Things That 0% Interest Rates Caused | Hacker News Reader

Things That 0% Interest Rates Caused

youngmoney.co

40 pointsjpn19 comments

Some of these were done by 0% interest rates (especially VCs who get those low interest loans first), others happen with unlimited base money printing as well (NFTs).

I don't know which one is coming after this recession, but one thing is sure: politicians are not the most fiscally responsible person, and they will print money some way.

One more thing that's even more scary is officially not having 0% interest rates, but having more and more exceptions to the rule.

Which recession is that exactly? There's no evidence of any at the moment, did you see the jobs report? If that doesn't matter, what's criteria?

I don't follow how 0% interests rates caused the NFT boon.

Does the author imply that if the interest rates fell back to 0% the NFTs would take off again? I have hard time believing that.

Notably the author misses the main effect of 0% interest rates: cheap mortgages that drive up home prices.

I think the argument would be similar to that for the art market in general (which is cyclical):

Low borrowing rates allow cheap speculation on NFTs. The artificial scarcity of particularly well marketed NFT "collections" means their value will appreciate. The NFT can itself be used as collateral for a loan. That new loan can be used to pay back the original loan used to buy the NFT in the first place. And since the boom is happening your NFT from the scarce and popular collection will continue appreciating in price. If you were smart and bought 10 NFTs from the exclusive collection you could pay off the original loan from the sale of, or a loan collateralized by, just one of the NFTs, giving you a net 9.

Start factoring in tax write-offs or whatever and who knows.

Now eventually this falls apart, but as long as loans are cheap people can keep this up for quite a while. It's quite amazing that someone spent half a billion dollars on even an original, "lost" da Vinci: https://luxe.digital/lifestyle/scene/most-expensive-painting...

I find the logic a bit strained,

get a loan -> buy NFT -> sell NFT cycle was sustained by 1000% rises in the NFT prices, not by the 0% interest rates of the loans.

Hence my incredulity towards the claim that 0% interest caused the NFT boom.

No, it wouldn't be the cause, but it is probably a contributing factor.

Lower loan rates increase the number of people who both are willing to risk taking out a loan to buy something on FOMO grounds, and who are offered the opportunity to take out a loan in the first place.

Lower loan rates also allow easy access to the money needed for wash trades and the like that allowed NFT (and cryptocurrency) market manipulation.

Chicken or the egg? Maybe nft prices went up because people had a bunch of free money that they had nothing better to do with

It seems pretty clear to me that the NFT boon was driven largely by the free COVID money people were given, combined with everyone trapped at home and bored.

Does the author think 0% interest was just a phenomenon of the past 2 years? I expected an analysis that went further back than just a cursory look at what happened to the world during the pandemic.

1. Day Trading as a career always was true, 90s, 00s, 10s, and 20s. No need for zero fed rate. Its not like WSB has gotten much crazier IMO. I think "meme stonks" became a thing due to zero-interest-rates but... optimistic day traders? That's always been true and still is true with higher interest rates.

2. SPACs... seems zero-percent ish. A pile of money that sits around and does nothing makes 0% for a year. Fine with 0% interest rates, terrible when the Fed Rate is 4.5% (its like you're losing 4.5% against money market funds).

3. ESG -- I think people want to invest more socially responsibly. ESG has its flaws, but the idea of ranking companies on environmental / social / governance metrics and then using that to change the %investment is a laudable goal. I think ESG needs to learn how to conduct its metrics, but I don't think I really disagree with the premise.

4. Sure. Legit point.

5. N/C. I'm too ignorant of Miami and didn't realize this was a thing at all.

6. NFTs, and their closely related Cryptocoins (see Ordinals) are terrible ideas IMO. I think they would have happened anyway, but a lot of people threw money into them because of the excessive money that was floating around. So I can see the correlation at least, but its a bit indirect.

7. Adjusted EBITDA has always been a thing as far as I can remember. GAAP is rigid and some people want flexibility in reporting. But everyone also knows how GAAP is supposed to be reported / audited.

8. Silicon Valley specific IMO and I don't think its related to rates. When in a boom, your amenities naturally increase. I'm not sure if the tech-boom of 2020 was only caused by zero-interest rate policy, the natural result of COVID19 / work from home protections also increased the amount of money the tech sector got. (see Zoom and other such online services).

9. Video games are surprisingly expensive. XBox famously lost money at Microsoft, and I'm reminded of the huge amount of effort that went into AIs that understood the human skeleton for video-video games, like Kinect and this abomination: https://www.youtube.com/watch?v=lg_FoEy8T_A .

10.See #8. During boom periods, managers will turn a blind eye to such behavior.

11. Cathie Wood's ARKK funds definitely are high-beta that would perform poorly as zero-interest rate policy lifts. I think this is a legit point.

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#2, #4, #6, #11. So I guess I agree maybe 4.5/11 (since I'm too ignorant on the Miami point, i'll score that .5).

EDIT: I guess I half-agree with #8 and #10. A lot of things were going on in 2020, zero-interest rate policies were at best, a partial cause to the conditions of 2020 / COVID19 tech boom. So maybe a half-agree on two more points pushing the score up to maybe 5.5/11.

> Miami

Personally, I'm giving Miami a try. And I disagree that its a Zero interest rate phenomena. Its a phenomena, of people leaving the most Beautiful state, California, for something that is not exactly a paradise because of California's extremely poor government. California has gotten so bad that people are actually moving to Texas, can you imagine that? Most of the people who are leaving are California's middle/lower middle class and the trend has nothing to do with tech or zero interest rates. And with respect to my "poor governance" comment, I'm not talking about GDP, or real estate - I owned a home in Berkeley (that was of course broken into). I'm talking about the absolutely depressing vibe caused by homelessness, the spike in anti-asian hate crimes, petty crimes, squalor, and Fentanyl deaths. Its impossible to solve, because California needs Republicans - and that's not going to happen for cultural and demographic reasons (way way too many boomers - the 60s generation rules)

I made the decision to leave California because it became a different and depressing place after COVID. Have you been to a store lately? Everything is behind plastic. Need cleaning supplies or dog meds? Then find a Target agent to unlock the plastic case.

I won't close the door completely to returning to California. I love California, the state, the place and the idea. It was once the place you'd go to get away from Orthodoxy, once a free place, once a vibrant leader who could deliver great projects. But it has become a place of extreme orthodoxy, a high tax, low service, failed state. And its getting worse every year. Homelessness and squalor are spreading to the suburbs. And it does make me sad to leave the place, but like I said, it was just getting depressing. Walking over bodies is not something I can easily ignore (As Californians - we can't talk about these things).

So far Miami is okay - there is no crime at least in comparison to SF, the East Bay and South Bay (I think California literally lies about its crime statistics), The weather is always 80, the beaches are better (the water is like bath water), there are no taxes, and the cost of living is much much better than SF.

Will Miami become a tech hub? I think it could happen if you study the number of companies leaving California, New York and other blue states. California will experience a negative feedback loop - as more companies leave the state the tax base will be reduced, reducing services, causing its problems to be exacerbated, which will lead more companies to leave the state. Of course, this is balanced by California's main offer: Its perfect climate, mountains, and scenery. So we will see. I will admit, in the long term - it is too beautiful to be ruined by politicians, but in the short/medium term there is a plethora of acute issues that need to be addressed.

> "I'm talking about the absolutely depressing vibe caused by homelessness, the spike in anti-asian hate crimes, petty crimes, squalor, and Fentanyl deaths. Its impossible to solve, because California needs Republicans - and that's not going to happen for cultural and demographic reasons (way way too many boomers - the 60s generation rules)"

I recall reading that much of the homeless crisis (especially among mentally ill people) was a result of Reagan-era policies. So Republicans are needed to fix a problem initially caused by Republican policy? And opioid deaths (which aren't just fentanyl) show that Florida was a top state for them in 2019: https://findaddictionrehabs.com/opioid-deaths-by-state/

> "Have you been to a store lately? Everything is behind plastic. Need cleaning supplies or dog meds? Then find a Target agent to unlock the plastic case."

Yes. And this is no longer the case, and hasn't been for about a year. At least not at the stores I go to. Except for easily stolen merchandise. And I recall seeing these things locked up before I ever moved to California.

> "Will Miami become a tech hub?"

And you see, there's the problem. Tech "hubs" should not be built in areas where the water eliminates 50%+ of the places where people can live, where buildings can expand. Sure, the SF bay area has a lot of building limitations due to hills and open spaces, but Miami is just as limited being at the tip of Florida. Make it a hub and it will eventually become what you are fleeing from (minus possibly some homeless issues, as the government starts doing what it can to expel homeless people).

At least most of the major cities in Texas aren't half surrounded by water (though those lakes around Dallas look potentially problematic).

> I recall reading that much of the homeless crisis (especially among mentally ill people) was a result of Reagan-era policies.

Reagan has been dead for two decades and hasn’t been involved in California politics for over 50 years. Also, the homeless problems got worse every year from my time in California 2009-Dec 2022. At some point the Democrats own it. I don’t want to completely burn the bridges as so many do behind me, I haven’t made my mind up on Miami, and the OD death count you referenced is interesting. One difference is that its not visible.

> "hubs" should not be built in areas where the water eliminates 50%+ of the places where people can live, where buildings can expand

Have you ever looked at the topography of Manhattan?

I did have the opportunity to meet the Mayor of Miami and he boasted Miami has the capacity to grow 10 times. They are building condos like crazy.

This may be correct, but it's also the pitch of the marketer-in-chief of the city.

Sure. And I've also looked at the housing costs in Manhattan.

I'm the kind of guy who wants to live in a semi-rural area, but I have a high-tech job that cannot be done remotely. It sucks. I kind of wish I had become a cow hoof trimmer instead.

Don’t forget that most Red states pay homeless people’s travel expenses to go to California.

California will have a huge homeless problem forever with that terrible attitude. But I guess my feeling is true. As I said before, California is too beautiful to be ruined by bad politics - eventually that attitude will die out.

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