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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?

#151

Post by lamontcg »

What if you're just too young to remember a business cycle because you weren't an adult or were still in college so were insulated from 2008?

Its funny to read all these takes from "kids" who think that all the fundamentals have totally changed at this point like the economy has turned some fundamental 180 degree turn and we're heading back towards >6% rates forever.

It hasn't. The Fed is going to crash the economy into a brick wall to bring down inflation via raising unemployment (we're probably still 6-12 months out) but then the Fed will slash rates in a panic and go "oopsie". This will bring back yet another low interest rate / cheap money period.

I suspect the next cycle will be shorter and a decade of ZIRP won't happen again, but we're going back to ZIRP again once the recession hits.

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

#152

Post by spaceman_2020 »

lmm wrote: post #147
spaceman_2020 wrote: post #124

Earlier quoted context omitted.

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 some…

My country has a massive shortage of doctors. There's also a virtual cap to how much doctors can charge for consultation - most people, outside of a small minority of tech elite, can't afford to pay any higher fees. My wife's uncle's fees is already high enough that only the wealthy can afford him.

The problem doesn't seem to be sorting itself out. On the contrary, it's making access to people like him even harder for all but the top 1%.

If doctor salaries were to go even higher, it would mean that people like my maid would never ever get even half-decent medical care.

The solution would be to pay the maid more, but there's an oversupply of unskilled labor and any attempt to increase their wages would be thwarted by a flood of new labor supply.

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

#153

Post by Biologist123 »

ako wrote: post #150
t0suj4 wrote: post #126

Earlier quoted context omitted.

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.

“Grocery _story_ bag filler”. Love the typo in the context of the post about artificial jobs.

Seriously though: other factors may create these needs: wage costs, security needs, cultural expectations.

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

#154

Post by qaq »

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…

"I'll be okay with a pay cut if it means a more equitable, more fair society" hmm you could make it more equitable by raising your maids comp by your own description it would have 0 adverse effect on you.

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

#155

Post by geysersam »

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..

Hasn't this always been the case?

Genuinely curious.

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

#156

Post by konschubert »

Krisjohn wrote: post #131
t0suj4 wrote: post #126

Earlier quoted context omitted.

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…

1000 people buzzing to build up a startup that has negative unit econimonics and will never be possible is no different than doing nothing at work.

That being said, you’re right that we are seeing a lot of genuine demand for important work not being filled.

To me, this seems like mid-allocation of labor and it’s one of the effects of a low interest environment.

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

#157

Post by blitzar »

benjaminwootton wrote: post #130
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…

As someone semi familiar with this stuff, it is fairly notable how rates are moving markets right now. Say the payroll number misses consensus by 5%, meaning there’s a fraction of a percent less chance of a 0.75% rise in rates vs 0.5%. The stock market then rallies by 2% or a few hundred $billion in market cap. Surely that isn’t a healthy market when changes in fractional rate expectations create so much volatility.

> As someone semi familiar with this stuff

Your comment suggests the opposite.

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

#158

Post by mvhvv »

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.

What do you think the value is in a stock that doesn't pay dividends? It seems to me that if you remove them, you're getting into pyramid-scheme territory.

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

#159

Post by geysersam »

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.

> A stocks worth is determined by supply and demand

That's a tautology. It's like saying the price is the price.

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

#160

Post by thebradbain »

AnthonyMouse wrote: post #34
smitty1e wrote: post #27

> The point of this silly question is to consider just how much of an outsized role the Fed now holds. Among the overarching points of the U.S. Constitution is that people who wield vast power stand for election. The Federal Reserve urinates all over this point. Reforming the Federal Reserve is sine qua non IMO if there is to be any improvement.

The issue is it's not just the Fed, it's the administrative state as a whole. The President appoints the Fed board and the FCC commissioners and the DoJ and the FDA, and then they make policy though nobody elected them. The rulemaking role of these agencies should be a subset of the legislature and the Congress should have to vote on their proposals before they become law.

Congress can barely agree on a debt ceiling without playing football every year.

Having them vote on the price tiers of postal service package weights or Amtrak route schedules seem like a surefire way to bring the management of every public agency to a standstill.

In fact, the only example we really have of our congress being in charge of setting rules for a public agency is the tax code— and its a mess of carve-outs, loopholes, stopgaps (AMT minimums?) that most lay people need to use a certified professional to simply perform a required function ever year. And it’s consistently subject to political football, drastic policy changes based on whatever party is in power, and core issues that congress was originally supposed to solve by running it (like supposed to balance how much money it brings in against public expenses) are often ignored anyways.

The point of a republic is not to put every decision to a vote, but to elect people we trust to be in charge— which includes who they appoint to run agencies, etc. In fact, that’s where most of the president’s power Tiber policy comes from— and it makes sense why, since he’s the only person in our government we all have a say nationwide in electing.

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