The American dream, of buying a home and raising a family is all but dead for many Americans, especially generation Z. 
Case-Shiller Home Prices vs Average Hourly Earnings Since 2000
- Home Prices: +49.1 Percent
- Average Hourly Earnings: +25.9 Percent
- Rent: +23.5 Percent
- CPI: +20.9 Percent
Case-Shiller Home Price Index vs Mortgage Payment
The above chart shows how the mortgage payment varied over time along with the purchase price of a home and the prevailing interest rate.
For example, a home that cost $150,000 in 1988 had a mortgage payment of $1068 per month.
That exact same house cost $499,548 in October of 2020 but the mortgage payment only rose to $1,574.
This is because mortgage rates fell to 2.68 percent from 10.38 percent.
Mortgage Payment and Mortgage Rate
For the same house, mortgage payments rose from $1,583 per month in October 2020 to $3,657 in June of 2024.
Mortgage payments are up 131 percent in that time frame.
That is just the mortgage payment. Factor in insurance, utilities, and property taxes.
The Unreachable American Dream
The Wall Street Journal has an article today on how The American Dream Feels Out of Reach for Most.
A July Wall Street Journal/NORC poll of 1,502 U.S. adults shows a stark gap between people’s wishes and their expectations. The trend was consistent across gender and party lines, but held more true for younger generations, who have been priced out of homeownership and saddled with high interest rates and student debt.
While 89% of respondents said owning a home is either essential or important to their vision of the future, only 10% said homeownership is easy or somewhat easy to achieve. Financial security and a comfortable retirement were similarly labeled as essential or important by 96% and 95% of people, respectively, but rated as easy or somewhat easy to pull off by only 9% and 8%.
Twelve years ago, when researchers at Public Religion Research Institute asked 2,501 people if the American dream “still holds true,” more than half said it did. When The Wall Street Journal asked the same question in July, that dropped to about a third of respondents.
“Key aspects of the American dream seem out of reach in a way that they were not in past generations,” says Emerson Sprick, an economist at Washington, D.C., think tank the Bipartisan Policy Center.
Pictures vs Anecdotes
The WSJ discussed anecdotes of those struggling. But pictures, not anecdotes show the true nature of the problem.
About 90% of children born in 1940 were ultimately better off than their parents according to research by Massachusetts Institute of Technology economics professor Nathaniel Hendren and Harvard University economist Raj Chetty.
Only around half of those born in the 1980s were able to say the same.
The article did not mention those born in the 1990s, but the above charts tell the story. Most in Generation Z are not as financially secure as their baby boomer grandparents at the same age.
Fed Myopia
Every member of the Fed as well as the typical economist will look at the first chart and not see inflation because they have been trained not to see it.
In the blind eyes of these economists, home prices are not inflation or a result of inflation because they consider homes to be a capital expense, not a consumer expense.
OK, so what? It should be clear by now that inflation matters, not just consumer inflation.
But this group of brainwashed economists somehow believe that only consumer inflation matters.
Moreover, the Fed spent 10 years trying to force inflation higher, in an incredibly foolish attempt to make up for lack of past inflation.
What a hoot.
Case-Shiller Home Price Index Hits Another New Record High
Yesterday, I noted Case-Shiller Home Price Index Hits Another New Record High
People who want a home but cannot afford one keep watching home prices soar out of sight. The Fed says this isn’t inflation.
Not Inflation?!
Home prices were the subject of a discussion of several friends and me over the course of the past few days ahead of the article.
I put together this synopsis.
- The Fed via QE lowered rates to zero hoping to achieve inflation. Success!
- Mortgages fell to under 3 percent for a year.
- Everyone who had a mortgage refinanced putting money in their pockets.
- With rates at 3% and free money pandemic aid, demand for houses soared.
- The Fed failed to see rising home prices as inflation.
- And the Fed thought three massive rounds of free money, eviction moratoriums, and student debt cancellation would not cause inflation. “Inflation is transitory,” said every member of the Fed.
- People are now trapped in their homes unwilling to trade a 3% mortgage for a 6.5% mortgage.
- The Fed gets grade F from every angle.
So now we have a different kind of housing bubble and crisis. And it’s all because economists do not view home prices as inflation.
The Fed never learns from mistakes. Instead, it doubles down on them. This is absurd no matter what angle you look at.
Recession Has Arrived
August 20: Improving the McKelvey Recession Indicator, No False Negative or Positive Signals
Adding the job vacancy rate to the McKelvey (Claudia Sahm) recession signal eliminates false negatives and false positives, and provides a much faster signal than Sahm.
August 20: The Share of People Seeking a Job Is the Highest Level Since 2014
A New York Fed survey shows a huge increase in the percent of job seekers. It’s especially pronounced for those making less than $60,000.
August 8: Trump Fires Arrows Missing the Target Badly, Will a Recession Save Him?
I don’t know the answer to that question, and nobody else does either.
Since February, I have been posting that young adults, renters, and Blacks will decide the election.
Those are the groups most left behind in the current housing mess.
The American Dream is a made up thing. If you believe in it, you are the fool.
What do YOU believe in ChipGuy?
I, myself, believe I will have another beer.
Everyone should believe in something.
ha ha ha. hat tip george carlin. i think amerikans got their cherry popped on 9.11.01 and the younger generation now get the BS the geezers were weaned on like puppies…….
There is discussion below which deals with the ‘decline’ of the US. Note ‘decline.’
After WW2, the US was one of the few countries with undamaged infrastructure. For a decade, the US was the world’s productive engine. Mostly-unionized factory workers enjoyed high wages, improving conditions, retirement packages etc, all affordable as the US was top dog, with limited competition. This enlarged the middle class, still largely uneducated beyond high school.
By the 1950s Europe was rebounding. By the 1960s, competition was growing. The post-Kennedy malaise slowed the US even more. Other countries were innovating to meet their unique situations. Small efficient cars, expanding education, entering new markets and US markets.
The fuel crises and Japan turned the tide. The middle class of American factory workers began to slide–high labor costs and inferior products, and CAFE standards (1975) set in motion a growing lower class. The professional ‘class’ became larger as higher education expanded–at the time the US led the world at graduate studies–the cream of foreign students poured in colleges for advanced degrees. Many stayed.
I could go on about how differential labor costs, regulation, and computerization reduced middle management, advanced the financial industry and electronics at the expense of other manufacturing. The Internet enabled service businesses to work from overseas, and to provide global services. The impact of green standards still awaits the US. Ditto mass immigration of recent years.
Yup, when you’re the only intact industrial base left it isn’t hard to build a thriving middle class. Once everyone else catches up, the lowest bidder wins.
Correct. One must constantly improve in order to remain competitive. If you do nothing but sit on your ass and complain, the rest of the world will pass you by.
“People are now trapped in their homes unwilling to trade a 3% mortgage for a 6.5% mortgage.”
The phase of the cycle always reverses. It has been said that interest rates were the lowest in 5,000 years. Some even went negative. The U.S national debt is now some 35 trillion dollars.
Klaus Schwab: you will own nothing and be happy.
Yep. Starting to believe its intentional
I’m a millennial buyer on strike. Could stretch for one of the starter homes in my area, but it would be a financially terrible idea. Rent to monthly house payment delta is still around 30-40%, so I’ll keep renting. Waiting for a significant drop in prices and rates
Fed is always focused upon Demand in economy as they are all cut from same Keynesian cloth of ideas.
This means savings and commitment to home ownership as end goal is downgraded below consumption expenditures.
Hence as Fed has ability to print rather then have a sound currency it chooses to debase currency currently by an per-announced 2% amount. This has not been stuck with and brings things to today’s situation. The destruction of Middle class and impoverishment of bottom rung with its dependence upon Government Largess to survive.
It will take a major event to change what is passed off as a system of economic growth.
This since true change and a return to sound money can only happen with a massive popular will of voting citizens.
When enough people find themselves without ownership and stuck in a Limbo land of making the next Bill payment then change will come. Seems a goodly part of populace is at that stage now.
Mish seems puzzled and goes after FED for not including Homes in the inflation category.
I would suggest that Homes being excluded, flows directly from how Fed acts. Based upon Keynesian economics being aimed directly at Demand as the only thing that matters. Manipulating market interest rates is how Fed controls Demand.
Housing inflation and unaffordability direct end result consequence of this Keynesian policy.
Interest rates high= top 10% win (5% interest on 5mill bank account is 250k) and rates low top 10% win ( buy assets cheap). Harris/walz will MMT = more inflation and pain. Passive investment funnels $$$$$$ into biggest companies, so middle class is killing them selves blindly as we will have only large cap crap on the landscape. Ppl not interested in leaving a better place behind just $$$$$$. We are just rats surviving.
very insightful article and charts. i concur on every word. it actually seems more dire. i’m an old man that goes to college for fun. the younger folks have given up on owning a piece of the rock. they seem to spend their energy and money and time on experiences. they also uniformly are way less naive and brain washed compared to the boomers……..they see the empire is crumbling. as it’s falling on their heads. i suspect they will deal with the coming big changes much better. like the younger generation i eyewitnessed in russia in the mid 90s after that evil empire crumbled.
Do not blame the Fed for the real problem, which is an entrenched crony capitalist system favoring the very wealthy and gutting all middle class jobs in the US. Blame things like Citizens United, courtesy of right wing judges, who have delivered the US Government to the rich and large corporations. Blame years of elitist policies aimed at gutting public education, healthcare and replacing them with private rackets. Blame decades of economic financialization where cutting jobs and increasing dividends and shares buybacks have destroyed middle class incomes. While Republicans have been especially vicious at this, the Democrats have not been much better because in the end both parties have their hands in the cookie jar.
But if people are so delusional that certain presidents will change this situation, then they deserve to get screwed even more.
On your first sentence. It is the Fed that has perpetrated this benefit to the so called wealthy or asset holders(not all wealthy).
That is not the fault of the free market capitalist system .
Good job Mister Mish. I am listening to you now on George Noory’s Coast to Coast AM.
Examine the Housing Affordability Index maintained by the NAR. It looks like long-term un-affordability started in the late 1990s / early 2000’s.
Recession+ inflation = stagflation
They think immigration will fix this, but it will only make it worse. In the end the transfer of wealth comes by the young paying less tax and the old being forced to cash in their gains, alas boomers want to have it all, hence the ultimate outcome is intergenerational economic war. No sympathy or respect for boomers from the young.
Trump never muttered a word about Kamala/Hakeem plan that is going to destroy suburbian women lives. They cherish their houses, schools, communities and SAFETY.
I look at this topic from a different perspective.
I do not consider the American Dream to mean home ownership.
To me, the American Dream means: That everyone has an opportunity to achieve success and prosperity through education, acquisition of skills, hard work, determination and initiative.
And I believe that the US still provides the best opportunity in the world for people to “get ahead” or make a better life for themselves.
And if we all focused on improving our lives, rather than complaining about them, our country would be even better than it already is.
Agree. I would only add that “success and prosperity” is subjective and is determined by each individual’s goals and expectations.
I really do dislike one size fits all slogans like the “American Dream”. These types of slogans are often concocted propaganda to give people an ideal to strive towards. The problem I have with that is that the ideal is someone else’s and not my own.
Good luck with getting people to stop bitching and moaning. Like politics, it’s our new national pastime.
Ownership of property (not just real estate) promotes responsibility and happiness that starts at the individual and trickles up to society. Anything else is Communist idealism. Why? Because someone will always own it, particularly the one that promotes the ideology.
horrific. not having a stable home is a source of many problems and stresses. not everyone wants your bohemian nomadic dream. without a home you can’t have a stable family.
I’m laughing my ass off here. I’ve met many families who live on sailboats, some as small as 30 feet long. They travel the world like gypsies/nomads. Few families are as close and stable.
Lol! People have different dreams. The point is to have the chance to pursue whatever your dream is. There are some people in this country who want to be “bohemian nomads”. I am not one of them. But, unlike you, I am not going to criticize them.
a man who does not get engaged with their states politics is an idiotes as the ancient greeks defined it. basically a sad life not worth living. i’d suggest everyone read “republic of plato”. it covers every known scenario in western civilization for the past 2500 years. don’t be an idiotes. give a damn and become an active man in one’s civilization. or the idiotes take over. we are living idiocracy documentary comedy.
Sorry. I will leave the politics to you. I am too busy living my own American Dream. What political office do you hold?
Check out the latest per capita wealth study of nations. The US isn’t in the top ten in median wealth per capita. Most of us are average and unable to achieve high level skills. I grew up in the 40’s, 50’s and 60’s, my wife’s father flunked out of high school but left a million-dollar estate. Working men were able to achieve a lot by just showing up and doing a job. Those days are over and most average men are left viewing the American dream as fantasy. The behavior of the young is understandable.
So, assuming you want a better chance to improve your life, which country will you be moving to? Where do lower skilled, average people like yourself have a better chance to get ahead?
What people do with their lives comes down to personal values. MIsh is an example, likely worth more in $$$ if he worked on Wall Street, yet he chooses a lifestyle most people don’t understand, or have. HIs photographs are proof of some of what he values. Ditto, the time he spends writing and researching–lifelong learning, figuring out complex issues, conveying what he knows etc.
Accumulating wealth for its own sake seems as pointless to me as bragging about what I have.
Perhaps ‘The Dream’ is that you can have a dream, and try to achieve it, until thought crimes are legislated. Meanwhile, debate and dialogue are an essential part of human intelligence.
Yep. Everyone has a different idea of success. Everyone has a different dream. And it’s wonderful to live in a country that provides the opportunity to pursue your personal goals. If your dream is to own a home; then go for it. But that doesn’t mean that everyone else has to have that same goal.
My goals remain the same; to focus on my health, wealth, family and friends. Something I have repeated over and over again here. But I don’t come here to discuss in detail, my health, family, or friends.
Politicians fake promises : 3,000,000 housing units in the flyover areas and the suburbs. Buyers will get $25K tax incentives.
1) The poor on transfer money cannot buy it, but they can rent. 2) The suburbs will be flooded with housing units and low income people. 3) Gov crowding the private markets. 4) $25K to buy a deflating asset isn’t a gift. 5) Commercial RE are down. Residential RE are next. 6) Dead on Arrival plan.
The ONLY solution for sky high home prices is a REAL recession with 7% unemployment for at least 18 months. Oh, and not letting Congress allow rent & mortgage relief would help as well.
There are other simple solutions that would cause no economic damage, none of which will ever be implemented. Government’s goal is to push housing prices higher, cf China.
USA has a 35% third world population. The US public education system is third rate. Americans are getting the standard of living they deserve. Those who attend rigorous schools and do homework until midnight for ten years prosper. Those who skip homework to play basketball or soccer earn a tent on the sidewalk. In some regards life is indeed fair.
soccer, skiing, any competitive sport…can send your kids to MIT, Stanford or CMU.
Nerds go to Yale.
added bonus for young and middle aged are the ivies have the huge endowments so they are cheaper than going to state u. don’t tell the middlebrows.
Which did you go to?
Were it as simple as doing homework and attending a rigorous school. Some of those tents are US military with psych issues.
You should get what you are capable of, and work for. However, not everyone starts from the same place, or even close.
Then where is the justice if both groups have the same vote. Poverty is power. All you have to do is convince the poor that the rich are the problem and you can get voted into power. It worked for Hitler. All he had to do is convince the poor that the problem was caused by the rich being rich. Electing him and his party would then allow him to fix the problem. This speech works every time.
Here is the final exam question? Where the Jews really guilty? Or where just selected as easy targets?
Bonues question. If poverty is power and you need more power to get elected, where can you find it. Produce it??? Or invited it to wade across the Rio Grande.
Gotta be over a decade you’ve been my go-to for morning items.
“The Fed gets grade F from every angle.”
If that’s true, it’s because you’re (generally speaking) grading them on the wrong parameters. They aren’t morons, they aren’t inept. They are working towards an end goal that differs from their official position.
Occam’s razor
They had no choice… when you start to run short of cheap energy … the kills growth .. if the Central Banks do not act with stimulus to battle the head winds of expensive energy … the global economy collapses.
Be thankful for all the extra years that stimulus has bought you….
Unfortunately there are limits…. what cannot continue… will stop
The Beginning of the End
JUNE 13, 2003 – There is increasing evidence that massive economic stimulus — monetary, courtesy of the Federal Reserve, and fiscal, thanks to the president and supply-side minded lawmakers — is taking hold. The magnitude of the policy turnaround, which caps a constructive, multi-year reflation process, should overwhelm the economic negatives — including the drag from expensive oil and poor finances at the state- and local-government levels.
Expensive oil and its impact on other energy costs remains a concern.
The current level of U.S. monetary stimulus is massive. Real interest rates have fallen 5.2 percent from December 2000 to March 2003, reaching -1.2 percent. A swing of this magnitude may be historical.
Read more at: http://www.nationalreview.com/article/207227/reversal-fortune-david-malpass
It was not JUST oil. The rest of the world caught up in the aftermath of WW2. The US lost its competitive edge with higher labor costs and over-regulation.
Thanks for referencing an article that is over 20 years old. But it could just as easily be from 50 years ago. It’s the same Doom and gloom predictions that people keep trotting out over and over again. Yet somehow, the economy just keeps chugging along.
correct. FEDRESNY which controls the currency…….just works for her owners. the NYC bankers. they don’t care about unemployment or inflation or anything else. i’m still shocked financial writers don’t get this elementary truth. i hat tip the FED when i walk by it weekly…….as a great long con…………the middlebrows and lumpenproles have no clue it seems
One place to start is stop going backwards. Start rebuilding income for middle class so they have ability to afford to buy and carry costs.
Strict reliance upon monetary policy has failed dramatically.
Time to take a different approach.
Hey how about creating real jobs instead of Amazon delivery jobs. Keeping money made in America in America so that it circulates around and lifts that proverbial all boats.
Give incentives so that potential first time buyers might have a nest egg account where they could contribute monies. Government has money to spare for illegals but to cut a break for own citizens, can’t have that can we.
Monetary policy:
Interest rates are headed down in any case as economy continues to slow.
Cut Scale of Government so as to take some pressure off credit markets. That would be Novel.
Every one of these will get fiercely attacked as those who benefit from what is occurring are not going to give it up.
A true wish list of possible actions would take weeks to assemble.
Things are were they are because of politics not because of true shortages. These are created shortages affecting Housing. They can get undone.
Add:
Homestead act 1862 162 acres of land was granted as long as the Land was worked and lived upon by recipient.
GI Bill 1944: Still going, helping with acquiring Housing
Employee Retirement Income Security Act 1974 authorized
Individual Retirement Accounts,
There is a history of Government acting to enable people taking personal responsibility for their own well being.
Creating an entity which would help people save for a Home down payment and choose between consumption and savings as a personal responsibility. This would go a long way towards getting people the initial Leg up in path towards ownership instead of being Renters.
Property owners have a stake in the community they live in. Renters are on the move.
Taking Self responsibility for where one is in Life seems to be a problem for some.
I have an adu on my property in a rural area. They wont let me rent it. I got a friend im thinking about letting in. Paying cash for rent. Then im going to tell them hes a squatter.
You must be in a “red” state here in the PNW and at my 2nd home in Tucson ADUs are highly encouraged. I think Tucson will allow up to 3 ADUs on one property.
Kansas so kinda sorta. In a stuckup county that thinks they’re something they aren’t.
I have a 700 sq.ft. ADU at my 1.2M WA house, it has a beautiful water view and a large private deck. I rent it out to a local working person for a reasonable $900/month including wifi and all utilities. This pays all the expenses, taxes, insurance, water, sewer, power, etc. So I live there half the year for free and I have a caretaker. I built the place in 2021 with my own two hands for $375k including the lot.
i’ve spent decades being a builder buying the most beat up places i could find, with high cap rates after r/e crashes. landlording is a great way to build wealth. though much harder than just sitting on my butt trading fx and equities…………last round i bought 20% cap rates in AZ in 2011. sold them off in 2022. i’ll wait for cap rates to come to me. it’s like fishing. patience. i remember the r/e and savings and loan, debacle from the 86 tax act. a great lesson for r/e when i was a middle aged man in his twenties. there were steals to be had in that aftermath.
It’d be clearer if one were to graph over the years the hours of work one needs at median wage to (a) save up a 20% down payment for a standard house and then also (b) to make the PITI payments on a new median-rate 30y mortgage for that house.
Bonus for including taxes on the median earnings, and also debits the median earnings for the change in cost of an assumed “typical lifestyle” which started out at a given % of the median income, and then increased to eat up the ability to even save at all…
What would be interesting to see your write, Mish, is the how the policies put forward by both Trump and Kamala would affect this. Would given new homeowners $25k help or hurt. Repeating a list of previous missives given the updates we’ve had on policies does not seem like the right way to approach the post.
Why should anyone do anything other than stop repeating mistakes?
$25,000 in free money wont do anything other than raise prices and get more marginal home buyers to stretch too far.
Politicians always want to “do something” and inevitably that something makes matters worse or fixes some tiny aspect while creating a bigger mess elsewhere.
I did not cash those STIMMIE CHECKS, EITHER, MISH!
Yup, just like in education, more free money to those taking it won’t drop prices.
The government will intervene which will drive up housing prices and get Gen Z into houses they still cannot possibly afford.
Student Loan Trickery Version II.
The millennials are set to inherit $85T in wealth from their parents. That’s an enormous amount of buoyancy for housing over the next 15 or so years. Born in 1946, the oldest Boomers are now 78, so they’re definitely starting to die off. When I drive around and see all these shiny new homes & vehicles, I can only surmise that a good portion of this comes from this slow rolling resource of generational wealth.
[1M] BRK.B $1T, but BRK.A $700B. Something is wrong. Between 1980 and 1998 BRK.A was taking off. Charlie was the brain. Lately, strange are happening. [1M] BRK.A support line: Mar 2009 low to Mar 2020 low. Parallel from : Jan 2018 high. Buffet is going crazy. BRK.A flipped/flopped many times. The last flop was in June 2024. June 2024 was a spike to ignore. It flipped again in July 2024. In Aug BRK.A is on sugar high. Cherry coke with See’s candies and blizzard : in order to move up there must be a close above June high.
?
TA
Just sent See’s candies chocolate gift box to somebody, from Amazon.
I’d Like to see a chart. I have TA skills, Too.
buffett is a grifter who started investing with inside crony GeICO thanks to his congressman father. he’s for sure going senile too. all that junk food he hawks and consumes is poison for mind and body
So if you extrapolate that “same house” over the life of a mortgage (360 monthly payments), that same house will cost you $746,000 more today than it did four years ago.
So would you rather have the Trump mortgage/house in 2020 or the Kamala mortgage/house in 2024?
There will be rebellion of the young. The government knows this and thus must move to protect itself. This is the root of abrogation of the Bill of rights in the Constitution currently underway. Think misinformation. This abrogation includes both political parties by the way. Those in power always will strive to stay so positioned. Young people are coming to realize that they cannot easily vote themselves back to prosperity. They cannot embrace anti-trade policies to achieve a better future. Please continue to educate them Mish. Thank you.
The ‘young’ will refuse to use their cellphones for a day. The young think males can become pregnant, and lactate. The ‘bill of rights’ is their Facebook agreement. The young believe abortion is a human right.
“But this group of brainwashed economists somehow believe that only consumer inflation matters.”
Based on the facts of recent history, I only believe in conspiracy theories. Stupidity cannot possibly explain it.
Nothing complex to understand.
People are buying a monthly rate; interest rates have doubles that monthly rate.
The price of houses still has to adjust, but it will … slowly.
Price of houses in not too expensive it is the reciprocal of mortgage rates.
That is the main cost factor, and suppressing interest rates has created a temporary deviation (also known as a bubble). A lot more people will be losing money when the bubble valuations leak out, not just candidates for new mortgages.
Basically, anyone owning a home is fabulously wealthy, and anyone who doesn’t already own is falling further and further behind, after already being trounced during the first few years of the pandemic. We are now a cliff-like bifurcated society based on owning a home or not (excluding wealthy people who rent by choice).
No, anyone owning a home still has the Exact. Same. Home… and therefore no change in wealth. (Selling the house might net more $, but they would need to buy another house or pay inflated rent, so there’s no net gain.)
But those who are saving to buy a home have suddenly fallen much farther behind in their life goals… they are poorer.
The solution to this is not to make houses more expensive, nor to give handouts to those who don’t yet have houses. It is to put more houses on the market at lower prices.
A huge number of people refinanced putting a monthly windfall into ther wallet. Those people are wealthier. They bought their home when the price to income ratio was around 4.1 (2019 or before) and the price to income ratio is now 5.6+. On top of the higher price, the interest percentage of monthly payments has doubled for anyone who wants to buy.
… that windfall was due to lower interest rates not higher house prices.
Your viewpoint is naive. New homes will be priced at current prices or higher. The only way to lower prices is to get rid of the GSEs, or freeze the FHFA conforming loan limit for a decade. In truth, the FHFA conforming loan limit is currently set at least 20% too high, hence the runup in prices.
NVDA is down, but DIA doesn’t care.
As of yesterday, according to the US Treasury web site, the deficit for this fiscal year stands at $2.122 trillion, or somewhere short of 10% of annual GDP. Inflation will not be curbed until our government representatives rise to the quality of the stereotype drunken sailor by spending only what they take in. Until then, nothing to include housing, cars, medical care, even vacations will become affordable for the common citizen. I would also venture that GDP does not increase by the amount of the deficit spend, thus considering deficit spending is stimulative by conventional economic thinking, then we are only getting a fraction of the stimulus in return so we lose more in GDP that the fiat money shoved into the system. Only in government is spending $10 for a $5 return looked at as a good deal.
The US debt is the canary in the coal mine. Congress on both sides of the aisle is oblivious to the oncoming freight train. Congressional efforts are being expended on bills relating to DEI, LGBTQ, Ukraine, Israel, Taiwan, gun control, abortion, etc. Nobody has the cojones to address the spiraling debt. The USA will implode from within. Congress cannot see the forest for the trees.
One of the best quotes I have ever heard applies here….”You can’t bullshit math”
You can’t bullshit math in a closed system. There isn’t a closed system. The government can choose to “create” money to any level they see fit.
Figures don’t lie but liers can figure. Learned that in High School.
Clinton ran deficits for 8 years but the brainwashed voters were convinced by the Majority Media that he produced surpluses. If you hide the math and publish the BS you can get away with enything.
Mortgage payment (blue) : draw a support line from 1994 low to 2021 low (at 1,101) and a parallel from 2006 high (at 2,082). After dropping to around 2,500/3,000 payments might rise to a new all time high. Speculators might buy munis and bonds in 2024/25 and in the early 2030’s.
So if “young adults, renters, and Blacks will decide the election” …
The Dems have them brainwashed with: 1) abortions, gun control (school shooting trauma) and war propaganda (bad settler/colonialist Israel; good Ukraine; bad Putin) for the young, 2) handouts/foodstamps and rent/price control for renters and (lower-income) blacks.
Sorry about racism and stereotyping (truly hate it) but Mish started it 🙂 … and blacks have lower income than other groups … fact. Figuring why is what gets contentious.
Of course, we all know the election is actually decided by the ballot harvesters and stuffers.
But we have many (maybe plural) black presidents! How can this be?
Honestly, I think it’s time we give a white guy a chance .
Until the US incorporates the true ‘systemic’ factors underlying social and cultural differences there will never be effective solutions, just band-aids. The problem is some of those systemic factors are genetic. Since even saying it is ‘racist,’ the consequences are unavoidable.
So if “young adults, renters, and Blacks will decide the election” what are the systemic factors holding them back.
When the problem is a great gaping hole below the waterline, the Titanic
will still sink regardless of where the deck chairs are placed.
It took 11 years to go from 400K back to 400K (2006-2016).
So why not:
It took 11 years to go from 480K back to 480K (2021-2031)?
2031 collapse brought to you by tens of millions of A.I. job losses.
It is true that mass production of cheap computers eliminated many jobs. Also true, the Internet also eliminated many jobs. Guess what also happened?
They said the same sort of thing, back in 2008-2010. That was shortly after The 2007-2008 Financial Crisis. You know, “The BIG One”
Yet here we are in 2024, with record highPayment’s and Rates what they were back in 2002.
Things that make you go Hmm..
Because employment and wages kept growing. A.I. will wipe out jobs and dramatically lower wages around 2031. There is a huge difference between low wage jobs disappearing and high wage jobs disappearing. A.I. will kill high wage jobs.
– A.I. will wipe out jobs and dramatically lower wages around 2031.
> A.I. is not even off the ground yet for use. Way more testing, modeling, more testing etc. This is the stage we are at right now. It’s called the “Test Phase” once we get past that in 2031 perhaps or maybe 2050 or maybe never? Nobody does, and furthermore for what exactly? They don’t know that yet either, because we could need years of more testing and be much further along on the ramifications of such. That’s looking counterproductive at the moment by the looks of it. Any date of implementation would be arbitrary at best, and not close to the actual date, if there ever is one.
P.S. By the way, if A.I. will be so Devastating to our livelihoods, and we are to lose unforeseen levels of high paying jobs, and our wages will be gutted, then WHY are we going to introduce A.I. in the first place? For a tool that was supposed to assist us, you make it seem to be the end of prosperity? I’m confused…
So the rich can get richer. That’s who Congress is there for. Why did they faciltate moving all manufacturing jobs overseas, and in fact give cover for a lot of it with the creation of the EPA?
There’s always the race track. Or a cardboard box. Welcome to the future kids.
The people that are really screwed are immigrants and native non-homeowners.
People who live here already will likely inherit a home one day. They’ll be fine.
That’s reassuring. One day…one year? 40 years? Doesn’t do much for me today.
Houses don’t last forever. Maintenance and upkeep costs are rising too.
People who inherit a home still need to be productive enough to keep it from falling down.
Inheriting your parents’ teepee is better than nothing.
I think a fundamental problem with US inflation is that it doesn’t consider certain basics as now being beyond the range of the average person – owning a home, owning a car, getting a college education. It’s much more than just the price of bread, eggs and gasoline.
Mish, it’s by design. A thief changes the measures so as not to reveal that he’s a thief. Just remove housing. Then make a core number exclude food and energy because it’s “too volatile”. What? We can’t smooth that out with moving averages?
Inflation is a conspiracy. It’s a clear mechanism of theft in which there are beneficiaries and victims. As long as people continue to believe that Inflation is higher prices then they will continue to get fleeced.
Simple as that. They aren’t idiots. They are corrupt profiteers.
Inflation this time is different from the inflation we had in 1970s. Inconvenient truth: we are paying the same today for a gallon of gas as we paid 11 years ago (zero gasoline inflation) and that is true for diesel as well (chicagogasprices.com). Natgas is so cheap now they are practically giving it away (you mostly pay for fees and taxes). So inflation this time isnt a conspiracy — its mostly a question of “deferred maintenance.” They didnt save for all the baby boomer cop/fireman/snow plow/teacher pensions due and now are scrambling. (Oh, and those pesky hurricanes are running up the insurance premiums too)
If home prices go up by 45%, why shouldn’t the cost of insurance go up by 45%?
I dont see an immediate connection. A house is full of “parts” and if the parts cost more, then the insurance that pays for replacement parts costs more, but I dont think there is a 1:1 link.
Simple example. House A is just completed for $500K. It is the same size and finish as House B, completed in 2010 for $210K, and now worth $500K.
What does it cost to rebuild house B after a fire destroys it?
a. $210K
b. $500K
c. $530K
BTW, the answer is C. The cost of demolition and removal would be in the order of $30K
I shall defer to your greatness on this issue. My original point (way up there) is that this is a different inflation this time around. All politicians talking about “rising gas prices” are just uninformed (tho it sounds good). Drivers of inflation this time around are shortages of apartments and houses (now owned en masse by the rich), under-investment in government pension funds (increasing prop taxes), busted supply lines (car parts) that have to be rebuilt, opportunistic companies increasing the price of Chips Ahoy cause they can for the moment, and hurricanes wrecking houses (insurance premiums).
The price of sex changes is out of control. Back in the old days we did our own sex changes, and we liked it that way.
i’ve always thought the infant sexual mutilation by rabbis and doctors to male penis is a sick and twisted practice…….
As sick as twisted as tattoos? Ear piercing? Nose rings? Feet binding? Breast augmentation?
Back out the cost of the lot.
The same lot cost applies to both new and old, and you don’t insure the lot but the improvements upon the lot.
It was never in.
Deduct the cost of the lot
Cherry-pick your data much? Long term chart of gasoline prices shows that current prices were only first hit in 2008, then in 2011, both for brief episodes. But the overall chart shows a persistent uptrend.
chicagogasprices.com It is not a straight line from 2014 to 2024 (charts used to go 11 years — oh well). Life happens — ups and downs. But it is a fact. We were paying (in Chicago) $3.35 a gallon of gas in 2014 and today we are paying $3.35 a gallon. Same thing with diesel. In 2000, natgas as a commodity was $2 per million BTU tradingeconomics/commodity/natural-gas. Today, 24 years later, it is $2 per million BTU (with ups and downs along the way). Point is .. this is NOT an energy-driven inflation.
Exactly my thoughts.
The FED and associated entities are helping some while screwing over a large percentage of the US citizens – especially the middle class. It must either be stupidity or intention. I may never got the reason why Mish is so convinced it’s just stupidity. Why not at least entertain the thought that it’s all by design?
Raise interest rates to 4% and keep them there! Hedge funds and private equity will quit borrowing free money to buy up all American assets, including houses. Prices go down (and deep recession results, but …). Problem solved.
You get an F for common sense. Where does the money come from for housing mortgages? Does the money have an opportunity cost? If so, what is it?
If you were going to lend $$$ to me to buy a house, to be repaid over 30 years, how much would you want in interest, as a percent?
We got this mess because the Fed thought it could force the opportunity cost to zero.
Sounds very academic. Here’s something simple. From 2006 to 2020, interest rates were zero for the best borrowers. I myself got zero percent balance transfers for my credit cards (saved thousands in interest). So the already wealthy borrowed hundreds of billions of dollars at zero percent, and bought everything under the sun: stocks (all time high), bonds (all time high) and houses (prices are at all time highs). Half the companies disappeared from the NYSE (7000 to 3500) cause they were bought out with the free money. Cut off the gravy train and leave the price of money at at least 4%, and the rich cant buy up and build as much.
Those who bought houses between 2007 to 2015/16 were subsidized by the Fed. Interest rates were forced lower by quantitative easing, initially to recover from the 2007-9 recession. They were kept low to keep the Obama administration afloat. Simply, the economy after 2008 was on life support. It should’ve failed in 2008, and been rebuilt. Instead, bad banks and incompetent companies survived.
Interest rates increased going into 2016 and onwards to make Trump’s term fail. Rates were decreased to compensate for Covid losses. The reason: a second term for Trump could not be tolerated for the simple reason he would have nothing to lose in his second term.
You are right, though. From 2008 on, the Fed engineered a massive transfer of wealth to the already wealthy.
You fix this by cutting off the head of the snake–the Fed.
If you can do that, please be my guest. What would be easier is the next president telling the “wholly independent and never takes orders from anyone” Fed president to keep the rates at 4ish% in 2025. Period. The Fed takes orders from the White House. Always has, always will. Then maybe I can get some interest in my savings account!! 🙂 Realistically, the Fed will drop the rates to zero in 2025 and inflation will be our new best friend.
sure thing. after biden sells out MSG for a rock concert and rump plays centerfield for the yankees……….
The Fed as been around for over 110 years. It might take more than a few pitchforks to kill the snake. I didn’t say it would be easy. It begins with an audit.
“The Fed gets grade F from every angle.”
And absolutely obviously so.
And yet you have supposed “people” who are so singularly clueless, indoctrinated and flat out imbecile, that they still fall for the completely; to anyone even the tiniest bit sentient; nonsensical drivel that there exists some sort of “role” for that aggregation of absolute idiots.
I am not trapped in a mortgage, it’s 2.375% and we make far more than our principal and interest AirBnBing the apartment in the downstairs of our house annually on about 60-70 overnights, leaving it vacant for friends and family to visit the other 300 days of the year. It’s our dream house the kids will drag our frail or dead bodies from long into the future. We are celebrating the Fed’s dumb decisions as we benefitted the most. Our Gen Z kid? She’ll probably inherit the house, no need for her to buy.
You’re making his point–winners vs losers brought to you by the Fed serving the interests of the Baby Boomers since 1945, serving their own interests since 1913. You benefitted so you’re pleased as punch by it. Wrong? Of course it is.
Why would it be wrong to take advantage of the construct a person must operate within? I’m not a Boomer myself, but I sure as hell took advantage of the mess the central banks have created. What should Rando do in your opinion?
Like it or not a central bank exists. People are simply taking advantage of the situation. Do you think today’s young people would have done it differently had they been in the Boomer’s shoes all things remaining equal? I highly doubt it.
Wrong? Why is it wrong to be relieved that you benefitted from the circumstances?
Actually, you are trapped by the 2.375% mortgage–you can’t sell your house and keep the mortgage–very few are assumable. I’m surprised the mortgage company allows use of the property as an AirBnB. Mortgage contracts tend to exclude commercial use.
debt has always been a trap for thousands of years. use cash for house purchases including investment properties. sure you might make a few more shekels if you luck out with debt before your dirt nap, but the anxiety and other negative affects from debt are a curse……
If you have to buy only with cash, and no debt, you won’t have a house for 30 years, or more, not a few years out of high school/college.
Borrowing and lending are sides of the same coin–enabling a more effective use of money by paying the cost of the opportunity. Negating the true opportunity cost is what caused the current problem,
80 year olds today could own a house by age early twenties. the Gen Z kids waiting for the death rattle of their 40 and fifty year old parents……will be 40 or 50 or older when they get their own house. and that is optimistic. the governments local state and feds will probably tax your house and funds to pay for never ending wars and government pensions………..
Gen Z has a high probability of being 55+ when their parents die.
God bless unfettered naked capitalism
Another 10 million immigrants and another 10 trillion dollars should fix it!