4 ms·

That's called "financial repression". Sorry that it causes you to take excessive risks, there are many like you. Walter Bagehot, the de facto founder of The Ec

That's called "financial repression". Sorry that it causes you to take excessive risks, there are many like you. Walter Bagehot, the de facto founder of The Economist, was of the opinion that people will never stand 2% rates (and he meant plus :) ). They would rather fund anything, any project, the weirdest thing that offers any hope of yield; no matter how stupid. And here we are, 143 years after Bagehot passed away. Sir, you are still absolutely correct!

toomuchtodo 6y ago
Wouldn’t it be more accurate to call it “financial entitlement”, to believe that your capital would always have positive value? While we’ll likely never run out of need for human labor, it’s very possible we’re running out of capital investment opportunities that realize a risk adjusted return above 0. “Too much money chasing too few deals” and all that jazz.
- H8crilA 6y ago
  I totally agree that growth and gains on capital are not a given, but: 1) The world's real GDP is still going up. Or at least has been till 2019. 2) Even if it was to slow down and remove prospects of gains on capital - it still doesn't mean that people will adjust quickly; you'd have to rewrite the entire concept of pensions for starters. 3) It seems to me that core rates are seriously manipulated down (interest rates, default spreads, equity discount rates); just look at ballooning of the balance sheets of pretty much everything, or look at the share of "zombie" companies, that is companies that cannot even service their interest payments. 3 is of course just an opinion, but if true will result in serious clogging of the machine with useless actors. 3 is where, I believe, things like "bullshit jobs" / "the office" come from, for example.
  - toomuchtodo 6y ago
    Agree with your points, hard to know what the future looks like but it’s clear it’s not going to look like the past.
    - H8crilA 6y ago
      BTW, as far as I can tell - the only thing that is still "working" is the Fourth Turning theory. It's a bold theory that many people have called bullshit, but it has worked well since the publication in the 90s. And of course matches the known pre-publication history dating up to a few centuries ago.
      - pmiller2 6y ago
        I wouldn't call it so much BS as "lacking in testable predictions." I think of it as string theory for history, minus all the math.
- mindslight 6y ago
  We're out of investment opportunities because the Fed keeps creating new money that immediately fills them rather than letting the market do so. The bond market bailout of a few months ago could and should have instead been funded with existing money, with a corresponding rise in bond rates. Expecting that a steward won't wantonly inflate away the currency is not "entitlement". And to the reality that these institutions are no longer constrained by notions of decency, people will move away to non-corrupt currencies.
  - collyw 6y ago
    I admit that I have very little knowledge about bond markets, but when you talk about moving away from "corrupt currencies" aren't all goverments / EU doing something similar just now? (is China?)
    - H8crilA 6y ago
      Everyone is in a deep trouble and trying to outprint themselves out of a problem. Even Germany (one of the best govt balance sheet country on the planet in 2019, going full Keynes and actually paying down their debts during the up phase of the cycle) may see a ratings downgrade. The CDS market is toying with this idea. We don't know which type of volatility are we going to experience, the left tail or the right tail. So far major currencies are actually strengthening (deflation) against consumer baskets, but it's early days, I think. Maybe even neither! In either case, I'm watching the bond yields (while they are still visible ;) ), various consumer inflation measures and most importantly gold. Gold will tell you what's going on.
      - pmiller2 6y ago
        The thing about printing money though, is that if everybody does it, it negates a lot of the effect. That means that if you want the effect, you have to print more and more to keep up. The only other alternative is to realize that money is essentially a fictional construct that keeps capitalism moving forward, and to consider that people may not need to be slaves to some numbers in a computer system.
- nogabebop23 6y ago
  >> While we’ll likely never run out of need for human labor, it’s very possible we’re running out of capital investment opportunities Is this true? automation is essentially a emphasis from human to physical capital. It seems like we're continuing to reduce and specialize human capital while growing other forms. Now I definitely see an end to passive capital gains in traditional financial markets; there's a lot of money sloshing around with not enough good places to put it. Anything near-passive (i.e. real estate) is also feeling similar pressures. It seems like a great time to build big projects that take a huge amount of money, I'm just not on board with pure public funding and all the issues that go with that.
  - pmiller2 6y ago
    > Now I definitely see an end to passive capital gains in traditional financial markets; there's a lot of money sloshing around with not enough good places to put it. Anything near-passive (i.e. real estate) is also feeling similar pressures. It seems like a great time to build big projects that take a huge amount of money, I'm just not on board with pure public funding and all the issues that go with that. Carry this a little further, and this means either the death of the concept of retirement as we know it. > Is this true? automation is essentially a emphasis from human to physical capital. It seems like we're continuing to reduce and specialize human capital while growing other forms. Here is really the only hope. If we can recognize one day that it's just plain not necessary for humans to labor for ~50 years between ~20 and ~70, leaving them only with their "golden years" -- the ones where serious health problems start to take the life out of life. I don't know what to call this type of society. It certainly wouldn't be "capitalist" in any real sense. It may be "post scarcity," but not necessarily. Perhaps it will be some weird techno-socialist thing?
  - tschwimmer 6y ago
    I'm becoming less and less bullish on automation. It may be stupid, but I think that a lot of commmon tasks are functionally un-automatable, or at least not at an acceptable level of error. Think about something as simple as phone support for pretty much any product or service. There's a ton of automation being employed there to relatively little effect - just try to do anything meaningful at any company yourself and you'll find you need to be shunted to a representative. I recently needed to switch my phone plan ownership from a personal account to a company account. There were a couple of wrinkles that made my case more complicated than normal which I can't share. Despite 4 or 5 calls, I couldn't get it done. It just didn't seem like the process for doing this type of transfer didn't exist in any codified way. I could explain what I wanted to do in plain language, but it wasn't a valid transition. Not only was it invalid, it seems like nobody at this major phone provider had ever planned for this scenario to happen. Now imagine this scenario under full phone support automation. The system wouldn't even understand what I was trying to do. You could definitely argue that you could design some sort of scenario router that might handle a situation like this, but it seems unlikely that if they couldn't come up with a human process, I doubt they could swing an automated one. Something like AGI could handle a problem like this, but it feels like we're dozens or maybe hundreds of years away from that.
luckylion 6y ago
Were those 2% meant at the then-current 0% (or even negative) inflation or adjusted to modern inflation levels that tend to hover between 1 and 2%?
- microtherion 6y ago
  Presumably they were meant to be real (inflation adjusted) return, rather than nominal. And it's true that between 1880-1900, inflation rates tended to be low or negative (the latter is NOT good for an economy, BTW), but the rest of the 19th century saw highly volatile inflation rates, ranging from -15.75% to +24.75%, if this source is to be believed. Not great for long term investment. https://www.officialdata.org/us/inflation/1800?amount=1 https://www.officialdata.org/us/inflation/1800?amount=1
pmiller2 6y ago
> Walter Bagehot, the de facto founder of The Economist, was of the opinion that people will never stand 2% rates (and he meant plus :) ). They would rather fund anything, any project, the weirdest thing that offers any hope of yield; no matter how stupid. That sounds very much like a description of the modern VC ecosystem.

toomuchtodo 6y ago

Wouldn’t it be more accurate to call it “financial entitlement”, to believe that your capital would always have positive value? While we’ll likely never run out of need for human labor, it’s very possible we’re running out of capital investment opportunities that realize a risk adjusted return above 0. “Too much money chasing too few deals” and all that jazz.

H8crilA 6y ago
I totally agree that growth and gains on capital are not a given, but: 1) The world's real GDP is still going up. Or at least has been till 2019. 2) Even if it was to slow down and remove prospects of gains on capital - it still doesn't mean that people will adjust quickly; you'd have to rewrite the entire concept of pensions for starters. 3) It seems to me that core rates are seriously manipulated down (interest rates, default spreads, equity discount rates); just look at ballooning of the balance sheets of pretty much everything, or look at the share of "zombie" companies, that is companies that cannot even service their interest payments. 3 is of course just an opinion, but if true will result in serious clogging of the machine with useless actors. 3 is where, I believe, things like "bullshit jobs" / "the office" come from, for example.
- toomuchtodo 6y ago
  Agree with your points, hard to know what the future looks like but it’s clear it’s not going to look like the past.
  - H8crilA 6y ago
    BTW, as far as I can tell - the only thing that is still "working" is the Fourth Turning theory. It's a bold theory that many people have called bullshit, but it has worked well since the publication in the 90s. And of course matches the known pre-publication history dating up to a few centuries ago.
    - pmiller2 6y ago
      I wouldn't call it so much BS as "lacking in testable predictions." I think of it as string theory for history, minus all the math.
mindslight 6y ago
We're out of investment opportunities because the Fed keeps creating new money that immediately fills them rather than letting the market do so. The bond market bailout of a few months ago could and should have instead been funded with existing money, with a corresponding rise in bond rates. Expecting that a steward won't wantonly inflate away the currency is not "entitlement". And to the reality that these institutions are no longer constrained by notions of decency, people will move away to non-corrupt currencies.
- collyw 6y ago
  I admit that I have very little knowledge about bond markets, but when you talk about moving away from "corrupt currencies" aren't all goverments / EU doing something similar just now? (is China?)
  - H8crilA 6y ago
    Everyone is in a deep trouble and trying to outprint themselves out of a problem. Even Germany (one of the best govt balance sheet country on the planet in 2019, going full Keynes and actually paying down their debts during the up phase of the cycle) may see a ratings downgrade. The CDS market is toying with this idea. We don't know which type of volatility are we going to experience, the left tail or the right tail. So far major currencies are actually strengthening (deflation) against consumer baskets, but it's early days, I think. Maybe even neither! In either case, I'm watching the bond yields (while they are still visible ;) ), various consumer inflation measures and most importantly gold. Gold will tell you what's going on.
    - pmiller2 6y ago
      The thing about printing money though, is that if everybody does it, it negates a lot of the effect. That means that if you want the effect, you have to print more and more to keep up. The only other alternative is to realize that money is essentially a fictional construct that keeps capitalism moving forward, and to consider that people may not need to be slaves to some numbers in a computer system.
nogabebop23 6y ago
>> While we’ll likely never run out of need for human labor, it’s very possible we’re running out of capital investment opportunities Is this true? automation is essentially a emphasis from human to physical capital. It seems like we're continuing to reduce and specialize human capital while growing other forms. Now I definitely see an end to passive capital gains in traditional financial markets; there's a lot of money sloshing around with not enough good places to put it. Anything near-passive (i.e. real estate) is also feeling similar pressures. It seems like a great time to build big projects that take a huge amount of money, I'm just not on board with pure public funding and all the issues that go with that.
- pmiller2 6y ago
  > Now I definitely see an end to passive capital gains in traditional financial markets; there's a lot of money sloshing around with not enough good places to put it. Anything near-passive (i.e. real estate) is also feeling similar pressures. It seems like a great time to build big projects that take a huge amount of money, I'm just not on board with pure public funding and all the issues that go with that. Carry this a little further, and this means either the death of the concept of retirement as we know it. > Is this true? automation is essentially a emphasis from human to physical capital. It seems like we're continuing to reduce and specialize human capital while growing other forms. Here is really the only hope. If we can recognize one day that it's just plain not necessary for humans to labor for ~50 years between ~20 and ~70, leaving them only with their "golden years" -- the ones where serious health problems start to take the life out of life. I don't know what to call this type of society. It certainly wouldn't be "capitalist" in any real sense. It may be "post scarcity," but not necessarily. Perhaps it will be some weird techno-socialist thing?
- tschwimmer 6y ago
  I'm becoming less and less bullish on automation. It may be stupid, but I think that a lot of commmon tasks are functionally un-automatable, or at least not at an acceptable level of error. Think about something as simple as phone support for pretty much any product or service. There's a ton of automation being employed there to relatively little effect - just try to do anything meaningful at any company yourself and you'll find you need to be shunted to a representative. I recently needed to switch my phone plan ownership from a personal account to a company account. There were a couple of wrinkles that made my case more complicated than normal which I can't share. Despite 4 or 5 calls, I couldn't get it done. It just didn't seem like the process for doing this type of transfer didn't exist in any codified way. I could explain what I wanted to do in plain language, but it wasn't a valid transition. Not only was it invalid, it seems like nobody at this major phone provider had ever planned for this scenario to happen. Now imagine this scenario under full phone support automation. The system wouldn't even understand what I was trying to do. You could definitely argue that you could design some sort of scenario router that might handle a situation like this, but it seems unlikely that if they couldn't come up with a human process, I doubt they could swing an automated one. Something like AGI could handle a problem like this, but it feels like we're dozens or maybe hundreds of years away from that.

luckylion 6y ago

Were those 2% meant at the then-current 0% (or even negative) inflation or adjusted to modern inflation levels that tend to hover between 1 and 2%?

microtherion 6y ago
Presumably they were meant to be real (inflation adjusted) return, rather than nominal. And it's true that between 1880-1900, inflation rates tended to be low or negative (the latter is NOT good for an economy, BTW), but the rest of the 19th century saw highly volatile inflation rates, ranging from -15.75% to +24.75%, if this source is to be believed. Not great for long term investment. https://www.officialdata.org/us/inflation/1800?amount=1 https://www.officialdata.org/us/inflation/1800?amount=1

pmiller2 6y ago

> Walter Bagehot, the de facto founder of The Economist, was of the opinion that people will never stand 2% rates (and he meant plus :) ). They would rather fund anything, any project, the weirdest thing that offers any hope of yield; no matter how stupid. That sounds very much like a description of the modern VC ecosystem.