The money is the message
drorpoleg.com
drorpoleg.com
The article is silly. In the real world, business people pay close attention to interest rates because we borrow money. We borrow money to smooth volatility, to manage inventories, and to invest in products/services. Interest rates are FAR from meaningless & simply the expectation they will be changed is enough to make many business owners change behaviors. At present we are watching interest rate changes vacuum up global liquidity, cause the USD to rise, and make US goods more expensive worldwide. Investors - invested in these businesses and with their own exposure to rates - pay close attention to rate jawboning and actual rates
I haven't thought enough about this to know if I agree or not, but that is what I understand the author's thesis to be.
A central bank setting base interest rates based on desire to converge on inflation targets rather than something completely arbitrary like the availability of a certain grade of shiny metal doesn't convey less actionable information, it conveys more.
The point is if you have a mandate pulling you to decrease a number and another equally important mandate pulling you to increase a number, it's kind of meaningless. You're essentially reading tea-leaves. You can justify anything really. I would prefer the central bank to control inflation as a single mandate through something like the Taylor Rule [1] and leave the employment mandate to the Legislative branch
[0] https://www.stlouisfed.org/publications/regional-economist/a...
[1] https://www.investopedia.com/articles/economics/10/taylor-ru...
Why is it so popular to complain about government intervention distorting the value of money, but is it a faux-pas to talk about banks and stock markets distorting the value of money by hiding unsecured debt behind nebulous contracts or ridiculously overvaluating companies?
> Economics as a whole is basically a right wing social science.
theres a reason they used to call it 'political economy' instead of just 'economics'...
Just as a thought experiment, try to restate that with the poker analogy.
1. behind nebulous contracts
A bluff. You are bidding up a hand so people believe it’s a good hand.
2. ridiculously overvaluating companies
Bidding up a hand because you know the other side can’t afford the risk (they can’t match you when you up the ante, doesn’t matter how good their hand, modest institutions won’t take the risk), so you can take the pot just economically.
Overvaluing a company is to make the sale look attractive to investors (it’s 50bn, must be worth a shit right). Once you have them, your job is done, take the pot, drop the value. A retirement fund can’t stand up to “we need crypto exposure in our portfolio”, they’ll fold and take it.
———
The point is, the economy has this psychological element. What most people are not ready to hear is that in this game, the psychological games leaves any side either fleeced, caught, exposed, or downright unlucky.
That’s why it’s unnerving, because our economy is supposed to be numbers in, numbers out. But it’s not.
It’s not the money that’s the problem, it’s the psychological game.
———-
Government debt printing is the most optimistic psychological game we have in the economy. It’s a bet on the future potential of the country. It’s a risk, the country may not be what we think it’s capable of in the future. But it’s far less insidious than the other psycho tricks.
Print too much and the big money poker game (capital formation) moves elsewhere.
Through immense propaganda and conditioning of the public by the publications of those very financial organizations, of course. Private entities can do it to maximize their profit at the expense of everyone else. Everyone else cant do it to maximize the benefit of everyone.
Its socialism for the rich. capitalism for the poor like always.
Most mortgages, at least in the States, are fixed rates.
Also, mortgages are almost entirely regulated. There's almost nothing a business can do in the mortgage sphere that wasn't specifically allowed by the feds.
Just look at loan sharks for a view of what banks sans regulation are.
It's like going full stupid. Never go full stupid.
Well over a million people during the 2005-2006 frenzy - https://www.stlouisfed.org/publications/bridges/spring-2007/...
> It's like going full stupid. Never go full stupid.
It's more like a bunch of sophisticated bankers and lawyers used their Ivy League education to trick working class people into a financing agreement they couldn't understand or afford. Your version seems kind of rude to people who have better things to do than learn the intricacies of finance - that's why government (some of the time) is good - they regulate bankers so that regular people can just buy a house without worrying about elite mendacity taking away their home and savings.
No, goverments never shrink themselves. The political class only vote for power growth over the population. There is no correction to that unless there is a popular revolt that takes them out.
Political class power expansion is always growing. A little regulation removal, a little pullback, doesn't make them not to stay power growth bullish. If you see that rule isn't fair to what is generally happening countries, please prove me wrong, show me in history in what countries the political class went bear on power growth without a revolt or revolution. Again, not a little pullback, but a bearish correction.
What are the chances of the political class individuals current psychology suddenly make them agree, collectively enough, to say "hey, let's make ourselves this amount of less powerful for the benefit of the people"?
It simply doesn't happen because before even trying, their propaganda collapses so bad that people revolts on the realization of the lies and revolt and replace their political class or even system. The left is a master at this by the way, that's why a good limiting constitution might be the last source of hope.
I fundamentally do not agree with that viewpoint.
You seem to be of the mindset that governments cannot improve as an axiom and only the free market can. I categorically disagree with that kind of view
I am leaving that quantity of chances as theoretical room for the possibility, so no, you saying I have an axiomatic "mindset" about it demonstrates an issue you have reading my "mindset".
In any case, we're digressing, you have way more faith in the political class than I could ever have. That is way too much blue pill for me.
The chances? Definitely more than the zero you make them out to be because they have explicitly reduced their power in the past. If you want an exact number that's a ridiculous ask.
>I am leaving that quantity of chances as theoretical room for the possibility, so no, you saying I have an axiomatic "mindset" about it demonstrates an issue you have reading my "mindset".
I am referring to you having an "axiomatic mindset" in regards to the government never improving, because you literally said
>No, goverments never shrink themselves. The political class only vote for power growth over the population.
If that was in the heat of the moment and needs to be modified to be more specific, I'm willing to hear it. But if you are standing by that statement I can't see any interpretation other than that you believe governments are incapable of improvement with regards to releasing power
Have you heard about Negative Dialectics?
Money Is Energy: George Mobus Discusses Biophysical Economics and Alternative Theories of Value - https://www.financialsense.com/contributors/george-mobus/bio...
Bitcoin as Battery - https://www.nickgrossman.xyz/2021/bitcoin-as-battery/
Bitcoin Is Not a Battery - https://www.aier.org/article/bitcoin-is-not-a-battery/
The medium is the message - https://en.wikipedia.org/wiki/The_medium_is_the_message
Cybernetics - https://en.wikipedia.org/wiki/Cybernetics
Blind men and an elephant - https://en.wikipedia.org/wiki/Blind_men_and_an_elephant
Energy changes behaviour (that is literally how we reason about behaviour; in terms of energy).
Let me try to justify "energy = persuasion" (which a very hippie way of seeing energy)we factor persuasion into the information that was presented and then the trust you place in that information. The more you trust the information the more it affects your behaviour. Clearly this is contextual! Depending on how you choose to interpret information you may have different assessments of trust.
Energy is a more materialistic concept, the information would be the matter I suppose while the trust (which is contextual by above) has to be an assessment of the relation this information has to other information (matter in this case), i.e. you can easily obtain some kind of newtonian physics (drawing in the forces acting on an object as a way to assess how to trust this information in the context of material world).
I think that we will soon be mature enough to accept that this is the case and we will be willing to read https://datalisp.is (so I don't have to write this over and over again).
Legitimacy essentially has a similar role to gravity. It is a force acting on the trustworthiness of information; thereby affecting its' persuasiveness.
Right, because the supply is elastic without any direct cost of manufacture. The idea that interest rates will go down when a lot of people start saving is based on the implicit assumption that the supply is more or less fixed. But that hasn't been true for a long, long time. As long as banks can print money (ie, lend more money than they have actual deposits), the saving rate will not significantly affect interest rates, even leaving the Fed out of the equation. (See, e.g., https://www.investopedia.com/articles/investing/022416/why-b...)
The danger of government money-printing is that the government ends up distorting the supply of money entering various industries (especially through big government contracts) and thus, to some extent, ends up determining what is profitable and what is not profitable... Then we end up with an economic system wherein winners are selected not on the basis of their adherence to the needs of working people, but on the basis of their adherence to the whims of government bureaucrats.
I think the problem both has to do with incentives (since government bureaucrats do not 'own' the climate; it's not really their problem) and also with capabilities (they generally do not have the scientific knowledge/qualifications or the critical thinking skills required to be able to effectively make such decisions). Climate change is a very complex topic, it's probable that nobody in the world fully understands all the dynamics which drive it because every single thing (living and non-living) which exists on this planet is a factor contributing either towards or against global warming and everything is interconnected with complex feedback loops... So it's difficult to see how politicians who do not have any scientific background would be able to know how to allocate funding to fight climate change.
There are also many scientists who reject the notion of man-made climate change altogether; in this case, the whole global warming narrative could be seen as nothing but a giant financial scheme to launder freshly printed money from governments to large corporate entities under the ESG label.
> Climate change is a very complex topic everything ..interconnected with complex feedback loops.
Main driver of global warming is CO2/methane levels. Main drivers of CO2/methane levels since the industrial revolution are human.
That's not complex.
> There are also many scientists who reject the notion of man-made climate change altogether
This is only true if you are loose with your definition of "many" and/or "scientists".
The reason for the apparent confusion over climate change is a well-funded long-term initiative by the oil industry to create confusion by creating fake complexity and doubt.
Humans only contribute around 3% of total CO2 emissions... That's almost certainly less than normal year-on-year variability of CO2 emissions from purely natural sources. The level of volcanic activity (which, on its own contributes more CO2 than humans) is not the same every year. It's difficult to see how human impact on climate change could be significant.
Another thing is that CO2 is good for plants and trees; so increased CO2 should contribute to global greening; and there is evidence of this occurring. Since plants consume carbon dioxide, one would think that more plants and trees on earth would mean that more carbon dioxide would be taken out of the atmosphere. It seems like mother nature has already figured out how to achieve CO2 equilibrium.
Do the climate change models account for things like global greening? Do they account for the fact that plants can evolve to adapt to a changing environment (with more CO2) through the process of natural selection? A good environmental model would have to account for all the different plant populations around the world and their DNA changes over time... We would have to understand how plant genes affect CO2 consumption; and the simulation would involve trillions of variables and probably require millions or billions of times all the world's current computational capacity to compute accurately. That's barely scratching the surface of the complexity. It's arrogant and disingenuous to suggest that it's simple.
All scientists have been able to establish to far is correlation. There is no evidence of causation. Establishing causation is likely impossible due to the huge number of variables involved. Not only do we not fully understand how all the variables interact, we don't even know what all the variables are because the earth is so complex and massive.
If you look at a chart like this, and think: hmm, this is probably fine, you've completely lost the plot. Something is going to happen from this, and its probably not going to be fun.
- Increased volcanic activity or other natural events (e.g. solar activity) causing this spike in CO2.
- Flaws in instruments used to accurately measure CO2 levels in the past due to some variables which have not been accounted for.
- That it could just be a temporary spike which will be offset by global greening, increases in ocean phytoplankton or some other natural events over the next few centuries.
In fact, a quick google search: ``` While sulfur dioxide released in contemporary volcanic eruptions has occasionally caused detectable global cooling of the lower atmosphere, the carbon dioxide released in contemporary volcanic eruptions has never caused detectable global warming of the atmosphere. All studies to date of global volcanic carbon dioxide emissions indicate that present-day subaerial and submarine volcanoes release less than a percent of the carbon dioxide released currently by human activities. [https://www.usgs.gov/programs/VHP] ```
Even if it were true that humans contribute less to global warming than scientists think, we should still try to decrease our overall CO2 output because it's still a contributor to climate change, albeit a smaller one, and the majority of processes that lead to us putting CO2 in the atmosphere are unhealthy in other ways. In the US 50% of greenhouse gas emissions are attributed to transportation and energy production. I think we'd all agree that burning fossil fuels is not great for our collective health and car/airplane exhaust fumes are full of stuff we don't want to breath.
What is arrogant and disingenuous is to argue that as something is complicated, scientists' models can't possibly hope to compete with your desire to seek out misinformation on the subject
That said I also wouldn't say that there is no global warming or that humans have no effect on it. I just think humans often overestimate their knowledge and capabilities, especially when there is a financial incentive for doing so.
> They keep changing models every few years and using 'technology has improved and made the old model redundant' as an excuse for doing so as opposed to 'the old model turned out to be wrong this year so we decided to switch to a newer model which has been right.
I’m unaware of any sort of major pivots like that happening each year. From what I’ve read it’s been pretty consistent for decades that increased co2 in the atmosphere is causing increased average heat on the planet and humans are the primary cause of the increased co2. The exact results of what that extra heat does/will do isn’t nailed down but the main point of global warming is accepted science
Of course, the exact opposite is true. There is now absolutely no doubt whatsoever that global warming is happening and that is is caused by the vast amounts of CO2 and other GHGs that our industrial activity is releasing into the atmosphere. There is a long history of fundamental science (chemical+physical quantifiable measurement of the warming effects of GHGs), historical data from geological records, statistical climate modeling and so on that is as established as any other of the earth sciences.
On the other hand, Economy can only vaguely be described as a science, with extremely over-simplified models that fail consistently, with very little theoretical or empirical evidence to back up the vast majority of its proponents claims - and with nowhere near the standards for what is considered "evidence" that physics or the earth sciences ask for (in terms of statistical measures).
GHG:s and their warming effects are solid science. This can be tested out in any lab.
Statistical climate modelling, and the historical climate reconstructions are much more shaky and are probably not much more reliable than economics is. And probably for the same reason too: Experiments in those area are very difficult to perform.
The reality is that various market participants have powers the others don't. One can argue that the law treats me and Goldman Sachs the same. (I'd also argue that's false, but at least there is a kernel of a case there.) But nobody can argue with a straight face that I have the capabilities to make the same bets. Repeat in thousands of different ways for different actors.
Similarly, the government has special powers that others don't. Indeed, if you treat "government" as a monolithic entity, it is certainly the most powerful actor. But it it just another actor. (Or rather a number of different actors in different contexts, sometimes fighting with each other.)
When your simplifying assumptions don't work, you have two choices. Change your model or complain about reality. The Austrian school has made a philosophy out of the second.
[1] The idea that choosing to feed your kids is a voluntary act but choosing to pay your taxes is not runs contrary to most peoples' moral intuition.
This should be on a t-shirt, I feel. Or on a tegeltje (https://en.wikipedia.org/wiki/Tegeltjeswijsheid)
Smug-ass more-logical-than-you tone (which is itself part of the con, so you feel good when you identify with them and start to repeat their arguments, and can more easily dismiss other ideas as "emotion-driven" or whatever, so you don't slip away from the pack) while apparently hoping I won't notice the parlor tricks they pulled near the beginning where they were relying on folksy, naïve definitions of key terms, and trying to sneak poorly-justified premises past me. And it seems to work on lots of people, is the worst part. Damned charlatans.
You mean like Uber or WeWork? Just remove "government" and it works just as well. Let's not pretend that the government is the only entity that distorts the market and pushes through preferred solution regardless of "the needs of working people".
Hmm... maybe its not that clear b/c I still have no ideal what we should takeaway from this article.
People naturally loath feeling out of control. Sometimes control is an illusion, other times it has a solid foundation and is not a mirage. The trick is to recognize real control and see some value in that. We cod ourselves when control is an illusion.
But the real problem we're facing is that we can't paper over the drag by an unrealistic financial system because we've run out of energy and energy security got pushed off the table by people who only cared about destroying fossil fuels. We needed broad consensus that a Chernobyl every 50 years was a perfectly acceptable price to pay vs. the looming resource wars we see warming up over dwindling oil. And the background issue of overpopulation.
The Asian countries that pulled themselves up from poverty to being rich countries all had industrial policies, where credit was allocated to chosen industries. How well those choices were made had a strong influence on how well that worked. (See "How Asia Works", Studwell, 2014.)
The US has industrial policy through tax policy. It's determined mostly by lobbying. Financial activity is encouraged; most internal transfers within the financial system are not taxed. (They could be, and it's been proposed; that's called a "Tobin tax"). There's a strong tax bias in favor of owning real estate. Debt, which is not taxed, is favored over paying dividends, which are taxed. Certain types of farming are encouraged.
Those parts of policy are not adjusted very often.
The acceleration of interest rate manipulation/interference to the point of full breakdown as a meaningful indicator of market participant time preferences.
It's a good thought but I'm left needing a "10 WAYS TO PROFIT FROM MARKET UNCERTAINTY" tweetstorm.
What is an efficient economy in the author perspective?
“Chaos is a ladder.” - Some ambitious financial bureaucrat in some universe. :)
If you want to make that analogy you will at least have to pick the right one. Money is more like blood. If money doesn't circulate throughout the body evenly it will develop necrosis or even die. If the organism grows bigger it will need more blood.
>"money is the channel through which we communicate with distant strangers, the original social media... distorting media distorts the way society talks to itself."
This is correct but what this means is that not communicating at all, i.e. never spending your money and never sending a price signal is the worst form of distortion because it breeds speculation on the supply side. Since no price signal is sent, nobody knows what to produce, people will have to blindly invest into the future and hope they are lucky. The cunning ones will try to coerce people into sending price signals by creating artificial needs or reducing production until scarcity sets in and people have no other choice other than to send price signals.
>Hence, prices expressed in money and the price of money itself are the lifeblood of the economy (I mean "the nervous system". Both metaphors work!). By "the price of money," I am referring to the interest rate money earned by doing nothing. Or, more accurately, the interest money can earn from being deposited in a bank. Interest rates indicate the supply and demand for money.
That is only true in a loanable funds model, which in theory isn't a bad idea but that isn't the money system we have right now. In a money system where deposits are created through loans the supply of money is in theory infinite, the idea of a price of money being the result of the supply and demand of money becomes illogical. Insteady the optimal rate of interest depends on yields in the real economy.
>In light of the above, it is common to say that intervention from governments and central banks "distort" money and makes it impossible for investors to get accurate information from the economy
Indeed, central banks and governments act in the worst kind of price control imaginable. A lower bound on interest rates combined with a deposit insurance and bailout scheme that effectively guarantees this price control. This effectively means vast amounts of capital are on unemployment support. The zero lower bound has become the minimum wage of capital.
Due to the speculative benefits of liquidity, people aren't going to lend out their money in long term bonds unless the interest rate is sufficiently high. This liquidity preference effectively acts like a constant which is applied on the lowest possible interest rate. 0% (zero lower bound) + 3% (liquidity preference) = 3%, therefore yields on money must always be positive or new money must be created exponentially (inflation) to avoid paying the 3% interest floor.
A minimum floor on the yield on capital means you must grow your economy by 3% just for incomes to not stagnate, for the standard of living to just stay the same! This isn't growth for prosperity's sake, it is growth just to keep food on the table! If you refuse to pay this yield, money will stop circulating, blood will stop flowing, the organism will die. So governments have decided that we won't pay the yield and must create more blood, fully aware that the blood is being lost via a hemorrhage that will grow and eventually burst.
One last word. If the interest rate on money is supposed to mirror the real world, then what does a positive interest rate mean? It means there is a shortage of capital and that the economy must grow. A zero interest rate means that there is no shortage and all capital is being utilized. A negative interest rate means there is more capital is more than enough capital and that we don't have to utilize all of it. In other words, the latter permits there to be slack in the economy, it allows for supply to outstrip demand and any prosperous economy should be able to do that.