The Shuffle

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Re: The Shuffle

Postby UrGod » Fri Jul 28, 2017 5:25 pm

Carleas wrote:Sorry for the delay, there's a lot to cover.

First, a point of agreement, which will hopefully help us bridge the gap on those points where we disagree:
Void_X_Zero wrote:Interest rates should reflect the real market reality and value of credit, just as the price of products should also reflect the real market reality and value. When the Fed or anyone else deliberately externally messes with that reality, as they are doing, you introduce error and irrationality into the system that will eventually have to be corrected for.
...
I don't believe the government or the Fed (the Fed isn't part of the government) should be trying to "get more people into houses" or pushing more cheap credit on people. That's another artificial manipulation introducing errors that eventually have to be painfully corrected.

I agree with this way of thinking. It's dangerous to distort markets, and you will often end up with worse outcomes than those you're trying to avoid. I think we agree that the government directly subsidizing home loans was a big part of what got us into the recession in the first place. Where we disagree, though, is that I'd argue that where we've been messing with market pricing for a generation, we shouldn't just up and stop all at once (I think that's the idea of the "taper"). It seems like you are more willing to pull the plug.


Tapering would have been fine. But now that the Fed owns 1/4 of the total US GDP in false value, it's too late. Sometimes you have to pull the plug and clean up the mess.

A couple factual points (may be semantic points, we'll see):
Void_X_Zero wrote:The recession is still ongoing.

This depends on what we mean by recession, but it seems accepted that in the US the recession ended in 2009. From wiki:
Wikipedia wrote:The bottom, or trough, was reached in the second quarter of 2009 (marking the technical end of the recession, defined as at least two consecutive quarters of declining GDP).

Note that the recession is defined by reference to rate of growth, so that it ends at the bottom of the trough, i.e. the recession is over when things stop getting worse , even if they haven't gotten better yet.


The "growth" is artificial, and not even very strong at that. When the Fed artificially injects an extra 25% of the entire GDP into the economy you're going to see at least "modest growth". And indeed it has been modest.

What does it tell you when the US economy has been only growing at 1-2% a year despite that it was injected with an extra 25% of its own value?

Void_X_Zero wrote:The economy isn't getting stronger...

This depends on what we mean by stronger, but GDP grown has been positive since 2010 according to the World Bank. The unemployment rate has also been falling steadily since 2010 -- but see this similar chart showing fall in labor force participation rate, suggesting it might just be that people are giving up. But median household and family income are up since 2010, i.e. post-recession. I'd say improving conditions for the middle is a compelling indicator of a strengthening economy.

The real unemployment was closer to 11% last year, I don't know what the real unemployment is at the moment because I haven't calculated it.

The official numbers aren't right. As you allude to. Do this: take total US population, subtract people under 18 and over 65, subtract people with disabilities, and then divide out the total number of full time jobs in the US, to figure out unemployment and underemployment. Then add part time to full time and divide, to get total unemployment.


Void_X_Zero wrote:You're ignoring the depreciation of housing value

Zillow finds that home values have increased since the end of the recession.


Housing value depreciated in 2008-09 causing mass foreclosures. Now the housing values are inflated up again because the housing bubble wasn't allowed to actually pop. And current home prices aren't as inflated as they were before the housing crisis hit simply because the bubble partly moved into the rental market.

When you ask what the alternative is that I mentioned, it would be the case where the trend lines in the linked charts didn't recover in the late 00s/early 10s. I think QE played a role in stabilizing the market.


It didn't need to be stabilized, it needed to be allowed to go through a correction.

Void_X_Zero wrote:The Fed isn't a branch of the government. It is a private corporation owned by, literally, the major private banks. Every dollar you have says "Federal Reserve note", which means it isn't US property or US treasury issued currency, it isn't owned by the American people or even just by the government in abstract, it is owned by a private corporation which in turn is owned by the banks. These are just facts.

I don't think that's quite right. It was created by an act of Congress, its President is appointed by the US President, as are the members of the Board of Governors. It's subject to GAO audit and certain government transparency requirements, and its structure and behavior can be changed by Congress. It isn't funded by Congress, but it's empowered by Congress, it reports to Congress, and it's subject to Congress' whims. All its earnings after expenses go to the US Treasury.

It's not a "branch of government", but it's clearly not just another company either.


What I said is correct. The banks who own the stock of the Fed get paid dividends by the Fed. They also have voting rights.

Yes I know the Fed was created by legislation. It is a private company that was created by legislation and has some of its leadership appointed by the president and approved by Congress. But it's still a private company. The Fed leadership aren't government employees, and the government (or "the people") do not own the money supply.

The Treasury is literally printing private currency and passing it off as government currency (which it isn't).

Void_X_Zero wrote:Getting a loan for a house, car or credit card isn't "getting money", because you didn't gain any money at all, you have to pay it back so it equalizes out, actually since you have to pay it back with interest you end up with less money than when you started. Except of course if the assets you purchase with the debt appreciate more than the interest cost of the debt you used to buy those assets.

I think this is a core disagreement we have, but I don't think it's a matter of opinion or values so I'm not sure why we can't find common ground.

It seems clear that getting an interest-free loan is effectively "getting money", in the sense that it's getting value that can pretty readily be converted into money over the term of the loan. If that's true, then getting a loan at a below-market interest rate is also "getting money", in that the difference between the market rate and the rate charged is again convertable to money; one way to think of it is as getting a market rate loan on a portion of the money, and a no-interest loan on the rest.

This is just describing the time value of money, that money now is worth more than money in the future. Lenders charge interest because money in the future is worth less than money now, so they want more money in the future in exchange for their money now. When the government subsidizes the exchange, when it provides consumers credit so that they can get money now and pay less than market rates for the privilege, they get value. That's money in their pocket.

Which part of this is false?


I'm not taking about inflation, I'm talking about if I give you $1 and you have to pay me back $1.50 later, you didn't actually gain anything in the future, unless you used that $1 to make more money than the $1.50 you end up paying me back.

For there to be more value gained, or at least more money, the US GDP would have to be its value plus $4 trillion plus the interest owed on that $4 trillion. Well actually that is just to break even. Has that been the case?

In 2008 real GDP was $14.8 trillion. In 2016 it was $16.6 trillion. So we've gained $1.8 trillion in GDP over the eight years of the Fed injecting $4 trillion into the economy.

Hm. Doesn't add up, does it?
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Re: The Shuffle

Postby Urwrongx1000 » Fri Jul 28, 2017 5:52 pm

Couple of notes:

A "stagnant market" means one that its currency neither inflates nor deflates. The money stays a consistent, constant value. In 100 years in a stagnant market, a $100 bill is going to be $100, with the same value and purchasing power. It's not until usury is introduced into a market that causes inflation. Inflation requires more money to be printed to account for the "imagined" gain on interest. For example if a person loans another $5000 with 10% interest then where does the extra $500 ultimately come from? It needs to be printed, eventually, otherwise the average value of a dollar goes down.

Assets, material goods, cars, appreciate or depreciate in value. Appreciation/Depreciation also affect inflation/deflation rates. If you live in a stagnant market, and the price of your home doubles, from $200,000 to $400,000 (maybe oil was found in your backyard), then where does that "imagined" extra value come from? It would need to be printed, again.

Stagnant markets are susceptible to fraud. Because usurers, money-lenders, creditors can make enormous profits off of giving people loans with average or high interest rates. Societies generally dislike usury practices (hence the main reason why jews are scapegoated) because they produce anti-social business relationships. Why should a person make money off of loans, except by the implication of distrust, that the loanee/borrower will not pay back the loan in full? Is it not the responsibility of the lender to simply say no to loaning money? Reality is not that simple or easy. People can be bullied or swindled out of money.


About employment, in my experiences, the u.s. is generally over-worked and over-employed. Most people I know work two jobs, or even three. Multiple part-time jobs is becoming more common, which is a problem. Corporations are shirking responsibilities by hiring somebody for less than X amount of hours per week, to push somebody into part-time status, so they do not deserve full time benefits. U.s. jobs, companies, and corporations are sticking it to the u.s. public.

The "11% unemployed" figure generally refers to handicapped people, mentally ill, homeless, and those on welfare which I would guess to be 6%. Some people abuse welfare. There are certain amounts of waste of federal money directed to aiding people.
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Re: The Shuffle

Postby Carleas » Fri Jul 28, 2017 7:06 pm

Void_X_Zero wrote:I'm not taking about inflation, I'm talking about if I give you $1 and you have to pay me back $1.50 later, you didn't actually gain anything in the future, unless you used that $1 to make more money than the $1.50 you end up paying me back.

Let me start here.

I give you $100 on the condition that you owe me $101 in 100 years. Have I made you better off? Take as a given that we're at the beginning of the term and don't know the future. I think the answer is clearly yes, because the expected return on $100 dollars is much greater than the <.01% annual return I would need to make money. We don't know the future, but we have reasonable expectations about what will happen. When we should reasonably expect to be made better off by a loan, the present value of the loan is positive. That seems like the only way to meaningfully evaluate whether a loan at a below-market rate makes us better or worse off.

You seem to be taking starting loan value, comparing it to that value plus interest, and concluding that since the latter is larger, people are made worse off. There's plenty of evidence that that's not how loans are valued (e.g., what people are willing to pay in interest for a loan).

Void_X_Zero wrote:Tapering would have been fine. But now that the Fed owns 1/4 of the total US GDP in false value, it's too late. Sometimes you have to pull the plug and clean up the mess.

So a slow let down would be good when the alternative is a small correction, but bad when the alternative is a society upending crash? That doesn't make sense. If the only thing we are going off of is the size of the misalignment, it seems larger misalignment is all the more reason to taper. I assume you will make the case that the larger the misalignment, the harder it is to effectively taper, i.e. the size of the misalignment and the ease/effectiveness of tapering are non-linearly correlated. Maybe, but higher costs can justify a harder path. This seems a very fact-based inquiry, do you agree?

Void_X_Zero wrote:The real unemployment was closer to 11% last year, I don't know what the real unemployment is at the moment because I haven't calculated it.

There are a bunch of different definitions of unemployment, but they all show the same trend of decreasing unemployment post recession. If we're interested in whether the economy is getting stronger, the trend matters more than the values.

Void_X_Zero wrote:It is a private company that was created by legislation and has some of its leadership appointed by the president and approved by Congress. But it's still a private company.

This is a misleading (and arguably false) characterization. There are many ways in which the fed does not resemble a private company. It isn't for profit. It is subject to direct, individual oversight by Congress and the GAO. For a normal company, if Congress passed a law disbanding the company, or changing its structure, or tying its hands, that would almost certainly be unconstitutional. For the Fed, it wouldn't be. The Fed is both created by Congress and subject to Congressional management in ways that other companies aren't and can't be.

It's not a private company in any ordinary sense. It's much closer to an independent governmental agency than it is to a private company.

Upon reflection, I can't recall why this is significant. What does a private-company-Fed get you? Different expectations about economic outcomes? Less reliable market indicators?

Void_X_Zero wrote:The "growth" is artificial...housing values are inflated up again because the housing bubble wasn't allowed to actually pop...it needed to be allowed to go through a correction

These are not factual statements. The value of the assets isn't real except as they are presently valued. To call the housing market a "bubble" is just a prediction that values will fall in the future (and if you're sure, you should bet on it). To say that growth is artificial is to say that a bunch of assets are mispriced, and the incomplete correction is a prediction too (and if you're sure, you should bet on it).

But it's also possible that housing values are actually around where they should be, that the correction that happened was right but that without QE they would have been underpriced due to a vicious cycle of bad debt causing foreclosure flooding the market with new properties causing more bad debt causing more foreclosure. And it's possible that the interest rate we're paying on debt is correct relative to the reliability of US Treasury Bonds. Treasury derivatives don't seem to be predicting a major devaluation of US debt, so we can't take that a given in this discussion.

But, if you're sure, you should bet on it. Hell, buy on margin, if the expected return is as high as you seem to think. Why wouldn't you?
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Re: The Shuffle

Postby UrGod » Fri Jul 28, 2017 8:03 pm

Carleas wrote:
Void_X_Zero wrote:I'm not taking about inflation, I'm talking about if I give you $1 and you have to pay me back $1.50 later, you didn't actually gain anything in the future, unless you used that $1 to make more money than the $1.50 you end up paying me back.

Let me start here.

I give you $100 on the condition that you owe me $101 in 100 years. Have I made you better off? Take as a given that we're at the beginning of the term and don't know the future. I think the answer is clearly yes, because the expected return on $100 dollars is much greater than the <.01% annual return I would need to make money. We don't know the future, but we have reasonable expectations about what will happen. When we should reasonably expect to be made better off by a loan, the present value of the loan is positive. That seems like the only way to meaningfully evaluate whether a loan at a below-market rate makes us better or worse off.

You seem to be taking starting loan value, comparing it to that value plus interest, and concluding that since the latter is larger, people are made worse off. There's plenty of evidence that that's not how loans are valued (e.g., what people are willing to pay in interest for a loan).


People pay interest for a loan for one of two reasons: either they are desperate for the money now, or they are planning to use the money to make more money than the cost of interest and repaying the loan. Most people are on the former side, and simply need a loan to make it from one day to the next. Small businesses are also in this category.

Debt is not money. I am not sure why you think it is.

And I never said debt is always bad, or that people will not value taking on debt. Of course debt can be useful, and of course people will often value going in debt to have a large injection of cash right now. So what? That is not relevant to the points I am making.

Void_X_Zero wrote:Tapering would have been fine. But now that the Fed owns 1/4 of the total US GDP in false value, it's too late. Sometimes you have to pull the plug and clean up the mess.

So a slow let down would be good when the alternative is a small correction, but bad when the alternative is a society upending crash? That doesn't make sense. If the only thing we are going off of is the size of the misalignment, it seems larger misalignment is all the more reason to taper. I assume you will make the case that the larger the misalignment, the harder it is to effectively taper, i.e. the size of the misalignment and the ease/effectiveness of tapering are non-linearly correlated. Maybe, but higher costs can justify a harder path. This seems a very fact-based inquiry, do you agree?


We took the harder path already, by doing TARP and refusing to let the markets correct for the irresponsible behaviors of wall street and the government pre-2008. It almost doesn't even matter anymore at this point, we are fucked whatever we do now. But we might still say that the first rule when you are in a hole is to stop digging.

Void_X_Zero wrote:The real unemployment was closer to 11% last year, I don't know what the real unemployment is at the moment because I haven't calculated it.

There are a bunch of different definitions of unemployment, but they all show the same trend of decreasing unemployment post recession. If we're interested in whether the economy is getting stronger, the trend matters more than the values.


You ignored my point, albeit skillfully. Rather, you dodged it. Do you accept that unemployment was closer to 11% than the official Obama numbers? And of course unemployment is going to go down, relatively, if you prop up the economy with massive debt spending. I never said that would not happen and, again, that doesn't even touch on my point at all.

Void_X_Zero wrote:It is a private company that was created by legislation and has some of its leadership appointed by the president and approved by Congress. But it's still a private company.

This is a misleading (and arguably false) characterization. There are many ways in which the fed does not resemble a private company. It isn't for profit. It is subject to direct, individual oversight by Congress and the GAO. For a normal company, if Congress passed a law disbanding the company, or changing its structure, or tying its hands, that would almost certainly be unconstitutional. For the Fed, it wouldn't be. The Fed is both created by Congress and subject to Congressional management in ways that other companies aren't and can't be.

It's not a private company in any ordinary sense. It's much closer to an independent governmental agency than it is to a private company.

Upon reflection, I can't recall why this is significant. What does a private-company-Fed get you? Different expectations about economic outcomes? Less reliable market indicators?


The Fed is not accountable to the people, and it is owned by the banks, which are privately owned. Private bankers and shareholders own the Federal Reserve, and the Federal Reserve is not subject to "the people" because it is not part of the government but rather has private ownership. If legislation is what created the Fed, which it did, then all this proves is that the Fed is a private company with a legal monopoly.

And if you study the policies and decisions of the Fed, most recently with QE, you will see how terrible they have been. Not only that, but the US government has to pay the Fed for the privilege of printing the Fed's currency (again which is not US government currency).

Maybe you have no problem with a nation's money being owned by a private entity, but I do have a problem with that. The people reserve the right to coin and print their own currency, and regulate that currency, and own it. That is what government is supposed to afford us, as a proxy for this right which we the people of our nation possess. "A government by the people, of the people, and for the people". Not so easy to claim that is the case when we do not even own our own money, and have to pay a surcharge (operating costs plus dividend to banks that own the Fed) just to rent it from a private entity that can otherwise invent it out of thin air.

Void_X_Zero wrote:The "growth" is artificial...housing values are inflated up again because the housing bubble wasn't allowed to actually pop...it needed to be allowed to go through a correction

These are not factual statements. The value of the assets isn't real except as they are presently valued. To call the housing market a "bubble" is just a prediction that values will fall in the future (and if you're sure, you should bet on it). To say that growth is artificial is to say that a bunch of assets are mispriced, and the incomplete correction is a prediction too (and if you're sure, you should bet on it).


Yeah, ok, your position is that market and commodity bubbles do not actually exist. Got it.

But it's also possible that housing values are actually around where they should be, that the correction that happened was right but that without QE they would have been underpriced due to a vicious cycle of bad debt causing foreclosure flooding the market with new properties causing more bad debt causing more foreclosure.


They should have been underpriced, that is the entire point of a correction. When the price gets so high as not to actually represent the market value of the thing in question, this eventually collapses and bottoms out in the other direction, naturally. That is how economics works. And through that bottoming out process you achieve stability again in the market as prices (via supply and demand) naturally reconfom to real world value.

When foreclosed properties flooded the market, that leads to an oversupply of houses, which increases supply, which decreases price. On top of that you have the fact that the price market crashed anyway, as housing prices were way too high (way higher than what the houses were actually worth on an open market of legitimate buyers). Thus prices crash. Then, with the oversupply and low prices, people start buying these houses up on the cheap and plentiful, and then housing prices begin to rise again. This is a natural market correction. I am not really sure why you do not understand how this works.

And it's possible that the interest rate we're paying on debt is correct relative to the reliability of US Treasury Bonds. Treasury derivatives don't seem to be predicting a major devaluation of US debt, so we can't take that a given in this discussion.


Treasury bonds are only as reliable as the US economy and the US credit rating. The global economy has an interest in keeping the US economy afloat because, as I have said, the US is the global consumer of reliability. The US consumes 1 billion dollars a day from the rest of the world, thus sustaining all those other economies by purchasing their exports. It is a rigged game, because the US cannot sustain this forever. The Fed tried to prop it up and keep this going with QE, which was a two-prong approach to propping up both the US government (through buying treasury bonds) and wall street (through buying mortgage backed securities), but that cannot last forever. US public debt is at an all-time high, actually surpassing GDP now. Consumers also have tremendous personal debts, which is stifling the economy even more.

How can you not see that the game is rigged? Everyone is trying to keep it propped up to avoid the inevitable crash, but the more they prop it up the more certain that crash becomes. Your argument seems to be that we simply keep propping it up forever, as if no crash will ever take place, as if treasury bonds will never stop being purchased like hotcakes, as if the US does not have to worry about having more debt owed than GDP (and that isn't even counting individual consumer debts, nor government's unfunded liabilities). I honestly do not see how you can be so dismissive of all this. You seem very psychologically invested in maintaining that "everything is fine, nothing to worry about, nothing to see here, it's all sunshine and rainbows". To me, your psychological motivations to that end are clouding your ability to see the situation impartially.

But, if you're sure, you should bet on it. Hell, buy on margin, if the expected return is as high as you seem to think. Why wouldn't you?


Because I am poor, and also because I am not such a scumbag to bet on the decline of my own economy and nation. That sort of thing is what led to the financial crisis to begin with. Fuck anyone who bets on the suffering and death of their own people.

Also, you seem to have ignored my point about how we added $4 trillion in debts on the Fed's balance sheets while the GDP went up only $1.8 trillion.
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Re: The Shuffle

Postby Arminius » Sun Jul 30, 2017 12:04 am

Carleas wrote:
Arminius wrote:Nothing can be found there about positive or negative aspects of the gold standard. I did not say anything about it.

Yes, Carleas, that is true: Nothing can be found there about positive or negative aspects of the gold standard. I did not say anything about it. The gold standard belonged to the story I was telling you. I was not telling you something about a positive or negative aspect of the gold standard but about an error of those who were responsible for the reversing the gold backing of the US Dollar in 1971. At that time (1971) it was an error, or more precisely: it would had been an error before 1971, if they had done it, for example in the 1960s, because the 1960s were certainly the last possibility to give up the nonsensical debt polilcy without huge negative consequences, but instead of giving it up (in the 1960s) they did just the opposite (in 1971), because giving up the gold standard consequently means even much more accelerated, thus even much more exponentially increasing debts and a bastard economy.

So by giving up the gold standard they made the nonsensical debt polilcy even more nonsensical. And in addition, they used the gold standard as an rhetorical "argument“, as if they were capable of "casting out the demons with the ruler of the demons“. But that is what the majority of neuroactive drugs still do.

So "giving up the gold standard (and by the way: in 1971)“ does not mean that "going back to the gold standard (and by the way: in 2017)“ is the solution for the problems with the debt policy we have today (today!).

In other words: I have never (never!) talked about the subject "going back to the gold standard“.

Carleas wrote:
Arminius wrote:Then many errors occurred, for example: [...] the reversing the gold backing of the US Dollar by Richard Nixon in 1971[...]

Forgive me if I overestimated the significance of supporting the gold standard to your position, but I read this claim to be that it was wrong to get rid of the gold standard, which implies that you believe it would be better to still have a gold standard.

I have never (never!) talked about the subject "going back to the gold standard“.

Carleas wrote:I picked on that because it's pretty easy to show the flaws in the gold standard, so if your position also requires (either as a premise or as a consequence) the gold standard, rejecting the gold standard would be the easiest way to address it.

Okay, I forgive you. :)

There is no absolute or optimal solution; but as I said (see above): if the gold standard is one of the demons, then the debt policy is the ruler of the demons. What they did in 1971 was casting out the demons with the ruler of the demons.
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Re: The Shuffle

Postby Arminius » Sun Jul 30, 2017 12:09 am

Otto_West wrote:Keynesian economics, it takes more debt to eventually get out of debt. 2+2=3

Or:

1 + 2 = 0 *

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WE ALL + IN THE LONG RUN = DEAD *

NO WOMAN + NO CHILDREN = NO PROBLEM *

:gay-imgay:

IS GAY WRONG ?

AND IN THE LONG RUN ?
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* = WRONG !
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Re: The Shuffle

Postby Carleas » Mon Jul 31, 2017 7:41 pm

Urwrong, I don't think your analysis is quite right.
Urwrongx1000 wrote:If you live in a stagnant market, and the price of your home doubles, from $200,000 to $400,000 (maybe oil was found in your backyard), then where does that "imagined" extra value come from?

It would be a change in relative value of other assets. The value of one house increasing would mean the value of other houses decreasing (which should be expected: if demand shifts towards one house, it should shift away from other houses. No new money needs to be created to make that happen.

Urwrongx1000 wrote:Why should a person make money off of loans, except by the implication of distrust, that the loanee/borrower will not pay back the loan in full?

If money lets me buy food, then I can eat and I can work and earn more money (or create other resources or whatever). If I have to wait until next month, I may be dead or infirm, and unable to work, and unable to earn money. It seems obvious that food today is worth more than food next month. Similarly, money now is worth more than money later. Really, it's that value now is worth more than value later, because value applied towards some end starts producing returns, and those returns compound.

It's not just distrust, it's timing.

I think the usefulness of inflation is more about keeping liquidity in the market. Inflation makes keeping money under your mattress a bad investment. It encourages risk-taking, which is good if humans are overly risk-averse by disposition.


Void_X_Zero wrote:People pay interest for a loan for one of two reasons: either they are desperate for the money now, or they are planning to use the money to make more money than the cost of interest and repaying the loan.

I think there's a place between desperation and investing, but maybe you just mean the second category to be larger. Someone who's buying a house usually isn't taking out a loan out of desperation, and they're also not primarily investing the money (though a house can be a good investment). They're usually interested in having access to a good before they can afford to buy it outright. They're willing to pay the interest premium because they get the good now (and because the loan is secured, that premium is usually very low relative to interest on unsecured debt), and their monthly payments are usually roughly equivalent to what they would be paying in rent. They could comfortably continue paying rent if they didn't take out the loan, so they aren't desperate, but they aren't necessarily planning to make money.

The same is true for people who buy cars on loan, and there is even less investment motive since cars depreciate significantly. But, as a good they are valuable and often improve peoples lives significantly, even though alternatives like public transportation or carpooling are available. Again there's no desperation, just a desire to have access to a good that they expect to be able to afford over a long period of time, which they can't afford outright now, but to which they want access now.

Void_X_Zero wrote:Debt is not money. I am not sure why you think it is.

I don't, and I haven't said so, but this misunderstanding is useful for making the distinction.

Someone who takes out a loan at a below-market rate receives a net-positive value. The value of the money they receive from the loan, less the value of the loan payments with interests over the term, is valuable, it's worth something, and that worth can be quantified in dollars. It's not money, but it has a value that can (in principle) be specified in dollars.

Void_X_Zero wrote:Do you accept that unemployment was closer to 11% than the official Obama numbers?

The link I provided is the "official Obama numbers": they are the numbers coming out of the Department of Labor, and that page was published in February 2015. Obama press releases, like probably all presidential press releases, probably used whichever definition of unemployment had the smallest number. That's the number the media also tends to talk about, even though numbers for all variations are published.

So, I concede that by some (official) definition of unemployment, the rate was about 11% last year (that's the U-6 definition in the link I provided). And you appear to concede that the trend post-recession is toward lower unemployment, by any definition.

Void_X_Zero wrote:And of course unemployment is going to go down, relatively, if you prop up the economy with massive debt spending. I never said that would not happen and, again, that doesn't even touch on my point at all.

It touches on your claim that "the economy is not getting stronger". If the economy is putting more people to work (it is), if it's raising median wealth (it is), if productivity has increased (it has), all those point to a strengthening economy post-recession.

If we don't assume that debt is bad, the fact that the strengthening is debt financed is irrelevant. If I go to law school on loans and come out into a $100k+/year job, my outlook is much stronger than when I entered even though I still need to pay back my loans. Similarly, if the US can borrow at a negligible interest rate (and again, it appears to be negative in real dollars), then the economy can be strengthened while debt increases. If the returns on debt are positive, then debt strengthens the economy.

Void_X_Zero wrote:Federal Reserve is not subject to "the people" because it is not part of the government but rather has private ownership.

This just isn't true. It's subject to oversight by the people's representatives in the form of the President and Congress and other federal agencies. It isn't privately owned, it's an independent governmental body created and controlled by the federal government to serve the national interest. Characterizing it as a private company is intentionally misleading: that's not how it functions, that's not what it means to be a private company.

Void_X_Zero wrote:Yeah, ok, your position is that market and commodity bubbles do not actually exist.

Not at all. My position is that if bubbles could be factually established in advance, they wouldn't be bubbles (because the market would correct). As long as people are willing to buy tech stocks at current prices, that's what the stocks are worth. If demand for tech stocks dries up and the price plummets, we'll say that it was a bubble. If instead they stay steady or rise for a decade, we'll say they're valuable companies.

My claim was just that when you say that something is a bubble before the bubble has popped, you're making a prediction, not a statement of fact.

Void_X_Zero wrote:They should have been underpriced, that is the entire point of a correction.

To say that something is "underpriced" is like the flip side of saying it's a "bubble": we're saying that the 'real' value of the thing is not reflected in its price. And after the fact, we can say whether or not we were right. If home lending were artificially restricted by bunch of turmoil in the banking sector, such that people who would happily buy a house are no longer able to, then that house's value is depressed and underpriced, and that will be apparent a few years later when the banking sector stabilizes and credit becomes available and buyers come back.

Something being underpriced can be as bad as it being overpriced (e.g. people being foreclosed because their homes were undervalued and no longer effective secured the loan). Ideally, we want all the exchanges the market will bear to occur, and for prices to accurately reflect value.

Void_X_Zero wrote:Your argument seems to be that we simply keep propping it up forever, as if no crash will ever take place

My argument is that we can afford to prop it up now, and there are alternatives to a crash as a way out. For example, we can prop it up and take on debt which gets invested back into society, which generates wealth enough to pay off the loan. That's how almost all debt works, and there's no reason to believe that it's impossible for that to happen here. That's not propping it up forever, but it's not letting it crash for no good reason. There's a third alternative.

Void_X_Zero wrote:Because I am poor, and also because I am not such a scumbag to bet on the decline of my own economy and nation. That sort of thing is what led to the financial crisis to begin with. Fuck anyone who bets on the suffering and death of their own people.

This is an overly emotional approach to the market. Every time you sell a stock, you're signaling that you find the stock to be less valuable than the money you're getting in exchange. Betting against the market is saying the same thing about stocks you don't own yet, and it's a valuable economic signal. If you're concerned about bubbles, betting against the market is a way of saying, "look out, I think that's a bubble". A sufficient amount of betting against the market will prevent bubbles from forming, which given your clear concern about bubbles should be a good thing.

Void_X_Zero wrote:Also, you seem to have ignored my point about how we added $4 trillion in debts on the Fed's balance sheets while the GDP went up only $1.8 trillion.

I don't find this particularly relevant (particularly because you brought it up in the context of a more general discussion of the value of debt with below-market interest rates). Must the rate of debt creation always exceed the rate of GDP growth? Why? It seems consistent with a sound economic policy for debt creation to outstrip GDP growth temporarily.
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Re: The Shuffle

Postby Otto_West » Tue Aug 01, 2017 12:22 am

The worthless baby boomer generation......

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Re: The Shuffle

Postby UrGod » Tue Aug 01, 2017 12:31 am

Otto_West wrote:The worthless baby boomer generation......

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Haha. For once we agree, it seems.
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Re: The Shuffle

Postby UrGod » Tue Aug 01, 2017 1:01 am

Carleas wrote:
Void_X_Zero wrote:People pay interest for a loan for one of two reasons: either they are desperate for the money now, or they are planning to use the money to make more money than the cost of interest and repaying the loan.

I think there's a place between desperation and investing, but maybe you just mean the second category to be larger. Someone who's buying a house usually isn't taking out a loan out of desperation, and they're also not primarily investing the money (though a house can be a good investment). They're usually interested in having access to a good before they can afford to buy it outright. They're willing to pay the interest premium because they get the good now (and because the loan is secured, that premium is usually very low relative to interest on unsecured debt), and their monthly payments are usually roughly equivalent to what they would be paying in rent. They could comfortably continue paying rent if they didn't take out the loan, so they aren't desperate, but they aren't necessarily planning to make money.


They are planning to make money, for two reasons: 1) owning a home is more work, so why do people do it? Because you actually own something at the end of the day, you have more money because you own a home and property, and 2) mortgages are often cheaper than rent, especially right now.

There is no reason to own a home except that it is a "plan to make money". Well and you can do whatever you want to it, of course. As for cars, buying a new car is stupid. You can buy a car that is 2-3 years used for half the price of a new version, and still own something at the end of the day. But yeah, cars depreciate fast. Yet that is still better than leasing a car, since those payments are just going down the drain, like with rent.

The same is true for people who buy cars on loan, and there is even less investment motive since cars depreciate significantly. But, as a good they are valuable and often improve peoples lives significantly, even though alternatives like public transportation or carpooling are available. Again there's no desperation, just a desire to have access to a good that they expect to be able to afford over a long period of time, which they can't afford outright now, but to which they want access now.


There is certainly desperation to have a car, for most people.

Void_X_Zero wrote:Debt is not money. I am not sure why you think it is.

I don't, and I haven't said so, but this misunderstanding is useful for making the distinction.

Someone who takes out a loan at a below-market rate receives a net-positive value.


Their gain is the loss of the entire system as a whole, though. If you need to purchase your gain at someone else's loss, that is wrong.

Why would anyone extend you credit at below market rate, freely of their choice? That only happens because government gets involved and uses its legal monopoly on force to push people into doing things they otherwise would not do, like offering subprime mortgages.

The value of the money they receive from the loan, less the value of the loan payments with interests over the term, is valuable, it's worth something, and that worth can be quantified in dollars. It's not money, but it has a value that can (in principle) be specified in dollars.


No, the value is specific in the product you use the money for, such as a car or a home. No one except investors would obtain credit otherwise.

Void_X_Zero wrote:Do you accept that unemployment was closer to 11% than the official Obama numbers?

The link I provided is the "official Obama numbers": they are the numbers coming out of the Department of Labor, and that page was published in February 2015. Obama press releases, like probably all presidential press releases, probably used whichever definition of unemployment had the smallest number. That's the number the media also tends to talk about, even though numbers for all variations are published.

So, I concede that by some (official) definition of unemployment, the rate was about 11% last year (that's the U-6 definition in the link I provided). And you appear to concede that the trend post-recession is toward lower unemployment, by any definition.


Interesting, I didn't even know that the 11% was a legit figure by some calculation. I came up with that on my own.

I wonder if you have a problem with the government using deliberately misleading and false data? I certainly have a problem with that.

Void_X_Zero wrote:And of course unemployment is going to go down, relatively, if you prop up the economy with massive debt spending. I never said that would not happen and, again, that doesn't even touch on my point at all.

It touches on your claim that "the economy is not getting stronger". If the economy is putting more people to work (it is), if it's raising median wealth (it is), if productivity has increased (it has), all those point to a strengthening economy post-recession.


And how do you parse out the economic gains that are legitimate against those that are simply the result of injecting an extra 25% of total GDP into the economy in the form of bad (borderline Ponzi scheme) debts?

If the economy were growing without such schemes, I could agree with you. Except that I cannot see any indicators that it really is. The job market is broken right now with way too few jobs per person seeking work, wages are not increasing with inflation thus are actually declining, public and personal credit debts are astronomical and increasing everywhere, and there is still a housing+rental bubble going on, as well as a general wall street bubble that will have to correct at some point. And of course we could also talk about student loans....

If we don't assume that debt is bad


I already said I do not assume that.

, the fact that the strengthening is debt financed is irrelevant. If I go to law school on loans and come out into a $100k+/year job, my outlook is much stronger than when I entered even though I still need to pay back my loans


Yeah, and what of the millions of college grads who are coming out of university with $50-100k in loans and cannot even find a decent job?

. Similarly, if the US can borrow at a negligible interest rate (and again, it appears to be negative in real dollars)


That is because the interest rate for borrowing is artificially lower than it ought to be. It does not reflect a real market rate.

, then the economy can be strengthened while debt increases. If the returns on debt are positive, then debt strengthens the economy.


I do not consider 7 years of anemic 'growth' to be a sign of a strengthening economy. I can remember when I could apply for jobs that require only high school or basic college degree and always get interviewed, almost always get hired; that was 10 years ago. Right now, I can apply for those same jobs and maybe 10% of the time get an interview, and almost never get hired. And I am more qualified now than I was back then. I know plenty of other people in this same situation.

And again that isn't even factoring in student loans, which you cannot purge in bankruptcy. But as Otto pointed out, baby boomers have absolutely no fucking idea what millennials have to go through today.

How much overall wealth do you think the US has lost in the last 10 years, how much do you think the average citizen has lost in wealth ownership or just in buying power, on average? But I suppose that doesn't matter, because we can keep printing more debt and manipulating interest rates to way below market levels, and everything will be all rosy sunshine and rainbows, right?

Void_X_Zero wrote:Federal Reserve is not subject to "the people" because it is not part of the government but rather has private ownership.

This just isn't true. It's subject to oversight by the people's representatives in the form of the President and Congress and other federal agencies.


Oh yeah, every once in a while they have the Fed Reserve chairman in front of congress to go through a half-ass circle jerk session. Meanwhile the Fed has never been audited and their meetings remain closed to the public. Wow. Such oversight.

It isn't privately owned


Yes it is. The major banks that all participate in the Fed Reserve system own stock in that system, and that stock gives then voting rights and pays them dividends.

Who do you think owns the money supply? The American people? Lol. Why do you think it says Federal Reserve Note on your cash?

, it's an independent governmental body


No it isn't.

created and controlled by the federal government to serve the national interest.


Only in a neoliberal wet dream.

Characterizing it as a private company is intentionally misleading: that's not how it functions, that's not what it means to be a private company.


It is exactly how it functions. Private citizens (non-government employees) are having secret meetings and making their decisions at their own will, without recourse or accountability to the American people. You remember TARP, and how there was a massive public outcry of people calling their congressional representatives with over 90% of them urging not to vote through TARP? Guess what, congress did it anyway. I remember that.

So much for congress's 'oversight' or accountability to the people.

Void_X_Zero wrote:Yeah, ok, your position is that market and commodity bubbles do not actually exist.

Not at all. My position is that if bubbles could be factually established in advance, they wouldn't be bubbles (because the market would correct).


So a bubble isn't a bubble because it eventually has to burst? How does that make sense? The correction proves that the bubble existed to begin with.

As long as people are willing to buy tech stocks at current prices, that's what the stocks are worth.


Who do you think is buying them? It isn't average Joe American anymore. And investors keep buying overprices financial instruments because they are caught up in herd mentality, in group think. It is a well known psychological phenomenon in economics.

If the Fed starts buying tend of billions of dollars of stocks on wallsteet with made-up money, you don't think that will artificially inflate wall street? Artificial inflation was the entire point of the Fed policies.

If demand for tech stocks dries up and the price plummets, we'll say that it was a bubble. If instead they stay steady or rise for a decade, we'll say they're valuable companies.


You are really unable to distinguish between natural growth and a market bubble? I find that hard to believe.

How long did the tech bubble go on in the 90s before it burst? How long did the housing bubble go on before it burst (partially)?

My claim was just that when you say that something is a bubble before the bubble has popped, you're making a prediction, not a statement of fact.


That is crazy. There were people who knew the housing bubble was a bubble. You act as if you do not have a brain with which to think about and two eyes with which to see the reality in front of you. But some of us actually bother to think about this reality we happen to have been born into.

It doesn't take a rocket scientist to see when something is artificially over-valued.

Void_X_Zero wrote:They should have been underpriced, that is the entire point of a correction.

To say that something is "underpriced" is like the flip side of saying it's a "bubble"


Yep, exactly.

: we're saying that the 'real' value of the thing is not reflected in its price. And after the fact, we can say whether or not we were right. If home lending were artificially restricted by bunch of turmoil in the banking sector, such that people who would happily buy a house are no longer able to, then that house's value is depressed and underpriced, and that will be apparent a few years later when the banking sector stabilizes and credit becomes available and buyers come back.

Something being underpriced can be as bad as it being overpriced (e.g. people being foreclosed because their homes were undervalued and no longer effective secured the loan). Ideally, we want all the exchanges the market will bear to occur, and for prices to accurately reflect value.


Interesting for you to say that, while at the same time defending the actions of the Fed and the government (pushing subprime mortgages, artificially low interest rates, QE, TARP).

Void_X_Zero wrote:Your argument seems to be that we simply keep propping it up forever, as if no crash will ever take place

My argument is that we can afford to prop it up now, and there are alternatives to a crash as a way out. For example, we can prop it up and take on debt which gets invested back into society, which generates wealth enough to pay off the loan. That's how almost all debt works, and there's no reason to believe that it's impossible for that to happen here. That's not propping it up forever, but it's not letting it crash for no good reason. There's a third alternative.


So if the crash was due to bad debt, then the way out is... more bad debt? Yeah, let's wait and see how that works out.

So I am guessing that when the current bad debt also crashes, your answer will be to inject more bad debt, right? Ad infinitum? At what point would you pull the plug on your methodology?

Real investment is staring to return to America, but it isn't because of the Fed or the liberal-leftist government policies under Obozo, rather it is because of Trump.

Void_X_Zero wrote:Because I am poor, and also because I am not such a scumbag to bet on the decline of my own economy and nation. That sort of thing is what led to the financial crisis to begin with. Fuck anyone who bets on the suffering and death of their own people.

This is an overly emotional approach to the market.


Yeah, because not wanting to bet on the demise of your neighbors is "overly emotional".

I am starting to see why you support the Fed and liberal-leftist government perpetual debt and market manipulations so much.

Every time you sell a stock, you're signaling that you find the stock to be less valuable than the money you're getting in exchange. Betting against the market is saying the same thing about stocks you don't own yet, and it's a valuable economic signal. If you're concerned about bubbles, betting against the market is a way of saying, "look out, I think that's a bubble". A sufficient amount of betting against the market will prevent bubbles from forming, which given your clear concern about bubbles should be a good thing.


Funny how that didn't actually work, though. The government guaranteed all the bad bets made by wall street, as wall street knew it would. So who got shafted? Not wall street itself, but the average joe American whose pension and job and mortgage and 401k went up in smoke. But hey, you're clearly ok with that, wouldn't want to get "overly emotional" right?

Void_X_Zero wrote:Also, you seem to have ignored my point about how we added $4 trillion in debts on the Fed's balance sheets while the GDP went up only $1.8 trillion.

I don't find this particularly relevant (particularly because you brought it up in the context of a more general discussion of the value of debt with below-market interest rates). Must the rate of debt creation always exceed the rate of GDP growth? Why? It seems consistent with a sound economic policy for debt creation to outstrip GDP growth temporarily.


If you take on so much more debt as to reflect a sizable percentage of your annual income, and years later you have nothing to show for it (except anemic growth that should have occurred anyway in any half-decent economy), I would say that is a problem.
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Re: The Shuffle

Postby Otto_West » Tue Aug 01, 2017 6:35 pm

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