Shut Out
Shut Out provides a much-needed correction to the causes and consequences of financial crises and secular stagnation.
Stats for nerds
2recommend
7mentions
4people
2019–2024years
57% recommend43% neutral
Mentions per year
What Hacker News says
- Huh? When women do stuff at home, you want to count that. Sure. But when men do stuff at home, you refuse to count that?
> Total real wages have gone up, while median real wages have stagnated.
An investigation of median wages can be interesting. The comment only talked about wages in general.
> Thanks to our glorious new economy instead of basically everyone getting a house, spouse, and kid, now many will rent, work and die.
The US doesn't build enough housing, yes. Though renting by itself isn't a problem, but that housing (whether rented or owned) has become less affordable.
That's mostly because of various regulations (especially zoning) that limit how much developers can build. See eg https://www.amazon.com/Shut-Out-Shortage-Recession-Universit...
- Agglomeration effects are real. And you are better off building space for people in highly productive cities like NYC and San Francisco, then to force them to toil in obscurity in Appalachia.
They wouldn't be paying exorbitant amounts of money to stay in NYC or SF. They haven't in the past, before America stopped building. The distribution of rents used to be fairly 'flat', without the crazy spikes in productive cities we see today. See eg https://kevinerdmann.substack.com/p/the-consumption-basket-w...
Yes, many people have a preference for single family homes. If the people who are ok with density were legally allowed to enjoy that density, then there would be more space (even relatively close to city centres), left over for the people who prefer single family homes on large plots.
That also applies for your concerns about rich people taking up land: legalise density and building taller.
> The retrofits are major capital expenses that my mention later on. They get more expensive the bigger the house is. You still have larger costs on things like a new roof or flooring since there's simply more of it. Yes, they themselves generally wouldn't become a limiting cost. But neither would the property cost nothing.
Maybe, but you'd expect homes meant for rich people to have nicer than average roofs and flooring already. So your concern is a bit weird.
The vacancy rate doesn't seem particularly outside of historic norms: https://tradingeconomics.com/united-states/rental-vacancy-ra... So I'm not quite sure what you are on about?
In any case, even with your much higher estimate of 10% it's not a big deal. Even if you magically went from 10% to 0% vacancies overnight, you'd still only increased the effective housing supply by about 11%. The shortfall in building is much larger than that.
Again, please have a look at https://kevinerdmann.substack.com/p/the-housing-shortage-is-... and perhaps https://kevinerdmann.substack.com/p/random-notes or https://www.amazon.com/Shut-Out-Shortage-Recession-Universit... for a book length treatment.
- > It might be right, but it's far from damning evidence that the housing bubbles are myths.
Kevin Erdmann's book 'Shut out' https://www.mercatus.org/research/books/shut-out has a lot more evidence piled up.
https://kevinerdmann.substack.com/p/interest-rates-arent-the... has some interesting recent observations about the topic of housing, finance and interest rates.
- The author Alex Danco’s link that supposedly proves that building housing doesn’t improve affordability is a poor review article by Michael Storper and Andres Rodríguez-Pose that is rather thoroughly debunked by their own colleagues Michael Manville, Michael Lens, and Paavo Monkkonen here: https://twitter.com/mc_lens/status/1129502980498022401 In summary, Storper badly misrepresents or misunderstands the economic literature, and attacks strawman arguments, to try to avoid admitting that supply improves affordability.
The author also says, “The third factor that somehow gets left out of a lot of armchair debates about housing and yet is an essential (possibly THE essential) element in all of this is credit.” As Kevin Erdmann explains in Shut Out (https://www.amazon.com/Shut-Out-Shortage-Recession-Universit...), the opposite is true. Credit is the factor that people jump to to the exclusion of rent (and expected rent given the low rate of homebuilding), which is directly related to supply constraints. Housing prices are high in the Bay Area because rents are high; low interest rates did not detach prices from rents.
Yes, there are a lot of factors in the housing market if you want to get deep in the weeds. But in my opinion, attempts to elevate second and third order factors to avoid dealing with the first-order factors of supply and demand are sophomoric.
- Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. -- Milton Friedman
> I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns
Take a look at M2 money supply [0]. Pumping huge amounts of fiscal stimulus into the global economy caused this. Inflation has been driven by poor policy decisions.
> Then throw in other factors like housing undersupply in developed countries
There has been a housing stock shortage for over a decade, that's not new, so it's hard to argue that's a proximate cause [1].
> continuing depletion of "easy" oil
There's plenty of oil available [2]. New technology (hydraulic fracturing, horizontal drilling, etc.) allows for accessing reserves that were too expensive previously. There has been structural underinvestment in O&G thanks to misguided green/ESG policy.
> Chinese threats against Taiwan
How does this drive inflation? If anything, China has reduced inflationary pressures by decimating economic activity with Covid lockdowns.
> Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation
Gold has been a great hedge against inflation in the long run. When measured in gold, a soldier today earns a similar salary to a Roman soldier 2000 years ago [3]. However, gold is not a good hedge against inflation in the short term. When inflation goes up, interest rates go up. When interest rates go up, the opportunity cost of owning gold increases. It should be noted that interest rates have steadily declined throughout history.
[0] https://fred.stlouisfed.org/series/M2REAL
[1] https://smile.amazon.com/Shut-Out-Shortage-Recession-Univers...
[2] https://bettermeetsreality.com/how-much-oil-is-left-in-the-w...
[3] https://www.mining.com/what-a-roman-centurions-pay-says-abou...
- Erdmann adds to the thesis in a very valuable way by pointing out that people move out Zoned zone to Phoenix and other US metros.
Sorry, I missed out some more of this.
Erdmann divides US cities into Closed Access Cities (CACs), contagion cities (CCs) and Open Access Cities (OACs). The CACs were New York, Boston, the Bay Area and Los Angeles where building housing has become very difficult and where the prices are shooting up. The contagian cities were places that people who moved out of the closed access cities went to. These include Phoenix and Florida. The Open Access Cities were places like Houston, Atlanta and Dallas where sufficient housing for population increases was being built. Erdmann describes the CACs as having a chronic undersupply that has caused many people to move into the CCs. The OACs saw some ride and an increase in homebuilding but didn’t see nearly the drop in prices as the other types of cities.
Shut Out suggests that a reaction to the rise in housing prices that was occuring in CACs led to policy that brought up interest rates and caused prices in the CCs to drop which then led to a loss in confidence and a drop in housing prices across the board. Erdmann says that excess credit wasn’t the primary driver and points to the fact that the increase in US house prices was well underway before the bad loans came in.
From a review on Goodreads of Erdmann's book:
