Non Footy Chat Thread II

[hindy111]

it is quite amazing the things we think about during our existence that really do not even matter in the end.
We all will be dust as some point. Put in a smoker and fired up and stuck in an urn.
The end

 

[Bandwagon]

Oh, sure, but the last 6 months have seen them go to, what, $7 trillion? And to keep that ponzi scheme going it has to be exponential growth, doesn't it?

Yes, it's not just the amount of money either, it's where it's being spent. As an example the fed buying up junk corporate bonds putting a floor on the value of bad debt, that would otherwise be completely f**king worthless. That's next level shit that one.

And didn't Powell basically say yesterday that he doesn't care about inflation, now, as long as they are progressing towards "full employment"?

To be fair, inflation has really only been a problem post GFC in that despite pumping trillions into the economy it's remained stubbornly low, and inflation is the only way the value of all this debt is gonna come down.

I just don't buy the MMT thing. Sooner or later that's gonna lead to inflation that will be really hard to reign in.

It doesn't have to, because the central tenet is to utilise capacity, so policy is set around the amount of spare capacity in the economy. It's not just printing money willy nilly, There's always room for an external factor to create conditions that lead to out of control inflation, but that remains the case under all economic theory that relies upon markets to do their thing.

We need to be clear that what is happening now, isn't MMT at work, because MMT is not about propping up asset prices. For mine this is neo liberal economics in it's death throes, it may well survive, but i don't believe it'll look quite the same again.

 

[Twizzle]

Well thats why they invented the rona ffs

the world according to Tony Abbott

 

[Hollywood Jesus]

On inflation...when were house prices excluded from CPI? 1998? Right when the housing boom started?

If that's correct...is our inflation actually significantly under reported? Have we been experiencing stagflation for some time but it's been whittled away through exclusion?

 

[parra pete]

An Englishman and an Irishman walk into a bakery
The pommie steals 3 buns and puts them into his pockets and leaves.
He says to the Irishman, "That took great skill and guile to steal those buns. The owner didn't even see me."
The Irishman replied, "That's just simple thievery, I'II show you how to do it the honest way and get the same result."
The Irishman then proceeded to call out the owner of the bakery and says, "Sir, I want to show you a magic trick."
The owner was intrigued so he came over to see the magic trick. The Irishman asked him for a bun and then he proceeded to eat it.
He asked 2 more times and after eating them again the owner says, "Okay my friend, where's the magic trick?".
The Irishman then said, "Look in the pom's pockets."

 

[Hollywood Jesus]

Yes, it's not just the amount of money either, it's where it's being spent. As an example the fed buying up junk corporate bonds putting a floor on the value of bad debt, that would otherwise be completely f**king worthless. That's next level shit that one.

Sure, and that's the legitimate argument of legitimate lefties - massive debt to prop up corporates while the common man gets nothing.

And, to be fair and against my earlier point, if the money is going to corporates and not to average folk, then it's not actually going into the real economy so it's not really creating inflation, is it?

To be fair, inflation has really only been a problem post GFC in that despite pumping trillions into the economy it's remained stubbornly low, and inflation is the only way the value of all this debt is gonna come down.

See above, I guess.

It doesn't have to, because the central tenet is to utilise capacity, so policy is set around the amount of spare capacity in the economy. It's not just printing money willy nilly, There's always room for an external factor to create conditions that lead to out of control inflation, but that remains the case under all economic theory that relies upon markets to do their thing.

And lack of spare capacity was what drove interest rates up under Howard (unemployment at 4.4% led to wage growth at 4%...more money to spend...limited capacity to produce more to counter increased demand...inflation...rates jacked to counter).

So, is the question then...will the extra money come into play if capacity is utilised? If Powell's full employment approaches will this extra money then create inflation or...because it's already in the system (sort of - see above) it will only be money created after that that?

Genuine question, so please let me know what your thoughts are.

We need to be clear that what is happening now, isn't MMT at work, because MMT is not about propping up asset prices. For mine this is neo liberal economics in it's death throes, it may well survive, but i don't believe it'll look quite the same again.

And so we come to the corporate socialism/private capitalism thing again, which is fair enough.

But there is some dumping of cash from debt into the economy at the moment and so surely it's MMT-ish? I don't know the exact US split or what the supposed $1200 payments etc. etc. amounted to vs. bonds...but here in Australia we've dumped tens of billions and we've got legislated tax cuts coming that (with a sluggish economy) I'm guessing we're going to have to borrow against if they are allowed to go forward.

On MMT, and I guess going back to my earlier question about what effect the money has if labour capacity is utilised...is inflation avoided by raising taxes to take this money out of the system? And then the money pays off the debt and is removed from the economy by the Fed/RBA, sending us back to an equilibrium?

And lastly, don't we already have stagflation? And that's with land value out of the equation, as per my last post? 0.4% underlying in June, wasn't it? With a shrinking GDP? So, what's the real figure for changes in GDP per capita taking into account inflation on top?

Anyways...gotta go and pretend to work again...

 

[Bandwagon]

On inflation...when were house prices excluded from CPI? 1998? Right when the housing boom started?

If that's correct...is our inflation actually significantly under reported? Have we been experiencing stagflation for some time but it's been whittled away through exclusion?

New Dwellings and rents are captured in the CPI, but not land purchases, to a degree rents are a half decent proxy for existing dwellings, though of course ROI has generally come down over time on rental properties as capital gains have increased, there's still some what of a relationship there.

https://www.rba.gov.au/publications/smp/2019/may/box-c-housing-in-the-consumer-price-index.html

 

[Hollywood Jesus]

Now, I've never built a new house before but I have heard (so, obviously anecdotal) that most of the increase in housing has come from a surge in the value of the land and not the actual construction.

Is that right? @Suitman ?

Now, I don't know how much weight anyone would put in this report (that's up to each of you to decide individually), but...



https://www.infrastructureaustralia...th_in_east_coast_capital_cities_july_2013.pdf

Now, excluding the post-GFC period that's an annual average of ~5% across 20 years - after CPI is excluded. Even including the post-GFC period that's 3.25% above CPI.

This seems to show house prices after CPI are lower?

https://www.rba.gov.au/publications/bulletin/2015/sep/3.html

• During the 1980s, annual housing price inflation was high, at nearly 10 per cent on average, but so too was general price inflation. In real terms, housing price inflation during the 1980s was relatively low, at 1.4 per cent per annum compared with 4.5 per cent during the period from 1990 to the mid 2000s, and 2.5 per cent over the past decade.

So, land was only 0.75%/year more than overall housing?

Or, because the cost of the land is, what two-thirds of the cost of the entire house, land was probably around 2% more?

Is that enough to make my question around land price relevant?

Anyways...

 

[Poupou Escobar]

Dumb jobs? That is harsh mate. Anyone who gets up amd goes to works job is important.

I never said they weren't. As a very smart person I think intelligence is highly overrated for both personal success and life satisfaction, as well as for social good. Some of society's most selfish parasites are intelligent people. Unfortunately society (the top end that is) holds up smart people as some kind of social paragon that deserves respect and adulation. Personally I think intelligence is a form of privilege that merkins use to benefit themselves and justify having more than their share of resources. BLM should be protesting against it. They could rebrand as DLM.

 

[Poupou Escobar]

Well that's an entirely separate issue and has little to nothing to do with the discussion at hand.

How 'bout we go back to the example I provided, please explain where all these surpluses were that "paid back the debt" created by say, the period around WW2.

Wasn't that a period of unprecedented economic growth coupled with government spending on infrastructure rather than welfare? That ship has sailed and is no longer relevant.

 

[Poupou Escobar]

Sure, and that's the legitimate argument of legitimate lefties - massive debt to prop up corporates while the common man gets nothing.

If you've got superannuation and/or a job you're getting plenty from corporations. Thanks to labour laws, corporations are the new welfare state.

 

[hindy111]

Now, I've never built a new house before but I have heard (so, obviously anecdotal) that most of the increase in housing has come from a surge in the value of the land and not the actual construction.

Is that right? @Suitman ?

Now, I don't know how much weight anyone would put in this report (that's up to each of you to decide individually), but...

View attachment 41559

https://www.infrastructureaustralia...th_in_east_coast_capital_cities_july_2013.pdf

Now, excluding the post-GFC period that's an annual average of ~5% across 20 years - after CPI is excluded. Even including the post-GFC period that's 3.25% above CPI.

This seems to show house prices after CPI are lower?

https://www.rba.gov.au/publications/bulletin/2015/sep/3.html


So, land was only 0.75%/year more than overall housing?

Or, because the cost of the land is, what two-thirds of the cost of the entire house, land was probably around 2% more?

Is that enough to make my question around land price relevant?

Anyways...

Both. I know my Dad built a house down the coast in 1996. A 3 bedda cost 74k. Built by Masterton. He could of went a cheaper builder at around 65k.
I'd imagine you would add 100k to that price now......Perhaps a little more.
So I'd say a house would be atleast double now to build. Closer to 2.5 x the cost.

 

[hindy111]

I never said they weren't. As a very smart person I think intelligence is highly overrated for both personal success and life satisfaction, as well as for social good. Some of society's most selfish parasites are intelligent people. Unfortunately society (the top end that is) holds up smart people as some kind of social paragon that deserves respect and adulation. Personally I think intelligence is a form of privilege that merkins use to benefit themselves and justify having more than their share of resources. BLM should be protesting against it. They could rebrand as DLM.

I think I'm dumb, or maybe just happy......

 

[Bandwagon]

Wasn't that a period of unprecedented economic growth coupled with government spending on infrastructure rather than welfare? That ship has sailed and is no longer relevant.

So that'll be a no, you can't, why not just say so?

 

[Bandwagon]

I never said they weren't. As a very smart person I think intelligence is highly overrated for both personal success and life satisfaction, as well as for social good. Some of society's most selfish parasites are intelligent people. Unfortunately society (the top end that is) holds up smart people as some kind of social paragon that deserves respect and adulation. Personally I think intelligence is a form of privilege that merkins use to benefit themselves and justify having more than their share of resources. BLM should be protesting against it. They could rebrand as DLM.

Intelligence is most definitely a form of privilege, smart merkins get a big head start over dumb merkins, all else being equal.

 

[Bandwagon]

Now, I've never built a new house before but I have heard (so, obviously anecdotal) that most of the increase in housing has come from a surge in the value of the land and not the actual construction.

Is that right? @Suitman ?

Now, I don't know how much weight anyone would put in this report (that's up to each of you to decide individually), but...

View attachment 41559

https://www.infrastructureaustralia...th_in_east_coast_capital_cities_july_2013.pdf

Now, excluding the post-GFC period that's an annual average of ~5% across 20 years - after CPI is excluded. Even including the post-GFC period that's 3.25% above CPI.

This seems to show house prices after CPI are lower?

https://www.rba.gov.au/publications/bulletin/2015/sep/3.html


So, land was only 0.75%/year more than overall housing?

Or, because the cost of the land is, what two-thirds of the cost of the entire house, land was probably around 2% more?

Is that enough to make my question around land price relevant?

Anyways...

It's certainly a relevant enough point, but it's also worth considering what's built into the price of residential land, namely the infrastructure that surrounds it.

When you buy a block you're paying for the road, the power, the sewage, and so on.

 

[Hollywood Jesus]

Once again, I'm not a house building expert by any means, but...hasn't that always been the case?

 

[Twizzle]

Once again, I'm not a house building expert by any means, but...hasn't that always been the case?

yes, but the contributions are higher now due to higher infrastructure costs

if council, or state govt (depending on who owns the road) build something, its much more pricier than if private enterprise build it

 

[Eelogical]

Yes, this is true, they should all uproot their lives for a few months of low paid employment thousands of miles away.

Back in my day, if i needed a job I'd carry my horse, Trevor Snr, ten thousand miles through six foot deep snow and across mountains and deserts to live in a cardboard box by the side of the road, just so i could get eaten alive by mosquitoes as i slept after a hard days work picking mangoes,

merkins are soft I tells ya.

I showed your response to the mrs. She confirmed my initial thoughts that there was quite the element of sarcasm involved. She also said "the youngins of today could show their elders that they would lead Australia into the future via a hard working ethic". I'm not one to contradict the mrs.

 

[Bandwagon]

And lack of spare capacity was what drove interest rates up under Howard (unemployment at 4.4% led to wage growth at 4%...more money to spend...limited capacity to produce more to counter increased demand...inflation...rates jacked to counter).

So, is the question then...will the extra money come into play if capacity is utilised? If Powell's full employment approaches will this extra money then create inflation or...because it's already in the system (sort of - see above) it will only be money created after that that?

Genuine question, so please let me know what your thoughts are..

I think first you have to question what Powell means by the term "full employment", is it literal, or is it Nairu? Because if it's the latter, which is the generally accepted version in neo liberal economics, then inflation isn't a problem by definition, if it's the former, then it's about the economies ability to absorb the extra demand that creates, which boils down to productivity.

As it stands, all the extra money being pumped into the US economy since the GFC is being absorbed by asset price increase, it isn't going into the real economy. We know this because wages aint rising, and inflation is low, but asset prices are increasing at far higher rates.

So for mine that just highlights that it isn't labour that's being supported, it's capital, and given that is held by a (relatively speaking) small number of people, it is only going to cause inflation of the things those people spend the most of their money on, which of course is assets.

The one percent don't drive up the price of milk and bread.
.

But there is some dumping of cash from debt into the economy at the moment and so surely it's MMT-ish? I don't know the exact US split or what the supposed $1200 payments etc. etc. amounted to vs. bonds...but here in Australia we've dumped tens of billions and we've got legislated tax cuts coming that (with a sluggish economy) I'm guessing we're going to have to borrow against if they are allowed to go forward.

On MMT, and I guess going back to my earlier question about what effect the money has if labour capacity is utilised...is inflation avoided by raising taxes to take this money out of the system? And then the money pays off the debt and is removed from the economy by the Fed/RBA, sending us back to an equilibrium?

My understanding is that if a state can simply print money at a whim ( so to speak ) then taxation is completely unnecessary in terms of raising revenue for the state. However, it is a useful tool in regulating money supply, and thus demand, and thus inflation.

And lastly, don't we already have stagflation? And that's with land value out of the equation, as per my last post? 0.4% underlying in June, wasn't it? With a shrinking GDP? So, what's the real figure for changes in GDP per capita taking into account inflation on top?

Anyways...gotta go and pretend to work again...

I don't believe we do, even taking the price of land into account, we're neither seeing persistently high inflation, nor persistently high unemployment. Yes there is high unemployment now, but it's all to early to start calling it "persistent"

Though I suspect that's not going to last given time, I would also expect that inflation will fall over time as well.