91–100 of 120 posts
Economist here. For what it’s worth I cannot find evidence that this paper was ever published, so I think it’s safe to say they did not convince the rest of the profession that this was the (or even a) trigger. I’m sure it’s being shared to suggest that high current gas prices will do the same now. I doubt anyone has any good reason to be confident in such a suggestion.
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> for the most part people are buying homes that they can pay the mortgage on The question is can they still pay the mortgage if cost of living goes up significantly (like it appears to be)
Inflation helps borrowers. They get to pay back their loans with cheaper dollars.
but they also have to pay for energy, food and automobiles, all of which is going up much faster than the average person's salary.
imo, the first area that is going to take a hit is in consumer discretionary spending - people will hold onto their tv's, smartphones, computers and a lot of other things longer than usual, because the things they have to buy (food, energy etc) are all going up dramatically. An awful lot of people live paycheck-to-paycheck and spend at least 100% of everything that comes in each month. Where my spouse works, 2/3's of the employees are in a panic if their paycheck is a single day late; they just don't have a cushion to fallback on.
Consumers cutting back on the 'extras' will be the first domino to fall.
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They can pay those mortgages in the moment they sign for them. They cannot necessarily pay those mortgages after inflation screws up the rest of their month to month budget. People always love to circle jerk about inflation "inflating away your mortgage" but that's only if you manage to hold onto it. Wages lagging inflation will still hurt a lot of people. "Just switch jobs" doesn't work in every industry and even wh…
It is also funny that people think banks do not want you to default on your mortgage. What did they learn from 2008? They can hand out mortgages ignoring valid economic signals that these people will not be able to repay it, they will then get your house and the government will bail them out and make laws against sleeping in a public place.
Economist here. For what it’s worth I cannot find evidence that this paper was ever published, so I think it’s safe to say they did not convince the rest of the profession that this was the (or even a) trigger. I’m sure it’s being shared to suggest that high current gas prices will do the same now. I doubt anyone has any good reason to be confident in such a suggestion.
I personally think that trends like increased EV/hybrid ownership and WFH could mitigate this issue in particular, but I don’t think these are trends that apply to all Americans equally (especially those with more precarious finances).
Economist here. For what it’s worth I cannot find evidence that this paper was ever published, so I think it’s safe to say they did not convince the rest of the profession that this was the (or even a) trigger. I’m sure it’s being shared to suggest that high current gas prices will do the same now. I doubt anyone has any good reason to be confident in such a suggestion.
Earlier quoted context omitted.
Gas prices have been from the $2.00 to the $5.00 mark for the past decade. Adjusting for inflation Gas is getting relatively cheaper but the last time it actually changed consumption it would be around 2008 so it was at the $5.00 mark ($6.55 a gallon). Biden just released the national gas reserves which is an attempt to keep prices lower. For a long time it has been said that we have to change peoples behavior to sol…
Just let gas prices be higher than we are used to, people will figure it out for themselves. Blame it on Russia, Saudi Arabia, ramp up local production and call it a day. I recently sold my large luxury SUV in exchange for a smaller sedan ( that happens to be electric). I’ve always thought I needed a large SUV to do the things I want to do, so far nothing is changed. I personally made a huge quantum leap in personal…
Americans already tend to buy way too much car, financing them over 60 or even 72 months, and that was happening before the incredible price increases over the past 2 years. Only the (increasingly small) upper middle class and above can responsibly afford an electric car.
Even expecting the general public to be forced to switch to hybrids and more fuel efficient gas cars is unrealistic in the short to mid term as the supply simply isn't there. Letting gas prices be higher than they used to be to incentivize electric car adoption could be a logical step, but likely in 3-10 years when prices are comparable to existing technology.
Source: https://mediaroom.kbb.com/2022-02-09-New-Vehicle-Prices-Retr...
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+1 It's been almost two decades since the last spike, five since the oil crisis of the 70s. If you're buying 50k plus gas guzzlers, and then get squeezed when gas prices are going up, it's almost self inflicted by now. So many alternatives: electrics, small frugal cars, carpooling, telecommuting, ... Can't believe USA is still incentivizing this madness.
...so again, those stupid poor people to dumb to buy Teslas.
That's only possible because the negative externalities are not priced in.
You can get from point A-B in supreme comfort, in cars that cost half that, or that have twice the mileage. The reason cars are instead bloated and have low mileage is because of American's fetishization of size, and the ratchet of the safety arms race. To break out of this tragedy of the commons, the tax-code needs to incentivize smaller cars, electric cars, flexible work-arrangements, etc... and disincentive larger cars.
And to your point; those stupid poor people (your words) buy used cars, and these used cars were originally the wasteful new cars that the selfish sociopathic rich people (my words) bought.
High gas prices certainly preceded the housing crises, but good luck convincing anyone it caused. Very subjective opinion ahead- High gas prices is probably this single most effective way to curb greenhouse gases and I am shocked that Biden and his climate Czar aren’t embracing it. As it stands, even prices doubling or tripling, I would conjecture that a very significant portion of Americans can make significant chan…
Partially. The problem is, if you allow (or introduce) a high gas price as a politician, you'll be causing social unrest - and that not just in the US where having a car is mandatory outside of the core of urbanized areas, but also even in modern places like France where precisely that was the cause of the infamous Yellow Vest riots. And that social unrest can deal way more damage long term than the GHG emissions you'd save - social unrest is how the 45th took power. Imagine a repeat of the 45th (or someone even worse)... say goodbye to anything done on the political side to curb GHG emissions.
> taking mass transit where available
Yes, the problem is that you'd need reliable mass transit in the first place. And in many areas - again not just in the US but worldwide - mass transit is either not existing at all outside of urban areas or very spotty (i.e. once in the morning and once in the afternoon as school bus). Governments will have to take a lot of money to build out that first. And in urban areas, the side effects of large homeless and/or mentally unwell people makes mass transit pretty unattractive, so again governments will have to take even more money to fix that mess.
We're all sitting on decades worth of political ignorance and now climate change, Putin and a lot of the population (the ones who deny climate change) collide together in a perfect storm event. And I'm not sure which way out it will take.
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Canada’s housing bubble didn’t pop a decade ago, and continued to inflate.
Is there a convincing explanation of why the US and Canadian markets behaved differently? Were Canadian banks smarter about what loans were issued? Not being a Canadian, most of the stories I hear about Canadian real estate are about international investment by the global rich -- is that a large enough share of market to support prices even through a recession?