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jedberg

Might as well get your piece of the pie while the government is still pumping billions into the market with QE.

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Partying like it's 1929.

However unlike that period, we won't have to deal with a contracting money supply.

The Weimar Republic didn't have a contracting money supply in that period

The Weimar Republic suffered a radicaly contracting money supply after 1929, which lead to deflation and depression:

https://www.businessinsider.com/weimar-germany-was-destroyed...

I think you might be thinking of the hyperinflation of 1923? That's when Germany printed money to pay off war debts. But the hyperinflation was over long before 1929.

What do you think caused the deflation then?

The Weimar Republic didn't experience deflation during that period.

"[Brüning] enacted a draconian policy of deflation and drastically cutting state expenditure.[5] Among other measures, he completely halted all public grants to the obligatory unemployment insurance introduced in 1927, resulting in workers making higher contributions and fewer benefits for the unemployed. Benefits for the sick, invalid and pensioners were also reduced sharply.[52] Additional difficulties were caused by the different deflationary policies pursued by Brüning and the Reichsbank, Germany's central bank.[...]Brüning triggered a deflationary internal devaluation by forcing the economy to reduce prices, rents, salaries and wages by 20%."

This made unemployment skyrocket and arguably caused the rise of Hitler.

https://en.wikipedia.org/wiki/Weimar_Republic#Br%C3%BCning's...

EDIT: I'm not sure why all the downvotes, maybe because it looks like I Godwin-ed the thread? I was just paraphrasing the rest of the wikipedia section:

"In 1933, the American economist Irving Fisher developed the theory of debt deflation. He explained that a deflation causes a decline of profits, asset prices and a still greater decline in the net worth of businesses. Even healthy companies, therefore, may appear over-indebted and facing bankruptcy.[57] The consensus today is that Brüning's policies exacerbated the German economic crisis and the population's growing frustration with democracy, contributing enormously to the increase in support for Hitler's National Socialist German Workers' Party"

> EDIT: I'm not sure why all the downvotes, maybe because it looks like I Godwin-ed the thread? I was just paraphrasing the rest of the wikipedia section:

Well in a thread about the re-emerging dominance of idiocy in silicon valley, consider it more supporting evidence.

The Weimar Republic known for dramatic hyperinflation.

Even if you google "weimar republic _deflation_" emphasis mine, the first hit is https://en.m.wikipedia.org/wiki/Hyperinflation_in_the_Weimar...

> A loaf of bread in Berlin that cost around 160 Marks at the end of 1922 cost 200,000,000,000 Marks by late 1923.

I was not previously familiar with the events you referenced. It sure seems like the Chancellor made very poor choices when the Great Depression began, perhaps because he was terrified of inflation happening again.

Wait, hold up. Are we talking about a policy of deflation (decreasing government spending), or deflation of the currency (contraction of the monetary supply and an ongoing increase of value of the currency)?

I thought we were talking about the latter.

I could still be wrong, and if you have any data on the value of the mark used at the time, I'd be willing to move on my position.

Ultimately what I'm asking here I guess, is do we have any evidence that what Brüning was trying to do worked?

Invest in your government. Buy Bonds!

> The Weimar Republic didn't have a contracting money supply in that period

And the German Papiermark was not the default reserve currency for the entire global financial system.

That can change, and quickly. It isn't really plausible at this point that the US is, under any voluntary circumstances, going to attempt to pay its debts down unless the financial system completely collapses. Debt to GDP has been in a pretty solid uptrend for 40 years now. US economists are starting to lay a theoretical groundwork for why the government can just create money at will too.

At some point something will give. It is frankly stunning to me that merchants accept ongoing crisis level debts from the US as part of the normal order of things. Someone thinks they are owed something and in real terms they aren't going to get it.

Sure we do, it's called AB2088 and it means private equity as we know it is going away in California.

There is also the not insignificant risk that we may also face lightweight socialism at the national level in January. Who knows what the Fed will do under pressure from a Left leaning administration in the White House?

It's actually the opposite that will need to be dealt with.

How much of the recent stock market gains are due to a hidden inflation thanks to the trillions of dollars being borrowed (or printed) by all the governments around the world?

Get ready for 2 dollar eggs and 20 dollar loaves of bread!

That doesn't seem to be what happens when the interest rate for full employment is below zero. I do think it has some other effects, like hedgefunds can easily leverage themselves to buy up assets that normal people want, like houses.

Speaking of houses, I've heard from some local agents that the housing market in my part of Utah is currently dominated by cash offers. They didn't say where the cash was coming from.

"Cash" might mean someone with several properties with Equity Lines of Credit on them that they can draw on immediately.

E.g. own 5 properties, each 50% mortgage, 50% equity, and 30% of equity immediately available keeping max LTV under 80%.

They could immediately buy 1.5 equivalent properties and work out the financing later.

They might even get better financing terms because they negotiate without the pressure of "I need you to give me a mortgage, otherwise I can't buy this hot property".

If you received two identical offers, 1 contingent on financing, the other cash, you'd take the cash offer.

We just put in a cash offer on a house, but we fully intend to put a mortgage the property. But we didn’t make the bid contingent on financing going through. We can cover the cost in cash if we have to, but we would rather not.

Around my area of the Midwest the cash offers are from investors. Guess the only alternative to equities is real estate.

Cash can also mean that you are selling a home and purchasing a new one with the equity proceeds of the first home (possibly + new savings).

That only works as long as the housing bubble lasts.

We've now been through 4.5 US presidential terms where the US administration does not want to turn the dial back. If anything, the dial is turned further and further to ensure housing prices remain artificially inflated with easy credit and low rates.

However much sense stable, realistic home prices make in the long term, it makes sense in the short term for each president to continue propping up the market -- which president wants to inflict wide-scale harm on 2/3 of the households in the US?

It’s possible it doesn’t result in inflation if the general public doesn’t benefit from the stock market appreciation. Worse, it might make them poorer if they buy the top.

But it probably means hot markets like nyc, sf, la will remain very expensive.

I am most sure if NYC and SF are too hot at the moment.

It really is hard to say what will happen as the banking system is so different today than in the past. I do think we will see continued leaking of all the new money that is being printed out into hard assets, but beyond that I have no idea.

Show me another place with 100,000 100k+ jobs.

There aren't many markets like this in the US and they're all expensive. NYC, Northern Virginia/DC. Overheated, maybe, but not by much.

To the GP's comment, this could be an artifact of a slow-leak inflation. If inflation leaks in some markets faster than others you would see those markets increase in cost and income faster than the average. Boston area condo prices rose 32% from April 2019 to April 2020, at best income increases are keeping pace.

Yup and clustering effects are still real. Eventually we'll come out of the pandemic and companies will want to be near there biggest customers.

> But it probably means hot markets like nyc, sf, la will remain very expensive.

All of those cities are seeing price declines.

SF will probably bottom out in 6-8 months. Depending on how long these fires burn prices could go down quite a bit.

... and the $3m starter home?

Ehm, you do know that the Fed's balance sheet has not increased for 3-4 months now? Whatever is happening right now - it is not QE.

It's not like the $700B they inject is instantly accounted for. They bought $500B in bonds, which means that bonds have to be sold off again for that money to appear in the economy. They also bought $200B in mortgages, which means those need to be resold and cashed out of before that money shows up in the market.

QE basically artificially raises the value of assets, but those assets still need to be sold/traded for it to have an effect on the economy.

It's not instant.

FYI: you're off by about $2300B

https://news.ycombinator.com/threads?id=H8crilA

Palantir knows this well

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