Seems like a lot of things are in play as far as the US economy is concerned:
We’re still not out of the pandemic, we have likely another 6 months until we have some resemblance of normal
Infrastructure bill and corporate tax rates - who knows what the final bill will look like, after Congress slowly neuters it over the next 3-6 months
Housing market - seems to be on fire, no matter where you look. Housing values have far outpaced wages, and many people will be stretching themselves to afford their houses. Interest rates may rise, which would cool the market somewhat
Jobs - many, especially on the low end of the economic scale are still out of work
My personal prediction is that we will see higher inflation that we’ve been used to over the past 13 years. Wages will be a laggard, and many people will be hurting. As far as politics are concerned, we will see another 2010 with Republicans capitalizing on people’s outrage and retaking control over the House and potentially even the Senate.
Part of the problem is that America left behind a free market economy some years back, something which might have made predictions less problematic. Today, instead, the Fed is inserting itself everywhere into our economic affairs. This results in the old adage, “don’t fight the Fed”, coming into play with increasing frequency.
About the only forecast I’m able to conjure, free and worth every penny, is that when economic change happens it will occur (relatively) abruptly. This happened last time in the 2008 debacle. Very few people saw that coming. I certainly admire and respect those who did, but I’m not among them. Instead I was blind as a bat until we were well into that mess.
Heck, we could already be in a downward spiral and I wouldn’t know. And I did quite well in economics in college, too! Means nothing.
agree w/ Shinobi about market manipulation and asset bubbles. As far as I remember though a lot of people on FWF did call out the 2008 real estate bubble… So we could harness that collective genius
If you call it out in 2003, does it count ? And if you call a real estate bubble without realizing what was driving it and how it would unravel, does it count? I don’t remember if anyone called it until Lehman failed and we all learned about CDOs.
On the one hand, human stupidity knows no bounds. On the other, digital items have been trade-able for over 20 years. Someone I knew back then spent a few grand to buy some in-game items for something like Ultima Online – a high level character and some weapons/armor. He then used that character to speed up leveling up a few of his own characters and acquire “rare” items to sell on ebay. In a way it was an investment (and a job that didn’t pay all that much, but he had fun). Some NFTs are tied to in-game items (like “land” and playable characters), which could be developed and be worth more in the future (if the game becomes popular and people remain stupid). But the NFTs that people talk about are just tied to images (“art”), or worse, the URL of an image, which could vanish. It’s utterly stupid. As Elon so cleverly put it, NFTs are a vanity trophy. Or at least that’s my interpretation of what he’s trying to say.
More relevant would be mortgage + insurance + property tax, no? Not sure which way that would shift things.
Sure, the monthly mortgage loan payments are lower when mortgage interest rates are near zero (even when the property values are inflated). But that doesn’t necessarily translate to more affordable housing by itself. The other components of the cost are not so greatly affected by the Fed interest rate policy.
An evaluation like this ultimately embraces politics. For example looking back most recently, the pandemic has surely disrupted economies all around the world. But there are (relative) winners and (relative) losers. Is it good strategy to disturb and disorder the economy of other countries if that results in advancing your own political goals? I think Americans would answer “no”. We do not operate that way, certainly not on purpose.
China might have a different answer. It’s possible the pandemic, which surely has had massive economic impact world wide, will also advance their long term goal to take over both Hong Kong and Taiwan. China plays the long game. They know the pandemic will ultimately subside. If by then they fully control Hong Kong and Taiwan, I’m confident they would view that as a major win.
But not to drift too far afield from nasheedb’s topic, that win should it materialize will have come amidst MASSIVE economic impact virtually everywhere, certainly including here in the USA. So it’s fair to ask: does China have other goals for the next 12-24 months which could hit our economy? And how about Russia or Iran? Again, it is very difficult to estimate timing. But surely those other powers could have plans which embrace negative consequences for us. I mean, when you consider how well COVID-19 has worked out for China, why should they not be considering a second act, and inspiring copycats as well?
I see this is a continuation of paying premium for art work that you can get a copy for several orders of magnitude less. Or real diamonds vs synthetic/cubic zirconia. For physical goods, you could make a case for unique materials, technique, etc. Maybe. Although most people wouldn’t make the difference.
But the digital goods, there is simply no distinction other than someone decided that one copy of the digital media was just much more valuable than the others. My rational feeling is that it’s utter BS. But I also know not to underestimate the stupidity and vanity of some people. On the flip side, if it pays some lucky/opportunistic artists for their work, maybe it’s fine. Let them live but count me out on NFTs. It’s more or less gambling vs. investing in my opinion.
As far as the next 12-24 months, my guess is slightly higher inflation due to increased money supply, increased savings and pent up demand for travel/entertainment/dining. Once the gravy train effect stops though, I have no idea since I don’t know how much of this has already been priced in.
I live in Central/Northern CA, (some might say “back woods”). But building new homes in my small town is going out of sight. I’m talking about starting price in the $500k + area. There are hundreds of new homes on the market today.
I realize that many people working in the Bay Area/SF are the real target of our housing boom.
Folks don’t mind driving a couple hours plus to & from work to afford a house in my town. Compared to the housing costs in San Jose or SF area. Salaries probably aren’t going down for the folks I’m talking about.
Actually when you break it down, these high tech business folks can do a lot of their work from home. Working from home with the pandemic happening the past year is common now.
We will see the happenings in the next 2 years. I think we see it now, in many aspects.
I don’t have data to back it but I believe that the chart woudl be pretty similar if you add in insurance & tax. Tax and insurance would have gone up over time gradually but might add ~$100/mo today vs 1989 net.
Do you live in Texas? I seem to recall you do but I might be confused. If you’r ein TX, then the insurance and property tax are probably more % of your cost than normal.
They’re based on the property “value” though. Whereas mortgages are based on interest rates. 9% interest rate vs 2.5% will massively shrink the “mortgage payment” portion on a 30yr amortized.
This article estimates 1.1% nationally for just the property tax, I haven’t researched it much either.
Hard to guess the insurance rates, but a relative with crappy house is still paying ~$1500 a year or something. That’s more than me with my below median value nice house, but I have a higher deductible of course. Poor people can’t afford high deductibles.
Maintenance/ repairs is usually rule-of-thumb 1% a year. Doesn’t scale for massively expensive places but with median, seems like maybe reasonable?
Add those three and you’re at ~3%. (Idk if utilities have been flat with inflation, either).
While HK is f’ed, why would you mention Taiwan in the same sentence? Taiwan is a completely different story. It wasn’t “leased” out to another country to rule, does not and will never recognize that it “belongs” to mainland and would be very costly to take by force. The pandemic hasn’t changed anything – Taiwan got it under control pretty quickly.
Agreed. It is certainly true that the Taiwanese people, who are free people, want nothing to do with Red China.
Problem is not in Taipei City, ROC. The problem is in Beijing. Leaders there have long claimed Taiwan as their own, a part of China. Most recently, earlier this week, they initiated an incursion with their aircraft, flying into Taiwanese air space. This violation is the second by Red China, into Taiwanese territory, within the last few weeks. Here is the story about this week’s affront by the Reds:
I see the communists as possibly laying a predicate here. You may be aware of the most recent meeting, in Anchorage, between high level Chinese representatives and those of the Biden administration. Bear in mind this took place on American soil. Diplomacy was cast aside. The communists were vicious and disrespectful with their remarks directed at our people, including especially our Secretary of State, Tony Blinken. Here is the story:
This stuff, and more by the communists, could be leading somewhere . . . or not . . . within the next 12-24 months . . . or not. I’m only reporting what is already known and obvious. So:
Were China to move against Taiwan would that impact the American economy? What sort of reaction would that evoke here? What would it do to the markets here and worldwide? People need to look elsewhere for answers to such questions. I don’t have 'em. And I make no predictions.
However, I do believe it is important to remain aware of what is happening, especially where the Chinese communists are concerned.
I’d much rather have that say high income tax (like in TX) You can control the cost of your house (nice small home in a nice neighborhood.+ paying it is easier vs filing income tax
? And if you call a real estate bubble without realizing what was driving it and how it would unravel, does it count? I don’t remember if anyone called it until Lehman failed and we all learned about CDOs.
