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Earlier quoted context omitted.
Can you please not create accounts to use HN for political flamewar? This is the sort of thing we're trying to avoid here. https://news.ycombinator.com/newsguidelines.html
I'm sorry, what? Everyone commenting on this article is discussing inflation.
> So as long as the moves don’t go too far, increases in inflation and interest rates would be a sign the global economy is returning to a more prosperous equilibrium like the one that prevailed before 2008. Pre-2008 was quite far from a prosperous equilibrium, otherwise it wouldn't have caused the crisis.
I'm not familiar with a world where interest rates and inflation aren't low. What should I expect?
It's almost guaranteed we are not leaving a world of low interest rates (vs historical norms of the past 30 or 50 years). Most of the global economy is loaded up on debt: Japan, China, the US, large parts of Europe. These days it's the exception when a country has a modest debt context, whether at the government level, corporate level, or household level. Countries that we normally think of as very well off, such as…
Earlier quoted context omitted.
Back in the 1970's a 12% interest rate on your mortgage was considered pretty good! It basically reduces buying power for real estate. Using the google mortgage calculator and assuming a $1500 max monthly payment. At a 3.92% (today) rate you can borrow ~$320K At an 8% rate you can borrow ~$200K A 38% decrease in buying power. It's already happening in Canada as the gov't is trying to slow down the real estate market…
> as the gov't is trying to slow down the real estate market This is not the reason for mortgage stress test, just one of its effects. The main reason for the regulation is to avoid a tsunami of bankruptcies when interest rates eventually increase.
I am not buying that inflation is low. Property taxes and housing cost (especially rent) has doubled in last 10 years in New York. I think so has the medical costs. Just because gas prices are low dose not mean inflation is low
This is why we calculate these numbers using a broad basket of various goods and assets.
I'm not familiar with a world where interest rates and inflation aren't low. What should I expect?
It's almost guaranteed we are not leaving a world of low interest rates (vs historical norms of the past 30 or 50 years). Most of the global economy is loaded up on debt: Japan, China, the US, large parts of Europe. These days it's the exception when a country has a modest debt context, whether at the government level, corporate level, or household level. Countries that we normally think of as very well off, such as…
Inflation is how a debt load becomes affordable again.
Is that not correct?
I'm not familiar with a world where interest rates and inflation aren't low. What should I expect?
It's almost guaranteed we are not leaving a world of low interest rates (vs historical norms of the past 30 or 50 years). Most of the global economy is loaded up on debt: Japan, China, the US, large parts of Europe. These days it's the exception when a country has a modest debt context, whether at the government level, corporate level, or household level. Countries that we normally think of as very well off, such as…
That's a little mixed up. The effect of inflation is to reduce the effective size of debt, not increase it. So if you owe someone $500US(which has a barter value of ~100 lattes), and a burst of inflation hits the dollar such that the price of a latte doubles, then you only need to pay back 50 lattes to the lender. You win!
Obviously it's the holder of the debt that ends up on the hook for this. Which is why interest rates of lots of debt get indexed in some way to adjust with inflation (or things like the prime rate, which itself tends to track inflation). So the net effect is complicated. But on the whole it's the lenders of money who stand to lose the most when inflation rises. Those who have borrowed come out ahead, on average.
So the net effect of inflation (assuming no second order effect like a global crash, yada yada yada) is to effect a wealth transfer from the lenders of money (e.g. banks and institutional investors) to the borrowers of money (consumers and governments).
There are some very smart people who think this isn't necessarily a bad thing at all.
Earlier quoted context omitted.
NY Case Schiller home price index is flat to slightly down over that period, actually. This is for the NYC metro area. I could be convinced that rent has doubled with housing price flat, but I'm guessing not? https://us.spindices.com/indices/real-estate/sp-corelogic-ca...
Metro area is a much larger sample size though; for certain rapidly gentrifying areas, like Long Island City, I could see there being a large increase which gets drowned out in metro-wide statistics.
I am not buying that inflation is low. Property taxes and housing cost (especially rent) has doubled in last 10 years in New York. I think so has the medical costs. Just because gas prices are low dose not mean inflation is low
My rent has increased about 10% over the past decade... And I live in neighborhood that pretty rapidly gentrified ~6 years ago. Yours doubled? Really?
I just looked up the current rent on the apartment complex I lived in from 2005-2009 in another part of the country. My rent didn't increase in those 4 years I lived there and the current rent is basically the same I was paying back then when you take into consideration CPI inflation.
Two data points, for what its worth.
I'm not familiar with a world where interest rates and inflation aren't low. What should I expect?
It's almost guaranteed we are not leaving a world of low interest rates (vs historical norms of the past 30 or 50 years). Most of the global economy is loaded up on debt: Japan, China, the US, large parts of Europe. These days it's the exception when a country has a modest debt context, whether at the government level, corporate level, or household level. Countries that we normally think of as very well off, such as…