10 ms·

Welcome to the Everything Boom, or Maybe the Everything Bubble

90 points by happyscrappy 12y ago

pmorici 12y ago
inflation - economics; a general increase in prices and fall in the purchasing value of money. https://www.google.com/webhp?espv=2&es_th=1&ie=UTF-8#q=define+inflation https://www.google.com/webhp?espv=2&es_th=1&ie=UTF-8#q=defin... So is the "Everything Boom" going to be the new polite way of saying inflation is happening? I mean that is the expected outcome of the economic policies of the past several years is it not?
- api 12y ago
  The problem is that everything is inflating except wages, which are still under extreme deflationary pressure due to outsourcing and automation. Stagnant or deflating wages means stagnant or falling consumer spending, resulting in an environment where there don't seem to be any good growth investments (no customers). As a result, you get bubbles in "safe" assets like real estate and bonds and lots of trendy speculation. I'd say both inflation and deflation are happening. We're getting inflation everywhere it's harmful, and deflation everywhere it's harmful. We are in a depression.
  - dnautics 12y ago
    so this is a complete misuse of the concept of inflation and deflation. The correct way to phrase this is: Our inflation rate is on the upswing (so that's like a third derivative), but workers are getting screwed because their wages are under downward pressure.
  - opendais 12y ago
    Inflation is normal: http://www.bls.gov/news.release/cpi.nr0.htm http://www.bls.gov/news.release/cpi.nr0.htm It is well in line with historic norms. Wage Growth is net positive adjusted for inflation again: http://www.nytimes.com/2014/04/05/business/economy/sign-of-spring-for-pay-real-wage-growth-in-some-places.html http://www.nytimes.com/2014/04/05/business/economy/sign-of-s... It has a nice graph if you scroll down and don't want to read. The underlying problem with trying to "fix" wages is the simple fact that with globalization you can't really push the wages for the US much higher than they are [except at the bottom where you can't really outsource the guy working in fast food for minimum wage]. It seems to be more the standard bubble event on investments due to cheap credit and poor allocation of tax burdens/govt spending. We need to do things like shift the tax burden to Capital and reduce it on the poorest of the working population. We need to fix our infrastructure issues while we can do so on cheap credit and when interest rates rise we simply cut back to "normal" (which is really just generating a different kind of debt, you can't ignore infrastructure forever).
    - shaunrussell 12y ago
      > It is well in line with historic norms. The CPI (used to gauge inflation) has been modified in a variety of ways over the past 35 years. Various estimates of what the annual rate would have been over the past four years if earlier methods of calculation had been continued come up with numbers in the 5%-to-10% range. http://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much/ http://business.time.com/2013/03/12/if-theres-no-inflation-w...
      - opendais 12y ago
        That isn't true at all :/ http://www.bls.gov/cpi/cpiqa.htm#Question_5 http://www.bls.gov/cpi/cpiqa.htm#Question_5 Its a variance of less than 00.3% due to methodology changes. I understand its a popular myth. Please provide a source that accurately copies the methodology from the 1970s and agrees with your claim. If you are unable to do so without citing Shadowstats or another source that wants money to see their full methodology, its an invalid claim intended to milk money from people with fixed belief systems.
    - canvia 12y ago
      Interesting article about inflation: http://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much/ http://business.time.com/2013/03/12/if-theres-no-inflation-w...
      - opendais 12y ago
        Yes, if you cherrypick items you can find item X changed faster than the total basket for CPI. CPI is intended to gauge the general rate of inflation over the economy as a whole, not that of specific purchasing patterns by individuals. As such, comparing a CPI from years ago (1999) to now (2014) is roughly equivalent. You can claim the number itself is wrong but not that is wrong compare to the values it held previously under the same methodology. [e.g. CPI can be claimed to be X% lower than reality, but if CPI is 2.7% in 1999 and 2.1% in 2014 under the same methodology the relative level of inflation is effectively identical] Even the title is wrong: "If There’s No Inflation, Why Are Prices Up So Much?" If you look at the CPI from that point in time: http://www.bls.gov/news.release/archives/cpi_03152013.htm http://www.bls.gov/news.release/archives/cpi_03152013.htm It shows 2% inflation. It is a linkbait article with a false premise and lots of cherrypicking. 1999: http://www.bls.gov/news.release/history/cpi_01142000.txt http://www.bls.gov/news.release/history/cpi_01142000.txt
  - eru 12y ago
    Shouldn't outsourcing increase median wages globally?
    - lmm 12y ago
      It probably does. Maybe wages in many places are up, and the companies that sell to those places are doing well. But the article is quite US-focussed.
      - eru 12y ago
        The discussion on HN is quite US-focussed. The article surprisingly less so.
- dnautics 12y ago
  correct. Demand-siders have insisted that we all need to start spending more money to kick the economy into gear. Broadly, the only tool to do this is to "print money"; read: lower interest rates, twiddle with the reserve ratio requirement, directly pay off banks for certain types of activities. Supposedly this will make people want to buy things now (instead of later). There is this odd effect though, that increasing prices also can make people insecure, as in: Worldwide, more money is piling into savings than businesses believe they can use to make productive investments. In other words, the people WANT deflation. The net effect though is we will be transferring wealth from the poor to the rich; and then the bubble will pop, the rich will cash out of their assets early, and people with slower investment classes (401ks, pension funds, etc.) will get screwed. And some of these other people will even get fired, putting them into even greater risk. I'm not going to defend "supply-side" economics, either, because that's got it's own brand of stupid going on. There is a modest distinction between bubbles and inflation. While inflation guns bubbles and aggregates small, local bubbles into bigger, systemic bubbles, there can be bubbles during deflationary periods, and systemic inflation doesn't necessarily end in a bubble. Bubbles are characterized by a specific set of price dynamics that are guided by human psychology; the most characteristic, but hardest to notice, is when the asset price collapses, typically around twice the speed that it rose.
  - Ma8ee 12y ago
    It's nothing wrong with demand side economics in this situation. The problem is that the current policy only make capital available to those who already have more than they know what to do with, such as banks and big investors. The middle class who usually drives demand are still struggling to pay of the mortgage of the house they bought during the bubble.
  - praxulus 12y ago
    >Demand-siders have insisted that we all need to start spending more money to kick the economy into gear. Pretty much. >Broadly, the only tool to do this is to "print money"; read: lower interest rates, twiddle with the reserve ratio requirement, directly pay off banks for certain types of activities. Well, those are the only tools central banks have available to them, but there are much better options. Unfortunately those tools are only available to legislatures, who have decided not to use them.
- aidenn0 12y ago
  No, because this is talking specifically about prices of investments, not prices of consumer goods. And it's talking about prices of investments in relation to the rate of return. An example: buying debt is more expensive, if the price is the same, but the interest rate is lower. If the price of e.g. a car or a sandwich is the same as before then we haven't had inflation.
hacknat 12y ago
I do think it is both right to view the problem as a savings glut and a genuine lack of worthwhile opportunities for the entities responsible for the savings glut. Why? Because the entities responsible for the savings glut, the multinationals, are the biggest hegemons the world has ever seen. There is a plethora of good opportunities to be exploited out in the world, but not if you're holding $180 billion in savings (I'm looking at you Apple). These huge savings gluts are, effectively, liquidity traps, because these entities (besides, perhaps, governments) can't possibly hope to effectively deploy such large amounts of capital effectively. Add to the mix that inflation is so low, and hanging on to vast sums of cash starts to look like one of the least foolish things the Fortune 500 are doing right now. There isn't a shortage of good opportunities, it's just that good opportunities look so tiny to the big boys. I don't have much hope that targeting a higher inflation rate will do much, but I think it's worth a shot.
- opendais 12y ago
  Yes, but Apple could probably find 50 $2 billion opportunities. [e.g. Give Marc Andreessen and friends $2 billion to invest in Valley startups to feed the acquihire/acquisition food chain so Apple doesn't have to test risky ideas out itself. Spend $2 billion on stock buy backs. Earmark $2 billion in bonuses over 5 years for top performers at Apple.]
- prostoalex 12y ago
  It's a QE-induced glut. At some point the Federal Reserve will start selling the assets it bought with freshly printed currency, and with the rates going up more interesting opportunities will appear. Apple's case has been dissected here http://www.quora.com/Apple-company/What-would-be-a-good-use-of-Apples-110-2+-billion-in-cash http://www.quora.com/Apple-company/What-would-be-a-good-use-... - having a large pile of cash is generally better than not having a large pile of cash if you're in the manufacturing business, and need to convince your partners that you have enough financial strength for them to commit to a factory build-out that could take years to accomplish.
- eru 12y ago
  The tax system seems to be set up backwards: Apple could release the cash to its shareholders, but won't do so for tax reasons (and because its managers are running the show; not the nominal owners of the company, the shareholders).
deleted 12y ago
[deleted]
logicallee 12y ago
This is an aside, but I take exception to their figure, "Nowhere to put your money". I find it manipulative. Look, I quickly rearranged their figure by just reversing the order of the 6 tranches (which is arbitrary, and not actually connected - though they seem that way). Original: http://imgur.com/6my8mqu http://imgur.com/6my8mqu Reversing the order of the 6 charts: http://imgur.com/mq61KrL http://imgur.com/mq61KrL Just flip back and forth! It shows a different impression. I haven't changed any of the data. The original impression only exists because they sorted the six downward (by end-point of each of the 6 charts - they even make those end-points bold dots). That's an awful shifty way to tell a story of something moving down over time.... Plus - how did they select these six? Indonesian Stocks - Manhattan Office buildings? Could it be they selected six that fit well together? (Mine, lacking this preselection, is way more jumpy.) That said, I enjoyed most of the article and don't like this sleight-of-hand, which calls it into question for me.
- JimboOmega 12y ago
  The point isn't so much the ordering, but that they are all - across different traditional returns - outside of historical norms. It's more about the grey bar - wherever it is, the asset is below it or at about the bottom.
  - logicallee 12y ago
    And why do the seven years 2004-2011 provide the "historical norms"? Regardless, it is a rather small point and I will readily agree that all six assets have been falling. But arrange them vertically - or better yet, superimpose them - instead of listing them side-by-side, sorted in descending order by 2014 value and selected to dovetail together! and the story isn't nearly as clear.... Just try it. The graph is set up to tell a macro story far beyond 2 years. It looks hastily like a 12-year story of rising from 6% to a high of under 8 and falling sharply and steadily down to 3 (briefly under 2). But that's not what the graph says at all. It just looks that way visually.
dreamdu5t 12y ago
The subtext of this article is that people should be able to just put their money anywhere and make returns. Infinite growth is finally being revealed as the financial dogma it is.
corford 12y ago
Interest earned on asset investments may be getting smaller and smaller but with inflation at 2% or less, investors are still coming out on top aren't they? So, doesn't this only become a real problem if inflation goes up markedly? Also, if it is a bubble and it pops, wont that mean that for many of those asset classes, investing will subsequently be viewed as more risky and the interest offered increased accordingly? And if inflation does go up, making current returns on asset investment unattractive wont that choke investor demand and force asset owners to offer better interest rates? Apologies for my economics 101 questions. I like finance but don't pretend to know much about it or understand any of it :) *Note: when I say assets I'm thinking more bonds, treasuries etc. than physical real estate.
anigbrowl 12y ago
Relevant: http://www.bloomberg.com/news/2014-07-06/bond-anxiety-grows-in-1-6-trillion-repo-market-as-failures-soar.html http://www.bloomberg.com/news/2014-07-06/bond-anxiety-grows-... tl;dr there's a severe shortage of treasury bonds, leading to a worrying lack of liquidity in the interbank market.
ilaksh 12y ago
They didn't mention cultural and psychological aspects that probably contribute -- the sustainability orientation and collapse anxiety. The central banks' actions seem to be providing more and more reasons for people to take a sustainable (defensive) view. It looks like a self-fulfilling prophecy unless you manipulate it fundamentally. There is plenty of manipulation built-in to the system already -- its just mainly opportunistic or used to preserve the existing structures. What is needed from the financial system is an institutional honesty and willingness to grow into an optimistic structure that incorporates more hard science and technology, focused on human and environmental well-being. Integrate more physical and social science, better utilization of technology, and a greater degree of holism, into the field of economics, while still preserving the values of freedom and appreciation of complexity that will allow for diversity and evolution of systems.
michaelochurch 12y ago
I'm-a cut through all of this. There's an incredibly simple explanation for what looks like an pan-asset bubble. “If you ask me to give you the one big bargain out there, I’m not sure there is one.” There is one. Human labor. "Everything" being expensive means that currencies are losing value, which means that wages are declining in terms of what the money buys. Ever look at the S&P in houses? Or in oil? Or in (though I don't find it as useful) gold? That alone makes our 21st-century look like Japan's lost decade (1990s). No, that's not something we could fix by moving to the gold standard. Human labor is just worth less, and capital is worth more. Like most bubbles, the process is actually faster-than-exponential. (Normal economic growth is already exponential.) The meltdown of the middle class is, for example, driving up college tuitions, creating demand for expensive high schools (now that it's extremely difficult to go to Harvard from a public high school, when it wasn't that rare 15 years ago) and, in the few urban areas where unconnected or semi-connected people can find good jobs, pushing rents into the ionosphere (and prices to 40-50x annual rent, which one hopes is due to various money-laundering shenanigan but may be in anticipation of further rent increases). The disintegration of middle-class America is a self-fueling feedback loop as talented people strive to get away from the old order into the new (expensive urban centers, elite universities). The goal (in this forceful middle-class in-pressure toward expensive, elite places) is to get enough connections to people who can keep their own lights on, before things start going out. Some of these changes are good (such as the movement away from environmentally unsustainable suburbs) but most are bad. Our society has stopped valuing labor, whether it's the skilled kind or unskilled. That's why a talentless dickhead with connections gets to be a "founder" and take 40%, doing nothing but monetizing his own social position, while you write all the code and get 1%. Is this a bubble? It sure is. The "crash" will probably be a revolution. It will be global, and it may not be violent here but it will probably be violent in many places. The funny thing about bubbles is that their ends are impossible to predict. This one, especially because it is political and social as well as economic, and a bit unprecedented (the large middle class of the US was unprecedented, much less its destruction) is impossible to time. It could happen next week, or it could be 100 years from now.
- ilaksh 12y ago
  This is extremely skeptical and critical and I can see why people on Hacker News wouldn't like it. But at the moment I am replying, people are downvoting it, trying to make it go away, without having made a single counter-argument. If someone can refute this viewpoint, I would like to see that. If not, don't shoot the messenger. Being critical and pessimistic is not the same as being wrong, and sometimes the most realistic and important viewpoint is the one that we most dislike.
unknown_apostle 12y ago
Not sure if the world has a glut of real savings. It does have a glut of liquidity and a huge steaming pile of IOUs that virtually ensures there will be no end to printing of new money for years to come. So markets are thinking "central banks will never allow another 2008 to happen. What could possybli go wrong!!" and throw billions at Snapchat and Somali pirate bonds. There are cheap financial assets. Basically any tail hedge that would benefit if it ever turns out that it's simply not up to central banks to fully decide what happens and when. Death may have taken a holiday but his return to work won't be announced much in advance.

90 points by happyscrappy 12y ago

inflation - economics; a general increase in prices and fall in the purchasing value of money. https://www.google.com/webhp?espv=2&es_th=1&ie=UTF-8#q=define+inflation https://www.google.com/webhp?espv=2&es_th=1&ie=UTF-8#q=defin... So is the "Everything Boom" going to be the new polite way of saying inflation is happening? I mean that is the expected outcome of the economic policies of the past several years is it not?

api 12y ago
The problem is that everything is inflating except wages, which are still under extreme deflationary pressure due to outsourcing and automation. Stagnant or deflating wages means stagnant or falling consumer spending, resulting in an environment where there don't seem to be any good growth investments (no customers). As a result, you get bubbles in "safe" assets like real estate and bonds and lots of trendy speculation. I'd say both inflation and deflation are happening. We're getting inflation everywhere it's harmful, and deflation everywhere it's harmful. We are in a depression.
- dnautics 12y ago
  so this is a complete misuse of the concept of inflation and deflation. The correct way to phrase this is: Our inflation rate is on the upswing (so that's like a third derivative), but workers are getting screwed because their wages are under downward pressure.
- opendais 12y ago
  Inflation is normal: http://www.bls.gov/news.release/cpi.nr0.htm http://www.bls.gov/news.release/cpi.nr0.htm It is well in line with historic norms. Wage Growth is net positive adjusted for inflation again: http://www.nytimes.com/2014/04/05/business/economy/sign-of-spring-for-pay-real-wage-growth-in-some-places.html http://www.nytimes.com/2014/04/05/business/economy/sign-of-s... It has a nice graph if you scroll down and don't want to read. The underlying problem with trying to "fix" wages is the simple fact that with globalization you can't really push the wages for the US much higher than they are [except at the bottom where you can't really outsource the guy working in fast food for minimum wage]. It seems to be more the standard bubble event on investments due to cheap credit and poor allocation of tax burdens/govt spending. We need to do things like shift the tax burden to Capital and reduce it on the poorest of the working population. We need to fix our infrastructure issues while we can do so on cheap credit and when interest rates rise we simply cut back to "normal" (which is really just generating a different kind of debt, you can't ignore infrastructure forever).
  - shaunrussell 12y ago
    > It is well in line with historic norms. The CPI (used to gauge inflation) has been modified in a variety of ways over the past 35 years. Various estimates of what the annual rate would have been over the past four years if earlier methods of calculation had been continued come up with numbers in the 5%-to-10% range. http://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much/ http://business.time.com/2013/03/12/if-theres-no-inflation-w...
    - opendais 12y ago
      That isn't true at all :/ http://www.bls.gov/cpi/cpiqa.htm#Question_5 http://www.bls.gov/cpi/cpiqa.htm#Question_5 Its a variance of less than 00.3% due to methodology changes. I understand its a popular myth. Please provide a source that accurately copies the methodology from the 1970s and agrees with your claim. If you are unable to do so without citing Shadowstats or another source that wants money to see their full methodology, its an invalid claim intended to milk money from people with fixed belief systems.
  - canvia 12y ago
    Interesting article about inflation: http://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much/ http://business.time.com/2013/03/12/if-theres-no-inflation-w...
    - opendais 12y ago
      Yes, if you cherrypick items you can find item X changed faster than the total basket for CPI. CPI is intended to gauge the general rate of inflation over the economy as a whole, not that of specific purchasing patterns by individuals. As such, comparing a CPI from years ago (1999) to now (2014) is roughly equivalent. You can claim the number itself is wrong but not that is wrong compare to the values it held previously under the same methodology. [e.g. CPI can be claimed to be X% lower than reality, but if CPI is 2.7% in 1999 and 2.1% in 2014 under the same methodology the relative level of inflation is effectively identical] Even the title is wrong: "If There’s No Inflation, Why Are Prices Up So Much?" If you look at the CPI from that point in time: http://www.bls.gov/news.release/archives/cpi_03152013.htm http://www.bls.gov/news.release/archives/cpi_03152013.htm It shows 2% inflation. It is a linkbait article with a false premise and lots of cherrypicking. 1999: http://www.bls.gov/news.release/history/cpi_01142000.txt http://www.bls.gov/news.release/history/cpi_01142000.txt
- eru 12y ago
  Shouldn't outsourcing increase median wages globally?
  - lmm 12y ago
    It probably does. Maybe wages in many places are up, and the companies that sell to those places are doing well. But the article is quite US-focussed.
    - eru 12y ago
      The discussion on HN is quite US-focussed. The article surprisingly less so.
dnautics 12y ago
correct. Demand-siders have insisted that we all need to start spending more money to kick the economy into gear. Broadly, the only tool to do this is to "print money"; read: lower interest rates, twiddle with the reserve ratio requirement, directly pay off banks for certain types of activities. Supposedly this will make people want to buy things now (instead of later). There is this odd effect though, that increasing prices also can make people insecure, as in: Worldwide, more money is piling into savings than businesses believe they can use to make productive investments. In other words, the people WANT deflation. The net effect though is we will be transferring wealth from the poor to the rich; and then the bubble will pop, the rich will cash out of their assets early, and people with slower investment classes (401ks, pension funds, etc.) will get screwed. And some of these other people will even get fired, putting them into even greater risk. I'm not going to defend "supply-side" economics, either, because that's got it's own brand of stupid going on. There is a modest distinction between bubbles and inflation. While inflation guns bubbles and aggregates small, local bubbles into bigger, systemic bubbles, there can be bubbles during deflationary periods, and systemic inflation doesn't necessarily end in a bubble. Bubbles are characterized by a specific set of price dynamics that are guided by human psychology; the most characteristic, but hardest to notice, is when the asset price collapses, typically around twice the speed that it rose.
- Ma8ee 12y ago
  It's nothing wrong with demand side economics in this situation. The problem is that the current policy only make capital available to those who already have more than they know what to do with, such as banks and big investors. The middle class who usually drives demand are still struggling to pay of the mortgage of the house they bought during the bubble.
- praxulus 12y ago
  >Demand-siders have insisted that we all need to start spending more money to kick the economy into gear. Pretty much. >Broadly, the only tool to do this is to "print money"; read: lower interest rates, twiddle with the reserve ratio requirement, directly pay off banks for certain types of activities. Well, those are the only tools central banks have available to them, but there are much better options. Unfortunately those tools are only available to legislatures, who have decided not to use them.
aidenn0 12y ago
No, because this is talking specifically about prices of investments, not prices of consumer goods. And it's talking about prices of investments in relation to the rate of return. An example: buying debt is more expensive, if the price is the same, but the interest rate is lower. If the price of e.g. a car or a sandwich is the same as before then we haven't had inflation.

hacknat 12y ago

I do think it is both right to view the problem as a savings glut and a genuine lack of worthwhile opportunities for the entities responsible for the savings glut. Why? Because the entities responsible for the savings glut, the multinationals, are the biggest hegemons the world has ever seen. There is a plethora of good opportunities to be exploited out in the world, but not if you're holding $180 billion in savings (I'm looking at you Apple). These huge savings gluts are, effectively, liquidity traps, because these entities (besides, perhaps, governments) can't possibly hope to effectively deploy such large amounts of capital effectively. Add to the mix that inflation is so low, and hanging on to vast sums of cash starts to look like one of the least foolish things the Fortune 500 are doing right now. There isn't a shortage of good opportunities, it's just that good opportunities look so tiny to the big boys. I don't have much hope that targeting a higher inflation rate will do much, but I think it's worth a shot.

opendais 12y ago
Yes, but Apple could probably find 50 $2 billion opportunities. [e.g. Give Marc Andreessen and friends $2 billion to invest in Valley startups to feed the acquihire/acquisition food chain so Apple doesn't have to test risky ideas out itself. Spend $2 billion on stock buy backs. Earmark $2 billion in bonuses over 5 years for top performers at Apple.]
prostoalex 12y ago
It's a QE-induced glut. At some point the Federal Reserve will start selling the assets it bought with freshly printed currency, and with the rates going up more interesting opportunities will appear. Apple's case has been dissected here http://www.quora.com/Apple-company/What-would-be-a-good-use-of-Apples-110-2+-billion-in-cash http://www.quora.com/Apple-company/What-would-be-a-good-use-... - having a large pile of cash is generally better than not having a large pile of cash if you're in the manufacturing business, and need to convince your partners that you have enough financial strength for them to commit to a factory build-out that could take years to accomplish.
eru 12y ago
The tax system seems to be set up backwards: Apple could release the cash to its shareholders, but won't do so for tax reasons (and because its managers are running the show; not the nominal owners of the company, the shareholders).

deleted 12y ago

[deleted]

logicallee 12y ago

This is an aside, but I take exception to their figure, "Nowhere to put your money". I find it manipulative. Look, I quickly rearranged their figure by just reversing the order of the 6 tranches (which is arbitrary, and not actually connected - though they seem that way). Original: http://imgur.com/6my8mqu http://imgur.com/6my8mqu Reversing the order of the 6 charts: http://imgur.com/mq61KrL http://imgur.com/mq61KrL Just flip back and forth! It shows a different impression. I haven't changed any of the data. The original impression only exists because they sorted the six downward (by end-point of each of the 6 charts - they even make those end-points bold dots). That's an awful shifty way to tell a story of something moving down over time.... Plus - how did they select these six? Indonesian Stocks - Manhattan Office buildings? Could it be they selected six that fit well together? (Mine, lacking this preselection, is way more jumpy.) That said, I enjoyed most of the article and don't like this sleight-of-hand, which calls it into question for me.

JimboOmega 12y ago
The point isn't so much the ordering, but that they are all - across different traditional returns - outside of historical norms. It's more about the grey bar - wherever it is, the asset is below it or at about the bottom.
- logicallee 12y ago
  And why do the seven years 2004-2011 provide the "historical norms"? Regardless, it is a rather small point and I will readily agree that all six assets have been falling. But arrange them vertically - or better yet, superimpose them - instead of listing them side-by-side, sorted in descending order by 2014 value and selected to dovetail together! and the story isn't nearly as clear.... Just try it. The graph is set up to tell a macro story far beyond 2 years. It looks hastily like a 12-year story of rising from 6% to a high of under 8 and falling sharply and steadily down to 3 (briefly under 2). But that's not what the graph says at all. It just looks that way visually.

dreamdu5t 12y ago

The subtext of this article is that people should be able to just put their money anywhere and make returns. Infinite growth is finally being revealed as the financial dogma it is.

corford 12y ago

Interest earned on asset investments may be getting smaller and smaller but with inflation at 2% or less, investors are still coming out on top aren't they? So, doesn't this only become a real problem if inflation goes up markedly? Also, if it is a bubble and it pops, wont that mean that for many of those asset classes, investing will subsequently be viewed as more risky and the interest offered increased accordingly? And if inflation does go up, making current returns on asset investment unattractive wont that choke investor demand and force asset owners to offer better interest rates? Apologies for my economics 101 questions. I like finance but don't pretend to know much about it or understand any of it :) *Note: when I say assets I'm thinking more bonds, treasuries etc. than physical real estate.

anigbrowl 12y ago

Relevant: http://www.bloomberg.com/news/2014-07-06/bond-anxiety-grows-in-1-6-trillion-repo-market-as-failures-soar.html http://www.bloomberg.com/news/2014-07-06/bond-anxiety-grows-... tl;dr there's a severe shortage of treasury bonds, leading to a worrying lack of liquidity in the interbank market.

ilaksh 12y ago

They didn't mention cultural and psychological aspects that probably contribute -- the sustainability orientation and collapse anxiety. The central banks' actions seem to be providing more and more reasons for people to take a sustainable (defensive) view. It looks like a self-fulfilling prophecy unless you manipulate it fundamentally. There is plenty of manipulation built-in to the system already -- its just mainly opportunistic or used to preserve the existing structures. What is needed from the financial system is an institutional honesty and willingness to grow into an optimistic structure that incorporates more hard science and technology, focused on human and environmental well-being. Integrate more physical and social science, better utilization of technology, and a greater degree of holism, into the field of economics, while still preserving the values of freedom and appreciation of complexity that will allow for diversity and evolution of systems.

michaelochurch 12y ago

I'm-a cut through all of this. There's an incredibly simple explanation for what looks like an pan-asset bubble. “If you ask me to give you the one big bargain out there, I’m not sure there is one.” There is one. Human labor. "Everything" being expensive means that currencies are losing value, which means that wages are declining in terms of what the money buys. Ever look at the S&P in houses? Or in oil? Or in (though I don't find it as useful) gold? That alone makes our 21st-century look like Japan's lost decade (1990s). No, that's not something we could fix by moving to the gold standard. Human labor is just worth less, and capital is worth more. Like most bubbles, the process is actually faster-than-exponential. (Normal economic growth is already exponential.) The meltdown of the middle class is, for example, driving up college tuitions, creating demand for expensive high schools (now that it's extremely difficult to go to Harvard from a public high school, when it wasn't that rare 15 years ago) and, in the few urban areas where unconnected or semi-connected people can find good jobs, pushing rents into the ionosphere (and prices to 40-50x annual rent, which one hopes is due to various money-laundering shenanigan but may be in anticipation of further rent increases). The disintegration of middle-class America is a self-fueling feedback loop as talented people strive to get away from the old order into the new (expensive urban centers, elite universities). The goal (in this forceful middle-class in-pressure toward expensive, elite places) is to get enough connections to people who can keep their own lights on, before things start going out. Some of these changes are good (such as the movement away from environmentally unsustainable suburbs) but most are bad. Our society has stopped valuing labor, whether it's the skilled kind or unskilled. That's why a talentless dickhead with connections gets to be a "founder" and take 40%, doing nothing but monetizing his own social position, while you write all the code and get 1%. Is this a bubble? It sure is. The "crash" will probably be a revolution. It will be global, and it may not be violent here but it will probably be violent in many places. The funny thing about bubbles is that their ends are impossible to predict. This one, especially because it is political and social as well as economic, and a bit unprecedented (the large middle class of the US was unprecedented, much less its destruction) is impossible to time. It could happen next week, or it could be 100 years from now.

ilaksh 12y ago
This is extremely skeptical and critical and I can see why people on Hacker News wouldn't like it. But at the moment I am replying, people are downvoting it, trying to make it go away, without having made a single counter-argument. If someone can refute this viewpoint, I would like to see that. If not, don't shoot the messenger. Being critical and pessimistic is not the same as being wrong, and sometimes the most realistic and important viewpoint is the one that we most dislike.

unknown_apostle 12y ago

Not sure if the world has a glut of real savings. It does have a glut of liquidity and a huge steaming pile of IOUs that virtually ensures there will be no end to printing of new money for years to come. So markets are thinking "central banks will never allow another 2008 to happen. What could possybli go wrong!!" and throw billions at Snapchat and Somali pirate bonds. There are cheap financial assets. Basically any tail hedge that would benefit if it ever turns out that it's simply not up to central banks to fully decide what happens and when. Death may have taken a holiday but his return to work won't be announced much in advance.