Grim trends are massing on the US economic horizon: commercial real estate (CRE) vacancies are piling up, interest rates remain high, home insurers are backing away from more locations, and climate change is heating up the planet. Yet, the US economy remains resilient. Inflation is falling, employment remains strong, people are still spending money at a good clip, and
2nd Impression -- The metaphor of a tug-of-war was fantastic. This would be a great candidate for Substack Chat as it could generate a lot of thoughtful commentary. Here's one OPINION. Economics and Finance are moribund most of the time. I believe that for the majority of business endeavors, what happens to them is mostly an issue with crazed neoliberalism deregulating their business or command economies over-regulating their sector. The 75 years of Moore's Law casts a larger shadow on our world with each passing year. Its gift in the last three is sufficient scalability to make AI a broad reality.
Interesting, I haven't thought about using Chat yet - maybe I should? Have you hopped into anyone's Substack Chat, and how was it? Good point about Moore's Law and whatever its successor is; chips really have changed our world in staggering ways.
And isn't it so fascinating how some sectors are over-regulated and others under-regulated? My personal soapbox is how small businesses are generally overregulated and big businesses are generally underregulated (of course there are exceptions) - some of the rules applied to tiny businesses are truly head-shakers.
First impression after a quick read -- (1) "Like evil Count Rugen in The Princess Bride, but with more Netflix" was an awesome turn-of-a-phrase. I'll revisit over coffee in the morning. I love your ability to guide us through your story and a willingness to say I don't know...that is refreshing.
I really like the analysis framed as a tug-of-war. It's interesting to look at this from a New Zealand perspective. We have some of the same issues, I think that commercial real estate is probably doing pretty badly and we have a pretty serious housing shortage. However, our grossly inflated property prices are declining. We've had a couple of nasty insurance shocks too. I'm not sure which side of the rope this is one, but NZ's wealthiest people pay tax at about half the rate of someone like me and the Prime Minister just said he's not willing to tackle that problem (and nor will the main opposition party).
We have that dichotomy in the US too - the federal capital gains tax rate is 0% on income up to $40,000, then 15% on income up to about $440,000, then 20% (there is another part about paying a bit of Medicare tax at a certain point, but this is the general gist). State taxes go on top of that, but it's still significantly less than a W2-employed person pays for similar income levels. Massively advantageous to those who can live off of investment income.
Edit to add: I wish capital gains tax rates would be applied to self-employed people and tiny business owners, since they get hit with having to pay both the employee and employer Social Security and Medicare taxes, so this would help to make up for that and promote entrepreneurship.
I agree this could be built into a model on the recession side. Not sure it's tugging too hard on the rope in the US currently, though, except via inflation in energy prices. Nuclear risk is a tail risk, but I don't think anyone really wants that to happen. A Taiwan invasion is also a huge tail risk but not actively pulling the rope right now (in my view).
Do you think I'm underestimating war risk? I'm open to hearing that and rethinking. I think it might work better to add international polarization (Edit: or global geopolitics!), which encompasses more situations and seems likely to get worse.
Yeah I didn't qualify the comment specifically because I wouldn't know what side to put it on. The growth side is the ramping up of industrial policy to prepare for it. But unlike some WWII fanboys, I see war as mostly recessionary. And I have no clue how big the risk actually is.
I love the tug of war graphic! You make a lot of great points in the article. I think bright side will win short term but medium to long term the rising oil prices and the higher interest rates are concerning.
Thanks, I'm glad the graphic resonates! There are so many factors at play, whereas in 2008 it was more of a huge pileup on the recession side without many counterbalancing forces.
2nd Impression -- The metaphor of a tug-of-war was fantastic. This would be a great candidate for Substack Chat as it could generate a lot of thoughtful commentary. Here's one OPINION. Economics and Finance are moribund most of the time. I believe that for the majority of business endeavors, what happens to them is mostly an issue with crazed neoliberalism deregulating their business or command economies over-regulating their sector. The 75 years of Moore's Law casts a larger shadow on our world with each passing year. Its gift in the last three is sufficient scalability to make AI a broad reality.
Interesting, I haven't thought about using Chat yet - maybe I should? Have you hopped into anyone's Substack Chat, and how was it? Good point about Moore's Law and whatever its successor is; chips really have changed our world in staggering ways.
And isn't it so fascinating how some sectors are over-regulated and others under-regulated? My personal soapbox is how small businesses are generally overregulated and big businesses are generally underregulated (of course there are exceptions) - some of the rules applied to tiny businesses are truly head-shakers.
First impression after a quick read -- (1) "Like evil Count Rugen in The Princess Bride, but with more Netflix" was an awesome turn-of-a-phrase. I'll revisit over coffee in the morning. I love your ability to guide us through your story and a willingness to say I don't know...that is refreshing.
Great
Thank you!
I really like the analysis framed as a tug-of-war. It's interesting to look at this from a New Zealand perspective. We have some of the same issues, I think that commercial real estate is probably doing pretty badly and we have a pretty serious housing shortage. However, our grossly inflated property prices are declining. We've had a couple of nasty insurance shocks too. I'm not sure which side of the rope this is one, but NZ's wealthiest people pay tax at about half the rate of someone like me and the Prime Minister just said he's not willing to tackle that problem (and nor will the main opposition party).
We have that dichotomy in the US too - the federal capital gains tax rate is 0% on income up to $40,000, then 15% on income up to about $440,000, then 20% (there is another part about paying a bit of Medicare tax at a certain point, but this is the general gist). State taxes go on top of that, but it's still significantly less than a W2-employed person pays for similar income levels. Massively advantageous to those who can live off of investment income.
Edit to add: I wish capital gains tax rates would be applied to self-employed people and tiny business owners, since they get hit with having to pay both the employee and employer Social Security and Medicare taxes, so this would help to make up for that and promote entrepreneurship.
War risk
I agree this could be built into a model on the recession side. Not sure it's tugging too hard on the rope in the US currently, though, except via inflation in energy prices. Nuclear risk is a tail risk, but I don't think anyone really wants that to happen. A Taiwan invasion is also a huge tail risk but not actively pulling the rope right now (in my view).
Do you think I'm underestimating war risk? I'm open to hearing that and rethinking. I think it might work better to add international polarization (Edit: or global geopolitics!), which encompasses more situations and seems likely to get worse.
Yeah I didn't qualify the comment specifically because I wouldn't know what side to put it on. The growth side is the ramping up of industrial policy to prepare for it. But unlike some WWII fanboys, I see war as mostly recessionary. And I have no clue how big the risk actually is.
The risk is dynamic and continuously changing over time, which makes it a good candidate for system dynamics modeling!
I love the tug of war graphic! You make a lot of great points in the article. I think bright side will win short term but medium to long term the rising oil prices and the higher interest rates are concerning.
Thanks, I'm glad the graphic resonates! There are so many factors at play, whereas in 2008 it was more of a huge pileup on the recession side without many counterbalancing forces.