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U.S. economy shrank at a 1.4% annual rate in the first quarter

wsj.com

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Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#211

Post by gruez »

colinmhayes wrote: post #83
bitcurious wrote: post #78

Earlier quoted context omitted.

In my neck of the woods, by far the largest and most impactful inflation has been in the housing sector - 50% price inflation over the past two years. This is entirely attributable to the Fed's pumping of soft assets like stocks, leading to a bunch of paper millionaires cashing out.

Also due to the fact that we stopped building new homes after 08. If supply keeps up with rising demand prices don't change.

>Also due to the fact that we stopped building new homes after 08.

That's easily refuted with a quick search.

https://tradingeconomics.com/united-states/housing-starts

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#212

Post by HFguy »

lkxijlewlf wrote: post #166
taylodl wrote: post #55

The fact the Fed is even contemplating a rate hike tells me they're misreading what's going on. The inflation we're seeing isn't a result of a hot economy needing to be kept in check, it's the fact that 40% of China's production is on lockdown and just about every product made, regardless of where it's made, is relying on part(s) coming from China. Supply is constrained and therefore prices are rising. Likewise, supp…

Some of it is from greed. Inflation is 8.5% but almost all the major food producers have raised prices by ~15%.

A lot of commodity inputs into food production are up way more than 8.5% (e.g., corn, wheat). And a lot of the farmers inputs (e.g., energy, fertilizer) are up more than 8.5%.

The 8.5% is a weighted, blended average of a lot of things.

So it could be reasonable that if you were selling bread, that the price would need to go up more than 8.5%.

The question is whether their profit margins are up? I don't know.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#213

Post by [deleted] »

bobthepanda wrote: post #188
JumpCrisscross wrote: post #174

Earlier quoted context omitted.

> we're still producing fewer units than we were producing in the 70's--when the population was ~60% of what it is now The population was growing around 1.1% a year in the 70s; it was 0.75% the last decade and is currently between 0.1% and 0.25% [1]. [1] https://united-states.reaproject.org/analysis/comparative-in...

To compare to housing starts, you need to compare to absolute numbers. You also need to consider the fact that household sizes are trending downwards pretty consistently, so there needs to be more houses for the same number of people.

[deleted]

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#214

Post by neffy »

riku_iki wrote: post #111
neffy wrote: post #84

Earlier quoted context omitted.

Yes it's the perfect storm for economic theories... increases in the money supply and actual product shortages both causing inflation at the same time. Meanwhile increasing interest rates are in a nasty intersection with banks and other lenders stuck with low interest 30 year loans on their books, which make them very vulnerable to any new lenders. definitely popcorn time.

> with low interest 30 year loans Are those loans supported by other low interest loans they took themself?

Not usually in the bank's case - we have to hope - and if they are hopefully the various buffers against duration mismatches are sufficient - but then again this was the reason why Northern Rock and a bunch of other lenders went under in the 2008 crash.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#215

Post by riku_iki »

gruez wrote: post #195
riku_iki wrote: post #157

Earlier quoted context omitted.

But market is not economy.

It trickles down. If the banks knew the interest rates are going to rise at the next fed meeting, they're not going to wait until the announcement to raise their rates. That means the effect of a rate increase is felt way ahead of it being announced.

> they're not going to wait until the announcement to raise their rates

they will do what market will allow them to do. One bank can raise rates, but others won't, they will secure pre-hike loans, and win customers because of lower rates.

Also, I am not sure if commenter above referred on loan rates market or maybe stock market..

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#216

Post by ben_w »

snikeris wrote: post #175
ben_w wrote: post #158

Earlier quoted context omitted.

> I’m super interested in what investing looks like in 50-100 years as the population starts collapsing I don’t think it’s possible to forecast economics on those scales. If I was cryonically preserved and woken up in 2122, I would be equally willing to believe we were declining or stagnant for the reasons you give… or that we had solved AI and von Neumann replicators and that the planet Mercury had been fully disman…

Before being frozen, what would you do w/ your current wealth to ensure you have something of value in the future?

There’s no way for me to ensure that outcome given I believe the nature of the world economy is not forecastable that far ahead.

In the Dyson swarm scenario, assuming constant population, the productive capacity per person is 2500 times higher than the current global output, and a random act of rounding-error charity would give you more than Musk, Bezos, Zuckerberg combined, and it won’t matter if you have nothing (unless your sense of self worth exists only by the size of your bank account).

In the stagnant scenario, you might be OK with property, if you can be sure it will be maintained in the meanwhile.

In a decay scenario, I wouldn’t even want to guess what’s resilient, but houses will be fairly redundant due to oversupply.

But those scenarios were deliberately chosen as illustrative outliers; there are options between them, and I would do no better with making the right choices there — a limited AI that makes one sector redundant would destroy any investment I made in that sector while also making the output of that sector too cheap to bill separately, much as digital computers have done to the human profession of “computer”.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#217

Post by CuriouslyC »

gruez wrote: post #204
CuriouslyC wrote: post #191

Earlier quoted context omitted.

Housing inflation is also exacerbated by low interest rates. I think severe taxes for unoccupied homes is a better solution than bumping rates though, as houses are already completely unaffordable for most and a rate hike just makes that worse for many while not limiting firms that buy in cash.

>I think severe taxes for unoccupied homes is a better solution than bumping rates though Yeah but unoccupied units is only a few % in the hottest housing markets. This makes sense, considering that the opportunity cost of leaving a home empty is higher if the rent is higher. Because of this I'm inclined to believe it's popular-but-ineffective intervention, like banning foreign buyers (which also make up a few % of o…

I'm sure there are a few different segments that could be targeted depending on the area. Housing inflation really does need to be solved without impacting the ability of a median income person to afford a house though. Housing affordability is one of the biggest economic problems of the modern age.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#218

Post by 30944836 »

mensetmanusman wrote: post #140

It’s always good to remind people that: GDP ~= Population * Productivity If your population growth flat-lines (which it did last year), productivity has to compensate. Can productivity compensate if the average age is getting older (people tend to be less productive after a certain median age)? One reason investing in index funds makes sense is the underlying assumption that global population growth keeps increasing…

>GDP has to be at certain levels to support different types of economic activity. E.g. at some point, GDP might be low enough that new semiconductor research isn’t affordable (because all the workers are used up caring for the elderly for example).

The good news is, this won't happen in the US, at least not in the 21st century. So if you're an American, feel lucky.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#219

Post by dragonwriter »

russdill wrote: post #199
mensetmanusman wrote: post #140

It’s always good to remind people that: GDP ~= Population * Productivity If your population growth flat-lines (which it did last year), productivity has to compensate. Can productivity compensate if the average age is getting older (people tend to be less productive after a certain median age)? One reason investing in index funds makes sense is the underlying assumption that global population growth keeps increasing…

I feel like you're using that equation in a bit backwards way. If suddenly, everyone between the ages of 0 and 5 vanished, it would have a huge effect on the population, but at first take, zero effect on the GDP since presumably that age group is not involved in production. With a second approximation, you might say that GDP would increase since parental childcare is not part of the GDP and those parents could instea…

> If suddenly, everyone between the ages of 0 and 5 vanished, it would have a huge effect on the population, but at first take, zero effect on the GDP since presumably that age group is not involved in production.

That age group is involved in production (e.g., in media.)

But not lot, so, yes, the narrow first-order GDP effect would be very small.

> With a second approximation, you might say that GDP would increase since parental childcare is not part of the GDP and those parents could instead be adding to the GDP.

I suspect second order demand side effects would probably be more strongly negative that second order supply side effects would be positive. You can't predict GDP effects from labor supply side effects alone.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#220

Post by gilbetron »

omginternets wrote: post #51
matthewdgreen wrote: post #29

Earlier quoted context omitted.

Maybe also losing 1.1 million people (according to the CDC's "excess deaths" website) wasn't that good for our economy either.

I really don’t want to sound calloused because caring for the weak and the elderly is a pillar of civilizations, but my impression was that the bulk of “excess deaths” were not among the most economically active populations. I could just as easily see this having the opposite economic effect: reducing the burden on the state for such things as retirement and Medicaid.

A couple of things. First, it isn't just deaths, a lot of people were hospitalized and/or have long-term effects because of contracting Covid. This tends to be in younger populations (although not young), because older populations tend to be the ones that just die.

Second, a lot of people retired well before they usually would to stay out of the path of covid or covid-induced craziness. This is a big part of the school bus driver shortage, for instance. A lot of older people drove school buses for a bit of extra cash, and to be around kids. Wisely, a lot of them decided to stop doing that, and might not come back for a while.

So it isn't just deaths that are the reason for a reduced working population, although that has an impact, too.

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