Poor people are making _nominal_ income gains. Their real income is actually declining because wage gains aren't keeping up with inflation despite a red hot labor market.
It's almost like rents rise to match incomes unless you build more housing. Rent control just means that the costs get offloaded to other things like the security deposit, application fees, and deferred maintenance. You can't regulate the market out of existence.
Every student debtor is 7.5% less in debt in real terms than they were last year.
Many of the poor working people have made substantial gains. Dishwashers and line cooks in my area are making $30/hr in some cases now.
Nurses are a while other universe. My friends are taking a year off after one of them banked almost $400k as a visiting nurse. Our local hospital has 90% turnover in nursing and is almost exclusively agency nurses.
Professional workers are getting slower increases, but the dirty secret is that they are more productive and less needed. Even in technology roles, many areas are operated at bare minimum as hyperscale clouds absorb more and more workloads.
> Every student debtor is 7.5% less in debt in real terms than they were last year.
Because Federal Student Loan payments were deferred last year, interest free.
Such loans can also be forgiven -- canceled and considered paid in full -- for borrowers which qualify for certain programs. One of the most widespread are programs for Public Service job holders, Teachers, and National Guard members. These borrowers are credited as paid in full after holding a qualifying job and making payments for ten years.
The student loan payment deferral due to COVID-19 relief did not extend the terms of such borrowers; they are credited with the year of service, even though payments were not required.
Then there are a constellation of programs to have student loan debt reorganized and in some cases reduced. You can settle on monthly payments of no more than 15% of your current income, and if you can make every payment without fail for some time (is it also 10 years? I think longer) then the remaining balance can be forgiven.
Global, blanket cancellation of a student loan debts is not yet a thing, and may never be.
All this is Federal debt. Private debt is another world... but private debt can be reorganized, renegotiated, or discharged (canceled) via bankruptcy.
The point is, instead of giving investors risk free returns, inflation is effectively a tax on the people and entities hoarding wealth with no productive purpose, and it benefits debtors.
We’ve had a carnival ride of cheap debt forever, which has powered and established many really dumb businesses. IMO, we’d benefit from a few years of 5-10% inflation.
I responded to the assertion "Every student debtor is 7.5% less in debt in real terms than they were last year." because I found it intriguing. It's a cool writing prompt.
I found that I don't disagree with this assertion, if I'm getting it right. But it's interesting...
In our household of four people, both kids and spouse are attending college. So far, we are holding no student debt, but that could change dramatically next year if kid changes school.
And there has been a lot of talk about addressing huge burden of student debt, with politicians crowing about debt forgiveness that they can bring home to constituents.
But as with any matter of publicly-funded policy, the money only exists if you know how to ask for it. There are usually complicated procedures in place, and of those who would otherwise be qualified, many will lack the ability to follow through to actually discharging their debt via one of these programs.
So I decided to look it up: how do I get this free money?
It was worth looking into, but it's complicated.
The most straightforward free money from debt relief has been, indeed, a 14(?) month interest-free deferment of student loan payments during this COVID crisis.
You only have to look at how the US faired in high inflation periods in the past to realize how awful this is for normal working people. I'm amazed at how many people are so flippant about something with hard data showing how destructive it is.
Look at how we are fairing with 30 years of no inflation, fueled by collusive bank consolidation, creating “too big to fail” institutions and unlimited capital.
How much of our economy is dominated by direct government spending, explicit or implicit support?
IMO, the longer this status quo continues, the worse the outcome will be.
Except, with higher interest rates the nominal price of housing falls relative to wages. A worker can reasonably hope to buy there way out of rents at some point in the future (assuming the price of the house is set as a multiple of it's rental equivalent cash flow discounted over time)
You are discussing the theory. The practice is that housing has been severely underproduced since 2008. Since the GFC, the state of Massachusetts has been adding on average 15000 units/year. You can't buy what doesn't exist, and with the present shortages you can't even build. It's a long-standing policy problem, but not a monetary policy problem.
I don't know about anyone else, but a figure like that (15000 units/year) is meaningless to me without context. What's the change in demand year on year? What was the rate of adding new units before 2008?
We're not all experts in Massachusetts' housing market, so it would be helpful to include information that makes your numbers meaningful.
It's not hard to discover that the population of MA went from 6.54 million in 2008 to 6.89 million in 2019. Just one look at the housing price indices is enough to tell that there's a severe shortage. (Anecdotally, around here (Western MA), ruins of type as-is-where-is that no bank will give you a mortgage on sell for > 125 USD/sqft.)
Anyone who disagrees should be cheery about the shortage of automobile parts and make sure it continues. Nowadays you pay more for a 3-year used car than you used to pay for a new one three years ago! Finally, you can invest in a car!
And the real value of debts fall, including student loan debt, housing debt and even consumer credit.
I think we're going to hit a wall soon where we either need to forgive or inflate debts away. The alternative is likely to be a crushing depression and fiscal austerity that is much less than any of the downsides of inflation.
If you're a largely debt free upper-mid to upper class tech person then the your personal viewpoint will be that inflation is all bad with no upside, because you have no crushing debts and you just think everyone should pay their debts and its a moral problem. Economically in the broad economy, though, your businesses are likely to be crippled by debt deflation when it really hits the bulk of the population.
Housing debt is mainly held by the wealthier half of society. Credit card interest rates, as well as other unsecured consumer lines of credit, are so incredibly high that inflation is far from reducing the value of those debts, it merely slightly slows their rate of growth.
If you think inflation's impact on debt favours the poor, you have to look at the interest rates available for borrowing. Poor people get loans without collateral, so their interest rates price in inflation and then some. Wealthy people get collateralized loans at interest rates below inflation -- for an extreme example, look at how billionaires borrow against their stock holdings rather than sell stocks for cash.
I never mentioned the poor. I'm considering mostly the bulk of middle-class Millennials who went to college with crushing student loan debt who can't save up enough to buy a house.
The lowest poorest 20% have the highest credit card debt to income ration (almost 25%). Inflation will crush them. Cost of debt will go up, cost of living will go up. Inflation is the worst for poor people.
Periodic forgiveness of debts was fairly common in ancient societies - that's what the Jubilee originally was about, for example - so there's certainly precedent for it.
It's almost like rents rise to match incomes unless you build more housing. Rent control just means that the costs get offloaded to other things like the security deposit, application fees, and deferred maintenance. You can't regulate the market out of existence.