4 ms·

Nominal interest rates are zero. We are living through the largest debt bubble in history. How is it surprising that assets are all incredibly overpriced? Ye

Nominal interest rates are zero. We are living through the largest debt bubble in history. How is it surprising that assets are all incredibly overpriced? Yes, of course it will end in tears.

shostack 10y ago
But what would cause it to pop? There is still insane demand in popular areas, in large part because that's where the jobs are. I could only see that becoming more true in a down market.
- atemerev 10y ago
  You have answered your own question — it will pop when jobs stop growing.
  - carsongross 10y ago
    Yep. And it will be reflexive, since the debt was loaned out against future production, exacerbating the downturn. Some cities might become safe havens for Chinese wealth, not much individuals can do about that except wait it out and hope that the US government starts working in the interests of its broader population, rather than the already rich landowners in a few cities. At a higher level, this is why privately issued debt is no way to manage your money supply.
  - shostack 10y ago
    Right, but what will be the catalyst that stops jobs growing? And would it necessarily be uniform to all geographic areas? The housing crisis was unique in that it impacted people across the nation. Likewise with the dotcom bust since that was all about the public markets. What would have a similar effect today? If tech jobs are killing other jobs/industries, wouldn't that lead to a situation where the tech market is still really strong with jobs, but other areas decline (and thus housing prices may stay the same in say, the Bay Area, but decline in another impacted area)? Just trying to extrapolate things out. Yes obviously if jobs stopped growing everywhere at once, things would crash. But what would cause that? It seems more likely that they would stop growing at different rates, and some may even grow more as a result. As such, we might see more weird fluctuations in the markets, but that isn't a popping event per se.

Nominal interest rates are zero. We are living through the largest debt bubble in history. How is it surprising that assets are all incredibly overpriced? Yes, of course it will end in tears.

shostack 10y ago

But what would cause it to pop? There is still insane demand in popular areas, in large part because that's where the jobs are. I could only see that becoming more true in a down market.

atemerev 10y ago
You have answered your own question — it will pop when jobs stop growing.
- carsongross 10y ago
  Yep. And it will be reflexive, since the debt was loaned out against future production, exacerbating the downturn. Some cities might become safe havens for Chinese wealth, not much individuals can do about that except wait it out and hope that the US government starts working in the interests of its broader population, rather than the already rich landowners in a few cities. At a higher level, this is why privately issued debt is no way to manage your money supply.
- shostack 10y ago
  Right, but what will be the catalyst that stops jobs growing? And would it necessarily be uniform to all geographic areas? The housing crisis was unique in that it impacted people across the nation. Likewise with the dotcom bust since that was all about the public markets. What would have a similar effect today? If tech jobs are killing other jobs/industries, wouldn't that lead to a situation where the tech market is still really strong with jobs, but other areas decline (and thus housing prices may stay the same in say, the Bay Area, but decline in another impacted area)? Just trying to extrapolate things out. Yes obviously if jobs stopped growing everywhere at once, things would crash. But what would cause that? It seems more likely that they would stop growing at different rates, and some may even grow more as a result. As such, we might see more weird fluctuations in the markets, but that isn't a popping event per se.