4 ms·
We’re also (probably) at the tail end of an enormous credit cycle, with rock bottom interest rates, and that means hugely inflated asset prices (and a correspon
by ericd 8y ago
We’re also (probably) at the tail end of an enormous credit cycle, with rock bottom interest rates, and that means hugely inflated asset prices (and a correspondingly grown wealth gap). After credit cycles end, though, you get deleveraging. Debts get defaulted on, and asset prices fall, both of which hurt the rich far more than those who have no assets and those who are in debt. Of course, deleveraging also coincides with unemployment and a bunch of other issues that harm the less well off.
- Mirioron 8y ago>Of course, deleveraging also coincides with unemployment and a bunch of other issues that harm the less well off. I don't think it's so much a coincidence, but rather a direct effect of it. Less investment into businesses usually means fewer jobs.
- deleted 8y ago[deleted]
- ericd 8y agoYep, that's exactly what I meant, coincide just means to occur at the same time. (https://www.merriam-webster.com/dictionary/coincide https://www.merriam-webster.com/dictionary/coincide)
- Mirioron 8y agoI guess I was caught by the word usage. It seemed to me that you were saying that they correlate rather than have a causal relationship. My bad.
- onlyrealcuzzo 8y agoPeople have been saying Japan has been at the tail end of it for 20+ years. What makes you so sure the US is at the tail end of it?
- ericd 8y agoI'm not sure, it just seems likely to me. I'm enjoying reading Ray Dalio's Big Debt Crises right now, which covers these cycles.
- Wildgoose 8y agoThat didn't seem to happen after the 2008 financial crash - the rich were bailed out by Quantative Easing while the poor lost their homes and had to suffer the taxes and austerity to bail out the rich.
- ericd 8y agoYep, QE seems to have largely limited the deleveraging in 2008 before it went all the way, and the USG took over a lot of the bad debts and socialized the costs. But the govt would have more limited options this time, since rates are so low already. Also, governments around the world have been doing QE since then, so this would be a world-wide thing. I don't know how it's going to play out, I just have some ideas.
- JMTQp8lwXL 8y agoI don't see interest rates going up anytime soon. The fed tried that and a handful of quarters later is reversing course. We know that debt will grow the economy, but it certainly seems like households are debt-saturated at this point.
- ericd 8y agoI agree, it doesn't seem politically possible with the current government to continue raising rates.