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>we'd be in negative interest rate territory Risk adjusted market returns are clearly in negative territory otherwise we wouldn't have these piles of idle rese

>we'd be in negative interest rate territory Risk adjusted market returns are clearly in negative territory otherwise we wouldn't have these piles of idle reserves even at -2% real return. > for malinvestments (e.g. the shale oil industry... Malinvestment is not something that exists under any mathematically consistent macroeconomic model but even if we try to tie the word to a somewhat sensical meaning, the most "malinvested" form of savings, short of using the money to hire people to destroy property, is to keep the savings as excess idle money. Savings have a return of near -100% to the aggregate economy when they are turned into uninvested idle fiat. The returns are even lower than -100% if you consider the welfare paid to the unemployed this results in. Even if the shale oil industry gets a very poor return of -50% it would still be better for economic value creation than building excess fiat. Of course central banks did not cause the shale oil troubles as they set their rate to imply anything not having at least -2% risk adjusted real returns is not worth doing. Shale oil went way below that because of factors independent of central banks. If a monetary bubble ends up bursting it will be because central banks have been too tight, making fiat keep its value above market safe returns and getting people and banks to stockpile it instead of investing in the private economy, effectively turning savings into mere intrinsically valueless paper which doesn't have any economic activity, any stuff or means of production to back them.

w0utert 12y ago
>> Risk adjusted market returns are clearly in negative territory otherwise we wouldn't have these piles of idle reserves even at -2% real return. What 'piles of idle reserves' are you talking about? Surely not peoples' savings or bank buffers, since these are low and any excess is used to plug holes elsewhere, which is exactly why you see so little of the flood of 'free' money going into the real economy, and almost all of it is used to rotate bad loans. If you're talking about overcapitalized companies sitting on excess money or using it for stock buybacks, you are taking a very narrow view. The economy isn't all made of Apples and Googles, most sectors actually have very low forward earnings, high P/E, and are not investing money because they know consumers are not profiting from the economic 'rebound' and will not increase spending anytime soon. >> Malinvestment is not something that exists under any mathematically consistent macroeconomic model I thought we've already established economics aren't mathematically consistent or rational? If you're still trying to explain it from textbook logic you probably think the 2008 financial crisis wasn't predictable, and wasn't caused by irrational agents working from mathematically inconsistent motives. >> If a monetary bubble ends up bursting it will be because central banks have been too tight, making fiat keep its value above market safe returns Just like Bernanke, you are putting the cart before the horse. Our currency isn't deflating because there's too little of it, we're forced to make more of it because it's in the wrong hands, not benefitting consumers and workers but bigcorps and the ultra-rich, who now have so much of it they can't come up with anything else but sitting on it, or 'investing' it in a house of cards built from financial derivatives that behind the scenes are only used to keep the circle-jerk of bad debt and shadow banking going, not to grow the economy or promote investment or risk taking.

w0utert 12y ago

>> Risk adjusted market returns are clearly in negative territory otherwise we wouldn't have these piles of idle reserves even at -2% real return. What 'piles of idle reserves' are you talking about? Surely not peoples' savings or bank buffers, since these are low and any excess is used to plug holes elsewhere, which is exactly why you see so little of the flood of 'free' money going into the real economy, and almost all of it is used to rotate bad loans. If you're talking about overcapitalized companies sitting on excess money or using it for stock buybacks, you are taking a very narrow view. The economy isn't all made of Apples and Googles, most sectors actually have very low forward earnings, high P/E, and are not investing money because they know consumers are not profiting from the economic 'rebound' and will not increase spending anytime soon. >> Malinvestment is not something that exists under any mathematically consistent macroeconomic model I thought we've already established economics aren't mathematically consistent or rational? If you're still trying to explain it from textbook logic you probably think the 2008 financial crisis wasn't predictable, and wasn't caused by irrational agents working from mathematically inconsistent motives. >> If a monetary bubble ends up bursting it will be because central banks have been too tight, making fiat keep its value above market safe returns Just like Bernanke, you are putting the cart before the horse. Our currency isn't deflating because there's too little of it, we're forced to make more of it because it's in the wrong hands, not benefitting consumers and workers but bigcorps and the ultra-rich, who now have so much of it they can't come up with anything else but sitting on it, or 'investing' it in a house of cards built from financial derivatives that behind the scenes are only used to keep the circle-jerk of bad debt and shadow banking going, not to grow the economy or promote investment or risk taking.