Post AQbw5vEHCeQTmP9ILQ by pluralistic@mamot.fr
(DIR) More posts by pluralistic@mamot.fr
(DIR) Post #AQbw5tlAfNYBDqWXL6 by pluralistic@mamot.fr
2022-12-14T22:07:36Z
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Here's the #inflation story you're expected to believe (advance warning: this story is entirely false): America gave the poors too much money during the lockdown and now the #economy is awash in #FreeMoney, which made those poors so rich that now they're refusing to work, which means the economy isn't making anything anymore. With all that extra money and all those missing workers, prices are skyrocketing.1/
(DIR) Post #AQbw5uFIrLeYjIcbJ2 by pluralistic@mamot.fr
2022-12-14T22:08:31Z
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To hear ghouls like Lawrence Summers tell it, there is only one answer to this. We have to immiserate the poors: jack up interest rates, kick off a #recession, destroy millions of jobs, until the poors are stripped of their underserved fortunes, and, humbled, they return to their labors:https://pluralistic.net/2021/11/20/quiet-part-out-loud/#profiteering2/
(DIR) Post #AQbw5ukUzMbgI3DVvk by pluralistic@mamot.fr
2022-12-14T22:08:58Z
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As noted: this is bullshit. Countries all over the world experienced inflation during and after the lockdowns, irrespective of whether they handed out relief money to keep people from starving to death while their workplaces were shuttered. America has slightly higher inflation than some other OECD countries, but the causes have nothing to do with overly generous relief packages.3/
(DIR) Post #AQbw5vEHCeQTmP9ILQ by pluralistic@mamot.fr
2022-12-14T22:10:10Z
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"The Causes of and Responses to Today’s Inflation," a Roosevelt Institute paper by Nobel-winning economist Joseph Stiglitz and macroeconomist Regmi Ira, debunks this false inflation narrative, revealing it as a sham aimed at destroying workers' lives, offering a far more plausible explanation for inflation:https://rooseveltinstitute.org/wp-content/uploads/2022/12/RI_CausesofandResponsestoTodaysInflation_Report_202212.pdf5/
(DIR) Post #AQbw5vgzTtOXDSaE6K by bananarama@mstdn.social
2022-12-14T22:12:37Z
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@pluralistic To anyone else who thought they missed a post, there was just a counting error.
(DIR) Post #AQbw5wkDZNZQTl6Jlo by pluralistic@mamot.fr
2022-12-14T22:10:30Z
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More than that, though, the authors show how sharp interest rate hikes actually harm the economy, deepening the recession and *increasing* inflation. They compare #MonetaryPolicy inflation remedies to medieval #bloodletting, where "doctors" did "more of the same when their therapy failed until the patient either had a miraculous recovery (for which the bloodletters took credit) or died (which was more likely)."6/
(DIR) Post #AQbwYTYLBMB8LC9JM8 by bananarama@mstdn.social
2022-12-14T22:17:47Z
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@pluralistic This seems similar to Tiff Macklem's justification for putting Canada through a recession. He's never really been able to justify it in any sensible manner. There are other options and tools that the Canadian government can use.
(DIR) Post #AQbwaNGhWEBLQentFA by pluralistic@mamot.fr
2022-12-14T22:11:09Z
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Let's start with the case against bloodletting. #InflationHawks warn us of the #WagePriceSpiral, which is when inflation goes up and powerful workers bargain for higher wages, which drives up costs, and thus prices, and thus wages. This is the fairy-tale version of what happened in the 1970s and it's entirely true except for the fact that it was #OPEC's #embargo driving up oil prices that caused inflation, a fact that makes it entirely false, but oh well.7/
(DIR) Post #AQbwaNmxaHzD2hteWe by pluralistic@mamot.fr
2022-12-14T22:11:37Z
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Still, let's be generous to bed-wetting, seventies-haunted inflation hawks and pretend that we're worried about a wage-price spiral. Good news! There isn't one. Wage growth peaked in June at 4.8% and by October it had declined to 4.2%, making real wages 2.3% *lower* than they were in Oct 2021.8/
(DIR) Post #AQbwaTRYYmQka3vdzs by pluralistic@mamot.fr
2022-12-14T22:12:01Z
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How is it that America's all-powerful workforce was willing to take a paycut rather than demanding wages that keep pace with inflation? "Weak unions, globalization, and changes in the structure of the economy."But there's another factor at play here: workers don't think inflation is going to get worse, so they're not demanding inflationary raises. 9/
(DIR) Post #AQbwaVGzl1AeFt0EoS by pluralistic@mamot.fr
2022-12-14T22:13:19Z
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For all the fearmongering about #InflationaryExpectations: "Inflationary expectations have also remained tame, which is consistent with our interpretation of the data."https://www.newyorkfed.org/microeconomics/sce#/Workers also aren't spending too much. While demand is up slightly, the evidence is that working people "treatexcess savings as wealth and spend it gradually over their lives." 10/
(DIR) Post #AQbwaWu1hNzDJEGvI0 by pluralistic@mamot.fr
2022-12-14T22:13:43Z
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People may have accumulated savings by eating in during the lockdown, but they're not going out for dinner every night to make up for it, instead, you hold those savings in reserve, as "precautionary balances." This is why "in total, the economy has largely remained below trend."To the extent that people are buying things with their pandemic savings, they're not buying #NonTradedGoods (basically, imports).11/
(DIR) Post #AQbwaYabQZdaXZCRI8 by pluralistic@mamot.fr
2022-12-14T22:14:04Z
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Buying imports doesn't produce the "multiplier" effect of domestic purchases. If you buy a loaf of bread from the corner baker for a dollar and they spend that dollar at the tavern across the street and the bartender spends it on a manicure down the road, that dollar generates three dollars in economic activity. But if you spend a dollar on goods from abroad, the dollar leaves the country and any multiplier effect happens there, and doesn't heat up the US economy.12/
(DIR) Post #AQbwahHn5swBVpT2ie by pluralistic@mamot.fr
2022-12-14T22:14:29Z
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Wages did go up slightly, but only slightly. The Employment Cost Index is only up 1.6% relative to 2019. Almost all those gains have gone to the 25% worst-paid workers in America. Contrary to the inflation scare story about too much savings, these workers don't earn enough to have *any* savings, even post-pandemic.US spending on non-traded categories (recreation, transport services) is the same or lower than pre-pandemic levels. 13/
(DIR) Post #AQbwajGniXKlfL1HSC by pluralistic@mamot.fr
2022-12-14T22:14:50Z
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Food and hotel expenditures are slightly higher (which doesn't mean were buying more food than we were in 2019, just that it costs more).So if inflation isn't caused by greedy workers and free money and too much demand, what *is* causing it? 14/
(DIR) Post #AQbwjmXsuNKsQmKLT6 by pluralistic@mamot.fr
2022-12-14T22:15:24Z
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Here's a clue: when it comes to domestic goods, the products that have risen most steeply in price are also producing the highest profits for their manufacturers. In other words, they're charging you more, even if they're not paying their workers or suppliers more.15/
(DIR) Post #AQbwjn352OHzzWvG5o by pluralistic@mamot.fr
2022-12-14T22:15:38Z
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Those additional profits also aren't producing multiplier effects, though: the biggest price-gougers are spending their profits on stock buybacks and dividends, meaning that they're funneling that money to rich people, who then stash it offshore. A billion dollar stock buyback doesn't result in a billion loaves of bread being bought at the corner bakery.16/
(DIR) Post #AQbwjnWrFg6nTsr2VU by pluralistic@mamot.fr
2022-12-14T22:15:53Z
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The five root causes of today's US inflation are:I. energy and food price-spikes;II. changes in the kinds of goods we want;III. supply interruptions (mostly for cars);IV. higher rents (resulting from work-from-home moves);V. market power (AKA price-gouging).None of these can be fixed by jacking interest rates or forcing workers into unemployment. 17/
(DIR) Post #AQbwjp25f2ga92TUpM by pluralistic@mamot.fr
2022-12-14T22:16:09Z
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I. Food and energy spikes: The three major causes here are Russia invading #Ukraine, #omicron, and #China's #ZeroCovid policy, all of which interrupted the flow of food and energy and the inputs for food and energy production. We made less of this stuff, and so the price went up. 18/
(DIR) Post #AQbwjr4e4VuyTXgZ5U by pluralistic@mamot.fr
2022-12-14T22:16:25Z
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The largest spike in oil pricing came right after the Russian invasion of Ukraine, and was made worse by sanctions. But that was February. By October, oil prices were back to pre-pandemic, 2015-era levels, thanks to adjustments in the global economy, which include a shift to #renewables. Every new renewable installation reduces demand for oil and directly impacts global oil pricing.19/
(DIR) Post #AQbwjskrp1HlgmRnXM by pluralistic@mamot.fr
2022-12-14T22:16:40Z
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Meanwhile, there's an obvious answer to high food prices: "For half a century, US and EU governments have paid their farmers not to produce. If the war continues, presumably that policy could or should end—and again, as that happens, food prices would fall."20/
(DIR) Post #AQbwju6WnyCrsFabwG by pluralistic@mamot.fr
2022-12-14T22:16:54Z
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II. Changes in demand. We many not want more stuff than we did in 2019, but we do want *different* stuff. As supply chains broke down during the lockdown, people substituted one kind of good for another. For example, half the US toilet-paper supply in 2019 was on oversized rolls intended for commercial customers. This is made in different mills, out of different stock, than the toilet paper we use at home. 21/
(DIR) Post #AQbxLsbmoZuqEsJoTg by pluralistic@mamot.fr
2022-12-14T22:17:26Z
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When lockdown hit, 100% of toilet paper demand shifted to home rolls, triggering shortages (the TP hoarding story was just another pandemic urban legend). Because grocery stores don't have accounts with distributors for commercial bumwad, it wasn't easy to simply order from the languishing stores of commercial paper. People substituted kleenex and paper towel, triggering more shortages.22/
(DIR) Post #AQbxLt6cxuaNmWkRY8 by pluralistic@mamot.fr
2022-12-14T22:17:39Z
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All that drove up prices in multiple categories of good - and there were plenty of other instances like it. But these are temporary increases, driven by inefficiencies in the supply chain, which are gradually resolving. Another significant shift driven by the pandemic was demand for frontline workers, who saw "a one-off repricing of wages," which is being clawed back even as we speak.23/
(DIR) Post #AQbxLteIwhWZSyVL2e by pluralistic@mamot.fr
2022-12-14T22:18:01Z
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III. Supply interruptions. All this was exacerbated by brittle, hollowed supply chains. The relentless pursuit of cheap labor and lax regulation by the monopolies that dominate most industries mean that goods are produced in far-flung lands, and financialization means that any "redundant" capital assets were sold off years ago, leaving companies without any #slack in their production. When the pandemic hit, many of these systems ground to a halt and took years to restart. 24/
(DIR) Post #AQbxLu37SRNEhw79ii by pluralistic@mamot.fr
2022-12-14T22:18:24Z
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Cars are a prime culprit here. Financialization centralized all microchip production in Taiwan and China, and monopolization centralized all auto production into a handful of global companies. Those global companies all cancelled their chip orders when the lockdowns hit, then, when they placed new orders, they found themselves at the back of the line for the chips from those very few suppliers.25/
(DIR) Post #AQbxLua5TrkGMBXU6i by pluralistic@mamot.fr
2022-12-14T22:18:39Z
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That substantially drove up the price of cars, which is part of the reason that the USA has slightly higher inflation than other wealthy countries: the US economy is exceptionally car-centric. 9% of the US #ConsumerPriceIndex is based on automobile prices. In France, it's 3.6%.26/
(DIR) Post #AQbxLycMTLwOsOdMCu by pluralistic@mamot.fr
2022-12-14T22:19:31Z
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IV. Rent shocks and work from home. When the pandemic hit, a lot of professionals moved to exurbs, small towns and the countryside, hoping to find more space in a #WorkFromHome world. Meanwhile, commercial properties emptied out, but due to planning limitations, it was virtually impossible to retrofit commercial real estate for residential to meet this demand. 27/
(DIR) Post #AQbxM07wrOnlYeQ652 by pluralistic@mamot.fr
2022-12-14T22:19:51Z
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If we're worried about rent inflation, addressing these barriers would do more to lower rent pricing than hiking inflation rates - a measure that causes an immediate and long-lasting halt to housing contruction.Some rent inflation, meanwhile, is a statistical mirage. When the CPI is calculated, it "imputes (i.e., guesses) what homeowners would pay if they had to rent their homes." 28/
(DIR) Post #AQbxM1ZdTwXk2oNisK by pluralistic@mamot.fr
2022-12-14T22:21:12Z
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This means that when rents go up in your neighborhood, the CPI assumes you are spending more on rent - even if you have a 30-year fixed-rate mortgage that hasn't changed.V. Market power. Almost every sector of the US economy is dominated by #monopolies, whose CEOs keep going on investor calls and admitting that they're using the scare stories about inflation to jack up prices and realized record profits:https://pluralistic.net/2022/02/02/its-the-economy-stupid/#overinflated29/
(DIR) Post #AQbxM36Ho2FqmMfJPE by pluralistic@mamot.fr
2022-12-14T22:21:39Z
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This is part of a long-run trend to higher profit margins. From 1960-80, markups averaged 26%. By 2021, it was 72%. Nearly all those markup increases (81%) can be attributed to market concentration (e.g. monopolization). In 2022, profit margins are at their highest peak "in more than 70 years." All these factors play into each other. Monopolies don't just price-gouge, they also hollow out their sectors and make them brittle and vulnerable to shocks. 30/
(DIR) Post #AQbxM4TMhiJH2ETG1A by pluralistic@mamot.fr
2022-12-14T22:22:03Z
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But if we are worried about a contracting workforce, there are more humane - and more rational - remedies than using interest-hikes to put the country into recession and force workers into unemployment. Instead, we could build the US capacity to produce goods and services by making it easier for workers to enter the workforce:https://pluralistic.net/2022/06/01/factories-to-condos-pipeline/#stuff-not-money31/
(DIR) Post #AQbxM61mvDRHrHaGJM by pluralistic@mamot.fr
2022-12-14T22:22:28Z
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For example, the US ranks near the bottom of rich countries when it comes to female workforce participation. This is no mystery: America's refusal to provide childcare, combined with low wages and poor conditions for female-dominated occupations, means that many women can't afford to work. If America doesn't have enough workers, it can lure this reserve army of laborers into the workplace with childcare subsidies and minimum wages. 32/
(DIR) Post #AQbxM7Y5GcroZjhZI0 by pluralistic@mamot.fr
2022-12-14T22:22:42Z
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By contrast, forcing the country into recession with interest-rate hikes will remove workers from the workforce, and the last hired (women, racialized people) are the first fired, and the last to be re-hired. Forcing the country into recession won't build America's capacity to produce the things its people demand - it will permanently reduce that capacity.33/
(DIR) Post #AQbxM90TqXAx65zlBo by pluralistic@mamot.fr
2022-12-14T22:22:56Z
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Nothing the Fed does will "contain the increases in prices coming from international markets, lack of investment in supply chains, COVID-19 disruptions, climate change, the war in Ukraine, or the exercise of market power." But they can make it worse! When inflation is being caused by failures in supply, jacking up inflation reduces investments that can alleviate shortages.34/
(DIR) Post #AQbxMAMUoANdIfIr8y by pluralistic@mamot.fr
2022-12-14T22:23:29Z
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Increasing interest rates also won't reduce rents: landlords pass these costs on to their tenants, and high interest rates reduce investment in new housing that tenants might move to in order to escape those costs. To fix supply-side inflation, you have to fix the supply. You can expand renewables investment (as the #InflationReductionAct does). 35/
(DIR) Post #AQbxMBuZ2zE46cFZsu by pluralistic@mamot.fr
2022-12-14T22:23:43Z
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You can bust monopolies (as the #IRA does). You can re-shore key goods (as the #CHIPSAct does). You can get workers working with better wages and child-care.You can also punish price-gouging companies with #WindfallTaxes that claw back their monopoly profits:https://pluralistic.net/2022/03/15/sanctions-financing/#soak-the-rich36/
(DIR) Post #AQbxMDMFfWy2amDCgC by pluralistic@mamot.fr
2022-12-14T22:24:01Z
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Back in 2008, we decided that fiscal answers (bailing out borrowers) were off the table, so we did monetary policy (bailing out banks) instead. This "saved the economy" but at the cost of massive increases in inequality and the collapse of trust in our institutions.37/
(DIR) Post #AQbyBHjn92ykwbZhvE by annaraven@sfba.social
2022-12-14T22:26:44Z
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@pluralistic I'm told that if you post the first post of a long thread publicly, then change the "public" setting to "unlisted", it won't clutter up the feed with 30+ posts for one thread. People can then boost the initial post and everyone can still read and respond to the thread without it showing up 30+ times.
(DIR) Post #AQbyBINqk71OwqJhMO by pluralistic@mamot.fr
2022-12-14T22:27:14Z
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@annaraven You have misunderstood how "unlisting" works (unlisted toots are hidden only for nonfollowers on the same instance, not followers). As noted in my bio, I post long threads from this account and there are many ways to get my essays if you don't like my Mastodon style - RSS, newsletter, Medium, Tumblr, a blog, etc. I recommend unfollowing me here and subscribing to one of those if you prefer. Links at pluralistic.net.
(DIR) Post #AQbyBIz4VinOoHjQNU by book@sleepy.cafe
2022-12-14T22:31:58.440125Z
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UOOOOOOOOH! CHILD EROTIC! 😭😭😭😭
(DIR) Post #AQbyHcAG6x4O2CyNbE by W9SSN@mastodon.radio
2022-12-14T22:27:00Z
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@pluralistic I tell people that inflation is both due to supply chain disruption due to COVID as well as the "price" that we are paying for avoiding a significant recession by using fiscal stimulus to allow people to keep their jobs and their homes. In the absence of fiscal stimulus, the housing market would have totally imploded and people would have been displaced making the problem 10x worse.
(DIR) Post #AQbyHcv3IyV4NKrkXI by bananarama@mstdn.social
2022-12-14T22:37:10Z
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@W9SSN @pluralistic This is still too simplistic and is not going to be an accurate picture everywhere. The Stiglitz paper goes in to some pretty good detail. Fiscal stimulus alone does not necessarily require inflation. Depending on where you are, the housing market is still imploding, like in Canada. A recession has a risk of making our housing market implode. We won't be in sub prime mortgage level of shit, but a lot of people will find themselves on the streets without anywhere to go.
(DIR) Post #AQbyHe3F60e5t1hnwO by W9SSN@mastodon.radio
2022-12-14T22:30:53Z
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@pluralistic The response to COVID was wayyyyyyyy better than the response to the GFC because funds got into the hands of those who needed them to avoid disruption in job and housing markets.
(DIR) Post #AQbyZAg72j1K04FBIm by W9SSN@mastodon.radio
2022-12-14T22:40:19Z
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@bananarama @pluralistic true, but I think the key is that a downward shock on the supply side while maintaining the demand side through stimulus almost ensures some level of inflation. Yes there can be stimulus that does not cause inflation (infact, inflation is the real limit to deficit spending). I am saying that the stimulus definitely helped mitigate the costs that would have been seen if masses of people were displaced from jobs and housing simultaneously
(DIR) Post #AQbyotRGuFTdANnb28 by bananarama@mstdn.social
2022-12-14T22:43:12Z
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@W9SSN @pluralistic The stimulus is over and we're still pushing in a direction that will simultaneously increase unemployment and foreclosures. They have successfully kicked the can down the road.
(DIR) Post #AQbyxENwub0mRnDk8G by W9SSN@mastodon.radio
2022-12-14T22:44:39Z
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@bananarama @pluralistic That's the misconception, I think. We don't need to increase unemployment to decrease demand. We should be facilitating full employment and helping on the supply side to tame inflation
(DIR) Post #AQbzljh0mle41bDg2K by W9SSN@mastodon.radio
2022-12-14T22:48:53Z
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@bananarama @pluralistic That is why all these rate hikes recently are nonsensical, IMO. We're artificially increasing the cost of capital to business when we need to facilitate capital for production and expansion.
(DIR) Post #AQbzlkB8yjkRX3Jk0G by bananarama@mstdn.social
2022-12-14T22:53:46Z
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@W9SSN @pluralistic Many of the changes that would reduce CoL in the US are not even particularly capital intensive either, which sucks. Encouraging cycling, walking and use of public transit are all inexpensive compared to something like trying to move semiconductor production away from China. They would also reduce CoL for a *lot* of people, which means there's more money to do other stuff. In my city, we were able to restore a park with a $5000 grant and a few weekends of family volunteering.
(DIR) Post #AQbzm16S3R601QFjY8 by W9SSN@mastodon.radio
2022-12-14T22:49:35Z
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@bananarama @pluralistic in reality, rate hike are just universal basic income for people who have money 🤣
(DIR) Post #AQbzvIQX0voSMD4OB6 by bananarama@mstdn.social
2022-12-14T22:55:33Z
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@W9SSN @pluralistic Biking and walking are both dangerous here, partly because of how cold it gets and partly because cars exist. Busses are pretty inexpensive to purchase and operate though. There's not a lot of demand for public transit because there's still too much parking though.
(DIR) Post #AQc2JqKymrnCO3J0C0 by thespoonless@epicure.social
2022-12-14T23:22:23Z
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@bananarama @W9SSN @pluralistic A lot of people who were approved for mortgages the Big Five knew they would default on; so the question is, who's responsible? The homeless mortgage-holders left holding the bag? Or the Big Five banks that lent money to people they knew would default?It may not be sub-prime but it looks awful damn close.
(DIR) Post #AQc3YZyU0Quxw7NDhg by bananarama@mstdn.social
2022-12-14T23:36:13Z
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@thespoonless @W9SSN @pluralistic They'll be able to repay if Macklem doesn't send us into a recession. The CHMC are not out to get you.