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People taking seriously what a hedgefund manager says in a public speech... it is to laugh. If productivity were going up because of automation to the point wh

People taking seriously what a hedgefund manager says in a public speech... it is to laugh. If productivity were going up because of automation to the point where mass unemployment is an issue, interest rates would be higher: the end. Anyone who disagrees doesn't understand how finance works.

lawrenceyan 7y ago
> If productivity were going up because of automation to the point where mass unemployment is an issue, interest rates would be higher: the end. Anyone who disagrees doesn't understand how finance works. Could you better explain the process by which you arrived at this conclusion? There's a lot of hand waving and little to no rigor in the proof that you provide.
starbugs 7y ago
That's an interesting thesis. Could you explain why?
- scottlocklin 7y ago
  If automation were increasing producitivity, you could invest capital in it and get giant returns, making capital more rare and valuable, as it would be tied up in productive ventures. It isn't. Even freaking google is basically punting on a basket of dumb ideas, absolutely none of which has worked out, and none of which are likely to pan out, and (rationally) sitting on a huge barrel of cash from their looting of the US media system. Therefore, negative interest rates. Negative interest rates = negative productivity increases. So it is, so it has always been. That's what finance is! You loan money to people to do useful things with. If there's nothing useful to do, the money isn't worth as much. Most of it, these days, goes to dumb shit like real estate bubbles. All you need do is look at times when human power over nature was obviously increasing; capital was dear and interest rates where high because you could invest in the Bessemer Process or the Concorde or the Haber process or, like, the invention of computers and telecommunications. These days, we have ... apps for your phone. Of course we have negative interest rates; there is literally nothing to invest in.
  - mistermann 7y ago
    How does the creation of trillions of dollars of new capital out of thin air fit into this theory?
    - Supermancho 7y ago
      Propping up the industries that are losses but whose failure would cause massive instability and upheaval. Those in power, have no interest in this outcome while they are in power. So Quantitative Easing part X and punt to the next election cycle.
  - smaddox 7y ago
    You've got the causality backwards. Low interest rates cause speculative investment. Good investments don't cause high interest rates.
    - scottlocklin 7y ago
      I made no statement on causality. It's a simple statement on returns. You can't pay out high interest rates, or, like returns on anything, unless you're going to get improved productivity. If your productivity is declining (it probably is, considering demographics), you'll get fun times like negative interest rates. And dumbass speculative bubbles. And low interest rates DEFINITELY do not cause speculative investment in R&D projects which could increase productivity. c.f. for example, the present! Compared to the high interest rate era of Bell Labs and moon shots; we have zilch for large scale investment in R&D for future productivity improvements.
      - mistermann 7y ago
        > I made no statement on causality. Does "Negative interest rates = negative productivity increases. So it is, so it has always been." not at least hint at causality? > And low interest rates DEFINITELY do not cause speculative investment in R&D projects which could increase productivity. This seems completely inconsistent with easily observed reality.
smaddox 7y ago
:sigh: Interest rates are pinned at the zero lower bound by the central banks. They can't raise the rates without tanking the economy, because just about every country has massive private debt burdens in excess of 150% of GDP. Higher interest rates means higher debt servicing costs, which forces borrowers to delever, which reduces macroeconomic demand by precisely the rate of change in debt. When private debt is larger than GDP by 1.5x to 2x, even a small fraction of borrowers deleveraging results in a massive reduction in demand. At the same time, the US stock market is at all time highs, due to $4 trillion dollars of QE (i.e. the Fed creating money to buy financial assets), making the filthy rich even more filthy rich. And the Fed can't reduce it's balance sheet without tanking the stock market, which would throw the economy, in general, into a tailspin. They tried, and now they're rapidly reversing that QT. We're in a liquidity trap. And unless there's a modern debt jubilee or large UBI (or a world war), we're going to be stuck here for decades. https://youtu.be/Pfg04wJtz8c https://youtu.be/Pfg04wJtz8c As automation continues to grow, unemployment will grow and labor force participation will fall. The new jobs being created now are predominantly gig / contractor jobs. Worker's share of wages is at an all time low. If you're in the US, take a look at Andrew Yang's campaign for president. The Freedom Dividend (UBI) is what this country needs in order to break the cycle.

lawrenceyan 7y ago

> If productivity were going up because of automation to the point where mass unemployment is an issue, interest rates would be higher: the end. Anyone who disagrees doesn't understand how finance works. Could you better explain the process by which you arrived at this conclusion? There's a lot of hand waving and little to no rigor in the proof that you provide.

starbugs 7y ago

That's an interesting thesis. Could you explain why?

scottlocklin 7y ago
If automation were increasing producitivity, you could invest capital in it and get giant returns, making capital more rare and valuable, as it would be tied up in productive ventures. It isn't. Even freaking google is basically punting on a basket of dumb ideas, absolutely none of which has worked out, and none of which are likely to pan out, and (rationally) sitting on a huge barrel of cash from their looting of the US media system. Therefore, negative interest rates. Negative interest rates = negative productivity increases. So it is, so it has always been. That's what finance is! You loan money to people to do useful things with. If there's nothing useful to do, the money isn't worth as much. Most of it, these days, goes to dumb shit like real estate bubbles. All you need do is look at times when human power over nature was obviously increasing; capital was dear and interest rates where high because you could invest in the Bessemer Process or the Concorde or the Haber process or, like, the invention of computers and telecommunications. These days, we have ... apps for your phone. Of course we have negative interest rates; there is literally nothing to invest in.
- mistermann 7y ago
  How does the creation of trillions of dollars of new capital out of thin air fit into this theory?
  - Supermancho 7y ago
    Propping up the industries that are losses but whose failure would cause massive instability and upheaval. Those in power, have no interest in this outcome while they are in power. So Quantitative Easing part X and punt to the next election cycle.
- smaddox 7y ago
  You've got the causality backwards. Low interest rates cause speculative investment. Good investments don't cause high interest rates.
  - scottlocklin 7y ago
    I made no statement on causality. It's a simple statement on returns. You can't pay out high interest rates, or, like returns on anything, unless you're going to get improved productivity. If your productivity is declining (it probably is, considering demographics), you'll get fun times like negative interest rates. And dumbass speculative bubbles. And low interest rates DEFINITELY do not cause speculative investment in R&D projects which could increase productivity. c.f. for example, the present! Compared to the high interest rate era of Bell Labs and moon shots; we have zilch for large scale investment in R&D for future productivity improvements.
    - mistermann 7y ago
      > I made no statement on causality. Does "Negative interest rates = negative productivity increases. So it is, so it has always been." not at least hint at causality? > And low interest rates DEFINITELY do not cause speculative investment in R&D projects which could increase productivity. This seems completely inconsistent with easily observed reality.

smaddox 7y ago

:sigh: Interest rates are pinned at the zero lower bound by the central banks. They can't raise the rates without tanking the economy, because just about every country has massive private debt burdens in excess of 150% of GDP. Higher interest rates means higher debt servicing costs, which forces borrowers to delever, which reduces macroeconomic demand by precisely the rate of change in debt. When private debt is larger than GDP by 1.5x to 2x, even a small fraction of borrowers deleveraging results in a massive reduction in demand. At the same time, the US stock market is at all time highs, due to $4 trillion dollars of QE (i.e. the Fed creating money to buy financial assets), making the filthy rich even more filthy rich. And the Fed can't reduce it's balance sheet without tanking the stock market, which would throw the economy, in general, into a tailspin. They tried, and now they're rapidly reversing that QT. We're in a liquidity trap. And unless there's a modern debt jubilee or large UBI (or a world war), we're going to be stuck here for decades. https://youtu.be/Pfg04wJtz8c https://youtu.be/Pfg04wJtz8c As automation continues to grow, unemployment will grow and labor force participation will fall. The new jobs being created now are predominantly gig / contractor jobs. Worker's share of wages is at an all time low. If you're in the US, take a look at Andrew Yang's campaign for president. The Freedom Dividend (UBI) is what this country needs in order to break the cycle.