That's what happens when you spend a decade printing a lot of money
Value becomes diluted
Value becomes diluted
Please don't take HN threads on generic tangents.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
For me there is a clear connection from flooding the system with cash and/or negative interest rates with hyper-financialization
"Dogecoin, created as a joke, is now in an S-1 as a material item" -> I consider this an hyper-financialization episode
The objective of the comment was to provide an simple explanation to a funny comment https://news.ycombinator.com/item?id=27702432
I also consider monetary policy one of the principal factors for so many services created around money and cashflows
Its gotten to the point that there are whole business models mounted around money and cashflow which bring negative value to the world
Although I understand the detachment I don't agree, because now the comment looks completely offtopic and tagent. I wish we could delete comments in these situations
It appears like you're saying that only one of these can possibly be good for tech stocks.
Why not both?
How do you know tech stocks couldn't have done much better in the 90s under different monetary conditions (ZIRP and a Federal Deficit of 35% of GDP)?
If the fed pumps a few trillion dollars into the market and causes everything to go up in price, and bystanders look at that and decide to buy in, then that seems like that the fed's action caused the speculative bubble.
Except when they did. Random google search:
>The central bank began purchasing ETFs such as the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) in early May last year.
However, even if all they do is buy bonds, money is fungible so those purchases will still spill over to other markets as investors chase for yields. If you pump a few trillion dollars into the bond market it's unrealistic to assume that it'll stay contained to just the bond market.
Then what, do you just keep that $1000 in cash while inflation slowly eats away at it? No, you'll invest it in something else (eg. stocks), so now the market for that has an extra $1000 injected into it.
And then what? After you sold that bond you're going to stop investing?
Where is the fed getting the 4 trillion dollars worth of bonds from? Existing bond holders, right? Are you telling me that even without the fed buying up bonds, that bond holders would still be converting 4 trillion dollars worth of bonds (net) to stocks/cash?
I was talking about 4 trillion net. In other words, 4 trillion dollars worth of outflows. 1 trillion dollars worth of trades per day doesn't tell much because it could very well be people selling bonds and then buying other bonds. On the other hand, google says that the US bond market is worth $46 trillion. That's almost 9% pumped into the market. If all that cash stayed in the bond market and didn't leak out, you'd expect bond yields to drop by 9%[1], which I don't see happening.
[1] bonds are essentially IOUs. They have fixed returns, which means the more you pay for them, the lower your yield is. For instance, if you bought a bond that's worth $105 on maturity (1 year from now) for $100, your yield is 5%. If the fed comes in and pumps a bunch of money into the market such that $100 bond is now worth $108.69, then your yield is negative (you paid more for a bond than what it will pay back).
>Inflation doesn't come about as a result of the Fed pumping asset prices up, this is a misunderstanding on your part.
In the technical sense that inflation = CPI by definition, then yes you're right. But that's not what I was arguing for, which is that fed pumping money has inflated the market.
Now you're making a different claim which is that the Fed inflated asset prices by pumping up the bond market. Yes, bond purchases by the Fed will tend to make bond prices increase, but your math is nonsense. Buying 9% of the supply of something doesn't mean the price will go up by 9%. This is not how prices work. Whether the Fed pumped up the bond market is an empirical question, which should be answered by looking at bond prices and seeing if they went up during 2020. So where's the data showing that bond prices were pumped up?