There’s Nothing to Do Except Gamble
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- It's inherent in NFTs that they are thinly traded. If each thing is unique, there is no overall market price. Price quotes are anecdotal. There are "indexes" which list prices for transactions, but that doesn't mean you can sell at that price.
- Liquidity is very limited. This works like collectables. Try to unload a million dollars worth of Beanie Babies. It may pay off as a way to monetize fame. Taylor Swift, who has a very good understanding of how to monetize followers, may bring it off. Mark Cuban and his basketball team are doing fine with it. If you have fans, this works. If you're just a fan, well, you're the sucker.
- The NFT industry is trying to become like the diamond industry. Diamonds are mostly hype. Diamond manufacturing is working so well that you can buy gemstones on Alibaba. The diamond industry works to get gemstones into "safe hands", that is, one person with some items of jewelry. A hedge fund with a vault full of stones ready to sell, constantly watching prices, destabilizes the market. NFTs are more like the hedge fund case.
- There's a long history of bulk manufacture of collectables. Beanie Babies. Cabbage Patch dolls. Franklin Mint castings. Commemorative plates. Currier and Ives prints from the 19th century. All of which can be purchased on eBay for low, low prices. There are people in eBay still trying to unload Jar Jar Binks merchandise. The stuff produced in quantity does not appreciate in value.
- The NFT bubble may already have popped.[1] Prices, such as they are, are down 70% since February 2021.
- The real reason for NFTs is that, not being commodities, they are not regulated by the CFTC, and not being securities, they are not regulated by the SEC. So unlimited hype is legal.
[1] https://www.cnn.com/2021/04/05/investing/nft-prices-falling/...
One could, for example, trade some art object at a grossly inflated price between two parties that are secretly cooperating. That's a "wash sale". Do that in a US-traded stock, and the SEC will go after you. Do that in a US-traded commodity, and the CFTC will go after you. Do that in a NFC, and you're probably legal. This is very convenient.
[1] https://www.cftc.gov/sites/default/files/idc/groups/public/%...
[1] https://itsartlaw.org/2015/05/19/art-investment-funds-intro/
Money is definitely an interesting concept. I'm not sure I fully understand it. But I use it.
But in the wake of that, the idea that you're going to be holding onto much of anything that'll matter globally is laughable.
What time wasn't a time of societal upheaval? The Great Depression? World War 2? The Cold War? The Sixties? Stagflation? The Reagan era? The Clinton era? Post-9/11? Trump?
Markets climb a wall of worry.
That is merely one function of money, and as the marginal cost of production plummets that role becomes less useful.
In a modern economy it’s also, for example, a signaling mechanism (arms-length communications tool), with pricing guiding production and effort.
But isn't Bitcoin money as well, not guaranteed by the government?
This is sort of a tautology. I like the explanation better that money is a "call option on goods and services."
I think it's the drive-by, reflexive assignment of guilt, while knowing nothing of the circumstances.
This strikes me as the opposite of thinking. What you said might be true, it might not, what have you added to the world?
"This is probably referring to the rothschilds based on (link to historical information). It's reasonable to extrapolate that they were war profiteers based on (reasoning)"
Then I think it really could have added some insight into the world instead of being like the drive-by ignorance the parent comment refers to.
This is why you must put your money into a bank account, because someone else out there will use that unemployed person's time to create value on behalf of you.
Wealth is something that people want. Lawnmowers or a movie stream.
One consequence of this distinction is that if money fails as a medium of exchange (eg everyone loses confidence in the dollar) then those dollars are now useless. But no wealth has been destroyed.
So I conclude money is not a store of wealth.
No, that's not true. One of the things that people want is the ability to easily acquire new things that they need. If there is no universally accepted medium of exchange, that adds friction to the economy which destroys actual wealth.
It's kind of like if you drain the oil out of your car. The value of the car goes down by more than the cost of the oil.
That's an interesting but slightly pedantic point. If we continue that line of thinking, if the "end of the dollar" is actually caused by switch to (say) the euro as a currency in our hypothetical world, then the "loss of medium exchange as a loss of wealth" argument no longer holds, but your original mechanism has been destroyed, so I think my point stands.
This is also why “crypto” (the asset class, not technology) is so corrosive, because it makes people who have done approximately nothing to create value in society, but who’ve enjoyed a massive boost in monetary value, think they’ve “won” or accomplished something real. This doesn’t work long term, and will eventually collapse on itself like all false religions.
If you’re planning to be alive in 20 years, you’re better off making sure you have a work ethic and skills that generate value, than obsessing over any sort of wealth-hoarding instrument at all, because it is the only true protection against change.
Savings pay no interest, manual labor doesn't scale, but rent seeking and financial games get many people riches in no time.
What are the incentives in this kind of a system, and where are the safe harbors for storing value? And if you can't in value creation, your safest bet may be to gamble.
There's a wealth of uninformed investors and they're all hearing stories about crypto millionaires and how much it went up and FOMO narratives about it.
People haven't been transacting in crypto basically at all - it's not even a blip in the popular discussion about it, except as a flimsy justification for why its value is not tulip-mania.
The only thing in effect is the ultimate truth of investing: the market can stay irrational a lot longer then you can stay solvent. No one was "surprised" when the housing bubble collapsed in 2008, and no one will be "surprised" when crypto collapses, but as we saw in 2008 when the returns get high enough even the "sensible" investors can't justify to their stockholders/board why they're not jumping in on the apparent "easy" money.
No, that isn't just it. Like other assets, there can be multiple narratives that explain cryptocurrencies rising prices.
Yes, pure speculation is one of them. But another reason for some is deliberately shifting wealth from an asset ($USD, euro, bolivar, etc) they believe is deteriorating.
E.g. a multi-billionaire like Ray Dalio is already rich. He's the one saying "cash is trash" because he like many others see the M2 money supply growing very rapidly which erodes future purchasing power. (The "cash is trash" also means not holding US Treasury government bonds because of inflation.)
Yes, the Fed + US Govt can have all sorts of rationale to justify $2 trillion stimulus checks and printing billions to buy corporate bonds (Home Depot bonds), bail out banks, etc ... but economic actors can also counteract the money supply expansion by taking steps to retain future purchasing power. E.g. Shift wealth into real estate, tech stocks, gold, bitcoin, etc.
That fact that nobody uses bitcoin to pay for Starbucks coffee is irrelevant to the wealth holders looking for alternatives away from $USD liquid assets as long term holdings.
This is not new information, this is literally by design as a product of the Fed's 2% inflation target.
US treasuries have always been a last resort investment, because the return sucks but they're as close to risk free as anything ever gets - what's happened recently is demand for them has been so incredibly high (because better investments are so rare) that the US has at various points been able to issue them with negative interest rates - taking a loss has been less of a loss then just holding currency and no better options existed.
Crypto has a narrative being pushed to increase the value of crypto, but "the end if nigh" doomsayers definitely don't act like they think it's actually coming - otherwise they'd be diversified into Swedish gold depositories and basically planning to move country. Because come whatever "collapse" they think is going to happen...the power company is still going to want to be paid in USD.
I'm not saying that. His recent "cash is trash" was talking about staying away from investments like US government bonds because of negative yields and money printing: https://www.youtube.com/watch?v=tZyWVxGXPHo&t=24s
(Because in the past, reasonable people did believe that buying and holding US Treasuries was a semi-decent way of investing. To be clear, we're not talking about just leaving pure cash in a $250k FDIC-insure bank savings account.)
>the US has at various points been able to issue them with negative interest rates - taking a loss has been less of a loss then just holding currency and no better options existed.
And this is the part I was responding to in your first comment. It's not just speculators. Another narrative for crypto's rising price is that some investors believe a better option now exists for preserving purchasing power. This is the defensive financial perspective that can simultaneously exist with other market participants who are only in bitcoin for the casino gambling speculation.
Yes, some people buy real estate and just leave the houses empty for "speculation". But some others also buy houses to live in them and many buyers bid up prices with competing offers because of desirable location closer to the office. If there can be 2 or more different narratives for rising real estate prices, why can't there be multiple narratives to explain crypto?
The real estate comparison is also irrelevant: unlike any other asset, cryptocurrency doesn't do anything useful.
Holding more cash than you need for transaction purposes is inefficient, regardless of the inflation rate. This is because what makes holding cash a bad idea is not the fact that it depreciates over time (in inflationary circumstances), but the fact that holding cash has an opportunity cost, and that opportunity cost is unaffected by inflation.
As I have said in previous comments, the Fed has been unable to erode future purchasing power, because the excess savings rate increases to compensate for the increase in the money supply.
> (The "cash is trash" also means not holding US Treasury government bonds because of inflation.)
But the entire problem is that the newly printed money ends up in exactly those places. Negative interest rates are impossible, because people can just get cash or rather, they get cash equivalents, namely treasury bonds. The Chinese government is using excess dollars from its trade surplus to purchase treasury bonds. The money put into treasury bonds can only be tapped into by issuing new debt, thus excess savings (uninvested savings) are being created. The government has to employ people on behalf of the Chinese investors otherwise the end result is unemployment because the household savings rate has to go down which means spending more than you earn.
>Yes, the Fed + US Govt can have all sorts of rationale to justify $2 trillion stimulus checks and printing billions to buy corporate bonds (Home Depot bonds), bail out banks, etc ... but economic actors can also counteract the money supply expansion by taking steps to retain future purchasing power. E.g. Shift wealth into real estate, tech stocks, gold, bitcoin, etc.
The problem with this strategy is that it is built on the existence of excess savings. If the inflation rate were to go up, which eats away at corporate savings, companies would be forced to find viable investments and thus generate jobs. The existence of these investments would allow the Fed to raise the interest rates again and excess savings would flood out of treasury bonds and other cash equivalents into regular bank accounts and corporate bonds again. That means stocks, real estate and cryptocurrencies would go down, precisely because inflation is going up i.e. because your future purchasing power is eroding.
Crypto is a 'get rich quick' speculative behaviour, driven by multiple narratives as you say, but those are effectively just narratives used to validate the participation.
Amway's 'narrative' was that you could 'help' your neighbours by selling them cleaning products.
But really it was a pyramid scheme.
There are some questions around the Fed and monetary dilution etc, but BTC is not the answer.
And of course currency was never meant to be a 'long term holding'.
Literally by design, we build at minimum a tiny bit of dilution into our currency, that's 'part of the plan' so don't hold it, hold something else.
Exactly. When I did a deep dive on crypto currency a few years ago I wondered, what can the transaction rate be for proof of work schemes. Turned out it was less than a dozen per second across an entire network. I don’t think this has changed (https://bitcoinvisuals.com/chain-tx-day). How many transactions does Visa alone do?
Initially it was supposed to be money, and so there was a lot of effort to drive adoption. You could buy games on Steam for BTC.
But then a thing happened: the value exploded, and new people started hearing about this amazing new asset growing in value. Crypto became not a coin, but a thing to hoard and sit on, waiting for the price to get higher still.
In this situation, using it as a money is stupid. That pizza somebody bought for 10000 BTC was a terrible loss to the buyer -- they could sell the 100BTC for $634 million today. They shouldn't have bought a pizza, they should have just kept their money in a wallet and done nothing at all with it for a decade.
Given that usage pattern, ability to process transactions doesn't matter. The ideal is one buy at the bottom, and one sell at the peak, possibly years apart. Fees don't really matter, because the transaction is enormous. Paying $5 to move $10 is ridiculous. Paying $5 to move $634 million is a rounding error.
And since Bitcoin was made to be deflationary this pattern of usage is more or less guaranteed. Using it as money is always silly because any newcomers to BTC increase demand and therefore the competition for the supply. And over time, some BTC gets lost, which adds to that as well.
I really don't understand how it can be secure and haven't tried to read more into it due to skepticism about cryptocurrency generally, but are non proof of work schemes more viable?
Since when was it ever coupled?
The last 20 years were marked by the corporate savings rate increasing, meaning companies are not investing. This could be related to China and various other factors but it is clear that the Fed and the government has done enough to help corporations, they are doing so extremely well that they don't need any more help. The mistake from the start was that the government didn't help citizens enough. It didn't create enough jobs or it didn't return those excess corporate savings to the population forcibly. The reason why wealth redistribution is popular is that excess savings are zero sum, for the corporate savings rate to go up, either total investment has to go up (it hasn't) or the household savings rate has to go down. There is a similar dynamic with rich vs poor.
The corrosion you speak of doesn't exist. The system is way too stable, far more stable than should be possible, that's the real problem. Your dollars, by that I mean the dollars corporations and therefore the wealthy own, aren't losing value fast enough.
Plenty of people have also lost money on crypto and oil speculation.
Explain to me the value of Daddy's Money and Landlords. No, seriously, tell me about it.
My evidence is that we still have a lot of legacy and technical debt around, and it's likely to still be there in 20 years, so even if you don't work on the cutting edge (which may now have stratospheric requirements for entry like a PhD and Github projects and 8 rounds of interviews), you can still take legacy work.
Security and defense (physical and IT/software) will also likely be around forever.
Maybe the demand will increase fast enough to keep salaries from dropping in real terms.
Everything that was valuable in 2001 is still of about the same value now. But the mechanics who didn't want to diagnose electronics and the accountants who refused to learn computers and the programmers who only wanna write php have seen their skills reduced in value because they did not maintain currency.
Being responsible for the work output of other people and doing your job somewhere unpleasant or dangerous pretty much always increases your pay.
I've been regularly asked by my employer to change role to help some other part of the business. Whether it was switching from mobile to server, server to front end web, or switching frameworks / tools within those domains, I always made the switch.
The problem is that now I'm a jack of all trades, and a master of none.
“I’m a master generlized problem solving machine, how can I be of service?”
If you're the jack of all trades guy, you'll always be asked to cleanup, or take care of small feature requests. When the company needs the big guns for a mission critical feature, you will never be called.
This is an important point for people to realize. There's risks at specializing for sure, but there's also a lot of risk to being a jack of all trade.
Granted i climbed the ladder in mid size non-hot companies so may not be applicable.
Im currently a consultant in my trade and I appear to sell this ONE thing but in every case i end up solving problems as a generilist.
Is there a chance that you can claim that you are already an expert in one the things you do? sometimes other people’s bar for expertise is lower than yours.
It might also be considered a "soft skill", but there are some communication skills I think are really valuable in a technical space; like knowing which diagram to make which will most effectively summarize the complexity of your system and is appropriate for your audience. The tools for constructing that drawing will change, but the activity of sketching for communication isn't going anywhere.
a 2% "tax", on retail sales, at best.
b2b, c2c, and large dollar b2c generally don't go through visa.
calling it a "tax" is nauseating. you get something from visa, and you can choose not use them, if you'd like. it's the rare place that won't take at least a few other alternative payments, including cash.
it's a rarer tax yet that you can choose not to pay.
Yes, and when you pay with an alternative, that’s when you get hit with the 2% credit card tax. Because you and the credit card user both pay the same price, but the merchant has to raise prices by 2% to cover fees caused by the latter. The credit card user is reimbursed for the fees they created via cash-back programs, while the cash user has to just swallow them.
I guess this is the thing that people are having a hard time coming to terms with - we no longer live in the real world.
All of these surveillance-advertising tech giants, all of these financial instruments, all of these media-induced bad feelings and ideological trends, everything that defines our contemporary era - none if it is real.
If it all simply stopped, wiped out from a solar flare - for most of us here, nothing "real" would change. We'd all sit for a moment looking at dead black rectangles, then we'd have to go and find something else to do. My bet is that we'd all be happier for it.
Yeah, except for those who'd suddenly be without electronic medical assistance. There are definite downsides to the digital era, but to act as if there's been no benefit is laughable at best and dangerously ignorant of the past at worst.
People adapt to whatever the new norm is, and sort of fall back to whatever their bio-chemical baseline is. When things are in the process of getting worse or better, it'll push them one way or another. But once it settles again, so too do they.
The point being that happiness generally has more to do with internal bio-chemistry than whatever the new norm is.
This, and the parent comment:
> If you’re planning to be alive in 20 years, you’re better off making sure you have a work ethic and skills that generate value, than obsessing over any sort of wealth-hoarding instrument at all, because it is the only true protection against change.
You see, the problem is that they both read like correct statements, which is rather worrying.
I don't think there's any non-tautological way in which this can be simultaneously true and not an oppressive imposition by capitalism.
Put another way, I'll worry about a million people not "adding value" when there ceases to exist individuals who have captured enough wealth to support a million people. The latter is the real problem.
I have no such thing. I am debt free and live the way I want. I live alone. I have no children or spouse to support. I owe nothing to anybody. I don't owe anyone an explanation. Maybe the opposing views come from people who believe they do, but in no way is it universal.
Your point from the perspective of wealth inequality is more elegant. In my case I am wealthy enough to support roughly one person: me.
If I want or need more resources, I have levers I can pull to obtain them. But don't tell me I have a "duty" to add value to the economy.
I won't name names, but I do know people who have simply not filed nor paid taxes in a decade. They even got stimulus checks.
Who is going to create all the value consumed by rent seekers, financial engineers, thieves, scammers, corrupt or bloated government? People who create and provide more value than they consume.
I don't think this is true. This is one of these work ethic corollaries that helped build wealthy societies when productivity was proportional to people's effort. But it seems to grow more obsolete by the day.
Without capitalism, we could regress to the most primitive version of civilization and still require contribution to the tribe. The alternative is to go off on your own (and at that point, there are no "people around you" to help). Less primitive alternatives, as different political-economic systems, usually still require you to contribute through taxation.
At this point, I can't imagine financial regulators doing anything to stop it.
I have a hard time imagining what actual tangible disasters will happen if crypto currencies lose their value overnight besides some speculators losing money and some mining centers closing.
From 2007 to 2008, for example, global wealth declined about ~10% [1].
There's not much room left for central banks before we officially enter banana town. If cyrpto implodes, it could easily be worse than the financial crisis - which means, regulators have an interest in it NOT imploding.
[1] https://www.credit-suisse.com/about-us/en/reports-research/g...
As an example, I have 5-20k in crypto assets on any given day. My wife and I are also shopping for a new couch. If my crypto assets evaporated we would not be shopping for a new couch, nor would we be going out for dinner tonight, despite the fact that I am not spending down crypto assets to fund either of those purchases. The psychology behind it is that people adjust to a certain amount of "savings" and will adjust purchasing to get back to that level if their savings changes quickly and substantially.
https://www.barrons.com/articles/a-new-crypto-etf-is-here-yo...
Crypto as an asset class is only working the way it is because there is a separation between perceived value and net present value. The same way fundamentalists value companies by expected earnings and angel investors look at the TAM, crypto is blowing up in large part because people are starting to believe in the story that crypto is pinned to.
At the end of the day, you probably should have some skills to fall back on and not depend on an asset increasing in value, but if you have enough assets, that is your skill.
Whether it works or not is to be seen. You can look at both Biden and Trump as the end of the arc of neoliberalism that began with Reagan. The same broad moves seem to be happening in other peer nations.
Nurses create a lot of value, especially during a pandemic, but they receive only a tiny part of it. Competition can force you to give most of the value you create to your customers.
Compared to the appreciation of worldwide real estate, the market value of crypto is only a drop in the ocean. And countless people got unbelievable rich due to rising prices and "crowding-out" in cities without creating any value for society at all (in the opposite, making life harder for everybody struggling to keep up with their rent).
And nobody so far managed to explain convincingly, in which ways investments in (existing, residential, not for self-use) real estate creates any value. People don't by these assets b/c they provide better service or can run their properties more efficiently than someone else. They buy these assets b/c its risk-free return on the backs of tenants who need a place to live. In this aspect, Real Estate investors are arguably way worse than Crypte gamblers. But I agree that the rent-seeking behavior we see in more and more parts of our economy and our society is indeed corrosive in the longterm....
Shelter is literally third on the list of human needs after water and food. Make something desirable and people will leave their previous (possibly decent) place behind to move in. I'm not sure how anyone can say real estate doesn't create value just because they are frustrated that some people make money off of real estate.
The problem isn't that speculators are evil people but rather that the "arbitrage" they are doing is fueled by regressive housing policies. Increasing the efficiency in the housing market exposes the fundamental housing problem. After all, it can't just be that speculators are snapping up properties, there must be buyers that are willing to buy properties from the speculators, otherwise the speculators lose money. Those buyers don't even need to think that the house is overpriced, the house could genuinely be a good deal for them.
GPs point is that owning land is not creating value. It is, however, very profitable.
In both cases the land would become a liability that you constantly have to take care of instead of being an "investment".
Productive work like building on top of land should be rewarded, waiting for a train station to be built in your neighborhood is not productive work that should be rewarded.
Pretty much every economist thinks that the work <-> reward relationship should be as tight as possible. However, most of them don't think of anything other than cutting taxes and strangely enough they insist on being able to take advantage of negative externalities (CO2 or illegal waste disposal in general).
That’s not the impression I get. They seem to have all kinds of broad beliefs.
And yes it does not stop at LVT which encourages useful development and discourages speculation and keeping land/homes empty. It extends to anywhere where society/the public/the commons is not being adequately compensated by private interests for the benefits they take. Goes from natural resources to pollution and paying for the waste processing of the products you produce (no more saving 5c by using a plastic bottle which costs the public 10c to dispose of).
> If you complain you're just jealous
Everytime.
That wasn't anyone's argument, I think you hallucinated all of that. The person I replied to said real estate has no value.
> > If you complain you're just jealous > Everytime.
I did not say this, you hallucinated that too.
This is why it's being compared to crypto currency. The parent comment I was responding to said it's not a fair comparison but "it's worth what someone is willing to pay for it" describes both.
Not sure I understand your reasoning there.
> You're speculating on a digital collectible.
And if you buy properties not for self-use you're speculating on a physical collectible. So?
If you buy properties not for self use, you can hold them indefinitely and have an income stream. If you buy a share of a company and hold it indefinitely you can have an income stream. There is no equivalent in cryptocurrencies. You buy it and hope you can sell at a later date for a higher price.
Investing versus speculation.
Investing in a currency/cash is speculation in the sense that currency itself does not produce anything but its value can go up and down. Investing in a currency is like investing in roulette in casino, you may win and you may lose.
So, keeping your money in bank for ~0% interest really is gambling/speculation too.
But, from the point of view of the individual investor it does not matter if you are "investing" or "speculating". In both cases you may win and you may lose.
So yes, I agree that real estate ownership is not ‘value creation’ in the modern world. It’s speculation of a finite resource, but unlike Bitcoin that resource is essential to livelihood
Where were you in 2008?
That's grim! It's not my job in life.
This suffers from a fundamental problem. If the creation of value is the ultimate good, and we are obligated to maximize that good, we could do a lot better job at it than smiling some dopamine into our neighbor as you suggest. We’re all irredeemably evil for not doing so.
As opposed to rent, property speculation, the stock market, etc?
And decades ago it was a number written down on a little piece of paper, and before that it was little pieces of “precious” metal locked away somewhere.
At least nowadays amateurs have a better chance to be literate.
The money seems real, swiping cards or phone financial transfers lack a physical reality and my brain has less friction with digital transfers, thus I avoid them out of financial prudence.
If you are trying to lose weight, shifting away from sugary & processed foods & meat to high-quality fresh fruits, vegetables, nuts, etc. can definitely increase your grocery bill while reducing your weight in a very healthy way. Food bill may go down by going directly to farmers, but travel & fetching costs increase.
Or, it could be an unhealthy shift towards more processed foods, costing more in factory work & transport, and you are seeing real inflation.
So, insufficient data to indicate inflation or not.
I had a fixed grocery budget, and over months, I lost weight due to a caloric deficit. Literally I bought less food with the same money and the result was just over a pound a month lost .
That is the data we need to confirm that you're seeing inflation. Curious where you are located that you are seeing these numbers?
I live in a city an hour away from Toronto, Canada.
I don't know if it's because I buy different things from you, or if I live in a different place from you, or what. But my andecdote is that no, I'm not paying more for stuff than a year ago.
Do you actually track spending or just don’t notice?
It sounds as if your basket of goods is different from mine. Most of the examples on that Wikipedia page are sugary foods, which I just don't buy a lot of.
Do you? The BLS does, and their inflation numbers for food is 3.5% YOY.
A 24pk of Rx Renal cat food went from 5.8oz to 5.1oz[1]. I buy two packs at a time and what used to cost $113.76 is now $114.72 Effectively they're charging me an extra buck to keep 33.6oz (5.7 old-cans / 6.5 new-cans) of cat food from me.
[1] https://www.chewy.com/royal-canin-veterinary-diet-renal/dp/2...
In the beginning you would just lend stuff from other people and give it back, or with consumables give something back of similar worth.
Precious metal was pretty rarely used, as its main benefit is that you need almost no common trust relationship.
Anyhow, to explain for the forum: Graeber's book goes through the evidence we know of from the places were money first appeared. In essence, debt came first, and money was a later innovation. Very interestingly temple records using tally mark schemes may have been what lead to the development of cuneiform writing in the levant. A similar debt first pattern appears in other places, at other times too.
Coinage, particularly metal coins, came about much later as a clever hack by rulers to simplify raising and maintaining a large army. Pass a law demanding all citizens pay you X coins each year. Pay your soldiers in coins. Suddenly your society is figuring out how to feed and house soldiers, without you haven't to build a command hierarchy to run it all directly.
I can't recommend this book enough. It's dense in parts because he goes into a lot of detail that fully justifies what he's saying. Still, completely fascinating to learn much of the way we think of economic history is mythology. It's also a great lens for understanding what's happening now with cryptocurrencies.
Expanding on this - one of the brilliant innovations in Bitcoin was to make the ledger fundamental and the coin an implementation artifact. The blockchain doesn't store coins - it stores a ledger of who transacted with whom, and for what amounts, and then ownership of a Bitcoin is a derived quantity from the transaction history. Ethereum just expands that ledger to let smart contracts on the blockchain define other quantities to track, as well as the rules and relationships between them.
It's completely backwards from how I would've thought to implement a cryptocurrency, which would be to start with the coin and figure out how to make its ownership distinct & incorruptible. By starting with the ledger first, you don't need to think very hard about ownership (because it's all recorded in the ledger), you just need to find a way to define a source of truth for the transaction history.
An oversimplified hunter and gatherer society would just let the hunters give meat to the gatherers, assuming that they will one day be paid back with gathered vegetables or fruit.
It’s the difference between 1) going out to a bar with friends and remembering “Alice has bought the group X rounds, Bob has bought Y rounds, and I’ve bought Z, meaning it’s Bob’s turn to buy a round because he is in beer debt” and 2) “Alice and Bob and I generally buy each other rounds and it all feels roughly balanced so I’ll buy this round.” Tracked and tallied debt came much later as I understand it.
These are two things I do on Ethereum right now which have analogs in the traditional finance system. Seems to me it matters little whether the activity is done in a traditional space or in cryptoland: they either both create value or neither creates value.
Currency exchange is fuzzier. If the exchange is happening to facilitate commerce, then sure, I would consider that value creation. If it's happening simply in order to support speculation in a different currency, then no, it's not value creating. And it's pretty clear from the data that the vast majority of crypto transactions are just glamorized forex trading - ie buying in order to hopefully sell later at a higher price. Add in the detrimental environmental externalities from crypto mining and you could even make the argument that crypto currency exchange actually creates negative value.
Only if people use loans to produce something valuable. Most people I know take loans for houses, which afaik does not produce any direct value to society.
Only because capital is privatised. Perversely, only those institutions with enough capital can obtain the privilege of creating money from thin air.
Everyone is gambling even if they dont know Crypto exists.
The tweet you linked leaves out half the story, which is that money velocity is down greatly, thus the increase in money supply hasn’t caused rapid inflation.
https://www.stlouisfed.org/on-the-economy/2014/september/wha...
I sometimes wonder if we've managed to mask the real state of the economy by pumping the metrics to make it look like it's fine.
This concept extrapolates widely in our personal and professional lives. The internet and cell phones were probably the biggest real pieces of innovation in my lifetime (mid thirties). Everything else is just fluffed up rehashes of relics or in very early stages of something radically new. I just read an article proposing genomics as the next big thing to really change the course of medicine and humanity, and I'm inclined to agree but do not see what the timeline of the tipping point will be. Everywhere else I look I just see more stagnation, short term thinking/goals, and continuation of status quo...with touches of regression throughout.
CRISPR is at the beginning of its journey, but monoclonal antibodies are practically miraculous to people with a lot of autoimmune conditions. I have one which almost certainly would have blinded me 30 years ago. Today I can get an (admittedly enormously expensive, we still have progress to make there) IV infusion every couple of months which has practically no side effects and effectively forces the disease into remission. This drug (Remicade) wasn't around when I was born, and I'm only 39.
It's like the governments are trying to control a lot of variables with only a couple of levers.
The World Bank says [0] the US GDP per capita has more than doubled since 1996. In real terms. Computers have been a big boost, but it seems a tough sell that the US population has actually seen a real doubling in that time. That is saying a dude with a house in 1996 is a dude with 2 houses now. Is that arguably true? Where is the stuff?
[0] https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location...
In the hands of increasingly few people, namely tech billionaires. Amazon for example is worth more than all but 18 of the entire world's sovereign nations' respective GDP.
The economy has grown tremendously, in measurable terms, but that growth has almost exclusively gone to the 0.1%
And also much of the 'stuff' is here, or converted to services. 25 yrs ago, approx no one had 55"+ tvs, internet connection was a minority, and media eas collections of CDs/Videotapes. Now 'net connections are near-universal, and it is all streaming. Cell phones were just beginning & expensive, now everyone has a powerful computer in their pocket. We don't have two houses, but the ones we have are worth twice as much. Cars are much better developed than 2 decades ago, snd we'll soon have ubiquitous electric cars...
All of it needs to be more evenly spread. Just look at the charts of portions of funds going to labor vs capital.
Imo, its really about things that give you more agency over your own life and the world. Cars are good, they represent a great increase in our ability to travel and make decisions for ourselves.
> We don't have two houses, but the ones we have are worth twice as much.
This is largely a wealth transfer to the elderly. Among under 40s, home ownership has fallen consistently since the 1990s, with only a brief increase in 2001-2005.
That's too limited a definition. For instance, living in a beautiful, well-designed city full of beautiful art is a form of wealth, but none of that is economic power. And what good is money ultimately, anyway, if not to buy goods and services that you want?
Those cell phones have voice navigation that will get you unlost practically anywhere on the planet. That would have been sci-fi fifty years ago. Give one to your kid and you don't have to worry about them being lost or not being able to get help.
Those cell phones (+ internet) will let you buy almost anything on the planet and have it shipped to your door usually within days, all without you leaving the house. Two hundred years ago you could not have done that even with servants, and since servants are unaffordable these days, it saves us the time spent driving around looking for the item. (I bought a wok ring last week; I could have driven an hour in traffic, or I just bought another item I needed and had it shipped "for free", and saved myself at least an hour.)
When I started programming, writing Windows programs took ages because if the Petzold book didn't have an example and/or the MS documentation was somewhat vague on some points, you just had to try it out. I spent days writing a screensaver for personal use, because I forgot I needed to zero out the struct, and it crashed NT, and it took me five or ten minutes to reboot, reload VS, and try again. Now I have a decent chance of finding things like that on StackOverflow, or at least posting it and coming back the next to find comments by complete strangers informing me of my silly error. (Being a young programmer without SO was a double-whammy...)
And in China and Africa people absolutely do use their cell phones to run their businesses. Even in the West we wanted more instant access: the movie "Sabrina" shows the wealthy executive making a business deal in the car with a portable phone, which was completely fantasy in 1954.
Cell phones and internet absolutely have made us wealthier. Even the 55" TV is a form of wealth: you can practically have your own private theater now, and thanks to the Internet, you can watch any one of the thousands of movies you want, instead of only the 12 most recent ones on offer at the cinema.
> [Falling homeownership amoung young implies wealth transfer to elderly]
Insufficient data to make that conclusion. It might be true, but you haven't examined any confounding variables. A counterexample: my parents own a house but I do not. It's not because I am not as wealthy as my parents (age-adjusted), it is because I am optimizing for flexibility and also because rent has been cheaper for me than owning. How many young people do not own a home because they want to live in an cool/hip/fun/whatever expensive location, while their parents are fine somewhere cheaper? How many people want to be digital nomads?
That is to say - not only are the houses almost three times larger, but the average American has nearly -four- times more personal space today vs in the 1950s.
The improvements in cars have been crazy - I wrote a comment about that recently: https://news.ycombinator.com/item?id=26389885
Only 3.4% of jobs in America require very heavy strength according to the Bureau of Labor Statistics. With the US employment rate at 56.8%, that's 1.9% of the population that has to do a very strenuous job.
Compared to even very recent generations, we live in palaces, we drive in luxury, we work cushy jobs, and we have endless entertainment.
>All of it needs to be more evenly spread.
Absolutely. Among the world, of course, but even within America the inequality is still huge. The fact that we live with this inequality while having the resources to fix it is a stain on our collective conscience.
We have problems, but I intuitively agree with this narrative of progress and want to see good data to back it up.
I do wish there were more choice - the ability to buy 1950s-70s grade housing, medical care, etc., for a lower price - but that seems to be becoming rarer.
Square foot per household: https://www.newser.com/story/225645/average-size-of-us-homes... (annoyingly, this data comes from the US Census but I can't seem to find it on their site - but it does match up with every other source)
Interesting, semi-related: https://ourworldindata.org/urbanization
Very interesting, about older housing: https://mountainmath.ca/teardowns
From there it's just simple division to see the square foot per person.
> the ability to buy 1950s-70s grade housing, medical care, etc., for a lower price
If you want 50s style housing (aka dated interior and 280 sqft per person) - there are plenty of options. Go on Zillow and limit your price to $75k and you'll see plenty of homes available. 600sqft homes aren't the average, but they certainly still exist. You may think "aha, but you can't find a home in NYC!" - but keep in mind, only 16% of the world lived in urban areas in 1900 (and only 29% in 1950!) If you want an old car, those are cheap too. Old phones, TVs, radios, etc etc are all basically free. Dated medical care is the one thing you obviously can't get.
No, if you want to party like it's nineteen (forty) nine, go ahead. Live without a car (the majority of households had no car in the 40s) - you can get around by bike if you're lucky, and if you're in a car-centric area you can ride along with your coworkers, family and friends, or hitchhike, as people did. Your small housing will be very inexpensive. Your old-fashioned diet will consist of staples like flour, potatoes, milk, bread etc that have gotten extremely cheap relative to your income. Costs that would have been a solid chunk of your budget in the 40s (new clothing, for example) have gotten so cheap as to be almost unrecognizable.
I say this all as someone who did live a life of consuming very little for several years. If you do want to live in a smaller space, not have a car, and simply consume less (water/electricity/money/resources) it is certainly possible, even in our modern world. Give it a shot! You'll be surprised.
My main takeaway is that it is actually a reasonable and healthy market, keeping the value of building roughly proportion to the value of the land/location.
Cool stuff, thanks!
You're right, they're a little scarce in my city but there are at least a few homes in the $75K range that don't seem uninhabitable:
https://www.zillow.com/homedetails/1010-Lombrano-St-San-Anto... https://www.zillow.com/homedetails/139-Prelude-Pl-San-Antoni...
That is really interesting to me, as the local market seems to have totally exploded in price recently. A few of my friends are paying prices that would have seemed ridiculous in January 2020 when we were looking at houses. Maybe it's mostly housing in the middle of the price spectrum that's inflating.
First off, the chart shows GDP per capita at current prices, meaning it's not adjusted for inflation.
GDP per capita is a very rough proxy for economic well-being. Adam Neumann of WeWork 'earned' $185 million for getting fired. So in essence, he raised GDP per capita by about $0.50.
In either case, it is still a highly misleading proxy measure for economic development and well-being.
There's an argument to be made that we have done too much over the past ~10 years and are risking significant inflation, but that's a separate argument and it's hard to say what else we could have done that would have been better. Inflationary blowoff is usually less painful than deflationary depression, but neither is good. Policy is often an exercise in choosing the least awful option.
> the US and much of the rest of the world have already been in a mild depression for the past 12 years, ever since the 2008 global financial crisis. It’s just not as obvious as the 1930s depression, because higher levels of technology and anti-deflationary monetary policy disguised it in a nominal sense.
The Covid pandemic is different. Western economies are heavily service-based and the pandemic effectively stopped many of those services being consumed. All of the restaurant meals and vacations and so on are gone, never happened, the opportunity to create them forfeited, even some factory production time was lost - and the money that would've paid for those things remained in the customers' pockets. Yet in most countries, the employees who would've worked to supply them also earned most of what they would've got for doing so. There's an imbalance there between stuff available to consume and money paid that's fundamentally very different from 2008, which was mostly a crisis in the financial and housing sectors.
1) Wealth wasn't created during WW2, almost all of the increased production went to things like bombs and tanks and bullets, these things don't provide a real increase in quality of life this is one of the main points in 1984, people need to be kept busy, but Quality of Life can't increase.
2) The postwar boom was largely a result of everyone except America being unable to really produce because their economy and workforce was shattered. When you suddenly have 66% percent of the world only able to purchase from you, that's a lot of demand that you can then serve.
https://www.loc.gov/item/today-in-history/october-23/#:~:tex....
Either way, I think it's possible to argue that the US did generate Wealth in WW2, in the sense that it developed new technologies and knowledge that were eventually shared worldwide (I'm thinking mass production of materials like plastics, antibiotics, better research on nutrition, etc, statistical engineering techniques which eventually helped build up the Japanese auto industry), and that it trained a large portion of its population via the G.I. Bill and women working in factories, etc.
(None of this is to belittle all the damage done by the bombs, etc, and the US did have a massive advantage in non having it's production capacity wrecked like Europe, Russia and Japan. The broken window fallacy is a real thing)
> Asked if the money the Fed was injecting into banks in the wake of the global financial crisis was “taxpayer money,” Bernanke shook his head and grinned sheepishly. “To lend to a bank,” he said, “we simply use the computer to mark up the size of the account that they have with the Fed.”
This paragraph with its doom and gloom seems apt in that it leaves out the aggregate stock market. In parallel with this, there’s a story of passive investment which is booming. Why take risks when you can put your money in here and just watch it go up reliably? The cynic in me contrasts those stories by looking at the doom and gloom one and pinpointing the line “safe long-term investments are rare” and rolling my eyes, wondering: if a safe broad market index gaining 10% per year for a few generations now isn’t enough, what is? Is it just not rich enough or quick enough? The curmudgeon on me really comes out now. I love the article, but not the “woe is us” aspect.
(I especially loved the description of MMT as Keynesian economics as told by Morpheus)
Growth based on real productivity is slowing (stagnate even), but it should be noted maybe growth is moving linearly, but we expect non-linear improvements (100 -> 110 is 10% growth, 1000 -> 1010 is 1% growth). As you point out, growth via financial instruments is all fine and dandy. Better than ever even. But the stock market is a model of the economy, but it doesn’t represent individual experiences.
But distribution in ownership of capital very much follows a power law. So while people in the market are making great paper gains, there are many who are left out.
We are growing, but relative inequality is growing faster. Psychologically, people can handle absolute differences in comparisons of wealth, but relative ones are what cause much of the views and behaviors we see today. Such as “woe is us”.
Of course this is all my synthetic anecdotal speculation.
https://www.spikeartmagazine.com/articles/downward-spiral-po...
When brokers did it it was OK, when algorithms did it in milliseconds (when common people can only operate with delays of hours and days, and with deterrent fees) it was OK, but now that there are platforms that allow more or less anyone to speculate, we start publishing moralistic pieces in the media and calling it "gambling"?
Yeah, I'm sure people are going to listen... next time they want to promote values based on work and effort, maybe they should try not to create a system where workers are punished and gamblers are rewarded.
PS: I don't even speculate myself, at most I buy and hold, but I'm disgusted by the level of hypocrisy of those who suddenly started saying that speculating was bad when common people started doing it. It almost makes me want to speculate just to do the opposite of what they say.
"Common people" are entering the game without the most important piece of equipment they need, namely a pile of money that doesn't come out of their own pocket if they lose.
I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices...but putting that aside...
I think the emphasis is more about how there's no other game in town that can compete, not that gambling is new.
Interest rates are so low that there isn't a simple/safe investment entity to pull out a reliable 10%. We're all stuck gambling whether we want to or not.
The existence of a financial elite hinges on the existence of a non-elite that actually does the work. If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something, it will be bad for the current financial elite.
In the end money is just an abstraction to determine who has to do back-breaking work all day, and who doesn't.
Maybe, but are you insinuating that no back breaking work would need to be done if money weren’t to exist?
Pretty sure the introduction of money reduces the total amount of backbreaking work to be done. Instead of hauling grain to trade for axe heads and carrying those back to your farm, you carry coins, paper, or in modern times, tap a few buttons on your smartphone.
Money is an abstraction, but the status quo as a whole (monetary policy, capital markets, labor policy) is designed to ensure a supply of labor. Capital begets capital [1], so those who don't have will engage in riskier behavior to get off the wage slave treadmill.
[1] https://news.ycombinator.com/item?id=16592414 ("I think capitalism is much simpler: capital begets capital. Those who have capital will accumulate more capital, almost infinitely, until the capital/income ratio reaches an equilibrium who knows how high (in the absence of major corrections like wars and hyper inflation). Add inherited wealth and low taxes. Capitalism's winners are those who already have capital. Thomas Pickety's book "Capital in the 21st Century" cogently illustrates this using massive tax return based data sets.")
If the grain only ever exists on your farm, it has no value to anyone else whether for coins or axe heads.
Nobody is complaining about people placing their paychecks in index funds though. Index funds are a reasonably good proxy for the future health of the economy, so your gains from it will likely represent real growth. By contrast, gains made from cryptocurrency and speculative stock must be coming from someone's losses.
Index funds happen to represent ownership of productive assets, but the assets don't really care who owns them, your investment in an index fund doesn't increase the number of productive assets in the world, likewise with cryptocurrency.
Not directly, but it creates an incentive landscape that encourages the formation of more capital, basically making the potential payoff of starting a company larger and more likely.
Eventually, some rich people will notice that they aren't getting as much money from buybacks and dividends as they used to and will place their money elsewhere. It would be relatively more attractive to invest in developing countries or buy PR in the form of charity.
On the other hand cryptocurrencies are negative sum. The only way the early folks make money is when late folks put money into the system. At the same time, the house (miners) are constantly extracting massive amounts of actual liquidity. The "sum" of Bitcoin is negative 21,000,000,000 per year. This welfare is extracted by Chinese mining cartels bribing their local governments for access to coal-powered electricity. Enough to offset all of the solar panels installed in the entire world.
The total amount of wasted power per Bitcoin transaction is now 30 days of power for the average household, and generates 100 grams of non-recyclable e-waste.
https://www.theatlantic.com/ideas/archive/2021/04/the-autopi...
Somewhat related, I really want to see someone offer some kind of customizable index fund. Let me start with a base index, and then exclude or include companies at will. e.g. start with the S&P 500, kick out companies like Exxon and Facebook and add in Tesla (pre inclusion), while the service auto weights investments appropriately.
You and me both! https://news.ycombinator.com/item?id=25552346
(Also, to your point, as someone commented on that thread this does already exist if you have enough money)
https://support.wealthfront.com/hc/en-us/articles/211005023-...
There was an article on the front page of Hacker News in the last couple days about how index funds were supposedly ruining the economy.
Were.
Index funds were a reasonably good proxy.
They have been completely detached from reality for at least a year, and arguably for several years.
S&P has doubled over the past 5 years. Does that mean the economy has also gotten twice as healthy?
But yeah, it's mostly the financial elite freaking out that their kids might actually have to be a wage slave for a living.
It depends on the situation and the game. Some poker professionals don't gamble significant sums with novices because the novices are far less likely to behave in a manner that is predictable according to statistics or some other strategy.
You dont get money because someone else lost some. You get money because you helped stabilizing the market by predicting it right. The losers lose because they predicted it wrong. Its a net gain for everyone who is somehow affected by the market which means basically everyone on this planet. There is no moral problem with winning or with loosing as you help either way.
Also there is no need for anyone to lose, everyone could be right all the time that would give a perfectly stable market, but people are terrible at predicting the future so that will never happens.
There are a few cases I can think of immediately where this applies - gambling with novices in Blackjack, for example, is not ideal. They'll screw up the flow of cards and can cause your math to go haywire. The same happens with Hold-em or Omaha Poker - you want people to have enough skill to play the game properly, but if you're looking to fleece them not enough skill to play the game well.
I once played 1/2 NL uncapped at a casino, a guy sat down and put $1000 on the table. Every other hand he would raise $25-50 preflop, and call re-raises. Got all in pre-flop and pre-turn a bunch of times, every time he bust he put another $1000 on the table. This is exactly the best player to play with. Yes, you have to sit and wait for good cards before getting involved, but if you get something good, you have very good odds of stacking them.
Even your more moderate point you’d rather not have them in the game is totally wrong.
In reality, every professional player loves players who do terrible, random things. Variance might go up, but variance is going to be annoying either way. Other players doing dumb things is where your EV comes from. I’ve only ever heard complaints about crazy players being a hassle from inexperienced amateurs who dabble. Pros want “live ones” in their games.
An actually strong player won’t have that problem.
Disclaimer: chess novice, don't know anything about poker.
An expert playing against beginners might 'lose' 50% of the hands they get involved in still, and make a ton more money on the ones they win. It's the difference between an average of 5 big blinds / hr, and 50 big blinds / hr.
I'm not an expert by the way, I just consider myself an 'advanced beginner', who can count on making $2-4 / hr playing 1/2 no limit at the casino (based on having played maybe 200 hrs of poker in the casino). Not worth it as a way to make money, and I stopped caring enough about poker to invest the time to become better.
But you can see the entire dynamic at a table change when a loose, novice player sits down. Players no longer play against each other as much because they can count on the loose player to raise the stakes, and they're much more likely to capitalize on that.
Sure, I'm more likely to beat the person that is going all in with a 2 5 off suit but bad beats are incredibly annoying. Over time, in a sit and go situation I'd beat that player, but online and in tournament play I found that was a hazard. I'll take a consistent bad player over a complete novice any day.
When someone just consistently plays bad, that's the ideal situation.
I don't know about you, but when I was grinding, I didn't really want to increase variance. I wanted a stable mental state with low focus on multiple tables to maximize the rate of return over that period. I found that alterations in that caused me to play more loosely, which ended up leading to avoidable mistakes, magnified because I'm playing multiple tables at once.
The same thing was true for a tournament. There's a far more limited return from players like this, in part because you meet them early. It's a fact of the online game that people just go all in a lot especially in the beginning, but it ends up being a gauntlet you just need to get through. I wouldn't call them my ideal opponents; it's not what I prefer, it just exists.
Maybe I'm not what you would consider a strong player but I did win consistently enough to feed myself with it for a couple of years, mostly online before it became illegal. It wasn't really my experience that high risk high reward play was the way to go. Most of the people I played with worked to limit variance's effect on their game, not increase it.
Again though, that's just me - not the strongest player ever, you clearly have a different opinion about it. All good.
It doesn't mean you were a bad player, but it sounds like you might have been avoiding some potentially +EV situations due to lack of comfort with trickier opponents/situations. That's fair enough if it worked for you--it's not at all necessary to play every situation perfectly to have a healthy win rate. Towards the end of my poker career I was playing mostly heads-up, which teaches you to be pretty fearless about exploiting any and every edge, and to get comfortable with aggression. But there was a point in my progression where I'd get thrown off as well. And even after I felt like I was pretty damn good, I knew players who were clearly head and shoulders above me, so it's all relative.
In Blackjack the other players are not really relevant, the count stays the same and on average you will be about equally profitable with or without them. They might increase the variance a little but they reduce the attention the dealer pays on you and my team never minded others on the table.
In Hold'em and Omaha you WANT weaker players, they are in short supply, and you will expect to have an edge against someone that barely knows the rules, too.
This is a statistical fallacy.
>This is a statistical fallacy.
Yes, "Your blackjack outcome is independent of other player's decision" IS a statistical fallacy. You're correct.
It's pretty easy to prove this.
Is the number of cards in play finite? Yes. Can other people at the table get more cards than they begin with? Yes.
If someone can impact the number of cards left in the deck, wouldn't they have the potential to change your outcome?
I agree, but I also don’t see this sentiment coming from the industry itself, with the exception of some people who go along with that narrative to get some TV time. It really seems to me more like the financial TV media are the ones who feel threatened by the emergence of WSB etc. and portray it as if it’s the sentiment of the broader investing community. But largely that community is just excited by any novelty as it creates opportunities that boring times don’t.
Long run even the stock market only averages about 7%, and that isn't simple or safe - but it beats other asset classes on return. Asking for a risk-free 10% is pretty much a fantasy.
One weird thing about the amount of volatility in recent years is that people are simultaneously used to the idea that their "cash savings" earn approximately nothing, but turn their noses up at a 5%-7% return. Historically speaking this irrational.
there is a huger "we all" that don't.
That aside, you know what’s averaged returns of 10% that’s simple and hasn’t risked your money going to zero (assuming you have the good sense to buy and hold)?
The stock market. Bog-standard index funds, available to anyone and everyone. VTSAX has returned just about 10% since Jan 1, 2000. Ironically, it’s about double that for the past ten years (since the recession caused it to be roughly even over the first ten years of that span).
The average person doesn’t need to gamble on options to get ahead. They already do have access to products with outsize returns compatible with a level of risk tolerable for one’s retirement nest egg. What we need are jobs that allow the average wage-earner to actually save a meaningful amount of money in these instruments.
"Professional" and "expert" aren't synonyms. "Amateur" and "novice" aren't synonyms either.
An expert might be glad to go against a novice. But when there are artificial barriers separating "professionals" from "amateurs", barriers that have nothing to do with level of expertise, that's a different story.
Risk is one factor, but not the only one. The main factor in low-risk investment returns is time preference. In essence: People are willing to pay rent (interest) in exchange for access to money now rather than later. Those with savings can earn a profit by renting out their accumulated savings even in a risk-free scenario where return of principle is 100% guaranteed.
[1] https://corporatefinanceinstitute.com/resources/knowledge/tr...
/thread closed
While yields over the past year have been rather low at about 2% due to some very unusual circumstances, and T-bill rates are essentially negative at a mere 0.17% nominal yield, US corporate AAA bonds have a long-term average effective yield of over 4%[0] with essentially no chance of default. This is considerably higher than inflation and nearly risk-free to the investor. These corporations could instead have saved up the amount of the payments and had that money at the end of the bond period, but they wanted the money now rather than later, and that is why they're paying you interest.
[0] https://ycharts.com/indicators/us_coporate_aaa_effective_yie...
The answer is to increase the total investment rate via infrastructure bills or to just inflate excess corporate savings away with stimulus checks. Inflation will allow the Fed to raise interest rates, which will cut into the corporate savings rate and after that point everything will return back to normal.
Housing prices on average across the US, on an inflation adjusted basis cost the same exact amount per square foot as they did in the 1970s. They're twice as big now. And in areas where they are more expensive, it's driven by cities refusing to allow new construction to match demand. Simply a supply and demand issue, and a zoning issue.
Why do you think the others are specifically because people "close to the king" are able to capture all the effects? That's the part you haven't proven.
And it is just supply and demand, and you've addressed supply but what is driving so much demand, and why do participants in that market have so much more money to be bidding up prices.
And looking at inflation in different targets of money is something that economists do all the time when they divide inflation up between CPI and core CPI ex-volatile commodities. This is just looking at the things that rich people buy and the inflation in those things versus the inflation in the broader economy. We know the rich are getting richer, the gini coefficient keeps on getting more skewed, and the things that rich people buy are getting more and more expensive. You can't call this "inflation" though because economists object because they invented that term and they'd prefer to call it asset bubbles. But cantillon effects describes it a bit better. They're capturing more of the gold and prices are rising in the things that they use it on creating skewed effects in the rise of prices in the economy.
This is something a quick visit to Wikipedia will explain to you. [1]
> Since the 1960s, San Francisco and the surrounding Bay Area have enacted strict zoning regulations. Among other restrictions, San Francisco does not allow buildings over 40 feet tall in most of the city, and has passed laws making it easier for neighbors to block developments. Partly as a result of these codes, from 2007 to 2014, the Bay Area issued building permits for only half the number of needed houses, based on the area's population growth. [1]
They literally built half as many houses as needed.
> ... and why do participants in that market have so much more money to be bidding up prices.
That would be because of the number of high-paying jobs added in the Bay Area.
> At the same time, there has been rapid economic growth of the high tech industry in San Francisco and nearby Silicon Valley, which has created hundreds of thousands of new jobs. The resultant high demand for housing, combined with the lack of supply, (caused by severe restrictions on the building of new housing units) have caused dramatic increases in rents and extremely high housing prices. [1]
Remember, these are outliers as on average across the US, on an inflation adjusted basis, the $/sqft price of housing has not budged since the 1970s. However, zoning rules left the average new house twice as big outside of metros, and regressive policies in metros skewed the supply side of supply and demand.
Thing is, I'm frustrated because you're right to be mad but pinning this on the Fed is pissing into the wind. Put the blame where it's due: deregulate housing construction. Allow supply to grow to meet demand. It's not rocket science.
The only thing the Fed has done to raise the price of houses is decrease interest rates. A drop from 5% APR on a 30-year fixed to 2.5% APR means for the same monthly payment you can afford a house 25% more expensive. Fundamentally however this didn't change the affordability of housing for the borrower class.
The cantillon effect may account for some subset of this wherein wealthy borrowers with easy access to capital are able to take advantage of the lower price of housing (before bid up) and also the lower interest rates. However, I've found zero quantification of this.
[1] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage
[2] https://fee.org/articles/new-homes-today-have-twice-the-squa...
Before SPACs, retail couldn't get into IPOs at anything lower than $40/share...and even that was _after_ missing the initial pop that happens once the ticker starts trading.
Now that retail can get into (support) exciting companies at a MUCH lower floor ($10 for commons, $2.50 for warrants), "SPAC bad" hit pieces are a dime a dozen and some brokers (Merrill Lynch, for example) won't allow retail to trade them unless they have $n million in net worth.
Are SPACs riskier? Of course they are. Are they any riskier than IPOs (which can and do trade lower than first-day valuation)? I don't think so. Retail finally has a shot at the same pathways for wealth than IBs and others have had since forever...and we can't have that.
There are significant regulatory and disclosure differences that make it easier to be shady with a SPAC. If WeWork had gone with a SPAC there’s probably a lot of stuff they wouldn’t have needed to share
If the aim is to open trading directly to retail, a direct listing (like Coinbase) is all you need.
Hardly. They make money from the commissions
What, you think that "low-frequency" brokers weren't upset about the rise of HFT, and didn't try to push back/kill HFT in the crib?
Of course they did; HFT was classic "disruption" for their industry. You just didn't see that disruption happening, because an inside-baseball conflict between two groups of very rich businesspeople doesn't achieve anything by roping the public into the discussion. The public's opinion wouldn't have one shred of determination over which side won that conflict, so why bother spending money on mass-media propaganda? Mass-media propaganda won't do a thing to sway the rich businesspeople on the other side of the table.
The moralistic Op-Eds are happening now because one side of the current conflict is the public. And so the rich people on the other side now have great interest in swaying public opinion.
I find it hard to see how people are even thinking that it's the gambling that's being rewarded. It doesn't take much to check that pure gambling is unlikely you to win you money on average, and that those who do make money are (again, on average) doing something more than just gambling.
FWIW, I've been calling it gambling since I found out what the stock market is, because that is what it is. Can't speak for anyone else, though.
Personally, I think gambling is an atrocious activity. I am not religious in any way, either. I just think it is a horrible activity from a moral standpoint. Also, people who have gambling addiction do actually have one of the worst and self-destructive addictions out there.
There are other ways to gamble in life without actually gambling.
But what's happening is somewhat different. It's really an alpha strategy to trigger a short and or gamma squeeze. It's not a simple ponzi scheme - it's not zero sum.
Why should tech tycoons and .1 percenters be the only ones living with their head in the clouds?
Potentially interesting piece on the subject, but not particularly deep or insightful.
https://iamnotafinancialadvisor.com/DD/GME/og/GMEv14.pdf
It hasn't alreadys been like this, but everything has been turned into overdrive. Where people were talking about 10% returns on investments, people are getting 1000% returns on investment.
There is some bubble going on at the moment with the repo-market, hyper inflatation and what is being coined 'the everything short', but it's all too crazy to talk about seriously. Money has always been valuable, but will becoming a millionaire in a years time be the same as it is now? It's literally a field in a database, and a sheet of paper from the future could get you there! The stock market and crypto is so similar to gambling too it really pushes those triggers in the brain.
Buy and HOLD does run counter to this though, but still, we are all still dreaming of benefiting from the chaos.
I've been full on GME for a while now, and back in January, the shorts did not cover. Not even by a long shot.
Ask me anything about GME and I will try to answer, but it does feel like some kind of echo chamber at the moment, even though I am participating, but then again everything is so crazy at the moment regardless, it might just be true.
What's your thoughts on how many GME investors are retail vs. institutional? Any idea on what the breakdown is like?
There have been estimates using subscriber counts on subreddits and an average value which feels like complete BS, and there are some brokers who broadcast how many they own.
However, institutional ownership for the top 10 is 192%
http://finra-markets.morningstar.com/MarketData/EquityOption...
Even Finra don't seem to know properly, the sums don't add up.
> given the global financial crisis and the Fed’s “using a computer to mark up the size of the account,” money had been reanimated from the suspension of settled policy consensus.
Was this the moment when the author discovered fractional/no reserve banking? This and other things he says betray a lack of expertise about finance and economics (not to mention history). How is he writing a money column then?
> Maybe the Marxists would finally figure out how to abolish the value form? (Don’t hold your breath.)
????
I think a lot of that is the now of finance rather than the future. We'll look back on meme stonks like we do on the pets.coms and webvans.
There is a lot of liquidity. But liquidity has a bad habit of disappearing when margin calls are made.
Don't get me wrong, I'm gambling too. The choice is to join the speculation party or sit out because there is no value to buy. And I'm joining in, but my eye is on the exit.
1) In my CS ethics course, we had a writing prompt asking whether, assuming perfect capability, it would be better to replace sports referees with computers
2) I wrote a cheat program for a word game my dad liked playing. Super proud of my accomplishment, I showed it to him, and he was impressed for a minute before stating the game wasn’t fun that way (also have an earlier version of this memory involving a Sega Genesis Game Genie)
A better way to make money is with 3x ETFs using options strategies, which I am working on. The performance of some of the major 3x funds such as TECL, FNGU, and TQQQ surpass even Bitcoin
what? which funds pay 3x dividends? All of the leveraged ETFs i'm familiar with replicate the 3x exposure with futures contracts, which do not pay dividends. the drag exists when these futures contracts are in contango, where the back-month is more expensive than the front-month. The leveraged ETF pays that drag every time the fund rolls to the next futures. Nothing to do with borrowing costs.
This is also the reason why USO trends down long term, regardless of the spot price of oil.
Leveraged ETFs are very dangerous animals, though.
UDOW lost 17% in 2020 while DIA went up 8%.
When inflation is 3% YOY, but wages don't increase.
If money was an indicator of value wages would track with inflation.
There's no objective measure of value anymore and most jobs are more or less bullshit jobs.
Less people are working, and yet households are bringing in 32% more.
I'm sure the parent comment actually meant in the context of how it income has increased in relation to cost of living (though they didn't indicate that explicitly)
eg, https://www.investopedia.com/ask/answers/101314/what-does-cu...
It doesn't capture that debt markets - things like housing, cars, and tuition - have gone up. This is because the debt service payments haven't gone up, because they've lowered the interest rate and made it cheaper for people to pay for those things with debt (like most people do).
So, sure, if you live in a world where debt doesn't exist, and all you care about is purchasing homes in cash - then the Fed's measure doesn't work for you.
For everyone else, it does.
I'm sure you know you're talking to people who understand that debt exists.
But I don't think there's any world where you can be so dismissive in a serious discussion about this subject— especially when you assume everyone qualifies for the debt required to gain an advantage—and that those most likely to be unqualified are those on the losing end of the whole equation.
Personally, I don't know enough about it all, so I try to understand others' perspectives and background before moving to personal insults—or at least to be a little more direct and less passive aggressive if I have something I think is important to say.
Median household income increased because there are more dual income families.
If you're honest and look at pure wage growth it's stagnated for decades.
https://www.google.com/amp/s/www.pewresearch.org/fact-tank/2...
This is bollocks. Money will always be scarce, by design. Look at all the ppl struggling to get by even in spite of these stimulus checks, who lost their jobs or businesses due to Covid and still have not be rehired. The money that the fed is creating is not the type of money that individuals exchange with, which also explains the low inflation.
Rather, what everyone got wrong is, the experts, pundits, etc. in 2008, and now in 2020-2021 thought that all of this printing would cause inflation to surge, but CPI just refuses to budge much. This is due to many factors, such as America's growing economic dominance, which has widened since 2008 and even more so since Covid.
Source? Maybe uk is different but that claim isn't consistent with the CPI figures coming from the BLS. In your list of things food makes up the biggest part, and it's only up 3.5% YOY. Computers is actually down 3.2%. New cars/trucks is only up 1.5%. Used cars/trucks is up 9.4%, but that only makes up 2.71% of the basket.
https://www.bls.gov/cpi/tables/supplemental-files/cpi-u-2021...
I’m calling bullshit. Where we live, the air we breathe, who we know, all we see and experience in our culture is mediated by how much money we have. Money defines our existence.
What the author is noticing is a change in our attitude towards risk. After the past year people have hit the saturation point for fear.
If you want to take on more risk, great — but with great risk comes lots of market manipulation. The wider public is now learning what every MBA is taught in investment theory classes: investing is a racket where the house always wins. Either you play long positions in a diversified portfolio or you enter the water with the sharks. If you’re not sitting on a billion dollars, you’re at an extreme disadvantage in the options market.
And the biggest risk in corporate America today is negative PR. The sharks you’re playing against have the connections to get insider trading info, the sophistication to hide it, and the influence to get away with it. Retail investors are at their mercy. I guarantee Elon Musk is making money moves off his tweets, he’s just sophisticated enough to hide it in a trust. And he’s not the only one; hedge funds have been known to actively seek out scandals to generate negative PR, then trade on that info.
The vibe on Reddit right now is “the system is broken and they’re cheating like crazy”. But that’s no revelation, this kind of crap has been completely normalized because the SEC can’t stop it (the people working there are largely the ones who couldn’t hack it on Wall Street). I fully expect that Wall Street will end up coming out on top in the end because the retail investors don’t quite understand the role of market makers and the level of coordination done with the investment side of things. Yeah, it’s flagrantly illegal, but if you get away with it (as they almost always do because the SEC can’t prove anything) you’re going to be rich.
You can still make money off that -- the stock market is baccarat, not poker, and you can make money off betting on whoever cheats best, or fastest, or whose manipulation you think will win. The strategy is difficult but not impossible.
The S&P 500 P/E ratio is up over 40, a number it has seen only twice before and both immediately before crashes. P/E is an imperfect measure, especially during a genuine crisis that results in fewer goods being produced, but the idea that "it will take 40 years to produce enough profits to return your money" is a little scary. The pandemic is certainly contributing, but it's been heading this direction since well before the pandemic.
The broad market is still probably your best bet long term, and even if now isn't a great time we all know that timing doesn't really work. Stick it in a broad index and forget about it remains the best advice. But that advice eventually undercuts itself, if everybody invests in every company regardless of its merits just because it's listed. The listing itself is becoming a skew.
Yes. The historical market P/E is around 15.
Overall market P/E [1], and median house price / median income[2] are classic ratios to watch as indicators of how close things are to a crash. Look at those graphs. When they shoot way up, a crash follows shortly thereafter.
[1] https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-ea...
[2] https://www.longtermtrends.net/home-price-median-annual-inco...
That's been going on since 1914 when the US switched to a fiat money banking system.
I am pretty sure the government forced more people into poverty with the lockdowns. To treat the stimulus checks as some mind of boon when people were forced to close productive businesses seems intellectually dishonest at best.