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Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

bankofengland.co.uk

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Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#61

Post by lettergram »

throw0101a wrote: post #49
koolba wrote: post #18

Earlier quoted context omitted.

> ... currencies haven't been debased ... We’ve printed trillions of dollars and Congress is en route to print trillions more. The price for that has yet to be paid.

> We’ve printed trillions of dollars and Congress is en route to print trillions more. First off: it's not Congress that controls the money supply, it's the Fed. They're independent. > The price for that has yet to be paid. What price is that? Inflation? Japan's M2 has risen a lot, and it hasn't seen any for decades: * https://fred.stlouisfed.org/series/MYAGM2JPM189S * https://fred.stlouisfed.org/series/FPCPITOTLZGJP…

You sure inflation isn’t here?

Houses are up massively, land, cars, stocks, crypto, etc.

The inflation measurement is off. But the inflation is here.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#62

Post by NeutronStar »

pishpash wrote: post #40
ahepp wrote: post #21

Earlier quoted context omitted.

Yet interest rates have yet to respond (unless I have missed some major news). You are correct to point out the risk, but I don't think we can call it currency debasement yet.

Interest rates have yet to respond because they are being held down actively by central banks. Those are not market forces.

> Those are not market forces.

Neither is printing money.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#63

Post by throw0101a »

lettergram wrote: post #61
throw0101a wrote: post #49

Earlier quoted context omitted.

> We’ve printed trillions of dollars and Congress is en route to print trillions more. First off: it's not Congress that controls the money supply, it's the Fed. They're independent. > The price for that has yet to be paid. What price is that? Inflation? Japan's M2 has risen a lot, and it hasn't seen any for decades: * https://fred.stlouisfed.org/series/MYAGM2JPM189S * https://fred.stlouisfed.org/series/FPCPITOTLZGJP…

You sure inflation isn’t here? Houses are up massively, land, cars, stocks, crypto, etc. The inflation measurement is off. But the inflation is here.

You list assets, which have generally always gone up in value over time. Inflation, i.e. CPI, is (roughly) about cost of living through a basket of goods:

* https://awealthofcommonsense.com/2021/01/inflation-truthers/

* https://news.ycombinator.com/item?id=25644580

If you don't believe the government-published CPI you can confirm their work, as others have done:

* https://en.wikipedia.org/wiki/MIT_Billion_Prices_project

For your items:

* Monthly carrying costs haven't changed much: prices up, but mortgage rates are down. Plus average square footage has gone up, so you're getting more.

* Land depends on location, and urban prices have gone up because it's more cool to live in the city now than in the 1970s and 1980s. I live in Toronto, so I know all about land/housing prices over the last 10-15 years.

* Modern cars have more power, while burning less fuel, and being safer, and on average lasting longer, for the same money. I own a 2003 Golf that I paid $30K for (in 2003). What's available for $30K is a lot better, and the equivalent dollars today is closer to $40K—which gets you some sweet things.

* I was invested in 2008: I've seen stocks go up and down.

* Crypto is a Ponzi scheme.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#64

Post by jessaustin »

lettergram wrote: post #61
throw0101a wrote: post #49

Earlier quoted context omitted.

> We’ve printed trillions of dollars and Congress is en route to print trillions more. First off: it's not Congress that controls the money supply, it's the Fed. They're independent. > The price for that has yet to be paid. What price is that? Inflation? Japan's M2 has risen a lot, and it hasn't seen any for decades: * https://fred.stlouisfed.org/series/MYAGM2JPM189S * https://fred.stlouisfed.org/series/FPCPITOTLZGJP…

You sure inflation isn’t here? Houses are up massively, land, cars, stocks, crypto, etc. The inflation measurement is off. But the inflation is here.

Presumably housing appreciation is somewhat offset by drops on commercial real estate: office space, video game storefronts, etc.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#65

Post by albertgoeswoof »

peteretep wrote: post #47
kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

> Mass death Covid has killed a lot of people and created a lot of heart-break, and it would be heartless to try and minimise that or to view it in purely economic times in this moment. However, I think that in 100 years, future historians will describe the effect of the deaths itself as being pretty negligable: maybe 10% over the expected rate without Covid in 2020 and 2021, maybe 5m people in each year total, again…

Doubt it. If current rates of progress continue, in 100 years five million deaths will be considered immensely tragic

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#66

Post by steveBK123 »

peteretep wrote: post #47
kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

> Mass death Covid has killed a lot of people and created a lot of heart-break, and it would be heartless to try and minimise that or to view it in purely economic times in this moment. However, I think that in 100 years, future historians will describe the effect of the deaths itself as being pretty negligable: maybe 10% over the expected rate without Covid in 2020 and 2021, maybe 5m people in each year total, again…

Arguably 10% may turn out to be the direct-attributable number if you zoom out far enough nationally or globally, but locally & temporally theres been significantly higher numbers. Also remember there’s a lot of death not captured in that number of people who died at home / were never tested / etc that gets captured in the “excess mortality” stat.

In NY State and NYC in particular its closer to 30%. Counting total “excess mortality” in NYC is closer to 60% on the year. Note that we’ve annualized here and ~90% of the death in NY took place in about an 8 week period, where the daily death ratepeaked closer to 500-1000% of normal for a week or two. So yes, there was mass death.

There are many similar stories in areas of California, Italy, England, etc.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#67

Post by bertjk »

koolba wrote: post #18
kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

> ... currencies haven't been debased ... We’ve printed trillions of dollars and Congress is en route to print trillions more. The price for that has yet to be paid.

The price is paid every time someone has to overpay for housing, and every time someone deposits money into their 401K which will invariably be invested chasing riskier and higher priced assets, whose future returns increasingly depend on stock appreciation, and less on dividend yields which will never catch up. Consider for a moment the common advice to just "buy and hold the SP500", and then the recent news that TSLA just joined the same.

They are slowly making it a foregone conclusion that any policy that favors companies with actual operating returns over inflating ratios will necessarily crush everyone's retirement portfolios, and therefore any such move would be politically untenable.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#68

Post by kristopolous »

peteretep wrote: post #47
kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

> Mass death Covid has killed a lot of people and created a lot of heart-break, and it would be heartless to try and minimise that or to view it in purely economic times in this moment. However, I think that in 100 years, future historians will describe the effect of the deaths itself as being pretty negligable: maybe 10% over the expected rate without Covid in 2020 and 2021, maybe 5m people in each year total, again…

Right, I've personally suffered very little and I wanted to be careful to not minimize the tragedy and suffering of those who have.

This has been a terrible and tragic event for millions of people. The worst is it was completely avoidable if some of our governments had only valued proper planning for such a predictable event

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#69

Post by Context_free »

AndrewBissell wrote: post #4
panax wrote: post #2

"since the major monetary upheavals of the late middle ages, a trend decline between 0.6–1.6 basis points per annum has prevailed" " Against their long‑term context, currently depressed sovereign real rates are in fact converging ‘back to historical trend’ — a trend that makes narratives about a ‘secular stagnation’ environment entirely misleading, and suggests that — irrespective of particular monetary and fiscal re…

Extrapolating a trend (even a 700 year long one) into the indefinite future is a fraught exercise, as is attempting to read it as benign just because it has perhaps been so in the past. Remind me, who was it that wrote about the tendency of the rate of the profit to fall over the long term, until the point it provokes a crisis?

You can find the answer here

https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit...

This is the first thing that came to my mind as well...the current data on falling rentier rates, crises of political economy etc. makes sense in light of that old model.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#70

Post by mindvirus »

jsweojtj wrote: post #52
mindvirus wrote: post #36

Earlier quoted context omitted.

I would think a dollar today is necessarily at least as valuable than a dollar tomorrow, since a dollar today can either be a dollar tomorrow or a dollar today - i.e. it has optionality built in.

What is a dollar worth besides what it can purchase? Put another way, if the number of dollars is constant in your account between today and tomorrow, but you can purchase less with it, you've lost wealth.

I understand but given the OPs comment, I would think it's always the case. Given the choice between a dollar today and a dollar tomorrow, you should always choose a dollar today since you can choose not to spend it. So it's strictly better than a dollar tomorrow.

The only time I see that it wouldn't be true is if there was risk in carrying it - taxes, negative interest rates, or theft. I could see for example a tonne of gold tomorrow being more valuable than a tonne of gold today since you'd have to deal with storage and security and such.

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