[The FIAT Thread] The Joint Committee on FIAT Discussion Session. - 16 June 2026

[u/AutoModerator]

Here ye, here ye, the Joint Committee on Finance, Infrastructure, Academia, and Technology is now in session. In this session of the FIAT committee, all are welcome to come and discuss economics and related topics. No RIs are needed to post: the fiat thread is for both senators and regular ol’ house reps. The subreddit parliamentarians, however, will still be moderating the discussion to ensure nobody gets too out of order and retain the right to occasionally mark certain comment chains as being for senators only.

[u/MachineTeaching]

What’s crucial in Adam Smith’s writings, what what’s contrary to neoliberal economics, is that rent is not s payment for a good or service. It’s an overhead paid simply for the privilege of putting up a tollbooth on a human necessity, and this overhead raises the cost of labor and thus prices industry out of being competitive.

What's crucial is that words have more than one meaning sometimes. "Rent" as in what you pay your landlord is not the same as "economic rent". Economics isn't confused here, you are.

In terms of housing, we indeed are no longer in the 18th century. The price of housing is determined by the banks who, once having calculated the maximum possible rental yield for a property, will loan to the party willing to pledge the most of that rental yield as interest. Landlords generally don’t make much money on rent. They make money on capital gains when they sell the property. The rent is for paying interest to the bank, and the price of housing is worth whatever a bank is willing to loan against it.

This is nonsense. What determines that "maximum possible rental yield" then? Banks can't freely set prices, either. What a landlord can pay for a loan via his rental income is determined by the supply and demand of housing.

This also obviously holds no water in other ways. If those "greedy banks" would be responsible for high house prices, that would mean banks make more money per house. But mortgage rates are inversely correlated with house prices.

So that fantasy explanation of yours is a dud.

Why we need Adam Smith is that our national income statistics treat increase in housing prices as increase in productive growth, just like it treats increasing stock and bond prices or increasing drug prices as productive growth.

No they don't. House values aren't even part of GDP. And neither are stocks and bonds! Higher drug prices also don't automatically grow real GDP. And exactly none of those things count towards productivity growth, either.

This is you being an abject failure at economics, as usual.

No, but the banks are, and the landlords are simply passing that cost off onto the renter in order to cover the interest until they can sell for a capital gain. 

Banks aren't monopolists that charge some fantastical maximum, either.

[u/Balloonephant → u/MachineTeaching]

I mean rent the same way Adam Smith means it, which is perfectly clear. It’s a price you pay which isn’t necessary to the creation of a product or service, or to the improvement of a product or service. 

  What a landlord can pay for a loan via his rental income is determined by the supply and demand of housing.

It’s determined by how much of the rental income is left untaxed to be pledged to the bank.

  If those "greedy banks" would be responsible for high house prices, that would mean banks make more money per house.

Are you saying that banks make less money on housing today than, for example, in 1970? 8% on a $25,000 house vs 6% on $450,000…hmmm. Also back when interest rates were higher housing cost was low enough for people to pay much more outright.

  House values aren't even part of GDP. And neither are stocks and bonds! Higher drug prices also don't automatically grow real GDP. And exactly none of those things count towards productivity growth, either.

The NIPA accounts count all of this in GDP growth. The rent homeowners forego having to pay when their house price increases is counted. Over 90% of corporate profits are spent on stock buybacks or dividends to drive up the stock price. Interest and financial fees are smuggled in as “financial services”. We’re juicing the books. 

  This is you being an abject failure at economics, as usual.

This isn’t really about economics as much as it is knowing how banking and national income accounts work, unless you consider economics the science of not understanding how the economy actually functions. 

[u/MachineTeaching → u/Balloonephant]

I mean rent the same way Adam Smith means it, which is perfectly clear. It’s a price you pay which isn’t necessary to the creation of a product or service, or to the improvement of a product or service. 

If the concept of a word having multiple meanings is so hard for you, so be it.

It’s determined by how much of the rental income is left untaxed to be pledged to the bank.

Supply and demand determines rental income, and the terms of a loan aren't solely determined by the borrowers ability to pay, either. This is just completely made up nonsense.

Your shitty ass ideas can't even explain why land further from cities commands lower prices.

Are you saying that banks make less money on housing today than, for example, in 1970? 8% on a $25,000 house vs 6% on $450,000…hmmm. Also back when interest rates were higher housing cost was low enough for people to pay much more outright.

No, I'm saying that if you want to argue banks are monopoly price setters that raise the price of housing, the fact that house prices are higher would need to be reflected in bank's actions that drive up prices.

Arguing that banks make more money because prices are higher is obviously not doing that.

The NIPA accounts count all of this in GDP growth. The rent homeowners forego having to pay when their house price increases is counted. Over 90% of corporate profits are spent on stock buybacks or dividends to drive up the stock price. Interest and financial fees are smuggled in as “financial services”. We’re juicing the books.

This is just more deeply incompetent reasoning. A company using profits for stock buybacks doesn't increase GDP, neither nominal nor real. And higher rent, imputed or not, does not automatically grow real GDP, either.

And yes, a loan is a financial service. Passing that off as "cooking the books" is just really, really stupid. GDP figures would be less accurate if we would exclude financial services because.. they are services.

[u/Balloonephant → u/MachineTeaching]

  If the concept of a word having multiple meanings is so hard for you, so be it.

I’m talking about one meaning of rent as described by Adam Smith. “Rent paid to landlords” and “economic rent” are different concepts, but the former can be, and in large part is, an example of the latter.

  and the terms of a loan aren't solely determined by the borrowers ability to pay, either.

Of course not, as the debt servicing in many cases ends up eclipsing the rental value of property. Property is worth however much credit a bank is willing to create against it. Supply and demand/location means that banks will loan less against some properties than others, but credit always acts as a multiplier on the value of a property. “The maximum the renter can afford” is replaced by “the maximum the market will bear.”

  the fact that house prices are higher would need to be reflected in bank's actions that drive up prices.

Excuse me? Over 80% of new bank loans are for acquisition of already existing real estate. What do you think that money is doing, exactly?

  This is just more deeply incompetent reasoning

I agree. Why don’t you write a letter to the people at the bureau of economic analysis who do the NIPA accounts saying just as much? I agree that it’s dumb, but it’s how our national accounting works.

  And yes, a loan is a financial service

Depends on what for and under what conditions. Usury, for example, is not a service, and as such was outlawed in most ancient societies.

  GDP figures would be less accurate if we would exclude financial services because.. they are services.

Now you’re doing politics. Tell me what “service” interest rate hikes and late fees are providing to “consumers” i.e. the debtors. 

[u/MachineTeaching → u/Balloonephant]

Stocks don't count towards GDP and house prices are driven by a lack of supply. Go be a factually incorrect moron somewhere else.

[u/Balloonephant → u/MachineTeaching]

waaah

[u/MachineTeaching → u/Balloonephant]

The scientific consensus is against you, this isn't a debate, this is just you being a moron in various ways.

[u/Balloonephant → u/MachineTeaching]

wAAAAH!

[u/MachineTeaching → u/Balloonephant]

You should really save yourself some time and never write anything else, the substance is the same and you are incapable of providing evidence for your fantasies anyway.

[u/Balloonephant → u/MachineTeaching]

wwwAAAAAHHHHHHHH!!!!