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You're absolutely right, its not the same and it will likely fail in ways we can't predict just yet. The 2008 crisis taught the US Federal Reserve how to respo

by pm90 6y ago

You're absolutely right, its not the same and it will likely fail in ways we can't predict just yet. The 2008 crisis taught the US Federal Reserve how to respond to an economic crisis effectively, and they've been pretty successful at managing the current one. Note that Fed's main concerns are macroeconomic, so their assistance necessarily goes mostly to larger corporations and financial institutions, which seem to be doing OK (smaller businesses are suffering, but Congress stepped in for them... somewhat). I don't anticipate a liquidity shortage-triggered panic + recession like 2008. However, all asset prices seem to be inflated. Real estate, crypto, stocks... all going up and up. They can't do so forever, it will be interesting to see how it fails this time.

vmception 6y ago
When you tie pricing metrics to interest rates, they are either not inflated or not that inflated. You have to account for the amount of money in the system and how that money seeks to beat inflation. You can't just pick up 40-year old chart analysis books and say "aha the P/E ratio for this sector is higher than normal", it is all part of an ecosystem. The macroeconomic policy is going to be a greater influence than any chart-based psychology proxy or seeing how many essential workers are talking about investing their spare change. Right now, more money is going to be created or distributed in the trillions. If the Central Banks are instructed to be involved, or chose to be involved, their method of getting new money into the market will be by purchasing more bonds which pushes interest rates even lower. The only thing this didn't predict were new ephemeral asset classes, crypto. That people are opting to buy.
Animats 6y ago
You're absolutely right, its not the same and it will likely fail in ways we can't predict just yet. Yes. We haven't yet had a bubble collapse in a time of zero or negative real interest rates. When it happens, cutting interest rates will not be an option. That option has been used up.
- anonisko 6y ago
  Like a junkie chasing that first high. You keep needing more and more but never get close to the first, until suddenly you wake up and realizing your life collapsed around you and your drug doesn't work at all anymore.

by pm90 6y ago

vmception 6y ago

When you tie pricing metrics to interest rates, they are either not inflated or not that inflated. You have to account for the amount of money in the system and how that money seeks to beat inflation. You can't just pick up 40-year old chart analysis books and say "aha the P/E ratio for this sector is higher than normal", it is all part of an ecosystem. The macroeconomic policy is going to be a greater influence than any chart-based psychology proxy or seeing how many essential workers are talking about investing their spare change. Right now, more money is going to be created or distributed in the trillions. If the Central Banks are instructed to be involved, or chose to be involved, their method of getting new money into the market will be by purchasing more bonds which pushes interest rates even lower. The only thing this didn't predict were new ephemeral asset classes, crypto. That people are opting to buy.

Animats 6y ago

You're absolutely right, its not the same and it will likely fail in ways we can't predict just yet. Yes. We haven't yet had a bubble collapse in a time of zero or negative real interest rates. When it happens, cutting interest rates will not be an option. That option has been used up.

anonisko 6y ago
Like a junkie chasing that first high. You keep needing more and more but never get close to the first, until suddenly you wake up and realizing your life collapsed around you and your drug doesn't work at all anymore.