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> Leading to a [...] severe demand for cash. Callooh! Callay! Something to sponge up the Global Savings Glut!

by tlholaday 7y ago

theandrewbailey 7y ago
Strange. I'd swear that there's a glut of borrowing, not saving.
- wffurr 7y ago
  Why can't there be both? There's lots of capital with nowhere to go, hence bonkers real estate prices, wacky startups getting funded, overpriced assets and low bond yields. There's also of people without much capital who want to do things like buy cars and houses or start businesses. These things aren't mutually exclusive. The capital is largely held by a small number of people. Most people don't have any or not very much.
  - jotakami 7y ago
    There’s a difference between capital and printed money. Capital is the result of forgone consumption, of producing more than is consumed. Much of what people call “capital” is really just inflated paper claims to assets. A share of stock is not capital, it is just a fractional claim on the residual earnings produced by a business. Capital isn’t magically created when stock prices are bid up, because the underlying assets (“capital”) of the business don’t change.
    - wffurr 7y ago
      Ok, change all of my uses of "capital" to "cash" and it still holds. Most capital can be readily exchanged for cash, hence it can be referring to as "liquid assets". Where wealth comes from is an interesting question, but not especially relevant to the topic at hand.
      - jotakami 7y ago
        This is where the problem lies. Sure, liquid assets are as good as cash... until they aren’t. If everyone tries to convert assets to cash simultaneously, then cash gets scarce really quick and the difference between the two becomes clear. This is completely relevant to the Minsky moment, because it is the illusion of wealth created by inflated asset values that leads people to take excess risks.
- marcosdumay 7y ago
  One doesn't exist without the other (unless you are saving real goods).
- throwawaybbb 7y ago
  The price of borrowing has never been lower. Stable governments can borrow at negative real rates. When prices drop it means there is more supply than demand.

> Leading to a [...] severe demand for cash. Callooh! Callay! Something to sponge up the Global Savings Glut!

theandrewbailey 7y ago

Strange. I'd swear that there's a glut of borrowing, not saving.

wffurr 7y ago
Why can't there be both? There's lots of capital with nowhere to go, hence bonkers real estate prices, wacky startups getting funded, overpriced assets and low bond yields. There's also of people without much capital who want to do things like buy cars and houses or start businesses. These things aren't mutually exclusive. The capital is largely held by a small number of people. Most people don't have any or not very much.
- jotakami 7y ago
  There’s a difference between capital and printed money. Capital is the result of forgone consumption, of producing more than is consumed. Much of what people call “capital” is really just inflated paper claims to assets. A share of stock is not capital, it is just a fractional claim on the residual earnings produced by a business. Capital isn’t magically created when stock prices are bid up, because the underlying assets (“capital”) of the business don’t change.
  - wffurr 7y ago
    Ok, change all of my uses of "capital" to "cash" and it still holds. Most capital can be readily exchanged for cash, hence it can be referring to as "liquid assets". Where wealth comes from is an interesting question, but not especially relevant to the topic at hand.
    - jotakami 7y ago
      This is where the problem lies. Sure, liquid assets are as good as cash... until they aren’t. If everyone tries to convert assets to cash simultaneously, then cash gets scarce really quick and the difference between the two becomes clear. This is completely relevant to the Minsky moment, because it is the illusion of wealth created by inflated asset values that leads people to take excess risks.
marcosdumay 7y ago
One doesn't exist without the other (unless you are saving real goods).
throwawaybbb 7y ago
The price of borrowing has never been lower. Stable governments can borrow at negative real rates. When prices drop it means there is more supply than demand.