5 ms·

Billionaire says Powell and his merry band of lunatics are destroying capitalism

12 points by SirLJ 4y ago

koyanisqatsi 4y ago
I would like to know how Powell is doing this. How exactly does the chair of the federal reserve "destroy" capitalism?
- deleted 4y ago
  [deleted]
- melling 4y ago
  “destroying faith in capitalism ” I’d say that’s quite a bit different than “destroying capitalism “
  - koyanisqatsi 4y ago
    I also want to know how he's doing that as well. I'd like to know how anyone can destroy faith in an ideology like capitalism.
    - ehvatum 4y ago
      By undermining the value of unit of account for capital via inflation, so that capital may no longer be kept or lent or borrowed, and barter and force of arms replace money as means of exchange.
      - koyanisqatsi 4y ago
        How exactly is it being undermined if it's still being used as the main unit of accounting? Is there some new political movement I'm not aware of that is trying to replace the US dollar with something else or is inflation of the US dollar sufficient to destroy people's faith in capitalism?
- AnimalMuppet 4y ago
  He kept the interest rate low for too long[1]. That left capitalists to their own devices, which has a tendency to cause problems. "Destroying capitalism" is a bit of a stretch even for that, though. [1] But it's not that simple. Powell left rates low until there was evidence that rates should rise. But that always comes too late, after the correct time to raise rates. On the other hand, if you raise rates before the evidence that you need to, you can kill a recovery - a recovery from 2008 that we were waiting for over a decade for it to really catch fire.
  - melling 4y ago
    Powell tried to raise rates a few years ago but the markets tanked and everyone criticized him, including the President. People didn’t want the market bubble to end. TINA https://www.investopedia.com/terms/t/tina-there-no-alternative.asp https://www.investopedia.com/terms/t/tina-there-no-alternati...
  - deepsquirrelnet 4y ago
    > “Doing great with China and other Trade Deals. The only problem we have is Jay Powell and the Fed. He’s like a golfer who can’t putt, has no touch. Big U.S. growth if he does the right thing, BIG CUT - but don’t count on him!” Trump wrote on Twitter. That would not really have been viable, considering the political climate. The previous administration was busy pumping steroids into the economy. Picture inflating a balloon. Rates were at 1.75 and pressure was to cut them to 1.5%. Different times… [1]https://www.reuters.com/article/us-usa-fed-trump/trump-heaps-pressure-on-fed-and-its-chairman-powell-to-cut-rates-idUSKCN1VB1I2 https://www.reuters.com/article/us-usa-fed-trump/trump-heaps... [2] https://brrr.money/ https://brrr.money/
  - mindslight 4y ago
    It's utterly amazing how flagrantly these posh-dole recipients will shamelessly gaslight us. The sine qua non of capitalism is that it's distributed. What has destroyed and continues to destroy capitalism is the Fed keeping interest rates ridiculously low, going on (at least) three decades now. All of those artifically-cheap "loans" are newly created money being given to the financial industry and handwaved away as "value neutral", while it's anything but. The real estate bubble, the stock market bubble, the auto loan bubble, the college bubble. Everywhere individuals are priced out of transacting directly and banks have stepped in to financialize our lives - it's all been fostered by these central-planning puppet masters, giving us a Potemkin village of "growth" while the real distributed economy gets more hollowed out as its wealth is sucked into the cancerous financial industry with much ultimately wasted on make-work jobs. And then to have the gall to say that rates going up ever so slightly is "destroying capitalism" ? If you want to know where the blind populist rage driving support for burn it all down candidates comes from, it's right here. If you want to know why "young people" are rejecting "late stage capitalism", it's right here. Heads they win, tails you lose.
rsj_hn 4y ago
Fortune tends towards the clickbait side of things, and this article is no different. But as in a lot of clickbait, there are kernels of truth. Our understanding of monetary policy views the interest rate as a control variable, and the objective variable that is being controlled is inflation. The goal is to keep current inflation around 2%. The idea is very simple, when inflation goes above target, you hike the rate, and when it falls below target you lower the rate. There is a hypothesized "natural" rate, which may change, and is the product of productivity growth, population growth, and many other factors like time preference of the population, etc. This natural rate is the rate at which inflation is exactly at target. And when inflation drifts above target, you increase the rate from the natural rate. That theory, historically, fixated on the problem of the zero bound -- you can always hike, but you can't always lower. Many old school people kept warning that no, the real problem remains high inflation, not low inflation. We can also debate whether we should be targeting inflation or the price level -- e.g. do we want high inflation to make up for a period of low inflation and vice versa? Or do we have no memory and only try to get inflation back to 2%? And we can debate whether 2% is the right target inflation or if it should be higher. In any case, wherever you fall on these issues, it's well known that the response for the control to work has to be greater than 1. E.g. if the inflation deviation is a little high, the interest rate deviation from the natural rate needs to be even higher. Any sustained period of negative real rates is going to be disastrous. That means with 10% inflation we may need a policy rate of 12% or 15%. It was for this reason that Volcker (even though the theory had not been worked out yet in academia) hiked rates to 19% in 1980 and that was what really crushed inflation, as previous efforts were insufficient. That would mean that today, we should see a much higher overnight rate than what we do see -- which is only 3%. It should be something like 13%. And people will say "wow, that's a very deep recession" and the answer is "yes, exactly. That's what's needed to bring inflation back down to target." Powell's refusal to stick to the policy that was initiated by Volcker and more or less honored by all his previous successors is what most economists blame for the current period of runaway inflation. Runaway inflation is not just about making people poorer, but long periods of negative real rates means that pensions will not be paid, there will be problems in credit markets, and it will be difficult to make long term investment plans, both for business and personal financial planning. It's really hard to find out how much you need to save if you have no idea what your savings will be worth in 20 years. That uncertainty about future prices causes long term standard of living to fall even more than what would happen in a very sharp, yet brief, recession that brings inflation back down and allows companies and households to make long term plans. Powell's refusal to create this recession, primarily for political reasons, as there is always an election coming up every 2 years, is what is jeopardizing the viability of our system of savings and investment.
jgalt212 4y ago
If ever catch Sternlicht making a statement that doesn't talk his own book, ping me.

12 points by SirLJ 4y ago

koyanisqatsi 4y ago

I would like to know how Powell is doing this. How exactly does the chair of the federal reserve "destroy" capitalism?

deleted 4y ago
[deleted]
melling 4y ago
“destroying faith in capitalism ” I’d say that’s quite a bit different than “destroying capitalism “
- koyanisqatsi 4y ago
  I also want to know how he's doing that as well. I'd like to know how anyone can destroy faith in an ideology like capitalism.
  - ehvatum 4y ago
    By undermining the value of unit of account for capital via inflation, so that capital may no longer be kept or lent or borrowed, and barter and force of arms replace money as means of exchange.
    - koyanisqatsi 4y ago
      How exactly is it being undermined if it's still being used as the main unit of accounting? Is there some new political movement I'm not aware of that is trying to replace the US dollar with something else or is inflation of the US dollar sufficient to destroy people's faith in capitalism?
AnimalMuppet 4y ago
He kept the interest rate low for too long[1]. That left capitalists to their own devices, which has a tendency to cause problems. "Destroying capitalism" is a bit of a stretch even for that, though. [1] But it's not that simple. Powell left rates low until there was evidence that rates should rise. But that always comes too late, after the correct time to raise rates. On the other hand, if you raise rates before the evidence that you need to, you can kill a recovery - a recovery from 2008 that we were waiting for over a decade for it to really catch fire.
- melling 4y ago
  Powell tried to raise rates a few years ago but the markets tanked and everyone criticized him, including the President. People didn’t want the market bubble to end. TINA https://www.investopedia.com/terms/t/tina-there-no-alternative.asp https://www.investopedia.com/terms/t/tina-there-no-alternati...
- deepsquirrelnet 4y ago
  > “Doing great with China and other Trade Deals. The only problem we have is Jay Powell and the Fed. He’s like a golfer who can’t putt, has no touch. Big U.S. growth if he does the right thing, BIG CUT - but don’t count on him!” Trump wrote on Twitter. That would not really have been viable, considering the political climate. The previous administration was busy pumping steroids into the economy. Picture inflating a balloon. Rates were at 1.75 and pressure was to cut them to 1.5%. Different times… [1]https://www.reuters.com/article/us-usa-fed-trump/trump-heaps-pressure-on-fed-and-its-chairman-powell-to-cut-rates-idUSKCN1VB1I2 https://www.reuters.com/article/us-usa-fed-trump/trump-heaps... [2] https://brrr.money/ https://brrr.money/
- mindslight 4y ago
  It's utterly amazing how flagrantly these posh-dole recipients will shamelessly gaslight us. The sine qua non of capitalism is that it's distributed. What has destroyed and continues to destroy capitalism is the Fed keeping interest rates ridiculously low, going on (at least) three decades now. All of those artifically-cheap "loans" are newly created money being given to the financial industry and handwaved away as "value neutral", while it's anything but. The real estate bubble, the stock market bubble, the auto loan bubble, the college bubble. Everywhere individuals are priced out of transacting directly and banks have stepped in to financialize our lives - it's all been fostered by these central-planning puppet masters, giving us a Potemkin village of "growth" while the real distributed economy gets more hollowed out as its wealth is sucked into the cancerous financial industry with much ultimately wasted on make-work jobs. And then to have the gall to say that rates going up ever so slightly is "destroying capitalism" ? If you want to know where the blind populist rage driving support for burn it all down candidates comes from, it's right here. If you want to know why "young people" are rejecting "late stage capitalism", it's right here. Heads they win, tails you lose.

rsj_hn 4y ago

Fortune tends towards the clickbait side of things, and this article is no different. But as in a lot of clickbait, there are kernels of truth. Our understanding of monetary policy views the interest rate as a control variable, and the objective variable that is being controlled is inflation. The goal is to keep current inflation around 2%. The idea is very simple, when inflation goes above target, you hike the rate, and when it falls below target you lower the rate. There is a hypothesized "natural" rate, which may change, and is the product of productivity growth, population growth, and many other factors like time preference of the population, etc. This natural rate is the rate at which inflation is exactly at target. And when inflation drifts above target, you increase the rate from the natural rate. That theory, historically, fixated on the problem of the zero bound -- you can always hike, but you can't always lower. Many old school people kept warning that no, the real problem remains high inflation, not low inflation. We can also debate whether we should be targeting inflation or the price level -- e.g. do we want high inflation to make up for a period of low inflation and vice versa? Or do we have no memory and only try to get inflation back to 2%? And we can debate whether 2% is the right target inflation or if it should be higher. In any case, wherever you fall on these issues, it's well known that the response for the control to work has to be greater than 1. E.g. if the inflation deviation is a little high, the interest rate deviation from the natural rate needs to be even higher. Any sustained period of negative real rates is going to be disastrous. That means with 10% inflation we may need a policy rate of 12% or 15%. It was for this reason that Volcker (even though the theory had not been worked out yet in academia) hiked rates to 19% in 1980 and that was what really crushed inflation, as previous efforts were insufficient. That would mean that today, we should see a much higher overnight rate than what we do see -- which is only 3%. It should be something like 13%. And people will say "wow, that's a very deep recession" and the answer is "yes, exactly. That's what's needed to bring inflation back down to target." Powell's refusal to stick to the policy that was initiated by Volcker and more or less honored by all his previous successors is what most economists blame for the current period of runaway inflation. Runaway inflation is not just about making people poorer, but long periods of negative real rates means that pensions will not be paid, there will be problems in credit markets, and it will be difficult to make long term investment plans, both for business and personal financial planning. It's really hard to find out how much you need to save if you have no idea what your savings will be worth in 20 years. That uncertainty about future prices causes long term standard of living to fall even more than what would happen in a very sharp, yet brief, recession that brings inflation back down and allows companies and households to make long term plans. Powell's refusal to create this recession, primarily for political reasons, as there is always an election coming up every 2 years, is what is jeopardizing the viability of our system of savings and investment.

jgalt212 4y ago

If ever catch Sternlicht making a statement that doesn't talk his own book, ping me.