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This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable s
by kristopolous 6y ago
This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries.
As far as a stable society goes, low interest rates are a good sign
Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and failure, yes, but the banks are still open, the lights are still on, the trash is still going out, your mail is still arriving... Things are more or less still operational
- xwdv 6y agoA plane crashed in Indonesia.
- phkahler 6y agothe US budget deficit is rising, soon out of control IMHO. Raising rates is no longer viable without severe consequences. Nobody has seemed to realize that it's the rate of change in interest rates that has an effect, not the absolute level of them (within reason). The stock market is one giant bubble. People talk occasionally about negative interest rates, and wonder how A) that might work and B) how not to have people realize what a house of cards it all is. But sure, rates are low and everything is great!
- anewaccount2021 6y agoRates can never rise. Americans and American corporations are too indebted with no room to finance increased debt servicing costs. The dilemma is the longer rates stay low, the more debt is piled on. Ultimately there must be a complete reset.
- phkahler 6y agoYes. The 2008 bubble popped when the fed made an abrupt upward change in rates. Because housing prices vary inversely with rates, that put people under water. Now imagine the same effect with corporate and government finances on a much larger scale.
- pochamago 6y agoEthiopia effectively started a civil war, but I don't think it's source is the pandemic.
- anewaccount2021 6y agoInterest rates are the cost to borrow money. Money isn't scarce, so its worth less, and as a result, costs less to borrow. Devalued currencies tend not to be consistent with historical stability - they tend to arrive around the same time a society "resets".
- koolba 6y ago> ... currencies haven't been debased ... We’ve printed trillions of dollars and Congress is en route to print trillions more. The price for that has yet to be paid.
- ahepp 6y agoYet interest rates have yet to respond (unless I have missed some major news). You are correct to point out the risk, but I don't think we can call it currency debasement yet.
- kangaroozach 6y agoPrinting money is debasing currency, no? We are stealing purchasing power from every holder of dollars.
- klodolph 6y agoThis is incorrect. The value of money will change, and the amount of money will change, but they are not perfect mirrors of each other.
- ahepp 6y agoOnly if the purchasing power of a dollar goes down. I know MMT is controversial, but I think of it more as a focus on empiricism. Sure, rationality suggests that printing dollars will reduce the value of dollars. But kickstarting inflation is in some ways the entire point, no? And it has remained consistently below FR targets for the past decade (I believe, I'm not an economist and I'm not looking at any charts)
- jbay808 6y agoIf I run a bakery and you run, say, the Mint... Ten years ago, I bake a loaf of bread, and sell it for a dollar. Then I invent an amazing machine that can produce the same bread more cheaply. I'm about to drop my bread prices, but you mint some new coins and add them into circulation. So I keep the price at a dollar per loaf. I scrutinize my bread supply chain to the last detail. I optimize the flour, I optimize the temperature. I fire all the workers and replace them with machines. I'm saving every penny I can. Loaves get made faster! Loaves get made cheaper! Bread is flying off the conveyor belt! You pull a lever and crank up the printing press. Dollars are being added in the millions, in the billions! The price of bread stays at a dollar; has the currency been debased? I honestly don't know.
- lmkg 6y agoIt's somewhat surprising because the recognition of "risk" as a concept is much more recent, and its relation to finance and rates much more recent than that. If the relation between risk and rates of return has held for longer than that, then it means that it's an emergent phenomenon of markets without anyone actually using it as an intentional strategy.
- dannyw 6y agoI don’t buy this. The recognition that when you lend money to someone, they may default, is something that has existed since bartering. “Risk” has excited forever. Risk is not a new recognition!
- s1artibartfast 6y ago>it means that it's an emergent phenomenon of markets without anyone actually using it as an intentional strategy. This is what pretty much every economist has said about market behavior. Participants don't need to understand theory for the markets to work. In fact, things get weird when participants DO understand it. Humans set prices long before written language was developed to describe supply and demand.
- joe_the_user 6y agoI don't think the concept of risk broadly speaking could possible be new. The danger that things might not work out had to be thought out since you had societies of moderate levels of complexity. See: https://en.wikipedia.org/wiki/History_of_insurance#Ancient_era https://en.wikipedia.org/wiki/History_of_insurance#Ancient_e...
- kristopolous 6y agoAs a formalized quantifiable theory, sure. But it's intuitive. If you think someone has less of a chance of making good on their promises whether because of their actions or some external calamity you will ask for more from them. I wouldn't be surprised to find such relationships chiseled in ancient tablets. Trust, risk and reward among groups is a topic that animal behaviorists study. I'm certainly not in that field but I believe they claim it's a common evolutionary trait and have done experiments with children and primates to show primates lacking this intuition wherein 2-year old humans don't. There was a lecture about this I saw recently. I'll have to dig it up edit: here: https://www.lse.ac.uk/Events/2020/11/202011191630/cooperation https://www.lse.ac.uk/Events/2020/11/202011191630/cooperatio... links at the bottom
- vegetablepotpie 6y ago> there's been an increase in stability and decrease in risk throughout the centuries. Wars, disease, and poverty have been on the decline [0], which is great and makes things more stable and predictable, and therefore debt is less risky and less expensive. It would be great if these trends continue and don’t reverse. However I can’t help but think of the risks climate change will introduce to our world. A world with more extreme weather events is going to chip away at all this stability we have and push us into a less predictable world again [1]. [0] Is the world getting better or worse? A look at the numbers https://m.youtube.com/watch?v=yCm9Ng0bbEQ https://m.youtube.com/watch?v=yCm9Ng0bbEQ [1] How climate change threatens to wreck the economy https://m.youtube.com/watch?v=SMBNWmQcRAc https://m.youtube.com/watch?v=SMBNWmQcRAc
- pishpash 6y agoIt's probably more that capital has become more and more abundant relative to need for capital (whether through wealth accumulation or more advanced financial infrastructure), so of course it has become cheaper and cheaper.
- peteretep 6y ago> Mass death Covid has killed a lot of people and created a lot of heart-break, and it would be heartless to try and minimise that or to view it in purely economic times in this moment. However, I think that in 100 years, future historians will describe the effect of the deaths itself as being pretty negligable: maybe 10% over the expected rate without Covid in 2020 and 2021, maybe 5m people in each year total, against an expected death rate of 50-60m. Many of these deaths were people outside of the primary workforce, unlike say WW2 which killed off many of the young able-bodied men the mid 1900s economies primarily relied on. I guess all I'm really trying to say is that when the story of Covid is written in 100 years time, "mass death" probably won't get much of a look-in vs economical and mental-health costs of lockdown, disruption to business, and so on.
- albertgoeswoof 6y agoDoubt it. If current rates of progress continue, in 100 years five million deaths will be considered immensely tragic
- steveBK123 6y agoArguably 10% may turn out to be the direct-attributable number if you zoom out far enough nationally or globally, but locally & temporally theres been significantly higher numbers. Also remember there’s a lot of death not captured in that number of people who died at home / were never tested / etc that gets captured in the “excess mortality” stat. In NY State and NYC in particular its closer to 30%. Counting total “excess mortality” in NYC is closer to 60% on the year. Note that we’ve annualized here and ~90% of the death in NY took place in about an 8 week period, where the daily death ratepeaked closer to 500-1000% of normal for a week or two. So yes, there was mass death. There are many similar stories in areas of California, Italy, England, etc.
- kristopolous 6y agoRight, I've personally suffered very little and I wanted to be careful to not minimize the tragedy and suffering of those who have. This has been a terrible and tragic event for millions of people. The worst is it was completely avoidable if some of our governments had only valued proper planning for such a predictable event
- gher-shyu3i 6y ago> As far as a stable society goes, low interest rates are a good sign Zero are even better. We've known for literally thousands of years that interest (usury) is parasitic, immoral, and dangerous. Islam, Judaism, and Christianity all outlaw it. Yet we continue to engage in it and wonder why we end up in mess after mess.
- chordalkeyboard 6y agoI disagree. The price of money across a period of time, denominated in monetary units, is the most important price in a diverse economy and setting it to zero causes all sorts of distortions. If someone can’t afford to pay interest on a debt then they should not take on the debt. My opinion of “usury” is that it refers to loans where the interest continues to accumulate if the debt is not paid. I think this can be solved by considering the contract to be a thing that terminates at a specified price.
- gher-shyu3i 6y agoIn Islam, there is no difference if interest continues to accumulate or not. A $1M loan with a $10 "fee" is still a usurious loan and is prohibited. This is not open for opinions. We're not going to have any meaningful progress if this issue is not tackled. Any talk of "equity" is nonsense until then. > setting it to zero causes all sorts of distortions It doesn't, because under Islamic law, loans are purely an act of charity. That's how the Islamic world has operated for a very long time now, until relatively recently where some people have succumbed to the Western economic practices post WWII. If you want to make money, you invest it, where the investor and invetee both take on risk, not like the basically one-sided interest contract where the lender is all but guaranteed to profit.
- chordalkeyboard 6y ago> This is not open for opinions. Thank God and all His angels that I’m not Muslim then. > We're not going to have any meaningful progress if this issue is not tackled. Exactly, however tackling it is going to include educating people on the time value of money. > It doesn't, because under Islamic law, loans are purely an act of charity. Fortunately I don’t abide by Islamic law. > If you want to make money, you invest it, where the investor and invetee both take on risk, not like the basically one-sided interest contract where the lender is all but guaranteed to profit. Lenders are not even close to guaranteed to profit, and a loan is a type of investment.
- anticodon 6y ago> nobody has gone to war I'm pretty sure USA will start a new war in 2021-2022. Most probable targets are Iran, Saudi Arabia, Russia. Russia is the most lucrative target but because of nuclear weapon, most likely more and more protests would be organized to attempt to destroy the country from inside, like they did in Ukraine in 2014. If this strategy fail or is taking too long time, Iran or Saudi Arabia should be prepared. Saudi Arabia is an ally but it's so rich in resources, that there will be some Casus Belli found. Besides there's no longer even a need for even remotely plausible explanation to start plundering other country. Facebook, YouTube and Twitter will explain it all and block all the discontent.
- helge9210 6y ago> like they did in Ukraine in 2014 Which "they" are you referring to?
- anticodon 6y agoEurope and USA. Victoria Nuland was there. I think it was a joint effort.
- helge9210 6y agoI was there too Victoria Nuland giving out sandwiches (literally) in Kyiv is not the same as unmarked Russian special forces opening police arsenals and giving out weapons to criminals in Slovyansk.
- anticodon 6y agoRevolution happened before Slavyansk. It had achieved its goals: now Ukraine is the poorest state in Europe, on par with African countries. Biden's son company Burisma had stolen trillions from Ukraine. All the industry is destroyed. Only Motor Sich still barely survives, but obviously not for long. Besides it was already sold to China, but now there's some dirty scandal about it. Also, my initial point wasn't about Ukraine which served it part already - there's almost nothing left to plunder. I wanted to leave a prediction that in 2021-2022 there will be a new war because USA desperately needs it. For many reasons, mostly economical. I've also named next most probable targets. Just to say "I said so" when it'll happen and point to the original comment.