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Four Basic Truths of Macroeconomics

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Re: Four Basic Truths of Macroeconomics

#61

Earlier quoted context omitted.

> Depreciating currency causes those assets to go up in nominal terms That does not increase the real value of those assets, and it does not have any distributional consequences. > Thats a theory-laden and motivated explanation You could go read like, any of the vast literature on the great depression, the things that caused it and the things that made it worse. But you'd rather expose your ignorance on the Internet…

> That does not increase the real value of those assets, Exactly correct. It decreases the value of the money use to pay for them, resulting in a higher nominal price and fewer people in society who are able to afford them, resulting in less access to capital for the majority of society. > and it does not have any distributional consequences. False. When assets go up relative to currency, fewer buyers can compete for…

> It decreases the value of the money use to pay for them

That is meaningless, though. Imagine last year you bought some asset, that someone else did not, and it appreciated 2% with the price level. You are not any better off. I see you are implying that the other person "couldn't afford" to invest and kept their money in cash instead, to argue that the other person is worse off. That is also wrong - the issue here is holding cash, not the wealth disparity. Don't hold cash if you are worried about inflation. Mutual funds have low minimums, and you can buy fractional ETF shares at this point. You have no argument here.

Re: Four Basic Truths of Macroeconomics

#62
post #7

"I also think measures of price inflation are almost useless over the long run, because a person today consumes a very different bundle of goods than one in, say, 1950." I agree with this wholeheartedly. How do we put a value on the fact that, for the cost of no more than a day's labor, most in the US can have a handheld device with access to nearly the sum total of the world's knowledge and entertainment? No one, at…

Sure you can have the entire worlds information and entertainment at your fingertips with a $50 smartphone, but if you can't afford to have a roof over your head I'd argue the smartphone is irrelevant. I don't think we should be including basic necessities alongside improvements in entertainment in the same statistic, because it will just hide problems.

I've seen homeless people with a smartphone, and the phone seems pretty relevant to them

Re: Four Basic Truths of Macroeconomics

#63

Earlier quoted context omitted.

> Do they? Generally inflation benefits debtors and not lenders, because debts are denominated in dollars in the year of issue, and repaid in future dollars, which are worth 2% less per year. Yes, exactly. This allows wealthy people to borrow money and pay it back with less value. > Overwhelmingly poor and middle class folks are debtors (think mortgages). Poor people often don’t have access to these extremely low int…

You've stated a bunch of stuff as fact without sources. > Yes, exactly. This allows wealthy people to borrow money and pay it back with less value. It lets everyone do so, and as a fraction of net worth, the poor are way disproportionately exposed, and hence benefit. A billionaire with $1B in net worth isn't leveraged to 10B in real estate. Someone worth $10K may easily have $100K in mortgage debt, however. Why do yo…

> It lets everyone do so

Citation for your claim that everyone has access to cheap credit. Are you aware of payday loans? [0]

> and as a fraction of net worth, the poor are way disproportionately exposed, and hence benefit.

Citation needed for your claim that the poor can access these low interest rates.

> A billionaire with $1B in net worth isn't leveraged to 10B in real estate.

Citation needed. Why do you think a person with $11B in assets wouldn’t borrow $10B?

> Someone worth $10K may easily have $100K in mortgage debt, however.

Citation needed. Do you mean someone worth $110k has a $100k mortgage? Or do you mean someone worth -$90k has $10k in assets and liabilities totalling $100k?

> Why do you say people who have both debt and assets benefit more than those who have just debts?

Because inflation causes assets to appreciate in nominal terms (assuming constant real value) and debt to depreciate in real terms.

> They strictly dont because those assets have to outperform inflation. Debts do not.

I’m not sure what you mean by “outperform inflation”

> That's irrelevant - that is to say, a separate problem

It means your theory about poor people benefitting from low interest rates is not true.

> because inflation affects everyone regardless of interest rate equally.

Citation needed.

> Interest rates are set based on likelihood of default.

You know this and yet you continue to assert that poor people benefit as much or more than the wealthy? I guess you think a person with a minimum wage job and no assets is just as likely to default as a billionaire?

> Yes, in aggregate, no the cost of houses hasn't increased on an inflation adjusted dollars per square foot basis since the 1970s

Right, when you adjust for the inflation, it hasn’t increased at all. Which is basically the point. The prices go up because of inflation, people who hold assets sell them for more money, people who earn paychecks get the same amount of dollars but can buy less for it, etc. None of this is controversial except when saying it around the proles who might take offense at the efforts of oligarchs to eat the bottoms out of their paychecks and savings.

> No, this is a fundamental misunderstanding. All businesses see their expenses and revenues rise with inflation.

But not at the same time or at the same rate. After all, if all prices relected inflation at the same time, there would be no point.

> If they choose not to adjust their salaries commensurately, they've made a conscious decision to reduce pay a fraction of income.

No, the bankers are the ones who made the conscious decision. Good rhetorical judo tho.

> [citation needed]

> You've stated a bunch of stuff as fact without sources.

Some of it is basically common knowledge, like poor people not having the collaterall, credit history, or social value required to access the same loans as billionaires. Some of it just seems like fundamental misunderstanding on your part, like your belief that all prices inflate at the same rate.

[0] https://www.cnbc.com/2021/02/16/map-shows-typical-payday-loa...

Re: Four Basic Truths of Macroeconomics

#64

The third great truth in this list is "an increase in the money supply leads to inflation, except when it doesn't" which is hard to argue with. Clearly a field where Nobel prizes should be awarded.

To be fair it's not a real Nobel prize. It's paid for by a bank and it was first issued in 1968. One of Nobel's descendants is on record speculating that Nobel would never have agreed to the award. It's very much about public relations for the field of economics. The field's effect on the world has been to undermine democratic governments through the establishment of treaties that people never voted for and organizat…

it was a joke...

Re: Four Basic Truths of Macroeconomics

#65

Earlier quoted context omitted.

You've stated a bunch of stuff as fact without sources. > Yes, exactly. This allows wealthy people to borrow money and pay it back with less value. It lets everyone do so, and as a fraction of net worth, the poor are way disproportionately exposed, and hence benefit. A billionaire with $1B in net worth isn't leveraged to 10B in real estate. Someone worth $10K may easily have $100K in mortgage debt, however. Why do yo…

> It lets everyone do so Citation for your claim that everyone has access to cheap credit. Are you aware of payday loans? [0] > and as a fraction of net worth, the poor are way disproportionately exposed, and hence benefit. Citation needed for your claim that the poor can access these low interest rates. > A billionaire with $1B in net worth isn't leveraged to 10B in real estate. Citation needed. Why do you think a p…

[deleted]

Re: Four Basic Truths of Macroeconomics

#66

Earlier quoted context omitted.

> As everyone includes the rich, it is true that they benefit, but not especially true. Asst holders benefit disproportionately, as do debtors. The people who benefit most have both assets and debt. These are wealthy people. > The alternative is not “employment at the same wages” when demand drops, it's “production cuts and unemployment, resulting in larger second order demand drop, resulting in more production cuts…

> people who benefit most have both assets and debt. These are wealthy people Generally you have to have more assets than debt to be considered "wealthy." This is why the word "net" is important in the parent comment. And you are completely ignoring the second-order effects, which is that an economy with low, stable inflation is good for everyone. And if you are going to quibble "why is low, stable inflation good for…

> Generally you have to have more assets than debt to be considered "wealthy." This is why the word "net" is important in the parent comment.

I think you’re missing the point.

> you are completely ignoring the second-order effects

I’m sure I referred to them repeatedly.

> an economy with low, stable inflation is good for everyone

This is argument by assertion, which I have already responded above by explaining, in detail, how this is not the case.

> look at the deflationary spirals of the great depression (or any pre-1900 crash) and any hyperinflationary economy of your choosing.

You’ve helped me to show why an unstable currency is bad. You haven’t supported your assertion of why a depreciating currency is good for everyone.

> COVID hits, demand plummets, we do nothing to try to keep people in jobs or keep the financial system from collapsing. Less production is indicated!

Sounds good. Those pesky billionaires are going to be upset that we don’t continue to pump up their asset prices but whatever.

> No one is talking about counter-cyclical monetary policy and implying it is being used to keep anachronistic firms in business.

Why not? Why is it good to print money so unproductive workers don’t get laid off, but its bad to print money to keep unproductive firms from disappearing?

Re: Four Basic Truths of Macroeconomics

#67

Earlier quoted context omitted.

> As everyone includes the rich, it is true that they benefit, but not especially true. Asst holders benefit disproportionately, as do debtors. The people who benefit most have both assets and debt. These are wealthy people. > The alternative is not “employment at the same wages” when demand drops, it's “production cuts and unemployment, resulting in larger second order demand drop, resulting in more production cuts…

> printing money so that the buggy whip makers didn’t notice that there was less demand for their product would have been a disservice lol, printing money wouldn't have changed anything there. If they made a -5% real return with no printing, and there's a 2% inflation rate, they'd have made a -3% notional return, or, and I believe this is true, a -5% real return. Unless it was handed directly to them, in which case w…

> lol, printing money wouldn't have changed anything there. If they made a -5% real return with no printing, and there's a 2% inflation rate, they'd have made a -3% notional return, or, and I believe this is true, a -5% real return.

This makes no sense. You print money and spend it on buggy whips, they continue to make a positive return. Because you printed money and took up the slack demand.

> Just as a 2006 vintage Krug isn't the same as a 2010 vintage Krug, a 2006 vintage dollar isn't the same as a 2010 vintage dollar.

This doesn’t make sense either, in 2010 the 2006 dollar is worth the same as the 2010 dollar.

Re: Four Basic Truths of Macroeconomics

#68

Earlier quoted context omitted.

> people who benefit most have both assets and debt. These are wealthy people Generally you have to have more assets than debt to be considered "wealthy." This is why the word "net" is important in the parent comment. And you are completely ignoring the second-order effects, which is that an economy with low, stable inflation is good for everyone. And if you are going to quibble "why is low, stable inflation good for…

> Generally you have to have more assets than debt to be considered "wealthy." This is why the word "net" is important in the parent comment. I think you’re missing the point. > you are completely ignoring the second-order effects I’m sure I referred to them repeatedly. > an economy with low, stable inflation is good for everyone This is argument by assertion, which I have already responded above by explaining, in de…

[deleted]

Re: Four Basic Truths of Macroeconomics

#69

The only truth: central banking facilitates theft of savings through debasement of the currency. This is the reason the founding fathers fought to keep central banking out of the US.

Yeah, it doesn't, though. Inflation only matters from the time you receive your paycheck to the time you invest it in productive assets or buy the necessities of life. After that it sets the benchmark rate of return for your investments. If your salary fails to track inflation that's between you and your boss who's giving you a pay cut year over year, or between you and congress if you're under the minimum wage umbre…

> Well, they also fought for slavery, they weren't perfect people.

They did not, under any reasonable interpretation of US history, “fight for slavery”.

Re: Four Basic Truths of Macroeconomics

#70

Earlier quoted context omitted.

> people who benefit most have both assets and debt. These are wealthy people Generally you have to have more assets than debt to be considered "wealthy." This is why the word "net" is important in the parent comment. And you are completely ignoring the second-order effects, which is that an economy with low, stable inflation is good for everyone. And if you are going to quibble "why is low, stable inflation good for…

> Generally you have to have more assets than debt to be considered "wealthy." This is why the word "net" is important in the parent comment. I think you’re missing the point. > you are completely ignoring the second-order effects I’m sure I referred to them repeatedly. > an economy with low, stable inflation is good for everyone This is argument by assertion, which I have already responded above by explaining, in de…

> Sounds good.

Aight chief I'm out. Glad we have agreed that 25% unemployment is a good thing. You sure are concerned about those working class people trying to feed their families! I am in awe of your superior economic knowledge and humanitarian instincts. It is unfortunate that the people running the central banks are such rascals, rigging the economy for the benefit of the ultra-wealthy, when you could be doing their job instead.

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