patrick.net

Randy H,

Despite our occasional disagreements about the odds of a soft/hard landing or the accuracy of the CPI as an inflation gauge, I certainly do not view you as my nemesis. :-)

I have argued consistently that rents would, are, and will continue to rise despite stagnant income.

Given overall inflation (5-7%/yr, depending on your benchmark), and the fact rents have been stagnant or even falling (esp. in NCAL), I would agree they can and will rise to a certain extent. However, rents can only rise so far unless wages also begin to rise, which IMO is highly unlikely to happen in the near future, given that: (a) we are now staring a recession/mass layoffs in the face, mainly due to the housing ATM shutdown, and (b) the unabated pressures of global wage arbitrage and massive-scale illegal immigration.

Unless and until wages start appreciably rising for ALL classes of working people, not just the Google-aires (or until the banks create a new type of HELOCs for renters), I just don't see how average working-class California renters can possible devote even more of their net incomes to rent than they already do, plus pay more for gas, plus pay more for utilities, etc., etc. That is, unless (one more time) all middle or working-class families are in effect forced out of CA, and replaced with a population mostly composed of 10-to-a-room illegals.

(See, I'm not dogmatic --I hedged my position ;-) ).

The wives entering the work force could increase household income even while the individual incomes fell.

The wifes income has already been factored in long ago, perhaps the children will have to start working too.

HARM,

We generally agree, it's just the effect on the "average" we're arguing about I think. A couple of points I disagree about:

- Global wage arbitrage. I don't believe it has near the effect on domestic wages as you do. If we're to worry about offshoring as a source of real wage deflation then we should be 50X more worried about simple automation. Automation is responsible for probably 19 of 20 jobs lost in the US economy. Remember, US mfg output has risen as a percent of global output, even as labor inputs have shrunk. This is the result of automation, not offshoring.

- What will give. I believe that the "average" American has quite a lot of "standard of living" that can give without real wages rising. In other words, real rent increases will displace conspicuous consumption. This will probably persist until people get pissed off enough to vote. And then, the result may not be pretty. I'm not so sure we'll get sane policy. It could as well be "hyper progressive" tax hikes, more social subsidies, and protectionism. We could run 10 more threads on how all that would play out.

Eventually, ignoring all the macro complications for the moment, people get pissed off and demand higher wages. But, this doesn't require more employment. In fact, it can actually prolong high structural unemployment (sticky-wage theory). So you get the effect I posted earlier: operating costs of landlords rise, rents rise, wages do not rise at first, and then later by not quite enough for enough people. Wealth is transferred at the cost of more socioeconomic "re-balancing", which just means more people are worse off. Of course, it's all hidden by inflation and not realized by enough folks until it's too late. (Their nominal wages may actually go up during all this, but their real wages drop).

The maximum % of income any renter can pay for rent is 100% of net income, and this can never be reached because people still have to eat, commute, use electricity, etc. I fully expect rental inflation to account for SOME of the balancing (and even this will require some amount of wage inflation), but not ALL of it as trolls/perma-bulls insist.

Everytime I think about rent rate hikes I shudder and think back to when I moved here in Summer 2000. And after a month of searching for an affordable apartment, was told by the broker my company hired for me that I had to respond to an offer in 2 hours or it was off the table.

Great way to start a life in California: locked into a 2 year lease for $2000 a month for a 1.5/1.5. (Fortunately, I was able to sublet the 88 sqft room for $800 a month, and later negotiate the total rent down in later 2002)

Timely!

http://tinyurl.com/ruwgk

Today, neither a college education nor computer literacy is enough to guarantee rising real wages. Some people are obviously doing better than others. Workers in the financial and health-care industries, for example, have seen their real wages drop by less over the past two years than those in retailing. But in no part of the economy are real wages doing well.

If the globalization answer is correct, then in general it's the young who are going to be hit the hardest. They don't have homes or other financial investments, and they have their whole working lives stretching in front of them, so weak real wages hurt them badly. For middle-class Americans aged 50 and higher, the math may be much different, since they likely own their own homes, which have greatly appreciated.

Boomers win!

All this talk about Generations - here’s a good table that outlines what years belongs to what generations:

http://en.wikipedia.org/wiki/Generation_Y#Generational_demographics

Left one out:

Housing Bubble Generation 2000-2008

I think I'll have to add that to wikipedia

Great way to start a life in California: locked into a 2 year lease for $2000 a month for a 1.5/1.5.

Where was that? We were looking for a 1.5/1.5 a while ago.

eburbed,

You didn't post the last part:

Overestimated?
The other explanation for weak real wages is much more gloomy. Remember that wages usually track along with productivity. I hate to even say it, but what if the productivity gains of recent years have been overestimated? The latest revision of gross domestic product, released on July 28, seems to have cut productivity growth in 2004 and 2005 by almost half a percentage point. Further revisions of the statistics could push the number down even more.

It does seem odd, that if unemployment is really as low as govt. would like you to believe, and productivity gains so large (ties into Randy's assertion that U.S. mfg output is rising as % of global output), then why are real wages falling? Could it be that manufacturing output/productivity stats and unemployment are being gamed in a similar way as the CPI?

Here we go!

I do want to become a lobbyist for the food industry and assist in the fight against environment fundamentalists.

skibum Says:
astrid and DS,
Wow, Communism and the organ market - that’s quite a bit OT!

exactly, as i said, it's not appropriate to write 2,000 words on either topic into this forum, i don't have the time right now, and no amount of baiting or whingeing will make me do it. i can write an email next week if you like after my deadline and the round of meetings is over. while astrid seems to have a lot of wishful thinking and funny ideas about organ markets, ethicists and govts everywhere aren't entertaining it, for the sorts of reasons i've already outlined, quite succinctly and non-tangentially. maybe do some study before opening mouth.

"skibum Says:
astrid and DS,
Wow, Communism and the organ market - that’s quite a bit OT!

exactly, as i said, it’s not appropriate to write 2,000 words on either topic into this forum"

Wow, that's never stopped you before.

Peter P,

Sorry, it was mostly an excuse to dust off a Hitchhikerism.

doodler,

DC has similar commuters who take the Maryland or Virginia train in from places like Fredricksburg. It's 4 to 5 hours of train riding + more time switching over.

I heard its not too bad. The folks just sleep or read or work on their blackberries during commute, and supposedly the Friday afternoon train is a hoot.

Sound much better than commuting that distance by car.

austingal,

"Austin is still full of californians buying property, although, like my co-worker, some of them are now heading back to CA."

Wow! Really? What do they cite as reasons for returning?

doodler :

Getting asking price is a thing of past in East Bay. 5% below seems to be fairly common. Even in Santa Clara county it is getting real tough to get asking. From people I know who have bought/sold houses as recently as last month, multiple offers still come by in Santa Clara county. But ALL are below asking. On top of that buyers manage to obtain a lot of concessions.

But yes, the news is nowhere near critical mass. A lot of people still argue that the median is going up. I know the trouble with median, but median turning -ve will be a headline in SJMN. Given the current downward slope of YOY appreciation on DQ's page, I expect that to happen before end of the year.

BTW, if you monitor DQ's page, July seems to be hovering about 8-9% YOY gains in the median. That's up from 6-7% YOY in June. Seems that July was more active than June.

Look forward to RE cartel declaring stabilization. "Signs of market distress are largely absent".

Sorry, it was mostly an excuse to dust off a Hitchhikerism.

Huh?

Likely a reference to the Sirius Cybernetics Corporation....

"a bunch of mindless jerks who'll be the first against the wall when the revolution comes"

It does seem odd, that if unemployment is really as low as govt. would like you to believe, and productivity gains so large (ties into Randy’s assertion that U.S. mfg output is rising as % of global output), then why are real wages falling?

Wealth accumulation? The amount of wealth being transferred from the middle layers to the top and from the young to the old has been tremendous over the past 30 years. I agree that productivity has been overstated most likely. I just don't believe it's being "gamed". There's a difference between political opportunism -- which clearly happens all the time -- and clandestine conspiracy. For productivity, broad inflation, M*, or any component of NIA to be "gamed" would require international cooperation. Those two words are oxymoron in my world view.

Not sure if you guys have seen this. To me it is by far the best video clip I've seen all year. Steven Colbert is now my hero.

http://tinyurl.com/lnjpz

Watch the whole thing, it is real. Not an edit job.

NARB,

I only watched the opening and had to stop. I don't like that people make disrespectful or irrevelant jokes (or speeches) about the president. Some noted psychologist said in earlier 20th century that the "Father Complex" was under-developed in US and that the US presidency was less "fatherly" than a monarch or modern European presidency. The defficiency in the "father complex" in the public life exerts great (but adverse) influence on the private life. This probably explains why most American men seem to grow up with proper fathering, live in perpetual adolescence (think tech toys), and are bossed and controlled by their wives AND children.

s/with proper/without proper/

s/earlier 20th/early 20th/

Quoting Richard Cohen of Washington Post:

[...]

Why are you wasting my time with Colbert, I hear you ask. Because he is representative of what too often passes for political courage, not to mention wit, in this country. His defenders -- and they are all over the blogosphere -- will tell you he spoke truth to power. This is a tired phrase, as we all know, but when it was fresh and meaningful it suggested repercussions, consequences -- maybe even death in some countries. When you spoke truth to power you took the distinct chance that power would smite you, toss you into a dungeon or -- if you're at work -- take away your office.

But in this country, anyone can insult the president of the United States. Colbert just did it, and he will not suffer any consequence at all. He knew that going in. He also knew that Bush would have to sit there and pretend to laugh at Colbert's lame and insulting jokes. Bush himself plays off his reputation as a dunce and his penchant for mangling English. Self-mockery can be funny. Mockery that is insulting is not. The sort of stuff that would get you punched in a bar can be said on a dais with impunity. This is why Colbert was more than rude. He was a bully.

I am not a member of the White House Correspondents' Association, and I have not attended its dinner in years (I watched this year's on C-SPAN). The gala is an essentially harmless event that requires the presence of one man, the president. If presidents started not to show up, the organization would have to transform itself into a burial association. But presidents come and suffer through a ritual that most of them find mildly painful, not to mention boring. Whatever the case, they are guests. They don't have to be there -- and if I were Bush, next year I would not. Spring is a marvelous time to be at Camp David.

[...]

G C aka Gentle Cheetah,

Not only do I find your comments a vapid attempt at intellectual voyeurism, but they are just generally annoying. You claim you are ignorant about American culture. In fact, you are just ignorant. I have a suggestion: go read "Culture Shock America" and go Troll somewhere else. Or would you like to share your opinions on pedophilia with us all again? Perhaps I should cross-link that for those who've forgotten what you are all about.

GC,

I can't decide if you're serious in that last comment, or if you're trying to one up Stephen Colbert.

http://patrick.net/wp/?p=224#comment-63262

# Bork Says:
May 10th, 2006 at 4:24 pm

Honestly, this blog has degraded somewhat thanks to Gentle Cheetah and his multiple alter egos. I have to skip a lot of comments originated by/in reply to GC. It started with homosexual fantasies, turned into pedophilia topic and now it seems to be taking a “suicide” turn.

Debate my points. Do not attack nor threaten nor blackmail me.

I don't like Corbert's performance. Period.

http://patrick.net/wp/?p=221#comment-61166

# Owneroccupier Says:
May 4th, 2006 at 5:14 pm

Can someone delete GC’s posts as well? If you go down this path, a lot of poster who have more interesting things to say will be discouraged to come visit again.

I know my comment hit some nerves. But you have to admit that Colbert's performance was just disgusting, cowardly, and improper.

Resorting to emotional appeal is a very feminine trait.

Some corrections to my hash comment:

1) s/most American men/many American men
2) s/irrevelant/irreverent/

Gentle Cheetah,

You are nothing more than a Troll and I've resolved to have your waste of cyberspace here banned again. Maybe you'll treat us all to another of your outbursts. Here's a hint. Don't pretend you're an innocent immigrant ignorant of "America" then tip your hat that you're anything but by letting lose a volley of colloquial idioms so culturally specific that even some Americans would be unable to utter such insults.

Or did you think I've forgotten your shit I had to delete in past threads?

SQT,

I'm emailing Patrick his IP info. He's still coming in off a fixed MSFT address. And it's any wonder they're having trouble of late...maybe he's a bi-polar late night janitor who found an old copy of Nietzsche in someone's trash can.

Thanks SQT. I tried looking back through to see if his/her ban was ever lifted, and couldn't see that it had. I think (s)he just kind of crept back in while no one was watching.

How about a new thread?

Shall you or I?

New Thread: Inflation