Economics

So many of us are caught in the same trap, chasing an ideal of productivity that seems to always be just out of reach.

We wear our busyness like a badge of honour as if being constantly stressed and overworked is something to be proud of.

We live in a world that worships at the altar of productivity. From the moment we wake up to the sound of our alarm clocks, to the final emails we send before collapsing into bed, we are caught in an endless cycle of tasks, deadlines, and expectations.

We are told that success means doing more, achieving more, and being more efficient. But this shitty sidequest, this hamster wheel, this relentless pursuit of productivity is making us less human. It’s making us less happy. And it’s making us less…well, us.

As interest rates have increased, mortgage payments, car payments, and other credit payments are now more expensive. This rise in everyday expenses has significantly affected consumer sentiment about the economy.

Economists have traditionally looked to unemployment and inflation rates to gauge consumer sentiment, but despite low unemployment and declining inflation, consumer sentiment remains subdued.

In the past, mortgage costs were included in the Consumer Price Index (CPI), as were car payments prior to 1998. However, modern price indexes no longer factor in borrowing costs. This oversight has resulted in a misrepresentation of the full impact of rising interest rates on consumer well-being, particularly when interest rates spiked last year.

This study demonstrates that the variation in the University of Michigan Index of Consumer Sentiment cannot be fully explained by official inflation and unemployment rates. Instead, it has historically shown a strong correlation with proxies for borrowing costs.

The survey's underlying questions also reveal that consumer concerns about borrowing costs have reached unprecedented levels, surpassed only by the era of Paul Volcker.

To address this discrepancy, alternative CPI measures have been developed that explicitly factor in borrowing costs. For instance, the CPI no longer just excludes mortgage costs but also personal interest payments, which increased by more than 50% in 2023.

By reconstructing the CPI of Okun's era, where inflation peaked at around 18% last year, we can account for 70% of the gap in consumer sentiment observed last year.

In conclusion, this study underscores the importance consumers attach to borrowing costs and highlights the potential for a significant improvement in consumer sentiment if interest rates were to decline.

https://www.reuters.com/markets/rates-bonds/japanese-bank-trains-staff-novel-scenario-positive-interest-rates-2024-03-18/

As Japan nears an end to eight years of negative interest rates, a regional lender in Kyoto is offering e-learning to train up staff who have no experience lending money or collecting deposits in a positive interest rate environment.

One of the sessions, targeting roughly 3,300 Bank of Kyoto (5844.T), opens new tab employees, explains why interest rates are important, how the lending rate is set and how rising interest rates affect the bank's business and its clients.

https://www.reuters.com/markets/asia/boj-wont-sway-japans-trillions-investment-abroad-2024-03-18/

Even as the Bank of Japan prepares for a pivotal change in monetary policy, analysts say much more will need to be done to materially shift the roughly $3 trillion of yen Japanese investors have parked in global bond markets and yen trades.

Japanese investors have invested trillions of yen overseas in their quest to earn anything better than the near-zero returns at home under the BOJ's decades-long effort to end deflation.

What a mess. :P

In early February, Mark Zuckerberg added $28 billion to his wealth in a matter of hours as Meta’s shares soared after the company announced its first dividend payout.

This follows a banner year for the Facebook founder, who saw his wealth surge 173% in 2023. Like Zuckerberg, many tech billionaires added huge sums to their wealth as the stock market rebounded.

This graphic, from Preyash Shah, shows the biggest winners and losers in billionaire wealth in 2023.

Since the mapping of the human genome in 2004, biologists have demonstrated genetic links to the expression of several income-enhancing physical traits. To illustrate how heredity produces intergenerational economic effects, this study uses one trait, beauty, to infer the extent to which parents’ physical characteristics transmit inequality across generations. Analyses of a large-scale longitudinal dataset in the U.S., and a much smaller dataset of Chinese parents and children, show that a one standard-deviation increase in parents’ looks is associated with a 0.4 standard-deviation increase in their child’s looks. A large data set of U.S. siblings shows a correlation of their beauty consistent with the same expression of their genetic similarity, as does a small sample of billionaire siblings. Coupling these estimates with parameter estimates from the literatures describing the impact of beauty on earnings and the intergenerational elasticity of income suggests that one standard-deviation difference in parents’ looks generates a 0.06 standard-deviation difference in their adult child’s earnings, which amounts to additional annual earnings in the U.S. of about $2300.

Shareholders want a firm's objective function to place some weight on consumer welfare, motivated by both self-interested and altruistic motivations. Firms have a unique technology for improving consumer welfare: lowering inefficient price markups, which increases consumer welfare more than it lowers profits. Optimal pricing formulas can be adapted to account for shareholders' marginal rate of substitution between profits and consumer welfare. Calibrations from preference parameters show many shareholders should place non-trivial weights on consumer welfare. A survey experiment on a representative sample elicits how shareholders would vote on resolutions giving strategic guidance to firms on what objective to pursue. Only 7% would vote for pure profit maximization. The median individual is indifferent between $0.44 in profits or $1 in consumer surplus, with those owning stocks preferring a lower weight on consumer welfare than non-stockholders.

Transcript: https://michael-hudson.com/2023/12/is-it-over-yet/

cross-posted from: https://hexbear.net/post/1519974

I'll probably be keeping this video in mind the next time I'm trying to get a new home haha

cross-posted from: https://hexbear.net/post/1469056

Good video, from what I can tell.

Only 13 minutes or so.

Maybe watch in picture mode while doing other things.

Your thoughts?

The barter origin story of money is a myth that still lingers in the public consciousness and even in our schools.

Neolithic and Bronze Age economies operated mainly on credit. Because of the time gap between planting and harvesting, few payments were made at the time of purchase. When Babylonians went to the local alehouse, they did not pay by carrying grain around in their pockets. They ran up a tab to be settled at harvest time on the threshing floor. The ale women who ran these “pubs” would then pay most of this grain to the palace for consignments advanced to them during the crop year. These payments were financial in character, not on-the-spot barter-type exchange.

As a means of payment, the early use of monetized grain and silver was mainly to settle such debts. This monetization was not physical; it was administrative and fiscal. The paradigmatic payments involved the palace or temples, which regulated the weights, measures and purity standards necessary for money to be accepted. Their accountants that developed money as an administrative tool for forward planning and resource allocation, and for transactions with the rest of the economy to collect land rent and assign values to trade consignments, which were paid in silver at the end of each seafaring or caravan cycle.

[…]

Origin myths at odds with the historical record [namely, the barter myth] are the result of the conflict between vested interests and reformers over whether the monetary and credit system should be controlled by banks or by governments. Are credit and debt to be administered by laws favoring creditors, or should the prosperity of the indebted population at large be protected? The way in which economic writers answer this question turns out to be the key to their preference regarding the Barter or State Theories of the origins and character of money, credit and interest.

Perhaps a more palatable descriptor than “myth” would be “theory which is not supported by currently available evidence.” It’s hard to investigate pre-agrarian, preliterate societies, and even if you did, how relevant would that be to how literate agrarian societies like ours function?

So there is a name for it. This situation we are in where nearly everyone wants to improve their society and avoid climate crisis etc, but there is no change an individual can make to improve the situation. So everyone keeps doing the same thing, helplessly knowing their strategy contributes to everything being terrible.