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What if your entire worldview was just because of near-zero interest rates?

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Re: What if your entire worldview was just because of near-zero interest rates?

#131

Post by Krisjohn »

t0suj4 wrote: post #126
neilwilson wrote: post #98

Given that putting interest rates up is an artificial intervention into the market for money, what if your worldview is based around allowing financial institutions to extract rent by taxing people for setting up home? Why is setting the price of money artificially - which gives free government money to financial institutions - better than the alternative: setting the base price of labour by guaranteeing people a job…

From my parents' experience guaranteeing people a job will only result in people idling at job site because there is no work to do instead of people idling at home or possibly studying for a job they want to do. Giving artificial jobs don't differ much from giving people artificially valued money.

Look around when you're outside and take notice of all the maintenance not being performed. Speak with people who have a job and see how many of them would describe their workplace as chronically understaffed. We're a long way away from "people idling at a job site". And even if we weren't, there's a cost to idle tasks that sit around waiting for someone to be available to do them.

That said, only a small percentage of workers are happy to be pointless. Punishing everyone over the few hypothetical lazy does more harm than good.

Re: What if your entire worldview was just because of near-zero interest rates?

#132

Post by eftychis »

IncRnd wrote: post #122
Animats wrote: post #113

Earlier quoted context omitted.

> I definitely think a lot of the startup world view is just a function of low rates. Startups could run for decades with $billions in losses and only a passing focus on eventual profits. Yes. Buying growth at a loss is so over. A stock is worth the present value of future dividends.

> A stock is worth the present value of future dividends. Not every stock pays dividends. A stock's worth is determined by supply and demand in a market or directly between the seller and the prospective purchaser.

In fact it is a terrible idea to pay dividends. You can thank the tax code if you subscribe to that school of thought.

Re: What if your entire worldview was just because of near-zero interest rates?

#133

Post by andsoitis »

Animats wrote: post #113
benjaminwootton wrote: post #106

I definetly think a lot of the startup world view is just a function of low rates. Startups could run for decades with $billions in losses and only a passing focus on eventual profits. All of those losses flowed into the bank accounts of big tech (via AWS credits, Google and Facebook Ads). All of the high salaries, employee expectations and leverage in tech startups and big tech derive from that spigot of cheap money…

> I definitely think a lot of the startup world view is just a function of low rates. Startups could run for decades with $billions in losses and only a passing focus on eventual profits. Yes. Buying growth at a loss is so over. A stock is worth the present value of future dividends.

> A stock is worth the present value of future dividends.

A more accurate thing to say would be that a stock is worth the present value of the future earnings the company generates divided by the number of outstanding shares.

Since the future is unknowable, a stock price is hence derived from the expectation of future earnings.

Re: What if your entire worldview was just because of near-zero interest rates?

#134

Post by reverius42 »

t0suj4 wrote: post #126
neilwilson wrote: post #98

Given that putting interest rates up is an artificial intervention into the market for money, what if your worldview is based around allowing financial institutions to extract rent by taxing people for setting up home? Why is setting the price of money artificially - which gives free government money to financial institutions - better than the alternative: setting the base price of labour by guaranteeing people a job…

From my parents' experience guaranteeing people a job will only result in people idling at job site because there is no work to do instead of people idling at home or possibly studying for a job they want to do. Giving artificial jobs don't differ much from giving people artificially valued money.

Except there is plenty of work to do in public infrastructure, if the government is willing to spend money on getting it done: roads and bridges crumbling, water treatment systems in dire need of maintenance and repair, power grids fluctuating and unable to handle peak loads. And lots of second order work: administration of, and job training for, these infrastructure projects comes to mind.

Re: What if your entire worldview was just because of near-zero interest rates?

#135

Post by spaceman_2020 »

throwawayftx wrote: post #100

Print more and dump on the world strategy will end in the near future since big countries are planning to ditch trade in dollars. Funnily monster that the west created is about to eat it alive.

Ray Dalio says that we are entering an era of currency competition. Instinct tells me that he is right.

Re: What if your entire worldview was just because of near-zero interest rates?

#136

Post by jongjong »

benjaminwootton wrote: post #127
jongjong wrote: post #119

I've been saying this for the last 5 years. People don't realize how powerful the 'money printer' is. All the money which exists in the system was created out of nothing and injected into the economy through a few specific channels (mostly as credit backed by debt). IMO, everything in modern society is influenced in some way by interest rates; even culture and morality. Money printing can distort the market pricing m…

I agree with your thesis that genuine value creation will become more important. I think this is a more exciting market to operate in as opposed to one where we simply need to raise and spend cash as quickly as possible.

For the first time in my career I'm also feeling cautiously optimistic about the future.

I'm one of these people who was absolutely terrible in this low-rate environment. At least I got to learn about some of the reasons why I absolutely suck at it.

One of my worst character traits is that I'm missing the hair-trigger opportunist factor (AKA "you've got one shot" factor) and this is precisely one of the traits which was rewarded heavily by the low-rate environment since it tends to reward first movers disproportionately.

Re: What if your entire worldview was just because of near-zero interest rates?

#137

Post by reverius42 »

miguelazo wrote: post #112
roflyear wrote: post #94

Earlier quoted context omitted.

How did Bernie sell out?

They told him he was a Kremlin asset in 2016 and he believed it. They gave him committee chairmanship as a consolation prize and now he’s one of the biggest hawks for the Dems’ proxy war in Ukraine. Even called out the CPC letter calling for diplomacy alongside military aid.

Ukraine was invaded by Russia. Not sure how that makes it "the Dems' proxy war".

Re: What if your entire worldview was just because of near-zero interest rates?

#138

Post by reverius42 »

xyzzyz wrote: post #93
ch4s3 wrote: post #89

Earlier quoted context omitted.

We have a TON of space, unlike Bangladesh and we’re already a developed economy with strong institutions and rule of law. From a lot of vantage points, the US has enviable problems.

Quoted post unavailable.

Yup, we definitely have rule of law! They're going to lock him/her up any minute now!*

* Substitute whichever "him" or "her" you are convinced has committed crimes and not been locked up.

Re: What if your entire worldview was just because of near-zero interest rates?

#139

Post by forgingahead »

I'm old enough to remember in university economics class, the professor would joke about how financial media would closely watch press conferences that Alan Greenspan would give after FOMC meetings, down to watching the thickness of the briefcase to guess as to whether the fed funds rate (which determines interest rates) would increase or decrease.

I am happy rates have risen, and I hope they stay at a sane level more in line with historical values rather than the insane period of the past 14 years. As another commenter here points out, when rates are not-zero, business defaults back to value-creation, instead of other silly game-the-system metrics that have arisen in this time frame.

Of course it will be painful, both for a generation of younger people who have never experienced "high rates", and also for the finance "professionals" who built reputations on nothing more than gaining access to easy-money and deploying them randomly to things which only rise in value because others also pumped in easy-money down the line. It may also address some of the woke-time-wasting initiatives at companies, as anything not actually adding value will be dropped.

The main thing will be to see if the Fed actually stays the course, or if the allure of the money-printer is too seductive and they decide to drop rates back down again even after (or worse, before) inflation is tamed. If so, then the currency will continue to debase until the crypto exit is inevitable.

Re: What if your entire worldview was just because of near-zero interest rates?

#140

Post by marvin »

howinteresting wrote: post #125
ChuckNorris89 wrote: post #121

Earlier quoted context omitted.

Sure, but if you compare to EU companies, their stock growth had been pitifull in comparison. Everyone invests in US stocks/ETFs/companies if they want to see good returns.

Isn't the EU lagging due to post-GFC austerity?

It’s much more than that. EU policies stunt growth on a structural level.

The tax system and other incentives lead people to not really work their hardest and best, and this propagates all the way to the stock indexes.

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