sure what system you are in, but in the US and Aus people pay tax on very low incomes. Look up the tax free threshold in Australia, it’s almost impossible to live on that income.
If you can’t afford the LVT, you can either rent the land or sell the land. Both are better for the economy than people sitting on idle land doing nothing of value. In this case I would focus on those barely making it who have no property, and whos taxes effectively make landholder’s assets more valuable through gov infrastructure spending.
Tariffs and luxury taxes have the same problems: they distort markets and in the case of tariffs, make goods more expensive which makes life harder for poorer people. Luxury taxes aren’t significant enough to be very useful, but could be useful in addition to LVT.
> No-one should be taxed on income anywhere near that level.
Don’t misunderstand me. I completely agree with this and would prefer having the standard deduction even higher with higher taxes above it to compensate.
> Federal minimum wage is $15,080.
I know which is why I said “close to”. This also with the assumption that it’s always 40 hours a week and you never get sick or need time off (which would assuredly be unpaid).
Even working 36 hours per week, every week, at minimum wage (which is considered a full time job), would put you under the standard deduction.
I'm looking to sell and move permanently overseas if Trump wins next fall, I'm planning on setting up a contract position in Europe well before that and watch and vote from abroad.
Don't worry if you are a citizen of the US you'll still be affected by what trump or any other president does. Cause unless you renounce your citizenship you'll still be paying taxes.
which is fine, because then those who find that area too expensive will then spread out to a cheaper area.
And with increased population in these "WFH" areas, other services would spring up to feed the demand of the now locals working from home there.
The only real issue is the inability for small businesses to start near there for cheap, or for regulatory reasons. For example, you cannot run a corner store in residential areas.
Thanks, I recall there being some debate about the magnitude of the effect, but if recall correctly, some authors argued the problem was even worse than Hsieh-Moretti thought originally?
Whatever the actual percentage, it makes intuitive sense a spatial misallocation of labor and capital will hurt economic growth.
> That is, businesses can’t find the needed local workers to expand, and workers lack access to good paying jobs.
Those are compatible problems. You need more workers to expand? Pay them. You'll get them. The jobs that can't (or won't) pay workers more will be the jobs that don't get filled. Those are the jobs that don't produce enough value to be worth paying decent money, and they are exactly the jobs we want to go unfilled.
Don’t forget credit card interest payments! GDP! Student loan payments! That also goes towards GDP! Great products! 30 years of mortgage interest? You guessed it, GDP!
Copium and GDP for everyone!
Anyone look at PPP or is that metric too inconvenient?
There's been a lot of spending on credit cards and the like but default rates are heading up such that it quite likely won't go on like this that much longer.
I do think the Fed's stunt with 2-3% interest rates in 2020-2022 was an effort to further concentrate wealth up the stack. Everyone who could buy/refinance did and will likely stop moving for the foreseeable future, as the same house would cost at least 33% more per month thanks to the higher interest rate alone.
Increasing interest rates should have the reverse effect. A lot of crazy financial instruments depend on low interest rates to work. When interest is increased, the price of money goes up; the wealthy are bouyed far more by ZIRP than someone say in the tenderloin, who does not have access to high finance.
Increasing rates is their attempts to bring inflation back to normal, since cheap money is cheap for _everyone_, including all Americans that were eager to get a low monthly payment on cars/houses (as I’ve alluded to), not just for existing collateral but for new homes/cars, thus increasing total demand - and that demand leading to price increases across the board.
Yeah, I assume the 2-3% rates is referring to mortgage rates, which isn’t directly caused by the fed but was certainly influenced by the fed setting short-term rates at 0.
It's true insomuch as aggregate spending being high drives inflation. Not necessarily government. More dollars, same goods. Not more gov't dollars, same goods.
We should really be trying to maximize a human happiness metric with the _minimum_ amount of GDP. Quantifying that is a challenge, but if we don’t start, we’ll never get there.
While the world’s resources are finite I think it is excessively pessimistic to suggest we’re consuming anywhere near all that is available to us.
It’s possible to call out externalized costs (eg greenhouse emissions, many plastics) and be optimistic about our ability, as a species, to produce more.
The problem is, how do we accurately measure that happiness? Economists would be first in line to use that measure. They know GDP is flawed--unpaid domestic work isn't included, for example--but it's the best they have. There is a ton of econ literature stating as much.
Using dollars spent as a measure of happiness is unfortunately the best we can do (so far).
The failure of this metric as measure of happiness is very obvious. I can be rich person (relatively rich not that rich) and are spending a lot of money on my health problems who are making my life hell. With such metric this indicates that I'm living my best days.
It can apply across a whole economy though. You could argue half of the population is obese thanks to economic policies that improve GDP. That will impact gross national happiness.
But you can’t argue that a one off really sad rich person has meaning. Nor can you argue that that’s a common occurrence that wouldn’t immediately be lost in the noise.
I’m also unconvinced that obesity is caused by “the economic policies that improve GDP”.
The answer to this always seemed self evident - ask people. Obviously this will be exceptionally subjective, but the entire point of all of these ostensibly "objective" metrics is to work to maximize the subjective metrics. Nobody gives a fly fark if a GDP is 37 or 38201784, but everybody cares about which place offers a more pleasant life.
When those objective metrics do map strongly to the subjective metrics, then it's awesome. But the problem is that in practice near to any objective metric can be completely and utterly gamed in, more or less, "honest" ways. Essentially, a government can find ways to increase it without increasing the things that it's supposed to represent. But you can't game how people themselves perceive things without outright lying and fraud.
The subjective metrics would also measure things objective metrics fail on hard. For instance war, as the aggressor or 'backer', is absolutely awesome for near to every economic metric. And national "defense" was one of the big winners in this GDP report. But do these wars provide a subjective quality of life improvement, or deterioration, for people? Basically I don't think the goal of the government should be to provide value to shareholders. That's the point of private industry and capitalism at large. The point of the government is to create a desirable state of life for people living within a country.
> When those objective metrics do map strongly to the subjective metrics, then it's awesome. But the problem is that in practice near to any objective metric can be completely and utterly gamed in, more or less, "honest" ways. Essentially, a government can find ways to increase it without increasing the things that it's supposed to represent. But you can't game how people themselves perceive things without outright lying and fraud.
Subjective metrics are even easier to game though. Just dope everyone up, or tell them every other country is worse off, or.... And it's harder to prove lying or fraud because it's all subjective ideas, whereas when you have an objective number then at least if someone actually lies about the number that's provable.
> And national "defense" was one of the big winners in this GDP report. But do these wars provide a subjective quality of life improvement, or deterioration, for people?
The point of defense spending is so that you don't get invaded. Getting invaded tends to cause a major deterioration in quality of life.
Not sure if correlated to happiness, but I wonder if we can measure the % of population who gives a f** in a country.
In some countries people seem totally disconnected and frustrated (France, Italy come to mind), in others people feel a personal responsibility to make their country a success (Scandinavian countries come to mind)
That to me seems a better indicator for the future
REAL, unofficial Chinese gdp is probably at near 0% or negative. you don't get 20-30% decline in all metrics like export, import, home price, tax revenue, land value, employment, salaries, etc etc and still have 5% gdp growth.
There's a reason why Xi Jing Ping came begging for relief in APEC San Francisco. Which he got none.
He rarely travelled abroad in the last 4 years. He made a special trip to the home turf of US. The country that just choked their AI ambition
He was trying to get American business to come back to China. Instead, not much deals happened. Furthermore, it was rumored that Goldman Sachs bought a seat at dinner with Xi, just to let him know that Goldman was selling huge amount of properties in China.
He was also protesting US giving arms to Taiwan. Nothing happened.
LOL. That's exactly what China states about the US, when the US sent multiple high up officials to China prior to Xi's trip to San Fran., in order to pave the way for Xi to come to the US because Biden was begging to meet with Xi. I guess it's all a matter of perspective.
One country has a 22% youth unemployment rate, before stopped reporting. Another country has a 8% youth unemployment rate.
One country has the primary investment sector being real estate, where their top 2 companies are bankrupt. Another country has the primary investment sector being stock market, where their tech top company is worth 30 of the other country's top tech companies.
Easy to figure out which one was begging for money
Again. It's a matter of perspective. If Biden didn't ask Xi to attend the APEC meeting, Xi probably wouldn't bother to attend. But based on your viewpoint, I guess no one needs to worry about China anymore because it's about to collapse. And whatever reserves China has is just all illusionary/fictitious, just like everything else in China.
I also wouldn't necessarily take current market values of companies to be their actual worth. A product from e.g. Apple and e.g. Xiaomi are 95% similar and more than likely sell roughly the same amount of e.g. phones. Apple's value is in its brand, not necessarily that the goods are vastly technologically superior, etc., nor its capabilities as a company to produce goods.
These aren't the Epoch Times forums or weird WeChat groups, please source your claims and innuendo b/c this doesn't contribute anything worthwhile to the discourse.
Juxtapose the "warrior wolf diplomacy" of not even a year ago with the hat-in-hand meeting with Biden in San Francisco. Xi bet he could stare down the US and win. He lost that bet.
I think the intention was clear? To have the US back down. China wants to be the dominant power in Asia. It despises the US alliance (Japan, South Korea, Philippines, Taiwan, Vietnam, Indonesia, Malaysia, Australia) that projects force along the entire Pacific Rim. However, much of China's growth is dependent on trade with the US and its allies. So it's in a bit of a pickle.
Xi thought China could win the political battle without losing the economic one. He assumed the alliance would split apart, and the US would be forced to back down. At that point China would be free to project it's power across most of Asia without interference from the West. Whether that's taking back Taiwan, or at least the entirety of the nine-dash line islands. The US or any other foreign vessel couldn't transit the South China sea without the OK from China.
He tried to pick off the members of the alliance one by one (the trade battle with Australia is a great example), but failed. Eventually the US and other nations said "enough is enough" and instituted sanctions on China. In addition private companies decided the political uncertainty was too high a risk. Combine that with the demographic bomb the country is facing, the debt-bomb from Chinese real estate and Xi realized he lost his gamble. The Chinese economy couldn't survive long enough under sanctions for China to win the political battle.
But to be honest, he burned too many bridges. The Chinese economy is struggling. The embargo on technology is going to hurt China way more than it hurts the West. He came to San Francisco in hopes of repairing enough of the relationship as to not entirely sink the Chinese economy.
It's not that clear and much more complex. If you follows the whole history of China's foreign policy, it's surprisingly consistent and the focus is never "competing with someone".
To the topic of ‘Wolf Warriors’, the policy dropped as early as May 2021 so it's highly possible that the change itself is not economic related (https://thediplomat.com/2022/01/is-china-putting-wolf-warrio...). The targeted audience (of the foreign policy) may not be the West, but global south. There is a paper (I'm too lazy to find the link) claim that the ‘Wolf Warriors’ rhetoric used by China's diplomats in non-west country doesn't change much.
If you are intrested in the changes under Xi, Kevin Rudd has a series of deep analysis: https://viet-studies.net/kinhte/WorldAccordingtoXi_FA.pdf. Generally China's decision making process doesn't care too much about winning or competing or any particular goal especially in short term. They are based on long-term analisys of "what will happen inevitably" and back track from that conclusion. Many of these decisions make no sense from West's perspective under a cost-benefit analysis.
Your article by Kevin Rudd (which is quite interesting) lays out some of the same ideas that I shared.
>"Xi’s ideological beliefs have committed China to the goal of building what Xi describes as a “fairer and more just” international system—one anchored in Chinese power rather than American power"
>"Xi has communicated to the party a crystal-clear message: China is much more powerful than it ever was, and he intends to use this power to change the course of history."
This being in the underlying goal (or as your put it - inevitability) of China being the predominant power in Asia.
>"But Xi is not completely secure. His Achilles’ heel is the economy"
And this comment reflecting the idea that he can only accomplish all this with a strong economy. And with the string of bad news coming out of China lately, one can't help but noticed Xi's much more conciliatory tone in the past few months compared with the image of a couple years back.
I think his point is not that this being the underlying goal. Instead the China’s foreign policy is designed based on the analysis that inevitably at some point, China will be the predominant power in Asia. The policy is not designed to realize the goal, but prepare / accommodate the inevitable future (which makes no sense from a cost-benefit model because you do something for the sake of its result).
> one can't help but noticed Xi's much more conciliatory tone in the past few month
It maybe more relates to the fact that diplomas advocating for a more hawkish foreign policy being slowly wiped out from the power centre after mid 2021. Though a full swing policy change may only possible after the first plenary session of the 20th Central Committee (which was October 2022).
Xi never hides that he is just reading what was decided within the party for many of these foreign policies. SCMP has reported that during the Xi-Biden meeting for any issue not directly related to China, he will read the notes.
I would argue the 2nd quote directly contradicts the idea that the policy is to just "prepare". From the article I got the sense in the "inevitability of the triumph of Marxism over capitalism", not necessarily that China will rise to be a power regardless of what it does.
It’s inevitable because of the CCP’s leadership and the objective conditions by their analysis. Remember CCP is an ideological party which means core party members do believe CCP as a party is more important than anyone including Xi. All decisions are made because the party’s ideology, not because anyone’s personal decision.
It doesn’t make sense from outside the party as I said so I think your feeling is probably why Kevin Rudd is lobbying in both U.S and Australia for better understanding the situation.
Also you can only go so far ideologically before stopped by the reality (or vice versa in realism because ideology is a larger part of our self-identity). A more ideological CCP only means they are more willing to afford the cost, push as far as they can, and retreat a little bit after over doing it. IMO cost-benefit analysis (or usually, who is the winner / the winning scenario) isn’t very helpful in such context because that’s not CCP’s calculation.
The US reports GDP growth as annualized growth rate, which is the annual rate that would occur if the QoQ rate is maintained for a full year. To get the QoQ rate, we need to roughly divide the rate by 4 (not exact but not far off). This means the US GDP grew 1.3% in the third quarter, matching that of China.
Have to say the concept of annualized GDP growth rate is kinda gobshite. Why would you report that instead of YoY and QoQ rates is beyond me.
What's amazing about it if the debt increased more in the absolute terms? :D . If I max out credit cards I can at least show spending (GDP) growth at least the same as what I borrowed...
How is it not obvious to everyone that this is the end game? Increasing rates will rapidly increase debt, which increases inflation, which pushes increasing rates ...
Whoever's lived long enough in USA would laugh about end game questions. Inflation? 3.2% is absolutely peanuts to what it was some 3-4 decades ago. Unemployment? Are you kidding? Pandemics? Did you compare what it is today with what it was 2 years ago? COVID is just 4th - which is a lot, but very far from mortal danger - cause of death, and the country even inches up in life expectancy. All fundamentals are pretty much positive, and only debt/GDP is vaguely comparable to the worst numbers in US history.
Now, what about alternatives? If you don't like US numbers, can you get anyplace better on Earth? I'll wait. Meanwhile, there are forward-positive questions and topics - USA is about to jump in 2, count 'em, two very consequential areas, which are AI and space exploration, within this decade. Are you sure your better bets are against USA? Did you take the history lessons into account, or it's business as usual?
> Did you take the history lessons into account, or it's business as usual?
Did we take the same history lessons? Lots of what led to the fall of the Roman Empire has been happening in USA the past few decades. And then we have China literally opium-warring us with fentanyl and killing tens of thousands of US citizens each year. But yeah, count on the cool shiny AI and space exploration to save the US.
I'm sorry but most of your comment has nothing to do to what I said, and seems like random rambling. Except:
> 3.2% is absolutely peanuts to what it was some 3-4 decades ago.
But 3-4 decades ago governments, all institutions and economy as as whole were not so much in debt. https://fred.stlouisfed.org/series/GFDEGDQ188S . And this chart doesn't include all the "unfunded liabilities".
You can hike rates to curb the inflation only if it doesn't bankrupt everything and everyone.
And 3-4 decades ago boomers globally were ahead of most productive years of their lives, without the "baggage" of tons of kids and globalization had plenty of room ahead to increase productivity.
I don't want to waste time talking about nonsense like AI and "space exploration". The financial system is screwed. That's all I'm saying.
Exactly. YCC is already happening in Japan; it's inevitable here too. The only alternative is outright default, which never happens when the debt is denominated in currency the debtor can print.
The bad news is the US has a ballooning, titanic budget deficit that is at wartime levels and is completely unsustainable. Greece too can have booming economies when the government is raking up debt.
The good news is there are genuine, revolutionary innovations in the economy, namely AI. You can't explain away AI as a mirage propped up by government spending.
The entire stock market is held up by the magnificent 7, and these stocks in turn are held up investors' AI dreams.
How will AI possibly help the economy? if it achieved even 1/10th of what the techno optimists think, you’ll see massive unemployment and likely collapse of credit markets that have been hanging on for a thread for a long time (like the trillions in student loan debt).
I just can’t possibly see how AI is going to revolutionize the economy, unless you define the “economy” as the nasdaq, then yea, i guess so, but that’s a real simpleton view.
That's not what they're asking. What happens to the individuals if AI can automate a large portion of service jobs? A lot of people who lost their jobs due to disrupting innovations never managed to return to their previous income level. And regardless, how does society survive a potential collapse of employment in the service sectors? The service industry employs ~80% of the employed population. If "just" 50% of service jobs can be automated, you've got ~60 million people losing their livelihood in the US alone. New jobs don't spring up overnight, especially if humans are redundant in the service industry. What happens to those 60 million people?
You see, the AI will allow people to free up enough time in their J1, J2, J3, etc. that they will have enough time to run more side-hustles or gig-economy jobs. ECONOMY! /s
>Greece too can have booming economies when the government is raking up debt.
That is not a good example. Greece was growing 5% back in those days and it was growing fast enough to outpace the debt. In fact, most of the debt to GDP explosion happened after the austerity policies, because GDP crashed and debt stayed the same. Greece didn't really have a spending problem either but rather the problem is the rampant tax evasion, i.e. there was a collection problem. Once the arm chair experts of the Troika got their way, Greece went downhill faster than from the original debt crisis.
> You can't explain away AI as a mirage propped up by government spending.
You absolutely can. Like, sure, it can generate crap quickly, but whether that translates into genuine productivity improvements is not really proven yet.
It is for me. I don't see it taking my job (yet), but I have no doubt it will help with productivity. Just like Google helped with productivity for my job.
The pertinent fraction is usually public debt (total) to GDP, which stands at 130% and is quite high. Up to 60% is considered a low, healthy level, up to 100% is considered not terrible, 130% is beyond that.
The US can get away with it, for a bunch of reasons, but essentially because it is such a powerful economy and trustworthy counterparty, but it is a high level nonetheless.
For comparison, the "indebted EU"'s fraction is 83% at pixel time. UK, not in the EU anymore, struggling a bit with debt, it around 100%.
The crime was Trump's deficit-fueling tax cuts during boom times. If he had stayed on Obama's track we would have had decent surplusses leaving us more prepared for the covid recession. Most economic theories say to counterbalance recessions by cutting back during boom times and spending more during down times. Biden is bringing us back faster post-pandemic than Obama post '08 financial crisis. Which indicates that the pandemic spending was appropriate, even if it fueled temporary inflation we're now growing way faster than most other economies.
Deficit spending is considered part of the GDP. Print a quadrillion dollars and we could have thousands of percent GDP growth! Part of the reason that GDP can be a highly misleading metric. The article alludes to this in a pretty amusing way:
---
"The U.S. economy grew at an even stronger pace then previously indicated in the third quarter, the product of better-than-expected business investment and stronger government spending.
...
Government spending also helped boost the Q3 estimate, rising 5.5% for the July-through-September period. However, consumer spending saw a downward revision, now rising just 3.6%, compared with 4% in the initial estimate."
GDP is inflation adjusted, so simply printing money won't work unless you also control inflation (although I will say I don't think the inflation calculation necessarily reflects the true value of the dollar).
Inflation from money printing can be lagging compared to the effect on GDP (depending on how the printed money is distributed). Not saying that this is what we have today, just pointing out the possibility.
Not much longer when interest rate payments are well on their way to $1T per year ($659 billion as of October), the bulk of the budget (66%) is non-discretionary and unfunded liabilities are $211T.
Given this where do you think $VTI will land in Q1 24?
Do you think we will see a 25% contraction (~annualized) like we saw Jan to Oct 2022? The huge November rally (this month) makes NO sense. I feel like the hammer is about to fall.
Student loan debt repayments starting back up plus impending layoffs sounds like an impending engineered disaster which will significantly suppress stocks in Q1. I can't decide if it will trigger enough of a panic to dip $VTI under 190.
> Will Europe ever start asking why it is falling behind the USA?
Compared to when exactly? The USA has played a major role in winning World War II when most Western European countries were occupied (read: lost already). Then, they funded the rise of the United Kingdom, France, and Germany through the Marshall Plan in 1948. Then, the USA pushed against Russia. Honestly, no Western democracy was really interested in becoming part of the Soviet Union, so having some USA backup was not bad. The USA flew circles around the Soviet engineering. Literally actually since the USA spy planes first flew too high for Soviet rockets to shoot down and when that didn't work anymore they flew too fast for Soviet rockets to shoot down. Then the USA military helped invent computer chips during the Vietnam war (a war which on itself is a bit more questionable, but okay), went to the moon first, and invented the internet.
In 2008, US GDP per capita was comparable to many large western European countries with the US at $48k, UK $47k, France $45k, Germany $45k, Italy $41k, Sweden $56k.
In 2022, the US was at $76k, UK $46k, France $41k, Germany $48k, Italy $34k, Sweden $56k.
It's mostly a factor of interest rates. And the USD is also the global reserve currency, helping it rise in times of instability, more so than the Euro.
But none the less, it still enormously skews your numbers in favour of the US, to the point they're practically useless.
According to your numbers the economy of France and Italy have shrunk over a period of 15 years. This is simply not the case.
Believe it or not, real GDP. Straight from the BLS.
"Real gross domestic product (GDP) increased at an annual rate of 5.2 percent in the third quarter of 2023 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.1 percent."
I'm pretty sure the average Joe would agree with you about the CPI numbers being a complete farce. It used to not matter when it was low. But after covid, when people, largely following the same habits over time, see their grocery receipts go up 15% yet the government quotes 7%, they're not going to forget that for a long time.
I'm betting is mostly due to inflation from the post-pandemic price-profit spiral. At one point, 60% of inflation was due to excessive corporate profits.
And those numbers are themselves are de facto lies because they don't adequately represent the rises in costs of inelastic demand items such as food that harm individuals. "Macroeconomics" to the point of hiding harms to large swaths of C that aren't billionaires with C billionaires, G, I, and NX.
We have armies of econ grads measuring baskets of goods to account for this and report it in various metrics.
Try a search "cost of living basket of goods" for more info.
Worry not, despite unrealistic public expectations and wanton reductivism bred from saltiness regarding wealth's stubborn unwillingness to consistently grow without effort... We actually can measure a lot of useful things.
> It's actually even more insulting when the gov is telling you how good you have it.
I agree that these aren't the best times the country has ever seen, but, objectively speaking, things are pretty good. Just as an example, gas is $5 a gallon (it's actually $3.40). But, where is it cheaper? Belarus? Is that really where you want to live?
>"But, where is it cheaper? Belarus? Is that really where you want to live?"
Why the fuck would we compare our lives to Belarus, Zimbabwe Ethiopia / etc. Let them sort their own problems. I can compare my country (Canada) to what it was 30 years ago and I do not like where we are going.
Ok, but compare yourself to the rest of the world. There's literally almost nowhere better to live than in Canada. You're assuming the current state is an aberration and that the status quo of the past is somehow obtainable. But most of human history has been profound suffering of the masses. More than likely, the good times of ol' are the aberration and aren't coming back.
Another thing to consider: the entire wealth of Canada and the U.S. is predicated on a genocide. Yea, it turns out when you're not killing people and taking their land, it generally gets more expensive over time.
Is that past an aberration or rather something we're actively destroying? We spent literally trillions of dollars on Iraq. By the time Israel and Ukraine are done, we'll also be into the trillions there. This is money that could have been used to have improve society in countless ways.
Get humanity to Mars? Sure, it's literally a rounding error on the scale of the money we completely squander. Fund a million startups? Sure, why not? A trillion bucks can offer a million dollars to a million startups, which is kind of mind boggling to even think about. One can think of near to any cause, and they could all be exceptionally well funded with all the money we waste on war and geopolitics. Because war has this amazing magic trick. It can take a trillion dollars and just make it disappear, like it never existed, with nothing to show for it. Houdini couldn't hold a candle to that sort of wizardry.
>"Ok, but compare yourself to the rest of the world."
I do not want to. I do not live in "the rest of the world". And Canada has everything for people to live decent life and keep improving it. Our "servants" however keep fucking it up lately.
Just looking at gasoline prices is misleading. You need to look at how much people spend on gas, and on cars, insurance, maintenance, parking, commute in traffic etc. If gas is more expensive in Barcelona, but I can walk to work or take the subway there then quality of life might be much better there even with higher gas prices.
Regarding the times objectively being pretty good, it depends what objectives you're using. Measures of consumer sentiment, for example, are similar to the 2008 financial crisis.
I would think if your metrics all say the economy is good and people mostly say it's bad, then your metrics are probably broken.
Retail gas prices have been just about flat for 50 years. Energy expenses as a fraction of GDP have never been lower. Household spending on motor fuels is also historically low. I really have no idea why people point to gas prices, which are objectively dirt cheap.
