I find the S&P500 to be interesting as a demonstration for currency risk. Denoted in US, it went up ~18% or so. For me as an EUR investor, it went up just 4.6% when accounting for the loss of the USD. Comparing that to indicies that usually do not perform that well, Euro Stoxx 50 is up ~22% and MSCI Emerging Markets ~21%.
I could be misunderstanding this, but you know that you can buy ETFs that are currency hedged?
Taking Vanguard for example, VGS is global equities, but VGAD is global equities that are AUD-hedged (my home country).
The only downside is that you pay more in fees (and they're less tax efficient). People generally don't bother with it though, because on a long enough time-line currencies usually revert to their long-term average, so if you're holding for retirement there's generally little point.
This is a _huge_ downside for index funds, though. Even quite a small fee difference has a huge compounding impact over time; people often miss just how much.
AIUI, assuming you're investing in a global equity fund, currency hedging is almost never worth it. It _may_ be worth it in some cases if you're investing in a foreign index (eg S&P for Europeans), but even then not usually.
You also can't predict when you might need to sell you stake, so that's ultimately the value of hedging. If you're forced to sell in 5-10 years, then hedging would be valuable.
Let's say I'm close to retirement. And let's say I'm in US dollars, and the dollar isn't doing well right now, and might continue to not do well for a long enough time frame to matter to me.
On the other hand, my expenses will also be in US dollars. To what degree should I hedge against the dollar?
Hard question to answer without understanding your circumstances.
Ultimately the point of hedging is to diversify. So the degree you should hedge is relative to the degree with which you have exposure to your home currency. So for example, if you already own a home in that country + you already own lots of shares in that home currency, then hedging might be less important.
The recommendation I've seen is around 25% of your portfolio in hedged global equities, assuming you have another 25-30% in non-hedged global equities.
There is no 'cure' per se as a non-US investor currency risk is just something to accept (or swap return for a hedge but then it ends up being a wash mostly), for example if you invest in a World equities ETF, it's a bit pointless to be hedging exposure to all the currencies. Even if you decide to slant away from the US, it's likely a majority of non-US large caps have USD exposures.
It's more a psychological thing, you see absolute USD return and think you could've made that but there's not the actual return, your actual return is post conversion, if you'd have hedged you wouldn't have that abosulte return either, so you've never had it.
Additionally, if you're like most people and investing regularly or DCA-ing from now on you can buy at lower USD
Actual return is for non-US investors having to convert back to say Euros for retirement, after having the dollar weaken, you get less Euros for example
Everyone wants to park some money and have other people work hard to increase the real value of said parked money. Not everyone can win big. Storing value is actually pretty amazing thing and that it can be profitable is magic. Of course the environment and poorest pays some of the free lunch.
it really depends on whether or not there is a global capital shortage. this is very easy to do when the economy requires much more capital than is available. and in the inverse, it is self explanatory
An investor friend once told me that the US needs to always be in debt because treasuries give investors a risk-free place to park their money between investments. The sense of entitlement was astounding.
I don't think this is necessarily entitlement. There are heteredox but popular economic theories (such as MMT) that view public debt issuance at least in part as a method to satisfy the demand for private savings.
Small caps and emerging markets in the long run should outpace advanced high cap markets as they have more room to grow.
There's also some other interesting aspects of emerging markets specifically: they never went more than 4.5 years before recovering from a crash to ath, whereas it took the SP500 12 years and EU 600 index 14 to recover from the 2000 one.
Google etc may be a US based company, but they can leverage emerging markets just fine.
There’s a stronger argument to be made for small caps, but stock buybacks allow any company’s stock to effectively experience exponential growth even with flat earnings. IE there’s little long term difference between buying back 2% a stock every year and ~2% actual growth every year assuming you never hold the majority of shares. (as in 1/0.98 ~= 1.02)
You can buy "into a market" by investing in a ETF following the MSCI EM or SP500. In any case not sure what's your point about single stock companies in a discussion about market indexes.
> You can buy "into a market" by investing in a ETF following the MSCI EM or SP500.
Nope. A more accurate description is saying you’re buying into a specific subset of a Market by buying shares of specific companies. Hand waving them as if they are the same thing doesn’t actually make them the same thing.
The MSCI EM, SP500, etc etc are simply a collection of public companies not the market of a given country. Which is why index funds all behave in fundamentally different ways than the actual markets we’re talking about.
Now if you do want more exposure to the upsides of a growing economy there are options, it’s just not a simple as buying an index fund.
This thread is about indexes and it started by a user stating that emerging markets indexes have been in line or outpaced global and even most of the advanced economies ones.
What these indexes are and how they behave is definitely on topic. Some of the indexes we can point to have in the past seen outsized returns, but many haven’t especially over specific timeframes. Currency fluctuations play a huge role, as does perception of risk etc.
Your previous statement about why in general they would have an advantage was inaccurate. As you have seemingly realized.
The logic isn't flawed. If you are a European investor, then you care about the returns in your currency, and the fact is your pile of money only grew by 4%.
Inversely, as a US investor, if you invested 100€ in the eurostoxx 50, your pile of money would have grown to about $140 (20% index growth, 15% dollar debasement). It absolutely makes a difference, that's $20 more in your pocket compared to the index.
Your comparison with temperatures is wrong. Celsius and Fahrenheit are fixed units, whereas the value of currencies fluctuate.
It is flawed because it's conflating two different independent variables. It's also looking for a specific weak point where there is none, more as if it is trying to state a narrative.
If you want to talk about EURUSD then just state it.
It makes sense if you're looking at it from the perspective of a European investor. e.g. You start with 1000 EUR, convert and buy into an S&P500 fund, wait a year, sell and convert back to EUR.
Celsius and Fahrenheit doesn't work as an analogy because the rate does not change over time as it does with currencies.
I think it depends on whether you're planning on holding it in currency or using the currency to buy other things. Does the cost of material goods and services mostly stay the same in EUR, or does it somewhat follow the S&P? If more the latter, then converting to EUR is just a very temporary exchange and its nominal amount doesn't exactly matter.
> Does the cost of material goods and services mostly stay the same in EUR, or does it somewhat follow the S&P?
I don't understand this question, are you asking if material goods and services in Europe, which uses EUR, "somewhat" follows the S&P, a US stock market index?
If you have to hold USD to buy and sell USD products (as a European) it doesn't make sense to compare your SPY position vs EURUSD because you have to use those USD to buy something or pay some debt.
> If you have to hold USD to buy and sell USD products (as a European)
Approximately no individual does this. Some companies may hold some foreign currency reserves, but even there it is not _particularly_ common in most cases.
As a European, I have never, in 40 years, had any USD, except a small amount of paper currency. If I'm buying something made in the US, I'm probably buying from a local vendor, or else will convert on the fly. If I'm visiting the US, I'll convert on the fly (this is even cheap, now, thanks to neo-banks). I own a bunch of US equity, but indirectly via a euro-denominated global market index fund. This is fairly standard. In general it's only common for individuals to hold foreign currency where the local currency is particularly unstable.
> If you have to hold USD to buy and sell USD products (as a European)
Do people do this? Up until some months ago, I was heavily invested in some US companies, and I never actually held USD in my accounts at any point. I used EUR to buy those stocks, the conversion happening together with the purchase, and same thing when I sold them, I received EUR ultimately.
I know I could have another account in my bank with USD set to the currency, I just don't know why'd anyone would want to, when you can convert at the point of sale/purchase. Of course, if you're doing forex trading or whatever, that might make sense, but I don't think generally people hold USD to buy/sell US stocks, because you don't have to.
> Does the cost of material goods and services mostly stay the same in EUR, or does it somewhat follow the S&P?
... Wait, why would you expect the price of goods to follow the valuation of, well, any market index, never mind one specific foreign market index? Like, I don't understand why you think that would happen. If anything, you'd expect a minor inverse relationship, at least on a global scale; rapid growth of cost of goods indicates inflation, which implies central bank tightening, which tends to depress stock values a bit.
I mean, for retail investors outside the US, the question you're asking boils down to „does purchasing power parity follow popular US domestic market indices?“, to which the answer is a resounding no.
There may be some offset for goods imported from the US, but that's a minority of consumer goods globally, and even then, the purchase currency will usually still be the local fiat, and then the attractiveness of the US index fund still has to be weighed against the performance of non-US-based indices in that same local currency as opportunity cost.
Also an American investor, really; an American investor who'd pulled out of S&P and moved to Eurostoxx at the time would have made something like 40% in their local currency (about half of it due to the decline of the dollar).
If you are in USA and invest outside USA. Do you look at returns in USD or in nominal value of the market you invested in? Say there is hyperinflation where you invested. You should be extremely happy. After all the nominal value of your investment is massively up. Even if USD value is now fraction...
The roi is unfortunately not the same if you earn your money in euros and need to pay your taxes in euros. At one point one has to do a forex trade and that will be a loss for the euro investor
Only if you convert it at a loss and are unable to wait for USD to recover. If (and it is, admittedly, a big assumption) we assume that USD and EUR are broadly stable currencies over the long term, then short term changes in the ratio don't matter for long term investors. You're buying a share of productive capacity, the currency it is listed in doesn't matter.
It's reasonable to assume they're broadly stable, but being broadly stable doesn't mean a drop will "recover". There's no specific ratio that the currencies are being pushed to. Permanent changes in the baseline can and do happen.
> You're buying a share of productive capacity, the currency it is listed in doesn't matter.
But I don't own a fixed percentage of production, I own a fixed number of shares and the number of shares can change. If the number of shares doubles, then my investment is worth half as much.
> But I don't own a fixed percentage of production, I own a fixed number of shares and the number of shares can change. If the number of shares doubles, then my investment is worth half as much.
How is that related to currency changes? That can happen anyway regardless of the currency.
It can happen in other situations, but the fact that it always happens with currency fluctuations is what's important here. When the dollar loses value, everything I own that's anchored to dollars loses value too. "buying a share of productive capacity" implies a counteracting effect, but there isn't one, because the amount of productive capacity represented by each share shrinks too.
yes, but could one also argue that due to currency weakening, the S&P's growth can simply be due to the weakened currency?
If I can say something has an "absolute" value of X, but I denominate it in USD, which is normally 1:1 to X, then it's value in USD in X.
but if USD drops to being worth half an X, but its absolute value hasn't changed, it will now appear to be worth 2X in USD.
so why can't one argue, if the dollar weakened by 15%, but everything else being equal, one would expect dollar denominated stocks to appreciate (in dollars) by the same amount? And if the dollar would strengthen, we would expect the stock price to depreciate?
Because the SP500 is a better indicator of the market than USD. Also if you look at the global dollar index, it is right at par historically.
The companies in the 500 are mostly global companies, if the USD shrunk so much they would either be losing money, or it doesn't matter because the US market is so strong it dwarfs the others.
> The companies in the 500 are mostly global companies
Isn't that saying exactly what the parent comment mentioned? Since those companies are global, the growth of the S&P 500 which is USD denominated will track the devaluation of the USD as the underlying companies haven't lost value, the dollar has, and the S&P 500 would track that as growth in percentage to balance it.
I don't understand why they would be losing money since as you said they're global, and more untethered to the USD than the S&P 500.
This is clearly the USD Global index dropping a few basis points, which is an active strategy. Look at the USD Index over 15 year period, there is nothing wrong with USD today.
I'm not arguing if the S&P is a better indicator of the US economy than USD or not.
What I'm asking, to me it seems if the USD drops in value, but everything else stays the same (i.e. GOOG hasn't lost any real value if measured in any other currency for instance). I'd expect GOOG to rise in USD terms (as its value has stayed constant).
Why wouldn't this be true (yes, there are a bunch of assumptions/complexities, and perhaps those assumptions/complexities break the argument), but at a very simplistic level is what I said wrong?
The USD and EURO being nearly on par was the exception. And given the current admins stated goals, I’m not sure we’re going to see the USD strengthen anytime soon. In fact, it’s more likely to get weaker.
> If (and it is, admittedly, a big assumption) we assume that USD and EUR are broadly stable currencies over the long term
Yeah, er, that's a very big if. There's no real reason to assume that, and history doesn't really bear it out.
If anything in the near term you'd probably expect the USD to weaken further vs the Euro; Trump seems _very_ keen to install a fed chair who'll cut rates even where not supported by inflation and employment numbers, whereas the ECB is more disciplined and less subject to political interference.
You're the one making a big assumption: that this is a short term movement in the dollar.
Trump has made it clear he wants a cheaper dollar to make US exports more competitive and JPM is forecasting another 10% drop in the value of the dollar this year.
Just because the dollar and euro have been roughly level for over a decade doesn't mean that will remain true, currencies often go through pretty fast changes in relative values every few decades as their financial and geopolitical positions change.
The pound drop around 2007~2009 is a good example of one such sudden but long term price shift.
I think it’s not perfect but probably the best we have.
People forgot or simply don’t realize how much worse life was just a couple of decades ago (in terms of nutrition, access to knowledge, clean water, material wealth).
The question is where. Couple decades ago rent in Munich was like 3x lower. While salaries were insignificantly lower with overall lower living cost.
Couple decades ago Germany had electronics industry. Now it’s gone. More industries are following.
Couple decades ago there were rather isolated Yugoslav Wars. Now it’s introduction into WW3 with active war in Ukraine and hybrid attacks everywhere in Europe.
It depends heavily on location. Indian colleague has completely different world view and is proud how India is progressing.
Just because GDP isn't a measure of affordability or security or industrial strategy doesn't mean it's not useful. It means you should also have measures of those (which in fact do exist because economists are not idiots and do fully understand these kinds of problems).
Renting for me generally sounds like a bad deal. On the same period the stock grew even more (ex: S&P x4.5 from 2000). So, if you want to say that if you lived 30 years ago in Munich AND did not save anything you would have lived better, I will have to answer that it was just delaying the issue of not being able to save - the ones that were able to save (maybe not living in Munich, maybe other ways), might at some point come and buy something in Munich. Accumulating wealth too much into some hands was the issue decades ago and remains an issue today. Just that decades ago people might not have been aware...
The electronics industries of a couple decades ago were producing stuff that are incomparable to what we have today. Taking that into account, I would say today is "better".
Renting is actually a better deal, financially, in Israel compared to purchasing. Rent is cheaper than the mortgage payment, by hundreds and sometimes thousands of dollars a month, in a society where the average price of housing is more than 14x the average annual salary but most people are highly emotionally compelled to purchase housing as a symbol of stability and wealth creation - an emotional decision instead of a financial one.
We calculated when buying the house near Munich that we pay around 140000€ more than renting our flat forever with moderate rent increase. At the moment of signing we needed bigger apartment. Few years later we see, that despite heavy construction in the old house we will save at least 200000€ as buyers. Rents in German cities are out of control. Probably it’s different in regions with solid real estate supply. Here’s nothing.
That progress in India comes as an excuse to weaken their democratic institutions. The fallacy is that Modi is to praise - the progress comes mostly because of enormously positive global trends developed in the past decades, the ones that are now being threatened.
> Couple decades ago there were rather isolated Yugoslav Wars.
A bit of nuance, they ended in 1999, however the whole thing is still influencing Europe negatively and is not as isolated as it seems. Not just there are now seven countries instead of one to consider and negotiate with, a couple of them are utterly disfunctional. Further, two biggest chunks are deeply sunk into nationalism. Far too little effort had been made back then to try to reform the place into a functional system.
Progress in India is due to policy in India. The idea that India can handwave it's successes and failures on external forces might have been well justified in 1955, but in this century they get to choose. Best hope for the anti-Modi-policy crowd is maybe it isn't Modi's policies specifically.
In fact, in the vast majority of cases (including North America, South America, Europe, East Asia, India & South-East Asia) progress is entirely about countries choosing how quickly they are comfortable with improvement happening. Africa and the Middle East it is a combination of policy choices and cultural problems. Arguably foreign interference - although even then policy and strategy tends to be the bigger thing over time.
This is an extremely bold claim. Always was, but especially in today's world it is. I am not saying that Modi's policies are bad, what I am trying to say is that he is basically playing the game on the easy mode. He has access to the unprecedentely dynamic and resilient global economy _and_ he has access to cheap Russian resources Europe doesn't want to buy anymore. All Modi needs to do is not do anything really stupid - the economy will perform well unless clubbed to the head.
And that is all fine, and I am genuinely happy for India. My problem is that Modi is using that easily achieved success to erode democratic institutions - and that will become a problem in the long-term, as it always historically has, everywhere.
Russia wasn't the group that stopped selling oil to the Europeans, the Europeans refused to take it and have a military policy of arming people to blow up the means of transporting that oil to Europe. They're very proud of not using Russian oil. Modi could have joined in with that, he had a lot of people asking him too. Doing nothing (if he did nothing, again - I have no idea about the details of Indian policy) is a rather decisive policy given the pressure the Europeans have been putting on people.
The world has been in easy mode for 70 years now. Any government can choose to sit back and let people get wealthy. It is literally so easy that even the communists figured it out.
Whats the point of this progress which is completely destroying nature and giving people all kinds of cancer, India's oligarchy is more destructive than any other country on Earth. Indians used to be the most naturalist people in the world and now look at the state of the country.
It's definitely not the best we have though. People have created all kinds of metrics which measured things in better ways more relevant to our human goals. It's an entire genre of publication in economics and some of them are very popular. It's a choice to ignore them.
Also, see what djtango said. It's not that simple.
Well, being right is better than being wrong, which is what happens when you claim that GDP as a measure of progress is valid. It simply doesn't measure what matter to the majority of humans, which has been argued endlessly already.
That's hardly a relevant response considering no society have used any of the ones I am speaking about in the way that you mean. The OECD, UN, IMF and others use many of them as secondary metrics though.
"THERE were two “Reigns of Terror,” if we would but remember it and consider it; the one wrought murder in hot passion, the other in heartless cold blood; the one lasted mere months, the other had lasted a thousand years; the one inflicted death upon ten thousand persons, the other upon a hundred millions; but our shudders are all for the “horrors” of the minor Terror, the momentary Terror, so to speak; whereas, what is the horror of swift death by the axe, compared with lifelong death from hunger, cold, insult, cruelty, and heart-break? What is swift death by lightning compared with death by slow fire at the stake? A city cemetery could contain the coffins filled by that brief Terror which we have all been so diligently taught to shiver at and mourn over; but all France could hardly contain the coffins filled by that older and real Terror—that unspeakably bitter and awful Terror which none of us has been taught to see in its vastness or pity as it deserves.”
― Mark Twain, A Connecticut Yankee in King Arthur's Court
People forgot or simply don't realize how much better life was just 3-4 decades ago (in terms of nutrition, access to knowledge, clean water, material wealth, housing costs, tuition costs, healthcare costs, jobs).
In advanced western countries that is. If you compare Nigeria from 2000 to Nigeria today, sure, maybe...
Better job prospects for more people, lower inflation, cheaper healthcare, cheaper housing (actually affordable housing), less obesity, better school programs, more distributed, less controled, and less corporate internet and web, higher fertility rates, less clouds of war and civil tension, more political legitimacy and better political climate, better nutricion (official stats show obesity at an all time high and rising - despite all the health influencer slop), less impacted rural areas and small towns, and many other stats besides. And a more stable global order too.
Most of those apply both here in Europe and the US.
And that's without even getting into more subjective QoL stuff, from cultural production to the widespread depression and the loneliness epidemic.
Simpson's paradox does allow for the possibility that nutrition, access to knowledge, clean water and material wealth has improved in the aggregate while it getting worse for subpopulations.
A lot of people in the world are angry and one of the things that fuels this anger is the "gaslighting" that the data shows their lives are better while their lived reality is the opposite.
Don't forget that Millennials are the first generation to be poorer than their parents in a long time...
There’s now a large segment (and several generations) of society for whom the system has never worked, even if the growth of retirement accounts masks the loss of wealth and well-being.
> Don't forget that Millennials are the first generation to be poorer than their parents in a long time...
This is simply not true. At some point, we do need to rely on data other than "lived experience," which compares one's quality of life at 22 to someone's quality of life at 50.
"Younger Americans (millennials and Gen Zers) owned $1.23 for every $1 of wealth owned by Gen Xers at the same age."
"Younger Americans (millennials and Gen Zers) owned $1.35 for every $1 of wealth owned by baby boomers at the same age."
If they ever want to own a house they won't need just 23% or 35% more wealth, but more like 200% and 1000% respectively. You do need to start at lived experience to know which data to look at.
Exactly - people have it backwards, when data diverges from lived experience you don't tell lived experience to shut up cuz' dataa you go back and check your models and your data collection. And you check and you check and you check. Einstein was famously wary of Quantum Mechanics rather than taking the findings at face value, and I guarantee that economic data is a hell of a lot less rigorous and more complicated than particle physics. Not to mention the data is political...
The thing is that that's not a conflict between data and lived experience, it's just a conflict between different sets of data. If you measure wealth and then you measure wealth relative to housing costs, neither one of those is "lived experience". If you do a survey on people's sentiments about the economy, that's data too. I'm skeptical of the term "lived experience" precisely because people tend to use it in arguments of the form "let's disregard data in favor of my individual preferences". But when you aggregate the "lived experience" of many people, you get data, and that data can be just as valuable as more anodyne economic data.
The problem with countering lived experience with data, is that whatever data you can provide, it's very unlikely to capture the exact sentiment you're addressing. That doesn't mean one shouldn't try, of course. But one should be very open to the possibility that things are happening outside of your specific data.
The most infuriating example, to me, is the overuse of GDP. As if that should tell us everything.
Yes, but I guess I'd say that we should not attempt to capture an exact sentiment in making policy decisions. The bigger the decision, the more people are involved and affected, and the more people, the greater the variation in their sentiments. It simply doesn't make sense to try to somehow please each individual to address something like housing affordability in the US (or California, or Los Angeles, or even Monterey). The only way to do that is to aggregate sentiments into data. In doing so you lose precision about those sentiments, but that's good, because some of that precision is measuring idiosyncratic stuff that shouldn't play a role in solving the problem in question.
No, it shouldn't tell us everything, but if someone makes a very data-oriented claim ("millenials will be the first generation poorer than their parents") and you return with data that shows the opposite, you can make a claim that the data is poorly gathered, etc.
But pivoting to the "but it's not my lived experience, bro" is weak.
If you made the claim that "millenials have it harder than their parent" then we're talking something where experience can be more useful.
It's funny, I say the exact same thing about crime in NYC.
Statistically it's safer than rural Oklahoma... but your lived experience in taking the subway 45 minutes every day will not paint the same safety experience that can't be found in any statistic.
Assuming this is an earnest question - the lived experience is that for some people, they are less well off than their parents. This is a big enough phenomenon that it has been measured and AFAIK is well accepted as a fact. So being poorer than your parents isn't about living the experience of both your life and your parents.
Although anecdotally my father moved to the UK with my mother with nothing but the clothes on their backs, and by 27 my dad was able to afford his first property in London start a family, all without a uni degree and hadn't even yet finished his accountancy training. He did that without any family help and in fact was sending money home. This has always helped provide a bit of colour of how things have changed
That's mean wealth, not median wealth. Mean millenial wealth at 34[0] is $345,000 and median millenial wealth at 38[1] is $130,000. Given that inequality has been rising steadily in the US over the past 30 years, the mean and median wealth of Gen Xers and boomers were almost certainly closer to each other than for millenials.
It hasn't been the best for a long time, and economist have long proposed alternatives, but gdp and gdp per capita seem to be the easiest to calculate and convey.
20 years ago? probably not significantly different accept at the margins (i.e. we tamed HIV and now have ways to defend against pandemics) but other than that is life much different?
Clean water was a one-time thing and more driven by state action than GDP growth. Fittingly, right now the AI bubble is making access to clean water worse for some, fracking did so too. Nutrition? GDP growth made food harder to access for many people before it got better - city laborers had worse food access than farmers. Still today people are living in food deserts. Upton Sinclair's "The Jungle" showed what kind of food unfettered GDP growth actually delivers.
And mere decades ago, life was more or less the same, if not arguably better in many ways.
It's utter trash, it was good when we had industry focused economies instead of service focused ones.
Everybody mocked Russia for having the same gdp as Spain. As it turns out your economy is much stronger when it's focused on heavy industries, steel, mining, oil, &c. Than when it is focused on tourism and other services
One produces value, the other generates money, when shits hit the fan you need energy, the drunk brits coming in your strip clubs aren't that useful anymore
On its own? Sure. (Although to be fair to Spain, they've invested heavily in solar and high-value agriculture in recent years).
But seen as part of a system with Germany and perhaps the UK (no longer part of the EU, but was better for both when they were), it's a valuable part of quality-of-life in the overall economic bloc.
Where would you rather live? Spain, easy.
Who would win in a war? Russia, easy.
Some will read this as an argument against the Spanish lifestyle. On balance I prefer to read it as an argument against war.
Really? Russia has not even done all that well against Ukraine, a much smaller economy.
What sort of war? I agree Spain could not successfully invade Russia, on the other hand Russia could not invade Spain either. No working aircraft carriers so their air force would be operating from very distant bases (even if they were allowed to pass over the countries in between), limits on ability to land large numbers of troops, etc.
> no longer part of the EU, but was better for both when they were
I do not understand why you even mention that as the EU does not have a military, NATO is relevant and the UK is in NATO.
Its a matter of opinion. I think the UK is at least as well off (growth has been similar to comparable economies like France and Germany since Brexit) without even seeing the long term benefits AND the EU is better off as the UK was a major impediment to the political integration the Euro zone needs.
> Spain army's is 1/10th of Ukraine's and basically haven't been in anything close to a war in decades, so yes, really and easily lmao.
They do not have a border with Russia so how could Russia get their army to Spain?
Ukraine has armed forces geared to fight a land war with Russia. How do Ukraine's air force and navy compare to Spain's?
> Ukraine alone produces more military drones per month than the entire EU per year btw.
Because they are in a war. You cannot compare fully geared up war time production to peacetime production. What was Ukraine's drone output prior to the current Russian invasion?
I’m certain that if Russia somehow managed to attack or invade Spain, they would not be standing alone. I can’t imagine the French will be as content to sit around twiddling thumbs when their neighbor is lit up.
Sure but again that's not my point, my point is that people use GDP to compare all kind of things while it is a completely outdated metric that doesn't really tell you anything about anything unless you use it to compare similar economies or compare the development of a country year after year.
Pointing to Russia as a functioning economy is comical.
Industry focused economies are going to continue to come under pressure due to automation. The US for example has a lot of industrial output, but shrinking industrial jobs. And that’s a good thing. Sending people into coal mines should never be a long term plan.
> Pointing to Russia as a functioning economy is comical.
idk man, France's economy minister said he would bring "russia on its knees" economically, 3 years later it's still not anywhere close to being a reality, the minister isn't here anymore tho.
Put half of the sanctions on spain and it would fold in a month
Actually yes. Ukraine is far easier to invade for Russia. Geography is super flat. You can drive in from anywhere. Easy to supply thanks to sovjet rail. Spain is very mountainous and a pain in the ass to invade. How would Russia supply their troops that are completely rail dependent?
Right but the services sector is more than running strip clubs for tourists. Spain just doesn't export any services other than strip clubs apparently. The US doesn't have this problem. The Financial Services market is the largest in the world.
Russia is fighting the war exactly how I would expect an economy of that size to fight a war. Slow attrition coming from an inability to overwhelm their enemy decisively and fast.
How exactly is their economy "strong"? By what measure? You cannot really eat tanks, that is what made life in the Soviet Union unsatisfactory as well.
Current price of Ural oil is some 9 dollars above their breakeven costs. As the classic says, not great, not terrible.
Agreed. Long term economic health is always tied to long term social health. We should be, ultimately, trying to look at a broader index than some simplistic view of just money. It is a hard problem though to pin down an index for social health. As soon as we name a measure or index it becomes a target and its value drops. I tried to think of a more 'universal' index, one that could be applied to civilizations in the past and present and the best I could come up with is the healthier a civilization the more people can live together, longer, without killing each other. Not rigorous, but in general when I view history it seems to fit reasonably well.
GDP and growth are blunt instruments, but they're not meaningless... They tell you something about aggregate capacity, incomes, and whether the system is shrinking or expanding
I said meaningful measure of economic health, not growth. :-) But I'm not sure. The book "Mismeasuring our lives" gives five recommendations for developing improved measures:
1. Look at income and consumption rather than production
2. Consider income and consumption jointly with wealth
3. Emphasize the household perspective (with this they seem to be focusing on more meaningful measurement of in-kind services and inter-sector payments, like government provision of healthcare and education, etc.)
4. Give more prominence to the distribution of income, consumption, and wealth
5. Broaden income measures to non-market activites (their examples here are things like childcare, where a shift from non-market childcare to market childcare over time can create the illusion of an increase in productivity)
Personally #4 is my biggest beef with GDP (and related measures like GDP per capita). Without some kind of adjustment for inequality, GDP can easily make bad things look good. What we need is not overall growth but equitably distributed gains; even a decrease in GDP could result in most people being better off if it occurred because of wealth redistribution.
and in every metric that encompasses logarithmic values (like income or wealth) normalize the use of the median ffs... Averages are gaslighting the "average" Joe.
Most meaningful alternative measures of growth very strongly correlate with GDP. Which is why we just go with GDP. It has issues but GDP has practical utility.
Sure, but once countries hit a moderate level of development the bulk of preventable infant deaths are handled. E.g. Frances' rate has been flat since the turn of the millennium.
> Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.
Robert F. Kennedy, Remarks at the University of Kansas, March 18, 1968
As someone who lived in a handful of countries with GDP per capita ranging from $3k to $70k I must say that GDP is a great proxy of the QoL and median citizen wealth. Not the only one and not the perfectly correlated one, but a very good one.
GDP is not useful to measure how good an economy works. The core problem of GDP is that it does not account for usefulness of spending.
GDP also ignores volunteer work and other non market transactions, completely dismisses externalities for health and the environment, and also has no indication of the distribution of said wealth.
If you had a Rawlsian veil pulled over your eyes and someone said to you "You won't know how rich you will be in that society, but would you rather live in a top ten GDP per Capita country or a bottom ten?" I think we all know what we would reply.
Granted it might not be fine grained enough to distinguish between Number 4 and Number 5 on the list.
Might still be a useless indicator considering that many of the low GDP countries also rank badly in other indicators that are often taken into consideration more broadly, like quality of life indicies, corruption indices or just the Gini coefficient. Correlation does not mean causation
Part of the problem though is that people often try to use GDP (or GDP per capita) to compare within the top of the list. Like they try to draw conclusions about whether "Germany is doing better than Italy". It's true that big differences in GDP per capita can distinguish between really good and really bad places, but so can many other measures (like life expectancy or education expectancy). Plus, even on a coarse rubric GDP isn't perfect. I'm pretty sure I'd rather live in Spain than Qatar or Greenland. :-)
I try to see it positive. With the AI bubble, I finally habe a tangible example to point to when I say that GDP growth is a bad indicator for economic success
You could have used the example of Ireland before. They score extremely well on GDP, and yet the quality of life of an average Irish person is on par with the rest of the Western Europe, with the costs of housing pressuring everything else.
Yeah, but everyone knows why. The IMF has called out that 40% of Ireland’s GDP isn’t real because it flows into and back out (back to the US mostly) due to tax schemes.
The book the 'Growth Delusion' has some great examples on this as well. To quote the FTs[1] review of the book.
"The official protocols define the scope of GDP as measuring all monetised activity between willing parties in a given period. It is a pragmatic definition, but leads to some counterintuitive results. The sale of stolen goods for cash contributes positively to GDP, for example — so theft is good for growth. A parent’s housework and childcare, however, being unpaid, are excluded — resulting, by one recent evaluation, in a $3.8 trillion underestimate of the size of the US economy."
I vaguely remember a similar one around traffic jams as well.
The UK is just starting official statistics that include the value of household self supply. I do not know whether there is good enough historical data to compare it with.
Unless you can demonstrate that there is in fact an AI bubble, that is simply begging the question.
Notice how the term “housing bubble” is used much less frequently today than 10 years ago? That’s because that so-called bubble has been ballooning in size for three decades now, and almost nobody still believes that it will “burst” in any meaningful sense. The Dotcom bubble was in many ways an outlier.
People often use it instead of 'raises the question'. E.g "There was very little fallout to the Y2K bug, which begs the question: was the Y2K crisis real and well handled or not really a crisis at all?"
The longer it takes to burst, the worse the outcome.
Housing is being propped up by the governments of the west because it was already so problematic if it fails that millions of people would be severely impacted.
Even the housing backed mortgage crisis of 2008 was as large a shock as the great depression, the reason we’re not all using money as toilet paper is due to government intervention. Rightly or wrongly. Some people believe that this intervention makes something worse bound to happen later- and based on the cost of housing I tend to believe them. It is not sustainable to keep housing at its current cost, and the financial model requires that they continue to increase in price. If house prices fall it is a disaster for millions.
There are a few noticeable differences between housing as an asset and AI datacenters. Beyond the obvious difference that a house has a depreciation in the order of decades, whereas AI GPUs are a few years.
Then there is the fact that housing is a fundamental human need whereas AI, as frequently demonstrated, isn‘t even a want by many people.
I am not saying that AI cannot demonstrate todays value 20 years into the future. But there is zero reason to believe the short to medium term payoffs on AI investment will be proportional to the investment we‘ve seen over the past few years
> a house has a depreciation in the order of decades, whereas AI GPUs are a few years.
That’s no longer true for datacenter-class GPUs. The A100 came out six years ago, and it still sells for $15k+, with no meaningful drop in the foreseeable future.
> That’s because that so-called bubble has been ballooning in size for three decades now, and almost nobody still believes that it will “burst” in any meaningful sense.
That's because Boomers live far longer than prior generations thanks to medical advances. The housing bubble will collapse (at least outside of the megalopolises) once the Boomers finally start to die en masse due to their over-representation in demographics.
But before that, the pension systems will crash hard. For people in systems with redistributions (like most of Europe), there simply aren't enough working age people contributing payments for the pensioners, and for people in stonk-based systems (e.g. US 401k), they will run into the issue that someone has to buy the stocks that the pensioners sell off to fund their retirement, and ain't no one of my generation buying stocks, thanks to us having to spend insane amounts of rent.
The problem is, people more and more can't manage to pay these rents, so they're either cutting back on any absolutely not necessary spending or going homeless outright. For now, there are enough desperate people that still have some money to pay rent... but retail, no matter which industry, is feeling the impact of people having no spending money hard.
Without the AI bubble artificially propping up the GDP, it is most likely the US economy is in a recession [1].
It is an indicator and it's not totally non-meaningful. But GDP growth, when it's at the price of increasing the public debt and inflation, is no real growth.
Instead of looking at the US, let's look at what used to be a relevant ally...
In the eurozone, for example, politicians are hiding the lack of growth behind a growing mountain of public debt and the GDP growth ain't even beating inflation since the 2008 crisis. In 2008 the eurozone represented about 25% of the world's GDP. Now it's not even 15% anymore.
Falling into irrelevancy doesn't begin to describe the state of things for the eurozone: from 25% of the world's GDP to less than 15% in 17 years is more than alarming.
And yet if you look at the eurozone in Euro, it looks like it's been growing since 2008. But it's actually been stuck since nearly two decades now and there aren't signs of anything getting any better in the eurozone. German carmarkers, the number one export of the eurozone, are in huge trouble (with China eating their lunch).
The US and China are, obviously, less fucked than the eurozone but the USA's growth has also been achieved at the cost of a runaway public debt and runaway inflation.
I don't know what protectionism can and cannot do for the US and it's not clear if manufacturing can really come back to the US but one thing is certain: the eurozone is a failure and whatever it is that they did or do should definitely not be copied. Unelected bureaucrats have managed, in 17 years, to drive the eurozone into the ground. It's mostly true for non-eurozone EU countries as well but some, like Poland (which is in the EU but not in the eurozone), are doing fine.
Basically: if you want to slash your part of the world's GDP by 40% in 17 years, do what the eurozone did.
Now we must understand this: the eurozone didn't just slash it's part of the global GDP by 40% in 17 years... They did so while, at the same time, creating a gigantic mountain of public debt and experiencing inflation.
Another 17 years of this, so another 40% loss, and the eurozone would only represent 9% of the world's GDP. And these unelected bureaucrats are so incompetent that I don't discard the possibility that they'll actually be able to crash the eurozone even faster than that. For example at the moment, while german carmarkers are in trouble, EU bureaucrats are hard at work trying to kill them for good.
Anti-americanism and anti-trumpism is a thing on HN but people should really look more closely at what's happening elsewhere.
What about an article from The Economist as to the reasons the eurozone managed to lose 40% of their share of the world's GDP since the 2008 financial crisis?
Share of the world's GDP is a flawed metric. It tells us we're getting a smaller slice, but it doesn't tell us if the pie grew or shrunk. If the EU grew by 50% while India and China became 200% richer, then on paper the share of the world's GDP would be dramatically lower, while everyone would be better off.
I don't disagree with the sentiment you expressed at all though.
Yeah but it wasn’t the unelected bureaucrats that fucked the EU. It was the German attitude towards debt and the redistribution of surplus. The Eurogroup sheepishly followed whatever Austerity fever dream of Schauble, tanked the Greek economy to teach every other Med country a lesson and by doing so, crippled any chance of post 2009 recovery
Italy's debt has ballooned to 150% of it's GDP, France is heading for 130% in the near future. Whatever happened in the EU, was not Germany's responsibility. Even Greece's debt is way higher than it should be after the Euro zone austerity "cure".
If there had been real austerity and real slashing of the national budgets so that all countries of the euro-zone actually complied with the fiscal pact that says that euro countries should not have a level of debt higher than 60% of it's GDP, then the Euro-zone would actually have some dry powder left to face these uncertain times.
Instead, the only country who seems to try to do something currently is Germany, precisely because it's debt is lower than most Euro-zone countries and therefore it can afford to spend more to try to create growth.
France is running 5%+++ deficit each year and it has not complied with the euro-zone fiscal rules for the last 20 years. Finland has 10% unemployment, Italy is not doing much better.
Where do these countries go from here? Do they cut social services and risk getting ousted in the next election? Do they borrow more and more with not much to show for it? That is the question that is facing these countries and nobody has the answers.
You do realize that the debt/gdp ratio is a ratio?
If you cripple the gdp through austerity policies (killing borrowing to chase the “responsibility dream”) the fiscal multiplier becomes a ruinous curse.
Of course, pissing money into a spending bonfire, driving inflation with excess liquidity, isn’t going to help; bit it’s just as bad as crippling growth by holding it back for lack of capital injection
I don't know - GDP has a few counter intuitive cases.
One example is when the same stuff gets more expensive. If I have something, like a loaf of bread, a house, a smartphone all of them the exact same get more expensive, GDP increases if demand doesn't change (let's say because its inflexible).
You could argue this is due to some increased foreign demand for said product and the price increase legit represents increased economic output.
But in the case of tariffs for example, we know that's not the case - stuff became more expensive because of levied taxes. No new stuff got produced, no foreigners are buying up this stuff, demand likely decreased for said product, yet the GDP contribution increased.
Another very typical example are things with inflexible supply, such as housing, where due to the increased volume of money, the exact same house now costs more. But since transactions still happen, that means the economy got better, right?
The Eurozone isn't a failure at all, and as a Polish person it annoys me that we have zloty and not Euro, it's very inconvenient when trying to do business beyond polish borders. It impacts me every month and creates quite some bureaucracy.
In any case where the European union keeps failing is that it keeps not focusing on creating as many common rules and regulations across the EU, so, yet again, scaling your french business beyond your borders, or bulgarian one, is always very difficult.
Most countries in Europe are ridden by pointless nationalism on so many matters when our biggest issue is creating a strong internal market in Europe, but our biggest economies are still manufacturing and exporting ones, with little focus on the strengthening of our internal markets.
US looks everything except being "less fucked" as eurozone. It is actively self destructing while mounting debt while, true, trying to destruct everyone else.
American debt is huge and growing unprecedently bigger. The economy is captured by rather small group of people completely intent on making this forever. It also seems to favor monopolization - one player capturing market and being able to prevent real competition. It has few sectors (ai, gambling, crypto) that do well and kind of hide the fact that other sectors are struggling.
The rare earths situation is embarrassing. This has been a political football for years now, but the efforts to fix it aren't working very well.
First, you need a mine site and a mine. The US has a big one at Mountain Pass, California, and it's producing. But in the past twenty years, it's gone bankrupt twice and has been through three owners, because there were a few rare earth gluts and the price crashed. Also, they once had a big spill from a retention pond, and that was expensive.
Mountain Pass isn't the only ore deposit in the US. There's what's supposed to be a good one in
Montana. But the company developing it has been doing "studies" since at least 2023.[2]
There are a few other rare earth "mining" companies which don't produce anything yet.
There's one in Tennessee with a "definitive feasibility study" underway.
I'm tempted to say that the real product is the stock. Anyway, it's not like there's a need to go to Ukraine or Greenland for rare earths. It's all available in the US, with a decent climate, good road access, and no wars.
Second, you need a beneficiation plant at the mine. This takes in rock and dirt, pulls out ore with a reasonable fraction of rare earths, and outputs almost as much waste as it takes in ore. This is a somewhat messy process. In China, the settling ponds are visible from space. Mountain Pass has a better process (the Sierra Club approves) and doesn't make such a mess. The waste is dried, the fluids are reused, and the dry waste can be put back where it came from eventually.
This is now a known technology and is being replicated at some Australian mines.
Then you need a separating plant, where the actual rare earths are separated out. The US has very little capability in this area. Not for any good reason. There's a small startup.[1]
They're slowly scaling up. Production in 2027. There's another startup, Medallion (then Gabo, then Gamma) which has been fooling around since 2020 without building much. That's one of those companies where you read five years of press releases and they're all about financing, reorgs, and management changes, with no actual product. Here's another one, RER. They've been at this since 2021, and they have a little demo plant in Wyoming.[3]
Then you need a smelting and magnet making plant. This is a modest size operation, because it processes tons, not millions of tons, of material. One has been built in an industrial park in Texas.
That took funding from DoD and General Motors. Not big enough to replace all imported magnets.
This is US postmodern capitalism. The US financial system just doesn't seem to be able to bring a complicated heavy industrial project to completion in a reasonable period of time.
Rare earths are not actually all that rare, they're just present in very low concentrations and require tons of processing with nasty chemicals to extract. Those startups etc aren't sitting around twiddling their thumbs for kicks, they're mostly mired in bureaucratic approvals and/or lack of finances due to a very justified fear of those approvals. Throw in the wild price fluctuations and it's much easier to just buy everything from China, which already has everything in place.
What you're describing looks less like "we tried protectionism and it failed" and more like "we don't have institutions that can reliably carry long-cycle industrial projects from idea to operation."
Exactly. This supply chain requires four quite different plants, none of which make money until the other three are running. US capitalism isn't good at setting that up from a cold start. Market forces may get there incrementally, but it takes a decade or two. It's high risk for any part of the chain to get ahead of the others.
China's industrial central planning has no problem doing this. Where there's been progress in the US, it's been because big customers, DoD and General Motors, pushed.
This is a nice example to look at closely. People in US politics have been screaming about rare earth problems for a decade now. It's not a resource problem. It's a capitalism problem.
why go to the trouble of building and maintaining mines in your expensive western country if you can just take all the minerals from african mines, while also getting the profits of these mines. no worries about salaries, no one cares when workers die by the dozens, ...
Because Africa produces a very small percentage of rare earths in mines, and basically 0 in separation, refining, and production of rare-earth components.
i had diamond and cobalt in mind, i'm sure that this doesn't apply to every type of mine. but you can't deny that this isn't a current, imperialist strategy. soft colonialism.
The chart they put doesn't prove a point since the difference between today and the last elections in the US can't be appreciated (aside from the fact that in the entire period the drop is caused by automation too). Additionally you have to account for the time it takes to move production from a country to another.
This is not to say that just setting random tariffs to punish other countries is an effective strategy, but I do think that targeted limitation of imports are necessary in a society that is becoming extremely materialistic. My bet is that France's surcharge on Shein products will be the first of many
I feel uncomfortable the more we celebrate economic 'resilience' Recession avoided. Growth sticks. ~
Jobs remain. I've learned to differentiate survival from renewal.
Surviving is the ability to withstand shocks and not break. Renewing is the ability to rebuild and strengthen so that the next shock is less painful.
Most policies focus on the former. The latter is far more difficult. It is slower and easier to postpone. Protectionism is a classic example. It keeps the numbers stable in the short run but it means there is often less incentive to improve productivity, skills and supply chains. On the surface it all looks fine, but nothing gets better.
A new guide for me is if a policy makes it easier to be static, it is probably not progress. I wonder if others think the same. What signs indicate that renewal is underway? When has buying time worked? What is more important than growth?
This is a wider concern. And partly the issue where economies have become very reliant on monetary policy being the controlling mechanism rather than a better mix of monetary and fiscal policy.
The fear now comes in the rock and a hard place issue that is ongoing here, whereby interest rates/monetary policy are arguably still not in restrictive territory enough that if a downturn was to occur, our coping tool is to loosen policy further but that would likely stoke further asset inflation and potentially general inflation compounding other issues.
It's why you get more leaning to the view that it might be necessary to just let things fail as a resetting mechanism, which I'm personally not sure about.
You've reminded me of the forest fire simulator[0], there's a potential second dynamic how reducing the occurrence of negative events might also increase their impact when they do eventually occur
Reduce lightning strikes and increase rate of tree growth, no idea if it applies here as much?
Black swan[1] talks about this and the housing crisis was a significant event, but you can make an argument against this position as well
What's more important than growth, to me, is adaptability. An economy that can reallocate people, capital, and ideas quickly will generate growth eventually. One that optimizes for stability alone may look fine for a while, but becomes fragile in ways the headline numbers won't show until it's too late
Well in the U.S., a majority of households are invested in the stock market via 401(k)’s. When their investments do well, the average Joe will give the incumbent president the credit.
Some people prefer to believe the media they consume over their lived reality.
My parents fall into this trap, they keep telling me things have never been so bad yet they live materially better lives than their own parents and their children.
I think that largely didn’t happen with Biden. But if it’s true then it makes divesting from US stocks a priority for countries targeted by the US administration.
> And it is America’s private sector, not industrial planners in Washington, which is chiefly responsible for the ai boom. The ongoing success of free markets is obscuring the damage protectionism is doing.
The AI boom is also largely being funded by defense spending on both sides of the Pacific. Without state investment this technological boom would also suffer.
Also — what industrial plan? As far as I can tell, we just have tariffs without a complementary plan to encourage investment, build infrastructure, train workers, reduce labor costs, etc.
Public funding of STEM in universities too. Foundational research is underprovisioned by the market because it's a non-rivalrous and non-excludable public good. It's a market failure that is best addressed by governments fulfilling their role as providers of positive sum public goods.
Solar went through a similar cycle with German and US funding for foundational R&D in the 1970s, which was eventually picked up by China's industry when it was mature enough.
SpaceX too.
There's a yin and yang to public and private that populists on all sides are ideologically incapable of appreciating.
What stands out to me is the disconnect between macro resilience and the stated goals of populist industrial policy. Growth holding up doesn't mean tariffs or subsidies are working, it mostly means firms are very good at routing around damage
Is ancap economists from Austrian school considers economics correctly? They say a lot of things but I still can not decide whether they geniuses or populists?
From a contemporary standpoint these categories are basically just ideologies. There has been a steady shift in economics towards empiricism, dynamic modeling and so on since a while now. Ideologies always have glaring blindspots, so their predictions and perspectives never really match up with reality.
There's a quote by Mahatma Gandhi that resonates whenever I see contrasting debates about this economic indicator or that:
"I will give you a talisman. Whenever you are in doubt, or when the self becomes too much with you, apply the following test. Recall the face of the poorest and the weakest man [woman] whom you may have seen, and ask yourself, if the step you contemplate is going to be of any use to him [her]. Will he [she] gain anything by it? Will it restore him [her] to a control over his [her] own life and destiny? In other words, will it lead to swaraj [freedom] for the hungry and spiritually starving millions? Then you will find your doubts and your self melt away."
India's IT outsourcing-led GDP growth can benefit many almost-poor and poor people by giving them access to more spending by the "middle-class" (a very debatable minority in India) and the rich. But it will not benefit the poorest - social welfare schemes do that, but anti-homeless measures cancel it out. Access to formalised lending can do that, but anti-immigrant schemes and the Kafkaesque labyrinth of getting an id-card in India will negate that. And banks won't give you a loan if you're poor (so they go to loansharks).
You can have all the Apples and the Facebooks of the world in California, but putting spikes in places where homeless people could sleep makes Gandhi's talisman stand out far better than any macro-economic indicator.
Inflation can be positive or negative but if you're living in a place with less supply than demand, your rent will go up by far more than the price of eggs. This will hurt you completely independently of the price of eggs.
All this to say - if you care about the poorest, you'll find little to cheer about. But should you care about the poorest? Is that a good measure of healthy economic growth? Is economic growth the only priority after 1991?
You can be poor and destitute in a capitalist dystopia and you can be poor and destitute in a communist dystopia. This is why I hate the language of the Cold War so much - we lose an infinite amount of nuance with terms like "Capitalism" "socialism" "communism" and "GDP"
I hate Trump, but this piece doesn't seem to prove or argue anything at all. It's basically free market fanaticism, it says that economic metrics are good in spite of protectionism and not because of it because how could it be otherwise? Invisible hand, etc. It's totally begging the question.
If the free market economy is so resilient to threats, why didn't it thrive also in 2008?
That's a good question. So, 2008 was a major problem and financial institutions brought that on themselves. But that's - fortunately, even though there were significant knock on effects - limited to one very important slice of the market, not unlike say when Enron went bust or when the .com bust happened. The rest of the free market is what pulled us out of those things.
Free markets are on balance a good thing, assuming a level playing field and regulations to curb externalization and monopolization as well as cartel forming.
So you are arguing for a regulated market, not a free one. Heavy anti-trust legislation and enforcement is needed for a healthy economy. This might lower the year-over-year stock raise but at least keeps the negative excesses somewhat in check (monopolization, power concentration, rent-seeking).
Saying that these are then not free markets is a fairly hardcore libertarian viewpoint, which tries to make it a 'black and white' issue, whereas in reality things are often more nuanced.
So, there are threats and the economic data is fine (like now) -> the free market works great because it works fine in spite of the threats.
There are threats, the economic data falls into the gutter, but eventually recovers (not without real and quite lasting negative consequences for many people) -> the free market works great because hey, if you held SP500 you were still fine in the long run.
It's like a religion. If things go well it's thanks to God, if things go wrong maybe God is testing or punishing you but all will eventually be fine (in the worst case, after death). The free market is a lot like a god for its followers.
I well remember what happened in 2008 (caused by government's deregulation by the way, not "technocratic managerialist", whatever it means).
Despite the severity of what happened, jobs rapidly recovered and were around the same pre-financial crisis levels (and well above US averages) in a matter of few years and workers earnings were at or above 2008 levels (inflation adjusted) by 2016.
All in all, as severe 2008 was, I don't see how free market economy made it more, rather than less severe. It's at best an opinion.
"Caused by government deregulation" could also be phrased as "not prevented by regulation, while caused by financial markets".
The rest of the market recovered quickly once the government re-arranged debt and prevented a full collapse.
But the lesson was that private debt was accumulating too quickly on a shaky basis, catalyzed by financial markets making the issue orders of magnitudes worse. Rapid private debt accumulation is still not discussed enough today for my taste.
Populism is best understood as the general public asserting elites have “broken the deal” that legitimizes their rule — and the public withdrawing their assent from the regime.
They are correct that the technocratic managerialists on the past century have failed — and failed in a way damaging to the state/nation. (For US and EU at least.) In so far as we’re all discussing that (and have been for several years), they’ve been wildly successful.
We come from decades if not a century of spectacular growth and yet "technocratic managerialists have failed", what, where, how?
The United States comes out of 25 years of unprecedented growth, in spite of two major economical recessions and has outpaced the majority of advanced economies.
You’re using top line numbers to make that assertion, but gains are not evenly distributed.
There’s prolific ink spilled on the failures of technocratic managerialism over the past 40 years as gain become decoupled — and particularly over the past decade as the breakdown has reached critical mass.
I am not a supporter of Nigel Farage and his many different parties in the UK ('Reform' just being the latest incarnation), and I don't believe his policies offer any real answers.
But what the rise of Reform does show us is the utter disillusionment with the mainstream parties of the UK, who have spent the last several decades afraid to make meaningful changes. They tell people they can't have what they want because it would be too risky/expensive/whatever. We can't do that, the bond markets won't like it. We're running high on debt so we can't afford to make this better. Here, I'm going to add 0.4% to this tax so we can give this service an extra 0.3% budget.
All the while government takes more in tax every year but the country feels like it's in a state of managed decline as services struggle. People wonder where all the money is going and there's no particularly good answer. And the managerial politicians' cautious approach hasn't led to economic growth either, so people don't feel like things are getting any easier.
With that background it's hardly surprising that the populace flock to someone loudly offering change, even if it's bullshit change.
(I left the UK a few years ago but I do visit and keep up on the news. Australia is on a similar path but less extreme, though with accelerating house prices and other forms of inequality, and the collapse of our traditional centre-right, expect things to get more populist in the coming years)
While I sympathise and agree with the point, it’s easiest to blame political parties but the electorate are also to blame.
They simply want to have their cake and eat it too. Plenty of times post-GFC where parties have tried or proposed much needed reform only for the voters, gerrymandered by the press, to throw their toys out of the pram. Theresa May’s “demantia tax”, Starmer’s winter fuel allowance for example.
Sadly it feels like it’ll probably be taken out of everyone’s hand, through some sort of economic crash or worse, to get people to be realistic again.
To me this is a prime example of the problem - they were really just fucking around at the edges anyway. It wasn't any sort of major reform. That old scene from Futurama often springs to mind -
"I say that your 3% Titanium tax goes too far!"
"And I say that your 3% Titanium tax doesn't go too far enough!"
Completely. That was the thing about the winter fuel allowance. It was largely a nothing burger and yet they couldn’t allow them to get it through. You could see almost immediately after they pulled back, what little confidence and ability the government had melt away. It’s been more of the same ever since
> People wonder where all the money is going and there's no particularly good answer.
That's because people don't want to open their eyes, it's mostly going in pensions and public services and is increasingly more paid with debt.
As for decades and decades politicians have avoided to become unpopular by raising pension ages (or did it way too slowly), those are the results.
Look at what happened in France under Macron when he raised pension age or tried to stop the bleeding in public financing: raise in national populism yet again, as if the far right in France (or the far left) had some magic wand (same for reform UK) to stop the bleeding.
Actually, if you look at the rightist populist across Europe (Poland, Hungary, Italy) they made the problems worse by actually jumping into very (historically) leftist measures such as throwing even more money at the public (benefits, pensions) at the expense of public debt.
Poland feels it slightly less because it has more growth (largely attributed to the nearly 2 millions of Ukrainians that settled there bringing with them their skills and tons of money).
It's not my contention really that the UK or other nation can or can't afford to do things differently, it's more that that is the constant refrain coming from mainstream politics, along with a multitude of other excuses for relative inaction.
Yes, that is the other side of the coin, that people are not just attracted to change because of loss of faith in the mainstream, but actually going over to support the populists.
And this is not aimed at you, but I do see all too often that people in the more mainstream spaces look at that side of the coin exclusively. "They're supporting reform because they're racist/stupid/brainwashed/propagandised". Sure, sure, those are definitely factors. But the opportunity to do that brainwashing and propagandising is there for a reason.
And those two effects feed off each other in a way that either one of them could never accomplish, the 'sum' (or rather the difference or negative sum) is much larger than those parts individually.
> I don't believe his policies offer any real answers.
Indeed, it's a shame that people are too dumb to realise they're just lining themselves up to be fleeced by a different "elite", instead of actual change.
Meanwhile we bail out large corporations on mere speculation they might fail. I don't know where you live, but around me a large chunk of the population have nothing to fail down to other than homelessness which is a huge drag upon the economy.
In the UK at least the biggest portion of welfare goes to the state pension.
It’s hard to deal with that when people have been paying into the system for their whole working lives on the promise that they will be looked after in old age.
It’s hard to see how you can fix this whilst pensioners continue to vote whilst young people don’t.
>It’s hard to deal with that when people have been paying into the system for their whole working lives on the promise that they will be looked after in old age.
They weren't paying "into the system". They were being taxed.
Treat it for what it was, and stop feeding the pyramid scheme.
That's about 25% of UK government spending. 33% if you include pensions.
The UK does have an issue with a lowering number of people in productive work and ever more on various kinds of disability payout, it's true, but this -
If education is welfare then so is everything. Defence is welfare becuase before you might have to hire private security. Police and fire serviecs are welfare because they used to be private. etc....
Ok so can you name me a single piece of government spending that isn't welfare Or are you advocating for governments to just cease existing all together.
The answer is the ultra-wealthy. Those on welfare are getting increasingly poor, while the ultra-wealthy are getting increasingly wealthy. It's clear where the money is going, and it's not to poor people.
I wish I had the kind of hubris to make a bunch of predictions that all turned out not to happen (high inflation, recession, etc) then come back a year later with more predictions and a “trust me bro, I’m 100% sure this time”
https://archive.is/POmBn
I find the S&P500 to be interesting as a demonstration for currency risk. Denoted in US, it went up ~18% or so. For me as an EUR investor, it went up just 4.6% when accounting for the loss of the USD. Comparing that to indicies that usually do not perform that well, Euro Stoxx 50 is up ~22% and MSCI Emerging Markets ~21%.
I noticed this as well. I haven’t found a good cure for this other than diversifying globally.
I could be misunderstanding this, but you know that you can buy ETFs that are currency hedged?
Taking Vanguard for example, VGS is global equities, but VGAD is global equities that are AUD-hedged (my home country).
The only downside is that you pay more in fees (and they're less tax efficient). People generally don't bother with it though, because on a long enough time-line currencies usually revert to their long-term average, so if you're holding for retirement there's generally little point.
> The only downside is that you pay more in fees
This is a _huge_ downside for index funds, though. Even quite a small fee difference has a huge compounding impact over time; people often miss just how much.
AIUI, assuming you're investing in a global equity fund, currency hedging is almost never worth it. It _may_ be worth it in some cases if you're investing in a foreign index (eg S&P for Europeans), but even then not usually.
It depends if you forsee potentially having to sell before retirement. Or if it may just happen out of your own circumstances.
Hedging is all about diversification at the end of the day. So it makes sense to hedge if you're coming close to retirement age.
TIL: currency moves have zero expected return
You also can't predict when you might need to sell you stake, so that's ultimately the value of hedging. If you're forced to sell in 5-10 years, then hedging would be valuable.
Let's say I'm close to retirement. And let's say I'm in US dollars, and the dollar isn't doing well right now, and might continue to not do well for a long enough time frame to matter to me.
On the other hand, my expenses will also be in US dollars. To what degree should I hedge against the dollar?
Oh right, sorry I completely misread this.
I'm actually not sure in your case. My guess is that it's something you wouldn't need to worry about, but I don't know.
Hard question to answer without understanding your circumstances.
Ultimately the point of hedging is to diversify. So the degree you should hedge is relative to the degree with which you have exposure to your home currency. So for example, if you already own a home in that country + you already own lots of shares in that home currency, then hedging might be less important.
The recommendation I've seen is around 25% of your portfolio in hedged global equities, assuming you have another 25-30% in non-hedged global equities.
There is no 'cure' per se as a non-US investor currency risk is just something to accept (or swap return for a hedge but then it ends up being a wash mostly), for example if you invest in a World equities ETF, it's a bit pointless to be hedging exposure to all the currencies. Even if you decide to slant away from the US, it's likely a majority of non-US large caps have USD exposures.
It's more a psychological thing, you see absolute USD return and think you could've made that but there's not the actual return, your actual return is post conversion, if you'd have hedged you wouldn't have that abosulte return either, so you've never had it.
Additionally, if you're like most people and investing regularly or DCA-ing from now on you can buy at lower USD
Is absolute USD return being lower than “actual return” (not sure what that is measured in) an issue if you stay in USD your whole life?
Actual return is for non-US investors having to convert back to say Euros for retirement, after having the dollar weaken, you get less Euros for example
No but your USD return gap should in theory be eaten away by inflation.
Everyone wants to park some money and have other people work hard to increase the real value of said parked money. Not everyone can win big. Storing value is actually pretty amazing thing and that it can be profitable is magic. Of course the environment and poorest pays some of the free lunch.
it really depends on whether or not there is a global capital shortage. this is very easy to do when the economy requires much more capital than is available. and in the inverse, it is self explanatory
An investor friend once told me that the US needs to always be in debt because treasuries give investors a risk-free place to park their money between investments. The sense of entitlement was astounding.
I don't think this is necessarily entitlement. There are heteredox but popular economic theories (such as MMT) that view public debt issuance at least in part as a method to satisfy the demand for private savings.
That sounds like just describing the way the current global system works, not entitlement.
Transitioning to another system would work (and seems inevitable at some point in the next hundred years??) but oof it would be chaotic.
Many global indexes are also traded in USD.
Ironically last year has been good for those who held EUR based or CHF based indexes.
Still not helpful if you need to pay your bills in EUR?
> indicies that usually do not perform that well
MSCI EM has outperformed MSCI US since it's inception in 2001 if you look at total return.
Small caps and emerging markets in the long run should outpace advanced high cap markets as they have more room to grow.
There's also some other interesting aspects of emerging markets specifically: they never went more than 4.5 years before recovering from a crash to ath, whereas it took the SP500 12 years and EU 600 index 14 to recover from the 2000 one.
Google etc may be a US based company, but they can leverage emerging markets just fine.
There’s a stronger argument to be made for small caps, but stock buybacks allow any company’s stock to effectively experience exponential growth even with flat earnings. IE there’s little long term difference between buying back 2% a stock every year and ~2% actual growth every year assuming you never hold the majority of shares. (as in 1/0.98 ~= 1.02)
> Google etc may be a US based company, but they can leverage emerging markets just fine.
Not sure what are you trying to say.
You’re buying stock in a company not a market, and a company doesn’t need to be based in a country to profit from that country.
Plenty of companies listed on foreign exchanges make the majority of their money from the US market etc.
You can buy "into a market" by investing in a ETF following the MSCI EM or SP500. In any case not sure what's your point about single stock companies in a discussion about market indexes.
> You can buy "into a market" by investing in a ETF following the MSCI EM or SP500.
Nope. A more accurate description is saying you’re buying into a specific subset of a Market by buying shares of specific companies. Hand waving them as if they are the same thing doesn’t actually make them the same thing.
The MSCI EM, SP500, etc etc are simply a collection of public companies not the market of a given country. Which is why index funds all behave in fundamentally different ways than the actual markets we’re talking about.
Now if you do want more exposure to the upsides of a growing economy there are options, it’s just not a simple as buying an index fund.
You keep being out of topic.
This thread is about indexes and it started by a user stating that emerging markets indexes have been in line or outpaced global and even most of the advanced economies ones.
What these indexes are and how they behave is definitely on topic. Some of the indexes we can point to have in the past seen outsized returns, but many haven’t especially over specific timeframes. Currency fluctuations play a huge role, as does perception of risk etc.
Your previous statement about why in general they would have an advantage was inaccurate. As you have seemingly realized.
> You’re buying stock in a company not a market
I mean, we're talking about index funds, where you essentially are buying a market.
A set of Stocks != a market.
For one thing you’re only buying public companies, that in and of itself is a significant difference.
That logic is flawed. The end value and ROI for S&P500 is the same regardless of the currency used to display it.
It's the same as complaining that the temperature increased more in Fahrenheit than in Celsius.
EDIT: The total value is the same regardless of the fluctuations of currencies used to represent the value. Those are two independent issues.
Currencies fluctuate even if you keep them in checking accounts without investing them.
And yes, if you measure distance in feet, your son will go every year further away than you because his feet keep growing, while yours stay the same.
The logic isn't flawed. If you are a European investor, then you care about the returns in your currency, and the fact is your pile of money only grew by 4%.
Inversely, as a US investor, if you invested 100€ in the eurostoxx 50, your pile of money would have grown to about $140 (20% index growth, 15% dollar debasement). It absolutely makes a difference, that's $20 more in your pocket compared to the index.
Your comparison with temperatures is wrong. Celsius and Fahrenheit are fixed units, whereas the value of currencies fluctuate.
It is flawed because it's conflating two different independent variables. It's also looking for a specific weak point where there is none, more as if it is trying to state a narrative.
If you want to talk about EURUSD then just state it.
It makes sense if you're looking at it from the perspective of a European investor. e.g. You start with 1000 EUR, convert and buy into an S&P500 fund, wait a year, sell and convert back to EUR.
Celsius and Fahrenheit doesn't work as an analogy because the rate does not change over time as it does with currencies.
I think it depends on whether you're planning on holding it in currency or using the currency to buy other things. Does the cost of material goods and services mostly stay the same in EUR, or does it somewhat follow the S&P? If more the latter, then converting to EUR is just a very temporary exchange and its nominal amount doesn't exactly matter.
> Does the cost of material goods and services mostly stay the same in EUR, or does it somewhat follow the S&P?
I don't understand this question, are you asking if material goods and services in Europe, which uses EUR, "somewhat" follows the S&P, a US stock market index?
If you have to hold USD to buy and sell USD products (as a European) it doesn't make sense to compare your SPY position vs EURUSD because you have to use those USD to buy something or pay some debt.
> If you have to hold USD to buy and sell USD products (as a European)
Approximately no individual does this. Some companies may hold some foreign currency reserves, but even there it is not _particularly_ common in most cases.
As a European, I have never, in 40 years, had any USD, except a small amount of paper currency. If I'm buying something made in the US, I'm probably buying from a local vendor, or else will convert on the fly. If I'm visiting the US, I'll convert on the fly (this is even cheap, now, thanks to neo-banks). I own a bunch of US equity, but indirectly via a euro-denominated global market index fund. This is fairly standard. In general it's only common for individuals to hold foreign currency where the local currency is particularly unstable.
> If you have to hold USD to buy and sell USD products (as a European)
Do people do this? Up until some months ago, I was heavily invested in some US companies, and I never actually held USD in my accounts at any point. I used EUR to buy those stocks, the conversion happening together with the purchase, and same thing when I sold them, I received EUR ultimately.
I know I could have another account in my bank with USD set to the currency, I just don't know why'd anyone would want to, when you can convert at the point of sale/purchase. Of course, if you're doing forex trading or whatever, that might make sense, but I don't think generally people hold USD to buy/sell US stocks, because you don't have to.
It is not common for Europeans to hold USD to buy and sell USD products.
> Does the cost of material goods and services mostly stay the same in EUR, or does it somewhat follow the S&P?
... Wait, why would you expect the price of goods to follow the valuation of, well, any market index, never mind one specific foreign market index? Like, I don't understand why you think that would happen. If anything, you'd expect a minor inverse relationship, at least on a global scale; rapid growth of cost of goods indicates inflation, which implies central bank tightening, which tends to depress stock values a bit.
I mean, for retail investors outside the US, the question you're asking boils down to „does purchasing power parity follow popular US domestic market indices?“, to which the answer is a resounding no.
There may be some offset for goods imported from the US, but that's a minority of consumer goods globally, and even then, the purchase currency will usually still be the local fiat, and then the attractiveness of the US index fund still has to be weighed against the performance of non-US-based indices in that same local currency as opportunity cost.
Also an American investor, really; an American investor who'd pulled out of S&P and moved to Eurostoxx at the time would have made something like 40% in their local currency (about half of it due to the decline of the dollar).
This analogy is flawed. The conversion formula between Fahrenheit and Celsius is fixed. Not so for currencies.
They are two separate issues, you don't look at the returns on SPY vs every currency.
If you are in USA and invest outside USA. Do you look at returns in USD or in nominal value of the market you invested in? Say there is hyperinflation where you invested. You should be extremely happy. After all the nominal value of your investment is massively up. Even if USD value is now fraction...
If you are outside the USA, then you absolutely do. Returns are denominated in the base currency but it doesn't paint the whole picture.
The roi is unfortunately not the same if you earn your money in euros and need to pay your taxes in euros. At one point one has to do a forex trade and that will be a loss for the euro investor
Only if you convert it at a loss and are unable to wait for USD to recover. If (and it is, admittedly, a big assumption) we assume that USD and EUR are broadly stable currencies over the long term, then short term changes in the ratio don't matter for long term investors. You're buying a share of productive capacity, the currency it is listed in doesn't matter.
Only if you convert it at a loss and are unable to wait for USD to recover.
If you need to wait for it to recover you have lost money.
Besides, who says it will recover?
It's reasonable to assume they're broadly stable, but being broadly stable doesn't mean a drop will "recover". There's no specific ratio that the currencies are being pushed to. Permanent changes in the baseline can and do happen.
> You're buying a share of productive capacity, the currency it is listed in doesn't matter.
But I don't own a fixed percentage of production, I own a fixed number of shares and the number of shares can change. If the number of shares doubles, then my investment is worth half as much.
> But I don't own a fixed percentage of production, I own a fixed number of shares and the number of shares can change. If the number of shares doubles, then my investment is worth half as much.
How is that related to currency changes? That can happen anyway regardless of the currency.
It can happen in other situations, but the fact that it always happens with currency fluctuations is what's important here. When the dollar loses value, everything I own that's anchored to dollars loses value too. "buying a share of productive capacity" implies a counteracting effect, but there isn't one, because the amount of productive capacity represented by each share shrinks too.
This is correct. A decent example would be comparing the CHF, EUR, USD over the last few decades. The CHF is to the EUR what the EUR is to the USD.
yes, but could one also argue that due to currency weakening, the S&P's growth can simply be due to the weakened currency?
If I can say something has an "absolute" value of X, but I denominate it in USD, which is normally 1:1 to X, then it's value in USD in X.
but if USD drops to being worth half an X, but its absolute value hasn't changed, it will now appear to be worth 2X in USD.
so why can't one argue, if the dollar weakened by 15%, but everything else being equal, one would expect dollar denominated stocks to appreciate (in dollars) by the same amount? And if the dollar would strengthen, we would expect the stock price to depreciate?
Because the SP500 is a better indicator of the market than USD. Also if you look at the global dollar index, it is right at par historically.
The companies in the 500 are mostly global companies, if the USD shrunk so much they would either be losing money, or it doesn't matter because the US market is so strong it dwarfs the others.
> The companies in the 500 are mostly global companies
Isn't that saying exactly what the parent comment mentioned? Since those companies are global, the growth of the S&P 500 which is USD denominated will track the devaluation of the USD as the underlying companies haven't lost value, the dollar has, and the S&P 500 would track that as growth in percentage to balance it.
I don't understand why they would be losing money since as you said they're global, and more untethered to the USD than the S&P 500.
I don't think they are losing money?
This is clearly the USD Global index dropping a few basis points, which is an active strategy. Look at the USD Index over 15 year period, there is nothing wrong with USD today.
I'm not arguing if the S&P is a better indicator of the US economy than USD or not.
What I'm asking, to me it seems if the USD drops in value, but everything else stays the same (i.e. GOOG hasn't lost any real value if measured in any other currency for instance). I'd expect GOOG to rise in USD terms (as its value has stayed constant).
Why wouldn't this be true (yes, there are a bunch of assumptions/complexities, and perhaps those assumptions/complexities break the argument), but at a very simplistic level is what I said wrong?
The USD and EURO being nearly on par was the exception. And given the current admins stated goals, I’m not sure we’re going to see the USD strengthen anytime soon. In fact, it’s more likely to get weaker.
> If (and it is, admittedly, a big assumption) we assume that USD and EUR are broadly stable currencies over the long term
Yeah, er, that's a very big if. There's no real reason to assume that, and history doesn't really bear it out.
If anything in the near term you'd probably expect the USD to weaken further vs the Euro; Trump seems _very_ keen to install a fed chair who'll cut rates even where not supported by inflation and employment numbers, whereas the ECB is more disciplined and less subject to political interference.
You're the one making a big assumption: that this is a short term movement in the dollar.
Trump has made it clear he wants a cheaper dollar to make US exports more competitive and JPM is forecasting another 10% drop in the value of the dollar this year.
Just because the dollar and euro have been roughly level for over a decade doesn't mean that will remain true, currencies often go through pretty fast changes in relative values every few decades as their financial and geopolitical positions change. The pound drop around 2007~2009 is a good example of one such sudden but long term price shift.
> That logic is flawed. The end value and ROI for S&P500 is the same regardless of the currency used to display it.
> It's the same as complaining that the temperature increased more in Fahrenheit than in Celsius.
No, that logic is flawed. Fahrenheit and Celsius are pegged to each other, the Euro and the USD are not.
Do not mistake economic indicators such as GDP or "growth" for meaningful measures of economic health.
I think it’s not perfect but probably the best we have.
People forgot or simply don’t realize how much worse life was just a couple of decades ago (in terms of nutrition, access to knowledge, clean water, material wealth).
The question is where. Couple decades ago rent in Munich was like 3x lower. While salaries were insignificantly lower with overall lower living cost.
Couple decades ago Germany had electronics industry. Now it’s gone. More industries are following.
Couple decades ago there were rather isolated Yugoslav Wars. Now it’s introduction into WW3 with active war in Ukraine and hybrid attacks everywhere in Europe.
It depends heavily on location. Indian colleague has completely different world view and is proud how India is progressing.
Just because GDP isn't a measure of affordability or security or industrial strategy doesn't mean it's not useful. It means you should also have measures of those (which in fact do exist because economists are not idiots and do fully understand these kinds of problems).
Renting for me generally sounds like a bad deal. On the same period the stock grew even more (ex: S&P x4.5 from 2000). So, if you want to say that if you lived 30 years ago in Munich AND did not save anything you would have lived better, I will have to answer that it was just delaying the issue of not being able to save - the ones that were able to save (maybe not living in Munich, maybe other ways), might at some point come and buy something in Munich. Accumulating wealth too much into some hands was the issue decades ago and remains an issue today. Just that decades ago people might not have been aware...
The electronics industries of a couple decades ago were producing stuff that are incomparable to what we have today. Taking that into account, I would say today is "better".
> Renting for me generally sounds like a bad deal.
It always is but not everyone has the option of buying. It takes investment and not everyone's parents are wealthy.
Renting is actually a better deal, financially, in Israel compared to purchasing. Rent is cheaper than the mortgage payment, by hundreds and sometimes thousands of dollars a month, in a society where the average price of housing is more than 14x the average annual salary but most people are highly emotionally compelled to purchase housing as a symbol of stability and wealth creation - an emotional decision instead of a financial one.
As always, local circumstances matter.
We calculated when buying the house near Munich that we pay around 140000€ more than renting our flat forever with moderate rent increase. At the moment of signing we needed bigger apartment. Few years later we see, that despite heavy construction in the old house we will save at least 200000€ as buyers. Rents in German cities are out of control. Probably it’s different in regions with solid real estate supply. Here’s nothing.
That progress in India comes as an excuse to weaken their democratic institutions. The fallacy is that Modi is to praise - the progress comes mostly because of enormously positive global trends developed in the past decades, the ones that are now being threatened.
> Couple decades ago there were rather isolated Yugoslav Wars.
A bit of nuance, they ended in 1999, however the whole thing is still influencing Europe negatively and is not as isolated as it seems. Not just there are now seven countries instead of one to consider and negotiate with, a couple of them are utterly disfunctional. Further, two biggest chunks are deeply sunk into nationalism. Far too little effort had been made back then to try to reform the place into a functional system.
Progress in India is due to policy in India. The idea that India can handwave it's successes and failures on external forces might have been well justified in 1955, but in this century they get to choose. Best hope for the anti-Modi-policy crowd is maybe it isn't Modi's policies specifically.
In fact, in the vast majority of cases (including North America, South America, Europe, East Asia, India & South-East Asia) progress is entirely about countries choosing how quickly they are comfortable with improvement happening. Africa and the Middle East it is a combination of policy choices and cultural problems. Arguably foreign interference - although even then policy and strategy tends to be the bigger thing over time.
> Progress in India is due to policy in India.
This is an extremely bold claim. Always was, but especially in today's world it is. I am not saying that Modi's policies are bad, what I am trying to say is that he is basically playing the game on the easy mode. He has access to the unprecedentely dynamic and resilient global economy _and_ he has access to cheap Russian resources Europe doesn't want to buy anymore. All Modi needs to do is not do anything really stupid - the economy will perform well unless clubbed to the head.
And that is all fine, and I am genuinely happy for India. My problem is that Modi is using that easily achieved success to erode democratic institutions - and that will become a problem in the long-term, as it always historically has, everywhere.
Russia wasn't the group that stopped selling oil to the Europeans, the Europeans refused to take it and have a military policy of arming people to blow up the means of transporting that oil to Europe. They're very proud of not using Russian oil. Modi could have joined in with that, he had a lot of people asking him too. Doing nothing (if he did nothing, again - I have no idea about the details of Indian policy) is a rather decisive policy given the pressure the Europeans have been putting on people.
The world has been in easy mode for 70 years now. Any government can choose to sit back and let people get wealthy. It is literally so easy that even the communists figured it out.
Whats the point of this progress which is completely destroying nature and giving people all kinds of cancer, India's oligarchy is more destructive than any other country on Earth. Indians used to be the most naturalist people in the world and now look at the state of the country.
Indians are generally too patriotic to trust and its like talking to MAGA sometimes.
Obviously it depends on your point of view. That entire region (India, Pakistan and Afghanistan) still has a lot of work to do.
It's definitely not the best we have though. People have created all kinds of metrics which measured things in better ways more relevant to our human goals. It's an entire genre of publication in economics and some of them are very popular. It's a choice to ignore them.
Also, see what djtango said. It's not that simple.
Similarly it’s a choice to ignore all those KPIs that are confounded.
Being pedantic about how we measure progress might create the impression that it’s not about the progress but instead about being right.
Well, being right is better than being wrong, which is what happens when you claim that GDP as a measure of progress is valid. It simply doesn't measure what matter to the majority of humans, which has been argued endlessly already.
It's the best that has been used by a society that didn't later collapse though.
That's hardly a relevant response considering no society have used any of the ones I am speaking about in the way that you mean. The OECD, UN, IMF and others use many of them as secondary metrics though.
I just find the "what have the romans ever done for us?" argument to be scary. It leads very quickly and easily to struggle sessions and the terror.
I'm all for trying things for sure, but it has to be done in very small scale and over significant time scales.
"THERE were two “Reigns of Terror,” if we would but remember it and consider it; the one wrought murder in hot passion, the other in heartless cold blood; the one lasted mere months, the other had lasted a thousand years; the one inflicted death upon ten thousand persons, the other upon a hundred millions; but our shudders are all for the “horrors” of the minor Terror, the momentary Terror, so to speak; whereas, what is the horror of swift death by the axe, compared with lifelong death from hunger, cold, insult, cruelty, and heart-break? What is swift death by lightning compared with death by slow fire at the stake? A city cemetery could contain the coffins filled by that brief Terror which we have all been so diligently taught to shiver at and mourn over; but all France could hardly contain the coffins filled by that older and real Terror—that unspeakably bitter and awful Terror which none of us has been taught to see in its vastness or pity as it deserves.”
― Mark Twain, A Connecticut Yankee in King Arthur's Court
All of those except for access to knowledge were better in the U.S. 20-30 years ago even though GDP per capita "grew" even in real terms.
If you take access to knowledge to mean post-secondary tuition, it was also much better 30 years ago
People forgot or simply don't realize how much better life was just 3-4 decades ago (in terms of nutrition, access to knowledge, clean water, material wealth, housing costs, tuition costs, healthcare costs, jobs).
In advanced western countries that is. If you compare Nigeria from 2000 to Nigeria today, sure, maybe...
What? Access to knowledge was better 3-4 decades ago? You're telling me that people had better access to knowledge in 1986 than they do today?
Infant mortality was 10.4 per 1,000 live births in 1986 in the US. It was 5.5 I'm 2023.
Life expectancy was 74. Now it's 78.
The crime rate peaked in the US in 1991.
Life isn't perfect now. Housing needs to be a lot more affordable, for one. University costs in the US are insane, for another.
But to paint this as no progress? Come on.
> People forgot or simply don't realize how much better life was just 3-4 decades ago
Are you just saying this thinking no one will ask you to back it up with data? Care to quantify what "so much better" actually means?
Better job prospects for more people, lower inflation, cheaper healthcare, cheaper housing (actually affordable housing), less obesity, better school programs, more distributed, less controled, and less corporate internet and web, higher fertility rates, less clouds of war and civil tension, more political legitimacy and better political climate, better nutricion (official stats show obesity at an all time high and rising - despite all the health influencer slop), less impacted rural areas and small towns, and many other stats besides. And a more stable global order too.
Most of those apply both here in Europe and the US.
And that's without even getting into more subjective QoL stuff, from cultural production to the widespread depression and the loneliness epidemic.
Yes, the bottom 90% have had their lives improve a little. But nowhere near the same as the top 10%.
Simpson's paradox does allow for the possibility that nutrition, access to knowledge, clean water and material wealth has improved in the aggregate while it getting worse for subpopulations.
A lot of people in the world are angry and one of the things that fuels this anger is the "gaslighting" that the data shows their lives are better while their lived reality is the opposite.
Don't forget that Millennials are the first generation to be poorer than their parents in a long time...
Millennials are 30-45, roughly.
There’s now a large segment (and several generations) of society for whom the system has never worked, even if the growth of retirement accounts masks the loss of wealth and well-being.
> Don't forget that Millennials are the first generation to be poorer than their parents in a long time...
This is simply not true. At some point, we do need to rely on data other than "lived experience," which compares one's quality of life at 22 to someone's quality of life at 50.
"Younger Americans (millennials and Gen Zers) owned $1.23 for every $1 of wealth owned by Gen Xers at the same age."
"Younger Americans (millennials and Gen Zers) owned $1.35 for every $1 of wealth owned by baby boomers at the same age."
https://www.stlouisfed.org/open-vault/2025/june/the-state-of...
If they ever want to own a house they won't need just 23% or 35% more wealth, but more like 200% and 1000% respectively. You do need to start at lived experience to know which data to look at.
Exactly - people have it backwards, when data diverges from lived experience you don't tell lived experience to shut up cuz' dataa you go back and check your models and your data collection. And you check and you check and you check. Einstein was famously wary of Quantum Mechanics rather than taking the findings at face value, and I guarantee that economic data is a hell of a lot less rigorous and more complicated than particle physics. Not to mention the data is political...
The thing is that that's not a conflict between data and lived experience, it's just a conflict between different sets of data. If you measure wealth and then you measure wealth relative to housing costs, neither one of those is "lived experience". If you do a survey on people's sentiments about the economy, that's data too. I'm skeptical of the term "lived experience" precisely because people tend to use it in arguments of the form "let's disregard data in favor of my individual preferences". But when you aggregate the "lived experience" of many people, you get data, and that data can be just as valuable as more anodyne economic data.
The problem with countering lived experience with data, is that whatever data you can provide, it's very unlikely to capture the exact sentiment you're addressing. That doesn't mean one shouldn't try, of course. But one should be very open to the possibility that things are happening outside of your specific data.
The most infuriating example, to me, is the overuse of GDP. As if that should tell us everything.
Yes, but I guess I'd say that we should not attempt to capture an exact sentiment in making policy decisions. The bigger the decision, the more people are involved and affected, and the more people, the greater the variation in their sentiments. It simply doesn't make sense to try to somehow please each individual to address something like housing affordability in the US (or California, or Los Angeles, or even Monterey). The only way to do that is to aggregate sentiments into data. In doing so you lose precision about those sentiments, but that's good, because some of that precision is measuring idiosyncratic stuff that shouldn't play a role in solving the problem in question.
No, it shouldn't tell us everything, but if someone makes a very data-oriented claim ("millenials will be the first generation poorer than their parents") and you return with data that shows the opposite, you can make a claim that the data is poorly gathered, etc.
But pivoting to the "but it's not my lived experience, bro" is weak.
If you made the claim that "millenials have it harder than their parent" then we're talking something where experience can be more useful.
It's funny, I say the exact same thing about crime in NYC.
Statistically it's safer than rural Oklahoma... but your lived experience in taking the subway 45 minutes every day will not paint the same safety experience that can't be found in any statistic.
That's silly. People have wrong impressions about a lot of things. Your "lived experience" (you can just say experience, okay?) can be wrong.
Who exactly has the "lived experience" of being a member of two different generations?
Assuming this is an earnest question - the lived experience is that for some people, they are less well off than their parents. This is a big enough phenomenon that it has been measured and AFAIK is well accepted as a fact. So being poorer than your parents isn't about living the experience of both your life and your parents.
Although anecdotally my father moved to the UK with my mother with nothing but the clothes on their backs, and by 27 my dad was able to afford his first property in London start a family, all without a uni degree and hadn't even yet finished his accountancy training. He did that without any family help and in fact was sending money home. This has always helped provide a bit of colour of how things have changed
That's mean wealth, not median wealth. Mean millenial wealth at 34[0] is $345,000 and median millenial wealth at 38[1] is $130,000. Given that inequality has been rising steadily in the US over the past 30 years, the mean and median wealth of Gen Xers and boomers were almost certainly closer to each other than for millenials.
0: your source has mean at 34 in 2025, https://www.stlouisfed.org/open-vault/2025/june/the-state-of... 1: the best I could find was median at 38 in 2022: https://www.stlouisfed.org/on-the-economy/2024/feb/millennia...
Yeah, but how does millennial median wealth compare to boomer median wealth? That's the question.
I'm happy to be proven wrong.
It hasn't been the best for a long time, and economist have long proposed alternatives, but gdp and gdp per capita seem to be the easiest to calculate and convey.
Yes, look at the massive 'success' of Vail, Colorado.
20 years ago? probably not significantly different accept at the margins (i.e. we tamed HIV and now have ways to defend against pandemics) but other than that is life much different?
Just a couple of decades ago a common working stiff could buy their family a nice home in any US city.
If you are talking about the 1960s or so, there also were 150 million fewer people in the US? That matters for housing costs.
Some places like Austin, which haven't gone down the NIMBY zoning route, are still somewhat affordable.
Clean water was a one-time thing and more driven by state action than GDP growth. Fittingly, right now the AI bubble is making access to clean water worse for some, fracking did so too. Nutrition? GDP growth made food harder to access for many people before it got better - city laborers had worse food access than farmers. Still today people are living in food deserts. Upton Sinclair's "The Jungle" showed what kind of food unfettered GDP growth actually delivers.
And mere decades ago, life was more or less the same, if not arguably better in many ways.
It's utter trash, it was good when we had industry focused economies instead of service focused ones.
Everybody mocked Russia for having the same gdp as Spain. As it turns out your economy is much stronger when it's focused on heavy industries, steel, mining, oil, &c. Than when it is focused on tourism and other services
One produces value, the other generates money, when shits hit the fan you need energy, the drunk brits coming in your strip clubs aren't that useful anymore
Depends if you look at Spain in isolation.
On its own? Sure. (Although to be fair to Spain, they've invested heavily in solar and high-value agriculture in recent years).
But seen as part of a system with Germany and perhaps the UK (no longer part of the EU, but was better for both when they were), it's a valuable part of quality-of-life in the overall economic bloc.
Where would you rather live? Spain, easy.
Who would win in a war? Russia, easy.
Some will read this as an argument against the Spanish lifestyle. On balance I prefer to read it as an argument against war.
> Who would win in a war? Russia, easy.
Really? Russia has not even done all that well against Ukraine, a much smaller economy.
What sort of war? I agree Spain could not successfully invade Russia, on the other hand Russia could not invade Spain either. No working aircraft carriers so their air force would be operating from very distant bases (even if they were allowed to pass over the countries in between), limits on ability to land large numbers of troops, etc.
> no longer part of the EU, but was better for both when they were
I do not understand why you even mention that as the EU does not have a military, NATO is relevant and the UK is in NATO.
Its a matter of opinion. I think the UK is at least as well off (growth has been similar to comparable economies like France and Germany since Brexit) without even seeing the long term benefits AND the EU is better off as the UK was a major impediment to the political integration the Euro zone needs.
> Really?
Spain army's is 1/10th of Ukraine's and basically haven't been in anything close to a war in decades, so yes, really and easily lmao.
Ukraine alone produces more military drones per month than the entire EU per year btw.
> Spain army's is 1/10th of Ukraine's and basically haven't been in anything close to a war in decades, so yes, really and easily lmao.
They do not have a border with Russia so how could Russia get their army to Spain?
Ukraine has armed forces geared to fight a land war with Russia. How do Ukraine's air force and navy compare to Spain's?
> Ukraine alone produces more military drones per month than the entire EU per year btw.
Because they are in a war. You cannot compare fully geared up war time production to peacetime production. What was Ukraine's drone output prior to the current Russian invasion?
I’m certain that if Russia somehow managed to attack or invade Spain, they would not be standing alone. I can’t imagine the French will be as content to sit around twiddling thumbs when their neighbor is lit up.
Sure but again that's not my point, my point is that people use GDP to compare all kind of things while it is a completely outdated metric that doesn't really tell you anything about anything unless you use it to compare similar economies or compare the development of a country year after year.
Pointing to Russia as a functioning economy is comical.
Industry focused economies are going to continue to come under pressure due to automation. The US for example has a lot of industrial output, but shrinking industrial jobs. And that’s a good thing. Sending people into coal mines should never be a long term plan.
> Pointing to Russia as a functioning economy is comical.
idk man, France's economy minister said he would bring "russia on its knees" economically, 3 years later it's still not anywhere close to being a reality, the minister isn't here anymore tho.
Put half of the sanctions on spain and it would fold in a month
That may be less a matter of him being wrong per se than of politicians loving to make grandiose and inflated pronouncements.
Oh yes sorry, I forgot that Russia is super successful in Ukraine and Europe is on the brink of collapse because it ran out of energy!
That's not my point at all
Do you think Spain would fair better than Russia against Ukraine ?
I get your point. Spain would fail miserably.
But you’re not taken into account how many men Russia is losing to maintain that level of aggression. It’s compensating its small GDP with humans.
Spain would never do that and thus fail.
Actually yes. Ukraine is far easier to invade for Russia. Geography is super flat. You can drive in from anywhere. Easy to supply thanks to sovjet rail. Spain is very mountainous and a pain in the ass to invade. How would Russia supply their troops that are completely rail dependent?
Right but the services sector is more than running strip clubs for tourists. Spain just doesn't export any services other than strip clubs apparently. The US doesn't have this problem. The Financial Services market is the largest in the world.
Russia is fighting the war exactly how I would expect an economy of that size to fight a war. Slow attrition coming from an inability to overwhelm their enemy decisively and fast.
How exactly is their economy "strong"? By what measure? You cannot really eat tanks, that is what made life in the Soviet Union unsatisfactory as well.
Current price of Ural oil is some 9 dollars above their breakeven costs. As the classic says, not great, not terrible.
Agreed. Long term economic health is always tied to long term social health. We should be, ultimately, trying to look at a broader index than some simplistic view of just money. It is a hard problem though to pin down an index for social health. As soon as we name a measure or index it becomes a target and its value drops. I tried to think of a more 'universal' index, one that could be applied to civilizations in the past and present and the best I could come up with is the healthier a civilization the more people can live together, longer, without killing each other. Not rigorous, but in general when I view history it seems to fit reasonably well.
GDP and growth are blunt instruments, but they're not meaningless... They tell you something about aggregate capacity, incomes, and whether the system is shrinking or expanding
What is a good measure of meaningful growth? Genuinely asking. I imagine all measures have pros and cons.
I said meaningful measure of economic health, not growth. :-) But I'm not sure. The book "Mismeasuring our lives" gives five recommendations for developing improved measures:
1. Look at income and consumption rather than production
2. Consider income and consumption jointly with wealth
3. Emphasize the household perspective (with this they seem to be focusing on more meaningful measurement of in-kind services and inter-sector payments, like government provision of healthcare and education, etc.)
4. Give more prominence to the distribution of income, consumption, and wealth
5. Broaden income measures to non-market activites (their examples here are things like childcare, where a shift from non-market childcare to market childcare over time can create the illusion of an increase in productivity)
Personally #4 is my biggest beef with GDP (and related measures like GDP per capita). Without some kind of adjustment for inequality, GDP can easily make bad things look good. What we need is not overall growth but equitably distributed gains; even a decrease in GDP could result in most people being better off if it occurred because of wealth redistribution.
> even a decrease in GDP could result in most people being better off if it occurred because of wealth redistribution
Which mechanisms exist to redistribute wealth fairly?
What's your subjective definition of fair?
Whoever wants to redistribute wealth would have to decide that.
You're perfectly free to offer a definition of your own subjective term yourself.
and in every metric that encompasses logarithmic values (like income or wealth) normalize the use of the median ffs... Averages are gaslighting the "average" Joe.
- Time to affordability ratios (Hours of work for food, energy, housing etc)
- Intergenerational social mobility trend
Not doing great on either.
You can't estimate a country with a single number. It makes no sense and actually hurts when someone decides to optimise for that number.
The kardashev scale?
https://energyforgrowth.org/article/watch-countries-climb-th...
Most meaningful alternative measures of growth very strongly correlate with GDP. Which is why we just go with GDP. It has issues but GDP has practical utility.
Infant mortality
Sure, but once countries hit a moderate level of development the bulk of preventable infant deaths are handled. E.g. Frances' rate has been flat since the turn of the millennium.
Seems like you’d asymptotically approach 0% and then this metric would ignore eg space travel or food production efficiency
> Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.
Robert F. Kennedy, Remarks at the University of Kansas, March 18, 1968
> meaningful measures of economic health
As someone who lived in a handful of countries with GDP per capita ranging from $3k to $70k I must say that GDP is a great proxy of the QoL and median citizen wealth. Not the only one and not the perfectly correlated one, but a very good one.
GDP per person should be the measure. The UK managed to make GDP go up while making GDP per person go down.
GDP is not useful to measure how good an economy works. The core problem of GDP is that it does not account for usefulness of spending.
GDP also ignores volunteer work and other non market transactions, completely dismisses externalities for health and the environment, and also has no indication of the distribution of said wealth.
If you had a Rawlsian veil pulled over your eyes and someone said to you "You won't know how rich you will be in that society, but would you rather live in a top ten GDP per Capita country or a bottom ten?" I think we all know what we would reply.
Granted it might not be fine grained enough to distinguish between Number 4 and Number 5 on the list.
Might still be a useless indicator considering that many of the low GDP countries also rank badly in other indicators that are often taken into consideration more broadly, like quality of life indicies, corruption indices or just the Gini coefficient. Correlation does not mean causation
Would you choose to live in one? I'm sure you could move if you believed it was better.
GDP per capita has basically all the same problems.
I'm sure it has problems, but if I look at the top of this list (and exclude the tax havens) the answer to "Would I like to live there?" is Yes.
Likewise for the bottom of the list it's an emphatic No.
Is it a completely accurate indicator? Probably not. Is it directionally accurate? Yes.
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...
Part of the problem though is that people often try to use GDP (or GDP per capita) to compare within the top of the list. Like they try to draw conclusions about whether "Germany is doing better than Italy". It's true that big differences in GDP per capita can distinguish between really good and really bad places, but so can many other measures (like life expectancy or education expectancy). Plus, even on a coarse rubric GDP isn't perfect. I'm pretty sure I'd rather live in Spain than Qatar or Greenland. :-)
GDP as a concept, and "growth" and "inflation" figures, remind me of that line from HBO's Chernobyl: "They gave them the propaganda number".
Do not mistake indicators by using them for things they do not measure.
There’s a lot of work being done by the term “all other things being equal” when using a measure like GDP.
I don’t think we are in times when all else is equal.
I try to see it positive. With the AI bubble, I finally habe a tangible example to point to when I say that GDP growth is a bad indicator for economic success
You could have used the example of Ireland before. They score extremely well on GDP, and yet the quality of life of an average Irish person is on par with the rest of the Western Europe, with the costs of housing pressuring everything else.
Yeah, but everyone knows why. The IMF has called out that 40% of Ireland’s GDP isn’t real because it flows into and back out (back to the US mostly) due to tax schemes.
The book the 'Growth Delusion' has some great examples on this as well. To quote the FTs[1] review of the book.
"The official protocols define the scope of GDP as measuring all monetised activity between willing parties in a given period. It is a pragmatic definition, but leads to some counterintuitive results. The sale of stolen goods for cash contributes positively to GDP, for example — so theft is good for growth. A parent’s housework and childcare, however, being unpaid, are excluded — resulting, by one recent evaluation, in a $3.8 trillion underestimate of the size of the US economy."
I vaguely remember a similar one around traffic jams as well.
[1] https://www.ft.com/content/b6182440-f21e-11e7-bb7d-c3edfe974...
There is also a book called "Mismeasuring our lives" that makes some similar points about the overreliance on GDP as "the" measure of economic health.
The UK is just starting official statistics that include the value of household self supply. I do not know whether there is good enough historical data to compare it with.
Unless you can demonstrate that there is in fact an AI bubble, that is simply begging the question.
Notice how the term “housing bubble” is used much less frequently today than 10 years ago? That’s because that so-called bubble has been ballooning in size for three decades now, and almost nobody still believes that it will “burst” in any meaningful sense. The Dotcom bubble was in many ways an outlier.
OT: I enjoyed seeing a dictionary-correct use of the term 'begging the question' in the wild :-)
What other uses are there? I only know the phrase as a synonym for “assuming the conclusion”, i.e., a type of circular reasoning.
People often use it instead of 'raises the question'. E.g "There was very little fallout to the Y2K bug, which begs the question: was the Y2K crisis real and well handled or not really a crisis at all?"
E.g https://hn.algolia.com/?q=%22begs+the+question%22
Wow, now that you pointed this out, that interpretation actually makes far more sense than the “correct” one.
The longer it takes to burst, the worse the outcome.
Housing is being propped up by the governments of the west because it was already so problematic if it fails that millions of people would be severely impacted.
Even the housing backed mortgage crisis of 2008 was as large a shock as the great depression, the reason we’re not all using money as toilet paper is due to government intervention. Rightly or wrongly. Some people believe that this intervention makes something worse bound to happen later- and based on the cost of housing I tend to believe them. It is not sustainable to keep housing at its current cost, and the financial model requires that they continue to increase in price. If house prices fall it is a disaster for millions.
There are a few noticeable differences between housing as an asset and AI datacenters. Beyond the obvious difference that a house has a depreciation in the order of decades, whereas AI GPUs are a few years.
Then there is the fact that housing is a fundamental human need whereas AI, as frequently demonstrated, isn‘t even a want by many people.
I am not saying that AI cannot demonstrate todays value 20 years into the future. But there is zero reason to believe the short to medium term payoffs on AI investment will be proportional to the investment we‘ve seen over the past few years
> a house has a depreciation in the order of decades, whereas AI GPUs are a few years.
That’s no longer true for datacenter-class GPUs. The A100 came out six years ago, and it still sells for $15k+, with no meaningful drop in the foreseeable future.
It's bursting as we speak, but certain actors are pulling every lever there is to slow down the process:
https://tradingeconomics.com/china/housing-index
Unsuccessfully, I might add.
> That’s because that so-called bubble has been ballooning in size for three decades now, and almost nobody still believes that it will “burst” in any meaningful sense.
That's because Boomers live far longer than prior generations thanks to medical advances. The housing bubble will collapse (at least outside of the megalopolises) once the Boomers finally start to die en masse due to their over-representation in demographics.
But before that, the pension systems will crash hard. For people in systems with redistributions (like most of Europe), there simply aren't enough working age people contributing payments for the pensioners, and for people in stonk-based systems (e.g. US 401k), they will run into the issue that someone has to buy the stocks that the pensioners sell off to fund their retirement, and ain't no one of my generation buying stocks, thanks to us having to spend insane amounts of rent.
Well, that rent and the debts incurred to finance consumption is also keeping the profits up and thus stonks valuations
The problem is, people more and more can't manage to pay these rents, so they're either cutting back on any absolutely not necessary spending or going homeless outright. For now, there are enough desperate people that still have some money to pay rent... but retail, no matter which industry, is feeling the impact of people having no spending money hard.
Without the AI bubble artificially propping up the GDP, it is most likely the US economy is in a recession [1].
[1] https://www.cnbc.com/2025/10/14/ai-infrastructure-boom-masks...
It is cause housing bubble was a thing of 2000 and burst in 2008 https://en.wikipedia.org/wiki/2000s_United_States_housing_bu...
People dont talk about housing bubble as much, because it is history at this point. Not something that would go on now.
And no, housing being expensive is not the same thing as a bubble. We dont have bubble in housing now.
> It is cause housing bubble was a thing of 2000 and burst in 2008
<Australia weeps>
Unless you have better alternatives you’re not really saying much.
And I don’t think anyone relies only on GDP. Typically you’d look at employment rates, inflation, etc.
It is an indicator and it's not totally non-meaningful. But GDP growth, when it's at the price of increasing the public debt and inflation, is no real growth.
Instead of looking at the US, let's look at what used to be a relevant ally...
In the eurozone, for example, politicians are hiding the lack of growth behind a growing mountain of public debt and the GDP growth ain't even beating inflation since the 2008 crisis. In 2008 the eurozone represented about 25% of the world's GDP. Now it's not even 15% anymore.
Falling into irrelevancy doesn't begin to describe the state of things for the eurozone: from 25% of the world's GDP to less than 15% in 17 years is more than alarming.
And yet if you look at the eurozone in Euro, it looks like it's been growing since 2008. But it's actually been stuck since nearly two decades now and there aren't signs of anything getting any better in the eurozone. German carmarkers, the number one export of the eurozone, are in huge trouble (with China eating their lunch).
The US and China are, obviously, less fucked than the eurozone but the USA's growth has also been achieved at the cost of a runaway public debt and runaway inflation.
I don't know what protectionism can and cannot do for the US and it's not clear if manufacturing can really come back to the US but one thing is certain: the eurozone is a failure and whatever it is that they did or do should definitely not be copied. Unelected bureaucrats have managed, in 17 years, to drive the eurozone into the ground. It's mostly true for non-eurozone EU countries as well but some, like Poland (which is in the EU but not in the eurozone), are doing fine.
Basically: if you want to slash your part of the world's GDP by 40% in 17 years, do what the eurozone did.
Now we must understand this: the eurozone didn't just slash it's part of the global GDP by 40% in 17 years... They did so while, at the same time, creating a gigantic mountain of public debt and experiencing inflation.
Another 17 years of this, so another 40% loss, and the eurozone would only represent 9% of the world's GDP. And these unelected bureaucrats are so incompetent that I don't discard the possibility that they'll actually be able to crash the eurozone even faster than that. For example at the moment, while german carmarkers are in trouble, EU bureaucrats are hard at work trying to kill them for good.
Anti-americanism and anti-trumpism is a thing on HN but people should really look more closely at what's happening elsewhere.
What about an article from The Economist as to the reasons the eurozone managed to lose 40% of their share of the world's GDP since the 2008 financial crisis?
Share of the world's GDP is a flawed metric. It tells us we're getting a smaller slice, but it doesn't tell us if the pie grew or shrunk. If the EU grew by 50% while India and China became 200% richer, then on paper the share of the world's GDP would be dramatically lower, while everyone would be better off.
I don't disagree with the sentiment you expressed at all though.
Ok but did that happen? And that's always been the case, what happens when EU shrinks to <1% of global GDP?
Yeah but it wasn’t the unelected bureaucrats that fucked the EU. It was the German attitude towards debt and the redistribution of surplus. The Eurogroup sheepishly followed whatever Austerity fever dream of Schauble, tanked the Greek economy to teach every other Med country a lesson and by doing so, crippled any chance of post 2009 recovery
The euro group did not follow austerity measures.
Italy's debt has ballooned to 150% of it's GDP, France is heading for 130% in the near future. Whatever happened in the EU, was not Germany's responsibility. Even Greece's debt is way higher than it should be after the Euro zone austerity "cure".
If there had been real austerity and real slashing of the national budgets so that all countries of the euro-zone actually complied with the fiscal pact that says that euro countries should not have a level of debt higher than 60% of it's GDP, then the Euro-zone would actually have some dry powder left to face these uncertain times.
Instead, the only country who seems to try to do something currently is Germany, precisely because it's debt is lower than most Euro-zone countries and therefore it can afford to spend more to try to create growth.
France is running 5%+++ deficit each year and it has not complied with the euro-zone fiscal rules for the last 20 years. Finland has 10% unemployment, Italy is not doing much better.
Where do these countries go from here? Do they cut social services and risk getting ousted in the next election? Do they borrow more and more with not much to show for it? That is the question that is facing these countries and nobody has the answers.
You do realize that the debt/gdp ratio is a ratio?
If you cripple the gdp through austerity policies (killing borrowing to chase the “responsibility dream”) the fiscal multiplier becomes a ruinous curse.
Of course, pissing money into a spending bonfire, driving inflation with excess liquidity, isn’t going to help; bit it’s just as bad as crippling growth by holding it back for lack of capital injection
Treating share of global gdp as meaningful is bizarre. It doesn't have to be bad for your share to shrink as long as the overall pie is growing.
When we talk about that in people terms, it goes one way. But then the same people defend the same argument on a country basis?
Aren't they the same thing?
I don't know - GDP has a few counter intuitive cases.
One example is when the same stuff gets more expensive. If I have something, like a loaf of bread, a house, a smartphone all of them the exact same get more expensive, GDP increases if demand doesn't change (let's say because its inflexible).
You could argue this is due to some increased foreign demand for said product and the price increase legit represents increased economic output.
But in the case of tariffs for example, we know that's not the case - stuff became more expensive because of levied taxes. No new stuff got produced, no foreigners are buying up this stuff, demand likely decreased for said product, yet the GDP contribution increased.
Another very typical example are things with inflexible supply, such as housing, where due to the increased volume of money, the exact same house now costs more. But since transactions still happen, that means the economy got better, right?
The Eurozone isn't a failure at all, and as a Polish person it annoys me that we have zloty and not Euro, it's very inconvenient when trying to do business beyond polish borders. It impacts me every month and creates quite some bureaucracy.
In any case where the European union keeps failing is that it keeps not focusing on creating as many common rules and regulations across the EU, so, yet again, scaling your french business beyond your borders, or bulgarian one, is always very difficult.
Most countries in Europe are ridden by pointless nationalism on so many matters when our biggest issue is creating a strong internal market in Europe, but our biggest economies are still manufacturing and exporting ones, with little focus on the strengthening of our internal markets.
GDP growth figures are adjusted for inflation.
US looks everything except being "less fucked" as eurozone. It is actively self destructing while mounting debt while, true, trying to destruct everyone else.
We are talking economically if you ignore all the pollical stuff the Eurozone is looks rather questionable at best compared to the USA.
American debt is huge and growing unprecedently bigger. The economy is captured by rather small group of people completely intent on making this forever. It also seems to favor monopolization - one player capturing market and being able to prevent real competition. It has few sectors (ai, gambling, crypto) that do well and kind of hide the fact that other sectors are struggling.
Both countries have high Debt to GDP, US being much higher is also a reserve currency which makes it slightly more complicated.
The point being is that the US should NOT follow ANY economic advice from EU leaders, it is a recipe for disaster.
Protectionism is failing to revive manufacturing
Yes.
The rare earths situation is embarrassing. This has been a political football for years now, but the efforts to fix it aren't working very well.
First, you need a mine site and a mine. The US has a big one at Mountain Pass, California, and it's producing. But in the past twenty years, it's gone bankrupt twice and has been through three owners, because there were a few rare earth gluts and the price crashed. Also, they once had a big spill from a retention pond, and that was expensive.
Mountain Pass isn't the only ore deposit in the US. There's what's supposed to be a good one in Montana. But the company developing it has been doing "studies" since at least 2023.[2] There are a few other rare earth "mining" companies which don't produce anything yet. There's one in Tennessee with a "definitive feasibility study" underway. I'm tempted to say that the real product is the stock. Anyway, it's not like there's a need to go to Ukraine or Greenland for rare earths. It's all available in the US, with a decent climate, good road access, and no wars.
Second, you need a beneficiation plant at the mine. This takes in rock and dirt, pulls out ore with a reasonable fraction of rare earths, and outputs almost as much waste as it takes in ore. This is a somewhat messy process. In China, the settling ponds are visible from space. Mountain Pass has a better process (the Sierra Club approves) and doesn't make such a mess. The waste is dried, the fluids are reused, and the dry waste can be put back where it came from eventually. This is now a known technology and is being replicated at some Australian mines.
Then you need a separating plant, where the actual rare earths are separated out. The US has very little capability in this area. Not for any good reason. There's a small startup.[1] They're slowly scaling up. Production in 2027. There's another startup, Medallion (then Gabo, then Gamma) which has been fooling around since 2020 without building much. That's one of those companies where you read five years of press releases and they're all about financing, reorgs, and management changes, with no actual product. Here's another one, RER. They've been at this since 2021, and they have a little demo plant in Wyoming.[3]
Then you need a smelting and magnet making plant. This is a modest size operation, because it processes tons, not millions of tons, of material. One has been built in an industrial park in Texas. That took funding from DoD and General Motors. Not big enough to replace all imported magnets.
This is US postmodern capitalism. The US financial system just doesn't seem to be able to bring a complicated heavy industrial project to completion in a reasonable period of time.
[1] https://rareearthexchanges.com/news/ucore-secures-18-4m-dod-...
[2] https://uscriticalmaterials.com
[3] https://www.rareelementresources.com/technology/
Rare earths are not actually all that rare, they're just present in very low concentrations and require tons of processing with nasty chemicals to extract. Those startups etc aren't sitting around twiddling their thumbs for kicks, they're mostly mired in bureaucratic approvals and/or lack of finances due to a very justified fear of those approvals. Throw in the wild price fluctuations and it's much easier to just buy everything from China, which already has everything in place.
What you're describing looks less like "we tried protectionism and it failed" and more like "we don't have institutions that can reliably carry long-cycle industrial projects from idea to operation."
Exactly. This supply chain requires four quite different plants, none of which make money until the other three are running. US capitalism isn't good at setting that up from a cold start. Market forces may get there incrementally, but it takes a decade or two. It's high risk for any part of the chain to get ahead of the others.
China's industrial central planning has no problem doing this. Where there's been progress in the US, it's been because big customers, DoD and General Motors, pushed.
This is a nice example to look at closely. People in US politics have been screaming about rare earth problems for a decade now. It's not a resource problem. It's a capitalism problem.
Protectionism was tried & has failed in other industries, most notably U.S. shipbuilding.
The Jones Act is arguably why China's Navy will soon dwarf the U.S.'s ancient fleet.
why go to the trouble of building and maintaining mines in your expensive western country if you can just take all the minerals from african mines, while also getting the profits of these mines. no worries about salaries, no one cares when workers die by the dozens, ...
Because Africa produces a very small percentage of rare earths in mines, and basically 0 in separation, refining, and production of rare-earth components.
i had diamond and cobalt in mind, i'm sure that this doesn't apply to every type of mine. but you can't deny that this isn't a current, imperialist strategy. soft colonialism.
Do you have a view on the patent situation around this?
I guess that just not make sense from economic pespective, they rather want build a data center and chip making capabilities
The chart they put doesn't prove a point since the difference between today and the last elections in the US can't be appreciated (aside from the fact that in the entire period the drop is caused by automation too). Additionally you have to account for the time it takes to move production from a country to another.
This is not to say that just setting random tariffs to punish other countries is an effective strategy, but I do think that targeted limitation of imports are necessary in a society that is becoming extremely materialistic. My bet is that France's surcharge on Shein products will be the first of many
Where I'm more skeptical is the jump from "the data can't yet show effects" to "import limits are therefore necessary." Those are different claims.
I feel uncomfortable the more we celebrate economic 'resilience' Recession avoided. Growth sticks. ~
Jobs remain. I've learned to differentiate survival from renewal.
Surviving is the ability to withstand shocks and not break. Renewing is the ability to rebuild and strengthen so that the next shock is less painful.
Most policies focus on the former. The latter is far more difficult. It is slower and easier to postpone. Protectionism is a classic example. It keeps the numbers stable in the short run but it means there is often less incentive to improve productivity, skills and supply chains. On the surface it all looks fine, but nothing gets better.
A new guide for me is if a policy makes it easier to be static, it is probably not progress. I wonder if others think the same. What signs indicate that renewal is underway? When has buying time worked? What is more important than growth?
This is a wider concern. And partly the issue where economies have become very reliant on monetary policy being the controlling mechanism rather than a better mix of monetary and fiscal policy.
The fear now comes in the rock and a hard place issue that is ongoing here, whereby interest rates/monetary policy are arguably still not in restrictive territory enough that if a downturn was to occur, our coping tool is to loosen policy further but that would likely stoke further asset inflation and potentially general inflation compounding other issues.
It's why you get more leaning to the view that it might be necessary to just let things fail as a resetting mechanism, which I'm personally not sure about.
You've reminded me of the forest fire simulator[0], there's a potential second dynamic how reducing the occurrence of negative events might also increase their impact when they do eventually occur
Reduce lightning strikes and increase rate of tree growth, no idea if it applies here as much?
Black swan[1] talks about this and the housing crisis was a significant event, but you can make an argument against this position as well
-[0]: https://www.veritasium.com/simulation5
-[1]: https://en.wikipedia.org/wiki/The_Black_Swan:_The_Impact_of_...
What's more important than growth, to me, is adaptability. An economy that can reallocate people, capital, and ideas quickly will generate growth eventually. One that optimizes for stability alone may look fine for a while, but becomes fragile in ways the headline numbers won't show until it's too late
Well in the U.S., a majority of households are invested in the stock market via 401(k)’s. When their investments do well, the average Joe will give the incumbent president the credit.
Only if there’s a net increase in their well-being.
If their 401k is up, but so is cost of living and job prospects are down, most families are not invested enough to view that as a positive.
Some people prefer to believe the media they consume over their lived reality.
My parents fall into this trap, they keep telling me things have never been so bad yet they live materially better lives than their own parents and their children.
I think that largely didn’t happen with Biden. But if it’s true then it makes divesting from US stocks a priority for countries targeted by the US administration.
The actual average tariff rate has been lower than than advertised rate https://www.nytimes.com/2026/01/03/business/economy/trump-ta...
> And it is America’s private sector, not industrial planners in Washington, which is chiefly responsible for the ai boom. The ongoing success of free markets is obscuring the damage protectionism is doing.
The AI boom is also largely being funded by defense spending on both sides of the Pacific. Without state investment this technological boom would also suffer.
Also — what industrial plan? As far as I can tell, we just have tariffs without a complementary plan to encourage investment, build infrastructure, train workers, reduce labor costs, etc.
Public funding of STEM in universities too. Foundational research is underprovisioned by the market because it's a non-rivalrous and non-excludable public good. It's a market failure that is best addressed by governments fulfilling their role as providers of positive sum public goods.
Solar went through a similar cycle with German and US funding for foundational R&D in the 1970s, which was eventually picked up by China's industry when it was mature enough.
SpaceX too.
There's a yin and yang to public and private that populists on all sides are ideologically incapable of appreciating.
One could argue we wouldn't even have EUV without state research funds, which I'd say could be seen as a necessary precursor to the AI boom.
Is it?
So another Apollo project? Didn’t that turn out well for us even though it was expensive?
What stands out to me is the disconnect between macro resilience and the stated goals of populist industrial policy. Growth holding up doesn't mean tariffs or subsidies are working, it mostly means firms are very good at routing around damage
Is ancap economists from Austrian school considers economics correctly? They say a lot of things but I still can not decide whether they geniuses or populists?
From a contemporary standpoint these categories are basically just ideologies. There has been a steady shift in economics towards empiricism, dynamic modeling and so on since a while now. Ideologies always have glaring blindspots, so their predictions and perspectives never really match up with reality.
Do not mistake a year on year profit for a resilient global economy.
When the conclusions don't match your predictions, examine your priors.
Do not "do not mistake..." ...
There's a quote by Mahatma Gandhi that resonates whenever I see contrasting debates about this economic indicator or that:
"I will give you a talisman. Whenever you are in doubt, or when the self becomes too much with you, apply the following test. Recall the face of the poorest and the weakest man [woman] whom you may have seen, and ask yourself, if the step you contemplate is going to be of any use to him [her]. Will he [she] gain anything by it? Will it restore him [her] to a control over his [her] own life and destiny? In other words, will it lead to swaraj [freedom] for the hungry and spiritually starving millions? Then you will find your doubts and your self melt away."
India's IT outsourcing-led GDP growth can benefit many almost-poor and poor people by giving them access to more spending by the "middle-class" (a very debatable minority in India) and the rich. But it will not benefit the poorest - social welfare schemes do that, but anti-homeless measures cancel it out. Access to formalised lending can do that, but anti-immigrant schemes and the Kafkaesque labyrinth of getting an id-card in India will negate that. And banks won't give you a loan if you're poor (so they go to loansharks).
You can have all the Apples and the Facebooks of the world in California, but putting spikes in places where homeless people could sleep makes Gandhi's talisman stand out far better than any macro-economic indicator.
Inflation can be positive or negative but if you're living in a place with less supply than demand, your rent will go up by far more than the price of eggs. This will hurt you completely independently of the price of eggs.
All this to say - if you care about the poorest, you'll find little to cheer about. But should you care about the poorest? Is that a good measure of healthy economic growth? Is economic growth the only priority after 1991?
You can be poor and destitute in a capitalist dystopia and you can be poor and destitute in a communist dystopia. This is why I hate the language of the Cold War so much - we lose an infinite amount of nuance with terms like "Capitalism" "socialism" "communism" and "GDP"
> But it will not benefit the poorest - social welfare schemes do that, but anti-homeless measures cancel it out.
Can you explain what you mean by anti-homeless measures ?
Spikes on ledges and floors, splitting up a park bench with armrests, all measures intended on preventing homeless from sleeping there.
This is an unusually perceptive lede.
I hate Trump, but this piece doesn't seem to prove or argue anything at all. It's basically free market fanaticism, it says that economic metrics are good in spite of protectionism and not because of it because how could it be otherwise? Invisible hand, etc. It's totally begging the question.
If the free market economy is so resilient to threats, why didn't it thrive also in 2008?
That's a good question. So, 2008 was a major problem and financial institutions brought that on themselves. But that's - fortunately, even though there were significant knock on effects - limited to one very important slice of the market, not unlike say when Enron went bust or when the .com bust happened. The rest of the free market is what pulled us out of those things.
Free markets are on balance a good thing, assuming a level playing field and regulations to curb externalization and monopolization as well as cartel forming.
So you are arguing for a regulated market, not a free one. Heavy anti-trust legislation and enforcement is needed for a healthy economy. This might lower the year-over-year stock raise but at least keeps the negative excesses somewhat in check (monopolization, power concentration, rent-seeking).
All markets are to some degree regulated.
Saying that these are then not free markets is a fairly hardcore libertarian viewpoint, which tries to make it a 'black and white' issue, whereas in reality things are often more nuanced.
I think 2008+ if anything shows that free market economies indeed are resilient to threats even in the worst times.
So, there are threats and the economic data is fine (like now) -> the free market works great because it works fine in spite of the threats.
There are threats, the economic data falls into the gutter, but eventually recovers (not without real and quite lasting negative consequences for many people) -> the free market works great because hey, if you held SP500 you were still fine in the long run.
It's like a religion. If things go well it's thanks to God, if things go wrong maybe God is testing or punishing you but all will eventually be fine (in the worst case, after death). The free market is a lot like a god for its followers.
The financial markets collapsed in 2007/2008 and survived because of government intervention.
I well remember what happened in 2008 (caused by government's deregulation by the way, not "technocratic managerialist", whatever it means).
Despite the severity of what happened, jobs rapidly recovered and were around the same pre-financial crisis levels (and well above US averages) in a matter of few years and workers earnings were at or above 2008 levels (inflation adjusted) by 2016.
All in all, as severe 2008 was, I don't see how free market economy made it more, rather than less severe. It's at best an opinion.
"Caused by government deregulation" could also be phrased as "not prevented by regulation, while caused by financial markets".
The rest of the market recovered quickly once the government re-arranged debt and prevented a full collapse.
But the lesson was that private debt was accumulating too quickly on a shaky basis, catalyzed by financial markets making the issue orders of magnitudes worse. Rapid private debt accumulation is still not discussed enough today for my taste.
Populism is best understood as the general public asserting elites have “broken the deal” that legitimizes their rule — and the public withdrawing their assent from the regime.
They are correct that the technocratic managerialists on the past century have failed — and failed in a way damaging to the state/nation. (For US and EU at least.) In so far as we’re all discussing that (and have been for several years), they’ve been wildly successful.
This is all so vague.
We come from decades if not a century of spectacular growth and yet "technocratic managerialists have failed", what, where, how?
The United States comes out of 25 years of unprecedented growth, in spite of two major economical recessions and has outpaced the majority of advanced economies.
You’re using top line numbers to make that assertion, but gains are not evenly distributed.
There’s prolific ink spilled on the failures of technocratic managerialism over the past 40 years as gain become decoupled — and particularly over the past decade as the breakdown has reached critical mass.
Then post these scientific papers on the failures of technocratic managerialism.
The massive amounts of homeless in america that can't do computer stuff.
Of course populism is a wonderful tool for “elites” to abuse power, so maybe the story is more complicated
Agreed.
I am not a supporter of Nigel Farage and his many different parties in the UK ('Reform' just being the latest incarnation), and I don't believe his policies offer any real answers.
But what the rise of Reform does show us is the utter disillusionment with the mainstream parties of the UK, who have spent the last several decades afraid to make meaningful changes. They tell people they can't have what they want because it would be too risky/expensive/whatever. We can't do that, the bond markets won't like it. We're running high on debt so we can't afford to make this better. Here, I'm going to add 0.4% to this tax so we can give this service an extra 0.3% budget.
All the while government takes more in tax every year but the country feels like it's in a state of managed decline as services struggle. People wonder where all the money is going and there's no particularly good answer. And the managerial politicians' cautious approach hasn't led to economic growth either, so people don't feel like things are getting any easier.
With that background it's hardly surprising that the populace flock to someone loudly offering change, even if it's bullshit change.
(I left the UK a few years ago but I do visit and keep up on the news. Australia is on a similar path but less extreme, though with accelerating house prices and other forms of inequality, and the collapse of our traditional centre-right, expect things to get more populist in the coming years)
While I sympathise and agree with the point, it’s easiest to blame political parties but the electorate are also to blame.
They simply want to have their cake and eat it too. Plenty of times post-GFC where parties have tried or proposed much needed reform only for the voters, gerrymandered by the press, to throw their toys out of the pram. Theresa May’s “demantia tax”, Starmer’s winter fuel allowance for example.
Sadly it feels like it’ll probably be taken out of everyone’s hand, through some sort of economic crash or worse, to get people to be realistic again.
> Starmer’s winter fuel allowance for example.
To me this is a prime example of the problem - they were really just fucking around at the edges anyway. It wasn't any sort of major reform. That old scene from Futurama often springs to mind -
"I say that your 3% Titanium tax goes too far!"
"And I say that your 3% Titanium tax doesn't go too far enough!"
I do agree the press are complicit though.
Completely. That was the thing about the winter fuel allowance. It was largely a nothing burger and yet they couldn’t allow them to get it through. You could see almost immediately after they pulled back, what little confidence and ability the government had melt away. It’s been more of the same ever since
> People wonder where all the money is going and there's no particularly good answer.
That's because people don't want to open their eyes, it's mostly going in pensions and public services and is increasingly more paid with debt.
As for decades and decades politicians have avoided to become unpopular by raising pension ages (or did it way too slowly), those are the results.
Look at what happened in France under Macron when he raised pension age or tried to stop the bleeding in public financing: raise in national populism yet again, as if the far right in France (or the far left) had some magic wand (same for reform UK) to stop the bleeding.
Actually, if you look at the rightist populist across Europe (Poland, Hungary, Italy) they made the problems worse by actually jumping into very (historically) leftist measures such as throwing even more money at the public (benefits, pensions) at the expense of public debt.
Poland feels it slightly less because it has more growth (largely attributed to the nearly 2 millions of Ukrainians that settled there bringing with them their skills and tons of money).
You might want to read https://www.tandfonline.com/doi/epdf/10.1080/00213624.2025.2...
Which will disabuse you of the notion that we are "high on debt". "high on savings" perhaps.
We can always afford to make things better. Afford is never the issue.
Political will to take on the vested interests is the issue.
It's not my contention really that the UK or other nation can or can't afford to do things differently, it's more that that is the constant refrain coming from mainstream politics, along with a multitude of other excuses for relative inaction.
It shows you that, but it also shows you the success of propaganda.
Yes, that is the other side of the coin, that people are not just attracted to change because of loss of faith in the mainstream, but actually going over to support the populists.
And this is not aimed at you, but I do see all too often that people in the more mainstream spaces look at that side of the coin exclusively. "They're supporting reform because they're racist/stupid/brainwashed/propagandised". Sure, sure, those are definitely factors. But the opportunity to do that brainwashing and propagandising is there for a reason.
And those two effects feed off each other in a way that either one of them could never accomplish, the 'sum' (or rather the difference or negative sum) is much larger than those parts individually.
I agree. Reform's success is utterly predictable.
> I don't believe his policies offer any real answers.
Indeed, it's a shame that people are too dumb to realise they're just lining themselves up to be fleeced by a different "elite", instead of actual change.
>People wonder where all the money is going and there's no particularly good answer.
The answer is welfare. That is the original sin of all of this, and the one people refuse to acknowledge.
You need to let people fail.
Meanwhile we bail out large corporations on mere speculation they might fail. I don't know where you live, but around me a large chunk of the population have nothing to fail down to other than homelessness which is a huge drag upon the economy.
In the UK at least the biggest portion of welfare goes to the state pension.
It’s hard to deal with that when people have been paying into the system for their whole working lives on the promise that they will be looked after in old age.
It’s hard to see how you can fix this whilst pensioners continue to vote whilst young people don’t.
>It’s hard to deal with that when people have been paying into the system for their whole working lives on the promise that they will be looked after in old age.
They weren't paying "into the system". They were being taxed.
Treat it for what it was, and stop feeding the pyramid scheme.
I had a promise that if I paid NI then I would receive the state pension.
It might have been better not to make that promise but you can’t blame people for accepting it.
Perhaps if people were burned for trusting electoral promises, they would be more mindful of their sustainability.
Stop justifying pyramid schemes.
>Stop justifying pyramid schemes.
It’s too late, those promises have been made. We have to lie in the bed we made.
All you can do is stop making future promises.
That's about 25% of UK government spending. 33% if you include pensions.
The UK does have an issue with a lowering number of people in productive work and ever more on various kinds of disability payout, it's true, but this -
> You need to let people fail.
Doesn't really follow.
As per the UK government for 2026-2027 9.2 Chart D.2: Public sector spending 2026-27:
Social protection - 400 b
personal social services - 54b
health - 294b
Education - 145b
industry agriculture and employment - 51b
housing and environment - 51 billion
That accounts for roughly 70% of public sector spending, not 33%.
https://www.gov.uk/government/publications/budget-2025-docum...
If education is welfare then so is everything. Defence is welfare becuase before you might have to hire private security. Police and fire serviecs are welfare because they used to be private. etc....
Yes, education is welfare. I'm not sure how anyone could possibly argue otherwise...
Ok so can you name me a single piece of government spending that isn't welfare Or are you advocating for governments to just cease existing all together.
So, it's obvious where the money goes, it's welfare, because everything is welfare.
0% insight there then.
The answer is the ultra-wealthy. Those on welfare are getting increasingly poor, while the ultra-wealthy are getting increasingly wealthy. It's clear where the money is going, and it's not to poor people.
I wish I had the kind of hubris to make a bunch of predictions that all turned out not to happen (high inflation, recession, etc) then come back a year later with more predictions and a “trust me bro, I’m 100% sure this time”
layoffs.fyi - 2025 was the best year since 2022. I'm fairly certain democrats want me destitute.
Well at some point there's just nobody left to be layed off, if you know what I mean...
"Do not mistake global economic resilience for a triumph by the likes of Mr Trump. "
Trans: The facts do not match the Economist's predictions, and therefore the facts are wrong.
<< Do not mistake global economic resilience for a triumph by the likes of Mr Trump.
You know.. it is a little hard to take legacy media seriously if the reporting they do amounts to:
'economy is working, but it is not thanks to ANYTHING Trump does'
Give him some credit; try to make it believable.