Fed Ends Zero-Rate Era • Hacker News Board

Re: Fed Ends Zero-Rate Era

#111

Post by api » Wed, Dec 16, 2015, 9:06 PM UTC

stanleydrew wrote: post #52

api wrote: post #35

Earlier quoted context omitted.

Not sure how much it will impact startups with saner valuations, but yes I do suspect we might see a unicorn apocalypse at some point in the future. If it happens it will unroll more slowly than a public market crash since these markets are mostly illiquid and private. What you'll see is former unicorns raising down rounds and a general regression of other valuations in proportion to how over-inflated they might be.…

You are not clueless. It's just nearly impossible to draw an actionable line in the sand where on one side your valuation is sane and on the other it isn't. You certainly can't do that in any kind of general sense. Every startup is by definition unique. And there's almost always a way to justify a higher or lower valuation for any given company.

Oh sure, it's a judgement call. I would say as a founder that it's best to seek a high but not insane valuation, and of course the definition thereof depends on multiple factors: what I think a reasonable growth estimate is (while not under the influence of drugs), what the market is currently paying for capital (average, not outliers), etc.

If every living multicellular organism on Earth would have to create an account on your service for it to be worth X, X is probably insane. If you have no meaningful revenue, then in most cases a valuation more than one standard deviation among the mean for your sector and maturity is probably nutty.

Re: Fed Ends Zero-Rate Era

#112

Post by codyb » Wed, Dec 16, 2015, 9:06 PM UTC

zeveb wrote: post #102

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner. Isn't it highly unlikely that tax dollars will be spent or invested more wisely than the original owners of those dollars would have spent or invested them, since no-one would have known the owners' preferences as well as the owners themselves? Keynesian pump-priming ends up thinking it mak…

I'd argue government spending on things like infrastructure moves goods and people to more places thus stimulating the economy.

Government spending on research results in new drugs and medications which improve peoples qualities of life.

Government investment in clean energy promises to reduce the tens of thousands of people adversely affected by pollution in our nation annually and also provide us with a hugely viable export technology.

Government spending on bureaus like the FDA, EPA, and BBB give consumers and citizens access to outlets for complaints against dirty businesses and give us a decent amount of protection against those who would harm us to gain more of those dollars you think they'd rather have in their own pocket.

Meanwhile, the original owner might buy a boat while thousands of people have shoddy products and no recourse. Or they might buy a nice car while people deal with the pollution from their industry.

In the end, I believe it to be about balance but lets not pretend that a lot of the research that goes into the vast majority of the technologically advanced products doesn't come from tax dollars and lets start ensuring that we as citizens benefit just as much as the owner of these big businesses which can (and should) capitalize on these investments made by society for the good of society.

Then we can all go back to our enjoyable lives of digging up and reburying jars of money.

Re: Fed Ends Zero-Rate Era

#113

Post by msellout » Wed, Dec 16, 2015, 9:07 PM UTC

zeveb wrote: post #102

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner. Isn't it highly unlikely that tax dollars will be spent or invested more wisely than the original owners of those dollars would have spent or invested them, since no-one would have known the owners' preferences as well as the owners themselves? Keynesian pump-priming ends up thinking it mak…

> more wisely than the original owners ... would have invested

It depends. If the original owners were a handful of wealthy oligarchs, that's likely to be worse (ie. more centralized) than as spent by a large, distributed bureaucracy. If the original owners were a large population of mostly middle-income and poor, that's likely to be better (ie. more decentralized) than government spending/investment.

> government spending in general is essentially a drag

If government is a centralizing force, then yes. If government is a decentralizing force -- improving the mechanism of the free market -- then it's increasing efficiency.

Re: Fed Ends Zero-Rate Era

#114

Post by brc » Wed, Dec 16, 2015, 9:09 PM UTC

dsr_ wrote: post #50

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

If you want to stimulate aggregate demand at the consumer level, you need more people to have good jobs, so they can make money, so they can spend money. This would represent a reversal of the trend since 1970 towards greater income inequality. It is not clear to me that anyone is doing anything about that (except, of course, in the negative sense.)

Consumer demand is meaningless. Trying to push it is like trying to push a string. Demand is an artefact of production. Unless your economy is producing, you won't increase quality of life and wealth for all citizens. This point is obvious, but gets completely lost in all the frenzy around 'stimulating demand'.

To buy something, first you have to produce something worthy of exchange. Everyone has to start from this point.

Re: Fed Ends Zero-Rate Era

#115

Post by laotzu » Wed, Dec 16, 2015, 9:09 PM UTC

gotchange wrote: post #106

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. How? Simply put by distributing cash to the people directly. Why do only rich people on Wall St. get subsidies and bailouts where the Fed purchase their worthless papers with hefty sum of money and push on their balance sheet on the taxpayer's dime? Not only this but they are also engaged with them in destroying the labor market by…

>This can't be going this way forever and something has to be done to stop this madness.

Wall St: "Invest in pitchforks!"

Re: Fed Ends Zero-Rate Era

#116

Post by dragonwriter » Wed, Dec 16, 2015, 9:09 PM UTC

vezzy-fnord wrote: post #100

dragonwriter wrote: post #95

Earlier quoted context omitted.

> > I argue my ideas only need to hold water for another 10-30 years, depending on if technology advancement keeps up. > Given that the AI community's prediction making skills have been just slightly better than those of Nostradamus, that's a very tough gambit to rely on. That's a weird comment; "technology" is a lot broader than "AI".

I made some perhaps overly hasty generalizations. HN is a community that is heavily skewed towards a belief in transhumanism (especially that AGI will be coming very soon) and moreover that high rates of technological unemployment are upon us, necessitating a UBI or stronger reforms to make sure the general-purpose labor saving of AGI doesn't cause social unrest from crowding humans out of the labor market. I can't i…

I think you accurately characterize a fringe of HN, but I think support for UBI, etc., isn't all (or even mostly) about imminent AI singularity (though certainly some is based in that belief), much of it is a belief that the Band-Aid over traditional capitalist economic relations provided by the modern mixed economy, particularly as implemented in the US, which remains heavily based on the assumption of steady wage labor with one primary employer (which, itself, is almost a pre-capitalist, feudal/manorial model) as the normal means for people to earn income, is fraying given present levels of automation and preferences for ad hoc interactions, necessitating a more efficient model of support to cushion the blows of long-term and short-term dislocation in an increasingly automated and increasingly fluid market, a need which will only get more acute with increasing automation (even fairly mundane automation that falls well short of AGI.)

Re: Fed Ends Zero-Rate Era

#117

Post by mywittyname » Wed, Dec 16, 2015, 9:13 PM UTC

pjungwir wrote: post #56

jfoutz wrote: post #30

Earlier quoted context omitted.

The fed interest rate is the foundation for pretty much all loans, cars, mortgages, whatever. Low interest rates are good for borrowers. I want a car, or a house, or a power plant, or a jet, or whatever. I want to spend some money that i don't actually have. This changes the economy because more money is moving around. High interest rates are good for lenders. I've got this pile of cash that isn't doing anything. The…

Rising interest rates also mean that house prices should drop (or deaccelerate), right? If you figure a buyer has a fixed budget, the more they are paying in interest the less they can pay in principal. Not saying 0.25% will have much effect, but in principle don't they have that relationship?

Right, but 25 basis points is such a miniscule increase that it's not really going to do much. It's only a few hundred dollars to buy that amount in discount points.

Re: Fed Ends Zero-Rate Era

#118

Post by toomuchtodo » Wed, Dec 16, 2015, 9:13 PM UTC

vezzy-fnord wrote: post #100

dragonwriter wrote: post #95

Earlier quoted context omitted.

> > I argue my ideas only need to hold water for another 10-30 years, depending on if technology advancement keeps up. > Given that the AI community's prediction making skills have been just slightly better than those of Nostradamus, that's a very tough gambit to rely on. That's a weird comment; "technology" is a lot broader than "AI".

I made some perhaps overly hasty generalizations. HN is a community that is heavily skewed towards a belief in transhumanism (especially that AGI will be coming very soon) and moreover that high rates of technological unemployment are upon us, necessitating a UBI or stronger reforms to make sure the general-purpose labor saving of AGI doesn't cause social unrest from crowding humans out of the labor market. I can't i…

> I can't imagine what else could the GP have been referring to other than mass automatized labor for most sectors, hence either AGI or lots of narrow AI.

* Renewables generating the majority of power consumed world wide

* Self driving electric vehicles

* Universal basic income

Nothing outlandish like transhumanism.

Re: Fed Ends Zero-Rate Era

#119

Post by vezzy-fnord » Wed, Dec 16, 2015, 9:13 PM UTC

codyb wrote: post #112

zeveb wrote: post #102

Earlier quoted context omitted.

> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner. Isn't it highly unlikely that tax dollars will be spent or invested more wisely than the original owners of those dollars would have spent or invested them, since no-one would have known the owners' preferences as well as the owners themselves? Keynesian pump-priming ends up thinking it mak…

I'd argue government spending on things like infrastructure moves goods and people to more places thus stimulating the economy. Government spending on research results in new drugs and medications which improve peoples qualities of life. Government investment in clean energy promises to reduce the tens of thousands of people adversely affected by pollution in our nation annually and also provide us with a hugely viab…

Government spending on bureaus like the FDA, EPA, and BBB give consumers and citizens access to outlets for complaints against dirty businesses and give us a decent amount of protection against those who would harm us to gain more of those dollars you think they'd rather have in their own pocket.

Some evidence to the contrary: http://www.brookings.edu/~/media/research/files/papers/2015/...

There's always costs of utility forgone to putting upper bounds on heterogeneous consumer preferences, and as it turns out, they can be rather severe.

Re: Fed Ends Zero-Rate Era

#120

Post by cft » Wed, Dec 16, 2015, 9:14 PM UTC

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing.

This means the end of 70% of the unicorns.