16 ms·

>Financial elites have been gambling for decades. They seem to be really upset that the plebs now can also do it. I really don't understand this sentiment, as

by jayd16 6y ago

>Financial elites have been gambling for decades. They seem to be really upset that the plebs now can also do it. I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices...but putting that aside... I think the emphasis is more about how there's no other game in town that can compete, not that gambling is new. Interest rates are so low that there isn't a simple/safe investment entity to pull out a reliable 10%. We're all stuck gambling whether we want to or not.

bondarchuk 6y ago
>I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices... The existence of a financial elite hinges on the existence of a non-elite that actually does the work. If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something, it will be bad for the current financial elite. In the end money is just an abstraction to determine who has to do back-breaking work all day, and who doesn't.
- sixstringtheory 6y ago
  > In the end money is just an abstraction to determine who has to do back-breaking work all day, and who doesn't. Maybe, but are you insinuating that no back breaking work would need to be done if money weren’t to exist? Pretty sure the introduction of money reduces the total amount of backbreaking work to be done. Instead of hauling grain to trade for axe heads and carrying those back to your farm, you carry coins, paper, or in modern times, tap a few buttons on your smartphone.
  - toomuchtodo 6y ago
    The market would need to find ways to perform the back-breaking work, either by wages increasing or the development of automation. Supply and demand. The more people who can accumulate wealth and capital, and intelligently manage that wealth, the greater the reduction in the labor supply (as they will fund their expenses using investment returns versus engaging in labor activities to do so). Money is an abstraction, but the status quo as a whole (monetary policy, capital markets, labor policy) is designed to ensure a supply of labor. Capital begets capital [1], so those who don't have will engage in riskier behavior to get off the wage slave treadmill. [1] https://news.ycombinator.com/item?id=16592414 https://news.ycombinator.com/item?id=16592414 ("I think capitalism is much simpler: capital begets capital. Those who have capital will accumulate more capital, almost infinitely, until the capital/income ratio reaches an equilibrium who knows how high (in the absence of major corrections like wars and hyper inflation). Add inherited wealth and low taxes. Capitalism's winners are those who already have capital. Thomas Pickety's book "Capital in the 21st Century" cogently illustrates this using massive tax return based data sets.")
    - golemiprague 6y ago
      No need to increase wage, there are enough people around the world willing to do it for cheap, either in their own place or comming in as immigrants, legal or illegal.
  - legulere 6y ago
    Very likely much less "work" would need to be done. There are a lot of bullshit jobs that are not productive and are just making people feel bad.
  - angus-prune 6y ago
    The grain still needs to be hauled to somewhere else though. If the grain only ever exists on your farm, it has no value to anyone else whether for coins or axe heads.
  - cambrianentropy 6y ago
    Barter economies have never existed. Myth starts with Smith.
- Aunche 6y ago
  > If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something, it will be bad for the current financial elite. Nobody is complaining about people placing their paychecks in index funds though. Index funds are a reasonably good proxy for the future health of the economy, so your gains from it will likely represent real growth. By contrast, gains made from cryptocurrency and speculative stock must be coming from someone's losses.
  - ksdale 6y ago
    Index funds go up because more people want to buy them than sell them, cryptocurrencies go up because more people want to buy them than sell them. Index funds happen to represent ownership of productive assets, but the assets don't really care who owns them, your investment in an index fund doesn't increase the number of productive assets in the world, likewise with cryptocurrency.
    - scarmig 6y ago
      > our investment in an index fund doesn't increase the number of productive assets in the world Not directly, but it creates an incentive landscape that encourages the formation of more capital, basically making the potential payoff of starting a company larger and more likely.
    - Aunche 6y ago
      > your investment in an index fund doesn't increase the number of productive assets in the world Eventually, some rich people will notice that they aren't getting as much money from buybacks and dividends as they used to and will place their money elsewhere. It would be relatively more attractive to invest in developing countries or buy PR in the form of charity.
    - arcticbull 6y ago
      Index funds are positive sum because companies are positive sum. You buy shares in a productive enterprise, which then generates revenues, and profits. These profits are returned to shareholders via dividends or buybacks, or just through the accretion of value within the enterprise. On the other hand cryptocurrencies are negative sum. The only way the early folks make money is when late folks put money into the system. At the same time, the house (miners) are constantly extracting massive amounts of actual liquidity. The "sum" of Bitcoin is negative 21,000,000,000 per year. This welfare is extracted by Chinese mining cartels bribing their local governments for access to coal-powered electricity. Enough to offset all of the solar panels installed in the entire world. The total amount of wasted power per Bitcoin transaction is now 30 days of power for the average household, and generates 100 grams of non-recyclable e-waste.
- bennysomething 6y ago
  Money being lost or won is not that. It's a signal that the public as a whole has benefited from the endeavour or not. Loses are a really important signal to stop wasting scarce resources .
- anonporridge 6y ago
  I do actually wonder if the FIRE movement will come under criticism in the coming years. Does the economy still work if too many people are checking out of their careers in their 30s and 40s? But yeah, it's mostly the financial elite freaking out that their kids might actually have to be a wage slave for a living.
  - Shaanie 6y ago
    I really doubt FIRE is popular enough for them to matter in practice. I suspect very few can stand pinching pennies for the 10-25 years it takes to save up the capital.
    - anonporridge 6y ago
      It probably matters more for highly paid professionals who can do it in 5-10 years.
  - nostrademons 6y ago
    FIRE folk (and every retiree) are going to get killed by inflation over the next ~5 years. The thing about retirement is that you're on a fixed income, and if you're doing it right you move capital from risk assets like stocks into more deterministic investments like bonds as you get close to needing them. The value of bonds and cash is about to get crushed; it's very hard to plan how much you need to live on when living costs may go up 5-10x or more in the next 5 years.
Ekaros 6y ago
Professionals have more money and experience. They should be winning really. Or at least know when to cut losses and move to other side...
slumdev 6y ago
> I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices... It depends on the situation and the game. Some poker professionals don't gamble significant sums with novices because the novices are far less likely to behave in a manner that is predictable according to statistics or some other strategy.
aaroninsf 6y ago
You're only "stuck" if what you need is to inflate your wealth at the expense of someone losing theirs.
- noxer 6y ago
  That's a fairy tail they teach in school. You dont get money because someone else lost some. You get money because you helped stabilizing the market by predicting it right. The losers lose because they predicted it wrong. Its a net gain for everyone who is somehow affected by the market which means basically everyone on this planet. There is no moral problem with winning or with loosing as you help either way. Also there is no need for anyone to lose, everyone could be right all the time that would give a perfectly stable market, but people are terrible at predicting the future so that will never happens.
ameister14 6y ago
>I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices... There are a few cases I can think of immediately where this applies - gambling with novices in Blackjack, for example, is not ideal. They'll screw up the flow of cards and can cause your math to go haywire. The same happens with Hold-em or Omaha Poker - you want people to have enough skill to play the game properly, but if you're looking to fleece them not enough skill to play the game well.
- danenania 6y ago
  That's not the case in poker. If someone thinks a novice player is messing them up somehow with poor play, it means they're not a good player either. A good poker player wants their opponents to play as poorly as possible.
  - rud7udehev 6y ago
    This is the sort of statement that sounds good to idiots and people who've never played poker. Anyone who's made money at casino poker is aware of how much of a hassle retards spasming at the card table can make things even if they're going to lose in the end.
    - danenania 6y ago
      I played professionally for years. I wanted my opponents to play as badly as possible.
    - pcthrowaway 6y ago
      It changes the strategy, and it might take you a while to hit, but it greatly improves your potential to win. I once played 1/2 NL uncapped at a casino, a guy sat down and put $1000 on the table. Every other hand he would raise $25-50 preflop, and call re-raises. Got all in pre-flop and pre-turn a bunch of times, every time he bust he put another $1000 on the table. This is exactly the best player to play with. Yes, you have to sit and wait for good cards before getting involved, but if you get something good, you have very good odds of stacking them.
paulpauper 6y ago
yeah ..had he ever head of house edge or the house cut/vig.
paulgb 6y ago
> I really don't understand this sentiment I agree, but I also don’t see this sentiment coming from the industry itself, with the exception of some people who go along with that narrative to get some TV time. It really seems to me more like the financial TV media are the ones who feel threatened by the emergence of WSB etc. and portray it as if it’s the sentiment of the broader investing community. But largely that community is just excited by any novelty as it creates opportunities that boring times don’t.
ska 6y ago
> isn't a simple/safe investment entity to pull out a reliable 10%. Long run even the stock market only averages about 7%, and that isn't simple or safe - but it beats other asset classes on return. Asking for a risk-free 10% is pretty much a fantasy. One weird thing about the amount of volatility in recent years is that people are simultaneously used to the idea that their "cash savings" earn approximately nothing, but turn their noses up at a 5%-7% return. Historically speaking this irrational.
- jayd16 6y ago
  Sorry, you're right. I was lazy in my rounding. That said, the exact number isn't too relevant to my point.
- deleted 6y ago
  [deleted]
backtoyoujim 6y ago
we all gamble that have excess money to do so. there is a huger "we all" that don't.
stouset 6y ago
Well of course there’s no “safe” 10% investment. That’s true across the board! Higher returns correlate with higher risk (otherwise a smart investor would pick the investment with the same returns and less risk). That aside, you know what’s averaged returns of 10% that’s simple and hasn’t risked your money going to zero (assuming you have the good sense to buy and hold)? The stock market. Bog-standard index funds, available to anyone and everyone. VTSAX has returned just about 10% since Jan 1, 2000. Ironically, it’s about double that for the past ten years (since the recession caused it to be roughly even over the first ten years of that span). The average person doesn’t need to gamble on options to get ahead. They already do have access to products with outsize returns compatible with a level of risk tolerable for one’s retirement nest egg. What we need are jobs that allow the average wage-earner to actually save a meaningful amount of money in these instruments.
- syntaxstic 6y ago
  100% percent agree. Here in Toronto, it's very difficult for the average person invest a meaningful amount of money.
CodeMage 6y ago
> I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices... "Professional" and "expert" aren't synonyms. "Amateur" and "novice" aren't synonyms either. An expert might be glad to go against a novice. But when there are artificial barriers separating "professionals" from "amateurs", barriers that have nothing to do with level of expertise, that's a different story.
ouid 6y ago
You haven't argued this, but there should never be an opportunity for safe passive income that scales with your wealth.
noxer 6y ago
The simple/safe/reliable 10% was a fluke that should never exist. Profit and risk must be in balance. If it isn't it should attracts more and more people until the balance is reached. Making it hard for people to join to keep it unbalanced is what happened and its slowly going away now.
- nybble41 6y ago
  > Profit and risk must be in balance. Risk is one factor, but not the only one. The main factor in low-risk investment returns is time preference. In essence: People are willing to pay rent (interest) in exchange for access to money now rather than later. Those with savings can earn a profit by renting out their accumulated savings even in a risk-free scenario where return of principle is 100% guaranteed.
  - noxer 6y ago
    There is no such thing as risk-free renting out your accumulated money.
    - nybble41 6y ago
      Nothing in life is completely without risk, but you can get arbitrarily close. Treasury bills are commonly used as an example of an approximately "risk-free" loan since the probability of the federal government repudiating its debts is considered extremely low. Bonds with the lowest investment-grade rating, BBB, have a 1% one-year default rate, with higher grades being significantly less (0% for AAA)[1]. The vast majority of the interest on such a loan is a result of time preference (rent), not risk-taking. [1] https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/investment-grade-bonds/ https://corporatefinanceinstitute.com/resources/knowledge/tr...
      - noxer 6y ago
        You know exactly what I meant. 1% does not even cover inflation loses and you still took a risk. This is total nonsense and has nothing to do with the initial conversation. /thread closed
imtringued 6y ago
Who are you supposed to lend your money to? Companies are saving more money, they ended up becoming net lenders. That's why inflation is low. Ironically, low inflation also makes the problem worse, because companies can save even more with low inflation. The threat of being forced to invest the money is gone. Ironically (yes I am repeating myself), low interest rates also increase the savings rate of companies because it is just a windfall profit for many of them. Consumers get loans with bad conditions so they don't borrow and even if they did, incomes are stagnating, so betting on a raise in the future may seem foolish. The answer is to increase the total investment rate via infrastructure bills or to just inflate excess corporate savings away with stimulus checks. Inflation will allow the Fed to raise interest rates, which will cut into the corporate savings rate and after that point everything will return back to normal.
lamontcg 6y ago
The problem is that the economy is being driven by rent seeking behavior and cantillion effects. This is great for the elites, but at the same time they can see how the ground is starting to crumble. As "the plebs" start to gamble they're working to blame any future collapse on the irresponsibility of the crowd. Shrinking responsibility for the fact that this is the system that they have lobbied for and created and the plebs are behaving rationally irrational.
- anonporridge 6y ago
  "We taxed work generated income greater than investment generated capital gains and now everyone is speculating! Why oh why would the plebs do this to us?!"
- arcticbull 6y ago
  Do you have any evidence at all for the economy being driven by cantillon effects? That is pretty much fringe economic voodoo.
  - lamontcg 6y ago
    Housing prices spiraling out of control, bubbles in the stock market and crypto, this crazy V-L recovery we just had out of the covid recession, insane art prices, bubbles in baseball cards, the declining tax burden on the wealthy. The people who are rich and "close to the king" are able to capture all the effects of monetary stimulus. That is leading to asset bubbles and dramatic increases in prices of the things those people throw their money at.
    - arcticbull 6y ago
      > Housing prices spiraling out of control Housing prices on average across the US, on an inflation adjusted basis cost the same exact amount per square foot as they did in the 1970s. They're twice as big now. And in areas where they are more expensive, it's driven by cities refusing to allow new construction to match demand. Simply a supply and demand issue, and a zoning issue. Why do you think the others are specifically because people "close to the king" are able to capture all the effects? That's the part you haven't proven.

by jayd16 6y ago

bondarchuk 6y ago

>I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices... The existence of a financial elite hinges on the existence of a non-elite that actually does the work. If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something, it will be bad for the current financial elite. In the end money is just an abstraction to determine who has to do back-breaking work all day, and who doesn't.

sixstringtheory 6y ago
> In the end money is just an abstraction to determine who has to do back-breaking work all day, and who doesn't. Maybe, but are you insinuating that no back breaking work would need to be done if money weren’t to exist? Pretty sure the introduction of money reduces the total amount of backbreaking work to be done. Instead of hauling grain to trade for axe heads and carrying those back to your farm, you carry coins, paper, or in modern times, tap a few buttons on your smartphone.
- toomuchtodo 6y ago
  The market would need to find ways to perform the back-breaking work, either by wages increasing or the development of automation. Supply and demand. The more people who can accumulate wealth and capital, and intelligently manage that wealth, the greater the reduction in the labor supply (as they will fund their expenses using investment returns versus engaging in labor activities to do so). Money is an abstraction, but the status quo as a whole (monetary policy, capital markets, labor policy) is designed to ensure a supply of labor. Capital begets capital [1], so those who don't have will engage in riskier behavior to get off the wage slave treadmill. [1] https://news.ycombinator.com/item?id=16592414 https://news.ycombinator.com/item?id=16592414 ("I think capitalism is much simpler: capital begets capital. Those who have capital will accumulate more capital, almost infinitely, until the capital/income ratio reaches an equilibrium who knows how high (in the absence of major corrections like wars and hyper inflation). Add inherited wealth and low taxes. Capitalism's winners are those who already have capital. Thomas Pickety's book "Capital in the 21st Century" cogently illustrates this using massive tax return based data sets.")
  - golemiprague 6y ago
    No need to increase wage, there are enough people around the world willing to do it for cheap, either in their own place or comming in as immigrants, legal or illegal.
- legulere 6y ago
  Very likely much less "work" would need to be done. There are a lot of bullshit jobs that are not productive and are just making people feel bad.
- angus-prune 6y ago
  The grain still needs to be hauled to somewhere else though. If the grain only ever exists on your farm, it has no value to anyone else whether for coins or axe heads.
- cambrianentropy 6y ago
  Barter economies have never existed. Myth starts with Smith.
Aunche 6y ago
> If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something, it will be bad for the current financial elite. Nobody is complaining about people placing their paychecks in index funds though. Index funds are a reasonably good proxy for the future health of the economy, so your gains from it will likely represent real growth. By contrast, gains made from cryptocurrency and speculative stock must be coming from someone's losses.
- ksdale 6y ago
  Index funds go up because more people want to buy them than sell them, cryptocurrencies go up because more people want to buy them than sell them. Index funds happen to represent ownership of productive assets, but the assets don't really care who owns them, your investment in an index fund doesn't increase the number of productive assets in the world, likewise with cryptocurrency.
  - scarmig 6y ago
    > our investment in an index fund doesn't increase the number of productive assets in the world Not directly, but it creates an incentive landscape that encourages the formation of more capital, basically making the potential payoff of starting a company larger and more likely.
  - Aunche 6y ago
    > your investment in an index fund doesn't increase the number of productive assets in the world Eventually, some rich people will notice that they aren't getting as much money from buybacks and dividends as they used to and will place their money elsewhere. It would be relatively more attractive to invest in developing countries or buy PR in the form of charity.
  - arcticbull 6y ago
    Index funds are positive sum because companies are positive sum. You buy shares in a productive enterprise, which then generates revenues, and profits. These profits are returned to shareholders via dividends or buybacks, or just through the accretion of value within the enterprise. On the other hand cryptocurrencies are negative sum. The only way the early folks make money is when late folks put money into the system. At the same time, the house (miners) are constantly extracting massive amounts of actual liquidity. The "sum" of Bitcoin is negative 21,000,000,000 per year. This welfare is extracted by Chinese mining cartels bribing their local governments for access to coal-powered electricity. Enough to offset all of the solar panels installed in the entire world. The total amount of wasted power per Bitcoin transaction is now 30 days of power for the average household, and generates 100 grams of non-recyclable e-waste.
bennysomething 6y ago
Money being lost or won is not that. It's a signal that the public as a whole has benefited from the endeavour or not. Loses are a really important signal to stop wasting scarce resources .
anonporridge 6y ago
I do actually wonder if the FIRE movement will come under criticism in the coming years. Does the economy still work if too many people are checking out of their careers in their 30s and 40s? But yeah, it's mostly the financial elite freaking out that their kids might actually have to be a wage slave for a living.
- Shaanie 6y ago
  I really doubt FIRE is popular enough for them to matter in practice. I suspect very few can stand pinching pennies for the 10-25 years it takes to save up the capital.
  - anonporridge 6y ago
    It probably matters more for highly paid professionals who can do it in 5-10 years.
- nostrademons 6y ago
  FIRE folk (and every retiree) are going to get killed by inflation over the next ~5 years. The thing about retirement is that you're on a fixed income, and if you're doing it right you move capital from risk assets like stocks into more deterministic investments like bonds as you get close to needing them. The value of bonds and cash is about to get crushed; it's very hard to plan how much you need to live on when living costs may go up 5-10x or more in the next 5 years.

Ekaros 6y ago

Professionals have more money and experience. They should be winning really. Or at least know when to cut losses and move to other side...

slumdev 6y ago

> I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices... It depends on the situation and the game. Some poker professionals don't gamble significant sums with novices because the novices are far less likely to behave in a manner that is predictable according to statistics or some other strategy.

aaroninsf 6y ago

You're only "stuck" if what you need is to inflate your wealth at the expense of someone losing theirs.

noxer 6y ago
That's a fairy tail they teach in school. You dont get money because someone else lost some. You get money because you helped stabilizing the market by predicting it right. The losers lose because they predicted it wrong. Its a net gain for everyone who is somehow affected by the market which means basically everyone on this planet. There is no moral problem with winning or with loosing as you help either way. Also there is no need for anyone to lose, everyone could be right all the time that would give a perfectly stable market, but people are terrible at predicting the future so that will never happens.

ameister14 6y ago

>I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices... There are a few cases I can think of immediately where this applies - gambling with novices in Blackjack, for example, is not ideal. They'll screw up the flow of cards and can cause your math to go haywire. The same happens with Hold-em or Omaha Poker - you want people to have enough skill to play the game properly, but if you're looking to fleece them not enough skill to play the game well.

danenania 6y ago
That's not the case in poker. If someone thinks a novice player is messing them up somehow with poor play, it means they're not a good player either. A good poker player wants their opponents to play as poorly as possible.
- rud7udehev 6y ago
  This is the sort of statement that sounds good to idiots and people who've never played poker. Anyone who's made money at casino poker is aware of how much of a hassle retards spasming at the card table can make things even if they're going to lose in the end.
  - danenania 6y ago
    I played professionally for years. I wanted my opponents to play as badly as possible.
  - pcthrowaway 6y ago
    It changes the strategy, and it might take you a while to hit, but it greatly improves your potential to win. I once played 1/2 NL uncapped at a casino, a guy sat down and put $1000 on the table. Every other hand he would raise $25-50 preflop, and call re-raises. Got all in pre-flop and pre-turn a bunch of times, every time he bust he put another $1000 on the table. This is exactly the best player to play with. Yes, you have to sit and wait for good cards before getting involved, but if you get something good, you have very good odds of stacking them.

paulpauper 6y ago

yeah ..had he ever head of house edge or the house cut/vig.

paulgb 6y ago

> I really don't understand this sentiment I agree, but I also don’t see this sentiment coming from the industry itself, with the exception of some people who go along with that narrative to get some TV time. It really seems to me more like the financial TV media are the ones who feel threatened by the emergence of WSB etc. and portray it as if it’s the sentiment of the broader investing community. But largely that community is just excited by any novelty as it creates opportunities that boring times don’t.

ska 6y ago

> isn't a simple/safe investment entity to pull out a reliable 10%. Long run even the stock market only averages about 7%, and that isn't simple or safe - but it beats other asset classes on return. Asking for a risk-free 10% is pretty much a fantasy. One weird thing about the amount of volatility in recent years is that people are simultaneously used to the idea that their "cash savings" earn approximately nothing, but turn their noses up at a 5%-7% return. Historically speaking this irrational.

jayd16 6y ago
Sorry, you're right. I was lazy in my rounding. That said, the exact number isn't too relevant to my point.
deleted 6y ago
[deleted]

backtoyoujim 6y ago

we all gamble that have excess money to do so. there is a huger "we all" that don't.

stouset 6y ago

Well of course there’s no “safe” 10% investment. That’s true across the board! Higher returns correlate with higher risk (otherwise a smart investor would pick the investment with the same returns and less risk). That aside, you know what’s averaged returns of 10% that’s simple and hasn’t risked your money going to zero (assuming you have the good sense to buy and hold)? The stock market. Bog-standard index funds, available to anyone and everyone. VTSAX has returned just about 10% since Jan 1, 2000. Ironically, it’s about double that for the past ten years (since the recession caused it to be roughly even over the first ten years of that span). The average person doesn’t need to gamble on options to get ahead. They already do have access to products with outsize returns compatible with a level of risk tolerable for one’s retirement nest egg. What we need are jobs that allow the average wage-earner to actually save a meaningful amount of money in these instruments.

syntaxstic 6y ago
100% percent agree. Here in Toronto, it's very difficult for the average person invest a meaningful amount of money.

CodeMage 6y ago

> I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices... "Professional" and "expert" aren't synonyms. "Amateur" and "novice" aren't synonyms either. An expert might be glad to go against a novice. But when there are artificial barriers separating "professionals" from "amateurs", barriers that have nothing to do with level of expertise, that's a different story.

ouid 6y ago

You haven't argued this, but there should never be an opportunity for safe passive income that scales with your wealth.

noxer 6y ago

The simple/safe/reliable 10% was a fluke that should never exist. Profit and risk must be in balance. If it isn't it should attracts more and more people until the balance is reached. Making it hard for people to join to keep it unbalanced is what happened and its slowly going away now.

nybble41 6y ago
> Profit and risk must be in balance. Risk is one factor, but not the only one. The main factor in low-risk investment returns is time preference. In essence: People are willing to pay rent (interest) in exchange for access to money now rather than later. Those with savings can earn a profit by renting out their accumulated savings even in a risk-free scenario where return of principle is 100% guaranteed.
- noxer 6y ago
  There is no such thing as risk-free renting out your accumulated money.
  - nybble41 6y ago
    Nothing in life is completely without risk, but you can get arbitrarily close. Treasury bills are commonly used as an example of an approximately "risk-free" loan since the probability of the federal government repudiating its debts is considered extremely low. Bonds with the lowest investment-grade rating, BBB, have a 1% one-year default rate, with higher grades being significantly less (0% for AAA)[1]. The vast majority of the interest on such a loan is a result of time preference (rent), not risk-taking. [1] https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/investment-grade-bonds/ https://corporatefinanceinstitute.com/resources/knowledge/tr...
    - noxer 6y ago
      You know exactly what I meant. 1% does not even cover inflation loses and you still took a risk. This is total nonsense and has nothing to do with the initial conversation. /thread closed

imtringued 6y ago

Who are you supposed to lend your money to? Companies are saving more money, they ended up becoming net lenders. That's why inflation is low. Ironically, low inflation also makes the problem worse, because companies can save even more with low inflation. The threat of being forced to invest the money is gone. Ironically (yes I am repeating myself), low interest rates also increase the savings rate of companies because it is just a windfall profit for many of them. Consumers get loans with bad conditions so they don't borrow and even if they did, incomes are stagnating, so betting on a raise in the future may seem foolish. The answer is to increase the total investment rate via infrastructure bills or to just inflate excess corporate savings away with stimulus checks. Inflation will allow the Fed to raise interest rates, which will cut into the corporate savings rate and after that point everything will return back to normal.

lamontcg 6y ago

The problem is that the economy is being driven by rent seeking behavior and cantillion effects. This is great for the elites, but at the same time they can see how the ground is starting to crumble. As "the plebs" start to gamble they're working to blame any future collapse on the irresponsibility of the crowd. Shrinking responsibility for the fact that this is the system that they have lobbied for and created and the plebs are behaving rationally irrational.

anonporridge 6y ago
"We taxed work generated income greater than investment generated capital gains and now everyone is speculating! Why oh why would the plebs do this to us?!"
arcticbull 6y ago
Do you have any evidence at all for the economy being driven by cantillon effects? That is pretty much fringe economic voodoo.
- lamontcg 6y ago
  Housing prices spiraling out of control, bubbles in the stock market and crypto, this crazy V-L recovery we just had out of the covid recession, insane art prices, bubbles in baseball cards, the declining tax burden on the wealthy. The people who are rich and "close to the king" are able to capture all the effects of monetary stimulus. That is leading to asset bubbles and dramatic increases in prices of the things those people throw their money at.
  - arcticbull 6y ago
    > Housing prices spiraling out of control Housing prices on average across the US, on an inflation adjusted basis cost the same exact amount per square foot as they did in the 1970s. They're twice as big now. And in areas where they are more expensive, it's driven by cities refusing to allow new construction to match demand. Simply a supply and demand issue, and a zoning issue. Why do you think the others are specifically because people "close to the king" are able to capture all the effects? That's the part you haven't proven.