Are peoples head in the sand about the looming economic catostrophe?

BUMP

Sorry dude - if there is one thing you should know about living in America (assuming you do) it's that NOTHING gets in the way of making money. And American has survived off the same flawed principals and janky foundations you speak of (which I objectively don't disagree with) for decades but it just doesn't matter - drop interest rates, price of oil, print more cash, write off debt, throw debt under the mattress - whatever dude, everything will be just fine.

#YOLO

As Congress has inflated the dollar throughout the pandemic creating an additional 1/3 of currency in circulation, what have the Chinese done with the Yuan? Nothing and just sat back and watch out economy destroy itself.

Ol Dirty Hog wrote:

As Congress has inflated the dollar throughout the pandemic creating an additional 1/3 of currency in circulation, what have the Chinese done with the Yuan? Nothing and just sat back and watch out economy destroy itself.

Where is the inflation?

Even before Covid we've been running a surplus of money into the economy (Deficit however you want to categorize it.). And we were having a hard time meeting are healthy inflation goals.

The speed limit of the economy is the resources and workers available. You go beyond that "slack" and you get inflation. There has not been inflation because are economy can absorb the money. Go beyond that ability to absorb and you get inflation.

It’s going to be a two part hit. Consumption is down and is going to stay low. I’ve realized you don’t need to eat out 3 times a week, you don’t need to buy a lot of stuff and social activities are over rated. It’s better to stay home.

The bigger time bomb is housing. Evictions and foreclosures are stayed . Tenants are way behind in rent. Landlords don’t have the money to pay mortgages and property taxes . When the moratorium ends the Bubble collapses. Plus. Businesses now realize they can operate with a lot less space. Commercial rents are already nosediving.

As current leases for office space expire and business do not renew because they have their employees work from home, the commercial real estate industry will tank and property values will plummet. This will in turn lead to tax assessment reevaluations an decreased tax revenue for municipalities. Couple this with the decreased need for business support services like coffee shops, lunch places, and all the other services that commuters relied on, things will crash even further. Speaking of commuters, without them, mass transit agencies will fail and transportation agencies will see less revenue from gas taxes. If people do not need to go to the office, their will be decreased need for business attire, not only suits, but also business casual clothing, so retail clothing sales will also tank. Drycleaners will see a big hit in business. With people isolated in their homes for work, there will be less "watercooler" talk and with less discourse there will be less free exchange of ideas. Has anyone noticed that most newspapers suspended their comment sections right before COVID hit and the 2020 campaign season started in earnest? This effectively prevented the veracity of news articles being questioned and squelched debate.

I actually agree with many of these concerns until you got to the last portion. BWAHAHA the concept that comment sections of online news is the great equalizer...

Buy physical silver.

Salvitore Stitchmo wrote:

Sorry dude - if there is one thing you should know about living in America (assuming you do) it's that NOTHING gets in the way of making money. And American has survived off the same flawed principals and janky foundations you speak of (which I objectively don't disagree with) for decades but it just doesn't matter - drop interest rates, price of oil, print more cash, write off debt, throw debt under the mattress - whatever dude, everything will be just fine.

Yep, here lies the ignorance. We are running 70 billion a month trade deficitis dependent on that money printing. What happens when the dollar crashes? Those trade deficits get much bigger. Then we print more money to pay for the deficits and dollar crashes more? This is the same vicious cycle that other countries that have had the reserve currency have gone through monetarily. We know from history exactly how this ends yet America right now is so ignorant to think that we can continue to consume what the rest of the world produces by way of printing paper backed by nothing.

anonamoose2222 wrote:

Curious, alot of white collar people I know dont seem to be phased about the economy.

There is zero chance that this whole situation wont materialize into a crisis that hits them. Massive white collar layoffs and paycuts, home foreclosures, IRA raiding, and asset impairments are simply unavoidable within the next 2 years.

They seem to not understand how spending multipliers work in society or that big companies can and do go bankrupt.

Furthermore alot of people think that peoples consumption habits are not forever changed.

At a very obvious level, lots of people are going to succumb to lifelong depression, depressed people participate little in the economy.

There are a LOT of experts predicting just the opposite...that 2021 specifically will see an economic boom.

I never buy into either hype nor doom and gloom. I simply do what should be done:

1) Invest 15% or more of your income into retirement accounts made up of diversified stock mutual funds. You do this in good market times and bad market times...as long as you have a job. Like clockwork, never ever missing a contribution. If 15% takes you above what you are allowed to contribute to a 401k plus IRA, then add to a non-retirement mutual fund(s) that you plan to not take from until you are retired.

2) Get out of debt as soon as possible while still investing in retirement accounts. Ultimately you should retire with ZERO debt including a paid-for home OR enough extra invested so that you can handle rent increases the rest of your life.

3) In retirement, have three YEARS of expenses saved outside of stocks in case the stock market sinks a lot. The three years is there to give the market time to recover. You should start out your retirement this way, and then depending on your age when and if you have to deplete this Emergency Fund, you either do or do not replenish it.

Well before Covid the market could not stand a market interest rate. Now it maintains the fiction of a return normalcy with more Fed QE, and now Congressional handouts. The shock will come when the reality of a phony economy reaches a breaking point, made worse by another $1.9 Trillion of excess.

Ghost of Igloi wrote:

Well before Covid the market could not stand a market interest rate. Now it maintains the fiction of a return normalcy with more Fed QE, and now Congressional handouts. The shock will come when the reality of a phony economy reaches a breaking point, made worse by another $1.9 Trillion of excess.

Per Milton Freidman after a massive expansion of the money supply for 6 months the money just goes into peoples bank accounts. There is not inflation because there is no velocity. Then people realize they have bigger bank accounts and start spending and in about 12 months inflation hits. We are about a year after the first major expansion. CPI which is totally a rigged metric is already rising. Things like homes and raw materials have shot up, food has risen. As mentioned the market could not stand Powell raising interests 3 years ago. Now we are $10 trillion more in debt so the ability to raise rates to fight inflation is gone as well. The US and Europe are both in terrible places monetarily. An additional stimulus when the last one is not spent and Covid is rapidly declining is an absolutely terrible idea.

We're going to be in a long economic depression, though it might not appear like one on the surface. We're already in an economic recession by definition (consecutive quarters GDP decline). A depression is a term that is somewhat subjective and not used by Economists anymore. In fact, during the Great Depression the economy actually grew, slowly. Think of a depression more in terms of standard of living and other subjective qualitites.

* We've already borrowed something like $5 trillion for fund the coronavirus lockdowns. The bill is coming due. It comes out to around $15k per American. It's as if everyone in the U.S. just inherited a credit card maxed out to $15k and has to pay it off. Governments are already in the process of passing the tax increases. In Washington state there is a income tax bill making rounds through the legislature. Double-digit property tax increases already taking effect in my city. The local university already has a budget shortfall of over $50 million. Remember in 2007/08 how controversial it was for the government to borrow $700 billion to fund the bank bailouts and how in the following years there was so much political strife over state government austerity measures, tax increases (comes the TEA Party). We're in for that multiplied many times.

* "Virtual" economy causing a misollaction of resources, mismatch of job skills, that will take years to iron. For example, let's say your career and passion before 2020 was Wedding Planner or Violin Player. The career simply doesn't exist in 2020-2021+ because weddings and symphonies are out of comission. Are you going to really forego 2+ years of income and executing your passion and try to revive it in 2022+? More likely, you'll try to retool your skillset for some WFH job that is already overcrowded with ambitious entrants into the profession. Lots of insourcing/outsourcing and downwards pressure on wages. Lots of white collar employment will turn into "gig" work.

* Luxuries that workers have enjoyed, such as business travel (Everyone knows that business travel is a disguise for an all-expenses-paid vacation), lavish Christmas parties, unlimited bus/subway passes in the city, are going away. It's likely that many employers will slash health insurance benefits because of WFH.

* Big events (e,g. concerts, marathons, football games) will be massively scaled down. Price of permits from the city and rent-a-cops will have skyrocketed to increase tax revenue. Lots of new virus regulations to curb activities such as tailgate parties. Businesses that used to sponsor charity road races and did not have to expend that budget in 2020-2021+ will not be able to find the budget in 2022+.

* International travel will be down for the foreseeable future. Vaccine passport requirements and skyrocketting ticket prices will cut down the customer base significantly. But there's a bigger problem than that. We live in the Instagram culture, where things like travel are done for the sole purpose of getting Likes. 2+ years w/out travelling the world will have already adjusted how people get Likes without posting pictures of them holding up the Leaning Tower of Pisa and whatnot. Incentive to travel will be down because of this.

* Virtual economy has freed up a lot of money to be "invested" but it's largely going into speculative assets like Dojecoin or TSLA.

jamin wrote:

* We've already borrowed something like $5 trillion for fund the coronavirus lockdowns. The bill is coming due. It comes out to around $15k per American. It's as if everyone in the U.S. just inherited a credit card maxed out to $15k and has to pay it off. Governments are already in the process of passing the tax increases. In Washington state there is a income tax bill making rounds through the legislature. Double-digit property tax increases already taking effect in my city. The local university already has a budget shortfall of over $50 million. Remember in 2007/08 how controversial it was for the government to borrow $700 billion to fund the bank bailouts and how in the following years there was so much political strife over state government austerity measures, tax increases (comes the TEA Party). We're in for that multiplied many times.

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Who are we borrowing our own money from?

Dunno. Many of our expectations have been subverted by the pandemic and the response.

I'll believe it when I see it. Hard to see how the economy craters NOW that we are on the way out of this mess.

anonamoose2222 wrote:

Curious, alot of white collar people I know dont seem to be phased about the economy.

The word is "fazed." Now you know.

Mate, my entire post was sarcasm. Nice pick up

"Here in lies the ignorance" is about spot on my friend!

Salvitore Stitchmo wrote:

Sir Adam Smith wrote:

Yep, here lies the ignorance. We are running 70 billion a month trade deficitis dependent on that money printing. What happens when the dollar crashes? Those trade deficits get much bigger. Then we print more money to pay for the deficits and dollar crashes more? This is the same vicious cycle that other countries that have had the reserve currency have gone through monetarily. We know from history exactly how this ends yet America right now is so ignorant to think that we can continue to consume what the rest of the world produces by way of printing paper backed by nothing.

Mate, my entire post was sarcasm. Nice pick up

"Here in lies the ignorance" is about spot on my friend!

I am not being sarcastic. But we will "mostly" be just fine. There will be some parts of the economy in depression for a while. Especially jobs that have been eliminated or industry that has been greatly hindered among the conditions.

In terms of the deficit. Not a problem. Never has been. In fact were not even trying.

We could create a lot more digital money and still be fine.