5 ms·

The Class of 1982 was special in graduating at the very inception of what has become a nearly 40-year bull market in credit, which is mostly a story of monetary

The Class of 1982 was special in graduating at the very inception of what has become a nearly 40-year bull market in credit, which is mostly a story of monetary and regulatory policy. When the books are written 100 years from now, they will explain this period as a hyperinflation that our HBS-trained leaders in government and finance managed to trap mostly in financial assets, all the while counter-intuitively justifying their money-creation activities based on a theoretical potential to leak gradually out to the broader economy. Hyperinflation here to maybe generate useful inflation there, but really useful primarily in creating robber-barrons and oligarchs, who perpetuate the system through 'soft bribery' and 'reputation laundering' described in the article. This article and the speeches etc. discussed in it should be a clarion call for folks to accelerate imagining what will come next, which may well go beyond increasingly cosmopolitan admissions and instruction at HBS.

lisper 7y ago
> they will explain this period as a hyperinflation No, they won't, because it wasn't.
- drtillberg 7y ago
  Ok, ok, asset price inflation measured by the S&P 500 has been about 9% annually from $123 in 1982 to $2,920 in 2019. In addition, the availability of debt amplifies increases. For example, the Case-Shiller Home Price Index increased from 100 to 220 between 2000 and 2019 (about 4% annually), but owners often leverage 80% at the start, and they actually have a 13% annual return (less carrying costs)-- lets say double the nominal return. If high finance generated a ROI of 9% x 2 on average since 1982, through asset price gains magnified by leverage ... that would be 64% every 3 years, on average for almost 40 years. That's a remarkable inflationary event, however you choose to define 'hyperinflation.'
  - lisper 7y ago
    https://en.wikipedia.org/wiki/Hyperinflation https://en.wikipedia.org/wiki/Hyperinflation
    - reallydude 7y ago
      Exactly. It fits for the world-wide inflation. > In economics, hyperinflation is very high and typically accelerating inflation. > It quickly erodes the real value of the local currency, as the prices of all goods increase. This is in process. You seem to think there's a specific periodic minimum that is absolute. If the period is decades, it looks the same. > This causes people to minimize their holdings in that currency as they usually switch to more stable foreign currencies, often the US Dollar.[1] Prices typically remain stable in terms of other relatively stable currencies. Given this has affected every currency (not counting some closed off systems like NK) the flight currency is property/land/gold/etc
      - lisper 7y ago
        > This is in process. Right. And Jesus is coming back any day now. Part of the definition of hyperinflation is that it happens fast. Price increases that take place over decades is not hyperinflation, it's just regular old inflation.
- solotronics 7y ago
  I understand that there is only a moderate increase per year in the cost of consumer goods but there is a trillion more digital USD being created every 2 years. Specifically 1,200,000,000,000 USD in a 2 year period. 2,280,000 per minute. https://www.federalreserve.gov/releases/h6/current/default.htm https://www.federalreserve.gov/releases/h6/current/default.h...
  - lisper 7y ago
    Yes, it's a mystery why this isn't causing huge inflation. Nonetheless, the indisputable fact of the matter is that it isn't.
    - Qasaur 7y ago
      It's not causing cousumer price inflation, but it definitely is causing price inflation in other parts of the economy (equities, real estate, startup valuations etc.).
      - lisper 7y ago
        No, it isn't, and certainly not since 1982. Between 1980 and 2000, California median home prices increased at a rate of less than 1% a year [1]. Over that same period many states saw price drops in real estate. In Southern California between 2000 and today, house prices increased at an average of about 5% a year [2]. Even health care is only going up at about 5% a year on average. Tuition is going up at about the same rate. None of this is even remotely in the same ballpark as hyperinflation. [1] https://www.cnbc.com/2017/06/27/how-much-housing-prices-have-increased-since-1940-in-every-state.html https://www.cnbc.com/2017/06/27/how-much-housing-prices-have... [2] https://www.latimes.com/business/la-fi-southern-california-home-prices-20190426-story.html https://www.latimes.com/business/la-fi-southern-california-h... [3] https://www.kff.org/other/state-indicator/avg-annual-growth-per-capita/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D https://www.kff.org/other/state-indicator/avg-annual-growth-...
weq 7y ago
Well put. it a reinforcing self-cycle. Rich people used to rule the world. Then we created democracy. Now rich people manipulate democracy from the inside. They define what is acceptable and what is not by owning prestigious schools, selectively funding research, and selectively funding ventures that re-inforce this self-importance. You need money to make money. Being smart has nothing todo with it. An idiot with a billion dollars is going to make more money in shorter time then the most acedemic investor with $1 to their name.

lisper 7y ago

> they will explain this period as a hyperinflation No, they won't, because it wasn't.

drtillberg 7y ago
Ok, ok, asset price inflation measured by the S&P 500 has been about 9% annually from $123 in 1982 to $2,920 in 2019. In addition, the availability of debt amplifies increases. For example, the Case-Shiller Home Price Index increased from 100 to 220 between 2000 and 2019 (about 4% annually), but owners often leverage 80% at the start, and they actually have a 13% annual return (less carrying costs)-- lets say double the nominal return. If high finance generated a ROI of 9% x 2 on average since 1982, through asset price gains magnified by leverage ... that would be 64% every 3 years, on average for almost 40 years. That's a remarkable inflationary event, however you choose to define 'hyperinflation.'
- lisper 7y ago
  https://en.wikipedia.org/wiki/Hyperinflation https://en.wikipedia.org/wiki/Hyperinflation
  - reallydude 7y ago
    Exactly. It fits for the world-wide inflation. > In economics, hyperinflation is very high and typically accelerating inflation. > It quickly erodes the real value of the local currency, as the prices of all goods increase. This is in process. You seem to think there's a specific periodic minimum that is absolute. If the period is decades, it looks the same. > This causes people to minimize their holdings in that currency as they usually switch to more stable foreign currencies, often the US Dollar.[1] Prices typically remain stable in terms of other relatively stable currencies. Given this has affected every currency (not counting some closed off systems like NK) the flight currency is property/land/gold/etc
    - lisper 7y ago
      > This is in process. Right. And Jesus is coming back any day now. Part of the definition of hyperinflation is that it happens fast. Price increases that take place over decades is not hyperinflation, it's just regular old inflation.
solotronics 7y ago
I understand that there is only a moderate increase per year in the cost of consumer goods but there is a trillion more digital USD being created every 2 years. Specifically 1,200,000,000,000 USD in a 2 year period. 2,280,000 per minute. https://www.federalreserve.gov/releases/h6/current/default.htm https://www.federalreserve.gov/releases/h6/current/default.h...
- lisper 7y ago
  Yes, it's a mystery why this isn't causing huge inflation. Nonetheless, the indisputable fact of the matter is that it isn't.
  - Qasaur 7y ago
    It's not causing cousumer price inflation, but it definitely is causing price inflation in other parts of the economy (equities, real estate, startup valuations etc.).
    - lisper 7y ago
      No, it isn't, and certainly not since 1982. Between 1980 and 2000, California median home prices increased at a rate of less than 1% a year [1]. Over that same period many states saw price drops in real estate. In Southern California between 2000 and today, house prices increased at an average of about 5% a year [2]. Even health care is only going up at about 5% a year on average. Tuition is going up at about the same rate. None of this is even remotely in the same ballpark as hyperinflation. [1] https://www.cnbc.com/2017/06/27/how-much-housing-prices-have-increased-since-1940-in-every-state.html https://www.cnbc.com/2017/06/27/how-much-housing-prices-have... [2] https://www.latimes.com/business/la-fi-southern-california-home-prices-20190426-story.html https://www.latimes.com/business/la-fi-southern-california-h... [3] https://www.kff.org/other/state-indicator/avg-annual-growth-per-capita/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D https://www.kff.org/other/state-indicator/avg-annual-growth-...

weq 7y ago

Well put. it a reinforcing self-cycle. Rich people used to rule the world. Then we created democracy. Now rich people manipulate democracy from the inside. They define what is acceptable and what is not by owning prestigious schools, selectively funding research, and selectively funding ventures that re-inforce this self-importance. You need money to make money. Being smart has nothing todo with it. An idiot with a billion dollars is going to make more money in shorter time then the most acedemic investor with $1 to their name.