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This Bubble's Got Legs

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Re: This Bubble's Got Legs

#61

Post by AngrySkillzz »

Inthenameofmine wrote: post #28
codingmyway wrote: post #26

Earlier quoted context omitted.

the problem with the 'wealth' effect, or equality effect, is that the person selling the asset is likely retired or close and won't spend it and the increase in asset prices take an equal amount from the people who need to buy for their retirements but can't because central banks own them all. So those people of working age who might have spent more are poorer and will spend less too. The question is why central bank…

Based on many papers, articles, and interviews by many central bankers I have come to the conclusion that most of them aren't very smart to say the least. They think of a country as a household, rather than a complex system. Economic orthodoxy is also very irrational atm.

What expertise do you have that makes your judgement of central bankers meaningful? Do you have any understanding of macroeconomics, forecasting, monetary policy?

Re: This Bubble's Got Legs

#62

Post by CalRobert »

icantdrive55 wrote: post #32
benmarten wrote: post #4

Earlier quoted context omitted.

Yes, i feel the same when I look at houses in San Francisco. The shittiest houses are valued at almost 1mio. I'm just saying, nope, I'm not buying that. ;)

But the wealthy, who are the one's who have really benefitted from this free money will buy these chit boxes, and rent them out at outragious ROI. And so will the wealthy foreigner--with a lousy phone call. I've given up on more building. I think we need to open up areas where people can camp without breaking the law. Or, at least allow people to legally sleep in their vehicles. The fines/fees for breaking over strin…

It's really a shame that we've coerced people into earning an income to live, because the means of living that don't require money are largely becoming illegal.

Where are you allowed to sleep for free in the US? You could perhaps get a wilderness permit and live in a national park for a time, but I'm not sure what the maximum period of validity is on them. Cities will cite you under anti-camping rules. There isn't really a frontier to go to where a person can live off the land, at least so far as I'm aware.

People who do not find the system of "I have to work because I have to have money because I have to pay rent/own a home because I have to have somewhere to sleep" satisfactory no longer have a frontier to which they can escape. This is worrying if you like the idea of preserving liberty, and especially worrying if (as this article suggest) the whole monetary system on which our civilization is built rests on weak foundations.

At least prison's still more or less free.

http://www.alternet.org/civil-liberties/us-laws-criminalizin...

Re: This Bubble's Got Legs

#63

Post by daxorid »

cs702 wrote: post #56

According to the OP, we have a global "central-bank-led cash bubble" powered by "an ever flowing money hose." If you believe interest rates are being kept "artificially low" (whatever that means) by the "money printing" of central banks like the Federal Reserve and the Bank of Japan, then you will agree with the OP. In this view of the world, central banks are contributing to our current economic malaise: by keeping…

whatever that means

I believe the notion of artificially low/high rates actually does have a precise meaning. If banks freely set rates as players in a competitive market based on prevailing inflation rates, demand for money, etc, that would be the "market rate" of money. "Artificially low" rates would be those rates set centrally which are lower than what the market rate would be in a competitive rate market.

Now it very well may be that zero would be the market rate of money, and the Fed is doing a great job of estimating it. But to say the notion of artificial rates has no meaning is a little odd.

Re: This Bubble's Got Legs

#64

Post by linkregister »

squozzer wrote: post #27

The conclusion makes sense only if every major economy participates. What about China and Russia? Granted, I doubt investors today trust either country without qualification, but if this goes on another 5 or 10 years, who knows?

Out of those two countries, Russia, a country with an economy smaller than that of Spain, is the only one not currently engaged in massive subsidies and stoking artificial demand (metallurgy, construction). China isn't engaging in QE but it is using other methods to prop growth.

I doubt China's position is as tenuous as the Euro zone, but it is engaging in some similar practices.

Russia is wholly dependent on the Euro zone as an export-based economy until it can improve internal consumption. It can't be relied upon to prop up the world economy in the event of an asset value correction.

Re: This Bubble's Got Legs

#65

Post by drcode »

cs702 wrote: post #56

According to the OP, we have a global "central-bank-led cash bubble" powered by "an ever flowing money hose." If you believe interest rates are being kept "artificially low" (whatever that means) by the "money printing" of central banks like the Federal Reserve and the Bank of Japan, then you will agree with the OP. In this view of the world, central banks are contributing to our current economic malaise: by keeping…

Odd how you criticize the framing in OP but then to use the pejorative term "hoarding" in lieu of "saving" throughout your post.

Re: This Bubble's Got Legs

#66

Post by benmarten »

cs702 wrote: post #56

According to the OP, we have a global "central-bank-led cash bubble" powered by "an ever flowing money hose." If you believe interest rates are being kept "artificially low" (whatever that means) by the "money printing" of central banks like the Federal Reserve and the Bank of Japan, then you will agree with the OP. In this view of the world, central banks are contributing to our current economic malaise: by keeping…

I believe this is a generation thing. Generation Y grew up with so many crisis and terror attacks, its just naturally everyone is hording their cash. Also a lot of people want to stay independent and mobile so they are not (yet) settling down.

Re: This Bubble's Got Legs

#67

Post by drcode »

dageshi wrote: post #38
randomgyatwork wrote: post #37

Isn't it always a thing before a bubble pops where everyone says the bubble wont pop.

A lot of people called housing a bubble a long time before it popped.

Economist cover June 2005: http://www.tradersnarrative.com/wp-content/uploads/2008/03/a...

Re: This Bubble's Got Legs

#68

Post by simonebrunozzi »

habosa wrote: post #43

If you're interested in monetary policy and a fundamental analysis of the state of money and banking in the world today, I highly recommend "The End of Alchemy" by Mervyn King [0]. The book starts with a long history of why we have money at all, why it takes the forms it takes, and how banks evolved into their current role. It then goes on to describe why there is so much inherent risk in our banking system and what…

This is a great suggestion - thanks!

Re: This Bubble's Got Legs

#69

Post by cloakandswagger »

cs702 wrote: post #56

According to the OP, we have a global "central-bank-led cash bubble" powered by "an ever flowing money hose." If you believe interest rates are being kept "artificially low" (whatever that means) by the "money printing" of central banks like the Federal Reserve and the Bank of Japan, then you will agree with the OP. In this view of the world, central banks are contributing to our current economic malaise: by keeping…

Saying that interest rates are low because of businesses hoarding cash (as opposed to massive expansion of Fed balance sheet which by definition controls interest rates) is absurd. The Fed themselves acknowledge that their policies are why interest rates are low or negative!

The true problem is that QE represents a wealth transfer to the richest among us. New money (which is more powerful at its introduction into the money supply) is funneled directly into equity markets or into foreign markets, creating massive asset bubbles, enriching the rich and robbing the poorest through inflation.

To suggest that massive Fed bond buying is not THE cause of low interest rates is ridiculous.

Re: This Bubble's Got Legs

#70

Post by dragonwriter »

daxorid wrote: post #63
cs702 wrote: post #56

According to the OP, we have a global "central-bank-led cash bubble" powered by "an ever flowing money hose." If you believe interest rates are being kept "artificially low" (whatever that means) by the "money printing" of central banks like the Federal Reserve and the Bank of Japan, then you will agree with the OP. In this view of the world, central banks are contributing to our current economic malaise: by keeping…

whatever that means I believe the notion of artificially low/high rates actually does have a precise meaning. If banks freely set rates as players in a competitive market based on prevailing inflation rates, demand for money, etc, that would be the "market rate" of money. "Artificially low" rates would be those rates set centrally which are lower than what the market rate would be in a competitive rate market. Now it…

> If banks freely set rates as players in a competitive market based on prevailing inflation rates, demand for money, etc, that would be the "market rate" of money.

But, they do.

Of course, "inflation rate" is in large part a product of monetary policy.

> Now it very well may be that zero would be the market rate of money, and the Fed is doing a great job of estimating it.

The Fed sets interest rate targets, and then directly takes action which affect those things which you suggest should be the inputs by which the market sets rates, which the market then actually takes as inputs, and sets the actual interest rates that are levied in practice.

> But to say the notion of artificial rates has no meaning is a little odd.

The notion of artificial rates has no meaning, because the things you suggest should be inputs in "natural" rates are not products of nature, but themselves "artificial" in that they are in many ways influenced by policy, and the first of them is not merely substantially influenced by monetary policy, its one of the two main things (alongside, but usually ahead of, employment) that monetary policy is aimed at controlling.

And, as a consequence, what you describe as the mechanism for "market rates" as opposed to "artificial rates" is the predominant way by which central bank interest rate targets are achieved.

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