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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)

#121

Post by snidane »

perfunctory wrote: post #118

> suggestions about the ‘virtual stability’ of capital returns, and the policy implications advanced by Piketty (2014) are in consequence equally unsubstantiated by the historical record. capital returns != interest rates

> capital returns != interest rates

What makes the difference? That one comes from stocks and the other from bonds and loans? Or the amount of risk associated with it?

I don't think there is a difference for an investor who just picks whatever instrument yielding higher ROI, whether it is risky tech startups or risk free government bonds.

Tech startups have higher return on capital with higher risk, government bonds have low yield but small risk. Risk adjusted those terms seem interchangeable to me.

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

#122

Post by chii »

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…

> The price of bread stays at a dollar; has the currency been debased? I honestly don't know.

i say no it hasn't. Imagine a third person, who mows lawn for $1 an hour. He has not improved his lawn mowing during this time period which the baker has made improvements to bread making. So the work of mowing the lawn for $1 should stay the same regardless of what the bakers did - and therefore, the lawn mower being able to buy bread for $1 is not unreasonable.

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

#123

Post by herewegoagain2 »

freeone3000 wrote: post #104
dnautics wrote: post #102

Earlier quoted context omitted.

> we have never really had much of a true lockdown here. And parts of europe had more of a lockdown than the US and the population fatality rate is worse. I wonder if covid just doesn't care about lockdowns; the countries that haven't gotten hit badly are 1) an island. 2) an isolated continent. 3) an island 4) a country that sits on a peninsula that has a hugely militarized impermeable border. and 5) a group of islan…

It also correlates well with countries that habitually wear masks and avoid close personal contact when feeling unwell, which fits the data better as it removes the UK outlier.

So you are saying asymptomatic infections are not an issue?

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

#124

Post by yoz-y »

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…

> Lots of people actually like their family & enjoy spending more time with them.

Let's not forget that there are a lot of people who don't live with families or in couple. For them (I am in this case too), most of social interactions are with colleagues during the day and friends in evenings or weekends. Both of these options are at minimum severely hindered.

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

#125

Post by helge9210 »

warlog wrote: post #19
pochamago wrote: post #16

Earlier quoted context omitted.

Ethiopia effectively started a civil war, but I don't think it's source is the pandemic.

Water!

Same reason for events in Syria and Egypt. Jordan is quiet only because of all the water they get from Israel.

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

#126

Post by helge9210 »

anticodon wrote: post #95
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 pre…

> like they did in Ukraine in 2014

Which "they" are you referring to?

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

#127

Post by phkahler »

anewaccount2021 wrote: post #22
phkahler wrote: post #15

Earlier quoted context omitted.

the US budget deficit is rising, soon out of control IMHO. Raising rates is no longer viable without severe consequences. Nobody has seemed to realize that it's the rate of change in interest rates that has an effect, not the absolute level of them (within reason). The stock market is one giant bubble. People talk occasionally about negative interest rates, and wonder how A) that might work and B) how not to have peo…

Rates can never rise. Americans and American corporations are too indebted with no room to finance increased debt servicing costs. The dilemma is the longer rates stay low, the more debt is piled on. Ultimately there must be a complete reset.

Yes. The 2008 bubble popped when the fed made an abrupt upward change in rates. Because housing prices vary inversely with rates, that put people under water. Now imagine the same effect with corporate and government finances on a much larger scale.

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

#128

Post by ookdatnog »

dnautics wrote: post #102
steveBK123 wrote: post #76

Earlier quoted context omitted.

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…

> we have never really had much of a true lockdown here. And parts of europe had more of a lockdown than the US and the population fatality rate is worse. I wonder if covid just doesn't care about lockdowns; the countries that haven't gotten hit badly are 1) an island. 2) an isolated continent. 3) an island 4) a country that sits on a peninsula that has a hugely militarized impermeable border. and 5) a group of islan…

Covid doesn't care about half-assed, poorly enforced lockdowns. China managed to control the virus pretty well it seems (after completely botching their early handling).

Lockdowns seemed to work in my country early in the pandemic. But in my country many covid measures are reliant on goodwill and voluntary compliance, so if morale drops (as you'd expect with extended lockdown), you expect lockdown effectiveness to drop as well.

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

#129

Post by throw0101a »

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.

One person's spending is another person's income. The more economic activity there is, the more people feel confident about their future, the more they spend.

They may at some point become "too confident" and start feeling that the 'party' may never end. So they go out and spend more and more: on new clothes, on renovations, or second (or third) houses, on new cars, boats, etc.

However, there's only so much capacity for (say) manufacturing: only so many cars can be built, and if you really want one, then you'll be will to pay $40K to get the new shiny instead of trying to haggle down to $37K. There's only so many housing builders and lumber that is available: and if you want more square footage, they'll be setting the price that you have to pay.

I'm not sure how old you are, but in the 2006-2007 timeframe there was a lot of "irrational exuberance" before people over-extended themselves.

The movie The Big Short is an entertaining and fairly accurate take.

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

#130

Post by throw0101a »

op03 wrote: post #103
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…

How many miles on that 2003 Golf?

Not a lot.

I bought it when I graduated and my first job was in an office park with little transit. Since then I've mostly worked in more urban areas, so I've been able to take transit or pedal, and so mostly use the car on weekends.

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