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Why are interest rates so low?

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Re: Why are interest rates so low?

#211

Post by RobertoG »

pdonis wrote: post #193
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…

> You print 100, you owe 110 counting interest. Um, no. I agree that printing money has bad side effects, but this is not one of them. Here's a better way of looking at it. You currently have a money supply of 1000. That money supply is matched up to 1000 units of goods and services. Assuming this situation has been stable for a while, there will be some set of equilibrium prices. Now you print 100. The total money s…

I think you are being a little unfair to Keynes here. Printing money doesn’t make people think that there are more goods and services. Money is a real thing, is a medium of exchange and there is a demand for it. If you have not enough supply of it the economy suffers. Also, it’s deserved to note that the preferred Keynesian way of stimulating the economy is by fiscal policies (investing from the government), and not by “printing” money, but that is not possible in Europe or the States because politics.

Re: Why are interest rates so low?

#212

Post by Gurkenmaster »

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…

> Enjoy television shows that offer multi-month and multi-year arcs and are designed to be consumed by dedicated fans in order, rather than principally for syndication in random order.

This has nothing to do with economic or technical limitations. It has cultural reasons. SDF Macross aired in 1982 in Japan with 26 episodes in order and I'm sure there are even earlier shows.

Re: Why are interest rates so low?

#213

Post by Gurkenmaster »

DeanCollinsNY wrote: post #187
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…

agree.....it still amazes me to this day that people don't wake up and realize that inflation is "government theft" you had 100 dollars today....next year with 6% inflation next year you have $94 idiots run around looking at their 401k's and their "property values" thinking they are rich but its really.....no you idiot the government stole from you and you are too stupid to realize.

Deflation also causes problems because the value of your money increases over time. Should I spend it today, tomorrow or in 10 years?

Re: Why are interest rates so low?

#214

Post by RobertoG »

DeanCollinsNY wrote: post #187
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…

agree.....it still amazes me to this day that people don't wake up and realize that inflation is "government theft" you had 100 dollars today....next year with 6% inflation next year you have $94 idiots run around looking at their 401k's and their "property values" thinking they are rich but its really.....no you idiot the government stole from you and you are too stupid to realize.

That’s a very strange way of thinking about money. Money is valuable but only in the context of an economy. Your example is true only if the economy didn’t grow that year. You could make the opposite example. You have 100 dollars today and 100 dollars tomorrow but the economy shrinks a 6%, what is the real value of your money?

A most interesting way would be see money as infrastructure. In order the economy to work you need money. In order to it work properly you need the proper quantity of money. Of course we can disagree in what is the proper quantity.

Re: Why are interest rates so low?

#215

Post by collyw »

angularly wrote: post #186
cmdkeen wrote: post #119

Earlier quoted context omitted.

The world as a whole is in one of its most peaceful periods ever. The 1990s saw a genocide in Europe, horrific civil wars in Africa, before that you had the Cold War with all of its attendant problems. Growth and Peace aren't mutually incompatible aims.

"Growth and Peace aren't mutually incompatible aims." No shit, almost all wars start with economic discontent. So all things equal, growth will mean less wars.

There has been a lot of growth in the States and the UK over the last 40 years. yet within both of those countries inequality has grown a lot. Few people under 40 can afford to buy a house in the UK these days, as opposed to 20 or thirty years ago.

Maybe I am just more politically aware than I used to be but I feel discontent is rising.

Re: Why are interest rates so low?

#216

Post by collyw »

pdonis wrote: post #192
collyw wrote: post #90

Earlier quoted context omitted.

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…

> I don't need a faster iPhone, or more tech. Maybe you don't, but lots of people do, as evidenced by the fact that they pay for it. If you don't need it, then don't pay for it. > the last ten years worth of "growth" (much of which seems to have been pumping up asset prices) This is true, but faster iPhones and other tech weren't what did that. Investment banks did that, by playing risky zero-sum games with other peo…

I got mine because it cam with the internet.

"How much is internet?" "40 euros" "How much is internet with a phone contract bundle?" "40 euros"

I was perfectly happy with my Nokia. Battery lasted a week. I could bounce it off the ground.

The smartphone can be useful at times, but at other times it is so frustrating to use it cancels out the benefit. And since everyone else is using whatsapp, I might as well join in.

I take my pleasure in life from things outside a 4 inch screen.

Re: Why are interest rates so low?

#217

Post by Bootvis »

avn2109 wrote: post #59
Bootvis wrote: post #55

Earlier quoted context omitted.

The economy needs to grow as quickly as the population because otherwise there would be a reduction in wealth on the individual level. Also, if inequality remains the same the lives of those on the bottom of society see their lives improve. Less essential, but the people here should appreciate it, growing the economy means that young people have the opportunity to develop themselves professionally, e.g start start-up…

>> "The economy needs to grow as quickly as the population..." In countries with declining populations, ought the economy to contract?

Well, it probably will if a large number of people leave and that doesn't have to be bad news for the ones that stay. Of course, that will depend on the specific situation. I can't come up with an example where there was a large decline in population in an area on a voluntariy basis.

Re: Why are interest rates so low?

#218

Post by evanpw »

pdq wrote: post #46
arielweisberg wrote: post #23

Earlier quoted context omitted.

Dividends are a tax inefficient way to compensate share holders because dividends are taxable. I hope dividends disappear. Share buybacks increase net asset value without any tax impact. There might be a downside, but I haven't heard it yet.

As the Alex cartoon posted by mauricemir points out, the majority of companies doing stock buybacks are not doing it from profits. They are taking on additional debt through bonds to buy their own stock. This may look good in the short term, while bond rates are at historic lows, but once they go back to normal levels, the companies will need to sell their own stock to pay the bonds off. If companies don't want to di…

1. Even Apple borrows money for buybacks rather than spending their giant cash hoard. The reason is taxes. Companies have a lot of cash generated overseas, and if they brought that cash back into the US in order to buy back stock, they would have to pay US corporate income tax on it, at a rate of something like 35%. From that perspective, a 2% fee to the bankers is a steal.

2. As far as I know, most corporate bonds don't have a floating interest rate, so those companies have the option of paying off the bonds at maturity and then just not borrowing more if interest rates have risen. They don't have to continue the buybacks under that scenario, because investors don't expect buybacks to be consistent from year to year -- another advantage over dividends.

3. Pouring money into R&D instead of returning money to shareholders only makes sense if the company can get a better rate of return than shareholders can get somewhere else. For a large, mature company that may well not be true. In that case, they should stick to what they do well, send the profits back to the shareholders, and let them invest it into some growing company which can make better use of the money.

Re: Why are interest rates so low?

#219

Post by zo1 »

RobertoG wrote: post #214
DeanCollinsNY wrote: post #187

Earlier quoted context omitted.

agree.....it still amazes me to this day that people don't wake up and realize that inflation is "government theft" you had 100 dollars today....next year with 6% inflation next year you have $94 idiots run around looking at their 401k's and their "property values" thinking they are rich but its really.....no you idiot the government stole from you and you are too stupid to realize.

That’s a very strange way of thinking about money. Money is valuable but only in the context of an economy. Your example is true only if the economy didn’t grow that year. You could make the opposite example. You have 100 dollars today and 100 dollars tomorrow but the economy shrinks a 6%, what is the real value of your money? A most interesting way would be see money as infrastructure. In order the economy to work y…

What way should one think of it, if you concede the fact that the "new" money printed doesn't get equally distributed to all the individuals based on their proportion of ownership of the previous total of money supply?

I.e. if there is 1000 floating around, and 2 individuals in the population. Then if the government prints an extra 100, it needs to give 50 to each individual (not 100 to the one, but not the other). Probably not logistically feasible with a large population, but that way you can at least say it's not "theft".

Re: Why are interest rates so low?

#220

Post by zo1 »

Gurkenmaster wrote: post #213
DeanCollinsNY wrote: post #187

Earlier quoted context omitted.

agree.....it still amazes me to this day that people don't wake up and realize that inflation is "government theft" you had 100 dollars today....next year with 6% inflation next year you have $94 idiots run around looking at their 401k's and their "property values" thinking they are rich but its really.....no you idiot the government stole from you and you are too stupid to realize.

Deflation also causes problems because the value of your money increases over time. Should I spend it today, tomorrow or in 10 years?

>"Should I spend it today, tomorrow or in 10 years?"

Whenever the "future" benefit does not outweigh the "current" benefit of said money. People do it now with the interest rates the other way around, why would it be any different with deflation? I.e. they spend now, or they invest now, or they invest in financial instruments now that will beat "inflation".

Both sides of inflation/deflation affect peoples' actions based on their time preference of money[1].

[1] Economists correct me on my usage of that term, if I'm wrong.

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