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Why Rent Is So High and Pay So Low

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Re: Why Rent Is So High and Pay So Low

#81

Post by rjurney »

oldmanjay wrote: post #4
pierrealexandre wrote: post #3

Earlier quoted context omitted.

The article provides historical context and a framework to think about the question. I think it does a better job answering the question than your last 2 paragraphs.

The article tries to backdoor an emotionally resonant populist political view in the guise of concern. If you think it does a good job answering the question, that probably just means that you have a converging viewpoint.

Yeah, nothing is persuasive. Everything simply confirms or disconfirms what you already know. There is no learning. I will die knowing what I knew yesterday.

Life is shit, eat Arby's. Am I following along?

Re: Why Rent Is So High and Pay So Low

#82

Post by merpnderp »

maxerickson wrote: post #64
natrius wrote: post #17

Earlier quoted context omitted.

This time is different. The new money enters the system via central bank asset purchases, which lower the returns on those assets. These purchases push investors into asset classes with higher returns, raising the prices of all assets as a result.

An additional buyer shouldn't have the effect of lowering the rate of return on an asset.

More money chasing the same asset will lower its rate of return.

Re: Why Rent Is So High and Pay So Low

#83

Post by scott_karana »

ryandrake wrote: post #69
tomp wrote: post #46

The money quotes: "If house prices fall, the middle aged and middle class will be in an uproar. [...] Perhaps even more critically, banks need house prices to rise, or at least not collapse." "More quality housing would increase its stock, and with supply rising to meet demand, prices would fall. This would be great for young renters, bad for middle-aged property owners, bad for banks. Thus it is not likely to happen…

> I couldn't agree more. I'm young and capital-poor, so this fact is a huge problem for me. I don't see a solution. Vote for politicians not obsessed with propping up the business and real-estate portfolios of wealthy middle-aged people? (assuming you can find such politicians)

> Assuming you can find such politicians

Some of us might become those politicians. :)

Re: Why Rent Is So High and Pay So Low

#84

Post by stretchwithme »

WalterBright wrote: post #51
nostromo wrote: post #6

This article doesn't answer the question and seems primary based on nostalgia. My theory: the Fed's zero interest rate policy is very good at inflating asset values: S&P500, housing, you name it. Rising income is a second-order effect: we hope that rising asset values will lead to increased wages. That used to be the case, but no longer is. Why? Because of automation and globalization probably. So, the Fed has the pe…

One thing nobody mentions is the increasing share of the GDP that the government consumes: http://www.usgovernmentspending.com/total_spending_chart That wealth has to come from somewhere.

I think the government's interference in the markets for housing, capital and labor are a much bigger problem than how much government consumes.

Bubbles happen because borrowing money is subsidized. Unemployment is caused when interference with prices prevent supply and demand from equalizing.

Government may waste capital, but I can point to many things that do.

I think you can increase taxes if you free markets enough and the economy could still grow.

You could GIVE everybody the downpayment for their first house and have a healthy housing market as long as you got rid of all the other subsidies and inducements and tax write-offs. Not proposing that, but you get the idea.

Re: Why Rent Is So High and Pay So Low

#86

Post by PythonicAlpha »

bluedino wrote: post #73
PythonicAlpha wrote: post #54

Reagan ended the Golden years and turned the US around from worker friendly to money-friendly. The result are low taxes for income generated from pure money, high speculation, bailouts for the big corporations and the decline of the US middle class. Many of the other "western countries" just copy this trend and get the same, just with a few years between.

The oil crisis and recession of the 70's happened before Reagan was even on the ballots.

The oil crisis and recession of the 70s has nothing to do with the situation today, at least not directly. More important where the political decisions that where made in this time. Of course they where not all made by Reagan alone, but he was one of the major breaches.

Re: Why Rent Is So High and Pay So Low

#87

Post by nickff »

merpnderp wrote: post #80
WalterBright wrote: post #51

Earlier quoted context omitted.

One thing nobody mentions is the increasing share of the GDP that the government consumes: http://www.usgovernmentspending.com/total_spending_chart That wealth has to come from somewhere.

I like how the charts run to 2020 to hide the massive ramp up in the last few years.

I don't particularly 'like' it, but entitlements will grow at an increasing pace as more of the baby boomers reach Social Security elidgibility.

Re: Why Rent Is So High and Pay So Low

#88

Post by powera »

timr wrote: post #65
happytrails wrote: post #11

How many people died during WW2? It all seems like supply and demand to me. If we want lower housing prices in major cities we need more supply. Anecdotal, L.A. is built to the max horizontally. If L.A. would allow more vertical space to be used prices would drop.

About 400,000 US citizens were killed in WW2, or about .0003% of the entire US population in 1945 (140M). It didn't have a huge downward impact on real estate prices.

400k is 0.3% of 140 million, not 0.0003%.

Re: Why Rent Is So High and Pay So Low

#89

Post by AnimalMuppet »

happytrails wrote: post #67
AnimalMuppet wrote: post #45

Earlier quoted context omitted.

If the unions are corrupt, why do you assume that it's in my best interest to join one?

Why do you assume I said that?

> Labor has been on the decline for years. The union corruption and bashing seems never ending. The ignorance in the general populace allows this to happen, as people will vote against their own best interests.

"The union corruption seems never ending." I agree. Unions are corrupt too much of the time. (Any is too much...)

"Labor has been on the decline for years... The ignorance in the general populace allows this to happen, as people will vote against their own best interests." I presume that this is supposed to mean that labor is in the best interest of people.

So it looks like you said that unions are corrupt, and that labor unions are in the best interest of people. Hence my question.

Re: Why Rent Is So High and Pay So Low

#90

Post by bhickey »

ArkyBeagle wrote: post #59
nostromo wrote: post #6

This article doesn't answer the question and seems primary based on nostalgia. My theory: the Fed's zero interest rate policy is very good at inflating asset values: S&P500, housing, you name it. Rising income is a second-order effect: we hope that rising asset values will lead to increased wages. That used to be the case, but no longer is. Why? Because of automation and globalization probably. So, the Fed has the pe…

The Fed never touched the pedal. See also "Interest on reserves". Land rents ( which are not the same as "rack rent", what you pay the landlord, but can be related by land prices going up speculatively ) drive out wage rises. Scott Sumner says we should have Nominal GDP Targeting; if Real GDP is < say, 4%, the rest is made up with inflation.

> Land rents drive (...) out wage rises.

Should we address rent seeking with land taxes and other Georgist policies?

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