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Comment by bruce511 | Hacker News Reader

The crash didn't happen because of 1 banker, but it did happen because of things he, and his contemporaries dreamed up.

Basically bankers make money when money flows. It flows only when "there is something better". So to keep making money there always has to be "something better" and ultimately that becomes unsustainable.

1929 was a re-adjustment, where all the bullshit is cleaned away. It was perhaps the first time it impacted such a large portion of society. An education of the masses if you will. Crashes did, and will, keep happening again - as long as the myth of "forever going up" persists.

In the early 2000s it was property. Today its (maybe /likely /probably) crypto.

At least today society is notably, collectively, smarter. There are a lot more naysayers in general, and whole there will be crashes, they tend to be more limited in scope and reach.

But greed, the root of all of this, will always be with us. Greed offers some to be winners, but most to be losers.

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I think it is properties again. And harder this time.

Except this time it is worse. It's not about the rising prices of properties, but the idea that there isn't something else more profitable than real state long term that makes me feel the economy is stuck in a bad place.

Cryptocurrencies are noisy news-makers, but their total value is still very small compared to basically anything else.

Property is intrinsically limited. Property in desirably places is especially intrinsically limited. You’re basically lucky if you own any property at all at this point.

Just take a gander and how much property in Hong Kong or Amsterdam costs and you’ll start to think it is cheap in the US. It’s only going to get worse. Do you think that people are going to desire living in Santa Monica or Queen Anne less over the next few hundred years?

Our planet is getting smaller relative to the amount of people that live on it and relative to the habitable places that exist.

Except why is no one asking the question why so few places are desirable and doing something to alleviate it.

Plenty of folks are, but if the thing you want to do about it is decommidify housing you get a whole lot of people saying, "that'll never work!" Without actually engaging with the ideas.

Plenty of ideas and people trying out there, just not much interest from the every day person.

Because housing policy is set up so that homeowners in desirable places are the ones who have control over whether more housing gets built there, and unsurprisingly they vote to enrich themselves at the cost of everyone else. The only way to fix it is to set planning rules strictly at the national level, but who's going to vote for that?

And - in all fairness - enriching yourself only is the side-effect, the major other output being "there now is a (more) desirable place".

People want to live at increasingly more desirable places, and that is true even more so for people who cannot afford to: If such desirability was no object in their quest, Detroit would be full of people, the Bay Area wouldn't have so many issues with housing, and housing prices would be a non-issue.

If the alternative is "everywhere sucks equally", which is the likely outcome of a national-level central planning, I doubt you will find many takers.

I live somewhere with national-level planning rules and it's brilliant (indeed it's the most populous metropolitan area in the world, and I don't think that's coincidence).

Without going too deep in Japanese real estate planning laws, iirc most I am aware of are more a "national guideline" and are frequently overridden by prefectures and cities. That's hardly on the level of actual national-planning, communist-style 5-year-plans.

> The only way to fix it is to set planning rules strictly at the national level

You don't even need centralized planning. Just implement a proper land value tax [0] so that the desirability of a plot of land has to be commensurately paid for by the owner.

[0]: https://en.wikipedia.org/wiki/Land_value_tax

Most of the time it’s because you get to live in a city and then also get to drive an hour and go hiking/skiing in the mountains or go to the beach. It isn’t very complicated.

> Property in desirably places is especially intrinsically limited.

Yes...but property values are way up all over. Boise, Phoenix, Nashville...even middle of nowhere Kansas.

El Paso is having it rough. They've always had super cheap houses to the point of unbelievable...what most would consider a decked out mansion for 300k or so, and a 3+ percent property tax. Guess what's happening now that everyone's regular ol 150k house is now worth 400k?

Valuable property will always have value, but the vast majority of US property is not so desirable. It's already stalled, and it's going to be a bloodbath next year.

The real question is what happens when all the buyers of the last 3 or so years are underwater? We either end up in 2008 again, or tons of bailouts which just pushes inflation further towards the houses being worth it again.

Why would they sell? They live there now.

Why also would builders not keep prices high buy produce less?

2008 was bad loans coming to head. I don’t think it’s going to be the same.

> Why would they sell

In many cases, they don't, they just walk away.

Would you stay in a 500k 2000sqft house that you have no equity in, when a 300k 2000sqft house was for sale next door? In a non-recourse state?

And even for principled people, when you lose your job or fall behind on something you overpaid for, it's really easy to just walk away.

Even in non-recourse states, walking away from your mortgage will decimate your credit score and preclude you from getting a mortgage on a cheaper property in practice, even if theoretically it pencils out on paper.

Because you have a 2.5% mortgage and your monthly payment is still smaller than than 300k house at current rates. This is going to be the main issue to me. People are just going to sit in all these houses with bloated prices because the rates they pay are so low, and prices are going to have a very hard time returning to anything close to what they were with inventory so low.

This is the situation I’m in. I’m in the Seattle metro and the mortgage on my 3 bedroom ranch is less than a 1 bedroom apartment in Seattle. I can commute if I need to but why would I ever give this up? I have 0 other debts which makes it extra compelling.

You will never get approved, unless you have workarounds. Even if you did that 7% interest rate will make it all even out for most people.

Boise, Phoenix, and Nashville are all very desirable, actually. Just not top tier desirable like the Bay Area, NYC, Austin, DC, and Seattle.

I didn't mean to insult those cities per se, I just meant their specific location isn't special. Near-ocean land in California can't really be built forever, nor elsewhere. Whereas, many cities like those I listed (and Austin you listed) don't really have anything inherently special about them, landwise.

> Do you think that people are going to desire living in Santa Monica or Queen Anne less over the next few hundred years?

Milwaukee and Detroit were pretty desirable not that long ago. Cuba was quite nice 80+ years ago. Hong Kong was desirable globally just 10 years ago. What is “desirable” changes from many other factors so property investments absolutely aren’t a given.

Land in the middle of nowhere barely beats inflation and has varying degrees of ongoing costs depending on the jurisdiction.

I doubt arable farmland has generally gone down over the long view.

The campesinos may disagree about Cuba being "quite nice" 80 years ago, what with all the slavery and rape. But yes, a seemingly good real estate investment for foreigners.

I think it's scarcity (or to be precise scarcity mentality, which would probably extend into post-scarcity). The very reason for trying to find profit in the first place, real estate crypto or whatever, arises from wanting to outcompete someone else for resources.

That is the definition of an economy.

That's a weird definition of economy you have, but you do you.

It is hardly a "weird" definition. Economics and "the economy" as a whole fundamentally deal with scarcity.

Figuring out the most appropriate use of a good or service given that its scarce and has a multitude of "other" uses is the core problem that capitalism tries to solve.

That's the definition of value storage. The economy works on greeds, realization of greeds, and creation of new greeds. Scarcity would lead to the greed of owning it.

Intro economics class our teacher posed a question "Would economics exist if everyone had a magic wand that could get them whatever they wanted?" I said "ya, cause someone would magic other peoples wands away then there would be an economy to restore peoples wands or grant wishes on behalf of people." Apparently that wasn't the answer they were looking for, but he said I might have some point. I think people just like messing with other people and that is inalienable.

In developed world, we already have all the goods we want and need, we spend a lot money on services. It is kind of like the world your teacher described :)

Ultimately though resource scarcity and more importantly scarcity mentality is still here.

Do you assume scarcity of resources is required for there to be a scarcity of products and especially services? You may still want to have someone cook you dinner without there being a scarcity of food. There is still art and stuff, live performances you may want to see. But no scarcity of resources, no need to fight for survival, the motivation to always optimize for profit at the expense of everything else

In theoretical microeconomics people's marginal utility per unit of effort is so low at some point that the marginal cost of additional effort exceeds the marginal utility and they stop working.

The expectation that every individual is trying to swallow the economy whole is actually impossible and the only reason why any individual would even consider pursuing that path is because for some reason the marginal cost of effort to obtain more utility is zero. In other words there is infinite demand for freebies but not infinite demand for things that require effort.

There is no such thing as a cost of zero, someone else will have to pay for it. It turns out the government offers a lot of free services that scale up with how much property you own and other people without property have to pay taxes to pay for those services.

If you own land you own a piece of the planet. How much is permanent ownership over a given plot of land worth? Millions? Billions? Trillions? Infinite?

Why would any sane person even run a business if the government pays massive subsidies (public services) to make your land more valuable? Just buy more land.

> How much is permanent ownership over a given plot of land worth?

> the government pays massive subsidies (public services) to make your land more valuable

Most of us have to pay taxes on property we own every year, pay for many of the public services (water, sewer, trash, etc.), and the benefits returned from taxes (like roads and police) are generally not worth the amount paid in a strict sense.

If you think a plot of land is oh so valuable, may I suggest you invest in some remote plots in Nevada, as there is no shortage, and they are quite inexpensive...

It's not the land that's valuable but the lands proximity to goods and services - in that sense, it's not fair that the value created by those goods and services is accrued by a private property that did not pay a proportionate fraction of the revenue sustaining it as the bulk of revenue is raise from other means.

This is where the Georgist idea of land value tax comes in.

Georgism now

> Most of us have to pay taxes on property we own every year, pay for many of the public services (water, sewer, trash, etc.), and the benefits returned from taxes (like roads and police) are generally not worth the amount paid in a strict sense.

If you don't think the benefits aren't worth it, why do you keep owning the property? Choosing to continue to own the property implies a revealed preference that the benefits outweigh the costs.

The biggest benefit from owning property is the right to exclusive use of a certain location for infinite time [0]. And the value of this right is proportional to how desirable living there is, which is made up of factors like economic liveness, proximity to nature, government services etc. The thing to note here is that while not all of these are due to government subsidy, all of these are the result of "other people's work"; you can just sit there and if other people do good work, the gains go to you.

Also, as a sidenote, most local services are not funded exclusively by property taxes: there's usually funding from things like sales and income taxes (either from that area, or transferred from higher levels of govt).

[0] - Minus property tax of course, but property tax is rarely equal to the benefit you get; if it was, the purchase price of the property would be 0.

I think you two are not on the same page about what the cost function is.

Because land is very easily taken away, so very easy to tax

It's not that easy to arbitrarily raising land taxes without doing a lot of economical damage. But you have a point: The land is inside a country and the country make all kinds of rules.

In theory, yes, but the last few decades show the opposite is happening: property tax rates are limited in many states (CA prop 13 being the prime example), and income taxes and sales tax fund more and more.

For example, the federal govt's total revenue is 6 times the total property tax collected in the US (and this ignores state income/sales taxes).

In California specifically, just the personal income tax alone is more than the property tax collected. Once you add in the other sources, property tax revenue is half of non-property tax revenue.

> Because land is very easily taken away

Really? Are you referring to eminent domain? Unless you are going up against a highway, landowners have a ton of protections, in the US anyway.

Tax liens are a thing.

I think when people forget that the crisis in 07/08 wasn't just a dip in property values. The entire financial system had managed to get itself propped up on extreme leverage against the single bet that mortgages would almost never default. That extreme leverage put the whole system in a highly unstable state, and it took just a little stress to pull the whole thing down. It collapsed the entire risk management systems of banks, funds and companies across the entire economy. That meant that there was nobody in the market that could lend, and everyone needed to borrow to try and plug the gaping hole that was ripped in their balance sheets.

The financial system just isn't completely levered to housing that way today. Today, an economic slowdown might lead to a dip in property prices, but to find an event that would cause widespread and long-lasting damage to the financial system I think you're going to have to look elsewhere.

> But greed, the root of all of this, will always be with us.

Greed isn't the root of all this, because greed was present at times when the market did crash, didn't crash, generated enormous real value and at all other times. Greed is just a mindset that makes people act, a bit like a fuel for activity. Fuel is associated with forest fires, but fuel isn't really a root cause.

5 years of confusion in the stock market isn't even that interesting. We shouldn't be talking about it almost a century later. Our stock market isn't even connected to the performance of the real economy like it was back then, modern markers went up during COVID and down with the recovery, because central bank policy has successfully dissociated reality from returns.

Really today its crypto? The tiny market and not the massively overpriced tech stocks trading way way above earnings. They have just slightly corrected from the covid mania but many are still trading at ridiculous multiples that everyone justifies with “they will keep growing”

Not exclusively crypto, but when I see adverts for crypto on TV, and hear it pitched over radio, then I wonder.

At that point it's appealing to the least sophisticated investors, which to me is the first signal of a bubble.

The nature of a ponzi scheme is that it starts small, but then has to appeal to an ever larger group. This ends with mass advertising to reach the biggest group of all. Then what?

Couple this with the tone. Crypto is being marketed as an investment, not as a utility, not as a currency. Its sole appeal is "it will go up".

Crypto itself is mostly a solution looking for a (legal) problem. While the killer app is facilitating illegal activity (which has some value for moral, but illegal activity - alas a minority of the actual use case) that's a hard sell. Finding a legal killer app though is proving elusive. Most things it _can_ do are already done better/faster/cheaper/simpler another way.

Of course it has some utility, but nowhere near the hype levels.

Tech stocks - yes, they are high, and will likely correct some. But apple, Google, Microsoft, amazon, Facebook and friends are all generating huge amounts of revenue and profit. Their stock values are massive, but their profit levels are unprecedented.

Startups get a lot if attention, but from VCs which is not public money, and not traded to the public, so is a different kind of bubble, unrelated to the 1929 depression etc.

You may be on to something here. JFK's father, Joe Kennedy, famously got out of the stock market before the 1929 crash after the kid shining his shoes gave him stock market tips. That's pretty much the equivalent of TV and radio ads for crypto.

Every time someone says cryptocurrencies are 'a bubble' I know they are not paying attention.

Or for some reason think there is going to be a single event that will finally end cryptocurrencies. Or they have an agenda and want them to end.

It's not a single bubble, that stuff happened several times already. They lost more than 50% of their value in a short amount of time, several times already.

It's a boiler. Its periodic bubbles, over and over again. Price fluctuations, slow climbing, then fast climbing, then it goes down, repeats. It has happened already, and it will be happening again and again.

Every time you will be watching, thinking: this time, this is 'the big bubble' and it will burst and cryptocurrencies will be no more. Except they will continue boiling, prices will go up and down, and you will have to wait for the next time.

I don't think anybody is expecting cryptocurrencies as a whole to cease to exist. I do think a lot of people, including myself, see the current turmoil in the market as only a precursor to what will happen if/when Tether implodes and a whole lot of funny money is suddenly sucked out of the system. In crypto history terms, this would be a Mt Gox level event, which crashed prices by over 80%: https://en.wikipedia.org/wiki/Mt._Gox#/media/File:Bitcoin_ex... (log scaled)

Exactly. I expect that to happen to tether eventually, just because of inflation.

There's also the probability of a 'flippening' event in the future, because ETH is no longer PoW. So ETH would switch to be the #1 currency. Or maybe not.

But the cat is out of the bag, and cryptocurrencies are here to stay, and I would even say in any four year period they will still gain more than any other kind of asset for the foreseeable future.

I agree that it's bubble and bursted several times. The key part of the rescue though is bringing in new money with another level of investors.

The current level seems to be pitched at "everyone". After that there's not much place to go. There are some territories currently excluded and they may come into the fold, but probably won't.

The root problem is that it's utility is limited, and as yet has not found a way to grow that utility in proportion to its overall growth.

By contrast a stock like say apple seems (and may be) bonkers, but apple has shown consistent utility growth. They improve sales by appealing to more market. People by an iPhone to use it, not to keep it and sell it for more.

Of course crypto may not crash. Red flags don't mean certain collapse. They are, after all, just red flags.

That's what they keep saying throughout history, yet it seems that tech industry as a whole just wants to reach these highs over and over again. I wonder why ? Could it be because it's the superior business case, which can reach global markets at ease ?

Oh noo... noo how can that be... my wood workshop in Agbogbloshie Dumpsite, Ghana has the best business model known to mankind, how can it be that it can not compete with BigTechCorpo123 ? Oh.. I don't know... maybe because BigTechCorpo123 can sell their product to the whole world at ease while your wood toys have to be shipped by vans ?

> At least today society is notably, collectively, smarter. There are a lot more naysayers in general, and whole there will be crashes, they tend to be more limited in scope and reach.

Is that really true?

No, society is getting less smart. Average IQ is falling and has been for almost half a century, which has been obvious to anyone who has lived through it.

AFAIK you have this exactly backwards https://en.wikipedia.org/wiki/Flynn_effect

The Flynn effect ended and reversed decades ago. In developed countries at least. It would be pretty sad if it has reversed in developing countries.

> At least today society is notably, collectively, smarter.

My pessimistic view will say greed will wipe out any "collective" smartness and the cycle repeats.

1929 wasn't a readjustment and the early 2000s weren't about property and no we are not "...notably, collectively, smarter."

Stay in school.

> it did happen because of things he, and his contemporaries dreamed up

Well yes and no. The common root of all evil behind all the bank runs and market crashes throughout the last 100 years is monetary inflation. It is not a coincidence that the worst economic crises happened after the installation of the Federal Reserve.

For a good general overview on this topic I recommend reading „The Ethics of Money Production“.

1929 refuted the notion that “what goes down will come back up.” Society in the US pushed hard for decades to investigate and protect against similar market conditions through banking regulations and oversight. Galbraiths work is worth reviewing on this. (The sad truth is much of those safeguards were dismantled by the 50s.)

Definitely history worth studying.

>At least today society is notably, collectively, smarter.

Intelligence has gone up, Wisdom has declined

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