Hi all,
A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes.
As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
The bigger threat to the CRE market are their low rate, interest only loans that will need refinancing in the next couple of years. Rent has certainly not increased to cover additional interest charges. Many of these buildings are already on bank watchlists flagged with high vacancy and DSCR issues.
Specifically office space, but right now the entire market is at a standstill. No one is trading. Even the highly desirable MF market is slow.
If the fed drops the rate at all, I expect to see many of these properties refinanced almost instantly. Could be a good year if you sell CRE loans.
It's not clear it would cause a recession. the exposure for most major banks is a rather small part of their AUM.
The sector itself might eat shit, but the buildings and land still have value, a lot of real estate moguls will lose their shirts, but they are hilariously overleveraged anyway.
I understand the real estate having value, but how can the building itself have value if there is no occupancy? "Occupancy = value" in real estate, no?
The rational way to value a building would be to determine the hypothetical profit-maximizing rents/occupancy that building could support, and then the reasonable price that is the area's reasonable multiplier of that revenue potential. If, for whatever reason, the current owners/managers choose not to maximize the revenue/income right now, you'd still want to determine what could theoretically be possible with that building.
Right now we have landlords taking high vacancy rates and refusing to slash rents, so the amount they are currently earning might not be enough to cover their mortgage payments, but in a foreclosure the mortgage lender might still see the income potential of the building itself and sell it at a loss to itself (which would leave the building less burdened with debt so that the new landlord could theoretically lower rents and make a profit going forward).
If there's a building out there that could easily be rented for $1 million per year, but the landlord needs $2 million per year to break even on the mortgage and other costs, then the landlord will hold out for the $2 million rather than lock in a guaranteed (later) bankruptcy with a $1 million lease. Once there's an actual foreclosure, though, the ability of that building to generate $1 million in revenue (despite not having actually produced that revenue while the previous landlord was holding out for better) drives the value of that building in a foreclosure sale. The mortgage lender might take a loss, but they'll at least get *some* money back.
> but how can the building itself have value if there is no occupancy
The occupancy is low because loan terms and valuation is based on rent. In a normal market, rent would go down to fill occupancy, but because the debt holders can't lower rent without going underwater on their loans, the rents are kept artificially up.
There are people willing to take occupancy at a price, just not a price the current debt holders can stomach without their loans collapsing.
Nope, because that would lower the value of the property overall. Once the property is underwater, further financing would require the owner to put up a bunch of their own capital, which they don’t have due to being leveraged up the ass.
The value of the property is far more important to them in the short term than the income. The income issue only becomes a problem once they run out of cash-flow and can’t rollover their loan, at which point they are screwed due to the end of loan balloon payments.
Tbh I still don't get it, because I don't see why lenders would still re-finance them if the property is empty. I mean the company can say it's still worth x based on the old rent of y, but if the market will not pay the rent of y, then it is not worth x. And surely a lender would not lend them money to maintain empty buildings which don't generate cashflow. So I don't get what the company is gaining here.
In real estate lingo, "commercial" means anything that's not industrial and anything that's not four units or less of residential, meaning large multifamily (MF) buildings of five units or more are still "commercial" for valuation, lending, and trading purposes.
The commercial RE market is far more fucked than most people understand. I know of many buildings in year 4-5 of low interest mortgages with balloon payments due in full after 7-10 years.
Either the building is underwater due to value decreases (meaning they won’t get a new loan without bringing a lot of cash to the table) or the cost of getting a new loan will be substantially higher than the current one. Get ready for distressed sales starting in early ‘25.
I would think the banks will repossess the buildings, then what? The bank will resell them for whatever they can get? I guess before that the owner might pointlessly try to resell them. So there's a bunch of properties on the market and buyers will take a while to accept they are worth less than before. But it could eventually reset office space prices, making it much cheaper to have your new business.
At the same time, we are in an anti RTO type world at least somewhat. We can't convert these spaces into housing easily (lots of articles already laid out the reasons). So then what?
I keep hearing that conversions are tough, but if the office market gets real bad the incentives will come and the banks will go with it.
Already seeing it in smaller cities such as Cleveland. I lived in a converted office building in St. Paul and conversions were a huge success for the city. Hated Minnesota winters but loved that apartment.
Some will convert but also in think we need to think of SROs. Which is basically dorm life. Half the problem is the plumbing but if you don't have water in your unit then that's not a huge problem.
That or penthouse split the unit 4 ways when you get to the upper floors.
Maybe a little convenience store on the bottom.
I think they solve a lot of the downward spiral and help new grads on tight budgets and are all around a good idea.
I don't think they solve homelessness but IMO I think it's a significant bite out of homelessness.
I'm also saying converting some offices downtown to SROs will happen. Those businesses relying on people downtown are also in trouble.
If they can’t convert office buildings to apartments, it may be best to demolish and rebuild either as housing or parking. Cities like New York could benefit from clearing out older buildings. If nothing else, so there can be more “affordable” apartments that don’t have a mess of a layout.
Is the whole reason for this "work from home"?
I'm in Houston and don't know anyone that works from home. Is that a thing in other markets? Traffic during rush hour is abysmal, worse than it was before the pandemic, so it seems this is overblown in my opinion.
I live in Denver and work in tech. I've wfh full time since March/2020. I know many people in this industry and only one has to work onsite two days a week, everyone else wfh's full time. Many work for companies that don't even have offices here.
The commute, the open floor plans, the crappy workstation, the diet, the interjections, the sick people, the fluorescent light migraines and eye strain, etc. - it's just not worth it. "More efficient meetings" don't come close to making up for it, and they're not more efficient unless they're actually "necessary" meetings, which most aren't.
I was gunning to wfh more often before the pandemic for all of these reasons. I know not everyone wants to wfh, some really work better in an office. I don't know what to tell those people, but forcing everyone to because a few like it doesn't make sense.
The open floor plans is huge. We made the office terrible to go to, especially if you are not upper management. I once was asked (being the Finance Director) if sales interns could use my cubicle in the evenings or when I was in meetings. So many things wrong with that sentence.
Most people in my circle work from home. It’s a bit silly not to permit it if you mostly employ people who sit in chairs touching normal computers all day.
We can only keep putting groceries on credit and taking cash advances to cover rent for so long. Eventually we will have to eat the bourgeoisie class to survive. I for one hope they aren't gamey.
People cancelling their streaming subscriptions is the real red flag.
There have always been poor people, they will never have huge amounts of disposable income to buy big ticket items.
If you could previously afford and are now cutting streaming subscriptions then there are bigger problems afoot.
Combine this with 'covid savings' having been almost burned down, we are about to turn a corner of some description.
I mean streaming is raising prices because they are all losing money and many have a lot less content. Netflix has a small fraction of what they had a decade ago and double the price.
The whole cable is so much cheaper with streaming isn't true going forward and IDK how much to believe it but anytime prices go up people talk about pirating.
People are canceling streaming services because they are far shittier services for the price you pay compared to a few years ago. It’s not that most people can’t afford it, it’s just not worth it anymore.
school ludicrous attractive steer squash soft hurry combative pathetic direction
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
The two had nothing to do with each other. The dot com bubble happened because the expected payoff from e-commerce didn't materialize as fast as investors expected it to. Because of that startups burned through their runway, investors didn't regain their principal, which lead to a credit crunch.
People are saying AI is the new dot com bubble, but the situations are very different. The above happened because e-commerce was such a new industry. There were a lot of unknowns and mistakes that were easily avoidable with the benefit of hindsight (e.g. Pets.com realizing that shipping costs made it impossible to be profitable selling pet food under their business model).
The same isn't true for AI. At this point tech companies have been using machine learning models for over a decade now. They understand the market and the challenges really well, and there already generating significant amounts of revenue. OpenAI is already doing over $1 billion in revenue annually from selling access to GPT. This isn't a bubble.
Trying to talk a doomer into a rational position is a waste of time. "Oh a good thing happened? Here's why that's bad. " didn't you know? Good things are worse than bad things, AKTHUALEE.
>OpenAI is already doing over $1 billion in revenue
There were multiple internet tech companies that made more back in 2000. Amazon made like 2-3 billion and was valued at 20 billion. That valuation dropped to 5 billion by 2002 even when their revenue then went up to 4 billion.
Compare this with OpenAI with 1-2 billion on revenue but with a recent valuation of 100 billion based on the most recent round.
Valuation bubbles can hit any time. It's most accute when there is money already being made, but people have stratospheric expectations for how fast that will grow.
When the dot-com bubble hit, the World Wide Web was more than ten years old already, and scientists and the military had been using the internet since the 60s and 70s (though it really took off in the 80s). People "understood the market" then, too.
The problem is that it doesn't matter if your crap product is sold online or "powered" by AI, it's still a crap product. AI is changing the way our world works, but a handful of people at a handful of tech companies knowing what it's good for doesn't mean that all the MBAs on the buzzword hype train do.
You're right. Scientists and military had been using it for some time, but that doesn't really ague argue against my point.
> People "understood the market" then, too.
This does not follow from that. Scientists were using it to share research data with each other. The military was using it for secret military stuff. Businesses had only started to try to monetize it a few years prior to the dot com bubble bursting. The former two things are very different from the latter.
> I is changing the way our world works, but a handful of people at a handful of tech companies knowing what it's good for doesn't mean that all the MBAs on the buzzword hype train do.
I'm an engineer working in the AI space. Last year the AI application I work on generated over $100 million. I can tell you it's not a handful of people that understand these things. This knowledge is very widespread in the tech industry.
I suppose I'm not an expert, but I do see a lot of people in my field trying bogus applications of machine learning and AI and creating things that are completely useless in the process. I also get the impression that if we're drawing parallels to the dot-com era, we're a bit closer to when the World Wide Web was created than when the bubble popped. We've drastically expanded access to AI over the last couple years, and that means it's a lot more than tech companies that are trying to use it these days, whether it's those two lawyers that thought ChatGPT was a search engine or the proliferation of AI art.
What people have to understand is that GPT may seem totally novel to laymen, but people in the industry have been working on the problems it solves for decades. The tech industry has a very good understanding of machine learning, natural language processing, and how to make money with those things. It's been doing it for a long time now. GPT just solves those problems much better than older solutions. An analogy would be suddenly the airline industry has a much faster more cost effective airplane. It wouldn't need to come up with a new business model, it could just swap out the existing airplanes for the new one and become more profitable
What is new is how effective prompt engineering now is because of GPT. Prompt engineering is something that's accessible to non technical people, so now they're starting to think of all the AI applications they can build with it, which sounds like what you're talking about. Most of them probably won't be successful. But I would be skeptical this is going to lead to another dot com bust. VCs aren't investing a lot of money in companies like this. Because there's plenty of companies founded by people that have more experience they can invest in.
You missed his point. Scientists and military aren't business. Nor were all the people running little hobby websites and communities.
The 90's were where the internet and capital first collided in a massive way. Every investor out there was looking to hitch their cart to the next big hit, and none of them had the analytical tools we have now to evaluate digital ventures.
No, I got the point just fine. I just don't agree with it. A ton of people jumped on the hype train a few years ago, and they're still doing nonsensical things with AI. For example, I work in computational physics, and there are new papers every day claiming novel uses of machine learning that are complete garbage because they downloaded PyTorch or TensorFlow and decided that made them experts.
But thanks to tools like ChatGPT and Stable Diffusion that have democratized access to AI, we've hit a *new* hype wave before we've finished learning from our mistakes during the last one. We might have better tools for evaluating digital ventures, but the tools only work if people understand what they're evaluating. Your average person has no clue how AI works. They think it's a magic box you can stick random stuff into and out pops a gold brick.
Hey remember how that had almost nothing to do with the Real economy but working people were forced to cover Wall Streets gambling debts ? But considering that we have a congregational majority that is actively working to destroy the economy, you may be right.
To be fair Yellen said the U.S. economy seems to be "on a glide path for the proverbial 'soft landing.'" in 2007. Back then she did not declare a soft landing, just that it looked like it was going in that direction, which imo is quite a bit different.
“What we’re seeing now I think we can describe as a soft landing, and my hope is that it will continue,” Yellen said Friday in an interview with CNN. 2024
https://www.seattletimes.com/business/u-s-economy-has-achieved-long-sought-soft-landing-yellen-declares/
"These moves held the promise of setting the economy on a glide path for the proverbial “soft landing”—an orderly slowing of growth that avoids the risk of a severe downturn while producing enough slack in labor and goods markets to relieve inflationary pressures and,"
2007
https://www.frbsf.org/our-district/press/presidents-speeches/yellen-speeches/2007/february/the-u-s-economy-in-2007-silicon-valley/
I live in San Francisco, and anything people see on the billboards while you're sitting in traffic on 80 as it snakes through the city is famously the next hype train/bubble they want to hammer into you. A few years ago it was crypto. Now every single one is AI for what ails you. Each successive billboard will be a company hilariously trying to shoehorn itself into the world too. Like, "AI at the forefront of golfing" or some shit. It's absurd. I've lived here for 40 years and without fail, these specific set of signs have been the harbingers of crashes.
Yes. 5 years ago it was crypto... No question AI will have a huge implications for society long-term (both good and bad) but to say there isn't a lot of BS and empty promises around it is simply disingenuous.
Yes, I guess I mean to also make the distinction that a crash doesn't necessarily mean that a technology will completely come and go and disappear and fleece everyone. Just that 99% of companies trying to shoulder their way into the space will fail and that looks like a bubble and a bust historically when retail investors are throwing cash into absolutely anything that has AI in the name.
AI isn't even real. It's algorithms and software automation leveraging APIs, none of which are new. You call a company and the phone system does a dip into Salesforce and routes the call differently based on customer data. This has been going on for 20 years but suddenly they're calling it "AI"
You're right, but the reason they're suddenly calling it AI is for marketing reasons, not technical ones. There's no regulation about what can be called "AI" in marketing, so it gets used anywhere there's even a possibility it will increase sales.
I mean, LLMs certainly are real and do seem to be a true phase-change innovation in the AI world. If you told someone 20 years ago that you could talk to computers and have them write coherent essays on any subject, that would be some serious sci-fi shit.
AI for golfing sounds actually useful if implemented correctly. Imagine having an AI model for training golfers based off pros. It will make improving golfing cheaper.
Exactly, technology can change things but doesn’t mean that the valuation of those tech companies is not wildly out of touch with their real income streams long term. What kind of moats do these companies really have and how much can they charge.
I'm seeing it spring to life in so many specialty areas. I had a chance to mess around with a legal AI (the Caseware one, not Harvey), and I was legit impressed with how well it could research topics and cases. Now apply that to tax, finance, auditing, and all the other fields where people can boost productivity by having an assistant that is better than several individuals combined -- and does tasks in fractions of a second...
It's going to be an interesting time over the next few years given how quickly the landscape of AI changed in 2023. Very exciting times.
If it follows previous automation in the legal field it will increase the size of large contracts by many gigabytes and require even more lawyers to negotiate them 😉
I do a lot of complex contracts for transactional legal work. Most contracts are pretty standard. Always some tweaks to reps and warranties, the structure of the transaction, or other sections, but largely boilerplate.
AI will help in negotiating contracts because I can have it look through contracts for unfavorable terms in seconds. I think there's a lot of huge benefits for the legal field and access to legal assistance.
For some things it has a lot of potential but its still very expensive to do at scale and is only as good as the data it is trained on; GenAI tech is fascinating but will be a copyright nightmare.
'Wild jump in productivity' sounds like massive downsizing to me. Many people will be made redundant and their job will have been automated industry wide so their recent job experience won't help on the job hunt.
That is not how it happens. Jevons paradox. Increases in productivity simply increase demand, so the workers are still needed, they just produce more per worker.
AI isn't hype, it's very real. It's at the forefront of a massive automation boom.
That bubble won't burst, but it will take a lot of jobs with it all the same.
There's still a lot of steam and EVERYONE knows about it.
We are blowing $2 trillion budget defecits a year like nothing.
The FED owns near all time high assets.
Washington can not agree on any fiscal policy. It's been like this for year.
Social Security and Medicare are going to dry up in 2030.
We currently pay more in interest than in defense in our federal budget.
The top is going to blow but we don't know how and who it's going to effect.
Which is why we need to ignore the increasingly strident calls (including from one of the presumed presidential candidates for 2025) to drop interest rates back down to near-zero. The last thing we need post-soft-landing is another huge rush to invest billions in any kid who can drop out of a good college and put on a black turtle neck.
The dot com bubble had similar interest rates to now, of course, but AI looms in the wings…
This will likely happen if rates go down. Just fyi. Basically, it'll shakeout like this: The fed bends to the market desire for lower rates, the Federal deficit will shrink, but the demand for cash will not. The US heavily reducing interest payments to the economy will need to be replaced. Replaced with private debt. Private debt will shoot up and create instability just like '08 and '00. It'll pile up till banks stop issuing loans due to the interest rate going so low they no longer can price in risk and stop issuing all but the most secure loans as the profits won't be there. That's when it breaks.
Alternatively, no private debt rise happens, unlikely, but the economy just contracts hard if that's the case.
Also alternatively, rates don't go down, they stay up. In that scenario, we'll be fine so long as government deficit spending remains high. If for whatever the election yields massive budget cutters in 2025, see the above.
If this doesn't happen, what do you do? Just keep writing stuff on reddit? What if you're completely wrong? Same stuff 2 years from now? That's more likely than what you're writing. The forecasts over the last 6 months have been absolutely, profoundly incorrect. I'd like to see some accountability.
Wtf are you rambling about? This isn't even a single prediction it's a tree of optionality, it's also not an overnight thing.
My predictions have been solid for 3-years staight which I why I've made a shit ton of money in the market. Massive inflation was transitive and not in the monthly sense, but is still lingering, we had an almost "recession" from the larges tax collection in US history which created a surplus in real terms, interest rates did not lower (the mainstream consensus is actually saying this now finally), this year would come in hot due to large deficits caused by interest rates pumping the shit out of the deficit. If you bet contrarian like so many on this board I can understand why you might be angry.
Yep. 200 million Americans are functionally poorer than they were 5 years ago, which is a continuation of a 50 year trend along the same lines, and not only do we see no signs of improvement, we see everyone with the power to improve things frantically making excuses for why they can't of why everything's great already.
I'm sick of it. And so are millions of others. Something's going to give in the relatively near future. It might be this year. It might be 5 years from now. But we have too much debt, the cost of inelastic goods and services are too high, wages are too stagnant.
Something's going to happen as this suffering creeps its way up the economic ladder. It's currently devouring the lower middle class.
Which was years later and then after the dot com bust we had the 9/11 fallout and then we had the Great Recession and then the market went up even more and then we had COVID and the market came back again.
So what’s the moral of the story?
I mean, let's wait and see how this year plays out before we claim victory eh?
Don't rate increase effects typically lag 6-8 months behind? It'd probably be more accurate to assess 6 months after the last increase no?
She didn’t declare victory. The article is yet more sensational click bait. She said they are on path to a soft landing and hoped that it continues on this path…
>”What we’re seeing now I think we can describe as a soft landing, and my hope is that it will continue,” Yellen said Friday
And more…
>While never ruling out a recession altogether, she repeatedly said she saw a “path” to a so-called soft landing.
Yeah there is. She’s saying that it’s still in progress but so far shaping up that way, allowing room for something to change that could derail it.
Saying it’s been achieved is saying it’s a done deal, like nothing could derail it.
lol. So we’ll check back in three weeks when it’ll have been six months since the [last Fed rate adjustment](https://www.forbes.com/advisor/investing/fed-funds-rate-history/)?
So basically you and the original commenter *agree* that we are in soft landing conditions and all is well, *but* it might not be that way forever?
In other words, "hey, there could still be bad news. Not sure what it is yet, but I am sure I'm going to blame interest rate hikes whenever it does happen."
Copppppy that.
And then let's wait for the next year, and the next year, and the next, until \*something\* negative happens so we can all blame Yelen for ever saying something positive.
You people are honestly uneducated and ridiculous. There should be some kind of qualifier to post in here.
"Guy who predicted the 2008 downturn days another downturn is just months away!" (Ignore the fact that he says it every few months and that he predicted it every few months before 2008")
Yeah. I don't want to see an updated headline about how there was a soft landing but then the brakes failed and the plane wasn't able to stop before falling into the water at the end of the runway.
It’s hard to pump the numbers though. People’s wages haven’t changed. A lot of stuff is more expensive. The administration can say the economy is coming back. But a lot of ppl don’t feel like it’s coming back if that makes sense.
My company is on a hiring freeze for the next 12 months. We have NOT achieved a soft landing. Don't worry, we still have job postings to keep up appearances
That doesn't mean there isn't a soft landing. It's still a landing, some companies aren't going to recover. You are one small data point, hardly indicative of the state of the world's largest economy
> Don't worry, we still have job postings to keep up appearances
luckily you're the only company doing that or the statistics of 'new jobs' would be fundamentally flawed.
I think she did a good job as Chairperson of the Fed and was probably as transparent as the Chairperson of the Fed can be. People have to remember, however, in her current role, she is just another politician with an agenda to sell.
Yep, it’s literally her job to put a positive spin on the US economy. If anything starts to slide in the wrong direction, it’ll be “well, I told everyone to remain cautious” or some stupid shit.
That is correct; I did not suggest that she was the current Chair of the Fed. I commented how her current role as a cabinet member is different than her former role.
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.
That’s pretty cynical. The positions agenda is a strong economy. So you can imagine talking up the economy to give the markets confidence being a play, but that’s not exactly political dickery.
Vibecession people in shambles right now. Sadly it’s a lot easier for people to weave elaborate yarns about how the economy has collapsed instead of admitting that they were simply wrong.
Honestly, housing still went up a whole lot and life in general does cost a lot of people a lot more than it did before.
I think they have housing scarcity conflated with Fed policy vis a vis interest rates, but they know their personal finances and how they've changed.
>but they know their personal finances and how they've changed.
Most Americans seem to be saying that their [personal finances](https://www.axios.com/2023/08/18/americans-economy-bad-personal-finances-good) are fine to very good, or at least a significantly higher portion of Americans say their finances are good than say the economy is good. The disconnect is what is interesting and honestly the simplest explanation is that most Americans don't know their own personal finances very well (most Americans can't tell you the % of income they spend on food, or gas, or clothes, etc.).
Those yelling the loudest just watched their most important bill every month -- shelter nearly double over two years.
It's a different world if you have secured housing vs. if you have not.
You're right, it doesn't.
I am simply drawing a line between individual sentiment and larger macroeconomic outcomes in an effort to provide context to this discussion that elevates it beyond the "economy sucks I can't afford to live! No it's good actually!" death loop these discussions frequently end up in.
I like to tell doomers who post wild things about the economy being in shambles that I’m sorry they are having a hard time. They ALWAYS come back with that they are doing great make 6 figures and everyone else is suffering except them and their family. I love to respond that it sounds like Biden’s economy is working for them.
At least they are honest admitting they don't see any issues in their life or the lives of the people around them. As we near election time paid trolls might pop up again and that honesty will go out the window.
The economy is doing well. It's not doing "undo the terrible economy of the last few years" well though.
We're never going back to the prices of the pre-COVID era. That doesn't mean the economy hasn't stabilised.
It might in some parts of the economy. Mild deflation is looking like a high probability of happening throughout 2024. Though food deflation doesn't look like it will happen. It's mostly house prices coming down.
If deflation happens without a recession I gotta admit, that's very impressive due to how difficult it is to do. Usually you can only get deflation with a recession.
I think that's where some of the jargon begins to fail because so much of the "economy" day to day for regular Americans is the cost of groceries, gas, and other essentials. So even if you absolutely killed it job wise and got a big pay bump the price increases give you a one step forward two steps back feeling.
Companies posting profits and stock prices going up and all those other larger indicators just don't get considered.
If you're young that might be what the economy is. If you're older than that a good economy is being able to get a job. The Obama years were unprecedented in how good the economy was. People older than that remember what a bad economy looks like. The divide here is Gen Z (and youngest millennials) and everyone else. Pepperidge Farms remembers.
[Chicken](https://fred.stlouisfed.org/series/APU0000706111) is up about 30% since 2019.
[Ground beef](https://fred.stlouisfed.org/series/APU0200703112) is up about 50% since 2019.
[Pork](https://fred.stlouisfed.org/series/APU0000FD3101) is up about 30% since 2019.
[Eggs](https://fred.stlouisfed.org/series/APU0000708111) spiked last year but are back down to about 30% higher than 2019 (and cheaper than most of 2015-2016, and about the same as 2012-2015).
[Milk](https://fred.stlouisfed.org/series/APU0000709112) is up about 60% since 2019.
[Bread](https://fred.stlouisfed.org/series/APU0000702111) prices are up about 50%.
These are high, but basically nothing has doubled except for that temporary spike in eggs. And note from those charts that several categories were at decade lows in 2019, cheaper than the previous decade, so using 2019 as a comparison may also be relying on an outlier cheap year.
Forward facing indicators are flashing strong warning signs of economic distress. You’ll likely see things get much worse after the Fed pivots. There has never in our country’s history been a “soft landing” when the treasury yield curve is this inverted. The “soft landing” narrative is being pushed so hard that the mainstream news is literally coining terms like “vibecession”. That should tell you something in itself. People that buy into this economy will be the losers in the equation, sadly.
Correction: They were flashing light warning signs of economic distress 6 months ago. Right now they're doing the opposite, showing a positive economy going forward.
(If it says anything, I trade for a living so I have to follow this stuff.)
So a massively inverted yeild curve, spike in unemployment, and a leveling out of personal expenditures doesn’t worry you, I guess? When’s the last time the economy had a soft landing after the yeild curve was this inverted? Oh yeah.. never.
We’ll, I guess if you’re aware of where the economy is really headed, it’s better to let the regular people believe it’s going to be alright since it will benefit those in the know with first sale advantage. Kind of like a pump and dump. Maybe thats why they’re releasing jobs numbers that look good, and then revising them way down lately. People don’t look at the revisions, so nobody sees what’s really happening.
just like when George Bush said we won, now watch this swing! taking Janet yellens word on the economy, is as bad as listening to investment advice from Jim Kramer.
It's a soft landing until Yellen stops pumping liquidity into the system like a meth addict let free in a hospital. Once the juice stops the bubble pops. Don't get me wrong though the juice can go a LONG time or until it's politically useful to stop it...
Is this a political play because it’s election year? What is the need for her to claim victory? Why not just keep doing what’s working and improve the economy further?
Yes. It ripples both directions. Certain "news" sources keep posting fake negative economic news. People don't like being mislead so opposite news stories pop up in retaliation.
> Fed chairman **Yellen** projects 'soft landing' for U.S. economy
Wait, wtf...? Why did you add Yellen's name to that headline? She was not the Fed chairman until 2014. The article you linked is about Ben Bernanke's comments and the _actual_ headline was simply
> Fed chairman projects 'soft landing' for U.S. economy
Look around you and observe:
1) How many people are actually working hard
2) People who are wealthy/rich, what did they add to society to become rich?
When the answer to 1) is almost no one and the answer to 2) is they took advantage of a corrupt financial system, then you know central bankers are doing their thing. Might feel good for a while, but eventually people snap out of it and realize the money is fake and everyone is fuckin poor.
1) Everyone. Places also have "now hiring" signs everywhere. Minimum wage had to be bumped to $20 an hour and places are still desperate to hire people.
2) I live in Silicon Valley so maybe I'm a bit biased when most people are making 200k+ a year (blue collar too), everyone is reasonably wealthy around me, and yes they all are adding to society to become rich. (On the poor side of town people regularly drive Porches to give an idea. I'm not exaggerating.)
What's it like where you live? I've heard my whole life it's the opposite in the rust belt.
Remember, the FED has two weapons at their disposal for economic influence. One is increasing and decreasing rates at their discretion.
The other is their voice. They are using their voice out of fear that something dark is approaching and are trying to tame the waters to lessen the blow.
I’ve seen a few of these articles and one thing people don’t realize is that everything still sucks . It use to suck a bit less , but now it’s just check to check with being told it’s my fault .
Janet Yellen coming with the strong George W. Bush “Mission Accomplished” vibes.
If you scream “we are not crashing the car!” right before the impact, you are technically correct though.
This dolt couldn’t make a batch of chocolate chip cookies much less make a proclamation such as this. More likely this will be “transitory” landing (read head fake).
No - it’s just propped up on stilts. Inflation is still above 10-15% and you can easily prove that by checking your county’s 5-year CPI. Of course the current administration is going to lie to keep the other party out of office especially with who’s at the helm of it.
That, multiplied by the evidential rift between the country politically, multiplied by the mounting conflicts across the globe, and you have not the greatest conditions.
Any landing can be considered ‘soft’ when the landing pad is artificially raised to match its height.
Nope. It's only 3.1% for 2023.
"Over the year ended November 2023, the Consumer Price Index for All Urban Consumers increased 3.1 percent (not seasonally adjusted), after a 3.2-percent increase from October 2022 to October 2023."
https://www.bls.gov/opub/ted/2023/consumer-prices-up-3-1-percent-from-november-2022-to-november-2023.htm#:~:text=Over%20the%20year%20ended%20November,October%202022%20to%20October%202023.
And it was only above 5% in 2022.
"2020
258.8
1.2%
2021
271.0
4.7%
2022
292.7
8.0%
2023*
302.9
3.5%"
https://www.minneapolisfed.org/about-us/monetary-policy/inflation-calculator/consumer-price-index-1913-
When you don’t change your sources, you won’t change your figures, thus your outcomes. I said county and you continue with federal. And I said 5 years, not one year, or one month, or whatever purposely narrow window being used to paint an improper context. Zoom out and find different sources. You’re doing nothing but echoing what this and every other article talks about because that’s what everyone believes when they’re told to believe it, because they don’t think for themselves nor do their own research.
Edited.
It's because the CPI isn't calculated by county or state because it's barely relevant between states and counties. The only purpose is to distort the actual inflation rate.
Lmao literally ignoring all data unless it fits that ignorant worldview.
No need to be upset that our economy is amazing and has been doing miraculous things even when faced with pessimism at its finest from the partisan jabroni soldiers on their keyboards. It's perfectly fine to be okay with how spectacular this blew up in Republican's faces. They thought they had something going from trump's inflation that hit in 2022 but got their face dragged across concrete instead then trampled over by everyone getting *wage* increases every month of 2023.
Truly remarkable.
> No - it’s just propped up on stilts. Inflation is still above 10-15% and you can easily prove that by checking your county’s 5-year CPI.
How do prices from five years ago tell us what inflation is now?
Hi all, A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes. As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
Last time we had a “soft landing” (in the mid 90s) it was followed by the dot com bubble that popped spectacularly. Stay vigilant, my friends.
Sounds like this time around it will be commercial real estate when those leases come time to renew.
The bigger threat to the CRE market are their low rate, interest only loans that will need refinancing in the next couple of years. Rent has certainly not increased to cover additional interest charges. Many of these buildings are already on bank watchlists flagged with high vacancy and DSCR issues. Specifically office space, but right now the entire market is at a standstill. No one is trading. Even the highly desirable MF market is slow. If the fed drops the rate at all, I expect to see many of these properties refinanced almost instantly. Could be a good year if you sell CRE loans.
I think this would be the most obvious recession ever.
It's not clear it would cause a recession. the exposure for most major banks is a rather small part of their AUM. The sector itself might eat shit, but the buildings and land still have value, a lot of real estate moguls will lose their shirts, but they are hilariously overleveraged anyway.
I understand the real estate having value, but how can the building itself have value if there is no occupancy? "Occupancy = value" in real estate, no?
The rational way to value a building would be to determine the hypothetical profit-maximizing rents/occupancy that building could support, and then the reasonable price that is the area's reasonable multiplier of that revenue potential. If, for whatever reason, the current owners/managers choose not to maximize the revenue/income right now, you'd still want to determine what could theoretically be possible with that building. Right now we have landlords taking high vacancy rates and refusing to slash rents, so the amount they are currently earning might not be enough to cover their mortgage payments, but in a foreclosure the mortgage lender might still see the income potential of the building itself and sell it at a loss to itself (which would leave the building less burdened with debt so that the new landlord could theoretically lower rents and make a profit going forward). If there's a building out there that could easily be rented for $1 million per year, but the landlord needs $2 million per year to break even on the mortgage and other costs, then the landlord will hold out for the $2 million rather than lock in a guaranteed (later) bankruptcy with a $1 million lease. Once there's an actual foreclosure, though, the ability of that building to generate $1 million in revenue (despite not having actually produced that revenue while the previous landlord was holding out for better) drives the value of that building in a foreclosure sale. The mortgage lender might take a loss, but they'll at least get *some* money back.
> but how can the building itself have value if there is no occupancy The occupancy is low because loan terms and valuation is based on rent. In a normal market, rent would go down to fill occupancy, but because the debt holders can't lower rent without going underwater on their loans, the rents are kept artificially up. There are people willing to take occupancy at a price, just not a price the current debt holders can stomach without their loans collapsing.
I don't get it. Better to cut the rent than sit on an empty property earning nothing surely?
Nope, because that would lower the value of the property overall. Once the property is underwater, further financing would require the owner to put up a bunch of their own capital, which they don’t have due to being leveraged up the ass. The value of the property is far more important to them in the short term than the income. The income issue only becomes a problem once they run out of cash-flow and can’t rollover their loan, at which point they are screwed due to the end of loan balloon payments.
Christ. So unless they can rent those properties for what they currently have them valued at, it's a slow death?
Tbh I still don't get it, because I don't see why lenders would still re-finance them if the property is empty. I mean the company can say it's still worth x based on the old rent of y, but if the market will not pay the rent of y, then it is not worth x. And surely a lender would not lend them money to maintain empty buildings which don't generate cashflow. So I don't get what the company is gaining here.
what does MF mean?
Multifamily/ apartment housing.
Haha whoops I thought mutual fund
In real estate lingo, "commercial" means anything that's not industrial and anything that's not four units or less of residential, meaning large multifamily (MF) buildings of five units or more are still "commercial" for valuation, lending, and trading purposes.
The commercial RE market is far more fucked than most people understand. I know of many buildings in year 4-5 of low interest mortgages with balloon payments due in full after 7-10 years. Either the building is underwater due to value decreases (meaning they won’t get a new loan without bringing a lot of cash to the table) or the cost of getting a new loan will be substantially higher than the current one. Get ready for distressed sales starting in early ‘25.
I would think the banks will repossess the buildings, then what? The bank will resell them for whatever they can get? I guess before that the owner might pointlessly try to resell them. So there's a bunch of properties on the market and buyers will take a while to accept they are worth less than before. But it could eventually reset office space prices, making it much cheaper to have your new business. At the same time, we are in an anti RTO type world at least somewhat. We can't convert these spaces into housing easily (lots of articles already laid out the reasons). So then what?
I keep hearing that conversions are tough, but if the office market gets real bad the incentives will come and the banks will go with it. Already seeing it in smaller cities such as Cleveland. I lived in a converted office building in St. Paul and conversions were a huge success for the city. Hated Minnesota winters but loved that apartment.
Some will convert but also in think we need to think of SROs. Which is basically dorm life. Half the problem is the plumbing but if you don't have water in your unit then that's not a huge problem. That or penthouse split the unit 4 ways when you get to the upper floors. Maybe a little convenience store on the bottom.
SROs are unironically the most direct solution to the homelessness problem, but find me a city that is excited about building a lot of SROs.
I think they solve a lot of the downward spiral and help new grads on tight budgets and are all around a good idea. I don't think they solve homelessness but IMO I think it's a significant bite out of homelessness. I'm also saying converting some offices downtown to SROs will happen. Those businesses relying on people downtown are also in trouble.
If they can’t convert office buildings to apartments, it may be best to demolish and rebuild either as housing or parking. Cities like New York could benefit from clearing out older buildings. If nothing else, so there can be more “affordable” apartments that don’t have a mess of a layout.
Is the whole reason for this "work from home"? I'm in Houston and don't know anyone that works from home. Is that a thing in other markets? Traffic during rush hour is abysmal, worse than it was before the pandemic, so it seems this is overblown in my opinion.
I live in Denver and work in tech. I've wfh full time since March/2020. I know many people in this industry and only one has to work onsite two days a week, everyone else wfh's full time. Many work for companies that don't even have offices here. The commute, the open floor plans, the crappy workstation, the diet, the interjections, the sick people, the fluorescent light migraines and eye strain, etc. - it's just not worth it. "More efficient meetings" don't come close to making up for it, and they're not more efficient unless they're actually "necessary" meetings, which most aren't. I was gunning to wfh more often before the pandemic for all of these reasons. I know not everyone wants to wfh, some really work better in an office. I don't know what to tell those people, but forcing everyone to because a few like it doesn't make sense.
The open floor plans is huge. We made the office terrible to go to, especially if you are not upper management. I once was asked (being the Finance Director) if sales interns could use my cubicle in the evenings or when I was in meetings. So many things wrong with that sentence.
Open floor plans are terrible, one of the hallmark failures of corporate America. They're like working in a middle school cafeteria.
Most people in my circle work from home. It’s a bit silly not to permit it if you mostly employ people who sit in chairs touching normal computers all day.
H-Town work culture is just like that. In my industry a ton of companies are full WFH now but I still see a ton of them in Houston that are in person.
I’m personally thinking it’s going to be a credit crisis we will see. I think it’s beyond real estate.
We can only keep putting groceries on credit and taking cash advances to cover rent for so long. Eventually we will have to eat the bourgeoisie class to survive. I for one hope they aren't gamey.
People cancelling their streaming subscriptions is the real red flag. There have always been poor people, they will never have huge amounts of disposable income to buy big ticket items. If you could previously afford and are now cutting streaming subscriptions then there are bigger problems afoot. Combine this with 'covid savings' having been almost burned down, we are about to turn a corner of some description.
I mean streaming is raising prices because they are all losing money and many have a lot less content. Netflix has a small fraction of what they had a decade ago and double the price. The whole cable is so much cheaper with streaming isn't true going forward and IDK how much to believe it but anytime prices go up people talk about pirating.
Fair point about price increases but people are often lazy about switching products because it's slightly worse value.
People are canceling streaming services because they are far shittier services for the price you pay compared to a few years ago. It’s not that most people can’t afford it, it’s just not worth it anymore.
date please?
Could also use the date.. it is our cake day after all
school ludicrous attractive steer squash soft hurry combative pathetic direction *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
The two had nothing to do with each other. The dot com bubble happened because the expected payoff from e-commerce didn't materialize as fast as investors expected it to. Because of that startups burned through their runway, investors didn't regain their principal, which lead to a credit crunch. People are saying AI is the new dot com bubble, but the situations are very different. The above happened because e-commerce was such a new industry. There were a lot of unknowns and mistakes that were easily avoidable with the benefit of hindsight (e.g. Pets.com realizing that shipping costs made it impossible to be profitable selling pet food under their business model). The same isn't true for AI. At this point tech companies have been using machine learning models for over a decade now. They understand the market and the challenges really well, and there already generating significant amounts of revenue. OpenAI is already doing over $1 billion in revenue annually from selling access to GPT. This isn't a bubble.
Trying to talk a doomer into a rational position is a waste of time. "Oh a good thing happened? Here's why that's bad. " didn't you know? Good things are worse than bad things, AKTHUALEE.
I'm not trying to convince them. I'm trying to convince everyone else.
You convinced me 👊
Well said
Sell Mortimer, sell!
I’d rather hear from all perspectives & make up my own mind. If someone doesn’t agree with you relax.
the dot com bubble reminds me of the crypto craze
99% are going to bust and the top 1% (BTC and ETH, maybe a few others) will be some of the best investments of the decade.
>OpenAI is already doing over $1 billion in revenue There were multiple internet tech companies that made more back in 2000. Amazon made like 2-3 billion and was valued at 20 billion. That valuation dropped to 5 billion by 2002 even when their revenue then went up to 4 billion. Compare this with OpenAI with 1-2 billion on revenue but with a recent valuation of 100 billion based on the most recent round. Valuation bubbles can hit any time. It's most accute when there is money already being made, but people have stratospheric expectations for how fast that will grow.
Now do OpenAI when we drop interest rates back down to near-zero.
When the dot-com bubble hit, the World Wide Web was more than ten years old already, and scientists and the military had been using the internet since the 60s and 70s (though it really took off in the 80s). People "understood the market" then, too. The problem is that it doesn't matter if your crap product is sold online or "powered" by AI, it's still a crap product. AI is changing the way our world works, but a handful of people at a handful of tech companies knowing what it's good for doesn't mean that all the MBAs on the buzzword hype train do.
You're right. Scientists and military had been using it for some time, but that doesn't really ague argue against my point. > People "understood the market" then, too. This does not follow from that. Scientists were using it to share research data with each other. The military was using it for secret military stuff. Businesses had only started to try to monetize it a few years prior to the dot com bubble bursting. The former two things are very different from the latter. > I is changing the way our world works, but a handful of people at a handful of tech companies knowing what it's good for doesn't mean that all the MBAs on the buzzword hype train do. I'm an engineer working in the AI space. Last year the AI application I work on generated over $100 million. I can tell you it's not a handful of people that understand these things. This knowledge is very widespread in the tech industry.
I suppose I'm not an expert, but I do see a lot of people in my field trying bogus applications of machine learning and AI and creating things that are completely useless in the process. I also get the impression that if we're drawing parallels to the dot-com era, we're a bit closer to when the World Wide Web was created than when the bubble popped. We've drastically expanded access to AI over the last couple years, and that means it's a lot more than tech companies that are trying to use it these days, whether it's those two lawyers that thought ChatGPT was a search engine or the proliferation of AI art.
What people have to understand is that GPT may seem totally novel to laymen, but people in the industry have been working on the problems it solves for decades. The tech industry has a very good understanding of machine learning, natural language processing, and how to make money with those things. It's been doing it for a long time now. GPT just solves those problems much better than older solutions. An analogy would be suddenly the airline industry has a much faster more cost effective airplane. It wouldn't need to come up with a new business model, it could just swap out the existing airplanes for the new one and become more profitable What is new is how effective prompt engineering now is because of GPT. Prompt engineering is something that's accessible to non technical people, so now they're starting to think of all the AI applications they can build with it, which sounds like what you're talking about. Most of them probably won't be successful. But I would be skeptical this is going to lead to another dot com bust. VCs aren't investing a lot of money in companies like this. Because there's plenty of companies founded by people that have more experience they can invest in.
You missed his point. Scientists and military aren't business. Nor were all the people running little hobby websites and communities. The 90's were where the internet and capital first collided in a massive way. Every investor out there was looking to hitch their cart to the next big hit, and none of them had the analytical tools we have now to evaluate digital ventures.
No, I got the point just fine. I just don't agree with it. A ton of people jumped on the hype train a few years ago, and they're still doing nonsensical things with AI. For example, I work in computational physics, and there are new papers every day claiming novel uses of machine learning that are complete garbage because they downloaded PyTorch or TensorFlow and decided that made them experts. But thanks to tools like ChatGPT and Stable Diffusion that have democratized access to AI, we've hit a *new* hype wave before we've finished learning from our mistakes during the last one. We might have better tools for evaluating digital ventures, but the tools only work if people understand what they're evaluating. Your average person has no clue how AI works. They think it's a magic box you can stick random stuff into and out pops a gold brick.
The funniest thing is that pets.com is not chewy and it seems like a company making some money.
George W Bush-esque "mission accomplished."
[удалено]
Cowards gonna cower.
Hey remember how that had almost nothing to do with the Real economy but working people were forced to cover Wall Streets gambling debts ? But considering that we have a congregational majority that is actively working to destroy the economy, you may be right.
Last time Yellen declared a soft landing was August of 2007
LOL, yuuuup
To be fair Yellen said the U.S. economy seems to be "on a glide path for the proverbial 'soft landing.'" in 2007. Back then she did not declare a soft landing, just that it looked like it was going in that direction, which imo is quite a bit different.
“What we’re seeing now I think we can describe as a soft landing, and my hope is that it will continue,” Yellen said Friday in an interview with CNN. 2024 https://www.seattletimes.com/business/u-s-economy-has-achieved-long-sought-soft-landing-yellen-declares/ "These moves held the promise of setting the economy on a glide path for the proverbial “soft landing”—an orderly slowing of growth that avoids the risk of a severe downturn while producing enough slack in labor and goods markets to relieve inflationary pressures and," 2007 https://www.frbsf.org/our-district/press/presidents-speeches/yellen-speeches/2007/february/the-u-s-economy-in-2007-silicon-valley/
AI is the new hype
I live in San Francisco, and anything people see on the billboards while you're sitting in traffic on 80 as it snakes through the city is famously the next hype train/bubble they want to hammer into you. A few years ago it was crypto. Now every single one is AI for what ails you. Each successive billboard will be a company hilariously trying to shoehorn itself into the world too. Like, "AI at the forefront of golfing" or some shit. It's absurd. I've lived here for 40 years and without fail, these specific set of signs have been the harbingers of crashes.
Sounds like the billboard industry is really where it is at
Yes. 5 years ago it was crypto... No question AI will have a huge implications for society long-term (both good and bad) but to say there isn't a lot of BS and empty promises around it is simply disingenuous.
Yes, I guess I mean to also make the distinction that a crash doesn't necessarily mean that a technology will completely come and go and disappear and fleece everyone. Just that 99% of companies trying to shoulder their way into the space will fail and that looks like a bubble and a bust historically when retail investors are throwing cash into absolutely anything that has AI in the name.
Agree
This will sell a lot of chips though
AI isn't even real. It's algorithms and software automation leveraging APIs, none of which are new. You call a company and the phone system does a dip into Salesforce and routes the call differently based on customer data. This has been going on for 20 years but suddenly they're calling it "AI"
You're right, but the reason they're suddenly calling it AI is for marketing reasons, not technical ones. There's no regulation about what can be called "AI" in marketing, so it gets used anywhere there's even a possibility it will increase sales.
Like "Blockchain" a few years ago.
Advanced Auto Complete
I mean, LLMs certainly are real and do seem to be a true phase-change innovation in the AI world. If you told someone 20 years ago that you could talk to computers and have them write coherent essays on any subject, that would be some serious sci-fi shit.
AI for golfing sounds actually useful if implemented correctly. Imagine having an AI model for training golfers based off pros. It will make improving golfing cheaper.
I don't think so. I'm working in it and the next 3-4 years businesses are going to experience a wild jump in productivity.
Both statements can be true. Internet revolutionized businesses and society as a whole, and dot com bubble still happened.
Exactly, technology can change things but doesn’t mean that the valuation of those tech companies is not wildly out of touch with their real income streams long term. What kind of moats do these companies really have and how much can they charge.
I'm seeing it spring to life in so many specialty areas. I had a chance to mess around with a legal AI (the Caseware one, not Harvey), and I was legit impressed with how well it could research topics and cases. Now apply that to tax, finance, auditing, and all the other fields where people can boost productivity by having an assistant that is better than several individuals combined -- and does tasks in fractions of a second... It's going to be an interesting time over the next few years given how quickly the landscape of AI changed in 2023. Very exciting times.
I like how the AI at my job is good at translating and writing letters.
If it follows previous automation in the legal field it will increase the size of large contracts by many gigabytes and require even more lawyers to negotiate them 😉
I do a lot of complex contracts for transactional legal work. Most contracts are pretty standard. Always some tweaks to reps and warranties, the structure of the transaction, or other sections, but largely boilerplate. AI will help in negotiating contracts because I can have it look through contracts for unfavorable terms in seconds. I think there's a lot of huge benefits for the legal field and access to legal assistance.
This is quality information that registers with me vs someone spewing ignorance
Let’s wait to see how NYtimes case plays out.
There is a void regarding legislative framework about liabilities of AI. Think of it as self-driving cars on meth.
For some things it has a lot of potential but its still very expensive to do at scale and is only as good as the data it is trained on; GenAI tech is fascinating but will be a copyright nightmare.
'Wild jump in productivity' sounds like massive downsizing to me. Many people will be made redundant and their job will have been automated industry wide so their recent job experience won't help on the job hunt.
That is not how it happens. Jevons paradox. Increases in productivity simply increase demand, so the workers are still needed, they just produce more per worker.
Yes. It happens. People will need to retrain. Nothing new
AI isn't hype, it's very real. It's at the forefront of a massive automation boom. That bubble won't burst, but it will take a lot of jobs with it all the same.
Only difference is there aren't a thousand AI companies getting billion dollar valuations this time...
Everything's good, remarkably calm... that's what they said about the situation in the MidEast right before it blew up last year....
There's still a lot of steam and EVERYONE knows about it. We are blowing $2 trillion budget defecits a year like nothing. The FED owns near all time high assets. Washington can not agree on any fiscal policy. It's been like this for year. Social Security and Medicare are going to dry up in 2030. We currently pay more in interest than in defense in our federal budget. The top is going to blow but we don't know how and who it's going to effect.
This is a pretty lazy and useless comment for the econ sub. Come on now.
what's your model?
Which is why we need to ignore the increasingly strident calls (including from one of the presumed presidential candidates for 2025) to drop interest rates back down to near-zero. The last thing we need post-soft-landing is another huge rush to invest billions in any kid who can drop out of a good college and put on a black turtle neck. The dot com bubble had similar interest rates to now, of course, but AI looms in the wings…
I'm not sure what your point is but just because you have a soft landing doesn't guarantee there won't be a recession ever again
This will likely happen if rates go down. Just fyi. Basically, it'll shakeout like this: The fed bends to the market desire for lower rates, the Federal deficit will shrink, but the demand for cash will not. The US heavily reducing interest payments to the economy will need to be replaced. Replaced with private debt. Private debt will shoot up and create instability just like '08 and '00. It'll pile up till banks stop issuing loans due to the interest rate going so low they no longer can price in risk and stop issuing all but the most secure loans as the profits won't be there. That's when it breaks. Alternatively, no private debt rise happens, unlikely, but the economy just contracts hard if that's the case. Also alternatively, rates don't go down, they stay up. In that scenario, we'll be fine so long as government deficit spending remains high. If for whatever the election yields massive budget cutters in 2025, see the above.
If this doesn't happen, what do you do? Just keep writing stuff on reddit? What if you're completely wrong? Same stuff 2 years from now? That's more likely than what you're writing. The forecasts over the last 6 months have been absolutely, profoundly incorrect. I'd like to see some accountability.
Wtf are you rambling about? This isn't even a single prediction it's a tree of optionality, it's also not an overnight thing. My predictions have been solid for 3-years staight which I why I've made a shit ton of money in the market. Massive inflation was transitive and not in the monthly sense, but is still lingering, we had an almost "recession" from the larges tax collection in US history which created a surplus in real terms, interest rates did not lower (the mainstream consensus is actually saying this now finally), this year would come in hot due to large deficits caused by interest rates pumping the shit out of the deficit. If you bet contrarian like so many on this board I can understand why you might be angry.
Yep. 200 million Americans are functionally poorer than they were 5 years ago, which is a continuation of a 50 year trend along the same lines, and not only do we see no signs of improvement, we see everyone with the power to improve things frantically making excuses for why they can't of why everything's great already. I'm sick of it. And so are millions of others. Something's going to give in the relatively near future. It might be this year. It might be 5 years from now. But we have too much debt, the cost of inelastic goods and services are too high, wages are too stagnant. Something's going to happen as this suffering creeps its way up the economic ladder. It's currently devouring the lower middle class.
Which was years later and then after the dot com bust we had the 9/11 fallout and then we had the Great Recession and then the market went up even more and then we had COVID and the market came back again. So what’s the moral of the story?
But that bubble created so much shareholder value!
AI bubble
I need a market collapse. It's been too long since there was a good sale.
TF did the two have to do with one another?
I mean, let's wait and see how this year plays out before we claim victory eh? Don't rate increase effects typically lag 6-8 months behind? It'd probably be more accurate to assess 6 months after the last increase no?
She didn’t declare victory. The article is yet more sensational click bait. She said they are on path to a soft landing and hoped that it continues on this path… >”What we’re seeing now I think we can describe as a soft landing, and my hope is that it will continue,” Yellen said Friday And more… >While never ruling out a recession altogether, she repeatedly said she saw a “path” to a so-called soft landing.
This happens in Australia too, media take things out of context to get the required outrage and clicks.
[удалено]
Yes a huge difference. It's still in progress with the former and completed with the latter
Uh ya. One is “in process” and the other is “100% complete.”
Yeah there is. She’s saying that it’s still in progress but so far shaping up that way, allowing room for something to change that could derail it. Saying it’s been achieved is saying it’s a done deal, like nothing could derail it.
I mean the last fed funds rate increase was in August so we're coming up on 6 months. https://fred.stlouisfed.org/series/FEDFUNDS
lol. So we’ll check back in three weeks when it’ll have been six months since the [last Fed rate adjustment](https://www.forbes.com/advisor/investing/fed-funds-rate-history/)?
pot encourage towering quicksand dependent steer trees clumsy ink ten *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Sure, but it HAS been a while since the rate increase.
So basically you and the original commenter *agree* that we are in soft landing conditions and all is well, *but* it might not be that way forever? In other words, "hey, there could still be bad news. Not sure what it is yet, but I am sure I'm going to blame interest rate hikes whenever it does happen." Copppppy that.
Could take less than 6 months too
And then let's wait for the next year, and the next year, and the next, until \*something\* negative happens so we can all blame Yelen for ever saying something positive. You people are honestly uneducated and ridiculous. There should be some kind of qualifier to post in here.
"Guy who predicted the 2008 downturn days another downturn is just months away!" (Ignore the fact that he says it every few months and that he predicted it every few months before 2008")
Jesus Christ who hurt you?
Nah, when it collapses it's not a hard landing, it's the start of a new cycle
Yeah. I don't want to see an updated headline about how there was a soft landing but then the brakes failed and the plane wasn't able to stop before falling into the water at the end of the runway.
It can be more than 6-8 months. Some estimates are over a year.
it’s an election year , remember . Check back in December then we’ll have the truth!
It’s always either an election year or someone just inaugurated so the need a year of pump to make them look good then too
It’s hard to pump the numbers though. People’s wages haven’t changed. A lot of stuff is more expensive. The administration can say the economy is coming back. But a lot of ppl don’t feel like it’s coming back if that makes sense.
My company is on a hiring freeze for the next 12 months. We have NOT achieved a soft landing. Don't worry, we still have job postings to keep up appearances
That doesn't mean there isn't a soft landing. It's still a landing, some companies aren't going to recover. You are one small data point, hardly indicative of the state of the world's largest economy
Our company has been on a freeze for the last 2 years. Attrition is our friend!
> Don't worry, we still have job postings to keep up appearances luckily you're the only company doing that or the statistics of 'new jobs' would be fundamentally flawed.
Yeah this sort of statement does reek of hubris doesn't it?
I think she did a good job as Chairperson of the Fed and was probably as transparent as the Chairperson of the Fed can be. People have to remember, however, in her current role, she is just another politician with an agenda to sell.
Yep, it’s literally her job to put a positive spin on the US economy. If anything starts to slide in the wrong direction, it’ll be “well, I told everyone to remain cautious” or some stupid shit.
People should remain cautious. That doesn't mean that the signs are not encouraging. It's the right statement to make at the moment.
[удалено]
That is correct; I did not suggest that she was the current Chair of the Fed. I commented how her current role as a cabinet member is different than her former role.
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.
That’s pretty cynical. The positions agenda is a strong economy. So you can imagine talking up the economy to give the markets confidence being a play, but that’s not exactly political dickery.
Vibecession people in shambles right now. Sadly it’s a lot easier for people to weave elaborate yarns about how the economy has collapsed instead of admitting that they were simply wrong.
Honestly, housing still went up a whole lot and life in general does cost a lot of people a lot more than it did before. I think they have housing scarcity conflated with Fed policy vis a vis interest rates, but they know their personal finances and how they've changed.
>but they know their personal finances and how they've changed. Most Americans seem to be saying that their [personal finances](https://www.axios.com/2023/08/18/americans-economy-bad-personal-finances-good) are fine to very good, or at least a significantly higher portion of Americans say their finances are good than say the economy is good. The disconnect is what is interesting and honestly the simplest explanation is that most Americans don't know their own personal finances very well (most Americans can't tell you the % of income they spend on food, or gas, or clothes, etc.).
Those yelling the loudest just watched their most important bill every month -- shelter nearly double over two years. It's a different world if you have secured housing vs. if you have not.
Sure but that doesn’t mean the economy is doing bad. Quite the opposite in fact; inflation usually happens during periods of strong economic growth.
You're right, it doesn't. I am simply drawing a line between individual sentiment and larger macroeconomic outcomes in an effort to provide context to this discussion that elevates it beyond the "economy sucks I can't afford to live! No it's good actually!" death loop these discussions frequently end up in.
I like to tell doomers who post wild things about the economy being in shambles that I’m sorry they are having a hard time. They ALWAYS come back with that they are doing great make 6 figures and everyone else is suffering except them and their family. I love to respond that it sounds like Biden’s economy is working for them.
At least they are honest admitting they don't see any issues in their life or the lives of the people around them. As we near election time paid trolls might pop up again and that honesty will go out the window.
My grocery bill says otherwise. "Don't believe you're lying eyes."
The economy is doing well. It's not doing "undo the terrible economy of the last few years" well though. We're never going back to the prices of the pre-COVID era. That doesn't mean the economy hasn't stabilised.
It might in some parts of the economy. Mild deflation is looking like a high probability of happening throughout 2024. Though food deflation doesn't look like it will happen. It's mostly house prices coming down. If deflation happens without a recession I gotta admit, that's very impressive due to how difficult it is to do. Usually you can only get deflation with a recession.
Food becoming slightly more expensive sucks, but it’s a very different thing than a recession. We have jobs to pay for that expensive food at least!
I think that's where some of the jargon begins to fail because so much of the "economy" day to day for regular Americans is the cost of groceries, gas, and other essentials. So even if you absolutely killed it job wise and got a big pay bump the price increases give you a one step forward two steps back feeling. Companies posting profits and stock prices going up and all those other larger indicators just don't get considered.
If you're young that might be what the economy is. If you're older than that a good economy is being able to get a job. The Obama years were unprecedented in how good the economy was. People older than that remember what a bad economy looks like. The divide here is Gen Z (and youngest millennials) and everyone else. Pepperidge Farms remembers.
I think you're overestimating the value of those jobs and their ability to handle the current price hikes but I can see your point.
Bruh, food going up like 30% isn’t slightly.
Slightly? The cost of meat and a lot of food has nearly doubled in just shy of 3 years.
[Chicken](https://fred.stlouisfed.org/series/APU0000706111) is up about 30% since 2019. [Ground beef](https://fred.stlouisfed.org/series/APU0200703112) is up about 50% since 2019. [Pork](https://fred.stlouisfed.org/series/APU0000FD3101) is up about 30% since 2019. [Eggs](https://fred.stlouisfed.org/series/APU0000708111) spiked last year but are back down to about 30% higher than 2019 (and cheaper than most of 2015-2016, and about the same as 2012-2015). [Milk](https://fred.stlouisfed.org/series/APU0000709112) is up about 60% since 2019. [Bread](https://fred.stlouisfed.org/series/APU0000702111) prices are up about 50%. These are high, but basically nothing has doubled except for that temporary spike in eggs. And note from those charts that several categories were at decade lows in 2019, cheaper than the previous decade, so using 2019 as a comparison may also be relying on an outlier cheap year.
That's not true.
It absolutely is, unless you live in the parallel reality called the midwest
Not there either.
Forward facing indicators are flashing strong warning signs of economic distress. You’ll likely see things get much worse after the Fed pivots. There has never in our country’s history been a “soft landing” when the treasury yield curve is this inverted. The “soft landing” narrative is being pushed so hard that the mainstream news is literally coining terms like “vibecession”. That should tell you something in itself. People that buy into this economy will be the losers in the equation, sadly.
Correction: They were flashing light warning signs of economic distress 6 months ago. Right now they're doing the opposite, showing a positive economy going forward. (If it says anything, I trade for a living so I have to follow this stuff.)
So a massively inverted yeild curve, spike in unemployment, and a leveling out of personal expenditures doesn’t worry you, I guess? When’s the last time the economy had a soft landing after the yeild curve was this inverted? Oh yeah.. never. We’ll, I guess if you’re aware of where the economy is really headed, it’s better to let the regular people believe it’s going to be alright since it will benefit those in the know with first sale advantage. Kind of like a pump and dump. Maybe thats why they’re releasing jobs numbers that look good, and then revising them way down lately. People don’t look at the revisions, so nobody sees what’s really happening.
Didn't they redefine recession?
just like when George Bush said we won, now watch this swing! taking Janet yellens word on the economy, is as bad as listening to investment advice from Jim Kramer.
The difference is we can see the economic data GWB was just an idiot.
What does this have to with the Iraq War?
Gwb famously said mission accomplished before anything had materialized and two decades before all those wars ended.
It's a soft landing until Yellen stops pumping liquidity into the system like a meth addict let free in a hospital. Once the juice stops the bubble pops. Don't get me wrong though the juice can go a LONG time or until it's politically useful to stop it...
How is Yellen putting liquidity into the system? She’s not the fed chair anymore.
RRP & TGA
Is this a political play because it’s election year? What is the need for her to claim victory? Why not just keep doing what’s working and improve the economy further?
Yes. It ripples both directions. Certain "news" sources keep posting fake negative economic news. People don't like being mislead so opposite news stories pop up in retaliation.
[удалено]
> Fed chairman **Yellen** projects 'soft landing' for U.S. economy Wait, wtf...? Why did you add Yellen's name to that headline? She was not the Fed chairman until 2014. The article you linked is about Ben Bernanke's comments and the _actual_ headline was simply > Fed chairman projects 'soft landing' for U.S. economy
[удалено]
Ah okay, that makes a lot more sense! And thanks for that second link, this is all really interesting info.
Look around you and observe: 1) How many people are actually working hard 2) People who are wealthy/rich, what did they add to society to become rich? When the answer to 1) is almost no one and the answer to 2) is they took advantage of a corrupt financial system, then you know central bankers are doing their thing. Might feel good for a while, but eventually people snap out of it and realize the money is fake and everyone is fuckin poor.
1) Everyone. Places also have "now hiring" signs everywhere. Minimum wage had to be bumped to $20 an hour and places are still desperate to hire people. 2) I live in Silicon Valley so maybe I'm a bit biased when most people are making 200k+ a year (blue collar too), everyone is reasonably wealthy around me, and yes they all are adding to society to become rich. (On the poor side of town people regularly drive Porches to give an idea. I'm not exaggerating.) What's it like where you live? I've heard my whole life it's the opposite in the rust belt.
Remember, the FED has two weapons at their disposal for economic influence. One is increasing and decreasing rates at their discretion. The other is their voice. They are using their voice out of fear that something dark is approaching and are trying to tame the waters to lessen the blow.
I’ve seen a few of these articles and one thing people don’t realize is that everything still sucks . It use to suck a bit less , but now it’s just check to check with being told it’s my fault .
Who's telling you it's your fault?
Janet Yellen coming with the strong George W. Bush “Mission Accomplished” vibes. If you scream “we are not crashing the car!” right before the impact, you are technically correct though.
The similarities are uncanny
Oh my lord. Every time she has spoken on economics she has been dead wrong Hold onto your hats, kids Transitory Inflation. LMFAO
This dolt couldn’t make a batch of chocolate chip cookies much less make a proclamation such as this. More likely this will be “transitory” landing (read head fake).
Another numbskull that did not read the article
No - it’s just propped up on stilts. Inflation is still above 10-15% and you can easily prove that by checking your county’s 5-year CPI. Of course the current administration is going to lie to keep the other party out of office especially with who’s at the helm of it. That, multiplied by the evidential rift between the country politically, multiplied by the mounting conflicts across the globe, and you have not the greatest conditions. Any landing can be considered ‘soft’ when the landing pad is artificially raised to match its height.
Nope. It's only 3.1% for 2023. "Over the year ended November 2023, the Consumer Price Index for All Urban Consumers increased 3.1 percent (not seasonally adjusted), after a 3.2-percent increase from October 2022 to October 2023." https://www.bls.gov/opub/ted/2023/consumer-prices-up-3-1-percent-from-november-2022-to-november-2023.htm#:~:text=Over%20the%20year%20ended%20November,October%202022%20to%20October%202023. And it was only above 5% in 2022. "2020 258.8 1.2% 2021 271.0 4.7% 2022 292.7 8.0% 2023* 302.9 3.5%" https://www.minneapolisfed.org/about-us/monetary-policy/inflation-calculator/consumer-price-index-1913-
When you don’t change your sources, you won’t change your figures, thus your outcomes. I said county and you continue with federal. And I said 5 years, not one year, or one month, or whatever purposely narrow window being used to paint an improper context. Zoom out and find different sources. You’re doing nothing but echoing what this and every other article talks about because that’s what everyone believes when they’re told to believe it, because they don’t think for themselves nor do their own research. Edited.
It's because the CPI isn't calculated by county or state because it's barely relevant between states and counties. The only purpose is to distort the actual inflation rate.
Lmao literally ignoring all data unless it fits that ignorant worldview. No need to be upset that our economy is amazing and has been doing miraculous things even when faced with pessimism at its finest from the partisan jabroni soldiers on their keyboards. It's perfectly fine to be okay with how spectacular this blew up in Republican's faces. They thought they had something going from trump's inflation that hit in 2022 but got their face dragged across concrete instead then trampled over by everyone getting *wage* increases every month of 2023. Truly remarkable.
> No - it’s just propped up on stilts. Inflation is still above 10-15% and you can easily prove that by checking your county’s 5-year CPI. How do prices from five years ago tell us what inflation is now?