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America’s banks are missing hundreds of billions of dollars

economist.com

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Re: America’s banks are missing hundreds of billions of dollars

#431

Post by robertlagrant »

geysersam wrote: post #426
robertlagrant wrote: post #423

Earlier quoted context omitted.

This is too simple, and misleading, as it leaves out tiered pricing. A slightly better seat on an airplane is 10x the price of economy seats. Without those seats, economy seats would cost much more each. A slightly better car spec is 2x the price of the base model. Without the better spec model, the base model would cost much more. Additionally, just the development of new technology is often for the wealthy first, a…

Is your point that wealthy people subsidize air travel by paying relatively more for the space on the plane? That's a perfect example of when inequality biases a market to produce suboptimal outcomes. Why? Because if people wouldn't be willing to spend to pay the cost of an airplane ticket in perfect market conditions, then them not buying a ticket is the optimal allocation of resources . If they then buy a ticket in…

> Because if people wouldn't be willing to spend to pay the cost of an airplane ticket in perfect market conditions, then them not buying a ticket is the optimal allocation of resources.

Sorry, you've lost me. How do you define perfect market conditions?

Re: America’s banks are missing hundreds of billions of dollars

#432

Post by geysersam »

robertlagrant wrote: post #431
geysersam wrote: post #426

Earlier quoted context omitted.

Is your point that wealthy people subsidize air travel by paying relatively more for the space on the plane? That's a perfect example of when inequality biases a market to produce suboptimal outcomes. Why? Because if people wouldn't be willing to spend to pay the cost of an airplane ticket in perfect market conditions, then them not buying a ticket is the optimal allocation of resources . If they then buy a ticket in…

> Because if people wouldn't be willing to spend to pay the cost of an airplane ticket in perfect market conditions, then them not buying a ticket is the optimal allocation of resources. Sorry, you've lost me. How do you define perfect market conditions?

It's a common concept in economic theory: https://en.m.wikipedia.org/wiki/Perfect_competition

It requires a bunch of idealizing conditions that never holds in practice. But it's still useful to study what effects deviations from perfect competition has on efficiency.

Think about it like this: subsidies lets you buy something you don't actually want, that's inefficient.

For subsidies to make sense, they need to compensate some other deviation from perfect competition. For example, it can make sense to subsidize green energy because fossile fuels has external costs not accounted for by the market.

But the fact that a rich individual is willing to pay your air ticket is not a good reason to subsidize something.

An intuitive example: A rich guy enters a bar and yells "free ice cream for everyone!". That's nice. But if the same cash were distributed among the guests, some would've gotten beers and some wine. But when faced with the choice "pay for beer or get free ice cream" everyone choose ice cream despite that being a suboptimal allocation of resources.

Re: America’s banks are missing hundreds of billions of dollars

#433

Post by robertlagrant »

geysersam wrote: post #432
robertlagrant wrote: post #431

Earlier quoted context omitted.

> Because if people wouldn't be willing to spend to pay the cost of an airplane ticket in perfect market conditions, then them not buying a ticket is the optimal allocation of resources. Sorry, you've lost me. How do you define perfect market conditions?

It's a common concept in economic theory: https://en.m.wikipedia.org/wiki/Perfect_competition It requires a bunch of idealizing conditions that never holds in practice. But it's still useful to study what effects deviations from perfect competition has on efficiency. Think about it like this: subsidies lets you buy something you don't actually want, that's inefficient. For subsidies to make sense, they need to compen…

Thanks for elaborating. It seems now I don't understand your definition of efficiency. People choosing free ice cream over costly beer doesn't strike me as a loss of efficiency.

Re: America’s banks are missing hundreds of billions of dollars

#434

Post by samus »

scotty79 wrote: post #332
samus wrote: post #277

Earlier quoted context omitted.

Bretton-Woods is history. Since the Nixon Shock, the USD isn't the global reserve currency anymore. It's still influential, but only because of the giant domestic market in the USA and its status as the only global superpower.

USA wouldn't be able to run at trade deficit for decades if it didn't literally print money for the rest of the global economy.

These two things are related the other way round as well: to become a reserve currency, the using country must have a trade deficit. Else the rest of the world would not have enough liquidity to actually use the currency, and the market would grind to a halt. If no liquidity were available, any transaction would have to be secured with other assets. That asset would be the actual reserve currency then.

Re: America’s banks are missing hundreds of billions of dollars

#435

Post by ceejayoz »

lmm wrote: post #419
ceejayoz wrote: post #228

Earlier quoted context omitted.

They’re protected. There’s an FDIC for securities. Same $250k limit, same likelihood of going above that in practice. https://www.sipc.org/for-investors/what-sipc-protects > Money market mutual funds, often thought of as cash, are protected as securities by SIPC.

> They’re protected. There’s an FDIC for securities. Same $250k limit, same likelihood of going above that in practice. Not really. You're (partially) protected from your broker using your money market fund for themselves - even in a bankruptcy you get your fund back - but you're not protected against it becoming worth a bit less than you deposited (which is what would happen in an SVB-like situation - interest rates…

If your money market fund is losing any significant portion of its value, you've got larger societal issues to deal with that make all this stuff irrelevant. Zombies, nuclear war, or something along those lines.

FDIC insurance won't protect you from inflation, either. You asserted the money market stuff isn't protected; it is, either via the FDIC or the SIPC.

Re: America’s banks are missing hundreds of billions of dollars

#436

Post by [deleted] »

geysersam wrote: post #432
robertlagrant wrote: post #431

Earlier quoted context omitted.

> Because if people wouldn't be willing to spend to pay the cost of an airplane ticket in perfect market conditions, then them not buying a ticket is the optimal allocation of resources. Sorry, you've lost me. How do you define perfect market conditions?

It's a common concept in economic theory: https://en.m.wikipedia.org/wiki/Perfect_competition It requires a bunch of idealizing conditions that never holds in practice. But it's still useful to study what effects deviations from perfect competition has on efficiency. Think about it like this: subsidies lets you buy something you don't actually want, that's inefficient. For subsidies to make sense, they need to compen…

[deleted]

Re: America’s banks are missing hundreds of billions of dollars

#437

Post by geysersam »

robertlagrant wrote: post #433
geysersam wrote: post #432

Earlier quoted context omitted.

It's a common concept in economic theory: https://en.m.wikipedia.org/wiki/Perfect_competition It requires a bunch of idealizing conditions that never holds in practice. But it's still useful to study what effects deviations from perfect competition has on efficiency. Think about it like this: subsidies lets you buy something you don't actually want, that's inefficient. For subsidies to make sense, they need to compen…

Thanks for elaborating. It seems now I don't understand your definition of efficiency. People choosing free ice cream over costly beer doesn't strike me as a loss of efficiency.

"Efficiency" is total Utility produced with the available resources.

> People choosing free ice cream over expensive beer doesn't strike me as inefficient.

But it is!

With the total available resources we have two options:

All get beer. Or all get ice cream.

Total utility (value/happiness/whatever) is maximized when everyone gets beer.

When resources are unevenly distributed, ice cream is subsidized, and all get ice cream.

When resources are evenly distributed everyone can make the choice themselves, and they get beer.

Clearly "resources evenly distributed" had the better outcome.

Re: America’s banks are missing hundreds of billions of dollars

#438

Post by bluGill »

edmundsauto wrote: post #422
bluGill wrote: post #331

Earlier quoted context omitted.

If everyone invested in index funds, then there would be a lot of money to be made from you alone looking at the market. There are often companies that announce some new product that will (at least for a few years) outsell their competition. Index fund have no way to know that the company will thus be worth more money than their competition, but you do. The problem is the above is similar to a zero sum game in that t…

> I concluded long ago that if I made studying the market my full time job and hobby I could make a good income doing it I'd be curious how you reached this conclusion. The outside view (lots of academic papers on this) is that nobody beats the market over a long time frame. I've often thought this assumes scale-invariance; as I look to make lower volumes of money, I'll see things that aren't worth a real trader's ti…

There are a handful of people - Peter Lynch, Warren Buffet... That over the years have proven that thesis false. The vast majority do not beat the market, but the vast majority are investing on emotion and fads.

I would have completely missed amazon and google, but there were other companies that would for a while grow at better than market rates that I would have found (or so I think!), and would have been able to get out of in time (this isn't hard because I don't need to call the top, I can be off by many months and still have a nice return). These companies carry much less downside risk vs dot coms - most of which failed, and part of doing well long term is ensuring that your losses are not good because you will have them from time to time.

Note that you don't have to beat the market by much to pull this off so long as you live cheap those first years.

Re: America’s banks are missing hundreds of billions of dollars

#439

Post by hnfong »

edmundsauto wrote: post #422
bluGill wrote: post #331

Earlier quoted context omitted.

If everyone invested in index funds, then there would be a lot of money to be made from you alone looking at the market. There are often companies that announce some new product that will (at least for a few years) outsell their competition. Index fund have no way to know that the company will thus be worth more money than their competition, but you do. The problem is the above is similar to a zero sum game in that t…

> I concluded long ago that if I made studying the market my full time job and hobby I could make a good income doing it I'd be curious how you reached this conclusion. The outside view (lots of academic papers on this) is that nobody beats the market over a long time frame. I've often thought this assumes scale-invariance; as I look to make lower volumes of money, I'll see things that aren't worth a real trader's ti…

I haven't read those academic papers you mentioned so I might have missed some insights, but after thinking about it on and off for a while my thoughts on it are:

1. Many people trading on the stock market are professional traders who do it as a full time job, and they have access to information and tools that you don't. So unless you expend similar amount of time in studying the markets, it's highly unlikely you'd beat them.

2. Even the best traders generally beat the market by a couple percent on average. So in order to compensate for time cost of equivalent to a full time job on studying the markets, the fund you're investing needs to be: (your salary / x%) -- Let's say you expect 100k salary, and somehow you can beat the market by 5% if you put in the time, then you need a fund of 100k/0.05 = 2000k for the enterprise to "break even" so to speak.

3. Most people don't have 2 million to invest. And even if they do, they don't want to spend 40+ hours a week studying the stock market. So, since trading is basically a zero sum game, most people who invest small amounts of money perform worse than the market.

This doesn't even go into the tricky details of determining whether your performance is due to skill or luck (or lack thereof). The 5% is subtle enough, but not having any degree of certainty at all makes reviewing your decisions and trying to improve your trading skills even harder.

That said, there's probably more than a couple people besides the big names who can pull this off. It's just that even if you consistently beat the market, it takes a long time for people (including yourself?) to notice, because the effects are so subtle at first. In a sense Warren Buffet owes his fame not only to his skill but also to his age, and his willingness to engage in the activity even when he has all the money in the world. I suspect most other people find other interesting things to do once they earn a hundred million or so since it's more money than they ever need...

Re: America’s banks are missing hundreds of billions of dollars

#440

Post by mrguyorama »

robertlagrant wrote: post #406
mrguyorama wrote: post #402

Earlier quoted context omitted.

People always point to "comorbidities" but many of the comorbidities in covid's case were things like "being overweight", you know, most of the population?

I'm not sure how globally applicable that point is, although it could be. Do you have a link to any stats? How do you define "overweight"?

Most wealthy countries are getting fat, and non wealthy countries have tons of other fun things that are common but would be considered "comorbidities" like parasites, or asthma (including pollution induced asthma)
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