American Economics Thread

[AssassinsMace]

The US lies about its economy as much as they accuse China of doing it for theirs. The US lies over statistics. Yes how many times does the West use surveys saying the world is negative on China when “the World” is only Western countries surveyed?

If the US was doing great even better than ever, how come they're tight on money even when it comes helping out to their own allies? The US closest allies are doing horribly mainly because they're obeying the US and yet very little help by opening the US market more to allies. The US can't even spare digging for change in its pocket lying to the Pacific island nation of Palau that it was going to help them out if they spread anti-China propaganda for the US where now because the US lied and couldn't even hand out change from its pocket, Palau is now threatening to go to China. Those are macro indicators how bad shape the US is in. The US is so great of shape that they're angry China is cancelling agricultural orders left and right. The US doesn't need China yet they want to sell tens of billions of dollars every year in agricultural goods that are so important that it's always a top Presidential election year issue all the time.

 

[Arij Javaid]

It was meant to challenge the validity of the “ShadowStats”. If inflation was as high as “ShadowStats” claims it was - everything should’ve doubled in price in the 2010s. Yet no one can point to a single price that doubled in the 2010s..


Yes. Insurance pools risk. If the pool becomes riskier to insure, everyone pays more for protection. All insurance - life, P&C, and health - have both community rated and experience rated components.

If they weren’t confident, why is their spending on discretionary items so high? Why do they report in surveys that they are confident in their own personal finances?

The spending is high due to higher prices for necessary goods, not because of high demand. Inflation overscores consumer spending.

If Americans are so confident in economy, why is economy the single biggest issue with Biden??

 

[chgough34]

The spending is high due to higher prices for necessary goods, not because of high demand. Inflation overscores consumer spending.

Except it’s up in real terms and for discretionary items. That’s inconsistent with either household finance stress or household economic anxieties.

If Americans are so confident in economy, why is economy the single biggest issue with Biden??

No, it’s not. Immigration is “the single biggest issue” and the economy is a perennial issue and a consistent one where democrats underperform.

 

[MortyandRick]

The tax cuts didn’t change spending or investing patterns, the economy is invariant to their existence

Speculative. We will never know for sure unless all of them are reversed dating back to the 1980s.

For now, yes. But crises force action that can’t happen in normal times; Social Security solvency running in the mid-2

Wishful thinking. You'd have to reverse bush era tax cuts and bring back estate tax etc. I highly doubt the US will be able to bring that to fruition. They will just keep printing money.

If all government debt is refinanced at 5%, CX that would cause federal interest expenses to be ~6% of GDP which would be 1% higher than it was in the 1990s and growing at around ~0.2% of GDP each year (7% budget deficits at 5% interest rates with 3% inflation - 7% * 2% is 0.14% of GDP). It’s unsustainable but it can run on until the 2030s when social security solvency can force change, dramatically

Yes unsustainable. But please show sources for this calculation.

The U.S. is fairly unequal so lower values near the 25th percentile simply don’t move the mean, much if at all. And they obviously don’t move the median at all.

What are you talking about. It's a mean. Even if unequal, the value moves. The mean would love more of there is inequality.

 

[chgough34]

How about education and medical care?

No -

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[chgough34]

Speculative. We will never know for sure unless all of them are reversed dating back to the 1980s.

All the tax cuts don’t need to be reversed. Just the TCJA. Why would businesses stop investing with a tax hike if they have tons of dead cash on their balance sheets? It’s dead cash.

Wishful thinking. You'd have to reverse bush era tax cuts and bring back estate tax etc. I highly doubt the US will be able to bring that to fruition. They will just keep printing money.

No. You need to close budget deficits of ~5-7% of GDP and push them closer to 2-3% to stabilize the debt. So around 2-4% of GDP in costs. TCJA repeal is ~2%, cutting social security benefits to rich people is ~1%, and then uncapping FICA/OASDI is ~1%.

Yes unsustainable. But please show sources for this calculation.

The sources of the calculation are from Fred - look up deficits to gdp, cpi inflation, and the yield on a 1yr treasury.

What are you talking about. It's a mean. Even if unequal, the value moves. The mean would love more of there is inequality.

The mean is broadly invariant to small values. Poor individuals who are asset poor having incomes won’t move the mean much. And the median is also higher for 65+ than for 55-65+ despite the median 65+ individual not working which means that for at least 50% of the elderly population, they have accumulated so much wealth that they are saving money even without doing any work since their investment income, business income, rental income, unrealized capital gains, social security, and pension payments are higher than their living expenses

 

[MortyandRick]

All the tax cuts don’t need to be reversed. Just the TCJA. Why would businesses stop investing with a tax hike if they have tons of dead cash on their balance sheets? It’s dead cash.

Because bush era tax cuts adds the most to the deficit and is will make it hard to make a balanced budget.

No. You need to close budget deficits of ~5-7% of GDP and push them closer to 2-3% to stabilize the debt. So around 2-4% of GDP in costs. TCJA repeal is ~2%, cutting social security benefits to rich people is ~1%, and then uncapping FICA/OASDI is ~1%.

Getting all those through Congress would be almost impossible. US politics will not be able to bring that through. And that's the ideal scenario.

The mean is broadly invariant to small values. Poor individuals who are asset poor having incomes won’t move the mean much. And the median is also higher for 65+ than for 55-65+ despite the median 65+ individual not working which means that for at least 50% of the elderly population, they have accumulated so much wealth that they are saving money even without doing any work since their investment income, business income, rental income, unrealized capital gains, social security, and pension payments are higher than their living expenses

The number of 65+ still working is not a small number and they will skew the mean. 24% of those over 65 still work. So only 26% of those median income would be non working 65+ and accumulated wealth. The other 74% do not have that wealth or has to work for it.

 

[Chevalier]

Right. But that is counted in the car component of the CPI. The insurance didn’t get more expensive because of inflation, the insurance got more expensive because people are buying more of it.

Once again, you are incorrect.
Insurance price isn't determined simply because of demand, it's priced due to risk ie why is insurance for shipping for UK and Israeli cargo gonna be more expensive than Chinese shipping? Those Houthis taking out Israeli cargo ships like Fremen taking down Harkonnen spice harvesters is going to result in increased risk for the Insurer, hence higher premiums. At some point, that cargo is going to be uninsurable, hence why wars and conflicts and revolutions are uninsurable.

This isn’t insurance, per se, it’s the amount of housing reconstruction in P&C that’s more expensive. The insurance loads (the unique function of insurance) is the inflation and that is broadly constant

Have you thought that clients who are not angry don’t call about their mildly increased premiums and so your dealing with a selection bias?

Again, you have at best a pedestrian understanding of risk and insurance; builders and construction firms are required by law to have insurance eg workers accident, compensation etc which gets added to the consumer price.
When people are on the verge of rioting due to the cost of living crisis, they're not just talking about the price of eggs, they're also talking about insurance, their car registration going up twofold, or their home insurance ballooning out due to cost of materials and natural disasters due to climate change. People treat paying for their insurance like another tax, which it is in a way because some states mandate certain cover to be included as part of one's work eg professional indemnity, compulsory permanent disability or death when driving cover, etc

You also failed to grasp the other major factor of US rising interest rates in an extended era of credit and low interest rates: Firms which run on lines of credit are no longer going to be able to carry on like usual, due to increased borrowing costs, which has a cascade effect on other consulting firms - or what i call 'make work nurseries' for the FailSons and Faildaughters of US/Atlanticist Elites. I'm talking firms like McKinsey are going to have to do shadow layoffs -which is already happening when they pay out 350k+ in annual salary to get their consultants to resign and take a hike because it would look bad if McKinsey, the consultancy that advises ppl on layoffs and how to rescue businesses, is now having to lay people off.

 

[chgough34]

Once again, you are incorrect.
Insurance price isn't determined simply because of demand, it's priced due to risk ie why is insurance for shipping for UK and Israeli cargo gonna be more expensive than Chinese shipping? Those Houthis taking out Israeli cargo ships like Fremen taking down Harkonnen spice harvesters is going to result in increased risk for the Insurer, hence higher premiums. At some point, that cargo is going to be uninsurable, hence why wars and conflicts and revolutions are uninsurable.

Yes. Insurance is p(risk)*[Event Loss] + Loads. The first part is just prepayment for future events which can be measured directly. Loads are what are separate insurance from a savings account and in there, insurance loads have been constant. Insurance premiums just aren’t driving inflation; if consumers get into more car accidents, it’s not a price increase, it’s a quantity increase

Again, you have at best a pedestrian understanding of risk and insurance; builders and construction firms are required by law to have insurance eg workers accident, compensation etc which gets added to the consumer price.

Consumers don’t buy workers comp, UI, marine insurance, etc directly. If you’re going to argue about pass-through incidence, well, the CPI already measures goods and services prices bought by consumers. It’s rising at 2-3% a year. Inflation is solved

You also failed to grasp the other major factor of US rising interest rates in an extended era of credit and low interest rates: Firms which run on lines of credit are no longer going to be able to carry on like usual, due to increased borrowing costs, which has a cascade effect on other consulting firms

Nope. US firms borrowed tons of money in 2020 by issuing fixed rate corporate bonds that won’t mature for decades. The recent hike in interest rates thus is totally irrelevant to them. US corporates have very good liquidity management.

 

[Chevalier]

Yes. Insurance is p(risk)*[Event Loss] + Loads. The first part is just prepayment for future events which can be measured directly. Loads are what are separate insurance from a savings account and in there, insurance loads have been constant. Insurance premiums just aren’t driving inflation; if consumers get into more car accidents, it’s not a price increase, it’s a quantity increase

Consumers don’t buy workers comp, UI, marine insurance, etc directly. If you’re going to argue about pass-through incidence, well, the CPI already measures goods and services prices bought by consumers. It’s rising at 2-3% a year. Inflation is solved

Nope. US firms borrowed tons of money in 2020 by issuing fixed rate corporate bonds that won’t mature for decades. The recent hike in interest rates thus is totally irrelevant to them. US corporates have very good liquidity management.

Not only are you failing to grasp the fact that companies pass on the cost of increased workers comp/insurance onto the consumer ie why building costs have increased despite the downturn in the economy, but you just wordcel'd your way with the sort of loquacious confidence often seen amongst indians.

You also failed to consider why firms use lines of credit as opposed to simply using their own profits ie tax deductibility, tax planning. If interest rates rise, that's gonna hamper business costs because firms are using lines of credit for their day to day activities and an increase in interest rates means their repayments are going to far, far bigger than they initially planned. In fact, i believe that's the reason why McKinsey is now doing shadow layoffs (don't believe me? jump on linkedin and see for yourself). If you were in any sort of consultancy/corporate admin. role you'd have cottoned onto that rather quickly but In fact, judging by what i've read of your posts thus far, I think we can safely rule that out.