13 ms·

His statement reinforces the whole point of ZIRP: minimize the value of financial capital and maximize the value of human capital. Force investors to take on m

by nugget 7y ago

His statement reinforces the whole point of ZIRP: minimize the value of financial capital and maximize the value of human capital. Force investors to take on more risk. Entrepreneurs ironically may take on less risk since the value of labor relative to capital shifts in their favor.

big_chungus 7y ago
But what people forget is it is not just "evil big corp" that has cash on hand which will be devalued in such a way. Individuals do too. Pension plans do. All those will also lose out. Why is there some bureaucrat in an office deciding how much my money gains or loses today? Maybe it would be better to go back to the gold standard.
- toomuchtodo 7y ago
  There is a penalty for assuming the future will always have value you’ll be able to extract. Perhaps everyone will consider working less when your excess fiat has so little value.
- mikeash 7y ago
  Nothing is stopping you from storing your savings in gold right now. You don’t need the gold standard for that.
  - cbanek 7y ago
    Other than needing to safely store your gold somewhere. I'm guessing there's probably also some insurance you could get to protect against loss? With a bank these are generally "free" with laws that protect deposits.
    - mikeash 7y ago
      If you trust others to keep it for you, there are companies that let you buy gold online that they will store for you, and there are even gold ETFs. If you have a brokerage account, buy some shares of GLD and you’re done.
      - rightbyte 7y ago
        If you don't trust the financial system surely you don't trust gold certificates either. Dig it down ... atleast I would.
        mikeash 7y ago
        The original comment mentioned the gold standard, which is just gold certificates used as everyday currency. If you don’t trust that sort of stuff then the gold standard is totally irrelevant anyway.
    - deleted 7y ago
      [deleted]
  - the-dude 7y ago
    Last week I stumbled upon an article which claimed the Dutch government ( NL ) has the power to claim all private gold in the country. If it is true, I wonder if similar laws exist in other countries.
    - johnchristopher 7y ago
      See https://en.wikipedia.org/wiki/Gold_Reserve_Act https://en.wikipedia.org/wiki/Gold_Reserve_Act and https://en.wikipedia.org/wiki/Executive_Order_6102#Similar_laws_in_other_countries https://en.wikipedia.org/wiki/Executive_Order_6102#Similar_l... and https://www.quora.com/Why-did-it-used-to-be-illegal-for-Americans-to-own-gold https://www.quora.com/Why-did-it-used-to-be-illegal-for-Amer...
  - big_chungus 7y ago
    Well I've considered doing it, but I'm here in America where Roosevelt stole gold at a whim ("mandatory buy-back" at $400/oz in today's currency, where the price is over $1,500). I do like the concept, but I'm not confident one of these kooky big-spending politicians won't decide to steal it to pay for some program. Regardless, most people won't do this due to liquidity issues. Why can't we just put the currency back on gold? That's like saying we shouldn't put an embargo on Iran because "Every one could just stop buying oil from her."
    - javert 7y ago
      > Why can't we just put the currency back on gold? Because politicians will take it back off gold again when it suits them. Sorry to be "that guy," but this is why bitcoin was created.
      - big_chungus 7y ago
        > this is why bitcoin was created I like the idea of cryptocurrency, but bitcoin is an awful store of value compared to gold. I haven't found a recent calculation for the beta of bitcoin, but it's something pretty crazy. Also, china controls over 2/3 of btc hashing power; I don't trust her with a penny.
        javert 7y ago
        I don't agree with you, but I upvoted you. Bitcoin was designed to replay gold/fiat money, but definitely hasn't grown up yet in terms of liquidity. That's OK in my book.
      - arcticbull 7y ago
        Don't be the guy advocating putting money into bitcoin to store value when we know 95% of all bitcoin trading volume is fake [1], the primary liquidity supplier in the space is currently being investigated by the NYAG for being a giant fraud [2] and the price is manipulated to serve exchanges looking to trim short and long positions. It's beanie babies for nerds. Parent said "safe" and BTC is about as safe as a chainsaw made of razor blades with no hand guard. [1] https://www.cnbc.com/2019/03/22/majority-of-bitcoin-trading-is-a-hoax-new-study-finds.html https://www.cnbc.com/2019/03/22/majority-of-bitcoin-trading-... [2] https://cointelegraph.com/news/tethers-trouble-with-new-york-attorney-general-will-crypto-cope https://cointelegraph.com/news/tethers-trouble-with-new-york...
- deleted 7y ago
  [deleted]
- EliRivers 7y ago
  Why is there some bureaucrat in an office deciding how much my money gains or loses today? How else would interest rates be set? If you want your money to grow all by itself just because you deposited in an account with an interest rate, how does that interest rate get decided if not by someone in an office? Someone, in an office, whatever tools they use to decide, has to make that decision, surely.
  - wongarsu 7y ago
    The maximum interest rate at which the bank is (nearly) guaranteed to make profit off my account balance can be calculated by an algorithm. Running that algorithm once a month and using it to set the bank's interest rate would be an interesting model that doesn't directly involve humans.
    - JumpCrisscross 7y ago
      > The maximum interest rate at which the bank is (nearly) guaranteed to make profit off my account balance can be calculated by an algorithm This is a good way to blow up a bank.
      - wongarsu 7y ago
        I'm not saying the algorithm is trivial, as it has to take long-term factors into account, as well as the reaction of the market to the new interest rate, and of course add safety and profit margins. It would be quite a bit of work, but it's well aligned with the core-competency of banks.
        JumpCrisscross 7y ago
        > It would be quite a bit of work, but it's well aligned with the core-competency of banks It is, and it’s difficult. Perhaps fundamentally impossible, given it would have to predict consumers’ tastes and preferences to estimate B2C companies’ creditworthiness. Rates are negotiated instruments, a combination of the return on safe assets today, the risk of that rate changing tomorrow, and the credit profile and availability of borrowers. There is no known algorithm which can robustly balance these variables. If it were discovered, it would be worth billions, perhaps more, and fundamentally change finance. Pretty much every crisis has a story about smart people thinking they’ve solved this problem in some narrow niche of the economy and then being shown disastrously wrong.
hogFeast 7y ago
Do you know about the behaviour of German savers? It is fundamentally different to America, the UK, most other countries in Europe. The only similar nation anywhere is Japan...and even then, still significant differences. The ECB is making a huge push, without any kind of democratic consent, towards a finance-based, American/UK-style financial system. This won't work because German savers have virtually no experience of such a system. All that will happen is: banks go bust (more bust, most German banks are insolvent), and savers lose all their money. Either they hold their money in banks or they take it out and lose it all doing stuff they know nothing about (if we don't have an immediate recession, you will see French investment banks swarm Germany...French bankers have some kind of innate ability to produce bullshit derivatives aimed at savers with a conservative bank-led culture of saving). It is kind of insane that we have got to the point where policymakers actively ignore markets. All that matters are the textbooks. But this doesn't work. You can't just transplant economic policies from another context and expect them to work the same. That said, it will be nice to see Germany return to the early 2000s. Objectively, Germany has one of the most vulnerable and poorly functioning economies in the G10. Combine this with utterly insufferable, self-important policymakers and you have quite a nice example of natural justice.
- krilly 7y ago
  Could you elaborate on how the behaviour of German savers differs to those in other countries?
  - JumpCrisscross 7y ago
    > Could you elaborate on how the behaviour of German savers differs to those in other countries? European finance is bank based. Banks make most of the loans. Bank managers decide which projects get financed and which don’t. Investors put money in banks and let the banks make decisions. American finance is market based. Bond buyers make most of the loans. Bond (and stock) investors decide which projects get financed and which don’t. Investors themselves make decisions. Broadly speaking, the European bank-based model is moribund. It concentrates risks and is too conservative. The ECB is trying to change this, but it involves changing a social contract around how investors behave. This has happened without a broader debate, because Europe, and now we’re seeing a backlash in Germany.
baddox 7y ago
Guess it just sucks for people who make a modest living and want to save a modest portion of their income over many years.
- javert 7y ago
  For that, you need honest, sound money.
  - arcticbull 7y ago
    There's nothing honest or dishonest, sound or unsound about this. It's a question of what the role of money is in a given civil society. The US tends to view money as a tool for voting on which projects, companies, etc are most efficient. Saving doesn't always mean saving money but rather saving value. If you own your house and land outright, would you not consider that "savings"? What about government bonds? Corporate bonds? Fixed-incomes? Dividend bearing stocks? Growth stocks? All of that is savings. Cash in a mattress is an unproductive asset, it's a waste of potential. An account at a bank that lends and kicks some back to you may be the most productive allocation in some circumstances but overwhelmingly it isn't. Money is only valuable when it moves.
    - fauigerzigerk 7y ago
      >An account at a bank that lends and kicks some back to you may be the most productive allocation in some circumstances but overwhelmingly it isn't. At least it's better than putting money in an index ETF, because bankers making loans do actually contribute to the capital allocation process in a meaningful way.
      - arcticbull 7y ago
        I believe thats a decision everyone has to make individually, and that's the point :)
        fauigerzigerk 7y ago
Proven 7y ago
You have absolutely no clue what you're talking about.

by nugget 7y ago

big_chungus 7y ago

But what people forget is it is not just "evil big corp" that has cash on hand which will be devalued in such a way. Individuals do too. Pension plans do. All those will also lose out. Why is there some bureaucrat in an office deciding how much my money gains or loses today? Maybe it would be better to go back to the gold standard.

toomuchtodo 7y ago
There is a penalty for assuming the future will always have value you’ll be able to extract. Perhaps everyone will consider working less when your excess fiat has so little value.
mikeash 7y ago
Nothing is stopping you from storing your savings in gold right now. You don’t need the gold standard for that.
- cbanek 7y ago
  Other than needing to safely store your gold somewhere. I'm guessing there's probably also some insurance you could get to protect against loss? With a bank these are generally "free" with laws that protect deposits.
  - mikeash 7y ago
    If you trust others to keep it for you, there are companies that let you buy gold online that they will store for you, and there are even gold ETFs. If you have a brokerage account, buy some shares of GLD and you’re done.
    - rightbyte 7y ago
      If you don't trust the financial system surely you don't trust gold certificates either. Dig it down ... atleast I would.
      - mikeash 7y ago
        The original comment mentioned the gold standard, which is just gold certificates used as everyday currency. If you don’t trust that sort of stuff then the gold standard is totally irrelevant anyway.
  - deleted 7y ago
    [deleted]
- the-dude 7y ago
  Last week I stumbled upon an article which claimed the Dutch government ( NL ) has the power to claim all private gold in the country. If it is true, I wonder if similar laws exist in other countries.
  - johnchristopher 7y ago
    See https://en.wikipedia.org/wiki/Gold_Reserve_Act https://en.wikipedia.org/wiki/Gold_Reserve_Act and https://en.wikipedia.org/wiki/Executive_Order_6102#Similar_laws_in_other_countries https://en.wikipedia.org/wiki/Executive_Order_6102#Similar_l... and https://www.quora.com/Why-did-it-used-to-be-illegal-for-Americans-to-own-gold https://www.quora.com/Why-did-it-used-to-be-illegal-for-Amer...
- big_chungus 7y ago
  Well I've considered doing it, but I'm here in America where Roosevelt stole gold at a whim ("mandatory buy-back" at $400/oz in today's currency, where the price is over $1,500). I do like the concept, but I'm not confident one of these kooky big-spending politicians won't decide to steal it to pay for some program. Regardless, most people won't do this due to liquidity issues. Why can't we just put the currency back on gold? That's like saying we shouldn't put an embargo on Iran because "Every one could just stop buying oil from her."
  - javert 7y ago
    > Why can't we just put the currency back on gold? Because politicians will take it back off gold again when it suits them. Sorry to be "that guy," but this is why bitcoin was created.
    - big_chungus 7y ago
      > this is why bitcoin was created I like the idea of cryptocurrency, but bitcoin is an awful store of value compared to gold. I haven't found a recent calculation for the beta of bitcoin, but it's something pretty crazy. Also, china controls over 2/3 of btc hashing power; I don't trust her with a penny.
      - javert 7y ago
        I don't agree with you, but I upvoted you. Bitcoin was designed to replay gold/fiat money, but definitely hasn't grown up yet in terms of liquidity. That's OK in my book.
    - arcticbull 7y ago
      Don't be the guy advocating putting money into bitcoin to store value when we know 95% of all bitcoin trading volume is fake [1], the primary liquidity supplier in the space is currently being investigated by the NYAG for being a giant fraud [2] and the price is manipulated to serve exchanges looking to trim short and long positions. It's beanie babies for nerds. Parent said "safe" and BTC is about as safe as a chainsaw made of razor blades with no hand guard. [1] https://www.cnbc.com/2019/03/22/majority-of-bitcoin-trading-is-a-hoax-new-study-finds.html https://www.cnbc.com/2019/03/22/majority-of-bitcoin-trading-... [2] https://cointelegraph.com/news/tethers-trouble-with-new-york-attorney-general-will-crypto-cope https://cointelegraph.com/news/tethers-trouble-with-new-york...
deleted 7y ago
[deleted]
EliRivers 7y ago
Why is there some bureaucrat in an office deciding how much my money gains or loses today? How else would interest rates be set? If you want your money to grow all by itself just because you deposited in an account with an interest rate, how does that interest rate get decided if not by someone in an office? Someone, in an office, whatever tools they use to decide, has to make that decision, surely.
- wongarsu 7y ago
  The maximum interest rate at which the bank is (nearly) guaranteed to make profit off my account balance can be calculated by an algorithm. Running that algorithm once a month and using it to set the bank's interest rate would be an interesting model that doesn't directly involve humans.
  - JumpCrisscross 7y ago
    > The maximum interest rate at which the bank is (nearly) guaranteed to make profit off my account balance can be calculated by an algorithm This is a good way to blow up a bank.
    - wongarsu 7y ago
      I'm not saying the algorithm is trivial, as it has to take long-term factors into account, as well as the reaction of the market to the new interest rate, and of course add safety and profit margins. It would be quite a bit of work, but it's well aligned with the core-competency of banks.
      - JumpCrisscross 7y ago
        > It would be quite a bit of work, but it's well aligned with the core-competency of banks It is, and it’s difficult. Perhaps fundamentally impossible, given it would have to predict consumers’ tastes and preferences to estimate B2C companies’ creditworthiness. Rates are negotiated instruments, a combination of the return on safe assets today, the risk of that rate changing tomorrow, and the credit profile and availability of borrowers. There is no known algorithm which can robustly balance these variables. If it were discovered, it would be worth billions, perhaps more, and fundamentally change finance. Pretty much every crisis has a story about smart people thinking they’ve solved this problem in some narrow niche of the economy and then being shown disastrously wrong.

hogFeast 7y ago

Do you know about the behaviour of German savers? It is fundamentally different to America, the UK, most other countries in Europe. The only similar nation anywhere is Japan...and even then, still significant differences. The ECB is making a huge push, without any kind of democratic consent, towards a finance-based, American/UK-style financial system. This won't work because German savers have virtually no experience of such a system. All that will happen is: banks go bust (more bust, most German banks are insolvent), and savers lose all their money. Either they hold their money in banks or they take it out and lose it all doing stuff they know nothing about (if we don't have an immediate recession, you will see French investment banks swarm Germany...French bankers have some kind of innate ability to produce bullshit derivatives aimed at savers with a conservative bank-led culture of saving). It is kind of insane that we have got to the point where policymakers actively ignore markets. All that matters are the textbooks. But this doesn't work. You can't just transplant economic policies from another context and expect them to work the same. That said, it will be nice to see Germany return to the early 2000s. Objectively, Germany has one of the most vulnerable and poorly functioning economies in the G10. Combine this with utterly insufferable, self-important policymakers and you have quite a nice example of natural justice.

krilly 7y ago
Could you elaborate on how the behaviour of German savers differs to those in other countries?
- JumpCrisscross 7y ago
  > Could you elaborate on how the behaviour of German savers differs to those in other countries? European finance is bank based. Banks make most of the loans. Bank managers decide which projects get financed and which don’t. Investors put money in banks and let the banks make decisions. American finance is market based. Bond buyers make most of the loans. Bond (and stock) investors decide which projects get financed and which don’t. Investors themselves make decisions. Broadly speaking, the European bank-based model is moribund. It concentrates risks and is too conservative. The ECB is trying to change this, but it involves changing a social contract around how investors behave. This has happened without a broader debate, because Europe, and now we’re seeing a backlash in Germany.

baddox 7y ago

Guess it just sucks for people who make a modest living and want to save a modest portion of their income over many years.

javert 7y ago
For that, you need honest, sound money.
- arcticbull 7y ago
  There's nothing honest or dishonest, sound or unsound about this. It's a question of what the role of money is in a given civil society. The US tends to view money as a tool for voting on which projects, companies, etc are most efficient. Saving doesn't always mean saving money but rather saving value. If you own your house and land outright, would you not consider that "savings"? What about government bonds? Corporate bonds? Fixed-incomes? Dividend bearing stocks? Growth stocks? All of that is savings. Cash in a mattress is an unproductive asset, it's a waste of potential. An account at a bank that lends and kicks some back to you may be the most productive allocation in some circumstances but overwhelmingly it isn't. Money is only valuable when it moves.
  - fauigerzigerk 7y ago
    >An account at a bank that lends and kicks some back to you may be the most productive allocation in some circumstances but overwhelmingly it isn't. At least it's better than putting money in an index ETF, because bankers making loans do actually contribute to the capital allocation process in a meaningful way.
    - arcticbull 7y ago
      I believe thats a decision everyone has to make individually, and that's the point :)
      - fauigerzigerk 7y ago

Proven 7y ago

You have absolutely no clue what you're talking about.