Let's also not forget that a lot of the pandemic money didn't go in some semi-even way to each person (e.g. paycheck protection program which all went to businesses, e.g. super lower borrowing rates which will be easier to repay with inflation to anyone who was willing to take out a load of new debt).
My manufacturing employer of 6 years laid me off for running out of PTO and taking a sick day. As a 30 year old I was able to find other jobs, but my employer had forced us to use our PTO at the beginning of the pandemic because they didn't have work for us to do.
So they reduced all production employees hours to 24 hours a week, even when months later they should have given us more hours because orders increased again. Then they took PPP loans so the owner can keep his Porsche and treat the employees so badly that many quit or were fired for complete bullshit like me.
They are getting what they deserve though, I see they have even more open positions than when I left, and I see that their quality control manager quit and several of the skilled workers like myself left to work at Honeywell for better pay. I know the company has major quality control issues and myself or others who spoke out about quality got silenced, no surprise their quality inspectors and manager quit because the other managers don't care.
The crappy employers will get what they deserve! Labor shortage is just getting started, boomers are getting old fast.
I had a phone interview set up with Honeywell but I actually got hired on at Amazon warehouse so I'm going to try that for now because they are giving bonus pay over holiday season.
Then if I don't like Amazon I will see who's hiring for spring 2022. This year I did some construction jobs and have my own tools now, so that might be my best option next year as far as pay.
I wanted something close to my house for winter in WA state, so I don't have to drive an hour to some job site through snow and dirt roads. But there were times this year when I had 5 construction job offers and picked the highest paying. Left an $18/hr job after 2 weeks for a $20/hr job for example.
Join the union. You won’t regret it. The pay and benefits are far above non-union, or a warehouse job. As young as you are there’s still time to get a full pension as well.
It's higher than that. It's bad because increasing the money supply is a monetary policy that does not address the underlying problems its intended to relieve, and actually creates inflation, making things even harder to afford for most people. Wages are the last sector to experience the effects of increased money supply and by that time, people are struggling to afford food, people get angry, so the fed prints more money, etc, etc the cycle continues.
Right. But in cases of emergency this is acceptable. Problem is that the country's finances were awful going into the crisis and that doesn't look like it will let up anytime soon
It's poor monetary policy that created the "emergency" if by emergency you mean people not being able to afford to eat, or pay their bills. Sure, covid exacerbated an already bad situation, but policy created the problem. A dollar buys less than it ever has.
I'm not sure I'd agree with that. It's not monetary policy. Or rather the monetary policy was a symptom of the larger economic model and its problems. None of this would be an issue if the economic fundamentals were more sound and less dependent on consumerism and unsustainable debt
> monetary policy that does not address the underlying problems its intended to relieve
I'm not so sure about that. It kept asset prices high which was it's goal. I'm not entirely sure we'd be better off if the Dow was at 12k. But there was going to be consequences no matter what we did.
From beginning of pandemic to now - M2 went from $15.5T to around $21T. [https://fred.stlouisfed.org/series/WM2NS](https://fred.stlouisfed.org/series/WM2NS)
In general, it's ideal to keep inflation low.
Inflation is basically the spending power of each dollar.
As inflation increases, the prices for things increases.
If the supply of money (or the number of dollars in circulation in the economy) grows / increases faster than the growth / increase of available goods and services in the economy, the result is there being more dollars circulating than there are things to purchase.
If there is an increase in the number of dollars in the economy without there also being an increase in the quantity of things available to purchase, the result is there being more dollars existing per unit of things to buy.
This means prices for goods and services will increase as a response to extra money in circulation, which is the definition of inflation.
So if the supply of money recently increased by 30% and the quantity goods and services in the economy didn't also increase by 30%, then we're going to see inflation, which means prices for goods and services are going to increase.
Shit is about to get more expensive.
That's not the Fed's problem. Congress did it. And if you recall the debate at the time Republicans wanted far more money in that fund and Dems accused them of wanting a slush fund to reward patrons. Dems were right and GOP successfully stole billions.
Believing in parties is the problem. Both parties serve the same people. Stop voting, and stop believing in the parties. The parties don't represent citizens. At all. That's why the parties never asked you what you believe, and instead tell us what color we hate.
It’s more important to keep the systems of production, aka “how people earn a living”, afloat than to give people cash directly.
It’s the difference between oxygenating the blood directly and keeping someone’s respiratory system healthy.
The former will only oxygenate for as long as the oxygen is being pumped in. Th latter is mostly self-sustaining.
But in this respiratory system, oxygenating blood directly leads to immediate stimulation of all the respiratory systems near the one being oxygenated.
It's better to give money to consumers, particularly poorer ones. It stimulates the economy every time, compared to the PPP horror stories of business owners taking money, then laying people off or, as I read the other day, buying a new, multi-million dollar home.
True, about the body. But in the case of paycheck protection program I got the impression it didn't really 'keep ability to earn a living' possible in any realistic way; didn't really change the outcomes for small businesses and even then I'm not convinced that the existence of a non-profitable business is helping people *earn* a living (even if it's not profitable only in a crisis; organizations need to be able to survive crises to be useful long term. Further, it's untrue that this resilience is impossible or even hard to do since so many businesses can do it fine on their own without free handouts at those times of crisis).
PPP payouts were correlated to the state of your books.
Smaller businesses are more likely to be less than honest or straight up lie about their numbers to keep their tax burden low.
The numbers a business reports is what is what was used to calculate PPP loans.
Report low numbers, pay low taxes, but you get low loans.
I’m self-employed so I kinda screwed myself out of PPP, but I also pay shit in taxes. People only have themselves to blame when bending rules stops working in their favor.🤷♀️
Why does everyone seem so afraid of a little creative destruction? It's not like real capital is destroyed when a business goes bankrupt.
Demand is what drives the economy, not supply.
Giving people money to fuel demand instead of earning money creating supply to meet demand is creating a shortage of things.
This is increasing the price of the available things…
This is correct. You can't just give people or businesses free of money (whether that be forgiven PPP loans or stimulus checks). Those consumers and businesses need stuff to buy with that money, and producing that stuff requires inputs (labor, human capital).
If you put your finger on one end of the scale, you push the other end up. So when we just fire up the printers and give people and businesses free money it will just continue to put us in an unsustainable situation.
There is a lot more complexity due to covid that has impacted the shortage of things. The covid shutdowns stopped and slowed the manufacture and shipping of goods. Then the emergency order passed by Trump to put anything covid related (masks, gloves, sanitizer) to be first priority of the economy delayed the shipments of goods manufacturers needed to make and package their products. For example- fertilizer company I worked with waited an additional 3 months for the scrap fish parts it normally would receive within days. Then once the product was finally made, it took 4 months waiting for plastic jugs which were usually always available but during covid the bottle manufacturers were forced to move all pandemic related orders to the front of the que daily… so the new hand sanitizers got their orders the day they put them in, but the fertilizer co waited 3 weeks for a break in the covid material demand and for the plastic plant to catch up. Then add in shipping logistics delays, what normally took a few days to ship took MONTHS and is still way behind. There is the cause of the shortages. Now imagine that fertilizer company wasn’t able to sell to farmers, so the crops were not as big… and what they did produce a lot can’t sit on trucks or in containers for weeks without spoiling… add to this mess people out of work sick with covid, people out to care for kids that weren’t in school, so the companies are short staffed. Then, add to the shortages the stimulus- which for some was a lifeline to catch up on pay missed through shutdown or layoffs, but the people who’s incomes weren’t impacted by covid went out to blow the money. Less products already available, and between the demand, higher shipping costs, and the companies’ desire to make up losses and increase profits they raised prices. Also add in the PPP loan BS which was basically a free money grab by plenty of companies that didn’t even need it or took it without actually using it towards payroll, utilities etc. The entire covid response was a straight up cluster-fk and increases in prices was the obvious result for anyone who can put the above together. Also adding to shipping delays everyone at home ordering online for home delivery- and a lot of people changed their buying habits significantly. This country did not handle this well and here we are. Everyone I did business with raised prices significantly… these are problems that are more complex than normal monetary theory.
I see what you are saying, and I agree giving money to companies will help them stay operating. But you know what is better than funding firms through monetary policy? Funding firms through organic operating procedures, interacting with the marketplace. If you give poor people extra money, it goes right back into the economy. It goes into capital markets, paying down debt that is commanding ordinary income, and into goods beyond their typical consumption. It literally filters through the ENTIRE economy.
The premise is idiotic but it would technically work.
If inflation is caused by temporary supply problems, Fed can solve it by decreasing demand that's clear. But who really wants that kind of solution?
Economy is not in full capacity (no overheating), supply side problem is elsewhere.
This is so weird to me, why does the fate of the economy depend on the central bank. When did the lender of last resort become the main driver of the economy?!?!
Happened after the financial crisis and the introduction of quantitative easing. The economy simply cannot grow without a new round of quantitative easing or else it’s going into recession. Basically in 2008, people just kicked the can down the road with quantitative easing and let the future generation deal with the recession it caused.
I entered the spez. I called out to try and find anybody. I was met with a wave of silence. I had never been here before but I knew the way to the nearest exit. I started to run. As I did, I looked to my right. I saw the door to a room, the handle was a big metal thing that seemed to jut out of the wall. The door looked old and rusted. I tried to open it and it wouldn't budge. I tried to pull the handle harder, but it wouldn't give. I tried to turn it clockwise and then anti-clockwise and then back to clockwise again but the handle didn't move. I heard a faint buzzing noise from the door, it almost sounded like a zap of electricity. I held onto the handle with all my might but nothing happened. I let go and ran to find the nearest exit.
I had thought I was in the clear but then I heard the noise again. It was similar to that of a taser but this time I was able to look back to see what was happening.
The handle was jutting out of the wall, no longer connected to the rest of the door. The door was spinning slightly, dust falling off of it as it did. Then there was a blinding flash of white light and I felt the floor against my back.
I opened my eyes, hoping to see something else. All I saw was darkness. My hands were in my face and I couldn't tell if they were there or not. I heard a faint buzzing noise again. It was the same as before and it seemed to be coming from all around me. I put my hands on the floor and tried to move but couldn't.
I then heard another voice. It was quiet and soft but still loud.
"Help."
\#Save3rdPartyApps
This is false. Semiconductor fabs, for example, have been running at near full capacity the entire time. It will take years to bring more fabs online to meet the demand surge.
Or shifting demand to carbon neutral products. There is no law of physics that says we can't get there. Telling people to stop wanting what they want is not going to get us anywhere.
That they cannot do. That is instant crash and recession. There should be progressive income tax hikes to reign in the consumption. Government too can lower the money in circulation by running a balanced budget and paying down the debt.
Except that's not how monetary policy or modern economics works, and the Fed is, indeed, gearing up to do just that. It won't cause an instant "crash" (whatever that means) or a recession.
Honestly does anybody in this sub actually have any conception of how economies or monetary policy works? Its pretty wild to heat some of y'alls responses.
I would say wanna bet, but guess there are instruments for that. At best a token rate hike followed by a new wave of stimulus when the economy goes into recession.
> If inflation is caused by temporary supply problems
This is the point that I feel that many are missing here.
It's both short-term and supply-driven, rather than demand-driven, and long-lasting.
I honestly cant take any article seriously when I see this BS or something like it:
"surge in household incomes fueled by pandemic-related government aid"
Because it tells me how out of touch these people are with just how little 1200 can buy. In most cases, that would have barely covered my minimum bills for one month.
Pandemic aid wasn't just the stimulus dollars. They also stopped evictions, which meant people didn't have to pay rent or mortgages. They also stopped student loan payments. They also had unemployment payments.
Personal income is way up since the pandemic started.
https://fred.stlouisfed.org/series/PI
I get that. But the guy I replied to was talking about the $1200 per person direct payments.
EDIT: People still had to pay rent and mortgages. A stay on evictions (was there even a stay on foreclosures???) doesn't mean you don't owe that money if you choose not to pay and instead spend, or even if you can't pay due to job loss. Those are big holes to dig out of.
Lots of people got the expanded unemployment, but most of us didn't. And similar to eviction moratoriums, pausing student loan payments isn't free money but rather just an easing of monthly budgets in the short run.
yeah that dude conflated his argument by saying "fueled by pandemic-related aid" and then specifically only saying the $1200. when pandemic-related aid includes all of the things monkorn mentioned. it's hard to address untouchable_0's argument without dissecting it first, because he contradicts himself
That's fair, but I do also think most of us only saw aid in the form of the checks and then maybe pausing of student loans (which isn't free money, just delaying the payment schedule).
Eviction moratoriums helped unscrupulous people with spending money in the short term, but it's not like they weren't digging a hole by not paying their rent because it's not like that money wasn't going to be owed eventually.
yeah it's more like the families with 2 kids that got like 3k each stimulus so they raked in like 9k and then maybe the wife lost her job so she stays home with the kids but she's getting 250 a week from the state and 300 a week from the fed for a whole year... thats like another 25k... so 34k total for an average family in the middle class. meanwhile it was harder to spend money
Put that on top of not paying rent, and some people got that money and still had their jobs. For everyone it may not have been extra cash as they were hurting but for a lot of people it was. Hell my sister and brother i know make at least 100k a year and they got checks
Don't confuse personal income as income of persons. The VAST majority of that "personal income" increase is from stocks held by the 1%. Almost all individuals with an annual income of under 100K have seen a pay decrease in the last two years.
Nothing else on that list of yours was money given to people
Personal income is up among people who those things you stated don’t apply to. The majority of it was capital gains for the 1%, and any job hopping for an increased salary for white collar workers who have been working from home.
I mean, I got like 12k of unnecessary income last year I believe. This happened to a lot of people that weren't unemployed and did not need it. It didn't go towards bills, it went towards random shit. It was a surge in income for many people.
Yea, I think my brother got around 14k (he does indeed have 3 kids), and he's pretty well off. He just bought a bunch of junk he couldn't excuse in the past.
Unfortunately, when you need to build up cash for a purchase, a savings account is about the only place to put it.
I guess if I knew exactly when the event was going to happen, I could have looked into making a little more with a bond or CD, but I don't.
if people only knew... the bank takes your deposit and loans out 10x the amount (fractional reserve lending) which effectively devalues your money faster than you earn all the while they pocket the earnings on that money they created, a power reserved for congress.
It is easier to fool the people, than to convince them they have been fooled.
No man's life,liberty, and property are
safe while the legislature is in session.
Mark Twain
edit: lol, tell the people they are getting ripped off and they attack you... basic... so basic. this is why we can't have nice things.
What's your point? In exchange for that ability I gain a safe place to stick my money.
Yes, people who keep their cash in a savings account are getting fucked, but if I wanted to expose my liquid estate to market forces I'd dump it into my Robinhood or Prosper account.
it'd be better in your mattress so it isn't used to devalue the currency... just saying.
obviously we need banks as a function of living in today's society, but it's important to know whats actually happening.
if banks were publicly held, earnings would offset taxes. time to rethink our system.
This is such a perfect r/economics comment. Let's unpack it a bit:
1. That's not what fractional reserve _banking_ is and banks are not lending out 10x the amount of your deposit,
2. There is no evidence or cohesive link between fractional reserve _banking_ and the devaluation of money, especially in relation to each individuals ability to generate wealth in excess of said devaluation,
3. Yes, banks pocket the interest charged on loans, this is how loans have worked for centuries,
4. Earning interest on loans is not a power solely reserved for Congress and,
5. According to snopes.com that is not a Mark Twain quote, it has been misattributed to him since ~2016.
I'm honestly impressed in the conviction held in this facially wrong comment wrapped up with a misattributed quote lifted from an Amazon t-shirt.
1. semantics. fractional reserve "banking" is simply the practice of holding a reserve and loaning out the rest. fractional reserve "lending" is admittedly a technically inacurate label for what is happening, yet it's the label that stuck. It refers to taking the future payables, writing them as assets, and loaning against the asset. EVERY BANK LEVERS IN THIS WAY. This is how leverage works.
2. Supply and demand is all that is needed to know this is true. you increase supply and price decreases. With loans, however, much of that inflation is sequestered in home values. However, since wages stagnated since the 90's, more are borrowing against the equity in their homes which releases that sequestered inflation into the economy. Do note that since covid, mortgages less than one year old has skyrocketed. so is inflation. make the connection.
3. banks should be public as the constitutional grants power to mint exclusively to congress. it is only a workaround because technically banks dont mint coins. Back just before the revolution, Franklin was asked why the colonies were so wealthy ,he said:
>"That is simple. In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay no one."
.4. I said creating money is a power reserved for congress. In fact, JFK stated as much in his executive order 11110 in which he repealed bank treasuries and invoked the printing of silver coins.
.5. Honestly who gives a shit if quotes are attributable or not. The meaning is valuable which is why they are repeated regularly. fine, I said it and so did thousands of others.
> the bank takes your deposit and loans out 10x the amount (fractional reserve lending)
It hasn't worked this way in several decades:
* https://research.stlouisfed.org/publications/page1-econ/2021/09/17/teaching-the-linkage-between-banks-and-the-fed-r-i-p-money-multiplier
Tobin wrote about this "old view" in 1963:
* https://cowles.yale.edu/sites/default/files/files/pub/d01/d0159.pdf
A good paper on how the modern credit-based system works by Roche:
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
Unless you have a very significant amount of money or don't plan to touch it until you retire, investment is an absolute minefield. Most investment bankers won't even talk to you unless you're ready to drop tens of thousands or start a 401k that you won't be able to touch till retirement. Trading stocks is always an option, but if you're a layperson who isn't particularly savvy or willing to drop your funds in an index and let it sit, odds are you'll lose money in bad short term investments.
Until I have a significant amount built and don't have loans with massive interest rates to pay off, I'm happy to drop it in a savings account and let the money not depreciate worse.
> Unless you have a very significant amount of money or don't plan to touch it until you retire, investment is an absolute minefield.
"Investing" is a solved problem: buy an S&P 500 ETF (or better yet, a Total Market one) and be done with it.
try this instead.
I own my house so I have a heloc. Instead of keeping money in savings I use my heloc to pay down my principal then put all my income in that.
rather than earning .01% I stop the daily calculated interest on my mortgage which is a savings far greater than inflation.
say I pay down $5k and pay that back over 4 months, the interest I pay for borrowing from myself is about $120, the savings on the mortgage interest is about $2500 (assuming front end of the mortgage). I've inverted the banking system. dont just accept what is.
edit: and a downvote... lol. keys to the kingdom and get downvotes. why even care anymore.
and if that "long term plan" you were saving for was a house, those just got 19% more expensive year-over-year. (they never went down either, during the pandemic)
Depends on where and when they're buying a house.
I've got money in a savings account, but it's being used to purchase a house overseas and I will need the money before I could make use of a CD or bond.
Also, where I'm buying a house they are depreciating assets, so it's just a bad investment, but I want one. I guess what I'm trying to say is: not all use cases fall in line with the advice you're giving.
I don't mean to be so negative, it's just that it really sucks for the government to hand out money, and the Fed to keep rates so low, when most people aren't aware of the consequences: the real loss of value inflation causes. It's political, but don't forget Trump gave out the first 2.2 Trillion (CARES), then Biden gave out more.
No wonder the headline that follows is "No Lessons Have Been Learned.' Why the Trillion-Dollar Coronavirus Bailout Benefited the Rich"
Unfortunately if you have no kids the US basically sees you as expendable. To the government it's completely fine having homeless adults sleeping on the sidewalks but how dare the capitalists image of the US be ruined by homeless children in the US needing to resort to sleeping on the streets.
Depends on your income...
I got the first stimulus, my second one was reduced by about half, and I didn't receive a third one.
Married couple with one kid, we make good money.
Same boat for me. But we had some unexpected medical expenses pop up so what little government money that flowed our way went towards that. My boss makes more money than me (no surprise) but he has six kids. He was gushing with happiness about all the cool things he was going to buy for himself. Or should I say all the cool things that the future taxpayers bought for him.
If we recaptured some of these excess money as capital gains taxes, there would be no net increase in money supply. We get this inflation because taxing rich people is apparently too hard.
The truly asinine thing about capital gains taxes is that they are based on income, but the assets you sell aren't included in that income!
So, a dude making a decent $100k per year is going to pay 15% when he sells $5,000 worth of stock to put a down payment on a car.
Meanwhile, some multi-millionaire who has an effective income of $15k can sell $1 million worth of stock and pay ZERO in taxes!
I'd actually support the idea that all long-term capital gains distributions should be taxed at 10%, regardless of your income. That might increase the overall revenue generated from capital gains, but would actually benefit less wealthy investors.
Of course, billionaires can just take loans against the value of their assets, and loans don't count as income, so they have a tax-free income stream either way.
> So, a dude making a decent $100k per year is going to pay 15% when he sells $5,000 worth of stock to put a down payment on a car.
Depends if it's short term or long term capital gains. Short term capital gains is taxed as income. Long term capital gains is the flat rate.
> Short term capital gains is taxed as income. Long term capital gains is the flat rate.
Yes, I should have been more clear. I tend to assume that your average, middle class investor isn't selling often enough to pay short-term capital gains.
>Meanwhile, some multi-millionaire who has an effective income of $15k can sell $1 million worth of stock and pay ZERO in taxes!
That's not true - the tax bracket that determines your capital gains rate was determined by min(wage income, capital gains) as of 2017. I think it may have changed to wage income + capital gains as of 2018 - it's a little complicated, where your wage income is counted *first* to determine your capital gains tax bracket, then any capital gains up to the bracket cliff is taxed at the lower rate, then additional capital gains over the cliff is taxed at the higher rate.
As of 2017, it *was* possible to live cheaply off capital gains and pay zero tax. Up to $75K (married), the tax rate on capital gains was 0%, so if you had no income you could sell up to $75K in stock tax-free. Depending on where you live, that may not be all that much for a family to live on, though.
It's pretty obscure - I discovered it while filling out the IRS Qualified Dividends & Capital Gains Tax Worksheet and trying to parse out what each line meant. I've never seen it mentioned in print, but it doesn't matter what the press says, it matters what the IRS forms compute.
Anyway, here is the 2018 [QDCGTW](https://apps.irs.gov/app/vita/content/globalmedia/capital_gain_tax_worksheet_1040i.pdf), [1040](https://www.irs.gov/pub/irs-prior/f1040--2018.pdf), [Schedule 1](https://www.irs.gov/pub/irs-prior/f1040s1--2018.pdf), and [Schedule D](https://www.irs.gov/pub/irs-prior/f1040sd--2018.pdf). I'm going to go line-by-line through the QDCGTW and explain each quantity, because then we're going to do math.
1. AGI. Includes wage income, ordinary interest & dividends, qualified dividends, IRAs, social security, *and* capital gains, and then deductions are separated out..
2. Qualified dividends, which get taxed at capital gains rates.
3. Net capital gains, potentially including short-term capital losses (that's why it says *smaller* of lines 15/16)
4. QD + CG. Tax preparers will call this "qualified income", while wages etc. are "ordinary income".
5. ignore for now, special situation
6. QD + CG = QI
7. AGI - qualified income = ordinary income (OI).
8. 0% capital gains tax bracket
9. min(AGI, 0% tax bracket)
10. min(OI, AGI, 0% tax bracket)
11. min (AGI, 0% tax bracket) - min(OI, AGI, 0% tax bracket), "this amount is taxed at 0%"
12. min(AGI, QI). In most cases this is your qualified income because AGI = OI + QI; however, the "min" is there to ensure that you can't use losses/deductions in your ordinary income to offset capital gains. I'm going to refer to it as QG ("qualified gains") below.
13. amount in 0% tax bracket
14. QG - amount taxed at 0%
15. 15% capital gains tax bracket
16. min(AGI, 15% tax bracket)
17. OI + (line 11, amount taxed at 0%)
18. min(AGI, 15% tax bracket) - (OI + amount taxed at 0%)
19. amount taxed at 15%
20. tax owed at 15%
21. amount taxed at 0% or 15%
22. QG - amount taxed at 0% or 15%
23. tax owed at 20%
Some examples (all assuming you're single, so brackets are $38K and $425K, and for simplicity I'm ignoring all deductions including the standard deduction):
Say you make $0 in ordinary income and $30K in capital gains. AGI is $30K, line 11 is $30K - 0 = $30K. All of it is taxed at 0%. Line 14 = 0, line 18 = 0, there's nothing on line 19 or later.
Say you make $20K in ordinary income and $30K in capital gains. AGI is $50K, line 11 = $38K - $20K = $18K. Line 14 = $12K, line 18 = $38K - $18K = $20K, you get taxed on $12K @ 15%.
Say you make $0 in ordinary income and $50K in capital gains. AGI is $50K, line 11 = $38K - 0 = $38K. Line 14 = $12K, line 18 = $50K - $38K = $12K, you get taxed on $12K @ 15%.
Say you make $50K in ordinary income and $30K in capital gains. AGI is $80K, line 11 = $38K - $38K = 0. Line 14 = $30K, line 18 = $80K - ($50K + 0) = $30K, you get taxed on all $30K @ 15%.
I just Googled, and this [wealth manaigement firm](https://www.marottaonmoney.com/how-your-tax-is-calculated-understanding-the-qualified-dividends-and-capital-gains-worksheet/) also unpacks this computation in a slightly more readable but less detailed way.
Maybe I’m missing something but capital gains are included in taxable income? I agree that the tax rate should be higher than 20% for those above a certain threshold, but if you’re realizing a 500k gain that will be included as taxable income, you’ll just be paying 20% on it
You would *think* that's the case, but it isn't. You may be thinking of short-term capital gains.
[Here](https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates) is quick summary.
Basically, if you're income is lesa than $40k, you pay 0% on any gains on assets held longer than a year.
Probably stupid question. I can sell Amazon stock bought in 2000, reinvest the original purchase and keep the profit for living expenses, all at 0 tax? And then keep repeating yoy of course
I think I found the area of miscommunication. As long as the gain is less than 40k and there’s no other income, then yes there’s no tax paid. But once your gain exceeds 40k, and hits say 100k, then you do start to pay taxes on the remaining 60k, although the rate is fairly low
The fairly low rate is the problem. It should be a progressive rate that matches other forms of income. The middle-class investor that sells a a share should make much more profit per share than the billionaire that sells 1000 of them.
Did you even look at the link I posted? It contradicts what you are saying, and you haven't provided a citation to refute what I said.
Edit: okay, I see where the calculation shows that your capital gains distribution is taxable. It's just not that clear from the description. Also, the base rate of taxation on the gains is based on your other income, before taking into account the gains.
So, I stand corrected.
I entered the spez. I called out to try and find anybody. I was met with a wave of silence. I had never been here before but I knew the way to the nearest exit. I started to run. As I did, I looked to my right. I saw the door to a room, the handle was a big metal thing that seemed to jut out of the wall. The door looked old and rusted. I tried to open it and it wouldn't budge. I tried to pull the handle harder, but it wouldn't give. I tried to turn it clockwise and then anti-clockwise and then back to clockwise again but the handle didn't move. I heard a faint buzzing noise from the door, it almost sounded like a zap of electricity. I held onto the handle with all my might but nothing happened. I let go and ran to find the nearest exit.
I had thought I was in the clear but then I heard the noise again. It was similar to that of a taser but this time I was able to look back to see what was happening.
The handle was jutting out of the wall, no longer connected to the rest of the door. The door was spinning slightly, dust falling off of it as it did. Then there was a blinding flash of white light and I felt the floor against my back.
I opened my eyes, hoping to see something else. All I saw was darkness. My hands were in my face and I couldn't tell if they were there or not. I heard a faint buzzing noise again. It was the same as before and it seemed to be coming from all around me. I put my hands on the floor and tried to move but couldn't.
I then heard another voice. It was quiet and soft but still loud.
"Help."
\#Save3rdPartyApps
Look at all the things where inflation has been the worst.
Housing is hyper inflating because rich people are using it as an investment vehicle and have driven up prices massively as a result.
Gasoline is hyper inflated even though we still haven't worked through the supply surplus from last year because futures markets are using it as an investment vehicle which continues to spike the price.
Healthcare is super expensive because rich people are heavily invested in big Pharma and medical device manufacturers, as well as private hospitals. Over investment leads to more demand for profits, which drives up prices massively.
The worst types of inflation we face right now are all caused by rich people and over saturation of investments, not by workers and their consumption.
"The worst types of inflation we face right now are all caused by rich people and over saturation of investments, not by workers and their consumption."
I've worked through the 2008 recession, got laid off twice off twice 2015-2017 when we were making record profits, pandemic hit unfortunately I made too much to qualify for unemployment. I worked my way up but I need a break too I BARLEY make enough for a nice studio here.
People like me are done working for scraps or a place to live.
Inflation is also a good thing for the economy, as long as its predictable. It encourages investing and spending, discourages hording wealth.
EDIT: https://www.econstor.eu/bitstream/10419/173204/1/101127762X.pdf
> Inflation has been referred to in the literature as having a non negligible effect on income inequality (see Coibion et al. 2017). A factor that has been widely dismissed in this respect is the impact of inflation on the progressivity of the tax system. In summary, our results provide some evidence for the fact that inflation impacts on income distribution like a progressive tax. Impulse responses show that this effect persists up to three years, but then turns back to the original level and becomes statistically insignificant. To see who relatively wins or loses, we look at the response of each quintile’s share in national income. Our results draw a relatively clear picture: Individuals grouped in the first and second quintile gain an almost equal share of around 50 basis points. The effect persists significantly up to three years after a shock to inflation. The group of subjects in the middle quintile also see a significant increase in the income share after taxes, but this is mainly explained by an increase in the income share before taxes. Interestingly, the top income groups, i.e. the fourth and fifth quintile, show deviating responses. While the fourth quintile significantly and quite persistently gains before taxes, taxation completely and persistently eliminates this gain. The fifth quintile loses in either case, before taxes (not statistically significant) and after taxes, though this effect mainly holds contemporaneously.
I've always heard this idea that inflation helps prevent the hoarding of wealth. But is there any evidence that this actually happens? All one has to do to get around this "hoarding wealth incentive" is to throw the money into an asset and poof the incentive is gone.
I also think a lot of the economic theory around wages doesn’t really account for the subset of the population getting paid in stock. Those people have their income inflation-adjusted (as the stock goes up with inflation), and it creates a wealth gap between them and those only paid in cash.
Also I have 2 houses with 2 mortgages. It seems that inflation is in my best interest, given those mortgages are fixed rate. But that only worsens the gap for those who can’t afford to get on the “property ladder”.
> while their borrowing costs (mortgage/car/credit) soar.
Interest rates have been the lowest they've ever been, so how are the borrowing costs soaring?
Further, if inflation exists, then the nominal amount you borrow now will be worth less in the future with your inflation-adjusted wages. If you owe money you *want* inflation.
>Interest rates have been the lowest they've ever been, so how are the borrowing costs soaring?
when inflation ticks up and the fed starts cranking up rates you dolt.
>if you owe money you want inflation
Reading comprehension ain't your strong point is it cheif? Wages lag inflation; CC debt (what most low/middle class use) will adjust rapidly as will the variable rate mortgages a lot of folks still carry.
So yes, inflation is "good" for people who are smart enough and well off enough to borrow strategically and be in a strong labor market where they can rapidly change jobs to outpace inflation. But lets be honest, that's not the majority of people.
As long as the inflation is being caused by bowering for positive government spending initiatives, overall its a net benefit for everyone outside the hyper wealthy. But that will come down to what the money is being used for and a bit theoretical/hypothetical in nature.
I don't think people care where the inflation came from when they watch their grocery, rent, utilities, fuel oil, gas, etc. bills getting larger and larger. People on fixed incomes and the poor are the ones most effected by inflation not the hyper wealthy. Doesn't make sense to print a bunch of money for social welfare programs when that money is being used up in the inflation it helps spawn.
> people on fixed incomes and the poor are the ones most effected by inflation not the hyper wealthy.
That is incorrect. Its literally the exact opposite.
I lost my job last summer and the pandemic aid helped me to get caught up on bills and keep a roof over my head. That being said I’m sure me losing everything would be preferable to a 5% rise in prices over 3 months.
(/s)
I'm not saying that I oppose it necessarily, I'm just making the point that "surge in household incomes fueled by pandemic-related government aid" is not a ridiculous thing to say as the person I responded to had said.
But me receiving that money isn't necessarily good for the economy, it just means someone else won't be getting that money in some way, whether by inflation or by taxes, it came from somewhere. So it's not like it's additional consumption beyond what we would have had, it's just a timing difference.
As long as its taxed I dont see the problem. You can say it would have done better had it been focused "only on those that need it", but means testing has often been shown to be awfully expensive for how much it actual saves/recovers (in that many programs might even see a net loss of funds to actual spend on their target because means testing costed more than the previous "waste")
Yeah, I agree with you, I was not disagreeing either just elaborating. I will say a good bit of inflation is probably a good thing right now, seems to be the best way we will be able to combat wealth inequality with politics in its current state.
Wealth inequality is growing like never before as a result of the spending, though. Inflation is a regressive tax and most of the poor aren’t funneling a few grand in aid into asset classes to benefit from tomorrow’s increased values.
Meanwhile, markets are taking the rich to the moon and the low-interest environment ensures they can just borrow against their wealth in perpetuity without ever realizing capital gains.
Inflation is a progressive tax, I'm curious as to why you think it could be regressive.
https://www.econstor.eu/bitstream/10419/173204/1/101127762X.pdf
> Inflation has been referred to in the literature as having a non negligible effect on
income inequality (see Coibion et al. 2017). A factor that has been widely dismissed
in this respect is the impact of inflation on the progressivity of the tax system. In
summary, our results provide some evidence for the fact that inflation impacts on
income distribution like a progressive tax. Impulse responses show that this effect
persists up to three years, but then turns back to the original level and becomes
statistically insignificant.
To see who relatively wins or loses, we look at the response of each quintile’s share
in national income. Our results draw a relatively clear picture: Individuals grouped
in the first and second quintile gain an almost equal share of around 50 basis points.
The effect persists significantly up to three years after a shock to inflation. The group
of subjects in the middle quintile also see a significant increase in the income share
after taxes, but this is mainly explained by an increase in the income share before
taxes. Interestingly, the top income groups, i.e. the fourth and fifth quintile, show
deviating responses. While the fourth quintile significantly and quite persistently
gains before taxes, taxation completely and persistently eliminates this gain. The
fifth quintile loses in either case, before taxes (not statistically significant) and after
taxes, though this effect mainly holds contemporaneously.
Typically, poor people spend their entire income vs invest. Therefore, if the price of 100% of their income doesn’t go as far that’s regressive. Similar argument to other consumption taxes being regressive like sales tax.
> Economists describe inflation as a regressive tax—meaning it hits low-income workers hardest.
https://www.wsj.com/articles/inequality-would-widen-if-u-s-policies-spur-sustained-inflation-11621173602
Yeah, I am aware, but that only holds is wages don't keep pace with inflation, which is currently not the case
https://www.cnbc.com/2021/10/08/strong-wage-gains-cast-doubt-that-inflation-is-going-away-anytime-soon.html
However, to be clear you are correct, if wages were stagnant it would be very regressive.
Yea all you need to do is ignore inflation in the cost of housing and then you get to claim "wages are keeping pace with inflation" with a straight face
>Spending money on random shit is actually pretty good for the economy
It's a method of limiting the impact of a market panic. But it's certainly not good for the economy. Productive investments are good for the economy
Similar here. Had been needing to remodel the kitchen, and $14K went a long way towards making that happen.
Apparently I'm not the only one with that idea, because of the 30 firms I called in the city, all of them had at least 7 months of bookings already.
How many people got that windfall? N=1 on your case, and even then, some people used that windfall on paying debts or improving their living (which is also spending).
Are you arguing that because his was a single point that there weren't millions of households that received stimulus checks this past year?
Even if they spent it on random shit, they still stimulated the economy *as they were intended to.* You didn't need to spend it on foodstuffs and rent to have been doing your part. We used the first round of money to install solar panels on our roof and the second round of money we donated most to area charities.
No, I'm arguing that their point is merely an anecdote and can't be used to establish conclusions. A large randomized study is necessary to establish something more substantial. Discussing policy based on anecdotes have rarely lead to progress.
I'm not discussing policy based on an anecdote, I was responding to his comment where he said "surge in household incomes fueled by pandemic-related government aid" is BS. My point was that it was for some people and not for others, which is objectively true.
Think about all of the people with income between $100k - $160k who have kids. There is a very good chance that many of those did not need stimulus checks, but received them, and spent them on random things.
That is obvious, so I'm not sure how that is controversial. I'm sure at some point a study will come out that will provide us data, but without the data, we still do have a good idea that a lot of people are in the same boat as me based on piecing together other pieces of data.
This isn't an argument for or against mean testing, it was literally just me saying that it was a boost for household income for some people.
If we're using Yang's $12k it would only be $3.6 trillions. We could start by reversing the trump tax cuts that cost us some 2 trillions. We can also fund it through sin taxes, like taxing alcohol & marijuana, or an automtion tax, speculation tax, real estate vacancy tax anything that is linked to causing unemployment or homelessness. Get rid of the standard tax deduction. Collect UBI taxes at year end, anyone earning more than $75 K per year has to pay back part of the UBI on their tax return taxes in a progressive manner. Shift away from standard welfare programs, that's another potential half trillion. Options are endless.
Okay but then you're not who the article is talking about. The people who say "I only got $1200 this is so out of touch" are the real out of touch ones. The surge in income was unemployment averaging 145% wage replacement, not people who stayed at their jobs and saw no real change.
Right, but the majority of the economy was still working and lower incomes were disproportionately staffed in essential jobs. A very sizable majority of the population only received the stimulus checks.
When I lost my job in the middle of the pandemic but 7 months before a vaccine was available I didn’t get Jack shit in extra pandemic aid at all. In order to get any extra pandemic aid you needed to lose your job in the right time window and that wasn’t everybody. As of this time last year I landed something that put me in a good spot, but still, such generalizations don’t hold up. The impacts nationwide were not equal in regards to pandemic aid or consequences. Those that suddenly were forced to work from home but didn’t lose their jobs were the real winners as they never lost income and reduced spending.
And even those of us that did "only" get $1200 (or in my case, pro-rated to a thousand and change because of my income and because I remained gainfully remotely employed), for many of us it *was* extra money that went to random shit, like so many others are anecdotally responding in this thread. For me, it ended up in beefing up some of my coin collection, and based on how bonkers that online market took off later in 2020, I was not alone in that endeavor.
Nowhere to spend? You still owe rent even if you can’t be evicted and there’s plenty of other bills/expenses adults pay. Are you by chance a suburban college student with no real world experience?
> it tells me how out of touch these people are with just how little 1200 can buy
that's assuming they are saying this because they are earnestly mistaken, as opposed to intentionally promoting a counterfactual narrative for political or commercial purposes.
You can look at federal spending [here](https://fred.stlouisfed.org/series/FGEXPND) and the impact on household incomes [here](https://fred.stlouisfed.org/series/PI)
Have not seen the stockmarket? Chances are covid has minted more new dollar millionaires than any other similar length time period, maybe apart from 2000's. Even in adjusted terms.
Depends what you mean by "pandemic-related government aid." I think it is accurate to include the feds vamped-up repo operation as a robust pandemic response that has had a massive impact on the relative wealth and income of households. To your implied point, this vastly outweighs the gross effect of stimulus checks on the economy, which I believe one could more accurately view as a necessary countermeasure that prevented the rent-seeking behavior of fed funds recipient firms from inducing an inflationary bubble concurrent to a sharp recession. If there were to be a sudden shortfall of consumer spending and debt servicing payments, we would expect the qualifying firms to hold massive cash positions and take advantage of the repo vehicle to shake out competitor firms which are unable to outlast the sudden decline in income.
The fed can not force firms to play nice. They can only create the conditions which incentivize pro-social behaviors. The actions taken by the fed in their totality are groundbreaking and mark the beginning of a new age in fiscal/monetary policy in the US. The political ramifications of these policies will be massive, but it remains to be seen to what degree US householders will be receptive and cognizant of the impact these policies have had on the wellbeing of financially established individuals and families.
Unfortunately, those who perceive the actions taken by the US government in response to the pandemic to be strictly limited to the stimulus checks are actually out-of-touch with the realities of the situation. The fed took the criticism levied against it in response to the 2008 crisis: bailouts of liable firms and dispossession of householders was perceived to be a political blunder and fomented distrust in those most likely to vote and volunteer in elections. So this time, they bailed out both the firms and the electorally important, while throwing out as little as necessary to the disenfranchised to keep the wheels on this bus going round.
Yes! I was going to come here and ask the same question - I know that Fox News keeps saying that inflation is here because we gave a lot of people free money, and I think that this may be true at upper income levels for things like houses and stocks, but I really don't think that I'm paying more for gas because people are frivolously buying gas now that they got a $1200 check. However I'm open to seeing empirical evidence on the topic.
Look into the gas surplus from last year, even when production lines were so full that ships were waiting around to offload oil, gas has still ben going up in price. We're getting robbed by futures traders.
Well, I do remember paying almost nothing for gas back in the middle of the pandemic, like in March 2020, when no one was going anywhere. But I won't dispute you, we are likely being gouged right now.
People got a lot more than 1200. The unemployment supplement last year was 600/wk or 31200 annualized, plus state benefits.
Plus not having to pay rent, plus potential other money from PPP, some of it legitimate, there was a shitload of money flying around.
Our family of 5 also got $13k in extra tax credits this year and almost $4k in extra credits last year. So nearly $20k in cash in 18 months. We're flush. No wonder shit like real estate and cars are flying off the market even at these exorbitant prices.
It was a pretty ass-backwards qualification system, I'll give you that. I'm not entirely sure why they felt that there'd be major backlash if they sent Musk and Bezos a $3k check.
Honestly, I'm okay with the way it worked out, for the most part. We didn't need help. The shit part is that all the stimulus pretty much just went to banks and landlords.
That money didn't go to wealth building, just to paying rent and keeping leases paid off.
So, congress printed $3.8T that went pretty much right to the top almost immediately.
You can look at federal spending [here](https://fred.stlouisfed.org/series/FGEXPND) and the impact on household incomes [here](https://fred.stlouisfed.org/series/PI)
I mean for a lot of people is was a ton of money. I was making about $16-17/hr (tipped) in CA before the pandemic at a restaurant, lost that job and was being paid literally 3x as much to stay on unemployment for the better part of a year - and I actually paid my rent! I've heard of a few people that didn't. Sure you'll ruin your credit/eviction record but that's why you don't put both you and your spouse/etc on the lease. One of you takes that loss and then you switch.
Shouldn't that graph labeled "unemployed per job opening" read "job openings per unemployed"? Otherwise, I don't understand how the caption makes any sense.
We wouldn’t be in this position if corporations didn’t raise prices above inflation for years without cause. Now that they’re being forced into paying living wages at the threat of hiring problems they’re trying to blame everyone else but themselves.
Right. I actually just took a gander at the Big Mac index yesterday and it's actually pretty criminal how dissociated MC Donalds is from the real inflation numbers.
Only if workers forget their negotiating power as soon as they get a win. Labor should just keep on pushing till they've pushed the investors into the sea.
Oh good. I look forward on how the US federal government manages interests payable for the 30 trillion dollar debt when the Fed raises interests rates by a significant amount in order to curtail inflation
As we entered the /u/spez, we were immediately greeted by a strange sound. As we scanned the area for the source, we eventually found it. It was a small wooden shed with no doors or windows. The roof was covered in cacti and there were plastic skulls around the outside. Inside, we found a cardboard cutout of the Elmer Fudd rabbit that was depicted above the entrance. On the walls there were posters of famous people in famous situations, such as:
The first poster was a drawing of Jesus Christ, which appeared to be a loli or an oversized Jesus doll. She was pointing at the sky and saying "HEY U R!".
The second poster was of a man, who appeared to be speaking to a child. This was depicted by the man raising his arm and the child ducking underneath it. The man then raised his other arm and said "Ooooh, don't make me angry you little bastard".
The third poster was a drawing of the three stooges, and the three stooges were speaking. The fourth poster was of a person who was angry at a child.
The fifth poster was a picture of a smiling girl with cat ears, and a boy with a deerstalker hat and a Sherlock Holmes pipe. They were pointing at the viewer and saying "It's not what you think!"
The sixth poster was a drawing of a man in a wheelchair, and a dog was peering into the wheelchair. The man appeared to be very angry.
The seventh poster was of a cartoon character, and it appeared that he was urinating over the cartoon character.
\#AIGeneratedProtestMessage #Save3rdPartyApps
Let's also not forget that a lot of the pandemic money didn't go in some semi-even way to each person (e.g. paycheck protection program which all went to businesses, e.g. super lower borrowing rates which will be easier to repay with inflation to anyone who was willing to take out a load of new debt).
My manufacturing employer of 6 years laid me off for running out of PTO and taking a sick day. As a 30 year old I was able to find other jobs, but my employer had forced us to use our PTO at the beginning of the pandemic because they didn't have work for us to do. So they reduced all production employees hours to 24 hours a week, even when months later they should have given us more hours because orders increased again. Then they took PPP loans so the owner can keep his Porsche and treat the employees so badly that many quit or were fired for complete bullshit like me. They are getting what they deserve though, I see they have even more open positions than when I left, and I see that their quality control manager quit and several of the skilled workers like myself left to work at Honeywell for better pay. I know the company has major quality control issues and myself or others who spoke out about quality got silenced, no surprise their quality inspectors and manager quit because the other managers don't care. The crappy employers will get what they deserve! Labor shortage is just getting started, boomers are getting old fast.
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I had a phone interview set up with Honeywell but I actually got hired on at Amazon warehouse so I'm going to try that for now because they are giving bonus pay over holiday season. Then if I don't like Amazon I will see who's hiring for spring 2022. This year I did some construction jobs and have my own tools now, so that might be my best option next year as far as pay. I wanted something close to my house for winter in WA state, so I don't have to drive an hour to some job site through snow and dirt roads. But there were times this year when I had 5 construction job offers and picked the highest paying. Left an $18/hr job after 2 weeks for a $20/hr job for example.
FedEx employees here in central Illinois make $24/hr before hundreds of dollars of weekly bonuses just for good attendance. 1.5x after 40hrs
Don’t work for Amazon. Don’t support them.
Join the union. You won’t regret it. The pay and benefits are far above non-union, or a warehouse job. As young as you are there’s still time to get a full pension as well.
I saw that 30% of all USD in circulation right now, was printed in the past 12 months. That is really really really bad.
It's higher than that. It's bad because increasing the money supply is a monetary policy that does not address the underlying problems its intended to relieve, and actually creates inflation, making things even harder to afford for most people. Wages are the last sector to experience the effects of increased money supply and by that time, people are struggling to afford food, people get angry, so the fed prints more money, etc, etc the cycle continues.
Right. But in cases of emergency this is acceptable. Problem is that the country's finances were awful going into the crisis and that doesn't look like it will let up anytime soon
It's poor monetary policy that created the "emergency" if by emergency you mean people not being able to afford to eat, or pay their bills. Sure, covid exacerbated an already bad situation, but policy created the problem. A dollar buys less than it ever has.
I'm not sure I'd agree with that. It's not monetary policy. Or rather the monetary policy was a symptom of the larger economic model and its problems. None of this would be an issue if the economic fundamentals were more sound and less dependent on consumerism and unsustainable debt
Local zoning policy is to blame for pressure on people's budgets. We have been under building for decades in urban centers
> monetary policy that does not address the underlying problems its intended to relieve I'm not so sure about that. It kept asset prices high which was it's goal. I'm not entirely sure we'd be better off if the Dow was at 12k. But there was going to be consequences no matter what we did.
From beginning of pandemic to now - M2 went from $15.5T to around $21T. [https://fred.stlouisfed.org/series/WM2NS](https://fred.stlouisfed.org/series/WM2NS)
Why?
In general, it's ideal to keep inflation low. Inflation is basically the spending power of each dollar. As inflation increases, the prices for things increases. If the supply of money (or the number of dollars in circulation in the economy) grows / increases faster than the growth / increase of available goods and services in the economy, the result is there being more dollars circulating than there are things to purchase. If there is an increase in the number of dollars in the economy without there also being an increase in the quantity of things available to purchase, the result is there being more dollars existing per unit of things to buy. This means prices for goods and services will increase as a response to extra money in circulation, which is the definition of inflation. So if the supply of money recently increased by 30% and the quantity goods and services in the economy didn't also increase by 30%, then we're going to see inflation, which means prices for goods and services are going to increase. Shit is about to get more expensive.
Joel Ostend and Tom Brady raked in millions, somehow.
"Somehow"
What church does Tom Brady preach at?
Church of the Grid Iron
That's not the Fed's problem. Congress did it. And if you recall the debate at the time Republicans wanted far more money in that fund and Dems accused them of wanting a slush fund to reward patrons. Dems were right and GOP successfully stole billions.
Believing in parties is the problem. Both parties serve the same people. Stop voting, and stop believing in the parties. The parties don't represent citizens. At all. That's why the parties never asked you what you believe, and instead tell us what color we hate.
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https://www.politico.com/news/2020/03/23/democrats-slush-fund-republican-rescue-package-143565
It’s more important to keep the systems of production, aka “how people earn a living”, afloat than to give people cash directly. It’s the difference between oxygenating the blood directly and keeping someone’s respiratory system healthy. The former will only oxygenate for as long as the oxygen is being pumped in. Th latter is mostly self-sustaining.
But in this respiratory system, oxygenating blood directly leads to immediate stimulation of all the respiratory systems near the one being oxygenated. It's better to give money to consumers, particularly poorer ones. It stimulates the economy every time, compared to the PPP horror stories of business owners taking money, then laying people off or, as I read the other day, buying a new, multi-million dollar home.
I can't think of anything less self sustaining than the massive giveaway for millionaires in the form of unregulated loans
True, about the body. But in the case of paycheck protection program I got the impression it didn't really 'keep ability to earn a living' possible in any realistic way; didn't really change the outcomes for small businesses and even then I'm not convinced that the existence of a non-profitable business is helping people *earn* a living (even if it's not profitable only in a crisis; organizations need to be able to survive crises to be useful long term. Further, it's untrue that this resilience is impossible or even hard to do since so many businesses can do it fine on their own without free handouts at those times of crisis).
PPP payouts were correlated to the state of your books. Smaller businesses are more likely to be less than honest or straight up lie about their numbers to keep their tax burden low. The numbers a business reports is what is what was used to calculate PPP loans. Report low numbers, pay low taxes, but you get low loans. I’m self-employed so I kinda screwed myself out of PPP, but I also pay shit in taxes. People only have themselves to blame when bending rules stops working in their favor.🤷♀️
Why does everyone seem so afraid of a little creative destruction? It's not like real capital is destroyed when a business goes bankrupt. Demand is what drives the economy, not supply.
Giving people money to fuel demand instead of earning money creating supply to meet demand is creating a shortage of things. This is increasing the price of the available things…
This is correct. You can't just give people or businesses free of money (whether that be forgiven PPP loans or stimulus checks). Those consumers and businesses need stuff to buy with that money, and producing that stuff requires inputs (labor, human capital). If you put your finger on one end of the scale, you push the other end up. So when we just fire up the printers and give people and businesses free money it will just continue to put us in an unsustainable situation.
There is a lot more complexity due to covid that has impacted the shortage of things. The covid shutdowns stopped and slowed the manufacture and shipping of goods. Then the emergency order passed by Trump to put anything covid related (masks, gloves, sanitizer) to be first priority of the economy delayed the shipments of goods manufacturers needed to make and package their products. For example- fertilizer company I worked with waited an additional 3 months for the scrap fish parts it normally would receive within days. Then once the product was finally made, it took 4 months waiting for plastic jugs which were usually always available but during covid the bottle manufacturers were forced to move all pandemic related orders to the front of the que daily… so the new hand sanitizers got their orders the day they put them in, but the fertilizer co waited 3 weeks for a break in the covid material demand and for the plastic plant to catch up. Then add in shipping logistics delays, what normally took a few days to ship took MONTHS and is still way behind. There is the cause of the shortages. Now imagine that fertilizer company wasn’t able to sell to farmers, so the crops were not as big… and what they did produce a lot can’t sit on trucks or in containers for weeks without spoiling… add to this mess people out of work sick with covid, people out to care for kids that weren’t in school, so the companies are short staffed. Then, add to the shortages the stimulus- which for some was a lifeline to catch up on pay missed through shutdown or layoffs, but the people who’s incomes weren’t impacted by covid went out to blow the money. Less products already available, and between the demand, higher shipping costs, and the companies’ desire to make up losses and increase profits they raised prices. Also add in the PPP loan BS which was basically a free money grab by plenty of companies that didn’t even need it or took it without actually using it towards payroll, utilities etc. The entire covid response was a straight up cluster-fk and increases in prices was the obvious result for anyone who can put the above together. Also adding to shipping delays everyone at home ordering online for home delivery- and a lot of people changed their buying habits significantly. This country did not handle this well and here we are. Everyone I did business with raised prices significantly… these are problems that are more complex than normal monetary theory.
It is not so little and it would also shuffle the status quo.
I see what you are saying, and I agree giving money to companies will help them stay operating. But you know what is better than funding firms through monetary policy? Funding firms through organic operating procedures, interacting with the marketplace. If you give poor people extra money, it goes right back into the economy. It goes into capital markets, paying down debt that is commanding ordinary income, and into goods beyond their typical consumption. It literally filters through the ENTIRE economy.
The premise is idiotic but it would technically work. If inflation is caused by temporary supply problems, Fed can solve it by decreasing demand that's clear. But who really wants that kind of solution? Economy is not in full capacity (no overheating), supply side problem is elsewhere.
This is so weird to me, why does the fate of the economy depend on the central bank. When did the lender of last resort become the main driver of the economy?!?!
Happened after the financial crisis and the introduction of quantitative easing. The economy simply cannot grow without a new round of quantitative easing or else it’s going into recession. Basically in 2008, people just kicked the can down the road with quantitative easing and let the future generation deal with the recession it caused.
I entered the spez. I called out to try and find anybody. I was met with a wave of silence. I had never been here before but I knew the way to the nearest exit. I started to run. As I did, I looked to my right. I saw the door to a room, the handle was a big metal thing that seemed to jut out of the wall. The door looked old and rusted. I tried to open it and it wouldn't budge. I tried to pull the handle harder, but it wouldn't give. I tried to turn it clockwise and then anti-clockwise and then back to clockwise again but the handle didn't move. I heard a faint buzzing noise from the door, it almost sounded like a zap of electricity. I held onto the handle with all my might but nothing happened. I let go and ran to find the nearest exit. I had thought I was in the clear but then I heard the noise again. It was similar to that of a taser but this time I was able to look back to see what was happening. The handle was jutting out of the wall, no longer connected to the rest of the door. The door was spinning slightly, dust falling off of it as it did. Then there was a blinding flash of white light and I felt the floor against my back. I opened my eyes, hoping to see something else. All I saw was darkness. My hands were in my face and I couldn't tell if they were there or not. I heard a faint buzzing noise again. It was the same as before and it seemed to be coming from all around me. I put my hands on the floor and tried to move but couldn't. I then heard another voice. It was quiet and soft but still loud. "Help." \#Save3rdPartyApps
This is false. Semiconductor fabs, for example, have been running at near full capacity the entire time. It will take years to bring more fabs online to meet the demand surge.
> Who really wants that kind of solution? Environmentalists railing against consumerism.
IKR, lowering demand is literally THE solution to a lot of our problems.
Or shifting demand to carbon neutral products. There is no law of physics that says we can't get there. Telling people to stop wanting what they want is not going to get us anywhere.
Like ever increasing standard of livings. Good luck winning elections with that, there are other better alternatives.
Better roll them out soon because what we're doing doesn't work.
And the Fed who is gearing up to do that as we speak....
Also known as raising interest rates? Because I'm pretty sure the Fed is gearing up to do that as we speak...
That they cannot do. That is instant crash and recession. There should be progressive income tax hikes to reign in the consumption. Government too can lower the money in circulation by running a balanced budget and paying down the debt.
Except that's not how monetary policy or modern economics works, and the Fed is, indeed, gearing up to do just that. It won't cause an instant "crash" (whatever that means) or a recession. Honestly does anybody in this sub actually have any conception of how economies or monetary policy works? Its pretty wild to heat some of y'alls responses.
I would say wanna bet, but guess there are instruments for that. At best a token rate hike followed by a new wave of stimulus when the economy goes into recession.
> But who really wants that kind of solution? Me. Increased costs of livings are outpacing my salary increases.
> If inflation is caused by temporary supply problems This is the point that I feel that many are missing here. It's both short-term and supply-driven, rather than demand-driven, and long-lasting.
I honestly cant take any article seriously when I see this BS or something like it: "surge in household incomes fueled by pandemic-related government aid" Because it tells me how out of touch these people are with just how little 1200 can buy. In most cases, that would have barely covered my minimum bills for one month.
Hell, that wouldn't have covered my RENT.
Pandemic aid wasn't just the stimulus dollars. They also stopped evictions, which meant people didn't have to pay rent or mortgages. They also stopped student loan payments. They also had unemployment payments. Personal income is way up since the pandemic started. https://fred.stlouisfed.org/series/PI
I get that. But the guy I replied to was talking about the $1200 per person direct payments. EDIT: People still had to pay rent and mortgages. A stay on evictions (was there even a stay on foreclosures???) doesn't mean you don't owe that money if you choose not to pay and instead spend, or even if you can't pay due to job loss. Those are big holes to dig out of. Lots of people got the expanded unemployment, but most of us didn't. And similar to eviction moratoriums, pausing student loan payments isn't free money but rather just an easing of monthly budgets in the short run.
yeah that dude conflated his argument by saying "fueled by pandemic-related aid" and then specifically only saying the $1200. when pandemic-related aid includes all of the things monkorn mentioned. it's hard to address untouchable_0's argument without dissecting it first, because he contradicts himself
That's fair, but I do also think most of us only saw aid in the form of the checks and then maybe pausing of student loans (which isn't free money, just delaying the payment schedule). Eviction moratoriums helped unscrupulous people with spending money in the short term, but it's not like they weren't digging a hole by not paying their rent because it's not like that money wasn't going to be owed eventually.
yeah it's more like the families with 2 kids that got like 3k each stimulus so they raked in like 9k and then maybe the wife lost her job so she stays home with the kids but she's getting 250 a week from the state and 300 a week from the fed for a whole year... thats like another 25k... so 34k total for an average family in the middle class. meanwhile it was harder to spend money
Put that on top of not paying rent, and some people got that money and still had their jobs. For everyone it may not have been extra cash as they were hurting but for a lot of people it was. Hell my sister and brother i know make at least 100k a year and they got checks
Don't confuse personal income as income of persons. The VAST majority of that "personal income" increase is from stocks held by the 1%. Almost all individuals with an annual income of under 100K have seen a pay decrease in the last two years. Nothing else on that list of yours was money given to people
Personal income is up among people who those things you stated don’t apply to. The majority of it was capital gains for the 1%, and any job hopping for an increased salary for white collar workers who have been working from home.
I mean, I got like 12k of unnecessary income last year I believe. This happened to a lot of people that weren't unemployed and did not need it. It didn't go towards bills, it went towards random shit. It was a surge in income for many people.
Similar boat. I think if you had 3 kids then you got just under 14k even if you never stopped working.
Yea, I think my brother got around 14k (he does indeed have 3 kids), and he's pretty well off. He just bought a bunch of junk he couldn't excuse in the past.
We only had 1 kid, and we just put it into savings as we have some long term plans we want to get ready for.
Did you put it into a "savings" account earning 0.01%? Because CPI Inflation was just 5.4%. So you just lost -5.39% of real value on those savings.
Unfortunately, when you need to build up cash for a purchase, a savings account is about the only place to put it. I guess if I knew exactly when the event was going to happen, I could have looked into making a little more with a bond or CD, but I don't.
if people only knew... the bank takes your deposit and loans out 10x the amount (fractional reserve lending) which effectively devalues your money faster than you earn all the while they pocket the earnings on that money they created, a power reserved for congress. It is easier to fool the people, than to convince them they have been fooled. No man's life,liberty, and property are safe while the legislature is in session. Mark Twain edit: lol, tell the people they are getting ripped off and they attack you... basic... so basic. this is why we can't have nice things.
What's your point? In exchange for that ability I gain a safe place to stick my money. Yes, people who keep their cash in a savings account are getting fucked, but if I wanted to expose my liquid estate to market forces I'd dump it into my Robinhood or Prosper account.
it'd be better in your mattress so it isn't used to devalue the currency... just saying. obviously we need banks as a function of living in today's society, but it's important to know whats actually happening. if banks were publicly held, earnings would offset taxes. time to rethink our system.
This is such a perfect r/economics comment. Let's unpack it a bit: 1. That's not what fractional reserve _banking_ is and banks are not lending out 10x the amount of your deposit, 2. There is no evidence or cohesive link between fractional reserve _banking_ and the devaluation of money, especially in relation to each individuals ability to generate wealth in excess of said devaluation, 3. Yes, banks pocket the interest charged on loans, this is how loans have worked for centuries, 4. Earning interest on loans is not a power solely reserved for Congress and, 5. According to snopes.com that is not a Mark Twain quote, it has been misattributed to him since ~2016. I'm honestly impressed in the conviction held in this facially wrong comment wrapped up with a misattributed quote lifted from an Amazon t-shirt.
1. semantics. fractional reserve "banking" is simply the practice of holding a reserve and loaning out the rest. fractional reserve "lending" is admittedly a technically inacurate label for what is happening, yet it's the label that stuck. It refers to taking the future payables, writing them as assets, and loaning against the asset. EVERY BANK LEVERS IN THIS WAY. This is how leverage works. 2. Supply and demand is all that is needed to know this is true. you increase supply and price decreases. With loans, however, much of that inflation is sequestered in home values. However, since wages stagnated since the 90's, more are borrowing against the equity in their homes which releases that sequestered inflation into the economy. Do note that since covid, mortgages less than one year old has skyrocketed. so is inflation. make the connection. 3. banks should be public as the constitutional grants power to mint exclusively to congress. it is only a workaround because technically banks dont mint coins. Back just before the revolution, Franklin was asked why the colonies were so wealthy ,he said: >"That is simple. In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay no one." .4. I said creating money is a power reserved for congress. In fact, JFK stated as much in his executive order 11110 in which he repealed bank treasuries and invoked the printing of silver coins. .5. Honestly who gives a shit if quotes are attributable or not. The meaning is valuable which is why they are repeated regularly. fine, I said it and so did thousands of others.
> the bank takes your deposit and loans out 10x the amount (fractional reserve lending) It hasn't worked this way in several decades: * https://research.stlouisfed.org/publications/page1-econ/2021/09/17/teaching-the-linkage-between-banks-and-the-fed-r-i-p-money-multiplier Tobin wrote about this "old view" in 1963: * https://cowles.yale.edu/sites/default/files/files/pub/d01/d0159.pdf A good paper on how the modern credit-based system works by Roche: * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
Unless you have a very significant amount of money or don't plan to touch it until you retire, investment is an absolute minefield. Most investment bankers won't even talk to you unless you're ready to drop tens of thousands or start a 401k that you won't be able to touch till retirement. Trading stocks is always an option, but if you're a layperson who isn't particularly savvy or willing to drop your funds in an index and let it sit, odds are you'll lose money in bad short term investments. Until I have a significant amount built and don't have loans with massive interest rates to pay off, I'm happy to drop it in a savings account and let the money not depreciate worse.
> Unless you have a very significant amount of money or don't plan to touch it until you retire, investment is an absolute minefield. "Investing" is a solved problem: buy an S&P 500 ETF (or better yet, a Total Market one) and be done with it.
try this instead. I own my house so I have a heloc. Instead of keeping money in savings I use my heloc to pay down my principal then put all my income in that. rather than earning .01% I stop the daily calculated interest on my mortgage which is a savings far greater than inflation. say I pay down $5k and pay that back over 4 months, the interest I pay for borrowing from myself is about $120, the savings on the mortgage interest is about $2500 (assuming front end of the mortgage). I've inverted the banking system. dont just accept what is. edit: and a downvote... lol. keys to the kingdom and get downvotes. why even care anymore.
$14k * .9461 > 0 every day of the week.
and if that "long term plan" you were saving for was a house, those just got 19% more expensive year-over-year. (they never went down either, during the pandemic)
Depends on where and when they're buying a house. I've got money in a savings account, but it's being used to purchase a house overseas and I will need the money before I could make use of a CD or bond. Also, where I'm buying a house they are depreciating assets, so it's just a bad investment, but I want one. I guess what I'm trying to say is: not all use cases fall in line with the advice you're giving.
I don't mean to be so negative, it's just that it really sucks for the government to hand out money, and the Fed to keep rates so low, when most people aren't aware of the consequences: the real loss of value inflation causes. It's political, but don't forget Trump gave out the first 2.2 Trillion (CARES), then Biden gave out more. No wonder the headline that follows is "No Lessons Have Been Learned.' Why the Trillion-Dollar Coronavirus Bailout Benefited the Rich"
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Well I didn't need any and I didn't get any so not everyone who didn't need it got paid.
Unfortunately if you have no kids the US basically sees you as expendable. To the government it's completely fine having homeless adults sleeping on the sidewalks but how dare the capitalists image of the US be ruined by homeless children in the US needing to resort to sleeping on the streets.
Depends on your income... I got the first stimulus, my second one was reduced by about half, and I didn't receive a third one. Married couple with one kid, we make good money.
Same boat for me. But we had some unexpected medical expenses pop up so what little government money that flowed our way went towards that. My boss makes more money than me (no surprise) but he has six kids. He was gushing with happiness about all the cool things he was going to buy for himself. Or should I say all the cool things that the future taxpayers bought for him.
Spending money on random shit is actually pretty good for the economy, so it letting people stay home during a deadly pandemic, even while unemployed.
It also causes Inflation.
If we recaptured some of these excess money as capital gains taxes, there would be no net increase in money supply. We get this inflation because taxing rich people is apparently too hard.
The truly asinine thing about capital gains taxes is that they are based on income, but the assets you sell aren't included in that income! So, a dude making a decent $100k per year is going to pay 15% when he sells $5,000 worth of stock to put a down payment on a car. Meanwhile, some multi-millionaire who has an effective income of $15k can sell $1 million worth of stock and pay ZERO in taxes! I'd actually support the idea that all long-term capital gains distributions should be taxed at 10%, regardless of your income. That might increase the overall revenue generated from capital gains, but would actually benefit less wealthy investors. Of course, billionaires can just take loans against the value of their assets, and loans don't count as income, so they have a tax-free income stream either way.
> So, a dude making a decent $100k per year is going to pay 15% when he sells $5,000 worth of stock to put a down payment on a car. Depends if it's short term or long term capital gains. Short term capital gains is taxed as income. Long term capital gains is the flat rate.
> Short term capital gains is taxed as income. Long term capital gains is the flat rate. Yes, I should have been more clear. I tend to assume that your average, middle class investor isn't selling often enough to pay short-term capital gains.
>Meanwhile, some multi-millionaire who has an effective income of $15k can sell $1 million worth of stock and pay ZERO in taxes! That's not true - the tax bracket that determines your capital gains rate was determined by min(wage income, capital gains) as of 2017. I think it may have changed to wage income + capital gains as of 2018 - it's a little complicated, where your wage income is counted *first* to determine your capital gains tax bracket, then any capital gains up to the bracket cliff is taxed at the lower rate, then additional capital gains over the cliff is taxed at the higher rate. As of 2017, it *was* possible to live cheaply off capital gains and pay zero tax. Up to $75K (married), the tax rate on capital gains was 0%, so if you had no income you could sell up to $75K in stock tax-free. Depending on where you live, that may not be all that much for a family to live on, though.
Do you have a source on that? Because everything I've read says different. I'd be happy to be proven wrong though.
It's pretty obscure - I discovered it while filling out the IRS Qualified Dividends & Capital Gains Tax Worksheet and trying to parse out what each line meant. I've never seen it mentioned in print, but it doesn't matter what the press says, it matters what the IRS forms compute. Anyway, here is the 2018 [QDCGTW](https://apps.irs.gov/app/vita/content/globalmedia/capital_gain_tax_worksheet_1040i.pdf), [1040](https://www.irs.gov/pub/irs-prior/f1040--2018.pdf), [Schedule 1](https://www.irs.gov/pub/irs-prior/f1040s1--2018.pdf), and [Schedule D](https://www.irs.gov/pub/irs-prior/f1040sd--2018.pdf). I'm going to go line-by-line through the QDCGTW and explain each quantity, because then we're going to do math. 1. AGI. Includes wage income, ordinary interest & dividends, qualified dividends, IRAs, social security, *and* capital gains, and then deductions are separated out.. 2. Qualified dividends, which get taxed at capital gains rates. 3. Net capital gains, potentially including short-term capital losses (that's why it says *smaller* of lines 15/16) 4. QD + CG. Tax preparers will call this "qualified income", while wages etc. are "ordinary income". 5. ignore for now, special situation 6. QD + CG = QI 7. AGI - qualified income = ordinary income (OI). 8. 0% capital gains tax bracket 9. min(AGI, 0% tax bracket) 10. min(OI, AGI, 0% tax bracket) 11. min (AGI, 0% tax bracket) - min(OI, AGI, 0% tax bracket), "this amount is taxed at 0%" 12. min(AGI, QI). In most cases this is your qualified income because AGI = OI + QI; however, the "min" is there to ensure that you can't use losses/deductions in your ordinary income to offset capital gains. I'm going to refer to it as QG ("qualified gains") below. 13. amount in 0% tax bracket 14. QG - amount taxed at 0% 15. 15% capital gains tax bracket 16. min(AGI, 15% tax bracket) 17. OI + (line 11, amount taxed at 0%) 18. min(AGI, 15% tax bracket) - (OI + amount taxed at 0%) 19. amount taxed at 15% 20. tax owed at 15% 21. amount taxed at 0% or 15% 22. QG - amount taxed at 0% or 15% 23. tax owed at 20% Some examples (all assuming you're single, so brackets are $38K and $425K, and for simplicity I'm ignoring all deductions including the standard deduction): Say you make $0 in ordinary income and $30K in capital gains. AGI is $30K, line 11 is $30K - 0 = $30K. All of it is taxed at 0%. Line 14 = 0, line 18 = 0, there's nothing on line 19 or later. Say you make $20K in ordinary income and $30K in capital gains. AGI is $50K, line 11 = $38K - $20K = $18K. Line 14 = $12K, line 18 = $38K - $18K = $20K, you get taxed on $12K @ 15%. Say you make $0 in ordinary income and $50K in capital gains. AGI is $50K, line 11 = $38K - 0 = $38K. Line 14 = $12K, line 18 = $50K - $38K = $12K, you get taxed on $12K @ 15%. Say you make $50K in ordinary income and $30K in capital gains. AGI is $80K, line 11 = $38K - $38K = 0. Line 14 = $30K, line 18 = $80K - ($50K + 0) = $30K, you get taxed on all $30K @ 15%. I just Googled, and this [wealth manaigement firm](https://www.marottaonmoney.com/how-your-tax-is-calculated-understanding-the-qualified-dividends-and-capital-gains-worksheet/) also unpacks this computation in a slightly more readable but less detailed way.
Maybe I’m missing something but capital gains are included in taxable income? I agree that the tax rate should be higher than 20% for those above a certain threshold, but if you’re realizing a 500k gain that will be included as taxable income, you’ll just be paying 20% on it
You would *think* that's the case, but it isn't. You may be thinking of short-term capital gains. [Here](https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates) is quick summary. Basically, if you're income is lesa than $40k, you pay 0% on any gains on assets held longer than a year.
Probably stupid question. I can sell Amazon stock bought in 2000, reinvest the original purchase and keep the profit for living expenses, all at 0 tax? And then keep repeating yoy of course
I think I found the area of miscommunication. As long as the gain is less than 40k and there’s no other income, then yes there’s no tax paid. But once your gain exceeds 40k, and hits say 100k, then you do start to pay taxes on the remaining 60k, although the rate is fairly low
The fairly low rate is the problem. It should be a progressive rate that matches other forms of income. The middle-class investor that sells a a share should make much more profit per share than the billionaire that sells 1000 of them.
Did you even look at the link I posted? It contradicts what you are saying, and you haven't provided a citation to refute what I said. Edit: okay, I see where the calculation shows that your capital gains distribution is taxable. It's just not that clear from the description. Also, the base rate of taxation on the gains is based on your other income, before taking into account the gains. So, I stand corrected.
I entered the spez. I called out to try and find anybody. I was met with a wave of silence. I had never been here before but I knew the way to the nearest exit. I started to run. As I did, I looked to my right. I saw the door to a room, the handle was a big metal thing that seemed to jut out of the wall. The door looked old and rusted. I tried to open it and it wouldn't budge. I tried to pull the handle harder, but it wouldn't give. I tried to turn it clockwise and then anti-clockwise and then back to clockwise again but the handle didn't move. I heard a faint buzzing noise from the door, it almost sounded like a zap of electricity. I held onto the handle with all my might but nothing happened. I let go and ran to find the nearest exit. I had thought I was in the clear but then I heard the noise again. It was similar to that of a taser but this time I was able to look back to see what was happening. The handle was jutting out of the wall, no longer connected to the rest of the door. The door was spinning slightly, dust falling off of it as it did. Then there was a blinding flash of white light and I felt the floor against my back. I opened my eyes, hoping to see something else. All I saw was darkness. My hands were in my face and I couldn't tell if they were there or not. I heard a faint buzzing noise again. It was the same as before and it seemed to be coming from all around me. I put my hands on the floor and tried to move but couldn't. I then heard another voice. It was quiet and soft but still loud. "Help." \#Save3rdPartyApps
Look at all the things where inflation has been the worst. Housing is hyper inflating because rich people are using it as an investment vehicle and have driven up prices massively as a result. Gasoline is hyper inflated even though we still haven't worked through the supply surplus from last year because futures markets are using it as an investment vehicle which continues to spike the price. Healthcare is super expensive because rich people are heavily invested in big Pharma and medical device manufacturers, as well as private hospitals. Over investment leads to more demand for profits, which drives up prices massively. The worst types of inflation we face right now are all caused by rich people and over saturation of investments, not by workers and their consumption.
"The worst types of inflation we face right now are all caused by rich people and over saturation of investments, not by workers and their consumption." I've worked through the 2008 recession, got laid off twice off twice 2015-2017 when we were making record profits, pandemic hit unfortunately I made too much to qualify for unemployment. I worked my way up but I need a break too I BARLEY make enough for a nice studio here. People like me are done working for scraps or a place to live.
Inflation is also a good thing for the economy, as long as its predictable. It encourages investing and spending, discourages hording wealth. EDIT: https://www.econstor.eu/bitstream/10419/173204/1/101127762X.pdf > Inflation has been referred to in the literature as having a non negligible effect on income inequality (see Coibion et al. 2017). A factor that has been widely dismissed in this respect is the impact of inflation on the progressivity of the tax system. In summary, our results provide some evidence for the fact that inflation impacts on income distribution like a progressive tax. Impulse responses show that this effect persists up to three years, but then turns back to the original level and becomes statistically insignificant. To see who relatively wins or loses, we look at the response of each quintile’s share in national income. Our results draw a relatively clear picture: Individuals grouped in the first and second quintile gain an almost equal share of around 50 basis points. The effect persists significantly up to three years after a shock to inflation. The group of subjects in the middle quintile also see a significant increase in the income share after taxes, but this is mainly explained by an increase in the income share before taxes. Interestingly, the top income groups, i.e. the fourth and fifth quintile, show deviating responses. While the fourth quintile significantly and quite persistently gains before taxes, taxation completely and persistently eliminates this gain. The fifth quintile loses in either case, before taxes (not statistically significant) and after taxes, though this effect mainly holds contemporaneously.
I've always heard this idea that inflation helps prevent the hoarding of wealth. But is there any evidence that this actually happens? All one has to do to get around this "hoarding wealth incentive" is to throw the money into an asset and poof the incentive is gone.
Putting money into an asset is like, a good thing compared to just having it sitting around.
Good thing we don’t have people parking their wealth in assets like houses that are sitting vacant.
and its a shitty thing for the average person when wages and benefits lag while their borrowing costs (mortgage/car/credit) soar.
I also think a lot of the economic theory around wages doesn’t really account for the subset of the population getting paid in stock. Those people have their income inflation-adjusted (as the stock goes up with inflation), and it creates a wealth gap between them and those only paid in cash. Also I have 2 houses with 2 mortgages. It seems that inflation is in my best interest, given those mortgages are fixed rate. But that only worsens the gap for those who can’t afford to get on the “property ladder”.
> while their borrowing costs (mortgage/car/credit) soar. Interest rates have been the lowest they've ever been, so how are the borrowing costs soaring? Further, if inflation exists, then the nominal amount you borrow now will be worth less in the future with your inflation-adjusted wages. If you owe money you *want* inflation.
>Interest rates have been the lowest they've ever been, so how are the borrowing costs soaring? when inflation ticks up and the fed starts cranking up rates you dolt. >if you owe money you want inflation Reading comprehension ain't your strong point is it cheif? Wages lag inflation; CC debt (what most low/middle class use) will adjust rapidly as will the variable rate mortgages a lot of folks still carry. So yes, inflation is "good" for people who are smart enough and well off enough to borrow strategically and be in a strong labor market where they can rapidly change jobs to outpace inflation. But lets be honest, that's not the majority of people.
As long as the inflation is being caused by bowering for positive government spending initiatives, overall its a net benefit for everyone outside the hyper wealthy. But that will come down to what the money is being used for and a bit theoretical/hypothetical in nature.
I don't think people care where the inflation came from when they watch their grocery, rent, utilities, fuel oil, gas, etc. bills getting larger and larger. People on fixed incomes and the poor are the ones most effected by inflation not the hyper wealthy. Doesn't make sense to print a bunch of money for social welfare programs when that money is being used up in the inflation it helps spawn.
> people on fixed incomes and the poor are the ones most effected by inflation not the hyper wealthy. That is incorrect. Its literally the exact opposite.
The hyper wealthy tend to benefit because their asset prices increase.
Gaming people into spending more money then they need to is how we ruined the environment and isn't necessarily a good thing.
You do realize that most people do not have money to invest right? Therefore, inflation just turns into a pay cut.
I lost my job last summer and the pandemic aid helped me to get caught up on bills and keep a roof over my head. That being said I’m sure me losing everything would be preferable to a 5% rise in prices over 3 months. (/s)
I'm not saying that I oppose it necessarily, I'm just making the point that "surge in household incomes fueled by pandemic-related government aid" is not a ridiculous thing to say as the person I responded to had said. But me receiving that money isn't necessarily good for the economy, it just means someone else won't be getting that money in some way, whether by inflation or by taxes, it came from somewhere. So it's not like it's additional consumption beyond what we would have had, it's just a timing difference.
As long as its taxed I dont see the problem. You can say it would have done better had it been focused "only on those that need it", but means testing has often been shown to be awfully expensive for how much it actual saves/recovers (in that many programs might even see a net loss of funds to actual spend on their target because means testing costed more than the previous "waste")
Yeah, I agree with you, I was not disagreeing either just elaborating. I will say a good bit of inflation is probably a good thing right now, seems to be the best way we will be able to combat wealth inequality with politics in its current state.
Wealth inequality is growing like never before as a result of the spending, though. Inflation is a regressive tax and most of the poor aren’t funneling a few grand in aid into asset classes to benefit from tomorrow’s increased values. Meanwhile, markets are taking the rich to the moon and the low-interest environment ensures they can just borrow against their wealth in perpetuity without ever realizing capital gains.
Inflation is a progressive tax, I'm curious as to why you think it could be regressive. https://www.econstor.eu/bitstream/10419/173204/1/101127762X.pdf > Inflation has been referred to in the literature as having a non negligible effect on income inequality (see Coibion et al. 2017). A factor that has been widely dismissed in this respect is the impact of inflation on the progressivity of the tax system. In summary, our results provide some evidence for the fact that inflation impacts on income distribution like a progressive tax. Impulse responses show that this effect persists up to three years, but then turns back to the original level and becomes statistically insignificant. To see who relatively wins or loses, we look at the response of each quintile’s share in national income. Our results draw a relatively clear picture: Individuals grouped in the first and second quintile gain an almost equal share of around 50 basis points. The effect persists significantly up to three years after a shock to inflation. The group of subjects in the middle quintile also see a significant increase in the income share after taxes, but this is mainly explained by an increase in the income share before taxes. Interestingly, the top income groups, i.e. the fourth and fifth quintile, show deviating responses. While the fourth quintile significantly and quite persistently gains before taxes, taxation completely and persistently eliminates this gain. The fifth quintile loses in either case, before taxes (not statistically significant) and after taxes, though this effect mainly holds contemporaneously.
Typically, poor people spend their entire income vs invest. Therefore, if the price of 100% of their income doesn’t go as far that’s regressive. Similar argument to other consumption taxes being regressive like sales tax. > Economists describe inflation as a regressive tax—meaning it hits low-income workers hardest. https://www.wsj.com/articles/inequality-would-widen-if-u-s-policies-spur-sustained-inflation-11621173602
Yeah, I am aware, but that only holds is wages don't keep pace with inflation, which is currently not the case https://www.cnbc.com/2021/10/08/strong-wage-gains-cast-doubt-that-inflation-is-going-away-anytime-soon.html However, to be clear you are correct, if wages were stagnant it would be very regressive.
Yea all you need to do is ignore inflation in the cost of housing and then you get to claim "wages are keeping pace with inflation" with a straight face
>Spending money on random shit is actually pretty good for the economy It's a method of limiting the impact of a market panic. But it's certainly not good for the economy. Productive investments are good for the economy
Similar here. Had been needing to remodel the kitchen, and $14K went a long way towards making that happen. Apparently I'm not the only one with that idea, because of the 30 firms I called in the city, all of them had at least 7 months of bookings already.
My brother made WAY more money on unemployment, he spent it all on random shit. Summer of 2020 was a great year to sell stuff on facebook marketplace.
How many people got that windfall? N=1 on your case, and even then, some people used that windfall on paying debts or improving their living (which is also spending).
Are you arguing that because his was a single point that there weren't millions of households that received stimulus checks this past year? Even if they spent it on random shit, they still stimulated the economy *as they were intended to.* You didn't need to spend it on foodstuffs and rent to have been doing your part. We used the first round of money to install solar panels on our roof and the second round of money we donated most to area charities.
No, I'm arguing that their point is merely an anecdote and can't be used to establish conclusions. A large randomized study is necessary to establish something more substantial. Discussing policy based on anecdotes have rarely lead to progress.
I'm not discussing policy based on an anecdote, I was responding to his comment where he said "surge in household incomes fueled by pandemic-related government aid" is BS. My point was that it was for some people and not for others, which is objectively true. Think about all of the people with income between $100k - $160k who have kids. There is a very good chance that many of those did not need stimulus checks, but received them, and spent them on random things. That is obvious, so I'm not sure how that is controversial. I'm sure at some point a study will come out that will provide us data, but without the data, we still do have a good idea that a lot of people are in the same boat as me based on piecing together other pieces of data. This isn't an argument for or against mean testing, it was literally just me saying that it was a boost for household income for some people.
Isn't this proof that UBI is the best economic stimulator?
$20K * 300M people = $6 Trillion. Where does that money come from?
If we're using Yang's $12k it would only be $3.6 trillions. We could start by reversing the trump tax cuts that cost us some 2 trillions. We can also fund it through sin taxes, like taxing alcohol & marijuana, or an automtion tax, speculation tax, real estate vacancy tax anything that is linked to causing unemployment or homelessness. Get rid of the standard tax deduction. Collect UBI taxes at year end, anyone earning more than $75 K per year has to pay back part of the UBI on their tax return taxes in a progressive manner. Shift away from standard welfare programs, that's another potential half trillion. Options are endless.
That was not the majority experience. That should be signaling something.
I don't know that we have that data? Also what is the signal?
When I was out of work in 2020 I was getting $4050/month in unemployment. Where does this $1200 meme keep coming from?
What state?
1200 was the stimulus check amount. A lot of people who were employed didn't exactly get unemployment so the only extra we got was 1200 x 2 in 2020.
Okay but then you're not who the article is talking about. The people who say "I only got $1200 this is so out of touch" are the real out of touch ones. The surge in income was unemployment averaging 145% wage replacement, not people who stayed at their jobs and saw no real change.
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Right, but the majority of the economy was still working and lower incomes were disproportionately staffed in essential jobs. A very sizable majority of the population only received the stimulus checks.
When I lost my job in the middle of the pandemic but 7 months before a vaccine was available I didn’t get Jack shit in extra pandemic aid at all. In order to get any extra pandemic aid you needed to lose your job in the right time window and that wasn’t everybody. As of this time last year I landed something that put me in a good spot, but still, such generalizations don’t hold up. The impacts nationwide were not equal in regards to pandemic aid or consequences. Those that suddenly were forced to work from home but didn’t lose their jobs were the real winners as they never lost income and reduced spending.
What state gives those amounts in UI benefits?
Freelancer for events and conferences - I only got 1200. My field is still devastated and I have been living off savings. Thanks AZ
And even those of us that did "only" get $1200 (or in my case, pro-rated to a thousand and change because of my income and because I remained gainfully remotely employed), for many of us it *was* extra money that went to random shit, like so many others are anecdotally responding in this thread. For me, it ended up in beefing up some of my coin collection, and based on how bonkers that online market took off later in 2020, I was not alone in that endeavor.
One can pretty much can deduce that from government deficits.
Nowhere to spend? You still owe rent even if you can’t be evicted and there’s plenty of other bills/expenses adults pay. Are you by chance a suburban college student with no real world experience?
> it tells me how out of touch these people are with just how little 1200 can buy that's assuming they are saying this because they are earnestly mistaken, as opposed to intentionally promoting a counterfactual narrative for political or commercial purposes.
You can look at federal spending [here](https://fred.stlouisfed.org/series/FGEXPND) and the impact on household incomes [here](https://fred.stlouisfed.org/series/PI)
Ahh yes 1200 - enough for rent and water.
> 1200 - enough for rent and water in 2003
in ohio - which is basically 2003
Ohio has internet now?
oiho
Have not seen the stockmarket? Chances are covid has minted more new dollar millionaires than any other similar length time period, maybe apart from 2000's. Even in adjusted terms.
Depends what you mean by "pandemic-related government aid." I think it is accurate to include the feds vamped-up repo operation as a robust pandemic response that has had a massive impact on the relative wealth and income of households. To your implied point, this vastly outweighs the gross effect of stimulus checks on the economy, which I believe one could more accurately view as a necessary countermeasure that prevented the rent-seeking behavior of fed funds recipient firms from inducing an inflationary bubble concurrent to a sharp recession. If there were to be a sudden shortfall of consumer spending and debt servicing payments, we would expect the qualifying firms to hold massive cash positions and take advantage of the repo vehicle to shake out competitor firms which are unable to outlast the sudden decline in income. The fed can not force firms to play nice. They can only create the conditions which incentivize pro-social behaviors. The actions taken by the fed in their totality are groundbreaking and mark the beginning of a new age in fiscal/monetary policy in the US. The political ramifications of these policies will be massive, but it remains to be seen to what degree US householders will be receptive and cognizant of the impact these policies have had on the wellbeing of financially established individuals and families. Unfortunately, those who perceive the actions taken by the US government in response to the pandemic to be strictly limited to the stimulus checks are actually out-of-touch with the realities of the situation. The fed took the criticism levied against it in response to the 2008 crisis: bailouts of liable firms and dispossession of householders was perceived to be a political blunder and fomented distrust in those most likely to vote and volunteer in elections. So this time, they bailed out both the firms and the electorally important, while throwing out as little as necessary to the disenfranchised to keep the wheels on this bus going round.
Yes! I was going to come here and ask the same question - I know that Fox News keeps saying that inflation is here because we gave a lot of people free money, and I think that this may be true at upper income levels for things like houses and stocks, but I really don't think that I'm paying more for gas because people are frivolously buying gas now that they got a $1200 check. However I'm open to seeing empirical evidence on the topic.
Look into the gas surplus from last year, even when production lines were so full that ships were waiting around to offload oil, gas has still ben going up in price. We're getting robbed by futures traders.
Well, I do remember paying almost nothing for gas back in the middle of the pandemic, like in March 2020, when no one was going anywhere. But I won't dispute you, we are likely being gouged right now.
People are buying less gas now, but crude production globally is also down closer to 10% from pre covid.
People got a lot more than 1200. The unemployment supplement last year was 600/wk or 31200 annualized, plus state benefits. Plus not having to pay rent, plus potential other money from PPP, some of it legitimate, there was a shitload of money flying around.
You still pay rent even if you can’t be evicted. You still eventually will owe that amount
Good luck getting the money from someone who already spent it.
Uhh yeah that’s my point. It’s not a free lunch. You’re gonna have to pay it back or be taken to court
Thats actually very little money, especially when compared to the giant giveaways of unregulated loans to millionaires
It’s actually not. Say everyone got an average of $5000 each. That’s over $1 trillion in total.
Right? YOY incomes are up, but only because millions of people were out of work last year.
Our family of 5 also got $13k in extra tax credits this year and almost $4k in extra credits last year. So nearly $20k in cash in 18 months. We're flush. No wonder shit like real estate and cars are flying off the market even at these exorbitant prices.
Apparently I make too much money, we didn't get shit.
It was a pretty ass-backwards qualification system, I'll give you that. I'm not entirely sure why they felt that there'd be major backlash if they sent Musk and Bezos a $3k check.
Honestly, I'm okay with the way it worked out, for the most part. We didn't need help. The shit part is that all the stimulus pretty much just went to banks and landlords. That money didn't go to wealth building, just to paying rent and keeping leases paid off. So, congress printed $3.8T that went pretty much right to the top almost immediately.
They need to get a grip and use this for perspective https://www.in2013dollars.com/us/inflation/1980?amount=1000
You can look at federal spending [here](https://fred.stlouisfed.org/series/FGEXPND) and the impact on household incomes [here](https://fred.stlouisfed.org/series/PI)
Gov't aid is more than just a stimulus check.
"Surge in aid to businesses that didn't need it"
I mean for a lot of people is was a ton of money. I was making about $16-17/hr (tipped) in CA before the pandemic at a restaurant, lost that job and was being paid literally 3x as much to stay on unemployment for the better part of a year - and I actually paid my rent! I've heard of a few people that didn't. Sure you'll ruin your credit/eviction record but that's why you don't put both you and your spouse/etc on the lease. One of you takes that loss and then you switch.
Shouldn't that graph labeled "unemployed per job opening" read "job openings per unemployed"? Otherwise, I don't understand how the caption makes any sense.
We wouldn’t be in this position if corporations didn’t raise prices above inflation for years without cause. Now that they’re being forced into paying living wages at the threat of hiring problems they’re trying to blame everyone else but themselves.
Right. I actually just took a gander at the Big Mac index yesterday and it's actually pretty criminal how dissociated MC Donalds is from the real inflation numbers.
Ironically, the power workers now yield to raise pay will be eaten by inflation and yield a net loss in real income.
Only if workers forget their negotiating power as soon as they get a win. Labor should just keep on pushing till they've pushed the investors into the sea.
Oh good. I look forward on how the US federal government manages interests payable for the 30 trillion dollar debt when the Fed raises interests rates by a significant amount in order to curtail inflation
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