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?

#371

Post by dangus » Tue, Dec 13, 2022, 6:24 AM UTC

antonomon wrote: post #15

dangus wrote: post #3

I think the article brings up too many separate concepts without sufficiently tying them together. One of the most basic concepts you have to accept to agree with the premise of the article is that the Fed kept interest rates low to transfer wealth to the wealthy. > After the Great Recession, the Federal Reserve instituted a zero or near-zero interest rate regime. The philosophy behind it was simple: > > The Fed’s “s…

Regardless of Wolf Richter, the Wealth Effect is an actual philosophy tapped into by Ben Bernanke and others post-2009 > In defending the Fed’s bond-purchasing plan late last year, Bernanke said that “higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support econ…

The difference is in the way Wolf Richter presents the concept and mischaracterizes it as trickle down economics.

Wolf says:

> …which would lead those holding stocks to feel wealthier and more confident, and then they’d spend a little more, and some droplets of this might trickle down to the people that are working in the real economy

This is distinctly different than what Bernanke says in that quote. Bernanke is saying that the mere economic indicator of higher stock prices boosts consumer confidence, like when someone sees a lower gas price and feels better about the economy.

I have to agree with Bernanke there. The layperson sees a number on the news that says “economy good” and they worry less about losing their job or spending too much.

Richter misunderstands the wealth effect to be the literal spending of money by people who own assets like stocks and the trickling down of that money.

Even if the wealth effect benefits the wealthy more, trickle down economics is not the same concept.

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

#372

Post by neilwilson » Tue, Dec 13, 2022, 6:31 AM UTC

mitthrowaway2 wrote: post #312

neilwilson wrote: post #206

Earlier quoted context omitted.

"That's exactly the point, because it's an attempt to encourage people to save money when they'd rather spend it because inflation is high." Except that can't happen can it. If Loans create deposits, then to get more savings, you need more loans. You can't have one without the other. What they are trying to do its get people to pay off loans. How many people do you know who pay off loans in the middle of an inflation…

Paying off loans is equivalent to saving! As long as you aren't taking on new debt to pay off the old one. > How many people do you know who pay off loans in the middle of an inflation? If interest rates are low, nobody. If they are high, lots. Go look at r/personalfinancecanada and there's been a huge shift from "taking out a line of credit at 2% when inflation is 6% is practically free money!" to "which should I re…

"If they are high, lots."

And what do the aggregate numbers say, rather than the anecdotes from rich people?

If you can't afford the heating then you don't pay down loans. You take out new ones.

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

#373

Post by neilwilson » Tue, Dec 13, 2022, 6:36 AM UTC

mitthrowaway2 wrote: post #315

neilwilson wrote: post #207

Earlier quoted context omitted.

"But with a jobs guarantee, who decides what the job is in service of? " Doesn't matter (ultimately it is a political choice). The point of the job is to use up hours so you can't use them yourself. It forces the spending of time - which is the actual underlying exchange amount. If you give up your time for others, then others will give up their time for you.

The purpose of jobs isn't to kill time, but to produce things like food, shoes, and soap. It's important that it accomplishes that.

The purpose of jobs is to use up time. A job is a contract for employment - selling hours.

If I have to use up my time to get the things I need to live, then I'm going to want to see you doing the same.

At root we exchange time with each other. And that time has to be for the service of others.

Service to others is the rent we pay for our room here on earth.

It's a little more than just producing consumption goods - which hopefully can be mostly done by machinery.

If somebody is giving up their time and they are being directed to do something pointless, who are you going to be annoyed with: the person doing the work, or the person directing the work?

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

#374

Post by neilwilson » Tue, Dec 13, 2022, 6:38 AM UTC

t0suj4 wrote: post #306

neilwilson wrote: post #285

Earlier quoted context omitted.

A contract of employment is a contract for time. Giving up the hours is all that is required. It's the job of capitalists to extract value from that time. If they do they get paid. If they don't they go bust. The number of 'artificial jobs' is entirely in the gift of capitalists. If they don't like them, all they have to do to make them go away is hire the people's time and use it better. If they can't do that in agg…

A contract of employment is also usually tied to some vague job description the employer is expecting from the employee. It's your job to take the most value out of your time, either selling it to someone else (getting employed) or helping a grandma across the street. Hiring a bag stuffer is less of an artificial position than hiring eleventh construction worker on a project for four. Artificial job - A job that does…

It's not your job to get the most value out of your time. It is the person who is hiring you's job to get the most value out of your time. That's where the surplus that pays them comes from.

Otherwise you are in business and the surplus should accrue to you, not your employer.

The employer has to extract value otherwise they have no right to that value.

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

#375

Post by neilwilson » Tue, Dec 13, 2022, 6:45 AM UTC

PeterisP wrote: post #360

neilwilson wrote: post #286

Earlier quoted context omitted.

If the central bank doesn't set a rate, then the interbank rate will drift to zero - because money is near costless to produce and no chance of non-payment because there is only one central bank in a currency and central bank money can't go anywhere else. That doesn't stop the rate for lending to businesses being higher than that because there is a risk of non-payment there. There is more than one commercial bank. Ev…

Wait, that's not how central bank lending works - you seem to equate "not setting a rate" with "setting a rate to 0" and offering limitless lending to commercial banks at that rate - which is a very high level of intervention IMHO; I'd rather equate "not setting a rate" by the central bank reducing its participation in the interbank lending and stopping this injection of 0-rate money, in which case the interbank lend…

That's exactly how central bank lending works. You have a fallacy of composition.

In reality the central bank doesn't lend to banks. The banks lend to each other and they do arbitrarily 'create money' to do so.

The commercial banks have accounts with each other. That's what interbank lending is, and what they clear to at the end of the day.

In Bank A it is DR Bank B, CR Customer 2 Deposit. In Bank B it is DR Customer 1 Loan, CR Bank A. They can't clear interbank payments unless that happens.[1]

The Bank of England has a full document on it [0]

[0]: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

[1]: https://new-wayland.com/blog/why-banks-pay-interest-on-depos...

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

#376

Post by polotics » Tue, Dec 13, 2022, 7:00 AM UTC

relaxing wrote: post #321

atoav wrote: post #216

Earlier quoted context omitted.

Ultra luxury goods have a few downsides tho. The ultra rich are not easy customers, there is a high risk involved with having few customers (e.g. they could leave you hanging, another company could outperform you and grab that customer and you are basically done for etc.). A friend of my family has made his living selling handcrafted multi-million dollar hunting rifles. Let me tell you, these people are not easy to d…

> handcrafted multi-million dollar hunting rifles Haha what?

Haha indeed. The difference between men and boys is not just the price of their toys anymore it seems: it's also got to shoot real bullets and kill animals. Aren't humans cute?

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

#377

Post by 015a » Tue, Dec 13, 2022, 7:10 AM UTC

ericpauley wrote: post #87

015a wrote: post #47

Earlier quoted context omitted.

The iShares S&P 500 ETF has returned about 11.6% annualized over the past ten years. Their Ex-US ETF: 2.8%. Point being: the third variable no one ever takes into account when considering Buffett's advice: "just invest in broad market indexes" literally only works in the US, and only has worked historically . It's not a coincidence that the US is the youngest developed economy on the planet. In other words: How high…

The US is at least as old as the concept of a contemporary “developed economy”, so it doesn’t seem like this part of the argument holds.

On the contrary; that's a component of my entire argument.

The US and the concept of a developed economy both started at Square 1 around the same time. That's a huge structural advantage. Developing or selling some new technology? No laws. Let's write one; with the input of the businesses doing the development. Other companies had to update their infrastructure over time; we green-fielded it. Much cheaper. Opening a factory? Take a thousand acres of land in the west, no one is using it, take it. Raw materials? An entire content worth of them, virtually untouched by the natives.

Those are all structural advantages which helped fuel the hyper-accelerated growth the US experienced throughout the past two centuries.

And the broader point is, every day that goes by everyone gets older; including the US itself. New businesses contend with more laws and regulations. Infrastructure was built without a plan for how to pay for its maintenance. The land is claimed, and the new owners want a million bucks for it.

That's the reversion to the global mean; that now, we're dealing with a lot of the same shit everyone else is and has been for centuries.

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

#378

Post by t0suj4 » Tue, Dec 13, 2022, 8:59 AM UTC

neilwilson wrote: post #374

t0suj4 wrote: post #306

Earlier quoted context omitted.

A contract of employment is also usually tied to some vague job description the employer is expecting from the employee. It's your job to take the most value out of your time, either selling it to someone else (getting employed) or helping a grandma across the street. Hiring a bag stuffer is less of an artificial position than hiring eleventh construction worker on a project for four. Artificial job - A job that does…

It's not your job to get the most value out of your time. It is the person who is hiring you's job to get the most value out of your time. That's where the surplus that pays them comes from. Otherwise you are in business and the surplus should accrue to you, not your employer. The employer has to extract value otherwise they have no right to that value.

How does that work on an island away from civilization? I still need to get the most value out of my time so I don't starve to death.

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

#379

Post by alltheworlds » Tue, Dec 13, 2022, 9:29 AM UTC

bagels wrote: post #250

r_hoods_ghost wrote: post #242

Earlier quoted context omitted.

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.

Good luck with that. We are now mostly a remote company but we still pay top rates for the best employees, some of whom like to come in to the office every day, some work from home 50% of the time, some come in one day a week and some work pretty much full time remote. All are in Europe (most in the UK) so we don't suffer from timezone issues or all the pitfalls of extreme offshoring that has plagued every project I've seen that has ever tried it.

I think you're going to need a lot of luck, because I doubt your approach will work.

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

#380

Post by kmlben65 » Tue, Dec 13, 2022, 12:00 PM 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…

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