6 ms·

Something strange happens when people get wealthy and advanced enough. Cost of living rises, workload increases, it becomes unaffordable to have kids. 30 years

by muzani 1mo ago

Something strange happens when people get wealthy and advanced enough. Cost of living rises, workload increases, it becomes unaffordable to have kids. 30 years later, everything is empty. Places like Australia have plenty of land but, nah, everyone wants to live urban where housing prices are insane or inherited. Food costs often go down in developed countries, cheaper than developing ones. Maybe they're so low that they can't afford to become farmers anymore? Not enough people buy corn and corn price is so cheap that it gets made into HFCS. But if you can't mass produce cheap corn, you're screwed and get a desk job. So we have the service economy. Everyone sells services to one another, works from home, makes tons of money. Madrid has top-tier designers, chefs, doctors, moneylenders, nearly every kind of service. All the piles of money in a concentrated place like Madrid makes the whole place overpriced. If you happen to be the best tuna butcher in Western Europe, there's a limited number of places you can work, but many of these specialist jobs are also wfh. Is there a hack to this though? Can our top tier Spanish pixel artist sell her services to someone in suburban Canada?

squishington 1mo ago
I grew up in regional Australia. All of my friends from there moved to the city because they wanted careers. Myself included. My friend who stayed there still works in farming and lives just above the poverty line, and can't compete for a rental so he lives in a shack in a paddock. House prices there also became ridiculous after the pandemic.
- spwa4 1mo ago
  Indeed. This is policy. House prices rising generates a lot of money for the government for a lot of reasons so they try to stimulate it, so they can spend more "with less taxing". The biggest factor here is the central bank lending to banks lending you mortgages (so the high house prices effectively become a tax. You will pay either through loan repayment or rental), the second factor is "seignorage" on the total value the central bank loans out (the government can spend effectively 4% of total money lent out loan for free, more if they also cause inflation) Governments do this in all sorts of ways, including the big one: making this the only real risk-free but effective way to save up and have a bigger pension at retirement (so any change to this system will take a LOT of money out of the pockets of old people, who often can't replace it anymore) But if you made mortgages either have real risk for banks or stopped funding them through central bank loans ... house prices will crash down. And having inflation is simply a choice. We could choose otherwise. The problem with changing this is that it will require a permanent reduction in government spending or a permanent (big) raise in tax. Both are non-starters. What this does over time is it makes labor that has low productivity, such as farming, less and less realistic if you want a decent life. It is a ratchet that forces the population to make more and more money over time ... or face destitution. It's been an extremely powerful way for countries to get rich.
  - squishington 1mo ago
    I think the benefits will be short lived. The long term outcome is a new class division (asset inheritors versus pure wage earners with no inheritance). This is a terrible outcome for society. I'm not convinced high house prices generated a lot of wealth for governments. Government debt is higher than previous decades, and government asset ownership is lower. I think this has been a bad strategy.
    - spwa4 1mo ago
      > I think the benefits will be short lived. Every country, with only a few exceptions, has been doing this since WW2, US and Europe longer. So the benefits have been going strong for 75 years and counting now. 200 to 1000 years and counting in various parts of Europe. > The long term outcome is a new class division (asset inheritors versus pure wage earners with no inheritance) Indeed. Unfortunately that means about the opposite of what you think it does. Even you agree that there's a new class. Before this system started inheritance was absolutely the only way to wealth. If this system goes wrong the outcome will be that inheritance is the only way to wealth. Right now that isn't the case (well, it is in Europe, but in the US most of the uber-wealthy come from ... well half of them were refugees as kids. There is generational wealth in America but nothing like there is in most of the world. Even in Europe there's like 10% who only found wealth after WW2. And 90% who had wealth before WW2 and managed to keep it with the Nazis in power and, frankly, there's only one way that happened (and most of the European commission members come from that 90%, as do most country governments, so good luck changing that). Still, you want to argue that this is better than what came before? That's easy) So great success!
      - squishington 1mo ago
        I was referring to the relatively newer situation where house prices have outrun wages, which is more of a 21st century phenomenon in Australia. The capital gains tax discount introduced in the early 2000s largely contributed to this, and housing became a government supported avenue for lazy and secure investment. It has resulted in a wealth transfer from the young to the old, or to the offspring of investment property owning families. When you couple that with the worst renter protection laws in the western world, and very high rent growth, it has become a destroyer of social mobility that once existed in this country.

by muzani 1mo ago

squishington 1mo ago

I grew up in regional Australia. All of my friends from there moved to the city because they wanted careers. Myself included. My friend who stayed there still works in farming and lives just above the poverty line, and can't compete for a rental so he lives in a shack in a paddock. House prices there also became ridiculous after the pandemic.

spwa4 1mo ago
Indeed. This is policy. House prices rising generates a lot of money for the government for a lot of reasons so they try to stimulate it, so they can spend more "with less taxing". The biggest factor here is the central bank lending to banks lending you mortgages (so the high house prices effectively become a tax. You will pay either through loan repayment or rental), the second factor is "seignorage" on the total value the central bank loans out (the government can spend effectively 4% of total money lent out loan for free, more if they also cause inflation) Governments do this in all sorts of ways, including the big one: making this the only real risk-free but effective way to save up and have a bigger pension at retirement (so any change to this system will take a LOT of money out of the pockets of old people, who often can't replace it anymore) But if you made mortgages either have real risk for banks or stopped funding them through central bank loans ... house prices will crash down. And having inflation is simply a choice. We could choose otherwise. The problem with changing this is that it will require a permanent reduction in government spending or a permanent (big) raise in tax. Both are non-starters. What this does over time is it makes labor that has low productivity, such as farming, less and less realistic if you want a decent life. It is a ratchet that forces the population to make more and more money over time ... or face destitution. It's been an extremely powerful way for countries to get rich.
- squishington 1mo ago
  I think the benefits will be short lived. The long term outcome is a new class division (asset inheritors versus pure wage earners with no inheritance). This is a terrible outcome for society. I'm not convinced high house prices generated a lot of wealth for governments. Government debt is higher than previous decades, and government asset ownership is lower. I think this has been a bad strategy.
  - spwa4 1mo ago
    > I think the benefits will be short lived. Every country, with only a few exceptions, has been doing this since WW2, US and Europe longer. So the benefits have been going strong for 75 years and counting now. 200 to 1000 years and counting in various parts of Europe. > The long term outcome is a new class division (asset inheritors versus pure wage earners with no inheritance) Indeed. Unfortunately that means about the opposite of what you think it does. Even you agree that there's a new class. Before this system started inheritance was absolutely the only way to wealth. If this system goes wrong the outcome will be that inheritance is the only way to wealth. Right now that isn't the case (well, it is in Europe, but in the US most of the uber-wealthy come from ... well half of them were refugees as kids. There is generational wealth in America but nothing like there is in most of the world. Even in Europe there's like 10% who only found wealth after WW2. And 90% who had wealth before WW2 and managed to keep it with the Nazis in power and, frankly, there's only one way that happened (and most of the European commission members come from that 90%, as do most country governments, so good luck changing that). Still, you want to argue that this is better than what came before? That's easy) So great success!
    - squishington 1mo ago
      I was referring to the relatively newer situation where house prices have outrun wages, which is more of a 21st century phenomenon in Australia. The capital gains tax discount introduced in the early 2000s largely contributed to this, and housing became a government supported avenue for lazy and secure investment. It has resulted in a wealth transfer from the young to the old, or to the offspring of investment property owning families. When you couple that with the worst renter protection laws in the western world, and very high rent growth, it has become a destroyer of social mobility that once existed in this country.