6 ms·

enough to offset the debt economy? dubious

by cryoshon 10y ago

topspin 10y ago
dubious Right on cue; statist happy talk. Don't vote with the Deplorables and change anything.
- norea-armozel 10y ago
  Yet it's the same Deplorables that want to LGBT down by any and all means (especially the T). Sorry if I don't support those folks but until they back something like ENDA then I'm not going to vote for them in any possible world.
- WalterSear 10y ago
  Two bad choices don't make a good one.
tostitos1979 10y ago
I am seriously confused. Most intelligent people I meet are aware of the "debt economy" aka debt supercycle aka shop-till-you-are-maxed-out phenomenon being caused by ultra low interest rates. Surely this theory is not just held by zerohedge readers any more and by normal people. Once consumers are maxed out, how the heck will they spend in the future? Surely the fed knows this and has a viable plan. Else, they are kicking bigger problems to the future, aren't they?
- smaddox 10y ago
  Prior to the global financial crisis, Neoclassical Economists, i.e. the ones running the US Fed, would not even consider the level of private debt as a significant macroeconomic metric. That's changed slightly, but not really. They still delusionally believe that private debt doesn't matter UNLESS there's an exogenous shock which forces interest rates to the zero lower bound. They seem unwilling to accept the reality that rising private debt drives macroeconomic demand and that stabilizing or reducing private debt triggers an endogenous crisis a la Hyman Minsky's financial instability hypothesis.
- withdavidli 10y ago
  By normal people? I think you are greatly overestimating people's knowledge of economic theory. Most probably only know of trickle down because it's mentioned in the news. There was a recent article by NYT about the Chase Sapphire Reserve credit card. Look at the comment section, most don't know how to do cost benefit analysis. All they saw was a $450 annual fee. A good amount still talk about paying with cash only. This doesn't mean I'm much better off. When you mentioned debt super cycles I have no idea what you mean. I'm only starting to get into economic theories. I'm 27, can be considered upper middle income, and given millennial income calculators in top 1% of earnings (not saying much since most people in the valley can get that, ~$70k income for that level). These theories does not have a perceived effect on people's day to day lives. So a lot don't know about them or don't care. Example, every few weeks I see an article in the front page about negotiating salary. This isn't a gauge of knowledge, but of interest. Everyone goes through negotiation situation, value is obvious, more people learn about it.
  - afterburner 10y ago
    You must be thinking top 1% in the world. To be in the top 1% in the US, you need more like a $450,000 income. http://money.cnn.com/calculator/pf/income-rank/ http://money.cnn.com/calculator/pf/income-rank/
    - tsunamifury 10y ago
      He's trying to measure himself against the average single person his age. Of course, more realistically according to the Bay Area metric, he is below the household poverty line.
      - withdavidli 10y ago
        Yes. This is what I did from a calculator by fusion http://fusion.net/story/41833/wealth-gap-calculator-are-you-in-the-millennial-one-percent/ http://fusion.net/story/41833/wealth-gap-calculator-are-you-... Mixed up my numbers, top 1% for age group ~106k. Bay Area metric I make more than median household, which is scary since that means the average single income family in the Bay Area would be barely scraping by (not hard to believe).
- ArkyBeagle 10y ago
  But household debt peaked in 2007.
hx87 10y ago
What's wrong with a debt economy? It allows startups to overthrow incumbents with relative ease, and without it you get an economy like Germany's, dominated by conservative companies founded 150+ years ago. There are certainly advantages to the German system, but it has plenty of disadvantages too.
- djschnei 10y ago
  savings and accurate interest rates fuel a health economy, not debt.
  - smallnamespace 10y ago
    > savings Every debt is matched by an equal and opposite asset. Savings create debt. http://www.investopedia.com/terms/b/bank-deposits.asp http://www.investopedia.com/terms/b/bank-deposits.asp E.g. you give a bank $1, it creates a liability for $1 on its balance sheet, and it also goes out and lends that cash to someone (allowing it to create debt somewhere else). The question you should be asking is not the total level of debt, but which groups in the economy are indebted. I agree that consumers as a whole should have positive savings.
    - djschnei 10y ago
      http://www.investopedia.com/terms/f/fractionalreservebanking.asp http://www.investopedia.com/terms/f/fractionalreservebanking... Beyond that, I said "and" not "or". Interest rates and savings should be organically tied together. They should signal each other. Nowadays, they do not.
      - smallnamespace 10y ago
        No doubt we all, including central banks, would be happier if rates were at 5% instead of 0%, but then we'd have much worse mass unemployment as an aftereffect of the financial crisis. The 0% bound you see today is the lesser of two evils.

enough to offset the debt economy? dubious

topspin 10y ago

dubious Right on cue; statist happy talk. Don't vote with the Deplorables and change anything.

norea-armozel 10y ago
Yet it's the same Deplorables that want to LGBT down by any and all means (especially the T). Sorry if I don't support those folks but until they back something like ENDA then I'm not going to vote for them in any possible world.
WalterSear 10y ago
Two bad choices don't make a good one.

tostitos1979 10y ago

I am seriously confused. Most intelligent people I meet are aware of the "debt economy" aka debt supercycle aka shop-till-you-are-maxed-out phenomenon being caused by ultra low interest rates. Surely this theory is not just held by zerohedge readers any more and by normal people. Once consumers are maxed out, how the heck will they spend in the future? Surely the fed knows this and has a viable plan. Else, they are kicking bigger problems to the future, aren't they?

smaddox 10y ago
Prior to the global financial crisis, Neoclassical Economists, i.e. the ones running the US Fed, would not even consider the level of private debt as a significant macroeconomic metric. That's changed slightly, but not really. They still delusionally believe that private debt doesn't matter UNLESS there's an exogenous shock which forces interest rates to the zero lower bound. They seem unwilling to accept the reality that rising private debt drives macroeconomic demand and that stabilizing or reducing private debt triggers an endogenous crisis a la Hyman Minsky's financial instability hypothesis.
withdavidli 10y ago
By normal people? I think you are greatly overestimating people's knowledge of economic theory. Most probably only know of trickle down because it's mentioned in the news. There was a recent article by NYT about the Chase Sapphire Reserve credit card. Look at the comment section, most don't know how to do cost benefit analysis. All they saw was a $450 annual fee. A good amount still talk about paying with cash only. This doesn't mean I'm much better off. When you mentioned debt super cycles I have no idea what you mean. I'm only starting to get into economic theories. I'm 27, can be considered upper middle income, and given millennial income calculators in top 1% of earnings (not saying much since most people in the valley can get that, ~$70k income for that level). These theories does not have a perceived effect on people's day to day lives. So a lot don't know about them or don't care. Example, every few weeks I see an article in the front page about negotiating salary. This isn't a gauge of knowledge, but of interest. Everyone goes through negotiation situation, value is obvious, more people learn about it.
- afterburner 10y ago
  You must be thinking top 1% in the world. To be in the top 1% in the US, you need more like a $450,000 income. http://money.cnn.com/calculator/pf/income-rank/ http://money.cnn.com/calculator/pf/income-rank/
  - tsunamifury 10y ago
    He's trying to measure himself against the average single person his age. Of course, more realistically according to the Bay Area metric, he is below the household poverty line.
    - withdavidli 10y ago
      Yes. This is what I did from a calculator by fusion http://fusion.net/story/41833/wealth-gap-calculator-are-you-in-the-millennial-one-percent/ http://fusion.net/story/41833/wealth-gap-calculator-are-you-... Mixed up my numbers, top 1% for age group ~106k. Bay Area metric I make more than median household, which is scary since that means the average single income family in the Bay Area would be barely scraping by (not hard to believe).
ArkyBeagle 10y ago
But household debt peaked in 2007.

hx87 10y ago

What's wrong with a debt economy? It allows startups to overthrow incumbents with relative ease, and without it you get an economy like Germany's, dominated by conservative companies founded 150+ years ago. There are certainly advantages to the German system, but it has plenty of disadvantages too.

djschnei 10y ago
savings and accurate interest rates fuel a health economy, not debt.
- smallnamespace 10y ago
  > savings Every debt is matched by an equal and opposite asset. Savings create debt. http://www.investopedia.com/terms/b/bank-deposits.asp http://www.investopedia.com/terms/b/bank-deposits.asp E.g. you give a bank $1, it creates a liability for $1 on its balance sheet, and it also goes out and lends that cash to someone (allowing it to create debt somewhere else). The question you should be asking is not the total level of debt, but which groups in the economy are indebted. I agree that consumers as a whole should have positive savings.
  - djschnei 10y ago
    http://www.investopedia.com/terms/f/fractionalreservebanking.asp http://www.investopedia.com/terms/f/fractionalreservebanking... Beyond that, I said "and" not "or". Interest rates and savings should be organically tied together. They should signal each other. Nowadays, they do not.
    - smallnamespace 10y ago
      No doubt we all, including central banks, would be happier if rates were at 5% instead of 0%, but then we'd have much worse mass unemployment as an aftereffect of the financial crisis. The 0% bound you see today is the lesser of two evils.