If your population growth flat-lines (which it did last year), productivity has to compensate.
Can productivity compensate if the average age is getting older (people tend to be less productive after a certain median age)?
One reason investing in index funds makes sense is the underlying assumption that global population growth keeps increasing (GDP for ‘free’).
I’m super interested in what investing looks like in 50-100 years as the population starts collapsing, because it might collapse faster than productivity can possibly compensate for, which means unstoppable GDP decline.
GDP has to be at certain levels to support different types of economic activity. E.g. at some point, GDP might be low enough that new semiconductor research isn’t affordable (because all the workers are used up caring for the elderly for example).
It is a common mistake, but stocks don't have a positive return because GDP increases over time. They have a positive expected return over time because they have a risk premium. That is, to invest and take on risk, an investor will demand a return above and beyond the expected value of the cash flows the business generates. Whatever path of GDP and/or population is expected to be is already factored into the discounted valuation of the cashflows.
That is, you aren't getting a positive expected return because population growth is increasing over time (i.e., everyone knows that, it is already baked into the price). Now, if the expected population growth changes...then the price would change.
You have an expected return because you are taking on risk.
> stocks don't have a positive return because GDP increases over time. They have a positive expected return over time because they have a risk premium
You’re both right. The equity risk premium [1] is real. But it’s a premium over something. That something is, approximately, production. (It’s precisely the risk-free rate of return. Which, in the long run, is base-rate production.)
Yes, all assets are priced relative to the risk free rate. As the assets all compete with each other and they all compete with cash rates. So that rate can be thought of as being baked into other assets already (including equities).
Having said that, if you wanted a return strictly on base-rate production, then you'd invest then in risk free assets (vs equities).
> Yes, all assets are priced relative to the risk free rate.
Based on your name I bet you work in research at a hedge fund.
I hate to break it to you but ask most people who are price setters what their discount is and they’ll say 10% regardless of 10Y treasury yields (since you know, TINA)
As a result securities are increasingly priced on liquidity more than cash flows and that’s a function of the credit cycle way more than it’s a function of productivity.
It’s a weird post modern approach to the economy, but hey that’s showbiz baby.
agree. GDP does not mean stock market gains. In fact, you can have strong shareholder returns even if the economy is not growing at all. If $1 billion company generates $100 million in net profit annually, this is $ that must go to shareholders regardless of GDP. This is the situation right now with the US...major companies are generating huge profits annually even if real GDP, productivity, and population growth is sluggish, which is why the stock market has done so well in spite of so many things seeming to be wrong..
Long term corporate profit growth overall can’t exceed demographic growth + productivity growth unless you assume that corporate profits will eventually consume all of GDP with labor and taxes going to zero.
A large amount of corporate profit growth since the 80s has been due to a declining share of labor compensation vs capital and declining effective tax rates. Productivity gains are the only real “free lunch” which is what capital investment is supposed to provide to justify the gains. Productivity growth has been stagnating for a couple of decades.
> They have a positive expected return over time because they have a risk premium
It feels very weird that the same:
1. US government (which bailed out some big banks when they did all of that corrupt greedy stuffy during the '07 housing collapse)
2. the predatory banks themselves
3. institutions like Vanguard, Blackrock, UBS
really let "the small guy" win in the "retail investor" by allowing us to just click "buy" on things like index funds. it all seems too good to be true. when does the little guy ever actually win?
> You have an expected return because you are taking on risk.
I have a dumb question. Most publicly traded companies rarely issue new shares. Why does a company care about its share price? If we are being rewarded for buying and holding their shares based on the growth a company makes quarterly, how does the company benefit from their share price going up? They don't commonly take loans against their shares or issue new shares. I know they have a duty to shareholders but... take Facebook for example. Who cares if their stock is down 60%? How does it affect the companies financials?
The company's board is appointed by its shareholders. The shareholders care, so the board cares. And the board hires the executives, so the executives care.
You don't actually need a separate "fiduciary duty". It comes from the shareholders themselves. If the shareholders are happy with a company has motivations other than maximizing profit, they can.
There's even a legal category for that: Public Benefit Corporation. Some of them are publicly traded -- like Warby Parker. Public Benefit Corporations are somewhat protected from shareholders forcing them to pursue profits, which will hurt the stock price, but investors can value the stock based on the benefit they perceive the company to be doing. (Like Warby Parker giving away free glasses to poor people.)
For regular companies, the executives try to make the line go up because if they don't, they'll lose their jobs.
> Most publicly traded companies rarely issue new shares.
False, most public companies have stock based compensation plans, which are ways of issuing new shares. Without them, they would need to substitute stock compensation with cash to acquire talent.
Facebook issues shares every time they approve a new stock based compensation plan.
FB has 2.3b shares outstanding. How much has that number grown past 12 months, 24 months, 36 months so I can put what you are discussing into perspective?
It's not as simple as looking at the stock of outstanding shares to determine issuance, as it's a net figure.
In terms of new issuance, FB spends billions in stock based compensation each year since 2012, all of these are new issuance under the equity incentive plan. It was ~$9.164B for FY2021 alone.
In terms of buybacks, FB started buying back stocks in 2017 and has continued since. In FY2021, they spent ~$55.47B to buy back stocks.
Therefore, outstanding shares have been decreasing since around 2020. But this doesn't mean the company stops issuing shares. The more stock prices fall, the more equity they would need to issue to compete for talent, or alternatively supplement with cash. Long term, stock prices is one of many measures of how the company would be able to raise capital (stock based compensation is an indirect way of raising capital).
> I have a dumb question. Most publicly traded companies rarely issue new shares. Why does a company care about its share price?
If a company doesn't care about share price, the shareholders will elect a board of directors who will install a management team that does care about share price.
i’m just trying to understand why a good share price benefits the company financially? It benefits the shareholders, and all the executives who are paid in stock. But I don’t understand why financially accompany benefits from a high share price unless they are diluting and issuing shares
i’m not asking about the executives or the board. Why does a company benefit financially if it stock goes up other than being able to issue stock more easily?
Shares of stock represent ownership in a company. If the company performs well and earns increasing amounts of money over time, that means the company is more valuable.
If the number of shares remain static, increasing earnings means the value of the company is higher on a per share basis and justifies a higher price per share. The company performance drives the stock price.
If I own stock in a company whose executives do not work to keep the stock price up or even increasing, I will replace those executives with executives who will work to keep the stock price up/increasing. (Corollary - I will not buy stock in a company whose executives are unconcerned with stock price. That unwillingness means that folks who own stock and might want to sell it to folks like me will "encourage" executives to make that possible.)
Is it really hard to understand that stockholders care about stock prices and that they will "encourage" the company to maintain/increase the value of their investment?
Would you buy stock in a company that didn't try to maintain/increase the stock price? Why?
This has nothing to do with bank financing or further stock sales by the company, although those can also be factors.
Your question was answered before. Companies issue stocks to generate cash. The higher value the stock the more cash the company can generate by keep issuing stocks. The stocks can also be used to secure loans and as a compensation for employee and the board. So the company benefits in a lot of ways by increasing stock prices.
They could issue shares to raise capital. That shouldn't actually affect the stock price as now company is more valuable. Question is where to use this capital? Also currently debt is very cheap, so it might be simpler for them to take on debt.
> I’m super interested in what investing looks like in 50-100 years as the population starts collapsing
I don’t think it’s possible to forecast economics on those scales. If I was cryonically preserved and woken up in 2122, I would be equally willing to believe we were declining or stagnant for the reasons you give… or that we had solved AI and von Neumann replicators and that the planet Mercury had been fully dismantled and used to construct a Dyson swarm whose descendants had already done the same to a similar planet around each of the nearest dozen or so stars.
There’s no way for me to ensure that outcome given I believe the nature of the world economy is not forecastable that far ahead.
In the Dyson swarm scenario, assuming constant population, the productive capacity per person is 2500 times higher than the current global output, and a random act of rounding-error charity would give you more than Musk, Bezos, Zuckerberg combined, and it won’t matter if you have nothing (unless your sense of self worth exists only by the size of your bank account).
In the stagnant scenario, you might be OK with property, if you can be sure it will be maintained in the meanwhile.
In a decay scenario, I wouldn’t even want to guess what’s resilient, but houses will be fairly redundant due to oversupply.
But those scenarios were deliberately chosen as illustrative outliers; there are options between them, and I would do no better with making the right choices there — a limited AI that makes one sector redundant would destroy any investment I made in that sector while also making the output of that sector too cheap to bill separately, much as digital computers have done to the human profession of “computer”.
I feel like you're using that equation in a bit backwards way. If suddenly, everyone between the ages of 0 and 5 vanished, it would have a huge effect on the population, but at first take, zero effect on the GDP since presumably that age group is not involved in production. With a second approximation, you might say that GDP would increase since parental childcare is not part of the GDP and those parents could instead be adding to the GDP.
Similarly, the current flatlining (ignoring the decrease due to excess deaths) of the population won't effect actual production until a couple of decades on, unless you count possibly increased production described above.
> If suddenly, everyone between the ages of 0 and 5 vanished, it would have a huge effect on the population, but at first take, zero effect on the GDP since presumably that age group is not involved in production.
That age group is involved in production (e.g., in media.)
But not lot, so, yes, the narrow first-order GDP effect would be very small.
> With a second approximation, you might say that GDP would increase since parental childcare is not part of the GDP and those parents could instead be adding to the GDP.
I suspect second order demand side effects would probably be more strongly negative that second order supply side effects would be positive. You can't predict GDP effects from labor supply side effects alone.
Lower birth rates initially boost economies because it increases the percentage of the working age population which can drive a virtuous cycle in terms of savings and investment. In economics this is called the demographic dividend which if well managed can lift countries out of economic poverty.
Eventually though the benefit disappears as the demographic pyramid becomes a pipe and the share of working population shrinks again. The US demographic dividend was the era of the baby boomers who were a large cohort but had relatively few children.
It is also good to keep in mind that GDP is not a good measure of societal well-being. If GDP double but the population quadruples, most people living at the end of that process would not consider it to be a good outcome.
It's an excellent measure of the typical societal well-being in fact.
On average there is a strong correlation between the two globally and there has been during the entire post WW2 era at the least. It is the rare outlier that doesn't see a correlation between societal well-being and GDP per capita.
Shall we stroll down the list of high GDP nations? Surely it's unnecessary, as we all know the names. Oh ok let's do it anyway.
Ireland $101k | Norway $99k | Switzerland $96k | Qatar $84k | Brunei $80k | Singapore $79k | US $76k | Iceland $74k | Denmark $68k | Australia $67k | Sweden $58k | Netherlands $57k | Canada $57k | Israel $54k | Finland $53k | Austria $53k | Belgium $52k | Germany $51k | New Zealand $50k | UAE $50k | UK $50k | France $44k | Japan $39k | Kuwait $39k | Taiwan $36k | South Korea $35k | and so on
And everyone also knows what the bottom 1/4 or 1/3 of GDP per capita nations look like and how horrible their societal well-being is. The correlation is blatant. It's not perfect of course, it is however very high.
There are no great societal paradises where the GDP per capita is ~$500-$5,000. And there are no countries that are like Zimbabwe, Somalia or North Korea but have $30k+ GDP per capita figures.
The only serious weak spots in the correlation, primarily, are the US being ranked so highly on GDP per capita (but being below eg Finland on societal well-being), and the couple of smaller resource rich nations like Qatar where human rights are weak. For the vast majority of nations the correlation is quite sound and consistently so.
Hmm, actually I wonder the true level of quality of life difference between top of that list and bottom of it. Probably not great predictor inside the list.
Still I agree that between top and bottom there is huge qualitative differences.
that's a country size of Sacramento. Even if it was a societal paradise (don't know much about that, life expectancy seems not great at 71), a sample of 700k people doesn't seem to crush the predictive power of GDP per capita.
That's true. But if GDP per capita goes up, even if GDP goes down, your odds of having society being better off as a result are much better than if GDP goes up while GDP per capita goes down.
Yes, that was my point. Everyone focuses on GDP but that is not the metric that matters. GDP per capita is the metric that matters (for everyone except the elites at the very top).
I have a friend who is obsessed with the notion that, despite tons of evidence otherwise, corporations have gone soft, employees have too much leverage (he's a successful business owner, shocker), and work from home is terrible for nationwide productivity.
I’m super interested in what investing looks like in 50-100 years as the population starts collapsing, because it might collapse faster than productivity can possibly compensate for, which means unstoppable GDP decline.
Probably the same as today. Big tech will do well: google, tesla, amazon, etc. The wealthy and B2B will continue to provide a growing share of economic value, outpacing retail consumers and compensating for population stagnation. I don't see any reason for productivity to fall. Productivity surged during pandemic.
If the only thing driving your GDP is new people (and mostly immigration) you don't have a very productive economy. I think this has been the case in a lot of places for a long time, but that statistic just has to go up by the tiniest of amounts and we technically don't have recession and our leaders are doing great, right? It's a huge and disastrous example of Goodhart's Law in action.
>GDP has to be at certain levels to support different types of economic activity. E.g. at some point, GDP might be low enough that new semiconductor research isn’t affordable (because all the workers are used up caring for the elderly for example).
The good news is, this won't happen in the US, at least not in the 21st century. So if you're an American, feel lucky.
The population growth of the United States will never flatline for any appreciable amount of time. In other words, we'll never run out of workers. This is for two reasons:
(1) We border a rapidly developing nation to the south (Mexico), with significant economic ties at that border.
(2) The United States is, hands down, the most effective society at integrating immigrants and allowing them to be productive. We can always, always import more workers, and people will always, always want to come here.
We should remember that GDP doesn't reflect the totality of the economic reality on its own. It was popularized at a time of high population growth and the acceleration of mass production, presenting a perfect measure for encapsulating that time's idea of progress. As environmental threats are forcing us to reconsider our consumption habits with future products possibly created with less parts/materials/inputs, people may buy more used items, durability can become more of a priority where things are purchased and kept for a long time, GDP will go down. This however, doesn't reflect the diminishing of economic activity which takes on many forms, but is just one of the indicators which requires further contextualization.
It only matters to the extent that many existing systems are built on the assumption that the economy grows over time... e.g. taking on a 30y mortgage. If environment becomes deflationary, then it becomes a deathtrap.
I think nominal GDP targeting is pretty bad policy though. Deflation can be a great thing for people, if its focused in the right areas.
e.g. imagine population is cut in half overnight... suddenly housing becomes very cheap and affordable, even in previously desirable areas. Of course, need to deal with all the ramifications and second order effects of that (lots of financial instruments would implode as their inflationary baseline assumptions unravel).
Debt instruments of all kind become problematic with deflation. At least in their current form.
Fortunately the US could toggle on population growth on a whim through changes in immigration policy
>I think nominal GDP targeting is pretty bad policy though. Deflation can be a great thing for people, if its focused in the right areas.
Only if accompanied with a negative interest rate so that the real interest rate is 0%. The problem with deflation is that it raises the real interest rate, even though nobody signed a contract "hey if deflation is 5% I will willingly pay a real interest rate of 5%". When you consider that deflation primarily happens in economies that don't need further growth, paying that interest rate is not good for society.
> Can productivity compensate if the average age is getting older (people tend to be less productive after a certain median age)?
Most certainly. We'll very clearly do it with robots and artificial intelligence. Although people are expecting way too much way too soon. The classic line about how people overestimate change in the short-term and underestimate change in the long-term.
Elon Musk may occasionally be a clown in his behavior, but he has persistently been out on the cutting edge where newer technology meets real-world usefulness (the point where technology is ready for mass adoption; an awareness Steve Jobs also had). That's why Musk & Tesla are so interested in robotics (and they have the cashflow now to easily afford to pursue it in a big way). It will be a very large market, 30 years out, and it'll do a lot for boosting per capita productivity while population declines or stagnates.
For example we might see a scenario where population declines in the affluent nations, with persistent aging, and productivity remains stable or even gains, thanks to all manner of human labor enhancements that we'll come up with in this looming era.
>and they have the cashflow now to easily afford to pursue it in a big way
Musk is in the process of tying most of his free cash up in a web app instead of investing it in his businesses which might cause those larger companies to have issues.
Musk is mostly not tying up free cash to buy Twitter, it's going to end up largely being a debt move (as is typical of what he does, as he hates to sell his stock).
And I'm not sure where your premise matters re what I said. Tesla is the entity in question with the booming free cash to spend from operations, as their business has become soundly profitable. If Musk leverages his enormous net worth on acquiring profitable Twitter - what does that have to do with Tesla's ability to direct its operational cash to robotics R&D? Maybe his focus being split further will increase the risk to Tesla's profitability over time, however you didn't suggest that (and maybe Tesla would be better off with a Gwynne Shotwell operating it anyway; a more distracted Musk that has to hire a superior operator might bolster Tesla).
With $3.6b in operating income last quarter, and $9.6b over the last four quarters, Tesla increasingly has huge resources to throw at big R&D programs. Which has little to nothing to do with Musk's personal finances.
SpaceX, as per Musk, has a decent chance of going bankrupt. Perhaps he was just saying that to guilt people into come in to work over Thanksgiving which raises an entire other collection of concerns.
So far Tesla Robotics hasn't shown much to make anyone think they are serious about it. He needs to run his companies like an adult and stop doing stupid stunts for attention and taking stupid risks like smoking drugs one of your most, if not the most, profitable customer says are illegal on camera.
I wrapped capital up in productivity since machines/software/tools are a facet of how the labor population manifests productive use of time (and to simplify the discussion:) )
A country with a declining population can keep a growing economy or low immigration, but not both. Some countries (the Anglophone countries, France, and Germany) are magnets for labor given their relatively high wages, standard of living, and multi-culturalism (racism and anti-immigrant politics are problems, but still). But others, like Japan (with low immigration) or Bulgaria (with low immigrant interest) can't reap the population dividend.
Perhaps you can pick two of three: a stagnant economy, low immigration, non-right-wing politics. Japan picks a stagnant economy and low immigration (Shinzo Abe though a nationalist was no Marine Le Pen). France picks a somewhat growing economy and somewhat high immigration, and suffers from the growth of right-wing anti-immigrant parties (Marine Le Pen won 40% of the vote recently).
Or you can have lots of immigration and a per capita contracting economy like France.
France population 1990: 58 million | France population today: 67 million
France GDP 1990: $1.2 trillion | France GDP today: $2.9 trillion ($1.2t inflation adjusted forward 32 years is $2.7 trillion)
They gained 15-16% in population, and gained 6-7% in GDP. A big net drop per capita over such a duration, particularly for a major affluent economy.
And if one wants to be more aggressive about how big of a failure their immigration program has been, the French economy has net contracted in real terms over the last 15 years. GDP was $2.9t at the peak in 2008, and it's still there now; except to just remain steady, it needed to climb to nearly $4 trillion to adjust for inflation. So France has gained 5% in population over ~15 years, and is missing a trillion dollars in GDP they should have just to remain flat (ie they've seen a massive per capita economic contraction over those 15 years).
One might claim the decline in France would have been even worse without their hefty immigration policies. Likely a false claim given the very high unemployment rate among immigrants in France over the past two decades. The French approach to mass immigration has been a disaster (while other better controlled examples have been great successes, as in Canada). Skilled immigration is vastly better than low-skill mass immigration, especially going into the era of basic human labor coming under attack by the field of productivity robotics. It's a far better approach to focus on improving your nation per capita net via attracting highly skilled labor, in terms of productivity and incomes, than just focusing on getting as much raw immigration as you can. That's the core failure of the French approach.
It's far better to be rich Canada, with a flat to very modestly increasing population, in which real per capita GDP keeps rising and they keep focused on adding high skill labor (which makes their country richer and richer over time), than to be an declining France that throws low skill labor at the problem. For one thing, the high skilled labor immediately begins contributing to the tax base in a big way, which is critical for an affluent welfare state; whereas a tilt toward low skilled labor + a welfare state is a recipe for fiscal disaster.
US GDP per capita is on track to reach a doubling of the French GDP per capita, plausibly this decade ($76k vs $44k now and the gap keeps widening year after year). Meanwhile Canada is also now up to $57k (France and Canada were nearly the same on GDP per capita in 2008, now there is a $13k gap), so they're increasingly leaving France behind as well.
You can weave whatever narrative you want about French immigration policies and it’s effect on growth, but the elephant in the room is that France has tied its economic fortunes to the eurozone pretty tightly:
It's unfortunately far more difficult to find long-term historical PPP figures.
The bigger question is whether you put much stock into PPP. I personally don't, I consider it a very weak economic metric, poorly constructed and poorly tracked. There are is no economist army traversing the globe every year and actually accurately tracking PPP nation by nation (every nation and to the great depth required); nobody does that, they slap giant guesses on it year after year, trying to extrapolate from a small basket of signals in a given country, and starting from the base GDP figures. PPP pretends that Puerto Rico is above Portugal (and nearly on par with Spain or Estonia), Russia is on par with Greece, and China is on par with Botswana. It's a bad, unreliable joke.
I think in place of PPP, it's almost always better to do a deep dive on a given country on its various quality of life metrics, even though those are also at times difficult to compare nation to nation (due to variances in how each country measures).
For example, I don't think it's difficult to show that Finland has a comparable or higher quality of life than the US (I believe it's solidly higher personally, particularly at the median or lower), despite the $20k GDP per capita gap. The US is typically used as the base for PPP, so starting at $76k for the US, you then have Canada and Finland at $58k and $57k on PPP - do I really believe there is such a gap between the US and those two on PPP? I'd be very skeptical, it's another case where PPP doesn't do a very good job.
A solid majority of countries are still experiencing population growth, and among those shrinking, the magnitude is small - the largest population decrease (in a non tiny island nation) is in Latvia, which is shrinking around 1% a year. Hardly a collapse.
I think the rate of change is pretty slow right now but number of births per woman has gone down. If these lower levels stay or goes down further then the population will start to shrink faster in many countries. Some countries may be able to delay this by taking in more immigrants.
The fact the Fed is even contemplating a rate hike tells me they're misreading what's going on. The inflation we're seeing isn't a result of a hot economy needing to be kept in check, it's the fact that 40% of China's production is on lockdown and just about every product made, regardless of where it's made, is relying on part(s) coming from China. Supply is constrained and therefore prices are rising. Likewise, supply is constrained and that's impacting industrial output - hence a shrinking economy.
In my neck of the woods, by far the largest and most impactful inflation has been in the housing sector - 50% price inflation over the past two years. This is entirely attributable to the Fed's pumping of soft assets like stocks, leading to a bunch of paper millionaires cashing out.
Housing units per capita is at an all time high. Housing units per working age person is at an all time high, by far.
Housing units per household is at year 2000 levels and in line with history.
Check the data, it's all on FRED
What you're repeating is common conversational talking points spread as fact.
It is true that building slowed in the 2010s, but housing was overbuilt in the 2000s too which neutralizes that. Also number of housing units under construction is at an all time high right now, while population growth is the slowest ever (including immigration) and decelerating.
Look to the Japanese property sector for the future of US pricing. Demographic story is a long one that will take decades to play out though. Immigration policy could change things
Japanese property values are reasonable because their zoning is decided at the national level and local residents have next to 0 power to stop people from building things in properly zoned areas.
What do you think happens to housing units per capita as population levels decline?
The US and China are on the same path, just some years behind. We can ignore demographics for the next handful of years, but it will become very impactful on a 10+ year time horizon. China will deal with the inverted population pyramid sooner than us, so it will be interesting to see if that affects their GDP surpassing the US.
Anyway, the property sector will be super interesting in 50 years, when everything is overbuilt relative to population size. I imagine eventually rents will naturally become deflationary
If you zoom out on that graph, housing starts were well-below average for over a decade and were actually trending down even before 08: https://fred.stlouisfed.org/series/HOUST
Decreased supply along with increasing population(demand) generally yields a shortage and increased prices.
This is a complete anecdote, but I am surrounded by new neighborhoods all built in the last couple of years, and some new ones being built now. We also have a BUNCH of new 4 story apartments that have never been seen in suburban Houston before 2020.
I know Houston supposedly got a HUGE influx of people leaving NYC and SV in 2020-2021, but still, my home town of around 20k people just got 2 brand new neighborhoods in 2021 with 500 homes between them all selling for $300k+ when you used to be able to buy a house in town for $50-100k. Even with record breaking housing development, the cost of homes in the last few years in Houston has been ridiculous.
That's primarily linked to commodity/labor prices over the past couple years. And, to some degree because developers know that people buying in Texas have to buy. It's not like they're looking to upgrade from a current residence, they've already moved and have no place to live.
"stopped building new homes" is clearly an exaggeration, but the spirit of the comment is spot on. Housing starts did collapse around '08, and only returned to the historical average in ~2021. Even so, we're still producing fewer units than we were producing in the 70's--when the population was ~60% of what it is now!
How can there be any doubt that this production glut has played a huge role in the rise of housing prices?
To compare to housing starts, you need to compare to absolute numbers.
You also need to consider the fact that household sizes are trending downwards pretty consistently, so there needs to be more houses for the same number of people.
Even your source shows that ~17M homes have been built since 2008. I mean, it's a drop off from previous decades, but it's hyperbole to say no homes have been built.
You don't need to sell off stocks to invest in more real estate. Even small-time investors can get margin loans (or use them as collateral) to finance mortgages while avoiding the tax implications of liquidating investments.
Housing inflation is also exacerbated by low interest rates. I think severe taxes for unoccupied homes is a better solution than bumping rates though, as houses are already completely unaffordable for most and a rate hike just makes that worse for many while not limiting firms that buy in cash.
>I think severe taxes for unoccupied homes is a better solution than bumping rates though
Yeah but unoccupied units is only a few % in the hottest housing markets. This makes sense, considering that the opportunity cost of leaving a home empty is higher if the rent is higher. Because of this I'm inclined to believe it's popular-but-ineffective intervention, like banning foreign buyers (which also make up a few % of overall sales)
As with many complex problems, the solution will likely need to include multiple parts. Taxing unoccupied properties and putting limits on who or what can buy residential properties (and how many they can buy) could both be elements of a bigger affordable housing package.
A less complicated solution would be to build more housing. Governments weld a lot of power in this respect. They can use eminent domain to acquire land and they have the capability to finance projects on an unrivaled scale.
If we want low-cost housing, the government can provide that. Instead, we rely on a market that is designed to optimized for highest cost the market can bare.
I'm sure there are a few different segments that could be targeted depending on the area. Housing inflation really does need to be solved without impacting the ability of a median income person to afford a house though. Housing affordability is one of the biggest economic problems of the modern age.
> I think severe taxes for unoccupied homes is a better solution than bumping rates though
99% of homes are not vacant. The vacancy rate of housing is not significantly different from the past, in fact its actually lower than it was a few years ago. While I don't really mind the idea of taxing long-vacant properties to encourage use and discourage pure speculation, I don't think it'll make that much of a different in residential property valuations.
Real estate prices aren't included in inflation (BLS CPI) calculations because those are investment assets, like buying stocks or gold bullion. The CPI does account for housing costs through rent and owner's imputed rent.
> The CPI does account for housing costs through rent and owner's imputed rent.
This can be very roughly approximated by a 10-year moving average on the product of (housing prices x mortgage rates). CPI shelter inflation is currently ticking up each month like clockwork, at 5% and climbing, and it has a long way still to go to catch up with that trend.
> pretty clear the primary driver was demand driven.
Perhaps after the sharp downward in 2020. But it isn't clear what is the primary driver after the 1st qtr of 2020.
That chart doesn't necessarily imply consumer consumption is driving the increase. It could be inflation that's driving the uptick in the chart.
If last year it cost $1 to buy a dozen eggs. And now it costs $2 to buy a dozen eggs, it would cause a spike in the chart. Same amount of purchases, but different prices.
It's hard to tell from that chart whether the rise to $600 billion in consumption is due to more consumption or higher prices. Is it 2 * $1/dozen = $2 or 1 * $2/dozen = $2. We end up at $2, but one is via greater consumption and the other via inflation.
The chart is very obvious. We have a 10y trend of gradual increases YoY in consumption. Then the pandemic hits and we have a 30%+ increase in consumption in the span of a year.
That doesn't happen by mistake, and if you look at the personal income charts it becomes even more obvious.
Also the various spikes in consumption clearly aligns with when the respective spending packages were passed.
The fact that it took a whole year for people to understand the root cause is quite amazing, given that we have this very obvious data. But there was a vested interest in it being a supply side issue, so I'm not surprised
It is only obvious to people who have already drawn their conclusions and are looking for justifications to back up their conclusions.
> That doesn't happen by mistake, and if you look at the personal income charts it becomes even more obvious.
Once again, you already had your conclusion and went looking for "data". Personal income spiked briefly and fell back down back to its linear trajectory.
> The fact that it took a whole year for people to understand the root cause is quite amazing, given that we have this very obvious data. But there was a vested interest in it being a supply side issue, so I'm not surprised
Looks like there is vested interested everywhere.
In my experience, people who see the "obvious" in a very complicated issue are agenda driven people with vested interests. Also, my comment was in relation to consumption and inflation. My point was that you can't necessarily see inflation in consumption because you can't tell if the increase in consumption was due to inflation or more purchases. Something you completely ignored.
> The rest of the economy is primarily services - which have very little impact from the supply of screws & toasters coming out of China going down.
That feels intuitively correct to me, but I’d like to see some data. For example the shampoos and ointments and such used in hair and nail salons all comes from China. OTOH essentially all restaurant food is domestic.
> "services" in the US are healthcare, food services, technology, and financial services.
with the exception of financial services, all of the other services you listed require commodity materials to work - things like food services require utensils, plates, napkins, not to mention the food. Healthcare has a lot of materials (not just the direct, but indirect materials like reagents for labs and diagnostics) which often come from overseas rather than locally produced.
As for technology, it's such a broad area that i dont know what to say about it but at least for compute, there's a lot of shortages of commodity hardware recently.
Not saying that all of the shrinkage and inflation is caused by the supply chain slowdown from china, but a large percentage of it is. The rest is from labour shortages.
> The fact the Fed is even contemplating a rate hike tells me they're misreading what's going on.
Irrespective of the source, the Fed rate hike (well, and QT, which it is expected to also deploy) is the only tool it has available to deal with inflation, which is still, for now, the bigger problem from the perspective of it's mandate.
The fact that (possibly transitory if policy were neutral) slowdown is occurring while the Fed is taking that action, though, means it is especially critical for Congress to take fiscal action to fine tune the impacts or there is a very high risk of recession occurring before inflation is controlled, producing a period of stagflation which is both tremendously painful across the economy and very difficult to escape from.
The problem is Congress is basically asleep at the switch on economic policy.
> the Fed rate hike (well, and QT, which it is expected to also deploy) is the only tool it has available to deal with inflation
And the signalling of aggressive hiking, though not all at once, is very important. By saying they will do it and then following through they can change course in a few months depending on conditions.
One of the important lessons from the 1970s was but unfortunately positive feedback loop baked into inflation escalators all based on expectations plus the only way to break the cycle was Carter to recruit Voelker to basically shut things down to damn that curve. Since then the Fed has used an interesting combination of oracular opacity alternating with clarity to try to prevent a repeat of the 1970s situation.
Congress dumped boatloads of money into the economy over the past two years and failed to provide oversight.
Everyone is pointing at the Fed for causing inflation and ignoring the fact that Congress gave business owners five-to-seven figure payouts in straight cash. You can find out how much businesses around you received from the PPP, and there's no shortage of small companies who received a few hundred grand in aid.
Imagine what you'd do with a $250k check from the government.
I think there is more than one reason for the current inflation. The supply crunch is one factor. The stimulus is another. In particular the Biden stimulus is considerably different than the Trump stimulus in that it gave the money to people who would spend it on goods and services instead of people who would just stuff it into their market accounts. This caused a demand spike right at a time when supply was unusually constrained.
Unfortunately as the stimulus was known to be a short term thing this did not lead to people starting factories to make products to sell. By the time they got it running the stimulus would run out and they would be left holding the bag.
That's one thing that India got right in response to Covid. The primary focus of the stimulus to alleviate the supply side constraints[1][2].
Many were questioning the approach of focusing on supply side, making small changes, observing and reacting instead of a big mega stimulus the likes of USA did. Good to see some merit in India.
I think India’s position was much more fiscally constrained to even consider a demand-side stimulus. I think a means-tested demand-side stimulus was still warranted given the number of people and industries who lost their livelihood because of multiple shutdowns.
Yes it's the perfect storm for economic theories... increases in the money supply and actual product shortages both causing inflation at the same time.
Meanwhile increasing interest rates are in a nasty intersection with banks and other lenders stuck with low interest 30 year loans on their books, which make them very vulnerable to any new lenders.
Not usually in the bank's case - we have to hope - and if they are hopefully the various buffers against duration mismatches are sufficient - but then again this was the reason why Northern Rock and a bunch of other lenders went under in the 2008 crash.
This is more true in Europe than the US. Most of the inflation there is due to (1) Increases in the price of energy and (2) Supply chain issues.
While those are also true in the US, much of the inflation in the US is due to wage increases (something like 40-50% of the inflation I believe). These are likely the result of a number of factors including the US having outsized stimulus relative to other developed countries (especially the fiscal stimulus).
So it is more reasonable for the Fed to consider tightening. And for the Europeans to be significantly slower on their tightening. Thus, what you are seeing in the currency markets where the EUR/USD is decreasing.
I'm pretty sure that's why they waited so long to raise interests, as they thought supply chain issue would be resolved and all will come back to normal.
Although that doesn't really explain the inflation of asset values.
Isn't that a tautology? In a basket of goods there's almost certainly going to be something that's inflating above average. That means you'll always have some sector (that's inflating faster than general inflation) to blame for "greed".
If inflation is 8.5 percent and the seed company raises prices by 9 percent (rounding up cause they arent really sure what inflation actually is), the fertilizer company goes up 9 percent, the tractor parts goes up even more (cause supply chain shortages), and the harvest contractors rates have to go up 9 percent, and the distribution that gets the harvest to the producer goes up 9 percent, what does the final price look like? Has there been analysis like that?
A lot of commodity inputs into food production are up way more than 8.5% (e.g., corn, wheat). And a lot of the farmers inputs (e.g., energy, fertilizer) are up more than 8.5%.
The 8.5% is a weighted, blended average of a lot of things.
So it could be reasonable that if you were selling bread, that the price would need to go up more than 8.5%.
The question is whether their profit margins are up? I don't know.
>The question is whether their profit margins are up? I don't know.
I would naturally expect companies to hold larger profit margins when there is instability. Setting up a business with low profit margin in a volatile business environment would be like building a house on a concrete slab right next to a river that often overflows its banks.
Actually considering the price of wheat from price of bread even 10% increase probably isn't too much. But that doesn't mean there hasn't be similar cost increases in other parts of the chain from commercial bakeries to store and transport.
Wait. Doesn't overheating produce exactly the same result? Supplies get constrained because demand went up. So now, demand stays stable and supplies are reduced. The gap is the same, isn't it?
This is what I think too, and I think it's going to lead to an unnecessary recession. Eventually, hitting the economy on the head with a large enough brick will drive demand down enough that even supply chain issues won't contribute to inflation, but that's an economy with such stagnant demand that it's definitely a recessed one.
> Isn't inflation mostly a necessity of printing extraordinary amounts of dollars and euros during covid?
Given that other rounds of QE did not produce inflation, no, it's not a “necessity” of that. Money supply is a factor in inflation vs deflation, but do are lots of other things.
Or is it? we really have very few experiments to determine this. War can certainly cause both inflation, and deflation. While monetary policy can adapt to an extent, it's unclear that it's the primary driver of inflation in all circumstances.
Inflation should take care of demand. A constrained supply is going to move the demand curve to higher prices - which we're seeing. The higher prices will bring demand in alignment with supply.
Traditionally, to deal with the problem of constrained supply you would lower rates to make more capital available in order to create more supply-producing assets. I don't think the Fed should lower rates in this situation because we all know that building more factories won't solve the supply chain issues due to the pandemic. However, we need to balance that against investing more in automation since having fewer workers due to the pandemic.
With everything opening back up and experiencing a labor shortage it would be very difficult to justify any further stimulus monies. I don't think we have to worry about that.
Economists expected a rise in inflation due to stimulus spending in 2020 - that had already been factored in to their forecasts. What has surprised them is the rate of inflation is higher than expected. I'm arguing the reason they're surprised is they were only considering financial policy and not also including the effects of constrained supply - which is also why they also missed forecasting a shrinking economy.
Hayek’s greatest contribution to economics was to show that society is far more complex than we realize, with little pieces of knowledge dispersed among millions of individuals. “The curious task of economics,” he famously wrote in “The Fatal Conceit,” which he published in 1988, “is to demonstrate to men how little they really know about what they imagine they can design.”
> ...because we all know that building more factories won't solve the supply chain issues due to the pandemic.
Wouldn't it be wise to start building more factories so that a supply chain disruption in one area doesn't cause such painful shortfalls in supply on a global scale? It seems like a China-free supply chain would be making bank right now. I guess you'd have to weigh the time to ramp that up versus the odds of China locking down severely again. Still, I would hope that a lasting consequence of this would be a diversification of supply chains to mitigate this kind of problem in the future.
Shows just how sensitive our economy is to small interest rate fluctuations, having lived around the zero bound for over a decade. We've encouraged everyone to lever out as far as possible while at the same time making real production more and more difficult (or, during the early lock downs, impossible) and, well, the long run is here.
Keynes was right: he's dead. Unfortunately, we, and our children, are not.
> We've encouraged everyone to lever out as far as possible
Household debt to GDP has gone down since the low interest rate environment kicked off in 2010. Same is true for household debt as a percentage of personal income. Although I will note that its debt payments, not absolute amount of debt and obviously lower rates lower the interest portion of debt payments.
I agree there is something troubling going on but it's not a personal debt crisis
Could also be an artifact of a global economy based around the dollar.
Quoting Asimov's description of Trantor in Foundation.
> This enormous population was devoted almost entirely to the administrative necessities of Empire, and found themselves to be few for the complications of the task.
Let's not forget COVID is not done yet. We've had two years of restrictions and now it seems like folks are behaving as if it's over. Mutations are propagating and yet most people are out and about without masks and the dialog around vaccines has all but dried up.
The ongoing confusion about what this disease's risk factor is worrisome. First I think people have much more distrust in science and government. There is still a deep divide amongst the population and I am concerned about how we will handle another wave of restrictions whilst the economy buckles and a global war is on the horizon.
COVID is endemic, which is functionally equivalent to 'over'. Just as there are bad flu seasons, there will likely be bad COVID seasons, but overall Africa has blessed the whole world with a relatively benign and incredibly infectious variant that keeps immune systems attuned without crashing. We have overwhelming returned to normal behavior around illness, which preferentially propagates mild pathogens by only stranding really sick people at home (where they don't spread things), while the rest of us go around unknowingly sharing our mildly inconvenient Omicron and omicron++ with one another.
I'm out and about without wearing a mask because the numbers of deaths per day due to covid in my state has dropped down to single digit numbers and the number of current cases is currently 1/30 of where it was at it's peak. Should those numbers start going back up, I'll start taking more precautions. We have to start living life again where we are able to or a series of economic woes will become the new normal instead of a single correction due to the pandemic.
In my neck of the woods, there would need to be a serious new threat to motivate people back into school closings and lockdowns. Heck, we're still below 60% fully vaccinated and only 30% have received any boosters. My states's population is done with COVID, even if COVID isn't done with us.
That said, SARS-CoV-2 is endemic now, with known animal reservoirs. We're not going to stop it with NPIs anymore.
Could that also be because people are living paycheck to paycheck and not buying things like houses and cars anymore?
Relatedly: a decrease in debt is exactly what I would expect from an Uberized economy where nobody owns anything anymore. I’m not sure this is such a good measure of economic health.
Stated differently: a small amount of debt is an indication that people are investing in things. That’s usually a good sign.
> Could that also be because people are living paycheck to paycheck and not buying things like houses and cars anymore?
No. New car sales are currently bottlenecked by supply chain issues, not demand. Housing sale demand is dropping, but still very solid compared to inventory.
At some point, this supply restriction becomes inflationary. If you can buy a new car and resell it a month later for more than you paid, the MSRP is below demand.
Since consumers react poorly to price increases, this is also coupled by reduction in quality or service.
I really don’t want to sound calloused because caring for the weak and the elderly is a pillar of civilizations, but my impression was that the bulk of “excess deaths” were not among the most economically active populations. I could just as easily see this having the opposite economic effect: reducing the burden on the state for such things as retirement and Medicaid.
I've seen this thrown about and have to take this with a grain of salt because even the infirmed/elderly/retired are still part of the economy. They consume food and resources, albeit they aren't out buying durable goods and new cars, but they are paying rent/mortgage in their retirement communities, eating food, buying CPGs* (some of which fully rely on an older population).
I'll take the example of my two relatives that died from COVID, neither had underlying conditions: One was a 65 yo former airline mechanic on the verge of retirement with a McMansion in Houston area, he spent a lot of money keeping up that lifestyle, and when he passed my aunt moved back to a small town, and downsized, considerably shrinking her spending. They had planned to spend the next 10 years in an RV that is no longer going to happen. The other is my 46 yo cousin with 4 kids and was a seven figure earner in sales living in Kansas City area. Again, huge amount of spend and now his wife is getting by with a massively reduced house and budget.
* Did the hard candy industry take a nose-dive? Should I be shorting Werther's Original stock?
3/4 of the million US deaths attributed to COVID-19 were age ~64 and above.
Only 1 in 20 deaths attributed to COVID-19 were between 0 and ~49.
Abstract models of "productivity" vs age peak close to where the covid death hockey stick turns upwards.
The 50-60 age bracket is where the big losses are, losing 100k-200k people near their prime and 5-15 years of remaining economic contributions. Younger populations saw much fewer losses, older populations mostly left the workforce.
> caring for the weak and the elderly is a pillar of civilizations
I'm not sure that's true. Many civilizations, up to and including now, have the cultural practice of the weak and elderly destroying themselves (or being destroyed) when they become a burden on their relative/society. The most obvious example being the concept of east asian (Korean/Japanese) elders "going to the mountain to die".
This is absurd. Eastern civilizations most certainly care for their weak, sick and elderly. Removing oneself from society by going up the proverbial mountain does not contradict this.
You have to look very hard for a successful civilization that doesn't do this. Sparta, perhaps?
(This is also not really the point of the original comment.)
It's not the point but I just thought it's useful to bring up. I disagree with you about your statement that civilizations must have this property (a pillar) you claim they have. All kind of civilizations didn't/don't care anywhere near the way it's done in judeo-christian derived civilizations, and they were/are still civilizations. If I were you, I'd be open to the idea that this is perhaps not an universal truth as you make it out to be. In fact this topic is specifically brought up quite early in "Our Oriental Heritage, The Story of Civilization, Volume 1" by Will Durant.
A couple of things. First, it isn't just deaths, a lot of people were hospitalized and/or have long-term effects because of contracting Covid. This tends to be in younger populations (although not young), because older populations tend to be the ones that just die.
Second, a lot of people retired well before they usually would to stay out of the path of covid or covid-induced craziness. This is a big part of the school bus driver shortage, for instance. A lot of older people drove school buses for a bit of extra cash, and to be around kids. Wisely, a lot of them decided to stop doing that, and might not come back for a while.
So it isn't just deaths that are the reason for a reduced working population, although that has an impact, too.
> I really don’t want to sound calloused because caring for the weak and the elderly is a pillar of civilizations, but my impression was that the bulk of “excess deaths” were not among the most economically active populations
Really? The elderly may not be likely to work, but they still consume (they consume lots of medical services in proportion to their numbers, for instance.)
> reducing the burden on the state for such things as retirement and Medicaid.
“the burden on the state for such things as ... Medicaid” is a chunk of economic activity. With taxes the same and that spending gone, alone, the economy shrinks.
"They consume medical care" sounds a lot like the broken window fallacy: If you smash a bunch of windows, you're increasing GDP and creating jobs when they get repaired.
To a ruthless cold-blooded optimizer, deleting the elderly should be good for the economy because you save on their maintenance costs and their resources get redistributed to more active investors. This might decrease GDP, but that only reflects on GDP being a problematic metric.
I guess it's true that smashing windows or providing medical care to the elderly would increase the "size of the economy", because it adds entries to the implicit "market's bid/ask order book". And you could measure the size of the economy by the size of that data structure.
> To a ruthless cold-blooded optimizer, deleting the elderly should be good for the economy because you save on their maintenance costs and their resources get redistributed to more active investors. This might decrease GDP
Right, and the upthread discussion was about GDP, not some abstract unspecified quality of the economy.
GDP per capita would be up, the actual best metric for quality of life (mostly, ignoring military defense and informal trade more likely in developing countries)
The excess death were among active demographics too. And in addition, the long term covid was affecting active demographics too. And also, the parents who had to drop out of workforce due to childcare being much more difficult were also active demographic too.
Actually as callous as it sounds extra deaths are good for the economy.
More dead people means fewer competitors for all resources except labor. What that means is fewer people need stuff and there are fewer people to make stuff, so the stuff the dead people had is easy to obtain for the living while employers have to pay more for labor because there is less of it.
As evidence the black plague was considered one of the major events that ended the dark ages and the oppressions (relatively speaking) of the peasant class. Suddenly lord's needed to start giving their peasants rights and things to do or risk losing them to a lord that would give them those things.
It's horrible and callous but it is also a fact, especially when you consider many of those deaths were not among the most productive segments of society.
This sounds almost like some version of the broken window fallacy. But there is no way that ~1 million dead Americans from COVID has helped this country economically. Supply chains have been hurt by COVID. Hospitalizations means unproductive workers. Deaths means unproductive workers. We are not thriving at all right now.
A reduction in people in the economy is good for some subsegments but for the economy as a whole, no
Think about the networks effects of an economy. An economy of one person has a size of zero units. An economy of two people has a size of one unit, an economy of n people has a max size of n^2 units, or more really nlogn, when you take into account the Gaussian distribution of value between each node of the network.
I'm not sure what you're suggesting. What was the mechanism by which talk of higher rates reduced GDP? Consumer and business spending both increased. Personal consumption expenditures increased at 2.7%, and business investment increased at 2.1%.
The big drag in the report is from inventories and trade, which are being impacted by pandemic-related supply chain issues and geopolitics.
All of the predictions ahead of this number and the article itself were predicting this based on inventory surpluses that had been built up in the previous 2 quarters. That seems a more directly attributable cause than fears of interest rate increases. In fact, if you anticipate interest rate increases it makes more sense to bring spending forward not to delay it.
It was already priced in. On jan 3 the markets were predicting a 57.12% chance of interest rate increase to 25-50bp, 3.6% chance of increasing to 50-75bp.
It trickles down. If the banks knew the interest rates are going to rise at the next fed meeting, they're not going to wait until the announcement to raise their rates. That means the effect of a rate increase is felt way ahead of it being announced.
> they're not going to wait until the announcement to raise their rates
they will do what market will allow them to do. One bank can raise rates, but others won't, they will secure pre-hike loans, and win customers because of lower rates.
Also, I am not sure if commenter above referred on loan rates market or maybe stock market..
That's what you get for not listening to Keynes and Silvio Gesell. Instead of introducing a negative interest rate on cash to prevent people from accumulating capital in a low growth environment we are forced to play the endless debt game to artificially increase the return on capital to satisfy liquidity preference.
If people stop borrowing, the interest rate on existing financial capital would fall way below 0% but since cash has a 0% interest rate, it's the working population that get screwed over during deflation through involuntary unemployment (also known as a economic depression).
Eternal money is a farce, it is inherently unstable and can't exist over the long term which is why it constantly collapses and all you can do is delay the collapse as if the economy was a roguelite where you are supposed to get as much progress inbetween runs.
Demurrage currencies allow the economy to represent negative interest rates and therefore eliminate the need for endless borrowing and inflation while simultaneously achieving full employment as predicted by Say's Law, decentralization of jobs, reducing wealth inequality and rewarding long term thinking.
I, for one, consider myself fortunate that I'm not dead. :)
I guess you're saying that Keynesian doesn't work all that well when growth in supply is constrained. This doesn't seem necessarily to be the case, to the extent that people can be convinced to buy things that aren't in short supply? Demand for many essentials is inelastic, though.
How much of that was due to inflation? Remember these numbers are nominal GDP. So if price levels doubled and nothing else changed, GDP would more or less double as consumption went up due to higher prices.
The worrying thing is there are no monetary levers available without the risk of higher inflation. And if people don't think GDP matters, its actually a very good indicator of all sorts of well being measures such as unemployment and premature deaths among other things
GDP is always reported as "Real GDP" with the inflation taken out. In fact the need to survey inflation to calculate GDP is the primary motivator for surveying inflation in the first place. Surveying for inflation is a ton of work, but its worth it to know GDP.
I believe there are many monetary levers that can be pulled at any time. They all revolve around government holding back business. For example, restrictions on building houses. Government needs to get out of the way of productive people.
“The report is more an illustration of how GDP calculations tend to be volatile from quarter to quarter, not necessarily indicating weakness in the economy or a sign of recession. The contraction was due to a jump in imports and a drop in exports, coupled with a slower buildup of businesses’ stockpiles. On a year-over-year basis, the economy grew 3.6%.
Together, trade and inventories subtracted about 4 percentage points from headline growth. Government spending shrank, also weighing on GDP. But real final sales to domestic purchasers, a measure of underlying demand that strips out the trade and inventories components, accelerated to a 2.6% annualized rate.“ [1]
In case you’re wondering why the market is blowing this off while the Wall Street Journal and, I presume, CNBC, are blowing it up.
I don't think the bloomberg explanation is right, because the net effect of imports on GDP is zero.
Assume you import $1 of goods, which are consumed. Then the GDP reflects $1 consumption (either private or government) minus $1 imports, for a net zero.
The goods may not be consumed immediately, in which case GDP counts $1 inventories minus $1 imports, still net zero.
The thing to remember is that GDP is domestic product, so anything produced abroad is irrelevant.
Correct [1]. Net exports is a non-zero component of GDP, but "the imports variable (M) correct[s] for the value of imports that have already been counted as personal consumption (C), gross private investment (I), or government purchases (G)" [2].
Inventories are rising. I'm an assembly line worker and our warehouses are getting stuffed. People are being sent home because we got too much product already. We make dryers. I can assume that the working class would put off buying dryers because more money has to go into rent and food. Nearly a fifth of my income goes to food now and about a quarter will go to rent.
Given that the economy grew 6.9% previous quarter, over the past two quarters, the US economy is growing at an annual rate of 5.5% - which is very high.
For those who are wondering, the correct calculation is (1 + 6.9% / 4) × (1 - 1.4% / 4), or ~1.37%. Economy started with 100. It grew at 6.9%, or 1.725% in the quarter, to 101.725. It then shrunk 1.4% annualised, or 0.35%, to 101.37. (Edited to account for annualisation.)
No. These are annual rates. The actual change in the fourth quarter was approximately 6.9/4 = 1.725% and the actual change in the first quarter was approximately -1.4/4 = -0.35%, for a total change of approximately 1.725-0.35=1.375% in the two quarters. That's an annual rate of approximately 1.375*2 = 2.75%.
(All calculations approximate, but close given that the percentages are all fairly small.)
Always wondering exactly what people mean when they talk of "civil unrest", and who and how will it start. Do the various riots in 2020 America or the Jan 6 storming of the capitol count?
On the other hand, Elon Musk Twitter purchase: $44bn. There's plenty of money out there still.
I think it's unlikely that merely raising rates will do anything, for two reasons: firstly there's a real need to do some fiscal policy as well, and secondly this inflation is being driven by real shortages not just the bidding up of goods. Chip shortages, fossil fuel shortages due to cutting Russia off the world market, food shortages, and the war in Europe's sixth-largest country destroying a lot of production capacity. Not to mention ongoing COVID costs.
> Do the various riots in 2020 America or the Jan 6 storming of the capitol count?
They do. So does Occupy Wall Street. It's actually been a little over a decade of people of many political stripes having the general impression that there's a significant disconnect between the will of the elected officials and the will of the people. People disagree about root causes and remedies.
>Always wondering exactly what people mean when they talk of "civil unrest", and who and how will it start. Do the various riots in 2020 America or the Jan 6 storming of the capitol count?
A whole lotta people, mostly outside the HN demographics, are real pissed off about a decade of public policy that has amounted to making their lives worse and worse at every juncture and now it's finally getting to the point where ends are hard to meet.
I am not dumb enough to try to make specific predictions but that's a pretty substantial powder keg.
It's been a lot longer than a decade. Reagan kicked off the looting of the middle-class in the 80s, and both parties officially adopted that policy by the mid-90s, almost 30 years ago. It takes a long time to drive an airplane as big as the US into the ground, but we're finally starting to see the tires hitting the ground now.
>A whole lotta people, mostly outside the HN demographics, are real pissed off about a decade of public policy that has amounted to making their lives worse and worse at every juncture and now it's finally getting to the point where ends are hard to meet.
They had four years under Trump threatening the city-dwellers and neo-liberals, a literal armed rioting mob, sympathy within the government and law enforcement and a gallows in front of the Capitol on Jan. 6th. They had the half of the country with all of the guns and all of the dreams of patriotic revolutionary glory convinced the election was being stolen at that moment by Chinese communists and the very party they blamed for all of their problems.
If they couldn't make it happen then, when all of the stars were aligned and the winds of populist ferver were at their backs, I don't think anything more than an occasional riot is going to happen in the future.
>If they couldn't make it happen then, when all of the stars were aligned and the winds of populist ferver were at their backs, I don't think anything more than an occasional riot is going to happen in the future.
Your average person wasn't being crushed by their rent in '08 and wasn't over leveraged on consumer debt in the 70s and 80s. Those are just two factors that are different this time around.
The information and media landscape is also very different now in ways that make disseminating "be a good little boy and everything will be all right" messages far less effective and the institutions such messages would come are more reputationally bankrupt than ever.
Sure, there's "plenty of money out there", but so much of it is held by the super-wealthy that the rest of us might as well be a rounding error. (Disclaimer: numbers not intended to be literal)
Increasingly, money and power are concentrating at the top, with people who are also increasingly insulated from the negative consequences of....well, all the bad stuff that's happening. That's a recipe for things spiraling out of control.
Look at the luxury stores being regularly robbed in cities like LA. Not exactly “civil”, but it’s an inevitable consequence of inequality: rich people can’t easily enjoy their nice things.
> Do the various riots in 2020 America or the Jan 6 storming of the capitol count?
Is there any reason those would not count as "civil unrest"? And non-rioting protesters of whom there was plenty count as civil unrest too.
> On the other hand, Elon Musk Twitter purchase: $44bn. There's plenty of money out there still.
Not sure what that has to do with civil unrests. Some people being super rich does not imply all that much benefit for the other people in the same country.
I haven't been able to comment on HN since my controversial post which mentions civil unrest. No doubt your comment is related? I'll eventually be able to post this response.
>Always wondering exactly what people mean when they talk of "civil unrest", and who and how will it start. Do the various riots in 2020 America or the Jan 6 storming of the capitol count?
It doesn't take a crystal ball to predict this will continue. Occupy wallstreet and teaparty stuff started 10 years ago and the USA hasn't really stopped since. We can go into reasoning or causes but that's not important.
The bigger reality is what's next. We have some pretty seriously bad economic numbers going down. High inflation, strong possibility of a recession, very probably food security issues.
When you mix civil unrest and riots with hunger. It's going to be bad. A civil war isn't inevitable, though if i'm predicting correctly, it wont be democrat vs republican or north vs south.
>I think it's unlikely that merely raising rates will do anything, for two reasons: firstly there's a real need to do some fiscal policy as well, and secondly this inflation is being driven by real shortages not just the bidding up of goods. Chip shortages, fossil fuel shortages due to cutting Russia off the world market, food shortages, and the war in Europe's sixth-largest country destroying a lot of production capacity. Not to mention ongoing COVID costs.
May 4th, I'm expecting a huge rate increase. Probably headed well over 1% and nothing you or I say matters. Supply vs demand inflation is certainly debatable but won't change their course of action.
Something we should seriously be looking into is massive seeding effort for lakes. Get tons of fish growing this year. Get fishing boats out into the oceans pulling fish in. Major culling and harvesting of sharks.
Effectively the plan would be to produce significant more food than necessary and proactively deal with consequences like overfishing.
By eliminating this problem, we may eliminate the possibility of the unrest/riots becoming something more.
> Something we should seriously be looking into is massive seeding effort for lakes. Get tons of fish growing this year. Get fishing boats out into the oceans pulling fish in. Major culling and harvesting of sharks.
Accelerate the destruction of the fish ecosystem? It's already being run at capacity, ditching quotas will give you more in year 1 and a total disaster in subsequent years. Most sharks are endangered species; which do you want to make extinct for a political point?
>Accelerate the destruction of the fish ecosystem? It's already being run at capacity, ditching quotas will give you more in year 1 and a total disaster in subsequent years. Most sharks are endangered species; which do you want to make extinct for a political point?
I know the great lakes very well. We are maybe around 5% capacity there, possibly far less. I believe your confusion might be that you misunderstood when I said massive seeding effort.
Oceans are less than 1% capacity. I couldn't even fathom to tell you how many zeros are in that small fraction of 1 percent.
In terms of sharks, great whites, tigers, bulls, hammerheads. All are 'vulnerable' or less but certainly not endangered. Yes there's a handful of endangered shark species but none of those would be your typically targeted types.
There's a lot of talk about high inflation rates, and what the Fed has to do to combat them, including causing a recession.
It's true that inflation is high, but the data shows us that most of this is being caused by factors not related to high economic demand: it's energy and food.
Core CPI also increased, but it's tempered considerably: the annualized rate of the latest month over month core CPI change is now under 4% (3.9%), having fallen from an annualized m/m rate of change of 6.5-7.5% a few months ago. 3.9% is a little higher than our target of 2%, but not as alarming as the headline rate of total CPI.
Everyone made fun of the claims of "transitory" inflation from late last year, but it's looking like -- except for energy and food, which are being driven by international events -- the drivers of base inflation really were one-off events, and are not continuing at the same rate. For example, international freight increased dramatically, from around $3,500 for a 40HC from Ningbo to LA to $18-20k, but it has since stabilized to around $15k - and inflation is a rate of change, so in that area we are not seeing a continued paced increase in cost. It's just stayed expensive.
Of course, energy and food matter, a lot. Food prices matter more than the price of, say, imported lawn chairs. But it's useful to ask why inflation is happening. Is it because our demand is too high and there's competition for resources? Then we need to slow down the economy to reduce competition for resources. That's the Fed's job. Or is it because there's a sudden reduction in available global oil and grain supply? Then it's not clear that causing a hard recession is going to fix it. In that case, we need to fix the decrease in supply. And in our current case, that's not easy: much of this increase is being driven by a misinformed dictator of a nuclear superpower hell-bent on escalating a regional war, and this type of problem is not one the Fed is well equipped to deal with.
What we're really seeing is supply-side driven inflation. The Fed should continue to drive core inflation back down to its target level of 2-2.5%, but we are already seeing success here. The real question is what we do about energy and food, and it's not clear the Fed's actions are going to solve that problem.
I hate this title. It makes it seem to people that our economy shrank when in fact, it just grew bigger less fast. To me its just as egregious as headlines saying that inflation in April is 7% or whatever, leading the less informed to think that inflation grew by 7% in a single month, not on an annual basis.
First words of article: "The U.S. economy shrank at a 1.4% annual rate in the first quarter". That's an actual shrinkage, not a lower rate of growth.
"Inflation in April was 7%" is indeed a frequent misleading/ambiguous phrase. They should say, "consumer prices rose in April at a 7% annual rate", or say "consumer prices increased by 0.6% in April", though constant incorrect usage might lead people to misinterpret the latter.
I think you are living too deep in your fears - lots of doom and gloom here. There isn't anything relative to a food shortage about to happen in the US and certainly we aren't on the cusp of a civil war. DC is actually less acrimonious than it was.
The equity market is not the economy and a lot of the financial websites make money on hyping up the latest quarterly numbers. Are there concerns here? Yes, there always are - is the world about to end from this? Absolutely not.
It's kind of funny how the worst things imaginable happened and everything is still fine. We literally just need to defend Ukraine and wait things out.
What are you talking about? Biden is going to use nuclear weapons against US citizens? I assure you, there is no food shortage in the United States. The S&P500 went down 15%, calm down, it'll go back up.
> Obviously Biden threatened to nuke insurrectionists.
That is an insane takeaway from the clip you shared. No reasonable person would listen to those words and take it as a direct threat to bomb insurrectionists.
I think you are a troll.
And? Do you think Americans are willing to give up everything they have and start warring with each other? Because a civil war will mean exactly that. You think inflation is bad, civil war would crater the economy like no modern-American has ever experienced.
Americans don’t even want to give up their private healthcare, and y’all talking about civil war.
>And? Do you think Americans are willing to give up everything they have and start warring with each other? Because a civil war will mean exactly that. You think inflation is bad, civil war would crater the economy like no modern-American has ever experienced.
I dont see civil war as an inevitability. Civil unrest seems inevitable. Then again not exactly much of a prediction there given ongoing civil unrest.
Also I don't believe civil war is rational as you project it to be.
Imagine republicans take over in midterms. Speaker of the house becomes Trump. They then impeach and remove biden and harris making Trump president again. What happens?
Imagine democrats clean sweep the election and they were boarding up windows again. Blue wave... what happens?
> They then impeach and remove biden and harris making Trump president again. What happens?
The GOP needs a 2/3 senate-majority to remove Biden, which won't happen. Best they can do is impeach, but not remove.
What happens in these cases? More of the same bullshit. Yes, there will probably be some form of civil unrest. But not war.
I agree with you that civil war isn't rational, but it does require enough people being onboard with it. I think when push comes to shove, most people realize that they want nothing to do with it. Just like the riots and protests we saw, most people dip out when shit hits the fan. The people that stay are the extremists.
My personal opinion is that what we are seeing is the extremists of both parties. The vast majority of people might have leanings one way or another, but they do not subscribe to most of the ideas pushed by the extreme ends of their parties. They are mostly just tired of the bickering and ineffectiveness of our government.
I think you’re confusing people’s online rhetoric with their IRL interactions. If there was no civil war after 2008, there sure as hell won’t be one this time when people are doing better by most metrics.
American’s financial situations are actually quite good right now. Everybody is just anxious as fuck, for many reasons.
Again, that’s not the first time that’s happened. We’ve had worse and it didn’t lead to civil war.
Think about what a civil war would entail. It is literally war between neighbors. You really think Americans are ready to kill each other en masse and give up everything they have, for what?
It’s easy to make proclamations about some abstract idea of “civil war” but the reality is that most Americans are doing relatively well and would not stake their lives on something that doesn’t even promise a better outcome.
I think the actions taken in 2008 delayed the effects until... now.
All the insane stuff that's happening and will happen is the hangover of not having a depression in 2008 and delaying it by printing money and propping up banks.
Um...that sounds like the words of someone in a bubble.
People are not doing that well right now, and there's a lot of anger between the people who are doing the worst, and the people who are doing fine and saying "America's financial situations are actually quite good right now."
I am an immigrant and have a large family within a community that would be classified as "lower-income" and I'm pretty in-tune with their perspective. I support my family financially now, and I will be supporting my parents in their retirement. I grew up poor and I understand the anxiety and stress that comes with it. I just recently spoke with my grandmother who is on a fixed income and is having trouble paying for basic necessities because of the recent inflation. I'm not blind to these struggles.
I'm not saying everybody is doing great. I'm saying that if you look at the stats of average American's personal finances, they are in pretty good shape. That doesn't mean there isn't a decent chunk of the population that is struggling. That doesn't mean there isn't a housing crisis across the country. That doesn't mean inflation isn't hitting these lower-income groups harder.
These issues are very real and are a major part of what is making everyone anxious. But in the context of the conversation, people are not getting ready to war with each other.
The level of food shortage you're talking about is extreme and very unlikely, excepting an extremely unlikely series of major disasters. It would take a lot to overcome people's inertia to action and by that stage of your theoretical disaster they will be too focused on immediate needs of food, energy & safety for them and their family to consider wider actions.
The food scarcity we have experienced in the pandemic is more like people wondering why there are no peppers or chicken this week. But there is plenty of other food to eat.
I think any issues we have will be people not having their first option of food, not going hungry.
I had a solid weeklong period here where no store within 15 miles had any fresh dairy products, meats, produce other than herbs, or bulk grains (flour, rice, pasta, etc).
Just to flesh out my experience. In the UK we defiantly had some things missing from shelves, but it would be running out of strawberry cereal bars and having to have raspberry ones instead. Aside from some short term (about 2 weeks) issues with everyone buying all the loo roll, there wasn't anything that couldn't be replaced.
Not where you would think: so cal. Now, it wasn't this bad everywhere in so cal -- for whatever reason certain areas got way more wrecked than others. I was still able to get food during this whole time, just not by going to a market within 15 miles of my house. This was clearly a distribution shortage not a real food shortage.
I drove about 35 miles to my parents' neighborhood and everything looked picked-over, but there was plenty of food. For example, I wanted pasta and sauce. I found pasta and sauce, but had to get a weird pasta shape and a more unusual/fancy sauce to find something in stock. That trip, I found some version of everything I needed, except that rice and flour could not be had. I wanted some produce, and I found some. Lettuce was gone, so were bananas and oranges, but I was able to get enough things that I felt comfortable I would still eat. Meat was a bigger challenge -- the regular market had only hamburger and bacon left (but the Costco in my parents' neighborhood still had plenty of all of the expensive meats and were only out-of-stock on the affordable stuff. If you wanted $20+/lb prime ribeye steaks, for example, they had plenty. Not huge mountains like usual, but plenty)
And restaurants (that didn't close) were fine at that time even in my neighborhood (they ran low at a different time, when local markets were fine). My local pizza place did a bigger business selling ziploc bags of flour, plastic beverage cups of milk and cream, and to-go containers full of eggs and butter than they did pizza delivery for a solid two months. (and commercial tissues and TP by the roll). These ingredients were all readily obtainable in commercial-sized units from commercial suppliers.
Still, I produced some (really bad) footage of completely empty markets, and, as a pretty rich guy in a pretty rich area, felt worried about whether I would be able to keep eating for the first time in my life. (I'll never again not keep at least a few shelves' worth of food in the house at all times)
Arab spring was instigated using social media manipulation by outside actors.
Look at Russia, they understood the threat of social media and thwarted it early on, and it's calm now despite huge economical issues.
The same will happen in US, no doom and gloom. Issues can be blamed on Putin and Ukraine not being able to produce enough due to Russian invasion.
Having a well-functioning democracy is probably the best insulation against this. You don't need a civil war when you can vote for a different government.
>"You don't need a civil war when you can vote for a different government."
This is one of those things that works perfectly in principle but does not seem to work in practice. I've lived in solidly red or blue districts all my life and in only one election did the party representation switch to a different team. That was only because blue team had two top-tier names splitting the vote which allowed a red team representative to win the special election. They were defeated in the next general election by a landslide.
Furthermore, I also see Congress as having a single digit to low teen approval rating as evidence that being unhappy with one's government does not correlate with actually getting "a different government". Without getting into a long drawn out discussion of why this is the case, I nevertheless think that voting is not the solution it is touted to be.
Edit: I still vote regularly and I encourage others to do so as well. It's not a totally hopeless situation but people should have realistic expectations and expect to be disappointed.
The US has a lot of problems. For one thing, we have a Presidential system in which control of Congress can be held by a different party than the Presidency, which leads to a situation where there are two "plausibly legitimate" elected governments that are in conflict. In many other countries this has resulted in coups and instability (usually in favor of unilateral executive power.) The US is unique in that we're basically the only country that has thrived under this system. For what it's worth, the alternative is a Parliamentary system where the legislature elects the executive.
The US also has a lot of gerrymandering of Congressional districts, and far too few of them (don't get me started on the ridiculous Senate.) Plus it has lots of minority veto points like the filibuster requiring 60 votes, the electoral college, and the Supreme Court. Some of these exist "by design" and can be beneficial, but they also present the possibility of legitimacy concerns.
Gerrymandering will never stop grinding on me. Districts should be drawn to make races artificially competitive so leaders need to be responsive to their constituents, not the opposite.
>How much food rotted at the Texas border after Governor Abbott's PR stunt held it up? Estimated to be over $4Billion.
First, I'm skeptical about $4 billion. That's a lot of food.
Second, what is with the need to bring up something or someone irrelevant as a rebuttal every time there's even a tangential criticism of the current powers-that-be?
What I’ve read is: Refrigerated trucks only have so much fuel to maintain the coolers. Typically, this is enough fuel for a standard haul, but forcing the trucks to stand motionless in the heat leads to the coolers running out of fuel and the food spoiling in the heat. Keep in mind that food safety regulations has specific guidelines for time/temp that may not align with a common expectation for “spoiled”.
Something about that $4 Billion figure seems exaggerated, intangible, or simply an on-paper calculation. Assuming a truck carrying food is 6 hours late, how much spoilage does that actually cause? Would a pileup on an interstate causing an hours long delay likewise have its "impact" calculated to be in the tens of millions?
I don't know about fruit, but nuts like pistachios will spoil after 12 hours in a truck. You have a finite time before picking and processing before they rot, and a tractor trailer is about the worst environment as the the load can cook itself from the waste heat of biological activity in a large poorly ventilated volume.
Not sure if you noticed but we had massive food scarcity in March and April 2020 and the most inconvenient thing about it was waiting in line to pay and my kids not having hot dogs for several months.
Not saying civil unrest isn’t a possibility, but I’m not sure economic uncertainty could do any worse than airborne-once-in-a-lifetime pandemic
> Not sure if you noticed but we had massive food scarcity in March and April 2020 and the most inconvenient thing about it was waiting in line to pay and my kids not having hot dogs for several months
Where was this? I had a few trips to the grocery where specific items were out of stock or rationed (i.e. limit 2 per customer), but never saw a shortage of processed meats.
From a non-US perspective, it seems that a lot of Americans are quick to conclude that a civil war is around the corner, even on HN where one would hope for a more nuanced analysis. There can't be that many boogaloo boys on this forum, so I wonder how common this narrative is in the US at the moment to make it a go-to conclusion. Is it really common to hear talk of this in the US?
From what I see of human nature, most people are willing to accept a good deal of change and discomfort before they are willing to jeopardise their relatively stable & comfortable lives (relative compared to countries where you actually see armed uprisings, revolutions & civil war).
There is a distinct element of the American psyche that focuses on anti-government suspicions, self determination, armed resistance, etc.
It’s part of our founding mythos and reinvents itself in all sorts of contexts.
Doesn’t mean it is at all realistic for our present circumstances. I don’t happen to think so. An increase in stochastic violence? Sure. Actual, organized civil war? No chance.
It is also a part of the family histories of many Americans. Many of them are descended from people who made the decision to flee 1000s of miles before things got really bad.
The January 6th event brought tensions to a high point, and caused many Americans on the liberal side to rethink how they approach those on the right. The event left many Americans fearful of a violent attempt to subvert the democratic process, with those on the right believing that their votes weren't counted.
With a paralyzed legislative body, tensions are likely to grow in the future as the government fails to deliver reforms that either side wants while simultaneously beating the drums on issues that both sides refuses to compromise on.
My optimistic take is that Jan 6th is actually the counterbalancing act that will lead to a less violent future.
Throughout much of 2020, both the dominant media narratives and political leaders of the Democrats were very supportive of violence during the BLM movement. Riots and looting were legitimized as "the voice of the unheard", threats of more violence if key court decisions didn't go the desired way were made by prominent leaders and were tolerated or encouraged by the mainstream media, corporate America essentially "gave in to the terrorists" and did anything necessary to avoid being targeted.
And then Jan 6th happened, and all of us on the left suddenly realized that the other side might start using violence to achieve their goals too. It was a scary wake-up call that maybe we should focus on peaceful progress within the existing democratic framework instead of the "boots on the street making demands" approach we had found so successful.
Without the encouragement and approval of violent means from senators and CNN anchors for months during the racial justice protests, there's no Jan 6th event. As long as the leaders go to a "no violence" messaging instead of a "violence is necessary and acceptable when these groups do it" I think we'll have a peaceful 2024.
It's not exactly a "narrative of the moment" or common talk. It's a hopeful fantasy of the right that is ever present, but seems to always burn brighter during tragic events or when democrats are in power (which to them, is a tragic event). It's incredibly ironic when you consider this is the same side that likes to call themselves patriots, but seem to always hope for a time when they could openly kill their fellow Americans.
>From a non-US perspective, it seems that a lot of Americans are quick to conclude that a civil war is around the corner, even on HN where one would hope for a more nuanced analysis. There can't be that many boogaloo boys on this forum, so I wonder how common this narrative is in the US at the moment to make it a go-to conclusion. Is it really common to hear talk of this in the US?
Ive stepped on a hornets nest in my comment quite negatively voted.
I too am a non-US perspective and 'boogaloo boys' aren't going to be a major factor at all.
>From what I see of human nature, most people are willing to accept a good deal of change and discomfort before they are willing to jeopardise their relatively stable & comfortable lives (relative compared to countries where you actually see armed uprisings, revolutions & civil war).
Never in my life have I seen polarization so bad. According to what I read the only ever time it was this bad was the first civil war.
That cohort is still a numerical minority and while they may own the majority of civilian firearms, the United States government absolutely owns the majority of effective weapons. That said, calling the potential conflict a “domestic insurgency” is not much of a comfort compared to “civil war” even if the former is unlikely to be an existential threat to the country.
According to studies, it only takes 3.5% of a population revolting to foment a successful revolution. I'd argue we're approaching that figure. Might take a few more years, but I could see it in the US in our lifetimes.
I’m skeptical. For one example - more than 3.5 percent of the Hong Kong population showed up for a single protest, but the leviathan power still prevailed.
Did you read your own source? It specifically calls out 3.5 percent nonviolent protest as 2x more effective than violent protest.
In any case, it is far more logically that a core of highly motivated protestors causes sudden political revolution because they represent the unrealized/unstated preferences of a popular majority. I don’t believe this is likely in this situation as that cohort’s displeasure is largely due to mass culture (and associated forms of economic, social influence) moving further and further away from them.
They're saying there will be food shortages this year. Combined with mass immigration from failed states (so already bringing violence + spreading what little we have even thinner) civil unrest is certain.
In terms of farmers retiring with a non-zero reduction of food produced but also farmers in north america getting more $ to ship their food overseas. In addition to food inflation pushing food prices up to unaffordable levels.
I agree with biden, food shortages will be happening.
That seems like an odd mismatch between Biden and Psaki. Do you think it's possible Biden was speaking about the World, more specifically Europe, and Psaki was speaking about the US?
If not, I am curious as to why you think there is a mismatch between them on this issue.
I have no idea what's going to happen with food, but it's very common for Biden to say something and then Psaki or other administration officials to walk it back.
There has been quite a few examples of Biden saying something and the white house backpedaling on the comment.
It's a very real issue that lots of people beyond Biden have commented on.
Ukraine does produce significant food/calories. This is almost certainly going to be bad for europe.
I made the obvious case about what might happen soon. I am happy to believe Psaki is the one who is wrong. Which is not really difficult to believe given trackrecord.
Maybe not this year and maybe not in the US, but next year much of the world will see significantly reduced food production both as a result of war/sanctions with food-exporting nations and a global fertilizer shortage.
Countries. The war in Europe is disrupting food production and fertilizer sourcing. There’s enough food but the logistics are screwy and many countries do not store food.
GDP ~= Population * Productivity
If your population growth flat-lines (which it did last year), productivity has to compensate.
Can productivity compensate if the average age is getting older (people tend to be less productive after a certain median age)?
One reason investing in index funds makes sense is the underlying assumption that global population growth keeps increasing (GDP for ‘free’).
I’m super interested in what investing looks like in 50-100 years as the population starts collapsing, because it might collapse faster than productivity can possibly compensate for, which means unstoppable GDP decline.
GDP has to be at certain levels to support different types of economic activity. E.g. at some point, GDP might be low enough that new semiconductor research isn’t affordable (because all the workers are used up caring for the elderly for example).