Higher-income people are worried about the economy

https://www.axios.com/wealth-inflation-fears-money-financial-assets-52779e2d-8940-4b87-85cd-29c65744fb29.html

by rbanffy • 4 years ago

107 222 4 years ago

jacquesm2• 4 years ago

If that is all they are worried about then they are not paying attention. There is a fairly large chance of a much larger war and the economy may well be the least of your problems.

deburo• 4 years ago

Are you talking about Axio?

WJW• 4 years ago

Pretty sure he's talking about the potential for Russia dropping nuclear bombs on every major city on Earth.

FrenchAmerican• 4 years ago

They are totally aware of the stakes, but they don't care. In our world, the richer you get, the more you can escape the consequences that the poor, popular and middle classes have to endure.

The higher income class is de facto in power in our democracies. No conspiracy here, just a class phenomenon. The poor don't vote ; the popular and middle classes tend to elect people from the higher income class. Their economic success give them credits for handling things.

The higher income class doesn't care about 1/ the health of people 2/ if the wages are enough to have a modest but at leat descent life 3/ the environment

They care about 1/ their own wealth, health 2/ having no social constraints whatsoever (in the name of freedom, which is a right for all but they are the ones who have the means to act as free persons) 3/ order: they want a super policed society. So the poor are over-repressed by the police but they escape the law (connections, bribery, very good lawyers).

On climate disruption and biodiversity annihilation, our "elite" reveals that they don't even care for their grandchildren. The 0.1%, the top of the income elite, do care and buy large pieces of land in New Zealand with 100% self-sustainable houses and food production. And armed security and heliports.

paulpauper9• 4 years ago

People have been predicting nuclear war for 70 years. Maybe they need to give it a rest. Obviously it would be very bad, but it's not something to be preoccupied with.

watwut4• 4 years ago

Apparently now, nuclear threat is THE reason why actual military help to Ukraine is ruled out. So, it matters and is influencing world right now.

pjc503• 4 years ago

Lower-income people are also worried about the economy. In fact, if I'm reading that graph correctly, the brief period where high-income people were the only people not worried about the economy has now ended.

Not really surprising given the sharp disconnection of a large chunk of the world's economy and the blockading and shelling of a smaller part.

gunfighthacksaw• 4 years ago

That small part is also a breadbasket and, together with the larger, makes up 1/3 of the worlds grain. That 1/3 is closer to 100% in some countries in the ME and Africa.

rbanffy4• 4 years ago

Lower-income people are also worried about the economy.

Sure, but they always are - as they should: they are the first to be affected and the last to see the effects of recovery.

JumpCrisscross3• 4 years ago

they are the first to be affected and the last to see the effects of recovery

Are they? Financial markets are usually hit first. Low-income people don't have financial assets. They're hit the hardest, because losing a job and losing money in a retirement account are night and day. And they're hit the longest. But they aren't hit first.

FredPret2• 4 years ago

Russia’s economy isn’t a large chunk. It’s criminally small given their population, land mass, and strategic location between China, India, and Europe. They make as much money as the Netherlands plus Belgium, two tiny countries with small populations. They need serious reforms, pronto.

Granted, from a resource point of view, they are important.

currycurry16• 4 years ago

People != Americans; orginal title of article is "Higher-income Americans are getting nervous about the economy".

rory• 4 years ago

A bit pedantic, but I agree the original title is distinctly clearer than the posted title.

Also, "getting nervous" is better terminology than "worried," since absolute consumer confidence is still higher among the higher-income group, it just decreased at a greater rate recently.

candiddevmike• 4 years ago

They should be, all the massive wage gains they've captured recently could turn into mass layoffs as companies can't afford to pay them, let alone the lower wage workers.

aresant• 4 years ago

I've been an entrepreneur through three major recessions - the early 2000s (8 months long), the great recession 2007 (18 months long), and the 2021 COVID recession (2 months long).

In each event I was significantly more impacted by the media salivating about the potential for a coming economic collapse than I was actually living through them.

Certainly my companies were impacted negatively at the outset of each, but emerged stronger to take advantage of the clear skies and sunny days that proceeded each event.

We've been playing on easy mode for the past 10 years in many ways - it's difficult to truly innovate without challenge, and today I embrace the potential for the board to shift, to find new opportunities to innovate, and to embrace change.

altdataseller2• 4 years ago

Even if we ignore the economy, starting a startup before 2015 or so was "easy mode" relatively speaking.

Now, there are less greenfield spaces, more competition, and less barriers to get started. Much much harder to start a successful business today.

taf2• 4 years ago

It was much harder to start in 2000 compared to 1990… it’s always the same every year it’s not harder it’s just harder to see compared to what you can look back to understand… the same is true today as it was yesterday and should be tomorrow - make something to help someone by adding value to what they do… charge them money for it - listen to how they use it etc etc … it’s never been easy IMO…. Finding the inflections is when you can make a unicorn but you can certainly build a business without one IMO… granted I’ve grew up with AOL surging and then collapsing … failed a few times and maybe have something that finally works … so who knows unless you try

dalbasal• 4 years ago

I suppose easy and hard depends on who you are.

Pre-2015 there were a lot of opportunities to get a running start without much investment. A cool new web-thing would spread organically, could be coded pretty fast, etc.

Now, it's easier to raise money and use that to build a business. A not uncommon strategy is paying Google and Facebook $200 to acquire a $100. It loses money, but shows growth.

For some people, the new way is easy mode. For a lot of people, the ability to raise, pay yourself a real salary and also recruit a well paid team is easy mode. For some people, three dudes and some ramen is easy mode.

jpadkins• 4 years ago

what happened in 2015?

laurent92• 4 years ago

I wonder whether having the media doomplay every crisis is part of the confounding or resorbing forces. Are they making it worse by persuading everyone that there is a crisis and that they should stop investing? Or are they helping decision makers anticipate and therefore smoothen the blow? I mean, the 2008 they talked so much about was way smoother than the 1995-1998 crisis, where managers were taken hostage in France in dozens of manufactures, where the Five Dragons fell in Asia and where Boris Yeltsin’s Russia came to an end?

The 1998 Russia crisis is particularly interesting:

- Russia was put under FMI (IMF) leadership with huge monetary injection,

- Financial games made that this money didn’t help the populace but only helped to create a new billionaire class in Russia.

- We have a dozen thousand Russian multimillionaires here on the French Côte d’Azur (Nice) coming from that period; and the other half of the oligarchs created the Putin regime.

Talk about a grave crisis, Ukraine is a ripple effect of the IMF stuffup.

toyg2• 4 years ago

having the media doomplay every crisis is part of the confounding or resorbing forces

Capitalist economy is fundamentally predicated on confidence cycles, so anything hitting that confidence will inevitably speed up the coming of the next downturn. However, the downturn would eventually come anyway.

the 2008 they talked so much about was way smoother than the 1995-1998 crisis

That really depended on where you were and a bunch of other factors. Entire neighbourhoods in the US were gutted by repossessions, in London we had meaningless riots, in the arts sector they saw budgets slashed, etc etc.

Ukraine is a ripple effect of the IMF stuffup.

Undoubtedly. Also of the post-2001 US doctrine on the use of force in international relations. And a bunch of other things. Nothing ever happens just because somebody woke up that day feeling like starting a war.

paulpauper9• 4 years ago

It's for clicks, ad revenue, page views etc. Doom and gloom sells.

bluetomcat• 4 years ago

What worries me more is that it seems like the post-WW2 order is shaken. Large-scale war is back on European soil. Information and propaganda wars are intensifying. The defense architecture of the Western hemisphere now needs to cope with unpredictable dictators posing a nuclear threat.

dkjaudyeqooe• 4 years ago

I don't think much has really changed except that the scales have fallen from the eyes of most Western countries. The military has always had the same pretty much the same posture towards Russia wrt threats and nuclear deterrents.

I see the spread of disinformation and propaganda as something that will inoculate the populace ultimately.

I think Russia (and China) has done the West a favor. Hopefully the West will start offering integration into our economies as a reward for democratic reforms instead of as an incentive, because god knows that hasn't produced the desired result.

javajosh10• 4 years ago

...unpredictable dictators posing a nuclear threat

I'm sorry to say that it makes the most sense to simply not worry about it, unless it's your job to.

We tend to forget that dictatorship is the default human civilization. It also happens to be the "normal" structure of the family, even in liberal countries, for the simple reason that kids are, by definition, incompetent. So I'm not sure if it makes sense to "stamp out dictatorship" when so many people legitimately want to live under one. So that leaves getting rid of nukes - a problem most of us assumed would solve itself over time after the fall of the Soviet Union. This backsliding is worrisome, but the path to success remains the same. But when the next Soviet Union falls, we should pursue denuclearification much much more seriously.

Melatonic• 4 years ago

We have circled back to robber barons running things and hoarding wealth again

jjtheblunt2• 4 years ago

Large-scale war is back on European soil.

Is it really, despite being horrific?

One essentially mobster is accosting another country with soldiers seemingly reluctant, in what might be no more complex than a clear mobster survival ploy in a country plagued by poverty for all but his cronies.

I ask that because it seems reminiscent of Slobodan Milosevic 23 years ago in Serbia.

lumost• 4 years ago

The parallels to WW1 are fairly strong. The World economy may simply be too broad relative to the power structures that sustain it. China and Russia do not want to participate in a global free economy that they do not dominate.

The risk here is that the Russia and China will use their military power to stamp out democracy for an undefined sphere of client states. History through the cold war shows that tolerating this behavior simply invites further escalation.

bsder• 4 years ago

The defense architecture of the Western hemisphere now needs to cope with unpredictable dictators posing a nuclear threat.

So pull the damn manufacturing back to your own shores and start having a bit a self-sufficiency!

Shifting things halfway around the world to save 2 pennies was never a good idea.

And, we have learned NOTHING. How many hospitals are back to buying masks from solely from Asian suppliers again?

fundad• 4 years ago

There was a chilling effect from swarms a "you're praying for a recession" about 3 years ago but it certainly wore off. The real power players make money coming and going so real economic growth and wage growth is the last thing they and the executives at media companies want.

jandrese• 4 years ago

The news media is addicted to economic doom stories IMHO. They generate a lot of viewer interest even when most people are barely affected. Even when times are good there are always stories about how it's all illusory and in fact we're all moments away from disaster.

paulpauper9• 4 years ago

for the media, every year is 1929, 2007, or 2008. crisis is always around the corner. everything is the start of ww3 or a depression. democracy is always on the brink.

ChrisMarshallNY• 4 years ago

Same here. The last 30 years have given me a very steady growth. The last five or so have been insane. I took a hit when Putin decided to ruin his country, but, if we don't go up in a fireball, things will be good, afterwards (except, maybe, in Russia. I really hope that they don't go back to Stalin-era privation, after having a few years, experiencing Western decadence/freedom. I've really enjoyed working with Russians, and this is pretty depressing).

raxxorrax4• 4 years ago

Our financial markets are basically casinos by now and highly influence by emotion. So negative press will inevitably have a real impact on the economy as sad as that is.

aftbit• 4 years ago

I would be curious to see the age vs wealth axes more explicitly explored. All this article really offers is:

They also tend to be older, and may remember living through inflation decades ago. "Young people don't know, and they'll soon find out."

How has consumer confidence been affected in older middle and lower class folks?

otoburb• 4 years ago

>How has consumer confidence been affected in older middle and lower class folks?

Broadly the same negative sentiment, according to the University of Michigan US consumer sentiment survey data broken down by age, income, education, region and gender.[1] I believe updated data will provided on March 25th in two days' time.

The Federal Reserve Economic Data (FRED) consumer sentiment and consumer inflation expectation data series[2] charts the UMich's surveys.

[1] https://data.sca.isr.umich.edu/charts.php?demographic=income...

[2] https://fred.stlouisfed.org/searchresults/?st=university%20o...

sudden_dystopia• 4 years ago

Such an odd title. Clearly, as the article even suggests, it’s actually people that understand finance and economics that are the ones that are concerned. Wealth is only tangentially related.

Regardless of the semantics, I am very much of the opinion that we are in for some rough ass times.

Recession+inflation=stagflation. Not sure what you call it when you add in energy crisis, risk of WW3, a push for a new global hegemony, an increasingly hawkish Fed, extreme political divisions, a looming food/fertilizer crises, and a globe still snarled by covid.

mistrial9• 4 years ago

associative thinking is great for learning, not great for thinking about major disaster.. tough times call for details and specifics, not "a list of everything that can go horribly wrong" .. its bad for mental health, literally, right?

toyg2• 4 years ago

Higher-income people are business people. Business people are always worried, deep down, even when they won't admit it to anyone. The worst whiners I've ever met were wealthy shopkeepers and industrialists - they know it can all go in an instant.

blablabla123• 4 years ago

I think industrialists are one of the few who are more or less inflation safe. But the part about the whining seems to be true

encryptluks2• 4 years ago

Ive found mostly the opposite true. Higher income people are mostly just spoiled and clueless. They don't know it can all go because they've rarely if never been in a situation where it has all went before.

JumpCrisscross3• 4 years ago

Higher-income people are business people

These data define "higher-income people" as those earning more than $100k. That's a very broad spectrum.

bpodgursky• 4 years ago

Given that $100k is the income bracket where people are highly leveraged on college loans (and housing prices), it makes sense that they are often more sensitive to economic conditions than those working lower-income jobs.

You NEED a strong economy to stay above water on the debt — you took out $200k in college + law school loans to accelerate your career and if you can't get a high-income job in your specialty you simply can't fall back to a low-income job without being in crushing debt forever.

Spooky233• 4 years ago

I run a big division of a big org.

Given the desire and investment in project/process, we could probably take half of the $100k+ workforce and replace with automation and a dumber, cheaper workforce. Economic crises often drive those decisions.

High income people are the least safe - $300k doctors are being treated like factory workers and replaced by $125k nurse practitioners.

Spooky233• 4 years ago

Once you have something you worry about losing it.

My dads good friend was a playboy, after getting out of Vietnam he went hippie, partied hard, lived fast. Then he hit the stock jackpot, riding Intel and Microsoft, etc in the 80s and 90s and cashing out with ~$20M.

Then he retired, moved to a golf course in South Carolina and turned into an ardent conservative defender of traditional values.

I tell the story as it illustrates the transformation - face death and risk at war, come back and embrace life, accumulate wealth and return to fear… guilt about what you have been able to do, fear of losing what you have.

We’re all animals at the end of the day, it’s difficult for us humans to process what life hands to us sometimes, good and bad. Deep down, the insecure business guy knows that he is mortal, and knows that a misstep can be fatal.

CPLX• 4 years ago

I mean most Boomers did this transformation and it didn't really have anything to do with their life trajectory.

It's just a very solipsistic generation culturally.

When they were in their 20's they thought everyone should pay attention to them and that their drug use and weekend music festivals were unusually profound.

When they were in their 40's they thought everyone should pay attention to their property tax bills.

When they got to their 60's and 70's they thought everything should just stay exactly the same as the way they remember it and that everyone should consider their fears and confused elderly outbursts as valid expressions of reality.

Not sure it's generalizable.

naetd• 4 years ago

If you look at the article data, the lower income bracket have FAR less confidence than higher income brackets.

Also, I think it actually doesn't all go in an instant. I've worked with local businesses that are over a hundred years old and seen many market turns both positive and negative. During recessions they'll make a reduction in employees or other costs and be able to stay open on that until profits rise again... or worst case, they sell the business or real estate and pocket a huge amount of money even though it closed.

The folks that have it all go in an instant are the ones living paycheck to paycheck who get laid off at the first sign of trouble. Their losses insulate the businesses and owners.

MomoXenosaga• 4 years ago

This is HN nobody gives a shit about the working poor. And neither does our political system. There are entire neighborhoods were only 40% of voters turn up.

vinyl7• 4 years ago

Wonder if these are the same people as the 33% of home buyers who bought as investments. I too would be worried buying at the peak of a bubble realizing nobody can afford to buy the flip at the extremely inflated prices with mortgage rates increasing. Or that few people can afford to pay rent at the price of inflated mortgage + profit margin

Aea• 4 years ago

I'm sure we'll find a way to keep inflating housing prices. I'm in my 30s and my entire adult life I've been thinking "no way it can keep going up" and it kept going up.

pavlov2• 4 years ago

IMO there’s a pretty simple rule that you can apply. If you’re planning to stay somewhere for at least 7 years, then buy your home. If not, renting gives more peace of mind.

The problem with buying is that it’s a single large transaction that you can’t spread over time. Over time ownership turns a profit, but if the time span is less than seven years, you may end up buying at the peak and having to sell near a bottom.

ProfessorLayton4• 4 years ago

Prices will keep going up while there is more demand than supply, and the supply shortage is mostly political. I advise you and everyone else feeling locked out of the housing market to pressure your representatives to allow more housing to be built.

TomVDB• 4 years ago

Is there a consensus that flipping is rampant these days?

I follow a couple of markets pretty closely and hardly see any houses that are bought and sold within a short time.

brimble4• 4 years ago

Prices are too high and there are too few foreclosures. Pros with a bunch of money in the bank and inside info can still do it, but the days of being able to snag a foreclosure that's scaring everyone off because it needs some drywall work and paint and maybe a little flooring but is basically fine, and is sitting on a totally ordinary public real estate listing for weeks or months so you know you can lowball and they'll probably accept, are long gone. That situation only lasted (around here, anyway) until maybe 2012 or 2013.

godot• 4 years ago

I don't think this mentions anything about housing or mortgages. I think it's a bit simpler than this. Higher income people currently already have their basic needs met and have a good amount saved up for eventual retirement. When people's current needs are met, they think about the future, the economy affects it. Lower income people are currently struggling to make ends meet. You'd already be worrying about it everyday, the economy getting worse basically feels like noise that you don't have time to add to your worries.

mywittyname4• 4 years ago

For my family, and probably many like mine, our concern is watching our savings evaporate. I lived through 08, so I remember massive recessions. But things are different when you're just starting out and watching your modest "retirement" account fall, than they are when you have a significant life that you've built. I know pragmatically that the markets will rebound, but it's still jarring to see your net worth move so dramatically in a matter of weeks.

I'm also not very concerned about housing. Even though I definitely overpaid, living through 08 gave me the mentality that houses are places you live, not investments you make.

nativespecies• 4 years ago

Hmm. You sound bitter.

asdff2• 4 years ago

Buying at the bubble only hurts short term flippers. If you bought at the peak of the last bubble in 2007 in markets actually worth buying in, you would have probably seen yourself back in the money in a few years and have been making money hand over fist on your investment since.

nonameiguess• 4 years ago

The takeaway bullets seem almost non-sequitur. I don't know what those numbers mean for consumer sentiment index, but the absolute level of consumer confidence is still higher for higher income groups. The fact that it has dropped for everything, but more steeply for higher income, doesn't seem like it has to be related to any causal phenomenon beyond basic diminishing marginal utility. When you're down in the dumps already, you don't have as far to fall. You may as well draw a bunch of weird conclusions about mindsets and possible reasons when you find an MMA fighter at the end of a fight half passed out on the mat, kick him in the face, also kick a random bystander in the face, and find the random bystander has more of a reaction. The first hit hurts a lot more than the 100th.

dominotw• 4 years ago

Is there any explanation for why previous stimulus during Obama administration didn't cause inflation. Lots of my friends are convinced that printing money doens't necessarily cause inflation and use that an example to support their case.

wskinner• 4 years ago

The quantity of the printing was far lower during the Obama presidency.

svachalek2• 4 years ago

Far, far lower. We're so casually throwing around plans priced in the trillions these days, when just a few years ago people thought billions of dollars was a lot of money.

dragonwriter2• 4 years ago

Is there any explanation for why previous stimulus during Obama administration didn't cause inflation

It did, compared to what would have existed without the stimulus.

But the underlying economic problem it addressed wasn't like the pandemic and the control measures directed at it, particularly in the rapidity with which things could spring back from it. What caused visible inflation wasn't the stimulus, but the rapid rebound in the underlying economy, which wasn't a direct product of the stimulus, though the stimulus mitigated second-order damage that might have prevented the rebound.

The slower emergence from the conditions prompting the Obama-era stimulus meant that slowly-tapering monetary response could buffer most net inflation effects.

throwawaycities2• 4 years ago

The 2008 bailouts spanned both the Bush and Obama administrations, we can even round them up to $1T each for a total of $2T. Keep in mind those 2 bailouts took the economy from near failure to the longest bull run in history.

The size of the bailouts - excuse me stimulus packages - in the last 2 years make 2008 look like a joke in comparison, and it looks like every few months a new “stimulus” will be passed that is larger than any 1 of the 2008 bailouts.

somethoughts2• 4 years ago

My back of the envelope thought is that the majority of the QE given out during the 2008 financial crisis was given out via the banks who then proceeded to lend/hand it out to Fortune 500 type corporations to keep them (and the banks) from collapsing. The stuff that got inflated/propped up were "assets" that wealthy corporations and individuals buy (i.e. risky VC startups, stocks, bonds, income property such as single family rental homes) - which is not stuff tracked by CPI.

In the Covid pandemic most of the QE stimulus was to enable low interest debt in order to allow Congress to give it out to "the people" via government stimulus checks. "The people" then proceeded to buy stuff that normal people buy - i.e. consumer staples/discretionary goods which is stuff tracked by CPI.

sjg0076• 4 years ago

The majority of the covid money went to the Paycheck protection act and the terms where so opaque that the rich got a lot richer. The peanuts handed out in direct relief was and is a non-issue except that supply chains shut down because of lock downs and reduced demand. After lock downs the economy has rebounded so now we have many dollars looking for products but the supply chains can't keep up.

paulpauper9• 4 years ago

Covid caused production to shutdown. This was not as much of a problem with 2007-2009. The result was a huge squeeze in prices and demand because everyone in early 2020 was expecting a repeat of 2008 or some prolonged recession, but instead the economy, stock market, GDP ,etc. went nuts.

lamontcg• 4 years ago

Printing money doesn't cause inflation if it doesn't get used.

If the Fed chair hands me a $100T check and I hide it under my mattress then it has no effect on prices. That check has to get put to use in order for it to start having effects on prices. I have to start buying properties and stuff and then the people that I buy the properties from go and put that money to use.

That is extreme but its an example of how money actually has to get used to have an effect on prices.

And we're seeing companies and the 1% and 0.1% sitting on massive piles of wealth. They invest that into safe short-term securities which pushes down interest rates. You see bubbles in things like certain rare baseball trading cards.

What we haven't seen is wage-price inflation, because that doesn't translate down into the broader real economy. We aren't fixing all the infrastructure and potholes in the nation and putting middle class people to work, who would then go out an buy groceries, middle class houses, etc. SWEs, of course, have been the exception to that rule. But the wage-productivity coupling broke back in 1980s when "inflation" (wage inflation) was put under control.

What is strange about the past year or two though is that there's now real upwards pressure on wages outside of tech workers. Don't know how much of that is due to COVID and long COVID removing workers from workforce and how much of that is workers looking at the pandemic and deciding that they weren't going to put up with any more bullshit HR cheerleading. The direct stimmy checks and eviction freeze may have helped with that as well -- although I think the indirect effect there was that many people were able to take a sabbatical and "just learn to code" and therefore hop up the wage ladder. I don't think we printed enough money there to really matter that much, but we gave everyone a 6+ month break so they actually spend some time jumping up the ladder rather than coming home from work too tired every day.

The fact that we now see some hard signs of wage-price inflation in the data is the thing which is going to really freak the Fed out, and ultimately they're going to hit the brakes hard, once enough of the pandemic/ukraine supply-shock is in the rear view mirror. It actually is "different this time" because of the rise in wages across the board. The next crisis I think is going to be due to the Fed stomping on the brakes (and possibly the crypto ponzi imploding). Then they'll flip back to ZIRP again, but I think they may not be able to print enough money to get out of the next crisis (which is the problem of "pushing on a string" which everyone has totally forgotten that Keynes used to talk about).

tjr225• 4 years ago

As a 33 y/o I am not sure if there has been a point in my life where I _wasn't_ worried about the economy.

Workaccount23• 4 years ago

I lost 3/4 my money (it wasn't much) when I was 20 in 2008 since I decided it was time to start putting my savings into the market like a responsible adult (August '08 is when I did this).

The traumatic psychological fall out from that completely destroyed any innate faith I could have in markets and I still suffer from it today regardless of how illogical it is. I basically lived the "...And it's gone" meme.

rbanffy4• 4 years ago

completely destroyed any innate faith I could have in markets

Faith is a bad advisor. I had a similar experience in 2000 (was a millionaire for a while, then abruptly returned to middle-class). Brazilian economy also provided me numerous opportunities (such as when BRL and USD were untied and, suddenly, my friends who were leasing cars in USD had to pay twice as much) to lose faith in markets and capitalism overall.

On the bright side, we don't need faith. We just need to learn to use markets to our benefit.

dntrkv• 4 years ago

About the same age, and I don't think there has been a point in my life where I didn't think the economy was on the verge of collapse. My whole life, even now, I think everything will be taken from me any second. Guessing it has to do a lot with the financial stress my soviet-immigrant parents experienced while I was growing up.

paulpauper9• 4 years ago

I just tune it out. There will always be negative headlines, reasons to sell stocks. Reasons to be pessimistic. Instead, I stay invested. What is supposed to be a crisis almost always comes to pass. What is supposed to be ww3 is just self-limited. Ukraine vs. Russia is not Germany vs Poland. We will get through this.

jeffbee3• 4 years ago

People I know who were recently unable to buy houses in California include a long-time staff engineer at Google and a heart surgeon married to a brain surgeon. I know this data is nationwide but the crisis in California has become so acute that even people with 98th-percentile incomes are looking around and saying how fucked up everything is.

Workaccount23• 4 years ago

Unable to buy a house, or unable to buy the house someone in their position 10 years ago could buy?

jeffbee3• 4 years ago

I'm sure they'll both eventually find houses but given a certain size family and desire to not move away from current schools and work, inventory is in the single digits. One of these people has been consistently outbid on offers even though they are offering well above list prices, the other had to walk away from their most recent offer after the seller demanded another half million dollars on top of an all-cash, no-contingency offer that was half a million above asking.

Incumbent land speculators are taking literally all of the money out of the California economy.

twox23• 4 years ago

Why is everyone so obsessed with buying a house. Why is that the measure of quality of life to strive towards?

lkxijlewlf4• 4 years ago

It would be preferable to own a home in retirement so that if all else goes to shit, you have a roof over your head.

sjg0076• 4 years ago

It's basically a hedge against rent and cost of living. In many markets rent is now higher than a mortgage. The goal is you are over a lifetime net-zero in housing cost or maybe make something back. Flippers and builders usually make 30% b/c they have cost advantages.

newaccount2021• 4 years ago

nice dodge. why not tackle head-on the brutal reality that even very-well-paid individuals can no longer afford to purchase a dwelling in the same city they work in? we're moving from a 99/1 economy to a 99.99/0.01 economy

randomdata4• 4 years ago

The significant rise in price of housing has left people who own housing a whole lot richer, at least on paper. Those who don't own housing want to also become rich and they see emulation as the way to achieve that.

Case in point: Ten years ago I pointed some people living in the higher cost big city complaining about the high cost of housing in the city to a home for sale in a small town for $80,000; something they considered cheap. At the time the prices were stagnant, though. Their response: "Why would I want to own that? That would be awful." A similar home in the same neighbourhood just sold for $436,000 after two days on the market. Now that price is rising, making it look like a way to get rich, everyone suddenly wants to own it. It is still every bit as awful to own the house, but the quest for riches offsets that.

Should housing lose its ability to make people rich, interest will quickly wane. People will move on to the next get rich quick scheme.

s1artibartfast• 4 years ago

Some people value security and independence.

Owning provides both of these and renting does not.

sjg0076• 4 years ago

They will be well positioned to buy however when prices collapse.

paulpauper9• 4 years ago

"when" People have been predicting this for a decade. Crashes are rare. Events like 2006 are much rarer than media hype would suggest.

paulpauper9• 4 years ago

They have to either be horrible at managing money or have other expenses or are being impractical. I am sure a 200-500k salary is enough to buy a decent home almost anywhere in California. Just run the numbers. "According to website HowMuch.net, your household needs to make roughly $95,000 a year to be able to afford the median home in L.A. which they value at around $480,000."

jeffbee3• 4 years ago

Yes, their personal habits are so awful that they are out on the market making all-cash offers for $3 million. Give me a break.

To illustrate how out of touch someone like you who obviously lives in a house bought by some other person is, please consider that the actual median home price in L.A. is $950k, double what you mentioned, while the actual median household income is $65,290, only a fraction of what you cited.

kube-system• 4 years ago

California, and especially the bay area, has been in housing crisis for most of my adult life. A 98th percentile income doesn't give you much buying leverage if you're only competing with other people in the 98th percentile (or higher).

rhexs• 4 years ago

If a heart and brain surgeon can’t afford a house in California, they need to look at their spending. Are they trying to qualify for a 20 million dollar mortgage or what?

That’s an absurd anecdote.

dam_broke_it2• 4 years ago

1 million over asking would make anyone blanche....

reducesuffering2• 4 years ago

It is absurd. Bay Area prices are far too high, but there are still many suburbs in Bay Area proper that are $6k/mth payments. With current 1.5% 30-year mortgage premiums over 10-year treasury rates, you're effectively only paying (1.5% * mortgage) per month + property tax, because most of that money is saved going into principal of the house loan and the house price keeping with inflation. So net worth wise, you're only wasting around $2k/mth to live there... (out of a $30k/mth after-tax making staff engineer, and assuredly a $35k+/mth after-tax making surgeon couple)

Of course, if you're too uppity to live in places like San Leandro, that's a you problem.

spacemadness• 4 years ago

It makes me physically ill seeing what houses have gone for in the bay after all the bids are in. A couple I know have been searching for a year and they’ve been consistently outbid by people offering 40% over ask which is obnoxious.

JumpCrisscross3• 4 years ago

Bad title. Based on their own chart, higher-income people (defined as those earning more than $100k) have more confidence than any other group. That confidence just dropped more than the others'. This is a story about a derivative. Given the higher baseline, it may not be a story at all.

bobro• 4 years ago

Even worse about the title, lower income people all had the same drop. They just did it earlier. Really bad analysis and narrative building by the author.

areoform2• 4 years ago

Having seen a small fraction of the tooling that the Fed uses behind the scenes, I am now convinced that there is a fairly big gap between the publicly available analysis + expertise v. the capabilities accessible to decision makers.

All decisions made by the Fed are made using comprehensive and sophisticated simulation tools, including tools that I'm under NDA and can't talk about. (However, I can say that the Fed is a customer, as that is publicly available information) Only a small fraction of this tooling is available publicly in the form of, FRB/US - https://www.federalreserve.gov/econres/us-models-package.htm , FLARE - https://www.federalreserve.gov/econres/notes/feds-notes/test... and whatever ABBA is, https://search.usa.gov/search?affiliate=ofr&query=agent-base...

When the policy makers are running millions of simulations with real-time transaction data + inputs, what utility does all of the fretting and "analysis" in the media have?

The system has become extremely dense and opaque, and what is in the public realm seems to be decoupled from the policy making + expertise. At best, the public can learn from footnotes that the Fed intends to (and has) pursued simulations to track, forecast & calibrate its policies,

29 To facilitate analysis of settlement disruptions, systems may need to develop the capability to simulate credit and liquidity effects on participants and on the system resulting from one or more participant defaults, or other possible sources of settlement disruption. Such simulations may need to include, if appropriate, the effects of changes in market prices, volatilities, or other factors.

Tools are only as good as the people who use them. We need more transparency into the decision making aids, as well as greater access to help people understand how the economy is managed as a system.

But until then, all this media doom and gloom isn't helping.

ramesh312• 4 years ago

I tend to trust the Fed as well. They saved us from total collapse in '08, and made the COVID recession the shortest one on record. I think after 40 years of practice we're starting to get pretty good at this MMT thing.

areoform2• 4 years ago

I don't "trust" them, because I don't trust any small group of extremely smart people. It's easy for group think to occur, and for the group to construct brittle systems that go horribly wrong.

If we had more eyes + more critiques, we could debug their thinking & see where it's going.

That being said, the policy makers and the economists at the Fed are far more capable than most people think. They've gotten a lot right, and proven most naysayers wrong. But the question is, how long will that record last?

satellite2• 4 years ago

MMT requires excess reserves to be absorbed by taxation. Taxation has not be increased since the beginning of the quantitative easing interventions. MMT has never been tested.

skylanh• 4 years ago

http://www.g8.utoronto.ca/finance/fm081010.htm

This is what it took to reverse 2008's recession. Every time I read this single page document I get a little shiver.

Item #2 is by my interpretation has "any and all means" finality.

("2 Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.")

AlexandrB2• 4 years ago

They saved us from total collapse in '08

Who is "us" in this case? A lot of people lost their homes/savings. The primary entities saved were the same ones that caused the crisis in the first place. I think it's fair to argue that in the short term a collapse of several major banks might have hurt "the working class" worse. But the in the medium to long term I'm not sure that pulling out all the stops to fix the financial industry's fuckups was the right call.

lkxijlewlf4• 4 years ago

I worry about my friends and relatives who are paying enormously inflated costs for the big three (housing, food and transportation).

How does anyone think anyone except those of us making high wages can make it? People are treading water at this point.

brimble4• 4 years ago

I think of it as the "big two" and it's housing and healthcare :-/ No other one thing exceeds half of either one of those.

[EDIT] Necessarily exceeds, I guess I should say. My food budget exceeds half of either of those, but that's mostly laziness and luxury. I could easily cut that a ton and barely even suffer for it.

yellowcake0• 4 years ago

the big three are housing, healthcare and education

Workaccount23• 4 years ago

The most worrying thing is that congress has to drastically cut spending and/or raise taxes so the fed can raise rates while still allowing the government to service it's debt.

I believe the government absolutely blew its load propping up lots of entities during the early pandemic who actually did not need propping up at all (in retrospect). In an idealized case, the government would go around and ask everyone "Hey, if you didn't actually need that money, could you give it back?" and people would honestly return it. Obviously not going to happen though.

goodluckchuck• 4 years ago

It's so manipulative to 1) use income and 2) break society into those low brackets of <$50k, $50-100k, and $100k+... as of they aren't all working-class people.

That might be where people are starting to escape the working class and enter the middle class, but certainly not "rich" or "high" class, as the article suggests. If your family has a net worth of $2-4 Million and are making $100-200k/yr, then you might... own one Arby's franchise.

I like Arby's and kinda wish I had that for lunch, but folks who own one Arby's are not exactly major competitors in the world of capitalism (in an individual sense). They're the middle class (to the extent that one even exists). Those are people who - together with many other small businesses - could form a community that shapes the market and provides a strong stabilizing force... but they're still "consumers."

giantg26• 4 years ago

Um, duh...? The people making less don't have much in the market, and a large part of that will be in highly restricted accounts like (most) 401k plans with just a few funds to pick from.

codr72• 4 years ago

Once you have nothing to lose anymore, getting the rest of society down to your level is a step forward; at least then we can begin to build something better together.

nostromo• 4 years ago

S&P 500 is down 7% this year and inflation is running at 8%. Those compound so folks are seeing 15% declines in wealth in 3 months.

The Fed can only choose one of those "problems" to solve -- let asset prices fall and tame inflation, or prop up asset prices and let inflation run wild.

tommiegannert• 4 years ago

That's an odd way of using inflation numbers. 8% is a YoY change. What makes you able to sum that up with a 3-month metric of SPX to yield anything useful?

It's 0.6% and 0.8% MoM so far [1], so if we're simply summing up an approximation for YTD and extrapolating to March, I'd suggest -(7% + 0.6% + 0.8% + 0.8%) for -9%.

[1] https://tradingeconomics.com/united-states/inflation-rate-mo...

coding123• 4 years ago

The graph clearly shows all demographic groups are fretting pretty much identically.

kkfx• 4 years ago

Well... I can consider myself in the "hi income/wealthy" of my country (Italian living in France), I'm worried not much about the economy but about society at a whole.

Being wealthy means just a probable less hard landing, the probable capacity of accepting new skyrocketing costs for a long period of time, still being able to access/source what I need for a more or less comfortable life and maybe also being able to invest in the meantime for a future perhaps not marginal profit, but even if all that happen respect of today I'll still get less because the whole society have less.

Just imaging being wealthy today in France and tomorrow being even very rich in Turkmenistan. Oh you are much more rich in relative sense but what can Turkmenistan offer? Perhaps in a far future with new technologies and space explorations things will change but that surely might happen far beyond my life expectancy.

That's is. That's the basic law of nature, no matter morality, no matter feelings, no matter what. We face a scarcity crisis that will led to social unrest and wars. The most optimistic scenario is bad so it's normal to being worried, because even the most optimistic scenario means at least a very bed decade, perhaps two or three decades, plus a not so quick recovery that probably still demand years.

Higher-income people are worried about the economy

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