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A large factor of the answer to this problem is in the second paragraph and the author glosses right over it: "This state of things has left analysts stumped.

A large factor of the answer to this problem is in the second paragraph and the author glosses right over it: "This state of things has left analysts stumped. For nearly a decade, the Federal Reserve has kept interest rates at extraordinarily low levels in order to initiate growth and rising demand, inflation, and ultimately higher wages. But the higher wages have been stubbornly slow to materialize." Interest rates have been dropped into the ground, and it hasn't increased investment(growth). We have the highest savings in the history of capitalism and the lowest level of investment. This is the wheel of capitalism literally coming to a halt because the oligarchs are staring each other down waiting for someone to go first. And I think there is a lot to be said about Wall Street leaching most of the investors' money because it promises better returns than actual investment into actual things with utility. Wall Street is 'supposed' to be the mechanism for recycling profits into investments so that this wheel keeps spinning. Does anyone honestly still believe it's functional?

toomuchtodo 9y ago
It's because the real unemployment rate is higher than the "official rate". U-6 is the best indicator. Workers are still being pulled into the labor force, hence why wages have not risen despite the labor market tightening. We still have a long way to go to "full employment", at which point wage inflation would accelerate. Interest rates were held low because the Federal Reserve has limited tools to stoke demand (and heh, who doesn't love a good asset bubble amirite?). It therefore "pushes the string", attempting to use monetary policy when what is really necessary is Congress to act (higher taxes and government spending, or pushing wages up with legislation). Call your representatives.
- harryh 9y ago
  It's weird to me that there are all kinds of wacky theories in this thread except for you with the obvious answer: the supply of workers exceeds demand so the price (their wage) is not rising. We had a really big recession in 2008-9 folks! You might have read about it? We've been recovering since mid 2010...adding 200k jobs per month or so. But these things take time.
  - toomuchtodo 9y ago
    Appreciate the kind words, but it's still much more complex then that. Businesses get anchored to a certain wage cost. In the article, they mention businesses unable to fill roles at $9 or $17 per hour. Well, there may be unemployed people, but they're not willing to do those jobs at those rates. They're not the market clearing price for those roles. If you're offering a wage for months on end, and you can't fill the role, you aren't paying enough. Full stop. Again, I want to stress that the curious macro nature of what we're seeing is because of a combination of poor statistics and business decisions. I'm sure we're not at full employment yet, and I'm sure business are not willing to pay more for labor until they absolutely have no choice, and I'm sure that time of reckoning is almost here. But not quite yet. Still more slack to pick up, as you mention.
    - harryh 9y ago
      Ya, I agree that there is some stubbornness among employers to raise wages and that more jobs than typical are remaining unfilled as they hope to find someone at their $12 price point rather than just ponying up $14 (or whatever). Probably this is due to the unusually large recession we had. The fact is that employers could get away without raising wages for a really long time. No big surprise if it takes them a while to catch on that the end of that line is neigh. But ya, mostly slack. Another 2 years or so. Maybe a bit more. The 2020 census could put the nail in the coffin. A shit ton of people get hired for those things.
      - chii 9y ago
        > $12 price point rather than just ponying up $14 that's interesting, but has anyone asked the question of whether the business can actually remain profitable if the rate was $14 rather than $12?
        harryh 9y ago
        Corporate profits are up a bit as a % of revenue. Similar labor's share of national income is down a bit. A lot of businesses could afford to pay a bit more. Just a bit though. There hasn't been some sort of sea change like a lot of people seem to think.
- walrus1066 9y ago
  In the UK the broad employment rate (including people not seeking work, students, homemakers etc) is the highest since the 70's. Yet wage growth has been much worse than in the US, and the rest of the EU barring Greece. So I think the story is a bit more complex than be explained by classic macroeconomic theory.
  - willyt 9y ago
    But if you are unemployed in the UK and relying on benefits to survive, if you try to negotiate salary and get turned down for a job offer your benefits will be sanctioned and you will have to rely on food banks for X weeks until the sanction expires, so negotiating on salary becomes a very risky proposition.
    - sqeaky 9y ago
      That is crazy. Negotiating Salary is just about the only place a worker as an advantage and can get ahead. I though all the anti-consumer and anti-employee laws were in the US.
    - walrus1066 9y ago
      Good point, also, there is a huge pool of skilled and unskilled workers in the EU to draw from, especially hard hit countries like Spain, Italy and Greece with stomach churningly high unemployment rates. Studies have claimed this has a negligible effect on wages, but I find it hard to believe.
- kerbalspacepro 9y ago
  http://www.macrotrends.net/1377/u6-unemployment-rate http://www.macrotrends.net/1377/u6-unemployment-rate The U-6 rate is at pre-recession levels though? And it's only 1% away from pre-Dot Com levels?
NTDF9 9y ago
The solution to this is plain and simple wealth-tax that can only be avoided if their investment creates X% jobs. There are corner cases to it but the underlying reasoning is, if your investment is just lying around accruing wealth, it's bullshit wealth.
- flamedoge 9y ago
  Ah, so either take the risk or get taxed? Kind of bold.
  - NTDF9 9y ago
    It's basically a choice between: 1. Hire more people and get a tax break 2. Innovate and hire less people and have smaller payrolls Both are win-win for companies and customers and employees. Today, it is just point 2.
    - refurb 9y ago
      Man oh man could you ever game a tax like that. Start a small company and hire your own family at minimum wage would be cheaper than just paying the tax. That would introduce a ton of perverse incentives.
      - NTDF9 9y ago
        >> That would introduce a ton of perverse incentives. That will also solve the unemployment problem and incentivize people to start small businesses. The family members will also have a choice between working minimum wage for their own business or seek a higher paying job, pushing wages higher and higher. Sounds good to me.
- dclowd9901 9y ago
  Sitting on money isn't profitable either. Equity investment is a risk, and simply saving it is a loss (due to inflation). It's just that businesses don't _need_ to spend more on payroll to be successful, or they don't see the relationship of that investment to payoff vs. any other investment they could make. And to be fair, it _is_ rather fluffy. How many more dollars do you need to pay on a position to get 10x return? Can you even quantify that at the level of a single business? If you pay a lot, but have a shitty workplace culture, you may be just as unproductive as a place that pays less, but has a great culture. Unfortunately dollars for employees doesn't necessarily translate to return as well as, say, hiring a process manager or automation engineer to try to eliminate the effects of a bad employee.
caesarshift 9y ago
You've summed up my feelings well: I can't afford to not be in the stock market as all other financial investments pay peanuts on the dollar. And yet I don't trust that the stock market numbers represents actual growth. It's propped up. When does this end?
- deleted 9y ago
  [deleted]
- JumpCrisscross 9y ago
  > I can't afford to not be in the stock market as all other financial investments pay peanuts on the dollar If the market crashes then cash outperformed. There is also a lot in terms of bonds, structured products and fund products between cash and equities.
- billmalarky 9y ago
  You shouldn't necessarily be all equities. Look up "Risk Adjusted Return" and "Modern Portfolio Theory." You can significantly lower variance (risk) and at the same time only slightly lower returns using diversification.
  - ThrustVectoring 9y ago
    Eh, futzing with your asset allocation is significantly less important than budgeting well, managing your lifestyle/expenses, and making your career work out well. You can retire without beating inflation, let alone stock market indexes.
    - sp332 9y ago
      Retire without beating inflation? Does this involve saving 30% of your paycheck for 40 years?
      - ThrustVectoring 9y ago
        It can. Depends on how much you make and spend. You can retire with zero savings if you can control costs to beneath what social security pays you, but it'll be really rough.
luckydata 9y ago
You are seeing what happens to a workforce that lacks any kind of EFFECTIVE collective bargaining system.
- adventured 9y ago
  That's blatantly not the issue, as supported by the actual facts of the global economy. The French have seen their wages grow at 1/4 to 1/2 the typical rate of American wage growth for the last decade. They do not lack for collective bargaining. The American median wage is higher than the German median wage. The Germans do not lack for collective bargaining. The American economy and median wage has outperformed: France, Germany, Spain, Italy, Finland, Britain, among many other developed nations. The American median wage is also higher than: Sweden, Finland, Netherlands, Germany, France. The American median wage is so high, nations such as Britain barely qualify as matching up with our poorest states. So much for your theory.
  - joelkesler 9y ago
    Please provide sources for your claims.
  - Texasian 9y ago
    All of those countries have cheap or free higher education and healthcare. Perhaps they don't need wages as high since their government chooses to cover two of the largest expenses an average person will encounter in their lives.
    - refurb 9y ago
      That makes no sense. Taxes come from wages. When the gov't gives you something, it's paid for with the money they received from you through taxes.
      - s73ver 9y ago
        But by banding together, and pooling the money from the average and the very wealthy, most people are able to get education and services that they would otherwise be unable to afford.
basicplus2 9y ago
You've absolutely nailed it 'This is the wheel of capitalism literally coming to a halt because the oligarchs are staring each other down waiting for someone to go first.'
aphextron 9y ago
>This is the wheel of capitalism literally coming to a halt because the oligarchs are staring each other down waiting for someone to go first. This makes a lot of sense. I constantly get the feeling in the US that we don't actually "do" anything anymore. And I don't just mean manufacturing. You look around at the rest of the world and infrastructure programs are at the forefront of every expanding economy. China, India, Turkey. All pouring hundreds of billions into great works at home and abroad. Where are the massive capital expenditures we saw in the 19th and 20th centuries? America has the largest population of highly skilled, financially endowed consumers on earth yet the most that any genius Venture Capitalist can figure out to do with these billions in free money from the fed is come up with a new skin for IRC.
- flashman 9y ago
  "The best minds of my generation are thinking about how to make people click ads," said Jeffrey Hammerbacher.
  - blunte 9y ago
    For the last decade, the "best minds" (by one common measure) have been going to hedge funds - helping a small group turn money into more money. It's not a sustainable strategy, and countries that take a different approach will eventually become the economic leaders.
    - honestoHeminway 9y ago
      Peak Gametheory.
- thisrod 9y ago
  > Where are the massive capital expenditures we saw in the 19th and 20th centuries? Those expenditures are still around: they built the roads, runways and skyscrapers that we all use today. Why do developing countries spend a lot more on development than developed countries do? That's almost a tautology.
specialist 9y ago
Labor income has stagnated because we have a glut of labor. Corporate profitability continues to grow because of increased productivity (increasing the surplus), which they haven't shared with their investors, employees, or government (taxes). Corporate savings continue to accrue because their (effective) tax rate is low. Whatever can be said about (low) interest rates, its effect on wage stagnation is second-order, at best.
nnq 9y ago
100% Agree. And this is my 2 cents of WHY: Basically all current investments are high-risk in the age we live in, because we are "at the brink of the chasm" on all fronts: - general technology: ...the barriers to market are so low that a startup can spring to being at any moment and eat all your profits away - (social) media / communication: anything can change anytime, today's Facebook can be tomorrow's Hi5 - biotech: we're getting closer to the "you can do it your garage stage" which will change everything - world politics: India and China are big players now and their moves can no longer be predicted, also US internal politics is a cauldron of volatility, and in a decade or two we'll have the "New Africa" rising... good luck predicting anything - ML/AI: we might be at the brink of f Singularity with superhuman-AI around the corner... but we have no idea whether it will be in 5 years or 100 years (!) ...this alone is enough to fuck up all worldwide future prediction on anything... when you're staring up from somewhere around the foot of an exponential curve everything looks like "wtf, nothing makes sense" And also, the last economic "crisis" increased everyone's aversion to risk, kind of the opposite of what you'd need now to increase level of investment... What needs to change is the attitude of people with money towards risk! I'd love to see people like Elon Musk succeed long-term, not because I like them or what they are doing, but because they are the only ones with an attitude that can create growth right now. We should really re-learn thinking and working with volatility, maybe starting from what Nassim Taleb says in his Antifragile (https://www.amazon.com/Antifragile-Things-That-Disorder-Incerto/dp/0812979680 https://www.amazon.com/Antifragile-Things-That-Disorder-Ince...) and his talks like How to Live in a World we Don't Understand (https://www.youtube.com/watch?v=iEnmjMgP_Jo https://www.youtube.com/watch?v=iEnmjMgP_Jo - warning: he's a terrible speaker... and not a great writer either, so getting to the root of his ideas will take time). Maybe not. But current "risk reduction" attitude cannot work (hint why: even if you reduce Infinity by 20% you still have f Infinity!).
logicchains 9y ago
>Interest rates have been dropped into the ground, and it hasn't increased investment(growth). We have the highest savings in the history of capitalism and the lowest level of investment. Savings _rates_ in the US are actually low by historical standards: https://tradingeconomics.com/united-states/personal-savings https://tradingeconomics.com/united-states/personal-savings (click the 'MAX' timespan toggle). Low interest rates discourage savings and encourage borrowing. One of the fundamentals of economics is that all other things being equal, in the long term savings is needed for growth: if we consume everything we produce, then nothing remains to be invested, so productivity won't increase. If we save more, then we have more to invest, and this greater investment will increase productivity more. The key thing to note here is that it is investment of forgone consumption that produces value (at a simple level, compare saving some wheat seeds to plant next season vs eating them all as flour). Lowering interest rates, printing money and similar things don't achieve this: they can create _money_, but not necessarily value. What they can do is increase demand, to address temporary shortfalls in demand, which under a popular form of economic reasoning will produce more growth than letting demand slump. That demand-boosting approach is however meant to be used as an immediate solution to a temporary slump, not an ongoing thing, as few economists deny a long term positive relationship between savings rates and growth. There've actually been attempts to model what the ideal savings rate would be: https://en.wikipedia.org/wiki/Golden_Rule_savings_rate https://en.wikipedia.org/wiki/Golden_Rule_savings_rate. Such models seem to have little influence on interest rate policy, however.
awkwarddaturtle 9y ago
Interest rates were kept low to bail out wall street, banks, auto industry, housing industry, etc. It was used to reinflate stock, housing, etc bubbles. If low interest rates boosted wages, the japanese worker would be the highest paid worker in the world. Instead, the japanese wage has declined for 20+ years.
Spooky23 9y ago
IMO, you need more inflation to make it too costly to just stockpile money.

toomuchtodo 9y ago

It's because the real unemployment rate is higher than the "official rate". U-6 is the best indicator. Workers are still being pulled into the labor force, hence why wages have not risen despite the labor market tightening. We still have a long way to go to "full employment", at which point wage inflation would accelerate. Interest rates were held low because the Federal Reserve has limited tools to stoke demand (and heh, who doesn't love a good asset bubble amirite?). It therefore "pushes the string", attempting to use monetary policy when what is really necessary is Congress to act (higher taxes and government spending, or pushing wages up with legislation). Call your representatives.

harryh 9y ago
It's weird to me that there are all kinds of wacky theories in this thread except for you with the obvious answer: the supply of workers exceeds demand so the price (their wage) is not rising. We had a really big recession in 2008-9 folks! You might have read about it? We've been recovering since mid 2010...adding 200k jobs per month or so. But these things take time.
- toomuchtodo 9y ago
  Appreciate the kind words, but it's still much more complex then that. Businesses get anchored to a certain wage cost. In the article, they mention businesses unable to fill roles at $9 or $17 per hour. Well, there may be unemployed people, but they're not willing to do those jobs at those rates. They're not the market clearing price for those roles. If you're offering a wage for months on end, and you can't fill the role, you aren't paying enough. Full stop. Again, I want to stress that the curious macro nature of what we're seeing is because of a combination of poor statistics and business decisions. I'm sure we're not at full employment yet, and I'm sure business are not willing to pay more for labor until they absolutely have no choice, and I'm sure that time of reckoning is almost here. But not quite yet. Still more slack to pick up, as you mention.
  - harryh 9y ago
    Ya, I agree that there is some stubbornness among employers to raise wages and that more jobs than typical are remaining unfilled as they hope to find someone at their $12 price point rather than just ponying up $14 (or whatever). Probably this is due to the unusually large recession we had. The fact is that employers could get away without raising wages for a really long time. No big surprise if it takes them a while to catch on that the end of that line is neigh. But ya, mostly slack. Another 2 years or so. Maybe a bit more. The 2020 census could put the nail in the coffin. A shit ton of people get hired for those things.
    - chii 9y ago
      > $12 price point rather than just ponying up $14 that's interesting, but has anyone asked the question of whether the business can actually remain profitable if the rate was $14 rather than $12?
      - harryh 9y ago
        Corporate profits are up a bit as a % of revenue. Similar labor's share of national income is down a bit. A lot of businesses could afford to pay a bit more. Just a bit though. There hasn't been some sort of sea change like a lot of people seem to think.
walrus1066 9y ago
In the UK the broad employment rate (including people not seeking work, students, homemakers etc) is the highest since the 70's. Yet wage growth has been much worse than in the US, and the rest of the EU barring Greece. So I think the story is a bit more complex than be explained by classic macroeconomic theory.
- willyt 9y ago
  But if you are unemployed in the UK and relying on benefits to survive, if you try to negotiate salary and get turned down for a job offer your benefits will be sanctioned and you will have to rely on food banks for X weeks until the sanction expires, so negotiating on salary becomes a very risky proposition.
  - sqeaky 9y ago
    That is crazy. Negotiating Salary is just about the only place a worker as an advantage and can get ahead. I though all the anti-consumer and anti-employee laws were in the US.
  - walrus1066 9y ago
    Good point, also, there is a huge pool of skilled and unskilled workers in the EU to draw from, especially hard hit countries like Spain, Italy and Greece with stomach churningly high unemployment rates. Studies have claimed this has a negligible effect on wages, but I find it hard to believe.
kerbalspacepro 9y ago
http://www.macrotrends.net/1377/u6-unemployment-rate http://www.macrotrends.net/1377/u6-unemployment-rate The U-6 rate is at pre-recession levels though? And it's only 1% away from pre-Dot Com levels?

NTDF9 9y ago

The solution to this is plain and simple wealth-tax that can only be avoided if their investment creates X% jobs. There are corner cases to it but the underlying reasoning is, if your investment is just lying around accruing wealth, it's bullshit wealth.

flamedoge 9y ago
Ah, so either take the risk or get taxed? Kind of bold.
- NTDF9 9y ago
  It's basically a choice between: 1. Hire more people and get a tax break 2. Innovate and hire less people and have smaller payrolls Both are win-win for companies and customers and employees. Today, it is just point 2.
  - refurb 9y ago
    Man oh man could you ever game a tax like that. Start a small company and hire your own family at minimum wage would be cheaper than just paying the tax. That would introduce a ton of perverse incentives.
    - NTDF9 9y ago
      >> That would introduce a ton of perverse incentives. That will also solve the unemployment problem and incentivize people to start small businesses. The family members will also have a choice between working minimum wage for their own business or seek a higher paying job, pushing wages higher and higher. Sounds good to me.
dclowd9901 9y ago
Sitting on money isn't profitable either. Equity investment is a risk, and simply saving it is a loss (due to inflation). It's just that businesses don't _need_ to spend more on payroll to be successful, or they don't see the relationship of that investment to payoff vs. any other investment they could make. And to be fair, it _is_ rather fluffy. How many more dollars do you need to pay on a position to get 10x return? Can you even quantify that at the level of a single business? If you pay a lot, but have a shitty workplace culture, you may be just as unproductive as a place that pays less, but has a great culture. Unfortunately dollars for employees doesn't necessarily translate to return as well as, say, hiring a process manager or automation engineer to try to eliminate the effects of a bad employee.

caesarshift 9y ago

You've summed up my feelings well: I can't afford to not be in the stock market as all other financial investments pay peanuts on the dollar. And yet I don't trust that the stock market numbers represents actual growth. It's propped up. When does this end?

deleted 9y ago
[deleted]
JumpCrisscross 9y ago
> I can't afford to not be in the stock market as all other financial investments pay peanuts on the dollar If the market crashes then cash outperformed. There is also a lot in terms of bonds, structured products and fund products between cash and equities.
billmalarky 9y ago
You shouldn't necessarily be all equities. Look up "Risk Adjusted Return" and "Modern Portfolio Theory." You can significantly lower variance (risk) and at the same time only slightly lower returns using diversification.
- ThrustVectoring 9y ago
  Eh, futzing with your asset allocation is significantly less important than budgeting well, managing your lifestyle/expenses, and making your career work out well. You can retire without beating inflation, let alone stock market indexes.
  - sp332 9y ago
    Retire without beating inflation? Does this involve saving 30% of your paycheck for 40 years?
    - ThrustVectoring 9y ago
      It can. Depends on how much you make and spend. You can retire with zero savings if you can control costs to beneath what social security pays you, but it'll be really rough.

luckydata 9y ago

You are seeing what happens to a workforce that lacks any kind of EFFECTIVE collective bargaining system.

adventured 9y ago
That's blatantly not the issue, as supported by the actual facts of the global economy. The French have seen their wages grow at 1/4 to 1/2 the typical rate of American wage growth for the last decade. They do not lack for collective bargaining. The American median wage is higher than the German median wage. The Germans do not lack for collective bargaining. The American economy and median wage has outperformed: France, Germany, Spain, Italy, Finland, Britain, among many other developed nations. The American median wage is also higher than: Sweden, Finland, Netherlands, Germany, France. The American median wage is so high, nations such as Britain barely qualify as matching up with our poorest states. So much for your theory.
- joelkesler 9y ago
  Please provide sources for your claims.
- Texasian 9y ago
  All of those countries have cheap or free higher education and healthcare. Perhaps they don't need wages as high since their government chooses to cover two of the largest expenses an average person will encounter in their lives.
  - refurb 9y ago
    That makes no sense. Taxes come from wages. When the gov't gives you something, it's paid for with the money they received from you through taxes.
    - s73ver 9y ago
      But by banding together, and pooling the money from the average and the very wealthy, most people are able to get education and services that they would otherwise be unable to afford.

basicplus2 9y ago

You've absolutely nailed it 'This is the wheel of capitalism literally coming to a halt because the oligarchs are staring each other down waiting for someone to go first.'

aphextron 9y ago

>This is the wheel of capitalism literally coming to a halt because the oligarchs are staring each other down waiting for someone to go first. This makes a lot of sense. I constantly get the feeling in the US that we don't actually "do" anything anymore. And I don't just mean manufacturing. You look around at the rest of the world and infrastructure programs are at the forefront of every expanding economy. China, India, Turkey. All pouring hundreds of billions into great works at home and abroad. Where are the massive capital expenditures we saw in the 19th and 20th centuries? America has the largest population of highly skilled, financially endowed consumers on earth yet the most that any genius Venture Capitalist can figure out to do with these billions in free money from the fed is come up with a new skin for IRC.

flashman 9y ago
"The best minds of my generation are thinking about how to make people click ads," said Jeffrey Hammerbacher.
- blunte 9y ago
  For the last decade, the "best minds" (by one common measure) have been going to hedge funds - helping a small group turn money into more money. It's not a sustainable strategy, and countries that take a different approach will eventually become the economic leaders.
  - honestoHeminway 9y ago
    Peak Gametheory.
thisrod 9y ago
> Where are the massive capital expenditures we saw in the 19th and 20th centuries? Those expenditures are still around: they built the roads, runways and skyscrapers that we all use today. Why do developing countries spend a lot more on development than developed countries do? That's almost a tautology.

specialist 9y ago

Labor income has stagnated because we have a glut of labor. Corporate profitability continues to grow because of increased productivity (increasing the surplus), which they haven't shared with their investors, employees, or government (taxes). Corporate savings continue to accrue because their (effective) tax rate is low. Whatever can be said about (low) interest rates, its effect on wage stagnation is second-order, at best.

nnq 9y ago

100% Agree. And this is my 2 cents of WHY: Basically all current investments are high-risk in the age we live in, because we are "at the brink of the chasm" on all fronts: - general technology: ...the barriers to market are so low that a startup can spring to being at any moment and eat all your profits away - (social) media / communication: anything can change anytime, today's Facebook can be tomorrow's Hi5 - biotech: we're getting closer to the "you can do it your garage stage" which will change everything - world politics: India and China are big players now and their moves can no longer be predicted, also US internal politics is a cauldron of volatility, and in a decade or two we'll have the "New Africa" rising... good luck predicting anything - ML/AI: we might be at the brink of f Singularity with superhuman-AI around the corner... but we have no idea whether it will be in 5 years or 100 years (!) ...this alone is enough to fuck up all worldwide future prediction on anything... when you're staring up from somewhere around the foot of an exponential curve everything looks like "wtf, nothing makes sense" And also, the last economic "crisis" increased everyone's aversion to risk, kind of the opposite of what you'd need now to increase level of investment... What needs to change is the attitude of people with money towards risk! I'd love to see people like Elon Musk succeed long-term, not because I like them or what they are doing, but because they are the only ones with an attitude that can create growth right now. We should really re-learn thinking and working with volatility, maybe starting from what Nassim Taleb says in his Antifragile (https://www.amazon.com/Antifragile-Things-That-Disorder-Incerto/dp/0812979680 https://www.amazon.com/Antifragile-Things-That-Disorder-Ince...) and his talks like How to Live in a World we Don't Understand (https://www.youtube.com/watch?v=iEnmjMgP_Jo https://www.youtube.com/watch?v=iEnmjMgP_Jo - warning: he's a terrible speaker... and not a great writer either, so getting to the root of his ideas will take time). Maybe not. But current "risk reduction" attitude cannot work (hint why: even if you reduce Infinity by 20% you still have f Infinity!).

logicchains 9y ago

>Interest rates have been dropped into the ground, and it hasn't increased investment(growth). We have the highest savings in the history of capitalism and the lowest level of investment. Savings _rates_ in the US are actually low by historical standards: https://tradingeconomics.com/united-states/personal-savings https://tradingeconomics.com/united-states/personal-savings (click the 'MAX' timespan toggle). Low interest rates discourage savings and encourage borrowing. One of the fundamentals of economics is that all other things being equal, in the long term savings is needed for growth: if we consume everything we produce, then nothing remains to be invested, so productivity won't increase. If we save more, then we have more to invest, and this greater investment will increase productivity more. The key thing to note here is that it is investment of forgone consumption that produces value (at a simple level, compare saving some wheat seeds to plant next season vs eating them all as flour). Lowering interest rates, printing money and similar things don't achieve this: they can create _money_, but not necessarily value. What they can do is increase demand, to address temporary shortfalls in demand, which under a popular form of economic reasoning will produce more growth than letting demand slump. That demand-boosting approach is however meant to be used as an immediate solution to a temporary slump, not an ongoing thing, as few economists deny a long term positive relationship between savings rates and growth. There've actually been attempts to model what the ideal savings rate would be: https://en.wikipedia.org/wiki/Golden_Rule_savings_rate https://en.wikipedia.org/wiki/Golden_Rule_savings_rate. Such models seem to have little influence on interest rate policy, however.

awkwarddaturtle 9y ago

Interest rates were kept low to bail out wall street, banks, auto industry, housing industry, etc. It was used to reinflate stock, housing, etc bubbles. If low interest rates boosted wages, the japanese worker would be the highest paid worker in the world. Instead, the japanese wage has declined for 20+ years.

Spooky23 9y ago

IMO, you need more inflation to make it too costly to just stockpile money.