7 ms·

The thesis statement of this essay is buried fairly far into the essay, but it seems this paragraph is the heart of their argument: "The lesson to be learned f

The thesis statement of this essay is buried fairly far into the essay, but it seems this paragraph is the heart of their argument: "The lesson to be learned from quantitative easing, zero-interest rate policy, and the bubble advance of recent years is simple: one must accept that there is no limit at all to the myopic speculation and self-interested amnesia of Wall Street. Bubbles and crashes will repeat again and again, and nothing will be learned from them. However, that does not mean abandoning the information from valuations or market internals. It means refraining from a negative market outlook, even amid extreme valuations and reckless speculation, until dispersion and divergences emerge in market internals (signaling a shift in investor psychology from speculation to risk-aversion). A neutral outlook is fine if conditions are sufficiently overextended, but defer a negative market outlook until market internals deteriorate." Basically, this can be read as a complaint about how distorted the financial markets become when we rely on the Fed to protect us from recessions. If Congress would do its job, and provide sufficiently large deficits to absorb the productive capacity of the modern economy, then there would be no need for the Fed to engage in such extreme behaviors, and we would not see this kind of distortion in the financial markets.

cowpig 8y ago
> Basically, this can be read as a complaint about how distorted the financial markets become when we rely on the Fed to protect us from recessions. I'm not sure how you get that from the quoted passage, nor from the article.
chapium 8y ago
“If congress would do its job...” is an interesting point. Congress have all sorts of incentives to consider “their” job is to stay elected by keeping special interests and local constituents happy. Perhaps we should have a few members of congress who are elected by the whole country and answer to the interests of the nation as a whole.
- murph-almighty 8y ago
  Different branch, but isn't that effectively the President/Vice-President? Especially when you consider the VP is the head of the Senate.
  - ianai 8y ago
    Now it is, but the president originally won votes from representatives of the states (IIRC). I think the US needs the ability for recall elections. It also needs newer voting procedures.
  - throwawayjava 8y ago
    The President is only indirectly elected by the country as a whole. Therefore, the president is highly incentivized to pander to a half-dozen or so states. And a few key voters within those states. It's exactly the same problem created by regionally-allocated representatives; the only difference is that the mechanism is just a little more opaque. Because strong presidents drive policy-making, this difference ("a few key states" vs. "the country as a whole") definitely shows up in Congressional behavior. A much simpler (and more plausible) solution to chapium's problem is simply getting rid of the electoral college.
    - sulam 8y ago
      So instead of pandering to one small set of states you’d rather they pander to a different small set of states? Perhaps the problem is federalism.
    - ttul 8y ago
      Hear hear... A parliamentary democracy would probably be better, but that’s not going to happen.
    - yock 8y ago
      > A much simpler (and more plausible) solution to chapium's problem is simply getting rid of the electoral college. Which would then require that a candidate only pander to an even smaller number of densely populated cities. It would be far better to revoke much of the power of the central government rather than to try and debug our way through to a mythical process by which all individual interests are considered. Because, in the end, minority interests will always be cast aside once the election is over anyway.
- lkrubner 8y ago
  "a few members of congress who are elected by the whole country and answer to the interests of the nation as a whole" I strongly agree. I would go further. The idea of a regional representative might have made sense in an era before the Internet, before the telephone, before the telegram and even before railroads could ensure fast delivery of written mail, but it does it make sense now? Why not have a legislature where every member is chosen based on a vote of the whole nation? Some parliamentary democracies do this, and their policies do seem more focused on national interests, as opposed to a bunch of local interests. Also evaporates the problem of gerrymandering.
  - zeveb 8y ago
    > Why not have a legislature where every member is chosen based on a vote of the whole nation? Because then whichever party currently has the support of the majority of the country would win every seat. Yes, you could do things like stagger elections, but overall I think it'd be worse: say each representative has a six-year term and there are six annual elections, you basically have six blocs in Congress instead of 435 members. And of course the United States comprise a federal republic; most issues simply shouldn't be federal, and the vast majority are definitely not national. Who outside of Massachusetts cares if Massachusetts makes wearing a leek on St. David's Day compulsory or forbidden?
    - lkrubner 8y ago
      "Because then whichever party currently has the support of the majority of the country would win every seat." That is incorrect. Every democracy that I'm aware of, which uses national voting, also has proportional representation based on the vote. The rules vary from country to country, but generally speaking, if a party gets 10% of the vote, then it gets 10% of Parliament. If they get 43% of the vote, then they get 43% of Parliament. About this: "most issues simply shouldn't be federal" This is a straightforward assertion of nostalgia, regarding an era that died out more than a century ago. Nowadays nearly all politics is either national or international. Small scale political divisions simply get in the way of efficient government.
- logfromblammo 8y ago
  When I think about history, and try to come up with initial conditions in government that could have brought the native tribes on board rather than deporting and destroying them, I thought that maybe people could make a voluntary declaration of their cultural identity during voter registration and again while voting. The House of Representatives would have a separate fixed pool of seats for cultural representation, but the cultural groups would not be guaranteed at least one seat, like the states; if your group doesn't have enough membership to meet the cutoff, you don't get seats that election. Every group with at least one Representative would get two seats in the Senate. Only those declaring for a culture could vote in the races for their seats. You'd end up with the Senator from Southern Baptist arguing with the Senator from Postmodern Counterculture, or the Representative in Hispanic-American seat 5 hashing things out with the Representative from Secular Scientists. Mergers and schisms could cause the representation to track with changes in the population. Perhaps Iroquois Confederacy would have to merge with Algonquian Peoples and Five Civilized Tribes to stay politically relevant. Anglo Male Landowners might split into Urban-Industrial and Southern Whites. It never could have happened, though. The only cultural group with representation back then was Anglo Male Landowners, and they were unlikely to share power voluntarily. Anglo Male Landowners are still over-represented in US federal government. I don't think an "at large" position would actually represent the whole country. It would give more power to the one of two political parties with support of the majority that election. You really need a mechanism to ensure minority positions can get more representation, such that any majority blocs have to seek consensus with at least one minority bloc to get anything done. The two-party system is washing out a lot of voices that never even get lip service from anybody, ever.
api 8y ago
> Bubbles and crashes will repeat again and again, and nothing will be learned from them. This is a larger scale version of the same psychological factors that power Las Vegas. Go to a Vegas casino's slots section and you'll see people sitting for hours and hours and hours staring blankly into slot machines. They're kept there by those hits of dopamine they get when they occasionally win, and the slots are calibrated so as to time those wins so as to slowly empty their wallets over time. https://en.wikipedia.org/wiki/Operant_conditioning_chamber https://en.wikipedia.org/wiki/Operant_conditioning_chamber Gamified social media, grinding-based MMORPGs, adversarial bullshit jobs, and many other things share similar characteristics. Should we expect humans to behave differently on Wall St.?
- atlasunshrugged 8y ago
  I just want to make a point about the analogy (because it is a very commonly used one) given the additional and often overlooked aspects of what also powers casinos, namely social interaction. If you go to a casino today (almost anywhere but the few very touristy ones on the strip) you'll see a lot of folks who are just lonely and for whom gambling fills an emotional void. The dopamine hits from winning are nice, but the power of having someone who knows your name and your drink order and has a conversation with you shouldn't be overlooked as a motivating factor for why people are at those machines day after day hour after hour. Source: Working as a bank teller near the Reno strip and having people of all walks of life come by day after day to get cash before going to the casino edited last sentence for clarity
clarkmoody 8y ago
> provide sufficiently large deficits to absorb the productive capacity of the modern economy Are you serious? How about letting the productive capacity of the economy work for consumers rather than for politicians? Of course I agree that there should be no bailouts for Wall Street firms, but I would also argue that the business cycle itself is induced by the lack of a sound money in the economy. Easy money tricks entrepreneurs into investing in long-term capital projects prematurely and causes malinvestment. So Wall Street is not to blame for business cycles. It's the soft-money fiat system that causes so much economic calamity. When the Fed steps in to stop recessions, nobody asks why we had the boom that preceded the bust, which was fueled by the Fed itself.
- njarboe 8y ago
  There was a time before the soft-money fiat system. Not really that long ago. It was also marked with many boom/bust cycles. The business cycle was probably first formally named and studied by Jean Charles Léonard de Sismondi and described in the 1819 book, "Nouveaux Principes d'économie politique"[1]. I would suggest that the cycle is not necessarily bad. During good times ideas are tried that would not be otherwise and people with little experience can get jobs and show their competence. Then some bad year forces some tightening and a serious evaluation of investments of all types. The big downfall with recessions is that people with little or no savings can end up in a very bad place economically. Not sure how or if our consumer culture could change to a saving culture, but I'd be interested in reading a book that compares the two. [1]https://en.wikipedia.org/wiki/Business_cycle https://en.wikipedia.org/wiki/Business_cycle
  - haskellandchill 8y ago
    Savings culture has beat me into submission, it only took a couple near death experiences from hitting zero in the bank account. So now what? My life is boring, fine. I accept I am a simple piece of human meat. Save for enough years and I suppose I can dream again.
  - yuhong 8y ago
    IMO it really became bad after US left the gold standard in 1971 and the petrodollar was invented.
ataturk 8y ago
I don't see how Congress running huge deficits can possibly be good for the US over the long term? It flies in the face of all conventional wisdom regarding debt. I know that at the macro level things operate differently, but in general I don't think the government can paper over a lack of demand for other kinds of debt. I read pretty much the whole article. It was interesting, but at the end, I realized that I don't think anyone knows how this all plays out and that stock buybacks or other factors are not that relevant. They may not be markers of anything, in fact. Stocks have always been kind of a manipulated insider scheme and that regular Americans have been forced into speculative exercises in an effort to hang on to what little wealth they (we) have been able to create for ourselves is what is wrong. Will there be another crash like 2008? Maybe. When? I don't know. What if it's 30 years from now? I'm tired of the breathless "it's all coming to a head" articles because it already did come to a head and the Fed and the government papered over the mess, just like Japan did. Has Japan had another crash? No, they just kind of meander on stagnantly. The biggest issue in the US is the Boomer retirement wave and the pension promises that can't possibly be kept to them. That's why we're hurting.
parasubvert 8y ago
The author doesn’t seem to like fiscal deficits either, though, as they too can lead to asset bubbles.
- yuhong 8y ago
  I don't like it either BTW. My favorite is how spending on the FBI/NSA is based on government debt.
abecedarius 8y ago
What are "market internals"? I didn't see that defined in the article.

cowpig 8y ago

> Basically, this can be read as a complaint about how distorted the financial markets become when we rely on the Fed to protect us from recessions. I'm not sure how you get that from the quoted passage, nor from the article.

chapium 8y ago

“If congress would do its job...” is an interesting point. Congress have all sorts of incentives to consider “their” job is to stay elected by keeping special interests and local constituents happy. Perhaps we should have a few members of congress who are elected by the whole country and answer to the interests of the nation as a whole.

murph-almighty 8y ago
Different branch, but isn't that effectively the President/Vice-President? Especially when you consider the VP is the head of the Senate.
- ianai 8y ago
  Now it is, but the president originally won votes from representatives of the states (IIRC). I think the US needs the ability for recall elections. It also needs newer voting procedures.
- throwawayjava 8y ago
  The President is only indirectly elected by the country as a whole. Therefore, the president is highly incentivized to pander to a half-dozen or so states. And a few key voters within those states. It's exactly the same problem created by regionally-allocated representatives; the only difference is that the mechanism is just a little more opaque. Because strong presidents drive policy-making, this difference ("a few key states" vs. "the country as a whole") definitely shows up in Congressional behavior. A much simpler (and more plausible) solution to chapium's problem is simply getting rid of the electoral college.
  - sulam 8y ago
    So instead of pandering to one small set of states you’d rather they pander to a different small set of states? Perhaps the problem is federalism.
  - ttul 8y ago
    Hear hear... A parliamentary democracy would probably be better, but that’s not going to happen.
  - yock 8y ago
    > A much simpler (and more plausible) solution to chapium's problem is simply getting rid of the electoral college. Which would then require that a candidate only pander to an even smaller number of densely populated cities. It would be far better to revoke much of the power of the central government rather than to try and debug our way through to a mythical process by which all individual interests are considered. Because, in the end, minority interests will always be cast aside once the election is over anyway.
lkrubner 8y ago
"a few members of congress who are elected by the whole country and answer to the interests of the nation as a whole" I strongly agree. I would go further. The idea of a regional representative might have made sense in an era before the Internet, before the telephone, before the telegram and even before railroads could ensure fast delivery of written mail, but it does it make sense now? Why not have a legislature where every member is chosen based on a vote of the whole nation? Some parliamentary democracies do this, and their policies do seem more focused on national interests, as opposed to a bunch of local interests. Also evaporates the problem of gerrymandering.
- zeveb 8y ago
  > Why not have a legislature where every member is chosen based on a vote of the whole nation? Because then whichever party currently has the support of the majority of the country would win every seat. Yes, you could do things like stagger elections, but overall I think it'd be worse: say each representative has a six-year term and there are six annual elections, you basically have six blocs in Congress instead of 435 members. And of course the United States comprise a federal republic; most issues simply shouldn't be federal, and the vast majority are definitely not national. Who outside of Massachusetts cares if Massachusetts makes wearing a leek on St. David's Day compulsory or forbidden?
  - lkrubner 8y ago
    "Because then whichever party currently has the support of the majority of the country would win every seat." That is incorrect. Every democracy that I'm aware of, which uses national voting, also has proportional representation based on the vote. The rules vary from country to country, but generally speaking, if a party gets 10% of the vote, then it gets 10% of Parliament. If they get 43% of the vote, then they get 43% of Parliament. About this: "most issues simply shouldn't be federal" This is a straightforward assertion of nostalgia, regarding an era that died out more than a century ago. Nowadays nearly all politics is either national or international. Small scale political divisions simply get in the way of efficient government.
logfromblammo 8y ago
When I think about history, and try to come up with initial conditions in government that could have brought the native tribes on board rather than deporting and destroying them, I thought that maybe people could make a voluntary declaration of their cultural identity during voter registration and again while voting. The House of Representatives would have a separate fixed pool of seats for cultural representation, but the cultural groups would not be guaranteed at least one seat, like the states; if your group doesn't have enough membership to meet the cutoff, you don't get seats that election. Every group with at least one Representative would get two seats in the Senate. Only those declaring for a culture could vote in the races for their seats. You'd end up with the Senator from Southern Baptist arguing with the Senator from Postmodern Counterculture, or the Representative in Hispanic-American seat 5 hashing things out with the Representative from Secular Scientists. Mergers and schisms could cause the representation to track with changes in the population. Perhaps Iroquois Confederacy would have to merge with Algonquian Peoples and Five Civilized Tribes to stay politically relevant. Anglo Male Landowners might split into Urban-Industrial and Southern Whites. It never could have happened, though. The only cultural group with representation back then was Anglo Male Landowners, and they were unlikely to share power voluntarily. Anglo Male Landowners are still over-represented in US federal government. I don't think an "at large" position would actually represent the whole country. It would give more power to the one of two political parties with support of the majority that election. You really need a mechanism to ensure minority positions can get more representation, such that any majority blocs have to seek consensus with at least one minority bloc to get anything done. The two-party system is washing out a lot of voices that never even get lip service from anybody, ever.

api 8y ago

> Bubbles and crashes will repeat again and again, and nothing will be learned from them. This is a larger scale version of the same psychological factors that power Las Vegas. Go to a Vegas casino's slots section and you'll see people sitting for hours and hours and hours staring blankly into slot machines. They're kept there by those hits of dopamine they get when they occasionally win, and the slots are calibrated so as to time those wins so as to slowly empty their wallets over time. https://en.wikipedia.org/wiki/Operant_conditioning_chamber https://en.wikipedia.org/wiki/Operant_conditioning_chamber Gamified social media, grinding-based MMORPGs, adversarial bullshit jobs, and many other things share similar characteristics. Should we expect humans to behave differently on Wall St.?

atlasunshrugged 8y ago
I just want to make a point about the analogy (because it is a very commonly used one) given the additional and often overlooked aspects of what also powers casinos, namely social interaction. If you go to a casino today (almost anywhere but the few very touristy ones on the strip) you'll see a lot of folks who are just lonely and for whom gambling fills an emotional void. The dopamine hits from winning are nice, but the power of having someone who knows your name and your drink order and has a conversation with you shouldn't be overlooked as a motivating factor for why people are at those machines day after day hour after hour. Source: Working as a bank teller near the Reno strip and having people of all walks of life come by day after day to get cash before going to the casino edited last sentence for clarity

clarkmoody 8y ago

> provide sufficiently large deficits to absorb the productive capacity of the modern economy Are you serious? How about letting the productive capacity of the economy work for consumers rather than for politicians? Of course I agree that there should be no bailouts for Wall Street firms, but I would also argue that the business cycle itself is induced by the lack of a sound money in the economy. Easy money tricks entrepreneurs into investing in long-term capital projects prematurely and causes malinvestment. So Wall Street is not to blame for business cycles. It's the soft-money fiat system that causes so much economic calamity. When the Fed steps in to stop recessions, nobody asks why we had the boom that preceded the bust, which was fueled by the Fed itself.

njarboe 8y ago
There was a time before the soft-money fiat system. Not really that long ago. It was also marked with many boom/bust cycles. The business cycle was probably first formally named and studied by Jean Charles Léonard de Sismondi and described in the 1819 book, "Nouveaux Principes d'économie politique"[1]. I would suggest that the cycle is not necessarily bad. During good times ideas are tried that would not be otherwise and people with little experience can get jobs and show their competence. Then some bad year forces some tightening and a serious evaluation of investments of all types. The big downfall with recessions is that people with little or no savings can end up in a very bad place economically. Not sure how or if our consumer culture could change to a saving culture, but I'd be interested in reading a book that compares the two. [1]https://en.wikipedia.org/wiki/Business_cycle https://en.wikipedia.org/wiki/Business_cycle
- haskellandchill 8y ago
  Savings culture has beat me into submission, it only took a couple near death experiences from hitting zero in the bank account. So now what? My life is boring, fine. I accept I am a simple piece of human meat. Save for enough years and I suppose I can dream again.
- yuhong 8y ago
  IMO it really became bad after US left the gold standard in 1971 and the petrodollar was invented.

ataturk 8y ago

I don't see how Congress running huge deficits can possibly be good for the US over the long term? It flies in the face of all conventional wisdom regarding debt. I know that at the macro level things operate differently, but in general I don't think the government can paper over a lack of demand for other kinds of debt. I read pretty much the whole article. It was interesting, but at the end, I realized that I don't think anyone knows how this all plays out and that stock buybacks or other factors are not that relevant. They may not be markers of anything, in fact. Stocks have always been kind of a manipulated insider scheme and that regular Americans have been forced into speculative exercises in an effort to hang on to what little wealth they (we) have been able to create for ourselves is what is wrong. Will there be another crash like 2008? Maybe. When? I don't know. What if it's 30 years from now? I'm tired of the breathless "it's all coming to a head" articles because it already did come to a head and the Fed and the government papered over the mess, just like Japan did. Has Japan had another crash? No, they just kind of meander on stagnantly. The biggest issue in the US is the Boomer retirement wave and the pension promises that can't possibly be kept to them. That's why we're hurting.

parasubvert 8y ago

The author doesn’t seem to like fiscal deficits either, though, as they too can lead to asset bubbles.

yuhong 8y ago
I don't like it either BTW. My favorite is how spending on the FBI/NSA is based on government debt.

abecedarius 8y ago

What are "market internals"? I didn't see that defined in the article.