111–120 of 314 posts
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> Those of you (US) with large stock/cash positions: what are you doing to weather the (inevitable) storm I follow the traditional advice of doing nothing and not trying to time the market.
Yeah I get that. What about for people like me who are trying to enter the market? I'm wondering if it's worth it to wait and see, or if I should just not worry too much and invest now anyway.
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There's no electronic cash account they can put up? If not, why not, and why can't we enable something like that so people aren't forced to buy bonds in order to hold cash?
It would be counter productive to society. Put money in a bank, the bank lends it out, the money serves society buy financing a new business or perhaps consumption but either way it is doing something. Lend it to the government in the form of bonds and they'll spend it on something. If it just goes into the cash account you're describing, it does nothing but exist, in the event of recessions this would be severely da…
Earlier quoted context omitted.
There's no electronic cash account they can put up? If not, why not, and why can't we enable something like that so people aren't forced to buy bonds in order to hold cash?
It would be counter productive to society. Put money in a bank, the bank lends it out, the money serves society buy financing a new business or perhaps consumption but either way it is doing something. Lend it to the government in the form of bonds and they'll spend it on something. If it just goes into the cash account you're describing, it does nothing but exist, in the event of recessions this would be severely da…
There is no way to hold money that isn't ultimately lent to or borrowed from some other entity. You can store cash under your mattress, but even that's money that you've effectively lent to the government (the seigniorage of storing it under your mattress means that you've now given them the ability to print that same amount of money at zero extra cost).
This is harder to wrap your head around, but once you understand the principle - money is always at work, no matter what form it's in - it's a lot easier to understand the flow of money on a macro or international scale.
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Not only - AFAIR the Colombian Steve Jobs had problems with humidity too - 2.1 billion 80s' USD lost to flooding and rotting is what I would call real liquidity :D And also rats I think.
It’s extremely insulting to refer to Escobar as the Colombian Steve Jobs, if that is the connection you are making.
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It would be counter productive to society. Put money in a bank, the bank lends it out, the money serves society buy financing a new business or perhaps consumption but either way it is doing something. Lend it to the government in the form of bonds and they'll spend it on something. If it just goes into the cash account you're describing, it does nothing but exist, in the event of recessions this would be severely da…
So people should be forced to invest their money even if they don't think any of the ventures are worthwhile? And physical cash shouldn't exist either?
Physical cash is also debt (backed by the full faith and credit of the US government, in the case of the US, or the relevant issuer in the case of other fiat currencies).
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Look at the S&P 500 index from early 2008 to say 2012. Governments will enact policies to prop up the stock and bond markets, as they always have. Our entire civilization is held up on the promise that financial market indices go up over time, except for temporary recessionary periods. We just accept that retirees cashing out at the wrong time will be victims of 'collateral damage' during these 'market corrections'.…
People who bought the Nikkei index in the early 1990s are still waiting for the correction to end...
Loosening monetary policy to fight deflationary pressure in the '90s also didn't seem to work because interest rates were already near zero. I think the US is different because the benchmark Fed rate is 2.25% now after many years of near-zero rates. So there's room to cut rates if needed.
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Why would a derivatives exchange not accept cash? what are people buying those derivatives with? Furthermore, how could any bond (or anything at all for that matter) be less risky than cash? the market value of a bond may change over time but $1 will always be worth $1. Inflation may change the purchasing power of that dollar but then the exact same mechanism will effect the bonds as well.
Cash has risks: * risk of physical destruction * risk of physical theft * risk of forgery etc etc There's some nonzero cost to accept, handle, vet, store, etc for cash. That's not even including if there are extra reporting laws or other for large amounts of cash, which just adds to the overhead.
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A lot of financial transactions and central clearinghouses require participants to post collateral. For example if an insurance company enters into an interest rate swap with a bank, both sides will have to post some percent of the contract's notional value in escrow. This protects both sides from counterparty risk (i.e. what if the insurance company goes out of business and can't pay its side of the swap). The colla…
There's no electronic cash account they can put up? If not, why not, and why can't we enable something like that so people aren't forced to buy bonds in order to hold cash?
I feel like I still don't understand negative yields, despite really trying to. Negative yields means that I put in $X (or euro/whatever germany is using) and I later am guarenteed no more than $Y out of the exchange, where Y < X. I am literally guaranteed to lose money. I could just hold on to my money, "keep it under my mattress" and still make a better ROI than bonds with negative yields. Why would anybody buy the…
I may be totally wrong, but I think the floor on negative yields is going to be the security costs of keeping cash for that timeframe.