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>"Artificially low interest rates is the main cause of most malinvestment and inflating assets." Rates aren't "artificial" (there is huge demand for treasuries

>"Artificially low interest rates is the main cause of most malinvestment and inflating assets." Rates aren't "artificial" (there is huge demand for treasuries) and malinvestment occurs at any time. Sure, it makes it "cheaper" to spend money stupidly, but it's also cheaper to spend money "smartly" -- to take risks and chances to do big things. You know, what places like SV are all about. I'm agnostic as to what the rates are, because our economy requires lenders and borrowers. Right now it favors borrowers. >"Wages don't keep up with inflation and assets are inflated" Who owns all these inflated assets, the houses, the stocks?

smitherfield 11y ago
>Rates aren't "artificial" (there is huge demand for treasuries) Of course they're "artificial." There may be huge demand for treasuries, but not enough to maintain a constant ~0% interest rate - that's the Fed's doing. The Fed certainly is not allowing treasuries to drop to their true market value, as Volcker did.
- jazzyk 11y ago
  You are mixing up interest rates and government debt yields. Interest rates are set artificially by the Fed. Because they are set almost at zero, this causes run on government debt as the only "safe" source of interest income, lowering yields thus making it inexpensive for the government to acquire even more debt. The result (in the US) is skyrocketing government debt (from 64% of GDP in 2008 to 103% in 2015) We. Are. So. Fucked.
  - smitherfield 11y ago
    Government debt yields are a nearly 1 to 1 function of the interest rate, assuming there's confidence in the currency and the government's ability to tax and print money.
    - hollerith 11y ago
      You mean "nearly the identity function". A 1-to-1 function is something different (((namely, a function f such that whenever f(a) = f(b), a = b))).
      - smitherfield 11y ago
        1-to-1 correlation, I meant to say. Anyway, I think my meaning was obvious.

smitherfield 11y ago

>Rates aren't "artificial" (there is huge demand for treasuries) Of course they're "artificial." There may be huge demand for treasuries, but not enough to maintain a constant ~0% interest rate - that's the Fed's doing. The Fed certainly is not allowing treasuries to drop to their true market value, as Volcker did.

jazzyk 11y ago
You are mixing up interest rates and government debt yields. Interest rates are set artificially by the Fed. Because they are set almost at zero, this causes run on government debt as the only "safe" source of interest income, lowering yields thus making it inexpensive for the government to acquire even more debt. The result (in the US) is skyrocketing government debt (from 64% of GDP in 2008 to 103% in 2015) We. Are. So. Fucked.
- smitherfield 11y ago
  Government debt yields are a nearly 1 to 1 function of the interest rate, assuming there's confidence in the currency and the government's ability to tax and print money.
  - hollerith 11y ago
    You mean "nearly the identity function". A 1-to-1 function is something different (((namely, a function f such that whenever f(a) = f(b), a = b))).
    - smitherfield 11y ago
      1-to-1 correlation, I meant to say. Anyway, I think my meaning was obvious.