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Bubbles of this magnitude are not caused by irrational sentiment. There is irrational optimism about market returns, but that's only a second-order effect from

by leppr 5y ago

Bubbles of this magnitude are not caused by irrational sentiment. There is irrational optimism about market returns, but that's only a second-order effect from mechanisms such as low/negative borrowing rates and scheduled asset purchases (QE), monetarily incentivizing investments, which in turns incentivizes gambling. Borrowing as much fiat as one could take and dumping it into assets was the rational choice, unless you were speculating on some black swan.

jkhdigital 5y ago
> Borrowing as much fiat as one could take and dumping it into assets was the rational choice This. I had a conversation with my boomer father the other day in which I tried to explain that the availability of cheap consumer debt means that individuals can now operate like mini hedge funds, making highly leveraged bets on everything from stocks to crypto to trading cards. Used to be that housing was the only highly leveraged investment available to the average consumer (20% down = 5x leverage).
- ProjectArcturis 5y ago
  How is there more cheap consumer debt now than 20 years ago?
  - jkhdigital 5y ago
    The answer to this question seems so self-evident that I’m not sure if you’re trolling or really just uninformed. To be fair, aggregate debt and interest rates don’t really tell the whole story, because credit providers are a lot more creative as well. Anecdotally, I routinely get offers for promotional low- or no-interest balances on unsecured credit (i.e. credit cards) that overlap such that I can fairly easily maintain a condition of “negative working capital” in excess of my annual income for maybe 2% APR.
    - ProjectArcturis 5y ago
      I'm not the one who's uninformed. Total consumer credit as a share of GDP was 18% in 2001 and is 19% now. Those offers aren't new either. They were around 20 years ago. And back then you could stick the balance in a savings account to arb a few percent positive interest.

by leppr 5y ago

jkhdigital 5y ago

> Borrowing as much fiat as one could take and dumping it into assets was the rational choice This. I had a conversation with my boomer father the other day in which I tried to explain that the availability of cheap consumer debt means that individuals can now operate like mini hedge funds, making highly leveraged bets on everything from stocks to crypto to trading cards. Used to be that housing was the only highly leveraged investment available to the average consumer (20% down = 5x leverage).

ProjectArcturis 5y ago
How is there more cheap consumer debt now than 20 years ago?
- jkhdigital 5y ago
  The answer to this question seems so self-evident that I’m not sure if you’re trolling or really just uninformed. To be fair, aggregate debt and interest rates don’t really tell the whole story, because credit providers are a lot more creative as well. Anecdotally, I routinely get offers for promotional low- or no-interest balances on unsecured credit (i.e. credit cards) that overlap such that I can fairly easily maintain a condition of “negative working capital” in excess of my annual income for maybe 2% APR.
  - ProjectArcturis 5y ago
    I'm not the one who's uninformed. Total consumer credit as a share of GDP was 18% in 2001 and is 19% now. Those offers aren't new either. They were around 20 years ago. And back then you could stick the balance in a savings account to arb a few percent positive interest.