661–670 of 693 posts
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That's not true.
Please elaborate
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Probably not much. The only time the US had a major home price adjustment was 2008 and that was because the housing market was the problem. Currently the housing market is up but not a problem. There aren't crazy foreclosures and there aren't any expected. Tho that can change if we have a big recession absolutely. Also home prices did not take a very long time to recover all things considered.
The recency bias is amazing. No, if interest rates go up, buyers can afford less, housing prices go down.
It is easy to see that even during insane rates (80s etc) housing prices didn't collapse.
They went down a little, but only after adjusting for inflation. :)
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Not necessarily true: Interest rates and home prices both roses during the most recent period of rising rates (2016-2019): https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/USSTHPI
It's not guaranteed and in fact, what you'll likely see is continued home price growth as people pile in the "now or never" mentality as rates increase and mortgages are harder and harder to get a the historic low rates (see Canada). But in the long run, when mortgage rates go from 3% to 6% affordability goes down - people buy based on monthly payments, not the size of the loan. Of course if wages drastically increas…
Nothing is a guarantee. Silly to base your argument on that. Nothing is for certain.
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Theories that are dismissed by the vast majority of the mainstream experts are often simple, yes. It turns out that the real world is complicated, and thats why we have experts in the world.
It's less that it's simple (it doesn't really seem simpler to me than any other fundamental approaches to macro, no?) than that at least real-world behavior of governments, and changes in the world as a result of that behavior, doesn't all seem to point strongly in the direction of something about it being wrong or badly incomplete. It's simple like universal gravitation is simpler than epicycles.
Thats the important part here. Whatever your opinion is on any of this, basically all the actual people who know what they are talking about, disagree and think that MMT is basically valueless.
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What do you mean by, 'Try paying your taxes in BTC ...' ? In USA, sales taxes are paid to government by the vendor. As just a typical person in USA who does not work for federal government nor reside in D.C., sales taxes and property taxes are all that I (implicitly) pay. The vendor and I determine amount and type of my payment. Your comment had a threatening tone implying something bad may happen. What is the lurkin…
You don't pay federal income taxes?
Definitely possible to not have what is known as wage income. Many do it. The super rich structure their affairs to avoid being in that system of voluntary contributions.
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>CPI only shows 5%, due to the lag induced by their rent counting methodology. So inflation as measured by CPI is understated if anything, not overstated. >Using the same formula as was used in the 70s would produce double digit numbers. Can you elaborate on this? When and what was the methodology changed?
On point one, CPI uses a combination of "owners equivalent rents" and more traditional rent measures. Owner's equivalent rent is basically just a survey where they ask homeowners how much they could rent their house for. So survey participants understanding of market rents may lag. But more importantly, when they survey renters, they ask them what they're currently paying. So if somebody is in a one year lease, and g…
Forecasting tool for what? Prices? Everything about the CPI is about measuring price changes that already occurred, not to forecast future price rises. If the price of widget goes up 10% year after year, that's all CPI is going to report. It's not going to report what the price of widgets are 10 years from now. If you want inflation forecasts, you look at TIPS spreads or the price of various swaps.
Once you understand that, most of the measurement choices make sense.
>Owner's equivalent rent is basically just a survey where they ask homeowners how much they could rent their house for. So survey participants understanding of market rents may lag.
That's fine because they're essentially insulated from the housing market, so the price they pay is effectively fixed for decades.
>But more importantly, when they survey renters, they ask them what they're currently paying. So if somebody is in a one year lease, and gets surveyed in month 11, they will give a rent figure that's almost a year old.
>Finally, they only survey 1/6 of the housing stock each month. So the whole sample is not updated every month.
Again, also fine because the point of CPI is to measure the cost of living for americans, and the cost of living for americans is largely fixed months in the past (or for homeowners, decades in the past). That said, I do think only updating 1/6 of the housing stock is a bit shady because it basically applies the lagged measure twice.
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The alternative is a static or deflationary currency. This leads to hoarding of assets which were originally intended to serve and increase commerce. Think Bitcoin. Without MMT, we would be falling from a skyscraper as you depict.
Bitcoin isn't static or deflationary. There is a schedule of inflation built in via the mining reward which is currently at 1.5% until the next "halvening" where it will become 0.75%. The mining reward will continue to half every 4 years until roughly near the year 2140. https://charts.woobull.com/bitcoin-inflation/
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I’m surprised this is top comment. Everyone ought to rebalance their assets as they get closer to retirement. If you are retired you should have a minimum of 3-10% of your portfolio in bonds, which typically fluctuate less than stocks. Then you draw from your bond assets to actually get money. As long as your stock assets aren’t touched for 3-5 years it doesn’t matter what the market does in the next few months.
You should have 60% bonds and 40% stocks As you get older 80% bonds 20% stocks. Source: The intelligent investor (famous finance book) People these days have 80% house, 15% crypto and 5% stocks
Using the suggested approach would demolish a bond portfolio. Assuming Barclays Aggregate index as a proxy, if interest rates rise to 7%, then half the value of the bonds would be lost.
Note that correlation of rising rates and rising stock market exists until about the 4-6% rate region before the market starts to be truly negatively correlated with bonds above that number.
Based on all my reading over the past several years, this is the first time in history that so many bonds have been priced at or near zero (including below zero rates). I think Benjamin Graham would be writing a supplement to his book if he were alive today.
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The alternative is a static or deflationary currency. This leads to hoarding of assets which were originally intended to serve and increase commerce. Think Bitcoin. Without MMT, we would be falling from a skyscraper as you depict.
' deflationary currency ... leads to hoarding of assets '. Someone owns every asset. By making it impractical to save using the fiat money, savings goes to non-fiat items like land, stocks, energy, and BTC. This harms the poor who are rarely able to escape into those non-money items.
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For a different take on types of money and the money supply, here is an article by David Friedman: https://www.cato.org/sites/cato.org/files/pubs/pdf/pa017.pdf Note in particular this at the end of the section on fractional reserve money: > Before leaving the subject of fractional reserve systems, I should mention one particularly bizarre variant -- a fractional reserve system based on fiat money. I call it bizarre b…
> Note in particular this at the end of the section on fractional reserve money: > (By "this country" he means the US, although the US is not the only country with such a system.) Actually the US is a country without such a system, i.e, the US (and most countries really) are not fractional reserve systems, and have not been in decades . James Tobin called this "The Old View" in 1963 : * https://cowles.yale.edu/sites/…
By the simple definition of "fractional reserve"--that a financial institution only needs to keep a fraction of its total liabilities as actual currency in its reserve pool, and must convert other assets into currency if withdrawals exceed that reserve amount--it most certainly is. That is how all financial institutions in the US work, just as in other countries.
It would be interesting to see a debate between Friedman and the other economists you reference, who obviously hold very different views. I don't think we're going to resolve any such differences here; I would simply note that there are such differences, and that the views of the economists you mention are not universal, nor are they necessarily correct.
