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Why Markets Boomed in a Year of Human Misery

86 points by tin7in 6y ago

sfblah 6y ago
The headline says it wasn’t just the Fed and stimulus. But then the chart shows that in fact large swaths of it were PPP loans, unemployment benefits and stimulus payments. All in a year where apparently (PPP excepted) total pay for employees almost didn’t go down at all. What this all suggests to me is that to pay for this we should have taxed high earners and not used debt. I say this because I fear inflating markets (stocks, housing, whatever) will actually wind up harming the middle class if/when the bubble bursts. Better just not to have the bubble in the first place, by taxing the money away on the front end.
- maria_weber23 6y ago
  That would be a death sentence for the current administration. It's always the same game. Whoever is in power does EVERYTHING imaginable to make themselves look good and unload all the fallout into the next term(s), which is often held by the opposing party, and if not, the game of deferring will simply continue... Until at some point it simply can't and we get a big bang. Why are people still thinking that taxing high earners is an option? The world is ruled by rich people, why would they tax themselves? Doesn't make any sense. Democracy is nice, until all the choices you have, exhibit the same underlying core values that you disagree with. Normally all successful parties will aim for the middle, where there are most voters. The ones that don't, are marginalized and perhaps have some chance at succeeding during times where voters go astray and just vote some extremists out of sheer frustration (like it happened in Germany a couple of times). But that never lasts. This seriously limits democracy, as you can be sure that some values will never change, because there is no party with enough votes to make these changes. Instead, what we need is Democracy 2.0, where the people vote on individual packages, not parties. Switzerland may be the only country where that works out quite well.
  - sjg007 6y ago
    Growing income inequality will lead to authoritarianism and then eventual revolution. We need a win:win situation and taxing the super rich is usually the best option.
  - nine_zeros 6y ago
    > Instead, what we need is Democracy 2.0, where the people vote on individual packages, not parties. Switzerland may be the only country where that works out quite well. This is hard and inefficient in a large country with an underlying population that lacks critical thinking. We could instead use a multi-party system where multiple voices are raised in the house and senate votes.
    - jfengel 6y ago
      The voices actually are raised, in the hearings. You can watch some of them on C-SPAN. The floor of a chamber with 100 or 435 members isn't really suited for debate, but it does happen. The vote is the very tail end of a long deliberative process. Most people only look at that tail end because the deliberation is dull, but if you want to know what it looks like, much of it is available to the public.
      - jlokier 6y ago
        And yet on some of the big headline issues, those tail-end votes are split almost perfectly 50:50 along party lines. Which leads people to think, correctly, that independent-minded critical thinking is not determining those votes.
        jfengel 6y ago
        It's not the vote, which is binary, but what they're voting on. It takes an enormous amount of effort to shape the language. The details matter.
      - nine_zeros 6y ago
        By raising voice, I mean actually voting as their base asks to. Not gonna happen in a two party system where their careers are at stake.
- emerged 6y ago
  Edit: Jeez sore spot on HN. I lost my job due to covid but don’t get a “stimulus” — pointing out this means it’s income redistribution not stimulus and not relief for those impacted. That is factually true.
  - BoorishBears 6y ago
    What was the difference in salary between the two of you when you were both working?
  - j-pb 6y ago
    The people being taxed would be the billionares. Those are by no measure the "productive" members of society, these people are statistical outliers created by chance and luck in an unstable system that sometimes creates self enforcing feedback loops that grow exponentially. We should recognize these feedback loops as a bug and rectify them. The fact that you even had a job that you could loose, means that you are NOT in that category, and (statistically speaking) never will be.
    - lotsofpulp 6y ago
      How do you plan on taxing unrecognized capital gains? Forcing the sale of equity? What parameters determine when someone is forced to sell equity? How about equity in non publicly listed assets, which don’t have a deep market or clear price?
      - j-pb 6y ago
        "Taxing the super rich is hard, so let's not do it." That's what tax inspectors are for.
        lotsofpulp 6y ago
        What is the purpose of misrepresenting a comment? If it makes it clearer, suppose the market value of the assets you own increases from $10M to $15M in a year. How would you tax this? Do you start forcing people to sell? What if the asset they own isn’t publicly traded, for example land, or privately owned companies? It’s not a “gotcha I’m against increasing taxes on wealthier people statement”. It’s a legitimate question on how to operate society when do much of the wealth is simply from increasing asset prices and decreasing currency values.
- atombender 6y ago
  Taxes can only be increased for the following tax year, so how would this have helped in March?
  - wutbrodo 6y ago
    I don't think he literally meant don't use debt as a vehicle; that's not really how government finances work IIUC. The suggestion is tying a funding source to new spending instead of taking on an unfunded liability. Carrying a year of interest at current rates is irrelevant.
- imtringued 6y ago
  There is no bubble, it's just that every dollar the central bank is pumping out is ending up in the wrong place.
Synaesthesia 6y ago
Because "the markets" meaning the stock markets is the owners and managers of capital, the wealthy adn the powerful. They did well, large Internet conmerce companies were positioned to take advantage of the pandemic. The markets don't care if lots of people lost their jobs or had an atrocious year. It's all about the quarterly profits. And the stimulus bill was a huge boon to business. Most of it went to business.
- aniro 6y ago
  The money sent to households was largely used to prop up rents mortgages or food/transportation/insurance and other consumer goods. All that money ended up in business coffers.
  - brazzy 6y ago
    > The money sent to households was largely used to prop up rents mortgages or food/transportation/insurance and other consumer goods. i.e. it was used by the people it was given to so they could pay their bills. You know, survive. Can you describe how a world would work where you can have one without the other? > All that money ended up in business coffers. ...and most of it was then promptly paid out as wages to employees.
    - aniro 6y ago
      I made no comment as to whether it was a good or bad thing. I stated a fact. But the fact that “the Market” has exploded in value while the Federal and State government is making direct payments in order to help a significant portion of the population just survive should be a little concerning, no?
  - beervirus 6y ago
    > business coffers That’s another way of saying that it was used to pay employees.
    - aniro 6y ago
IAmGraydon 6y ago
Very interesting article. Personal anecdote, but I made a gain of 1,100% on investments in 2020. I've positioned for 2021 in leisure, heavily in casinos and sports betting. If savings unwind a bit/spending picks up this year as the article mentions at the end, that should be one of the sectors money flows into.
- s5300 6y ago
  11x pretty low for this year unless it was on 5m+ :P
  - deleted 6y ago
    [deleted]
  - vmception 6y ago
    how about 55x? I thought I was sitting on the sidelines this year, just barely maintaining my finances while being ineligible for PPP or unemployment, but then I found an old position in an account I forgot about.
    - IAmGraydon 6y ago
      That's like finding $20 you left in your winter jacket but better. What company was it?
- marktangotango 6y ago
  How are you investing in sports betting? Publicly traded books like fan duel?
  - IAmGraydon 6y ago
    I'm exposed to sports betting through CZR (acquired William Hill), PENN and DKNG. Largest position is CZR, however.
abhinav22 6y ago
It’s sad that fake news and manipulation has extended far beyond Trumps Twitter account into everything we do. The blatant wealth transfer since the GFC from the majority of the population to the ultra rich is despicable but looks like we are in an end game scenario of capitalism. Average Americans barely get 600$ to survive whilst corporates get such huge bailouts. Same thing happened during the GFC and the years since, when the fed printed money and pushed it back into the markets via QE. This is not a republican or democrat problem, they are both equally complicit in all of this. I work in Finance, and to see all those around me try and use sophisticated language and models and avoid admitting the glaringly obvious shows the lack of ethics and a morale compass. We are all getting played by the rich and ultra rich. Edit: Whats really got me is the role of pension funds in this. Pension funds worldwide are an aggregation of our savings, yet they are pushing capital more and more into markets and increasing our cost of living (especially property prices by doing so). Fund managers and pension managers all along the way get a cut through performance fees, whilst we get stuck with unbearable rent prices and we don’t get much benefit of the investment gain since inflation will reduce the value of the dollar...
- seibelj 6y ago
  Buy bitcoin and promote it to others. It is a global escape hatch away from inflating fiat currency and corrupt elites who control the money printers.
- imtringued 6y ago
  I think it is pretty weird that Trump is popular among the middle class and lower strata of society. He is the go to example of a rich asshole billionaire that is only looking out for himself. He is promising the moon like every other politician but it's extremely easy to look behind his words precisely because of his economic background. Democrats are just as bad when it is about the things that matter but they are not glaringly bad like Trump. Fixing first world economies is not very difficult if you had a benevolent dictator whose only job was to fix the economy. I'm not advocating against democracy but every time there is a systemic issue the fundamental cause lies in power creep of the wealthy and the difficulty of telling the population to accept a tiny bit of hardship for massive future gains because they are already used to getting screwed over all the time.
CyberRabbi 6y ago
This isn’t rocket science. At least 20% of all dollars that have ever existed were created this year. It’s inflation. This is also why Bitcoin is peaking. It’s really interesting to me that media outlets like the NYT continue to obscure this fact. For those who don’t believe me check out how the dollar has declined relative to other currencies. I’m not making this up: https://www.reuters.com/article/uk-global-forex/more-weakness-seen-as-dollar-posts-worst-year-since-2017-idUSKBN29501M https://www.reuters.com/article/uk-global-forex/more-weaknes...
- wazoox 6y ago
  Exactly. Dollar is declining quite fast in value against the Yuan, particularly if you take into account base rates.
- soared 6y ago
  The consumer price index shows it isn't inflation. This is 20 years of data and you can click each basket to see it on the graph. "ALL" is up 1% YoY. https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm https://www.bls.gov/charts/consumer-price-index/consumer-pri... The only item baskets I found with recent increases are food, new vehicles, and medical care.
  - CyberRabbi 6y ago
    The immediate price of goods isn’t the only measure of inflation. The fact is that the supply of the dollar has exploded. https://www.cnbc.com/2020/12/31/forex-markets-dollar.html https://www.cnbc.com/2020/12/31/forex-markets-dollar.html
    - SpicyLemonZest 6y ago
      Inflation is by definition an increase in prices. The amount of money in the economy is called the "money supply". Some economists do argue that the money supply is the primary factor in determining inflation, but that's very different than saying that increases in the money supply are inflation, because the need for money in the economy (usually expressed in terms of the "velocity of money") can vary.
defnmacro 6y ago
It's simpler than that ZIRP simply means the only way to find yield is in assets i.e. to fulfill fiduciary obligations i.e. pensions you have to go further out on the risk curve to produce that yield e.g. buy equities. The equation is simply one of risk adjusted return relative to sharpe and there's currently no yield in US debt.
giantrobot 6y ago
TINA: There is no alternative When markets are the only place to put money that beats inflation, that's where people with money will put it. As more money gets dumped into equities their price goes up. Since those "investors" are just looking to hold the equity until someone else comes along and pays more for it they don't care about fundamentals or dividends. Some companies have good fundamentals and have done well despite the pandemic. Many more have only gotten by with government handouts. A lot of exuberance today comes from big traders picking up stocks at a huge discount last March. The huge market drops were basically an interest free loan to anyone with enough money to pick up more stocks. It's a great environment if you've already got money or retired recently with stocks as a large component of your investment portfolio. For everyone else the markets haven't done anything useful, if anything they've convinced low information voters that the economy is doing better than it is.
- apta_ 6y ago
  Exactly. It's basically inflation, just not in day to day commodities (food, groceries, etc.). I think it's the same reason bitcoin price is jumping.
  - imtringued 6y ago
    In theory Bitcoin should perform about as well as gold. Gold did pretty well this year but what Bitcoin did is so insane it is bound to see a correction eventually.
    - hobby-coder-guy 6y ago
      >In theory What theory?
    - pashamur 6y ago
      In theory, yes, but similar amounts of inflows to bitcoin/gold will result in different performances since the market cap of bitcoin is so much smaller (supposedly the circulating supply is ~4 million bitcoin, so functionally ~120 billion USD float currently, versus multi-trillion for gold).
Gunax 6y ago
In reality a bad year is just a bad year, and many investors are (imo perfectly rationally) expect the market to return to normal soon. The 'investor class' often gets derided for being short-sighted, but this is nonsense. In reality there are plenty of long-outlook investors who recognize this is a temporary set-back, and even then only in certain industries. Even companies that had to essentially write '0' for revenue on their last 3 10-Qs are typically only marginally down. [1][2][3]. When stocks go up, the narrative is 'look! all the rich are getting richer!' When stocks fall it's 'Those greedy millionaires are short sighted, look at what happened to everyone's pension!' [1] https://www.marketwatch.com/investing/stock/dal https://www.marketwatch.com/investing/stock/dal [2] https://www.marketwatch.com/investing/stock/ual https://www.marketwatch.com/investing/stock/ual [3] https://www.marketwatch.com/investing/stock/ccl https://www.marketwatch.com/investing/stock/ccl
- wutbrodo 6y ago
  > When stocks go up, the narrative is 'look! all the rich are getting richer!' > When stocks fall it's 'Those greedy millionaires are short sighted, look at what happened to everyone's pension!' This hits the nail on the head. When the stock market was down 30% in Q2 and personal income was _up_, nobody was writing breathless articles about how investors were getting screwed while the common man was fine. It's pretty shocking how unserious coverage of the stock market is, from picking dishonest time windows ("stock market up 10% during pandemic! [counting from after the 30% crash]") to selectively ignoring the difference in time horizons between equity prices and snapshot economic statistics. A good rule of thumb is that reading mainstream articles harrumphing about the stock market is a waste of one's time, unless you're looking for a cable-news style dose of misinformed outrage for recreational reasons.
  - harryh 6y ago
    stock market up 10% during pandemic! [counting from after the 30% crash] God these articles/tweets drove me absolutely nuts and they were everywhere. It was so disheartening to see.
fasteddie31003 6y ago
So I'm going to hell for this comment but could be a premature death for older, sick people be a good thing for the economy in the long run? Maybe future medical bills would be lower. A redistribution of wealth from older people to younger people with more opportunities for growth. I am not calculating the emotional toll for these deaths. It is not a friendly comment that I bring up easily, but it is something that must be considered. Please convince me that I'm wrong. Let me say that I am not an evil person and do not wish death upon anyone.
- wallacoloo 6y ago
  > Please convince me that I’m wrong More working-age people will be inheriting homes and wealth than in a typical year, as you suggest. If I was one of those people, I would use that as an opportunity to retire (why keep working for someone else if I already own a home and savings?). That means more working people than usual might retire this year, which I think is generally not good for an economy (less production).
  - imtringued 6y ago
    Well, the problems with an aging society is that there are less children than parents which means that fewer people are inheriting money. You would expect that a lot of the money goes to the first child and probably only child of a billionaire or millionaire.
- arnoooooo 6y ago
  The economy is supposed to serve people. Older people are people. A better question would be to ask if people overall are better off when order people die sooner… but that kind of question is always morally very difficult to answer.
- imtringued 6y ago
  You have to consider that healthcare is a wealth transfer from older people to younger people because young workers are taking care of the old. It's entirely possible that what you propose is a net loss economically.

86 points by tin7in 6y ago

The headline says it wasn’t just the Fed and stimulus. But then the chart shows that in fact large swaths of it were PPP loans, unemployment benefits and stimulus payments. All in a year where apparently (PPP excepted) total pay for employees almost didn’t go down at all. What this all suggests to me is that to pay for this we should have taxed high earners and not used debt. I say this because I fear inflating markets (stocks, housing, whatever) will actually wind up harming the middle class if/when the bubble bursts. Better just not to have the bubble in the first place, by taxing the money away on the front end.

maria_weber23 6y ago
That would be a death sentence for the current administration. It's always the same game. Whoever is in power does EVERYTHING imaginable to make themselves look good and unload all the fallout into the next term(s), which is often held by the opposing party, and if not, the game of deferring will simply continue... Until at some point it simply can't and we get a big bang. Why are people still thinking that taxing high earners is an option? The world is ruled by rich people, why would they tax themselves? Doesn't make any sense. Democracy is nice, until all the choices you have, exhibit the same underlying core values that you disagree with. Normally all successful parties will aim for the middle, where there are most voters. The ones that don't, are marginalized and perhaps have some chance at succeeding during times where voters go astray and just vote some extremists out of sheer frustration (like it happened in Germany a couple of times). But that never lasts. This seriously limits democracy, as you can be sure that some values will never change, because there is no party with enough votes to make these changes. Instead, what we need is Democracy 2.0, where the people vote on individual packages, not parties. Switzerland may be the only country where that works out quite well.
- sjg007 6y ago
  Growing income inequality will lead to authoritarianism and then eventual revolution. We need a win:win situation and taxing the super rich is usually the best option.
- nine_zeros 6y ago
  > Instead, what we need is Democracy 2.0, where the people vote on individual packages, not parties. Switzerland may be the only country where that works out quite well. This is hard and inefficient in a large country with an underlying population that lacks critical thinking. We could instead use a multi-party system where multiple voices are raised in the house and senate votes.
  - jfengel 6y ago
    The voices actually are raised, in the hearings. You can watch some of them on C-SPAN. The floor of a chamber with 100 or 435 members isn't really suited for debate, but it does happen. The vote is the very tail end of a long deliberative process. Most people only look at that tail end because the deliberation is dull, but if you want to know what it looks like, much of it is available to the public.
    - jlokier 6y ago
      And yet on some of the big headline issues, those tail-end votes are split almost perfectly 50:50 along party lines. Which leads people to think, correctly, that independent-minded critical thinking is not determining those votes.
      - jfengel 6y ago
        It's not the vote, which is binary, but what they're voting on. It takes an enormous amount of effort to shape the language. The details matter.
    - nine_zeros 6y ago
      By raising voice, I mean actually voting as their base asks to. Not gonna happen in a two party system where their careers are at stake.
emerged 6y ago
Edit: Jeez sore spot on HN. I lost my job due to covid but don’t get a “stimulus” — pointing out this means it’s income redistribution not stimulus and not relief for those impacted. That is factually true.
- BoorishBears 6y ago
  What was the difference in salary between the two of you when you were both working?
- j-pb 6y ago
  The people being taxed would be the billionares. Those are by no measure the "productive" members of society, these people are statistical outliers created by chance and luck in an unstable system that sometimes creates self enforcing feedback loops that grow exponentially. We should recognize these feedback loops as a bug and rectify them. The fact that you even had a job that you could loose, means that you are NOT in that category, and (statistically speaking) never will be.
  - lotsofpulp 6y ago
    How do you plan on taxing unrecognized capital gains? Forcing the sale of equity? What parameters determine when someone is forced to sell equity? How about equity in non publicly listed assets, which don’t have a deep market or clear price?
    - j-pb 6y ago
      "Taxing the super rich is hard, so let's not do it." That's what tax inspectors are for.
      - lotsofpulp 6y ago
        What is the purpose of misrepresenting a comment? If it makes it clearer, suppose the market value of the assets you own increases from $10M to $15M in a year. How would you tax this? Do you start forcing people to sell? What if the asset they own isn’t publicly traded, for example land, or privately owned companies? It’s not a “gotcha I’m against increasing taxes on wealthier people statement”. It’s a legitimate question on how to operate society when do much of the wealth is simply from increasing asset prices and decreasing currency values.
atombender 6y ago
Taxes can only be increased for the following tax year, so how would this have helped in March?
- wutbrodo 6y ago
  I don't think he literally meant don't use debt as a vehicle; that's not really how government finances work IIUC. The suggestion is tying a funding source to new spending instead of taking on an unfunded liability. Carrying a year of interest at current rates is irrelevant.
imtringued 6y ago
There is no bubble, it's just that every dollar the central bank is pumping out is ending up in the wrong place.

Synaesthesia 6y ago

Because "the markets" meaning the stock markets is the owners and managers of capital, the wealthy adn the powerful. They did well, large Internet conmerce companies were positioned to take advantage of the pandemic. The markets don't care if lots of people lost their jobs or had an atrocious year. It's all about the quarterly profits. And the stimulus bill was a huge boon to business. Most of it went to business.

aniro 6y ago
The money sent to households was largely used to prop up rents mortgages or food/transportation/insurance and other consumer goods. All that money ended up in business coffers.
- brazzy 6y ago
  > The money sent to households was largely used to prop up rents mortgages or food/transportation/insurance and other consumer goods. i.e. it was used by the people it was given to so they could pay their bills. You know, survive. Can you describe how a world would work where you can have one without the other? > All that money ended up in business coffers. ...and most of it was then promptly paid out as wages to employees.
  - aniro 6y ago
    I made no comment as to whether it was a good or bad thing. I stated a fact. But the fact that “the Market” has exploded in value while the Federal and State government is making direct payments in order to help a significant portion of the population just survive should be a little concerning, no?
- beervirus 6y ago
  > business coffers That’s another way of saying that it was used to pay employees.
  - aniro 6y ago

IAmGraydon 6y ago

Very interesting article. Personal anecdote, but I made a gain of 1,100% on investments in 2020. I've positioned for 2021 in leisure, heavily in casinos and sports betting. If savings unwind a bit/spending picks up this year as the article mentions at the end, that should be one of the sectors money flows into.

s5300 6y ago
11x pretty low for this year unless it was on 5m+ :P
- deleted 6y ago
  [deleted]
- vmception 6y ago
  how about 55x? I thought I was sitting on the sidelines this year, just barely maintaining my finances while being ineligible for PPP or unemployment, but then I found an old position in an account I forgot about.
  - IAmGraydon 6y ago
    That's like finding $20 you left in your winter jacket but better. What company was it?
marktangotango 6y ago
How are you investing in sports betting? Publicly traded books like fan duel?
- IAmGraydon 6y ago
  I'm exposed to sports betting through CZR (acquired William Hill), PENN and DKNG. Largest position is CZR, however.

abhinav22 6y ago

It’s sad that fake news and manipulation has extended far beyond Trumps Twitter account into everything we do. The blatant wealth transfer since the GFC from the majority of the population to the ultra rich is despicable but looks like we are in an end game scenario of capitalism. Average Americans barely get 600$ to survive whilst corporates get such huge bailouts. Same thing happened during the GFC and the years since, when the fed printed money and pushed it back into the markets via QE. This is not a republican or democrat problem, they are both equally complicit in all of this. I work in Finance, and to see all those around me try and use sophisticated language and models and avoid admitting the glaringly obvious shows the lack of ethics and a morale compass. We are all getting played by the rich and ultra rich. Edit: Whats really got me is the role of pension funds in this. Pension funds worldwide are an aggregation of our savings, yet they are pushing capital more and more into markets and increasing our cost of living (especially property prices by doing so). Fund managers and pension managers all along the way get a cut through performance fees, whilst we get stuck with unbearable rent prices and we don’t get much benefit of the investment gain since inflation will reduce the value of the dollar...

seibelj 6y ago
Buy bitcoin and promote it to others. It is a global escape hatch away from inflating fiat currency and corrupt elites who control the money printers.
imtringued 6y ago
I think it is pretty weird that Trump is popular among the middle class and lower strata of society. He is the go to example of a rich asshole billionaire that is only looking out for himself. He is promising the moon like every other politician but it's extremely easy to look behind his words precisely because of his economic background. Democrats are just as bad when it is about the things that matter but they are not glaringly bad like Trump. Fixing first world economies is not very difficult if you had a benevolent dictator whose only job was to fix the economy. I'm not advocating against democracy but every time there is a systemic issue the fundamental cause lies in power creep of the wealthy and the difficulty of telling the population to accept a tiny bit of hardship for massive future gains because they are already used to getting screwed over all the time.

CyberRabbi 6y ago

This isn’t rocket science. At least 20% of all dollars that have ever existed were created this year. It’s inflation. This is also why Bitcoin is peaking. It’s really interesting to me that media outlets like the NYT continue to obscure this fact. For those who don’t believe me check out how the dollar has declined relative to other currencies. I’m not making this up: https://www.reuters.com/article/uk-global-forex/more-weakness-seen-as-dollar-posts-worst-year-since-2017-idUSKBN29501M https://www.reuters.com/article/uk-global-forex/more-weaknes...

wazoox 6y ago
Exactly. Dollar is declining quite fast in value against the Yuan, particularly if you take into account base rates.
soared 6y ago
The consumer price index shows it isn't inflation. This is 20 years of data and you can click each basket to see it on the graph. "ALL" is up 1% YoY. https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm https://www.bls.gov/charts/consumer-price-index/consumer-pri... The only item baskets I found with recent increases are food, new vehicles, and medical care.
- CyberRabbi 6y ago
  The immediate price of goods isn’t the only measure of inflation. The fact is that the supply of the dollar has exploded. https://www.cnbc.com/2020/12/31/forex-markets-dollar.html https://www.cnbc.com/2020/12/31/forex-markets-dollar.html
  - SpicyLemonZest 6y ago
    Inflation is by definition an increase in prices. The amount of money in the economy is called the "money supply". Some economists do argue that the money supply is the primary factor in determining inflation, but that's very different than saying that increases in the money supply are inflation, because the need for money in the economy (usually expressed in terms of the "velocity of money") can vary.

defnmacro 6y ago

It's simpler than that ZIRP simply means the only way to find yield is in assets i.e. to fulfill fiduciary obligations i.e. pensions you have to go further out on the risk curve to produce that yield e.g. buy equities. The equation is simply one of risk adjusted return relative to sharpe and there's currently no yield in US debt.

giantrobot 6y ago

TINA: There is no alternative When markets are the only place to put money that beats inflation, that's where people with money will put it. As more money gets dumped into equities their price goes up. Since those "investors" are just looking to hold the equity until someone else comes along and pays more for it they don't care about fundamentals or dividends. Some companies have good fundamentals and have done well despite the pandemic. Many more have only gotten by with government handouts. A lot of exuberance today comes from big traders picking up stocks at a huge discount last March. The huge market drops were basically an interest free loan to anyone with enough money to pick up more stocks. It's a great environment if you've already got money or retired recently with stocks as a large component of your investment portfolio. For everyone else the markets haven't done anything useful, if anything they've convinced low information voters that the economy is doing better than it is.

apta_ 6y ago
Exactly. It's basically inflation, just not in day to day commodities (food, groceries, etc.). I think it's the same reason bitcoin price is jumping.
- imtringued 6y ago
  In theory Bitcoin should perform about as well as gold. Gold did pretty well this year but what Bitcoin did is so insane it is bound to see a correction eventually.
  - hobby-coder-guy 6y ago
    >In theory What theory?
  - pashamur 6y ago
    In theory, yes, but similar amounts of inflows to bitcoin/gold will result in different performances since the market cap of bitcoin is so much smaller (supposedly the circulating supply is ~4 million bitcoin, so functionally ~120 billion USD float currently, versus multi-trillion for gold).

Gunax 6y ago

In reality a bad year is just a bad year, and many investors are (imo perfectly rationally) expect the market to return to normal soon. The 'investor class' often gets derided for being short-sighted, but this is nonsense. In reality there are plenty of long-outlook investors who recognize this is a temporary set-back, and even then only in certain industries. Even companies that had to essentially write '0' for revenue on their last 3 10-Qs are typically only marginally down. [1][2][3]. When stocks go up, the narrative is 'look! all the rich are getting richer!' When stocks fall it's 'Those greedy millionaires are short sighted, look at what happened to everyone's pension!' [1] https://www.marketwatch.com/investing/stock/dal https://www.marketwatch.com/investing/stock/dal [2] https://www.marketwatch.com/investing/stock/ual https://www.marketwatch.com/investing/stock/ual [3] https://www.marketwatch.com/investing/stock/ccl https://www.marketwatch.com/investing/stock/ccl

wutbrodo 6y ago
> When stocks go up, the narrative is 'look! all the rich are getting richer!' > When stocks fall it's 'Those greedy millionaires are short sighted, look at what happened to everyone's pension!' This hits the nail on the head. When the stock market was down 30% in Q2 and personal income was _up_, nobody was writing breathless articles about how investors were getting screwed while the common man was fine. It's pretty shocking how unserious coverage of the stock market is, from picking dishonest time windows ("stock market up 10% during pandemic! [counting from after the 30% crash]") to selectively ignoring the difference in time horizons between equity prices and snapshot economic statistics. A good rule of thumb is that reading mainstream articles harrumphing about the stock market is a waste of one's time, unless you're looking for a cable-news style dose of misinformed outrage for recreational reasons.
- harryh 6y ago
  stock market up 10% during pandemic! [counting from after the 30% crash] God these articles/tweets drove me absolutely nuts and they were everywhere. It was so disheartening to see.

fasteddie31003 6y ago

So I'm going to hell for this comment but could be a premature death for older, sick people be a good thing for the economy in the long run? Maybe future medical bills would be lower. A redistribution of wealth from older people to younger people with more opportunities for growth. I am not calculating the emotional toll for these deaths. It is not a friendly comment that I bring up easily, but it is something that must be considered. Please convince me that I'm wrong. Let me say that I am not an evil person and do not wish death upon anyone.

wallacoloo 6y ago
> Please convince me that I’m wrong More working-age people will be inheriting homes and wealth than in a typical year, as you suggest. If I was one of those people, I would use that as an opportunity to retire (why keep working for someone else if I already own a home and savings?). That means more working people than usual might retire this year, which I think is generally not good for an economy (less production).
- imtringued 6y ago
  Well, the problems with an aging society is that there are less children than parents which means that fewer people are inheriting money. You would expect that a lot of the money goes to the first child and probably only child of a billionaire or millionaire.
arnoooooo 6y ago
The economy is supposed to serve people. Older people are people. A better question would be to ask if people overall are better off when order people die sooner… but that kind of question is always morally very difficult to answer.
imtringued 6y ago
You have to consider that healthcare is a wealth transfer from older people to younger people because young workers are taking care of the old. It's entirely possible that what you propose is a net loss economically.