The Rate of Return on Everything, 1870–2015 (2019) • Hacker News Board

Re: The Rate of Return on Everything, 1870–2015 (2019)

#141

Post by esyir » Thu, Jun 13, 2024, 4:13 AM UTC

cyberax wrote: post #103

javednissar wrote: post #79

Earlier quoted context omitted.

I don’t understand the logic here, the land itself will be valuable regardless of whether or not there is a house there or an apartment building. The principal component of the cost of buying a house or a condo is the associated land cost. Building more density gives more people access to that land. If your contention is that more housing is bad because it draws more economic activity which raises land values then th…

It's the "spiral" part (i.e. self-reinforcing vicious process). Dense cities allow employers to get access to a larger pool of workers, giving them a competitive advantage. This in turn makes cities more attractive for workers. Since land area is conserved and people won't commute for much more than 30 minutes, it means cities have to increase the density. This in turn makes cities more attractive for employers, driv…

Except famously Japan, even Tokyo, where housing costs have consistently stayed low.

Re: The Rate of Return on Everything, 1870–2015 (2019)

#142

Post by chii » Thu, Jun 13, 2024, 4:15 AM UTC

pessimizer wrote: post #60

pineaux wrote: post #2

So basically, housing is the best investment vehicle based on all the numbers.

Yes, but only because you can overcharge rents to people who can't afford housing. If everyone could afford housing, it wouldn't have any return. The return on housing rents is equal to the minimum (psychological) expectation that landlords expect. It's an arbitrary vig/rake, and like all arbitrary vigs/rakes, it's around 5%. It's an expected gift for owning the house . It's a gratuity for being wealthy enough that y…

> It's an expected gift for owning the house.

it's not a gift (implying it's free).

Owning capital has a cost - the cost of capital (aka, the cost of money). At minimum, the cost is the risk free interest rate.

The owner paid a pretty penny (or borrowed, at a higher than risk-free rate) to buy the property. The previous seller did the same, or invested capital in building the property itself. So therefore, "owning a house" is the last chain in a sequence of investments, all of which costs money.

Re: The Rate of Return on Everything, 1870–2015 (2019)

#143

Post by neilwilson » Thu, Jun 13, 2024, 5:10 AM UTC

Etheryte wrote: post #123

neilwilson wrote: post #114

Earlier quoted context omitted.

"By printing more money you're not making more pie, just dividing the existing pie into thinner slices." So if you need a haircut but can't afford one, and I give you a new £10 note to get a haircut, and the barber works the extra 10 minutes to do that haircut and earn that £10 there's no new pie there. Looks like 10 minutes more output to me. "Printing more money" does make more pie. That's exactly what happens ever…

This mixes up where the value creation takes place. Shitcoins are a good example of this fallacy, I can mint ten billion neilwilson-coins right now and hand them out, it doesn't mean any new value has been created. Perhaps an easier way to understand this conceptually is to think of money as a loan, because that's what it essentially is, a pair of credit and debit. Taking out a loan in and of itself it doesn't create…

How does it mix it up?

The example was a barber. There is no difference between transferring an existing credit to the barber and generating a new credit for the barber. The result is the same - an additional haircut is performed.

In the case of a new credit that is an additional haircut that wouldn't otherwise have been performed because the person wanting it has desire, not demand (desire backed by the ability to pay).

So I disagree. We have a monetary economy. Since the whole point of the game is to 'make money' people will create more output if you offer them money in exchange for doing that.

The 'loan' as you call it drives the new production, as any loan does since all loans are, necessarily, new money.

Re: The Rate of Return on Everything, 1870–2015 (2019)

#144

Post by Etheryte » Thu, Jun 13, 2024, 9:52 AM UTC

neilwilson wrote: post #143

Etheryte wrote: post #123

Earlier quoted context omitted.

This mixes up where the value creation takes place. Shitcoins are a good example of this fallacy, I can mint ten billion neilwilson-coins right now and hand them out, it doesn't mean any new value has been created. Perhaps an easier way to understand this conceptually is to think of money as a loan, because that's what it essentially is, a pair of credit and debit. Taking out a loan in and of itself it doesn't create…

How does it mix it up? The example was a barber. There is no difference between transferring an existing credit to the barber and generating a new credit for the barber. The result is the same - an additional haircut is performed. In the case of a new credit that is an additional haircut that wouldn't otherwise have been performed because the person wanting it has desire, not demand (desire backed by the ability to p…

This is a mixup of money and wealth. Money is not wealth, and in the same vein, the point of the game if you'd like to call it that, is not to make money, but to become wealthy. These are two very different things.

Wealth is possession of real assets, natural resources, real estate, valuable companies, in classical econ terms, any scarce resource. Money is not a scarce resource, for nearly marginal cost we could create a near infinite amount of it (and in the digital age of banking we often do create large amounts of it with no direct cost). You can't create more oil, land, houses etc without incurring considerable costs, whether it be in the form of effort, time or etc and that's what makes those resources scarce. Money is scarce if you look at it on a personal level, you can't just create more money for yourself, but that doesn't make it scarce on a global level.

What might create some confusion is that wealth is often measured in money, but that doesn't make it the same thing. Wealth is real resources and money is the means we use to decide who gets how much of those real resources.

Re: The Rate of Return on Everything, 1870–2015 (2019)

#145

Post by bombcar » Thu, Jun 13, 2024, 1:16 PM UTC

darth_avocado wrote: post #43

mensetmanusman wrote: post #37

Earlier quoted context omitted.

Yeah, it would be interesting to have more transparent costs, especially with inflation. New siding every 20 years is $40k, a new roof might be $30k every 25 years, a new driveway, etc.

Biggest of them all: interest. On a $1M mortgage, you’ll almost pay $2M as interest over 30 years even at 7%. Historically interest was never as low as during the pandemic. And most people bought houses using mortgages. The average “cost” of owning a house is much more than the selling price, even before you account for the upkeep.

The mortgage interest is one of the few costs that people (sometimes) account for. Usually with a hand-waving "my mortgage payment is lower or about the same as my rent payment" - which ignores that a rent payment covers everything whereas the mortgage payment only covers principal, interest (and sometimes insurance and property tax, if escrowed).

Re: The Rate of Return on Everything, 1870–2015 (2019)

#146

Post by bombcar » Thu, Jun 13, 2024, 1:17 PM UTC

cmrdporcupine wrote: post #120

nradov wrote: post #107

Earlier quoted context omitted.

You should add it all up. Some of the things you purchased at Home Depot can be counted in the cost basis of the home and reduce your capital gains tax if you later sell it.

No capital gains at all on primary residences here in Canada. For better or for worse.

Really? Really? So if you bought a shack in Vancouver twenty years ago for a song and now it's worth the entire symphony orchestra you can sell it with no taxes?

No wonder prices up there have gone bonkers even by US standards.

Re: The Rate of Return on Everything, 1870–2015 (2019)

#147

Post by cmrdporcupine » Thu, Jun 13, 2024, 1:44 PM UTC

bombcar wrote: post #146

cmrdporcupine wrote: post #120

Earlier quoted context omitted.

No capital gains at all on primary residences here in Canada. For better or for worse.

Really? Really? So if you bought a shack in Vancouver twenty years ago for a song and now it's worth the entire symphony orchestra you can sell it with no taxes? No wonder prices up there have gone bonkers even by US standards.

Yeah 0. None other than land transfer tax which is very little. And if anybody suggested putting in a sane G7 standard tax policy around this, the baby boomers would come rip their head off and parade it around on a pitchfork.

Non-primary residence of course gets fully taxed.

Re: The Rate of Return on Everything, 1870–2015 (2019)

#148

Post by bombcar » Thu, Jun 13, 2024, 1:56 PM UTC

cmrdporcupine wrote: post #147

bombcar wrote: post #146

Earlier quoted context omitted.

Really? Really? So if you bought a shack in Vancouver twenty years ago for a song and now it's worth the entire symphony orchestra you can sell it with no taxes? No wonder prices up there have gone bonkers even by US standards.

Yeah 0. None other than land transfer tax which is very little. And if anybody suggested putting in a sane G7 standard tax policy around this, the baby boomers would come rip their head off and parade it around on a pitchfork. Non-primary residence of course gets fully taxed.

It's ... actually a reasonable policy, in some way. It can be quite annoying in the USA when you (if single) have more capital gains than you get "for free" ($250k which sounds like a lot, but if you bought in CA 20 years ago and are now moving, that can get eaten up quickly - a $300k house in 2004 would be almost $500k today from inflation alone) you pay tax.

Then if the house you bought with the proceeds drops in value and you have to sell, you can't claim a deduction for the capital loss.

Of course all capital gains taxes whatsoever have the hidden inflation problem, where you get taxed on the inflation caused by ...

Re: The Rate of Return on Everything, 1870–2015 (2019)

#149

Post by cmrdporcupine » Thu, Jun 13, 2024, 1:59 PM UTC

bombcar wrote: post #148

cmrdporcupine wrote: post #147

Earlier quoted context omitted.

Yeah 0. None other than land transfer tax which is very little. And if anybody suggested putting in a sane G7 standard tax policy around this, the baby boomers would come rip their head off and parade it around on a pitchfork. Non-primary residence of course gets fully taxed.

It's ... actually a reasonable policy, in some way. It can be quite annoying in the USA when you (if single) have more capital gains than you get "for free" ($250k which sounds like a lot, but if you bought in CA 20 years ago and are now moving, that can get eaten up quickly - a $300k house in 2004 would be almost $500k today from inflation alone ) you pay tax. Then if the house you bought with the proceeds drops in…

In my opinion all these policies which encourage housing inflation are just the result of western neo-liberal economies trying to cover over their abdication of reasonable retirement/pension policies.

Trudeau was on record a couple weeks ago basically saying "we can't let housing prices fall. if housing prices fall, people won't be able to retire" which is a fucked up admission that there's no way to "retire" without passing debt onto the next generation.

It's not going to end well. It either falls apart in crisis / housing bubble pop, or we end up with some kind of neo-feudalist future slowly developing over the next 100-200 years.

Re: The Rate of Return on Everything, 1870–2015 (2019)

#150

Post by mdnahas » Thu, Jun 13, 2024, 10:59 PM UTC

smarm52 wrote: post #73

> In fact, the long decline observed in the past few decades is reminiscent of the secular decline that took place from 1870 to World War I. > The fact that returns to wealth have remained fairly high and stable while aggregate wealth increased rapidly since the 1970s suggests that capital accumulation may have contributed to the decline in the labor share of income over the recent decades (Karabarbounis and Neiman 2…

Politicians in democracies favor property owners because they are a majority, reliable voters and are likely to stay in the district. Therefore, the tax and political policies encourage owning a house. Many families take inordinate risks to own a house when, with fairer rules, they would rent.