In a sane political system, we would’ve raised taxes (across the board). That would’ve slowed down consumption and allowed the Fed to lower interest rates, which would’ve raised investment. It also would’ve reduced the deficit, which would also be good for long term economic health.

Instead, we blew up the deficit and lowered taxes (but only for the really rich).

So many problems and social angst is downstream of expensive housing. Higher interest rates, fewer laborers, and more expensive building supplies (due to tariffs) is just making the housing crisis worse.

Oh and just wait until the Fed’s independence is completely gone. Our economy is galloping towards Peronism. Favored groups get economic benefits. Inflation is out of control. Competitiveness is gone. Capital flight. Rapid erosion of quality of life. It won’t be fun.

" we would’ve raised taxes (across the board)"

So I lived in Canada (Ontario) for 18 years, and I've been back in the US for 4. In Canada (and here) I don't see how you "raise taxes across the board" when most tech salaries (90-180k) by the time you add in sales tax and fuel taxes you're already paying 45-50% tax rate. For example, hypothetically one year I was buying a house, so no RRSP contributions that year. On my hypothetical 160k salary I paid $58k in income tax and withholding, plus 13% HST on just about every single purchase, plus something like 24% for fuel/road taxes. That means an effective tax rate of something like 45%. But we don't get pensions or anything like that, so you also need to save. A lot. If my hypothetical example doesn't sound so bad, imagine if you were making $45k. Sure, lower tax rate, but still.

I'm sorry, as bad as it sounds to everyone, it's time for the capital class to pay up, the middle class can no longer subsidize society because it's simply too small now.

edit I want to be clear that I am not against taxes, I am for social services, I'm just tired of paying 10% of my net worth every year while folks worth tens to hundreds of millions of dollars pay very little tax because they have limited "income", but then I pay for the roads they drive on and the public services they use.

Lol wait wait... RRSP is equivalent to US 401K, right? You can't contribute to your 401K the entire year when you buy a house?

Agree w/ everything you said and have similar feelings. My SO is from Toronto and we've always considered moving but mix of job market/housing prices have continually convinced us otherwise.

It's not that I couldn't contribute to a 401k/RRSP that year, it's that I needed the cash for downpayment/repairs.

You can take a loan from your RRSP for a downpayment, but only on your first home purchase.

(I was an immigrant and had owned a house in the US, and I am apparently the only person who had ever answered that question honestly, so I could not borrow from my retirement, and I had to pay provincial sales tax because of this as well).

The economic theory where using taxes to deal with demand shocks works is predicated on lowering taxes while cutting spending when things are going well in the private sector, driving down investment with high interest rates, like in the last 15 years. Especially lowering social spending, trying to get as many people into the private sector as possible so that more people work when the inevitable next crisis comes, at which point a movement in the other direction (at which point the government would have lots of saved up money and resources to both drive up demand and take care of people the private sector can't take care of anymore)

The idea is that government-generated demand is adjusted to keep total demand for the economy to service roughly constant, while keeping everyone either employed or receiving benefits. This means when the private sector does well, the government deliberately slows down, almost hinders activity and builds up a bank (you can tell: when the government does this it drives down house prices). When the private sector does badly, the government generates economic activity with their piggy bank.

Of course, the government never lowered its expenditures. I could say "after the last crisis" but with only very few exceptions the government has never lowered expenditures. In fact all governments worldwide have lowered expenditures so few times in all of history that a lot of economists can recite the entire list of exceptions by hard.

So there will be a demand shock, which will really hurt the private sector, and this gives the government a steep drop in income while the private sector is dropping employees by the thousands and everyone is screaming for government benefits, because they're really needed. Oh and meanwhile interest rates are going up, so the government is also rapidly losing the ability to borrow, which they'll try to prevent by ... driving up house prices.

What can be said? This is exactly what Canadians (and UK, and US, and EU, and ...) citizens have voted for. Governments will be forced into drastic social services cutbacks while doing everything they can to raise house prices (in fact all prices, since that's where they loan the money, which then results in the people that manage to keep jobs/keep in business produce more goods for the government)

This sounds more disastrous than it is though. All that's really lost is the ability to buy foreign goods. So if the government is able to quickly get the private sector to build/grow the goods that are currently imported there won't be much of a crisis. However ...

All there is to say is: either move to a tax haven, or enjoy.

> Inflation is an increase in the money supply which also happens to increases prices.

This is not a definition I have seen used by academic or working economists. If the purchasing power of $1 decreases, we can say there has been inflation. Even if the money supply is constant, if shirts used to cost $10 but now cost they cost $100 due to increased demand, a supply shock, a union strike, a tax, or a speculative shirt buying bubble, it would be considered inflation in all of those cases, regardless of the cause.

It sounds like you mean monetary inflation, but the fed’s mandate is not to control monetary inflation (which would be a lot simpler) but to ensure stable prices. The mandate has no exception for non-monetary causes of price instability.

Of course measuring how much a dollar can purchases is an enormously complex and subtle task that can be approached in many different ways. But the whole argument for tariffs is that foreign producers of goods are selling them so cheaply that American producers cannot compete. So if we increase the price of those foreign goods by adding a tax on it and shift some good consumption to more expensive American producers, that’s obviously going to reduce what a dollar can purchase.

> Inflation is an increase in the money supply

If the money supply increase slower than production, you get deflation (temporary, as deflation stop investments, which slow production), so hopefully no one important use your definition of inflation.

> Tariffs increase prices to the benefit of domestic producers and benefits everybody.

I think tariffs are a regressive tax brought on by the most economically illiterate administration in living memory.

> What we will see is if prices are more important than building skills and wealth of our fellow citizens.

So instead of it being on the shoulders of the “wealthy job creators” who definitely earned it all fair and square and should keep every penny, it’s now on the poor and the average citizen?

These are just regressive policies that lead to outright social unrest , and a horrific distribution of wealth.

>I think tariffs are a regressive tax brought on by the most economically illiterate administration

That's the kind interpretation. The maligned one is they are brought on by those who lust for power and control and realize those come from more wealth and tariffs increase wealth disparity, increasing their percentage of the whole higher even if the pie shrinks.

> Tariffs increase prices to the benefit of domestic producers and benefits everybody.

Not necessarily, and there are plenty of examples around the world of tariffs that do not do that, but instead cripple the economy. Tariffs are just one aspect. If the domestic supply is not there for one reason or another, you have the worst of both worlds, with high prices and still no re-industrialisation.

You need companies to be reasonable confident that they’ll be making money next year, and you need the situation to be stable enough to let people invest to make it happen. You need those people to be confident enough that they won’t just be crushed by a president’s friend who has more access to power than they have. You need rule of law and due process. Not a kleptocratic oligarchy.

Otherwise you’re just sawing off your leg to repair a broken ankle.