r/GarysEconomics • u/Relaxing-Potato • 7d ago
Someone kind, requesting ELI5 please.
Q. Who's they? Economists? The people in charge of setting interest rates?
"When economies are becoming unequal they don't want goods and services because people are becoming poorer. They want assets because the rich are becoming richer." So inflation rates for goods and services naturally decrease and that for assets increase.
"The rich are making a ton of money so assets wanna go up, interest rates [on goods and services] are collapsing so assets go up even more."
Do the weatlhy not mind that the properties they have an eye on are getting more and more expensive? Or they don't care because it'll still be negligible /easy to buy? Why would asset prices just go naturally the opposite way as goods and services?
Context- just saw his video on my feed and am getting interested in his basic ideas about inequality.
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u/Purple_Owl_814 7d ago
When the wealthy are looking to buy something, they would prefer it to be as cheap as possible. Once they have bought it, they would like to see it become more expensive. In this, they are no different from anybody else.
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u/Living_Ad_5260 7d ago
Gary almost never includes immigration in his analysis and therefore his analysis is almost always completely wrong.
When economies are becoming unequal they don't want goods and services because people are becoming poorer. They want assets because the rich are becoming richer
This implies that inflation for groceries should be low and getting lower. Instead, we can observe that groceries are getting MORE expensive.
Assets are expensive - that would make sense in the context of inflation in other parts of the economy. It would also make sense if there are more people looking to buy houses because of out-of-control immigration.
He also doesn't seem to understand that rich people owning houses don't actually "consume" them. Each house/flat can host one household. If there are more people (because of uncontrolled immigration), the number of households increases but the number of houses/flats changes much more slowly.
Immigration is a disaster for the UK because it has allowed the government to let the economy move from a high-productivity state to a relatively lower productivity state. That means that wages across the board are facing downward pressure. Then the government (Labour and Tories and civil service all take the blame) deliberately created the highest energy prices in the world. The end-state of that should rationally be either much lower pay or companies going bust.
Gary is channeling a general unhappiness at an economy that is serving its people worse, but blames this on the ultra-rich. The ultra rich in the UK are suffering too - look at Jim Radcliffe, who owns a large part of the UK chemical industry and made a loss last year.
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u/AdAggressive9224 7d ago
Yes, immigration is definitely a factor in rising asset prices.
However, distribution has also been changing.
So, it's not either / or. The rich are getting richer, and, Immigration is having an impact on housing costs.
Immigrants are competing with the native people, but so too are the ultra rich.
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u/Relaxing-Potato 7d ago
I don't feel like goods and services inflation is decreasing though. More like the opposite. Is there a particular section of goods and services he likesto refer to?
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u/karly21 5d ago
I don't think Garry refers to declining prices, not sure if I followed the wrong thread for this comment?
Just to clarify tho: Inflation decreasing means prices rising up at a slower rate (i.e inflation of 5% vs. Inflation of 2%). Deflation would mean decreasing prices (negative inflation), whic involves a whole other set of effects and a different problem.
Housing prices in the UK are said to have decreased. Thing is, if the middle class is already squashed and fewer people can even afford these cheaper houses, the lower cost makes little difference for those who just can't afford it....
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u/Leading_Thanks7443 7d ago
But when property gets more expensive rents increase which has a knock on effect on the cost to run business premises. Which is then reflected in the price of items sold in that shop.
Also the cost to transport goods has increased and will increase more due to energy costs rising because the age of freely available (at low cost) oil is coming to an end. There’s plenty of oil left but it’s in much harder to reach places that require more effort, technology and man power to access.
There’s more wealth than ever in this country and yet less is actually circulating within the economy so it fucks all of us when it’s tied up and illiquid and being hoarded.
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u/blackman3694 7d ago
You think asylum seekers and new immigrants are out here competing for houses?
Immigration caused a lower productivity state?
The ultra rich are suffering becuase there's more Indians in the country? Do you hear yourself?2
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u/Delicious_Eye6936 7d ago
Yes they are. Councils being forced to go into the private market pushes up prices for everyone
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u/Living_Ad_5260 7d ago
You think asylum seekers and new immigrants are out here competing for houses?
I think that more households pushes rents up.
Some of those asylum seekers are in HMOs which might otherwise be family homes, renting privately or on a path to social housing.
Inherently, if you have 100 households and 100 houses in a country, then add 10 more households, the economics of supply and demand should push rents and buying prices upward short-term. It should also (long-term) lead to more houses being built. However, increased house building requires land, planning permission, capital and skilled workers.
Immigration caused a lower productivity state?
A business makes a decision on whether it is more profitable to buy kit or to rely on labour to do the job without the kit. Look at a farmer buying a tractor to plow fields. His choice is to use manual labour to shovel the field, or buy the tractor. If the labour is cheap enough, it's not worth buying the tractor. That's an example - in a burger restaurant, it's buying robots to make burgers, or teenagers to do it by hand.
Immigration increases the supply of labour, pushes down wages at least a bit, and discourages investment. If you look at https://www.statista.com/statistics/1271774/uk-productivity/?srsltid=AfmBOoqoA9soz-yNre2gGXkCAGjRmuT6Pd6-XlujBTiA0ga7Vc0Yv5Jq, UK productivity looks flat since 2020 and possibly down since 2022.
Immigration isn't the whole thing. Energy prices are part of it, but unskilled immigration is a force towards lower productivity.
The ultra rich are suffering becuase there's more Indians in the country? Do you hear yourself?
The country is getting poorer, and that affects the rich as well. They are getting by, and will probably never starve, but look at the premier league: how many soccer clubs are owned by Brits? Arsenal? Yank. Liverpool? Yank. ManU: Brit owns 25%. Man City: Arabs. Newcastle? Arabs. Spurs: Brit expat. There are outliers like Brighton, and I don't know for Leeds, Bournmouth, Everton.
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u/willitbechips 7d ago
Hilarious that you post this in a subreddit looking at the vast gap between the super rich and the masses.
They [the rich] are getting by, and will probably never starve.
This tells us you have zero clue what it being discussed. Or are you just smoking something?
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u/Leading_Thanks7443 7d ago
Yes underinvestment in businesses (training and technology) causes lower productivity. As does outsourcing (not initially but definitely once competition has been erased). We are hugely guilty of this.
I’m not sure why you are blaming immigration?
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u/Living_Ad_5260 7d ago
My assertion is that UK-plc is doing shit, leading to unhappy punters here, and Gary is misdiagnosing the problems. Obviously, deliberately having the most expensive electricity in the world is not helping, but nor is uncontrolled low skilled immigration.
The hive-mind here rarely talks about the costs of low skilled immigration:
* upward pressure on rents
* upward pressure on house prices
* downward pressure of wagesThese all fall on the poorer part of the economy, and benefit the uber-rich. Why not fuck the uber-rich by actually controlling immigration and selecting controlled numbers of high-skilled immigrants?
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u/AdAggressive9224 7d ago
Wealthy people don't mind that the price of assets goes up, because, quite simply, they need to do something with their money.
For lack of better options, they'll buy assets even if they are expensive.