9 ms·

The money is the message

65 points by jger15 4y ago

lysergia 4y ago
> Uncertainty does not mean things will get worse. It only means we know less and have less control. People naturally loath feeling out of control. Sometimes control is an illusion, other times it has a solid foundation and is not a mirage. The trick is to recognize real control and see some value in that. We cod ourselves when control is an illusion.
roenxi 4y ago
I like this message, but I don't think interest rates are actually our biggest problem. The sort of ideologies that tolerate unrealistic interest rates - effectively lies about what the market reality is - probably led to idiots being in charge which didn't help. But the real problem we're facing is that we can't paper over the drag by an unrealistic financial system because we've run out of energy and energy security got pushed off the table by people who only cared about destroying fossil fuels. We needed broad consensus that a Chernobyl every 50 years was a perfectly acceptable price to pay vs. the looming resource wars we see warming up over dwindling oil. And the background issue of overpopulation.
tremon 4y ago
it is common to say that intervention from governments and central banks "distort" money and makes it impossible for investors to get accurate information from the economy. Why is it so popular to complain about government intervention distorting the value of money, but is it a faux-pas to talk about banks and stock markets distorting the value of money by hiding unsecured debt behind nebulous contracts or ridiculously overvaluating companies?
- djbusby 4y ago
  It's popular because "government bad" and "capitalism good". Of course that blanket logic is false however, it's widely believed, it sells and gets propagated.
- SilverBirch 4y ago
  Core to almost all economic study is a set of simplifying assumptions that make models of the world so that from those models we can then make predictions. The problem is that economists lose sight of this. When the government intervenes in the economy it makes the economy not look like economists model of the economy. So they claim the government is distorting the economy, but in reality that's rubbish. The government is an actor in the economy, one that economists are bad at modelling, and even if they were good at modelling it, there's no normative reason why the world should behave like their model. It's a wildly right wing view of the world that has been subtly smuggled into the core of economists view of the world.
  - confidantlake 4y ago
    I agree and would even go further. Economics as a whole is basically a right wing social science. Most models bear little resemblance to real life and offer virtually no predictive power. It is an entirely unserious field.
    - andrekandre 4y ago
      > Economics as a whole is basically a right wing social science. im not sure i would got that far, but its definitely has a strong neo-liberal bent for some time i'd say theres a reason they used to call it 'political economy' instead of just 'economics'...
      - SilverBirch 4y ago
        Neoliberal economics is basically "WE GET RICHER ON AVERAGE and maybe at some point possibly we should compensate those people we fucked over"
- jesuscript 4y ago
  behind nebulous contracts or ridiculously overvaluating companies Just as a thought experiment, try to restate that with the poker analogy. 1. behind nebulous contracts A bluff. You are bidding up a hand so people believe it’s a good hand. 2. ridiculously overvaluating companies Bidding up a hand because you know the other side can’t afford the risk (they can’t match you when you up the ante, doesn’t matter how good their hand, modest institutions won’t take the risk), so you can take the pot just economically. Overvaluing a company is to make the sale look attractive to investors (it’s 50bn, must be worth a shit right). Once you have them, your job is done, take the pot, drop the value. A retirement fund can’t stand up to “we need crypto exposure in our portfolio”, they’ll fold and take it. ——— The point is, the economy has this psychological element. What most people are not ready to hear is that in this game, the psychological games leaves any side either fleeced, caught, exposed, or downright unlucky. That’s why it’s unnerving, because our economy is supposed to be numbers in, numbers out. But it’s not. It’s not the money that’s the problem, it’s the psychological game. ———- Government debt printing is the most optimistic psychological game we have in the economy. It’s a bet on the future potential of the country. It’s a risk, the country may not be what we think it’s capable of in the future. But it’s far less insidious than the other psycho tricks.
  - junofan 4y ago
    > Government debt printing is the most optimistic psychological game we have in the economy. Print too much and the big money poker game (capital formation) moves elsewhere.
    - jesuscript 4y ago
      What casino fears that? Where you gonna play, China?
- unity1001 4y ago
  > but is it a faux-pas to talk about banks and stock markets distorting the value of money by hiding unsecured debt behind nebulous contracts or ridiculously overvaluating companies? Through immense propaganda and conditioning of the public by the publications of those very financial organizations, of course. Private entities can do it to maximize their profit at the expense of everyone else. Everyone else cant do it to maximize the benefit of everyone. Its socialism for the rich. capitalism for the poor like always.
- hammock 4y ago
  Banks and stock markets don’t pilfer my wallet at the point of a gun under the guise of protecting my freedom
  - arrosenberg 4y ago
    Sure, the banks will protect your freedom with a 5/1 adjustable mortgage and then kick you out in year 6 when the interest spikes. Those lovable banks!
    - ThunderSizzle 4y ago
      Who the hell is getting an ARM? Most mortgages, at least in the States, are fixed rates. Also, mortgages are almost entirely regulated. There's almost nothing a business can do in the mortgage sphere that wasn't specifically allowed by the feds.
      - simiones 4y ago
        Yes, the point is that the banks are (edit: should have said "would be, in the absence of government regulation") far more predatory than government - it's in fact government (who GP claimed is "sticking them at gunpoint") that is protecting us from the banks. Just look at loan sharks for a view of what banks sans regulation are.
      - arrosenberg 4y ago
        Thats cute, but I lived through the 2008 housing crash, none of that stuff stopped the banks from kicking people out of their homes and destroying a bunch of lives.
        guhidalg 4y ago
        Your bank isn't a good bank, their bank is obviously a virtuous bank that would never prey on desperate borrowers /s
        ThunderSizzle 4y ago
- pmichaud 4y ago
  Is it a faux pas? I hear this sort of thing constantly, eg. your post?
- sebastianconcpt 4y ago
  Because the market will correct itself. Government never do that (unless there is a civil war or revolution).
  - lovich 4y ago
    Governments have corrected themselves numerous times without revolution, unless you are counting democratic regime changes as a revolution.
    - sebastianconcpt 4y ago
      Oh boy what do I have to listen to... you're talking to an argentinean. Yeah, from an insanely rich land in steady and perfectly predictable decadence for more about 100 years by now. And straight from the top of the world. No, goverments never shrink themselves. The political class only vote for power growth over the population. There is no correction to that unless there is a popular revolt that takes them out.
      - lovich 4y ago
        I don’t believe that shrinking themselves is required for a correction and even to that extent the governments in the west at least have shrunk themselves several times by removing or reducing regulatory agencies
        sebastianconcpt 4y ago
        You are basically agreeing with what I've said then. Political class power expansion is always growing. A little regulation removal, a little pullback, doesn't make them not to stay power growth bullish. If you see that rule isn't fair to what is generally happening countries, please prove me wrong, show me in history in what countries the political class went bear on power growth without a revolt or revolution. Again, not a little pullback, but a bearish correction. What are the chances of the political class individuals current psychology suddenly make them agree, collectively enough, to say "hey, let's make ourselves this amount of less powerful for the benefit of the people"? It simply doesn't happen because before even trying, their propaganda collapses so bad that people revolts on the realization of the lies and revolt and replace their political class or even system. The left is a master at this by the way, that's why a good limiting constitution might be the last source of hope.
molsongolden 4y ago
>The distortion itself is the message. It conveys the fact that technology now enables banks and governments to do what they do with unprecedented scale and speed. It tells us that interest rates cannot be trusted to guide investment decisions because they should not be trusted. By "not making sense," interest rates tell investors not to rely on them. The acceleration of interest rate manipulation/interference to the point of full breakdown as a meaningful indicator of market participant time preferences. It's a good thought but I'm left needing a "10 WAYS TO PROFIT FROM MARKET UNCERTAINTY" tweetstorm.
- imtringued 4y ago
  Interest rates were never a meaningful representation of time preferences to begin with.
fasteddie31003 4y ago
I think of money as being a messaging protocol for trust. When the government lowers interest rates it benefits asset holders first because the rest of the economy has not realized that their money is worth less (see the Cantillon effect https://en.wikipedia.org/wiki/Richard_Cantillon https://en.wikipedia.org/wiki/Richard_Cantillon).
jongjong 4y ago
That sounds very much like what Austrian Economist Friedrich Hayek had been advocating. He also discussed prices as being information signals. The danger of government money-printing is that the government ends up distorting the supply of money entering various industries (especially through big government contracts) and thus, to some extent, ends up determining what is profitable and what is not profitable... Then we end up with an economic system wherein winners are selected not on the basis of their adherence to the needs of working people, but on the basis of their adherence to the whims of government bureaucrats.
- jongjong 4y ago
  On a related subject, I can understand why reserve banks and governments think that they can use money printing as an incentive mechanism to fight against climate change, but so far, it does not seem to be effective because government bureaucrats are terrible stakeholders when it comes to the climate; they do not have the ability to differentiate between the kinds of ventures which will genuinely help to fight climate change and those which are merely engaging in green-washing... And it's too easy for government officials to claim plausible deniability when their true intentions have been to help their corporate friends get their hands on big stacks of public 'ESG' money. I think the problem both has to do with incentives (since government bureaucrats do not 'own' the climate; it's not really their problem) and also with capabilities (they generally do not have the scientific knowledge/qualifications or the critical thinking skills required to be able to effectively make such decisions). Climate change is a very complex topic, it's probable that nobody in the world fully understands all the dynamics which drive it because every single thing (living and non-living) which exists on this planet is a factor contributing either towards or against global warming and everything is interconnected with complex feedback loops... So it's difficult to see how politicians who do not have any scientific background would be able to know how to allocate funding to fight climate change. There are also many scientists who reject the notion of man-made climate change altogether; in this case, the whole global warming narrative could be seen as nothing but a giant financial scheme to launder freshly printed money from governments to large corporate entities under the ESG label.
  - 4y ago
vannevar 4y ago
In reality, the price of money is not determined by supply and demand. Right, because the supply is elastic without any direct cost of manufacture. The idea that interest rates will go down when a lot of people start saving is based on the implicit assumption that the supply is more or less fixed. But that hasn't been true for a long, long time. As long as banks can print money (ie, lend more money than they have actual deposits), the saving rate will not significantly affect interest rates, even leaving the Fed out of the equation. (See, e.g., https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp https://www.investopedia.com/articles/investing/022416/why-b...)
howmayiannoyyou 4y ago
> Ultimately, interest rates become meaningless. They no longer tell investors anything. The article is silly. In the real world, business people pay close attention to interest rates because we borrow money. We borrow money to smooth volatility, to manage inventories, and to invest in products/services. Interest rates are FAR from meaningless & simply the expectation they will be changed is enough to make many business owners change behaviors. At present we are watching interest rate changes vacuum up global liquidity, cause the USD to rise, and make US goods more expensive worldwide. Investors - invested in these businesses and with their own exposure to rates - pay close attention to rate jawboning and actual rates
- gapplebees 4y ago
- deeg 4y ago
  I paused at the same line. This told me that the author has an agenda. A more fair statement might be that the interest rates are less meaningful than they could be but meaningless? No way.
- drdec 4y ago
  I think the author's point was that the interest rates have become decoupled from the information they would otherwise convey, in the absence of government interference. It is not that they are irrelevant, simply that they are not revealing any information about the underlying economy and are in that way "meaningless". I haven't thought enough about this to know if I agree or not, but that is what I understand the author's thesis to be.
  - notahacker 4y ago
    It's a nonsense argument though (which tbf the author hints at understanding with the latter part of their post) A central bank setting base interest rates based on desire to converge on inflation targets rather than something completely arbitrary like the availability of a certain grade of shiny metal doesn't convey less actionable information, it conveys more.
bognition 4y ago
> The economy is telling us something similar. It is an unpleasant message. But it is clear. And we should listen to it. Hmm... maybe its not that clear b/c I still have no ideal what we should takeaway from this article.
michaelwww 4y ago
I like the idea that money both energy and information, while simultaneously being different things to different people. For Jeff Bezos, money is personal power and prestige, for McKenzie Scott, money is a tool for social good. Money Is Energy: George Mobus Discusses Biophysical Economics and Alternative Theories of Value - https://www.financialsense.com/contributors/george-mobus/biophysical-economics-energy-standard-money https://www.financialsense.com/contributors/george-mobus/bio... Bitcoin as Battery - https://www.nickgrossman.xyz/2021/bitcoin-as-battery/ https://www.nickgrossman.xyz/2021/bitcoin-as-battery/ Bitcoin Is Not a Battery - https://www.aier.org/article/bitcoin-is-not-a-battery/ https://www.aier.org/article/bitcoin-is-not-a-battery/ The medium is the message - https://en.wikipedia.org/wiki/The_medium_is_the_message https://en.wikipedia.org/wiki/The_medium_is_the_message Cybernetics - https://en.wikipedia.org/wiki/Cybernetics https://en.wikipedia.org/wiki/Cybernetics Blind men and an elephant - https://en.wikipedia.org/wiki/Blind_men_and_an_elephant https://en.wikipedia.org/wiki/Blind_men_and_an_elephant
- openfuture 4y ago
  If money is persuasion (i.e. I can pay you money to change your behaviour) then that explains perfectly why money is both energy and information.... Energy changes behaviour (that is literally how we reason about behaviour; in terms of energy). Let me try to justify "energy = persuasion" (which a very hippie way of seeing energy)we factor persuasion into the information that was presented and then the trust you place in that information. The more you trust the information the more it affects your behaviour. Clearly this is contextual! Depending on how you choose to interpret information you may have different assessments of trust. Energy is a more materialistic concept, the information would be the matter I suppose while the trust (which is contextual by above) has to be an assessment of the relation this information has to other information (matter in this case), i.e. you can easily obtain some kind of newtonian physics (drawing in the forces acting on an object as a way to assess how to trust this information in the context of material world). I think that we will soon be mature enough to accept that this is the case and we will be willing to read https://datalisp.is https://datalisp.is (so I don't have to write this over and over again). Legitimacy essentially has a similar role to gravity. It is a force acting on the trustworthiness of information; thereby affecting its' persuasiveness.
psychoslave 4y ago
> For example, it is legitimate for a government to choose to have a less efficient economy but one in which more people have a job and can afford a home. What is an efficient economy in the author perspective?
mempko 4y ago
We should ask the question, since when was money ever NOT manipulated by it's creators (governments and banks). There is no such period in human history. Money is a creation of governments so they can provision themselves. The old story of money coming from barter is a fairy tale. Made up. The problem with the article is that it assumes such a period (money without intervention) is possible or even desirable.
- marcosdumay 4y ago
  Logically, there must have existed some time when money was generally agreed upon, and nobody started manipulating its supply yet. It was probably a very local setup, changing in time from one place to another. I imagine it was also all if it in ancient history.
imtringued 4y ago
>The global economy is a biological system, and money is its nervous system. This is more than a mere analogy. If you want to make that analogy you will at least have to pick the right one. Money is more like blood. If money doesn't circulate throughout the body evenly it will develop necrosis or even die. If the organism grows bigger it will need more blood. >"money is the channel through which we communicate with distant strangers, the original social media... distorting media distorts the way society talks to itself." This is correct but what this means is that not communicating at all, i.e. never spending your money and never sending a price signal is the worst form of distortion because it breeds speculation on the supply side. Since no price signal is sent, nobody knows what to produce, people will have to blindly invest into the future and hope they are lucky. The cunning ones will try to coerce people into sending price signals by creating artificial needs or reducing production until scarcity sets in and people have no other choice other than to send price signals. >Hence, prices expressed in money and the price of money itself are the lifeblood of the economy (I mean "the nervous system". Both metaphors work!). By "the price of money," I am referring to the interest rate money earned by doing nothing. Or, more accurately, the interest money can earn from being deposited in a bank. Interest rates indicate the supply and demand for money. That is only true in a loanable funds model, which in theory isn't a bad idea but that isn't the money system we have right now. In a money system where deposits are created through loans the supply of money is in theory infinite, the idea of a price of money being the result of the supply and demand of money becomes illogical. Insteady the optimal rate of interest depends on yields in the real economy. >In light of the above, it is common to say that intervention from governments and central banks "distort" money and makes it impossible for investors to get accurate information from the economy Indeed, central banks and governments act in the worst kind of price control imaginable. A lower bound on interest rates combined with a deposit insurance and bailout scheme that effectively guarantees this price control. This effectively means vast amounts of capital are on unemployment support. The zero lower bound has become the minimum wage of capital. Due to the speculative benefits of liquidity, people aren't going to lend out their money in long term bonds unless the interest rate is sufficiently high. This liquidity preference effectively acts like a constant which is applied on the lowest possible interest rate. 0% (zero lower bound) + 3% (liquidity preference) = 3%, therefore yields on money must always be positive or new money must be created exponentially (inflation) to avoid paying the 3% interest floor. A minimum floor on the yield on capital means you must grow your economy by 3% just for incomes to not stagnate, for the standard of living to just stay the same! This isn't growth for prosperity's sake, it is growth just to keep food on the table! If you refuse to pay this yield, money will stop circulating, blood will stop flowing, the organism will die. So governments have decided that we won't pay the yield and must create more blood, fully aware that the blood is being lost via a hemorrhage that will grow and eventually burst. One last word. If the interest rate on money is supposed to mirror the real world, then what does a positive interest rate mean? It means there is a shortage of capital and that the economy must grow. A zero interest rate means that there is no shortage and all capital is being utilized. A negative interest rate means there is more capital is more than enough capital and that we don't have to utilize all of it. In other words, the latter permits there to be slack in the economy, it allows for supply to outstrip demand and any prosperous economy should be able to do that.
Animats 4y ago
The problem here is the US trying to control economic policy without controlling economic policy. The Asian countries that pulled themselves up from poverty to being rich countries all had industrial policies, where credit was allocated to chosen industries. How well those choices were made had a strong influence on how well that worked. (See "How Asia Works", Studwell, 2014.) The US has industrial policy through tax policy. It's determined mostly by lobbying. Financial activity is encouraged; most internal transfers within the financial system are not taxed. (They could be, and it's been proposed; that's called a "Tobin tax"). There's a strong tax bias in favor of owning real estate. Debt, which is not taxed, is favored over paying dividends, which are taxed. Certain types of farming are encouraged. Those parts of policy are not adjusted very often.
grahamplace 4y ago
Not called out in the article itself, but the title is most likely a reference to McLuhan's phrase "The medium is the message" https://en.wikipedia.org/wiki/The_medium_is_the_message https://en.wikipedia.org/wiki/The_medium_is_the_message
Nevermark 4y ago
> Uncertainty does not mean things will get worse. It only means we know less and have less control. “Chaos is a ladder.” - Some ambitious financial bureaucrat in some universe. :)

65 points by jger15 4y ago

> Uncertainty does not mean things will get worse. It only means we know less and have less control. People naturally loath feeling out of control. Sometimes control is an illusion, other times it has a solid foundation and is not a mirage. The trick is to recognize real control and see some value in that. We cod ourselves when control is an illusion.

roenxi 4y ago

I like this message, but I don't think interest rates are actually our biggest problem. The sort of ideologies that tolerate unrealistic interest rates - effectively lies about what the market reality is - probably led to idiots being in charge which didn't help. But the real problem we're facing is that we can't paper over the drag by an unrealistic financial system because we've run out of energy and energy security got pushed off the table by people who only cared about destroying fossil fuels. We needed broad consensus that a Chernobyl every 50 years was a perfectly acceptable price to pay vs. the looming resource wars we see warming up over dwindling oil. And the background issue of overpopulation.

tremon 4y ago

it is common to say that intervention from governments and central banks "distort" money and makes it impossible for investors to get accurate information from the economy. Why is it so popular to complain about government intervention distorting the value of money, but is it a faux-pas to talk about banks and stock markets distorting the value of money by hiding unsecured debt behind nebulous contracts or ridiculously overvaluating companies?

djbusby 4y ago
It's popular because "government bad" and "capitalism good". Of course that blanket logic is false however, it's widely believed, it sells and gets propagated.
SilverBirch 4y ago
Core to almost all economic study is a set of simplifying assumptions that make models of the world so that from those models we can then make predictions. The problem is that economists lose sight of this. When the government intervenes in the economy it makes the economy not look like economists model of the economy. So they claim the government is distorting the economy, but in reality that's rubbish. The government is an actor in the economy, one that economists are bad at modelling, and even if they were good at modelling it, there's no normative reason why the world should behave like their model. It's a wildly right wing view of the world that has been subtly smuggled into the core of economists view of the world.
- confidantlake 4y ago
  I agree and would even go further. Economics as a whole is basically a right wing social science. Most models bear little resemblance to real life and offer virtually no predictive power. It is an entirely unserious field.
  - andrekandre 4y ago
    > Economics as a whole is basically a right wing social science. im not sure i would got that far, but its definitely has a strong neo-liberal bent for some time i'd say theres a reason they used to call it 'political economy' instead of just 'economics'...
    - SilverBirch 4y ago
      Neoliberal economics is basically "WE GET RICHER ON AVERAGE and maybe at some point possibly we should compensate those people we fucked over"
jesuscript 4y ago
behind nebulous contracts or ridiculously overvaluating companies Just as a thought experiment, try to restate that with the poker analogy. 1. behind nebulous contracts A bluff. You are bidding up a hand so people believe it’s a good hand. 2. ridiculously overvaluating companies Bidding up a hand because you know the other side can’t afford the risk (they can’t match you when you up the ante, doesn’t matter how good their hand, modest institutions won’t take the risk), so you can take the pot just economically. Overvaluing a company is to make the sale look attractive to investors (it’s 50bn, must be worth a shit right). Once you have them, your job is done, take the pot, drop the value. A retirement fund can’t stand up to “we need crypto exposure in our portfolio”, they’ll fold and take it. ——— The point is, the economy has this psychological element. What most people are not ready to hear is that in this game, the psychological games leaves any side either fleeced, caught, exposed, or downright unlucky. That’s why it’s unnerving, because our economy is supposed to be numbers in, numbers out. But it’s not. It’s not the money that’s the problem, it’s the psychological game. ———- Government debt printing is the most optimistic psychological game we have in the economy. It’s a bet on the future potential of the country. It’s a risk, the country may not be what we think it’s capable of in the future. But it’s far less insidious than the other psycho tricks.
- junofan 4y ago
  > Government debt printing is the most optimistic psychological game we have in the economy. Print too much and the big money poker game (capital formation) moves elsewhere.
  - jesuscript 4y ago
    What casino fears that? Where you gonna play, China?
unity1001 4y ago
> but is it a faux-pas to talk about banks and stock markets distorting the value of money by hiding unsecured debt behind nebulous contracts or ridiculously overvaluating companies? Through immense propaganda and conditioning of the public by the publications of those very financial organizations, of course. Private entities can do it to maximize their profit at the expense of everyone else. Everyone else cant do it to maximize the benefit of everyone. Its socialism for the rich. capitalism for the poor like always.
hammock 4y ago
Banks and stock markets don’t pilfer my wallet at the point of a gun under the guise of protecting my freedom
- arrosenberg 4y ago
  Sure, the banks will protect your freedom with a 5/1 adjustable mortgage and then kick you out in year 6 when the interest spikes. Those lovable banks!
  - ThunderSizzle 4y ago
    Who the hell is getting an ARM? Most mortgages, at least in the States, are fixed rates. Also, mortgages are almost entirely regulated. There's almost nothing a business can do in the mortgage sphere that wasn't specifically allowed by the feds.
    - simiones 4y ago
      Yes, the point is that the banks are (edit: should have said "would be, in the absence of government regulation") far more predatory than government - it's in fact government (who GP claimed is "sticking them at gunpoint") that is protecting us from the banks. Just look at loan sharks for a view of what banks sans regulation are.
    - arrosenberg 4y ago
      Thats cute, but I lived through the 2008 housing crash, none of that stuff stopped the banks from kicking people out of their homes and destroying a bunch of lives.
      - guhidalg 4y ago
        Your bank isn't a good bank, their bank is obviously a virtuous bank that would never prey on desperate borrowers /s
      - ThunderSizzle 4y ago
pmichaud 4y ago
Is it a faux pas? I hear this sort of thing constantly, eg. your post?
sebastianconcpt 4y ago
Because the market will correct itself. Government never do that (unless there is a civil war or revolution).
- lovich 4y ago
  Governments have corrected themselves numerous times without revolution, unless you are counting democratic regime changes as a revolution.
  - sebastianconcpt 4y ago
    Oh boy what do I have to listen to... you're talking to an argentinean. Yeah, from an insanely rich land in steady and perfectly predictable decadence for more about 100 years by now. And straight from the top of the world. No, goverments never shrink themselves. The political class only vote for power growth over the population. There is no correction to that unless there is a popular revolt that takes them out.
    - lovich 4y ago
      I don’t believe that shrinking themselves is required for a correction and even to that extent the governments in the west at least have shrunk themselves several times by removing or reducing regulatory agencies
      - sebastianconcpt 4y ago
        You are basically agreeing with what I've said then. Political class power expansion is always growing. A little regulation removal, a little pullback, doesn't make them not to stay power growth bullish. If you see that rule isn't fair to what is generally happening countries, please prove me wrong, show me in history in what countries the political class went bear on power growth without a revolt or revolution. Again, not a little pullback, but a bearish correction. What are the chances of the political class individuals current psychology suddenly make them agree, collectively enough, to say "hey, let's make ourselves this amount of less powerful for the benefit of the people"? It simply doesn't happen because before even trying, their propaganda collapses so bad that people revolts on the realization of the lies and revolt and replace their political class or even system. The left is a master at this by the way, that's why a good limiting constitution might be the last source of hope.

molsongolden 4y ago

>The distortion itself is the message. It conveys the fact that technology now enables banks and governments to do what they do with unprecedented scale and speed. It tells us that interest rates cannot be trusted to guide investment decisions because they should not be trusted. By "not making sense," interest rates tell investors not to rely on them. The acceleration of interest rate manipulation/interference to the point of full breakdown as a meaningful indicator of market participant time preferences. It's a good thought but I'm left needing a "10 WAYS TO PROFIT FROM MARKET UNCERTAINTY" tweetstorm.

imtringued 4y ago
Interest rates were never a meaningful representation of time preferences to begin with.

fasteddie31003 4y ago

I think of money as being a messaging protocol for trust. When the government lowers interest rates it benefits asset holders first because the rest of the economy has not realized that their money is worth less (see the Cantillon effect https://en.wikipedia.org/wiki/Richard_Cantillon https://en.wikipedia.org/wiki/Richard_Cantillon).

jongjong 4y ago

That sounds very much like what Austrian Economist Friedrich Hayek had been advocating. He also discussed prices as being information signals. The danger of government money-printing is that the government ends up distorting the supply of money entering various industries (especially through big government contracts) and thus, to some extent, ends up determining what is profitable and what is not profitable... Then we end up with an economic system wherein winners are selected not on the basis of their adherence to the needs of working people, but on the basis of their adherence to the whims of government bureaucrats.

jongjong 4y ago
On a related subject, I can understand why reserve banks and governments think that they can use money printing as an incentive mechanism to fight against climate change, but so far, it does not seem to be effective because government bureaucrats are terrible stakeholders when it comes to the climate; they do not have the ability to differentiate between the kinds of ventures which will genuinely help to fight climate change and those which are merely engaging in green-washing... And it's too easy for government officials to claim plausible deniability when their true intentions have been to help their corporate friends get their hands on big stacks of public 'ESG' money. I think the problem both has to do with incentives (since government bureaucrats do not 'own' the climate; it's not really their problem) and also with capabilities (they generally do not have the scientific knowledge/qualifications or the critical thinking skills required to be able to effectively make such decisions). Climate change is a very complex topic, it's probable that nobody in the world fully understands all the dynamics which drive it because every single thing (living and non-living) which exists on this planet is a factor contributing either towards or against global warming and everything is interconnected with complex feedback loops... So it's difficult to see how politicians who do not have any scientific background would be able to know how to allocate funding to fight climate change. There are also many scientists who reject the notion of man-made climate change altogether; in this case, the whole global warming narrative could be seen as nothing but a giant financial scheme to launder freshly printed money from governments to large corporate entities under the ESG label.
- 4y ago

vannevar 4y ago

In reality, the price of money is not determined by supply and demand. Right, because the supply is elastic without any direct cost of manufacture. The idea that interest rates will go down when a lot of people start saving is based on the implicit assumption that the supply is more or less fixed. But that hasn't been true for a long, long time. As long as banks can print money (ie, lend more money than they have actual deposits), the saving rate will not significantly affect interest rates, even leaving the Fed out of the equation. (See, e.g., https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp https://www.investopedia.com/articles/investing/022416/why-b...)

howmayiannoyyou 4y ago

> Ultimately, interest rates become meaningless. They no longer tell investors anything. The article is silly. In the real world, business people pay close attention to interest rates because we borrow money. We borrow money to smooth volatility, to manage inventories, and to invest in products/services. Interest rates are FAR from meaningless & simply the expectation they will be changed is enough to make many business owners change behaviors. At present we are watching interest rate changes vacuum up global liquidity, cause the USD to rise, and make US goods more expensive worldwide. Investors - invested in these businesses and with their own exposure to rates - pay close attention to rate jawboning and actual rates

gapplebees 4y ago
deeg 4y ago
I paused at the same line. This told me that the author has an agenda. A more fair statement might be that the interest rates are less meaningful than they could be but meaningless? No way.
drdec 4y ago
I think the author's point was that the interest rates have become decoupled from the information they would otherwise convey, in the absence of government interference. It is not that they are irrelevant, simply that they are not revealing any information about the underlying economy and are in that way "meaningless". I haven't thought enough about this to know if I agree or not, but that is what I understand the author's thesis to be.
- notahacker 4y ago
  It's a nonsense argument though (which tbf the author hints at understanding with the latter part of their post) A central bank setting base interest rates based on desire to converge on inflation targets rather than something completely arbitrary like the availability of a certain grade of shiny metal doesn't convey less actionable information, it conveys more.

bognition 4y ago

> The economy is telling us something similar. It is an unpleasant message. But it is clear. And we should listen to it. Hmm... maybe its not that clear b/c I still have no ideal what we should takeaway from this article.

michaelwww 4y ago

I like the idea that money both energy and information, while simultaneously being different things to different people. For Jeff Bezos, money is personal power and prestige, for McKenzie Scott, money is a tool for social good. Money Is Energy: George Mobus Discusses Biophysical Economics and Alternative Theories of Value - https://www.financialsense.com/contributors/george-mobus/biophysical-economics-energy-standard-money https://www.financialsense.com/contributors/george-mobus/bio... Bitcoin as Battery - https://www.nickgrossman.xyz/2021/bitcoin-as-battery/ https://www.nickgrossman.xyz/2021/bitcoin-as-battery/ Bitcoin Is Not a Battery - https://www.aier.org/article/bitcoin-is-not-a-battery/ https://www.aier.org/article/bitcoin-is-not-a-battery/ The medium is the message - https://en.wikipedia.org/wiki/The_medium_is_the_message https://en.wikipedia.org/wiki/The_medium_is_the_message Cybernetics - https://en.wikipedia.org/wiki/Cybernetics https://en.wikipedia.org/wiki/Cybernetics Blind men and an elephant - https://en.wikipedia.org/wiki/Blind_men_and_an_elephant https://en.wikipedia.org/wiki/Blind_men_and_an_elephant

openfuture 4y ago
If money is persuasion (i.e. I can pay you money to change your behaviour) then that explains perfectly why money is both energy and information.... Energy changes behaviour (that is literally how we reason about behaviour; in terms of energy). Let me try to justify "energy = persuasion" (which a very hippie way of seeing energy)we factor persuasion into the information that was presented and then the trust you place in that information. The more you trust the information the more it affects your behaviour. Clearly this is contextual! Depending on how you choose to interpret information you may have different assessments of trust. Energy is a more materialistic concept, the information would be the matter I suppose while the trust (which is contextual by above) has to be an assessment of the relation this information has to other information (matter in this case), i.e. you can easily obtain some kind of newtonian physics (drawing in the forces acting on an object as a way to assess how to trust this information in the context of material world). I think that we will soon be mature enough to accept that this is the case and we will be willing to read https://datalisp.is https://datalisp.is (so I don't have to write this over and over again). Legitimacy essentially has a similar role to gravity. It is a force acting on the trustworthiness of information; thereby affecting its' persuasiveness.

psychoslave 4y ago

> For example, it is legitimate for a government to choose to have a less efficient economy but one in which more people have a job and can afford a home. What is an efficient economy in the author perspective?

mempko 4y ago

We should ask the question, since when was money ever NOT manipulated by it's creators (governments and banks). There is no such period in human history. Money is a creation of governments so they can provision themselves. The old story of money coming from barter is a fairy tale. Made up. The problem with the article is that it assumes such a period (money without intervention) is possible or even desirable.

marcosdumay 4y ago
Logically, there must have existed some time when money was generally agreed upon, and nobody started manipulating its supply yet. It was probably a very local setup, changing in time from one place to another. I imagine it was also all if it in ancient history.

imtringued 4y ago

>The global economy is a biological system, and money is its nervous system. This is more than a mere analogy. If you want to make that analogy you will at least have to pick the right one. Money is more like blood. If money doesn't circulate throughout the body evenly it will develop necrosis or even die. If the organism grows bigger it will need more blood. >"money is the channel through which we communicate with distant strangers, the original social media... distorting media distorts the way society talks to itself." This is correct but what this means is that not communicating at all, i.e. never spending your money and never sending a price signal is the worst form of distortion because it breeds speculation on the supply side. Since no price signal is sent, nobody knows what to produce, people will have to blindly invest into the future and hope they are lucky. The cunning ones will try to coerce people into sending price signals by creating artificial needs or reducing production until scarcity sets in and people have no other choice other than to send price signals. >Hence, prices expressed in money and the price of money itself are the lifeblood of the economy (I mean "the nervous system". Both metaphors work!). By "the price of money," I am referring to the interest rate money earned by doing nothing. Or, more accurately, the interest money can earn from being deposited in a bank. Interest rates indicate the supply and demand for money. That is only true in a loanable funds model, which in theory isn't a bad idea but that isn't the money system we have right now. In a money system where deposits are created through loans the supply of money is in theory infinite, the idea of a price of money being the result of the supply and demand of money becomes illogical. Insteady the optimal rate of interest depends on yields in the real economy. >In light of the above, it is common to say that intervention from governments and central banks "distort" money and makes it impossible for investors to get accurate information from the economy Indeed, central banks and governments act in the worst kind of price control imaginable. A lower bound on interest rates combined with a deposit insurance and bailout scheme that effectively guarantees this price control. This effectively means vast amounts of capital are on unemployment support. The zero lower bound has become the minimum wage of capital. Due to the speculative benefits of liquidity, people aren't going to lend out their money in long term bonds unless the interest rate is sufficiently high. This liquidity preference effectively acts like a constant which is applied on the lowest possible interest rate. 0% (zero lower bound) + 3% (liquidity preference) = 3%, therefore yields on money must always be positive or new money must be created exponentially (inflation) to avoid paying the 3% interest floor. A minimum floor on the yield on capital means you must grow your economy by 3% just for incomes to not stagnate, for the standard of living to just stay the same! This isn't growth for prosperity's sake, it is growth just to keep food on the table! If you refuse to pay this yield, money will stop circulating, blood will stop flowing, the organism will die. So governments have decided that we won't pay the yield and must create more blood, fully aware that the blood is being lost via a hemorrhage that will grow and eventually burst. One last word. If the interest rate on money is supposed to mirror the real world, then what does a positive interest rate mean? It means there is a shortage of capital and that the economy must grow. A zero interest rate means that there is no shortage and all capital is being utilized. A negative interest rate means there is more capital is more than enough capital and that we don't have to utilize all of it. In other words, the latter permits there to be slack in the economy, it allows for supply to outstrip demand and any prosperous economy should be able to do that.

Animats 4y ago

The problem here is the US trying to control economic policy without controlling economic policy. The Asian countries that pulled themselves up from poverty to being rich countries all had industrial policies, where credit was allocated to chosen industries. How well those choices were made had a strong influence on how well that worked. (See "How Asia Works", Studwell, 2014.) The US has industrial policy through tax policy. It's determined mostly by lobbying. Financial activity is encouraged; most internal transfers within the financial system are not taxed. (They could be, and it's been proposed; that's called a "Tobin tax"). There's a strong tax bias in favor of owning real estate. Debt, which is not taxed, is favored over paying dividends, which are taxed. Certain types of farming are encouraged. Those parts of policy are not adjusted very often.

grahamplace 4y ago

Not called out in the article itself, but the title is most likely a reference to McLuhan's phrase "The medium is the message" https://en.wikipedia.org/wiki/The_medium_is_the_message https://en.wikipedia.org/wiki/The_medium_is_the_message

Nevermark 4y ago

> Uncertainty does not mean things will get worse. It only means we know less and have less control. “Chaos is a ladder.” - Some ambitious financial bureaucrat in some universe. :)