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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)

#81

Post by throw0101a »

mxcrossb wrote: post #77
throw0101a wrote: post #63

Earlier quoted context omitted.

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_proj…

I think your analysis is right, but if cars and houses are things that people buy with borrowed money, it does seem like interest rates being low would drive prices up. And it might increase the price of inflation proof assets like crypto. Is there a framework we should be describing this with besides the broad “inflation” term?

Cars are lasting longer, and how many cars can the average person own? There's also depreciation, so cars aren't 'quite' an asset, so trade-in is also limited if people want to rotate vehicles (unless one leases).

> Is there a framework we should be describing this with besides the broad “inflation” term?

If asset prices are higher than what they "should" be, then one generally calls that a bubble.

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

#82

Post by throw0101a »

freeone3000 wrote: post #58
vbtemp wrote: post #50

Earlier quoted context omitted.

Have you had to pay for medical care, child care, housing, care for elderly or disabled loved ones and/or education?? How on earth can you say that inflation has remained low??? All of those have become insanely expensive and people die all the time because they can't afford them! Just because cheap, crappy electronics and egg McMuffins don't appreciate in cost and stay crappy and cheap does NOT mean inflation is low…

But none of those things have risen at the same rate, or even comparable rates. The increase in childcare has kept up with the average wage increase, but education is hundreds of times more! I don't even know how you'd price medical care, as everyone is effectively charged differently, even for the same service. Housing doesn't track either of those -- purchasing follows literally nothing, renting follows local wage.…

> […] but education is hundreds of times more!

You're not wrong, but I ran into an interesting observation: yes the prices for many high-end institutions have gone up, but those are 'list' prices.

How many people pay list? How many people get bursaries and offsets from endowments?

I'd be interested in seeing those stats.

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

#84

Post by mrec »

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.

Inflation is absolutely here. Assets are way up because "safe" stores of value - what money was supposed to be - haven't been keeping pace with inflation since 2008, so you have to either join the casino or watch your savings erode.

A lot of younger people don't seem to realize that this is new. That you used to be able to put your money in a bank and not lose it. While rock-bottom interest rates are good in some ways, I don't see this as a positive trend overall, especially given how shark-filled the financial waters are for most people. I'm a big fan of the Vegas dictum - "there's a patsy at every table, and if you don't know who the patsy is, it's you". As a retail investor, you're pretty much always the patsy.

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

#85

Post by Barrin92 »

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…

Death is not and should not be judged purely based on some headcount, but in relation to the degree to which it was preventable, and the errors that were made to achieve exactly that. And on that front Covid may very well be the worst, most easily preventable pandemic mass death in this century.

The sheer incompetence, misinformation, petty squabbling within and between countries is going to make it to the history books. Disruption to business won't even be a footnote.

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

#86

Post by jbay808 »

jbay808 wrote: post #44
ahepp wrote: post #27

Earlier quoted context omitted.

Only if the purchasing power of a dollar goes down. I know MMT is controversial, but I think of it more as a focus on empiricism. Sure, rationality suggests that printing dollars will reduce the value of dollars. But kickstarting inflation is in some ways the entire point, no? And it has remained consistently below FR targets for the past decade (I believe, I'm not an economist and I'm not looking at any charts)

If I run a bakery and you run, say, the Mint... Ten years ago, I bake a loaf of bread, and sell it for a dollar. Then I invent an amazing machine that can produce the same bread more cheaply. I'm about to drop my bread prices, but you mint some new coins and add them into circulation. So I keep the price at a dollar per loaf. I scrutinize my bread supply chain to the last detail. I optimize the flour, I optimize the…

(Addendum: If your salary was a dollar ten years ago, and a dollar today, you can afford just as much bread as you used to, but your chance of buying a majority share in my bakery, or outbidding me on a house in a good school district, has gone way down.)

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

#87

Post by tomjakubowski »

smabie wrote: post #79

interest rates are not low, we just measure them wrong. The dollar is being devalued at an astounding pace, and yet some people will split hairs and say "well, technically.." look at stocks, housing, land, education, health care and food.

> interest rates are not low, we just measure them wrong. The dollar is being devalued

I don't follow. Could you explain? If the dollar is losing value, then wouldn't interest rates "really" be lower than they'd appear to be without accounting for the devaluation? Here's my reasoning:

Imagine the dollar loses 50% of its value in the next year. You park $100 in a 1% APY 12 month CD today. After a year, you've earned $1 in interest. But your CD has actually lost value in that time, even accounting for the interest money the bank gave you. In real terms, the interest rate was less than 1%; in fact, it was negative! So the 1% interest rate appeared higher than it "really" was.

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

#88

Post by GizmoSwan »

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…

Assets have been inflating.

Velocity of money is a measure of economic activity. If Q is the GDP and constant, prices will go up if economic activity goes up. So only if economic activity does not pick up, will the prices not go up.

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

#89

Post by strken »

steveBK123 wrote: post #76
peteretep wrote: post #47

Earlier quoted context omitted.

> 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…

Also, I’m not sure exactly how you meant it, so I won’t direct this at you, just generally... I can’t get over the techbro straw man of the “lockdown” I’ve seen thrown around a lot. First, compared to most of Asia that actually got this virus under control, we have never really had much of a true lockdown here. Second, it’s not the lockdown, its the pandemic. In most areas economic activity dropped off well before an…

Can't speak to the US lockdown, but Melbourne, Victoria, Australia had restrictive lockdowns (1 hour outdoor exercise with up to 2 people together, 1 daily trip to the supermarket per household, couldn't travel more than 5km from your house, police roadblocks out of the city and out of the state, non-essential industries shut down and some essential ones operating at significantly reduced capacity, 8pm-5am curfew) and was accompanied by a 22% spike in calls to the largest suicide hotline.

Even introverts can miss going outside or seeing their family.

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

#90

Post by Robotbeat »

mrec wrote: post #84
lettergram wrote: post #61

Earlier quoted context omitted.

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.

Inflation is absolutely here. Assets are way up because "safe" stores of value - what money was supposed to be - haven't been keeping pace with inflation since 2008, so you have to either join the casino or watch your savings erode. A lot of younger people don't seem to realize that this is new. That you used to be able to put your money in a bank and not lose it. While rock-bottom interest rates are good in some way…

Money is not supposed to be a "safe" store of value. It's supposed to be a stable one. Too low of inflation is bad because it means less investment in the physical economy. The Fed prints money to try to keep people from just hoarding cash. They want some inflation (and definitely not deflation) because a deflationary spiral means more and more money gets stuffed into mattresses instead of physical investments.

Unfortunately we're seeing land prices and stock prices and crypto (etc) bid up instead of, say, a massive build out of factories and solar farms and multistory houses. (EDIT: We are seeing lots of houses being built, actually. Lumber is near all-time highs.)

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