Financial anxiety: The alarming side effect of inflation

https://www.bbc.com/worklife/article/20231005-financial-anxiety-the-alarming-side-effect-of-inflation

by rntn • 3 years ago

101 96 3 years ago

bbc.com

BaculumMeumEst• 3 years ago

anxiety. bad bad bad. you feel bad. sign up to view this article. upvote it to the front page of hackernews.

johnchristopher• 3 years ago

freeze. freeze. no, fight. flight. close tab

michaelteter• 3 years ago

Financial anxiety: Media - the primary instigator

It's one thing to feel financially tight. It's another thing to have endless news articles and publications and posts warning of how bad the global economy is and how inflation is running out of control.

Not only does this constant negative message directly cause stress on the viewers, but it can cause fear in business which can lead to "precautionary" retractions... which can exacerbate the actual market problems.

Decision-makers in companies will make harsh short term decisions either to look responsible to shareholders or to cover their asses from upper management, and these decisions can have negative long term consequences to the company, employees (especially those laid off), and the market in general.

How often do we see news of mass layoffs, and a month or two later we see a big hiring round from the same companies? This is grossly inefficient for the companies, and it's obviously very harmful to those let go.

If the media didn't jump on every potential disaster with such fervor, we would all be better off. But promoting fear gets attention, and attention is potential revenue... or votes.

gjsman-10002• 3 years ago

Don't shoot the messenger. If anything, inflation and shrinkflation's effects on the average American are, in my opinion, understated; and Thomas Jefferson (if you've ever read his comments about inflation) would've been calling for hangings.

Also, worth remembering, the median American income is $40,480 /yr., while median household is $74,580 /yr. Half of Americans make less than that per year. 20th percentile income, by median, says that 1/5th of American households make less than $28,000/yr (no law of averages with high earners skewing the result here). One glance at the housing market, or inflation, and I think they have every right to feel angry.

Edit: Or is it 80th percentile?

loeg2• 3 years ago

Your median figure for individual income includes children, part-time workers, and retirees.

lesuorac4• 3 years ago

Perhaps more importantly and that during inflation/shrinkflation the median income has _decreased_ so not only do you get less for your money you also have less money!

I will say though on inflation we should shoot the messenger. Inflation is a disease; it describes a symptom (increased prices). The word inflation does not describe at all why prices increased. Did oil get more expensive so the cost of revenue increased? Did a company realize they were charging below market rate? The news can be do a tiny bit of investigation before reporting on it for hours on end.

https://www.census.gov/library/publications/2023/demo/p60-27...

coffeebeqn• 3 years ago

This is hardly just the news talking too much about the thing. Cumulative inflation over the last 4 years has been insane and most people haven’t gotten double digit raises (just to tread water in the best case). People feel the pinch because it’s an actual fact in their day to day life

andrewmutz2• 3 years ago

In inflation-adjusted terms, the lowest income americans have done the best over the last few years, with their wages rising 9%:

https://www.epi.org/publication/swa-wages-2022/

Between 2019 and 2022, hourly wage growth was strongest at the bottom of the wage distribution. The 10th-percentile real hourly wage grew 9.0% over the three-year period. When we look across the wage distribution, we see wage growth declining for each successive wage group until we reach the high-wage group. Compared with the 9.0% wage growth at the bottom, growth was less than half as fast for lower-middle-wage workers (3.9%) and less than one-third as fast for middle-wage workers (2.4%) between 2019 and 2022. Upper-middle wages grew even more slowly at 1.8% over the three-year period, while the 90th-percentile wage grew 4.9%—faster than the middle wages, but not as fast as the 10th-percentile wage.

And this is from EPI, a left-leaning think tank.

makomk• 3 years ago

The BBC is a British institution though, and the British media has treated the effects of inflation here very differently to how the American media did, with endless front-page coverage of every last detail and prediction and problem whereas the American media downplayed the issue and how badly people were doing in day-to-day terms and instead told readers that inflation was some partisan Republican narrative.

PheonixPharts• 3 years ago

I think it's great to check media sensationalism, but I think there's a massive disconnect between the impacts of inflation on highly paid software engineers, and most Americans.

It's also a bit strange to see you view media as a completely separate entity from "decision-makers in companies". My experience has been that most decision makers in companies get most of their ideas entirely from the board and major investors. I recently left a publicly traded company, and pretty much every time our "leaders" met with the border and major investors they would come back singing a very different tune then they went in.

But these same major investors and board members also have relationships with people running major media companies (which are also just companies), in many cases they may even be the same people.

There's this trend I've seen on HN to just dismiss anything that seems wrong with the world, no matter the evidence, with "media sensationalism", as though we are living in fantastic times if it were for that pesky media distorting our views.

kvathupo• 3 years ago

As the child of blue-collar parents, I'd agree that there's a lot of price anxiety in their neck of the woods.

I'd also add that the statistics can be misleading: of the jobs added, many are in food services and front-line healthcare. For the former, the positions don't provide hours and pay poorly. Not a great area to be adding jobs in amidst high inflation and depressed lending.

PH95VuimJjqBqy• 3 years ago

I think it's great to check media sensationalism, but I think there's a massive disconnect between the impacts of inflation on highly paid software engineers, and most Americans.

Thank you for saying this, it's exactly what was going through my head while reading that post.

The very idea that money problems are in people's heads, while it can be true, people are panicking not because the media told them to but because they can see for themselves that they don't make enough money.

If you've never been through it you may not understand. When we hit the recession in the early 90's my family quite literally did not make enough money to afford everything month to month (stepfather worked at a grocery store). We were slowly going into debt just to survive (bills, housing, food, gas).

lawlessone• 3 years ago

did media make my milk sour?

crvdgc2• 3 years ago

It's not as applicative in this case, at least for the UK.

As a software developer based in the UK, the inflation mentioned in the article is felt very deeply by myself. The article cited 7.2% as the price inflation rate, which is close to the rate of 7.6% calculated by the Office for National Statistics based on my household spending[1] and is consistent with my personal experience.

On top of that, the UK Treasury adjusted the personal tax threshold policy back in April this year, basically freezing the tax bands to no longer rise with the inflation, which caused a direct 3.3% hit on my income. This freeze is estimated to be the largest over 50 years according to BBC[2], but since we are discussing media sensationalism, so maybe that's not something that would convince you.

Anyway, maybe the situation is different elsewhere, but I do find this article more truthful than not from where I stand.

[1] https://www.ons.gov.uk/economy/inflationandpriceindices/arti... [2]: https://www.bbc.co.uk/news/business-67031930

WarOnPrivacy3• 3 years ago

The article cited 7.2% as the price inflation rate, which is close to the rate of 7.6% calculated by the Office for National Statistics based on my household spending[1] and is consistent with my personal experience.

Do you know if those figures factor in non-consumables like housing and insurance?

Asking because many US areas are seeing 20-100% jumps (or higher), year over year over year. When your largest expenses skyrocket, single digit increase stats don't reflect reality well.

vikingerik• 3 years ago

Laying off then hiring should be a positive. Presumably the laid-off were your worst talent and workers, while the new hires are at least randomly distributed and should be selected towards the upper end of the talent range.

ok_dad• 3 years ago

Again, that’s not how it works. You don’t lay off bad employees, you lay off randomly or lay off teams you no longer need or want. Layoffs are an opex reduction exercise, not a house cleaning.

nonameiguess• 3 years ago

Unless you managed to somehow change the intellectual characteristics of the labor pool in the span of less than a year, this is impossible on an industry-wide basis. At best, one company gains and another loses, but even if it evens out, the deadweight loss of unemployment payouts, time spent applying and interviewing, onboarding and offboarding, relationship upheavals, all make this a net negative activity socially.

titzer4• 3 years ago

The media sensationalism isn't the underlying problem, it just exposes it. The modern economy runs primarily on the confidence and emotions of the market participants. It is at the mercy of an irrational mix of evolved ape behavior.

diogenes42• 3 years ago

Financial anxiety: Media - the primary instigator

In my experience it's "how will i pay for rent and food the next two months".

WarOnPrivacy3• 3 years ago

Yep. Then toss in widespread housing insecurity. I've got an aging sister likely facing homelessness.

2devnull• 3 years ago

You are right, except in this instance there is very objective proof that inflation and homelessness are problems that have gotten worse recently and are having widespread impacts. If the media choose not to cover this, because of whatever reasons they have (maybe they worry about frightening the public ?) then it will not be addressed politically. They are called the 4th estate for a reason. They determine what political discussions are allowed. Inflation is an important issue for lower income and middle class workers.

commandlinefan• 3 years ago

Media

As far as I can tell, the mainstream media is working overtime to _downplay_ the actual state of things.

I'm a computer programmer with an advanced degree and three decades of experience and until about a year ago, I got a dozen unsolicited job offers a month. Now I can't recall the last time I saw any. Reddit's /r/cscareerquestions used to be flooded with people complaining about persistent recruiters, now it's flooded with credentialed people who've been looking for a job for months with no success.

My wife and I both make good salaries in a relatively low cost of living area and we're suddenly finding ourselves cutting back drastically just to keep from falling behind. I track my finances pretty carefully and I can compare what I spent on groceries and gas and medical expenses later year vs. this year (against the 0% pay raise we've both gotten for the past few years) and it's quite a bit.

I'm in a good position since I bought a house a long time ago at a fixed mortgage rate and am still employed, but I can't even imagine how people even a little worse off than me are doing... all while the network news and the places on the internet that haven't been shadowbanned are insisting that we're just exaggerating the scope of this financial crisis.

I remember 2000 and 2008, and neither seem like anything compared to this.

Gibbon1• 3 years ago

can cause fear in business which can lead to "precautionary" retractions... which can exacerbate the actual market problems.

Thing I learned a long time ago from an experience[1]. Managers often place more trust in what they read in rags like the NYT and the WSJ than they do their in house experts. Which is crazy because the guys that scribble for those outfits are relative buffoons with a knack for writing and nothing else. And relying on third hand bullshit most of the time.

[1] VP said we were idiots because what were were saying didn't line up with an article he read in Inc Magazine.

waynenilsen• 3 years ago

Inflation is the most regressive form of taxation imaginable.

https://youtu.be/B_nGEj8wIP0?si=G2__21GKU7S83aHB&t=1080

zeroonetwothree• 3 years ago

I’m sure we could imagine more regressive forms.

datadrivenangel2• 3 years ago

I visited Argentina earlier this year, and the psychological effects of years of inflation were very real. The exchange rate has gone from 5 pesos per USD, to 350 officially in the last 10 years. The unofficial rate is up to almost 900 pesos per USD. In March the unofficial rate was half of that, so the currency has lost 50% of its value in the last 6 months.

Everybody prefers to be paid in dollars, and if you're getting paid in cash, why pay taxes? I had an Argentinian tell me that I could pay ~25% of the list price if I paid in USD instead of credit card, because the unofficial exchange rate and not paying taxes on it would save that much. Money requires trust that you can exchange it for goods and services, which are provided by other members of society, so debasing the money supply like this is killing society in the lovely country of Argentina.

hbossy• 3 years ago

Is it harder to travel from abroad? I imagine that thousands of $1 bills might rise some eyebrows at customs.

latchkey3• 3 years ago

Imagine a plane full of people carrying gold nuggets in their pockets.

datadrivenangel2• 3 years ago

You get the best exchange rate with crisp $100 bills, and any USD that is damaged or too worn will get rejected by the money changers... Which makes you see where the demand for dollars is greatest (The wealthy).

amjnsx2• 3 years ago

It’s a tale as old as time unfortunately. Currencies have been debased for centuries.

It won’t change until we have actual hard money that can’t be debased by leaders/bankers/politicians.

diogenes42• 3 years ago

Sorry, is there any reason to expect money to revert to behaving like gold any time soon? Sounds suspiciously like crypto tripe. Why would that be beneficial anyway? The relative purchasing power of poor countries won't change without some serious shifting in resource distribution worldwide.

rando_dfad• 3 years ago

Hard as gold, perhaps?

That creates other issues. Volatility, for one.

HPsquared• 3 years ago

Sounds like society is continuing, on a USD basis. Society ≠ government. They're usually orthogonal, and often go against each other.

anon11990223• 3 years ago

Lovely country of Argentina had 9 defaults in it's history. Maybe people and their parents, which certain % of them are part of government or economy. Should start taking little more responsilibity to understand how Finance works long term? Naa, let's default again, blame other things and not even understand how debt and modern monetary system works. https://www.bloomberg.com/news/photo-essays/2019-09-11/one-c...

giraffe_lady• 3 years ago

Anything else come to mind in argentina's history that might be relevant?

is_true2• 3 years ago

The money is provided by that monetary system you speak of.

mouzogu• 3 years ago

"with uncertainty around the current economic climate, the widespread issue of financial anxiety isn't going away."

privatise profits and socialise losses.

the truth is that for anxiety to be relieved, we need higher wages, much more time off, good healthcare and less rising costs.

economic "uncertainty" and inflation are not natural disasters. they are the outcomes of rational and incentivised behaviour.

StuntPope2• 3 years ago

They talk about inflation like it comes from a comet out of deep space.

Not one mention that inflation is caused by the government and central banks expanding the money supply.

artificialLimbs3• 3 years ago

Just wait. You will be downvoted for this comment for reasons I am unable to explain.

earthscienceman• 3 years ago

That is one lens with which to view the situation. But it's a simple lens when inflation is a large forceful re-structuring of the economic pyramid that is impacted by the attempts of central authorities to manage money.

Inflation is just a word that we have for changes between the costs of various goods and services and the amount of money that people are being paid for the work they do (averaged across various parameters to make communication simple). Those changes happen for many reasons, because people aren't making enough money... because people are hording money... because the govt et al increase the supply of money to counteract those phenomena... because the economic chain of supply has shifted... and for some massive combination of all those things and more. The economy is a complex machination that you're deeply oversimplifying with this two sentence comment. Although the government trying to predict such things and get involved can be deeply flawed, the alternative is the crushing burden of unemployment and crumbling structures.

As such, pointing the finger strongly at big government and saying "how dare you get involved" is myopic and heavy handed. We could also easily point the finger at the financiers and real-estate moguls who have brought us into a world where the average worker has little income and extreme "expenses" that filter into the coffers of wall street.

voisin3• 3 years ago

Although the government trying to predict such things and get involved can be deeply flawed, the alternative is the crushing burden of unemployment and crumbling structures.

This is a little overstated, no?

I agree the economy is more complicated than simply money supply, but subscribe to Hayek’s view of the pretence of knowledge - that the central bank can possibly manage the economy better than the economy can manage itself. The problem with a small elite managing the money supply is that it isn’t predictable. We see them saying rates will be low for the foreseeable future and then a few quarters later start jacking up interest rates at the fastest rate in 40 years. Well, I guess it just sucks to be anyone that listened to the “low for long” guidance. But this uncertainty has a cooling effect on economic activity. If anything we should trust money supply to a predictable, simple equation rather than the whims of men behind closed doors.

eatsyourtacos• 3 years ago

Not one mention that inflation is caused by the government and central banks expanding the money supply.

The recent inflation is more because of unfettered capitalism. Supply chain issues? Ok let's just keep on raising prices as much as we can. Things back under control? Ok, well we are still going to claim we have issues and just keep on raising prices.

Workers want more money? Ok instead of us shareholders taking the hit, we are going to pass on every bit of that (and more) to the consumer because "we can".

Want to go to a football game? A concert? Disney world? Cool- we are just going to keep increasing prices like crazy because there is a large enough people in the top 10% that will pay because that increase doesn't really matter.

Prices are being driven the fuck up because of greed and income divide.

nradov3• 3 years ago

That is not a plausible explanation. Capitalists were no less greedy 10 years ago. So, something else must have changed.

ftlio• 3 years ago

Central Banks have allowed for the creation of tens of trillions of dollars / euro into a bases that were only in the tens of trillions.

That glut of new money took a flight to quality in banks and things like tech companies. Such firms, and all the people that contract with them or are employed by them as downstream from this money thus had a warped cost to capital compared to everyone else.

It wouldn’t make sense to operate a business and not choose the customer who can support a higher price point over the lower one with an identical cost, and with such a large delta, increasing margin as a matter of price increase made fundamentally more sense than investing in cost reductions.

The fact is that Central Banks had the largest role to play here assuming that choosing to make more money over less money by simply raising prices is not inherently evil.

titzer4• 3 years ago

Not one mention that inflation is caused by the government and central banks expanding the money supply.
Prices are being driven the fuck up because of greed and income divide.

Maybe...it's both? Could it actually be that the government and central banks collude to prop up the housing and stock markets and print money (through debt creation) in order to make sure that the upper quintile keeps getting paid and the reset squabble about it?

Moldoteck• 3 years ago

Imo it's bc of monopoly. Imagine a world where there sre thousands of processor manufacturers, not just tsmc, samsung and ~5 more at best

wing-_-nuts4• 3 years ago

I used to have a lot of financial anxiety when I was younger. These days I thought I was pretty well set but the increase in prices for everything has been kind of a wake up call, especially housing! Kind of shocking when SFH's in my southern suburb went from costing ~ 400k in 2017 to ~ 800k now. What blows me away is that it appears to have no bearing to what people can actually afford? I make multiples of the local median household income and even I'm starting to worry about affordability if I ever needed more space.

amjnsx2• 3 years ago

Imo because the rich get richer, they inevitably need to store that wealth somewhere. Cash would be stupid because inflation, so they can buy property over market rates as a “safe haven”

toomanyrichers2• 3 years ago

What blows me away is that it appears to have no bearing to what people can actually afford?

If the houses aren’t sitting on the market, people can afford them. I think what actually happened is people realized that housing was underpriced. Which is insane in terms of the raw numbers, but it’s the truth: lack of supply along with increasing numbers of buyers means that the market really is that hot.

Sucks to be late to this party.

wing-_-nuts4• 3 years ago

Building a little cabin out in the woods with starlink is looking increasingly tempting honestly...

jplusequalt• 3 years ago

I don't buy this at all. There are shoddy houses in my area that were sold in 2021 for $100k that are now on the market for $250k in 2023. We're in a bubble.

StuntPope2• 3 years ago

It's called "The Cantillion Effect".

g8oz• 3 years ago

Thanks for that. Investopedia has a good primer on it.

https://www.investopedia.com/terms/b/biflation.asp

helen___keller• 3 years ago

Change is scary. Change for the worse is terrifying.

From my observation, most people rightfully assume their incomes aren’t going to rise very fast, if at all. We’re in a world where some people would call a 3% annual raise “generous”.

The correct and only way to get by inflation without getting pinched is to make sure your income raises to match cost of living increase. But a lot of people don’t live in the rat race so this might not be obvious and certainly doesn’t feel desirable.

As someone living in the urban rat race, inflation doesn’t feel like a big deal. In the 2010s amidst “low inflation” I saw rents rise in my city astronomically. In the same time period I worked / negotiated to increase my own pay astronomically. Prices go up, income goes up, life goes on.

saltcured• 3 years ago

For those with some savings, you also need to understand how to get into inflation-resistant investments if you want to not be pinched by savings. Otherwise this spiral of increasing wages makes your prior savings irrelevant.

On the other hand, those with some debt need the financial wisdom to use their spiraling wages to pay down debt principal and not let the debt spiral due to increasing interest rates.

So, high inflation can be a kind of continuous cash debt/savings jubilee, resetting small-time debtors and savers to living hand-to-mouth as it erases their cash history. But it can accelerate the gap between the worst debtors and the biggest investors who are on opposite sides of the spiral...

helij• 3 years ago

What are some examples of inflation-resistant investments that are not real estate? Should a person just put anything extra into mortgage even though interest rates in savings accounts are higher than mortgage interest? Stock market at the moment is something I don't understand and I don't want to get burned again with Bonds.

Just spend like there's no tomorrow?

m3kw9• 3 years ago

Inflation affects the poor the most mental wise.

makeitdouble2• 3 years ago

Often, people are reluctant to engage with support services and instead shut down, which can hinder long-term financial planning and wealth accumulation, particularly if the cause of the anxiety is driven by high debts," says Vyas-Lee. And, she adds, "financial anxiety rarely resolves by itself, so professional support can be genuinely transformational for those who do step forward".

I'm genuinely curious about that professional help.

A this point it seems the general advice is "just accept to be poor", which doesn't seem to go in line with wealth accumulation over time.

thibautg• 3 years ago

Where I live, wages are automatically adjusted for inflation. Quite comfortable, but it favors high wages.

BadCookie• 3 years ago

The song “Rich Men North of Richmond” really captures the zeitgeist. It was #1 on the Billboard Hot 100 music chart in August. If you haven’t heard it, it’s worth a listen.

“‘Cause your dollar ain’t shit and it’s taxed to no end”

https://youtu.be/sqSA-SY5Hro

makeitdouble2• 3 years ago

The controversy around it is the funniest part to me, as it also revolves around paying in mass for downloads to get to the top.

NPR's mostly neutral take on it: https://www.npr.org/transcripts/1197954458

Financial anxiety: The alarming side effect of inflation

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