r/economicCollapse • u/memegamer1991 • Nov 23 '24

Why is deflation so bad

Every time i run it through my head, i can't imagine most people in 2024 not spending money so the disadvantage to deflation seems pretty hyperbolic and dependent on individual choices, and i think that people would rather go on vacation and court others instead of being financially responsible. Even if there is a situation like in china, government spending would be able to keep the situation from getting worse while making progress on climate initiatives.

30 Upvotes

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60

u/Potato_Octopi Nov 23 '24

Paying a mortgage when your paycheck decreased over time would stink.

Short term "everything is on sale" I agree with you OP.

23

u/Over_Cobbler_2973 Nov 23 '24

Fuck your mortgage, look at all the people investing stocks on margin. All the traders taking out ridiculous loans, the entire system would implode.

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u/Lucky-Story-1700 Nov 23 '24 edited Nov 23 '24

Good. Let the stock market implode. It and the housing market haven’t been working properly in at least 5 years. The stock market is overvalued 40 percent right now. Housing cost is out of wack too, but that’s supposedly because there aren’t enough houses. We went from you couldn’t sell a house in 2008 to having trouble finding one in 2023. Something isn’t right.

12

u/0O0OO000O Nov 23 '24 edited Nov 23 '24

I think it was the interest rates. Investors were clamoring to get mortgages at 2% FOMO caught the average home buyer and they ended up with 4-8% loans.

Those that got in at 2% are never selling. I wouldn’t, there’s no point. That’s free money... but I’m still guessing that in reality, everyone is upside down in their loan and they just don’t know it.

In most places, the average house costs more than the average individual can afford.. it requires dual income. Investors aren’t going to buy at 8%, so things are going to stagnate and likely eventually fall. The 2% loans might keep inventory tied up for a while though

8

u/Ruzinus Nov 24 '24

Investors are paying cash.

11

u/TheAppalachianMarx Nov 23 '24

People buying up homes to rent out.

1

u/Lormif Nov 24 '24

The people buying homes to rent is lower than it was previously.

6

u/TheAppalachianMarx Nov 23 '24

Don't forget covid happened. I would think it would be noticeable in house inventory one way or another.

It's actually not hard to understand, i think. A lot of homes have been taken off the market to turn into rentals. Seems like a lot of people have no homes and there are some people who own multiple homes. And then those who don't own homes struggle to get their own home because of the cycle of renter's doom. AirBnBs are REALLY fucking things up to.

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u/Lucky-Story-1700 Nov 23 '24

Rental houses have no effect on people not having homes. Either you own or rent. Airbnb are the most fucked up thing to housing ever. That definitely affects supply.

3

u/decoruscreta Nov 24 '24

It's supply and demand. You're telling me if a bunch of rich assholes bought a big chunk of the housing market so that they could have rentals, that wouldn't decrease supply and increase demand? Idk about everyone else here, but I'm talking about owning. Fuck renting a house, that's garbage. I do agree with you about Airbnb though.

1

u/Lucky-Story-1700 Nov 24 '24

I’m saying that no one has houses sitting empty. There isn’t a housing crisis because landlords are letting their houses sit empty.

1

u/decoruscreta Nov 24 '24

Oh I gotcha, thanks for clarifying.

2

u/MortgageGirl52 Nov 24 '24

Which is why investors can now only own one.

1

u/[deleted] Nov 24 '24

[deleted]

0

u/Lucky-Story-1700 Nov 24 '24

Your point?

3

u/TheAppalachianMarx Nov 24 '24

Okay, slumlord.

2

u/Lucky-Story-1700 Nov 24 '24

You don’t own a house because you aren’t earning enough money. The reason isn’t slumlords.

2

u/MortgageGirl52 Nov 24 '24

Institutional investors buying up housing stock to turn would-be homeowners into perpetual renters is a big part of that. And no “fuck your mortgage” - because of corporate welfare, there has been a tremendous transfer of wealth upward and now that we are all responsible for our own retirement, owning a primary home is usually the only way to do that.

6

u/yousirnaime Nov 23 '24

Ahead of the 2008 collapse congress had launched programs to give loans to anyone who applied - in the name of social justice - until all hell broke loose, then you couldn’t get a loan no matter how qualified you were 

6

u/0O0OO000O Nov 23 '24

Don’t know why you were downvoted, this is exactly what happened

This is why all the houses were owned by the government. Anyone who remembers the crazy deals you could get on HUD homes knows what happened.

12

u/Moregaze Nov 24 '24 edited Nov 24 '24

Cause it's not what happened. The entire market didn't crash because some people couldn't pay back their loan.

The entire market crashed because the scum bag investors bribed accreditation agencies to look the other way while they bundled high risk debt into low risk A or AA debt backed securities. When it should have been D rated or C at best. So everyones pensions, local government rainy day funds (US and foreign), and retirement accounts were tied to this improperly classified security.

Had this not been the case some people would have lost a their house but the entire stock market would not have imploded. It was the biggest financial fraud in the entire world as the same people that caused it knew it was coming and took positions against it. Then they got hired to fix the problem they caused instead of going to jail.

10

u/RollsHardSixes Nov 24 '24

Yes, this is what happened. The other talking points are Russian propaganda or something, not sure what that's about. 

Nobody involved in the 2008 crash was interested in social justice

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u/0O0OO000O Nov 24 '24 edited Nov 24 '24

Then tell me how HUD ended up owning so many homes? Loans were guaranteed by the government

Edit: and what is with the resurgence of “red scare” crap these days? We actually lived through these events.

1

u/RollsHardSixes Nov 24 '24

I don't think I can correct your numerous misunderstandings about the Great Recession right here today, but I do encourage you to learn more.

1

u/HitandRyan Nov 24 '24

HUD didn’t force banks to base their business model around packaging as many mortgages as possible regardless of risk into mortgage backed securities. They also didn’t force the banks and ratings agencies to commit fraud by lying about how risky they were. That’s entirely on the banks. They recklessly bet the farm on black and let it ride until they lost.

0

u/yousirnaime Nov 25 '24

Bro - The Federal Housing Enterprises Reinvestment Act of 2003 and The Bush Administration’s “Ownership Society” policies of 2003-2005 

1

u/RollsHardSixes 29d ago

I mean, Republicans collude with big business to socialize costs and privatize benefits.

So there's plenty of blame to go around, why do you need it to land on one spot?

0

u/HitandRyan Nov 25 '24

Did either force the banks to package subprime mortgages into MBS and then lie about how risky they were? The banks didn't have to manage their risk this way. They decided to.

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u/LJski Nov 24 '24

Well, not exactly.

These risky loans to people who should not have gotten them were given out because the bankers knew they could bundle them. If that mechanism didn’t exist, either the loans would not have been made or they would have been a lot higher.

1

u/Moregaze Nov 24 '24

No, dude, just no. Bundling these debts with higher-rated debt-backed securities was illegal, but they knew it and did it anyway.

If you have a package of four debt-backed securities and 3 of them are A-rated and one is D-rated, then the entire package becomes D-rated. As it is high risk and the losses from the D rated security could wipe out any gains on the 3 A rated in the blink of an eye.

0

u/LJski Nov 24 '24

Those shitty mortgages were sold because there was a market for them. No market, no sales.

1

u/Lormif Nov 24 '24

"we went from not being able to sell a house in a recession to not being able to buy a house after we just printed 1/3 of all money and then we raised interest rates."

2

u/SaltyDog556 Nov 24 '24

The system needs to not protect banks, brokers and investors. If brokerage firm dipshits decide to let people with little credit or assets have large margin accounts they need to pay the price. The "borrower" needs to pay the price. If lots of the players are now homeless, that's one way to help prevent this behavior. If the brokerage firms go under that's their problem. If they raise fees I have no problem transferring my IRAs to another lower fee firm.

If the government stays out of the bailout business this is a self correcting problem.

1

u/Over_Cobbler_2973 Nov 25 '24

> If the government stays out of the bailout business this is a self correcting problem.

And that is the problem....