There is a reason why Economists aren't billionaires! :-)
Economists’ projections of interest rates and unemployment have proved too high
121–130 of 164 posts
Re: Economists’ projections of interest rates and unemployment have proved too high
#122> Economists have been casting around for the answer, a theory to explain their inability to peer accurately in the months ahead, let alone the years. ... No mention of "quantitative easing" anywhere. QE ran in various forms from 2008-2013. Short term rates were held at zero in the US from 2008-2015. Several industrialized areas now have negative nominal rates. The Fed has started QE back up again to prop up the fail…
Why is QE a market distortion? Is all monetary policy a market distortion? If we used a gold standard is that not a market distortion? If the price of gold changes drastically due to gold mines closing/opening changing interest rates is that a market distortion?
Technically getting $50 in a Christmas card is a market distortion. What matters is the scale of it. With technology and economic optimization (eg offshoring), we expect the cost of production to continually drop. Yet the Fed has seen fit to declare that the exact opposite should generally occur to consumer prices.
How this plays out is obvious if you draw a diagram of the feedback loop that is the CPI. Prices of manufactured goods do go slowly down. To keep the overall average rising other components have to go up, and the natural ones are where consumers have access to newly-created money (debt). Easy credit then prices straightforward cash out of the market, pushing us all to sign up for more overfinancialized monthly payments instead of simply saving for a rainy day.
Re: Economists’ projections of interest rates and unemployment have proved too high
#123Earlier quoted context omitted.
I would have to combine it with changes in CoL in areas of economic opportunity versus those without. Parts of the country offer far more security in future income than others.
That would penalize the national statistics for the dysfunctional laws and policies of a handful of localities.
How else can one account for increased volatility in labor markets due to automation and outsourcing?
Re: Economists’ projections of interest rates and unemployment have proved too high
#124> Economists have been casting around for the answer, a theory to explain their inability to peer accurately in the months ahead, let alone the years. ... No mention of "quantitative easing" anywhere. QE ran in various forms from 2008-2013. Short term rates were held at zero in the US from 2008-2015. Several industrialized areas now have negative nominal rates. The Fed has started QE back up again to prop up the fail…
There's no mention about QE because QE is only about lowering the cost for the private sector to borrow money. The main threat to QE is inflation, which is hovering around 2% and stubbornly low, so QE is in the clear. The repo purchases are operating as intended, with new liquidity requirements for banks from Basel 3 reforms. Also you complain about negative nominal rates, which make banks less likely to lend; then y…
> The main threat to QE is inflation, which is hovering around 2%
If I lent money at 6% interest from 2007 to today, I would have performed about the same as the capital gains from owning an equivalent amount of everyone's Favourite Shiny Rock, gold. Not including the recent price jump from QE4.
Owning a rock should not be generating a real return. In reality, it probably isn't. Real inflation is likely different from consumer price inflation.
It isn't perfect evidence, but gold is basically as pure an asset as we can get and it lines up with what should be happening if the government is printing money with its ears pinned back. No practical uses, easy to store, rare enough to be valuable. Anyone who is interested in saving for their retirement would be unwise to treat CPI as inflation in their calculations.
Re: Economists’ projections of interest rates and unemployment have proved too high
#125Earlier quoted context omitted.
Satoshi used his/her economic theories to create a 100 billion market cap asset from literally zero... what would they have to do to convince you folks that they were on to something with their ideas? Also cure cancer?
Bitcoin isn't used for anything except to transfer dollars from regular buyers to miners and/or large early adopters.
I buy things with it. Such as on Overstock.com and elsewhere.
Re: Economists’ projections of interest rates and unemployment have proved too high
#126Earlier quoted context omitted.
Could you point me to resources where I could learn about this?
The BLS is completely nuts with computing CPI. What the previous poster is referring to is called "hedonic adjustment" [1]. For example, the CPI contains a TV, and adjusts its price [2]. As an example, say that you put a 19" CRT TV in there in the 1980's, and it cost $400 at the time. Over time, as televisions got better, and it became impossible to buy that specific TV, the BLS started adjusting the price of the ori…
You can get a 22" LCD 1080p TV for $60.
However the actual calculation would be more like:
19" color TV in 1980 $600. "Equivalent today" price $9.21 which is a bit absurd, though the 22" TV has roughly 6x the pixels, so it's not entirely divorced from reality.
Re: Economists’ projections of interest rates and unemployment have proved too high
#127There is a reason why Economists aren't billionaires! :-)
Two of the richest investors I can think of off the top of my head (Warren Buffett and Steven Cohen) have an education in economics. In fact, lots of fund managers do. Also, economists as a group are quite varied, and dare I say the more successful ones are making millions trading and working for banks, not making public predictions.
Re: Economists’ projections of interest rates and unemployment have proved too high
#128> Economists have been casting around for the answer, a theory to explain their inability to peer accurately in the months ahead, let alone the years. ... No mention of "quantitative easing" anywhere. QE ran in various forms from 2008-2013. Short term rates were held at zero in the US from 2008-2015. Several industrialized areas now have negative nominal rates. The Fed has started QE back up again to prop up the fail…
One huge issue I've seen as a result of near-zero interest rates is how this has hit tax collection from corporations and the very wealthy.
Currently, if a company earns profits overseas and doesn't repatriate those funds then the IRS doesn't tax them. This all came about due to ridiculous IP licensing that tech companies engaged in (eg sell their IP to an Irish subsidiary and then license it as a form of transfer pricing, essentially).
So companies are faced with a choice of repatriating "foreign" profits at 21%+ or just borrowing money locally at 1-2% to cover local cash needs. This is a big reason why corporate debt has ballooned: it's essentially just deferring tax obligations for years, hopefully long enough so they can buy another Congress to pass a "one-time" tax holiday. Then rinse and repeat.
What the US needs to do is to treat all borrowings as the repatriation of that same amount of money of foreign profits.
Re: Economists’ projections of interest rates and unemployment have proved too high
#129> Economists have been casting around for the answer, a theory to explain their inability to peer accurately in the months ahead, let alone the years. ... No mention of "quantitative easing" anywhere. QE ran in various forms from 2008-2013. Short term rates were held at zero in the US from 2008-2015. Several industrialized areas now have negative nominal rates. The Fed has started QE back up again to prop up the fail…
One huge issue I've seen as a result of near-zero interest rates is how this has hit tax collection from corporations and the very wealthy. Currently, if a company earns profits overseas and doesn't repatriate those funds then the IRS doesn't tax them. This all came about due to ridiculous IP licensing that tech companies engaged in (eg sell their IP to an Irish subsidiary and then license it as a form of transfer pr…
> What the US needs to do is to treat all borrowings as the repatriation of that same amount of money of foreign profits.
That would be ludicrously punitive to entities using debt financing that aren't shielding foreign profits from taxation.
If the US wants to tax foreign profits without repatriation, it should just do that.
Re: Economists’ projections of interest rates and unemployment have proved too high
#130Earlier quoted context omitted.
The thing that's glutted is the savings themselves - the number of dollar bills that have been scanned in and put in spreadsheets. That the spreadsheets are in the name of a small fraction of the population doesn't change the fact that there is a glut of the dollars.
Pretty sure it does - if you split that "glut" up evenly across the population of, say, earth, I'm pretty sure they would find more than "marginal returns" on its expenditure - perhaps not in the form of literal investments in monetary instruments, though. When its concentrated in the hands of a few, its marginal value is very small. The very wealthy aren't looking to spend that money on like actually useful things l…
You and the parent are agreeing with each other.
There is a savings glut, but those savings are in accounts owned by large corporations and very wealthy individuals.