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"The current system is actually quite resilient, because it has the built-in capacity for parts of it to fail without bringing down the whole thing." This is f

by rsync 8y ago

"The current system is actually quite resilient, because it has the built-in capacity for parts of it to fail without bringing down the whole thing." This is false. It is the hallmark of the current economic order that our systems are very efficient, very interconnected, and very fragile. I shouldn't care whether or not provincial Chinese governors are faking their economic reports or making bad loans - but of course, I do, since that could have a ripple effect that makes my business suffer. I shouldn't be fragile to that but I am. Making the system less fragile would require removing some of the interconnections and the efficiencies. Growth and returns would be lower, but failures would be localized and less "interesting".

gobengo 8y ago
I actually think parent comment to yours was quite measured and appropriate. Did you fully grok it? > This is false. It is the hallmark of the current economic order that our systems are very efficient, very interconnected, and very fragile. What evidence do you have to support this? Even in 07 an index-weighted fund only took 3 years to recover. If you were 50% in bonds, 1 year to recover. OP was encouraging you to separate your fear from the evidence-backed likelihood that while you may lose a bit in deliveraging, there are also gains to be had in the 10-year term. If you're feeling that things are fragile right now, adjust your allocation to something more conservative, take a two week vacation, listen to some mindfulness podcasts to calm down, and then think through where it might make sense to put 10% of your bets on 10yr+ plays.
- robotrout 8y ago
  The last 10 years of "recovery" have themselves been on the back of more and more credit and leverage. Pointing to them as some sort of proof that the system is not fragile is an error. The system has much more debt than it did in 2007 and is more fragile than ever. The stock market recovery that comforts you was partially due to central banks such as the BOJ and SNB actually buying stocks. That is not normal. What happens if they need to unwind those positions? Sometimes people discuss things at a systemic level, rather than a personal level. The person you are lecturing to deleverage may be debt free, with $5M in Gold in a vault, but still be wistful of a less fragile world economic system.

by rsync 8y ago

gobengo 8y ago

I actually think parent comment to yours was quite measured and appropriate. Did you fully grok it? > This is false. It is the hallmark of the current economic order that our systems are very efficient, very interconnected, and very fragile. What evidence do you have to support this? Even in 07 an index-weighted fund only took 3 years to recover. If you were 50% in bonds, 1 year to recover. OP was encouraging you to separate your fear from the evidence-backed likelihood that while you may lose a bit in deliveraging, there are also gains to be had in the 10-year term. If you're feeling that things are fragile right now, adjust your allocation to something more conservative, take a two week vacation, listen to some mindfulness podcasts to calm down, and then think through where it might make sense to put 10% of your bets on 10yr+ plays.

robotrout 8y ago
The last 10 years of "recovery" have themselves been on the back of more and more credit and leverage. Pointing to them as some sort of proof that the system is not fragile is an error. The system has much more debt than it did in 2007 and is more fragile than ever. The stock market recovery that comforts you was partially due to central banks such as the BOJ and SNB actually buying stocks. That is not normal. What happens if they need to unwind those positions? Sometimes people discuss things at a systemic level, rather than a personal level. The person you are lecturing to deleverage may be debt free, with $5M in Gold in a vault, but still be wistful of a less fragile world economic system.