The bond market is warning about the fiscal situation in the United States: the problem is not so much the fear of uncontrolled inflation, but the sharp increase in real interest rates caused by public deficits close to 1.9 trillion dollars and a growing demand for capital for private investments, especially in artificial intelligence and infrastructure.
This competition for available savings makes government financing more expensive, debt interest payments skyrocket and generates a vicious circle of more deficit and more debt. According to the author, the middle class is trapped in this process because politicians avoid unpopular tax and spending reforms, while the increase in debt ends up slowing down productive investment and long-term economic growth.
If the 10 year yield keeps rising I wonder if it'll be the needle that finally pops the real estate market. For the past two years single family home inventories keep going up while the number of prospective home buyers keep going down, simultaneously the commercial real estate market looks to be in distress as the number of tenants defaulting on their leases keep rising. Yet prices stay fixed; prices just stubbornly won't drop no matter how much the basic law of supply and demand say they should. With the 10 year yield going up like this it's pulling up mortgage and other real estate backed loans rates up with them. Seems like a precarious situation.
Then again with this market "nothing ever matters" seems to be the way of things. Just makes me wonder how long this can last. My guess is the Fed or the treasury is going to get involved soon with something more serious than Bessent's $6B "I am the House" pathetic display. Regardless, it seems to me that the 10 year yield, and especially how long term treasury bonds control commercial and especially real estate lending, could have dire impacts on an already weak real estate sector.
There are a lot of dominoes that could fall. Lowered real estate values means lower property taxes for cities. And if cities want to issue municipal bonds, they have to be competitive with other investments. And some states have suspended gas taxes that fund road repairs, so roads, schools, etc. are going to collapse even worse.
If anything happens with the stock market, which is currently being dragged along by AI based growth, large institutional investors, some of whom are leveraged to hell and back, will be forced to put up more equity if their accounts are too out of whack. Seven percent of the nation's debt is currently owned by hedge funds. What happens if they have to dump their bonds to cover losses elsewhere? And that's just the hedge funds- what about the mutual funds, trusts, etc. What about large pension funds that bought bonds? Will their members be fucked out of a stable retirement?
If other countries sell their US treasuries, could a few leaders of large investment institutions use their debt buying as a way to coerce Congress? I.e. "we will only buy more of your debt if you roll back insider trading rules"? Or something else? We've worried in the past about holders of US debt using it to blackmail our government.
And post 2008, banks are now required to keep more liquid assets on hand. So they bought bonds. What happens if the value of those bonds goes down the toilet? Where do banks make up that liquidity?
This doesn't even touch bond yields driving up interest rates on other loans. And if there's a liquidity issue, could the banks even make the loans the economy needs to keep functioning? Sure a lot of Americans are already on fixed rate mortgages, but I'm worried about car loans... you basically need a car to be employable in many areas.
I have no idea WTF will happen. The global economy is a fucking Rube Goldberg machine.
The 2008 rules have almost all been rescinded by the Mango regime; all the covering requirements for lending have: If a bank holds any cash, even just $1, they can now leverage an infinite amount of lending against it... Interestingly enough the banks themselves have self governed themselves and not overleveraged to the hilt since the rules were changed. Private equity on the other hand, who knows what is happening there. But interestingly enough, even though they are not required to do so, the banks are still only writing mortgages against equities they actually hold at a reasonable fractional rate. Maybe there are enough people still working in the banks who remember just how out of hand, and how much money they lost, in the GFC; which is restraining their behavior for now.
The biggest unwinding threat in the market is margin debt. It's not just hedge fund margin either, but retail is leveraged to the hilt higher than at any point since 1929 (both absolute and compared to the M2 money supply terms).
Those are excellent points- I'll admit that with all the noise and chaos of politics, I missed those regulation rollbacks. I'll have to go do some more reading.
And I didn't even think about retail investors (even though I AM one 😅). I pulled up Robinhood's page on margin investing and it used the words "extra buying power" to describe it. Which is kind of true in the sense that a credit card offers "extra buying power". It's very easy to get in over your head.
The Fed would step in with QE relief if they start to fail. I'd be more worried about private equity firms dragging down the market if the house of cards starts toppling.
But the maneuverability of the Fed itself also gets limited by the increased yields and politics of the US. If the market judges any intervention as potentially inflationary, investors will demand even higher yields for treasuries, exacerbating the very cause of the problem. The fact that Trump is floating the idea of inflating the US out of debt is defkniu not helping either.
I agree. Artificial low rates helped a lot of people to buy. Now that rates have normalized prices can only go down. Just a matter of time. My guess is there will be increasing short sales showing up in the next 12 months.
Because demand keeps growing as the population grows, and supply literally won't.
https://fred.stlouisfed.org/series/houst
The number of new housing construction starts has been falling for five years now; we're marginally above the 2018 rate of construction. Yes you might see new neighborhoods going up, but it's not at the rate to keep up with net immigration in your community.
If the bonds go up too high, the government will do the insane thing and print money. If they print money, we get hyperinflation. If we get hyperinflation...
Well, that's more reason why housing prices won't go down.
Only one of the last centuries worth of financial recessions and depressions saw a crash in housing costs - and it was the one caused by fraudulent housing underwriting.
If my house, which I bought at 3.15% in 2020 for 5% down, fell in value by 48% from where it's currently estimated based on comps, I still would not be underwater.
This house, if I sold it at the break-even price (what I paid in 2020 minus the what I've paid off - not including speculation), would cost more per month in principal than what I'm currently by easily 50%.
In order to get to a break-even point for the next buyer to pay, per month, what I was in 2020 - the value of my home will need to fall 31% relative to the 2020 price, or 62% of the current estimated value.
Just for frame of reference - the 2008 crisis saw average prices drop between 20-30%. And that was because houses were foreclosed on by banks because the buyers weren't qualified in the first place.
NINJA loans don't exist anymore. Underwriting standards are significantly higher than they were twenty years ago. Anyone who qualified for a house after 2008 qualified for that house. Barring a major life event, they're not getting kicked out.
Simply put, I'm not going to sell my house for less than what I paid for it. I have a 3% mortgage. I'm paying $2k/mo for 7 acres of land and a 2,500 square foot home.
People making a hell of a lot less than I am pay $2k a month in rent - I can make that happen, too.
We haven’t had a recession yet. There are homes in Seattle and Florida that have been on the market for over a year. Take away a person ability to pay and see what happens.
States were already loosing legitimacy and their bonds already were losing “risk free” status, repeatedly down graded with open consistent talks of default and soft default (inflation)
Ai is real. Stock may be in a bubble and shareholders may suffer, but they may rise in authority and displace nations in status. They already have the ability to take down nations. The creep of dystopian control tightening its grip may make this more clear pretty quickly
Having dealt with a debt crisis in Canada in the mid-1990s - foreign lenders are fed up with the US failing to do anything about the debt and deficit. Combined with endless debt issuance by AI & tech companies - it is setting the country up for a debt crisis unless they enact deep spending cuts and tax hikes like Canada did in the mid 1990s.
personally, i think the rapid rate of this rise is that no one in power trusts trump. They are gonna to step back, get conservative and wait for him to crash the economy.
Ooh yes, what does this portend for the Middle Class?
Will it be easier now for two adult Americans to form a family, own a home, have 2-3 children, 1-2 vehicles, take 1-2 vacations a year (even if in the back seat of a station wagon), afford college, and a nice retirement. Oh, and make enough money to afford child care or for one parent to stay home with the kids and tend to the house because that's a full time job especially at first?
For the last several years you've had to be in the top tax bracket to afford to be middle class which is kind of weird because it feels like you should be able to afford the middle if you're in the middle...
Throughout most of history there was only been two classes. There are examples here and there where there were arguably more than two, but by and large there are haves and have nots. The have somes were a fluke.
Throughout history there were not democratic societies that allowed people to vote either and yet we have those now and we recognize that's a better way to do things....
Same with vaccines and roads and a belief that witchcraft is bullshit.
The entire point is that every single generation ought to be raising the floor.
If we're regressing there ought to be a massive reason why and there's no reason for this regression.
Every 100 or so years the wealthy get checked because of how insane they become. We're hitting that point now, as social media becomes fake and botted garbage.
Why is middle class definition based on something not available to any other country?
The American Dream seems to have become the new basis for middle class, but that’s not transferable across to another country let alone guaranteed for every generation.
Most of those things apply to more countries than the US and i agree for the most part not unreasonable to aspire to.
But people in the US consume by far the most and we know excessive consumption is sustainable so it can also be argued that the US standards of living may need to be adapted.
Sadly though those at the top just want to siphon off as much money for billionaires as possible.
It drives me fucking crazy. I know conservatives that will say that dumb ‘well not everyone needs the new iPhone’ like it’s some kind of sage advice. Everything in the US is built upon the idea that people are going to buy dumb shit. Buying dumb shit ushered in a pretty significant era of prosperity for most of the western world. It’s not a perfect system, it most definitely has flaws, but it has been working well. This whole idea of trickle down is not/has not/never will work. It’s against the entire basis of our economy. We even saw this lesson during Covid. They gave money to the not 1% and suddenly the economy restarted.
> Buying dumb shit ushered in a pretty significant era of prosperity for most of the western world. It’s not a perfect system, it most definitely has flaws, but it has been working well.
other than that the planet is soon predicted to be unable to sustain organized human life. but otherwise pretty good.
The standard of living is set by the poverty line which is calculated by basic necessities and not a dream which is different per person.
Edit: we should also not normalize to an outlier of American economic history- the post war middle class which saw little global competition for manufacturing jobs until Europe and Japan rebuilt. Now we see China doing the same and economic competition is higher than ever before and we can’t rebuild a middle class against the face of that reality
The term middle class comes from the American middle class that emerged for the first time in world history following World War II and it became a iconic defining feature of American life that most Americans could expect to graduate from a typical working class into a middle class with participation in this style of middle class hitting 70% of the country at one point.
One of the problems in the current system is that we are not maximizing for the middle class because we haven't defined the middle class and if you haven't defined something you can't maximize for it.
We are currently maximizing for the wealth of a few people at the expense of the American middle class.
I don't give a rat's ass about other countries but ultimately I think any country that isn't attempting to maximize the wealth of their middle class or create a middle class isn't working on behalf of the majority of its citizens.
In my opinion everything in the system of American government and society should be designed to maximize the wealth and breadth of the middle class.
The post war middle class is an outlier in American history and by purchasing power and selling power, the post war American economy was an outlier globally. We can’t ask for a return to that without seeking a return to global economic conditions which were not good for most of the world.
The definition of middle class =/= the American Dream.
That is a right-wing talking point as far as I'm concerned. The only reason the middle class is in such dire straits in America right now is that we have had 40 years of disastrous tax policy and trade policy bthat have pushed the wealth that should be in the hands of the American middle class up into the hands of billionaires.
You may be right that the middle class is unsustainable for 10,000 years but it would still exist today as a much larger percentage of the population had we had far better tax policy over the last several decades. The money is still there.
I also just refuse to be a defeatist and admit that we can't do things like social security or the middle class until we have actually tried some things that would bolster that class. Same thing with climate tech.
We're currently using tariffs and tax policy to attempt to siphon even more wealth from the bottom to the top.
I will entertain people like you who have this defeatist and quite frankly right-wing brainwashed view that we can't do the things that we did 100 years ago when we actually try to do some of those things again.
We've tried nothing except policy that destroys and erodes the middle class. Oh well! It's an unsustainable dream!
> The definition of middle class =/= the American Dream.
I hate to break it to you, but this is why people risk everything to come to America. It's because within one generation your family could enter that middle class.
I guess one was to make that stop is to turn us into Russia.
> We can’t ask for a return to that without seeking a return to global economic conditions which were not good for most of the world.
The heck we can't.
What we ought to have spent the last 25 years doing is pushing for sustainable ways to expand that class.
Worker productivity skyrocketed and share of the profits dwindled as the social contact was destroyed by fiscal, foreign policy. Low interest rates led to vampire companies like Uber and Airbnb.
I don't disagree that we should be a force for better around the world but I fail to see how an America that turns into a Russian kleptocracy under an authoritarian leader with a lower class and a ruling class is better for the world.
Republicans started saying that social security was unsustainable two days after it passed and the talking points have remained the same.
The same thing is true about what you parroted back about the middle class.
Counterpoint: France tries to make the best economy for the worker but is clearly struggling and hasn’t even made it to our dream for everyone. To stake any claim the US could do it to is pretentious at best because there’s no data supporting your belief but at least one that refutes it.
That said, I've been to France several times over the last few decades and France 2025 made France 2013 look like a shit hole. The improvement has been incredible. Whereas London has gone the opposite direction.
I can't argue tons of policy specifics outside of the US, but there's no reason the US middle class is in such dire straits right now other than terrible neo-conservative and neo-liberal policies for the last 40 years. And the reason I know that is that the wealth still exists it's just pooled upwards. It didn't disappear it didn't go elsewhere.
It's the same thing with climate change. We've tried nothing! Guess it's impossible to solve. Oh well, how do we burn more gas.
That type of thinking is stupid.
Even if we can never get back the type of middle class that I described we should be still reaching for that as the goal rather than the current goal of all of our policies which is to maximize the wealth of Mark Zuckerberg and a few other people like Mark Zuckerberg.
That's what led to the French Revolution and we're past that level of income inequality.
So if you want to talk about France maybe it's time that we did what they did in the 1700s with some of these people and watch and see how quickly they change their tune and how easy it is for them to restore this middle class that can't be done because reasons.
Yeah, I don’t see myself convincing someone that has a worldview of economics that conflates everything that you see wrong with the world together. Show actual policy with tested results that can’t easily be picked apart by saying that it’s basically a Mao level 5 year plan.
Healthcare and Education are the lowest hanging fruit.
You could start by implementing universal healthcare (medical, dental, vision) and creating one single group (the nation) from which to pool.
Make college loans forgivable after 10 years in a protected bankruptcy that cannot show up on credit reports for cars/homes but can be used by educational institutions. If you loaned money to an 18 year old and their degree can't pay it back in a decade? That's predatory.
It's also useless to the country because we need you forming a family between 20 - 40 which locks you into a 18-22 year old consumption cycle not drowning in student loans and unable to afford a home.
State college used to be free and then the civil Rights Act happened so Ronald Reagan decided that California State University should start charging a small fee because of the "added costs". It also had the benefit of keeping black people out. Then Joe Biden had the brilliant idea in the 90s to make student loans not dischargeable in bankruptcy to allow more kids to go to college which ultimately caused a lot of this inflation in price.
I would make state college free again.
Housing? Start taxing third homes at 100% of the purchase price.
Childcare? I think tax policy is your lever. Easiest way to do this is to get at home parents again.
Time to start taxing the fuck out of corporations (of a certain size) that do not pay a majority of their workers a middle class wage. Offer massive tax reductions for companies that do employ mostly US citizens at a middle class wage.
Same thing with H-1. Bring in all the H-1 workers you want but we're going to tax you to pay for the education of one American worker for every one H-1 you bring in. So if Facebook says they can't find any Americans to do a job and they want to bring in a bunch of people from elsewhere, fine, but you better be training Americans. Have the costs ramp as well. If it takes 4 years to train someone, have taxes on H-1 employees count scale exponentially over time.
Tax corporations that do return to office and give massive tax breaks for WFH. Quit forcing people to drive to buildings to sit on Zoom. That's net negative for society. Tax negative things. Discount positive things.
Taxes also have to pay for something. Not more wars or weapons for Israel or whatever. They have to pay for tangible benefits for Americans so that Americans understand that government is something that they pay for and get something out of.
It's pretty simple though...
It really doesn't matter what the policy is as long as you use incentives to encourage behaviors and the society shape you want.
K shape is what led to the Declaration of Independence. It's not some enlightened new state.
The problems of affordability are completely self-inflicted. Simply deregulating the housing market, radically bringing down trade barriers to bring down the price of building homes, reducing immigration barriers that will drive down construction labor costs substantially ,reducing the power of the professional licensing cartels that will drive down healthcare costs substantially, and voila, you have a pretty powerful approximation of the post-war American dream for the median American that is attainable.
All of this is self-inflicted and the result of catastrophically bad economics. None of it was inevitable.
You aren’t the same person as I was replying to and I agree with all of your points. I don’t think the person I responded to will agree with us.
Deregulation is the answer to faster growth due to added competition and unlocking government controlled resources (zoning, permissions, red tape) etc.
Again, I highly doubt this is what the person I replied to would be for at all!
I hate to throw this question into this thread because it is unrelated, but the top link is locked down and all of the comments have been removed, but the link itself has not been removed indicating the link itself wasn't the problem. I was just wondering if we could get a quick explanation from the mods on why that happened so others don't accidentally engage in behavior that could be judged poorly by the mods without realizing it.
I know the site can be weird about links sometimes, so I'll say the article name was "The Gap Between the Rich and the Very, Very Rich Is Getting Wider" from the Wall Street Journal.
Honestly, I consider this relevant. I got temporarily banned from various news and economy subreddits repeatedly at the beginning of September. There's no way to reply to the message now? And also, one got banned because I used the curse word for poop. On an article about NSFW things. What is happening??
The test of this admin, and the present fiscal situation will be the next financial crisis. I think they have used up a huge amount of the borrowing required to climb out of the next disaster.
If it is 2008 bad, and they need to start throwing money out of helicopters; that may be where very bad "collapse" sort of things happen.
Not, the people in the streets fighting over the last scraps of dog meat bad, but more, "We can't really afford that right now." sort of bad. Science funding doesn't end, but it is really anemic. Military funding doesn't end, but again, anemic.
Americans will go overseas and see two things. People aren't as interested in American Dollars, and the quality of life elsewhere will keep climbing.
They will return to their American cities and realize things are dirtier, shabbier, smokier, and just that little bit more grim, and getting worse every day. Yet, there will be people screaming, "America's #1" while twisting logic into knots to "prove" this.
One simple debate problem is that all over the world there are things better and things worse than other areas.
Someone defending the supremacy of the US can easily compare a vastly superior country and still find endless faults.
Worst case, you reach out for things which are crap comparisons. Places with great public transportation could be called "communist" where they force you out of your "freedom" trucks.
The key result of this will be the whole "If you want to solve a problem, you must first acknowledge you have a problem."
Some intellectuals will, but the vast bulk of the voting public will blame hunter biden's laptop or something.
One of the many problems is that most Americans never go overseas. The ones who have traveled extensively are almost always the highly educated liberal types who often live in big international cities, who are very aware of how messed up of a path the US is on.
But the core of the support for the current policies is small town rural people in flyover states who never really get a chance to travel (either due to lack of interest, or lack of money). They’ll never see how much better life can be, they remain in their tiny little state of ignorance.
No part of economics can predict what happens next. The US is lead by fascists that don't care about the economy. No one could predict the Maduro abduction or the war with Iran because they are insane. All that can be said is if nothing else happens how it will go. Especially anything beyond November is just optimistic guesswork.
[OP] Sufficient_Fuel5269 | a day ago
The bond market is warning about the fiscal situation in the United States: the problem is not so much the fear of uncontrolled inflation, but the sharp increase in real interest rates caused by public deficits close to 1.9 trillion dollars and a growing demand for capital for private investments, especially in artificial intelligence and infrastructure.
This competition for available savings makes government financing more expensive, debt interest payments skyrocket and generates a vicious circle of more deficit and more debt. According to the author, the middle class is trapped in this process because politicians avoid unpopular tax and spending reforms, while the increase in debt ends up slowing down productive investment and long-term economic growth.
phungus420 | 23 hours ago
If the 10 year yield keeps rising I wonder if it'll be the needle that finally pops the real estate market. For the past two years single family home inventories keep going up while the number of prospective home buyers keep going down, simultaneously the commercial real estate market looks to be in distress as the number of tenants defaulting on their leases keep rising. Yet prices stay fixed; prices just stubbornly won't drop no matter how much the basic law of supply and demand say they should. With the 10 year yield going up like this it's pulling up mortgage and other real estate backed loans rates up with them. Seems like a precarious situation.
Then again with this market "nothing ever matters" seems to be the way of things. Just makes me wonder how long this can last. My guess is the Fed or the treasury is going to get involved soon with something more serious than Bessent's $6B "I am the House" pathetic display. Regardless, it seems to me that the 10 year yield, and especially how long term treasury bonds control commercial and especially real estate lending, could have dire impacts on an already weak real estate sector.
MILF_Goddess740 | 20 hours ago
There are a lot of dominoes that could fall. Lowered real estate values means lower property taxes for cities. And if cities want to issue municipal bonds, they have to be competitive with other investments. And some states have suspended gas taxes that fund road repairs, so roads, schools, etc. are going to collapse even worse.
If anything happens with the stock market, which is currently being dragged along by AI based growth, large institutional investors, some of whom are leveraged to hell and back, will be forced to put up more equity if their accounts are too out of whack. Seven percent of the nation's debt is currently owned by hedge funds. What happens if they have to dump their bonds to cover losses elsewhere? And that's just the hedge funds- what about the mutual funds, trusts, etc. What about large pension funds that bought bonds? Will their members be fucked out of a stable retirement?
If other countries sell their US treasuries, could a few leaders of large investment institutions use their debt buying as a way to coerce Congress? I.e. "we will only buy more of your debt if you roll back insider trading rules"? Or something else? We've worried in the past about holders of US debt using it to blackmail our government.
And post 2008, banks are now required to keep more liquid assets on hand. So they bought bonds. What happens if the value of those bonds goes down the toilet? Where do banks make up that liquidity?
This doesn't even touch bond yields driving up interest rates on other loans. And if there's a liquidity issue, could the banks even make the loans the economy needs to keep functioning? Sure a lot of Americans are already on fixed rate mortgages, but I'm worried about car loans... you basically need a car to be employable in many areas.
I have no idea WTF will happen. The global economy is a fucking Rube Goldberg machine.
phungus420 | 17 hours ago
The 2008 rules have almost all been rescinded by the Mango regime; all the covering requirements for lending have: If a bank holds any cash, even just $1, they can now leverage an infinite amount of lending against it... Interestingly enough the banks themselves have self governed themselves and not overleveraged to the hilt since the rules were changed. Private equity on the other hand, who knows what is happening there. But interestingly enough, even though they are not required to do so, the banks are still only writing mortgages against equities they actually hold at a reasonable fractional rate. Maybe there are enough people still working in the banks who remember just how out of hand, and how much money they lost, in the GFC; which is restraining their behavior for now.
The biggest unwinding threat in the market is margin debt. It's not just hedge fund margin either, but retail is leveraged to the hilt higher than at any point since 1929 (both absolute and compared to the M2 money supply terms).
MILF_Goddess740 | 10 hours ago
Those are excellent points- I'll admit that with all the noise and chaos of politics, I missed those regulation rollbacks. I'll have to go do some more reading.
And I didn't even think about retail investors (even though I AM one 😅). I pulled up Robinhood's page on margin investing and it used the words "extra buying power" to describe it. Which is kind of true in the sense that a credit card offers "extra buying power". It's very easy to get in over your head.
dimsumwitmychum | 20 hours ago
Regional banks are probably in big trouble and could be the first real domino in this chain.
phungus420 | 17 hours ago
The Fed would step in with QE relief if they start to fail. I'd be more worried about private equity firms dragging down the market if the house of cards starts toppling.
3_Thumbs_Up | 11 hours ago
But the maneuverability of the Fed itself also gets limited by the increased yields and politics of the US. If the market judges any intervention as potentially inflationary, investors will demand even higher yields for treasuries, exacerbating the very cause of the problem. The fact that Trump is floating the idea of inflating the US out of debt is defkniu not helping either.
FederalExpressMan | 8 hours ago
Jamie Dimon is licking his lips as we speak
Pugsly007 | 22 hours ago
I agree. Artificial low rates helped a lot of people to buy. Now that rates have normalized prices can only go down. Just a matter of time. My guess is there will be increasing short sales showing up in the next 12 months.
s48L55 | 7 hours ago
Because demand keeps growing as the population grows, and supply literally won't.
https://fred.stlouisfed.org/series/houst
The number of new housing construction starts has been falling for five years now; we're marginally above the 2018 rate of construction. Yes you might see new neighborhoods going up, but it's not at the rate to keep up with net immigration in your community.
If the bonds go up too high, the government will do the insane thing and print money. If they print money, we get hyperinflation. If we get hyperinflation...
Well, that's more reason why housing prices won't go down.
Only one of the last centuries worth of financial recessions and depressions saw a crash in housing costs - and it was the one caused by fraudulent housing underwriting.
Pugsly007 | 4 hours ago
I betting it’s going down.
s48L55 | an hour ago
If my house, which I bought at 3.15% in 2020 for 5% down, fell in value by 48% from where it's currently estimated based on comps, I still would not be underwater.
This house, if I sold it at the break-even price (what I paid in 2020 minus the what I've paid off - not including speculation), would cost more per month in principal than what I'm currently by easily 50%.
In order to get to a break-even point for the next buyer to pay, per month, what I was in 2020 - the value of my home will need to fall 31% relative to the 2020 price, or 62% of the current estimated value.
Just for frame of reference - the 2008 crisis saw average prices drop between 20-30%. And that was because houses were foreclosed on by banks because the buyers weren't qualified in the first place.
NINJA loans don't exist anymore. Underwriting standards are significantly higher than they were twenty years ago. Anyone who qualified for a house after 2008 qualified for that house. Barring a major life event, they're not getting kicked out.
Simply put, I'm not going to sell my house for less than what I paid for it. I have a 3% mortgage. I'm paying $2k/mo for 7 acres of land and a 2,500 square foot home.
People making a hell of a lot less than I am pay $2k a month in rent - I can make that happen, too.
Multiply that nation wide.
Pugsly007 | an hour ago
We haven’t had a recession yet. There are homes in Seattle and Florida that have been on the market for over a year. Take away a person ability to pay and see what happens.
BenjaminHamnett | 5 hours ago
States were already loosing legitimacy and their bonds already were losing “risk free” status, repeatedly down graded with open consistent talks of default and soft default (inflation)
Ai is real. Stock may be in a bubble and shareholders may suffer, but they may rise in authority and displace nations in status. They already have the ability to take down nations. The creep of dystopian control tightening its grip may make this more clear pretty quickly
Fair-Yogurtcloset235 | a day ago
Having dealt with a debt crisis in Canada in the mid-1990s - foreign lenders are fed up with the US failing to do anything about the debt and deficit. Combined with endless debt issuance by AI & tech companies - it is setting the country up for a debt crisis unless they enact deep spending cuts and tax hikes like Canada did in the mid 1990s.
OpportunityPretty | a day ago
Hahaha Republicans are in charge. No sensible tax policy for two more years
pcny54 | a day ago
That really should read, "no sensible anything for two more years" .
eskimoboob | 23 hours ago
And then if we do actually do something about it, it will just be repealed 2 years later.
ThatsFae | 17 hours ago
Or more likely declared unconstitutional by the Second Taney Court headed by John Roberts.
aquavelva23 | a day ago
personally, i think the rapid rate of this rise is that no one in power trusts trump. They are gonna to step back, get conservative and wait for him to crash the economy.
linerva | a day ago
As they shouldn't. The man is a loose canon who has screwed over every alliance the US has had.
3_Thumbs_Up | 11 hours ago
Doesn't explain that rates are going up across the board in Europe as well.
alilhillbilly | a day ago
Ooh yes, what does this portend for the Middle Class?
Will it be easier now for two adult Americans to form a family, own a home, have 2-3 children, 1-2 vehicles, take 1-2 vacations a year (even if in the back seat of a station wagon), afford college, and a nice retirement. Oh, and make enough money to afford child care or for one parent to stay home with the kids and tend to the house because that's a full time job especially at first?
For the last several years you've had to be in the top tax bracket to afford to be middle class which is kind of weird because it feels like you should be able to afford the middle if you're in the middle...
makemeking706 | 19 hours ago
Throughout most of history there was only been two classes. There are examples here and there where there were arguably more than two, but by and large there are haves and have nots. The have somes were a fluke.
alilhillbilly | 17 hours ago
Throughout history there were not democratic societies that allowed people to vote either and yet we have those now and we recognize that's a better way to do things....
Same with vaccines and roads and a belief that witchcraft is bullshit.
The entire point is that every single generation ought to be raising the floor.
If we're regressing there ought to be a massive reason why and there's no reason for this regression.
ThatsFae | 17 hours ago
> If we're regressing there ought to be a massive reason why and there's no reason for this regression.
Algorithmically controlled social media bubbles.
Olangotang | 14 hours ago
The bots are becoming unbearable. All people give a shit about outside of the Internet bubble is data centers and their wallet.
Olangotang | 14 hours ago
Every 100 or so years the wealthy get checked because of how insane they become. We're hitting that point now, as social media becomes fake and botted garbage.
unsafeideas | 8 hours ago
Eh, this is not really true. That is how it may appear from super simplified textbooks.
DeathMetal007 | a day ago
Why is middle class definition based on something not available to any other country?
The American Dream seems to have become the new basis for middle class, but that’s not transferable across to another country let alone guaranteed for every generation.
dust4ngel | a day ago
> Why is middle class definition based on something not available to any other country?
why are we trying to normalize declining standard of living?
linerva | a day ago
Most of those things apply to more countries than the US and i agree for the most part not unreasonable to aspire to.
But people in the US consume by far the most and we know excessive consumption is sustainable so it can also be argued that the US standards of living may need to be adapted.
Sadly though those at the top just want to siphon off as much money for billionaires as possible.
beardofjustice | a day ago
It drives me fucking crazy. I know conservatives that will say that dumb ‘well not everyone needs the new iPhone’ like it’s some kind of sage advice. Everything in the US is built upon the idea that people are going to buy dumb shit. Buying dumb shit ushered in a pretty significant era of prosperity for most of the western world. It’s not a perfect system, it most definitely has flaws, but it has been working well. This whole idea of trickle down is not/has not/never will work. It’s against the entire basis of our economy. We even saw this lesson during Covid. They gave money to the not 1% and suddenly the economy restarted.
dust4ngel | 22 hours ago
> Buying dumb shit ushered in a pretty significant era of prosperity for most of the western world. It’s not a perfect system, it most definitely has flaws, but it has been working well.
other than that the planet is soon predicted to be unable to sustain organized human life. but otherwise pretty good.
alilhillbilly | 20 hours ago
No one is changing their behaviors. Humans across the globe long ago decided that the only way out was through.
Why is the US not leading that charge?
We should be pouring investment into reversing climate issues or mitigation.
Instead we're actively impeding it and have put people in charge that want to accelerate the damage.
DeathMetal007 | a day ago
The standard of living is set by the poverty line which is calculated by basic necessities and not a dream which is different per person.
Edit: we should also not normalize to an outlier of American economic history- the post war middle class which saw little global competition for manufacturing jobs until Europe and Japan rebuilt. Now we see China doing the same and economic competition is higher than ever before and we can’t rebuild a middle class against the face of that reality
elacidero | 18 hours ago
I'm pretty sure the down votes are because people dislike history and facts.
alilhillbilly | a day ago
Because that's what the Middle Class is?
The term middle class comes from the American middle class that emerged for the first time in world history following World War II and it became a iconic defining feature of American life that most Americans could expect to graduate from a typical working class into a middle class with participation in this style of middle class hitting 70% of the country at one point.
One of the problems in the current system is that we are not maximizing for the middle class because we haven't defined the middle class and if you haven't defined something you can't maximize for it.
We are currently maximizing for the wealth of a few people at the expense of the American middle class.
I don't give a rat's ass about other countries but ultimately I think any country that isn't attempting to maximize the wealth of their middle class or create a middle class isn't working on behalf of the majority of its citizens.
In my opinion everything in the system of American government and society should be designed to maximize the wealth and breadth of the middle class.
DeathMetal007 | a day ago
The post war middle class is an outlier in American history and by purchasing power and selling power, the post war American economy was an outlier globally. We can’t ask for a return to that without seeking a return to global economic conditions which were not good for most of the world.
The definition of middle class =/= the American Dream.
alilhillbilly | a day ago
That is a right-wing talking point as far as I'm concerned. The only reason the middle class is in such dire straits in America right now is that we have had 40 years of disastrous tax policy and trade policy bthat have pushed the wealth that should be in the hands of the American middle class up into the hands of billionaires.
You may be right that the middle class is unsustainable for 10,000 years but it would still exist today as a much larger percentage of the population had we had far better tax policy over the last several decades. The money is still there.
I also just refuse to be a defeatist and admit that we can't do things like social security or the middle class until we have actually tried some things that would bolster that class. Same thing with climate tech.
We're currently using tariffs and tax policy to attempt to siphon even more wealth from the bottom to the top.
I will entertain people like you who have this defeatist and quite frankly right-wing brainwashed view that we can't do the things that we did 100 years ago when we actually try to do some of those things again.
We've tried nothing except policy that destroys and erodes the middle class. Oh well! It's an unsustainable dream!
> The definition of middle class =/= the American Dream.
I hate to break it to you, but this is why people risk everything to come to America. It's because within one generation your family could enter that middle class.
I guess one was to make that stop is to turn us into Russia.
> We can’t ask for a return to that without seeking a return to global economic conditions which were not good for most of the world.
The heck we can't.
What we ought to have spent the last 25 years doing is pushing for sustainable ways to expand that class.
Worker productivity skyrocketed and share of the profits dwindled as the social contact was destroyed by fiscal, foreign policy. Low interest rates led to vampire companies like Uber and Airbnb.
I don't disagree that we should be a force for better around the world but I fail to see how an America that turns into a Russian kleptocracy under an authoritarian leader with a lower class and a ruling class is better for the world.
Republicans started saying that social security was unsustainable two days after it passed and the talking points have remained the same.
The same thing is true about what you parroted back about the middle class.
DeathMetal007 | a day ago
Counterpoint: France tries to make the best economy for the worker but is clearly struggling and hasn’t even made it to our dream for everyone. To stake any claim the US could do it to is pretentious at best because there’s no data supporting your belief but at least one that refutes it.
alilhillbilly | 23 hours ago
I don't think that's much of a counterpoint.
France has different issues.
That said, I've been to France several times over the last few decades and France 2025 made France 2013 look like a shit hole. The improvement has been incredible. Whereas London has gone the opposite direction.
I can't argue tons of policy specifics outside of the US, but there's no reason the US middle class is in such dire straits right now other than terrible neo-conservative and neo-liberal policies for the last 40 years. And the reason I know that is that the wealth still exists it's just pooled upwards. It didn't disappear it didn't go elsewhere.
It's the same thing with climate change. We've tried nothing! Guess it's impossible to solve. Oh well, how do we burn more gas.
That type of thinking is stupid.
Even if we can never get back the type of middle class that I described we should be still reaching for that as the goal rather than the current goal of all of our policies which is to maximize the wealth of Mark Zuckerberg and a few other people like Mark Zuckerberg.
That's what led to the French Revolution and we're past that level of income inequality.
So if you want to talk about France maybe it's time that we did what they did in the 1700s with some of these people and watch and see how quickly they change their tune and how easy it is for them to restore this middle class that can't be done because reasons.
DeathMetal007 | 22 hours ago
Yeah, I don’t see myself convincing someone that has a worldview of economics that conflates everything that you see wrong with the world together. Show actual policy with tested results that can’t easily be picked apart by saying that it’s basically a Mao level 5 year plan.
alilhillbilly | 20 hours ago
Policy-wise we need to kill 4 huge cost centers:
Healthcare and Education are the lowest hanging fruit.
You could start by implementing universal healthcare (medical, dental, vision) and creating one single group (the nation) from which to pool.
Make college loans forgivable after 10 years in a protected bankruptcy that cannot show up on credit reports for cars/homes but can be used by educational institutions. If you loaned money to an 18 year old and their degree can't pay it back in a decade? That's predatory.
It's also useless to the country because we need you forming a family between 20 - 40 which locks you into a 18-22 year old consumption cycle not drowning in student loans and unable to afford a home.
State college used to be free and then the civil Rights Act happened so Ronald Reagan decided that California State University should start charging a small fee because of the "added costs". It also had the benefit of keeping black people out. Then Joe Biden had the brilliant idea in the 90s to make student loans not dischargeable in bankruptcy to allow more kids to go to college which ultimately caused a lot of this inflation in price.
I would make state college free again.
Housing? Start taxing third homes at 100% of the purchase price.
Childcare? I think tax policy is your lever. Easiest way to do this is to get at home parents again.
Time to start taxing the fuck out of corporations (of a certain size) that do not pay a majority of their workers a middle class wage. Offer massive tax reductions for companies that do employ mostly US citizens at a middle class wage.
Same thing with H-1. Bring in all the H-1 workers you want but we're going to tax you to pay for the education of one American worker for every one H-1 you bring in. So if Facebook says they can't find any Americans to do a job and they want to bring in a bunch of people from elsewhere, fine, but you better be training Americans. Have the costs ramp as well. If it takes 4 years to train someone, have taxes on H-1 employees count scale exponentially over time.
Tax corporations that do return to office and give massive tax breaks for WFH. Quit forcing people to drive to buildings to sit on Zoom. That's net negative for society. Tax negative things. Discount positive things.
Taxes also have to pay for something. Not more wars or weapons for Israel or whatever. They have to pay for tangible benefits for Americans so that Americans understand that government is something that they pay for and get something out of.
It's pretty simple though...
It really doesn't matter what the policy is as long as you use incentives to encourage behaviors and the society shape you want.
K shape is what led to the Declaration of Independence. It's not some enlightened new state.
Only way you get to a goal is to define it.
Medium_Owl_4119 | 20 hours ago
Lul, what? In an economics sub?
The problems of affordability are completely self-inflicted. Simply deregulating the housing market, radically bringing down trade barriers to bring down the price of building homes, reducing immigration barriers that will drive down construction labor costs substantially ,reducing the power of the professional licensing cartels that will drive down healthcare costs substantially, and voila, you have a pretty powerful approximation of the post-war American dream for the median American that is attainable.
All of this is self-inflicted and the result of catastrophically bad economics. None of it was inevitable.
DeathMetal007 | 20 hours ago
You aren’t the same person as I was replying to and I agree with all of your points. I don’t think the person I responded to will agree with us.
Deregulation is the answer to faster growth due to added competition and unlocking government controlled resources (zoning, permissions, red tape) etc.
Again, I highly doubt this is what the person I replied to would be for at all!
Barnyard_Rich | a day ago
I hate to throw this question into this thread because it is unrelated, but the top link is locked down and all of the comments have been removed, but the link itself has not been removed indicating the link itself wasn't the problem. I was just wondering if we could get a quick explanation from the mods on why that happened so others don't accidentally engage in behavior that could be judged poorly by the mods without realizing it.
I know the site can be weird about links sometimes, so I'll say the article name was "The Gap Between the Rich and the Very, Very Rich Is Getting Wider" from the Wall Street Journal.
Thanks
demonicpixiestix | 23 hours ago
Honestly, I consider this relevant. I got temporarily banned from various news and economy subreddits repeatedly at the beginning of September. There's no way to reply to the message now? And also, one got banned because I used the curse word for poop. On an article about NSFW things. What is happening??
EmperorOfCanada | 20 hours ago
The test of this admin, and the present fiscal situation will be the next financial crisis. I think they have used up a huge amount of the borrowing required to climb out of the next disaster.
If it is 2008 bad, and they need to start throwing money out of helicopters; that may be where very bad "collapse" sort of things happen.
Not, the people in the streets fighting over the last scraps of dog meat bad, but more, "We can't really afford that right now." sort of bad. Science funding doesn't end, but it is really anemic. Military funding doesn't end, but again, anemic.
Americans will go overseas and see two things. People aren't as interested in American Dollars, and the quality of life elsewhere will keep climbing.
They will return to their American cities and realize things are dirtier, shabbier, smokier, and just that little bit more grim, and getting worse every day. Yet, there will be people screaming, "America's #1" while twisting logic into knots to "prove" this.
pseudonominom | 19 hours ago
Arguably that’s already the case in much of America.
Used to be “why can’t we have light rail?”
Now it’s “why does our internet suck so much” and “why does all the food taste like plastic?”
Little things. They do add up.
EmperorOfCanada | 16 hours ago
One simple debate problem is that all over the world there are things better and things worse than other areas.
Someone defending the supremacy of the US can easily compare a vastly superior country and still find endless faults.
Worst case, you reach out for things which are crap comparisons. Places with great public transportation could be called "communist" where they force you out of your "freedom" trucks.
The key result of this will be the whole "If you want to solve a problem, you must first acknowledge you have a problem."
Some intellectuals will, but the vast bulk of the voting public will blame hunter biden's laptop or something.
Princess_Fluffypants | 6 hours ago
> Americans will go overseas and see two things.
One of the many problems is that most Americans never go overseas. The ones who have traveled extensively are almost always the highly educated liberal types who often live in big international cities, who are very aware of how messed up of a path the US is on.
But the core of the support for the current policies is small town rural people in flyover states who never really get a chance to travel (either due to lack of interest, or lack of money). They’ll never see how much better life can be, they remain in their tiny little state of ignorance.
DuranStar | 19 hours ago
No part of economics can predict what happens next. The US is lead by fascists that don't care about the economy. No one could predict the Maduro abduction or the war with Iran because they are insane. All that can be said is if nothing else happens how it will go. Especially anything beyond November is just optimistic guesswork.