I think he's right that we're headed to neo-feudalism. Already in Canada the price of housing has spiked so high and so fast that regular people pretty much have no hope in hell of buying anything without parent help (ie. dynastic wealth).
Wasn't even 20 years ago that housing was affordable by working class people.
We seem very far away from any sort of political shift that would change this.
The term neo-feutalsim for me as a somebody interest in history is just so incredibly dumb. It plays on the absolute non-understanding of what feudalism was just to play on the association 'feudalism' bad therefore 'Neo-feudalism' bad.
There are plenty of places where you could get a cheap house, that's just not where people would want to live most of the time.
And we know pretty well what mechanism drive the insane prices in city properties. Its not that big a mystery and certainty not to the point where we should claim our modern economy is 'neo-feudalsim'.
"Neo Feudalism" is a dumb term... but people say "hold down the fort" O_o
I'd love a more nuanced term, but I don't think 'minimal social mobility' is snappy enough to catch on. What's a better label? Asking sincerely as a person with only a passing familiarity of historic economies.
> we know pretty well what mechanism drive the insane prices
Asking four people here would yield five different answers. And they'd all be somewhat correct and correlated!
I think reducing complex economic problems to snappy 1 word reduction is generally not a very good idea. It just leads politicization of the issue making almost all discussion of the topic impossible.
Terms such a 'Neo-liberalism' is a become meaningless term that has been project into every possible direction by ever possible social scientist and amateur and have become so broad that it basically means 'it exists in the world currently'. The same fate would happen to uses like 'Neo-feudalism'.
At some point one just has to spell out what the actual problem is.
> Asking four people here would yield five different answers. And they'd all be somewhat correct and correlated!
I think we can argue about some of the drivers, but the fundamental reason is a simple supply and demand. One can argue why there is so much demand, or not enough supply.
I think we have a pretty clear understanding why in most western cities supply failing to grow as fast as demand.
> snappy 1 word reduction is generally not a very good idea. It just leads politicization
'Sound byte' reductive labels seem to be a symptom, not a cause, of political tribalism. Or they are both side effects of attention driven add-supported platforms, where the degenerate strategy for attention is outrage. Or they're all mutually reinforcing.
I want to live in the world where labels still have value. But that will require a cultural shift back to people listening to each other. "Supply and demand" is a simple label, but we can still say it and unpack all the ways it's manipulated. We just need to let words be stepping stones and not lines in the sand.
Anyway, that's getting very meta and further from a chat on feudalism. Insights I'd love to hear from a historian include: How much worse was serfdom than current wage slavery? How much of that was a function of technology? What alternative (better?) systems existed at the same technology level? What forces led to feudalism being replaced? Do they have contemporary analogues that can now help us reduce wealth inequality and protect the middle class?
Asking just because it sounds interesting. Not trying to pigeon hole your politics OR have you write my undergrad history paper. Cheers.
> There are plenty of places where you could get a cheap house, that's just not where people would want to live most of the time.
We are at the point in British Columbia where this no longer the case. Doesn't matter if it's a quasi-ghost town in the deep interior of this province with zero economy. It's still priced beyond a working class salary.
Yes and lots of people made millions buying and selling crypto currencies, or stocks or whatever. Making a couple million is hardly prove that your 'grand theory' is correct. As Talib and others have long pointed out with traders, there is an element of randomness. At the same time correctly identifying the effect from the symptoms might be useful, but it doesn't mean you understand the root cause.
Total nominal spending is a function of central bank action. What he actually bet on was that central bank failed to properly react to the situation and let a massive nominal spending gap develop. Monetary economics predicts very well what happens when you have nominal spending gap and that is exactly what happened in 2008 and beyond.
Recovery was massively better if the places where the central banks had nominal spending on trend and much worse the bigger the spending gap was.
Some Keynesian economist might argue that central banks couldn't not do anything if interest rates were low. This is an old Keynesian believe that somehow stuck in the minds of many older influential economists and had still been around in central banks operational doctrines. Of course many of economists both before and after Keynes never believed this. Central banks models were based on New Keynsian style economic modeling that were interest rate depended and relied on past data, rather then forward looking indicators. Central banks were literally driving by looking in the mirror while having a steering-wheel that only worked under certain conditions. Even in New Keynesian economics this had been criticized but not enough for it to make it into conservative bank operations (with few exceptions). And even those famous economists who were critical continued their focus on interest rate.
This led central banks to misunderstand the crisis, the realized the spending collapse to late. Real-interest rates collapsed and nominal interest rates were close to zero breaking many central banks models. Leading to nominal spending shortfall and the exact sort of problems described in the article.
The idea that this happened because of inequality makes no sense. If that was true then post-2008 we should have seen a clear dataset where more equal countries had better rediscover then more unequal countries (or monetary zones). However no such correlation exists to my knowledge.
Just like in 1929-1931 all kinds of things were blamed (and are often still blamed) but by now the majority of economists agree that fundamentally about a nominal collapse and a failure of the central bank. Even central banks have admitted it. It probably gone take another 50 years but eventually they will admit that they were mostly at fault in 2008 as well. Until then everybody can parade around their hobby horse.
Non of this of course says anything about if in-equally is good or bad. Or if such crisis make inequality worse, they very well might. My assertion here is simply that overall economic recovery measures are not dedicated by inequality rates.
The article was rubbish, the author himself is a counterargument to his point. He came from a poor family, worked hard studying economic history, became a successful trader and thus extremely wealthy, yet he still proports
>Now, no matter how hard you work, how smart you are, if you come from the ‘wrong’ family you’ll probably never own property. That is feudalism. We’re going back into a world of aristocracy. Capitalism’s over.
Seems more like he thinks so much of himself that no one else could possibly do what he did.
If he want's to declare 'capitalism' over then he should do more then say 'probably' as that is quite a range of possibility. How 'probable' is it and what alternative system does he propose that makes it much more 'probable'.
By the reading he suggest, I has fallen in with a school of economic thinking that is basically going back to 1960 socialist school of thought that in my opinion is so much theoretical nonsense with no practical reality.
“My grand, macro thesis is that real interest rates have to stay low, and that’s because the rich have all the wealth and like saving,” he reflected. “Now, no matter how hard you work, how smart you are, if you come from the ‘wrong’ family you’ll probably never own property. That is feudalism. We’re going back into a world of aristocracy. Capitalism’s over.”
> Now, no matter how hard you work, how smart you are, if you come from the ‘wrong’ family you’ll probably never own property. That is feudalism. We’re going back into a world of aristocracy. Capitalism’s over.
As of 2021, 47.9% millenials in US own homes. So "new feudalism" has ~50% aristocracy rate (compare: 2-3% in times of real feudalism). This is probably partially due to increasing urbanization and higher life expectancy (alive grandfathers = no inherence).
Millennial home ownership lags sharply behind previous generatons. He's not saying that we have feudalism. He's arguing that is the direction the world is heading with increasing inequality. This video does a good job of explaining his views:
I particularly like his point about why homes have risen from 2-3x wages to 20-30x wages, this was a question I had always pondered about and could never find a good explanation for. The GINI data you posted is interesting but ends at 2018 and if I had to guess the pandemic has only worsened inequality. Asset prices such as homes have risen sharply putting them out of reach for many families.
Edit:
Looks like has worsened signficantly:
The United States’ Gini coefficient is .484, the highest it’s been in 50 years according to the U.S. Census Bureau. The U.S. has the highest Gini coefficient among the G7 nations. The top 1% of earners in the United States earn about 40 times more than the bottom 90% of earners.
> “My grand, macro thesis is that real interest rates have to stay low, and that’s because the rich have all the wealth and like saving,”
I feel I'm the choir and this guy is the preacher, leaning as I do towards full-on socialist, so I'd like to hear a counter argument from someone who believes the opposite.
The rich are generally net lenders so low real interest rates should hurt them. Yes asset prices seem to be going up, but asset prices should generally stay the same in real terms.
The poor are generally net borrowers so low interest rates have for most of history been considered good for the poor.
Very recently wages have not kept up especially real wages. I think most of that has to do with globalization. IE US wages have lagged while China/India has seen above average wage growth. Basically you have much of the US workforce saying 'I make twice as much as my parents did at my age, why can't I afford a house?' But in real terms, their parents' labor was valued significantly higher than their labor currently is. The world was a different and less connected place back then so there was much less international wage competition.
What does "net lenders" mean? The rich use debt extensively to invest in assets. They're not lending the money out. They borrow way more than the poor, and buy assets.
A loan is an asset to the person that made the loan. Yes some of the rich use leverage to increase the amounts they can put towards assets / lend out. In general though they are still net lenders.
For example it is very unlikely that a rich person with 100mil would take out additional leverage for another 50mil and let that 150mil just sit in cash. Doing that would make them a net borrower (of 50mil).
Instead, they will invest that 150mil, suppose they decide to buy a bundle of mortgage-backed securities. They now have an asset worth 150mil, and via the txn they are effectively lending 150mil worth of value to homeowners. Even with the 50mil loan, they are still a 100mil net lender.
I'm definitely not full-on socialist[1], but that statement just seems obviously true to me. My lifetime has been a steady increase in levels of inequality, with no end in sight.
1: I think a moderately progressive tax system (e.g. top tax bracket around 50%) combined with unifying investment-income with earned income would go a long way towards fixing the system. Progressives seem to believe that billionaires need to be punished, I'd just like for them to not be able to maintain their wealth indefinitely without taking on some real risk.
That's a was oversimplification and is as constructed not correct.
Interest rates on government debt are not set by central bank policy. Nominal rates on back reserves are set by central bank policy. But those rates are set RELATIVE to real rates.
So if real rates are low then the central bank can not magically set them higher without causing massive economic damage.
So yes, investors and the real economy very much influences interest rates.
In addition government debt interest rates are very different and are mostly determined by market forces.
Wasn't even 20 years ago that housing was affordable by working class people.
We seem very far away from any sort of political shift that would change this.