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How This Ends

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Re: How This Ends

#491

Post by scarab92 »

fny wrote: post #470
cup_of_joe wrote: post #440

Earlier quoted context omitted.

"If inflation continues and the fed becomes aggressive with hiking, all assets are dead." This sounds incredibly short-term-oriented and alarmist. Dead is a word to describe the end of something's existence. Market turbulence is not a novel occurrence, nor are unsustainably inflated economies driven by cheap money and speculation.

At 10% rates I think the fair value of the S&P becomes something like 2000 assuming the same earnings. High yield rates would moon and tons of bankruptcies would ensue. Consider how heavily pensions and retirement accounts are concentrated in stocks. The ramifications of reaching a point like that would be devastating, so yes, I think dead is not alarmist but appropriate.

That's only true if investors think the 10% rates are permanent. Future interest rates are a time series not a single value, and I suspect most will use a lower rate in later years reflecting some mean reversion.

Re: How This Ends

#492

Post by thatfrenchguy »

lazide wrote: post #458
vintagedave wrote: post #171

Earlier quoted context omitted.

So for non-finance-experts, what should we be doing with our money? Investing in what? Keeping in the bank? It sounds from your comment like there is _nothing_ that won't be devalued, even gold. Is real estate worthwhile? (Note: I am in the EU not US.)

Real estate is going to be gutted - increasing mortgage rates (already have been happening) will decimate qualified buyers. Decreasing prices will further decimate those willing to Hail Mary with cash offers hoping to get something after years of frustration.

It'll make housing even more expensive in 10 years as builders will be decimated like in 2008, we won't build housing for half a decade, and a new generation will look for housing while boomers sit on their 80% vacant 4bd houses they paid 1/5 of the current market price for.

Re: How This Ends

#493

Post by ajsnigrutin »

cma wrote: post #476
ajsnigrutin wrote: post #448

Earlier quoted context omitted.

> Ukraine war is in Europe so what... A country has a minority, minority wants to separate, the main country won't let them, and fights happen between the main country and the minority, a big player steps in and destroys the main country to "save the minority" (and gain whatever their geopolitical interest was). Kosovo, ukraine, same shit, different players. > The current situations are caused by politicians but poli…

> caused by the politicians directly, and not by covid/war/whatever, and sadly, they're the first that will have to go, if we want to return to somewhat normal future. > Not really... in the past, the politicians were "removed" one way or another many many times,... this current peaceful era is more of an anomaly. I'm going to go out on a limb here and say this poster seems to essentially be dog whistling for assassi…

Not assassination, more like revolution.

Look at america for example... a bunch of senile should-be-pensioners are leading the country on basically all levels. Look at EU, a bunch of unelected people in brussles want to break e2e encryption and intruduce private message monitoring.. "for the children". Look at shanghai and their lockdowns. Look at global realestate prices. Look at the profits vs wages ratio.

I mean... something will happen sooner or later, if we want it, call for it, or not.

Re: How This Ends

#494

Post by WalterBright »

vmception wrote: post #480
WalterBright wrote: post #363

Earlier quoted context omitted.

The Federal Reserve Bank system was supposed to prevent busts. We've had some pretty big ones recently - 2000, 2008, 2022. Let's face it. The FRB cannot stop busts. The real reason for the FRB is so the federal government can inflate the currency.

Yes, there are limitations to the tools available to the Federal Reserve and what can be done with monetary policy. At the end of the day you are trying to control individual's behaviors with gravitational pulls of satellite objects, and that doesn't really work. The analogy continues as even astrology enthusiasts might do things because of the believed influence of a celestial body's location, but can really still d…

Milton Friedman showed in "Monetary History of the United States" that the free banking era had more stability in its blind reaction to market forces than the Fed ever did with their deliberate "steady hand" on the throttle.

Re: How This Ends

#495

Post by [deleted] »

walleeee wrote: post #490
ketzo wrote: post #474

Earlier quoted context omitted.

I appreciate this comment. I think the way that it’s written might drive off, say, a more traditional conservative — but I think if rephrased, they would agree. “Spend time at your church, and spend money to invest in a local private school” would line up perfectly w/ 75% of Republicans that I know, (and, if I may assume your views, probably does not line up with them); and yet I think it is a very similar line of th…

I wrote it to try to appeal to traditionalists and progressives and people of all political persuasions! spending time building a religious or spiritual community is fine by me, especially if it provides material services to the locality and a sense of civic responsibility also fine with private schools although I do think they should cater to students without the means to pay exorbitant tuition (some provide tuition…

[deleted]

Re: How This Ends

#496

Post by AnotherGoodName »

tootie wrote: post #217
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…

It seems to me that with the pandemic ebbing, that the only systemic shock going on right now is the war in Ukraine. Russia can't sustain either its offensive or its separation from global fuel markets for very long without collapsing. Developed economies aren't sitting on giant piles of toxic assets or collapsing consumer demand and employment is still sky high. I don't see how this goes much beyond an asset correct…

That's a big one though. It hits food and energy prices which are very fundamental.

Re: How This Ends

#497

Post by phdelightful »

TekMol wrote: post #254
tomesco wrote: post #17

Earlier quoted context omitted.

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?

If you're asking why banks lend money to each other, it's mostly because banks need liquidity (e.g. $ in an account) in order to do transactions and meet legally mandated reserve requirements. If I'm a bank, rather than constantly be sitting on a huge pile of money for the (relatively) rare event that I have a huge transactions to make, I'll mostly do something more useful with my money, and then borrow it from another bank on a short-term basis when I need a bunch of cash.

The fed does this for banks that can't find another bank to transact with, albeit at a slightly higher rate. The fed will also borrow money from banks at a slightly lower rate. This causes the banks to naturally lend among each other between those two rates. This is how the fed controls the interest rate.

The other thing the fed does is buy treasuries. I think this is where the "printing" of money happens. The fed buys a treasury on the market and pays for it by printing money and placing it in the appropriate account. This is how the fed controls money supply.

Re: How This Ends

#498

Post by didericis »

axiosgunnar wrote: post #471
lettergram wrote: post #313

Earlier quoted context omitted.

All GDP is not equal. As an example, Ireland’s GDP was ~1/3 tourism, with covid they lost that GDP. Russia GDP is primarily raw goods, commodities. They also have a decent domestic market for manufactured goods. Look up the global production of wheat, natural gas, oil, etc and look for Russia and Belarus. To put it bluntly, USA GDP is a mix and has everything from commodities to information tech to finance. Russia is…

> I see Russia winning on all fronts tbh. I do not, and anyone else not trying to be contrarian and edgy on the back's of a humanitarian catastrophe does not either. Russia's goal was a blitzkrieg surprise win, measured in hours, taking over the capital and the government, before the West could even muster up sanctions. They have failed abysmally at that, and capturing a few towns in Eastern Ukraine (just a little bi…

They seem to have lost their initial short term objectives, and the fog of war is real/I can’t tell how good or bad they’re currently doing, but I think regardless of their competency or resolve it’s foolish to underestimate a China-Russia coalition’s resiliency long term, if only due to their much more totalitarian hold over their populace. The lack of easy avenues for a change in leadership even if extremely disastrous for most Russians is a significant difference.

That said, I think there are rumblings of regime change in China. The housing market crash and extreme lockdowns seem to have a lot of people upset.

Seems like we’re living through interesting times, unfortunately… I’m probably delusional, but I’m somewhat optimistic that people will be better off once the dust settles. Depends on how rough it gets and whether we can manage a smooth landing.

Re: How This Ends

#499

Post by wonderwonder »

ajsnigrutin wrote: post #493
cma wrote: post #476

Earlier quoted context omitted.

> caused by the politicians directly, and not by covid/war/whatever, and sadly, they're the first that will have to go, if we want to return to somewhat normal future. > Not really... in the past, the politicians were "removed" one way or another many many times,... this current peaceful era is more of an anomaly. I'm going to go out on a limb here and say this poster seems to essentially be dog whistling for assassi…

Not assassination, more like revolution. Look at america for example... a bunch of senile should-be-pensioners are leading the country on basically all levels. Look at EU, a bunch of unelected people in brussles want to break e2e encryption and intruduce private message monitoring.. "for the children". Look at shanghai and their lockdowns. Look at global realestate prices. Look at the profits vs wages ratio. I mean..…

America is a good example. A country that has a population that is essentially 50/50 divided on almost every single thing. There is no "hey we kicked them out" and now everything is good, it ends in a massive pogrom. The us has elections where we have the option to kick them out every 4 years, the current focus on eroding trust in that process is weakening America and has me more concerned than anything else. Elections provide a way to vent pressure, one side takes over and then the other. Messing with elections and eroding trust in them leads to an increase in that pressure without a vent.

No matter what the revolution, it never leads to utopia, it just leads to another group of politicians. An effective Democracy is the best option. Issue is a ton of people choose not to vote and instead just complain. Its far from perfect but better than the alternatives.

"Look at global realestate prices. Look at the profits vs wages ratio" these are the results of capitalism and while I agree there are some massive limitations to it, it has lifted billions out of poverty and subsistence level living. Perhaps technology will lead to a better solution but right now I dont think we have one and just kicking over the sandcastle is not going to make things better and will very likely make things much much worse.

Re: How This Ends

#500

Post by BigBubbleButt »

PaulDavisThe1st wrote: post #483
BigBubbleButt wrote: post #406

Earlier quoted context omitted.

> In my personal view, it would be stupid to hike to 10% since that will also cut off the needed supply response: this will decapitate energy, farm, and housing expansion while at the same time decimating all forms of wealth. But there is a possibility depending on how trigger happy the fed becomes. The only reason Volcker managed to bring down inflation is because he was willing to actually do what needed to be done…

Lots of assumption buried in your comment/worldview about what's actually causing inflation. Is it actually just a slow accretion of growing costs for resources, distribution? Is it companies deciding that now would be a great time to increase prices "because inflation" and thus get ahead of the nascent wage growth that was threatening to take off post-pandemic? Clearly it's a mixture of the two but the implications…

Honestly, that's really not that important for what I was saying, because we're talking about the Fed. The Federal Reserve can choose to fight inflation or it can choose to inflate assets, and that lies on a spectrum. The "why" of inflation isn't nearly as important as the severity of it. If inflation is at 10% you're not going to debate it before doing something about it - that just allows the situation to fester instead of taking initiative. The reason we're in this situation where inflation is still getting worse, a year after being told not to worry about it, is because it's politically untenable to actually try to fix the problem. Meanwhile inflation continues to worsen while we make symbolic gestures about fighting it.

Yes, understanding what's causing inflation matters. I'm not saying it doesn't. But when you have a crisis, you want to focus on mitigation first and then root causing it after the situation is averted.

Also you mention two possible causes of inflation. Limited resources and distribution, and companies deciding to raise prices because they can. What about the Fed printing money like crazy, flooding the M2 money supply? That's the one that's relevant to this conversation.

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