5 ms·

The "ZIRP" meme is way overdone by now. ZIRP doesn't explain much. Interest rates had been rock bottom since the 2008 crisis, were already quite low since the 1

by pyb 3y ago

The "ZIRP" meme is way overdone by now. ZIRP doesn't explain much. Interest rates had been rock bottom since the 2008 crisis, were already quite low since the 1990s, and are still not very high today. IMO the "vibecession" meme explains what's going on within tech a bit better. Tech CEOs and VCs have decided that the tech industry had to shrink, notwithstanding that the wider economy was and is doing fine.

pgeorgi 3y ago
Tech CEOs and VPs found that they're out of ideas on how to grow the pie. So to achieve their personal goals (which is always more), they had to increase their share. The fear, uncertainty and doubt over the economy serves to make everybody else fear that the pie could disappear completely. And so they're happy they still get scraps, leaving enough for those CEOs - for now. Lately I keep thinking about Mr Buffett's remark about class warfare...
rco8786 3y ago
> Interest rates had been rock bottom since the 2008 crisis Exactly. So we had ~14ish years of effectively 0% interest rates. That's never happened before in history. Now that we're going back to normal rates, we're discovering that some things we did when rates were 0 aren't actually feasible anymore. That's what ZIRP is. It's a decade and a half of 0% coming to an end.
- laidoffamazon 3y ago
  I think it's absurd to compare the tech sector in 2023/2024 to the tech sector in 2010/2011. Unemployment is lower today, and several capital intensive industries (ML hardware acceleration for one) are significantly hotter than anything we had then.
  - lumost 3y ago
    Having been in both time periods, a distinct difference in 2021 was a sense of unreality - a company/org/large team could survive provided that they had someone important who believed that it would be useful some day. Ultimately, I suspect this is because important people had access to effectively infinite dollars for a time. Provided that they did not have to mark down a loss. This time period is coming to an end, we're once again looking at real metrics and seeing that some sectors of tech had none. In the end, this will probably be good for the industry - but it will be an unpleasant transition.
  - rco8786 3y ago
    I didn't compare the tech sector now to the tech sector in 2010. Not sure where that came from. I'm saying that having 0% rates for 10+ years resulted in a lot of behavior that is largely impossible in a normal non-zero environment and we're just beginning to fully discover what those behaviors were.
laidoffamazon 3y ago
People seem to forget that the dot com boom happened under very similar interest rates as today, and the tech companies that are announcing layoffs for the first time ever like Google are the least sensitive to interest rate shifts because they have their own massive treasuries. What we are really seeing is massive extrapolations from 2020 and 2021 being completely off and companies having to manage more realistic growth expectations.
- pyb 3y ago
  Agree with the first part. Mark Zuckerberg is not laying people off because "higher interest rates => no one wants to invest in Meta any more". He's laying people off because he has found the excuses he needed. Rightly or wrongly, he simply wants to follow Elon in building a much leaner organisation.
- 15457345234 3y ago
  > massive extrapolations from 2020 and 2021 being completely off They really did think that nobody would be going outside ever again...
margalabargala 3y ago
> Interest rates had been rock bottom since the 2008 crisis, were already quite low since the 1990s, and are still not very high today. Interest rates dropped from previous highs in 1990 and have stayed down. The current interest rate is about equal to the mean and median for the 90s, and is near the peak of interest rates we've seen in that time. 45% of the US population is age 34 or younger. So for nearly half of the country's population, interest rates are nearly as high as they've ever been. So calling it "not very high" is misleading; you're comparing now to back before nearly half the country was born.
- pyb 3y ago
  It's easier to learn from history if we look beyond our own short lives.
  - margalabargala 3y ago
    I agree the past has a lot to teach us. I just disagree with the characterization of current interest rates as "not very high" when higher interest rates happened so long ago nearly half of us weren't alive. It's important to contextualize when we use the past as a learning tool. For example, this article is thinking about how low interest rates affected the tech sector. When interest rates were much higher than they are now, the internet did not yet exist.
NanoYohaneTSU 3y ago
Except the wider economy is not doing fine by any metric. Prices go up, people taking home less, etc. Tech CEOs don't control the interest rates. The interest rate effects their ability to get free and cheap money.
- seadan83 3y ago
  You're talking about the US economy? The "by any metric" statements seems false. A "not doing fine" does not have 54-year low unemployment rate @ 3.4% [1] US GDP growth for since 2022 Q3 has been in the 5% range (very strong) [2] Median individual income is at an all time high, poverty rate is at a 10 year low (2% decrease from 2014 to now, not huge percentage wise, but that is still 6 million people) On the flip side - yes, home sales are at a low. Increased interest rates and a real estate market that saw a price correction in 2011 and 2020 with the corresponding economic recessions, has not made housing any more affordable at all. > Tech CEOs don't control the interest rates. The interest rate effects their ability to get free and cheap money. True, though that free & cheap money means more people can start companies, grow their companies faster - and that in turn creates bottom-up economics where more people have more disposable income and can then buy homes. My second mortgage is now absurdly expensive.. But yeah, we are seeing the result of the Fed policy to try and _cool_ the economy as much as they can. One of the big levers they have - interest rates. The Fed intentionally made mortgages more expensive. Further yet though, housing inventory is a big factor, which you then need to look at local governments and zoning restrictions for why there is not more housing built. In sum, the wider economy IS doing fine by several metrics. Inflation AFAIK was not really a factor for home prices to increase. That was caused by the Fed, a a deep pandemic-induced recession, and all of the same forces that have caused housing prices to increase since essentially the 70s & 80s [4]. [1] https://www.commerce.gov/news/blog/2023/02/news-unemployment-its-lowest-level-54-years https://www.commerce.gov/news/blog/2023/02/news-unemployment... [2] https://www.bea.gov/news/2024/gross-domestic-product-fourth-quarter-and-year-2023-advance-estimate https://www.bea.gov/news/2024/gross-domestic-product-fourth-... [3] https://datacommons.org/place/country/USA?mprop=amount&popt=EconomicActivity&cpv=activitySource,GrossDomesticProduction&hl=en https://datacommons.org/place/country/USA?mprop=amount&popt=... [4] https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MSPUS
azemetre 3y ago
I never heard of “vibecession.” Is there some article that coined the term or uses it prolifically? I liked your explanation of it.
- pyb 3y ago
  Not sure, it's something I heard on Twitter.
dragonwriter 3y ago
I don't think tech shrinkage is vibecession (though its part of the reason for the broader vibecession), tech saw countercyclical high demand during the pandemic slowdown and took advantage of that and easy money due to stimulus-oriented monetary policy to expand; the demand boost ebbed and monetary policy aimed at controlling inflation took easy money away, so there had to be some correction. You don't see it elsewhere because the countercyclical demand wasn't elsewhere; procyclical demand shifts are buffered by reactive monetary policy rather than magnified the way countercyclical ones are.

by pyb 3y ago

pgeorgi 3y ago

Tech CEOs and VPs found that they're out of ideas on how to grow the pie. So to achieve their personal goals (which is always more), they had to increase their share. The fear, uncertainty and doubt over the economy serves to make everybody else fear that the pie could disappear completely. And so they're happy they still get scraps, leaving enough for those CEOs - for now. Lately I keep thinking about Mr Buffett's remark about class warfare...

rco8786 3y ago

> Interest rates had been rock bottom since the 2008 crisis Exactly. So we had ~14ish years of effectively 0% interest rates. That's never happened before in history. Now that we're going back to normal rates, we're discovering that some things we did when rates were 0 aren't actually feasible anymore. That's what ZIRP is. It's a decade and a half of 0% coming to an end.

laidoffamazon 3y ago
I think it's absurd to compare the tech sector in 2023/2024 to the tech sector in 2010/2011. Unemployment is lower today, and several capital intensive industries (ML hardware acceleration for one) are significantly hotter than anything we had then.
- lumost 3y ago
  Having been in both time periods, a distinct difference in 2021 was a sense of unreality - a company/org/large team could survive provided that they had someone important who believed that it would be useful some day. Ultimately, I suspect this is because important people had access to effectively infinite dollars for a time. Provided that they did not have to mark down a loss. This time period is coming to an end, we're once again looking at real metrics and seeing that some sectors of tech had none. In the end, this will probably be good for the industry - but it will be an unpleasant transition.
- rco8786 3y ago
  I didn't compare the tech sector now to the tech sector in 2010. Not sure where that came from. I'm saying that having 0% rates for 10+ years resulted in a lot of behavior that is largely impossible in a normal non-zero environment and we're just beginning to fully discover what those behaviors were.

laidoffamazon 3y ago

People seem to forget that the dot com boom happened under very similar interest rates as today, and the tech companies that are announcing layoffs for the first time ever like Google are the least sensitive to interest rate shifts because they have their own massive treasuries. What we are really seeing is massive extrapolations from 2020 and 2021 being completely off and companies having to manage more realistic growth expectations.

pyb 3y ago
Agree with the first part. Mark Zuckerberg is not laying people off because "higher interest rates => no one wants to invest in Meta any more". He's laying people off because he has found the excuses he needed. Rightly or wrongly, he simply wants to follow Elon in building a much leaner organisation.
15457345234 3y ago
> massive extrapolations from 2020 and 2021 being completely off They really did think that nobody would be going outside ever again...

margalabargala 3y ago

> Interest rates had been rock bottom since the 2008 crisis, were already quite low since the 1990s, and are still not very high today. Interest rates dropped from previous highs in 1990 and have stayed down. The current interest rate is about equal to the mean and median for the 90s, and is near the peak of interest rates we've seen in that time. 45% of the US population is age 34 or younger. So for nearly half of the country's population, interest rates are nearly as high as they've ever been. So calling it "not very high" is misleading; you're comparing now to back before nearly half the country was born.

pyb 3y ago
It's easier to learn from history if we look beyond our own short lives.
- margalabargala 3y ago
  I agree the past has a lot to teach us. I just disagree with the characterization of current interest rates as "not very high" when higher interest rates happened so long ago nearly half of us weren't alive. It's important to contextualize when we use the past as a learning tool. For example, this article is thinking about how low interest rates affected the tech sector. When interest rates were much higher than they are now, the internet did not yet exist.

NanoYohaneTSU 3y ago

Except the wider economy is not doing fine by any metric. Prices go up, people taking home less, etc. Tech CEOs don't control the interest rates. The interest rate effects their ability to get free and cheap money.

seadan83 3y ago
You're talking about the US economy? The "by any metric" statements seems false. A "not doing fine" does not have 54-year low unemployment rate @ 3.4% [1] US GDP growth for since 2022 Q3 has been in the 5% range (very strong) [2] Median individual income is at an all time high, poverty rate is at a 10 year low (2% decrease from 2014 to now, not huge percentage wise, but that is still 6 million people) On the flip side - yes, home sales are at a low. Increased interest rates and a real estate market that saw a price correction in 2011 and 2020 with the corresponding economic recessions, has not made housing any more affordable at all. > Tech CEOs don't control the interest rates. The interest rate effects their ability to get free and cheap money. True, though that free & cheap money means more people can start companies, grow their companies faster - and that in turn creates bottom-up economics where more people have more disposable income and can then buy homes. My second mortgage is now absurdly expensive.. But yeah, we are seeing the result of the Fed policy to try and _cool_ the economy as much as they can. One of the big levers they have - interest rates. The Fed intentionally made mortgages more expensive. Further yet though, housing inventory is a big factor, which you then need to look at local governments and zoning restrictions for why there is not more housing built. In sum, the wider economy IS doing fine by several metrics. Inflation AFAIK was not really a factor for home prices to increase. That was caused by the Fed, a a deep pandemic-induced recession, and all of the same forces that have caused housing prices to increase since essentially the 70s & 80s [4]. [1] https://www.commerce.gov/news/blog/2023/02/news-unemployment-its-lowest-level-54-years https://www.commerce.gov/news/blog/2023/02/news-unemployment... [2] https://www.bea.gov/news/2024/gross-domestic-product-fourth-quarter-and-year-2023-advance-estimate https://www.bea.gov/news/2024/gross-domestic-product-fourth-... [3] https://datacommons.org/place/country/USA?mprop=amount&popt=EconomicActivity&cpv=activitySource,GrossDomesticProduction&hl=en https://datacommons.org/place/country/USA?mprop=amount&popt=... [4] https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MSPUS

azemetre 3y ago

I never heard of “vibecession.” Is there some article that coined the term or uses it prolifically? I liked your explanation of it.

pyb 3y ago
Not sure, it's something I heard on Twitter.

dragonwriter 3y ago

I don't think tech shrinkage is vibecession (though its part of the reason for the broader vibecession), tech saw countercyclical high demand during the pandemic slowdown and took advantage of that and easy money due to stimulus-oriented monetary policy to expand; the demand boost ebbed and monetary policy aimed at controlling inflation took easy money away, so there had to be some correction. You don't see it elsewhere because the countercyclical demand wasn't elsewhere; procyclical demand shifts are buffered by reactive monetary policy rather than magnified the way countercyclical ones are.