Fed Ends Zero-Rate Era • Hacker News Board

Re: Fed Ends Zero-Rate Era

#281

Post by eru » Thu, Dec 17, 2015, 1:40 AM UTC

latch wrote: post #240

eru wrote: post #216

Earlier quoted context omitted.

Allow competetion to set the wages, just like all other prices. Singapore doesn't have a minimum, and wages there are not zero. (Neither did Germany until recently.)

Not all other prices are set by competition. There's much manipulation through things like subsidies, tariffs, tax incentives, and bailouts. Also, having lived in Singapore for years, it's a wonderful city and I love it, but the wage story isn't necessarily one to mimic. It might look grand as a foreigner, but your cleaning lady is probably sharing a 3 bedroom apartment with 16+ other women and doesn't see her family…

And, yet, she still makes more money than in her home country.

Re: Fed Ends Zero-Rate Era

#282

Post by nostrademons » Thu, Dec 17, 2015, 1:44 AM UTC

superuser2 wrote: post #279

nostrademons wrote: post #237

Earlier quoted context omitted.

The downside of everyone piling into index funds isn't something systemic that'll bring down the financial system the way the real estate bubble did. Rather, it's that the capital market as a whole becomes less efficient. All the money parked in index funds is money whose owners did no due-diligence about where they put it; it means that if reality changes and the value of the underlying businesses goes up or down, t…

The problem is that Wall Street fund managers who beat the market almost never do so consistently, i.e. there is insufficient evidence to reject the null hypothesis "all actively managed funds have a roughly equal (low) chance of beating the market" in favor of "this fund knows how to beat the market consistently and will probably do so next year." So a rational personal investor, who does not have insider informatio…

Yeah, I know the rationale behind why index funds exist. The majority of my wealth is in them, after all.

The parent poster, however, is asking "What's the catch? Where's the trade-off to investing in index funds, and what sort of new systemic risks does widespread adoption of them bring to the financial system?" He's right to ask that: there is always a catch, because the financial system is about distributing & incentivizing the wealth of society and doesn't directly produce any wealth itself.

I'm saying that the catch is in diminishing returns from the index itself. A well-subscribed index fund, by definition, will always give you the median return of the market it tracks. I'm saying that the effect of large amounts of capital pouring into index funds is that the mean and median returns will diverge. Market inefficiencies become more prevalent as fewer eyes are on each business; as a result, people who successfully exploit them become richer than they would otherwise. Wealth becomes increasingly more concentrated in the few people that actively invest (usually with insider information) and do so successfully. Passive investors continue to make the median return, but the median return falls further behind the mean return.

We're seeing exactly this phenomena right now. I haven't seen anyone else who has explicitly linked it to the rise of index funds & passive investing, but I wouldn't be surprised if it's related.

Re: Fed Ends Zero-Rate Era

#283

Post by ZenoArrow » Thu, Dec 17, 2015, 1:46 AM UTC

vezzy-fnord wrote: post #214

ZenoArrow wrote: post #191

Earlier quoted context omitted.

> "increasing the minimum wage Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... " Let's look at what is being said: "Unlike most public income support programs, increased earnings from the minimum wage are taxable. Over 25 percent of the increased earnings are collected back as income and payroll taxes" Is that a problem? The minimum wage should be the minimum needed to li…

Competition drives prices down, but chances are people with limited options to shop around and who disproportionately head towards mass retailers already , by example, live in areas with im perfect competition and in the worst case, food deserts. As such, a minimum wage would seem to negate itself again.

You've missed the point of what I'm saying. I'm suggesting that minimum wage increases aren't detrimental on their own, they're detrimental when combined with reduced competition. A minimum wage increase in an area with strong competition for consumers is likely to be a net win.

Re: Fed Ends Zero-Rate Era

#284

Post by tostitos1979 » Thu, Dec 17, 2015, 1:53 AM UTC

gohrt wrote: post #213

toomuchtodo wrote: post #185

Earlier quoted context omitted.

> Existing home equity lines of credit, credit cards and other consumer loans with variable interest rates tied to the prime rate will be impacted if the prime rate rises, the person said. > "We won't automatically change deposit rates because they aren't tied directly to the prime," a JPMorgan Chase spokesperson told CNBC. "We'll continue to monitor the market to make sure we stay competitive." Heads I win, tails yo…

Does it matter though? 21st Century, everyone with savings can open a Vanguard mutual fund account with the risk/reward profile of their choosing, that's almost as convenient wrt withdrawals.

Can you elaborate? As an extremely risk averse individual who prefers liquidity, how does a Vanguard mutual fund help me? I.e. an alternative to CDs.

Re: Fed Ends Zero-Rate Era

#285

Post by brc » Thu, Dec 17, 2015, 1:53 AM UTC

gnaritas wrote: post #271

brc wrote: post #134

Earlier quoted context omitted.

How do you categorise a set of 'wealthy oligarchs' as having 'worse' spending than a monolithic government, which we all know has terrible spending patterns and priorities. Politicians spend money on vain projects to get themselves popular and re-elected- how is that not worse than a wealthy oligarch spending money on a gold plated fountain? At least the gold plated fountain would not be built on promises that the fu…

You're missing his point; he's saying whomever happens to be the larger group in a given scenario will be the better spender of the money. Which is a point, given your stances, that you should be agreeing with unless you're just purely anti-government. He's saying the government is a better spender than the 'wealthy oligarchs' precisely because that's such a small group and the government is the bigger group but that…

'Good' and 'bad' spending are pretty loose concepts. Sure, building weapons is worse than building tractors in terms of human impact, but when you get down to incessant government intervention in everyday spending, it's not clear that governments spend money better than individuals of any wealth level. Only a minority of citizens waste their money; while a majority of governments waste theirs.

Re: Fed Ends Zero-Rate Era

#286

Post by millstone » Thu, Dec 17, 2015, 2:00 AM UTC

brc wrote: post #226

millstone wrote: post #177

Earlier quoted context omitted.

> production creates demand. Not because people want to buy it, but because the act of production gives you something to trade What are you describing is called Say's Law. There's various ways it can be false, and the US economy experienced lots of them. An example of how production does not create demand: people can save money for the future. A person who wants to save more will produce more (work harder) and reduce…

Of course I know it is Say's Law. My purpose here is to post it for people to understand the principle. Giving everyone money does not work. You can only increase the size of the economy and wealth of the people within by producing more. That much is self evident, yet people have been bamboozled by muddied thinking that aggregate demand is all. I don't try and convince the hardened Keynesian thinker with Krugman in t…

I'm not sure where you're going with that. Ok, so we become wealthier if we produce more. The next question is, how do we shape public policy so that our economy produces more?

If you tug on that rope, you find that supply is connected to demand, and demand is connected to things like the money supply. So choosing the correct money supply can increase real output.

I think you're arguing against a strawman, something like "if you give everyone money then we'll all be richer because we have more money." But nobody's saying that.

Re: Fed Ends Zero-Rate Era

#287

Post by unclebucknasty » Thu, Dec 17, 2015, 2:17 AM UTC

vezzy-fnord wrote: post #235

crdoconnor wrote: post #224

Earlier quoted context omitted.

>Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... . tl;dr if you raise the minimum wage imperceptibly, poverty reduction is affected imperceptibly and prices are affected imperceptibly. In general if something will have a negative effect on corporate profits (minimum wage hikes have an outsized effect on corporate profits) you will be able to find a legion of economists wh…

The reason many economists are unsure or against the minimum wage is not because they're some agents of bourgeoisie capitalists, but because arguments in favor of it tend to be moral, not economic. For instance, here's a case for the minimum wage presented by an (otherwise very knowledgeable, I'll grant) Post-Keynesian economist: http://socialdemocracy21stcentury.blogspot.com/2013/02/the-e... It's pretty weak. The fi…

There is obviously an economic impact from not paying workers a living wage, irrespective of how certain arguments can be parsed. There is also obviously an economic cost associated with paying a living wage.

The alternatives to the minimum wage that you listed are pretty much variations on the mimimum wage in that they seek to achieve the same goals and also have attendant costs. They are, essentially, no more or less moral vs. economic in nature than is the minimum wage, though their invocation may be less charged at present.

The latter point is evidenced by your juxtaposition of the "moral" minimum wage with its presumably amoral (and thus economics-based) alternatives. But, in truth, if any of these have valid economic arguments, then so does the minimum wage.

Re: Fed Ends Zero-Rate Era

#288

Post by PaulWillis » Thu, Dec 17, 2015, 2:23 AM UTC

adventured wrote: post #242

PaulWillis wrote: post #200

Earlier quoted context omitted.

> the affordability and draw of public UC Berkley where Jobs and Wozniaki met. Didn't Jobs quit college because it was too expensive?

No, most colleges were extraordinarily inexpensive at the time Jobs was going. You could pay for it entirely with a part-time job.

In his famous Stanford commencement speech he said he quit because it was too expensive.

Re: Fed Ends Zero-Rate Era

#289

Post by [deleted] » Thu, Dec 17, 2015, 2:26 AM UTC

graeme wrote: post #182

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…

Why do you say "fed can push the supply side of money". By raising rates, the fed is decreasing the money supply. Unless I've seriously misinterpreted your comment, this really shouldn't be the top comment, because it's wrong. And "markets pricing in" the move isn't the same as "the move had no effect". It just means the effect already started prior to the announcement.

[deleted]

Re: Fed Ends Zero-Rate Era

#290

Post by refurb » Thu, Dec 17, 2015, 2:30 AM UTC

dragonwriter wrote: post #202

binarycrusader wrote: post #193

Earlier quoted context omitted.

Because taxing those people won't solve the real issue? I pay more in taxes every year on my income than many millionaires do because my income is primarily salary instead of stocks, etc. 120k may seem like a lot, but it isn't in several parts of the US now (e.g SF Bay Area, New York).

> Because taxing those people won't solve the real issue? I pay more in taxes every year on my income than many millionaires do because my income is primarily salary instead of stocks, etc. Taxing capital income like other income is another possible solution.

So tax capital income twice? Once at the business and once for shareholders? That's the reason why we have low capital gains tax.