Latest / Words & Numbers / Episode 487: Is It The Economy, Stupid?

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Episode 487: Is It The Economy, Stupid? · Words & Numbers

• 0:00
  Coming up next on Words and Numbers, Arizona Senator Mark
• 0:03
  Kelly a late Christmas story white slash Nazi dating sites.
• 0:08
  And what's wrong with the economy?
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  All this and more coming up next on Words and numbers, a civil
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  original production. Check us out at civil.com.
• 0:17
  That's C ivl dot COM. Hi, I'm James.
• 0:21
  And I'm Anthony and. This is words and numbers.
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  Aunt, what's new and exciting in your world this week?
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  I want to start by apologizing to our listeners for a first in
• 0:36
  words and numbers. A very first.
• 0:39
  We missed a episode 2 days ago, first time in 7-8 years.
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  I want to point out that we have gotten our.
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  Episodes in even when one or both of us were hospitalized.
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  Right. Hospitalized through COVID.
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  I was travelling several times. You were travelling?
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  Yeah, Despite that you had back surgery, in fact during one of
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  them. And we thought it in nonetheless
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  well. And we still couldn't get it.
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  Done. What was finally our downfall
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  was a cascade of technical problems between my mic not
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  working, James Cameron not working, the platform not
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  working and on top of everything else we had one of our
• 1:27
  listeners, David Greene, who spent 30 years in the health
• 1:32
  insurance industry, came on to join us.
• 1:34
  Oh yes, his dog also. That was part of the thing and
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  we had a very nice conversation about the state of healthcare
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  and the entire episode was just, it was lost.
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  Apart from all the problems, the the thing didn't download, but
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  we're going to have David back. He's thankfully, not only is he
• 1:54
  still a listener, but he's agreed to come back.
• 1:57
  So we will have that episode in the future.
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  And I have to say, it was a a a pretty illuminating
• 2:02
  conversation. I learned this.
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  I had I had no idea about some of the things he told us so
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  looking forward to having him back.
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  Well, we started that conversation with David saying
• 2:14
  that we never talk about healthcare, health insurance,
• 2:18
  because we don't know anything about it.
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  And apparently the universe didn't like our change of plans.
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  That's right. But we do now know more about
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  it. I had something I wanted to
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  show. Oh God, you're going to show
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  this thing to the people? I was going to show it and I
• 2:35
  can't find it. My wife probably took it.
• 2:38
  Yeah, I bet that's. Right, that's what I get in the
• 2:41
  mail a couple of days ago, a package from one of our
• 2:44
  listeners, Jordan Woodhams from Jordan is the president of the
• 2:50
  West Australia Liber Libertarian.
• 2:54
  I don't know what the word is. Society Group Party W Australian
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  Libertarian Party and James and I had Woody was he goes by
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  Woody. Woody was very nice to have us
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  on and we gave a lecture in what was the middle of the day for
• 3:11
  them, but it was like 2:00 in the morning for us.
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  And Woody sends this signed calendar.
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  Go ahead and show, you'll know why my wife ran off with it.
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  Here's Woody Firefighters. Woody is Mr. Perth Firefighter
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  2026 for February, and this is easily the weirdest gift I have
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  ever gotten. And while I often say it, that
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  there's no such thing as a gift, I don't want.
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  I don't know about this one, man I, I, I don't know.
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  Anyway, Woody, thanks. Thank you.
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  Don't know what to do with this, but here we are.
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  My opening story for this week is a belated Christmas story.
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  I ran across this about a week ago and it was so good I want to
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  share it. And we're still kind of in the
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  Christmas season now. By the way, James used to make
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  fun of me about this. He's will again when I remind
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  him in the official Christian calendar, there are 12 days of
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  Christmas, you know, from the song The 12 Days of Christmas.
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  The 12 days begin on Christmas Day and then go for the season
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  of 12. And in the United States, of
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  course, we've developed this habit of starting Christmas like
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  the day after Halloween and then ending it on the 26th.
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  So nonetheless, we're still kind of close to around the Christmas
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  season. So I have a Christmas story 1
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  Christmas. Rob Parsons and his wife Diane
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  were were having dinner in their home in Cardiff, England.
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  There's a knock at the door. On the parson's doorstep stood
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  Ronnie Lockwood, age 30, a homeless autistic man.
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  In his right hand, Rodney held a large bag containing all his
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  possessions. In his left, a frozen chicken.
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  And Rob Parsons said something that would change all three of
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  their lives forever. Rob said come in, what's with
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  the chicken? Robin Diane Parsons, age 2726 at
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  the time, offered Ronnie a place to shower, invited him to stay
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  for Christmas to make him feel welcomed.
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  They asked relatives to bring Ronnie Christmas gifts.
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  Diane says, Quote, I can remember him now.
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  He sat at the Christmas table with his presence and cried.
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  He said he'd never known that feeling of love.
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  The Parsons compassion for Ronnie would last far longer
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  than the Christmas holidays. Ronnie became a member of their
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  family, living with the Parsons until his death 45 years later.
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  During his years with the Parsons, Ronnie would help
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  around the house and with the kids.
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  Rob said that their kids had never known life without Ronnie.
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  Ronnie was there before they came and he was there after they
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  were gone with children of their own.
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  The Parsons helped him to get a job as a garbage collector.
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  Rob Parson, who was a lawyer, would drop Ronnie at work on the
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  way to his law firm. One day on the way to work,
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  Ronnie is smiling and Rob asks what's amusing you so much?
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  Ronnie replied, When you drop me off, the other men say, who is
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  that? Who brings you to work?
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  And I say, oh, that's my solicitor.
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  Over the years, Ronnie saved his pennies.
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  When he died, he left 40,000 lbs to Glenwood Church in Cardiff,
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  which is now home to a new Wellness Center named Lockwood
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  House in Ronnie's honor. That's actually such a nice
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  story, I can't make fun of you for it.
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  Isn't that a great story? I have one to break.
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  I have to break with tradition here because usually at this
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  point I'm calling you a name of some kind and we're moving on to
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  a far more interesting story. I'm not going to call you a
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  name, but we're going to move on to a far more interesting story
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  nonetheless. You you might remember aunt,
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  when my senator in Arizona, one of my 2, Mark Kelly, former
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  military figure, former astronaut, really pretty, pretty
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  accomplished guy, got himself into Dutch with the current
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  administration when he said something along the lines of in
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  a video message to active troops that you don't have to follow
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  illegal orders. Remember that?
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  Now, one might think that saying you don't have to do an illegal
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  thing wouldn't get anybody in trouble unless you're working
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  for the mob. But here, here comes the
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  Secretary of War, Pete Hagseth, saying that they're going to cut
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  Mark Kelly's retirement pay over a seditious video.
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  So now I I just want you to think this through.
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  It's apparently sedition to tell people that they don't have to
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  break the law. Yeah.
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  Now, I I don't know how we got here, but I did a little
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  digging. Not a lot, but a little.
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  And I learned some fascinating things.
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  When an officer, And this is true of each branch of the
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  military. This is the oath I'm going to
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  read you, the oath that officers take.
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  Officers, I state your name, do solemnly swear or affirm that I
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  will support and defend the Constitution of the United
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  States against all enemies, foreign and domestic, that I
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  will bear true faith and allegiance to the same.
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  That I take this obligation freely, without any mental
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  reservation or purpose of evasion, and that I will that I
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  will well and faithfully discharge the duties of the
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  office on which I am about to enter.
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  So help me God. Do you notice a word that's not
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  in there, President? Yeah, I guess so.
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  Right, Because they're do. Yes, I love that the duty is to
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  the. Constitution Now let me move on
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  because the the oath of for an enlisted man is different.
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  Enlisted. I state your name, do solemnly
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  swear or affirm that I will support and defend the
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  Constitution of the United States against all enemies
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  foreign and domestic, That I will bear true faith and
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  allegiance to the same, and that I will obey the orders of the
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  President of the United States and the officers appointed over
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  me according to regulations and the Uniform Code of Military
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  Justice. So help me God.
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  So officers are, in a sense, exempt from orders issued from
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  the president. Orders come from the president
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  to the officers to the enlisted, and the officers are charged
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  with deciding whether those are true and legal orders.
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  Isn't that fascinating? So I don't know what the hell is
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  going to happen with Mark Kelly. I really don't.
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  I suspect Mark Kelly doesn't need the pension.
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  So I, you know, I suspect it's, it's all for show at this point.
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  But I thought it would be interesting for people to hear
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  those two ovens of office and understand that they are
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  fundamentally different and that officers occupy a very special
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  place in the constitutional Republic.
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  Officers are also, at least annually, given ethics training
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  whereby the difference between legal and illegal orders are
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  covered. I saw this.
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  I didn't read into it as deeply as you did, but I saw the news
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  about this and it occurred to me Mark Kelly's best response
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  should have been a public mea culpa.
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  I'm terribly sorry. I was wrong.
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  The Secretary of War has made it clear that he would like you to
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  follow illegal orders. I, I would have done exactly
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  that, but this one's going to play out a little bit because
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  it, it, it strikes to the heart of the constitutional regime in
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  a way that a lot of things that we gripe about don't.
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  So I'm going to keep an eye on it, see what happens, and we'll
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  get back to it if anything does. We're happy to announce that
• 11:54
  Civil members can join me and James for a new lecture series,
• 11:57
  Words and Numbers Live. Words and Numbers Live is a
• 11:59
  members only series in which James and I talk about issues in
• 12:03
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  We take a deeper dive and then invite listeners for a live Q&A
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  questions for us at wordsandnumberspodcast@gmail.com.
• 12:15
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  civil@civil.com. That's civl.com.
• 12:22
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  Subscribe to Civil for $5 a month or $50.00 for an annual
• 12:39
  subscription. This brings us to the
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  foolishness of the week. And aunt, we've got a humdinger.
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  This time there is a You know at this point, of course, that
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  there are hacker conferences where all the nerds get together
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  and make a mess of things. Oh yeah, that's they've been
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  around for a long time. For a long time.
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  Well there there is a hacker who goes by the name Martha Root and
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  wears the pink Power Ranger outfit when she becomes Martha
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  Root. I don't know what that means,
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  but OK. Anyway, she took the stage at a
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  the annual Chaos Communication Congress in Hamburg, Germany and
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  took. Down.
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  Three, what she called Nazi dating sites.
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  I think they they were all three dedicated.
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  They were called and and I'll let you decide whether they're
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  Nazis or not. That's not a word I throw around
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  lightly, but in her defense, the the three companies were called
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  White Date, White Child and White Deal.
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  Yeah. So we might have Nazi dating
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  websites anyway, she said. They were so easy to take down
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  that it was embarrassing. And she made all of the metadata
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  public, so now people can go look up all of all of the people
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  who had accounts on these websites.
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  Oh my God. Yeah, and I can't, and I can't
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  imagine this is going to end well.
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  The white child, one in the middle.
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  Not exactly a dating website. That was a sperm and egg donor
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  website so people could make sure they got little Aryan
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  babies. Wow.
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  You know, the Internet just lets all sorts of people find each
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  other. Yeah.
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  And when there's 8 billion of us, there are a lot of
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  combinations. Used to say a long time ago that
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  this was a really good thing. But you know, my village idiot
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  analysis is, I think, going to come to rule the day.
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  I hope one day they call it the Harrigan Village idiot.
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  Something principle, right? Yeah, sure, why not?
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  The principle's good, as good as anything else.
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  But boy, every now and then I read a story and it's hilarious
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  on its face, and then I read it for another 3 seconds and my
• 15:06
  faith in humanity is dimmed yet another notch.
• 15:09
  You know, James, you've, you've said this before and I think
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  you're, the more I think about it, the more I think there's,
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  there's some serious truth there.
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  So perhaps you might restate your village idiot principle.
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  Yeah, or the village idiot thesis might, might be a better,
• 15:29
  a better moniker. I don't know.
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  It is my firm belief that we have always had village idiots.
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  I I know this because I remember them when I was a boy.
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  And the town generally and the neighbors specifically made sure
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  that nothing terrible happened to the village idiots, that they
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  had food and that the, you know, they, they got their electricity
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  running and the, the houses were heated, these sorts of things.
• 15:57
  And everybody said, well, you know, Johnny, he's not too
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  bright. We got to take care of him.
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  Things like this. And when people talk about
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  community the way you do, this is typically what they're
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  talking about, right? Making sure that people who
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  aren't fully equipped to deal with the vagaries of life get
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  through things without freezing to death in their own living
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  rooms. Things like this.
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  But then the Internet came along and we made it so easy to get
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  online that the village idiots were able to do it.
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  And a year or so after that happened, they all started
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  finding each other. And I like to think that AOL
• 16:43
  message rooms were probably the the problem initially.
• 16:47
  But look, let's face it, you can find people like you everywhere.
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  And for all the reasons that village idiots were protected
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  and and nasty people were shunned and things like this,
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  well, now there's no shame in any of it.
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  And they became a political force when they realized there
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  were a lot more of them than maybe any of us realized.
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  Yeah, they they levelled up. They did level up.
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  And they're having tremendous luck with all the final bosses
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  and, well, now the political idiots or the village idiots are
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  a political force. They're the lowest common
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  denominator and they have to be pandered to.
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  And they are. That's just wonderful.
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  And stupidity is much more dangerous than evil.
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  Yeah, yeah. Give me over stupidity any day
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  of the week. I can reason with malfeasance.
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  Well, you could reason with it. And it's directed.
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  You can predict it. Stupidity.
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  It's random, yeah. Stupidity just drifts around
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  like a formless cloud. But anyway, Speaking of formless
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  clouds, we're going to talk today about the American economy
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  yet again, because this one thing keeps coming up right
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  there. There seems to be a disconnect
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  between the data that's available that you make a living
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  trolling through and the opinions of the American people
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  about the economy they live in. The data says one thing, the
• 18:36
  people, they say another. And this is actually, I know
• 18:39
  this is reaching ahead because Donald Trump, I believe it was
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  yesterday, as we record this, was on a conference call with
• 18:50
  congressional Republicans. And he was saying, look, we're
• 18:53
  we're going to have a real problem in the midterms because
• 18:56
  people think the economy is a mess.
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  But our policies are all doing wonders and the economy is not a
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  mess. And he and he wants to know why
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  all these people keep saying that there's a problem with the
• 19:12
  economy when he thinks it's wonderful now.
• 19:16
  Yeah. Now let let's start by saying
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  regardless of any of that, the Republicans are historically
• 19:23
  very likely to take a drubbing in the midterms.
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  On average, the part on average, the party in power loses 24
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  seats in the House of Representatives on and off year
• 19:35
  election. So that's that's the average.
• 19:39
  And the Republicans, I believe right now with the death of the
• 19:42
  guy in California yesterday, the day before, have a 5 vote
• 19:47
  majority. So they're almost assured to be
• 19:50
  in the minority party. And if they're in the minority
• 19:53
  party and Huckim Jeffries become speaker of the House, Donald
• 19:56
  Trump will be impeached almost immediately.
• 19:59
  What? Happens in the state.
• 20:01
  Is there any chance of the Senate shifting to Democrat?
• 20:04
  I, I, I think there is, but it's a real long shot.
• 20:09
  So the Constitution, Republic working as designed, the House,
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  because that's the House, mirrors what the people think
• 20:18
  right now. The Senate takes a much longer
• 20:21
  view. That would be interesting.
• 20:23
  And I, I, I mean that simply in the historical sense, because if
• 20:28
  the Democrats took both that that would be the end.
• 20:32
  He would be impeached and removed.
• 20:34
  Yes, well. Just in the way the politics
• 20:37
  goes. In all likelihood, I mean, there
• 20:41
  are some conservative Democrats out there who might not be
• 20:44
  willing to do it. Yeah.
• 20:46
  And I'm, you know, as as interesting as that might be as
• 20:49
  being a first for the US, I'm not sure it's wise even even I
• 20:57
  would imagine a lot of people who dislike President Trump
• 21:01
  would agree with me, given what he has demonstrated.
• 21:04
  I don't think he would leave. I think we'd have a big problem.
• 21:07
  Oh no, he he would leave. You think so?
• 21:11
  Assuredly so. However, what people don't think
• 21:18
  through is would President JD Vance be any different or any
• 21:23
  better if he were different, etcetera, etcetera, right?
• 21:29
  You know, nobody thinks about the unknown unknowns.
• 21:34
  Right, right. And and you see this with our
• 21:38
  decapitation of the Venezuelan regime.
• 21:42
  What's going to happen next? Well, apparently nobody stopped
• 21:45
  to think about that. OK, So I don't know.
• 21:49
  I don't know what's going to happen.
• 21:51
  I do know we'll be covering this in next January, but I'm but for
• 21:56
  now, let's go to this economy business.
• 21:59
  Yeah. The thing is, the president has
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  a point because I've been scratching my head for a long
• 22:05
  time about this. It's as if there were two
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  economies out there. When you look at the consumer
• 22:13
  sentiment numbers, they are, they are so low.
• 22:16
  I think consumer sentiment right now is at third lowest point
• 22:20
  since the 1950s. And this is measured monthly.
• 22:24
  So there's, you know, tons of observations here.
• 22:26
  This is the third lowest. Do you have that data at hand?
• 22:30
  I don't, but I could pull it up pretty quickly.
• 22:32
  You want to see something? I, I do, I would like to see
• 22:36
  compare right now to let's say September of 1979.
• 22:41
  Oh, that's a good question. Oh wait, I've got it actually.
• 22:45
  Let's go to September of 1980. OK, let's see here.
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  September of 1980, it was approximately we're in the high
• 22:56
  50s, low 60s area. You said September, right?
• 23:02
  Of 1980. Yes, here it is 74.
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  This is on a roughly a zero to 100 scale.
• 23:10
  It does go. Beyond 100, with 100 being. 100
• 23:14
  is considered anything above 100.
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  People are happy, they think that tomorrow's going to be
• 23:19
  better than today and today is really good.
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  There, it's, well, positive. I tell you that at that time in
• 23:25
  1980, people weren't too thrilled with things.
• 23:29
  They weren't too thrilled with their economic fortunes.
• 23:32
  Yeah, September 80, What was happening specifically?
• 23:35
  I mean, we're in the middle of a huge recession.
• 23:37
  What was specific about September?
• 23:39
  I I just wanted to get a few months before the presidential.
• 23:42
  Oh, I see. Yeah.
• 23:44
  Well, I'm looking at 1980 in general and it's it minimums.
• 23:49
  The minimum is March. It's at 57.
• 23:52
  Generally most of the years spent in the mid 60 range.
• 23:57
  And this is 1980, the time when we had stagflation, right double
• 24:01
  digit unemployment and double digit inflation.
• 24:04
  Double digit inflation. People complain about mortgage
• 24:07
  rates now at I think they're around 6%.
• 24:10
  Mortgage rates then were like 20%, but that's a nice data
• 24:16
  point to look at. We right now, well, we're up in
• 24:21
  December. November was 51.
• 24:24
  Wow, so. We are at a lower sentiment now
• 24:27
  than we were then. Yes, yeah, we are.
• 24:32
  We're, we're up at 53 now, but that's, you know, we've been in
• 24:36
  the 50s for a long time. All right, so let's dig into the
• 24:40
  data at the individual level, right?
• 24:43
  What? What do we know about median the
• 24:47
  median American as he lives in this economy?
• 24:52
  Well, that's. Yeah.
• 24:53
  And that's the let me talk about that in a second.
• 24:56
  But before we go there, I want to point out something
• 24:58
  interesting, which is consumer sentiment was, you know, of
• 25:02
  course it fluctuates, but steadily rising from the housing
• 25:08
  crisis. So we come out of that roughly
• 25:09
  2009, 2009 is rising all the way through 20, 19, beginning of
• 25:17
  2020. And then it tanks.
• 25:19
  Of course you expect it to tank because of COVID, but it it
• 25:24
  pretty much never recovers. It's this huge break.
• 25:27
  Everything after 2020 looks markedly different than what was
• 25:33
  before. And people are going to say, oh,
• 25:35
  well, you know, we had Trump and OK, we had Trump, but we also
• 25:39
  had Biden. It's not a political thing.
• 25:42
  It's just Americans. If you look at the fundamentals,
• 25:46
  economic growth, unemployment, inflation, the economy today
• 25:51
  looks just like the economy multiple times in the past when
• 25:57
  we've had ratings of 100 or more.
• 26:00
  Americans have seen this economy before and loved it.
• 26:03
  This one they don't. That's interesting.
• 26:06
  And, and look, there's always a psychological impact, right?
• 26:10
  When you start looking around at the things politicians say and
• 26:15
  how they behave, right? Do you feel safe and secure is
• 26:20
  probably a question that should be asked prior to any economic
• 26:25
  considerations. And I think most people right
• 26:30
  now aren't exactly sure that we're on steady footing.
• 26:36
  And that's got to matter, right? And I I'm not, I'm not throwing
• 26:42
  stones here. I'm I'm just saying that by and
• 26:46
  large, and I've been tracking the opinion polls on President
• 26:49
  Trump, by and large, people don't trust him.
• 26:53
  Yeah, Yeah, I think, I mean, I think that's true.
• 26:57
  So there is a psychological. 38 to 41% approval rating and, and
• 27:02
  that's really, really terrible. Yeah, but you know, they weren't
• 27:08
  crazy about Bush the first either.
• 27:10
  And yet, I mean, they liked him, I think, better than they like
• 27:14
  Trump. And I'm not saying you're wrong.
• 27:16
  I think that does play, but I don't think it plays to the tune
• 27:19
  of consumer sentiment, dropping from 100 to. 50 Well, let's get
• 27:23
  get us into the data. OK, so let's go.
• 27:26
  Let's. Look, I, I want, I can tell you
• 27:29
  off right off the jump that I'm, I'm looking at inflation right
• 27:35
  in 2019, it's 1.82000. Twenty, it's 1.221.
• 27:41
  It's up to 4.722, it's up to 823.
• 27:46
  It's still high at 3.424. It's 2.9.
• 27:51
  And three seems to be the right answer as we move forward,
• 27:56
  whereas it was always 2. But the thing I always point out
• 28:00
  when I point out inflation is that prices keep going up.
• 28:04
  And when the inflation rate drops, prices don't drop, they
• 28:09
  just escalate less quickly. So we're living in a different
• 28:13
  world of pricing. We're probably paying 30% more
• 28:17
  for almost everything. Well, you're, yeah, you've got
• 28:21
  that. In fact, I've got the CPI
• 28:23
  numbers in front of me here somewhere.
• 28:26
  CPI is up over the past roughly 5 to 6 years.
• 28:32
  Yeah, 20%. All right.
• 28:34
  So if that's true, then we would have to see a corresponding
• 28:39
  increase in the average wage rate to offset.
• 28:43
  Yeah. And and we did wages are up
• 28:47
  actually a little bit higher than than inflation, so that
• 28:52
  your median household income is about two per median real
• 28:57
  household income. So it's adjusted for inflation
• 28:59
  is about 2% higher than it was 2020 and.
• 29:05
  And that's interesting, right? Because you should be able to
• 29:08
  say painting with a very broad brush that look, things are more
• 29:13
  expensive, but for the most part you're making more than the
• 29:18
  difference back in your salary. So you should you actually have
• 29:23
  more money now than you did five years ago?
• 29:27
  Yeah, yeah, there. There are a couple of couple of
• 29:31
  caveats here. 1 is, yes, the median household is 2% better
• 29:37
  off in terms of purchasing power, but that's 2% / 5 years.
• 29:41
  That's a heck of a long way to go for a measly 2%.
• 29:46
  So, so it, it's not going to feel like you're better off,
• 29:49
  it's going to feel like you've stagnated for the past five
• 29:52
  years. Yeah, but that's different from
• 29:54
  feeling like you're far, far worse off.
• 29:56
  It is it it? This baffles me.
• 29:59
  And people will say, well, you're talking about the median
• 30:02
  household. What's probably happened is that
• 30:06
  the higher income households have done well and the lower
• 30:08
  income households have done poorly.
• 30:11
  If there's something to be said for that, in fact, so much so
• 30:14
  that I used to just say it as well, that's a, you know, a
• 30:18
  reasonable explanation until I yesterday pulled data on
• 30:24
  household income for the poorest 20% of Americans.
• 30:28
  And again, this is adjusted for inflation.
• 30:32
  It's up versus pre COVID 2019-2020.
• 30:38
  And that again leaves you wondering what are people
• 30:41
  complaining about? And then I think I saw it, or at
• 30:44
  least one of what I'm going to propose are several possible
• 30:48
  explanations here. I pulled the data.
• 30:51
  When we normally talk about household incomes, we're talking
• 30:54
  about gross income, income before taxes.
• 30:57
  I pulled the data on income after taxes and transfers with
• 31:03
  the poorest 20% of Americans. So this is you get your
• 31:07
  paycheck, the government takes some out of it, and the
• 31:10
  government gives you some money as well.
• 31:13
  Some people, you know, the poorer you are, the more money
• 31:15
  you get back. Earned income tax credit from
• 31:19
  various things. But you know that we call those
• 31:22
  transfers. And if you look at real
• 31:25
  household income after transfers, taxes and transfers,
• 31:29
  it's also up. And again, you ask the question,
• 31:32
  what's the problem? Until you notice at 2020 when
• 31:37
  the government started handing out those stimulus checks, those
• 31:42
  stimulus checks were a very large percentage of lower income
• 31:47
  households income. And so you see lower income
• 31:50
  household, you know, income going up, up, up, up, up, and
• 31:54
  then all of a sudden skyrockets like overnight 20% plus increase
• 32:01
  in their purchasing power. And it holds there as the
• 32:05
  government kicks out these checks for however long the
• 32:08
  government kicked out the checks and then it tanks.
• 32:13
  And I suspect that part of the explanation here is that for
• 32:19
  households, at least for households below the median,
• 32:23
  they experienced all of a sudden a substantial increase in their
• 32:28
  incomes. And it held for long enough for
• 32:31
  them to get used to it, and then it went away.
• 32:35
  And so they're not feeling that they're down to three, 4%.
• 32:39
  They're feeling that they're down 20% because their baseline
• 32:44
  is what they were getting during COVID.
• 32:47
  Yeah, yeah. And I suspect there's something
• 32:50
  else at work here and and you'll have to help parse this out,
• 32:54
  right? Because a lot of it's going to
• 32:56
  end up being definitional, what constitutes a household,
• 33:00
  etcetera, etcetera. Young people are the primary
• 33:06
  complainers. If I can be so obnoxious as to
• 33:11
  call them complainers. But it's young people, it's 18
• 33:15
  to 34 ish, and they have a batch of different complaints, but
• 33:21
  they all watered down to about the same thing that they can't
• 33:25
  get ahead the way previous generations did.
• 33:30
  Now I, I know through anecdotal experience and through the data
• 33:37
  that I've been able to dig up that it is more expensive to
• 33:42
  rent now than it has ever been. But that's almost always true,
• 33:46
  right? You can almost always say that
• 33:49
  it is expensive to rent. It's incredibly expensive to buy
• 33:54
  a house. If you're renting, it's
• 33:57
  incredibly difficult to save the the 20% you should really save
• 34:02
  to buy a house. You know, we let people buy
• 34:05
  houses with three, four, 5% now, but when we do, their rates are
• 34:11
  higher and rates are already pretty high and you start to ask
• 34:16
  questions like, well. How can young people?
• 34:20
  Break into middle class life and it seems now and I used the word
• 34:25
  seems on purpose. It seems now to be more
• 34:30
  difficult than it once was. I, I think you're, you're right.
• 34:35
  And again, I'm, I think you're right at the gut level.
• 34:39
  But again, I, I look at the numbers.
• 34:41
  So I'm asking what, what's going on here?
• 34:43
  And I went back and calculated the the payment you would make
• 34:52
  on the median priced house at the median mortgage rate.
• 34:59
  So picture here's the median house.
• 35:03
  In fact I can give you a number in 2024 it was $420,000 and that
• 35:08
  same year the 30 year fixed rate was 6.7%.
• 35:13
  So do the math and your monthly payment is $2300, which is
• 35:21
  pretty substantial for anybody. But here's what's interesting.
• 35:26
  If you go back over time, and by overtime, I mean I'm looking
• 35:28
  back to like 19801980 through 2022, things happened.
• 35:34
  The prices of houses went up and they kept going up and up and
• 35:40
  up, but mortgage interest rates were going the other direction.
• 35:45
  Right. And it was, it wasn't until
• 35:47
  roughly 2022 or so when we start to get the inflation that those
• 35:54
  two things went together. So, so you've got back up prior
• 35:59
  to 2022, housing prices going up, which makes things more
• 36:03
  expensive, but mortgage prices going down, which makes your
• 36:06
  mortgage rates going down, which makes your final monthly payment
• 36:11
  basically the same. One would expect an inverse
• 36:16
  relationship either way with those two things.
• 36:20
  You would kind of expect because you know, as interest rates
• 36:25
  fall, it's cheaper to buy housing.
• 36:28
  And if I'm looking to bought to sell a house, I'm going to say
• 36:31
  well. I'm a Jack.
• 36:32
  Yeah, I'm going to Jack up the price because I know you guys
• 36:34
  could afford it, right? But but when mortgage rates hit
• 36:37
  8% and I need to sell my house, I can't Jack it up.
• 36:42
  I have to lower the press because on the buyer side, what
• 36:47
  really matters to the buyer is the monthly payment.
• 36:50
  Right, What matters to the buyer is a monthly payment.
• 36:53
  And what happened starting in 2022, these two things that were
• 36:57
  going in opposite directions, housing prices going up, but
• 37:00
  mortgage rates going down. Mortgage rates turn around.
• 37:04
  They started coming up and all of a sudden you got the double
• 37:06
  whammy of price. Houses in pricing were becoming
• 37:10
  more expensive in the mortgage rate was becoming more
• 37:12
  expensive. And all of a sudden you go from
• 37:14
  the median mortgage payment of around 1000 bucks in one year,
• 37:21
  pretty much double s to 2000 and then increases another 25% to
• 37:26
  2500. So you're going from 1000 bucks
• 37:29
  to 2500 bucks, the median mortgage payment over the course
• 37:33
  of two years. What 2 years were those?
• 37:36
  That is from 2021 to 2023, so it's right there.
• 37:41
  Flagging, of course, what happened?
• 37:43
  We got the inflation in 2022. The Fed tries to fight it, and
• 37:47
  the way it fights it is by raising interest rates.
• 37:50
  Well, right there goes your mortgage rate.
• 37:52
  There's your mortgage. That's right.
• 37:54
  And when mortgages go up, there's a ripple effect into the
• 37:58
  rental market because owners of rental properties have
• 38:01
  mortgages, which means rents have to go up too.
• 38:05
  And and here's the thing, I see young people complaining about
• 38:10
  this all the time and I just want to slap every last one of
• 38:14
  them. They say, well I couldn't get
• 38:17
  approved for a $2000 a month mortgage so now I have to pay
• 38:21
  $2300 a month rent. And they think that that's an
• 38:26
  injustice. What they don't bother to think
• 38:29
  about are all the expenses that come with home ownership.
• 38:34
  Well, it's not just that, it's the risk.
• 38:37
  You're with a landlord. If I, if I rent A room to
• 38:40
  somebody at $2300 and they don't pay, I can kick them out.
• 38:44
  Depending on what state I'm in, that might take a month, it
• 38:47
  might take six months, but I can kick them out with a mortgage.
• 38:51
  You're giving the kid $430,000, and if he stops paying on it,
• 38:57
  you know, now what do you do? I mean, you can eventually
• 38:59
  repossess the house that is so expensive for the bank.
• 39:01
  There's a much greater risk with the mortgage than there is with
• 39:05
  the rent. It is, but you know, my point is
• 39:07
  a simple one. If you can afford 2300 in in
• 39:10
  rent, that doesn't necessarily mean you can afford a $2000
• 39:14
  mortgage. Exactly.
• 39:15
  Yes, yes, the rent is a month old thing.
• 39:19
  The mortgage, you're signed up 30 years.
• 39:21
  I have told this story before and I I bought this house in
• 39:25
  Arizona and within eight months both air conditioning units
• 39:30
  went. Yep.
• 39:33
  And yes, I could afford the mortgage.
• 39:35
  It took me some doing to afford the what?
• 39:40
  What did it come out to be $34,000 to replace both HVAC
• 39:44
  systems. Call the landlord, James.
• 39:47
  Yeah. I did and I answered the phone
• 39:51
  and then I had to go get a second job to afford the the
• 39:55
  HVAC units. So, you know, there are all
• 39:58
  these things right below the surface which people just brush
• 40:02
  away that you have to keep thinking about, right?
• 40:05
  It's it's a lot deeper than just the surface level.
• 40:10
  Yeah. So, you know, that's housing.
• 40:14
  And I think, look, housing is more expensive now.
• 40:17
  Let's just admit it. You and I say all the time that
• 40:20
  yes, it's more expensive and houses are way better than
• 40:24
  they've ever been. But I don't know that you could
• 40:28
  legally build a 1950s style house anymore given modern
• 40:33
  codes. Yeah, right.
• 40:36
  So we've we've painted ourselves into a bit of a corner legally.
• 40:40
  Well, we've made, yeah, we've made the much higher quality in
• 40:44
  all sorts of ways, bigger, better, all of this.
• 40:47
  And of course, that's going to mean that $100,000 house today
• 40:51
  is not nearly the same thing as $100,000 house in 1950, even
• 40:55
  adjusting for inflation. But.
• 40:57
  But there's something else that's interesting going on here
• 40:59
  that people miss. They talk about, I'm going to
• 41:03
  focus on the mortgage payments. They'll say things like, well,
• 41:09
  when I pay rent, I'm just flushing that money down the
• 41:12
  drain. But the mortgage payment is some
• 41:14
  somehow better. And it is better because when
• 41:20
  you pay a mortgage payment, you're actually purchasing 2
• 41:23
  things. One is the house as a place to
• 41:27
  live. The other is really savings.
• 41:31
  It's the equity that you're putting into the house.
• 41:34
  And you're going to get an asset.
• 41:36
  Yeah, you're going to get that back when you sell the thing.
• 41:39
  And we all understand that because while the house is going
• 41:41
  to appreciate in value, yes, but what you're doing is you're
• 41:45
  counting the entire mortgage payment and saying look at how
• 41:49
  expensive housing has become. But part of what you're counting
• 41:53
  shouldn't be counted at all because it's not the cost of the
• 41:56
  house as a place to live, it's the investment in it that you're
• 42:00
  going to get back later. So basically you're you're
• 42:03
  counting that plus savings. I think people generally get
• 42:08
  that they but what they don't get is why they can't afford a
• 42:12
  house right now. Well, I suspect they can't
• 42:18
  afford a house right now because that second part of the house
• 42:23
  the the house as an investment as opposed to house as a place
• 42:27
  to live. That's the piece that has gotten
• 42:29
  so expensive and and ioffer you the following evidence.
• 42:35
  Economists calculate this metric called OER owner equivalent
• 42:41
  rent. Owner equivalent rent is a it's
• 42:44
  like a like the CPI or price index.
• 42:47
  It's an index of the cost of your home, not the investment
• 42:53
  part, but the living in it part. So strip, strip away the, you
• 42:59
  know, all of the strip away all of the things that are different
• 43:03
  about your house versus an apartment and tell me what's
• 43:08
  left in terms of cost. That's owner equivalent rent.
• 43:11
  Or if you want to think about it easily, it's think of it this
• 43:13
  way. If you were to not live in your
• 43:16
  house, but rent it out to somebody, what would you rent it
• 43:19
  for? That's the only.
• 43:20
  Counselor, we're saying it's house minus apartment.
• 43:23
  Yeah. But but if you look at this, the
• 43:25
  owner equivalent rent, so the portion of your housing cost
• 43:29
  that is due to you living in the house as opposed to the house as
• 43:33
  an investment that has gone up in the past five years, it's
• 43:37
  gone up 23% versus the median household income has gone up
• 43:45
  23%. It's not the cost of the house
• 43:48
  as a domicile, it's the cost of the house as an investment.
• 43:53
  It's gone up now that doesn't that doesn't make it feel any
• 43:57
  better when you have to write the rent check.
• 43:59
  What it does mean is that that extra piece of pain in writing
• 44:04
  the rent check that is going to come back to you when you sell
• 44:08
  the house in the form of greater value.
• 44:11
  In the mysterious future, but that doesn't take the sting out
• 44:15
  when people cannot afford a house right now.
• 44:19
  No, it it doesn't. But but it should.
• 44:23
  It should give people pause. And the way I think you should
• 44:28
  think about it is this. Imagine your mortgage payment is
• 44:32
  $2500 to take a big amount and you say, well I could rent, you
• 44:36
  know, I can't afford a house. I rent an apartment for $1500,
• 44:40
  so it's $1000 less. OK, rent that apartment for
• 44:44
  $1500 and put $1000 a month into your savings and you say, well I
• 44:49
  can't afford to do that, but that's exactly what you were
• 44:52
  doing when you looked at buying the house for the $2500
• 44:55
  mortgage. James and I are delighted to be
• 44:58
  working with Sybil. For years we have been pushing
• 45:00
  people to think about how we can make the world a better place.
• 45:03
  Sybil's mission of upgrading society fits exactly with what
• 45:07
  James and I have been talking about for years.
• 45:09
  Civil helps us by allowing us to do what we do best, which is
• 45:13
  researching topics that are important in communicating these
• 45:16
  to our listeners in ways we hope they find enjoyable.
• 45:20
  To see Civil's extensive list of content, including our podcast
• 45:23
  Words and Numbers and our new lecture series, Words and
• 45:26
  Numbers Live, visit Civil. Dot com.
• 45:29
  That's civl.com. We're still not answering the
• 45:33
  question. Why can't people afford these
• 45:35
  things? You keep telling me why
• 45:37
  everything is the same. Why then can people not afford
• 45:40
  it? I think I have the beginnings of
• 45:42
  an answer, but I want to hear yours first.
• 45:44
  Well, they they can't afford it because two reasons. 1, the
• 45:49
  price of housing has been going up, but it's been going up for
• 45:51
  30-40 years. That's not news.
• 45:53
  The news is the mortgage rate. The mortgage rate turned around
• 45:57
  from what three years ago was around 2%.
• 46:00
  It's now like 6 to 7%. It doesn't sound like much, but
• 46:04
  that dramatically balloons your payments.
• 46:07
  It does, but I bought houses at 5 and 6%.
• 46:12
  I absolutely. But I bought much smaller.
• 46:15
  I bought $200,000 houses at 5 and 6%, and a $200,000 house now
• 46:21
  might get you killed. Yeah, right.
• 46:26
  Right. So there's problem here.
• 46:28
  There's no such thing as affordable comma good housing.
• 46:34
  Is there affordable housing? You bet.
• 46:36
  Is there good housing? Absolutely.
• 46:39
  They're not the same group. There is no overlap in that Venn
• 46:42
  diagram. And what you're left with here
• 46:47
  is if, if good housing is too expensive, it is being
• 46:53
  undersupplied, it's not being built.
• 46:57
  And if there's a big giant group of people who want it, it would
• 47:03
  be being built. Now, you can't build it in
• 47:06
  Manhattan, right? And you can't build it in San
• 47:09
  Diego, so people have to check their expectations.
• 47:15
  But aunt, when I was 18, I couldn't afford to to move to
• 47:19
  New York City. Oh my God, no.
• 47:22
  I don't know, I could afford it now.
• 47:25
  Yeah, no, I couldn't afford it now either.
• 47:27
  So I, I think we're dealing with unrealistic expectations to some
• 47:32
  degree, right? People want what they want and
• 47:35
  they don't give a shit about the reality of real estate.
• 47:40
  I mean look, I I moved to Utah, as you well know, not not too
• 47:45
  terribly long ago and I was able to get a 2 bedroom apartment
• 47:48
  there for $425.00 a month. Yeah.
• 47:52
  And so let's talk about the the expectations for a minute,
• 47:55
  because it sounds like someone listening to this is going to
• 47:58
  say, well, you're, you know, you're blaming young people and
• 48:01
  saying it's all their fault. That's in their heads and their
• 48:03
  expectations and all that. And I, I want to back off of
• 48:06
  that a little bit. I think there's, I think young
• 48:11
  people have been subjected to something we were not subjected
• 48:14
  to. And interestingly, this decline
• 48:20
  in consumer sentiment roughly coincides with the
• 48:29
  proliferation. I'm going to go back and change
• 48:31
  that word, but I'll say proliferation of cell phones,
• 48:34
  smartphones particular. We crossed the 50% barrier, 50%
• 48:41
  of Americans owning smartphones, specifically not cell phones,
• 48:44
  but smartphones. We cross that roughly within a
• 48:48
  few years of this massive decline in consumer sentiment.
• 48:53
  I submit what's happening is people, particularly younger
• 48:59
  people, are quite understandably spending a lot of time on their
• 49:03
  phones and advertisers have gotten really, really good.
• 49:09
  Not just advertisers, but any YouTube Blogger has gotten
• 49:14
  really good at presenting perfect lives.
• 49:18
  And so you see these people with the perfect skin in the perfect
• 49:22
  car, the perfect boyfriend or whatever it is.
• 49:25
  And they're not movie stars. They're regular people who have
• 49:30
  crafted their lives to present themselves in this way.
• 49:33
  And you think, by comparison, there's something wrong with
• 49:36
  you. Why isn't your life like that?
• 49:38
  You you try to reach for it, and you realize I can't afford that.
• 49:41
  Of course you can't afford it, and it's not real.
• 49:44
  But you don't realize it's not real.
• 49:46
  I want to get to that sort of thing in a future episode.
• 49:49
  And and what triggered me on that was watching young women
• 49:53
  explaining their requirements for a husband and it was 62
• 50:02
  chiseled good looks making over 200,000 a year.
• 50:07
  You've just described like .2% of the male population.
• 50:11
  Right. Yeah.
• 50:13
  Yeah, I want to get to, I want to get to that some other time.
• 50:15
  But I, I, I had this realization today, right?
• 50:20
  Because if people are worried about not being able to afford,
• 50:26
  say a house and, and I think home ownership is a great proxy
• 50:31
  or, or the, the idea that you could go out and buy a house is
• 50:36
  a great proxy for the relative health of an economy, right?
• 50:41
  It it just is when, when a bunch of people say, well, I'll, I'll
• 50:44
  buy a house. You've got an economy that's
• 50:46
  running pretty well. OK.
• 50:48
  If they can't say that, that means one of two things or both
• 50:54
  things, it means they're not making enough or they're
• 50:58
  spending too much or a combination of the two.
• 51:03
  And I started to think, well, there's nothing I can say about
• 51:07
  what they can make right. That's that's a market force
• 51:11
  that's driven by the choices they have made over an entire
• 51:14
  over their entire lives thus far.
• 51:17
  Part of that though is the student loan debt that they
• 51:20
  carry. And I don't think we factored
• 51:23
  this in nearly enough to the sorts of equations we are now
• 51:29
  talking about. So I did a little bit of digging
• 51:31
  today, and as of 2025, the average monthly student payment
• 51:36
  in the US is generally cited between two and $500 a month,
• 51:42
  and 300 to 3:40 is common. For recent bachelor's 60% of
• 51:48
  borrowers pay 299 or less, while the average borrower takes 20
• 51:54
  years to pay off student loans. But as usual.
• 52:01
  But wait, there's more. Because if you've gone out to
• 52:06
  get a graduate degree, which will increase your earnings
• 52:10
  potential, theoretically, your average payments are over $800 a
• 52:15
  month. And if your household consists
• 52:21
  of a married couple each with a graduate degree, you're paying
• 52:26
  1600 a month on your student loans already for 20 years.
• 52:34
  Good Lord, why can't you afford a house?
• 52:38
  There's your reason. Let me add some color to that.
• 52:45
  How much do you think average tuition, private university, 4
• 52:51
  year average tuition has gone up let's say in the past 10 years?
• 52:55
  Got to guess. Past 10 I I I know the answer is
• 52:59
  monumental. It actually isn't.
• 53:03
  Oh no. Come on, 1515% and that's 15%
• 53:08
  over the course of ten years. Well, I guess we hit a cap.
• 53:15
  We've found how much people can afford and they can't afford any
• 53:19
  more than that. Well but, and I don't, I'm not
• 53:23
  disputing what you said about student loans, but what I'm
• 53:27
  counting here is only tuition and fees.
• 53:31
  And I'm not counting the published tuition and fees.
• 53:34
  I'm counting the actual what you actually pay after you get the
• 53:39
  non loan aid, right. That's gone up 15% in the past
• 53:43
  10 years, 30% in the past 20 years.
• 53:48
  Quite reasonable actually under inflation, maybe less than
• 53:52
  inflation. It's under inflation.
• 53:53
  But here's the thing I suggest that you're absolutely right
• 53:59
  about the student loan debt, but rather it's not the tuition,
• 54:04
  it's the room in the board. Well, that the.
• 54:07
  Colleges are whatever. You spend the money on it,
• 54:11
  that's what it is. Yeah.
• 54:12
  And and so I think what, what may be happening here is when
• 54:16
  people talk about the, the cost of the college, they're lumping
• 54:20
  in living expenses. Well, you're going to have the
• 54:23
  living expenses whether you go to college or not.
• 54:25
  In fact, if you go to college, they're going to be worse
• 54:28
  because the college is going to give you, no, it's going to
• 54:31
  charge you out the butt for living there, but it's going to
• 54:33
  give you all kinds of of extra perks in the gyms and all this
• 54:37
  kind of thing. I think that's what's going on
• 54:40
  here. People aren't counting the fact
• 54:42
  that for four years they're living a decent at a decent
• 54:47
  level without earning money. Right, taking out loans to cover
• 54:51
  the difference. Yeah.
• 54:54
  This, this is a problem, right? And you and I have talked about
• 54:57
  student loan debt and how stupid it is often, and there are a few
• 55:03
  degrees where we would both easily say no no no, that makes
• 55:06
  perfect sense. Go ahead and do it.
• 55:08
  But for the vast majority of people, going into debt for
• 55:11
  college is the dumbest thing you can possibly do.
• 55:18
  If you can't afford the college you want to go to, you should
• 55:21
  find another college that you can afford.
• 55:25
  It's like any other product. I'd love to be driving a
• 55:29
  Ferrari. I can't afford a Ferrari.
• 55:31
  I have a Subaru. And if you're thinking my dream
• 55:34
  school is pick one out of that Berry College, a place that I
• 55:39
  happen to love in Georgia and they want to charge you $65,000.
• 55:45
  But you should probably go to your state school and pay 8I.
• 55:50
  Mean I live at home and pay even less.
• 55:54
  And pay even less. But, but here's where I think
• 55:57
  the current generations, the younger generations, there's a
• 56:01
  bit of a disconnect. They have decided that their
• 56:05
  dream life is the life they're entitled to, not that life is
• 56:10
  hard and trade-offs have to be made.
• 56:13
  I'm going to have to go back and in defense of young people, I
• 56:17
  don't think that I don't think that they're thinking this if
• 56:21
  indeed they are out of any, you know, stupidity or ego or
• 56:25
  anything like that. I think that what's happening is
• 56:28
  we've they basically had their brains captured by this perfect
• 56:34
  one on social media shows. I'm not speaking to their
• 56:37
  motivation, I'm not speaking to the reason why.
• 56:39
  I'm just saying I think this is an issue.
• 56:43
  I can give you a very good example of this.
• 56:46
  When we were first married, this would have been in the early
• 56:50
  1990s. Got an apartment, couldn't
• 56:54
  afford cable for television and lived in a place that without
• 57:01
  cable you didn't have television.
• 57:03
  So we didn't have television and missed out on all kinds of do
• 57:09
  you remember the the show Northern Exposure, which was
• 57:12
  really popular back then? That's the first major show that
• 57:17
  I have no idea what it's about. I didn't see everybody's talking
• 57:19
  about it. We didn't have television to the
• 57:21
  point that people started to get concerned.
• 57:23
  Like when we had kids and we still didn't have television,
• 57:25
  people would say, you know, aren't you afraid someone's
• 57:27
  going to call social services because like you're depriving
• 57:30
  your children? People actually said that with a
• 57:32
  straight face, right. But we didn't have television.
• 57:34
  And I've done research in, I've done experimentation in consumer
• 57:39
  behavior. I understand how this works.
• 57:43
  I understand consumer psychology.
• 57:44
  It's part of my specialty, and I know the effect that advertising
• 57:51
  has on people. Despite all of that, I was taken
• 57:57
  aback that after we got rid of the television, all of a sudden
• 58:01
  I found I didn't feel like I had to go out and get a new car.
• 58:06
  And I realized, Oh my God, at a gut level, I understand how all
• 58:09
  this advertising works and how it's supposed to get into your
• 58:12
  head and all of that. And it's.
• 58:13
  Still, I have no idea how insidious it is now now that's
• 58:17
  right. Take that experience and
• 58:20
  multiple put a couple of zeros on it because now you've got
• 58:24
  24/7, it's in your pocket. It's attracting your attention.
• 58:28
  You know, I don't know how many hours people spend on, on, on
• 58:31
  smartphones now, but I know it's, you know, over 5 a day.
• 58:35
  And what is it doing to our minds?
• 58:38
  I suggest that it's causing us to expect that we should have a
• 58:44
  lifestyle that's here. We can't get there and we're
• 58:47
  saying there's a problem. I can't afford this.
• 58:50
  And the problem is less on the afford side.
• 58:53
  I'm not saying that there there's not a problem there, but
• 58:55
  I think it's less on the afford side than it is on the
• 58:57
  psychological side. Yeah, I mean, I I remember when
• 59:01
  I was a college professor at the right, around the turn of the
• 59:06
  century, we had to rent a house. That left me with a decision to
• 59:13
  make in the kitchen. Did I want a refrigerator or a
• 59:19
  table? Because I couldn't have both.
• 59:24
  Both would not fit. The house was so small that that
• 59:28
  was my choice. And you know, of course you go
• 59:31
  with the fridge because that's what you do.
• 59:35
  But I never once looked at that house and said, I'm a college
• 59:39
  professor. I deserve better than this.
• 59:41
  I thought, I'm young, it's early in my career, I'll do better.
• 59:45
  This is fine. It keeps the warmth in.
• 59:50
  Right. Bit, bit along those lines.
• 59:52
  So when my first job was in West Virginia and, and when I moved
• 59:58
  there, I moved there from New York.
• 1:00:00
  And my first impression of the place was, Oh my God, everybody
• 1:00:03
  here is poor, which I mean, clearly it was a poor area
• 1:00:07
  compared to, to where we came from.
• 1:00:09
  And, and yet very quickly that becomes normal.
• 1:00:14
  And so after, you know, a year there, I'm not, I'm not looking
• 1:00:17
  at the places. I don't look at my neighbors and
• 1:00:19
  say they're poor. They're my neighbors.
• 1:00:22
  Not only that, but all of a sudden it didn't, you know, you,
• 1:00:26
  you don't have the latest clothes.
• 1:00:27
  That doesn't matter. Nobody else does either.
• 1:00:29
  Your car's got rusted wheel wells.
• 1:00:32
  It does all right. Everybody else does too.
• 1:00:34
  And and your whole expectation changes based on on what you've
• 1:00:40
  surrounded yourself with. Well, look, if if your theory is
• 1:00:45
  correct and I I suspect it's at least part of the issue.
• 1:00:52
  How big a part I don't know, but I if I were pressed I would say
• 1:00:56
  probably significant. Then we are likely to be stuck
• 1:01:01
  in a world where consumer sentiment will always be lower
• 1:01:07
  relative to years gone past, until we figure out a way to
• 1:01:14
  produce everything everybody wants for almost nothing.
• 1:01:18
  Or, or until, and I think the the younger generation is coming
• 1:01:22
  around to this or until we take a step back and realize there's
• 1:01:27
  there's something. We're being sold a standard of
• 1:01:33
  living that is impractical, is not word, is not the right word.
• 1:01:37
  We're being sold the standard of living that is perfection and
• 1:01:40
  that's just not achievable. I would use the word ridiculous.
• 1:01:44
  Yeah, yeah, unachievable would be a better word, probably.
• 1:01:50
  But I asked my, I asked my kids about this in preparation for
• 1:01:54
  this episode. And we're, we're all on White's
• 1:01:58
  WhatsApp. So I put it, we're on the phone,
• 1:02:00
  right? I put his thing on WhatsApp.
• 1:02:02
  I said, look, we're going to talk about this stuff and give
• 1:02:04
  me your, give me your opinion. Just your, your gut reaction.
• 1:02:07
  What's going on here? 6 kids, right?
• 1:02:10
  Immediately my phone starts blowing up.
• 1:02:13
  They're mad that I asked the question, implying that I didn't
• 1:02:18
  understand what they're going through and all of this.
• 1:02:21
  And so, I mean, clearly there's a lot of emotion here.
• 1:02:23
  And so, you know, we calm down a bit and and my eldest son is the
• 1:02:31
  one who said he thinks that this is a psychological thing, that
• 1:02:35
  people, people are depressed. We look at the world and we see
• 1:02:40
  how horrible it is. To which I responded, yeah,
• 1:02:45
  there are horrible things in the world, but they're also really
• 1:02:49
  good things. And I think the good things
• 1:02:51
  outnumber by far the bad things. But you don't see them because
• 1:02:55
  that's not what sells. What sells is the bad news.
• 1:02:59
  And while you're watching the bad news, I'll tell you about
• 1:03:02
  this wonderful car that you absolutely should own because
• 1:03:04
  everybody owns it and it cost $500,000.
• 1:03:07
  And then you'd hail even worse. Maybe, I don't know, The thought
• 1:03:11
  of a $500,000 car has literally never entered my mind.
• 1:03:17
  Literally never. I mean, even if I had that kind
• 1:03:19
  of money to throw around, I wouldn't spend it on a car that
• 1:03:24
  that seems foolish enough to me. But I get it, right?
• 1:03:27
  I, I get why people think, look, I've done all the things I was
• 1:03:33
  told to do. I did all the right things.
• 1:03:36
  I played by the rules and now when it's time for me to win, I
• 1:03:41
  don't, I mean, I get that. And in individuals are going to
• 1:03:49
  end up there even if there's statistical noise, right?
• 1:03:53
  There will be outliers, people who just get screwed at every
• 1:03:57
  turn in their lives and and there's no mathematical
• 1:03:59
  accounting for it, right? It's statistical noise.
• 1:04:03
  I happen to be one of them, but let's leave that for another
• 1:04:06
  day. The vast majority of people, if
• 1:04:10
  they do the right things, will experience good outcomes.
• 1:04:14
  So what do you tell them? But they don't come immediately,
• 1:04:20
  they take time, and you can easily be led to believe that if
• 1:04:24
  they aren't occurring immediately, they're not going
• 1:04:26
  to occur. And I understand that.
• 1:04:29
  I felt the same way. I think another thing that plays
• 1:04:33
  here is that people are living longer.
• 1:04:37
  They're staying single for much longer.
• 1:04:41
  And when you add those two things together, people say,
• 1:04:45
  well, my parents achieved this by the time they were 35.
• 1:04:49
  By the time your parents were 35, they've been married for 15
• 1:04:53
  years. Right.
• 1:04:54
  Yeah, yeah. Right.
• 1:04:56
  You're 35 and you're thinking about maybe finishing Graduate
• 1:05:00
  School and, and there's a real difference there in in terms of
• 1:05:05
  time. Let me give some what I let me
• 1:05:10
  give a prediction which is going to be good news.
• 1:05:13
  This problem with housing prices really is a is a recent
• 1:05:19
  phenomenon. Well, I say recent.
• 1:05:22
  When you when you look at the at the massive increase in what it
• 1:05:28
  costs you on a monthly basis to pay your mortgage, that really
• 1:05:33
  jumped round about 2022. I think it's going to come back
• 1:05:38
  down for two reasons. One is we're just entering now a
• 1:05:44
  period of what economists are calling the great wealth
• 1:05:48
  transfer. As the boomers die, they leave
• 1:05:52
  their wealth to the younger generations.
• 1:05:55
  There's $70 trillion on the table.
• 1:06:00
  That's if you do the math, over the course of the the period
• 1:06:04
  that economists think this will transfer, that's roughly $3
• 1:06:07
  trillion a year. That's going to get transferred
• 1:06:10
  to younger generations. So younger generations are going
• 1:06:14
  to benefit from that. Part of the transfer is going to
• 1:06:16
  be housing. They live in houses.
• 1:06:19
  So all of a sudden there's going to be an increase in the supply
• 1:06:23
  of housing and there's not going to be a commensurate increase in
• 1:06:28
  the demand for housing because our population is topping out.
• 1:06:31
  So I think what my guess is if we were to come back in 20 years
• 1:06:38
  and have this conversation again, people are going to be
• 1:06:41
  wringing their hands. What did we do about the falling
• 1:06:43
  prices of housing that you know, I bought this house for $500,000
• 1:06:48
  and now I can only sell it for 300 because the price of housing
• 1:06:52
  is falling because there's so many houses and not as many
• 1:06:55
  people. And I'll, I'll tell you what
• 1:06:57
  else we're going to be talking about.
• 1:06:59
  We're going to be talking about how white generational wealth
• 1:07:03
  was one number and black generational wealth was a
• 1:07:06
  fraction of that number. And that's going to 'cause
• 1:07:11
  that's going to cause racial inequality for decades to come,
• 1:07:17
  and people will point to it and draw all the wrong conclusions.
• 1:07:22
  Yeah. But you can bet that that's
• 1:07:23
  what's going to happen. Yeah.
• 1:07:26
  So in the large I, I think you're right.
• 1:07:29
  I think there's mostly good news on the horizon because housing
• 1:07:34
  can only cost, in the end what people can afford.
• 1:07:38
  That's how markets work. When people can no longer afford
• 1:07:41
  housing, downward pressure is applied is applied to the cost
• 1:07:45
  of housing, and markets speak very loudly.
• 1:07:50
  The problem is is that they don't speak immediately.
• 1:07:53
  Before we end this, I do want to point out one thing.
• 1:07:57
  I looked. I looked at a whole bunch of
• 1:07:58
  things. Cost of rent, cost of housing,
• 1:08:00
  cost of gas, adjusted houses for square footage, tuition, on and
• 1:08:06
  on and on. Look, a whole bunch of things
• 1:08:07
  comparing what's happened today versus 10 years ago, 20 years
• 1:08:12
  ago, 30 years ago, 40 years ago, on and on.
• 1:08:15
  One thing stood out kind of head and almost head and shoulders
• 1:08:20
  above everything else as becoming more expensive, faster
• 1:08:25
  federal government. I'm looking at federal total
• 1:08:30
  federal tax revenues, so all taxes combined federal
• 1:08:33
  government on a per person basis.
• 1:08:37
  The cost of that has risen markedly faster than almost the
• 1:08:42
  cost of everything else. But who would build the roads
• 1:08:45
  and who would build the roads? Well, but the roads have been
• 1:08:49
  built right? Yeah, that's, that's, that's
• 1:08:52
  always the, that's always the tricky bit, isn't it?
• 1:08:56
  Look, I can tell you the 100% certainty that the cost of
• 1:09:00
  government will continue to rise until there is no more
• 1:09:03
  government. Yeah.
• 1:09:05
  And when I'm looking at these numbers, I'm not looking at
• 1:09:09
  government spending, which is going up even faster.
• 1:09:12
  This is just what do you what do we have to pay on a per person
• 1:09:15
  basis in the form of taxes? Apparently, given that there's a
• 1:09:19
  massive shortfall every year, even though it's gone up year
• 1:09:23
  after year after year, we still aren't paying our fair share.
• 1:09:28
  Nobody is, because we're not covering the bill.
• 1:09:32
  Oh well, on that happy note, I'll see you next time and I
• 1:09:37
  will remind people because they didn't get a reminder couple of
• 1:09:40
  days ago to be nice to each other.
• 1:09:42
  I know it's harder now that Christmas is past, right?
• 1:09:45
  Thanksgiving, easy to be nice. Christmas, easy to be nice.
• 1:09:49
  New Year's easy to be nice. Aw man, second week of January.
• 1:09:53
  What a pain in the ass that becomes.
• 1:09:55
  Now I got to deal with you people for the rest of the year.
• 1:09:58
  So now, when it's a challenge, accept that challenge.
• 1:10:02
  Rise to it. Be nice to each other.
• 1:10:05
  See you next time, Aunt. See you next time, James, at
• 1:10:07
  Words of Numbers. We spend a lot of time talking
• 1:10:10
  about what's going on in the economy and the government, but
• 1:10:12
  fundamentally, all of this boils down to one thing.
• 1:10:15
  The greatest threat facing modern society is a lack of
• 1:10:18
  respect. The people who disagree somehow
• 1:10:21
  find it difficult, if not impossible, to discuss their
• 1:10:24
  differences in a civil manner. We at Civil are interested in
• 1:10:27
  upgrading civilization by encouraging people to engage
• 1:10:31
  with new ideas and ultimately engage civilly with each other.
• 1:10:35
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