Permanently low interest rates?

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Mister Imperceptible
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Re: Permanently low interest rates?

Post by Mister Imperceptible »

At the highest point in the tech bubble a major asset class was remarkably cheap.

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Re: Permanently low interest rates?

Post by jacob »

@Augustus - I think cutting rates was a mistake due to political pressure. QE doesn't make sense. Negative rates do to some extent---as a way to remove some of the heat/slush in the system. In the EU, the goal is definitely to create a "there's no alternative but risk-on" scenario. This is misguided, because rather than spending or investing, the low/negative rates just make people save even more. I don't think that's the case in the US, where the overpriced market could also be explained by bull market optimism (which you'll find in spades outside this forum anyway). The other "problem" for those who invest now "for the long run" (a phrase I hear often) is that at this price level, the "long run" is really long before an expected return obtains---whether that's prices going sideways or going down or even up before they come back, I don't know.

@MI - But at this point in the everything bubble, that major asset class is still 2x as expensive as it was during the tech bubble, so while cheap, it's not remarkably cheap. Also, I don't like it due to my "feels" about paying what's essentially a negative interest rate (ETF fees) lest I store it in the mattress (fig or litt) which I don't like either. I wish there was an interest bearing account in that currency.

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Mister Imperceptible
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Re: Permanently low interest rates?

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BRUTE’s old remark that the central bankers have physics penis envy no longer applies. They know it doesn’t work. It’s about perpetuating power and postponing hard decisions. At best we outsourced the fiat bubble contagion to China post-2008 so as to ensure that everyone goes down with us.

It’s about loss of trust. Having to put something in a mattress is because the banking system is untrustworthy. If you put cash in a bank account they inflate it away. If you take it out they make you feel like a criminal, because you are supposed to let them steal it from you slowly at first, then suddenly all at once. The GenXers went all-in and got their faces ripped off in the tech bubble. The Boomers tried to make up for a lifetime of irresponsibility and got their faces ripped off in the housing bubble. Soon the Millennials will have their faces ripped off. The system is designed to rip your face off. The bankers of old were men of prudence who only survived with proper risk control. The bankers of today are finance bros stealing from America’s retirement fund because as the WSP say “You are obligated to no one.” I have to trust myself, the system has proven itself wholly untrustworthy.

The Romans observed in their decline that their trading partners no longer accepted materials or goods, only hard currency. The Denarius was hard at first and soon enough it was worthless.(*) That you can no longer have an interest bearing account in that currency is a symptom of decline. Government bonds are great in a hard standard because you’re skimming off the top of Manifest Destiny. The tech bubble wasn’t just the buying opportunity of a lifetime for an asset, it was the opportunity to sell the top in Peak America. The current imbalance is still great enough to present an exploitable opportunity worthy of Harry Browne. Great for students of history and human nature, terrible for people who believe what they are told.

(*)Note in the graph the gentle slope under the Antonines. This was engineered by the Five Good Emperors to last longer, but not to last. The decline had already begun.

I would think an 8-shot Ruger Redhawk .357 magnum revolver will retain its value more than the paper you use to pay for it, and has the potential for great marginal utility.

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Re: Permanently low interest rates?

Post by 7Wannabe5 »

As I noted in c_L's journal, I am being swamped with business loan offers at fairly low rates. Maybe I don't get it, but extremely low interest rates seems to me to signal a lack of enterprising individuals in the market place. Also might signal that Picketty was wrong and the elasticity of capital is much smaller than he supposed.

Anyways, I have no shortage of micro-business ideas in which to invest if/when somebody is wanting to offer me a loan at negative 2% :lol:

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Mister Imperceptible
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Re: Permanently low interest rates?

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Mister Imperceptible wrote:
Tue Oct 29, 2019 9:40 pm
At best we exported the fiat bubble contagion to China post-2008 so as to ensure that everyone goes down with us.
fixed

China’s Biggest Banks Prepare For Hard Times

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Mister Imperceptible
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Re: Permanently low interest rates?

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7Wannabe5 wrote:
Wed Oct 30, 2019 6:27 am
Maybe I don't get it, but extremely low interest rates seems to me to signal a lack of enterprising individuals in the market place.
You are confusing the cause and the effect. The Baby Boomers made an unprecedented amount of promises to themselves that others are now expected to pay.

On a macro level, they cannot increase interest rates because the debts are so large that the interest payments would become unpayable. And the reason loans are being made at such low rates is because in the hunt for short term yield, marginal or otherwise perpetual money-losing anti-businesses are seen as viable or least as the means to generating a marketable security that can be sold to a shmuck.

On a micro level, you should look at the cost of living and the cost of tuition and see how that impacts individual choices.

I consider myself a very enterprising individual. But after graduating from college with $150k in student debt(*) and with the exorbitant costs of living in first-tier cities, I have spent my twenties and early thirties living in my parents basement in the exurbs or in third-tier cities, digging out of debt. I have never known anything other than having to get money. If creating or innovating something can be done by taking risk without prioritizing short term income, I might have been able to do that sooner were it not for Sallie Mae coming each month to extract a pound of flesh. As it is I have worked my way into being a highly paid office dweller.

(*)Speaking of marketable securities being sold to schmucks. But you have to question how getting educated is painted as the only way to get ahead in life by all the elders (parents and teachers alike) and then is made so expensive that at age 17 the youth makes a life-altering and perhaps permanently life-restricting decision.

If the State and the older generations were interested in the country’s youth as innovators and creators, they would allow for an environment in which the younger generation was not viewed as a stable of wage slaves from which to extract rents and interest payments.

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Re: Permanently low interest rates?

Post by 7Wannabe5 »

MI wrote:On a macro level, they cannot increase interest rates because the debts are so large that the interest payments would become unpayable. And the reason loans are being made at such low rates is because in the hunt for short term yield, marginal or otherwise perpetual money-losing anti-businesses are seen as viable or least as the means to generating a marketable security that can be sold to a shmuck.
Right, I get this, but these whys and wherefores shouldn't matter from the perspective of your theoretical "anti-businessman" considering the loan offer :lol: I have a friend who is a more genius level ENTP than me. Sometimes he takes a salary man job. Sometimes he partners on a start-up. Sometimes he does contract work. Sometimes he hires a crew and offers up contracts. During the last recession when there were a lot of young programmers sitting around unemployed in cafes in the town where he resided, he was hiring them because they were relatively cheap. What I am observing is that right now money/loans is what is cheap, so that must mean that entrepreneurs/innovators are relatively scarce.

I kind of agree with your reasoning that the educational system is to blame, but I think it has more to do with too much time in daycare and adult-supervised after school activities. Also, I read in a magazine for teens that the average high school student currently only spends 2.5 hours/week working for money. Serious shortage of kids getting early life experience engaged in activities such as manufacturing cinnamon flavored toothpicks and selling them on the playground or putting on a show in the garage and charging quarter for admittance or making up babysitting business cards and putting them in every mailbox in new subdivision, etc, etc, etc,

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Re: Permanently low interest rates?

Post by shemp »

"Permanently" low interest rates is extremely unlikely, but low for another decade (two decades at most) is possible. The massive worldwide savings glut is driven by aging populations. Pig of baby boomers passing through the lifecycle python, so to speak. In 10-20 years, aging populations will be forced to dis-save, meaning spend accumulated hordes of savings, especially on medical expenses, and that will end the savings glut. Wars or epic natural disasters could end the glut sooner, of course.

Governments will have accumulated massive debts by this time, which can be reduced in real terms by keeping short term interest rates low despite growing inflationary pressures (financial repression). Long term interest rates are not central bank controlled, and will skyrocket under financial repression. Once the wealthy have exchanged their stocks, gold, real estate and cash in favor of long term bonds, governments will raise short term interest rates to stop inflation, which will crush prices of stocks, gold, real estate. There will still be plenty of government debt, which will be expensive to service with high short interest rates, so expect lots of changes to reduce spending, especially government medical care for the elderly. Sickly old people are less numerous and much more expensive than old people in general, hence an inviting target.

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Re: Permanently low interest rates?

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shemp wrote:
Tue Nov 05, 2019 6:35 pm
Long term interest rates are not central bank controlled, and will skyrocket under financial repression.
Are you sure? They can keyboard into existence as much money as is required to control rates.

The last time rates were hiked to stop inflation was not until after a full decade of sustained high inflation.

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Re: Permanently low interest rates?

Post by shemp »

Mister Imperceptible wrote:
Tue Nov 05, 2019 7:00 pm
Are you sure? They can keyboard into existence as much money as is required to control rates.
Central banks could buy up long bonds (and also stocks and gold) to drive down long rates, but they normally only buy short term bonds, to drive down short rates, and let the market handle the long rates (and also stocks and gold).

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Mister Imperceptible
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Re: Permanently low interest rates?

Post by Mister Imperceptible »

shemp wrote:
Tue Nov 05, 2019 11:11 pm
I’ve been reading your posts and you have a sinister faith in the power of central authorities to control everything. I am certainly wary of this possibility but I feel there is a limit to this. It assumes a kabal of bankers and politicians can sick a military force on the entire world’s population. I am wondering to what degree loyalties become divided.

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Re: Permanently low interest rates?

Post by shemp »

Mister Imperceptible wrote:
Tue Nov 05, 2019 11:16 pm
I’ve been reading your posts and you have a sinister faith in the power of central authorities to control everything. I am certainly wary of this possibility but I feel there is a limit to this. It assumes a kabal of bankers and politicians can sick a military force on the entire world’s population. I am wondering to what degree loyalties become divided.
My faith is in mathematival logic and natural science. Given limited resources and two sets of morals, one which proposes sharing and non-violence and the other which proposes the opposite (selfishness and violence), those who embrace the latter set of morals will eat and thus survive and those who embrace the former set will starve. Thus the former set of morals will go extinct.

Of course the elites might fight among themselves, of that's what you mean by divided loyalties. But only the ruthless elites survive. It makes no difference whether the surviving ruthless elites are united or broken into numerous competing groups. What matters is that that all the survivors will be ruthless.

In today's USA military, most soldiers would be unwilling to carry out orders to exterminate masses of civilians, another form of divided loyalties. But there are always some psychopaths in the military, and that's all that's needed. A minority that will eventually grow into a majority when the time is ripe.

All this is obvious if you study history or apply mathematical logic to natural science. We forget how violent humans are because we have temporarily escaped confrontation with the laws of nature due to the industrial revolution. But this won't go on forever.

Populations always rise to the limit of resources, barring violence to control population. But if population rises to the limit of resources, then there is violent competition for resources. Violence either way. Some say world population will stabilize voluntaryily. Once again, suppose two sets of morals, one advocating producing as many children as possible and the other advocating restraint. Those embracing the first set of morals eventually prevail, unless the second group is willing to use violence to enforce their views.

Low interest rates, like the lack of widespread starvation among humans nowadays, lack of wars, etc, is the result of a temporary excess of resources, allowing escape from the usual violent competition in nature (humans are a part of nature, not an exception) for limited resources. When the excess of savings dissipates, interest rates will rise. When resources in general become scarce, wars and other widespread violence by humans competing for limited resources will return.

The non-stop propaganda of the media blinds us to reality. People willingly consume this propaganda because they want to know what to think and what to say to please their corporate masters and prove they will be cooperative and peaceful worker bees. But I'm retired, so don't have to swallow and regurgitate fairy tales to please any master. I can afford to know and speak the truth of what is coming in the future.

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Re: Permanently low interest rates?

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shemp wrote:
Wed Nov 06, 2019 7:24 am
Thanks for the honesty, we are in short supply of it. Most obfuscate the truth or outright lie because they are afraid. Your assessment is essentially mine. The difficulty is getting along socially in the world with this perspective, knowing what needs to be done without having any malice towards others, only the willingness to face the truth and the take the necessary steps to survive.

https://m.youtube.com/watch?v=DXY23gsHXXo&t=2s


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Re: Permanently low interest rates?

Post by black_son_of_gray »

Well if it's going to be a WIkipedia dump...might as well mention that "survival advantage" depends very much on the level at which selection takes place (spoiler alert: there are very good arguments that level is not always the individual): https://en.wikipedia.org/wiki/Group_sel ... ion_theory

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Re: Permanently low interest rates?

Post by Mister Imperceptible »

If the United States has a disadvantage it is that the resources, both human and natural, in both Russia and China are largely subservient to a central authority.

What is an “American”?

Who is your “we”?

Right now our corporate overlords seem to be selecting each other at everyone else’s expense.

Mind you that this is an expression of disgust with leadership and the inability of humans to evolve morally, not a celebration of nihilism.

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Re: Permanently low interest rates?

Post by Lemur »

Mister Imperceptible wrote:
Wed Nov 06, 2019 3:21 pm
If the United States has a disadvantage it is that the resources, both human and natural, in both Russia and China are largely subservient to a central authority.
Hasn't free market (well mixed economies) always outperformed central planning? And if true, wouldn't that give the U.S. an advantage? I think their is a reason why the Europeans are at negative interest rates now and we're not there...(yet at least).

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Re: Permanently low interest rates?

Post by Mister Imperceptible »

As long as we are playing a cooperative game geopolitically, yes, I think free markets will outperform. But if the long term sustainable world population is only a few billion or several hundreds of millions instead of several tens of billions, geopolitics becomes a competitive zero-sum game and the nation that can have everyone rowing in one direction against the enemy is better able to survive.
Mister Imperceptible wrote:
Fri Jun 08, 2018 4:08 pm
A hypothetical.

Let’s suppose Country A focuses its resources on a minimax for the lowest common denominator.

Neighboring Country B focuses its resources on stronger infrastructure, economy, and military.

Country A would be a nicer country to live in, or at least an easier country to live in. Studies are released that indicate the aggregate happiness quotient in Country A is higher. It is decided! Country A has the best form of government, as it attends to its least advantaged persons and tries to minimize the worst outcomes for all individuals. No one is left poor, homeless, or hungry. Even male virgins in the MGTOW movement are provided with beautiful women for sex, as the beautiful women decide that inequality of outcomes is unbearable.

Country B is denounced as unpleasant and indifferent to human rights. Not only are the MGTOW virgins left unrewarded, their knuckles are whipped at each mention of “equality” and “fairness.” The underprivileged from Country B longingly seek to emigrate to Country A, as they feel Country A must be better. Right up until Country B invades, conquers, and subjagates Country A. The best and brightest of Country A are killed, and its lowest common denominator is made subservient.

Another hypothetical.

An asteroid is hurtling towards the Earth, and is expected to destroy all life on the planet when it impacts in a few years.

The leaders of Country A convene. Life is fleeting, and so all private property is confiscated from the wealthy and redistributed to the masses, to be consumed in a massive orgy. Anarchy reigns as the ultimate fate is a foregone conclusion. People devolve into hedonistic monsters.

The leaders of Country B convene. They decide that survival of the species is the ultimate goal. All social programs are suspended. Every bit of human-energy in society is dedicated toward the construction of a spaceship that will carry 1,000 individuals to the nearest habitable planet. Even those who are not designated to go on the ship channel all of their energy into the spaceship construction. Even as their death approaches, the meaning of their work is imbued with a spiritual importance. They are the inheritors and perpetuators of all human history. The spaceship is constructed, and all but 1,000 individuals from Country B are annihilated. Mankind survives.

I am not sure a minimax strategy is sacrosanct.

****Disclaimer: These hypotheticals were written by a privileged straight white male in an air-conditioned American office setting, sitting in a comfy office chair and sipping on free iced coffee provided by work, and he probably never has to worry about being marginalized or being dealt the worst hand.*****

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Re: Permanently low interest rates?

Post by tonyedgecombe »

Lemur wrote:
Wed Nov 13, 2019 11:57 am
Hasn't free market (well mixed economies) always outperformed central planning? And if true, wouldn't that give the U.S. an advantage? I think their is a reason why the Europeans are at negative interest rates now and we're not there...(yet at least).
I do wonder what difference modern technology would have made to the USSR, certainly it would have made monitoring and controlling its population easier but could it have made the whole thing more economically viable. I don't particularly like the idea but I wouldn't be surprised to see the developed world fall into such a system.

By the way I don't think there are any Western European countries that are centrally planned, even the Scandinavian countries have free market economies.

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Re: Permanently low interest rates?

Post by fiby41 »

Can y'all invest in countries that give higher interest rates?
I saw a video of Trump where he said that people of European countries which had lower interest rate than USA were taking advantage of it. Or maybe he meant banks or other big companies.
However if you can, then welcome to India. The repo and reverse repo rates of the reserve bank are between 5-5.5%, but the interest rate on deposits are up to 9%.

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