How This Ends • Hacker News Board

Re: How This Ends

#251

Post by abirch » Sun, May 22, 2022, 5:08 PM UTC

atq2119 wrote: post #188

abirch wrote: post #111

Earlier quoted context omitted.

I thought that the liquidity was driven by the money multiplier and the Fed's quantitative easing. If the fed set the interest rate at 10% but put in 20 trillion dollars into the economy there'd be bubbles everywhere.

Why would they be able to put 20T$ into the economy at a 10% interest rate? Who are the counterparties? In other words, who is taking those loans in your mind?

The Fed can buy mortgage backed securities like they have done since they've started quantitative easing. The Fed has purchased Apple bonds. This is in addition to US Treasuries.

My original comment was a mechanics related comment in which liquidity (credit + cash) pushes up asset prices and not rates (although there's high correlation especially in the past 20 years in the US).

This is based on my understanding of Ray Dalio. https://www.youtube.com/watch?v=PHe0bXAIuk0

Re: How This Ends

#252

Post by v-erne » Sun, May 22, 2022, 5:10 PM UTC

rhexs wrote: post #115

zht wrote: post #105

Earlier quoted context omitted.

not to mention the millions of people who basically cannot work anymore because they've be irreparably damaged by COVID...

I'm sure a good chunk of the same people who were "irreparably damaged by COVID" would have been irreparably damaged by diseases such as lyme, fibromyalgia, chronic fatigue syndrome, etc. in another universe.

What's Your point? You are suggesting that this people would find another disease to get out of job market? If so that is some high level dystopian stuff you believe.

Re: How This Ends

#253

Post by abirch » Sun, May 22, 2022, 5:11 PM UTC

hackernewds wrote: post #180

abirch wrote: post #48

Earlier quoted context omitted.

The good news is the US Government doesn't have to pay back 5.5% of its debt. Unfortunately the spending keeps increasing.

Yet the government keep spending like debt isn't high ($40B to Ukraine aid) and ignoring causes of inflation for political gain (Biden tweeted: it's time to for corporations to pay their share to bring down inflation)

I'm not a Bezos fan in general but his response to Biden's tweet was spot on.

https://www.twitter.com/JeffBezos/status/1525309091970699265

Re: How This Ends

#254

Post by TekMol » Sun, May 22, 2022, 5:12 PM UTC

tomesco wrote: post #17

TekMol wrote: post #10

When governments rise the interest rate, is that the interest rate the government pays when you lend money to the government?

Close. The federal reserve (or any central bank) will lend money to other banks at a rate just below the target rate, and it will borrow from other banks at a rate just above. Because banks can borrow and lend largely risk free at those two rates, banks will transact amongst themselves at a rate in between. This is how the federal reserve makes banks transact at the target rate.

Why do banks lend money? I thought they create it via writing into their database "Tomesco: $100" and boom $100 was created?

Re: How This Ends

#255

Post by alexashka » Sun, May 22, 2022, 5:13 PM UTC

tsunamifury wrote: post #189

alexashka wrote: post #82

Earlier quoted context omitted.

You don't. It's all useless. If you have a high paying job/lots of money, it doesn't matter. If you don't have a high paying job, it also doesn't matter. Do you see why? That leaves people people for whom it doesn't matter, but they choose to entertain themselves with horoscopes, ahem, I mean market predictions.

The outcomes for those two are significant. And those in leveraged positions even more so.

How do you think your comment relates to mine?

Re: How This Ends

#256

Post by nradov » Sun, May 22, 2022, 5:13 PM UTC

freediver wrote: post #31

fny wrote: post #24

I'm going to explain what has happened so far. What happens next entirely depends on how inflation continues and the feds reaction. 1. We had zero percent interest rates. This causes the value of assets with cash flows out into the future (think speculative tech, Tesla) to accelerate. 2. We had massive herding in megacap tech. These valuations are high in part because for a decade you would not have beat the index wi…

> that bond yields would never normalize. Now that they have, there is a risk free alternative to stocks. Treasury bond yields are 3%, inflation is 8.5%, so in real terms you are guaranteed to lose 5.5% annually if you hold bonds. Or basically instead of risk-free gain you are holding gain-free risk.

The longer term TIPS have positive yield in real terms.

https://home.treasury.gov/policy-issues/financing-the-govern...

Re: How This Ends

#257

Post by TekMol » Sun, May 22, 2022, 5:14 PM UTC

senthil_rajasek wrote: post #246

TekMol wrote: post #232

Earlier quoted context omitted.

The FED can buy bonds in an auction at will. Because it prints the money to do so. It's not like the FED goes "Uh oh, those bonds are too expensive for me".

It's a recent phenomenon. During the covid crisis the fed became a buyer of last resort. It's not usual.

Maybe it's the new normal?

Just like doubling the money supply every couple of years seems to be the new normal since it started in 2008?

Re: How This Ends

#258

Post by unethical_ban » Sun, May 22, 2022, 5:15 PM UTC

omginternets wrote: post #2

I don’t have any good mental tools to distinguish between useful and useless economic predictions like this. How does HN navigate this kind of thing?

This has the feeling of an article posted here in early 2020 about the coronavirus, "The Hammer and the Dance".

It was pretty spot on for the level of info it had on hand.

This feels similar.aybe I shouldn't buy that watch I've been wanting.

Re: How This Ends

#259

Post by cjbgkagh » Sun, May 22, 2022, 5:16 PM UTC

mym1990 wrote: post #142

My view is that capital and investment will dry up and companies that are operating at a loss(many in tech right now) will either have to downsize or close up completely. This will cause a domino effect. People will lose jobs, and some of those people will have bought a million dollar shack in the past 2 years and they might have to sell at a loss or foreclose. Generally I think we have yet to see any real macroecono…

I wonder how many profit making companies are only making profits due to lost making customers. Things could spiral out of hand.

Re: How This Ends

#260

Post by 88913527 » Sun, May 22, 2022, 5:16 PM UTC

jbay808 wrote: post #240

88913527 wrote: post #145

Earlier quoted context omitted.

When you buy a home -- the largest single purchase one makes in the middle class -- you lock in the purchase price, but not the interest rate. Housing prices still haven't recovered in Japan to their 1990 highs. So if you don't pay attention to the macro environment, you could be costing yourself a great deal. Fortunately, other asset purchases like mutual funds in retirement accounts are DCA'ed in by the paycheck, a…

(This situation might not be familiar to US commenters, who can lock in an interest rate for their entire mortgage).

US commenters hopefully know they can re-finance when rates go down. Locked in, with the option of re-fi'ing. Only possible when rates drop but we're yet to have a period of 30 years of continually rising rates.