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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?

#271

Post by executesorder66 »

BeetleB wrote: post #95
zamfi wrote: post #74

Earlier quoted context omitted.

Maybe it only works in the US equity markets , but that's not "only works in the US" -- the S&P 500's companies are: not all based in the US, and in total derive only 75% of their revenues from outside the US. For reference, the US share of world GDP is about 25%. It would not surprise me at all if the most scalable, profitable, and growth-oriented companies ended up on the S&P 500 regardless of where in the world th…

The point he's making, which is well known, is that while in the US stocks and index funds derived from them dominated all other forms (bonds, real estate, etc), it's almost never the case in any other developed country. For most of the recent past (recent meaning the last century), putting money in index funds would have been suboptimal in almost every country out there. The fact that the companies get a lot of thei…

What is typically the highest performing long term investment outside the US?

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

#272

Post by heartbeats »

hoseja wrote: post #214
boppo1 wrote: post #197

Earlier quoted context omitted.

> genuine value creation But how do we even know what this is anymore? With more than half the wealth accumulated by the top fraction of society it seems like ultra-luxury goods are going to be the most profitable, but surely that's not actually genuine value creation. And have we strayed too far to achieve that without austerity? How will we pay interest on the national debt?

Does the top fraction of society ever actually spend significant amounts though. No. Trickle-down has never worked.

They don't have to spend it per se; by conventional economic theory, as long as they keep it in the bank, it's enough. Keynes:

> Europe was so organized socially and economically as to secure the maximum accumulation of capital. While there was some continuous improvement in the daily conditions of life of the mass of the population, Society was so framed as to throw a great part of the increased income into the control of the class least likely to consume it. The new rich of the nineteenth century were not brought up to large expenditures, and preferred the power which investment gave them to the pleasures of immediate consumption. ... If the rich had spent their new wealth on their own enjoyments, the world would long ago have found such a régime intolerable. But like bees they saved and accumulated, not less to the advantage of the whole community because they themselves held narrower ends in prospect.

> Thus this remarkable system depended for its growth on a double bluff or deception. On the one hand the laboring classes accepted ... a situation in which they could call their own very little of the cake that they ... were co-operating to produce. And on the other hand the capitalist classes were allowed to call the best part of the cake theirs and were theoretically free to consume it, on the tacit underlying condition that they consumed very little of it in practice. ... And so the cake increased; but to what end was not clearly contemplated. Individuals would be exhorted not so much to abstain as to defer, and to cultivate the pleasures of security and anticipation. Saving was for old age or for your children; but this was only in theory,—the virtue of the cake was that it was never to be consumed, neither by you nor by your children after you.

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

#273

Post by erwincoumans »

s1artibartfast wrote: post #55
FooBarWidget wrote: post #28

Earlier quoted context omitted.

> For me, it makes a lot more sense to tax realized profit, or better yet consumption, than wealth itself. Why not tax all of that simultaneously? That's what the Dutch do. > I don't think it is desirable to force realization just to increase tax revenue. And yet various governments are doing or are planning exactly that.

I searched and couldnt find anything about a Dutch wealth tax, just answers saying they dont have one. Do you have a source? I wasn't aware of any western countries which have wealth taxes, but I was surprised to find that Norway, Spain, and Switzerland do have some. https://taxfoundation.org/net-wealth-tax-europe-2022/#:~:tex... .

Yes, the Netherlands has wealth tax, also known as "Box 3", and it includes tax on hypothetical yield on your savings accounts. The government got into issues with the European Supreme Court for this:

https://home.kpmg/us/en/home/insights/2022/05/tnf-netherland...

"The box 3 tax rate is assessed against a hypothetical yield. You are not taxed for capital gains or actual rental income. Instead, the Dutch tax office assumes that you enjoy a yield of up to 5.69% over your total asset value, irrespective if any actual gains are higher or lower(!)."

Note that actual savings interest rates were close to zero or even negative.

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

#274

Post by qaq »

michaelt wrote: post #258
qaq wrote: post #213

Earlier quoted context omitted.

It does not have to be about "them" you have a path available to you to make a person that you supposedly feel bad about better off.

While spaceman_2020 certainly has the money to pay their maid a lot more if they earn 50x what their maid does, that doesn't address the issue of all the other maids in the economy. I mean, I give a sandwich to the one homeless guy I see on my daily commute, which might have a big impact on that one guy - but let's not pretend I'm solving homelessness by doing so.

But it does in a small way and it adds up when a lot of people do it. Being from Ukraine I see first hand how a lot of people volunteering/donating are making very sizeable impact on the problem even though each individuals contribution might be small.

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

#275

Post by geysersam »

mejutoco wrote: post #215
geysersam wrote: post #159

Earlier quoted context omitted.

> A stocks worth is determined by supply and demand That's a tautology. It's like saying the price is the price.

This was a novel idea, at some point. For the stock it is a tautology, but for generally determining the worth it is a deep idea. It requires buying into a point of view of this model and, like all models, it is a (useful) approximation. If one accepts that the worth of something is the price that supply and demand establish, there is no room for workers being underpaid (or overpaid), according to this model. They ar…

That's not what I meant.

The price is whatever the market pays. That's the definition, nobody disagrees.

The value is a different question. As you point out.

In our time, claiming those are the same (or even that they are meaningfully related) borders on fanaticism.

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

#276

Post by erwincoumans »

s1artibartfast wrote: post #268
em500 wrote: post #163

Earlier quoted context omitted.

Straight from the source: https://www.belastingdienst.nl/wps/wcm/connect/en/income-in-... Summary: https://en.wikipedia.org/wiki/Taxation_in_the_Netherlands#Bo...

This looks like capital gains to me. Taxation on income from wealth, not wealth itself. https://www.belastingdienst.nl/wps/wcm/connect/en/income-in-...

No, they use hypothetical yield (of over 5%). It applies to savings accounts, that had negative interest rates...

See my reply above.

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

#277

Post by Jommi »

jsmith99 wrote: post #184
antonomon wrote: post #179

Earlier quoted context omitted.

While I try not to comment to 'defend my views' because it's a bit lame, I have to plainly say I am not "just opening my eyes to the huge role central banks play in the economy." I have been following markets many years, both as an investor and because I enjoy reading about economic history (also as part of my study). My whole point with that sentence was - did you ever pay attention to a Jackson Hole conference befo…

Are you the writer? In what way was the rise of Vanguard driven by cheap credit?

"Index funds are a sure way to get stock-like returns with low volatility!"

When cost of credit < index fund return, it just makes sense to borrow and invest in those until the gap is smaller

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

#278

Post by konschubert »

konschubert wrote: post #156
Krisjohn wrote: post #131

Earlier quoted context omitted.

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.

*mis-allocation

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

#279

Post by Olreich »

qaq wrote: post #238
sph wrote: post #200

Earlier quoted context omitted.

The problem is thinking blue or red are the answer to this problem. Their current iteration is the leading reason why we are in this situation now.

Nope they are a reflection of their voters e.g. "us". As long as majority regardless of side continues to vote for amorphous virtue signalling unprincipled politicians the things will stay as they are.

Fun part of that is that the political systems are flawed as well and actively resist hiring new politicians who are more principled. In the US, it’s almost impossible to win without endorsement from Dem or Rep parties. Anywhere that does First Past the Post will devolve to two party rule at scale. Many countries have authoritarian regimes, so elections don’t matter. Even just drawing political lines is fraught and liable to bias against the will of the people based on existing precedent. Money in politics provides advantages to the rich and corporate interests.

Politicians are motivated to keep constituents happy, but only so far. The political systems generally provide a significant buffer for politicians to act on behalf of themselves or their donors and not get replaced.

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

#280

Post by heartbeats »

tomcam wrote: post #253
nobrains wrote: post #241

Earlier quoted context omitted.

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…

> If US prints money, the wealth of all countries holding USD goes down. While the wealth of US increases. True, yet average Americans lose out because their savings get eaten away by inflation

Real interest rates have been positive. Unless you were saving in a mattress, your purchasing power increased.
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