40-year-old homeowner says economy doesn’t add up: ‘I’m making the most money I’ve ever made, and I’m still living paycheck to paycheck’
fortune.com
“There's this wild disconnect between what people are experiencing and what economists are experiencing,” says Nikki Cimino, a recruiter in Denver.
Hey, somebody's gotta pay for the highest corporate profits in 70 years.
Important to note:
Just saying that their profit is higher means nothing because of inflation. Inflation will mean that their profits are more often than not the highest they have ever been every year. But the highest margins? That shows they are price gouging.
If you want to know how bad we're being fucked, search for the PPI, the producer price index. CPI, the one we always hear about, is the measure of inflation to us, the consumer. The PPI is the measure of inflation to producers, what they pay for goods and services to produce the goods and services we buy.
The PPI has been back to "normal" for a while now. Pretty much as soon as the post COVID logistics issues were mostly ironed out. The difference between PPI and CPI changes is almost all profit.
We don't get daily articles on the PPI though, I wonder why.
Tell people about PPI whenever you can, online or off, the more people know, the better. It's easy enough to say inflation is just down to greed but being able to back it up by comparing two simple charts will help people really understand.
PPI
CPI
I couldn't find a comparable historical CPI chart on the BLS website, just a 12 month average and historical data by region. Are you able to find something to compare that chart to? It's kind of difficult to grasp intuitively (without a comparison, that is).
I edited the links to try to get more apples to apples. For the PPI just deselect the blue line and compare red lines between the two. Those should give 12 month change numbers for all goods and services unless I screwed it up.
Edit: I edited the links again, I accidentally used final demand instead of intermediate demand for PPI. No need to deselect anything now. I linked the chart for processed goods, other categories are available in the drop-down list.
Thank you! And thank you for finding and linking all that, it is very informative!
My favorite part was how PPI reversed inflation every month from Feb 2023 onward, but CPI only continued to show positive inflation. 😃
Exactly that. On average the economy is doing fine but it's skewed very heavily towards the top and nothing much for the 90%. The median income is actually decreasing.
There's a term for this, HENRY. High Earner, Not Rich Yet. The lie is the "Yet". Millennials and Gen Xers have been struggling to reach the middle class that is kept perpetually out of reach. They have given up on the idea of financial solvency and are going into debt to indulge in luxuries like having children, going on vacations, and living somewhere that isn't a complete shithole. Saving for retirement is as realistic as training to live on Mars, so why bother? Keep digging a financial hole and then lie down and die in it.
Gen X here and I can’t afford to contribute to my retirement. Even had to withdraw some during unemployment. I’m either working until I die or hoping assisted suicide becomes legal in 20 years.
Yep. Same. I do pretty good for myself and I'm more fortunate than most, but I had to borrow money from my dad recently for a series of expenses I couldn't absorb in real time. I got the "you don't know how to budget" sermon. It felt as fun as you'd expect
I said fuck it and gave him a list of earnings and expenses (I'm pretty frugal) and he was like, "oh..."
Oh hey, this is what my partner and I have been experiencing for the last year or so.
Gen Millennial here. I can assist you on your suicide that day for a hot meal so I can at least eat on that day. Maybe someone from Gen Z can assist my suicide if I leave him my blanket then.
A hot meal? If you're eating the person who just suicided then you could probably stretch those left overs out for at least a week or two.
You might be on to something here....
Sounds like a modest proposal
Is that when you die but take a billionaire with you?
On the bright side, 9mm is cheaper than a retirement home. Somebody's getting a blowjob on my 60th birthday, and it ain't gonna be me!
Damn, that's dark. Like my favourite kind of humour.
X here too, 53yo, cannot contribute to retirement. At 67 I will have to sell my house because I'll not be able to afford taxes, insurances, power, repair, etc
Assisted suicide vs... illegal suicide? What's the difference?
Illegal doesn’t pay out insurance claims. Not that I can afford life insurance….
I might be "rich" when my parents die, depending on how much elder care they need.
I'm actually kind of looking forward to the day I look my kids in the eye and say "I'm going out to look for firewood" and just walk out into the snow and die.
But there won't be any snow anymore so I'll just wander off into a slightly chilly night.
You're a glass half full kind of person, aren't you?
What if we just financed all our kids advantages on our own credit for them and then promptly died?
What would happen to the debt?
Say I max out my credit card for their down payment on a house and then go "get firewood".
They definitely try to track large cash gifts when putting down a down payment on a house.
So I buy a bunch of gold and leave a map and then bury it in the woods and when I "get firewood."
Then the credit card companies crank their interest rates higher and restrict the credit they extend to your kids to compensate. It's not "free money."
I'd rather look forward to the improvements in technology that make elder care less expensive.
As if regular people can afford whatever improvements happen
You didn't finish reading the end of the single sentence in my comment.
There is a possibility of that being happening but the last half-century of economic trends makes this unlikely, unfortunately. This decade, especially, makes it likely that the gouging will continue and any advances making care less expensive will just see an increase in profits at the top. Every industry seems to have give into overdrive on driving up profits at the populace's expense, with the exception of basic consumer entertainment electronics but, they are, realistically also driving up effective costs as they are being used to harvest customer data for sale.
If we're getting out of this, we're going to have to do it ourselves because none of the established holders of power have shown the slightest inkling of being interested in stopping it.
The last half-century of economic trends supports my expectations, actually. Treatments have been getting cheaper as technology advances. New treatments tend to be expensive, yes. But then as they become older they too get cheaper.
Insulin was discovered over 100 years ago and it took policy, not improvements in manufacturing, to lower the price (which only happened last year).
In America, they don't get cheaper because it got easier to make.
That's not true. Originally insulin had to be isolated from animal pancreases, a costly procedure. The first handful of humans to be treated with it were literally the children of wealthy politicians, a congressman and the secretary of state. They were the only ones who could get access to it. It's now produced in industrial quantities using recombinant bacteria to synthesize it. It's routine.
I'm speaking about large-scale trends here. Obviously the prices of things have their localized ups and downs when you look at them on the scale of a few years. But I'm not expecting to need elder care for quite a few decades yet.
Here's the first picture I found on Google for the search "insulin prices worldwide"
Yes, again, I'm talking about large-scale trends, not the current spot prices. I don't live in the United States anyway, most people don't. Note how cheap it is everywhere else?
You should watch the movie The Road if you haven't already.
Honestly, same boat. Our power bill has gone up over 20% this past year like it's insane. Our grocery costs have easily doubled in that time, too. Like I'm doing the math and seeing the numbers like I'm making more than I was 3 years ago, but I wasn't living paycheck to paycheck then, and I'm rationing food today.
I also can't count the number of times prices have gone up on common groceries in the last year. Every time I go in I'm spending more than I did the previous time. And the grocery stores around here have started phasing out their cost saving brands. More and more lately what used to be the expensive brand is the only one left, and I'm paying twice as much for half as much compared to what I was getting before. They're not even trying to hide what they're doing.
I'm in this same boat. I get letters from the power company all the time about how I'm using more power than anyone around me. The heat in my place has been kept around 62 all winter, occasionally allowed to get colder. It's a pretty modern build for a house too. I actually used my PC to heat just my bedroom over winter which should be far more power efficient the heating every room. The letters I get try selling me how I need to or could be more efficient like genius ideas like "turn down the thermostat"... its already nearly almost off, just enough to make sure pipes don't freeze.
Only thing that really changed was they installed a new smart meter last fall, of which I had no say.
In Canada those so-called smart meters turned out to be sending incorrect data (or no data at all) AND causing fires.
Best of luck in getting the powers that be to check them tho. :/
Maybe you're getting incorrectly billed, have you checked the meter readings? Smart meters don't have a great reputation.
My bill also shows I use way more electricity than similar houses. My best guess is they have a heat pump or gas heat/water heater. Whereas I have forced air electric.
I recently installed an emporia energy monitor. It's basically a kill-a-watt meter that you connect to the circuit breakers for full house monitoring. And while I see some areas that I could improve to cut my bill, no where near enough to get to what the power company is saying similar houses are using. Saving up for a heat pump now as I think that's the best thing I can do to get my bill down. And as a plus I'd have central AC instead of having to use window units in the heat.
I'm convinced those statements are wrong in some way. Either not comparing houses of similar size or unoccupied units are skewing the numbers. Or they just tell everyone they're doing horrible to try and sell energy efficiency stuff.
When I compare using figures from my thermostat via beestat.io my house is in the top 40% (uses less energy than 60% of similar homes in my area).
Yes that actually makes sense. Gas is used in most homes, and is considerably cheaper than resistive electric heating. Probably you can get a subsidy for the heat pump.
I went grocery shopping Saturday. Grapes were $6/pound. It's getting so we can't afford produce anymore.
Are we talking regular red/black/green non-organic grapes or some of the more exotic varieties? I track grape prices myself and $2.99/lbs mark for out-of-season-domestic grapes. This is the current price a regular grocery stores right now here with the exception of warehouse clubs which have them at $2.29/lbs. The normal in-season non-warehouse price can be as low as 89c/lbs, but is usually $1.25/lbs.
Is there something special about your geography that makes it more expensive?
Is there really some kind of nation wide grape price standard? Don’t they have to add costs for transportation to places where they do not grow grapes?
Not to my knowledge, no.
Certainly, but with economies of scale and good logistics, the prices across the country aren't that much different. There are some exceptions, such as pockets of the continental USA that are under served, or states like Alaska and Hawaii which don't benefit from the continental USA logistics. That was the "geography" question I had to the poster.
The prices of grapes at my grocery stores right now are $2.99/lbs and they are imported from Chile or Argentina usually because grapes are out-of-season for the USA right now.
They're just regular red table grapes. I have no idea what's going on with fruit prices near me but they're nauseating. I'm in the northeast; we should still have some late apple varieties left from fall but those are getting outrageous too.
Now I'm really curious. After reading your post, I happened to be at the grocery story this evening and our (Midwest) price for regular red grapes is $2.69/lbs. Down from the high of $2.99/lbs I saw last week.
I'm in the southern emisphere and just started eating grapes. Assuming you are in the US, consider looking for produce that is in season. Besides helping with your budget, it contributes to addressa number of other issues around shops and producers trying to focus on growing stuff that doesn't want to grow at a particular time of the year.
I usually try to but here in the Northeast USA almost nothing is in season except mushrooms.
Grapes are in season the exact opposite time of year as we are now.
Imported/greenhouse produce is expensive. Always has been.
Ordinarily I'd totally agree. But they've been going up in price constantly for the last 2 years and never come down.
I had dinner with my mom last night. She told me she made $2.20/hr as a waitress in 1972. Not including tips.
That's the equivalent of over $16/hr now.
The boomers have no idea how lucky they were. And they fucking wasted it.
They weren't lucky. They voted for people that removed all the guardrails that enabled their success.
I agree. I still think they were lucky insofar as they were born in the right place at the right time to benefit massively over future generations.
This is the important detail. Europe was destroyed and the USA was able to flourish. Opportunities existed that will likely never exist again. Capitalism has never been as great as it was in the USA post-WWII.
Ah, but the USA post-WWIII will be even better! Or at least growth capitalism suggests it will.
America was basically the only industrialized country that hadn't been bombed to fuck. You had to be a clown to not succeed in that environment (or systemically oppressed, since opportunity in the US is always only for white people). Boomers took quality jobs making reliable products and moved those to low wage jobs making disposable products in China.
Boomers Now: "hey if we blow up half the world again maybe it will help the economy, also I'm way too old to be drafted"
They had too. They couldn't get rich if they had to pay workers what they were paid when they were starting out.
Not mutually exclusive.
Waiters today make $2.13 an hour in my state.
Few people in that period had the information you have now. People were presented with this economic miracle in the 50s and there was little to no components other than conformity.
As more time has passed and I continually re-assess my Boomer parents, I am struck more and more that they truly were a propagandized generation who was never given the tools to properly think through what they were seeing. It was always just "here, more, buy this, this technology is new and amazing". Everything was new year after year until the late 80s/early 90s, when technology evened out. Even then people had cell phones and such. Once met with the Internet, especially through Facebook, we could see all of their problems flourish.
Not to say that any generation is better than any other or not, but I do believe that each generation after Boomers is actually much better than the previous one at critical thinking--probably because society had no choice but to and the fact that more people have at least a bachelors degree now.
Bachelor's degrees and unleaded fuel make a hell of a difference.
It's the credit card debt...
Instead of paying that off since 2020, she saved a down payment and bought an expensive condo. She's wasting a shit ton of money on interest because credit cards are all like 20-30%
Credit cards are predatory, if you ever carry a balance to the next month, that needs to be your highest priority.
Do a transfer to get 0% each year if you have to when recovering from emergencies. But paying credit interest for years is insane.
Holy crap! She was "saving up" to buy a condo instead of using that money to pay off the credit cards? That's absolutely insane. I really feel like society would benefit immensely if there were mandatory financial literacy courses every 4 years, or at least before any major purchases (house, car, etc).
Or just common sense laws against predatory lending by capping interest rates.
Most people don't have a safety net and live paycheck to paycheck.
A huge expense comes up, and rather than get a bank loan at even 8-10%, it goes on a credit card
Companies have a tiny "minimum payment" because they don't want you to pay it off. They want that balance to grow while people ignore it. They don't want it back now, they want thousands more later.
I'm all for interest caps but if the highest they could charge was say 9% they'd just deny credit to tons of people, not give them lower interest debt. I'm okay with that though.
Pretty sure every cc has the minimum payment higher than the interest. If you just stop buying shit you'll pay it off eventually, even if you can only afford the minimum payment. The balance can't grow unless you're still buying shit.
Also she was apparently planning on low interest rates, but when the rates went up she shrugged and didn't adjust her plans. It's kind of hard feeling sympathy for her. If she'd been hit with an unexpected but unavoidable expense that would be a different matter.
Have you seen the movie Maxed Out? That was pretty eye opening for me.
Bingo. I never, ever let credit card debt carry over. I'd genuinely rather miss a house payment.
Jesus. I don’t see how this gets un-fucked without a massive wave of defaults. And that’ll just lead to a different kind of fucked.
Someone page Caleb Hammer!
I like the implication that economists aren't people
Spot on if you ask me.
Her mortgage is $1650/mo, which is incredibly reasonable in Denver. I think this specific person's problems have more to do with her recent divorce. She was used to splitting costs, and probably spent quite a bit on the divorce itself
She's paying $1650 for a house? You'd pay more for a house in a neighborhood where every night is the purge here.
That's supply and demand, for you.
...that's more than I'd make with minimum wage in my state, which I don't think is that far behind colorado. Yikes.
ETA: ok nvm I did math and if you make a little over $10/hr 40 hrs a week, your entire paycheck would go just toward that.
You're still off unfortunately.
Full time at $10/hr is $1600/month before income tax. For simplicity, we'll say federal+state tax is 15% so now we're at $1360. Social security is 6.2% so take away another $100.
Then, of course, this is the United States where most people have to rely on their employees for "affordable" health insurance - and often still have money taken out of their check for it.
So now we're at $1000-1260 monthly take home pay for a full time job at $10/hr
At that income, you would qualify for Medicaid.
Also I don’t think you pay income tax when your income is that low.
The standard deduction is $13850 so there's no way you're paying 15% tax on an income of $20,000
You're paying about a little over $600 federal plus whatever state tax and usually state tax is less than federal, but depends on the state. In some states you don't pay state income taxes.
So best case scenario you pay a little over 3% federal and no state.
At that salary you'd also get EIC and likely pay no taxes at all.
Someone making minimum wage is unfortunately not likely to be getting a mortgage.
It's always been pretty interesting to me how crazy the price of living changes. $1650 a month for a house seems insane to me.
$1650/mo for a mortgage in Denver, CO at 5.25% interest is a fantastic price. You're going to find it can be a lot less in a lot of places in the US, but not in highly desirable major metropolitan areas
lol i'm looking at paying ~4500/mo for a 3br 2ba ~1300sqft.
That is absolutely ridiculous
You must be in an area like SF or NYC. Or this is a luxury space.
Greater boston area, not inside boston. Malden/Medford/Everett/Chelsea area. Everett and Chelsea are NOT desirable.
The smallest of places are 650k+ here for 2br minimum. You can find 1br condos for 500-600k sometimes.
We're talking about 20-100yo+ homes. Not new construction. There's no "luxury" involved. No yard or acreage. Often no parking included.
$1650/mo hopefully includes taxes and homeowners insurance
Yes, mortgages include an escrow payment for these
I pay more than $2k for a 1-bed apartment in Seattle. Would love that rate for sure.
The floor is rising! But, the floor is lava.
But the lava is tax deductable
But you need an attorney to claim the deduction
To anyone struggling in the USA and wondering how to possibly get out, just live like Congress and become rich. Then, money problems are way easier to handle. If you have as much money as a Congressman, you will be equally as unconcerned with them as to the state of our union and you will be able to say things are great with a straight face.
Not even.
All you really need is wealthy parents. That way you never have to have any debt and get exploited by the credit system and can live your life glib and clueless and wondering why other people are so lazy and poor and didn't work hard like you.
Exactly, just do a lot of insider trading and live the good life.
Hard part is being rich first. New money goes to jail before old money
Congress members don't make enough to be rich without taking bribes. They make $174k/year in 2024, which is equivalent to $75k/year in 1990. The only wages that haven't dropped due to inflation are CEO and other C-suites.
That's why so many of them take bribes :)
That's why you can't just look at their salary, the real money is in lobbyists and stock market betting prior to rolling out industry wide changes.
And some are rich because of government money through contracts or handouts.
But then again they have no health care costs whatsoever.
I dunno. Congressional salary really is still in the rage of "Middle Class", though definitely at the higher end of that. These people were wealthy or connected, for the most part, before getting into office. People who are barely getting by don't quit their jobs for political campaigns.
I should have been more specific. Let's talk salary + perks. (official and unofficial)
Like Dubya said, you should get 2 or 3 more jobs so you can put more food on your family.
"You work three jobs? Uniquely American, isn't it. That is fantastic that you're doing that. Get any sleep?" - President George Bush to a divorced mother of three. Omaha, Nebraska Feb. 4th 2005
Proof you can't die of cringe
That requires self awareness
Well he is a war criminal so I don't think he feels shame like a normal person would.
Our enemies are innovative and resourceful - and so are we. They never stop thinking about new ways to harm our country and our people and neither do we.
It was funnier when it wasn't so blatant. A politician saying this today might mean it.
How else is she going to put food on her family?
Aahahaha Bush's malapropisms, a gift that never stops giving
Most of them were said by Dan Quayle.
I'm in this article and don't like it.
Gary Stevenson explains why this is, and why it's not gonna get better anytime soon.
This video is great. He put into words what I've been suspecting for a couple months now. He predicts asset/housing prices will continue increasing while living standards stay terrible and he thinks they'll get worse. I think he's absolutely correct. A better quality of life is being gatekept by the wealthy.
Great channel!
Consider the possibility that, first and given the political importance they have in the present day, the official numbers that the Economists are using are less than honest.
Also, I know that some countries don't include Housing Inflation - which is huge* - in their Official Inflation. Is that also the case in the US?
Last but not least, there is the whole difference between what is usually reported to us by Politicians, Economists and the Press, which is either country totals (which grow up merelly by the population growing) or the mean average (i.e. adding all values and dividing by the total number of points) which suffers from the "if a man has 10 chickens and 9 others have none, each has in average 1 chicken even though most have none" problem, and the mode (the value around which most cases are found) which is far more representative of most people's experiences: if for example the wealth increases from higher productivity are going entirelly to a few people who just get ever more filthy rich whilst the many have either stagnated or, worse, are getting a bit poorer due to inflation eating up the true value of their pay, the grand total will be growing, as will the average (if the population numbers are steady) but the mode will have stagnated or even be falling, matching the experience of most people - people get to hear about country GDP growing and even GPD-per-capita growing all the while the vast majority see not growth at all, maybe even a falling of their purchasing power (the latter for sure for any who don't already own their house).
Been arguing for years that the Mode is far more representative of the common person's experience than Mean or Median. Most ppl don't remember that Mode even exists.
All three should be reported, along with raw data. Maybe it's available somewhere, I haven't looked.
I've never understood why median is a useful metric.
Apparently inflation went down bigly in the 1980s when they decided to stop counting the cost of housing. NPR last week had a report about people advocating to put that back in so that we can have a better idea of what is going on.
Well, the official Inflation is used in the calculation of the official GDP were it acts as a deflator (i.e. the more the inflation the less the GDP) to correct the Nominal GDP (which is in present day currency terms) to make the Real GDP (which is supposedly free of Inflation and hence comparable between years) aka the Official GDP.
If the official Inflation understates the real Inflation, what happens is that the increase is the Nominal GDP that comes merelly from inflation rather than from any actual growth in wealth, is not fully offset when the Real/Official GDP is calculated, so the resulting "real" GDP number is bigger than reality and proud government politicians can come out, compare it to last years's GDP (which it should've been comparable with, if both were done properly) and claim that it was their steering of the Economy that made such a difference to last year's GDP, i.e such high GDP Growth.
Hence the is massive political pressure to understate Inflation, i.e. to lie, so that ultimatelly larger GDP Growth figures can be posted and boasted about.
A higher quality of living is being gatekept by the wealthy.
Honest work: You make just enough to live on until its not enough and then you're homeless
Scams and grifting: You make possibly lots of money then maybe get sent to jail which is where the courts are gearing up to send homeless people anyway.
Money is for corporate people, not normal people! Silly goose
Oh boy, that's gonna upset some people.
Only people dumb enough not to connect the strong economy under Trump to Obama, or the current issues to Trump.
Too bad that's the majority of people.
"He's gonna come back and run the country like a business again!"
Yeah, his businesses that routinely fail and he bails out on.
Also, its a country, not a company, assholes. People matter more than our bottom line.
When Covid hit and lockdowns started, it was reasonable to think that the world as we know it might be ending. I was scared for sure and had started making contingency plans to flee to the mountains in a U-Haul full of canned foods and water.
Things are manageable now despite people still dying from Covid. Big corporate has been milking us since, as if their profits today are the last dollars they will ever make, and so it goes that they squeeze and squeeze and squeeze.
It takes a special kind of ignorance to ignore the impacts of Covid which were made worse by the inaction of trump, the fucking idiot, and say something as blitheringly stupid as ‘well I had more money when trump was president ahardy har har’
I'm just going to say it absolutely was not reasonable to believe the world was ending. It was bad, made far worse by people who thought it was reasonable to cough and sneeze and spit on others, on food, and mass purchase hundreds of dollars of toilet paper. However, "world ending" is a bit sensationalist and only the easily fooled and unreasonable people justified such viewpoints.
Putting aside the tragic losses caused by Covid, both directly and indirectly, those three years might be argued as having been a chance to shift climate talks and the more negative cultural expectations experienced in developed nations, and especially the U.S. Hell, even the air itself was clearly up.
I recognize this is a hot take and am not in any way attempting to downplay how damaging Covid was to many families. It's just such a damned shame a chance to change for the better ended up with where we are now. Further struggling, more homeless, greedflation, and an incessant need to argue amongst ourselves.
Agreed that it is a shame the world hasn’t changed for the better, but completely unrelated is the fact that there were a few months there where absolutely nobody knew just how bad it was going to get.
Only easily fooled unreasonable people were convinced one way or another when there was no scientific consensus on if the virus was going to kill 1 million or 1 billion, or somewhere in between.
It’s easy to look back and say ‘well it wasn’t world ending so it was irrational to have that fear’, but when millions are dying, you aren’t allowed to leave your house, and experts are saying that they don’t know how bad this is going to get, I would say that it was reasonable to be worried.
Gotta hand it to the politicians, they played a master game of locking us against ourselves. Hard to meet the other side halfway when one of you is literally trying to strip the rights from... everybody??
That works the other way too. The second half of the Trump administration brought three separate events into my life that would each be financially devastating on their own. I went from debt free except mortgage and a proper emergency fund to now, even with a higher salary, I’m scraping by and have a bunch of debt to pay off.
But I’m one of those people that knows that the President doesn’t directly control my financial situation. Trump sure as shit didn’t improve anything he touched, and I could see things in my life being a bit different if he was remotely competent with Covid, sure. I had more money at the end of the Obama administration than the end of the Trump administration. But even if that were swapped I don’t see that as a compelling reason to vote for a corrupt narcissistic rapey wannabe dictator.
Thats... kind of how credit card debt be.
Yeah welcome to the fuck guy.
I’m going to start using this. Thanks!
Every year the value of our money goes down because the government keeps printing more of it like its a cocaine addiction (This is on top of prices going up for other reasons as well).
Unless you're getting huge raises every year you're never going to get ahead, and if you're getting nothing, you're actually losing money.
It's way worse than that.
I suggest you go read the paper entitled "Money
makingcreation in the modern economy" from the Bank Of England, but I'll summarize it here:The "good" old days when all the money was created by governments has been gone since the 90s and the advent of digital account keeping and digital money transfers. A banking license is de facto a license to print money, though within certain conditions, with central banks somewhat limiting that money creation by imposing reserve ratios on banks (i.e. money that they do have to put aside against those outstanding loans) which can be as little as 2% of the outstanding amount.
Edit: the title of the paper was slightly wrong. Also, here is a link to it.
Digital account keeping has been a thing since the 1950's. And doing it on a computer didn't change that all banks lent out more than they had. It's the premise of the movie It's a Wonderful Life. Bank runs were a thing for as long as banks have existed.
There's a lot more to it than just that (such as, how do banks settle interbank transfers or even things like how the end of the gold standard paved the way for it) but I didn't want to complicate the explanation with too much details, though the main difference is the widespread use of digital transfers, especially by consumers which actually dates back a bit further than the 90s but definitelly not all the way to the 50s.
If you really want to know it in depth, I recommend you read the paper I pointed which is here. (By the way, I got the name slightly wrong: it's "Money creation in the modern economy")
Digital transfers are not necessary for banks to loan money. As your link says, it's the loan, which gives money to a business or consumer that the bank doesn't physically have, that creates money.
Electronic fund transfers and ATM's started in the 1960's. Nasdaq the first completely computerized exchange (no people involved) started in 1971.
Digital transfers are now the dominat way for money to be exchanged in trades, replacing mainly cash, i.e. the coins and currency that can only be made by the Mint.
The less people use cash to pay, the less the cash withdrawls from the banks, the less the banks need to procure cash - in a world world were payments are almost all done via payment orders, typically digital, the banks only need to procure cash for periodic settlement of the differences in payments between them: for example, if person 1 does an electronic transfer of $1000 from their account in bank A to person 2's account in bank B and person 3 does an electronic transfer of $900 from his account in bank B to person 4's account in bank A, all that bank A has to procure to settle the difference is $100 and bank B nothing at all, even though $1900 changed hands between various otherwise unrelated parties. If they were cash transfers, bank A would have to get $1000 in notes and coins from the mint (to give to person 1) and bank B would have to get $900 (to give to person 3). Now imagine this times hundreds of thousands fold of transactions a day and you can see how much money can change hands without the banks having to get the actual coins and notes (or treasuries and so on: the stuff they can't produce) that ultimatelly would come from the government.
This is also possible with cheques, but it was the widespread use of electronic transfers, namelly electronic payment methods, that really reduced the need for banks to procure actual money tokens that they can't legally make themselves, such as cash.
It wasn't the invention of electronic transfers that made this happen (as I said, cheques also enable a similar thing), it was its widespread use - replacing most cash transactions out there - that made this mechanism become dominant over the traditional one were banks needed to get cash in as deposits so that they could give cash out as withdrawals that then were used by people and businesses for payments and came back on the other side as deposits.
Without such a high need to provide cash to their customers, banks can have a much higher percentage of IOUs (in the form of mere numbers in computers) to cash than before only requiring cash (and ither such forms of money such a treasury certificates) for the periodic settlement of the pending differences between banks of inflows minus outflows, ad per my example above.
People don't venmo at grocery store checkout. It's all credit cards. The credit card craze started in the 60's which unsurprisingly coincided with banks switching to eft's.
Credit cards are electronic payments, hence why they had magstrips and later smartchips. Also how long ago did they replace most cash transactions depends on the country - in plenty of even Western nations card payments were pretty rare even it the 90s.
Thwt said your point that fhe transation to said "modern" economy has been going on for longer than merely "since the 90s" does make sense.
This is false and understanding why it's false is important in order for us to be able to do the right choices which allow us to both keep inflation in check and avoid pointless deep recessions or depressions. You can find a decent overview here. Creating money (multiple ways, check video) is required for a growing economy to keep prices stable (inflation close to 0). This isn't new either. It was done even in ancient Greece with silver as it is easy to see the need for it once you have all the variables in front of you. The problem isn't with money creation per se, it's with the amount but most importantly its distribution. Where does it go. Does it go towards the creation of an additional bag of chip which we have little real constraint to do, or does it go towards a house in an area where there's bidding wars for houses and no new houses can be built.
Also if you're getting raises below the cost of living increase (which most people are), you're losing money. If you get laid off, which hundreds of thousands of tech workers are, you're definitely losing money. It's not a great time right now.
Exactly. A 3% rise when inflation is 8% is effectively a paycut.
Inflation is hitting people hard. And it's happening globally not just in the USA.
Last night I ordered some food and the delivery agent told me she is living in her car because people are not tipping well and she can't afford rent anymore. Paid for her stay in a motel for now.
So it isn't just me. My spouse and I bring in together $250000 (before taxes), we own a house and we are living paycheck to paycheck. One factor of many why I chose to move to another country. The only good thing is that once I sell the house I will be able to pay off all my debts because of how much the price of the house gone up.
I'm sorry, but if you're making $250,000 and you're living paycheck to paycheck, your consumption if just too high, and you need to make cuts. In most countries, including the United States, you can live very comfortably on a $250,000 salary and reasonable spending.
Most of my expense, other than taxes, are healthcare costs. I know of no way I can reduce how often my family needs healthcare, and I have thousands of dollars in healthcare debt still not paid. We rarely travel, rarely eat out, and rarely splurge. Maybe there is some way to squeeze our belts even tighter and make it work.
It is easier to just move to a country with more affordable healthcare. 12 years ago when I met Americans living and working in Japan I didn't believe them when they said they were better off in Japan making less money than in the US because of how expensive healthcare is in the US. Now I regret not believing them. My family's healthcare costs grew faster than our incomes.
I see. I'm sorry about the healthcare expenses. That makes more sense. The US healthcare system is truly predatory and awful in just about every way. Vote for people who want to change it.
The ACA should have had a single payer option. I also believe the US government should run public hospitals and have a national generic drug company.
I'm in the same boat, single income just under $200k, but my savings has stagnated the past three years due to medical bills (wife was hospitalized and is now disabled).
Debt is beginning to pile up and it seems like the only real option is to start cherry picking the more important medical expenses to keep up on and letting the others slide (like the $26k hospital bill).
At the current rate things are going, I'll have no savings and no college fund for my kid along with a stack of unpaid medical bills and needing to downsize to a cheaper home in a worse neighborhood. At least our only car is paid off end of the year and should hold up as long as the last one (made it 12 years, 220k miles).
Living that American dream.
The person mentions medical bills, but I largely agree. If most people can live somewhere in the $50 - $75k range, than this person can live at $250k by making adjustments. A lot of this sort of trouble comes because of scale. You can't fathom making so much money or what that means and you are likely to spend it without knowing precisely how much or what it means.
250k is a top 1% income level. There are some you problems in that math.
250k is not top 1%
Have you tried skipping breakfast??? /s
It's as if workers can only improve their condition in a capitalist society when the pie grows exponentially, but continual exponential growth is an impossibility in a physical world.
It doesn't need to grow exponentially, just faster than the population.
Yes, money itself is the problem, I recommend Lyn Alden's "Broken Money".
Isn't Denver an expensive city? Buying doesn't mean instant low monthly payments. You gotta sit on that crap for ten years.
I dunno but my buddy just moved from his apartment in Brooklyn to Omaha and he was shocked the prices there were way too close to NYC prices for rent. He did go from a 1BD to 2BD but the cost difference per ft² was almost the same. Like $200 difference.
I've heard similar stories all across Canada as well, I think landlords have unchecked greed these days because people will end up paying no matter what they have to sacrifice you have a roof over their head.
Yeah, I always laugh at those median house prices because it's impossible to find a house for that.
A former treasurer of Australia solved it. You just need to get a good job.
Treasurer of Australia sounds like a good job. Can I have that one?
yes
Some months I struggle just to save $1000 and it's really starting to get to me
You can save $1000 a month? Damn!
Right???
I really don't get these humble brags. Or are they actually just that disconnected from reality? Or maybe trying to mock people?
No, they genuinely think they are struggling. Rich people don't think they are rich, because there is someone who makes more, and they are rich. The 10% thinks they are struggling because they aren't the 1%. The 1% thinks they are struggling because they aren't the .1% and so on and so on.
I met a doctor once who thought that she was being 'struggling' by only making 450K/yr and she thought she deserved 550k/yr. She was 100% genuine.
I make 3x median income. and all i ever hear is how 'poor' i am from my friends/peers. Because do then 'poor' is anything less than 250K/year w/ multiple family properties to vacation and stuff.
It's that they have ALL THESE GOALS and want to do ALL THE THINGS and may genuinely make a great deal of money. It doesn't mean that they don't need to budget and save, though. This person is definitely out of touch with reality or was brought up wealthy.
I only make about 68k/year. I'm just single and live a frugal life. I only started driving at the age of 39 after I decided to splurge and buy a used Nissan with 145km on it.
I'm lucky if I can save $50 a month. You are effectively rich. Congrats on being disconnected from reality.
poor thing
No shade for your success but you may need a bit of a reality check. Most people cannot save $100 a month.
Yep. That's the truth. I didn't even feel like I was treading water until my late 40s and we were making decent money by any standard. A mortgage, a single car payment, all the insurances (family health, dental, home, car) you need to pay for, data connections (we don't have cable tv), taxes (FSaLT), and skimming money off the top for a 401k and there's very little left. Especially with the all the rising prices of groceries (our bill feels like it's almost doubled) and being subscription-fee'd to death.