5 ms·

Accumulation of savings is valuable as it can be used for capital investment at the best opportunity. Forcing people to spend prematurely on crappy mal-investme

Accumulation of savings is valuable as it can be used for capital investment at the best opportunity. Forcing people to spend prematurely on crappy mal-investment is not optimal. Spending for the sake of spending is not optimal investment.

arcticbull 7y ago
You're telling me in the market today, there's absolutely nowhere for you to productively allocate capital for an expected return of over 1.8% per annum? Even though Ally offers savings accounts that yield 1.8% per annum? And treasury bills yields are 2.2%? Remember, a savings account or CD are also valid investments assuming they yield more than inflation. What I'm saying you shouldn't do is store literal cash in a mattress. A savings account serves as collateral for loans which are in fact productive investments.
- randomidiot123 7y ago
  A savings account pays below the real inflation rate here in New Zealand. The cost of housing has increased hundreds of percent over the last 20 years thanks to central bank monetary policy that artificially manipulate interest rates. A shoebox apartment is now ridiculously unaffordable. I can put money into savings that loses money after inflation, and funds a system that is fundamentally corrupt, which leaves me worse off overall than if we had a real free market without centralized manipulation of currency and interest rates. This centralized artificial interference has caused major imbalances in the economy here. It didn't work for the Soviet Union and it's not working in the "capitalist" world either.
  - arcticbull 7y ago
    > A savings account pays below the real inflation rate here in New Zealand. That's a market force designed to disincentivize that investment. Nobody's guaranteed a risk-free return, or even retention of value in what's not a long-term store of value. Pick something else to invest it in. For what it's worth, NZ's inflation rate is tracking at 1.5% per annum and Rabobank offers a 2.4% online savings account. > The cost of housing has increased hundreds of percent over the last 20 years thanks to central bank monetary policy that artificially manipulate interest rates. A shoebox apartment is now ridiculously unaffordable. Cost of housing is a total red herring and largely unrelated to this conversation. Cost of housing is overwhelmingly supply-side driven. If you want cheaper houses demand municipalities permit new construction. You can always build up, there's no limit on that. Build enough, the cost will drop substantially. There's plenty of markets that exemplify this effect, like Houston and Tokyo. SF on the other hand routinely forbids totally reasonable construction and the pricing speaks for itself. The cost of housing roughly boils down to this: the narrative is that housing "should be an investment" and that it "should go up over time" so the directionality is accepted. Homeowners tend to be older, wealthier, have deeper ties to the community and vote. Renters tend to be younger, less affluent, transient and don't vote. As such policies are enacted that benefit homeowners. This includes zoning restrictions, building restrictions and tax deductions benefiting homeowners. Too few new units are built relative to influx of population, and price goes up. It's simple market economics. Want to solve the problem? Get people to vote to allow more housing. For what it's worth in the US housing prices on average tend to track inflation. It's certain municipalities like SF and NYC that far exceed due to asinine policy. The monetary policy was the same in all regions of the US so why then would pricing changes be uncorrelated across markets? > I can put money into savings that loses money after inflation, and funds a system that is fundamentally corrupt, which leaves me worse off overall than if we had a real free market without centralized manipulation of currency and interest rates. New Zealand ranks routinely as the world's least corrupt government. A system that maintains stability of money and debases it over time slowly and predictably helps keep wealth inequality down, and benefits the less well off by inflating away debts and encourages productive allocation of capital. > This centralized artificial interference has caused major imbalances in the economy here. It didn't work for the Soviet Union and it's not working in the "capitalist" world either. This doesn't make sense. The Soviet Union fell for all sorts of reasons that weren't inflation related or even central planning related. Authoritarian states tend to do so in time. I'd say it's working just fine, inflation is roughly 1-2% per annum and incredibly well controlled. We've got plenty of actual problems (like the cost of housing), though, this isn't one of them.
    - randomidiot123 7y ago
      New Zealands actual inflation is way, way higher than 1.5%. You are very naive and gullible if you believe that number. You also have no idea how the cost of housing is determined. Central banks have artificially manipulated interest rates to an extremely low level, where savers are forced to malinvest in things such as housing, which is also encouraged by mortgage rates being way below the reasonable cost, because again, the interest rates are artificially low. The reserve bank governor even admitted they were at fault.
      - arcticbull 7y ago
        > New Zealands actual inflation is way, way higher than 1.5%. You are very naive and gullible if you believe that number. It's defined with a mathematical formula based on a basket of goods. You haven't provided any sources other than your gut and a baseless assertion about gullibility. I have references [1, 2]. > You also have no idea how the cost of housing is determined. It's literally on the investopedia write-up. [3] And also, it's basic, fundamental market economics. More supply, price goes down. Less supply, price goes up assuming constant demand. Sure lending makes unaffordable places more affordable. That doesn't really matter if you flood the market with supply though does it? [4] FTA [4]: "Tokyo rent is cheaper because it builds lots of housing. Every year, the city adds about 100,000 new homes. This increase has more than kept up with the increase in population, leading to a housing surplus." Average rent is $2.50/sqft in Tokyo vs $6/sqft in SF. And they have negative interest rates. Supply. Matters. > Central banks have artificially manipulated interest rates to an extremely low level. Set them at a low level. That's their job. To maintain a consistent, low, predictable rate of inflation. > The reserve bank governor even admitted they were at fault. Look I'm not saying they're perfect, I'm saying inflation has little to do with the very real issues you call out. [1] https://www.rbnz.govt.nz/monetary-policy/inflation https://www.rbnz.govt.nz/monetary-policy/inflation [2] https://www.stats.govt.nz/information-releases/consumers-price-index-september-2019-quarter https://www.stats.govt.nz/information-releases/consumers-pri... [3] https://www.investopedia.com/ask/answers/040215/how-does-law-supply-and-demand-affect-housing-market.asp https://www.investopedia.com/ask/answers/040215/how-does-law... [4] https://www.orlandosentinel.com/business/os-ed-california-housing-density-near-transit-tokyo-example-20180321-story.html https://www.orlandosentinel.com/business/os-ed-california-ho...

arcticbull 7y ago

You're telling me in the market today, there's absolutely nowhere for you to productively allocate capital for an expected return of over 1.8% per annum? Even though Ally offers savings accounts that yield 1.8% per annum? And treasury bills yields are 2.2%? Remember, a savings account or CD are also valid investments assuming they yield more than inflation. What I'm saying you shouldn't do is store literal cash in a mattress. A savings account serves as collateral for loans which are in fact productive investments.

randomidiot123 7y ago
A savings account pays below the real inflation rate here in New Zealand. The cost of housing has increased hundreds of percent over the last 20 years thanks to central bank monetary policy that artificially manipulate interest rates. A shoebox apartment is now ridiculously unaffordable. I can put money into savings that loses money after inflation, and funds a system that is fundamentally corrupt, which leaves me worse off overall than if we had a real free market without centralized manipulation of currency and interest rates. This centralized artificial interference has caused major imbalances in the economy here. It didn't work for the Soviet Union and it's not working in the "capitalist" world either.
- arcticbull 7y ago
  > A savings account pays below the real inflation rate here in New Zealand. That's a market force designed to disincentivize that investment. Nobody's guaranteed a risk-free return, or even retention of value in what's not a long-term store of value. Pick something else to invest it in. For what it's worth, NZ's inflation rate is tracking at 1.5% per annum and Rabobank offers a 2.4% online savings account. > The cost of housing has increased hundreds of percent over the last 20 years thanks to central bank monetary policy that artificially manipulate interest rates. A shoebox apartment is now ridiculously unaffordable. Cost of housing is a total red herring and largely unrelated to this conversation. Cost of housing is overwhelmingly supply-side driven. If you want cheaper houses demand municipalities permit new construction. You can always build up, there's no limit on that. Build enough, the cost will drop substantially. There's plenty of markets that exemplify this effect, like Houston and Tokyo. SF on the other hand routinely forbids totally reasonable construction and the pricing speaks for itself. The cost of housing roughly boils down to this: the narrative is that housing "should be an investment" and that it "should go up over time" so the directionality is accepted. Homeowners tend to be older, wealthier, have deeper ties to the community and vote. Renters tend to be younger, less affluent, transient and don't vote. As such policies are enacted that benefit homeowners. This includes zoning restrictions, building restrictions and tax deductions benefiting homeowners. Too few new units are built relative to influx of population, and price goes up. It's simple market economics. Want to solve the problem? Get people to vote to allow more housing. For what it's worth in the US housing prices on average tend to track inflation. It's certain municipalities like SF and NYC that far exceed due to asinine policy. The monetary policy was the same in all regions of the US so why then would pricing changes be uncorrelated across markets? > I can put money into savings that loses money after inflation, and funds a system that is fundamentally corrupt, which leaves me worse off overall than if we had a real free market without centralized manipulation of currency and interest rates. New Zealand ranks routinely as the world's least corrupt government. A system that maintains stability of money and debases it over time slowly and predictably helps keep wealth inequality down, and benefits the less well off by inflating away debts and encourages productive allocation of capital. > This centralized artificial interference has caused major imbalances in the economy here. It didn't work for the Soviet Union and it's not working in the "capitalist" world either. This doesn't make sense. The Soviet Union fell for all sorts of reasons that weren't inflation related or even central planning related. Authoritarian states tend to do so in time. I'd say it's working just fine, inflation is roughly 1-2% per annum and incredibly well controlled. We've got plenty of actual problems (like the cost of housing), though, this isn't one of them.
  - randomidiot123 7y ago
    New Zealands actual inflation is way, way higher than 1.5%. You are very naive and gullible if you believe that number. You also have no idea how the cost of housing is determined. Central banks have artificially manipulated interest rates to an extremely low level, where savers are forced to malinvest in things such as housing, which is also encouraged by mortgage rates being way below the reasonable cost, because again, the interest rates are artificially low. The reserve bank governor even admitted they were at fault.
    - arcticbull 7y ago
      > New Zealands actual inflation is way, way higher than 1.5%. You are very naive and gullible if you believe that number. It's defined with a mathematical formula based on a basket of goods. You haven't provided any sources other than your gut and a baseless assertion about gullibility. I have references [1, 2]. > You also have no idea how the cost of housing is determined. It's literally on the investopedia write-up. [3] And also, it's basic, fundamental market economics. More supply, price goes down. Less supply, price goes up assuming constant demand. Sure lending makes unaffordable places more affordable. That doesn't really matter if you flood the market with supply though does it? [4] FTA [4]: "Tokyo rent is cheaper because it builds lots of housing. Every year, the city adds about 100,000 new homes. This increase has more than kept up with the increase in population, leading to a housing surplus." Average rent is $2.50/sqft in Tokyo vs $6/sqft in SF. And they have negative interest rates. Supply. Matters. > Central banks have artificially manipulated interest rates to an extremely low level. Set them at a low level. That's their job. To maintain a consistent, low, predictable rate of inflation. > The reserve bank governor even admitted they were at fault. Look I'm not saying they're perfect, I'm saying inflation has little to do with the very real issues you call out. [1] https://www.rbnz.govt.nz/monetary-policy/inflation https://www.rbnz.govt.nz/monetary-policy/inflation [2] https://www.stats.govt.nz/information-releases/consumers-price-index-september-2019-quarter https://www.stats.govt.nz/information-releases/consumers-pri... [3] https://www.investopedia.com/ask/answers/040215/how-does-law-supply-and-demand-affect-housing-market.asp https://www.investopedia.com/ask/answers/040215/how-does-law... [4] https://www.orlandosentinel.com/business/os-ed-california-housing-density-near-transit-tokyo-example-20180321-story.html https://www.orlandosentinel.com/business/os-ed-california-ho...