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Why are interest rates so low?

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Re: Why are interest rates so low?

#121

Post by branchless »

collyw wrote: post #90
enraged_camel wrote: post #73

Earlier quoted context omitted.

You can have technological, scientific and cultural advancement without economic growth. Building more shopping malls out in the suburbs leads to growth, but it doesn't advance society.

I have discussed this with friends recently. Why do we need growth? I don't need a faster iPhone, or more tech. I honestly don't see my life being any better for the last ten years worth of "growth" (much of which seems to have been pumping up asset prices). I would quite like to relax and coast a bit in life, but with the constant chasing of growth by everyone else, standing still means you will get left behind (i.e…

IMHO we need more growth because the more growth we have the more the establishment can skim off and the more they can then consume.

If we all stopped producing a surplus how will movie stars and bankers get the energy to run their private jets?

Re: Why are interest rates so low?

#122

Post by mcguire »

colund wrote: post #6

Why the obsession of economic growth? In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high. This greed doesn't lead to less global warming or happier people. I think politicians and economists should start thinking about what actually makes people happy. Economics is efficient management of resources nothing else. Giving the population…

"...negative prime interest rate and [...] housing prices are all time high."

Wait. How does that work?

Negative prime interest rate -> no loans available -> housing (and other credit-oriented purchase) prices fall.

Re: Why are interest rates so low?

#123

Post by twobits »

harperlee wrote: post #113
twobits wrote: post #98

Earlier quoted context omitted.

"Why the obsession of economic growth?" Because central banks (CB) print money out of thin air. That "money" is debt. You print 100, you owe 110 counting interest. How can you pay the 10, if you only printed/exists, 100? You can't. You, me, everyone, is a debt slave. "Times are good" = CBs print a lot of money (out of thin air). A lot of non existant interest too, but you don't notice, cause more money/debt is printe…

Assuming that you can create value of 11 or more with that 100, someone can exchange 11 of their future / current / past effort (with money), (s)he pays you, you pay your debt, and you now have 1 or more to be at the other side of the transaction. Unless you state that all value in the world is fixed, a zero sum game, that argument of the "Money as debt" documentary doesn't really hold water.

Value is definitely and obviously not fixed. It increases with effort, creativity, work, inventions, etc. But you pay for value with money. And you don't control that, and someone else controls how much, or not at all, you have access to. ..ie, you get 100 to (try to) invent X. You deliver. You give a lot of value to the world. But the CBs decided to cut printing money, and tomorrow you have to pay back 110. Your work, gave (new) value. But that's irrelevant. You can't find the 10. You are bankrupt. The people on top, get your work (which is 100+50 in new value), for 20. You still owe. Have a good day.

Re: Why are interest rates so low?

#124

Post by cmdkeen »

dgregd wrote: post #53
dualogy wrote: post #34

Earlier quoted context omitted.

> Why the obsession of economic growth? Easy. Essentially unknowable/unpredictable future growth expectations/extrapolations were already baked into present-day voter promises, welfare obligations and many bank/insurance/pension calculations, plus current "financial asset" valuations. Now the big scramble is on to will said growth assumptions into actually happening, lest "all bets will be off", literally.

> many bank/insurance/pension calculations It will also clearly show how big banks, HFT companies are making huge profits. They are slowly pulling money out of your pension fund. Banks do not produce, they have no income from dividends, so how they earn?

HFT are making huge profit margins - their entire industry profit is estimated at around $1bn, or a percentage of what a single large financial institution will make in a year. It's all relative - they can only make so much profit before they move the market too much themselves, they are limited by their size.

Your pension fund is not trading in a way which is significantly adversely affected by HFTs, the CEO of Vanguard is even on the record as saying that HFTs make his traders more efficient. Fund managers employ their own dealers to ensure best execution, if HFTs were causing significant losses you can be sure they would be raising hell - and that regulators and governments would listen.

Re: Why are interest rates so low?

#125

Post by xorcist »

cloakandswagger wrote: post #58
xorcist wrote: post #51

Earlier quoted context omitted.

That's not an answer. You could just as well ask "at what point in time do you consider interest rates low enough"? 0%, -1% or -10%? There's no clear answer for either question, of course, but that doesn't mean we shouldn't discuss them.

How is it not an answer? He's saying that the "greed" described by the original commenter is the same source of innovation that's given us all of the modern amenities we enjoy today. Conversely, I would say outright dismissing the pursuit of growth is not an answer.

No, the commenter asked a specific question about why we optimize for growth at the apparent cost of a negative interest rate, and rapidly rising salaries as well as housing prices.

"When do you consider the economy big enough?" is rhetorical question which doesn't even touch on the trade-offs apparent to what's being asked.

Re: Why are interest rates so low?

#126

Post by cmdkeen »

Someone wrote: post #60
kardashev wrote: post #26

Earlier quoted context omitted.

Inflation would be a way to get rid of debt, but it literally takes money from the poor and working class and gives it to the rich. 10% inflation is equivalent to a person's salary going down by 10%. Also, any savings you had would be eaten up by 10%. Inflation is the same as taking people's money to pay debt. It's not some magic thing that makes debt go poof.

If you manage to combine a x% inflation with a x% rise in welfare payments and of worker's income, people with relatively little money in the bank will not suffer much. That includes the poor and the very rich (who likely will have invested a large fraction of their savings). The clear winners will be those with relatively high debts, the losers those who have been saving, but not investing. Is it fair to tax the ant…

The unfortunate side effect is that it shafts pensioners who should not be investing in equities because of the time scales involved. The UK (though a hefty dose of electioneering is involved) is offering bonds to pensioners which pay a higher coupon to offset the low gilt returns available.

Re: Why are interest rates so low?

#127

Post by mcguire »

enraged_camel wrote: post #73
jseliger wrote: post #25

Earlier quoted context omitted.

Why the obsession of economic growth? One alternate question might be, "At what point in time do you consider the economy to have become 'big enough' that you don't care about growth?" Today? 2000? 1990? 1970? The people who might think today is "big enough" might also have thought that say 1990 was big enough, and yet very few people would want to be limited to 1990's tech / culture. It seems reasonable to imagine t…

You can have technological, scientific and cultural advancement without economic growth. Building more shopping malls out in the suburbs leads to growth, but it doesn't advance society.

Can you? How can you have technological or scientific advancement without someone to pay for it in advance? Who would pay for it without a reasonable expectation of getting more out than they had to put in?

(For some reason, I'm reminded of the Superconducting Super Collider and the western invention (discovery? reverse-engineering?) of porcelain.)

I'm going to leave the idea of "cultural advancement" alone, 'cause I can't easily and convincingly define it or figure out where it comes from. And I don't believe anyone else can either.

Re: Why are interest rates so low?

#128

Post by Retric »

enraged_camel wrote: post #99
baddox wrote: post #91

Earlier quoted context omitted.

Lots of people love living in suburbs and visiting shopping malls. You'll have to define "advancing society."

>>You'll have to define "advancing society." Actually, if you follow the discussion, it has already been defined in the comment I responded to: >>The people who might think today is "big enough" might also have thought that say 1990 was big enough, and yet very few people would want to be limited to 1990's tech / culture. What is being implied here is that we want economic growth because we don't want to be limited i…

There are several examples of ethnic cleansing over the last 5 years.

But, I guess as long as it’s not "in Europe" then it’s ok....

http://en.wikipedia.org/wiki/List_of_ongoing_armed_conflicts

Yes, WWII saw 10+ times the number of dead per year, but that's not such a huge gap as you might think.

PS: Many of those conflicts have far more civilian deaths than that link suggests.

Re: Why are interest rates so low?

#129

Post by xorcist »

aetherson wrote: post #89
Mikeb85 wrote: post #74

Earlier quoted context omitted.

> He's saying that the "greed" described by the original commenter is the same source of innovation that's given us all of the modern amenities we enjoy today. And is life any better today than in 1990? Are we happier? I think he's arguing that material possessions don't necessarily correlate to 'quality of life' and happiness. I would personally be pretty happy without a car or computer. But I live in a ridiculous c…

Things that you can do today that you couldn't do in 1990: * Survive much longer with many types of cancer. * Live a pretty normal life, more or less indefinitely, despite being HIV+ * See your grandkids that live in a different state via a high-quality video connection. * Enjoy television shows that offer multi-month and multi-year arcs and are designed to be consumed by dedicated fans in order, rather than principa…

While all those points are true, they are mainly because of advancing science, rather than economic growth. Those are partly interconnected, but there are also important differences.

The Internet as you know it is also a direct product of its academic background. That's why we have had network neutrality so inherent in its culture. That's why there are only peers, not producers and consumers. If it had been designed as a product, the network itself would never have been designed to be dumb with smart endpoints. (And there are countless examples of this.)

If Tim Berners-Lee designed the web to be a product, there would be a marketplace of competing web-like products, which in turn would have given us other features, but it would never have become societal infrastructure in the way it did.

Sometimes we need academia and science, sometimes we need products.

The question here is how to optimize between the two.

Re: Why are interest rates so low?

#130

Post by sliverstorm »

collyw wrote: post #90
enraged_camel wrote: post #73

Earlier quoted context omitted.

You can have technological, scientific and cultural advancement without economic growth. Building more shopping malls out in the suburbs leads to growth, but it doesn't advance society.

I have discussed this with friends recently. Why do we need growth? I don't need a faster iPhone, or more tech. I honestly don't see my life being any better for the last ten years worth of "growth" (much of which seems to have been pumping up asset prices). I would quite like to relax and coast a bit in life, but with the constant chasing of growth by everyone else, standing still means you will get left behind (i.e…

If you want to freeze on ten years back, there's nothing stopping you from getting an old flip phone.

Or if you want to freeze on 8 years back, nobody will prevent you from buying a iPhone 2G.

It sounds like you are saying you won't do that because you don't want to be "left behind", so you'd like everyone else to stop moving forward to accommodate you. But that's their choice, just like using an iPhone 2G is your choice.

"We have too much progress, can everybody just slow down a bit here!?" - first world problems :)

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