I’ve had a thesis for a while that the sudden increase in the cost of debt is one of the main drivers behind people believing the economy sucks, and my God: - ThreadSky

sky.skymarchini.net • 3 days ago

I’ve had a thesis for a while that the sudden increase in the cost of debt is one of the main drivers behind people believing the economy sucks, and my God:

Reposted from Joe Weisenthal

One chart that shows the huge gap between people with a ZIRP-era mortgage vs. those who don't.

From today's newsletter.

www.bloomberg.com/news/newslet...

Comments

kebe.com•3 days ago

Has someone mined the data of the 70s/80s? The Volcker shock (which started at the end of Carter's term and ended mid 1st-term-Reagan) may be instructive.

1mkk.bsky.social•3 days ago

Also- people paying more than that percentage of income on rent and never able to save down payment. Forever paying more than a mortgage.

borogove.bsky.social•2 days ago

I’m sure I’d have a strong reaction to this chart too, if two of the three axes weren’t unlabeled.

boomies-n-zoomies.bsky.social•3 days ago

Zero interest really helped paper over the fact that America was desperately short on housing units, at least if you were in the lucky cohort who could afford a down payment.

cameronpat.bsky.social•3 days ago

totally agree and it's not just the direct effects on debtors, either: software engineers earning $infinity from FAANG, venture capitalists subsidising a private taxi for every burrito, every economic time series increasing exponentially, etc

trashbot.bsky.social•2 days ago

It is sort of remarkable to degree to which the centrist consensus around Obama wants to point fingers at Biden for letting inflation get out of control when it is them who used a series of unprecedented financial gimmicks that created the ZIRP bubble

altrocks.bsky.social•3 days ago

I've had people tell me that the 18% homelessness increase in 2024 was the outlier and all other economic indicators showed it was a great economy. To me that points to a bad set of economic indicators because homelessness doesn't go up that much in a good economy. Klarna groceries are a bad sign 2.

lavendesic.bsky.social•2 days ago

People living outside their means blame minorities for their financial difficulties.

Makes sense!

spryoldlorax.bsky.social•2 days ago

I realized about that time (around 2021) that I was stuck in my current house forever. I will never be able to move. I will die in this house. I cannot afford to move. I cannot afford to buy a new house EVEN WITH the proceeds from this house as down-payment.

wanderlib.bsky.social•2 days ago

It's debt and job searching being GFC-levels of suck.

regimecpa.bsky.social•2 days ago

The labor market is very sick.

hyperlexic.bsky.social•3 days ago

similarly people with fixed rate mortgages were largely shielded from inflation whereas renters took the full brunt.

stephenjudkins.bsky.social•2 days ago

A house nearby me is for sale and seemed pretty cool. I would consider upgrading, except for the fact that a modest increase in total debt would also reset the interest rate on it from 2% to 7%. So I'm staying put forever

scottmccaskill.bsky.social•2 days ago

Could this help? https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx

stephenjudkins.bsky.social•2 days ago

I don't think that has much to do with mortgages

scottmccaskill.bsky.social•2 days ago

If you qualify, you can keep your existing mortgage. At least that was my understanding. You have to jump through some hoops. It's not just an IRS thing.

wowitschris.bsky.social•2 days ago

no expert but back in the day I was reading up on these & these were only in the context of deferring taxes.

Maybe there’s a financial tool that lets you transfer a mortgage to a new property but it’s orthogonal to 1031, which is literally an IRS thing bc 1031 is the section of the tax code

surrealjones.bsky.social•2 days ago

Only helps if it's an investment property, not if it's your primary residence.

nclud.bsky.social•2 days ago

Housing theory of everything striking again. But less everything and more some people

neilpostman.bsky.social•2 days ago

And critically that person who made those purchases is absolutely the person who will vote no matter what on that issue alone.

jgschraiber.bsky.social•2 days ago

I do think this could explain the disconnect between the actual economy and people's perception of it. Financing things just became crazy expensive and it was basically out of nowhere

how-are-u.bsky.social•2 days ago

I was always taught to live within my means and spend thriftily. Guess that's not the norm.

mbcarr.bsky.social•2 days ago

@quantian.bsky.social did some regression analysis about this a while ago. it’s probably still on twitter. but the upshot is that it explains a lot of that sentiment

bill-of-lefts.bsky.social•2 days ago

I mean, it’s more than perception, yeah? It’s an actual economic reality

eli403.bsky.social•2 days ago

I've thought for a while that massively low interest rates were kept low for way too long and wonder how much of a driver to inflation that was.

It's led to people who would usually sell a house refusing to do so just because of how low their mortgage is

connecticut-yankee.bsky.social•3 days ago

Welp, now you've zeroed in on why I quit being a real estate agent. 🥴

shahbanu.kawaii.social•3 days ago

connecticut-yankee.bsky.social•3 days ago

Like, are you happy I lost my career because I refused to be a scumbag and lie to people about their future, Grace?

robbinsa.me•3 days ago

oh god the ct market in particular

shahbanu.kawaii.social•3 days ago

> realtor™

boomies-n-zoomies.bsky.social•3 days ago

It’s always kinda funny when someone thinks they’ve got the moral high ground and then thoroughly demonstrate that they’re a trash person eager for a reason to hurt other people.

connecticut-yankee.bsky.social•3 days ago

Go fuck yourself, Grace.

thatusernameisslre.bsky.social•2 days ago

The fact that wages have fallen dramatically in real dollars is what has caused people to believe, rightly so, that the economy sucks.

Workers are unorganized and capitalists have taken advantage of that fact for decades to systemically erode wages.

doail.bsky.social•1 day ago

Wages were up in real dollars, especially for the lowest earners, over the last few years.

bradleymike.bsky.social•3 days ago

Totally agree with your thesis. The entire economy, top to bottom, is built on debt. Nobody cares what a house or a car costs, they care what the payment is.

lov4all.bsky.social•2 days ago

Stagnant wages, more debt.

aspwriter85.bsky.social•3 days ago

It also directly impacts mobility. We are locked in at a very low interest rate. We will have to more than double our rate to move anywhere. Plus the increase in base housing and low stock.

geminidrgn.bsky.social•2 days ago

yeah the problem is that the problem is the 30 year fixed rate, not 'the rate went up' but approximately 0 people want to hear that

aspwriter85.bsky.social•2 days ago

I've seen other places never do a 30-year loan.

captainahab.bsky.social•2 days ago

It's this plus the genuinely bad job market for people under 30

mgraalum.bsky.social•2 days ago

With the exception of about 2 years 2022 and 2023, this has been true my entire adult life

utopia-defer.red•2 days ago

Now also imagine you accumulated debt for a STEM career that was explicitly marketed as “safe, middle income” by everyone in your life

phasebinary.bsky.social•2 days ago

oh man, I started my computer science degree right after the dot-com crash, and then got my bay area mortgage in 2012, which means I really need to reflect how lucky I am to lock in both of those :-(

oneshoup.bsky.social•2 days ago

Similar to how law school students became super depressed in 2009 as the law bubble burst with the economy (it still hasn't recovered)

tektology-enjoyer.bsky.social•3 days ago

100% agree, honestly Quantitative Easing had basically become the post-2008 Social Contract. Maybe it was necessary to ditch it on some level but I don't think they anticipated how disruptive it'd be for people.

scottmccaskill.bsky.social•2 days ago

Thing was, & we learned from spending post covid, we could have spent our way out of the GFC but congress wouldn't. So the fed was left with QE, and that created a whole lot of behaviors based on ZIRP. Unfortunately b/c we got supplier inflation post covid, no one will lead with spending again.

tektology-enjoyer.bsky.social•2 days ago

I think it's more that "leading with spending" boosted wages relative to other things more than oligarchs liked. Important to point out that the drop in Purchasing Power (more useful than inflation imho) was price gouging + actual supply chain issues.

tektology-enjoyer.bsky.social•3 days ago

bethcodes.bsky.social•3 days ago

Stopping wage growth was enormously expensive.

zeldaokaloosa.bsky.social•2 days ago

I had a college project that asked us to analyze the costs of bringing blueberries to market and whether the price we pay for them is fair in light of human and environmental costs... And stagnant wages was a major thing I kept coming back to. Should we pay more? Maybe. Can most folks afford to? No

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