The NFT thing is interesting. Some things to note:
- 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.
That is not entirely correct.[1] The CFTC has authority to investigate frauds which affect commodity markets in which futures trading exists, and they have used this with regard to Bitcoin.
"Examples of Prohibited Activities: Price manipulation of a virtual currency traded in interstate commerce.", writes the CFTC.
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.
Money is stored wealth, the ability to buy goods and services in the future. The problem seems to be that we live in a time of societal upheaval. The future of stored wealth becomes cloudier and more uncertain the further you go out in time. So, what is the best place to store wealth? Will my wealth be eroded by inflation? Will the companies I invest in become obsolete by technology or market-manipulating nation states? Will regulation changes suddenly damage the value of my investment? Will changes in tax regime eat my earnings? Will corruption and crime take my wealth?
Clearly, some people are getting out of hand with speculation and credit (a suitcase full of lottery tickets is not diversification). As Warren Buffett says, when the tide goes out you learn who's been swimming naked. The economy has its ups and downs and speculative fervor ebbs and flows. There are no certainties, but IMHO all you can do is stay diversified and maximize the probability of your success.
I heard of a wealthy family that had managed to maintain their wealth in Europe across multiple generations, through lots of war, upheaval, regime change, and so on. Their formula was "one third gold, one third art, one third land". You could lose any piece of it in any upheaval, but you wouldn't be likely to lose all of it.
that's a good strategy, but I'd change one thing: instead of art, use equities, and broden gold to commodities. so then you have: 1/3 real estate, 1/3 equities, 1/3 commodities (mostly gold and bitcoin with some other precious metals thrown in). It's hard to get more diversified than that.
Their formula was being wealthy enough to float above war, upheaval, regime change and so on. If they were wealthy enough, they probably triggered some of that and capitalized on war profiteering.
The gold, land, art reference 2 posts above yours almost certainly refers to the Rothschilds, so I don't know why solosoyokaze is being downvoted as the Rothschilds most definitely funded wars to their own profit.
Well actually if solosoyokaze had said something more like
"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.
The parent comment had no more sourcing than my comment, I'm not sure why you're singling my comment out. Yes the Rothschilds fit my description, but I'd argue anyone who maintained generational wealth in the time of colonization, slavery and zero labor laws, did so through non-ethical means.
My answer to these questions and other unknowns about the fed, fiscal policy, America and its role in the world, the economy etc. is that the future will be a lot like the present, but more so. So extent the current trends into the future. Sure, things sometimes change, even dramatically such as the fall of the USSR or 911, but we are living in a steady-state world in which the underling trends do not change. Inflation will remain low in spite of printing, America remain on top economically and militaristically. Stock market keep going up. US dollar remain strong.
inflation has been much higher than reported. Just look at the big mac index, which shows nearly 4% inflation for the last 20 years. Cape shiller housing index, also nearly 4% for the last 20 years. According to Peter Schiff, "Trusting the CPI from the labor department is like trusting the Mob to report on crime."
The current president is attempting to bring things back to normal and the USA will stay strong because of that. The EU and Japan are not doing what they really should be doing.
Sure and like America eventually, they'll be taken out by ecological collapse (Rome was dealing with exhausted agricultural soils for much of it's collapse).
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.
The current trend is record breaking wealth inequality. We already have rampant inflation in the form of housing, education and health care costs. It's an unsustainable situation near its breaking point.
My take was always that money is a medium of exchange. A mechanism by which you can buy or sell things.
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.
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.
Well, yeah, but that's a big if. A switch from the dollar to the Euro is unlikely to be seamless, especially in the U.S. which is still the world's biggest economy.
Money is a representation of stored wealth. An important distinction. Live in a country that has an unstable currency for a while and money is a liability and may show what it's truly worth. Nothing.
>> The problem seems to be that we live in a time of societal upheaval
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?
it may be that crypto is seen as a way to mobilize untapped wealth that currently sits in cash (for whatever reason); with cryptocurrencies you have something that is relatively unregulated, so that crypto may mobilise that kind of money.
Money isn't really stored wealth, it's a transferable debt obligation from the government. It's guaranteed to be redeemable to settle up taxes and court rulings, and entitles you to some estimate of the productivity of it's jurisdiction - enforced by the government.
Assets are less ephemeral stored wealth. Money facilitates transactions, but it is not a factor of production, it is not a consumption good, and it is not backed up by any of these things, so it is a very nebulous type of wealth.
I would agree with a previous poster that money is a debt obligation. If you have "money" in bank, what does it mean? It means the bank has a debt-obligation to pay you back with other type of debt-obligation, the government sanctioned cash.
Money is definitely an interesting concept. I'm not sure I fully understand it. But I use it.
Money is a debt that grants you to the right to someone else's labor, the reason you work for money is that someone else promises to work for you in exchange. It doesn't store wealth. If you do not utilize your money, then someone else doesn't work and that person's time is irreversibly lost, despite no work being performed. That is why money is losing value over time, I mean, money should be losing value over time. The "should" is just a political decision because we consider it fairer, than the inverse, letting someone become unemployed and then you ask for even more work from them because your money has appreciated.
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.
Our job in life is to engage in value creation. When money is decoupled from value creation, your long-term bet is that it will lose its value, as value creation is what actually matters in the “real” world.
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.
What you call "corrosive" (appreciation of non-value-creating assets) is 1:1 applicable to Real Estate.
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....
Comparing cryptocurrency to real estate is laughable. With real estate you have either a place to live, reducing a real world expense (rent), or an income producing property. No matter how much you dress up cryptocurrencies as stocks, by using terms like market cap, you are not buying a share of an income producing asset. You're speculating on a digital collectible. You can speculate on real estate and stocks, but you can also invest in them.
First quote isn't exact, so I'm not sure what you're addressing.
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.
I agree. I think it's worth pointing out that investing in crypto-currencies is really no different from investing in any currency say Euro. And when you have money in a US bank-account you are (typically) "invested" in US Dollars. But see below, that really is not investment, but 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.
Many people buy real estate and let it sit empty, to sell at a later date when the price increases. This is actually a destruction of value as the house is no longer being utilized for it's intended purpose.
They compared it to the appreciation of real estate, which is wildly divorced from real value. Real-estate prices in say, the Bay Area are driven by legislation and speculation. Not actual value. The move to remote works accelerates the discrepancy.
Isn't the value of a house what someone is willing to pay for it? There are still a lot of people buying homes in the Bay Area to live in. There are just a lot of rich people in the area, so they're willing to pay the price that the market is setting.
> Isn't the value of a house what someone is willing to pay for it?
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.
Real estate prices in the Bay Area are also driven by the boatloads of money coming into the area and then not going back out. Our local money supply has gone way up. After all, when local worker salaries go so far up, why wouldn’t the price of goods they’re bidding for go up too?
It isn't. If you look at residential income properties, they trade around the rents that they command, sometimes with some development potential sprinkled on top.
California has statewide politics that prevent the housing problem from being solved, so people move to the next state, which they don't like because California has nice weather.
> And nobody so far managed to explain convincingly, in which ways investments in (existing, residential, not for self-use) real estate creates any value.
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.
In densely populated areas, the value of real estate has very little to do with what's built on the property, and everything to do with the land it is build on.
GPs point is that owning land is not creating value. It is, however, very profitable.
You either have a sufficiently large land value tax or let the government rent out land instead of selling it.
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).
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).
Because the real estate market is very illiquid. Each property is unique. It's not easy to figure out the right price. Trading isn't even bad, it's contributing to price discovery in the market and makes sure that the average sale price is close to the actual market price.
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.
Who says they are? Speculators are betting on what costs will be, but the people selling to them are (tautologically) doing it based on what it costs now. Some speculators win, some speculators lose, but I would say they’re necessarily performing arbitrage.
So people use unfair property rights in order to extract a rent from an essential human need, without doing labour or providing any service in return. Is that your argument?
> So people use unfair property rights in order to extract a rent from an essential human need, without doing labour or providing any service in return. Is that your argument?
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.
In the grand scheme of history, land ownership by the larger public is essentially nonexistent. Land almost always was ‘owned’ by a government-supported aristocracy. For the vast majority of history, land ownership also meant sovereignty. As in, it’s yours if you can fight for it.
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
> as value creation is what actually matters in the “real” world.
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.
Everyone whose food supply depends on electronic supply chain management (ie everyone who is not actively farming their own food _right now_) is also going to be in for a pretty rough time though. Or everyone who needs gasoline for transport because they live a non-walkable distance from the nearest food and water.
An interesting theory from "Sapiens" is that human happiness doesn't change too much throughout macro history.
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.
> 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.
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 agree with your last statement, but I think you are mixing cause and effect. Crypto is exploding because our system is already corroded. Starting with the creation of the Fed, and tracing through endless money printing and complex financial instruments which let well-connected companies and politicians create paper wealth out of nothing, we've decoupled money from value.
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.
Crypto is exploding because people are looking to get rich via speculation, that's it.
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.
>Crypto is exploding because people are looking to get rich via speculation, that's it.
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.
Ray Dalio at no point in his life ever believed he should be keeping his wealth in "cash". It has been basic economic knowledge that cash is a terrible place to keep large idle piles of wealth, and that it has to be invested to not depreciate.
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.
>Ray Dalio at no point in his life ever believed he should be keeping his wealth in "cash".
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?
I'm not dismissing the idea that "some" investors believe that, I'm dismissing the idea that they're a big enough group to matter in anyway. Or that they're likely to believe it for very long over looking at how much USD they think they'll cash out for. And if they were looking for a stable store of value, an asset under enormous speculation is a terrible choice.
The real estate comparison is also irrelevant: unlike any other asset, cryptocurrency doesn't do anything useful.
> is literally by design as a product of the Fed's 2% inflation target
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.
>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.
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.
“People haven’t been transacting in crypto basically at all”
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?
I'm not deep into the cryptocurrency world at all, but a good friend of mine is really into it and has given me a bit of Nano. Transactions are settled nearly instantly on a mobile device, and it relies more on a "proof of stake" than proof of work style system: https://docs.nano.org/whitepaper/english/
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?
I have for years heard about pressuring merchants to accept bitcoin or what ever currency and in the end the number of daily or even monthly users was most often laughably low. Not that there isn't some that move stuff, but that isn't really too many...
Crypto basically changed tracks in the last few years.
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.
The real problem the US, Japan and EU are facing is that the system is way too stable and resilient, the COVID stimulus should have created enough inflation to bring the economy back to a normal state yet it completely failed to do so.
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.
The whole economy feels like nonsense now. There's a massive overabundance of both capital and labor required to meet actual needs, so we keep creating ever more useless games to play with capital so that we can create more capital that the world doesn't need or actually use. In the meantime, massive portions of the population are struggling to make ends meet. I don't know where this ends but it can't be good.
You are seeing one response in the various relief and reform proposals put forward by the Biden administration. Biden is following FDR’s blueprint of first relief then reform in response to a crisis. The refundable child tax credit alone has the potential to sharply curtail extreme poverty.
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.
Your great advices pays dividends much further down the road too - focusing on work and creating value is also good for your children. Sadly, there’s been many children that took decades to get out of their entitled mindset caused by easy money from their parents or the government.
Did Visa create no value in society with plastic payment cards? If crypto is valueless, payment processors are valueless too. It's unfortunate that Visa gets a 2% tax on the economy, but the convenience of plastic or a public/private keypair unlocks more economic growth compared to a world with only paper cash.
Yes. If you read up on the history of the credit card industry they solved the incredibly huge problem of small businesses extending loans to individuals.
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.
Semantically, would 'haircut' be a preferable term to describe what's occurring? Visa isn't some government-mandated thing, so I agree that 'tax' is overloaded, but it isn't meant literally. Given the nearly omniscient use of plastic payment methods, that's why "tax" is used: everybody pays taxes.
> it's the rare place that won't take at least a few other alternative payments, including cash.
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.
That's really nice in theory, but in the real world money IS a proxy for time and value creation. Having money is the same thing has being able to create value, and gives you freedom to create value at your own pace however you want.
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.
The cycnicism in me insists that the the ones saying this also make money in finance; and feel that the purpose of life for everybody should be to create value - of course with an implicit exclusion of themselves; because their purpose in life is obviously to ENJOY. (The latter of course is a silent narcisitic thought that can only dwell in the privacy of the ego, and is not allowed to enter public discourse)
Value doesn't have to be money. You can be nice to someone and that adds value to the world and counts as value creation. If all you do is suck value out of the world then I would argue you are a bad human being.
I refuse to accept that my life must fulfill some utilitarianism of nebulous “value,” I would sooner ascribe to a Calvinist predestination than accept that framework for living.
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.
"The government" is a massive institution inclusive of multiple separate power bases, agencies, motivations, responsibilities, and bosses. It doesn't view me as anything; parts of it view - if "view" is the right verb - as variously a citizen, a suspect, a taxpayer. Always a datum, sure, but the important metadata varies.
Value creation is only one part. The next question is how much of the value you create, you can capture for yourself.
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.
I'd argue that this is also an systemic issue, that can not exhaustively be thought about on the level of just an economic model (of supply and demand), but has to be scrutinized on a broader scope. (Epistemic, historical, sociological, psychologically etc.)
Reproductive labor (actual birthgiving as well as carework, sustaining the potential to work in the bodies), has for the most time been thought to be just given by the "nature" of women. Even early Marxsim excluded reproductive work, as the precondition of all productive labor from its aspirations.
The problem is that economy and technology shifts. Not so great when you are a cold fusion developer today as an example. So it is required to hedge against that isn't it. You need to ensure you have a future by saving for retirement. I've been saying "it will eventually collapse" for what seems like forever now. The market can stay irrational longer than you can stay solvent - to borrow a cliché.
What skills can you guarantee (or at least say with high confidence) will be valuable in 20 years? I can't really think of any except maybe "soft skills" and whatever skills allow you to build a large network.
There is no skill that doesn't require upkeep over 20yr.
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.
This is so hard to do in an industry that also heavily rewards specialists.
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.
Yes, well, I can't help but look around at people who have chosen to specialize and see how much quicker they climb into leadership roles, and getting to work on mission critical features.
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.
Despite the semi trolly comment history on this profile, i was able to climb the ladder by knowing ONE thing extremely well and then being a generlist in everything else.
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.
How diverse are the experiences you are generalizing from? Companies are different, so you'll need to sample from lots of different ones. You can also try talking to your manager about what your career goals are and what needs to change to get there. It sounds like you might just need to be in a team / company where your skills and matches the mission critical features, so you could look for transfer opportunities. Or if you don't care about the "leadership" route, you can opt out and try contracting / consulting. Every client wants a different set of experiences, so jack-of-all-trades is more likely to hit on multiple skills.
Maybe this is a bit out of the spirit of the question, but I think of a lot of "domestic" skills this way, like cooking, cleaning and home maintenance, and knowing specialized dressing and hygiene. This stuff requires considerable time and effort to be good at, and you wind up paying a lot to get someone else to do it for you. Covid has forced me to actually live in my apartment (instead of just sleeping and showering here) and I've increasingly learned that the housewives of yore were actually a lot like managers and process engineers - they constantly need to take inventory and think ahead in order to efficiently keep ahead of all the entropy added in regular life.
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.
Skills around software and IT - not just developers. There might be a lot of churn within that industry, but if you can solve problems in those industries industry with any tools, you're going to be valuable. It might take longer to find a job depending on the current times and your own retraining speed, but it will be there in some form. Nothing is likely going to make all software and IT workers obsolete like automation does to factory workers.
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.
I’d love to believe this, but dev and IT people are not paid exceptionally well in most of the world. That says to me that the high salaries are a consequence of social structures and the current economy, not that the skills are super valuable. It’s proximity to money that actually matters.
Developers are paid pretty well in most of the world, usually well above median income for the country. Just because they’re not paid at 90-95th percentile incomes as in the U.S. doesn’t mean they don’t have valuable skills.
Also, you'd better believe that a tsunami of smart, motivated young people are coming through the education pipeline to pump up the labor supply for the IT/dev sector.
Maybe the demand will increase fast enough to keep salaries from dropping in real terms.
Welding is probably bit multi-modal. Traditional stuff isn't likely going away, but already there is already advanced robots for the job. Though it's unlikely they will be entirely AI controlled.
No doubt a lot of "assembly line" welding operations have already become highly automated. This is, however, already the area requiring lesser skilled and more easily replaced workpeople. I was thinking more about on-site and craft-associated welding which I imagine will continue to be highly valued until extremely portable and versatile high-DOF robotic manipulators become commonplace.
People (at least in the developed world) already have created all the value that they need. They have enough food, safety and shelter. Majority of the effort now goes into creating virtual goods. If you’re planning to be alive in 20 years, you’re better off making sure you hire robots with good work ethics.
The bizarre part is that the speculation does create "value," in terms of appreciation. But it's a Ponzi scheme, and whoever cashes out before everyone else has the same idea wins.
The same could be said of the US Dollar (or anything really). All value is speculative until proven and changes in those speculations can't be stopped. What's worse in the Dollar's case vis a vis crypto is that the divorce between "real" value and "created" value is determined by a tiny group of institutional bankers and their government liaisons. Reality, much less work ethic, won't change their minds. If you think that crypto is akin to a religious sect, then the Fed is a financial Vatican slowly collapsing in its importance while denying it all the same. Rid yourself of the fallacy that holding on to value is hoarding lest you believe that what one does with one's wealth should be determined by others.
Even without capitalism, you have a duty to create value for the people around you, and you might expect the same of them. There are exceptions for the young, old, and infirm.
In no world where there is a "duty" to provide value am I going to be found happily providing value. In this world, in my experience, your statement is simply false. If I happen to provide some form of value it is from my choosing to, not to satisfy the demands of some formless "duty".
The "duty" is to satisfy the demands of existing within a community of people, where able-bodied freeloaders are never welcome. But I can understand nitpicking over semantics. Replace the word "duty" with whatever you want.
Nonsense, a different word doesn't suddenly make it universally true. It could be a guiding philosophy, something like "to live a good life provide value to your community". But it is in no practical way a rule.
It is a universal rule as if you don't do that, you are part of the problem and are creating a drag on the society, reducing the value for everyone to use and enjoy. Your argument sounds like You want to see the society to fail and collapse.
It's not universal. I'd rather see someone "freeload" in a system of wild wealth inequality than further enrich those who already have runaway gains via the power law. In fact, I'd say it's quite an ethical position to take.
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.
Exactly, thank you. I struggled for the right words but you captured my sentiment perfectly. I think the perspective that we have a "duty to contribute" might be a valid one in a philosophical sense, but I resent being told as by a parent scolding their child that I have some duty or other.
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.
If you are not creating value that means you are consuming value created by others. The total value created for everyone to enjoy shrinks. Society just cannot sustain itself without people who create more value than they consume.
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.
> Even without capitalism, you have a duty to create value for the people around you
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.
Do you think that early hunter-gatherers shared their food with people who did not participate in acquiring food?
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.
> 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.
As opposed to rent, property speculation, the stock market, etc?
What will actually happen if the crypto coins collapse in price? What tangible effects will there be? Very few people's salaries are paid in crypto, crypto isn't backing people's mortgages, and outside of the rare (and newsworthy) cases, people are not investing extreme amounts of money into crypto that they cannot possibly afford to lose.
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.
What will happen is 2% of the world's "wealth" would disappear - which would almost certainly spill over causing a much larger decline.
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.
In no way, shape or form would a crypto implosion be anywhere near the financial crisis in impact. It’s just not systemically important. It’s essentially “phantom wealth” not underpinned by any economic reality - even more unglued from reality than esoteric derivatives.
No real damage (except to those holding it) unless enough people have bought crypto with borrowed money. That's where it can cause damage to the overall economy.
The Wealth Effect is a real consideration here. During 2007 people cut their spending considerable because their houses went down in value, even if they were not, at that time, trying to sell their home. You would see the wealth effect work similarly if cypto assets were devalued.
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.
60% of Americans (roughly) own real estate. It’s by far their largest asset. What proportion of Americans own crypto and how much of their net worth does it comprise? That would show you how significant the wealth effect would be.
Is there even any significant amount of debt backed by crypto? As otherwise it is just money that some have spend and others have gained... Ofc, there are some energy producers that will be hit and some manufacturers. But I wouldn't be too worried about later, they should be able to pivot to other chips in current market.
Wealth is a human's worth under capitalism and arguing against riches of any kind while the number goes up is a philosophical attack on what we believe in as a society. At best you're looked at as an idiot, at worst you're the enemy that threatens the system. Fortunately, this too shall pass.
I mean the crypto folks bought in at the right time? It's like finding oil under your land. For some reason you bought into it and that's takes some type of skill.
> 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.
Explain to me the value of Daddy's Money and Landlords. No, seriously, tell me about it.
>for many of us, money is only experienced through our phones, as a number on a screen. You pay your rent with one app, you buy put options with another. The number goes up, it goes down, it lives in the little portal we hold in our hands.
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.
I see you've read Graeber. Great book and changed my views on a lot of things, particularly how much of our "common sense" understanding/education on topics relies on "just so" assumptions made by some aristocratic scholar a couple centuries ago.
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.
> 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.
Yeah. That’s a great way to describe it! It’s like a differential equation where the fundamental function is the change and you have to integrate it to find the state. Traversing the blockchain is like integration.
Yeah this is true, people didn't necessarily "barter" back in the day. Traders and merchants probably did because they wanted immediate payment, but within a trustworthy community you simply record or memorize what you did and demand the other side to pay you back in the future.
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.
Describing it as debt makes it sound like people tallied it, which I believe they didn’t for a long time. It gets the facts right but uses a very modern way to frame it. I think it’s more accurate to look at it as reciprocal altruism. I do you favors, you do OP favors, OP does me favors and we do so so long as it feels like nobody is mooching.
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.
I still have gold and prefer cash for purchasing daily items.
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.
Have you noticed how your cash is buying fewer items than it did a ~year ago? My daily item costs are WAY up, which is really just saying the value of the cash is WAY down.
Honestly, no, I haven't. My groceries are the same. My electric bill is stable. The watch I'm replacing today is the same price today as ten years ago when I got its predecessor.
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.
A gallon of milk is still a gallon of milk. A pound of carrots is still a pound of carrots.
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.
Here, two pounds of carrots are $1.79, just as they have been for as long as I can remember. I don't have a spreadsheet, but I know what carrots cost. They certainly haven't shot up by 50%.
I do actually. Because I am poor, I’m extremely conscious of my spending, and have spreadsheets and save receipts to track price changes in normal purchases.
I just saw this in real-time this past month with cat food.
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.
Clothing prices seem to be way up in the US, especially shoes. My suspicion is people are flush with cash from the stimulus checks and retailers can charge whatever and people are buying.
Yes, inflation is real, and since I’m on a fixed income I noticed that despite cutting out luxuries and limiting meat purchases, my groovy bill went up and I still lost weight.
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.
Wasn’t trying to lose weight and my diet remained essentially the same other than modification due to cost (mainly less meat).
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 .
Yeah, it gets harder to believe there's "smart money" when your friend Alice made bank following some meme stock and Bob down the road became crypto-rich off Dogecoin.
If you think about the difference between "investing" and "speculating" (ie. gambling), the latter involves no actual value creation, just transfer of assets based on outcomes the speculating party has no influence over. Crypto, meme stocks, penny stocks...just pure speculation. To be fair, hedge funds and HFT are also mostly speculation, just a more sophisticated version.
Do I create value when I loan another person some asset? What about when I act as a currency exchange, and offer at any moment in time to take either side of any trade along with a 0.3% fee?
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.
Loans would be one of the classic value creating activities, because they allow others to use otherwise idle capital to produce something new.
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.
> Loans would be one of the classic value creating activities, because they allow others to use otherwise idle capital to produce something new.
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.
AFAIK most of the loans in DeFi go to people who are leveraging their bets one way or another. So if speculation isn’t valuable, then perhaps many of these loans are also also not valuable under that criteria.
Fair enough, although one can make a reasonable argument that arbitrage is not a value creating activity either, if the market is already reasonably efficient.
Room to exploit arbitrage does not necessarily imply meaningful market inefficiencies. HFT only works because people with deep pockets can build huge fiber lines directly connected to the stock exchange. It's a model where milliseconds matter in order to trade on differences of fractions of pennies. The market would operate just fine in the absence of HFT operators.
That’s why it feels so unequal. The arbitrage doesn’t come from market inefficiency, it comes from regulation/government, ingrained asymmetries, and consumer ‘dumb’ money
Zero mention of the recent unprecedented fiat currency printing we've seen, nor the fact that every time since the Tang Dynasty when we have done this, it has led to very troubling times 12-18 months later.
Everyone is gambling even if they dont know Crypto exists.
then how come the US economy boomed after 2009 in spite of unprecedented stimulus and other programs. Not saying that the programs caused the expansion, but it did not seem to hurt it either. Everyone who said that the printing would cause inflation, a repeat crisis, recession, or other problems, were wrong.
Doesn't something feel wrong about the post 2008 "boom"? Theoretically the economy is doing great but you have constant social upheaval, a generation where many are still living with their parents, and the need for constant central bank stimulus in the form of cheap credit.
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.
Add to that the collapse in wage growth and the conspicuous difference in the rate of improvement in Asia vs in America.
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?
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.
It's worth mentioning that houses are not only worth far more, they are also physically much larger while household sizes have gotten smaller. In 1850 households had on average nearly 6 people; in 1890 five, in the 1930s four, in the seventies three - and today, the average household in America has two and a half people. Meanwhile house sizes have almost tripled since the 50s: new single-family homes were an average of 983 square feet in 1950 (about 280 sqft per person); today they are around 2,600 square feet (around 1050 sqft per person.)
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.
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.
Do you have a source on the housing statistics (people per house, house size, square foot per person)? I'm curious how this trend holds up internationally; maybe a US source would help.
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.
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.
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.
That teardown analysis site is very interesting indeed!
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.
Those things became cheaper to produce because of technological advancement, largely developed by people who did not benefit from this rise in production. They do not represent wealth in any meaningful sense. Wealth is economic power, and 55" TVs dont help you start a buisness or pay a downpayment for a mortgage. Internet connection may once have served as some measure of economic power, but its no coincidence that those with the power currently are doing everything they can to restrict the rights of normal people to create using it.
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?
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.
someone needs to do a blog post or write up explaining how in sane world this is rational or justified, but in a serious manner . That is unheard of anywhere else in the world where people get paid so much after they fuckk up.
> 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.
I wouldn't be so quick to dismiss medicine; we all just witnessed mRNA paying off its research tab, so it would seem.
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.
Lyn Alden explored this idea in her January newsletter, titled "The Hindsight Depression"[0].
> 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.
Things are kind of distorted from what would be fair. The near zero interest rates have lead to high property prices which has made owners rich and renters poor in a rather arbitrary manner.
It's like the governments are trying to control a lot of variables with only a couple of levers.
A lot of the Fed problems are related to the fact that it doesn't have direct control over the economy and the help (fiscal stimulus) that is most needed can only be done by the US government.
Many economists argue that the 2008 stimulus didn't do enough, and that where it did provide stimulus it was applied at the wrong places (towards the top rather than the bottom). That's why we're seeing this response to the current situation.
If you are going to do stimulus, the way we are doing it now is better. Even better still would be to drop money from helicopters.
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.
I agree, ineffective policies just cause unintended consequences. If the Fed or us government had done its job we wouldn't have to print so much money in the first place.
Empty houses everywhere since 2008. Someone has those booked at "full value" as assets, but they're gonna take money to remove before any use of the site can be made; they have negative value.
I'm not sure to what extent the 2008 crisis and the stimulus programs even did result in net printing of money. Remember, every time a bank issues a new loan they're printing money and every time they reduce lending they're destroying it, and increases in the flow of money are also act much like an increase in the money supply. So when the banks stopped lending and the money flows locked up back in 2008, this was effectively a massive destruction of money that offset some of the money printing.
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.
The US printed and spent tons of money during World War 2, and the postwar period was one of, if not the largest economic expansions in its modern history.
I see this argument come up a lot, I'd like to point out 2 points.
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.
Plus it was an unprecedented investment in labor. An entire generation of young men were either killed or maimed, or they received job training and the offer of a free college degree. Suddenly you have an exceedingly employable workforce. And, on top of that, employing women became acceptable too, all creating a situation in which supply expanded massively.
Just for clarity, how are you defining "Wealth" here? I tend to think of knowledge and skills as a form of Wealth, but it's reasonable for that to be debated; especially if all you're measuring is relative positions in a commodities market.
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)
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.
The Fed sells its assets to decrease the USD supply and raises rates. My best guess is a short period of higher inflation and then a correction, but who knows.
> 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.”
> In an era defined by slow growth and flatlined productivity (if not outright economic stagnation) and marked by widening inequality and underemployment, “money” feels at once deadly serious and stupidly silly. Seen from this viewpoint, the pandemic economy isn’t an anomaly but a heightened version of one possible future: a world where money is abundant but safe long-term investments are rare and where “getting rich quick” is less an American pathology and more the best bet for a stable life — assuming you think such a thing is possible with ecological catastrophe looming. If you’re supposed to buy stocks as a bet on the future condition of a business, why would you buy stock in a brick-and-mortar retail video-game chain unless you didn’t really believe in any future at all? How different is the stock market from betting on soccer? What’s the point of investing safely when Elon Musk can create and destroy millions of dollars of value with a couple of tweets?
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.
The difference between finance and gambling is largely class. The things we call finance and gambling today both trace back to gambling/insurance in Venice a few centuries ago. They've diverged over time to reflect society and now Vegas is low brow and Wall Street is peopled with suits. If finance has been reduced to gambling, it just means that class boundaries are being broken down. In the cases listed, broken down by technology.
"I used to be with it, but then they changed what it was. Now what I'm with isn't it, and what's it seems weird and scary to me, and it'll happen to you, too" -Abe Simpson
Skip this NYMag pablum. Read Dean Kissick's Downward Spiral: Popular Things (on NFTs and the pervasiveness of mundane art) instead. "We live in an algorithmically generated culture, and we are the algorithms" ;)
I hope your dismissive tone doesn't cause people to skip the column you linked. I appreciate seeing a criticism of NFTs (and meme "art" in general) that isn't solely about environmental impact. "Post-death culture" is a term that's going to stick with me.
Financial elites have been gambling for decades. They seem to be really upset that the plebs now can also do it.
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.
>Financial elites have been gambling for decades. They seem to be really upset that the plebs now can also do it.
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.
>I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices...
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.
> 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.
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 go up because more people want to buy them than sell them, cryptocurrencies go up because more people want to buy them than sell them.
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.
> our investment in an index fund doesn't increase the number of productive assets in the world
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.
Index funds are positive sum because companies are positive sum. You buy shares in a productive enterprise, which then generates revenues, and profits. These profits are returned to shareholders via dividends or buybacks, or just through the accretion of value within the enterprise.
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.
> your investment in an index fund doesn't increase the number of productive assets in the world
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.
Amazingly, some people are complaining about index funds. It’s a pretty fringe position, but it comes up frequently enough that “should index funds be illegal?” is one of the recurring headings of Matt Levine’s newsletter.
Index funds being illegal just means they're illegal for the poor and middle class. Any person with sufficient wealth could construct a personal index fund manually by buying the individual stocks. You would probably need millions to make this a worthwhile exercise.
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.
Hmm. It looks like Wealthfront offers direct indexing for reasonably small account sizes. But it's not clear from this description if they actually allow customizing stock picks. Could be worth investigating. Their fees might also make it unattractive.
> 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.
The market would need to find ways to perform the back-breaking work, either by wages increasing or the development of automation. Supply and demand. The more people who can accumulate wealth and capital, and intelligently manage that wealth, the greater the reduction in the labor supply (as they will fund their expenses using investment returns versus engaging in labor activities to do so).
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.")
I do actually wonder if the FIRE movement will come under criticism in the coming years. Does the economy still work if too many people are checking out of their careers in their 30s and 40s?
But yeah, it's mostly the financial elite freaking out that their kids might actually have to be a wage slave for a living.
FIRE folk (and every retiree) are going to get killed by inflation over the next ~5 years. The thing about retirement is that you're on a fixed income, and if you're doing it right you move capital from risk assets like stocks into more deterministic investments like bonds as you get close to needing them. The value of bonds and cash is about to get crushed; it's very hard to plan how much you need to live on when living costs may go up 5-10x or more in the next 5 years.
I really doubt FIRE is popular enough for them to matter in practice. I suspect very few can stand pinching pennies for the 10-25 years it takes to save up the capital.
Money being lost or won is not that. It's a signal that the public as a whole has benefited from the endeavour or not. Loses are a really important signal to stop wasting scarce resources .
Well of course there’s no “safe” 10% investment. That’s true across the board! Higher returns correlate with higher risk (otherwise a smart investor would pick the investment with the same returns and less risk).
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.
> isn't a simple/safe investment entity to pull out a reliable 10%.
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.
>I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices...
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've bought counted cards at casinos and played poker semi-professionally and this is just wrong.
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.
That's not the case in poker. If someone thinks a novice player is messing them up somehow with poor play, it means they're not a good player either. A good poker player wants their opponents to play as poorly as possible.
I never liked having true novices, especially in tournaments or when I was running multiple tables at once - it was easier to make notes of play style and predict when people knew how to play at a basic level.
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.
Sure, playing correctly against a maniac, novice, or otherwise unpredictable player can be more difficult and have higher variance, but it's also as lucrative as it gets if you know what you're doing. All the strong players I've known would be elated to play against people like that.
>Sure, playing correctly against a maniac, novice, or otherwise unpredictable player can be more difficult and have higher variance, it's also as lucrative as it gets if you know what you're doing. All the strong players I've known would be elated to play against people like that.
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.
My understanding after spending a lot of time digging into and discussing this stuff was that playing better and increasing your win rate has a much greater effect than style of play (whether yours or your opponents'). So while your short term swings might be bigger, you'll have a lower chance of a losing month (or a longer slump) and make more overall by eking out every last drop of EV.
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.
When someone is playing randomly (as some very newbie players might), it's a little difficult to directly exploit, but more of a patience game. It's only a matter of time until you stack them.
When someone just consistently plays bad, that's the ideal situation.
This is the sort of statement that sounds good to idiots and people who've never played poker. Anyone who's made money at casino poker is aware of how much of a hassle retards spasming at the card table can make things even if they're going to lose in the end.
No, totally wrong, it’s the exact opposite. Novices and only novices think “you can’t beat bad players cause they’re unpredictable!”
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.
Like in chess for example - a kind of player who has more trouble with extreme novices than people their own level is someone who knows how the game “should” be played, but doesn’t actually have the skill to go off-book themselves or punish mistakes when an opponent deviates.
An actually strong player won’t have that problem.
Except that chess is a perfect information game, but poker is not. Which means it's possible to tell if your opponent made a mistake in chess, but it might not be in poker.
Disclaimer: chess novice, don't know anything about poker.
Playing poker against very novice players makes it a more volatile game. You might lose big and you might win big, but that's actually good for your EV; the beginner has no concept of bet sizing and that's where you shine. An expert playing against many intermediate player may end up winning on average 5 big blinds / hr over the course of a month. They'll certainly have losing sessions as well.
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.
It changes the strategy, and it might take you a while to hit, but it greatly improves your potential to win.
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.
The problem is that the economy is being driven by rent seeking behavior and cantillion effects. This is great for the elites, but at the same time they can see how the ground is starting to crumble. As "the plebs" start to gamble they're working to blame any future collapse on the irresponsibility of the crowd. Shrinking responsibility for the fact that this is the system that they have lobbied for and created and the plebs are behaving rationally irrational.
"We taxed work generated income greater than investment generated capital gains and now everyone is speculating! Why oh why would the plebs do this to us?!"
Housing prices spiraling out of control, bubbles in the stock market and crypto, this crazy V-L recovery we just had out of the covid recession, insane art prices, bubbles in baseball cards, the declining tax burden on the wealthy. The people who are rich and "close to the king" are able to capture all the effects of monetary stimulus. That is leading to asset bubbles and dramatic increases in prices of the things those people throw their money at.
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.
The housing prices that are spiraling out of control are those which are being driven up by the increasing wealth of the upper-1% to 10%. The price of housing in Krupp, WA isn't inflating at all. The price of housing where software developers and people in finance and business and industry, and the places where people like to buy second homes is inflating.
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.
> 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.
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.
Who are you supposed to lend your money to? Companies are saving more money, they ended up becoming net lenders. That's why inflation is low. Ironically, low inflation also makes the problem worse, because companies can save even more with low inflation. The threat of being forced to invest the money is gone.
Ironically (yes I am repeating myself), low interest rates also increase the savings rate of companies because it is just a windfall profit for many of them. Consumers get loans with bad conditions so they don't borrow and even if they did, incomes are stagnating, so betting on a raise in the future may seem foolish.
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.
The simple/safe/reliable 10% was a fluke that should never exist. Profit and risk must be in balance. If it isn't it should attracts more and more people until the balance is reached.
Making it hard for people to join to keep it unbalanced is what happened and its slowly going away now.
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.
Nothing in life is completely without risk, but you can get arbitrarily close. Treasury bills are commonly used as an example of an approximately "risk-free" loan since the probability of the federal government repudiating its debts is considered extremely low. Bonds with the lowest investment-grade rating, BBB, have a 1% one-year default rate, with higher grades being significantly less (0% for AAA)[1]. The vast majority of the interest on such a loan is a result of time preference (rent), not risk-taking.
You know exactly what I meant.
1% does not even cover inflation loses and you still took a risk. This is total nonsense and has nothing to do with the initial conversation.
If what you meant is that interest is fully accounted for by the lender taking the risk that the borrower will default on the loan then what you are saying is nonsense.
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.
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.
> I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices...
"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.
> I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices...
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.
Professionals don't gamble with their own money. They gamble with other people's money, and keep a percentage if they win.
"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.
Thanks to fees, professionals can also keep a portion if they loose. If they under-perform, they also win as long as their clients aren't calling them on it.
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.
> Are they any riskier than IPOs (which can and do trade lower than first-day valuation)? I don't think so
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.
> 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
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.
This could be hypocrisy, but it doesn't have to be. It may be "kids, don't try this at home". The pros should have a lot better knowledge of the risks involved, and the resources to take the consequences when they're wrong. (Yeah, I know, they don't always either have the knowledge or the ability to take their lumps. They still are far ahead of the amateurs in both departments.)
This is really broad stroke. Everything we do is a gamble. Investment firms work for their clients if they didn't they wouldn't last very long. Contrary to what most people think they play a important roles. For example spending time with firms to decide if they are worth investing in. Capitol allocation is really important. It allows someone like me to delegate investment choices for my pension. This funds things new medicine development, new technology etc. Sure there are things like high frequency trading. But taken as a whole I know who'd I prefer to give my money to to invest: people with something to lose if it doesn't work out. I'm not sure how else to allocate capitol with out totally eroding personal choice.
It should be noted that gambling needs to be viewed as nothing more than a form of entertainment. Back in the day, formal engineering schools offered elective courses on the mathematics of gambling. Just know that if you partake in the activity in short stints long-term, they have it so rigged that it is mathematically impossible to yield net gains long-term.
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.
What makes gambling inherently immoral in your opinion? I agree that it's addictive, but I don't see the how it's any less or more immoral than smoking, drinking alcohol, etc.
>maybe they should try not to create a system where workers are punished and gamblers are rewarded.
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.
> 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"?
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.
I don’t quite believe that there was no moralistic sentiment directed against it when high frequency started, or even before that when whatever changed changed. The fact that people weren’t currently writing about the status quo, but then write about a change to it isn’t surprising.
The NYT had a pretty well received article on it back in 2009. Michael Lewis published a book criticizing HFT back in early 2014 which is a pretty good sign there was indeeed moralistic sentiment against it.
I think it's fair to snipe at speculating unreasonably when anyone does it. Its not good for society.
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.
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.
Why doesn't gamestop just sell back a ton of stock? They repurchased >100 Million shares in 2019 for dirt cheap. I saw the news about the share selloff, but a paltry 3.5M shares isn't what I was expecting, and thats part of the reason I was extremely skeptical about GME, why wouldn't the company simply sell directly to the shorts so that they could cover?
Not screwing over ~9M wallstreetbets users, possibly resulting in a short squeeze, nets you millions of loyal customers for life. On top of that, the whole reason the stock is currently priced so high is the lack of available shares. Release slightly too much new shares and stock prices will plummet. It's not a linear relationship.
Well, I guess you're a lot more optimistic than me. I always assume that big companies don't give a shit about their customers and will always screw them over if there is some benefit in doing so.
Honestly, no-one knows, except maybe Citadel and brokers who run via 'payment for order flow'
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%
> If you were going to choose a moment when money became unstuck in the popular imagination — when it stopped being entirely serious and started being, at least a little, funny — you could do worse than an interview that then–Federal Reserve chair Ben Bernanke gave to 60 Minutes in 2009. 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.”
> 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.)
This article is the a sign of a speculative mania peaking.
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.
Is it better to live in a world where the future is unknown, and the best we can do is guess where value will be, or one where the future is known, and the prices of all investments are stable and already priced at their exact values? In which world is optimism and class mobility possible?
Excellent question that reminds me of two anecdotes:
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)
Excellent point. And to drive a steak further into this idea - ironically gambling is the one where all the prices / chance / rewards are absolutely known up front and calculable. I guess that's what sets wall st. apart from gambling in a casino.
There's only one entity to blame for this mess of a bubble, the US federal reserve. It started with Greenspan, and it's gotten worse with every subsequent chairperson
How many people are actually getting rich with NFTs besides people who who are already celebrities/famous? Not many. The market is flooded now with NTFs. The overwhelming majority of listings do not sell or sell for little.
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.
it would only be in contago if there is borrow and storage cost. This applies to commodities. But stocks pay dividends, so this can cease backwardation if interest rates are low relative to dividends.
futures and swaps do not pay dividends, so the dividends on 3x funds are imputed in the nav, adjusted incrementally everyday . I compared a 3x of the DIA (UDOW) to the 1x version and found that the 3x outperform in such a way that the only reason for the discrepancy is 3x dividends.
Median household income is up to $69k now. In 1980, it was $17k. Wages are up 3.7x since 1980. REAL median household income is up 32% [1]. And this is with labor force participation absolutely plummeting [2].
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)
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.
It seems like you have a vested interest in what you're preaching here, so I don't know what plane you're really dealing on.
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.
>If crisis had opened the door to a new way of thinking about money, the checks closed the door on the old: Gone was an understanding of money as a scarce, quasi-natural resource to be managed disinterestedly by apolitical experts. The question was: What was replacing it? Would MMT’s chartalist view of money as a tool of state power prevail? (The undeniable success of the pandemic cash drop seemed to be a point in its favor.) Or could the crypto-millenarians’ anarchic vision of money backed by cybermetal take the upper hand? (Cryptocurrency had a boom year, perhaps driven by the existential fear that accompanies a global pandemic.) Maybe the Marxists would finally figure out how to abolish the value form? (Don’t hold your breath.)
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.
Remember, CPI is just the average of a particular basket of goods weighted in a particular way - it doesn't necessarily represent the real levels of inflation people will see. I know for example that here in the UK, the low figures were the result of price increases in things people were actually buying like food, computers, cars, holiday stays when we weren't locked down, etc being counterbalanced by lower increases or even decreases in things they weren't buying as much anymore like clothes. (Our better news sources went out their way to explain this.) So the average person would have seen rather higher inflation than the CPI and RPI would suggest.
>I know for example that here in the UK, the low figures were the result of price increases in things people were actually buying like food, computers, cars, holiday stays when we weren't locked down, etc being counterbalanced by lower increases or even decreases in things they weren't buying as much anymore like clothes.
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.
“for many of us, money is only experienced through our phones”
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.
The “woe is me, how do I know how to invest?” drivel in this article is solved by a sufficiently diversified portfolio. The article even admits that these shenanigans have no impact on the larger market — so invest there.
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.
I have begun to worry that broad indexes are themselves becoming a problem. As that advice seeps out, a lot of people are buying "the market". Which has long been good sensible advice, because the market as a whole genuinely produces wealth, but it's not inexhaustible.
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.
The S&P 500 P/E ratio is up over 40, a number it has seen only twice before and both immediately before crashes.
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.
>the system is broken and they’re cheating like crazy
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.
“ last year the U.S. government pulled 13 million people out of poverty with a few million strokes of the autopens”
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.
- 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/...