We need to be making it possible for people to earn a living safely. We need to be focused on creating new work opportunities that work in the current climate.
This "waiting for things to return to normal" looks pretty dumb to me. I think the stimulus checks and other relief funds are smarter than just throwing a third of Americans out into the street, but it's not really a long term solution. A long term solution is the economy needs to adapt and we need to create work opportunities and reshape work with more of an eye towards germ control.
I've been trying to write down some of my thoughts about how we move forward in a sensible way. For example:
Earlier this year I wrote about a work opportunity I know of and about my opinion that this model should be borrowed for other kinds of work. That piece is here:
I'm very frustrated at the kinds of things I see other people saying. We need to stop framing this as an either/or thing: Either we protect ourselves from the virus or we go back to work.
We need to do both. We need to figure that out. We aren't even trying. This assumption that we need to choose one or the other is part of the problem. It's not true.
I get what you're saying here, and I respect the fact that you were able to pull yourself up by your bootstraps, literally.
Depending upon where you get your numbers there are 18-31 million unemployed right now. Some of that will be solved by brains -- people who can find niches and what not. But with a 1/3 of the renters who won't be able to make the August check, that's just a bunch of people who can't afford to spend money at all.
So demand is purely in the trash right now.
So the question is, if you could get 18-31 million people in gig positions, what would happen?
Well for one thing the pay would be low, because the supply for labor (unemployed people) would be more then plentiful to meet current demand.
E.g. How many uber drivers do we really need right now? And if you doubled or tripled the amount of uber drivers what happens to the income for one uber driver? That would drop by basically by 1/3, as more uber drivers compete for the same amount of rides. And more and more uber drivers are willing to take less money for the same effort.
The result is you have an uber driver making less income and less willing to spend money. And that starts a vicious cycle. More and more people not willing to spend, more and more companies laying off individuals.
That continues until we hit a bottom, which we may or may not have seen yet, given the massive amounts of evictions coming as of today.
I agree with your sentiment, but the problem is that there is no "we", there are only a variety of different people with different interests and incentives, all muddled by a series of government actions intended to help.
My opinion is that there are a number of business models which are simply untenable in the current pandemic and taxation climate, like water-front bars. Many people are 'sticking' to these troubled businesses, with hopes of improvement; the reality is that their tax obligations, facility costs (including rent/mortgage), and general cost structure will not allow them to survive.
As a commercial landlord, I've seen all sorts of assistance offered, but no local government I know of is offering property tax deferrals. I have a $60,000 property tax bill due, and tenants who can't pay their rent (I've discounted them 75% to help them out.)
There's a distinction between assistance to renters vs assistance to landlords: assistance to renters prevents them from becoming homeless, whereas landlords are usually not at risk of becoming homeless.
Mass homelessness would be hellish for everyone. While we are all naturally focused on our individual situations it's good to not lose sight of the big picture.
IIRC, states and cities can’t really run up year-to-year deficits the way the federal government does. They can really only cut services, issue bonds, raise taxes, or use emergency funds to cover increased expenses. That’s why federal bailouts of states keeps coming up.
I’m budgeting for up to a 10% aggregate tax increase now, but I have no idea if that’s too high or low.
State governments are totally MIA here. There’s not even a hint they’ll defer state or local taxes, let alone forgive. In fact in some states they’re proposing the highest income tax hikes in their history.
Well Congress needs to get reasonable with the boost per week for unemployment rather than the $600 a week boost; a number likely chosen for that 600/40 magic number. The $600 isn't sustainable let alone on top of the $1200 per house hold plus $500 per dependent.
Worse is the stuffing of the bills with defense appropriations and more items not related to COVID19. Worse is the attempt to feed the state governments between five hundred to a trillion dollars to shore up budgets of states that are not even trying to clip their expenditures, most of this is routed towards shoring up their pension systems and again, not COVID19 related.
The real pandemic is the debt bomb that Congress is foisting on the American public, remember, no serious crisis can be allowed to go to waste. It is time for the money to flow to friends and family.
> Worse is the attempt to feed the state governments between five hundred to a trillion dollars to shore up budgets of states that are not even trying to clip their expenditures,
States shouldn't be trying to clip overall service expenditures during a massive economic and public health emergency that creates novel challenges for education delivery (health, economic safety net, and education cover much of the big ticket state spending items, and this situation creates additional demands on all of them.)
And, unlike the feds, states can't as a practical (and usually constitutional) matter meet temporary emergency need with deficit spending for operations, because most have Constitutional balanced operating budget requirements but, more importantly (because it's a constraint that applies whatever the state chooses), they have a much higher cost of borrowing because they aren’t currency issuers whose debt is in their own currency.
For that reason, it's normal for the federal government to backstop the states on major emergencies specifically so they aren't forced to make temporary economic emergencies worse by taking more money out through spending cuts or saddle taxpayers with greater debts than if the feds were paying by borrowing at the state level.
The $600 a week number was chosen because the average American makes $900 a week, and the average unemployment amount is $300. $900 - $300 = $600 to make up the shortfall and get everyone to the average.
This is obviously flawed, and the initial idea was income replacement so your income remained the same, but the state of the IT infrastructure in unemployment offices across the US is so dismal there was no way they could cope with that requirement.
I'm not sure this is the time to be debt fear mongering. Such fear-mongering was nowhere to be seen when the Fed hit the markets with 2+ Trillion dollars. That money-grab went off without a peep, only when the money is going to run-of the mill Americans do we want to close our purse strings.
The $600 per week is definitely sustainable as are all the other payments that are going directly to people. If we can afford all the unrelated stuff you mention and a ton you didn't, we can afford to help people directly, which is the absolute number one priority.
The real pandemic is people dying and being disabled, not debt. Saying it's debt is callous and cruel as people are dying and becoming disabled all around us. How is it possible to have no empathy at all like this?
> Worse is the attempt to feed the state governments between five hundred to a trillion dollars to shore up budgets of states that are not even trying to clip their expenditures
This is so frustrating to me. States pretend like their budgets are sacrosanct and refuse to take any action to prepare themselves. They’ll milk every last drop from their constituents before they start cutting fat.
Could someone knowledgeable in this topic maybe tell us which international financial institutions will be mostly impacted by this kind of defaults (short or long term). Any CDS-like turmoil possible?
Turmoil, yes, but internalized to the corporations impacted. One of the major impacts of the financial crisis a decade ago was the massive increase in private equity ownership of real estate. Groups like Blackstone (BX), the largest residential landlord in the US, may take a hit. Not covered in the article (but referenced elsewhere on HN lately), you're seeing even worse trends in retail-focused commercial mortage backed security portfolios. REITS like Simon (SPG, a mall operator) have been cut in half since pre-COVID.
Your question, though, is presumably around whether we'd expect problems with systemically important banks. Highly unlikely, for two reasons:
First, regulatory changes to their capital structures largely prevent them from holding things like CMBS on their balance sheet unless they reserve significant amounts of capital against it. This is what facilitate the rise of private equity landlordship: banks exited the business.
Second (and this has, largely, already happened) the Fed and other central banks learned their lessons well, and were swift and comprehensive about backstopping the financial markets.
The housing market is delusional in the US but it's even crazier here in Canada. We never had the 2008 correction that the US had, and things just continued to climb. In southern Ontario housing prices are so out of wack of what earning potential is that it just boggles the mind.
I thought the COVID crisis would blow this all up, but it hasn't. In fact rural land values keep climbing because of wealthy Torontonians now seeking to have cottages and the like outside of the city.
I don't even know what to say about it at this point. Admittedly the economic situation isn't as dire here because the gov't has spent freely to help keep people afloat, but it just seems so irrational to me that housing prices continue to go up at almost 10% a year when the economic fundamentals are so messed up.
Its long overdue, and I hope it happens (even though I am a home owner). It seems to me all the stimulus money ends up in the realty market. It looks great for home owners (but money printing isn't good for anyone). It really hurts the people just getting started in the economy.
It happens, but rarely. We should really ease pressure by putting in laws to keep prices lower. In three cities I've lived, every 'good deal' is snatched in cash by landlords or flippers. Why not regulate the amount or at least the velocity of how many homes a person can own? My current landlord has 16 houses, that's ridiculous.
Housing prices will drop, rich individuals and companies flush with profits from the federally propped up stock market will swoop in and buy them at a discount. Stocks will drop as cash leaves it for housing, negatively affecting retirement accounts and lower net worth individuals. The new landlords will rent them out, housing prices will rise again.
The current system works perfectly for what it was designed to do.
The cycle repeats endlessly funneling money from the lower class upwards.
It would seem obvious that housing prices should drop in the near term (and I hope they do), but I can't totally square that with falling mortgage rates and rising asset inflation. If the Fed rate stays at 0% then I've been told to expect 30-year fixed mortgage rates should eventually drop to between 1.5-2%. Rates that low increase buying power and could be a powerful form of stimulus for the housing market. Beyond that, rental real estate is not immune to the current inflationary multiple expansion seen in financial assets. The lower the yield on something like $SPY falls, the more attractive the yield/rent from real estate becomes by comparison.
It's funny, I've been hearing since at least 2011 that a stock market correction is going to happen any time now. For the past few years I've heard the same thing about housing. But there is so much money out there looking for a return, and so few good places to allocate it, that it is hard to see what the catalyst could be for causing a correction. Obviously things can't go on this way forever though.
A financial collapse on top of a demand shock wouldn't have helped. This is speculation but Wells Fargo and Deutsche Bank were probably at risk of collapsing, thereby tanking the market for CLOs and sparking a wave of corporate bankruptcies and bank failures. In order to prevent this and restore confidence, the fed went all out. There's always waste involved but I'm hesitant to call the whole thing a waste without knowing what the Fed knows.
Do agree on unemployment though. The overhead of administering the program is nonsensical. Florida purposefully designed its systems to deny as many claims as possible. The idea of designing government systems as terribly as possible so that people hate the government is holding us back in times of crisis.
Why is it that whenever the government does something, it takes me about ten minutes to come up with a better plan? I've considered that I could be wrong that my plan is actually better, or that I'm missing something (I surely am) but I don't find that compelling.
I'm starting to think that the outcome of our political systems in the West produces suboptimal compromises engineered by politicians who are quite frankly ignorant, incompetent, corrupt, and really just not good specimens of the species. It's like the system is designed to be mediocre.
Agreed, but is this really the right time? A discussion about the benefits of UBI seems like an excellent discussion to have after making sure all the folks who will be in serious trouble once the $600 payments stop get some help from their government ...
Is your confusion around the verb tense in the headline? I.e. "renters did expect to miss" (past) vs. "renters are expected to miss" (present)?
In either case it doesn't make much difference. It was a survey done in July for August rent. One-third of renters DID EXPECT to miss August rent; and now, August rent being past due, we EXPECT that one-third of August rent was missed (lacking actual data around August rent payments made).
You tried to add in a bit of non sequitur / additional unsubstantiated info in your interpretation which was about the "scraping together" - there's nothing about that in the data
This isn't real surprising. On a good day, a ridiculous percentage of people don't pay their rent when it's due. This doesn't mean they don't pay their rent. They just pay it late. Chronically.
Economic activity is not the be-all, end-all purpose of human life. But even if it was...
Every business opening tomorrow as if there was no pandemic does not mean the economy will magically return to Nov 2019.
People who do not feel safe do not spend money freely. People without financial security tend to not spend on frivolous things. People with crushing medical debt do not contribute to the economy the same way that they used to.
It's OK to want a return to normalcy, but it will only happen through a careful process (which is already not happening). Getting frustrated and saying to hell with caution has no chance of success now, or ever.
No, we need to help individuals and people who are struggling with economic assistance. Economic assistance isn't sacrificing people onto the alter of capitalism.
Government need to reasonable, still have the lockdown while we know the virus is not that dangerous ? paying people extra unemployment money to not working ?
> still have the lockdown while we know the virus is not that dangerous ?
Does the graph presented of those most likely to have issues with rent match with those states that locked down the hardest?
> paying people extra unemployment money to not working ?
I'm confused - are you implying that by giving some people money (for some more than they would earn while employed), that prevented them paying rent? If any, it would seem like a failure in the dispersal of said money.
[+] [-] DoreenMichele|5 years ago|reply
This "waiting for things to return to normal" looks pretty dumb to me. I think the stimulus checks and other relief funds are smarter than just throwing a third of Americans out into the street, but it's not really a long term solution. A long term solution is the economy needs to adapt and we need to create work opportunities and reshape work with more of an eye towards germ control.
I've been trying to write down some of my thoughts about how we move forward in a sensible way. For example:
Earlier this year I wrote about a work opportunity I know of and about my opinion that this model should be borrowed for other kinds of work. That piece is here:
http://writepay.blogspot.com/2020/03/the-textbroker-solution...
I also wrote about my thought that more eateries need a contactless takeout option similar to Little Caesar's pizza portal:
https://projectsro.blogspot.com/2020/07/pizza-portal.html
I'm very frustrated at the kinds of things I see other people saying. We need to stop framing this as an either/or thing: Either we protect ourselves from the virus or we go back to work.
We need to do both. We need to figure that out. We aren't even trying. This assumption that we need to choose one or the other is part of the problem. It's not true.
[+] [-] bb88|5 years ago|reply
Depending upon where you get your numbers there are 18-31 million unemployed right now. Some of that will be solved by brains -- people who can find niches and what not. But with a 1/3 of the renters who won't be able to make the August check, that's just a bunch of people who can't afford to spend money at all.
So demand is purely in the trash right now.
So the question is, if you could get 18-31 million people in gig positions, what would happen?
Well for one thing the pay would be low, because the supply for labor (unemployed people) would be more then plentiful to meet current demand.
E.g. How many uber drivers do we really need right now? And if you doubled or tripled the amount of uber drivers what happens to the income for one uber driver? That would drop by basically by 1/3, as more uber drivers compete for the same amount of rides. And more and more uber drivers are willing to take less money for the same effort.
The result is you have an uber driver making less income and less willing to spend money. And that starts a vicious cycle. More and more people not willing to spend, more and more companies laying off individuals.
That continues until we hit a bottom, which we may or may not have seen yet, given the massive amounts of evictions coming as of today.
[+] [-] nickff|5 years ago|reply
My opinion is that there are a number of business models which are simply untenable in the current pandemic and taxation climate, like water-front bars. Many people are 'sticking' to these troubled businesses, with hopes of improvement; the reality is that their tax obligations, facility costs (including rent/mortgage), and general cost structure will not allow them to survive.
[+] [-] smileysteve|5 years ago|reply
For the 3 trillion CARES; the U.S. probably could have funded it for this year easily, but companies would fund it on their own in the future.
[+] [-] fortran77|5 years ago|reply
[+] [-] xenocyon|5 years ago|reply
Mass homelessness would be hellish for everyone. While we are all naturally focused on our individual situations it's good to not lose sight of the big picture.
[+] [-] barryrandall|5 years ago|reply
I’m budgeting for up to a 10% aggregate tax increase now, but I have no idea if that’s too high or low.
[+] [-] ed25519FUUU|5 years ago|reply
[+] [-] Shivetya|5 years ago|reply
Worse is the stuffing of the bills with defense appropriations and more items not related to COVID19. Worse is the attempt to feed the state governments between five hundred to a trillion dollars to shore up budgets of states that are not even trying to clip their expenditures, most of this is routed towards shoring up their pension systems and again, not COVID19 related.
The real pandemic is the debt bomb that Congress is foisting on the American public, remember, no serious crisis can be allowed to go to waste. It is time for the money to flow to friends and family.
[+] [-] dragonwriter|5 years ago|reply
States shouldn't be trying to clip overall service expenditures during a massive economic and public health emergency that creates novel challenges for education delivery (health, economic safety net, and education cover much of the big ticket state spending items, and this situation creates additional demands on all of them.)
And, unlike the feds, states can't as a practical (and usually constitutional) matter meet temporary emergency need with deficit spending for operations, because most have Constitutional balanced operating budget requirements but, more importantly (because it's a constraint that applies whatever the state chooses), they have a much higher cost of borrowing because they aren’t currency issuers whose debt is in their own currency.
For that reason, it's normal for the federal government to backstop the states on major emergencies specifically so they aren't forced to make temporary economic emergencies worse by taking more money out through spending cuts or saddle taxpayers with greater debts than if the feds were paying by borrowing at the state level.
[+] [-] rescripting|5 years ago|reply
This is obviously flawed, and the initial idea was income replacement so your income remained the same, but the state of the IT infrastructure in unemployment offices across the US is so dismal there was no way they could cope with that requirement.
[+] [-] x86_64Ubuntu|5 years ago|reply
[+] [-] adamsea|5 years ago|reply
And how many Americans has that pandemic killed over the last few months?
[+] [-] mnm1|5 years ago|reply
The real pandemic is people dying and being disabled, not debt. Saying it's debt is callous and cruel as people are dying and becoming disabled all around us. How is it possible to have no empathy at all like this?
[+] [-] germinalphrase|5 years ago|reply
Hyperbolic.
[+] [-] ed25519FUUU|5 years ago|reply
This is so frustrating to me. States pretend like their budgets are sacrosanct and refuse to take any action to prepare themselves. They’ll milk every last drop from their constituents before they start cutting fat.
[+] [-] jlnthws|5 years ago|reply
[+] [-] Lavery|5 years ago|reply
Your question, though, is presumably around whether we'd expect problems with systemically important banks. Highly unlikely, for two reasons:
First, regulatory changes to their capital structures largely prevent them from holding things like CMBS on their balance sheet unless they reserve significant amounts of capital against it. This is what facilitate the rise of private equity landlordship: banks exited the business.
Second (and this has, largely, already happened) the Fed and other central banks learned their lessons well, and were swift and comprehensive about backstopping the financial markets.
[+] [-] kache_|5 years ago|reply
[+] [-] cmrdporcupine|5 years ago|reply
I thought the COVID crisis would blow this all up, but it hasn't. In fact rural land values keep climbing because of wealthy Torontonians now seeking to have cottages and the like outside of the city.
I don't even know what to say about it at this point. Admittedly the economic situation isn't as dire here because the gov't has spent freely to help keep people afloat, but it just seems so irrational to me that housing prices continue to go up at almost 10% a year when the economic fundamentals are so messed up.
[+] [-] rolobio|5 years ago|reply
[+] [-] axaxs|5 years ago|reply
[+] [-] wonderwonder|5 years ago|reply
The current system works perfectly for what it was designed to do. The cycle repeats endlessly funneling money from the lower class upwards.
[+] [-] nugget|5 years ago|reply
[+] [-] bluedevil2k|5 years ago|reply
[+] [-] jeffreyrogers|5 years ago|reply
[+] [-] AbrahamParangi|5 years ago|reply
The government has spent $10,000 per US resident propping up banks, hedge funds, dog-shit junk-grade corporate debt, etc.
Do you think that money was well spent propping up braindead investment funds, or would you have used it better?
[+] [-] epistasis|5 years ago|reply
We are at ridiculously high unemployment numbers, so whether people are "incentivized" to work or not doesn't mean much.
[+] [-] cowmoo728|5 years ago|reply
Do agree on unemployment though. The overhead of administering the program is nonsensical. Florida purposefully designed its systems to deny as many claims as possible. The idea of designing government systems as terribly as possible so that people hate the government is holding us back in times of crisis.
UBI payments simplify the whole thing.
[+] [-] eloff|5 years ago|reply
I'm starting to think that the outcome of our political systems in the West produces suboptimal compromises engineered by politicians who are quite frankly ignorant, incompetent, corrupt, and really just not good specimens of the species. It's like the system is designed to be mediocre.
What's the alternative though?
[+] [-] calvinbhai|5 years ago|reply
Decide minimum wage, then give UBI to adults based on that.
If $15 per hr is minimum wage, UBI should be $2600 per month.
Once someone is getting this UBI, it should be legal to have jobs that pay $1 per hr or $0.5 per hr.
[+] [-] dustingetz|5 years ago|reply
[+] [-] adamsea|5 years ago|reply
[+] [-] dingaling|5 years ago|reply
One-third had expected to miss, but managed to scrape together the payment?
Or
One-third are expected to miss?
Brevity is valuable but not at the cost of clarity.
[+] [-] hammock|5 years ago|reply
In either case it doesn't make much difference. It was a survey done in July for August rent. One-third of renters DID EXPECT to miss August rent; and now, August rent being past due, we EXPECT that one-third of August rent was missed (lacking actual data around August rent payments made).
You tried to add in a bit of non sequitur / additional unsubstantiated info in your interpretation which was about the "scraping together" - there's nothing about that in the data
[+] [-] snissn|5 years ago|reply
[+] [-] abstractbarista|5 years ago|reply
[+] [-] FriendlyNormie|5 years ago|reply
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[+] [-] NDizzle|5 years ago|reply
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[+] [-] AbrahamParangi|5 years ago|reply
Bars will have patrons, but won't be as busy. People will travel, but not as much. Restaurants will still serve food, but half will be delivery.
The govt. has little control over real economic productivity except by handling the pandemic and the economic shocks produced by it.
[+] [-] skuhn|5 years ago|reply
Every business opening tomorrow as if there was no pandemic does not mean the economy will magically return to Nov 2019.
People who do not feel safe do not spend money freely. People without financial security tend to not spend on frivolous things. People with crushing medical debt do not contribute to the economy the same way that they used to.
It's OK to want a return to normalcy, but it will only happen through a careful process (which is already not happening). Getting frustrated and saying to hell with caution has no chance of success now, or ever.
[+] [-] pwinnski|5 years ago|reply
[+] [-] unknown|5 years ago|reply
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[+] [-] throwaway543123|5 years ago|reply
[+] [-] gizmo385|5 years ago|reply
[+] [-] troughway|5 years ago|reply
[+] [-] swiley|5 years ago|reply
[+] [-] unknown|5 years ago|reply
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[+] [-] matz1|5 years ago|reply
[+] [-] SketchySeaBeast|5 years ago|reply
Does the graph presented of those most likely to have issues with rent match with those states that locked down the hardest?
> paying people extra unemployment money to not working ?
I'm confused - are you implying that by giving some people money (for some more than they would earn while employed), that prevented them paying rent? If any, it would seem like a failure in the dispersal of said money.