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Has there been any evidence that the long period of ultra-low interest rates we enjoyed resulted in additional productive capacity? It sounds like a lot of it j

Has there been any evidence that the long period of ultra-low interest rates we enjoyed resulted in additional productive capacity? It sounds like a lot of it just went to unprofitable SaaS companies and other virtual endeavors, and not so much to things that exist in the physical world.

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dopamean 3y ago
> the long period of ultra-low interest rates we enjoyed resulted in additional productive capacity If there is evidence of that I'd love to see it. If this was true then we'd have a huge supply of homes all over America now which I think is not the case is it? All I hear about is undersupply driving up home prices despite demand being low. I live in Austin where this is very true so maybe I'm in a bit of a bubble?
- notaustinpowers 3y ago
  Even with the ultra-low interest rates, supply was kept low due to nervousness from home builders. Builders were decimated in the housing crisis and, honestly, never recovered. To them, the collapse came sudden and quick, and many housing projects and developments just sit half-finished even to this day. The focus was turned from single-family housing to apartments, specifically luxury apartments as the luxury housing sector picked up steam quickly as developers and investors jumped on those properties when they were at their lowest prices. So "luxury" apartments were built at low-costs and purchased by investment firms. The main focus was for the builder to get their money back and more as quickly as possible, minimizing their risk, and the investors in the new complex got a bargain "luxury" property that they can increase rents quickly on, while ensuring demand since fewer and fewer single-family homes were being built. The current issue of supply and demand for housing is, largely, artificially created, possibly accidentally. Single-family housing is just risky now, apartments are less risky. But as people are desiring yards and space again (due to COVID and WFH), we are now seeing the rental model extend to "build-to-rent" single-family communities.
bjacokes 3y ago
> It sounds like a lot of it just went to unprofitable SaaS companies U.S. GDP is north of $25 trillion and has grown 75% since 2009. Annual VC investments appear to be in the $200-300 billion range, from a quick search - presumably not all of it going to unprofitable SaaS companies. I'd go with the statistics over the gut intuition here.
- gottorf 3y ago
  > U.S. GDP is north of $25 trillion and has grown 75% since 2009. Cumulative inflation since 2009 is 42.5%. Real GDP from Q3 2009 to Q3 2023 is up 37.8%[0], and that's with the base effect of 2009 having been a deep recession. And looking deeper into the sector breakdowns, from 2009[1] to 2022[2], the lion's share of gains in GDP were from the information, finance, professional and business services, and government categories. Some, like manufacturing, have had no growth in real terms over that time. The homeownership rate is lower now than in 2009[3]. Food is nearly 50% more expensive[4], higher than overall inflation. The cost to produce food is 51.8% higher[5]. Construction materials are 75% higher[6]. So yes, there are a lot of indications to suggest that proportionally, not as much capital was invested into the parts of the economy that are composed of atoms, not bits. [0]: https://fred.stlouisfed.org/series/GDPC1 https://fred.stlouisfed.org/series/GDPC1 [1]: https://apps.bea.gov/scb/pdf/2012/05%20May/0512_industry.pdf https://apps.bea.gov/scb/pdf/2012/05%20May/0512_industry.pdf [2]: https://apps.bea.gov/iTable/?reqid=150&step=2&isuri=1&categories=gdpxind https://apps.bea.gov/iTable/?reqid=150&step=2&isuri=1&catego... [3]: https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N [4]: https://fred.stlouisfed.org/series/CPIUFDS https://fred.stlouisfed.org/series/CPIUFDS [5]: https://fred.stlouisfed.org/series/PCU311311 https://fred.stlouisfed.org/series/PCU311311 [6]: https://fred.stlouisfed.org/series/WPUSI012011 https://fred.stlouisfed.org/series/WPUSI012011
runeks 3y ago
> Has there been any evidence that the long period of ultra-low interest rates we enjoyed resulted in additional productive capacity? I’d say that the comparatively low inflation rate from 2010 to 2020 [1] qualifies as evidence of this. > It sounds like a lot of it just went to unprofitable SaaS companies and other virtual endeavors, and not so much to things that exist in the physical world. A lot of it did, I agree. But it would be strange if somehow no productive equipment at all was purchased based on a low-interest loan. [1] https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi
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dopamean 3y ago

> the long period of ultra-low interest rates we enjoyed resulted in additional productive capacity If there is evidence of that I'd love to see it. If this was true then we'd have a huge supply of homes all over America now which I think is not the case is it? All I hear about is undersupply driving up home prices despite demand being low. I live in Austin where this is very true so maybe I'm in a bit of a bubble?

notaustinpowers 3y ago
Even with the ultra-low interest rates, supply was kept low due to nervousness from home builders. Builders were decimated in the housing crisis and, honestly, never recovered. To them, the collapse came sudden and quick, and many housing projects and developments just sit half-finished even to this day. The focus was turned from single-family housing to apartments, specifically luxury apartments as the luxury housing sector picked up steam quickly as developers and investors jumped on those properties when they were at their lowest prices. So "luxury" apartments were built at low-costs and purchased by investment firms. The main focus was for the builder to get their money back and more as quickly as possible, minimizing their risk, and the investors in the new complex got a bargain "luxury" property that they can increase rents quickly on, while ensuring demand since fewer and fewer single-family homes were being built. The current issue of supply and demand for housing is, largely, artificially created, possibly accidentally. Single-family housing is just risky now, apartments are less risky. But as people are desiring yards and space again (due to COVID and WFH), we are now seeing the rental model extend to "build-to-rent" single-family communities.

bjacokes 3y ago

> It sounds like a lot of it just went to unprofitable SaaS companies U.S. GDP is north of $25 trillion and has grown 75% since 2009. Annual VC investments appear to be in the $200-300 billion range, from a quick search - presumably not all of it going to unprofitable SaaS companies. I'd go with the statistics over the gut intuition here.

gottorf 3y ago
> U.S. GDP is north of $25 trillion and has grown 75% since 2009. Cumulative inflation since 2009 is 42.5%. Real GDP from Q3 2009 to Q3 2023 is up 37.8%[0], and that's with the base effect of 2009 having been a deep recession. And looking deeper into the sector breakdowns, from 2009[1] to 2022[2], the lion's share of gains in GDP were from the information, finance, professional and business services, and government categories. Some, like manufacturing, have had no growth in real terms over that time. The homeownership rate is lower now than in 2009[3]. Food is nearly 50% more expensive[4], higher than overall inflation. The cost to produce food is 51.8% higher[5]. Construction materials are 75% higher[6]. So yes, there are a lot of indications to suggest that proportionally, not as much capital was invested into the parts of the economy that are composed of atoms, not bits. [0]: https://fred.stlouisfed.org/series/GDPC1 https://fred.stlouisfed.org/series/GDPC1 [1]: https://apps.bea.gov/scb/pdf/2012/05%20May/0512_industry.pdf https://apps.bea.gov/scb/pdf/2012/05%20May/0512_industry.pdf [2]: https://apps.bea.gov/iTable/?reqid=150&step=2&isuri=1&categories=gdpxind https://apps.bea.gov/iTable/?reqid=150&step=2&isuri=1&catego... [3]: https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N [4]: https://fred.stlouisfed.org/series/CPIUFDS https://fred.stlouisfed.org/series/CPIUFDS [5]: https://fred.stlouisfed.org/series/PCU311311 https://fred.stlouisfed.org/series/PCU311311 [6]: https://fred.stlouisfed.org/series/WPUSI012011 https://fred.stlouisfed.org/series/WPUSI012011

runeks 3y ago

> Has there been any evidence that the long period of ultra-low interest rates we enjoyed resulted in additional productive capacity? I’d say that the comparatively low inflation rate from 2010 to 2020 [1] qualifies as evidence of this. > It sounds like a lot of it just went to unprofitable SaaS companies and other virtual endeavors, and not so much to things that exist in the physical world. A lot of it did, I agree. But it would be strange if somehow no productive equipment at all was purchased based on a low-interest loan. [1] https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi

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