No one knows how much the government can borrow • Hacker News Board

Re: No one knows how much the government can borrow

#121

Post by snowwrestler » Sat, Jan 23, 2021, 11:40 PM UTC

jennyyang wrote: post #97

The only time people care is when they care. And you can't predict when that will happen. It's like a flock of birds flying in the air, you can't figure out which individual bird caused the first change in direction, but it quickly spreads across the entire flock. The other fallacy is that inflation is here, it's just not being measured by the Federal Reserve properly. There is crazy inflation in things like house pr…

Inflation is the amount that prices rise without an increase in real value. And if there is no increase in real value, then you haven’t actually made any money.

Conversely, if people are making money on assets in real terms, then that is appreciation, not inflation.

Income inequality is a difference in real income. It’s growing because the economy is differentially allocating real value, not because of inflation.

Re: No one knows how much the government can borrow

#122

Post by [deleted] » Sat, Jan 23, 2021, 11:42 PM UTC

headmelted wrote: post #104

throw0101a wrote: post #68

Earlier quoted context omitted.

> He has had the resources and status to access any scholar on the topic he would like. So did Bill Gross of PIMCO, one of the largest fixed-income (bond) management firms in the world (AUM: $1.9T): * https://en.wikipedia.org/wiki/PIMCO He bet that interest rates would rise in 2011 after QE(2). Keynesian macroeconomists like Krugman said they wouldn't. Krugam was right: * https://www.businessinsider.com/this-was-the-…

We’re basing the prediction of inflation on the notion that there’s more money “sloshing around out there”. I’m not convinced that more of it is sloshing. Wage growth has been largely absent for many people in the 12 years since the crisis, and as a result those people haven’t had more money to spend. The money clearly exists of course given that it’s been printed, but there’s a good chance it just isn’t finding it’s…

[deleted]

Re: No one knows how much the government can borrow

#123

Post by username90 » Sat, Jan 23, 2021, 11:42 PM UTC

dragonwriter wrote: post #61

drtillberg wrote: post #14

> Remember that some people thought that government borrowing ... facilitated by quantitative easing (Fed bond-buying) ... was going to lead to substantial inflation. But it didn’t. Every time someone says "but where's the inflation" I sigh. Look at literally any financial asset, SP500, stocks, real estate, even bond values (the inverse of interest rates). There is your inflation. Maybe we like asset inflation, maybe…

Like producer price inflation, asset inflation isn't what people are talking about when they talk about “inflation” without modifiers, which refers to consumer price inflation. When people predicted inflation from QE, they were predicting consumer price inflation. And depending on how you look at it, they were either right and that was entirely the point of the policy (if you look at the difference between actual res…

Giving people more money doesn't make them buy more basic goods, just more assets, so price of normal goods doesn't go up but price of assets do.

Re: No one knows how much the government can borrow

#124

Post by [deleted] » Sat, Jan 23, 2021, 11:43 PM UTC

ashtonkem wrote: post #92

hntrader wrote: post #83

Earlier quoted context omitted.

A fixed income fund manager is a domain expert in this area, even though he was wrong about this prediction. Their full time job is largely to understand and anticipate Central Bank policy.

My time in finance has led me to believe that traders and investors are far more prone to groupthink than they’re willing to admit to. “Hedge fund manager predicted inflation after QE and was wrong” is very low on my list of things that surprise me.

[deleted]

Re: No one knows how much the government can borrow

#125

Post by Swizec » Sat, Jan 23, 2021, 11:48 PM UTC

flatline wrote: post #119

avianlyric wrote: post #113

Earlier quoted context omitted.

Just because many people haven’t seen wage growth, doesn’t mean money isn’t sloshing around out there. Remember 20% of Americans own ~80% of all the wealth in the US. So if your looking for sloshing money you should look at what they’re doing, not what “most” people are doing. I think it’s fair to say that those a big chunk of those 20% probably have more money than they know what to do with, which probably means mon…

20% is 1 of 5, hardly easy to miss. A lot of that money goes toward expenses in HCOL areas, where more people live, and the salaries are higher. A lot goes into consumer goods. People buy stuff, a lot of it. A lot of the rest is in the stock market in retirement accounts because nobody has pensions anymore. Americans don’t save a lot of money, and are not particularly fiscally responsible, that money is not hiding in…

> Now start talking the top 1-2% and the story changes dramatically.

Probably the top 5-6%. The numbers are lower but the behavior is similar. You’d be surprised how soon you hit the “More money than I know what to do with” line.

Make 150 to 200k/year (not uncommon on HN) and what are you gonna do, buy a new car every year? Rent is paid, food is paid, clothes are good, 1 or 2 vacations per year, go out to eat whenever you want, one-off nice purchases aren’t a big concern ... it’s cushy. Not enough to buy real estate cash or anything like that, but def more slosh than you need.

Re: No one knows how much the government can borrow

#126

Post by mandelbrotwurst » Sat, Jan 23, 2021, 11:49 PM UTC

avianlyric wrote: post #113

headmelted wrote: post #104

Earlier quoted context omitted.

We’re basing the prediction of inflation on the notion that there’s more money “sloshing around out there”. I’m not convinced that more of it is sloshing. Wage growth has been largely absent for many people in the 12 years since the crisis, and as a result those people haven’t had more money to spend. The money clearly exists of course given that it’s been printed, but there’s a good chance it just isn’t finding it’s…

Just because many people haven’t seen wage growth, doesn’t mean money isn’t sloshing around out there. Remember 20% of Americans own ~80% of all the wealth in the US. So if your looking for sloshing money you should look at what they’re doing, not what “most” people are doing. I think it’s fair to say that those a big chunk of those 20% probably have more money than they know what to do with, which probably means mon…

Is the distribution of the money supply similar to the distribution of all types of wealth?

Re: No one knows how much the government can borrow

#127

Post by pmiller2 » Sat, Jan 23, 2021, 11:50 PM UTC

throw0101a wrote: post #68

njarboe wrote: post #27

Ray Dailo has been thinking about this idea for most of his life. He has had the resources and status to access any scholar on the topic he would like. Smart and motivated to understand the answer, he has written a book about this topic that is coming out soon, but is also available in full on-line for free[1]. I'm half-way through and it is very good so far. [1] https://www.principles.com/the-changing-world-order/#i…

> He has had the resources and status to access any scholar on the topic he would like. So did Bill Gross of PIMCO, one of the largest fixed-income (bond) management firms in the world (AUM: $1.9T): * https://en.wikipedia.org/wiki/PIMCO He bet that interest rates would rise in 2011 after QE(2). Keynesian macroeconomists like Krugman said they wouldn't. Krugam was right: * https://www.businessinsider.com/this-was-the-…

Economists as a whole don't have a great track record of predictions here, either. You know the saying, right? Economists have successfully predicted 9 of the last 6 recessions.

Re: No one knows how much the government can borrow

#128

Post by mandelbrotwurst » Sat, Jan 23, 2021, 11:52 PM UTC

ashtonkem wrote: post #92

hntrader wrote: post #83

Earlier quoted context omitted.

A fixed income fund manager is a domain expert in this area, even though he was wrong about this prediction. Their full time job is largely to understand and anticipate Central Bank policy.

My time in finance has led me to believe that traders and investors are far more prone to groupthink than they’re willing to admit to. “Hedge fund manager predicted inflation after QE and was wrong” is very low on my list of things that surprise me.

Yeah, especially when a very common scenario is fund manager predicts the same thing every day for twenty years, is right once per market cycle, attracts attention and profits when his broken clock is correct, and is largely ignored the rest of the time.

Re: No one knows how much the government can borrow

#129

Post by pmiller2 » Sat, Jan 23, 2021, 11:52 PM UTC

roenxi wrote: post #99

jennyyang wrote: post #97

The only time people care is when they care. And you can't predict when that will happen. It's like a flock of birds flying in the air, you can't figure out which individual bird caused the first change in direction, but it quickly spreads across the entire flock. The other fallacy is that inflation is here, it's just not being measured by the Federal Reserve properly. There is crazy inflation in things like house pr…

> The other fallacy is that inflation is here, it's just not being measured by the Federal Reserve properly. Another theory is a 0% inflation rate doesn't mean 0% inflation. It means inflation is close to the rate that goods/services are getting cheaper naturally as technology & market organisation improves.

That assumes that goods and services are getting cheaper, which isn't the case for several key necessities. In particular, housing, education, and medical care have risen far faster than inflation for the past 40+ years.

Re: No one knows how much the government can borrow

#130

Post by jjk166 » Sat, Jan 23, 2021, 11:57 PM UTC

sesuximo wrote: post #89

anticristi wrote: post #69

I can't help feeling that the question is ill-posed. It's not "how much", but "why" that matters. Think about it: Would you borrow $10,000 to a friend who opens a dentist with a solid business plan? Probably yes. Would you borrow $1000 to a friend to cover an existing debt? Probably not, or, if you are very generous, you would gift them the money. If a government can demonstrate that it borrows money to invest in the…

government does both, but you cannot specify what your loan pays for

If someone loans you money to start a business and you blow it gambling, you're going to have a hard time getting them to give you another loan.

The government can say it's taking on debt responsibly, but if there are no subsequent economic improvements eventually their credit rating will fall.