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The Economy

blog.samaltman.com

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Re: The Economy

#151

Post by AJ007 »

jeffdavis wrote: post #99
yahelc wrote: post #46

Earlier quoted context omitted.

Agreed. Further, there's little evidence that Debt-to-GDP over 100% (despite "feeling" meaningful, because, 100%!) has any kind of predictive value for the long term direction of an economy, particularly one that has unusually low interest rates. If Debt-to-GDP were a problem for the US, you'd expect higher interest rates, not lower ones, as investors would be demanding higher returns on US debt. The fact that intere…

The thing that worries me about our debt is that it's not like the rates are locked-in for 1000 years. After bonds mature, we need to issue new bonds to pay for them. And if the interest rates are higher at the time, the new debt will have a higher interest rate (I guess, technically, the bonds will sell for a lower price, which has the same effect). Paying our current level of interest on our debt is not crushing. B…

My guidance to others, when they ask about US debt, I suggest they watch Japan. When Japan's interest rates rise, even just a little, their debt will become unserviceable. Once that happens, it will be time to think hard about US debt. The plan is clearly to inflate out of it. Survivable for the wealthy, devastating for everyone else.

The blog post raises some fair points, but the author does a pretty poor job at getting any point across. The most concerning things right now are: low interest rates on very high risk debt, continued and dramatic growth of derivatives (you fail, I fail, we all fail), and China's decision to push the 2008 correction in to the future finally running out of steam. The geo-political issues in the Middle East, North Africa, and Asia are a whole other cause for concern.

I think the risks now are still fairly benign compared to what was faced during the Cold War (though we still build new nuclear weapons and delivery vehicles, Russia fell short of its recent goal of 300 and instead has built 30 so far.)

Re: The Economy

#152

Post by throwawaymsft »

fchollet wrote: post #139
nostromo wrote: post #134

We need to find the next big growth engine. Like "the internet" big, or its baby brother "mobile" big. (Imagine what the US economy would be like without those growth engines. Even with them, their effect on the US GDP growth chart in the article is unnoticeable.) I have a hard time thinking of things that could be so dramatic in terms of growth. AI, radical life extension, space elevators, renewables... I'm not sure…

Although Google has done a much better PR around its research efforts, IBM and Microsoft are both investing much more in R&D. Microsoft is the tech company with the most research investment.

I'd caution using R&D investment as a metric. Historically, it seems the huge game changers (Google, Apple, Facebook, etc.) came from motivated individuals and not corporate research labs. Microsoft's early and enormous investments did not help them catch/contribute to the search/social/tablet/mobile wave which generated much of the value in the tech economy the past decade.

Re: The Economy

#153

Post by johnward »

ef4 wrote: post #113
johnward wrote: post #23

Earlier quoted context omitted.

I'm no economist but at some point aren't we going to become so productive that there won't be enough need for workers. Are we maybe at that point now? If every single person wanted to work there would not be enough jobs to support that. So what happens in the future? Some people have jobs and are rich while the rest are in poverty and can't eat? I don't think society could function with that many people not having a…

This same argument has been repeated for literally centuries now, and it always turns out wrong in the long run. Imagine if we could run the entire world economy with only 5% of the workers. Pandemonium? No, it has already happened before. Agriculture was the whole economy, the rest was rounding error. Virtually all workers worked in agriculture. Now we produce all that and much more with something less than 5% of th…

Are you saying that we will continue to invent things to do in exchange for money? I feel like there has to be a point that you can't do that. I guess it would have been insane to think that people would be sitting in offices making comments on news forums most of the day.

Re: The Economy

#154

Post by DINKDINK »

yahelc wrote: post #46
tdees40 wrote: post #24

I'm not clear on how any of this will lead to a recession. Why will high Debt-to-GDP or government spending send the economy into a recession? Q1 GDP numbers were clearly affected by dismal weather (although still bad), but labor markets are improving markedly, and there are reasons for optimism. I don't see this as a very convincing bear case. For the bull case, see this post, from a guy who's been right about every…

Agreed. Further, there's little evidence that Debt-to-GDP over 100% (despite "feeling" meaningful, because, 100%!) has any kind of predictive value for the long term direction of an economy, particularly one that has unusually low interest rates. If Debt-to-GDP were a problem for the US, you'd expect higher interest rates, not lower ones, as investors would be demanding higher returns on US debt. The fact that intere…

>The fact that interest rates on Treasury bonds remain so low, despite our debt levels and despite certain political figures repeatedly attempting to force the US Government to default on that debt, is prima facie refutation of the idea that no one in the market actually thinks US debt levels pose a major macroeconomic problem in the short to medium term.

Not necessarily. If you have to ask yourself what the country had to do to keep those rates from changing. The more a country is in debt (especially to other countries) the more their foreign debtors have leverage over what policies the debted country can enact. For the sake of arguement, let's say that China decided to annex Alaska. If we retorted with a threat of military action, China could come back and say we'll increase your interest rates.

Also high debt to GDP ratio makes printing money as a solution more attractive for a government. Inflation is a theft from everyone.

Re: The Economy

#155

Post by gautambay »

roc wrote: post #103
gautambay wrote: post #43

Earlier quoted context omitted.

i prefer universal essential services (healthcare, education, etc.) over a guaranteed basic income. with basic income, you run the risk that the receivers spend it on shiny objects (especially in an economy like ours with rampant consumerism) instead of things that benefit them and their families long-term. of course, what constitutes "essential services" can be the subject of a lengthy debate.

> "i prefer universal essential services (healthcare, education, etc.) over a guaranteed basic income." If we believe in the market's ability to efficiently find the path forward, identifying "essential services", even if it were possible, is wasteful at best and more likely counter-productive over time. Twenty years ago we'd have locked in home phone service and missed internet. 10 years ago we might have locked in…

Fair points, all.

However, markets fail when there is a misalignment of incentives and/or lack of information/education. I view the government's job primarily as aligning people's incentives with the desired long-term direction.

In India (where I'm from), there have been decades of dole-outs for the poor (especially farmers), but it has failed to create any long-term economic benefits for those communities. On the other hand, education (both for the farmers and their children) has been far more effective in uplifting people out of poverty.

I realize that the average American is more educated and has better access to information that the average Indian farmer. But still, you can be assured that some of that "basic income" will be going into a slot machine.

Perhaps the solution is a basic income with some restrictions / incentives around how to spend it?

Re: The Economy

#156

Post by gone35 »

thaumaturgy wrote: post #73
fokinsean wrote: post #13

Does anyone think we are heading towards an economic collapse?

Collapse, no. But I do think we're going to see, in our lifetimes, a mostly-global economy that is very different from anything that humans have had in the past, and that the transition to that is going to sometimes look disastrous. I can't say much about the intricacies of how economies are managed, because I don't know much about that. But there are a few trends happening today that are unique in human history. For…

For one, we've entered an age where the economies of most of the countries in the world have become interconnected to some extent. Just 100 years ago, this wasn't the case.

I don't blame you because this is the kind of conventional trope that everybody parrots and just feels right, but economic historians agree on that the extent of globalization 100 years ago was in fact just as high as it is today in many respects --and in some respects such as labor mobility, it was even higher then [1,2].

In fact, it was only after the collapse of the transoceanic European colonies after the wars that nationalism and the Great Depression gave rise to isolationism and trade protectionism as the natural state of affairs; only to be gradually re-dismantled towards the end of the twentieth century. But if you think about it, the technical and institutional elements of globalization --efficient mechanized shipping, industrialized commodities production/extraction, global electronic communications, settling/clearing institutions-- were all there then.

[1] http://groups.csail.mit.edu/mac/users/rauch/misc/globalizati...

[2] http://eml.berkeley.edu/~eichengr/research/brooking.pdf

Re: The Economy

#157

Post by ThomPete »

gautambay wrote: post #43
sama wrote: post #22

Earlier quoted context omitted.

oops, i accidentally published an earlier draft. i added a bit more of my thinking here--my sense is that it would probably lead to less waste than current systems. i'm also not sure it's the right approach, but i haven't heard any better ideas yet.

i prefer universal essential services (healthcare, education, etc.) over a guaranteed basic income. with basic income, you run the risk that the receivers spend it on shiny objects (especially in an economy like ours with rampant consumerism) instead of things that benefit them and their families long-term. of course, what constitutes "essential services" can be the subject of a lengthy debate.

We have that in Denmark and it holds it's own problems.

Personally I believe that a UBI is the way forward for the very simple fact that it always pay off to work and it will remove a huge control system and free those people to do better things with their lives than controlling other people.

Re: The Economy

#158

Post by diafygi »

nostromo wrote: post #134

We need to find the next big growth engine. Like "the internet" big, or its baby brother "mobile" big. (Imagine what the US economy would be like without those growth engines. Even with them, their effect on the US GDP growth chart in the article is unnoticeable.) I have a hard time thinking of things that could be so dramatic in terms of growth. AI, radical life extension, space elevators, renewables... I'm not sure…

I nominate cleantech, energy efficiency, and renewable energy.

Over the next 30ish years, the entire globe will have to transition from fossil fuels to sustainable energy. The amount of growth that needs to happen is probably bigger than what we experienced in the internet boom. Already in California, green jobs outnumber Hollywood jobs, and solar is now profitable without subsidy.

These are the areas that are going to have the largest growth and innovation over the next few decades. The next Google is going to be an energy company.

Re: The Economy

#159

Post by againblah »

jerf wrote: post #52
moblahbl4hblah wrote: post #9

Earlier quoted context omitted.

They are called entitlements to make people think that some undeserving class is getting over...they think they are "entitled"...is the way that is put. It was done on purpose by conservatives. Its a dog whistle.

I don't think you get what a "dog whistle" is. Everyone calls them entitlements.

Everyone huh? Try Google-ing entitlements and racism.

Re: The Economy

#160

Post by yuhong »

michaelochurch wrote: post #40

It's a dismal situation. Low interest rates mean cheap money in theory, but the "people" best equipped to take advantage of it are corporations. It's not like average people are able to start businesses just because the interest rate is low. However, low interest rates mean the penalty (to companies) for hoarding and for general risk aversion is also low. This means that lousy executives don't get a lot of investor p…

(and, to be fair, I can't blame them; I'd do the same in their shoes)

Why?

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