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Four Basic Truths of Macroeconomics

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Re: Four Basic Truths of Macroeconomics

#111

Post by neilwilson »

NortySpock wrote: post #11
tabtab wrote: post #2

I get a "please subscribe" pop-up and can't get rid of it without fiddling with the CSS editor. Anyhow... Summary of Truisms: 1) During recessions, employers tend to lay off rather than reduce wages 2) Central bank stimulus helps recessions 3) Too much stimulus causes run-away inflation 4) Non-monetary problems like oil shocks and pandemics can cause recessions 5) Increasing population helps economies. ("Hump to de-s…

Regarding point 5: increasing population via reproduction adds workers in 16-18 years. Immigration adds workers immediately. Additionally, immigration increases both labor supply (obviously) but also labor demand (more consumption, because immigrants buy stuff and services just like anyone else) and as a result wages are flat even when a lot of immigrants join the economy in a short amount of time. "This has been tes…

But the viewpoint is one of a country.

What it misses, obviously, is the negative impact on where they have come from.

One areas net immigration is another area's brain drain - hence why you have concentrations in cities and poor rural areas.

Re: Four Basic Truths of Macroeconomics

#113

Post by arcticbull »

chordalkeyboard wrote: post #90
arcticbull wrote: post #84

Earlier quoted context omitted.

> This doesn’t make sense either, in 2010 the 2006 dollar is worth the same as the 2010 dollar. No, it isn't. A 2006 dollar is worth ((1 + 0.02)^15) = $1.34 in 2021 dollars. A 2010 dollar is worth ((1 + 0.02)^11) = $1.24. Each reflects a slice of the GDP in the year of issue and if you'd exchanged it for assets in the year of issue like you were supposed to you'd have preserved that value. You chose to bring it forwa…

You misunderstood my comment. > if you'd exchanged it for assets in the year of issue like you were supposed to like you were supposed to This is exactly how the central bank policy is set up for the wealthy. > You willingly took the haircut. Alas, most Americans (and all the poor ones) do not have the same access to investment opportunities as myself.

> like you were supposed to This is exactly how the central bank policy is set up for the wealthy.

The poor have no assets to invest.

> Alas, most Americans (and all the poor ones) do not have the same access to investment opportunities as myself.

Yes they do. If they have money, they have Robinhood. If they don't have money, inflation doesn't matter.

Re: Four Basic Truths of Macroeconomics

#114

Post by chordalkeyboard »

arcticbull wrote: post #103
chordalkeyboard wrote: post #75

Earlier quoted context omitted.

> Boy are you going to freak out when you learn about stock splits and fractional share investing. You really must be confused if you think thats a rebuttal.

> You seem to be unaware that different investors have different investment goals. No, investors only have one goal: total returns. Anything else makes no sense. After all a stock that issues a $5 dividend and goes down $10 ain't worth investing in, is it? > Yeah, no. Some investors want dividends, some want gains, some are more concerned with security of principle, some optimize for total return. This is taught in f…

> No, investors only have one goal: total returns.

You’re misinformed. There are 3 considerations: dividend yield, capital gain, and security of principle.

> Both are gains. If you hold 100 shares and a company doesn't issue a dividend you can sell 1 share to obtain a 1% dividend. Or you can wait for them to issue a 1% divided and be left with 99% the value. It's a no-op. Same thing. You've failed at basic math here.

Owning cash isn’t the same as owning a business and almost everyone understands that. I’m not sure if you’re really this clueless or you’re trying to gaslight me, either way you’re wrong.

> No. You are strictly wrong. When a dividend is issued the stock goes down by that amount. [1]

> After a stock goes ex-dividend, the share price typically drops by the amount of the dividend paid to reflect the fact that new shareholders are not entitled to that payment.

> strictly

> typically

You don’t seem to understand the subject based on this exchange. Do you realize that’s not a rebuttal to what I said?

> No dividends are less valuable because they offer no flexibility in recognition date.

So if they are less valuable then you understand that some investors would prefer them less, and this is not the same as only caring about total returns?

> In fact, I believe, correct me if I'm wrong, dividends are treated as ordinary income. On the other hand if you sell something you've held for 1 year in lieu you'll get long-term capital gains treatment.

So you do understand that they are different, and investors care about more than total return?

Re: Four Basic Truths of Macroeconomics

#115

Post by XorNot »

TearsInTheRain wrote: post #105
arcticbull wrote: post #20

Earlier quoted context omitted.

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…

> 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. This statement just reeks of entitlement and elitism. This is not how most americans live their lives. Stock ownership is highly correlated with income and education. Inflation is a regressive tax on the financially illiterate.

Anyone with a mortgage is actively benefiting from inflation.

Re: Four Basic Truths of Macroeconomics

#116

Post by neilwilson »

anarchop wrote: post #17

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.

If I give you a fresh $100 bill and you put it in a drawer (ie save it), how does that affect inflation?

What mainstream economics can't handle is financial saving. Quite literally it is abstracted away from their models, yet it exists in the real world.

And that's why they keep getting things wrong. It's the savings, stupid.

Re: Four Basic Truths of Macroeconomics

#117

Post by arcticbull »

arcticbull wrote: post #59
chordalkeyboard wrote: post #54

Earlier quoted context omitted.

> 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…

> When assets go up relative to currency, fewer buyers can compete for those assets, leading to the wealthy owning more and the poor getting poorer. Boy are you going to freak out when you learn about stock splits and fractional share investing.

> Owning cash isn’t the same as owning a business and almost everyone understands that. I’m not sure if you’re really this clueless or you’re trying to gaslight me, either way you’re wrong.

So sell 1% of your holdings, now you have cash, same as if you'd been issued a 1% dividend. Either you have 100 shares worth 99% as much, or you have 99 shares each worth 100%. Same thing. The difference is whether the cash remains in the coffers of the company or not. And that only matters depending on what the company plans to do with the cash.

> So if they are less valuable then you understand that some investors would prefer them less, and this is not the same as only caring about total returns?

They're less valuable because they offer less flexibility in terms of recognition date. If I made $100K in a year, I'd be very inclined to sell some shares and recognize capital gains. Much more so than if I'd made $1M. Because I'd get to keep more of them. Flexibility is worth money, but of course, more or less depending on the financial situation of the person you're talking to.

> So you do understand that they are different, and investors care about more than total return?

What on earth are you talking about. There's 1 pot of money, and the government treats the distribution methods differently. It's still a total return from the perspective of the company and the investor.

When you evaluate an investment you should take into account your tax situation. If this is in an IRA, then there's no distinction between a 1% dividend and selling 1% of your holdings. None. Same if you happened to live in Belgium. However for the purposes of this conversation the tax authority is an unrelated third party, whose created a system to incentivize a certain type of behavior.

> Inflation creates a margin rate of profit that must be met or a business loses money.

Yes, a benchmark rate as I've said about 5 times now. It's useful because it establishes the minimum total return a company must have before its worth investing in. If interest rates a 0% the company doesn't have to be too successful. If it's 12% they better know what they're doing.

Look here's the thing. Someone who tells you they want a dividend instead of a stock appreciating has no idea what they're talking about. It's the same thing. The difference is a dividend is predictable... sort of (see last year)... and taxed different. Nobody is going to turn down a 10% total return in exchange for a 2% dividend. Nobody.

Re: Four Basic Truths of Macroeconomics

#118

Post by chordalkeyboard »

arcticbull wrote: post #113
chordalkeyboard wrote: post #90

Earlier quoted context omitted.

You misunderstood my comment. > if you'd exchanged it for assets in the year of issue like you were supposed to like you were supposed to This is exactly how the central bank policy is set up for the wealthy. > You willingly took the haircut. Alas, most Americans (and all the poor ones) do not have the same access to investment opportunities as myself.

> like you were supposed to This is exactly how the central bank policy is set up for the wealthy. The poor have no assets to invest. > Alas, most Americans (and all the poor ones) do not have the same access to investment opportunities as myself. Yes they do. If they have money, they have Robinhood. If they don't have money, inflation doesn't matter.

> The poor have no assets to invest.

They (or their households) have an income, which is paid in units that are constantly depreciating while the investments are increasing in nominal terms. Of course they have no assets, because central bank policies have priced all of the assets out of their reach.

> Yes they do. If they have money, they have Robinhood. If they don't have money, inflation doesn't matter.

They don’t have enough time after working and chores to investigate which assets to purchase on the stock market, which is why banks existed before the central bank destroyed the savings market.

Re: Four Basic Truths of Macroeconomics

#119

Post by jkhdigital »

arcticbull wrote: post #20
anarchop wrote: post #17

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…

Back with your "money under the mattress" red herring as usual, I see. This is not about inflation, it's about monetary debasement. Completely different concepts.

Re: Four Basic Truths of Macroeconomics

#120

Post by neilwilson »

chordalkeyboard wrote: post #26
arcticbull wrote: post #20

Earlier quoted context omitted.

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…

> 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. It means the people who save by depositing cash in the bank lose value over time, causing them to purchase investments out of necessity (rather than purchasing them because they believe its a good investment). This bids up the price of investments relative to their return, wh…

"anyone who relies on fixed payments denominated in dollars (retirees, pensioners, disabled persons, those on public assistance, etc.).

All those people are, or should be, index-linked. But they are a convenient human shield for the real culprits.

The people who actually rely on fixed incomes are those holding the debt assets that rot by inflation - ie bankers and rich people.

Inflation helps debt payers by transfers from debt holders. However it is the latter that have the political power.

Nobody else is affected by inflation. They are affected by the systemic lack of jobs induced by a central bank system that is overly tight to avoid inflation that never happens.

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