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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?

#241

Post by nobrains »

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 refer to this as the US 3rd nuclear bomb.

Most countries hold USD reserves/bonds.

If US prints money, the wealth of all countries holding USD goes down. While the wealth of US increases.

Since US started this monetary policy of easy money printing, they have been "bombing" the rest of the world, violence-free, ammunition-free and uranium-free.

I am not an American, but if I were, I would be pretty happy about it. Yes, it would affect me and my neighbors, but in the end I would be getting a net benefit.

The real beauty is how the other countries don't even fully realize this is happening to them and the people who do realize (finance ministries, central bankers, etc.) are kept rich enough to not talk about it too much.

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

#242

Post by r_hoods_ghost »

LarsDu88 wrote: post #175

The folks reading this are going to get the wrong message. They are going to believe that rising interest rates will magically make it so that the most highly valued companies are the ones that produce the most societal good. This may start to happen more to a certain extent, but it's a totally false assumption. The most valuable companies before and after this era of low interest rates were and continue to be monopo…

I think a lot of HN adjacent engineers are going to have a rude shock over the next few years as there are several pressures working against them. The first is that companies that have been trading debt for growth are not sustainable in a high interest rate environment. The second is that the shift to working from home has meant that employing remote teams, be they in other areas of the states or overseas has become much more normalized. Why would you pay Bay area salaries when you can employ just as qualified people elsewhere for less?

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

#243

Post by huijzer »

sph wrote: post #231
huijzer wrote: post #196

> The 2010s were a decade that “disrupted everything but resolved nothing,” as Andy Beckett wrote, and I tend to agree. These kinds of sentiments are great for drawing attention and might be true on a macro level, but I do not agree at all. Although there is currently a lot of nonsense going around, there are also great things going on if you look carefully. For example, I think that electric cars do have their probl…

I don't think TFA meant "resolved nothing" as a literal nothing, and they meant in a more general sense of the world, not just seen from the tech point of view. Sure, we made cool things in tech during this era, but was it worthwhile on a global scale, on a social level, in an economic sense? That is debatable. It is nonsensical to say that the creation of the SSD or Github has created a more fair society. Apples and…

> Sure, we made cool things in tech during this era, but was it worthwhile on a global scale, on a social level, in an economic sense? That is debatable.

Globally, I do think that it's getting more and more difficult each year for organizations and countries to hide immoral behavior. For example, the Chernobyl disaster of 1986 was kept secret from the West for a few days (maybe a few weeks) whereas I nowadays would imagine a Western satellite on top of it within a few hours to days. Similarly, the situation with the Uyghurs is well known and other countries do take that into account when interacting with China. With an optimistic hat on, I would say that at least knowing about immoral/inhuman actions is better than not even knowing about them. And then I come back to the SSD and chips. They help in gathering and sharing information.

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

#244

Post by benj111 »

fragmede wrote: post #187
benj111 wrote: post #170

Earlier quoted context omitted.

There has to be some basis for valuation. If you buy a stock, not because you expect it to pay something but because you expect someone to pay more later for the same reason you don't have investment. You have speculation. Yes there are other methods for distributing profits (stock buy backs) but unless you're saying it's a massive Ponzi scheme, then the value has to come from something real.

The market can stay irrational far longer than you can stay solvent. What the years of free money proved is that the points are made up anyway. If you stayed playing the old game of PE ratios and market fundamentals you lost out on a ton of gainz in years past other than this one. The value comes down to how much the next sucker is winning to pay for what you're selling.

Just because the market is irrational, doesn't mean you have to be.

To bastardise buffet. I'd much rather everyone else gorge themselves on hotdogs so I can have my favourite burger restaurant to myself. When they come to their senses I will have to pay more for my burgers, if I can even get a seat in the restaurant.

'gainz' are only 'gainz' when you come to sell, and I have more confidence that something that I bought at current inherent value will maintain that value when I want to sell, compared to something with no inherent value.

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

#245

Post by tasuki »

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…

> All the money which exists in the system was created out of nothing

People keep saying this. But hasn't it almost always been true, almost everywhere? Apart from some rare exceptions, such as people using livestock as money.

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

#246

Post by notahacker »

boppo1 wrote: post #201

Can anyone explain to me why we don't have a policy of 'natural' or 'equilibrium' interest rate? As I studied finance in college in the 2010s I was aghast to realize that the US had basically turned into a centrally planned economy, and could not wrap my head around how any serious economist could advocate for the paradigm with a straight face. I'll never forget my freshman year investment analysis professor angrily…

Because there's no such thing as a 'natural equilibrium' interest rate[1]. The base interest rate is an equilibrium, which regardless of monetary policy regime is influenced by something completely artificial (the quantity of base money in an economy) and lending activity. The Fed deciding to set the quantity of base money added to an economy 'no more ever' or 'x% per year' or 'in proportion to stocks of some shiny metal' or some other target leads to every bit as much of an artificial equilibrium interest rate, it's just that the vast majority of alternatives lead to more volatility and lower growth.

[1]OK, there's Wicksell defining "natural" interest rate as one which leads to commodity price stability, but a slight modification of Wicksell's definition of price stability (to avoid the threat of destabilising deflation) has actually been the Fed's primary objective over recent decades...

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

#247

Post by bagels »

nobrains wrote: post #241
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 refer to this as the US 3rd nuclear bomb. Most countries hold USD reserves/bonds. If US prints money, the wealth of all countries holding USD goes down. While the wealth of US increases. Since US started this monetary policy of easy money printing, they have been "bombing" the rest of the world, violence-free, ammunition-free and uranium-free. I am not an American, but if I were, I would be pretty happy about it. Y…

They are trying to replace usd as the reserve currency.

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

#248

Post by PedroBatista »

ornornor wrote: post #172
geysersam wrote: post #155

Earlier quoted context omitted.

> a stock is worth.. Hasn't this always been the case? Genuinely curious.

Not an economist. AFAIK this used to be true in the olden days. For the last few decades, many tech companies have turned little to no profit and yet trade at insanely high premiums given the fundamentals because most people have FOMO and pay for the expectation that maybe one day $money_loser will make money and be worth what they paid. Outside of tech, I don’t think this is the case though. It’s valuing stocks by t…

It always been like that for every company in every field.

The only new factor is the amount of “free” money on the market. In the past it was minimal ( more or less ), now it’s maximal after a decade of zero interest rates and trillions of paper printed.

This exacerbated some aspects of the market but the fundamentals remain the same.

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

#249

Post by michaelt »

boppo1 wrote: post #201

Can anyone explain to me why we don't have a policy of 'natural' or 'equilibrium' interest rate? As I studied finance in college in the 2010s I was aghast to realize that the US had basically turned into a centrally planned economy, and could not wrap my head around how any serious economist could advocate for the paradigm with a straight face. I'll never forget my freshman year investment analysis professor angrily…

One serious economic theory states there is a 'business cycle' [1], where the economy varies between doing well and doing badly every, say, 5-10 years. Keynesian economists [2] think the government should dampen these cycles by saving up a war chest when the economy is doing well, and spending when the economy is doing badly.

After all, if there's a Great Depression and you build the Hoover Dam, you get a big discount on the construction because nobody else is building - and you get 10,000 jobs for people who would otherwise be idle.

So the idea of targeting a given amount of growth, pressing the throttle on the economy when below that and the brakes when above it, is a well established notion.

Of course, these days in practice election cycles don't match business cycles, and there ain't no way Party A is building up a war-chest so Party B can deliver tax cuts, or vice-versa. And if a sector of the economy - like house prices - is overheating, the government is as likely to cut taxes to help out buyers, as it is to raise taxes to reduce price growth and build up a war chest.

[1] https://en.wikipedia.org/wiki/Business_cycle [2] https://en.wikipedia.org/wiki/Keynesian_economics

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

#250

Post by bagels »

r_hoods_ghost wrote: post #242
LarsDu88 wrote: post #175

The folks reading this are going to get the wrong message. They are going to believe that rising interest rates will magically make it so that the most highly valued companies are the ones that produce the most societal good. This may start to happen more to a certain extent, but it's a totally false assumption. The most valuable companies before and after this era of low interest rates were and continue to be monopo…

I think a lot of HN adjacent engineers are going to have a rude shock over the next few years as there are several pressures working against them. The first is that companies that have been trading debt for growth are not sustainable in a high interest rate environment. The second is that the shift to working from home has meant that employing remote teams, be they in other areas of the states or overseas has become…

I completely agree with this. COVID + everyone refusing to go back to the office means nobody needs to be in a specific place anymore. I've changed my hiring strategy to cultivate talent elsewhere and pay 1/3 of what is paid in the US.
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