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The root cause is low interest rates, people being able to issue junk, high interest bonds at AAA ratings, and the FED being willing to exchange dollars for tho
by raducu 7y ago
The root cause is low interest rates, people being able to issue junk, high interest bonds at AAA ratings, and the FED being willing to exchange dollars for those bonds.
The FED is replacing the regular markets providing properly priced liquidity, it is only staving off a due recession in unhealthy sectors while completely fucking up the entire financial system; the next recession will be so severe, that the great recession will look like a walk in the park.
When everybody is too big to fail, capitalsim is dead.
- specialist 7y agoEconomy is a measure of the movement of money. To spend up the economy, we have to keep the money moving. Isn't the problem hoarding? Everyone hoards. Rich people hoard wealth. Right? Not a moral statement. Preferential attachment (winner takes all) is just math. The problem for society (the economy): we have all this unproductive capital (wealth) lying around, AND we have all this work that needs doing, BUT it's not efficient for rich people to manage a large basket of smaller investments. So to grow the economy, we need better strategies to keep the money moving. Progressive taxation has worked in the past. YCombinator seems to have found a new way to match investors to opportunities more efficiently. (Sorry, being a simple bear, I don't know of any other strategies. Maybe "Buy Local", which keeps the money moving in smaller networks.) To me -- a person who barely understands "money", finance, economics -- it's really just that simple. Keep the money moving.
- Fjolsvith 7y agoTrump is pushing for negative interest rates. Wouldn't that break Capital free?
- specialist 7y agoSorry, I have no idea. I can only repeat what I've read. Others have compared inflation to taxation; both reduce capital over time. So is the converse true? Does lower, or even negative, inflation favor the hoarding of wealth?
- benaadams 7y agoYes. Inflation decreases debts and means people with wealth need to do something with their money (e.g. invest) in order to retain its value. However, speculative increases (buying land for increase in prices, buying shares for increase in share price, etc) and rent seeking adds price but doesn't add real value/investment to the economy.