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Current Inflation Has Different Effects on Different Age Groups

macroaffairs.com

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Re: Current Inflation Has Different Effects on Different Age Groups

#51

Post by refurb »

aphextron wrote: post #21
joefourier wrote: post #12

Earlier quoted context omitted.

Where do you live, and what on earth are you spending your money on? Housing may be absurdly costly in many cities but $5.5k a month after tax (assuming you're American) is enough to do much better than "barely ok" almost anywhere. Are you significantly in debt or living above your means?

>Where do you live, and what on earth are you spending your money on? Bay area ~$5,000 net monthly $2500 Rent/PGE $1000 Car/Insurance/Gas/Parking/Phone/Internet $500 Food/Clothing $500 IRA That leaves ~$500 monthly discretionary income, which I usually try to save as much as possible but inevitably gets eaten up by all the stupid little things in life that cost too much nowadays. I can't even imagine supporting a fam…

Socking away 10% of your take home income for retirement is not "barely making it".

Also, do you have a 401k contribution coming out as well? I assume the $500 IRA is a Roth IRA?

By that same argument I could make $200K, sock $5000 per month away in savings and say "I only have $500 in discretionary funds each month! I'm barely making it!"

Re: Current Inflation Has Different Effects on Different Age Groups

#52

Post by kcorbitt »

aphextron wrote: post #21
joefourier wrote: post #12

Earlier quoted context omitted.

Where do you live, and what on earth are you spending your money on? Housing may be absurdly costly in many cities but $5.5k a month after tax (assuming you're American) is enough to do much better than "barely ok" almost anywhere. Are you significantly in debt or living above your means?

>Where do you live, and what on earth are you spending your money on? Bay area ~$5,000 net monthly $2500 Rent/PGE $1000 Car/Insurance/Gas/Parking/Phone/Internet $500 Food/Clothing $500 IRA That leaves ~$500 monthly discretionary income, which I usually try to save as much as possible but inevitably gets eaten up by all the stupid little things in life that cost too much nowadays. I can't even imagine supporting a fam…

Yes, housing is extremely expensive in the Bay Area. However, consider your options before deciding that there's no way to save more. I pay $500/month for your "Car/Insurance/Gas/Parking/Phone/Internet" category (old car, cheap MVNO, don't take the car to places where they charge for parking) and $300 for food/clothing. And that's for a family of 3. I do pay a bit more than you for Rent/PGE ($2750 all told) but again, family of 3 -- we need the second bedroom (and lived in a 1-bedroom for the first two years after my son was born anyway).

I'm certainly not saying that my choices are the "right" ones, but I am saying that if you make saving for the future a high priority it's possible to do at your income level, even in the Bay Area.

Re: Current Inflation Has Different Effects on Different Age Groups

#53

Post by wtvanhest »

3pt14159 wrote: post #10
taurath wrote: post #3

I wonder how much higher it would be if medical costs were taken out. Housing is the biggest problem for my generation, but it gets almost no traction nor solution.

Housing is largely a problem to do with interest rates and mortgages inflating the land. The actual construction materials themselves (at least here in Canada) aren't too bad. I keep wondering why someone doesn't kickstarter a town. It has all the right incentives. Make guidelines that enforce density in the core and do common sense things from day 1, like wire fibre to every domicile.

> Housing is largely a problem to do with interest rates and mortgages inflating the land.

Interest rates and debt impact the value of a property, but do not impact the willingness to pay (i.e. the rental market). If rates were 10%, people would still be willing to pay $3k/month for a 1 bed in san francisco. The only difference is that buyers would have to adjust their offering prices due to the additional interest expense.

Re: Current Inflation Has Different Effects on Different Age Groups

#54

Post by refurb »

School-Cotton wrote: post #43
ttul wrote: post #14

Earlier quoted context omitted.

In the Bay Area, $90K is not sufficient. A one bedroom might cost $3500/month - that’s $40K of your net income.

You can’t build wealth on $90K in Monaco either, but that says something about Monaco, not about “capitalism”.

That's what I don't get. People with high rent are typically living in one of the most expensive areas of the country. They are still wealthy, they are just spending it on living there.

Re: Current Inflation Has Different Effects on Different Age Groups

#55

Post by refurb »

ttul wrote: post #14
dylrich wrote: post #5

Earlier quoted context omitted.

You make ~$90,000 a year and are barely getting by with no debt or children? Where do you live?

In the Bay Area, $90K is not sufficient. A one bedroom might cost $3500/month - that’s $40K of your net income.

$3500 if you want to live in a new building. I've been looking at 1 bedrooms and rent has come down in SF. Not hard to find one for less than $2500 now (in a good neighborhood).

Re: Current Inflation Has Different Effects on Different Age Groups

#56

Post by smnrchrds »

3pt14159 wrote: post #15
aphextron wrote: post #2

I feel like technology has led to such an efficient form of capitalism over the past 20 years, that there's no room left for any possibility of social mobility. It's this system where there is just enough room for you to live and get by, but never get ahead. Prices for everything are so efficiently optimized at this point that there is no more "wiggle room" for a working person to build wealth. The basic necessities…

Guys, downvoting aphextron isn't helpful. He's sharing his perspective. I get that some of us are poor students living off of almost nothing, but try to listen when people talk about their own personal situation. People struggle with different things and we should try to learn from them instead of dismissing them. Aphextron, I actually kinda get where you're coming from. Things like housing are appreciating so fast t…

To be clear, I haven't downvoted aphextron, but I disagree with them. Here is my objection:

> The basic necessities of life have risen to perfectly match your income

No, the basic quality of life has risen to perfectly match your income. Houses are more expensive compared to decades ago, but they have nice things like indoor plumbing, electricity, and fire retardant walls; all of which would have been a luxury if you go back long enough. Medical costs have ballooned, but so has the quality of care, life expectancy, and medical technology; so many incurable diseases of generations ago are now easily cured, e.g. Hepatitis C.

There is an argument to be made that we should be able to afford all these things for less, that the price has risen above the rate of its utility, that we have reached the point of diminishing returns for basic necessities, and I agree with that to some extent.

There is also another argument (a libertarian one) that says government has illegalized poverty by raising the floor on the quality of goods and services. For example, if you want to build a 1920-style home (with asbestos-laced walls, without plumbing and electricity, without smoke or CO detectors, etc.) at 1920-level prices, you cannot legally do that due to regulations. The minimum quality set by government regulations have made everything more expensive and one should not be forced to abide by these quality rules if they want to break them knowingly and of free will. There was an story about a (Mexican?) car which was priced at 5000$ new. But it would not pass safety regulations in the US. In that country, you would have a choice to buy a safe car and pay the higher price for it, buy an unsafe car and pay a much lower price, or don't buy a car. In the US, you lose one of these choices and you are more severely affected if you are poor. I see the point in this argument, but I don't agree with it. I like raising minimum standards to match the level the society can afford as it gets more prosperous.

But in either case, let's not pretend we are paying more for getting the same or lower utility. We are living longer and better lives compared to generations past. If we are going to debate about prices across generations, we should also take quality and utility into account. Otherwise the comparison would be meaningless.

Re: Current Inflation Has Different Effects on Different Age Groups

#57

Post by olfactory »

Official inflation numbers are based on a basket of goods that are thought to be representative for the purpose of broad economic policy.

But it's certainly true that inflation is not the same for all goods or for the basket that is highly relevant to one person or to one firm or industry.

So like any economic policy it has winners and losers. Just because the policy may be reasonable does not mean that the winners and losers are irrelevant.

During the startup boom many developers saw their wages inflating rapidly in spite of little skill growth. Some also saw their rent increasing if they lived in the bay area.

Landlords in the bay area saw their income increasing, and firms hiring developers in the bay area saw the cost associated with wages inflate rapidly.

The mistake this article makes is that it puts all its eggs into the young vs old theme when really this is a fairly obvious consequence of a dynamic economy.

Re: Current Inflation Has Different Effects on Different Age Groups

#58

Post by betahiker »

WhompingWindows wrote: post #37

This strikes me as lazy data science and full of overreaching conclusions, because nowhere is uncertainty/spread/variance discussed. What are the errors/variance on these estimations for each year and each spending category? Are these inflation differences statistically significantly different? Comparing 7% vs 8% is already cutting it close without even knowing this crucial information. The headline vastly oversteps…

> nowhere is uncertainty/spread/variance discussed

This is the standard for reporting on inflation data. Do you know of a reporting on inflation where they mention an uncertainty measure? For example when reporting on the difference between this year and last year's inflation number?

> failing to mention it's a difference of 1% over 7-8%

Quoting from the article:

> Over the past five years, millennials have seen their goods become 8.7% more expensive, Generation X 8%, and baby boomers 7.6%.

Re: Current Inflation Has Different Effects on Different Age Groups

#59

Post by thesagan »

smnrchrds wrote: post #56
3pt14159 wrote: post #15

Earlier quoted context omitted.

Guys, downvoting aphextron isn't helpful. He's sharing his perspective. I get that some of us are poor students living off of almost nothing, but try to listen when people talk about their own personal situation. People struggle with different things and we should try to learn from them instead of dismissing them. Aphextron, I actually kinda get where you're coming from. Things like housing are appreciating so fast t…

To be clear, I haven't downvoted aphextron, but I disagree with them. Here is my objection: > The basic necessities of life have risen to perfectly match your income No, the basic quality of life has risen to perfectly match your income. Houses are more expensive compared to decades ago, but they have nice things like indoor plumbing, electricity, and fire retardant walls; all of which would have been a luxury if you…

“We are living longer and better lives compared to generations past”

I appreciate all your writing, but statistics show lifespans in the U.S. are declining and housing is out of reach for increasing populations. On a mass society level that means something is very wrong and has been for some time. (Lots of folks like to also blame drug use but those have been around for ages.)

I think you’re missing the big picture.

“No, the basic quality of life has risen to perfectly match your income.”

What? That sounds ideological.

Re: Current Inflation Has Different Effects on Different Age Groups

#60

Post by seiferteric »

mobilefriendly wrote: post #6
aphextron wrote: post #2

I feel like technology has led to such an efficient form of capitalism over the past 20 years, that there's no room left for any possibility of social mobility. It's this system where there is just enough room for you to live and get by, but never get ahead. Prices for everything are so efficiently optimized at this point that there is no more "wiggle room" for a working person to build wealth. The basic necessities…

High marginal income tax rates are designed to keep you from building wealth-- the capital-holding classes don't want the competition for assets.

I actually just had this thought the other day. It used to be that most people didn't even pay income tax. I realized that income tax is like "regulatory capture" for the wealthy and acts as a barrier from the poor/middle class from moving up. If we really want to touch the rich, we would have to have more capital gains tax, wealth tax, inheritance tax etc.
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