First, I wonder if you have data and conclusions already collected for an general analysis of correlation between developed nations' mandatory government spending (vs. discretionary spending), those nations' income crises (or lack thereof), and those nations' approaching population crises. If you do, I'd be interested to read your conclusions (quick conclusions, since it likely diverges to a side topic for you).
I think back to your article "America's Income Crisis: How It's Triggering a Collapse in Birth Rates" and your past video about approaching population crises across developed nations / regions, and I would be unsurprised to see correlations, especially in nations or regions in which home ownership rates and land available for development are comparable to US and China.
Second, I'm curious about potential economic effects of a widening of the "wealth gap" between low- and middle-income families--especially if government mandatory spending continues to increase in its share of the federal budget--and further-order effects on issues such as the population and income crises.
To provide context, recent US inflation without comparable increases in employment income has really slammed lower-income families in several, somewhat co-recursive ways, such as
(1) Lower-income families generally rent their homes, whereas much of the middle-income population attains home ownership at some point in their adult lives. Inflation increases the cost of maintaining property and, therefore, passes on to tenants by means of rent increases. Since inflation has recently outpaced increases in wages and salaries by a large amount, lower-income families have fallen into further economic trouble (perhaps triggering increases in government spending for them). On the flip side, property-owning families have seen less economic impact since their mortgage payments will have remained mostly flat, technically becoming easier to afford as inflation progresses.
(2) Lower-income families--especially those desperate for immediate financial assistance--are more likely to take on higher-rate debt. Throughout this period of inflation, the required income and asset level to maintain credit worthiness has also increased, even though income rates themselves have not increased at the same amount. Lower credit worthiness forces lower-income families to borrow at higher interest rates (on top of the rate increases banks have already applied in order to counter high inflation levels). Obviously, the effect on lower-income families is a depression on the growth of their wealth over time, extending the time that they will be in economic duress and, in some cases, reliant on government assistance (perhaps, again, increasing the amount of federal mandatory spending and extending that portion of the spending by several years). In the worst case, lower-income families simply lack the requisite credit worthiness and monthly income for any leverage and become massively dependent on government assistance. On the flip side, homeowners' assets generally increase in value with inflation (not considering other market effects) and serve to maintain credit worthiness (or to improve it over the course of a mortgage, as equity increases). Again, this leads to more depression of lower-income households versus stability or even lift for home-owning households.
Given the previous two bullets, the effect of public (federal government) debt on the drop in real personal income gains would seem to be an increasingly self-reinforcing mechanism as the economic gap between middle-income and lower-income households widens.
You explained very well the prospects and intertwined causes of high federal mandatory spending, high federal debt, declining real income gains, and declining birthrates within the context of the current US household economic situation. First, do you see a widening gap between the economic situations of middle- and low-income households? If so, do you see the gap acting as an amplifying feedback loop on the issues I just mentioned--that is, do you see the gap significantly affecting the math, so to speak, in your analyses as the gap widens or has widened year by year? Lastly, if you've happened to look at relevant data, are you able to form a general conclusion on whether the potential "widening wealth-gap amplification issue" is a uniquely US problem or appears in other, comparable developed nations?
While the full scope of many of these questions falls outside the realm of short-term investing, I believe it is nonetheless important for forming government policy and understanding policy effects on the near-term health of our economy, competition with comparable nations, and assessing how and where to invest in industries now.
Nice, first multi-fam, some CRE and KRE get hit again and then consumers pile on with decr. spending, more layoffs, Fed starts to cut.... boom.....before you know it....
I always appreciate that you superbly explain each datum's relevance and carry readers (and video viewers) through each step of analysis without losing them or skimping on detail. Thanks!
Obviously you have invested considerable time and skills in the latest Substack. Thank you.
I have two largish questions for you.
First, I wonder if you have data and conclusions already collected for an general analysis of correlation between developed nations' mandatory government spending (vs. discretionary spending), those nations' income crises (or lack thereof), and those nations' approaching population crises. If you do, I'd be interested to read your conclusions (quick conclusions, since it likely diverges to a side topic for you).
I think back to your article "America's Income Crisis: How It's Triggering a Collapse in Birth Rates" and your past video about approaching population crises across developed nations / regions, and I would be unsurprised to see correlations, especially in nations or regions in which home ownership rates and land available for development are comparable to US and China.
Second, I'm curious about potential economic effects of a widening of the "wealth gap" between low- and middle-income families--especially if government mandatory spending continues to increase in its share of the federal budget--and further-order effects on issues such as the population and income crises.
To provide context, recent US inflation without comparable increases in employment income has really slammed lower-income families in several, somewhat co-recursive ways, such as
(1) Lower-income families generally rent their homes, whereas much of the middle-income population attains home ownership at some point in their adult lives. Inflation increases the cost of maintaining property and, therefore, passes on to tenants by means of rent increases. Since inflation has recently outpaced increases in wages and salaries by a large amount, lower-income families have fallen into further economic trouble (perhaps triggering increases in government spending for them). On the flip side, property-owning families have seen less economic impact since their mortgage payments will have remained mostly flat, technically becoming easier to afford as inflation progresses.
(2) Lower-income families--especially those desperate for immediate financial assistance--are more likely to take on higher-rate debt. Throughout this period of inflation, the required income and asset level to maintain credit worthiness has also increased, even though income rates themselves have not increased at the same amount. Lower credit worthiness forces lower-income families to borrow at higher interest rates (on top of the rate increases banks have already applied in order to counter high inflation levels). Obviously, the effect on lower-income families is a depression on the growth of their wealth over time, extending the time that they will be in economic duress and, in some cases, reliant on government assistance (perhaps, again, increasing the amount of federal mandatory spending and extending that portion of the spending by several years). In the worst case, lower-income families simply lack the requisite credit worthiness and monthly income for any leverage and become massively dependent on government assistance. On the flip side, homeowners' assets generally increase in value with inflation (not considering other market effects) and serve to maintain credit worthiness (or to improve it over the course of a mortgage, as equity increases). Again, this leads to more depression of lower-income households versus stability or even lift for home-owning households.
Given the previous two bullets, the effect of public (federal government) debt on the drop in real personal income gains would seem to be an increasingly self-reinforcing mechanism as the economic gap between middle-income and lower-income households widens.
You explained very well the prospects and intertwined causes of high federal mandatory spending, high federal debt, declining real income gains, and declining birthrates within the context of the current US household economic situation. First, do you see a widening gap between the economic situations of middle- and low-income households? If so, do you see the gap acting as an amplifying feedback loop on the issues I just mentioned--that is, do you see the gap significantly affecting the math, so to speak, in your analyses as the gap widens or has widened year by year? Lastly, if you've happened to look at relevant data, are you able to form a general conclusion on whether the potential "widening wealth-gap amplification issue" is a uniquely US problem or appears in other, comparable developed nations?
While the full scope of many of these questions falls outside the realm of short-term investing, I believe it is nonetheless important for forming government policy and understanding policy effects on the near-term health of our economy, competition with comparable nations, and assessing how and where to invest in industries now.
unique and compelling as always Earic
Nice, first multi-fam, some CRE and KRE get hit again and then consumers pile on with decr. spending, more layoffs, Fed starts to cut.... boom.....before you know it....
I always appreciate that you superbly explain each datum's relevance and carry readers (and video viewers) through each step of analysis without losing them or skimping on detail. Thanks!