Poland's economic experiment based on Thomas Piketty • Hacker News Board

Re: Poland's economic experiment based on Thomas Piketty

#21

Post by ucaetano » Wed, Mar 21, 2018, 9:19 PM UTC

bobthechef wrote: post #17

ucaetano wrote: post #12

Earlier quoted context omitted.

> Isn't it because majority of Germans rent and majority of Poles buy? No. Economically, it doesn't make a difference. Although renting is better to society as a whole.

> renting is better to society as a whole. Care to explain? I would say that widespread renting is actually quite terrible. It means that property is kept in the hands of class of landowners (and when wealth is concentrated, this also tends to concentrate power); that instead of investing one's income, renters are basically paying off the owner's mortgage; that generally, people prefer to own, and so widespread renti…

> Care to explain?

Sure!

Caveat: please ignore taxes, emotional value and a few other country-specific details.

When you're buying a home, you're doing 3 independent things:

1) Borrowing money (optional)

2) Making a capital investment into an illiquid, immovable asset

3) Renting an asset that you own to yourself for you own usage

Give how much little money you have (compared to a company) and how your earnings and spending might oscillate, having so much of your assets locked up in an illiquid, immovable, single piece is a bad idea. It prevents you from moving around and taking a new job, for example.

Also, given your individual risk, you have to pay interest rates much higher than what you'd expect from an institutional investor. Also, you don't have any economies of scale for renting out, selling, doing maintenance, etc.

Now if an institutional investor bought a large stock of housing and rented it out, it is:

1) Borrowing money at lower rates than you

2) Making capital investment in thousands of individual, immovable assets

3) Renting an asset to you

With a much larger scale, the institutional investor has massive gains in economies of scale on selling, buying, renting, fixing, etc. Also, it is able to spread the risk of a single house or resident across its entire base, essentially transforming the individual risk into a financial cost to the renters, reducing the exposure to extreme events.

Finally, renting increases an individual's mobility, allowing for better allocation of jobs to different places in a country, improving economic growth and enabling the economy to adapt faster to changing situations.

PS: NIMBYism fucks this up. This only works if new housing is allowed to be built freely based on supply and demand, which is not the case in the most "progressive" parts of the US (Bay Area, for example).

Re: Poland's economic experiment based on Thomas Piketty

#22

Post by bobthechef » Wed, Mar 21, 2018, 9:23 PM UTC

nkkollaw wrote: post #13

the_nozzle wrote: post #7

Earlier quoted context omitted.

Pump your breaks there kid - the only thing that is being denied is that occupied Poland had anything to do with the installment of the holocaust by the Germans (they were next in line to the chimney). As much as I don't like the asshats from PiS, I do understand where they are coming from, after seeing "Polish concentration camps" in the western press on a monthly basis. To your other point - most of the polish judi…

> most of the polish judiciary has roots in the communist prosecution apparatus and is actively shielding all of the assholes that had a soft landing after the "toppling" of the communist government I was under the impression that most of the people that were working as judges during the Soviet occupation are now dead or retired..?

He didn't say they were all judges. He said they had roots in the Communist establishment (his focus is on the deeply embedded secret police, but it goes beyond that). You also have Communist/post-Communist dynasties and clans where power is inherited and shared through ties and nepotistic practices stemming from the Communist period.

It's nice to think that the fall of Communism automatically led to the wholesale liquidation of the Communist establishment, but that's fabular, and after you think about it, quite a silly thing to expect. It would be disastrous to simply remove them without having prepared to replace them. When a certain establishment had been running the state for half a century, with all its ties and knowledge and competencies, you couldn't just expel them all just like that. They and they alone have been running the state for almost 50 years! (Especially given that the pre-War elites were either exterminated by the Nazis and the Soviets, or fled the country, or whatever, but outsiders unless they joined the ranks of the People's Republic).

So, unless you manage this transition somehow with the end goal of reducing if not disrupting the continuation of that corrupt establishment[0], an establishment known for profiting for its own selfish gains[1] and trained by Moscow to function as essentially colonial puppets of foreign interest, you still have a problem.

[0] Not everyone in that establishment was corrupt, of course.

[1] Hence the actual way in which state assets were privatized, often for funny money to foreign owners, sometimes for liquidation and removing domestic sources of competition, and in ways where former party apparatchiks and the like profited from their sale.

Re: Poland's economic experiment based on Thomas Piketty

#23

Post by galfarragem » Wed, Mar 21, 2018, 9:24 PM UTC

pleasecalllater wrote: post #6

ed_balls wrote: post #2

> That has meant a negative household saving rate, compared with Germany's 10 percent of disposable income. Isn't it because majority of Germans rent and majority of Poles buy?

If you compare the cost of a mortgage, and a rent, they are very similar in Poland. So after 30 years you can sell the flat/house and you will get half of that money back. It's better than nothing. Half, because usually the total mortgage cost for 30 years is about 100%.

In Portugal renting is more expensive then the cost of a mortgage due to tenant ultra-protective laws. Landlords are literally afraid to rent. Economically this is a disaster.

Re: Poland's economic experiment based on Thomas Piketty

#24

Post by conanbatt » Wed, Mar 21, 2018, 9:26 PM UTC

ucaetano wrote: post #11

> That means a pause in privatization, which Morawiecki says contributed up to 14 billion zlotys a year to the budget, a preference for domestic over foreign borrowing (the share of Poland's debt owned by foreigners is down to 50 percent from about 60 percent three years ago) and a reliance on state enterprises to increase investment because private companies are too small and not boldly expansionist enough to provid…

Domestic borrowing is a guarantee of inflation, because the incentive to dilute the debt is too great to not use.

Re: Poland's economic experiment based on Thomas Piketty

#25

Post by baq » Wed, Mar 21, 2018, 9:31 PM UTC

ergo14 wrote: post #10

dozzie wrote: post #4

Earlier quoted context omitted.

> The current government is a far right Catholic party [...] More like "far center, a little to the left", with a twist for religion and nationalism. It doesn't have that much with being pro capitalism.

And conservatism. It is hard to categorize them easly, but they don't seem to be center of political scene in my opinon.

They're national socialists. They don't like aliens, want to be in control of everything they deem important and are perfectly willing to break the rule of law for the good of society. They gave everyone with more than one child free money. They also call everything 'national' instead of 'public'. They think that the EU is a hindrance and an enemy, as if Putin didn't exist (that the part I can't understand the most.)

Re: Poland's economic experiment based on Thomas Piketty

#26

Post by bobthechef » Wed, Mar 21, 2018, 9:31 PM UTC

ergo14 wrote: post #10

dozzie wrote: post #4

Earlier quoted context omitted.

> The current government is a far right Catholic party [...] More like "far center, a little to the left", with a twist for religion and nationalism. It doesn't have that much with being pro capitalism.

And conservatism. It is hard to categorize them easly, but they don't seem to be center of political scene in my opinon.

One of the sources Morawiecki draws from is Catholic social teaching, which, as can be expected, is not particularly friendly toward morally bankrupt, exploitative, and unrestrained incarnations of capitalism. So, really, opposition to that variety of destructive capitalism is not a left/right wing issue as it is erroneously often thought of in the United States. (The Church is also opposed to socialism as an inherently perverse model, but it is not categorically opposed to some government social programs, though I would suspect they are viewed as less than idea, preferring saner business practices and charity).

Re: Poland's economic experiment based on Thomas Piketty

#27

Post by ucaetano » Wed, Mar 21, 2018, 9:36 PM UTC

baq wrote: post #14

ucaetano wrote: post #12

Earlier quoted context omitted.

> Isn't it because majority of Germans rent and majority of Poles buy? No. Economically, it doesn't make a difference. Although renting is better to society as a whole.

I never understood that. I keep hearing about landlords ultimately sucking all the earnings of the society that lives on the land they own (see the Bay Area for an example, where a mattress in a wardrobe costs you $1k or whatever).

> I never understood that. I keep hearing about landlords ultimately sucking all the earnings of the society that lives on the land they own

When you buy a house, you're essentially becoming your own landlord.

Taxes aside, it doesn't make a difference if you rent, buy a house and live in it, or buy a house, rent it out, and rent another house for yourself.

The issue isn't being a landlord, but blocking the building of new housing when demand is going up so you can extract economic rents from society.

Re: Poland's economic experiment based on Thomas Piketty

#28

Post by ucaetano » Wed, Mar 21, 2018, 9:38 PM UTC

conanbatt wrote: post #24

ucaetano wrote: post #11

> That means a pause in privatization, which Morawiecki says contributed up to 14 billion zlotys a year to the budget, a preference for domestic over foreign borrowing (the share of Poland's debt owned by foreigners is down to 50 percent from about 60 percent three years ago) and a reliance on state enterprises to increase investment because private companies are too small and not boldly expansionist enough to provid…

Domestic borrowing is a guarantee of inflation, because the incentive to dilute the debt is too great to not use.

Exactly! And inflation is just another form of taxes.

Re: Poland's economic experiment based on Thomas Piketty

#29

Post by skybrian » Wed, Mar 21, 2018, 9:53 PM UTC

conanbatt wrote: post #24

ucaetano wrote: post #11

> That means a pause in privatization, which Morawiecki says contributed up to 14 billion zlotys a year to the budget, a preference for domestic over foreign borrowing (the share of Poland's debt owned by foreigners is down to 50 percent from about 60 percent three years ago) and a reliance on state enterprises to increase investment because private companies are too small and not boldly expansionist enough to provid…

Domestic borrowing is a guarantee of inflation, because the incentive to dilute the debt is too great to not use.

On the other hand, borrowing in a foreign currency risks being ruined by exchange rates if the currency collapses. As happened to businesses in many Asian countries not that long ago. Also: Iceland.

Re: Poland's economic experiment based on Thomas Piketty

#30

Post by bitumen » Wed, Mar 21, 2018, 9:53 PM UTC

ucaetano wrote: post #28

conanbatt wrote: post #24

Earlier quoted context omitted.

Domestic borrowing is a guarantee of inflation, because the incentive to dilute the debt is too great to not use.

Exactly! And inflation is just another form of taxes.

A very pernicious form which disproportionately harms the middle and lower classes. I’ve never understood hard left thinks this kind of thing is a good idea. I understand wanting to change gross inequality and reject runaway capitalism, especially the rigged cronyism we see today. Choosing to change things by engaging in failed alternatives though seems crazy.

I’m not being rhetorical, I don’t understand. If someone can explain it to me, or point me to some good explanations I’d appreciate it.