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Electric Wrigglies posted:I assume you expect the ambulance to come and the best brain surgeon nearby to be available if you have an accident/medical emergency? WTF are you talking about? My dad was a paramedic and his schedule was set weeks in advance. If someone called in sick the dispatch would call off duty paramedics to come in, but they would offer overtime pay (1.5x), and he could always tell them to screw off. If no one accepted it they would start another round of calls offering double pay.
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Mar 2, 2023 19:22
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HootTheOwl posted:Go without. the usual answer is "they buy from the vendor that couldn't sell all of its supply before, and is jumping at the chance to sell more" because usually there's some excess supply in the system, and that excess supply is what holds down prices. this does not work when the economy is supply-constrained: hence, a company can get away with "we raised our prices because gently caress you, that's why" the "greed" stuff is companies falsely claiming that they are only passing along increases in their costs as an explanation for why they raised their prices. but that's just PR nonsense. it also misses the point to focus on "greed": even if the specific company you're buying from is telling the truth that they have not increased their profits one penny and are just passing on costs, all that means is that someone earlier in the supply chain raised their prices because "gently caress you, that's why".
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Mar 2, 2023 19:31
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evilweasel posted:given that we are currently experiencing problems with inflation, we definitely cannot just print more money. This implies that the current inflation is directly tied or even heavily tied with printing money, which it is not. Maybe 1-2% of inflation is coming from there, which is part of why raising interest rates hasn't seriously controlled it. We printed asstons of money for years prior to inflation going up sharply and inflation stayed at 2% or under. The current inflation is largely due to supply chain shocks and increase in energy and other staple costs due to the war in Ukraine, as well as companies using the covid crisis and other shocks to increase prices.
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Mar 2, 2023 21:57
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As we all know, a reduction in supply always leads to higher costs. That's why the minimum wage has risen to $20 an hour due to the covid and covid related die off!
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Mar 3, 2023 00:30
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Watermelon Daiquiri posted:As we all know, a reduction in supply always leads to higher costs. That's why the minimum wage has risen to $20 an hour due to the covid and covid related die off! Wages have been rising and the low wage jobs have been having a hard time finding workers
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Mar 3, 2023 00:49
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Harold Fjord posted:Wages have been rising and the low wage jobs have been having a hard time finding workers https://www.businessinsider.com/us-wage-salary-growth-slowing-inflation-fed-interest-rate-hike-2023-2
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Mar 3, 2023 01:00
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Jaxyon posted:This implies that the current inflation is directly tied or even heavily tied with printing money, which it is not. I explained this point in the part of my post you removed from your quote. you're basically (a) reasoning from times (the past 15 years, more or less) where demand was too low and printing more money (which stimulates demand) would cause economic growth, not inflation; and (b) yes, current inflation is largely because we are supply-constrained due to covid loving up supply lines something fierce, but that doesn't matter to the point which is because we are supply-constrained printing money will cause inflation rising interest rates have helped to curb inflation not because the inflation was caused by too much money printing, but because rising interest rates destroys demand and thereby reduces the demand/supply imbalance that creates inflation.
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Mar 3, 2023 01:09
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evilweasel posted:given that we are currently experiencing problems with inflation, we definitely cannot just print more money. yeah, i was just making a joke about the possible death of the US dollar as the world's reserve currency and how the US's seems to only have one solution (jacking up interest rates and printing more money). https://www.youtube.com/watch?v=r8IGu-fbbeQ imo i don't think the real estate bubble in the US will pop unless everything else does too. it's still probably the most secure thing you can invest money in for business and entire companies like blackrock want to buy it up completely for a monopoly.
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Mar 3, 2023 01:52
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Watermelon Daiquiri posted:As we all know, a reduction in supply always leads to higher costs. That's why the minimum wage has risen to $20 an hour due to the covid and covid related die off! COVID didn't have a significant permanent effect on the workforce, because older people were much more likely to be killed by COVID or COVID-related effects. On top of that, minimum wage workers are disproportionately likely to be at the young end of the workforce, which saw relatively few COVID deaths. The official US COVID death count to date is 1,113,560, of which only 71,928 were below age 50. That's just 0.04% of the currently employed US workforce as of Jan 2023. People under age 25 (a group that makes up nearly half the minimum wage workforce) saw only a few thousand deaths. Despite that, the labor force disruptions from various COVID-related measures did indeed send wages rising drastically, which brings us to the next point... cat botherer posted:Wages have been rising slower than inflation. In other words, they have been falling. Yes, because the labor market wasn't the only one that saw supply disruptions - the larger economy saw various supply chain disruptions as well, which caused prices to rise along with wages. Which isn't terribly shocking. The increasing wages were driven by labor disruptions and shortages, which contributed to the general supply chain disruptions and were caused by many of the same root problems. It's also worth noting that the wage growth was stronger in customer-facing service industries (such as retail, leisure, and hospitality) and supply chain industries (such as transportation and warehousing), to the point where the former have still managed to beat inflation and see real wage growth. Meanwhile, office industries that could be sent home for remote work with minimal disruption and little labor churn, such as finance and information, have seen some of the biggest drops in real wages. This chart's a bit old by now (source), but as far as I can tell, the patterns it shows pretty much persisted through 2022 (it's still a bit early for solid 2023 data). 
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Mar 3, 2023 03:04
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Main Paineframe posted:COVID didn't have a significant permanent effect on the workforce, because older people were much more likely to be killed by COVID or COVID-related effects. On top of that, minimum wage workers are disproportionately likely to be at the young end of the workforce, which saw relatively few COVID deaths. it's not just deaths. https://www.bloomberg.com/news/articles/2023-02-24/millions-of-us-workers-are-still-missing-after-the-pandemic-where-did-they-go quote:Millions of US Workers Are Still Missing After The Pandemic. Where Did They Go? there's graphs in the article, but the gist is early retirement, low-income hospitality/service workers not coming back, low immigration and long covid all being possible factors.
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Mar 3, 2023 03:15
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crepeface posted:imo i don't think the real estate bubble in the US will pop The fact that big finance has all ten fingers and ten toes in twenty real estate pies is just extra impetus to never let anything happen to housing costs.
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Mar 3, 2023 04:59
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evilweasel posted:given that we are currently experiencing problems with inflation, we definitely cannot just print more money. Which were the "normal" times in the last, say, 50 years, and when do you expect things to get back to "normal"? Because to me it looks like economics (and mainstream theories thereof) is going off the rails - literally at times - and pundits are grasping at straws to explain what happened in the last 6-12 months, let alone predict what's coming next.
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Mar 3, 2023 06:19
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In short, eat the rich.
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Mar 3, 2023 08:31
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eXXon posted:Which were the "normal" times in the last, say, 50 years, and when do you expect things to get back to "normal"? Because to me it looks like economics (and mainstream theories thereof) is going off the rails - literally at times - and pundits are grasping at straws to explain what happened in the last 6-12 months, let alone predict what's coming next. The answer seems to be written right there in the post, pre-BFC. Also, you're conflating “normal times” with interest rates being meaningful in western economies. cinci zoo sniper fucked around with this message at 09:59 on Mar 3, 2023 |
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Mar 3, 2023 09:56
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Shrecknet posted:Real Estate will never be allowed to pop because most Americans who have any holdings at all have them in their homes. Letting housing prices fall $1 would get people into the streets (more like into their congressperson's offices) more than literally any other policy possible. 2008 has entered the thread.
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Mar 3, 2023 19:56
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Volmarias posted:2008 has entered the thread. "These folks don’t know what they’re talking about. If losses go to ten percent there will be, like, a million homeless people.” (Losses in the pools Hubler’s group had bet on would eventually reach 40 percent.)” - The Big Short
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Mar 3, 2023 20:16
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eXXon posted:Which were the "normal" times in the last, say, 50 years, and when do you expect things to get back to "normal"? Because to me it looks like economics (and mainstream theories thereof) is going off the rails - literally at times - and pundits are grasping at straws to explain what happened in the last 6-12 months, let alone predict what's coming next. you can see how aberrant the last 15 years are for interest rates here: https://www.macrotrends.net/2015/fed-funds-rate-historical-chart. what is "normal" in an economy is different from what is "normal" for interest rates: currently, we have more historically normal interest rates but our economy is highly abnormal right now as part of the aftershocks of covid. mainstream economics isn't really going off the rails at all right now. there are basically two issues you have to understand when understanding economics and when it's useful vs not. first: often the results of economic theory are essentially very political decisions. there is a very very very high risk of intentionally or unintentionally biasing economic theory to fit desired political outcomes. the closer an economic theory comes to giving political advice, the reality is the more likely it is to be garbage. a lot of what does give political advice is understood and known if it's bad or good, but actual economics is ignored by people in power in favor of cranks that say what they want to say. however, this is not really a critical issue for this particular discussion - but it's really important to keep in mind. the second is: getting reliable data is very very hard. take a fairly discrete issue that has a right, knowable answer: how many people in the united states have a job right now? that is something we have spent decades and decades and decades trying to measure and we're still not very good at it: we frequently have to go back and significantly revise previous employment estimates. and that's despite all of the information being collectable in the united states, and nobody really having an incentive to lie. for the current economic situation, we are in fairly uncharted waters - a global pandemic on a scale that hasn't really happened in 100 years - and there has been a lot of just basic data collection that has been really hard to get. set aside job numbers: it has been tremendously difficult to get a firm grasp of the level of fuckery in the supply chain, how permanent it is vs how temporary it is, and so on. much of this data is not public, in the hands of people with an incentive to lie about it, and/or abroad. now basically, to vastly oversimplify: inflation is when demand (at current price levels) outstrips supply over the economy as a whole. usually this is because demand is artificially boosted. if you give everyone a pile of money, they go out and spend it. that's why "printing money" causes inflation, basically: there's more money to spend, ergo more demand, but not more supply. that also happens when people are just wildly overconfident about the economy because they're paper rich (because the economy is overheating and they have invested in bubbles). the basic way you deal with this via monetary policy is to take actions that effectively reduce the money supply (thereby lowering demand) and increase interest rates (thereby also lowering demand). here, we have a very odd situation where the cause of inflation is abruptly limited supply. the question that has bedeviled people is: how limited, for how long? hence, the whole debate over if inflation would be "transitory" or not. if the supply situation is going to unfuck itself within a month or two - there's no reason to go out and destroy demand, because then supply unfucks itself before monetary policy destroys demand, then demand gets destroyed, and you have oversupply and a recession. what the fed has been trying to do is, basically, exactly tune the demand destruction to match up with supply so prices stop increasing. if they undershoot demand destruction, then inflation persists. if they overshoot, then they cause a recession. if they get it exactly right, you get a "soft landing" where inflation stops and the economy cools down to its "natural" growth rate. the issue is that there are tons of tools in the toolbox macroeconomics has proposed, many of which work very very well and in fact work better than monetary policy. the issue is: they require congressional action and are much, much more political than monetary policy (which both parties have mostly agreed to keep out of politics, as a government loving around with monetary policy directly tends to lead to very bad economic results - Turkey is currently learning that right now). so, in the United States, they're virtually unusable unless the republican party feels like saving the economy that year, and the only real levers that work are those controlled by the fed.
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Mar 3, 2023 20:22
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I still don't understand why I need the physical disc of a video game on a console once I installed it, especially now that my disc drive seems to be failing. Game is installed, shows up on XBox Live as installed but needs the disc to "read the license" The gently caress for? If it's to prevent piracy, the game store already knows the game installed and registered to my device under my name. Says it right there on my account. "Well just by digital copies then?" Right, but some of these games were gifts (discs, gift wrapped), cheap used ones I picked up at yard sales and flea markets and sometimes my internet goes down, especially during big storms here in Florida. I mistakenly thought that physical copies would save me from always needing to be online. I still don't see the point in this approach, even from a "greedy corporation" standpoint. I mean...I guess it's so I don't buy the game and install it on ten of my friends' consoles but if I need to be online anyway, the game can already tell if this has happened just by reading the digital license. Adobe mastered this 20 years ago when print and graphics shops would try to buy one copy of Illustrator or Photoshop and install it on 15 work stations. It can't be to combat selling and buying used games either because that makes no sense given the fact that..well...you can DO that; buy a used game and install it. Still needing the disc is pointless.
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Mar 4, 2023 01:26
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BiggerBoat posted:I still don't understand why I need the physical disc of a video game on a console once I installed it, especially now that my disc drive seems to be failing. Game is installed, shows up on XBox Live as installed but needs the disc to "read the license" Publishers view reselling used games to be a big problem (somehow), hence locking it to your account to require a physical token. You are, in fact, correct. This is bullshit.
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Mar 4, 2023 01:57
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Volmarias posted:Publishers view reselling used games to be a big problem (somehow), hence locking it to your account to require a physical token. Thanks. I guess that kinda makes sense. But the only reason it's working as intended here is due to a failing disc drive. Not anything Microsoft or From is doing with license keys. They KNOW I own the game and (should) know what device it's installed on, given the fact that my device and games are right there on my XBox Live/MS account. Like I said, Adobe figured this out decades ago. Then again, Adobe also pioneered the Always Online approach and then hosed over casual users with a subscription model that makes me lose money if I have a slow freelance month, forces upgrades on me I don't need or want and renders me unable to work if my internet connection goes down for any reason.
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Mar 4, 2023 02:09
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huh didnt not think the CD keys would be literally CDs. how does that work with the non zero amount of game rental stores or the surprising larger amount of librarys that lend out games?
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Mar 4, 2023 02:28
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BiggerBoat posted:If it's to prevent piracy, the game store already knows the game installed and registered to my device under my name. Says it right there on my account.
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Mar 4, 2023 02:39
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BiggerBoat posted:
Do you see the problem here with your assumption that the game is attached to your account? Like, what do you think would happen if you gave/sold the game to someone else? Or, as mentioned, if you checked it out from a library?
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Mar 4, 2023 04:15
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Xbox wanted to go discless, people freaked out. Well now the majority of game sold are digital it probably will happen next generation.
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Mar 4, 2023 08:50
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Nintendo just went back to cartridges and may have the last laugh.
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Mar 4, 2023 10:08
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It really felt weird in 2017 when I put a game into the console and it just... launched
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Mar 4, 2023 10:10
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I have not had a gaming console since streaming really even was a thing so hearing about those shenanigans really makes me sad.Ruffian Price posted:It really felt weird in 2017 when I put a game into the console and it just... launched What? Like, did it launch it straight across the room or something?
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Mar 4, 2023 10:27
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Rocko Bonaparte posted:I have not had a gaming console since streaming really even was a thing so hearing about those shenanigans really makes me sad. Out of a cannon, directly into the sun.
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Mar 4, 2023 10:28
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Maximum Overdrive sequel, but with game consoles and chatbots instead of trucks.
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Mar 4, 2023 11:54
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raifield posted:Maximum Overdrive sequel, but with game consoles and chatbots instead of trucks. https://www.youtube.com/watch?v=d81Nv8GG9as
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Mar 4, 2023 12:45
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To keep everyone updated on the thread's title, they've just raised $200-250m at $1bn valuation. https://www.ft.com/content/b230eb4c-ed53-45ff-8b64-c286a4b98fc1
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Mar 4, 2023 17:27
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Of course, no less than Andreesen involvement telling you loud and clear that it's something to avoid.
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Mar 4, 2023 21:28
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Do we know what that valuation is in terms of Hitlers? How many Hitlers is that?
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Mar 5, 2023 07:27
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cinci zoo sniper posted:The answer seems to be written right there in the post, pre-BFC. Also, you're conflating “normal times” with interest rates being meaningful in western economies. I assume you mean pre-GFC, and to that end, maybe?  As I've had it explained, the job of the US fed is to tweak interest rates to keep inflation at 2%. I suppose that graph shows that rate hikes may have actually done that from 2004-2006, although not to the same degree as in the 1980s. But... evilweasel posted:you can see how aberrant the last 15 years are for interest rates here: https://www.macrotrends.net/2015/fed-funds-rate-historical-chart. what is "normal" in an economy is different from what is "normal" for interest rates: currently, we have more historically normal interest rates but our economy is highly abnormal right now as part of the aftershocks of covid. Part of the reason I asked when the last time economics was "normal" was that the start of the GFC was what, 5-6 years removed from the end of the dot-com bubble bursting? Was the economy otherwise normal while these two massive bubbles were inflating, until they burst and things were very much not normal again? There hasn't been a similar bubble burst in 15 years now, is that surprising or did the pandemic just delay the inevitable (tech again?)? evilweasel posted:there are basically two issues you have to understand when understanding economics and when it's useful vs not. first: often the results of economic theory are essentially very political decisions. there is a very very very high risk of intentionally or unintentionally biasing economic theory to fit desired political outcomes. the closer an economic theory comes to giving political advice, the reality is the more likely it is to be garbage. a lot of what does give political advice is understood and known if it's bad or good, but actual economics is ignored by people in power in favor of cranks that say what they want to say. however, this is not really a critical issue for this particular discussion - but it's really important to keep in mind. I'm not really convinced that economic theories that fall apart in the absence of perfect data would actually work that well if such data existed, but it's not really a field I follow so I won't belabor the point. The question I'm more interested in is when are conditions expected to return to "normal", or are we going to continue to find ourselves in unusual situations that defy explanation for the foreseeable (or not) future, in which case what use are these theories for spherical frictionless cows? evilweasel posted:now basically, to vastly oversimplify: inflation is when demand (at current price levels) outstrips supply over the economy as a whole. usually this is because demand is artificially boosted. if you give everyone a pile of money, they go out and spend it. that's why "printing money" causes inflation, basically: there's more money to spend, ergo more demand, but not more supply. that also happens when people are just wildly overconfident about the economy because they're paper rich (because the economy is overheating and they have invested in bubbles). the basic way you deal with this via monetary policy is to take actions that effectively reduce the money supply (thereby lowering demand) and increase interest rates (thereby also lowering demand). Economists - or at least, the pundits that make the news - are still making oblique references to pandemic stimulus affecting inflation now, years after the fact (at least in the US; I gather most other countries are winding down their COVID stimulus/support as well e.g. CERB). Last year they were still arguing about whether supply chain disruptions were to blame for inflation or not. Paul Krugman was going on about being on Team Transitory and declaring victory over inflation up until a couple of weeks ago when monthly inflation numbers were revised significantly upwards, then he shrugged and went back to blaming unreliable data and concern trolling about "wage inflation". And actually there were a bunch of graphs showing that a significant amount of pandemic stimulus went to "excess" savings... for a time, until they didn't. Anyway, I don't want to give the impression that I understand any of this, I'm mostly just skeptical of the existence of this "normal" that we're supposed to be heading towards. I find it more likely that the near future will be punctuated by yet more unique crises that defy explanation and also end up increasing the gap between the rich and everyone else, again.
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Mar 5, 2023 08:05
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eXXon posted:Anyway, I don't want to give the impression that I understand any of this, I'm mostly just skeptical of the existence of this "normal" that we're supposed to be heading towards. I find it more likely that the near future will be punctuated by yet more unique crises that defy explanation and also end up increasing the gap between the rich and everyone else, again. This is where technicalities do matter, I'm afraid. The interest rate being at 0% for years on end is a very specific, abnormal characteristic of the BFC aftermath, as readily confirmed by your graph. And the conversation is still about interest rates, I'd like to remind you, and, as not too familiar topic for you, may not be the most helpful turf to lob not-so-subtle digs at people. cinci zoo sniper fucked around with this message at 16:20 on Mar 5, 2023 |
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Mar 5, 2023 11:02
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A very smart guy predicted these crises over a century ago and so I am with you exxon in imagining that they will continue
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Mar 5, 2023 15:13
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eXXon posted:Part of the reason I asked when the last time economics was "normal" was that the start of the GFC was what, 5-6 years removed from the end of the dot-com bubble bursting? Was the economy otherwise normal while these two massive bubbles were inflating, until they burst and things were very much not normal again? There hasn't been a similar bubble burst in 15 years now, is that surprising or did the pandemic just delay the inevitable (tech again?)? eXXon posted:Anyway, I don't want to give the impression that I understand any of this, I'm mostly just skeptical of the existence of this "normal" that we're supposed to be heading towards. I find it more likely that the near future will be punctuated by yet more unique crises that defy explanation and also end up increasing the gap between the rich and everyone else, again. i took this second part out of order because i think it gets at the key issue here. i think you're ascribing something to the concept of "normal" that is very different than what it actually means. first, what i said is that it was not normal for interest rates to be effectively zero. which, as the graphs both you and i posted, is pretty indisputably correct. that has had significant warping effects on the economy that will not be present when interest rates are in a more normal range. that does not mean that "all will be normal" at all other times, nor that "normal" is some sort of judgement that Things Are Good. it means things are more normal in how the economy responds to things because interest rates are at a non-zero level. the dot-com bubble was relatively normal. the boom/bust cycle of economies is very historically normal - it comes from, basically, imperfect information leading to swings of overinvestment (a bubble) / underinvestment (a recession). the current tech boom not popping (and the tech boom getting where it did) for so long is historically abnormal but not really surprising. it is related to zero interest rates: the whole point of low interest rates is to spur investment to combat underinvestment in a recession, but it is well known that causes bubbles which results in the need to "cool down" the economy by raising interest rates. the current tech bubble is, basically, why a discussion of interest rates makes sense in a tech thread. the prevalence of incredibly stupid tech ideas that got scads of money is a result of near-zero interest rates: because near-zero interest rates force capital looking for returns into more and more speculative investments because there's more capital looking for those returns than there are safe, clearly good ideas for investment. again, you seem to be thinking "normal" is a normative judgement where normal = good. that's not the case. normal means, well, the usual course of an economy - i.e. not dealing from the aftershocks of a global financial crisis that provoked a very long and deep recession, and not dealing with a once-in-100-years pandemic. that does not mean that when we return to normal you will get everything you want. the divergence between the rich and poor is largely related to tax policy and over levers over how you distribute the gains of the economy that are largely under the control of congress and not the fed. eXXon posted:I'm not really convinced that economic theories that fall apart in the absence of perfect data would actually work that well if such data existed, but it's not really a field I follow so I won't belabor the point. The question I'm more interested in is when are conditions expected to return to "normal", or are we going to continue to find ourselves in unusual situations that defy explanation for the foreseeable (or not) future, in which case what use are these theories for spherical frictionless cows? all economic systems deal with the immense difficulty of getting information on the true state of the economy. they don't "fall apart" without perfect information. command economies similarly suffer from significant problems in getting accurate data on the underlying economy. many of the problems in an economy - the boom-bust cycle - stem from a lack of perfect information. but that doesn't mean we don't have a good sense of how to use the information we have: it means that our ability to manipulate the economy is severely constrained by the quality of our information. but again, i think this attitude is stemming from your belief that "normal" is a description of what we ought to strive for, which isn't the case. evilweasel fucked around with this message at 16:22 on Mar 5, 2023 |
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Mar 5, 2023 16:19
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evilweasel posted:i took this second part out of order because i think it gets at the key issue here. i think you're ascribing something to the concept of "normal" that is very different than what it actually means. first, what i said is that it was not normal for interest rates to be effectively zero. which, as the graphs both you and i posted, is pretty indisputably correct. that has had significant warping effects on the economy that will not be present when interest rates are in a more normal range. that does not mean that "all will be normal" at all other times, nor that "normal" is some sort of judgement that Things Are Good. it means things are more normal in how the economy responds to things because interest rates are at a non-zero level. I'm not disputing that near-zero interest rates are abnormal. Let me try to summarize in almost-chronological order, and correct me where I'm wrong or you disagree: - The GFC was caused largely by subprime lending, an avenue of unusually cheap credit in a time of low (2002-2004) but not quite historically or abnormally low (2005-2007) interest rates. Either way, it wasn't tech and is not really the thread topic. - The dot-com bubble was standard speculative investing in a time of fairly normal interest rates. I'm unaware of a source of cheap credit that fuelled it but I wasn't exactly following politics closely then. Otherwise, is there some useful insight into what caused it? - The crypto bubble has sort of half-popped, largely due to regulatory action and not so much thanks to interest rate hikes. SBF and FTX's collapse haven't destroyed the "industry" just yet, and BTC in particular has been unusually stable for 6+ months. - The current tech bubble outside of crypto is sort of deflating, although the NASDAQ peaked in Nov 2021, a few months before Fed rate hikes. So it's unclear that rising interest rates caused the slightly diminished exuberance even if near-zero interest encouraged it in the first place. Didn't both investors and companies also have huge piles of cash on hand that they had nothing else to do with, leading to stock buybacks in the latter case? Back to the original discussion, I'm concerned by the rather blase attitude by some pundits as to whether further interest rate hikes might trigger a recession and whether that's necessary or worthwhile to control inflation (see also the debate over whether 2% inflation is even possible anymore or whether it should be 3%, though that's also not really a thread topic). The Fed especially being wrong about what's causing inflation this time around seems like it might have extreme consequences.
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Mar 5, 2023 19:54
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eXXon posted:I'm not disputing that near-zero interest rates are abnormal. Let me try to summarize in almost-chronological order, and correct me where I'm wrong or you disagree: I think we mostly agree except on a few points: 1) The GFC was not really caused by subprime lending being an avenue of unusually cheap credit. It is better understood as a combination of a couple of issues. First, subprime lending was fueled because it was mispriced. Subprime borrowers would pay much higher interest rates, but the risks inherent in subprime lending (not getting paid back) didn't justify that level of higher interest rates. So, banks wanted to get in on subprime mortgages because they were much more profitable than making mortgages to very creditworthy borrowers (who generally could demand low interest rates). The usual way that solves itself is that the first movers make a ton of money, then competition eventually pushes down subprime interest rates. Instead, what happened was the lenders (collectively) mispriced the risks: assuming real estate never went down so the shittiest of lovely loans didn't really have meaningful risk. Now, lots of people in the system knew the issues and were busy scamming to make more money and describing anything as "the lenders" mispricing the risk vastly oversimplifies it, but it's hard to do better than that without writing a book. So, the machine kept running, and then in an incredibly perverse result it was the people betting against the machine who kept it going. This is because the people shorting the market (basically, betting "this is all dumb and going to end in tears") did that by, basically, being synthetic subprime borrowers themselves. So when the world ran out of people to take out lovely, lovely mortgages the people shorting the market stepped in and were a source of additional "mortgages" to keep it all running. So that magnified it all. Then what utterly wrecked the global markets was this poo poo was on everyone's books, so nobody knew who was insolvent and about to collapse, so there was a bank run on everyone everywhere which further magnified the damage and made plenty of solvent companies insolvent due to the bank run and the vanishing of credit. The GFC was a failure of regulation more than low interest rates. Low interest rates contributed to capital seeking out new things like subprime mortgages but it's mostly a failure of regulation. 2) the dot-com bubble was because the internet really was a big deal. i mean, look at Amazon. it was everyone realizing it was a big deal and overinvesting figuring (rightly) that the winners were going to be immense winners. a lot of really significant technology creates those bubbles because people see it's going to be big in the future and want to be that winner. that doesn't mean all bubbles are because of big important technology - my view is a lot of the current tech bubble is just wishful thinking that the current stuff is going to make people as rich as amazon/google/etc did. 3) crypto is its own immense thing i could talk for ages about but is definitely partially due to low interest rates causing people to invest in stupid poo poo. it also probably has some boost from fallout from the GFC priming people to invest in stupid poo poo as opposed to "wall street" stuff because ultimately I don't think most people really get what the value of stocks comes from, so people don't really get why stocks are categorically different than Digital Beanie Babies. when it comes to what the fed is doing now: basically everyone agrees (a) inflation rates of 7% are immensely destructive to the economy and can't be allowed to persist; that (b) we would prefer to avoid creating a recession (well, there are people who politically want a recession on Biden's watch but let's ignore that for now) as opposed to a "soft landing." where the real debate over interest rates is comes from: (a) the data problem - if we had perfect data we could calibrate much more precisely to get to a "soft landing" but our data is worse than usual. this is the root of the debate over if inflation is "transitory" (i.e. it's going to mostly unfuck itself as supply chains unfuck themselves) or if it's not (i.e. we need aggressive action to control inflation). this is magnified because there's not a lot of situations where the government has handed out so much cash like happened for the covid stimulus so the effects of that just plain aren't all that well understood. these are mostly good-faith empirical debates as people try to get better information. (b) the tradeoff between inflation and employment - this is kind of two debates. first, there has been a longstanding debate if the fed should exclusively prioritize keeping inflation under control, or if it should also prioritize employment as well. I agree with the latter (prioritize employment as well) and that's generally dominant in democratic-leaning economists and even most centrist economists to my understanding. republicans are, well, much more in favor of keeping inflation under control without caring about employment (and/or affirmatively in favor of unemployment, at least under democratic presidents). second is, ignoring the people who want to cause a recession, we all generally agree that we want a "soft landing". the question is, though, given that we know our data is lovely, do we err on one side or the other? i.e. do we err on making very sure we squash inflation and increase the risk of a recession, do we err on the side of making sure we don't cause a recession but potentially don't squash inflation, or do we just do the very best we can without erring on one side or another? this has both political aspects (you can guess who is in favor of what) and, to some degree, empirical aspects (to what degree would inflation itself cause a recession and/or greater damage to workers over the medium term vs. a recession that gets inflation under control). you are absolutely right that being wrong here can have huge consequences. the first problem is that the second question is both empirical and political and you will often see people making empirical arguments that are disguised political arguments (again, a huge issue with economics). the second problem is that when you have bad data, who is right in their predictions can be somewhat random. for example: paul krugman was wrong about inflation being transitory and larry summers was right. but, uh, I don't think I want to be listening to Larry Summers vs Paul Krugman despite that.
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Mar 5, 2023 20:38
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that last bit is super critical because people who don't understand the data issue have been thinking "maybe we should be listening to Larry summers, after all he got it right that inflation wasn't transitory" and it is really really really important not to do that
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Mar 5, 2023 21:04
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