r/AskEconomics

In Fiat currency, the value of money is tied to what traders and consumers feel money is worth, and there is no real way of fixing the value of money at a certain point. So, money is worth whatever somebody will offer for it.

Say 2 people have $100 between them, and their services/goods are both of equal value - one ends up with $50, the other also ends up with $50.

If they had $200 between them, it would still be that one has $100 and the other has $100? Surely? In what world would this not happen?

The only way that I can see that an increase in the money supply wouldn't cause inflation of everything, is if there was a lot of inequality. So, e.g. one person's money supply triples but the other person still has $50, just because the first person happens to be very few steps removed from the central bank where the money is generated, so they see the new money supply first. But icl that seems like a horrible idea to me, because then many people have in real terms less money, simply because they are more removed from the central bank ?? Like, this is not a good outcome

I haven't had any formal economics training - I'm very open to being corrected on any misunderstandings

I learned in my basic economics class that banks create money by issuing loans. People put their money in the bank and said bank keeps a ledger of how much money each person has. In the past, the money was physical, which meant that the ledger and money were separate things. This means that when a bank "created" money with loans they were changing the ledger, and stating on it that, in total, their depositors have more money than they actual hold. This means the money they "created" isn't the same as actual currency. It doesn't actually exist, but effectively does because the actual amount of currency used in the economy is less than the amount that theoretically exists because of loans.

But now money is money is mostly digital, which means that the vast majority of money is exists because a digital ledger says so. Because most transactions are also digital (meaning banks just change their ledgers when a transaction occurs), there is no need for any amount of real currency to back the values on the ledger. In short, because the currency only exists on the ledger, when banks change that ledger when they create loans they should literally be creating currency in the same way a central bank prints money.

I feel like I'm missing something. Am I wrong?

Suppose the extreme case occurs where all countries outside the U.S. decide to rapidly move away from using the U.S. dollar as a reserve currency. Also, suppose that investors outside the U.S. wanted to sell their U.S. Treasury bills and bonds as soon as they mature and not buy new ones. Would there be any way to avoid a catastrophe in the U.S.? Alan Greenspan famously said that the U.S. can always pay its debt by printing money. Given the massive size of the debt (> 40 trillion), is it likely that a fire sale on U.S. treasuries, coupled with an end to the U.S. reserve currency, would cause hyperinflation in the U.S.?

Only two countries use a debt ceiling: the United States and Denmark. Both have a nominal debt ceiling, but the U.S. keeps its limit so tight that it has to raise it every year, whereas Denmark’s ceiling is so high that reaching it seems like a fantasy.

This makes me wonder: why hasn't the U.S. taken a different approach to debt? They could set a ridiculously high limit, tie the debt ceiling to GDP (for instance, at 776%), or create a debt unit that adjusts for inflation much like the Consumer Price Index (CPI). I would like to know your views on this matter, now that the U.S. debt has surpassed $40 trillion.

I am applying to a few schools this semester that have caught my eye, not doing a full market like I did as a fresh PhD, but a lot has changed since then. I have developed my research pipeline substantially, (several A and B pubs in ABDC since starting my current TTAP job), come into my "brand" of research instead of eclectic "whatever mentors/advisors want to work on when I'm in grad school", and obviously gained lots more experience teaching and building curriculum across both regular econ and applied/statistics/data type courses. Does anyone have any good information about the advanced assistant professor market? Am I at an advantage as someone who is more developed, or a disadvantage? Any inside scoops on advanced AP market?

Sorry for the random flair. I think there ought to be a job market flair but I feel that people looking at the teaching flair are at least marginally more likely to be PhD students or professors.

The US spends far more on healthcare than countries such as the UK, Switzerland and Japan without achieving obviously better health outcomes. However, it is also the world's largest pharmaceutical market and a major source of biomedical R&D.

Does this create a global benefit? For example, US patients and insurers pay much higher drug prices, potentially making pharmaceutical R&D more profitable, while countries with public systems negotiate lower prices but still benefit from the resulting drugs.

If the US introduced single-payer healthcare and negotiated prices down toward European/Japanese levels, basically are other countries currently "free-riding" on high US healthcare spending?

Essentially, is the inefficient and expensive US healthcare system partly subsidising medical innovation for the rest of the world?

I understand the stock market fairly well, but when it comes to the interplay between the two, I am less certain.

Specifically, how can a potential crisis in the bond market cause a long-term ripple effect in stocks?

How do corporations view the bond market and what does this mean for the overall health of the U.S. economy in both the short & long term?

Andy Burnham wants to bring economic growth to every postcode, if he does this what would happen to house prices?

I read that, as a method of dealing with inflation, some governments simply replace their currency as a sort of reset. Would this help with inflation now, or would that currency immediately inflate beyond control?

What if a new gold standard was made alongside the new currency, except with a more appropriate material? I've been told gold isn't worth enough relative to the US economy for a standard anymore.

Debt keeps accumulating and deficit keeps growing. From my understanding the main "breaking point" is when creditors don't believe the State can reasonably pay their debts anymore, I understand that you can't calculate "the line" but still, what could happen if this keeps on going?

I am aware that this may lead to lower wages per capita, and that this is not applicable in a lot of industries, but in that policy conflict, let's take Full Employment as a priority.

However, I am more primarily concerned with the trade off between job losses from firms being less efficient and competitive and therefore are pushed out of the market, and job gains from this policy, possibly including improved working conditions due to less responsibilities on existing employees.

I would be glad to be directed to relevant research and if there's policies better suited to reduce unemployment and underemployment. Thank you.

I've read some of Good Economics for Hard Times, which bridges the gap between the median voter and economists. When asked to rank professionals by how much they trusted them, most people put economists in second-to-last place, beating only politicians. Why do you think this is?

I am 21F and planning to build a career in finance, but something I have been hearing about AI has genuinely made me question how I should think about my future.
I recently heard Elon Musk argue that if AI and robots eventually produce most goods and services, money may become much less important and we could even see deflation.

That made me wonder—-> is finance still a sensible career to invest the next 10–20 years? (Deep down u think yes, but I want to what from experts)
And on a bigger level, if AI makes most things abundant and cheap, where does value move? What becomes scarce and valuable? —-> ( land, natural resources?)
And perhaps most interestingly, what would actually separate the “elites” from everyone else in that kind of world?

I am not saying I believe Musk is right. I am genuinely trying to understand what I might be missing.
I am asking because it at times become confusing deciding what to spend the next 10–20 years learning and building my career around. Sometimes I feel like I am preparing for a world that could look completely different by the time I am 35.
Would really appreciate perspectives from people in finance, economics, investing, or technology who have thought seriously about this.

Post edit : “The more precise question is what is the real minimum income to be self sufficient and not rely on public or caritative programs. “ unfortunately I can’t change the title any more.

I come up with roughly 39,000 per year as the minimum pre-tax income required for a single adult with no children to cover bare-necessities living costs in the United States . 49% of the active population is earning less than 39,000 per year , pre -tax.

This is not an official government statistic. It is an estimate based on the MIT Living Wage Calculator, cross-checked against other self-sufficiency/living-wage standards.

The main source was the MIT Living Wage Calculator.

URL:
https://livingwage.mit.edu/

Inputs used:

· Single adult
· No children
· Full-time employment, 2,080 hours per year

The MIT Living Wage Calculator estimates the minimum income needed to cover:

· Housing
· Food
· Transportation
· Medical care
· Taxes
· Basic household necessities
· Basic civic and personal expenses
· Broadband/communications where applicable

It does not include:

· Savings or retirement
· Dining out or entertainment
· Debt repayment
· Vacations
· Middle-class or comfortable lifestyle spending

I collected the annual living-income figure for each U.S. state from the MIT Living Wage Calculator for one adult with no children.

State values ranged from approximately:

· South Dakota: $31,179
· California: $51,584

The simple average across all 50 states was:
· $36,842 per year including Washington, D.C.

The population weighted average across all 50 states was:
. $38,867 per year including Washington, D.C.

The figure is a state-level U.S. average. Actual costs vary significantly by county and metro area. Also a population weighted average would have been a more precise estimate.

I use

· $39,000 as a slightly higher, conservative round number

Other Supporting Sources to make sure that we are not far from consensus

2. Economic Policy Institute Family Budget Calculator
   https://www.epi.org/resources/budget/
3. United Way ALICE Thresholds
   https://www.unitedforalice.org/
4. Census Bureau Income Data
   https://www.census.gov/topics/income-poverty/income.html

Why Not Use the Official Federal Poverty Line?

The official federal poverty line is widely considered outdated and too low.

For a single adult, the official federal poverty guideline is roughly:

· 15,650 per year

This is only about:

· 40% of the $39,000 living-income benchmark

The official poverty measure was created in the 1960s using a food-cost formula and has not been modernized to reflect current housing, healthcare, childcare, transportation, and tax costs. Therefore, the living-income figure of approximately 39,000 is a more realistic measure of the minimum needed to live independently.

Important Caveats

· The figure is for a single adult with no children
· Families and households require higher income
· It is a bare-necessities standard, not a comfortable or middle-class income
· Many people earn above this but still struggle because of debt, childcare, medical costs, or part-time work

PERCENTAGE OF US LABOR FORCE

Using individual earnings data from the U.S. Census Bureau Current Population Survey, the approximate shares below $39,000 per year are:

Group Percentage below $39,000
All U.S. workers, including part-time ≈ 47%
Full-time, year-round workers only ≈ 21%
Entire labor force, including unemployed with zero earnings ≈ 49%

So for the broadest definition of the active/working population, roughly:

49% of U.S. workers fall below $39,000 per year.

Important caveat: this is individual income, not household income. Households can have multiple earners, so the household share below $39,000 is much lower, around 26%.

A tentative (AI assisted) breakdown of pre-tax living income for a single adult with no children. Please feel free to contribute and improve the parsing.

Spending category Annual amount % of $39,000
Housing $14,040 36.0%
— Rent/mortgage $11,100 28.5%
— Utilities: electric, gas, water, trash $2,940 7.5%
— Food $4,290 11.0%
— Transportation $5,460 14.0%
— Medical / health care $3,120 8.0%
Other necessities $5,070 13.0%
— Cell phone $960 2.5%
— Internet / broadband $840 2.2%
— Clothing / footwear $960 2.5%
— Personal care / hygiene $540 1.4%
— Household supplies / cleaning $600 1.5%
— Civic participation / misc. $1,170 3.0%

Taxes $7,020 18.0%
Total $39,000 100%

Something I've thought about, especially after I've seen discussions relating inflation with COVID stimulus payments:

Suppose, through some means, income and wealth became more evenly distributed (e.g. let's consider the US). Will the fact that the lower percentiles now have more dispensable cash mean that inflation will follow, such that it would "cancel out" the increased cash? If so, does this mean that an unconstrained free market economy will require that the lowest percentiles will always just be scraping by?

I'm sure the answer is complicated, but maybe you all have some insights?

And as this trend continues to grow, could the economy remain chugging along as more and more consumption concentrates among the top 10% and the bottom 50% increasingly are spending exclusively on staples and essentials?

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Hi all! Not sure if this question is allowed, but also unsure of where else to go. TLDR, I hated math growing up and am now incredibly fascinated by the study of economics as a whole. I’m generally good at guiding myself through a self-made syllabus of sorts, but it seems daunting to sort through and decide what to teach myself about first, especially in our current era of misinformation. I am aware that no amount of research or reading can replace a formal education, nor do I desire to necessarily work in economics, but I do want to gather as much of a whole-rounded view of the topic as I can. So:

Where do I start? What starting topics, areas of study, books, studies, papers, etc will best inform me on the study of economics? What are the key schools of thought that are the backbone of economics? I obviously have ideas of what these answers would be, but want to know if that’s true in practice.

Hello,

Since Spain's economy is enjoying cheap energy, great infrastructure, investments, high quality immigrants, I am wondering how it would compare against Italy's robust and big economy. Italy relative to Spain feels like it has more problems.

Spain:
-Energy wise Spain is much more advanced

-Infrastructure in Spain is on France's level, Italy is behind.

-Spain's GDP growth is way more promising.

-Public investments in Spain are higher

-Spain enjoys immigrants who are culturally close.

Italy:

-Has a higher GDP per capita

-Is a member of the G7

-Has a more robust industry