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Capital Is No Longer Scarce

continuations.com

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Re: Capital Is No Longer Scarce

#51

Post by ChuckMcM »

cryptica wrote: post #20

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basically, we are spending huge amounts of money getting numbed out of our minds instead of solving real fundamental problems. In general, I think it reveals a deeper problem about capitalism; none of us understand value anymore (we have more junk in our lives than w…

I don't think you can look at a subset of capital expenditures and then conclude "capital is misallocated."

You would have to look at all the businesses funded and see where the money is going. Also I would caution you about falling into the trap of confusing "valuation" with "capital". SnapChat might have had a $16B valuation but really only "allocated" a bit more than a billion dollars.

If you subscribe to the 'too much money is idle' point of view like continuations does, then you should be very bullish on the startup eco-system growing for all kinds of businesses, and that gives the capital a chance to be allocated to something useful, like another Watsi.

Re: Capital Is No Longer Scarce

#52

Post by nwah1 »

Ashendar wrote: post #23
cryptica wrote: post #20

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basically, we are spending huge amounts of money getting numbed out of our minds instead of solving real fundamental problems. In general, I think it reveals a deeper problem about capitalism; none of us understand value anymore (we have more junk in our lives than w…

' I think a significant amount of money is going into advertising, pointless startups, entertainment and social media.' My suspicion is that a lot of it is going into housing, driving up the costs for home buyers with no productive benefit for the economy.

You'd be correct. http://www.economist.com/blogs/freeexchange/2015/03/wealth-i...

Re: Capital Is No Longer Scarce

#53

Post by peter303 »

Central Banks have been pumping it out with near zero interest rates on and off for the past 14 years. The US Fed alone created about four trillion during quantitative easing. This cycle doesnt seem to have caused consumer inflation, but asset inflation: unicorns, high stocks, high houses.

Re: Capital Is No Longer Scarce

#54

Post by norea-armozel »

bluetomcat wrote: post #50
norea-armozel wrote: post #44

I follow @Damn_Jehu and I've been talking with him about it. What I find scary about the situation is the fact that if all that "dead money" ever gets into the wider economy you can kiss the current capital valuations goodbye. It could possibly result in the largest devaluation in history (larger than the Great Depression and the several panics/scares before then combined). For me this is amusing in a way since I wor…

Such heaps of money could only be meaningfully invested in case of a large technological breakthrough that would enable the emergence of entirely new industries, skill-sets and supporting businesses. Think of the internal-combustion engine, electricity, and (we are already exhausting the potential of this one) the Internet. Otherwise, the mere existence of that money (even if it never gets spent) serves no other purp…

Problem is that effectively if you spend that money you wind up devaluing any capital you already have invested in. So, why risk the devaluation? If I were Apple or Microsoft I would just quietly hum to myself and pretend it didn't exist. Or that I'm saving it for occasional dividend payouts. But beyond that, I'd stay as far away from active investment as possible.

In many ways this is akin to a mathematical singularity where all economic models break down. Can't tax it out of the economy or deficit spend it, both will cause misallocations from the speculative markets as they'll assume the dead money has worth which incentivizes them to spend it which again devalues existing capital invested which causes the markets to collapse. So, what to do? I assume at this point we're heading into a situation that's similar to a post-scarcity economy, so it's inevitable that prices will have to collapse whether we want them to or not. And that means certain norms such as property rights go away (along with the State institutions that prop it up). We'll get a Star Trek future, but only after the Mad Max nightmare between now and then is my guess (purely speculative and not of substance imo).

Re: Capital Is No Longer Scarce

#55

Post by merpnderp »

cryoshon wrote: post #49
merpnderp wrote: post #39

Earlier quoted context omitted.

Capitalism has never been about making the world a better place. All systems deal with humans and humans inevitably prefer helping out themselves and people close to them over others, which leads to corruption regardless of the system. And capitalism seems the best method for controlling innate human corruption (see China's incredible economic growth once socialism was all but abandoned for capitalism in the 80's pul…

I left medical research science because it isn't survivable... the world cares nothing for curing diseases, and incentivizes people to do so as such.

Didn't Jimmy Carter just go into complete remission from what used to be a death sentence, stage 4 melanoma? It was in his brain and liver, and now it's undetectable. He's 91 years old and a decade ago he would have stood almost zero chance of recovery.

I'm sorry the situation is so bad in research, but it does produce miracles.

Re: Capital Is No Longer Scarce

#56

Post by rm_-rf_slash »

peter303 wrote: post #53

Central Banks have been pumping it out with near zero interest rates on and off for the past 14 years. The US Fed alone created about four trillion during quantitative easing. This cycle doesnt seem to have caused consumer inflation, but asset inflation: unicorns, high stocks, high houses.

Because those banks lend to banks, who lend to other institutions, which are owned by institutions or directly by wealthy people. Aside from pension funds and such, the vast majority of financial markets stand to benefit wealthy individuals almost exclusively. It wasn't always this way. Citizen stock ownership in the US was quite significant in the 50s. It's been on a downward trend ever since.

Re: Capital Is No Longer Scarce

#57

Post by Retric »

ChuckMcM wrote: post #51
cryptica wrote: post #20

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basically, we are spending huge amounts of money getting numbed out of our minds instead of solving real fundamental problems. In general, I think it reveals a deeper problem about capitalism; none of us understand value anymore (we have more junk in our lives than w…

I don't think you can look at a subset of capital expenditures and then conclude "capital is misallocated." You would have to look at all the businesses funded and see where the money is going. Also I would caution you about falling into the trap of confusing "valuation" with "capital". SnapChat might have had a $16B valuation but really only "allocated" a bit more than a billion dollars. If you subscribe to the 'too…

If you see a large amount of money (as in 100+ of billion) flow in and significantly substandard returns then it was misallocated. The VC industry has seen substandard returns over the last 20+ years. So, it's not a good allocation of money.

PS: Some people get rich at Vegas, that does not mean gambling is a good investment.

Re: Capital Is No Longer Scarce

#58

Post by amelius »

erikpukinskis wrote: post #41
merpnderp wrote: post #39

Earlier quoted context omitted.

Capitalism has never been about making the world a better place. All systems deal with humans and humans inevitably prefer helping out themselves and people close to them over others, which leads to corruption regardless of the system. And capitalism seems the best method for controlling innate human corruption (see China's incredible economic growth once socialism was all but abandoned for capitalism in the 80's pul…

> capitalism seems the best method for controlling innate human corruption Capitalism seems better than past failures. But it is surely a local maximum. We have thousands of years of social evolution in front of us. Experiments have hardly been exhaustive, and material conditions seem to be changing faster than ever.

The best way to control corruption is transparency. Eventually, IT systems will solve large-scale corruption.

Re: Capital Is No Longer Scarce

#59

Post by ryandrake »

It's a sad situation. The world, in total, has more money than it needs, distributed to a wildly disproportionate few, who have no idea what to do with it, yet there are billions of people who suffer and struggle with issues that that money could solve. But "redistribution is bad", so we all just accept the status quo.

Re: Capital Is No Longer Scarce

#60

Post by graeham »

mohanmcgeek wrote: post #32

The article overlooks the sovereign debt. The world has a total sovereign debt of about 50 trillion. The Government bonds and their derivatives account for most of the difference between available capital and GDP. "Capital is no longer scarce" sounds very absurd. There will always be more people chasing limited resources and whenever less men (labor) are required for a task, the society directs that "capital" to eith…

One man's capital (credit) is another man's debt.
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