Ask HN: How to prosper under negative interest rates? • Hacker News Board

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

#221

Post by qeternity » Tue, Mar 31, 2020, 10:21 PM UTC

MuffinFlavored wrote: post #93

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…

> The Fed is unlikely to go negative as they face a very different beast. Does the United States risk doing damage to our currency and how other nations use it with the stimulus/money printing that is going on?

Unfortunately not. The US is the tallest midget for the time being, and that’s unlikely to change in the coming decades.

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

#222

Post by jiaaro » Tue, Mar 31, 2020, 10:22 PM UTC

csomar wrote: post #178

thorwasdfasdf wrote: post #82

Earlier quoted context omitted.

but we're not having deflation. With fewer and fewer people working, there's less and less supply with even larger demand, now that they're printing money like never before. As a result, we're going to get really really serious inflation of over 2%, 3%, maybe even more than 3%. It doesn't sound like much because we've become innured to it. But, it's really bad. Just think, you earned 100K in 1 year and 1 year later i…

> but we're not having deflation. We are going to have deflation. The stock market already "deflated". Just wait for the rest. Food prices are going to go through the roof (and maybe medical procedures) but everything else is going to get cheaper.

Given that food and medicine make up a large portion of spending, I think we'll see something more like, "some prices go up and others go down."

Another big chunk is housing, which as far as I know, shouldn't expect much difference in supply or demand in the short term, though demand may increase (at least as measured by square footage) if people are staying home for a long enough time. That may be countered by the reduction in demand for real estate by businesses, though zoning will probably limit the short term effects that has on housing.

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

#223

Post by qeternity » Tue, Mar 31, 2020, 10:30 PM UTC

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…

I think you’re missing the meat of the argument: relatively speaking these things get cheaper over time. Bread has never been cheaper for most people. The average person can buy 2000 kcal for a few percent of their daily wages. However, in absolute terms, a few bucks today is many multiples of what it would have cost a century ago. The difference is that the increase in wages outpaced the increase in the cost of bread. And that is precisely what drives inflation. And that’s why talking in inflation adjusted terms (“real” terms) is so important. So even though bread costs 10x more than it did a century ago because people are earning 20x more so it’s actually cheaper. Compute works the same. Technological progress makes things cheaper in real terms and this is how quality of life improves.

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

#224

Post by thorwasdfasdf » Tue, Mar 31, 2020, 11:14 PM UTC

mdorazio wrote: post #107

thorwasdfasdf wrote: post #82

Earlier quoted context omitted.

but we're not having deflation. With fewer and fewer people working, there's less and less supply with even larger demand, now that they're printing money like never before. As a result, we're going to get really really serious inflation of over 2%, 3%, maybe even more than 3%. It doesn't sound like much because we've become innured to it. But, it's really bad. Just think, you earned 100K in 1 year and 1 year later i…

1) Once again, inflation does not work that way. If it did, it would have been out of control in 2009. Instead, it was near zero. The same thing is happening right now. 2) The idea that 2-3% inflation is "really really serious" is completely absurd. I'm guessing you're young because historical US inflation prior to the ridiculous post-2009 financial situation had long periods of being well above 3% and the sky didn't…

i was well aware of the 70s and 80s, that doesn't make it right.

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

#225

Post by CSSer » Tue, Mar 31, 2020, 11:25 PM UTC

fauigerzigerk wrote: post #158

jjeaff wrote: post #150

Earlier quoted context omitted.

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).

We have a shortage of farm labour for instance, which may soon turn into a shortage of fresh produce and into massive food price inflation. We have a shortage of home delivery capacity. If stuff doesn't get manufactured for months, we will have a shortage of many other things as well. Obviously we have a lack of demand for other things at the same time. I don't think there is that much unreasonable stockpiling. Peopl…

Where did the restaurants and the school get their food from? I know that means a great disruption, but I’m still not convinced that means a shortage.

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

#226

Post by dntbnmpls » Tue, Mar 31, 2020, 11:49 PM UTC

> I was brought up to work diligently, not take on debt, and save - a simple approach to building wealth

This is a lie told to the lower class to have them work like slaves. That's not how wealth is generated anywhere on earth. Wealth is created by "luck" ( finding oil, discoveries, stealing/confiscating, etc ) or using capital ( inherit it, borrow it, steal it, whatever ) to hire others to generate value and give those "others" as small a piece of the generated value as possible ( without the others turning on you ) and keeping the rest for yourself ( aka wealth ).

Imagine you and your 3 brothers make 10 pizza pies. If you can get them to take 1 pie each and you keep 7 pies, you just generated wealth. Congratulations.

> but I'm concerned that will put me at a disadvantage under an economic system with negative rates.

If you have to ask "How to prosper under negative interest rates?", then you are already disadvantaged and nothing is likely to change that. Negative interest rates, positive interest rates, it really doesn't matter for the average joe. Why not just live your life instead of worrying about things outside of your control? Ultimately, it all balances out. Sure, your savings account might not pay decent interest, but your mortgage or student loan interests will be lower.

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

#227

Post by nitrogen » Wed, Apr 01, 2020, 12:22 AM UTC

CSSer wrote: post #225

fauigerzigerk wrote: post #158

Earlier quoted context omitted.

We have a shortage of farm labour for instance, which may soon turn into a shortage of fresh produce and into massive food price inflation. We have a shortage of home delivery capacity. If stuff doesn't get manufactured for months, we will have a shortage of many other things as well. Obviously we have a lack of demand for other things at the same time. I don't think there is that much unreasonable stockpiling. Peopl…

Where did the restaurants and the school get their food from? I know that means a great disruption, but I’m still not convinced that means a shortage.

Sysco and the like. It's probably a distribution rather than a supply issue.

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

#228

Post by tradertef » Wed, Apr 01, 2020, 12:23 AM UTC

ls612 wrote: post #192

rayuela wrote: post #151

Earlier quoted context omitted.

I would love to see you take this and short the SP500, really put your money where your mouth is. Value is relative, and relative to the rest of the world the US is going to fare quite well. So good luck to you!

I think you are misunderstanding what he said. He's saying you have never gotten better off by betting against the United States in the long run, not that now is the time to bet against the United States.

I read the sentence two time to get what he was saying. Figured it out based on his first part of the sentence.

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

#229

Post by sokoloff » Wed, Apr 01, 2020, 12:40 AM UTC

nitrogen wrote: post #227

CSSer wrote: post #225

Earlier quoted context omitted.

Where did the restaurants and the school get their food from? I know that means a great disruption, but I’m still not convinced that means a shortage.

Sysco and the like. It's probably a distribution rather than a supply issue.

Exactly. Typical container size in foodservice distribution is a #10 can, packed 6 to a case. Each #10 can is 3 quarts.

Fairly few households are interested in buying canned tomatoes 18 quarts at a time.

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

#230

Post by chelovek89 » Wed, Apr 01, 2020, 12:42 AM UTC

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).

A personal example. Gym equipment: barbells, weight plates, squat racks, etc are either sold out or way overpriced right now because gyms are closed. I bought a barbell set the week before my gym closed, and now that I went to look to buy new weights for it Im looking at "out of stock until May"