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The Economy

blog.samaltman.com

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Re: The Economy

#171

Post by MaysonL »

DINKDINK wrote: post #154
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 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…

Foreign debtors have zero leverage over the United States. What would happen if China decided to stop buying US debt? Their currency would appreciate, their exports would collapse, and their economy would go into recession. Our currency would depreciate, our exports would increase, and our economy would get a much desired boost.

Re: The Economy

#172

Post by AJ007 »

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…

A much better thing to look at is how much GDP growth do you get for each additional dollar/currency of debt?

If we borrow $1 and get $2 of GDP growth, great. If we borrow $1 and get 10 cents of GDP growth, big fucking problems ahead. Considering that the debt is going cost more than we borrowed, that benefit red line is pretty far ahead of $1.

Demographics are another trend to look at. Shrinking population generally means the GDP is going to end up going the same direction. On a micro-level we could examine Detroit, on a macro-level Japan. Both are returning developed land to farmland; quite a paradigm shift for someone who grew up watching fields turn in to suburbs. A country, or city, with a rapidly growing population needs to borrow money to build infrastructure. One that is shrinking may face a crises even with a much smaller debt load.

Thinking about recessions or perhaps even depressions is a bit simplistic. Both are bumps in the road. A more valuable idea is to look at the multi-decade trends where countries fall in and out of power or even cease to exist.

Re: The Economy

#173

Post by quadrangle »

pkaler wrote: post #110

Almost any argument that relies on GDP numbers to back up its claim is specious at best. For example, you could have a tornado destroy a town and the disaster recovery spending would increase GDP. You could build a teleportation device that puts all delivery drivers out of work. GDP would decrease but there would be an overall increase in wealth and quality of life. Thinking about economics through the lens of GDP is…

Perfectly stated. We need to get to where we truly reject the whole GDP concept. It is corrupt, manipulable, and destructive.

Re: The Economy

#174

Post by marcosdumay »

ahoy wrote: post #114
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.

The counter to that is that I understand what services and goods are essential to me better than the government does (or anyone that isn't me, for that matter). If the goal is to do the most good with the least waste, basic income is probably better than a hodgepodge of universal services. That said, I'm all for either or a combination of approaches. Anything to catch the US up with the rest of the developed world so…

That. I think a combination is the way to go, for no other reason than the fact that some desirable services have huge scale gains (transportation), and some services have huge positive externalities (health). It would be unwise not to incentive people to use those.

Re: The Economy

#175

Post by virtue3 »

at-fates-hands wrote: post #79
chillingeffect wrote: post #41

Earlier quoted context omitted.

> any better ideas yet Progressive tax on incomes >$1,000,000. This won't slow anyone down except the ultra-wealthy. As of 2009, it's 236,883 people. That's less than 1 in a thousand. With more income in a single year than most people in the U.S. earn in a lifetime , they'll certainly still be much more than quite comfortable.

>>> Progressive tax on incomes >$1,000,000. This won't slow anyone down except the ultra-wealthy. What do you think happens to anybody, let alone people who are really rich when you continually increase their taxes? They stop spending, they start hiding their money, they it send it to foreign countries, they will find ways around the taxes you're trying to levy against them. It doesn't matter who you tax, they're goi…

I'm 99% sure rich people don't get rich by "spending money". Just saying.

"Trickle down" is fucking bullshit.

Re: The Economy

#176

Post by thaumaturgy »

gone35 wrote: post #156
thaumaturgy wrote: post #73

Earlier quoted context omitted.

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…

I was specifically thinking of the European Union (which didn't exist 100 years ago) and its relationship with the Greek economy, and the extent to which a Greek default in 2011 or 2012 might have affected economies across Europe and overseas, as well as the effects of the U.S. economic recession in 2008 on the rest of the world.

You're right to point out that all (edit: many) of the pieces of globalization were well in place by 1915, but the number of countries involved now, and the extent to which they're involved, is quite a bit different. Political conflicts between countries are now as likely to be handled economically as by any other means.

I thought my comment was already way too long, so I didn't explain what I meant.

Re: The Economy

#177

Post by MaysonL »

AJ007 wrote: post #164
Humjob wrote: post #66

Earlier quoted context omitted.

If government debt grows high enough then an increasingly large percentage of federal spending will be devoted to paying interest on that debt rather than on arguably more useful areas which create future prosperity, such as education and scientific research. After a certain point this becomes unsustainable and bad things start to happen, ranging from total political & economic collapse (Germany in the 1920s) to hype…

Something to consider is the difference between debt denominated in a countries' own currency verse that of another country. In 2010 Germany finally repaid debt it had raised to pay its World War I reparations. The reparations never were paid in full but you damn bet the US dollar denominated debt was. If a country borrows money in a foreign currency they may have bills due for an incredibly long time unless the cred…

Next time what should be done (but probably won't) is to take over the insolvent banks, prosecute the fraudsters, and allow mortgage debt to be reduced in bankruptcies, perhaps converted to equity. The US federal government assets are certainly an order of magnitude (possibly two) bigger than the Fed balance sheet, so to talk of leverage is laughable.

Re: The Economy

#178

Post by scarmig »

gautambay wrote: post #155
roc wrote: post #103

Earlier quoted context omitted.

> "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 ot…

I doubt that the basic income bears much resemblance to the dole-outs for the poor in India. "For the poor" is the kicker: by far the most economically appealing aspect of the basic income is that it's provided to everyone. If it's only provided to a particular type of person, that offers opportunities for corruption, administrative costs, and, most importantly, a very sharp disincentive against improving yourself and working harder, sometimes amounting to implicit marginal tax rates that are higher than 100%.

Another aspect is simplicity of administration. Providing some restrictions is a bit paternalistic, though I wouldn't dismiss it out of hand: for me the biggest issue would be how you can implement that with a minimum of cost, administrative overhead, and opportunities for corruption. And there's a bunch of areas that'd result in vindictive political debate. Sure, slot machines and vodka might be things we'd agree to restrict. But liberal arts MA programs? For-profit colleges? MLM schemes? Online class certificates via Coursera? Internet connectivity? Reddit gold? Gym memberships?

If you doubt that this kind of item by item trench warfare is what would happen, just look at the furor in the USA over something as obviously {good,bad} as providing {cost-effective,immoral} birth control to the insured.

I have difficulty imagining a system where the government picks and chooses what's good and what's bad for people to use that's not rife with corruption, sclerotic from past decisions and bureaucratic rules, and easy to use for the actual citizen it's intended to enable. The value recovered from preventing "bad spending" would almost certainly be outweighed by the cost of policing the billions of purchases that happen every day.

Re: The Economy

#180

Post by ChrisBland »

pdovy wrote: post #170
DINKDINK wrote: post #154

Earlier quoted context omitted.

>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…

That doesn't really seem to follow, to me. The worst a single creditor could do is not bid, or bid for higher rates in future treasury auctions. The terms of existing debt are fixed. The impact of this wouldn't be large unless other creditors followed suit - there are many parties interested in buying up US debt. Furthermore, if a holder of US debt declared war on the US, I wonder if that wouldn't be viewed as a cred…

The creditor could dump the bonds on the open market, and depending on the level of pain they were willing to feel, could crush the us bond markets. The fed can only stand in and defend for so long until we have to go inflationary to defend the dollar. Its actually a good thing that china controls a large chunk of US bonds, they can't dump without taking a huge hit themselves, MAD (for you cold war buffs). The countries you need to worry about dumping are ones with large amounts of hydrocarbons, Russia. They could theoretically dump, and then they have the hard asset to trade (oil) if they truly wanted to cause pain, however doing so to the US would send the entire world in to a free fall and they would probably end up worse than before, however everyone would be worse than before. It would be a large global reset.
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