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>These people sure have a way of "explaining" things without really explaining anything at all. It's hard to explain things to laymen, especially in subjects l

>These people sure have a way of "explaining" things without really explaining anything at all. It's hard to explain things to laymen, especially in subjects like economics, where everyone thinks they've got a complete understanding of the mechanics after watching a couple YouTube videos. The supply of financial capital is high, so borrowers are not willing to pay high interest rates. I see nothing wrong with the explanation of why low rates persist.

jcbrand 8y ago
Nowhere in the article is it explained WHY the supply of capital is so high. Here's a hint. Trillions of dollars were printed (and are still being printed) by central banks.
- jlawson 8y ago
  I thought it was because capital has been building up since WW2 without any giant destructive events to reduce it. Kind of like how things had been just before WW1. This is a central part of Piketty's case in Capital in the Twenty-First Century. Capital just builds up over time, unless something happens to destroy it. Of course I can't argue against money printing being a cause; I don't know the numbers. It seems there are likely several significant contributing causes.
  - village-idiot 8y ago
    Eh, several countries have proven that monetary, tax, and welfare policy can absolutely reduce wealth disparity within a nation. The US is currently proving that some policies can increase disparity. Certainly major catastrophic events has a larger effect, but you don’t need one.
    - jlawson 8y ago
      Is be interested in specific examples of these 'several countries'.
      - village-idiot 8y ago
        Denmark and Canada come to mind. Both have flattened their inequality curve in the past decade or so.
        jlawson 8y ago
        Canada had a pro-business conservative government up until a few years ago. I don't have the numbers to say if any inequality curve was flattened or not, but if something did happen it seems very unlikely it was a result of policy. Denmark and Canada also share a property: They are small (population-wise) nations with heavyweight neighbors. Any effect you see is likely to be totally confounded by interactions with those neighbors. E.g. Canadian billionaires may tend go to America, so Canadian inequality "falls". But obviously this isn't doable for the world as a whole.
- Symmetry 8y ago
  M0, the sort of money that gets printed, is quite small compared to more inclusive money aggregates like M3 and is downright tiny compared to the overall capital supply of the economy. https://en.wikipedia.org/wiki/Money_supply https://en.wikipedia.org/wiki/Money_supply
  - jcbrand 8y ago
    I don't mean "printed" literally, I'm talking about quantitative easing.
- hndamien 8y ago
  I thought "Quantitative Tightening" was code for "stop the money printers"?
lotsofpulp 8y ago
His quote would be more accurate with my additions in the brackets: >a phenomenon which he explained as excess savings [of already rich people] pursuing a shortage of investments [that benefit those already rich people]. There is an enormous backlog of infrastructure work that needs to be done in the US, and around the world, that would benefit everyone and the environment, but since it doesn't result in [immediate] measurable returns that can be sold to investors, these are not investments worth investing in. Money existing for the sake of making more money is pretty useless in the long run, but that's where we're at. Ideally, money would be used to accomplish an end result, such as increasing living standards for all.
- rcMgD2BwE72F 8y ago
  > In the 18th and 19th centuries western European society was highly unequal. Private wealth dwarfed national income and was concentrated in the hands of the rich families who sat atop a relatively rigid class structure. This system persisted even as industrialisation slowly contributed to rising wages for workers. Only the chaos of the first and second world wars and the Depression disrupted this pattern. High taxes, inflation, bankruptcies and the growth of sprawling welfare states caused wealth to shrink dramatically, and ushered in a period in which both income and wealth were distributed in relatively egalitarian fashion. But the shocks of the early 20th century have faded and wealth is now reasserting itself. On many measures, Piketty reckons, the importance of wealth in modern economies is approaching levels last seen before the first world war. Source: https://www.economist.com/the-economist-explains/2014/05/04/thomas-pikettys-capital-summarised-in-four-paragraphs https://www.economist.com/the-economist-explains/2014/05/04/... If things haven't change much (i.e if we think we can't do much to reduce inequality), there are many reasons to fear war and/or chaos.
salawat 8y ago
>It's hard to explain things to laymen, especially in subjects like economics, where everyone thinks they've got a complete understanding of the mechanics after watching a couple YouTube videos. The refuge of an expert who maybe isn't as much an expert as he thinks he is. Not saying that's you GP, but A) laymen aren't as dumb as you think, B) they don't have an incentive to obfuscate things to preserve or justify their status as an expert, and C) the field of economics suffers enormously from the curse of mathematics. The deeper you go, the less relevant it tends to be at predicting the real world. I recently took a month to start digging through a slog of economic theory to try to counter my own Dunning-Kruger effect in the field and had to stop because it just made me angry at the sheer scale of uncompensated positive feedback loops and reliance on statistical multiplexing that our economic system is built on. Any system that depends on all depositors NOT needing their assets back at the same time is fundamentally a scam. A system like Fractional Reserve which is inherently inflationary biases the entire system against those with the smallest and least inclined to grow income streams from the get go. Economics is difficult when you JUST look at money movement to facilitate virtual growth. When you start looking at economics as a means to an end to get PHYSICAL work or change done instead of just in the vacuum of a theoretical accountant's model, you can see some very disturbing trends in the direction things are going. And again, that's just from someone from the outside looking in who isn't relying on their economic expertise to win them their daily bread. Full disclosure, my research revolved more around the ways in which "conservative" (not political, but minimum risk tolerant) investment behavior incentivizes and guaranteed corporate behaviors which optimize for growth figures at all costs, damn the externalities. I'm becoming one of the people who thinks we've been doing things really wrong since about the 80's, but the foundations were laid long before that; we just didn't recognize it because humans generally suck at handling long period trends where the period is > a human lifespan, and labor had enough clout to eke out a greater chunk of the revenue stream at the "cost" of creating a slow growth economy in terms of capital gains by non-practicing investors (I.e. investors who weren't themselves laborers, but were living off managing their wealth's capital gains). Don't ask for data though, my day job has precluded me from being able to do the hard part of the research... (Actually doing it.) I at least think I've almost got the falsification criteria worked out though. Just need to sit down and figure out what data I actually need to give me a complete picture to reason from.

jcbrand 8y ago

Nowhere in the article is it explained WHY the supply of capital is so high. Here's a hint. Trillions of dollars were printed (and are still being printed) by central banks.

jlawson 8y ago
I thought it was because capital has been building up since WW2 without any giant destructive events to reduce it. Kind of like how things had been just before WW1. This is a central part of Piketty's case in Capital in the Twenty-First Century. Capital just builds up over time, unless something happens to destroy it. Of course I can't argue against money printing being a cause; I don't know the numbers. It seems there are likely several significant contributing causes.
- village-idiot 8y ago
  Eh, several countries have proven that monetary, tax, and welfare policy can absolutely reduce wealth disparity within a nation. The US is currently proving that some policies can increase disparity. Certainly major catastrophic events has a larger effect, but you don’t need one.
  - jlawson 8y ago
    Is be interested in specific examples of these 'several countries'.
    - village-idiot 8y ago
      Denmark and Canada come to mind. Both have flattened their inequality curve in the past decade or so.
      - jlawson 8y ago
        Canada had a pro-business conservative government up until a few years ago. I don't have the numbers to say if any inequality curve was flattened or not, but if something did happen it seems very unlikely it was a result of policy. Denmark and Canada also share a property: They are small (population-wise) nations with heavyweight neighbors. Any effect you see is likely to be totally confounded by interactions with those neighbors. E.g. Canadian billionaires may tend go to America, so Canadian inequality "falls". But obviously this isn't doable for the world as a whole.
Symmetry 8y ago
M0, the sort of money that gets printed, is quite small compared to more inclusive money aggregates like M3 and is downright tiny compared to the overall capital supply of the economy. https://en.wikipedia.org/wiki/Money_supply https://en.wikipedia.org/wiki/Money_supply
- jcbrand 8y ago
  I don't mean "printed" literally, I'm talking about quantitative easing.
hndamien 8y ago
I thought "Quantitative Tightening" was code for "stop the money printers"?

lotsofpulp 8y ago

His quote would be more accurate with my additions in the brackets: >a phenomenon which he explained as excess savings [of already rich people] pursuing a shortage of investments [that benefit those already rich people]. There is an enormous backlog of infrastructure work that needs to be done in the US, and around the world, that would benefit everyone and the environment, but since it doesn't result in [immediate] measurable returns that can be sold to investors, these are not investments worth investing in. Money existing for the sake of making more money is pretty useless in the long run, but that's where we're at. Ideally, money would be used to accomplish an end result, such as increasing living standards for all.

rcMgD2BwE72F 8y ago
> In the 18th and 19th centuries western European society was highly unequal. Private wealth dwarfed national income and was concentrated in the hands of the rich families who sat atop a relatively rigid class structure. This system persisted even as industrialisation slowly contributed to rising wages for workers. Only the chaos of the first and second world wars and the Depression disrupted this pattern. High taxes, inflation, bankruptcies and the growth of sprawling welfare states caused wealth to shrink dramatically, and ushered in a period in which both income and wealth were distributed in relatively egalitarian fashion. But the shocks of the early 20th century have faded and wealth is now reasserting itself. On many measures, Piketty reckons, the importance of wealth in modern economies is approaching levels last seen before the first world war. Source: https://www.economist.com/the-economist-explains/2014/05/04/thomas-pikettys-capital-summarised-in-four-paragraphs https://www.economist.com/the-economist-explains/2014/05/04/... If things haven't change much (i.e if we think we can't do much to reduce inequality), there are many reasons to fear war and/or chaos.

salawat 8y ago

>It's hard to explain things to laymen, especially in subjects like economics, where everyone thinks they've got a complete understanding of the mechanics after watching a couple YouTube videos. The refuge of an expert who maybe isn't as much an expert as he thinks he is. Not saying that's you GP, but A) laymen aren't as dumb as you think, B) they don't have an incentive to obfuscate things to preserve or justify their status as an expert, and C) the field of economics suffers enormously from the curse of mathematics. The deeper you go, the less relevant it tends to be at predicting the real world. I recently took a month to start digging through a slog of economic theory to try to counter my own Dunning-Kruger effect in the field and had to stop because it just made me angry at the sheer scale of uncompensated positive feedback loops and reliance on statistical multiplexing that our economic system is built on. Any system that depends on all depositors NOT needing their assets back at the same time is fundamentally a scam. A system like Fractional Reserve which is inherently inflationary biases the entire system against those with the smallest and least inclined to grow income streams from the get go. Economics is difficult when you JUST look at money movement to facilitate virtual growth. When you start looking at economics as a means to an end to get PHYSICAL work or change done instead of just in the vacuum of a theoretical accountant's model, you can see some very disturbing trends in the direction things are going. And again, that's just from someone from the outside looking in who isn't relying on their economic expertise to win them their daily bread. Full disclosure, my research revolved more around the ways in which "conservative" (not political, but minimum risk tolerant) investment behavior incentivizes and guaranteed corporate behaviors which optimize for growth figures at all costs, damn the externalities. I'm becoming one of the people who thinks we've been doing things really wrong since about the 80's, but the foundations were laid long before that; we just didn't recognize it because humans generally suck at handling long period trends where the period is > a human lifespan, and labor had enough clout to eke out a greater chunk of the revenue stream at the "cost" of creating a slow growth economy in terms of capital gains by non-practicing investors (I.e. investors who weren't themselves laborers, but were living off managing their wealth's capital gains). Don't ask for data though, my day job has precluded me from being able to do the hard part of the research... (Actually doing it.) I at least think I've almost got the falsification criteria worked out though. Just need to sit down and figure out what data I actually need to give me a complete picture to reason from.