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Great question. Not sure I have an 'answer' but think it has something to do with the demand for money today vs the demand for money tomorrow. Lots of the wor

Great question. Not sure I have an 'answer' but think it has something to do with the demand for money today vs the demand for money tomorrow. Lots of the world's money is being held in the hands of those with...a lot of money. Those people tend not to need money to spend it, and are looking for places to park it. Meaning there is a large supply of money today. Meanwhile, lots of people need money, but there are fewer and fewer places where money can go and get a 10%+ return, so the demand for money today isn't that hot. If supply is up, and demand is down, the price goes...down. The 'price' of money today vs money tomorrow is basically the interest rate. So lots of supply, not much demand, and the price has collapsed. Now why demand and supply are in that position, that's another (harder) story, and one that I've yet to see a good synthesis of.

netsharc 7y ago
I'll butcher this explanation, but part of (actually a lot of) the blame is governments saying they need to have a balanced budget or surplus, thus performing austerity since 2008, but making the vulnerable in society suffer (guess why the working class are a bit angry nowadays, voting in right wing populist governments and morons like, well, you know who). In an ideal world, the government would borrow money and spend it in infrastructure and social projects; this would keep people employed, and employed people would be saving less for rainy days but spending a bit more, keeping the economy spinning and demand up. So nowadays people with money don't know where to put it to make it grow, incredibly this has also lead to Bubble 2.0, investors being attracted to startups like Uber or food delivery crap where they use investor money to build tech to exploit the under-employed (see above), because, well, these "unicorns" promise good ROI!
- throw0101a 7y ago
  Some folks on HN don't like Krugamn, and no one is perfect, but I think he has decent explanations and takes on many things. The idea of budget deficit versus surplus is an interesting topic over the last ten years or so: > I would summarize the Keynesian view in terms of four points: > 1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn’t enough spending. Such episodes can happen for a variety of reasons; the question is how to respond. > 2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain. > 3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by “printing money”, using the central bank’s power of currency creation to push interest rates down. > 4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses. * https://krugman.blogs.nytimes.com/2015/09/15/keynesianism-explained/ https://krugman.blogs.nytimes.com/2015/09/15/keynesianism-ex... On austerity, there's a good book that goes over its origins and history: * https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Dangerous_Idea https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da... Good videos of talks and videos by the author, Mark Blyth, if you do a search.
pbecotte 7y ago
Something I have thought privately for years is that lowering the "cost of money" is the best way to reduce inequality. It is beginning to look like we may find out as that cost keeps going lower.

netsharc 7y ago

I'll butcher this explanation, but part of (actually a lot of) the blame is governments saying they need to have a balanced budget or surplus, thus performing austerity since 2008, but making the vulnerable in society suffer (guess why the working class are a bit angry nowadays, voting in right wing populist governments and morons like, well, you know who). In an ideal world, the government would borrow money and spend it in infrastructure and social projects; this would keep people employed, and employed people would be saving less for rainy days but spending a bit more, keeping the economy spinning and demand up. So nowadays people with money don't know where to put it to make it grow, incredibly this has also lead to Bubble 2.0, investors being attracted to startups like Uber or food delivery crap where they use investor money to build tech to exploit the under-employed (see above), because, well, these "unicorns" promise good ROI!

throw0101a 7y ago
Some folks on HN don't like Krugamn, and no one is perfect, but I think he has decent explanations and takes on many things. The idea of budget deficit versus surplus is an interesting topic over the last ten years or so: > I would summarize the Keynesian view in terms of four points: > 1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn’t enough spending. Such episodes can happen for a variety of reasons; the question is how to respond. > 2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain. > 3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by “printing money”, using the central bank’s power of currency creation to push interest rates down. > 4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses. * https://krugman.blogs.nytimes.com/2015/09/15/keynesianism-explained/ https://krugman.blogs.nytimes.com/2015/09/15/keynesianism-ex... On austerity, there's a good book that goes over its origins and history: * https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Dangerous_Idea https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da... Good videos of talks and videos by the author, Mark Blyth, if you do a search.

pbecotte 7y ago

Something I have thought privately for years is that lowering the "cost of money" is the best way to reduce inequality. It is beginning to look like we may find out as that cost keeps going lower.