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5 months ago on HN... 10 points by djyaz1200 5 months ago | parent [-] | on: U.S. personal income posts first drop in over thre... "We can't sit there and lea

5 months ago on HN... 10 points by djyaz1200 5 months ago | parent [-] | on: U.S. personal income posts first drop in over thre... "We can't sit there and leave interests rates low forever" ...says who? What force dictates that the equilibrium for rates must be higher? Yes that's historically been the case but that doesn't mean that's the right path for us now and in the future. I would argue that low interest rates will be and need to be the new normal. Interest is the ultimate rent seeking activity. The fed funds rate is a form of price fixing for banks whereby they collectively decide how much interest they can extract from the economy without killing it. Why must this be the case, the economy should be allowed to run much hotter for much longer. Inflation is less of a risk now because of technology + globalization, right now we are experiencing significant deflationary pressure as products and labor converge towards global pricing/wages. Our economy and government will be in very serious trouble if we have to pay higher interest on our significant national debt, so the government has a big interest (pun intended) in keeping rates low to protect its own financial solvency. Finally, high interest rates imply money is scarce and that's far from the case now. Having large sums of money is not what it used to be, you're competing against a lot of other people and organizations seeking to deploy that money productively for a return. This generates downward pressure on market interest rates as evidenced by European Central banks going below zero to negative rates.

remarkEon 7y ago
>Inflation is less of a risk now because of technology + globalization, right now we are experiencing significant deflationary pressure as products and labor converge towards global pricing/wages. I've seen this point frequently cited on blogs, but I've yet to see any academic data that supports it. Intuitively it makes sense to me. I just haven't seen any raw data that backs it up yet. Indeed, isn't this what Trump and Brexit are trying to reverse?
- djyaz1200 7y ago
  I agree, I have yet to see hard data on this but academic research tends to shed light on things long after the fact... while a big part of making money is about what is happening right now. Anecdotally I've seen (and you probably have too) that I can buy many of the items I need for daily life for dirt cheap online, and when I need labor for my company I can hire nationally/globally on sites like upwork for a fraction of what local talent would cost. Both have low transaction costs and because of ratings I waste much less time and money buying the wrong thing or hiring the wrong person... which is an aspect of inflation. That final point is probably worth study. My thesis would be that when the economy is hot everyone is in a hurry and more likely to hire people/vendors and buy things that aren't ideal. Online rating systems tend to direct demand to the vendors who can successfully satisfy that demand. The web also makes discovery of new vendors and products very quick lowering the switching costs.

remarkEon 7y ago

>Inflation is less of a risk now because of technology + globalization, right now we are experiencing significant deflationary pressure as products and labor converge towards global pricing/wages. I've seen this point frequently cited on blogs, but I've yet to see any academic data that supports it. Intuitively it makes sense to me. I just haven't seen any raw data that backs it up yet. Indeed, isn't this what Trump and Brexit are trying to reverse?

djyaz1200 7y ago
I agree, I have yet to see hard data on this but academic research tends to shed light on things long after the fact... while a big part of making money is about what is happening right now. Anecdotally I've seen (and you probably have too) that I can buy many of the items I need for daily life for dirt cheap online, and when I need labor for my company I can hire nationally/globally on sites like upwork for a fraction of what local talent would cost. Both have low transaction costs and because of ratings I waste much less time and money buying the wrong thing or hiring the wrong person... which is an aspect of inflation. That final point is probably worth study. My thesis would be that when the economy is hot everyone is in a hurry and more likely to hire people/vendors and buy things that aren't ideal. Online rating systems tend to direct demand to the vendors who can successfully satisfy that demand. The web also makes discovery of new vendors and products very quick lowering the switching costs.