What if your entire worldview was just because of near-zero interest rates? • Hacker News Board

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

#141

Post by imtringued » Mon, Dec 12, 2022, 7:28 AM UTC

Areading314 wrote: post #61

lokar wrote: post #13

People who complain about extreme fed policy should look to congress. The inability of congress to address core economic and financial issues forces the feds hand.

Very accurate. The dysfunction of congress led to a much slower economic recovery after the GFC due to sequestration and partisan debt ceiling games. Then went far the other way with huge tax cuts, huge spending, followed by even more spending by the current admin, and claim surprise at the resulting inflation. If we do have a recession coming, we are in a very bad position to cushion it at the moment due to politica…

Low interest rates are supposed to make it easier to build new housing but instead zoning keeps getting more restrictive. People complain about Chinese investors buying up houses when they should be glad that they can use this money to build homes.

Local residents might think property values going up benefits the city but in practice wealthier individuals will be able to afford more houses and all of those increased property values exit the community when "mortals" move in and buy the house. The 700k paid on a house does not go to the community, it goes to some absentee owner/landlord in San Francisco or New York or some other major city.

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

#142

Post by prox » Mon, Dec 12, 2022, 7:28 AM UTC

jongjong wrote: post #136

benjaminwootton wrote: post #127

Earlier quoted context omitted.

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…

What are some the skills or things you know that make you successful in this new environment, if I may ask?

I think I might be one of those, but I lack the contextual information/knowledge to act on it.

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

#143

Post by hef19898 » Mon, Dec 12, 2022, 7:32 AM UTC

RayVR wrote: post #117

I just can’t take this person seriously. Clearly written by a non-expert and the questions/ideas are, as a result, well-trodden ground without anything original to add. Take this representative quote “It’s Jerome Powell’s world: never before have I seen markets move so erratically in response to a once-boring Jackson Hole conference. Actually, the first time I ever heard of this event was this year since some acquain…

Just yesterday I commented something about the disconnect between huge parts of the population (or at the very least those on social media and the internet) and just how the basic, underlying things in our society work. Seems this submission is just another, great example for this.

The recipe is always the same: lack of basic understanding of things (economics, law, finance, supply chains, medicine, science,...), a certain level of eloquence, full certainty to be able to work out everything based on first principle, no curiosity or intention to do some basic research into topics and a huge drive to look smart / proof to the world how smart you are. Easy to spot so, for example by sentences you pointed out.

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

#144

Post by HWR_14 » Mon, Dec 12, 2022, 7:33 AM UTC

eftychis wrote: post #132

IncRnd wrote: post #122

Earlier quoted context omitted.

> 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.

Why on earth would you think dividends are a terrible idea?

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

#145

Post by hef19898 » Mon, Dec 12, 2022, 7:34 AM UTC

marvin wrote: post #140

howinteresting wrote: post #125

Earlier quoted context omitted.

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.

Growth =/= increasing share prices (or company valuations)

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

#146

Post by imtringued » Mon, Dec 12, 2022, 7:35 AM UTC

shock-value wrote: post #70

dnissley wrote: post #24

Earlier quoted context omitted.

Hm, but we've had zero interest rates that entire time so shouldn't we have expected even higher returns? E.g. what would the 90s have looked like with zero rates?

Lowering rates will give a boost to the stock market in the short to medium term. In the long term, returns will settle closer to the interest rate in question (plus a risk premium). See: Japan over the last couple of decades.

It is kind of interesting how this was the core observation of Keynes. It isn't capital that dominates the markets it is money.

According to classical economics people either spend or save, there can be no such thing as indecisiveness or paralysis. What this means is that a too low interest rate would immediately cause inflation and therefore result in a higher nominal interest rate because the rate of capital formation is too slow.

In practice we haven't observed any capital shortages that weren't the result of a one off event. The interest rate appears to be the only barrier and the return on capital followed it in countries excluding the USA.

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

#147

Post by lmm » Mon, Dec 12, 2022, 7:39 AM UTC

spaceman_2020 wrote: post #124

miguelazo wrote: post #109

Earlier quoted context omitted.

It has skewed the labor market to an insane degree. So much talent went into idiotic pursuits, and away from anything that had to do with public service.

My wife's uncles is one of the top doctors in his field in the country, and was the head of department in the country's top medical university. He makes less money than me, even though I'm 35 years younger and my "skills" include some basic coding, some marketing, and some understanding of social media. Whereas this man has spent nearly 50 years in the medical field and has treated multiple presidents. None of the st…

> All that free money has seriously misaligned societies incentives. Enrollment in the medical field is falling drastically because no one wants to work years to make less money than some 24 year old with two years of coding experience.

Sounds like a problem that's sorting itself out. There were far too many people who wanted to be doctors; maybe if the supply drops the medical industry might have to - gasp - do something about their working conditions, or even pay more.

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

#148

Post by lmm » Mon, Dec 12, 2022, 7:40 AM UTC

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.

It's harder for a few at the top to monopolize all the jobs than all the money.

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

#149

Post by echelon » Mon, Dec 12, 2022, 7:41 AM UTC

HWR_14 wrote: post #144

eftychis wrote: post #132

Earlier quoted context omitted.

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

Why on earth would you think dividends are a terrible idea?

1. Theoretically speaking, this means the company has nowhere else better to put that cash [1]. Rather than reinvesting back into itself to fuel growth, dividends return company proceeds to investors. It's a sign of slow or no growth.

2. As an investor, you can't control when and how you're taxed. Dividends are taxable when they are paid out. A company stock buyback, on the other hand, would increase the value of your shares and let you sell when you're ready.

[1] Discounting stocks like REITs which are required to return profit in the form of dividends.

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

#150

Post by ako » Mon, Dec 12, 2022, 7:42 AM UTC

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.

First time I came to the US over 25 years ago, one thing I noticed that was really different from western Europe was the amount of artificial jobs: grocery store bag filler, elevator boy, parking place guard, etc. I hadn’t seen these in Europe for years, cause nobody needs them. Having first visited Eastern Europe during communism, the resemblance in this aspect surprised me.