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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)

#91

Post by hanniabu »

throw0101a wrote: post #63
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.

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…

> Crypto is a Ponzi scheme.

I've never heard anybody educated on the matter make this statement. It's always from someone that doesn't understand it and therefore thinks it's a scam.

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

#92

Post by hanniabu »

throw0101a wrote: post #56
freeone3000 wrote: post #55

Earlier quoted context omitted.

What makes V increase? A new big investment opportunity? A savings tax? What starts money circulating?

Economic activity: > The velocity of money (or the velocity of circulation of money) is a measure of the number of times that the average unit of currency is used to purchase goods and services within a given time period.[3] * https://en.wikipedia.org/wiki/Velocity_of_money Good video by a CFA trainer: * https://www.youtube.com/watch?v=l0mh7cCjwDU The first 10 minutes (maybe 20) probably has the most pertinent inform…

What's the logic behind economic activity leading to inflation? That seems very counterintuitive. From that equation, if you were to look at the extreme and print a ton of money and have zero usage there would no inflation. I would think the opposite would be true.

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

#93

Post by ahepp »

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.

I actually mis-spoke. I meant to say "inflation has yet to respond".

Interest rates is the manipulated variable, inflation is the observed.

Appreciate you catching that.

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

#94

Post by deepnotderp »

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…

CPI has been kept down because of electronics and other manufactured goods like automobiles, things like healthcare, college education and textbooks and real estate have increased dramatically.

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

#95

Post by anticodon »

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…

> nobody has gone to war

I'm pretty sure USA will start a new war in 2021-2022. Most probable targets are Iran, Saudi Arabia, Russia.

Russia is the most lucrative target but because of nuclear weapon, most likely more and more protests would be organized to attempt to destroy the country from inside, like they did in Ukraine in 2014.

If this strategy fail or is taking too long time, Iran or Saudi Arabia should be prepared. Saudi Arabia is an ally but it's so rich in resources, that there will be some Casus Belli found.

Besides there's no longer even a need for even remotely plausible explanation to start plundering other country. Facebook, YouTube and Twitter will explain it all and block all the discontent.

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

#96

Post by Zenst »

Many factors for the decline in interest rates, but past few decades 80's onwards I would factor in:

1) The recessions of the 70's and subsequent bumps showed that high interest rates in such times hurt the populas deeply. 2) Lower interest rates enable economic stimulus 3) QE can be used to keep interest rates down and stimulate the money, so it may stimulate the economy.

The future - we are seeing things like negative interest rates come into play.

Personal view is the whole shift to silly low interest rates has driven people away from responsible money management and from a save for a rainy day towards have now pay tomorrow. The real downside is that low interest rates discourage savings and those that do save are now not so well off.

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

#97

Post by [deleted] »

hanniabu wrote: post #92
throw0101a wrote: post #56

Earlier quoted context omitted.

Economic activity: > The velocity of money (or the velocity of circulation of money) is a measure of the number of times that the average unit of currency is used to purchase goods and services within a given time period.[3] * https://en.wikipedia.org/wiki/Velocity_of_money Good video by a CFA trainer: * https://www.youtube.com/watch?v=l0mh7cCjwDU The first 10 minutes (maybe 20) probably has the most pertinent inform…

What's the logic behind economic activity leading to inflation? That seems very counterintuitive. From that equation, if you were to look at the extreme and print a ton of money and have zero usage there would no inflation. I would think the opposite would be true.

[deleted]

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

#99

Post by mrec »

Robotbeat wrote: post #90
mrec wrote: post #84

Earlier quoted context omitted.

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. Unfor…

> Too low of inflation is bad because it means less investment in the physical economy

But why did this apparently only become the case after 2008? Positive real returns without gambling were acceptable before that, and we still got a gigantic speculative bubble, so why does it suddenly become reasonable to encourage bubbles even more? Was it just a coordination problem? An initial panic reaction to slash to zero, and then no central bank being willing to go first and unwind it?

As you say, the other major part of this problem is the inability or unwillingness to steer money toward productive investment rather than speculation. Here in the UK it's housing that's the killer; my suspicion is that governments have become addicted to the jam-today enabled by the money created for mortgage loans, which will then have to be paid off on some other poor sucker's watch.

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

#100

Post by postingawayonhn »

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?

There's a practically unlimited supply of cars. If people start buying more manufacturers will produce more.
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