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Ask HN: How to prosper under negative interest rates?

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Re: Ask HN: How to prosper under negative interest rates?

#181

Post by tathougies »

mindslight wrote: post #146
tathougies wrote: post #75

Earlier quoted context omitted.

That's why we have a stock market, a futures market, businesses, etc. The commenter above gave an example of a real estate investor. That is a particular type of investor which has to deal with some particular kinds of risk that not everyone is suited to or wants to deal with. For those people, there are other investments they would be good at, and they should engage in.

You didn't actually respond to my points, but just pointed out the existence of other types of business where the centralizing flow is less obvious than real estate.

If everyone participates in acquiring assets, then everyone builds wealth. Your claim is that real estate builds wealth for one person (or in aggregate, particular people). This is certainly true. If there are 300 million Americans, then, if everyone were a landlord holding 4 other properties (other than their house), only 60 million Americans could benefit from real estate. However, the other 240 million could benefit from owning a business, or owning a stake in one, or owning any of the myriad of assets available to invest in.

Societal wealth is built by one person building a lot of wealth based on others paying him, and just replicating that millions of times over the population.

Re: Ask HN: How to prosper under negative interest rates?

#182

Post by chewz »

hluska wrote: post #130
solaxun wrote: post #103

Earlier quoted context omitted.

"So, since you don't want to store that money under your mattress"... I never understood/agreed with this argument. I'd much rather withdraw all my money and keep it in a safe than lock in a loss. I suppose for most people though the minor loss of principal outweighs that inconvenience, but for me, as a matter of principle, I refuse to be paid less than my principal (I didn't mean for that to come out as cheesy as it…

When I was 19, I had an economics professor who did a great job of explaining that idiom to our young ears. He talked about feudal times when landowners had to store their gold. So they had to build these massive castles with walls, hire professional soldiers, train their kids to wield weapons and even give some of their land to particularly good soldiers. That system was really expensive so they needed slaves to kee…

Actually until industrial revolution the only asset generating yield was not gold but landowning. It wasn't risk less but on average it was the only asset available generating positive returns.

The castles and gold vaults were nice but only as a temporary store of wealth. Most of rulers were constantly in debt used to pay for wars and representation (buying influence).

XIX century introduced bonds which paid yields in coin, bankrupted most of landowners and created this new breed of entrepreneur capitalist.

Re: Ask HN: How to prosper under negative interest rates?

#183

Post by tathougies »

marcus_holmes wrote: post #166
mancerayder wrote: post #89

Earlier quoted context omitted.

Ditto. And in this crisis, they're suspending evictions and presumably suspending mortgage payments too. I feel very lucky to have gotten out of that chain. Now I'm renting and fairly comfortable compared to the much larger structure I used to own which included land (now I'm in a one bedroom condo). I just wish I could drill a pull-up bar and TV articulating arm into the wall. However, I'm able to rent and live in a…

I recently moved to Berlin, and the whole rental market here is awesome. Rent controls mean the rents aren't huge (but they are rising because of the high demand). But the amazing thing (to someone from UK/Australia anyway) is that I can repaint, make alterations, drill holes in the walls, etc. I might have to put it back the way it was at the end, but the landlord can't stop me from doing what I like to the place wh…

> I might have to put it back the way it was at the end, but the landlord can't stop me from doing what I like to the place while I'm here. A whole different attitude to renting.

This is the same in the US, FWIW. Most landlords aren't going to care what you do, as long as you don't damage common areas and return it in mint conditoin.

Re: Ask HN: How to prosper under negative interest rates?

#184

Post by DuskStar »

Supermancho wrote: post #126
m11a wrote: post #120

Earlier quoted context omitted.

Those presidents had remote wars and recessions as their triggers. Trump has a pandemic. Ultimately, you can't really go out and build a high speed railway during a pandemic, when you want to enforce social distancing and isolations (construction is the opposite to social distancing). And the US is so big that high speed rail would still be an awful way to go cross-country (it's only really effective within states),…

> Dumping money into schools won't fix education, either. Depending on what you mean by "fix". If colleges payed Silicon Valley salaries, I think the quality of College Education would soar.

That's not what is generally meant by dumping money into education (normally it refers to primary/secondary education), but I think it holds true here too. After all, we're putting FAR more money into colleges than we did 20 years ago, but very little of that money is going to the professors and it's VERY debatable if there's been any improvement to outcomes due too that funding increase.

Re: Ask HN: How to prosper under negative interest rates?

#185

Post by jbay808 »

ping_pong wrote: post #36
al_chemist wrote: post #31

Earlier quoted context omitted.

> You don't build wealth by saving. You do it by investing using leverage. For some reason, this sounds like "you don't build wealth by saving. You do it by lottery and scratchcards!"

That's because you don't understand finance. Leverage is the easiest way to make a larger percentage on your money, as long as it's used prudently. Borrowing money to buy real estate and then collect income is a very common way to leverage your money. Over time that builds real wealth. My friend has bought 5 properties and is renting them all out. When he retires, the properties will have been paid for, and the renta…

If it was so certain to work, why we would anyone lend me money to do it when they could just buy the property themselves?

Re: Ask HN: How to prosper under negative interest rates?

#186

Post by Eric_WVGG »

erehweb wrote: post #160
Eric_WVGG wrote: post #29

for a science fiction take: the economy is in negative inflation in Frederik Pohl’s _The Other End of Time_. There is a scene where some astronauts are on their way home from a day of preparation, and as part of their routine convert their paychecks into cash and browse various sidewalk tables full of collectibles and antiques on the way home, converting their cash into miscellaneous items that would cling to or appr…

Wait, if there's negative inflation, wouldn't you want to hang onto your cash? Sounds more like hyperinflation.

ugh. I think you're right. Sorry, it's been about fifteen years since I read it.

Re: Ask HN: How to prosper under negative interest rates?

#187

Post by chewz »

If you have a deflation and negative rates then you should hold to your money because year after year everything around you is getting cheaper. So delay consumption. Hold the cash. You will get better deal next year.

If you have and inflation and negative rates then this is just a temporary anomaly in monetary policy. Don't hold the cash. Borrow at fixed rate and invest risk free.

Re: Ask HN: How to prosper under negative interest rates?

#188

Post by seanmcdirmid »

jjeaff wrote: post #150
fauigerzigerk wrote: post #137

Earlier quoted context omitted.

I agree that 2-3% inflation is nothing to worry about. But what's happening now is not quite the same thing as in 2009. For the first time in a very long time we actually have a shortage of supply. We didn't have that in 2009. But I think/hope it will be short lived, and depending on how we act now it could easily turn into a shortage of demand once again.

Do we really have a shortage of supply? For what products? The only shortages I have seen are for toilet paper and a few random grocery store products that maniacs decide to stockpile next. (in my community, there is all the sudden a run on ice cream now that bread is back in stock).

VR systems and Nintendo Switch systems are also out of supply, they were bought up quickly when the quarantine started and China hasn’t been making any new ones for a couple of months now.

Re: Ask HN: How to prosper under negative interest rates?

#189

Post by jnwatson »

jjeaff wrote: post #152
jnwatson wrote: post #144

Earlier quoted context omitted.

That printing money necessarily leads to inflation is not true in a situation like this. Inflation happens when there's more and more money being used to chase a finite amount of goods. In our current economic situation, there's a huge pile of money that's not chasing any goods at all. Like like after the 2008 crisis that didn't lead to inflation, this won't either, as long at they turn off the money printer when peo…

They aren't really printing money. They are buying up debt, both private and government that will eventually be sold back to the market or will mature this returning that money back, with appreciation, to the fed. Which will then make it disappear just as easily as they created it.

Sure. The Fed doesn't even own printing presses, the Department of Treasury does. However, in this context, "printing money" doesn't mean making physical pieces of paper. It means creating money out of thin air. It does that by buying debt, which, as you note, can be destroyed just as fast as it is created.

Re: Ask HN: How to prosper under negative interest rates?

#190

Post by dropit_sphere »

mindslight wrote: post #33
qeternity wrote: post #8

You have to look at real rates, not nominal rates. The only markets that have negative nominal rates are battling deflation (which the US is not) or have serious liquidity concerns at the moment. The Fed is unlikely to go negative as they face a very different beast. Here's a quick example. Let's say you're in a deflationary environment: in 1 year, your money actually buys you more than it did last year, let's say fo…

> in 1 year, your money actually buys you more than it did last year, let's say for instance, 2% more. Under this weird environment It's worth pointing out that this is not "weird", but rather the natural state of things! The effect is so strong in computing that we still see it, but technological progress means everything in general gets easier to produce. This policy that "prices must always go up" is itself the ab…

You can have inflation as a market result though.

A lot of economic activity is adversarial and negative-sum. In the best case it's negative-sum but a multiplier of over 1, like police work. In the worst case it's value-destroying Uber vs Lyft wars, where companies spend on guns to fight each other with, which effort is forever lost for butter. Digital marketers are the soldiers in these battles, along with lawyers and security people.

In other words, just because everyone's rich doesn't mean there won't be someone willing to pay a lot of money to get more of the pie. Which leads to good scarcity (both from a smaller overall pie and the public having less access to it) and more money flying around, and boom, inflation.

We are in this situation today.

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