Impacts short term rates, bond market controls longer term rates (10Y-30Y). Bond market prices in inflation forecasts regardless of what the Fed does from a pricing and yield optimization perspective, so inflation data reporting goes directly into bond market movements.
Is the theory still sound for raising rates to control inflation under these circumstances? Not completely unsound, but I think less effective when inflation is driven by energy prices, than when the inflation is driven more by financialization.
It's a great question. The Fed cannot print more oil, and so any efforts to reduce energy inflation with interest rates is going to be futile. Fiscal policy must step in (Congress) to both stabilize the oil market and accelerate our transition off of oil (which would prevent energy inflation in the future, EVs, batteries, enough sunlight hits the Earth every 30 minutes to power humanity for a year, etc, etc).
Fundamentally, due to structural demographics, we have arrived at a capital shortage period after a long capital surplus period [1]; there will be, for long into the future, more projects chasing a shrinking supply of capital. This will continue to push interest rates up, which will also drive asset prices down (real estate, private equity, etc) [2].
Tangentially, about a year ago, I predicted that the Fed could beat on the economy all it wants with higher rates and this would not cause mass unemployment, because the world is rapidly aging and how fast workers are retiring out of the labor force [3]. This thesis appears to have been proven accurate, but more time is required to make the thesis more durable.
> The Fed cannot print more oil, and so any efforts to reduce energy inflation with interest rates is going to be futile
Doesn't increasing interest rates reduce demand though? So they can't print more oil, but they can reduce the attractiveness of investments that will require oil, thus indirectly driving prices down?
Elastic demand, but not inelastic demand. And there is a material amount of inelastic demand across the economy which is keeping demand durable, regardless of interest rates and oil/diesel prices.
In the US, the economy is passing increased money and energy costs to consumers. In China and other countries, they are rapidly electrifying light and heavy vehicles. Different responses to similar economic signals.
Well part of the problem is that while waging a war that increased oil prices, the US government has simultaneously been systematically dismantling existing projects to use and incentivise alternative energy sources.
Reducing our reliance on oil would be a very sensible response. Unfortunately, I don't think it is one our current government would consider.
Could be more specific, but I agree with the sentiment. Highest US earners (top 10%) drive almost half of US consumption, so yeah, the wealthy are consuming as long as they are and continue to feel wealthy from the stock market. Energy inflation is immaterial to them, it is a rounding error.
"...average MPCs decline gradually with both income and wealth—from around 25 percent to 20 percent—before dropping off in the upper segments. Average MPCs among households in the top percent of the income and wealth distributions are about 14 percent and 15 percent, respectively" (FEDS Note).
I didn't know this. I wonder if the concavity is symmetric between an increase and decrease in wealth...
It reduces the attractiveness of a lot of investments, some that require oil, some that don't, and many that require labor, and that last thing means less jobs.
> any efforts to reduce energy inflation with interest rates is going to be futile
Raising rates makes credit more expensive. That cools down growth. That, in turn, eases resource demand (as a function of the resource intensity of GDP).
Practically speaking, higher rates today would mean less borrowing to build datacenters. (And new homes, et cetera.) Which would mean those marginal resources going to other uses. Which would ease price pressure.
> there will be, for long into the future, more projects chasing a shrinking supply of capital
Capital is priced in rates. Too many projects chasing too little capital will drive rates up until the capital markets balance. The case where that doesn't happen is when rates are being held low.
And current spreads indicate a surplus of capital [1]. That's why we're seeing e.g. multi-trillion dollar IPOs.
> the Fed could beat on the economy all it wants with higher rates and this would not cause mass unemployment, because the world is rapidly aging and how fast workers are retiring out of the labor force
I like this thesis–it means the Fed has a lot more room to raise rates than is conventionally appreciated. I'm also cautious about embracing it. Reminds me too much of the MMT-means-inflation-isn't-real nutters from the early 2020s.
> Practically speaking, higher rates today would mean less borrowing to build datacenters.
This is only true if the cost of capital is a functional constraint. If the constraint is elsewhere (in this case: sourcing GPUs, bringing online energy resources) it will not have any significant effect.
When the expected return is very high because the captured resource is perceived to be monopolistic, this lever does practically nothing. Unless they raise it so much they destroy everything else.
> This is only true if the cost of capital is a functional constraint
Then there are not, by definition, "more projects chasing a shrinking supply of capital."
> in this case: sourcing GPUs, bringing online energy resources
This is supply-side inflation. You can still bring down inflation with rates by cooling demand. (Less free cash in the economy means less spending on AI means less demand for GPUs.) The downside is it costs you more output than in a balanced economy.
> Then there are not, by definition, "more projects chasing a shrinking supply of capital."
It can be true if it is a subset of “more projects”, if the decision mechanism
works outside a market, or if that capital is accessible via mechanisms within the market which are not directly linked to borrowing rates, such as where the cost of capital was locked in years ago. Rates are not a panacea.
> This is supply-side inflation. You can still bring down inflation with rates by cooling demand. (Less free cash in the economy means less spending on AI means less demand for GPUs.) The downside is it costs you more output than in a balanced economy.
You said the same thing I said, just euphemistically. This is like saying you can rid your house of insects with a flamethrower.
> if that capital is accessible via mechanisms within the market which are not directly linked to borrowing rates, such as where the cost of capital was locked in years ago
Sure. Now do the next project that's going to lock itself in today.
> Rates are not a panacea
Nobody argued as much. Just that the effect has size and meaningful magnitude.
> You said the same thing I said, just euphemistically
It's not sound no, and never really was given how doggedly the policy has been stuck to. The policy amounts to handing out wadges of cash to people with money, then ignoring that bit and hoping the hardship suffered by those that need to borrow will offset the activity of the people with interest income. At best, it's weak sauce compared to actual fiscal policy.
The Fed can control inflation through demand destruction. Tank the economy and throw enough people out of work so people buy less and inflation goes down.
It's like chemotherapy: it works, but it destroys so much of the rest of your body in the meantime that sometimes you wonder if the pain is worth the gain.
Trump & Congress have access to much less painful means to lower inflation, but they've refused to act.
Reducing the deficit. Credit changes how private money is made through the monetary system. Fiscal policy directly creates and destroys dollars in the economy–it's fare more powerful.
Reducing the deficit by any substantial amount means cutting entitlements or raising taxes substantially. That's political suicide (not that political suicide wasn't already committed by this administration).
Energy prices for Joe Average can be stabilized by having non-essential users (AI data centers) subsidize everyone else through taxes or differentiated rates.
A crisis doesn't magically create generating capacity.
Say a system had X capacity and 100% utilization. Now someone wants to build a data center that consumes 0.1X power. Demand is now 1.1X and to prevent the system from going over capacity 0.1X of pre-existing demand has to be destroyed.
Subsidizing other users makes the problem worse because they will increase their energy usage in response to the lower prices.
Simpler isn't always the thing to optimize for when people can't afford to heat their homes.
But you're right, we could also solve this problem very simply, without gradiated utility rates, by taxing the crap out of corporate profits and redistributing them to everyone else. This would punish corps who aren't building data centers, but if you don't mind turning the whole country into an AI server farm, I guess that would work too.
... Or, we could take the hit of extra complexity, and make high consumers pay extra, as I described.
I understand but it takes time to build power plants. You still have the same immediate capacity problem and need to reduce demand until the new supply comes online.
No, but energy is sold at market prices, and money is fungible and money can be moved.
Money does, in fact, create generating capacity, as expensive, idling energy sources are turned up.
Giving everyone a discount bill on the first X KWH, and making them pay market rate for the next Y KWH and making them pay a market + penalty rate for everything above that solves the problem of consumer inflation.
> Reducing the deficit by any substantial amount means cutting entitlements or raising taxes substantially
2016's $585bn DoD budget [1] bought what $817bn does today [2]. 2027's NDAA requests $1.1 trillion [3]. On top of like $100bn–on par with Saudi Arabia's military budget–we gave to ICE.
I'd generally consider myself a defence hawk. I think we should support Ukraine. I value our commitments to Korea and Taiwan. But what in the actual fuck are we doing blowing an already-bloated deficit on checks notes a WW2 battleship.
The elephant in the room is still Medicare and Social Security. Not only are they a much larger share of federal spending, they are growing much faster than the budget as a whole. If we froze spending on these programs today, over the long term the budget would essentially balance itself due to rising tax revenue combined with the slow grower growth of discretionary spending. The CBO models that scenario in their "payable benefits scenario". Remember, Congress has to re-authorize defense spending so the defense budget doesn't grows unless Congress wants it to. Entitlements on the other hand, are on auto-pilot!
The independent ability of the Fed to do unpopular things is one of the strengths of the American system. Carter paid the price politically to establish it; subsequent politicians have benefited for decades subsequent.
Entitlements absolutely need to be cut. It’s beyond unsustainable already and it will get worse and worse. As you’ve mentioned, it’s political suicide, so most likely nothing will change and we will keep getting massive government overspending and inflation.
If I recall correctly, the court ruled that the way Trump was doing them was illegal. So Trump started doing them via a different mechanism (or stated legal rationale, or something), and as far as I know the courts have not yet ruled on that new approach.
I don't know if the new Congress is going to be able to put a stop to this.
End the optional negatives: eliminate the tariffs that are working their way through the economy. End the war against Iran.
Do some positives. Work with Congress to arrive at a sane resolution to the US economy's persistent reliance on undocumented labor. (The policy of deporting all immigrants, legal or not, is inflationary.) Implement a healthcare backstop policy to guarantee access to healthcare for all citizens. (Health insurance premium inflation is running around 2x+ overall inflation.)
Can happen doesn’t mean likely to happen. Certainly disinflation in 2022-2023 raised unemployment, and it’s by far the most likely outcome of raising rates high enough to curb inflation.
What do you think "demand cooled" means if not increased unemployment. Its a neat way of transferring the pain to the politically weak, whilst calling it "demand cooling", or whatever the euphemism du jour is for making people unemployed. It's all about targeting the mythical NAIRU rate.
The problem is it requires the economists to realise they've dedicated their education and professional careers to the economic equivalent of the geocentric model.
Edit: erroneously wrote heliocentric rather than geocentric, which was the opposite of what I meant!
> What do you think "demand cooled" means if not increased unemployment
Gross private domestic investment contributed more to output growth than personal consumption expenditure in two out of the last three quarters [1].
Reduce marginal investment, e.g. by raising the cost of borrowing for folks building datacenters, and you that demand goes away without any major shock to current employment.
> Plenty of institutional investors are cash rich and they do very well with high interest rates
That's the point. They shift their investment into Treasuries instead of buying up land and turbines and power and GPUs. Also, as the rate goes up it gets harder to make the math math. So e.g. large construction projects get paused, et cetera.
That might be the case, but those large construction projects being paused means someone losing their job. We're literally paying people to make people unemployed.
Sure, if labor demand exceeds supply, unemployment will stay close to its natural bottom even in an environment of demand cooling. It's the same mechanism -- the supply/demand curve shifting. First it exhibits as wage increases slowing; then it exhibits as unemployment.
We've seen a lot of the first in 2026 -- wage increases have dropped significantly below the rate of inflation.
Not OP, but some inflationary pressures were self-inflicted by the executive, and therefore can be reversed.
The levers they can pull include using diplomacy to end of the stalemate at the strait of Hormuz that is increasing energy and shipping costs. Scrapping excessive import taxes (tariffs) inflicted since "Freedom day" could help some, though prices have a ratcheting effect and retailers are likely to pocket the difference to pad their profits.
Trump & most of Congress have no idea how the world works as they chose willful ignorance and fail up thanks to post-WW2 demand for American goods as the rest of the world was a crater
50+ year olds have done little more than take STEM research generated in the pre-1950s late 1800s era of science and copy the knowledge to computers; no net new physical science has come out of the last 50 years; it's all just carrying on nuclear, relativity, electromagnetism research conducted in the pre-1950s era; leadership is a bunch of know nothing American philosophers.
The very definition of functional illiterates who cannot reason outside their childhood cultural tropes; American domination and subjugation of the globe
They noodle tiny decimals of percents such the financial network effects make them richer.
That’s work to them. Zero meaningful contribution. They're TV personalities who offer nothing more to humanity.
Despite the obvious big picture trend all this science and tech existed even if in just rudimentary form when they were in Sunday school; they truly believe they're a divine people lucking into existence and responsible for human progress; 100ish million truly insane lead gas fume huffing, post war/cold war paranoid people control American economy and politics
There are two big levers the government has to control inflation: monetary policy and fiscal policy.
Monetary policy is where the central bank changes rates. This is effective to a point. It defuses a lot of zero-interest nonsense but the primary idea was to cool the business sector by making borrowing more expensive. Thing is, we don't really do that anymore. We don't borrow a bunch of money to build a factory to make widgets. No, we simply financialize everything. Yes, we have a ton of AI debt now but (IMHO) it's not productive output. The big product and promise of AI is labor displacement. That's going to destroy the economy.
Private equity technically borrows money but usually only temporarily. The target gets bought, restructured, a loan is taken out against the assets to pay back to investors and the corpse is spun out before the debt explodes. The problem? The market seems to be wising up to this bargain and these husks need to be kept on the books longer than desired. PE firms are having to borrow to refinance. That's another house of cards in all of this.
But what really fuels PE and all of this? Real estate. Hoarding land has become the best performing asset.
So the second lever the government has is fiscal policy, specifically taxation. Prior to the pandemic, a lot of companies were afraid to raising prices too much as they'd lose market share. An energy crisis triggered a fundamental change in corporate attitudes to raising prices and we've had a ton of raising prices simply to maintain profits or in anticipation of inflation. Pepsi now is in deep trouble because they've discovered that people don't want to pay $8 for corn chips and Walmart's generic brand is $5 and probably made by the same factory.
In the wake of the pandemic some countries introduced a windfall profits tax. Basically, predatory price-raising should be punished with at least a form of wealth redistribution. These measures were few and far between however.
As an example, because of 2020 energy crisis (caused by Trump) and Russia's invasion of Ukraine, Europe has been in a deep energy crisis for years with no end in sight. Many European governments have tried to protect consumers by subsidizing electricity. Well, these energy providers are making record profits. Why aren't they taxing the back end to pay for those subsidies? Instead, we just have a massive wealth transfer from European governments to (often private) utilities and gas producers.
But fiscal policy, particularly in the US, never gets discussed int his way. We could solve so many problems by simply having a 50% corporate tax rate. The standard objection is "they'll move overseas". Well, you can't move land overseas, particularly mines and oil wells. And the IRS is capable of tackling transfer pricing and profit shifting. Well, they would be if they weren't deliberately starved by successive governments. And if all else fails, punish companies for moving overseas with tariffs. That's what they're actually for.
So, back to your question, no, I don't think the theory is sound because we have a malignant tumor at the heart of our economy, which is land-hoarding.
Sure. First, a bit of context. Back in the 1980s we had the era of the so-called "corporate raider". These people would buy up a failing or unprofitable company, break it up and sell it for parts. Basically, the book value of the company was more than the price to buy the company. Some viewed this as market efficiency. But the cost of job losses is never borne by the raiders. No, the government pays for that. So it's another form of wealth transfer from the government to the wealthy. This btw is the origin of the Rust Belt and how formerly Democratic strongholds ultimately turned red as the Democratic Party under Bill Clinton abandoned organized labor for corporate donations.
It's worth adding a little about the subprime debt crisis and the GFC. Mortgage debt is probably the most liberal in terms of collaterization rules. You can borrow so much more of the value because housing was considered "safe". So subprime loans started at a low rate but then that rate kept going up. There's more to it of course but the point I want to highlight how this was a case of complicated debt that exploded.
Private equity is really the next generation of corporate raiding. Here's how it works. You start a PE fund and raise capital for it. You then identify a target you can profit from and do what's called a leveraged buy out ("LBO"). You borrow more money against your capital and the business.
A lot of businesses have been poorly performing and they're sitting on a ton of real estate appreciation. Toys R Us was a big example of this. Toys R Us was an old company so owned a lot of its stores. But now that unrealized gain doomed them.
The PE firm will typically restructure a company into two companies: one holds the business operations. The other holds all the real estate. The first one will have binding contracts to rent from the real estate holding company.
Somewhere in all this the new owners will take a loan out against the company's assets to repay the LBO. So they've basically gotten a company for "free" and just loaded it up with debt. The financial arrangements will be complex and you may find that the rents will explode in future years, ultimately dooming the business operations. Now if you're a PE firm, you don't want to hold onto that. You want to sell it. That usually means relisting it on some exchange.
At some future point the business collapses, the PE firms often still owns the real estate and because that real estate has usually kept appreciating, it's even more profit.
So if the real estate hadn't appreciated so much, Toys R Us and many other companies simply wouldn't have been targeted this way. We killed a longstanding business that employed thousands of people so a handful of people could cash in on appreciating real estate. That's all that happened.
For this to work, somebody needs to buy the business operations half. And investors are increasingly cottoning on to this. If you can't sell it, it stays on the books and none of this works. This is where the principals in PE firms are being asked to contribute capital to keep this ball int he air until buyers can be found. Also, there are now trillions in private credit to keep this all afloat.
PE defenders will bring up Hilton and Kroger as two companies that were arguably improved by these LBOs but they are the exception.
As time has gone on, PE has gotten increasingly evil too. Now it looks for what they call "pricing power". They've invented a new term because the existing term would make what's going on obvious. It's inelastic demand. PE now loves private utilities. People need electricity. Profits are guaranteed. People also need healthcare so a PE firm will try and buy up every medical practice in an area or every vet or every trailer park.
Adam Smith:
> As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce
Karl Marx quoted Adam Smith in 1844 and also said separately many things about this including:
> The landlords,... operate a certain kind of monopoly against the tenants. The demand for their commodity, site and soil, can go on expanding indefinitely; but there is only a given, limited amount of their commodity.... The bargain struck between landlord and tenant is always advantageous to the former in the greatest possible degree.
PE is just one of many distortions that come from a system that allows people to hoard land.
>At some future point the business collapses, the PE firms often still owns the real estate and because that real estate has usually kept appreciating, it's even more profit.
>So if the real estate hadn't appreciated so much, Toys R Us and many other companies simply wouldn't have been targeted this way. We killed a longstanding business that employed thousands of people so a handful of people could cash in on appreciating real estate. That's all that happened.
Which is in "large enough to direct blame and shame their way" part a side effect of the environmentalists and zoning karens who joined forces to combat the concrete jungle. Everything they did had the side effect of increasing the value of an already built, already paved site.
It used to be 50yr ago that an aged out facility, even a clean one, was a liability. Because if you wanted to do anything there you'd have to demo it or rehab it up to modern expectations/competitiveness (note I did not say code) which would cost more than starting from nothing. Last century's liabilities are now lucrative "brownfield redevelopments".
What I believe you're referring to is NIMBYism. The belief seems to be that we can build our way out of this problem, often called YIMBYism. I believe YIMBYism is generally well-intentioned but fundamentally flawed.
YIMBYism is often used an excuse for rampant deregulation. I believe that private developers won't ever build our way out of this problem because that hurts profit. It takes the government as a major player to solve this problem. People will point to examples like Austin having declining rents as a direct result of supply but that doesn't really invalidate my criticism.
UK supermarkets used to engage in a practice called land banking [1]. Basically they would buy up land and do nothing with it. They were buying it to prevent competition. And if land kept going up in value there was no cost in doing it. Ultimately Aldi and Lidl came along and ate their lunch by building in less desirable but cheaper areas. But another consequence was that it restricted the supply of housing.
What YIMBY policy would prevent land banking (hoarding)? You need something and it's not even more deregulation. The cost of just holding land needs to be higher. You need some form of land value tax [2].
More than a decade ago, I remember hearing about "investors" buying up all the trailer parks and jacking up the rents (eg [3]). This is entirely parasitic behavior. Any form of ground rent on permanent structures like this should be somewhere between illegal and uneconomical. The land of the trailer parks should be co-owned by the residents, period.
This has a huge negative social cost too. Trailer parks are often the housing of last resort for many. Make it unaffordable and people end up living in cars and them ultimately the streets. So what have we achieved here other than padding the profit margins of investors? We've shifted that cost onto the government, which is just another wealth transfer from tax coffers to the wealthy.
Ten years ago, Xi Jinping quietly popped China's real estate bubble, which has been in decline ever since. He famous said [4] "Houses are for living, not for speculation". It's funny reading Western reporting on this because China's real estate recession is viewed as a negative when it's just a correction from intentional state policy.
That required government intervention in the housing market. This would never have happened with any set of incentives of private developers.
Nope. I'm talking about the Trump 2020 OPEC deal [1][2].
Without recounting the entire saga, OPEC tries to maintain a floor and a ceiling for oil prices. Too low and they don't make enough money. Too high and it causes political problems. They meet every 3 months to project demand and they adjust supply accordingly. Some members cheat and lie about their output but the system generally works. One thing that keeps the Gulf powers in line is military support, particularly Saudi Arabia.
When the pandemic hit in March 2020, demand cratered. Futures prices briefly went negative because producers had nowhere to store oil and nobody was buying. This is where Trump cajoled MBS into cutting supply in a 2 year deal. This superseded the normal 3 month review and adjustment process so it wasn't even necessary. This deal was huge too. It would initially cut global supply by 10%.
So then in 2021 demand roared back and prices exploded. The Biden admin obviously came in in January 2021. They quietly went to MBS to get him to rescind the deal. MBS refused.
Republicans blamed Biden even though it was a Trump deal. Democrats blamed oil companies for being greedy because they, just like the Republicans, didn't want to upset Saudi Arabia even though Biden could've absolutely threatened Saudi Arabia with the weapons the US provides.
As to why MBS refused, it's complicated and there's a lot of history but a big part of it is that Trump screwed over OPEC in 2018 and (in OPEC's view) the Obama admin screwed them over in 2015 by removing the ban on crude oil exports.
What gets me though is nobody talks about the Trump 2020 OPEC deal.
Classically this is true with regards to Monetary policy, but didn't this fall to the wayside when they set required deposit rates to 0% in 2020, and haven't implemented appropriately sound measures for an appropriate reserve requirement system (Basel3) thus doing away with fractional reserve to full on money-printing.
My reading of the 1000+pg Basel3 document from BiS seems to point to the weighted risk categories being fundamentally flawed (relating to valuation for those risk weighted categories, not unsurprising given the subjective value of assets), not to mention the indirect business flaws that limit new banks potentially growing the number of GSIBs, leading to concentration of risk through sieving.
AI debt seems to be supercharging the indirect stagflation indicators which started showing up a few years ago.
Most empire's above a certain size inevitably run into internal conflict from land-use issues related to rentseeking and monopoly.
For anyone confused how the fed rate could go up without a fed meeting; it cannot. The above is shorthand for market predictions of the fed rate going up.
> anyone confused how the fed rate could go up without a fed meeting; it cannot
Finance being finance, the jargon is fucked.
The federal funds rate–"the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight"–is set by the market [1]. (Well, by banks. But among themselves.)
The FOMC "meets eight times a year to determine the federal funds target range." The FOMC then directs the buying and selling of securities–usually Treasuries–to encourage that market rate into their range. (The FOMC is "composed of the seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank presidents" [2]. It's a superset of the Board of Governors.)
Your first link is from October. The second link is current prediction for fed rate changes, which doesn't help anyone understand changes from this PPI report, and the last link is the yield curve, which just shows that long term rates are higher than short term rates (generally seen as indicative there's no near term recession risk).
Are bond market rates going up in response to this? I'd actually like to know.
https://www.pimco.com/us/en/resources/education/bonds-102-in... ("Apart from purchasing power, inflation can influence bonds in another way. When inflation rises above a certain level, interest rates also tend to rise as central banks try to put pressure on consumers to reduce spending. In response, bond prices fall which can reduce their total return.")
> The second link is current prediction for fed rate changes, which doesn't help anyone understand changes from this PPI report, and the last link is the yield curve, which just shows that long term rates are higher than short term rates (generally seen as indicative there's no near term recession risk).
The second link predicts forward interest rate changes by the Fed based on underlying futures contract market activity, activity that is driven by...released inflation data impacting market participant activity.
I'm confused. Nothing you say here contradicts my comment at all? I'm just saying that your links don't show any market move in relation to this specific PPI report, not that inflation and bond prices are not related.
We really need to reduce the fiscal/govt budget deficit. It's basically printing trillions per year, and as confidence in the soundness of the USD decreases, demanded interest rates rise, and increase the deficit further. The interest payments are already larger than the defense budget, about $1T/yr. It's an emergency at this point. The old method of raising interest rates to cool inflation isn't effective anymore with this sort of fiscal deficit, because it increases the interest payments, and effectively increases the rate of money printing, counteracting the effect of the decrease in private credit creation.
Eh, it's an issue. We should solve it now. (We should have solved it ten years ago.) But we have a little time.
Emergency will be stagflation. Crisis would be if the Treasury couldn't sell debt.
> the old method of raising interest rates to cool inflation isn't effective anymore with this sort of fiscal deficit, because it increases the interest payments
There is no evidence of this. There might have been in Japan (in the 1980s). But Americans don't save as much as the Japanese, and the concavity of the wealth effect means that those who do don't tend to spend much more when their interest income rises.
We have a little time, yes, but politicians aren’t exactly running to fix the issue. Far from it, they’re avoiding this and kicking the can down the road
Agreed. Maybe I'm just sensitive to the disaster fatigue overzealous promoters of the climate crisis inadvertently–and mostly good-naturedly–caused for a while.
I just don't see much political appetite for austerity/entitlement cuts/more taxes, so I don't think we're going to fix this in any orderly way.
I guess the thing that worries me most about this is how this interacts with the USD's reserve currency status - that's historically absorbed a lot of the govt's deficits and suppressed inflation. I don't see many good alternatives to it in the set of global currencies, but there's been a lot of central bank buying of gold, and I could imagine a basket of other hard capital goods maybe functioning that way. And we're seeing more rmb-denominated trade.
>There is no evidence of this. There was in Japan. But Americans don't save as much as the Japanese, and the concavity of the wealth effect means that those who do don't tend to spend much more when their interest income rises.
I believe it tends to get sunk into asset inflation? Real estate/housing being one of those, and one of the biggest inflation drivers. Also of populist unrest. Agree that it doesn't push up labor prices as much because of the distribution effect you're talking about.
True. I think CPI excludes mortgage interest, but in terms of real actual housing expense that people experience, it seems like it'd still cause it to rise. And as renting becomes more attractive as an alternative to buying, landlords get more pricing power.
> as renting becomes more attractive as an alternative to buying, landlords get more pricing power
You're right.
"...contractionary monetary policy increases both real and nominal rents. A 25 basis point unexpected increase in the 30-year fixed rate mortgage raises real (nominal) rents by 1.7 (1.4) percent 12-24 months following the monetary policy shock. We find that the effect is driven primarily by a shift in household demand from the owner-occupied market to the rental market. Using transaction level data, we show that when monetary policy tightens, renters are less likely to become homeowners and the home-ownership rate drops. This then crowds in the rental market and increases rents. We find that the increase in demand for rentals is accommodated by real-estate investors who capitalize on the higher rents by buying houses from owner-occupiers and renting them in out the rental market" [1].
Going back to the top, however, despite rent being "the single largest component of" CPI, we have not seen evidence anywhere of higher rates causing higher inflation. I suppose one could argue within the constant-unemployment state the effect of rates on inflation may be muted by the above. But again, being in an economy where private investment rivals personal consumption gives the Fed a lot more leeway on the upper limits of rate rises.
Yeah, anyone talking about the dollar being replaced by RMB or something is just kind of talking out of it.
China specifically does not actually want to be the reserve currency and replace the US, a good reserve currency should be fairly liquid and they like the ability to shut down capital flows into and out of China.
The other alternatives are not great; JPY has the same debt problems as USD. EUR has the same debt problems in certain member states like France, and the fiscal/banking crossborder liquidity isn’t very good and the governance still fickle and precarious. CHF is too small.
We could restore tax rates to what they were in the 80s, maybe. When I was a kid investment income was taxed at a higher rate than earned income. Maybe that's an idea.
> I just don't see much political appetite for austerity/entitlement cuts/more taxes
One of these things is not like the others, one of these things just doesn't belong...
Austerity and entitlement cuts are what we've been trying since Reagan. They haven't worked. They don't work.
Raising taxes is unpopular, sure, but a) it can actually solve the problems—not just the symptoms, but make a good hard dig in at the root causes—and b) if we do it right, only a tiny fraction of the people will have to bear those increases.
Because what we need to be doing is returning tax rates to what they were like before Reagan. Before "trickle-down economics". Before all this black magic shit that has never worked, will never work, and any actual economist with a brain and a functioning heart could tell you would never work right from the start.
Yeah, I'm generally onboard for higher top tax rates, some additional higher brackets, and higher tax on investment income, ideally paired with lowered rates on the lower brackets/higher standard deduction. This would hit me, but I think we need it to avoid some of the more extreme populist futures.
But we also really need to fix spending, especially procurement, the amount of wealth that we're collectively being cheated out of via terrible government contracts is staggering, there's a large network of extremely inefficient businesses that live off of the federal govt. Also, the medical system, though my understanding is that Medicare is generally getting a better deal than private insurers.
I'm fully onboard with being careful about government contracts—indeed, many of those terrible contracts are deliberately so; they're part of the corruption that's funneling money from the many to the few.
But 99% of the time, if you say "reduce spending", everyone, on both sides of the aisle, will hear "stop helping people", which is deeply counterproductive, as well as being cruel.
Don't worry, with Democrats coming into office they'll reduce the deficit. All while Republicans shout and scream about the deficit being an emergency. Then Republicans will get back into power, enact massive tax cuts and balloon the deficit again.
1. Republicans get elected. Pass bills that cut taxes for businesses and ultra high net worth individuals. Maybe toss some crumbs to people.
2. Democrats get elected, notice budget deficit from previous cuts. Propose increasing taxes on W2 working class, including white collar. Businesses and UHNW people continue with their tax breaks and schemes.
High taxes don't work, that's why Europe is stagnating badly, and declining in many areas.
When you directly compare the US to Europe, the gap is widening rapidly.
Pretty clear that the high tax model is a complete failure. Not to mention a European brain surgeon is paid like a slave compared to an American one, and you can make those comparisons across any industry.
A Senior Engineer in Stockholm makes less than a new grad in the US, for example. And pays higher taxes!
All the "social Democrats" of Europe will be downvoting this. Too bad they don't have their own HackerNews. Europe just can't come up with stuff like YCombinator.
Do low taxes in the US work for anyone other than the Epstein class? Ancient, crumbling infrastructure, rising cost of living & basic necessities, stagnate wages, shrinking middle class, massive transfer of wealth from the working class, worsening education and healthcare, corrupt government at all levels (corrupted by the benefactors of those tax cuts), market consolidation and collusion resulting in less choice, higher prices, and on and on. It's not all bad of course, for example some luxuries are cheap (such as phones or TVs.)
Sweden may have fewer billionaires flying child models to tropical paradises for coke and popper fueled orgies, but I'm guessing their senior engineers plans for long term unemployment or serious injury/illness don't often include choosing between suicide or homelessness so maybe they're doing something right? I'm sure a happy medium exists and we don't need to go back to our 'great' (1950s) era tax rates though
the epstein class has low effective tax rate, because they are able to write off a lot of their consumption.
large SUV? written off via accelerated depreciation.
hotel or travel or leisure? written off as a business expense.
the issue is not with the nominal tax rates, the issue with numerous tax breaks, carve outs, deductions and etc etc. Every single one of them costs hundreds of billions to the state/federal budget and has to be recouped via taxes on W2 workers.
W2 workers are taxed on wages (income), while capitalists are taxed on profits (so they are able to deduct a lot of stuff), plus all the tax breaks, offsets, deductions, carveouts.
plus capital gain tax is 10%, while marginal income tax rate (fed+state) can be 50%+
we W2 workers bust our asses off, only for half of the stuff get stolen away by uncle sam. Meanwhile rich capitalist just watches his portfolio go up and to the right, and pays 10% (if he ever pays! lot of them just borrow, instead of selling)
Again, the problem is a flooded labor market. When you get growth, the demand for labor increases. What should happen is the amount you can demand for your labor goes up, but if you have programs like H-1B and you effectively throw open the border, that won't happen.
That sort of crime-stop thinking is what keeps working class people just scraping by. I said nothing about race or tax policy. You're so busy looking for "code words" only you can read you've missed the point.
Tax policy is a red herring even if you don't realize it. Wealthy people never pay more than about 25% in tax. If you raise the actual tax rate more than that their tolerance for risk goes down and you gimp your economy.
why do you care about wealthy people's tolerance for risk ? nobody thinks of my tolerance for being overtaxed
I have far more in common with tech visa workers who are overtaxed on their W2 wages, than with big capitalist who never sells and never pays a dime to irs
We all care about tolerance for risk. Investing in a new venture is risky, and every calculation is a balance of risk and potential reward. If you tax away the reward, nobody will take a risk, and that will stifle job growth.
No new jobs means more competition for the jobs that exist, and that means lower pay.
I'd sooner see offshoring banned than programs that bring in potentially motivated/skilled workers here (though they should still have limits), and I think it'd be more impactful. Theres the obvious dev/IT impact, and we also have companies like Google and Tesla eliminating humans from the workforce with AI and farming out oversight of that AI overseas. When your Waymo or Cybercab makes an oopsie some guy in Manilla or Nairobi is going to be handling it while the out of work uber/taxi driver is shivering in a tent under a bridge.
Offshoring restrictions tend to founder on practicalities. Exactly what constitutes offshoring? If a company creates a subsidiary in another country and hires people to produce a product, is that offshoring? What about when it buys a product from an independent company in another country?
If I fire a bunch of people in the US and hire the same number of people in another country to work on the same project, that's clearly offshoring. But what if I don't fire anyone in the US? What if I fire them five years later?
The whole thing is a mess for regulation and I suspect if you wrote regulations that weren't easy to bypass you'd hamstring local producers.
Not to turn this too much into a political argument, but a lot of the things that have been discussed as the Democrat’s platform has been things that tend to increase government spending rather than reduce it, such as:
- Paid medical insurance for all
- Free child care
- Regulatory oversight which requires funding and committees etc
- Affordable housing (there are ways to solve this with gov spending and without, but likely we’ll need some form of gov incentives/spending)
I’m not commenting on the validity of these things individually, just that I don’t believe the Democrats since Clinton era have tried to reduce spending
Honestly I think it’s a fundamental hurdle with our political system. Charlie M’s quote of “show me the incentives and I’ll show you the outcome.”
The Democrats under Obama reduced the deficit meaningfully after the financial crisis recovery set in. The deficit went from $1.4T in 2009 to $0.6T by 2016. Part of that was the economic recovery, but there was also both legislation and executive orders that reduced spending and increased taxes.
The Budget Control Act of 2011 capped discretionary spending and cut $1 trillion over ten years, the administration further cut administrative spending by 20% via executive order in 2011. Subsequent actions reduced the deficit by $2 trillion, with 3/4 spending cuts and 1/4 tax increases (e.g. the 0.9% Medicare surcharge and capital gains taxes on earners of >$250k).
I agree with you, though, both parties seem to have stopped trying to reduce the deficit over the last decade, I think in part because it hasn't been rewarded politically at all.
I have some questions about this story. I ask genuinely out of confusion combined with some informed disagreement. If I glance at the deficit in [1], it seems the deficit was lowered a lot, after rising meteorically in 2009, so yes, _someone_ turned the heat down after turning it up super high. Not sure where you're getting a $2T deficit decrease though.
My confusion is augmented by the focus on the first derivative (the deficit) during this period while the national debt rose by more than $10T [2#Background]. It's not clear what matters more on an admins report card. Interest accruing is arguably less under your control, which might be relevant to this question.
Finally, I'm struggling to understand why the 2011 passage of the BCA (which cuts spending in exchange for raising the debt ceiling) is attributed to Democrats primarily. Reading [2], if I were to narrativize it, the story seems to be that the Republicans, spurred on especially by the Tea Party, forced Democrats to agree to spending cuts.
Quoth Wikipedia:
"The Republican Party, which gained control of the House of Representatives in January 2011, demanded that President Obama negotiate over deficit reduction in exchange for an increase in the debt ceiling, the statutory maximum of money the Treasury is allowed to borrow. The debt ceiling had routinely been raised in the past without partisan debate ...
</quote>
Furthermore, in the House, 72% of Republicans voted for the bill, while only half of Democrats did. In the 112th Senate the story was more mixed, with about 86% Dems and 60% Reps voting yes.
I have not read all this shit in great detail but I hope you can appreciate my confusion, and invite you to indicate what I might be missing. For example, I don't why the deficit was so high in 2009. In one universe of explanations, the conclusion: it's not very praiseworthy to decrease the deficit you skyrocketed yourself.
The 2009 deficit was high because of the 2008-2010 financial crisis. Deficits increase dramatically in economic downturns because tax collections decline (job losses, lower profits, bankruptcies) and increased spending (unemployment, bailouts).
Most mainstream economists think it's good for a government to increase deficit spending temporarily during a recession because it helps prevent deeper recessions that cause long-term impairment of the tax base. If you let half the auto industry fail, for example, it may take a long time for your tax base to recover and start generating taxable income again.
After the crisis, there was bipartisan agreement that the deficit needed to be reduced, but the disagreement was on how. Obama was willing to cut spending but also wanted to increase taxes on higher income households, while the Republicans in Congress drew a hard line against any tax increases and wanted deeper spending cuts. In the end, they reached bipartisan bills, including the American Taxpayer Relief Act of 2012.
The debt ceiling brinksmanship was political theater. Republicans used the threat of defaulting on US debt in order to extract concessions from Democrats without having to agree to any policy demands. Congress passed laws with required spending every year and no one has the legal authority to not spend it. If Congress really cared about reducing the deficit, they wouldn't pass spending bills that required deficit spending.
As for increasing debt in the 2010s, I think it was viewed as a potential long-term problem but sustainable because interest rates were quite low. When inflation was at 2% and interest is at 2%, the US government was able to borrow money at 0% in real terms. Government spending on roads, airports, and even marginally productive projects that increase economic growth could be viewed as rational.
I think the US and world got complacent during the low interest rate era, and eventually realized deficit-spending in a low-rate environment boosted economic growth more than expected. The US doubled down on this by passing the 2018 Tax Cut and Jobs Act, which reduced taxes significantly without cutting spending concurrently, which created large deficits even during periods of economic growth.
The problem now is interest rates have gone up substantially, so debt servicing is going to become a much bigger burden. I don't think it's politically possible to reduce the deficit through spending cuts alone. The annual deficit is greater than the entire US defense budget and Medicaid combined.
Unless we suddenly get a burst of growth from AI that will increase our tax base, (which I think a lot of politicians are counting on), a long-term fix will require increased taxes (which will slow economic growth at least somewhat) and reduced spending (in particular lowering healthcare expenses, which are still rising at an unsustainable rate).
We're on like a half dozen straight Republican administrations of tax cuts for the rich and massive deficit spending combined with unnecessary wars.
Everything you just described is an investment that has a substantial positive output economically, Even when implemented incompetently.
It's so funny to see economic "rationalism" always pop up as soon as Democratic political waves appear, while when Republicans have all the control of the purse strings: utterly unrestrained fiscal malfeasance.
And the disturbing trend with Republican administrations is that the corruption and incompetence gets worse every cycle.
I'm not sure either party tries especially hard to reduce spending. Clinton was strong-armed into abandoning expensive social programs in his first term and had a hell of a good bubble economy paired with a pre-Norquist tax regime and a post-base-closure budget to reduce the deficit in his second term.
I would say "look at the numbers," but the 2008 housing crisis and the 2020 pandemic really don't make for easy comparisons.
But by a first order of approximation, I fear your statement is correct. Tax cuts sometimes goose the economy but always increase the deficit. Democrats sometimes advocate for tax cuts, but Republicans always do, regardless of the current macro-economic climate.
As someone else pointed out they will increase the deficit (over the baseline expectation) as they did before under Obama and Biden.
They might partially repeal tax cuts, but if they expand social security and medicare then the deficit will increase dramatically. Don't expect any of the recently elected senators to do the fiscally responsible thing when Social Security is insolvent in 2032.
The only way to fix the budget is to fix the medical system, and that doesn't mean enacting more schemes to figure out how to pay the absurd costs, it means destroying the cost side by applying long standing anti-trust law to the entire system.
Some people think that the fix to the medical system is to make it more socialist and others think it should be made more capitalist. What we have right now is somewhere in the middle.
Whatever ideological team jersey we want it to wear, the root cause is that medical insurance has gone from being insurance used in case of emergency, and gone to being a middleman skimming as much as humanly possible while ghoulishly denying healthcare if it is more profitable to let a human die before they can appeal the payout decision.
The only way out of this is to remove the profit motive sparking this avarice: either nationalize the healthcare, or ban healthcare insurance and regulate hospitals so tightly that they aren't allowed to profit as a business, the executives have capped pay, and the business can't be publicly or privately traded.
The laissez-faire approach to healthcare has completely failed in the US. Given it is the wealthiest country in the world, I cannot think of a more damning result for the health insurance model.
> The laissez-faire approach to healthcare has completely failed in the US.
Why do you think we have a free market approach to healthcare? Why can I only sign-up once per year unless I have a QLE? Why can I contribute a certain amount to an HSA which is triple tax advantaged with an HDHP but I can't with a PPO? If I have an HDHP+HSA why can I also contribute pre-tax dollars to an FSA that is use-it-or-lose-it for dental or vision only but if I have a PPO I can have a limited purpose FSA that can be used for medical, dental, and vision? Why are there contribution limits? Or even more basic, why is healthcare tied to employment?
The reality is we don't have a free market when it comes to healthcare at all, we have a hampered market where over the years we have politically regulated it into the abomination it is today with some of the worst incentives possible. We can certainly have the debate of whether a free market or nationalized healthcare is best, they both have trade-offs, but it's fallacious to assume we have the former and discount it entirely thus leaving either more regulation or nationalization as the only alternatives. More regulation is almost certainly the worst possible option, we've been on that path since WW2.
The answer to all of your questions is that if you are obscenely well off, all of these restrictions go away with enough money. Private insurance exists, or hell - just paying out of pocket. It is a free market, but only for those with enough money to pay.
The average person cannot pay. Health insurance is designed to maximize extraction of wealth from the non-wealthy, while doing just barely enough that they don't immediately get regulated away. The reason for this is greed: sure, greed drives efficiency in capitalism, but if it isn't reined in via regulation we wind up with the abomination we have today.
> More regulation is almost certainly the worst possible option, we've been on that path since WW2
We have de-regulated. In 1950, stock buybacks were illegal, the top corporate tax was 42%, and the top personal income tax was 91%. Today, companies buy back their stocks (transferring wealth to shareholders faster than dividends), top corp tax is 21%, and top income tax is 37%.
Sure, in some cases there is more regulation: factories can't dump waste into the rivers, and employers can't discriminate by race or whatever. But none of these things are the reason why healthcare has become unobtainable to many in the US.
> sure, greed drives efficiency in capitalism, but if it isn't reined in via regulation we wind up with the abomination we have today.
This is exactly where we part ways though. You specifically said "laissez-faire", i.e. "leave it alone" in French; economically this is anti-interventionist, let the markets sort themselves out without interference from government. You are saying regulation is required for the market to function or it leads to what we have today and I'm pointing out that we already have enormous quantities of regulation in healthcare. I pointed out several very easy examples to identify with but by no means is that an exhaustive list of healthcare interventions. The very thing you are advocating for, regulations, has been increasingly attempting to "fix" this market for the past 80 years and our current system exists because of it, not in spite of it. It is not a free market in any sense of the word, and doubling down on more regulation will not improve it. I am more than happy to debate an actual free market or nationalized healthcare model, but further regulating this "free" market is misdiagnosing the system we currently have and assumes the same good intentions that have failed to improve it for four generations will somehow produce better results this time.
What is the market value of your mother's morbidity and mortality? Your spouse's? Your children's? Trying to apply a market to healthcare can become macabre rather quickly.
Assuming a nationalized healthcare model, should the entire productivity of the nation be dedicated towards keeping a single person alive and healthy at the expense of every other conceivable economic activity such as building houses, growing food, manufacturing water treatment facilities, etc? Would it be macabre to deny them any amount of healthcare?
All economic systems allocate scarce resources which have alternative uses and thus rationing must always exists regardless of whether it is a free market, mercantilist, socialist, or as yet unknown economic system. Prices are a rationing mechanism within markets[1] but every other system will have its own set of one or more rationing mechanisms such as by-status, by-lot, by-need, by-survivability, etc. That necessarily means that there aren't enough resources to treat everyone for everything under all circumstances. Do you believe that all economic systems are thus macabre? If so I agree if only because life itself gives us hard choices, never utopic solutions.
[1] In terms of emergency healthcare by-need tends to be used even in market systems.
When you're trying to analyze the failures, perhaps try to not wear any ideological jersey to begin with?
The US does not have a laissez-faire approach to healthcare. The industry has been designed on government interventions. From the financial perspective, the main dynamic is some idea that by being middlemen, health "insurance" companies will work to put pricing pressure on healthcare providers. This was fallacious when it was designed (in 80s or 90s I think), but became patently absurd when the ACA limited insurance company profits to a percentage of revenue.
What other industry do you go to buy a service from a seller, but when you ask about pricing they tell you they don't know anything, and they can't know anything, until they decide to bill you some arbitrary amount months or even years later?
The closest thing is something like auto repair [0]. But mechanics offer fixed fee straightforward services (oil change), straightforward pricing (shop rate at book hours), and written estimates - to be responsive to customers' concerns! Sure, you can drop your car off at a shop and say "fix everything, spare no expense, and call me when it's ready", but that is not how most people operate, by far.
I am definitely not going to tell you that a functioning price dynamic is sufficient for healthcare reform [1] - but it is most certainly necessary!
Single payer supposes to move that pricing dynamic onto the government, where there could be at least a modicum of responsibility. I'm not even against this - our system needs a strong push in some direction. We've currently got the worst of both worlds - centralized planning for provision, coupled with laissez faire extortion for billing (made especially powerful due to the resulting shortages).
But even with single payer, there are going to be cases that exist outside its scope, right? And unscrupulous providers claiming they provided things outside of that scope and demand to be paid directly, rather than settle for their regulated rates [2]. And so regardless what you see as the overall solution, whatever legal bases that create this post-facto-billing-shakedown need to be completely eliminated. Sending fictitious inflated bills at patients needs to be prosecuted as the straightforward attempt to defraud that it is, not trivialized as the standard operating procedure it has become.
[0] who are actually dealing with a much wider gamut of unknown unknowns!
[1] also just preempting the inevitable nonsense response about having to compare hospital prices on your phone before the ambulance arrives. ie tell me you've never significantly interacted with the healthcare system without telling me...
[2] this culture of fraud has become so embedded in the industry, I've had billing agents continue to attempt to defraud me even after confronted with a solid price limit confirmed by both Medicare guidelines and the underwriter (of a medicare advantage plan). This is about as close to single payer as one can get right now, and yet the fraud/extortion dynamic still exists.
Every medical system in the world "ghoulishly den[ies] health care" to patients. If it's not an insurance company, it's the charity providing the care or a government bureaucrat.
And the least accurate label to apply to the US health care system is "laissez-faire approach", since the government is involved in literally every decision.
Most of hospitals are non profit. If you choose HMO insurance, its will probably be non profit as well like Kaisser. Some of big PPOs are also non profit like blue cross blue shield. Problem seems like over complicated billing and accounts receivables which leads to large administrative staff hospitals have to employee. Lack of medical professionals nurses and doctors which lead to increased salaries.
The largest expense in the medical system is caregiver wages; administrative wages are the 'foreign aid' of the medical system (very unpopular, but not a major cost-driver). Reducing doctors' and nurses' salaries is very unpopular even though the USA pays those two groups much more than any other country in the world (by almost any measure).
But how on Earth do the numbers square with this? When our insurance company pays $20k or whatever at the hospital for a normal vaginal delivery, on a bill of $80k, I have a hard time believing that a significant portion of that is caregiver wages, the majority of the time spent there, the caregivers are focused elsewhere, and just check in periodically. Or $40k for outpatient knee surgery.
The top line bill in US medicine is almost entirely fictitious. Hospitals and insurers built a system to defraud people on percentage plans. If you're on an 80/20 plan, for example, and the bill is $100, in theory you pay $20 and your insurer pays $80.
But what actually happens is you pay $20, the insurer pays $80, and then the hospital has to remit a large block discount back to the insurer at some point (it's either the end of the quarter or year. I can't remember). I haven't looked into this in awhile, but when I did local area hospitals were discounting payments by almost 80%, meaning the insurance company actually pays $16 on that bill and the plan that's supposed to have you paying 20% of the bill actually has you paying 55.6% of what the hospital receives. Like I said, it's fraud. It may not meed the legal definition of fraud, but it's still fraud.
Are you saying the insurance company is not paying the 80% of the negotiated rate? Why would a hospital defraud people when they are non profit entities?
AMA is a literal cartel restricting supply. Most of a doctor's job can be done better by ChatGPT (or a regular individual with a 4 year degree with specialized training for that matter), so it is obvious the licensing and supply is a major issue.
Yes, we should apply anti-trust law to the whole system, but this doesn't really pass the smell test. First, consider what proportion of medical costs is corporate profits. Maybe 5-15% as a guess? Then, excess monopoly profits would have to be a subset of this (what, 20%?). Sure, it would be nice as a one time adjustment but it's not going to fix the problem over decades.
The problem is, with the way things are right now, it's basically impossible to tell how much is profit.
Profit, for various entities, is baked in at every level, in multiple ways that are very difficult to disentangle from the actual costs without getting real auditors on the ground with access to all the data.
Hot take: stop funding biomedical research. Turn the tap off from which bleeding edge but super expensive therapies emerge. People won't demand what doesn't exist.
GLP-1 treatments alone are responsible for a plurality of the rise in costs this year and next. Over $7000/per/year for a huge fraction of the population.
I guess nixing patents might have the same effect, but it'd be easier to get Republicans onboard an approach that simply cuts outlays rather than one that ruins the wet dreams of biomedical research private equity.
It’s counter intuitive but totally valid. Another angle on this would be to lower the standards for clinical trials. The fact that it costs billions of dollars to run a drug trial is a key part of why everything is so expensive the FDA standards are extremely high. The result is safe drugs but it also makes the R&D market extremely skewed towards the big entrenched players. There is also no room for physicians or patients to take calculated risks. Sure it all falls into a sensible self consistent philosophy of “do no harm” but the side effects of that principle are extreme cost and actually slow innovation. In this modern era data collection should not be this expensive.
We have continuously overcorrected in the hundred years since we banned snake oil medicines.
Sure, people should know what they are taking, and they should take things that are safely manufactured and safe to use.
But, there needs to be room for a person to make informed decisions as part of their body autonomy. I personally do not want to start taking peptides because they're so new and the long term risk is unknown, but people who see the initial results and want to be human guinea pigs should be allowed to.
There really needs to be a middle ground between a decade of testing on the off-chance that 1-in-1,000,000 parents gets an upset stomach, and ordering who-knows-what research chem from a sketchy website.
Generally we should be lowering costs, but if lowering development costs results in more therapies, even if they're cheaper individually our aggregate cost trajectory could remain the same. The fundamental problem is, all our social inequities notwithstanding, we're super rich and our demand price sensitivity for healthcare is incredibly inelastic. Other rich countries throttle the introduction of new therapies at their borders to mitigate this dilemma, but because most of the therapies are coming from the US we can't do that.
paying for GLP-1 is a net benefit to insurance pools, because obesity (and other uncontrolled hunger-like cravings) have very expensive downstream symptoms.
But if we committed to reducing the deficit, we wouldn't be able to give tax breaks to AI Data Centers, Bomb Iran or subsidize our private health care system.
The thing is that "inflating it away" isn't a serious long-term proposal. Suppose we were do something drastic, like target 6% intentional inflation, obviously nobody would buy bonds at 6% anymore, they'd demand at minimum 12% (because they'd lose 6% of it due to inflation). Once they demanded 12% the interest payments [on the gov debt] would shoot up well above the current 1t / year, and then the amount we'd need to inflate would again spiral up. The spiral runs away, there's no secret cheat to a free lunch.
You will find no-one who argues that our government is serious about the debt or how to pay for the unfunded programs like Medicare and Social Security.
When governments (or anyone) wants to sell bonds, the money has to already exist 'in the wild'. The selling of government bonds does not create new money/currency. The pool(s) of money is already out there, and when bonds are offered, the people who control the pool(s) decide whether to buy or not.
(This isn't to deny that government deficits/debt needs to be at reasonable levels.)
I was being imprecise, it's not literally making up the entire deficit with new money, though the Federal Reserve's securities did increase by $200B over the past year, and M2 money supply increased by $1.2T. A lot of the deficit is inflationary in that it adds to the financial balance sheets of the private sector, even when financed by bonds sold to non-banks. It pushes up aggregate demand even when it doesn't increase the money supply. When aggregate supply can't keep up, you get inflation.
The Republicans enacted starv the beast policy starting in the 80s with the plan of making debt/government unsustainable in the long term. What you are describing is the result of planned Republican policy.
> US producer prices rose moderately in October, but inflation at the factory gate posted its largest annual gain in four years, supporting the view that the Federal Reserve could continue raising interest rates after next month's widely expected increase.
> Despite the better-than-expected monthly reading reported by the Labor Department on Friday, there were more signs of inflation broadening out beyond energy goods, with food prices increasing by the most in eight months as expensive diesel raised transportation costs. Prices of goods excluding food and energy logged their biggest gain since May.
Broken record, but don't lose sight of how we got here. Covid caused massive inflation because of the supply shock and all the money giveaways, mostly to businesses (i.e., wealthier Americans where the wealthier the person the more money they were given, no strings attached).
People blame Biden (and Trump) for that, amongst other things related to Covid, so what do they do? Vote the party into power that loves nothing more than tax cuts so they do what they do and cut taxes aggressively on those same people who benefitted the most from Covid inflation (i.e., the wealthy) when almost all of their net worths have gone through the roof, which is precisely when you can raise taxes to account for the over-aggressive Covid handouts.
And even after all of that, when it looked likely the US was actually getting inflation under control, the same party doesn't put up any fight against its leader who rams through nonsensical tariffs and then starts a war that obviously will (and does) spike the price of the great elixir of growth, a material increase in the price of pretty much everything produced on earth.
As I said when the election happened, people finally woke up, but I just gotta say you cannot hate the politicians enough who caused all of this. Oh, and now we have the party that doesn't know how to balance a checkbook coming into (some) power to further exacerbate the whole thing (and thank god they are because the other guys are straight up crooks, but, man, if this doesn't end poorly there's no justice in the world (and I say that not in some gleeful way, but shouldn't there be some repercussions for the absolute idiocy we've seen these past 6 years or so?)).
Sorry for ranting. I just am so so mad because when you say "who is responsible for this?" people either raise their hands and say "wasn't me!" or, worse, point at the person next to or across the aisle from them. Maybe the silver lining is we're all responsible because we just stick our heads in the sand and let this go on (though, again thank god the election shows at least a little bit of a comeuppance. That's not a partisan comment if you can believe it!).
> Oh, and now we have the party that doesn't know how to balance a checkbook coming into (some) power to further exacerbate the whole thing
After the Big Beautiful Bill, I think that "the party that doesn't know how to balance a checkbook" may have switched sides. (I mean, the Democrats didn't learn how, but the Republicans drastically forgot.)
You're totally right, of course. I wrote it in an attempt to "both sides" it but that one line caused the rest of what I wrote to be completely discounted. To double down on the comment about democrats, though, there's obviously a lot of conversation about increasing spending (e.g., Medicare for All and less-tectonic items like reintroducing health care subsidies) and with Trump in the White House nothing is going to happen on the increasing revenue side of things and so we have at least another two years of both rampant spending, and continued giveaways to those who can afford to give (some of it) back, a cocktail for even more inflation.
Normally I would say no, but it was easy enough to search for
and there's already a fair amount of discussion going on. This
is the hit I found in google news after searching for "us october
ppi":
[[ https://www.cnbc.com/2026/11/13/ppi-inflation-report-october-2026.html ]]
That's what happens when you put a person with no concept of what economic restraint is in the Oval Office and let him run the country like his own business ventures, which included a casino that went into bankruptcy. The nearly recession-proof business model could not weather his management style. And of course, he claimed a tax credit he didn't deserve on the write-off of said casino, just like many of his ilk have over the last generation or two, which has contributed to deficit spending, which in turn has been "dealt with" by quantitive easing (read: the Fed printing money backed by nothing).
It's been a f*cking decade of this guy. How are people still surprised that this is the outcome? And when are we going to legally do something decisive about it? I watched my late 20s and early 30s get fed through an economic shredder by this clown. Life milestones are passing my generation by.
Republicans want this. It fits their starve the beast policy. Intentionaly enact mechanisms to force smaller government, even if that requires putting the country in so much debt it is broke and broken, they don't case because the end result is smaller government.
Fundamentally this is a result of wealth accumulation. It is at an all-time high larger than that of the robber baron era. At this point printing money, raising interest rates, quantitative easing (also known as transferring wealth to the wealthy class) can no longer kick the can down the road. Regular populace has been squeezed to the max and system is starting to buckle.
toomuchtodo | 8 hours ago
https://blog.sentinel-team.org/p/special-report-rising-bond-...
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...
https://www.ustreasuryyieldcurve.com/
laweijfmvo | 8 hours ago
toomuchtodo | 8 hours ago
derektank | 8 hours ago
https://www.cnbc.com/2026/11/12/in-policy-switch-fed-says-it...
dv_dt | 8 hours ago
toomuchtodo | 8 hours ago
Fundamentally, due to structural demographics, we have arrived at a capital shortage period after a long capital surplus period [1]; there will be, for long into the future, more projects chasing a shrinking supply of capital. This will continue to push interest rates up, which will also drive asset prices down (real estate, private equity, etc) [2].
Tangentially, about a year ago, I predicted that the Fed could beat on the economy all it wants with higher rates and this would not cause mass unemployment, because the world is rapidly aging and how fast workers are retiring out of the labor force [3]. This thesis appears to have been proven accurate, but more time is required to make the thesis more durable.
[1] https://www.apollo.com/wealth/insights-news/insights/daily-s...
[2] https://news.ycombinator.com/item?id=50329344
[3] https://news.ycombinator.com/item?id=44392820
eqmvii | 8 hours ago
Doesn't increasing interest rates reduce demand though? So they can't print more oil, but they can reduce the attractiveness of investments that will require oil, thus indirectly driving prices down?
toomuchtodo | 8 hours ago
In the US, the economy is passing increased money and energy costs to consumers. In China and other countries, they are rapidly electrifying light and heavy vehicles. Different responses to similar economic signals.
Muromec | 8 hours ago
So maybe elastic or inelastic isn't a binary, but somewhat closer to a step function
thayne | 7 hours ago
Reducing our reliance on oil would be a very sensible response. Unfortunately, I don't think it is one our current government would consider.
toomuchtodo | 6 hours ago
hgomersall | 8 hours ago
toomuchtodo | 8 hours ago
Citations:
https://www.rbc.com/en/economics/us-analysis/us-featured-ana...
https://www.cnbc.com/make-it/2026/03/06/e-shaped-economy-rep...
https://www.axios.com/2026/01/22/jobs-stock-market-rich-amer...
https://finance.yahoo.com/news/top-10-earners-drive-nearly-1...
https://www.federalreserve.gov/econres/notes/feds-notes/weal...
JumpCrisscross | 8 hours ago
I didn't know this. I wonder if the concavity is symmetric between an increase and decrease in wealth...
thayne | 7 hours ago
JumpCrisscross | 8 hours ago
Raising rates makes credit more expensive. That cools down growth. That, in turn, eases resource demand (as a function of the resource intensity of GDP).
Practically speaking, higher rates today would mean less borrowing to build datacenters. (And new homes, et cetera.) Which would mean those marginal resources going to other uses. Which would ease price pressure.
> there will be, for long into the future, more projects chasing a shrinking supply of capital
Capital is priced in rates. Too many projects chasing too little capital will drive rates up until the capital markets balance. The case where that doesn't happen is when rates are being held low.
And current spreads indicate a surplus of capital [1]. That's why we're seeing e.g. multi-trillion dollar IPOs.
> the Fed could beat on the economy all it wants with higher rates and this would not cause mass unemployment, because the world is rapidly aging and how fast workers are retiring out of the labor force
I like this thesis–it means the Fed has a lot more room to raise rates than is conventionally appreciated. I'm also cautious about embracing it. Reminds me too much of the MMT-means-inflation-isn't-real nutters from the early 2020s.
[1] https://www.macrotrends.net/3229/us-high-yield-bond-spread
toomuchtodo | 8 hours ago
JumpCrisscross | 7 hours ago
svnt | 8 hours ago
This is only true if the cost of capital is a functional constraint. If the constraint is elsewhere (in this case: sourcing GPUs, bringing online energy resources) it will not have any significant effect.
When the expected return is very high because the captured resource is perceived to be monopolistic, this lever does practically nothing. Unless they raise it so much they destroy everything else.
JumpCrisscross | 8 hours ago
Then there are not, by definition, "more projects chasing a shrinking supply of capital."
> in this case: sourcing GPUs, bringing online energy resources
This is supply-side inflation. You can still bring down inflation with rates by cooling demand. (Less free cash in the economy means less spending on AI means less demand for GPUs.) The downside is it costs you more output than in a balanced economy.
svnt | 7 hours ago
It can be true if it is a subset of “more projects”, if the decision mechanism works outside a market, or if that capital is accessible via mechanisms within the market which are not directly linked to borrowing rates, such as where the cost of capital was locked in years ago. Rates are not a panacea.
> This is supply-side inflation. You can still bring down inflation with rates by cooling demand. (Less free cash in the economy means less spending on AI means less demand for GPUs.) The downside is it costs you more output than in a balanced economy.
You said the same thing I said, just euphemistically. This is like saying you can rid your house of insects with a flamethrower.
JumpCrisscross | 6 hours ago
Sure. Now do the next project that's going to lock itself in today.
> Rates are not a panacea
Nobody argued as much. Just that the effect has size and meaningful magnitude.
> You said the same thing I said, just euphemistically
In what sense?
hgomersall | 8 hours ago
bryanlarsen | 8 hours ago
It's like chemotherapy: it works, but it destroys so much of the rest of your body in the meantime that sometimes you wonder if the pain is worth the gain.
Trump & Congress have access to much less painful means to lower inflation, but they've refused to act.
SoftTalker | 7 hours ago
JumpCrisscross | 7 hours ago
Reducing the deficit. Credit changes how private money is made through the monetary system. Fiscal policy directly creates and destroys dollars in the economy–it's fare more powerful.
SoftTalker | 7 hours ago
vkou | 7 hours ago
treis | 7 hours ago
vkou | 7 hours ago
treis | 7 hours ago
Say a system had X capacity and 100% utilization. Now someone wants to build a data center that consumes 0.1X power. Demand is now 1.1X and to prevent the system from going over capacity 0.1X of pre-existing demand has to be destroyed.
Subsidizing other users makes the problem worse because they will increase their energy usage in response to the lower prices.
JumpCrisscross | 7 hours ago
Every household gets X gallons of water a month at a regulated rate. After that, everyone competes equally.
irishcoffee | 4 hours ago
Regulation and increased taxes/fees just make everything more obtuse and expensive, not better or simpler.
vkou | 3 hours ago
But you're right, we could also solve this problem very simply, without gradiated utility rates, by taxing the crap out of corporate profits and redistributing them to everyone else. This would punish corps who aren't building data centers, but if you don't mind turning the whole country into an AI server farm, I guess that would work too.
... Or, we could take the hit of extra complexity, and make high consumers pay extra, as I described.
SoftTalker | 6 hours ago
treis | 6 hours ago
SoftTalker | 6 hours ago
treis | 6 hours ago
vkou | 6 hours ago
Money does, in fact, create generating capacity, as expensive, idling energy sources are turned up.
Giving everyone a discount bill on the first X KWH, and making them pay market rate for the next Y KWH and making them pay a market + penalty rate for everything above that solves the problem of consumer inflation.
JumpCrisscross | 7 hours ago
2016's $585bn DoD budget [1] bought what $817bn does today [2]. 2027's NDAA requests $1.1 trillion [3]. On top of like $100bn–on par with Saudi Arabia's military budget–we gave to ICE.
I'd generally consider myself a defence hawk. I think we should support Ukraine. I value our commitments to Korea and Taiwan. But what in the actual fuck are we doing blowing an already-bloated deficit on checks notes a WW2 battleship.
[1] https://dodcio.defense.gov/Portals/0/Documents/Library/2016%...
[2] https://www.bls.gov/data/inflation_calculator.htm
[3] https://comptroller.war.gov/Portals/45/Documents/defbudget/F...
Acrobatic_Road | 38 minutes ago
bryanlarsen | 7 hours ago
gunsle | 7 hours ago
JumpCrisscross | 7 hours ago
Or taxes raised. I'm personally a fan of adding a few and then doubling all tax brackets.
We probably need a combination of both. But it's not a mathematical requirement. (The way it is in e.g. France.)
exmicrosoldier | 7 hours ago
Changing stupid energy policy that is propping up oil demand.
When China is selling batteries and solar below cost or at tiny profit, the federal government is effectively giving the subsidy to other countries.
When wind is the cheapest with the highest ROI we should be doing more of it.
0xcafecafe | 6 hours ago
AnimalMuppet | 5 hours ago
I don't know if the new Congress is going to be able to put a stop to this.
vkou | 7 hours ago
kevin_thibedeau | 6 hours ago
runako | an hour ago
Do some positives. Work with Congress to arrive at a sane resolution to the US economy's persistent reliance on undocumented labor. (The policy of deporting all immigrants, legal or not, is inflationary.) Implement a healthcare backstop policy to guarantee access to healthcare for all citizens. (Health insurance premium inflation is running around 2x+ overall inflation.)
There are a lot of options.
JumpCrisscross | 7 hours ago
Rates can be raised, and demand cooled, without raising unemployment.
derektank | 7 hours ago
JumpCrisscross | 7 hours ago
Sort of [1]. Labor-force participation stayed flat until federal lay-offs and tariffs hit [2].
[1] https://fred.stlouisfed.org/series/UNRATE
[2] https://fred.stlouisfed.org/series/civpart
hgomersall | 7 hours ago
kspacewalk2 | 7 hours ago
hgomersall | 6 hours ago
The problem is it requires the economists to realise they've dedicated their education and professional careers to the economic equivalent of the geocentric model.
Edit: erroneously wrote heliocentric rather than geocentric, which was the opposite of what I meant!
JumpCrisscross | 7 hours ago
Gross private domestic investment contributed more to output growth than personal consumption expenditure in two out of the last three quarters [1].
Reduce marginal investment, e.g. by raising the cost of borrowing for folks building datacenters, and you that demand goes away without any major shock to current employment.
[1] https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categor...
hgomersall | 7 hours ago
JumpCrisscross | 7 hours ago
That's the point. They shift their investment into Treasuries instead of buying up land and turbines and power and GPUs. Also, as the rate goes up it gets harder to make the math math. So e.g. large construction projects get paused, et cetera.
hgomersall | 6 hours ago
JumpCrisscross | 6 hours ago
Sometimes. Sometimes it shuffles them to other work, often less resource-intensive work. There is a lot of latent demand for construction.
We have precedence for supply shocks being cooled by rate hikes without causing an unemployment spike.
overfeed | 6 hours ago
Cue companies like Microsoft and Oracle laying off even more workers to make room for the higher AI budgets.
bryanlarsen | 7 hours ago
We've seen a lot of the first in 2026 -- wage increases have dropped significantly below the rate of inflation.
JumpCrisscross | 7 hours ago
In the private sector. The public sector (and what I'd call non-discretionary hiring, e.g. in healthcare) makes the response a bit more inelastic.
toomuchtodo | 6 hours ago
jimbokun | 7 hours ago
Elaborate?
Do you mean raising taxes and cutting spending?
overfeed | 6 hours ago
The levers they can pull include using diplomacy to end of the stalemate at the strait of Hormuz that is increasing energy and shipping costs. Scrapping excessive import taxes (tariffs) inflicted since "Freedom day" could help some, though prices have a ratcheting effect and retailers are likely to pocket the difference to pad their profits.
LdBaringSwallow | 6 hours ago
50+ year olds have done little more than take STEM research generated in the pre-1950s late 1800s era of science and copy the knowledge to computers; no net new physical science has come out of the last 50 years; it's all just carrying on nuclear, relativity, electromagnetism research conducted in the pre-1950s era; leadership is a bunch of know nothing American philosophers.
The very definition of functional illiterates who cannot reason outside their childhood cultural tropes; American domination and subjugation of the globe
They noodle tiny decimals of percents such the financial network effects make them richer.
That’s work to them. Zero meaningful contribution. They're TV personalities who offer nothing more to humanity.
Despite the obvious big picture trend all this science and tech existed even if in just rudimentary form when they were in Sunday school; they truly believe they're a divine people lucking into existence and responsible for human progress; 100ish million truly insane lead gas fume huffing, post war/cold war paranoid people control American economy and politics
jmyeet | 7 hours ago
Monetary policy is where the central bank changes rates. This is effective to a point. It defuses a lot of zero-interest nonsense but the primary idea was to cool the business sector by making borrowing more expensive. Thing is, we don't really do that anymore. We don't borrow a bunch of money to build a factory to make widgets. No, we simply financialize everything. Yes, we have a ton of AI debt now but (IMHO) it's not productive output. The big product and promise of AI is labor displacement. That's going to destroy the economy.
Private equity technically borrows money but usually only temporarily. The target gets bought, restructured, a loan is taken out against the assets to pay back to investors and the corpse is spun out before the debt explodes. The problem? The market seems to be wising up to this bargain and these husks need to be kept on the books longer than desired. PE firms are having to borrow to refinance. That's another house of cards in all of this.
But what really fuels PE and all of this? Real estate. Hoarding land has become the best performing asset.
So the second lever the government has is fiscal policy, specifically taxation. Prior to the pandemic, a lot of companies were afraid to raising prices too much as they'd lose market share. An energy crisis triggered a fundamental change in corporate attitudes to raising prices and we've had a ton of raising prices simply to maintain profits or in anticipation of inflation. Pepsi now is in deep trouble because they've discovered that people don't want to pay $8 for corn chips and Walmart's generic brand is $5 and probably made by the same factory.
In the wake of the pandemic some countries introduced a windfall profits tax. Basically, predatory price-raising should be punished with at least a form of wealth redistribution. These measures were few and far between however.
As an example, because of 2020 energy crisis (caused by Trump) and Russia's invasion of Ukraine, Europe has been in a deep energy crisis for years with no end in sight. Many European governments have tried to protect consumers by subsidizing electricity. Well, these energy providers are making record profits. Why aren't they taxing the back end to pay for those subsidies? Instead, we just have a massive wealth transfer from European governments to (often private) utilities and gas producers.
But fiscal policy, particularly in the US, never gets discussed int his way. We could solve so many problems by simply having a 50% corporate tax rate. The standard objection is "they'll move overseas". Well, you can't move land overseas, particularly mines and oil wells. And the IRS is capable of tackling transfer pricing and profit shifting. Well, they would be if they weren't deliberately starved by successive governments. And if all else fails, punish companies for moving overseas with tariffs. That's what they're actually for.
So, back to your question, no, I don't think the theory is sound because we have a malignant tumor at the heart of our economy, which is land-hoarding.
ijidak | 7 hours ago
Can you elaborate on this please? I find this claim interesting and probably true. But it's not clear how you reached that conclusion.
jmyeet | 7 hours ago
It's worth adding a little about the subprime debt crisis and the GFC. Mortgage debt is probably the most liberal in terms of collaterization rules. You can borrow so much more of the value because housing was considered "safe". So subprime loans started at a low rate but then that rate kept going up. There's more to it of course but the point I want to highlight how this was a case of complicated debt that exploded.
Private equity is really the next generation of corporate raiding. Here's how it works. You start a PE fund and raise capital for it. You then identify a target you can profit from and do what's called a leveraged buy out ("LBO"). You borrow more money against your capital and the business.
A lot of businesses have been poorly performing and they're sitting on a ton of real estate appreciation. Toys R Us was a big example of this. Toys R Us was an old company so owned a lot of its stores. But now that unrealized gain doomed them.
The PE firm will typically restructure a company into two companies: one holds the business operations. The other holds all the real estate. The first one will have binding contracts to rent from the real estate holding company.
Somewhere in all this the new owners will take a loan out against the company's assets to repay the LBO. So they've basically gotten a company for "free" and just loaded it up with debt. The financial arrangements will be complex and you may find that the rents will explode in future years, ultimately dooming the business operations. Now if you're a PE firm, you don't want to hold onto that. You want to sell it. That usually means relisting it on some exchange.
At some future point the business collapses, the PE firms often still owns the real estate and because that real estate has usually kept appreciating, it's even more profit.
So if the real estate hadn't appreciated so much, Toys R Us and many other companies simply wouldn't have been targeted this way. We killed a longstanding business that employed thousands of people so a handful of people could cash in on appreciating real estate. That's all that happened.
For this to work, somebody needs to buy the business operations half. And investors are increasingly cottoning on to this. If you can't sell it, it stays on the books and none of this works. This is where the principals in PE firms are being asked to contribute capital to keep this ball int he air until buyers can be found. Also, there are now trillions in private credit to keep this all afloat.
PE defenders will bring up Hilton and Kroger as two companies that were arguably improved by these LBOs but they are the exception.
As time has gone on, PE has gotten increasingly evil too. Now it looks for what they call "pricing power". They've invented a new term because the existing term would make what's going on obvious. It's inelastic demand. PE now loves private utilities. People need electricity. Profits are guaranteed. People also need healthcare so a PE firm will try and buy up every medical practice in an area or every vet or every trailer park.
Adam Smith:
> As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce
Karl Marx quoted Adam Smith in 1844 and also said separately many things about this including:
> The landlords,... operate a certain kind of monopoly against the tenants. The demand for their commodity, site and soil, can go on expanding indefinitely; but there is only a given, limited amount of their commodity.... The bargain struck between landlord and tenant is always advantageous to the former in the greatest possible degree.
PE is just one of many distortions that come from a system that allows people to hoard land.
cucumber3732842 | 7 hours ago
>So if the real estate hadn't appreciated so much, Toys R Us and many other companies simply wouldn't have been targeted this way. We killed a longstanding business that employed thousands of people so a handful of people could cash in on appreciating real estate. That's all that happened.
Which is in "large enough to direct blame and shame their way" part a side effect of the environmentalists and zoning karens who joined forces to combat the concrete jungle. Everything they did had the side effect of increasing the value of an already built, already paved site.
It used to be 50yr ago that an aged out facility, even a clean one, was a liability. Because if you wanted to do anything there you'd have to demo it or rehab it up to modern expectations/competitiveness (note I did not say code) which would cost more than starting from nothing. Last century's liabilities are now lucrative "brownfield redevelopments".
jmyeet | 6 hours ago
YIMBYism is often used an excuse for rampant deregulation. I believe that private developers won't ever build our way out of this problem because that hurts profit. It takes the government as a major player to solve this problem. People will point to examples like Austin having declining rents as a direct result of supply but that doesn't really invalidate my criticism.
UK supermarkets used to engage in a practice called land banking [1]. Basically they would buy up land and do nothing with it. They were buying it to prevent competition. And if land kept going up in value there was no cost in doing it. Ultimately Aldi and Lidl came along and ate their lunch by building in less desirable but cheaper areas. But another consequence was that it restricted the supply of housing.
What YIMBY policy would prevent land banking (hoarding)? You need something and it's not even more deregulation. The cost of just holding land needs to be higher. You need some form of land value tax [2].
More than a decade ago, I remember hearing about "investors" buying up all the trailer parks and jacking up the rents (eg [3]). This is entirely parasitic behavior. Any form of ground rent on permanent structures like this should be somewhere between illegal and uneconomical. The land of the trailer parks should be co-owned by the residents, period.
This has a huge negative social cost too. Trailer parks are often the housing of last resort for many. Make it unaffordable and people end up living in cars and them ultimately the streets. So what have we achieved here other than padding the profit margins of investors? We've shifted that cost onto the government, which is just another wealth transfer from tax coffers to the wealthy.
Ten years ago, Xi Jinping quietly popped China's real estate bubble, which has been in decline ever since. He famous said [4] "Houses are for living, not for speculation". It's funny reading Western reporting on this because China's real estate recession is viewed as a negative when it's just a correction from intentional state policy.
That required government intervention in the housing market. This would never have happened with any set of incentives of private developers.
[1]: https://www.theguardian.com/business/2014/jun/26/tesco-hoard...
[2]: https://en.wikipedia.org/wiki/Land_value_tax
[3]: https://publicintegrity.org/inequality-poverty-opportunity/w...
[4]: https://en.wikipedia.org/wiki/Houses_are_for_living,_not_for...
sokoloff | 7 hours ago
This is not immediately ringing a bell. Are you referring to the 5-7% drop in energy demand associated with the global pandemic or something else?
jmyeet | 7 hours ago
Without recounting the entire saga, OPEC tries to maintain a floor and a ceiling for oil prices. Too low and they don't make enough money. Too high and it causes political problems. They meet every 3 months to project demand and they adjust supply accordingly. Some members cheat and lie about their output but the system generally works. One thing that keeps the Gulf powers in line is military support, particularly Saudi Arabia.
When the pandemic hit in March 2020, demand cratered. Futures prices briefly went negative because producers had nowhere to store oil and nobody was buying. This is where Trump cajoled MBS into cutting supply in a 2 year deal. This superseded the normal 3 month review and adjustment process so it wasn't even necessary. This deal was huge too. It would initially cut global supply by 10%.
So then in 2021 demand roared back and prices exploded. The Biden admin obviously came in in January 2021. They quietly went to MBS to get him to rescind the deal. MBS refused.
Republicans blamed Biden even though it was a Trump deal. Democrats blamed oil companies for being greedy because they, just like the Republicans, didn't want to upset Saudi Arabia even though Biden could've absolutely threatened Saudi Arabia with the weapons the US provides.
As to why MBS refused, it's complicated and there's a lot of history but a big part of it is that Trump screwed over OPEC in 2018 and (in OPEC's view) the Obama admin screwed them over in 2015 by removing the ban on crude oil exports.
What gets me though is nobody talks about the Trump 2020 OPEC deal.
[1]: https://www.reuters.com/article/economy/special-report-trump...
[2]: https://www.reuters.com/article/business/opec-agrees-largest...
silenc3d_sage | 7 hours ago
My reading of the 1000+pg Basel3 document from BiS seems to point to the weighted risk categories being fundamentally flawed (relating to valuation for those risk weighted categories, not unsurprising given the subjective value of assets), not to mention the indirect business flaws that limit new banks potentially growing the number of GSIBs, leading to concentration of risk through sieving.
AI debt seems to be supercharging the indirect stagflation indicators which started showing up a few years ago.
Most empire's above a certain size inevitably run into internal conflict from land-use issues related to rentseeking and monopoly.
wcoenen | 7 hours ago
For anyone confused how the fed rate could go up without a fed meeting; it cannot. The above is shorthand for market predictions of the fed rate going up.
JumpCrisscross | 7 hours ago
Finance being finance, the jargon is fucked.
The federal funds rate–"the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight"–is set by the market [1]. (Well, by banks. But among themselves.)
The FOMC "meets eight times a year to determine the federal funds target range." The FOMC then directs the buying and selling of securities–usually Treasuries–to encourage that market rate into their range. (The FOMC is "composed of the seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank presidents" [2]. It's a superset of the Board of Governors.)
[1] https://fred.stlouisfed.org/series/FEDFUNDS
[2] https://en.wikipedia.org/wiki/Structure_of_the_Federal_Reser...
seizethecheese | 6 hours ago
Are bond market rates going up in response to this? I'd actually like to know.
toomuchtodo | 6 hours ago
https://www.pimco.com/us/en/resources/education/bonds-102-in... ("Apart from purchasing power, inflation can influence bonds in another way. When inflation rises above a certain level, interest rates also tend to rise as central banks try to put pressure on consumers to reduce spending. In response, bond prices fall which can reduce their total return.")
> The second link is current prediction for fed rate changes, which doesn't help anyone understand changes from this PPI report, and the last link is the yield curve, which just shows that long term rates are higher than short term rates (generally seen as indicative there's no near term recession risk).
The second link predicts forward interest rate changes by the Fed based on underlying futures contract market activity, activity that is driven by...released inflation data impacting market participant activity.
Understanding the CME Group FedWatch Tool Methodology - https://www.cmegroup.com/articles/2023/understanding-the-cme... - January 24th, 2025
System: "Economic data and indicators -> Market impact -> Forecasts based on market changes -> Fed decisions and announcements"
seizethecheese | 6 hours ago
method_capital | 7 hours ago
throooooo | 7 hours ago
boringg | 7 hours ago
jraby3 | 7 hours ago
ericd | 7 hours ago
JumpCrisscross | 7 hours ago
Eh, it's an issue. We should solve it now. (We should have solved it ten years ago.) But we have a little time.
Emergency will be stagflation. Crisis would be if the Treasury couldn't sell debt.
> the old method of raising interest rates to cool inflation isn't effective anymore with this sort of fiscal deficit, because it increases the interest payments
There is no evidence of this. There might have been in Japan (in the 1980s). But Americans don't save as much as the Japanese, and the concavity of the wealth effect means that those who do don't tend to spend much more when their interest income rises.
y-curious | 7 hours ago
JumpCrisscross | 7 hours ago
ericd | 7 hours ago
I guess the thing that worries me most about this is how this interacts with the USD's reserve currency status - that's historically absorbed a lot of the govt's deficits and suppressed inflation. I don't see many good alternatives to it in the set of global currencies, but there's been a lot of central bank buying of gold, and I could imagine a basket of other hard capital goods maybe functioning that way. And we're seeing more rmb-denominated trade.
>There is no evidence of this. There was in Japan. But Americans don't save as much as the Japanese, and the concavity of the wealth effect means that those who do don't tend to spend much more when their interest income rises.
I believe it tends to get sunk into asset inflation? Real estate/housing being one of those, and one of the biggest inflation drivers. Also of populist unrest. Agree that it doesn't push up labor prices as much because of the distribution effect you're talking about.
JumpCrisscross | 7 hours ago
Housing prices tend to go down or at least stabilize when rates rise.
ericd | 7 hours ago
JumpCrisscross | 6 hours ago
You're right.
"...contractionary monetary policy increases both real and nominal rents. A 25 basis point unexpected increase in the 30-year fixed rate mortgage raises real (nominal) rents by 1.7 (1.4) percent 12-24 months following the monetary policy shock. We find that the effect is driven primarily by a shift in household demand from the owner-occupied market to the rental market. Using transaction level data, we show that when monetary policy tightens, renters are less likely to become homeowners and the home-ownership rate drops. This then crowds in the rental market and increases rents. We find that the increase in demand for rentals is accommodated by real-estate investors who capitalize on the higher rents by buying houses from owner-occupiers and renting them in out the rental market" [1].
Going back to the top, however, despite rent being "the single largest component of" CPI, we have not seen evidence anywhere of higher rates causing higher inflation. I suppose one could argue within the constant-unemployment state the effect of rates on inflation may be muted by the above. But again, being in an economy where private investment rivals personal consumption gives the Fed a lot more leeway on the upper limits of rate rises.
[1] https://business.columbia.edu/sites/default/files-efs/citati...
bobthepanda | 7 hours ago
China specifically does not actually want to be the reserve currency and replace the US, a good reserve currency should be fairly liquid and they like the ability to shut down capital flows into and out of China.
The other alternatives are not great; JPY has the same debt problems as USD. EUR has the same debt problems in certain member states like France, and the fiscal/banking crossborder liquidity isn’t very good and the governance still fickle and precarious. CHF is too small.
ericd | 7 hours ago
OhMeadhbh | 7 hours ago
method_capital | 4 hours ago
danaris | 6 hours ago
One of these things is not like the others, one of these things just doesn't belong...
Austerity and entitlement cuts are what we've been trying since Reagan. They haven't worked. They don't work.
Raising taxes is unpopular, sure, but a) it can actually solve the problems—not just the symptoms, but make a good hard dig in at the root causes—and b) if we do it right, only a tiny fraction of the people will have to bear those increases.
Because what we need to be doing is returning tax rates to what they were like before Reagan. Before "trickle-down economics". Before all this black magic shit that has never worked, will never work, and any actual economist with a brain and a functioning heart could tell you would never work right from the start.
ericd | 5 hours ago
Yeah, I'm generally onboard for higher top tax rates, some additional higher brackets, and higher tax on investment income, ideally paired with lowered rates on the lower brackets/higher standard deduction. This would hit me, but I think we need it to avoid some of the more extreme populist futures.
But we also really need to fix spending, especially procurement, the amount of wealth that we're collectively being cheated out of via terrible government contracts is staggering, there's a large network of extremely inefficient businesses that live off of the federal govt. Also, the medical system, though my understanding is that Medicare is generally getting a better deal than private insurers.
danaris | 5 hours ago
But 99% of the time, if you say "reduce spending", everyone, on both sides of the aisle, will hear "stop helping people", which is deeply counterproductive, as well as being cruel.
ericd | 4 hours ago
iugtmkbdfil834 | 7 hours ago
afavour | 7 hours ago
bijowo1676 | 7 hours ago
1. Republicans get elected. Pass bills that cut taxes for businesses and ultra high net worth individuals. Maybe toss some crumbs to people.
2. Democrats get elected, notice budget deficit from previous cuts. Propose increasing taxes on W2 working class, including white collar. Businesses and UHNW people continue with their tax breaks and schemes.
3. Back to p.1
0xy | 6 hours ago
When you directly compare the US to Europe, the gap is widening rapidly.
Pretty clear that the high tax model is a complete failure. Not to mention a European brain surgeon is paid like a slave compared to an American one, and you can make those comparisons across any industry.
A Senior Engineer in Stockholm makes less than a new grad in the US, for example. And pays higher taxes!
drnick1 | 6 hours ago
m4ck_ | 5 hours ago
Sweden may have fewer billionaires flying child models to tropical paradises for coke and popper fueled orgies, but I'm guessing their senior engineers plans for long term unemployment or serious injury/illness don't often include choosing between suicide or homelessness so maybe they're doing something right? I'm sure a happy medium exists and we don't need to go back to our 'great' (1950s) era tax rates though
bijowo1676 | 5 hours ago
large SUV? written off via accelerated depreciation.
hotel or travel or leisure? written off as a business expense.
the issue is not with the nominal tax rates, the issue with numerous tax breaks, carve outs, deductions and etc etc. Every single one of them costs hundreds of billions to the state/federal budget and has to be recouped via taxes on W2 workers.
W2 workers are taxed on wages (income), while capitalists are taxed on profits (so they are able to deduct a lot of stuff), plus all the tax breaks, offsets, deductions, carveouts.
plus capital gain tax is 10%, while marginal income tax rate (fed+state) can be 50%+
we W2 workers bust our asses off, only for half of the stuff get stolen away by uncle sam. Meanwhile rich capitalist just watches his portfolio go up and to the right, and pays 10% (if he ever pays! lot of them just borrow, instead of selling)
method_capital | 4 hours ago
We have to stop with these dumb extrapolations.
It's kinda like bitching about administrations for government spending when Congress controls it all.
laughing_man | 4 hours ago
Yes, as long as you don't allow companies to flood the job market with low cost foreign labor.
bijowo1676 | 4 hours ago
there is a huge gap between working class and capitalist class.
https://taxpolicycenter.org/taxvox/effective-income-tax-rate...
laughing_man | 4 hours ago
bijowo1676 | 3 hours ago
I am here to discuss Tax policy, not your racist jingoism
laughing_man | an hour ago
Tax policy is a red herring even if you don't realize it. Wealthy people never pay more than about 25% in tax. If you raise the actual tax rate more than that their tolerance for risk goes down and you gimp your economy.
bijowo1676 | 43 minutes ago
I have far more in common with tech visa workers who are overtaxed on their W2 wages, than with big capitalist who never sells and never pays a dime to irs
laughing_man | 6 minutes ago
No new jobs means more competition for the jobs that exist, and that means lower pay.
m4ck_ | 3 hours ago
laughing_man | an hour ago
If I fire a bunch of people in the US and hire the same number of people in another country to work on the same project, that's clearly offshoring. But what if I don't fire anyone in the US? What if I fire them five years later?
The whole thing is a mess for regulation and I suspect if you wrote regulations that weren't easy to bypass you'd hamstring local producers.
spacephysics | 7 hours ago
- Paid medical insurance for all
- Free child care
- Regulatory oversight which requires funding and committees etc
- Affordable housing (there are ways to solve this with gov spending and without, but likely we’ll need some form of gov incentives/spending)
I’m not commenting on the validity of these things individually, just that I don’t believe the Democrats since Clinton era have tried to reduce spending
Honestly I think it’s a fundamental hurdle with our political system. Charlie M’s quote of “show me the incentives and I’ll show you the outcome.”
JauntTrooper | 6 hours ago
The Budget Control Act of 2011 capped discretionary spending and cut $1 trillion over ten years, the administration further cut administrative spending by 20% via executive order in 2011. Subsequent actions reduced the deficit by $2 trillion, with 3/4 spending cuts and 1/4 tax increases (e.g. the 0.9% Medicare surcharge and capital gains taxes on earners of >$250k).
I agree with you, though, both parties seem to have stopped trying to reduce the deficit over the last decade, I think in part because it hasn't been rewarded politically at all.
akramachamarei | 4 hours ago
My confusion is augmented by the focus on the first derivative (the deficit) during this period while the national debt rose by more than $10T [2#Background]. It's not clear what matters more on an admins report card. Interest accruing is arguably less under your control, which might be relevant to this question.
Finally, I'm struggling to understand why the 2011 passage of the BCA (which cuts spending in exchange for raising the debt ceiling) is attributed to Democrats primarily. Reading [2], if I were to narrativize it, the story seems to be that the Republicans, spurred on especially by the Tea Party, forced Democrats to agree to spending cuts.
Quoth Wikipedia: "The Republican Party, which gained control of the House of Representatives in January 2011, demanded that President Obama negotiate over deficit reduction in exchange for an increase in the debt ceiling, the statutory maximum of money the Treasury is allowed to borrow. The debt ceiling had routinely been raised in the past without partisan debate ... </quote>
Furthermore, in the House, 72% of Republicans voted for the bill, while only half of Democrats did. In the 112th Senate the story was more mixed, with about 86% Dems and 60% Reps voting yes.
I have not read all this shit in great detail but I hope you can appreciate my confusion, and invite you to indicate what I might be missing. For example, I don't why the deficit was so high in 2009. In one universe of explanations, the conclusion: it's not very praiseworthy to decrease the deficit you skyrocketed yourself.
1: https://www.us-debt-clock.com/data/deficit-by-year
2: https://en.wikipedia.org/wiki/2011_United_States_debt-ceilin...
JauntTrooper | an hour ago
Most mainstream economists think it's good for a government to increase deficit spending temporarily during a recession because it helps prevent deeper recessions that cause long-term impairment of the tax base. If you let half the auto industry fail, for example, it may take a long time for your tax base to recover and start generating taxable income again.
After the crisis, there was bipartisan agreement that the deficit needed to be reduced, but the disagreement was on how. Obama was willing to cut spending but also wanted to increase taxes on higher income households, while the Republicans in Congress drew a hard line against any tax increases and wanted deeper spending cuts. In the end, they reached bipartisan bills, including the American Taxpayer Relief Act of 2012.
The debt ceiling brinksmanship was political theater. Republicans used the threat of defaulting on US debt in order to extract concessions from Democrats without having to agree to any policy demands. Congress passed laws with required spending every year and no one has the legal authority to not spend it. If Congress really cared about reducing the deficit, they wouldn't pass spending bills that required deficit spending.
As for increasing debt in the 2010s, I think it was viewed as a potential long-term problem but sustainable because interest rates were quite low. When inflation was at 2% and interest is at 2%, the US government was able to borrow money at 0% in real terms. Government spending on roads, airports, and even marginally productive projects that increase economic growth could be viewed as rational.
I think the US and world got complacent during the low interest rate era, and eventually realized deficit-spending in a low-rate environment boosted economic growth more than expected. The US doubled down on this by passing the 2018 Tax Cut and Jobs Act, which reduced taxes significantly without cutting spending concurrently, which created large deficits even during periods of economic growth.
The problem now is interest rates have gone up substantially, so debt servicing is going to become a much bigger burden. I don't think it's politically possible to reduce the deficit through spending cuts alone. The annual deficit is greater than the entire US defense budget and Medicaid combined.
Unless we suddenly get a burst of growth from AI that will increase our tax base, (which I think a lot of politicians are counting on), a long-term fix will require increased taxes (which will slow economic growth at least somewhat) and reduced spending (in particular lowering healthcare expenses, which are still rising at an unsustainable rate).
AtlasBarfed | 6 hours ago
Everything you just described is an investment that has a substantial positive output economically, Even when implemented incompetently.
It's so funny to see economic "rationalism" always pop up as soon as Democratic political waves appear, while when Republicans have all the control of the purse strings: utterly unrestrained fiscal malfeasance.
And the disturbing trend with Republican administrations is that the corruption and incompetence gets worse every cycle.
laughing_man | 4 hours ago
retrocryptid | an hour ago
I would say "look at the numbers," but the 2008 housing crisis and the 2020 pandemic really don't make for easy comparisons.
But by a first order of approximation, I fear your statement is correct. Tax cuts sometimes goose the economy but always increase the deficit. Democrats sometimes advocate for tax cuts, but Republicans always do, regardless of the current macro-economic climate.
Acrobatic_Road | 48 minutes ago
They might partially repeal tax cuts, but if they expand social security and medicare then the deficit will increase dramatically. Don't expect any of the recently elected senators to do the fiscally responsible thing when Social Security is insolvent in 2032.
seniorThrowaway | 7 hours ago
OhMeadhbh | 7 hours ago
(note: I did not say this was a bad idea.)
changoplatanero | 6 hours ago
StableAlkyne | 6 hours ago
The only way out of this is to remove the profit motive sparking this avarice: either nationalize the healthcare, or ban healthcare insurance and regulate hospitals so tightly that they aren't allowed to profit as a business, the executives have capped pay, and the business can't be publicly or privately traded.
The laissez-faire approach to healthcare has completely failed in the US. Given it is the wealthiest country in the world, I cannot think of a more damning result for the health insurance model.
jack_h | 6 hours ago
Why do you think we have a free market approach to healthcare? Why can I only sign-up once per year unless I have a QLE? Why can I contribute a certain amount to an HSA which is triple tax advantaged with an HDHP but I can't with a PPO? If I have an HDHP+HSA why can I also contribute pre-tax dollars to an FSA that is use-it-or-lose-it for dental or vision only but if I have a PPO I can have a limited purpose FSA that can be used for medical, dental, and vision? Why are there contribution limits? Or even more basic, why is healthcare tied to employment?
The reality is we don't have a free market when it comes to healthcare at all, we have a hampered market where over the years we have politically regulated it into the abomination it is today with some of the worst incentives possible. We can certainly have the debate of whether a free market or nationalized healthcare is best, they both have trade-offs, but it's fallacious to assume we have the former and discount it entirely thus leaving either more regulation or nationalization as the only alternatives. More regulation is almost certainly the worst possible option, we've been on that path since WW2.
StableAlkyne | 6 hours ago
The average person cannot pay. Health insurance is designed to maximize extraction of wealth from the non-wealthy, while doing just barely enough that they don't immediately get regulated away. The reason for this is greed: sure, greed drives efficiency in capitalism, but if it isn't reined in via regulation we wind up with the abomination we have today.
> More regulation is almost certainly the worst possible option, we've been on that path since WW2
We have de-regulated. In 1950, stock buybacks were illegal, the top corporate tax was 42%, and the top personal income tax was 91%. Today, companies buy back their stocks (transferring wealth to shareholders faster than dividends), top corp tax is 21%, and top income tax is 37%.
Sure, in some cases there is more regulation: factories can't dump waste into the rivers, and employers can't discriminate by race or whatever. But none of these things are the reason why healthcare has become unobtainable to many in the US.
jack_h | 5 hours ago
This is exactly where we part ways though. You specifically said "laissez-faire", i.e. "leave it alone" in French; economically this is anti-interventionist, let the markets sort themselves out without interference from government. You are saying regulation is required for the market to function or it leads to what we have today and I'm pointing out that we already have enormous quantities of regulation in healthcare. I pointed out several very easy examples to identify with but by no means is that an exhaustive list of healthcare interventions. The very thing you are advocating for, regulations, has been increasingly attempting to "fix" this market for the past 80 years and our current system exists because of it, not in spite of it. It is not a free market in any sense of the word, and doubling down on more regulation will not improve it. I am more than happy to debate an actual free market or nationalized healthcare model, but further regulating this "free" market is misdiagnosing the system we currently have and assumes the same good intentions that have failed to improve it for four generations will somehow produce better results this time.
franktankbank | 5 hours ago
Seems to be flaunted in tech.
silverquiet | 5 hours ago
nickff | 5 hours ago
https://globalnews.ca/news/11812425/alberta-family-fights-fo...
https://globalnews.ca/news/11801531/bc-denies-funding-drug-c...
jack_h | 5 hours ago
All economic systems allocate scarce resources which have alternative uses and thus rationing must always exists regardless of whether it is a free market, mercantilist, socialist, or as yet unknown economic system. Prices are a rationing mechanism within markets[1] but every other system will have its own set of one or more rationing mechanisms such as by-status, by-lot, by-need, by-survivability, etc. That necessarily means that there aren't enough resources to treat everyone for everything under all circumstances. Do you believe that all economic systems are thus macabre? If so I agree if only because life itself gives us hard choices, never utopic solutions.
[1] In terms of emergency healthcare by-need tends to be used even in market systems.
mindslight | 5 hours ago
The US does not have a laissez-faire approach to healthcare. The industry has been designed on government interventions. From the financial perspective, the main dynamic is some idea that by being middlemen, health "insurance" companies will work to put pricing pressure on healthcare providers. This was fallacious when it was designed (in 80s or 90s I think), but became patently absurd when the ACA limited insurance company profits to a percentage of revenue.
What other industry do you go to buy a service from a seller, but when you ask about pricing they tell you they don't know anything, and they can't know anything, until they decide to bill you some arbitrary amount months or even years later?
The closest thing is something like auto repair [0]. But mechanics offer fixed fee straightforward services (oil change), straightforward pricing (shop rate at book hours), and written estimates - to be responsive to customers' concerns! Sure, you can drop your car off at a shop and say "fix everything, spare no expense, and call me when it's ready", but that is not how most people operate, by far.
I am definitely not going to tell you that a functioning price dynamic is sufficient for healthcare reform [1] - but it is most certainly necessary!
Single payer supposes to move that pricing dynamic onto the government, where there could be at least a modicum of responsibility. I'm not even against this - our system needs a strong push in some direction. We've currently got the worst of both worlds - centralized planning for provision, coupled with laissez faire extortion for billing (made especially powerful due to the resulting shortages).
But even with single payer, there are going to be cases that exist outside its scope, right? And unscrupulous providers claiming they provided things outside of that scope and demand to be paid directly, rather than settle for their regulated rates [2]. And so regardless what you see as the overall solution, whatever legal bases that create this post-facto-billing-shakedown need to be completely eliminated. Sending fictitious inflated bills at patients needs to be prosecuted as the straightforward attempt to defraud that it is, not trivialized as the standard operating procedure it has become.
[0] who are actually dealing with a much wider gamut of unknown unknowns!
[1] also just preempting the inevitable nonsense response about having to compare hospital prices on your phone before the ambulance arrives. ie tell me you've never significantly interacted with the healthcare system without telling me...
[2] this culture of fraud has become so embedded in the industry, I've had billing agents continue to attempt to defraud me even after confronted with a solid price limit confirmed by both Medicare guidelines and the underwriter (of a medicare advantage plan). This is about as close to single payer as one can get right now, and yet the fraud/extortion dynamic still exists.
laughing_man | 4 hours ago
And the least accurate label to apply to the US health care system is "laissez-faire approach", since the government is involved in literally every decision.
adrr | 6 hours ago
nickff | 5 hours ago
ericd | 5 hours ago
laughing_man | 4 hours ago
But what actually happens is you pay $20, the insurer pays $80, and then the hospital has to remit a large block discount back to the insurer at some point (it's either the end of the quarter or year. I can't remember). I haven't looked into this in awhile, but when I did local area hospitals were discounting payments by almost 80%, meaning the insurance company actually pays $16 on that bill and the plan that's supposed to have you paying 20% of the bill actually has you paying 55.6% of what the hospital receives. Like I said, it's fraud. It may not meed the legal definition of fraud, but it's still fraud.
adrr | an hour ago
tgma | 3 hours ago
seizethecheese | 6 hours ago
danaris | 6 hours ago
Profit, for various entities, is baked in at every level, in multiple ways that are very difficult to disentangle from the actual costs without getting real auditors on the ground with access to all the data.
xur17 | 6 hours ago
burnedbyhell | 5 hours ago
method_capital | 4 hours ago
franktankbank | 6 hours ago
seizethecheese | 5 hours ago
altairprime | 5 hours ago
franktankbank | 4 hours ago
wahern | 6 hours ago
GLP-1 treatments alone are responsible for a plurality of the rise in costs this year and next. Over $7000/per/year for a huge fraction of the population.
I guess nixing patents might have the same effect, but it'd be easier to get Republicans onboard an approach that simply cuts outlays rather than one that ruins the wet dreams of biomedical research private equity.
oofbey | 6 hours ago
StableAlkyne | 6 hours ago
Sure, people should know what they are taking, and they should take things that are safely manufactured and safe to use.
But, there needs to be room for a person to make informed decisions as part of their body autonomy. I personally do not want to start taking peptides because they're so new and the long term risk is unknown, but people who see the initial results and want to be human guinea pigs should be allowed to.
There really needs to be a middle ground between a decade of testing on the off-chance that 1-in-1,000,000 parents gets an upset stomach, and ordering who-knows-what research chem from a sketchy website.
oofbey | 4 hours ago
wahern | 5 hours ago
tgma | 6 hours ago
pas | 6 hours ago
wpm | 6 hours ago
tgma | 5 hours ago
analognoise | 6 hours ago
readthenotes1 | 3 hours ago
Now that is the number three or four. Depending on how you count, we're going for the actual number one, which is unfunded Medicare.
Unfortunately, the second highest expense now is interest on the debt accrued.
OhMeadhbh | 7 hours ago
bobthepanda | 7 hours ago
ericd | 6 hours ago
zug_zug | 6 hours ago
rawgabbit | 2 hours ago
throw-the-towel | 6 hours ago
lossolo | 5 hours ago
throw0101c | 6 hours ago
That's not how money is created:
* https://www.bankofengland.co.uk/explainers/how-is-money-crea...
When governments (or anyone) wants to sell bonds, the money has to already exist 'in the wild'. The selling of government bonds does not create new money/currency. The pool(s) of money is already out there, and when bonds are offered, the people who control the pool(s) decide whether to buy or not.
(This isn't to deny that government deficits/debt needs to be at reasonable levels.)
ericd | 4 hours ago
AtlasBarfed | 6 hours ago
Seems pretty clear historically
laughing_man | 4 hours ago
_DeadFred_ | 4 hours ago
bloppe | 24 minutes ago
tflinton | 7 hours ago
QGQBGdeZREunxLe | 7 hours ago
https://en.wikipedia.org/wiki/Producer_price_index?wprov=sft...
CSSer | 7 hours ago
QGQBGdeZREunxLe | 6 hours ago
fsflover | 6 hours ago
y-c-o-m-b | 7 hours ago
> US producer prices rose moderately in October, but inflation at the factory gate posted its largest annual gain in four years, supporting the view that the Federal Reserve could continue raising interest rates after next month's widely expected increase.
> Despite the better-than-expected monthly reading reported by the Labor Department on Friday, there were more signs of inflation broadening out beyond energy goods, with food prices increasing by the most in eight months as expensive diesel raised transportation costs. Prices of goods excluding food and energy logged their biggest gain since May.
raincole | 6 hours ago
First sentence of the submission btw.
mancerayder | 3 hours ago
harmmonica | 6 hours ago
People blame Biden (and Trump) for that, amongst other things related to Covid, so what do they do? Vote the party into power that loves nothing more than tax cuts so they do what they do and cut taxes aggressively on those same people who benefitted the most from Covid inflation (i.e., the wealthy) when almost all of their net worths have gone through the roof, which is precisely when you can raise taxes to account for the over-aggressive Covid handouts.
And even after all of that, when it looked likely the US was actually getting inflation under control, the same party doesn't put up any fight against its leader who rams through nonsensical tariffs and then starts a war that obviously will (and does) spike the price of the great elixir of growth, a material increase in the price of pretty much everything produced on earth.
As I said when the election happened, people finally woke up, but I just gotta say you cannot hate the politicians enough who caused all of this. Oh, and now we have the party that doesn't know how to balance a checkbook coming into (some) power to further exacerbate the whole thing (and thank god they are because the other guys are straight up crooks, but, man, if this doesn't end poorly there's no justice in the world (and I say that not in some gleeful way, but shouldn't there be some repercussions for the absolute idiocy we've seen these past 6 years or so?)).
Sorry for ranting. I just am so so mad because when you say "who is responsible for this?" people either raise their hands and say "wasn't me!" or, worse, point at the person next to or across the aisle from them. Maybe the silver lining is we're all responsible because we just stick our heads in the sand and let this go on (though, again thank god the election shows at least a little bit of a comeuppance. That's not a partisan comment if you can believe it!).
bdangubic | 6 hours ago
you should look up which of the two crazy parties actually has issues balancing the checkbook, you’ll be surprised it is not the one you think…
bilsbie | 6 hours ago
throw0101c | 6 hours ago
High energy prices?
* https://en.wikipedia.org/wiki/Cost-push_inflation
Geopolitical adventures by leaders who are clueless?
AnimalMuppet | 6 hours ago
After the Big Beautiful Bill, I think that "the party that doesn't know how to balance a checkbook" may have switched sides. (I mean, the Democrats didn't learn how, but the Republicans drastically forgot.)
harmmonica | 3 hours ago
raincole | 6 hours ago
gigatexal | 6 hours ago
altairprime | 5 hours ago
seizethecheese | 6 hours ago
OhMeadhbh | 6 hours ago
OhMeadhbh | 6 hours ago
seizethecheese | 6 hours ago
lenerdenator | 6 hours ago
That's what happens when you put a person with no concept of what economic restraint is in the Oval Office and let him run the country like his own business ventures, which included a casino that went into bankruptcy. The nearly recession-proof business model could not weather his management style. And of course, he claimed a tax credit he didn't deserve on the write-off of said casino, just like many of his ilk have over the last generation or two, which has contributed to deficit spending, which in turn has been "dealt with" by quantitive easing (read: the Fed printing money backed by nothing).
It's been a f*cking decade of this guy. How are people still surprised that this is the outcome? And when are we going to legally do something decisive about it? I watched my late 20s and early 30s get fed through an economic shredder by this clown. Life milestones are passing my generation by.
_DeadFred_ | 4 hours ago
spwa4 | 6 hours ago
roody15 | 5 hours ago