This weekly roundup thread is intended for all culture war posts. 'Culture war' is vaguely defined, but it basically means controversial issues that fall along set tribal lines. Arguments over culture war issues generate a lot of heat and little light, and few deeply entrenched people ever change their minds. This thread is for voicing opinions and analyzing the state of the discussion while trying to optimize for light over heat.
Optimistically, we think that engaging with people you disagree with is worth your time, and so is being nice! Pessimistically, there are many dynamics that can lead discussions on Culture War topics to become unproductive. There's a human tendency to divide along tribal lines, praising your ingroup and vilifying your outgroup - and if you think you find it easy to criticize your ingroup, then it may be that your outgroup is not who you think it is. Extremists with opposing positions can feed off each other, highlighting each other's worst points to justify their own angry rhetoric, which becomes in turn a new example of bad behavior for the other side to highlight.
We would like to avoid these negative dynamics. Accordingly, we ask that you do not use this thread for waging the Culture War. Examples of waging the Culture War:
-
Shaming.
-
Attempting to 'build consensus' or enforce ideological conformity.
-
Making sweeping generalizations to vilify a group you dislike.
-
Recruiting for a cause.
-
Posting links that could be summarized as 'Boo outgroup!' Basically, if your content is 'Can you believe what Those People did this week?' then you should either refrain from posting, or do some very patient work to contextualize and/or steel-man the relevant viewpoint.
In general, you should argue to understand, not to win. This thread is not territory to be claimed by one group or another; indeed, the aim is to have many different viewpoints represented here. Thus, we also ask that you follow some guidelines:
-
Speak plainly. Avoid sarcasm and mockery. When disagreeing with someone, state your objections explicitly.
-
Be as precise and charitable as you can. Don't paraphrase unflatteringly.
-
Don't imply that someone said something they did not say, even if you think it follows from what they said.
-
Write like everyone is reading and you want them to be included in the discussion.
On an ad hoc basis, the mods will try to compile a list of the best posts/comments from the previous week, posted in Quality Contribution threads and archived at /r/TheThread. You may nominate a comment for this list by clicking on 'report' at the bottom of the post and typing 'Actually a quality contribution' as the report reason.
Jump in the discussion.
No email address required.
Notes -
Finance is not parasitic. I'm very open to the idea that as a society we'd be better off if we found a way to subsidize very smart people into jobs with more high leverage externalities but finance as a field is actually quite positive sum. Having a bunch of smart people direct resource allocation to its most in demand use is actually hugely beneficial to the world. Imagine the vast amount of value lost if people with great ideas and potential weren't able to get capital allocated to their endeavors. The main people who think finance is some horrible negative sum industry in my experience are people who have never actually interfaced with it or worse, had front office sales roles.
I do have one friend who is some kind of commodity trader and who considers finance at least occasionally negative-sum. He's mentioned examples like, wars have been good for his business, and some financial instruments and the way they are used are in his opinion clearly designed for extraction as opposed to efficient allocation.
And this is at least for me the main worry: Finance is simultaneously complicated and opaque as well as important enough that it seems to me trivially easy for them to just become an extractive middlemen, and even if the state attempts to plug loopholes, they'll probably always be a step ahead. Needless to say, I consider the state itself the same kind of problematic extractive middlemen, which means they are in practice natural partners in crime instead.
Lots of things are occasionally negative-sum. I am not inclined to get rid of all of them.
But then, I might just be defensive about my own line of work.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
Yeah but Finance is largely allocating to SAAS bullshit due to margins at this point. There's benefits of liquidity, but most of the truly transformational stuff we've seen in recent years (Like SpaceX) has had a lot more to do with Elon Musk's personal ballast and raising money for a space project now would generally be incredibly difficult since Finance beancounters say no.
Isn't "Finance" a pretty wide axis? If you include everything from angel and VC investors who are looking at such radical startups all the way to traditional banks evaluating local business cases for loans to highly risk-averse bond funds, it's hard to call it all anything in particular. SAAS is perhaps overweighted, but that is something that gets acknowledged, and there are some advantages to the model (easy scaling, low up front costs) that make it attractive.
More options
Context Copy link
More options
Context Copy link
Do we actually have a financial system that directs resource allocation to prosocial ends? Are people with great ideas and potential getting capital directed to their endeavours? To some extent, yes.
But safe returns can also be found in 'house prices up only!' lending, which directly undermines the demographic sustainability of civilization and transfers wealth from young to old. Or SEO/adtech/addictive mobile games.
What about the returns of offshoring industrial capacity? Or standard MBA-tier 'cut investment, cut R&D' wrecking? This kind of sabotage can be very lucrative for well-connected individuals but is corrosive to the national interest as a whole. Or cynically favouring mass immigration to lower wages and thus stalling automation and productivity growth. Privatized gains, socialized costs.
Just because there are smart people in finance, it doesn't mean the sector as a whole is doing a good job. Very smart people can do tremendous damage, more than any idiot robber or murderer.
Housing prices only go up thanks to government policy. You can't really blame the finance industry for that.
The government is responsible for land use restrictions and migration, sure. It's ultimately responsible for regulating and organizing the rest of the economy. But finance is directly responsible for issuing credit, which directly contributes to house building v land appreciation. If they provide more credit, prices will rise! They are creating money when they extend loans.
If an owner lets a dog off the leash and it bites someone, who is responsible? The owner or the dog? Both, to some extent. The owner was unwise to unleash an untrained dog. And the dog's natural characteristics favour biting, that's just what it is. The financial sector pursues profit in the same way. That's fine when profits are made directing capital towards productive development, bad when rendering cities unliveable by ridiculous land appreciation.
Finance also does its best to channel money to lobbying groups and supporting political parties that perpetuate the status quo
More options
Context Copy link
You are aware that mortgages are propped up by Fannie and Freddie, correct?
This is probably true in the narrow sense of price to income but it's not true in the sense that people care about (monthly payment to income). In either case, it's quite clear that mortgages have existed in the modern form, with some changes in interest rates within certain bounds, for nearly 100 years and can't possibly explain the housing crisis. Getting rid of mortgages would have a one time price cut and then you're back on the old trend line.
Mortgages aren't the issue in and of themselves. Besides, I'm talking about the Anglosphere generally not just America. The issue is whether credit is deployed for new builds or lending to buy existing houses at higher and higher valuations, effectively bidding up the price of land. Banks devoting so much of their lending to mortgages because it's 'safe' is the problem.
People being chained to enormous mortgages isn't ideal either, it prevents people moving around easily, locks them down in jobs with the high debt load. Yes, price to income is important actually!
What's profitable for banks is not necessarily ideal for the economy, which would be better off with more lending to industry and development. House prices could be permanently lowered by redirecting lending from buying up existing housing stock to new-builds but this would necessitate boomers losing some money and is off the cards.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
The Case-Shiller index went down (in nominal terms) from 2006-2012. It's roughly flat (again in nominal terms) now. Median sales price went down from 2006-2009, and is dropping now.
When I go and look at a graph of US house prices vs median income, that's not exactly the conclusion that comes first to mind!
https://www.longtermtrends.com/home-price-median-annual-income-ratio/
How about 'home price/median income is at its peak, higher even than the very top of the housing bubble' or 'the salary needed to buy a home doubled from 2017 to 2025'.
The claim was "housing prices only go up". They don't. That's different from the claim that housing prices are high now; they are. As for that graph, since the median household income series ends in 2024, data after that aren't accurate.
The claim was ''house prices up only!' lending' is bad, gesturing at the idea that bidding up the price of land is bad and a poor use of credit. Not that house prices only go up. House prices occasionally fall but have been rising as a general trend since financial deregulation. House prices are higher than ever before.
The facts straightforwardly support my conclusions, whereas your claim is misleading in the extreme.
"House prices up only!" lending implies that lending for houses is safe because house prices only go up. Since this is not in fact the case, it is your claim that is misleading.
A lot of things have been rising as a general trend (the S&P 500, for instance). That's different than monotonic increase.
As for "financial deregulation", I don't know which particular one you mean.
Repeal of the Glass-Steagall Act, likely.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
Thanks. House prices mostly only go up. A correction highly relevant to my point.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
If you think that middle-class homeownership as the default is a good thing, mortgage lending is the biggest pro-social things banks do*. The transfer from young to old is driven by housing scarcity - generous mortgage finance just determines how it plays out.
If we didn't have a mortgage finance system that allows desperate upper-middle-class youth to somehow-or-other scrape together enough money, then the Boomers would be selling out to investors who would become a new landed aristocracy. Given the less-generous mortgage system in the US post-2008, this is already happening at the low end of the market. (Hence the moral panic about corporate landlords buying SFHs - this is actually less harmful than individual landlords buying them, but easier to demagogue).
* In dollar terms, the mortgage bond market was traditionally bigger than the stock market. The recent run-up in the stock market means this is no longer true in terms of outstanding market cap, although the SpaceX IPO will mark the first and possibly only year when the stock market was bigger in terms of new issuance, which is a better measure of the impact finance is having on the real world.
Mortgage lending is important. But there's a distinction between lending for new builds to expand supply and foster development vs fuelling property bubbles and land speculation. It's not impossible to make houses cheaply - financial resources could be directed to replicate the postwar baby boom era of cheap housing and industrial development. That's how it happened in the first place, financial repression and capital controls. Credit was directed into creating new housing stock.
This doesn't happen naturally. It is often more profitable to buy houses in desirable areas since they're not making any more land. Elastic credit, inelastic supply - prices rise. It can be a lot 'safer' than lending to industry, from the perspective of the bank. If a business fails the money can be lost, whereas you can always repossess a house.
In 17 advanced economies, the share of mortgage loans in banks' total lending portfolios roughly doubled over the past century from 30% in 1900 to about 60% in 2014. More productive industrial investment has been crowded out.
It does happen naturally. It DID happen naturally. Well, sort of; the timing was partly because of relaxation of capital controls forbidding mortgage lenders from lending for development. But that relaxation happened because the time was right and the lobbyists were called in to remove the obstacle. The banks wanted to lend for development (because they could see the wave of demand coming), but were prevented, until they had the laws changed.
The banks also wanted to lend during the early-2000s bubble. After the bubble, housing has been durably repressed, but this isn't for lack of funds; the US is awash in funds. It's because the reaction to suburbia, the New Urban anti-sprawl smart-growth people, who had been on the back foot for a long time, were able to use the housing crash to get the upper hand politically, which they still have.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link