The medium is the message. We've been talking about this for decades - the structure of the thing you are interacting with determines how you interact with it. Substantive debate is difficult in 140 characters, so substantive debate does not often happen on Twitter. Infinite scroll and auto-play video eliminates the "decision points" where people would otherwise reconsider if they want to continue, so people spend more time on those sites than they would otherwise. Maybe the attributes of these mediums aren't "inherently bad," but they absolutely do influence the way that they are used and it is up to us to make the judgement of whether that has good or bad outcomes. And a lot of us think the results of infinite scroll is a bad outcome.
People are already contributing code and resources to the actual catastrophic, existential AI risk du jour, the one that is likely to cause massive political disruption and potentially attendant destruction of value and/or human life: the algorithmic news feed.
Exactly. Asset prices are not determined by central bank actions, there is a third component that pushes both asset prices and central bank policy - the global supply/demand of savings vs investment opportunities. Which is driven mostly by demographics. China's massive working class, and the unprecedented rate at which they are getting wealthier, and their savings rate which is like >10x the average US citizen means there is a huge increase in the global supply of savings. Which bids up asset prices and pushes down yields, as savers compete with each other to buy up the extant profitable and safe opportunities. Central banks are the on the receiving end of this too: over-saving pushes down the natural rate of interest, which means policy rates must be lower to respond (unless you want to condemn some working Americans to unemployment).
Yeah, the unfortunate consequence of the widespread misunderstanding and demonization of finance is that everyone thinks its all "made up" or "rigged," and then when they see something that REALLY IS rigged they think it's normal.
The point is that the companies are making the same amount of revenue regardless of where you live. If Google cuts your salary 50% because you move to a cheaper area, maybe that doesn't make a difference to you but it is free profit for Google shareholders. It makes it more obvious to people that the amount they are paid and the amount of marginal profit they earn for the company is WILDLY incommensurate, even for over-compensated Silly Valley engineers, and would be even moreso if you move somewhere cheaper and take a pay cut.
Go read Money Stuff before you spread more misinformation about how the financial system works. There are no counterfeit shares, ownership is obvious except for cases like voting (because a short can pay a negative dividend but can't perform a negative vote), settlement is not error-prone and is slow on purpose (Russia tried real-time settlement and went back to T+2), HFT is literally just a service provider doing inter-temporal mediation between buyers and sellers rather than some evil money-stealing machine. Front-running is not real, naked shorting is super illegal with very few exceptions. If you can't tell me what part of Regulation SHO governs naked shorting, what the bona-fide market maker exception is and when they are required to fulfill a FTD, then you probably shouldn't be talking about this confidently in public.
The other main reason it is not a currency is that it only processes 5 transactions per second and they cost a ridiculous amount of money ($60 at the peak in 2017). Which makes it only usable for large transfers of speculative value, not like, buying your daily coffee. It's not a currency.
citation needed, most of the increases in global wealth and output are due to technological innovation and increased trade and improved governance. If you are going to claim that all the worlds wealth is just extractive you are going to need a big source for that. Most economic historians disagree with you.
And the hilarious part is, we actually have regulations like capital requirements and FDIC insurance and central bank lenders-of-last-resort to prevent bank runs? Whereas crypto has... none of that? And unaudited Tether pumping >$1B into the crypto ecosystem every week
Defi loans are not actually useful though. You overcollateralize 150% of your ETH or whatever, to get say 100% back in some stablecoin.
But you could have just sold the ETH in the first place...? If it truly is a "currency" then why are you taking a currency loan on your currency? That's like putting up $150 of collateral to get a $100 loan, it makes no sense.
Unless it's not a currency, in which case this is just a margin loan - I think my speculative asset is going to go up in price, so I will take out a loan against it instead of selling it. Which has only two use cases: I need the dollars and I'm avoiding paying capital gains, OR I want this margin loan to speculate on more cryptocurrency!
That's a pretty small use case compared to like, "loans" in general. Plus if/when the ETH/USD price crashes, all of these loans will get liquidated and push the price down further. I fully expect a "portfolio insurance"-Black Monday type crash if ETH ever falls by more than 30%.
And then you look at the GME hoopla on HN and realize that no one here actually knows anything about the financial sector... If you don't know what a clearinghouse is or what Regulation SHO covers, YOU ARE NOT QUALIFIED TO SPECULATE ON STORIES ABOUT FINANCIAL PLUMBING. And yet here we are, a couple weeks into everyone on HN showing that they are big dummies who are way too confident about things they know nothing about. Gell-Mann amnesia applies just as much to internet comments and communities as to anything else
Very Serious People are Concerned With it...? Sam Altman and other tech power players are involved? I wouldn't call any of the Silly Valley people "serious" but they definitely have power and think they are serious.
I mean, it's definitely very similar to HN in that way, at least. Watching people here talk about econ or finance makes me want to smash my head against a wall - because econ is just politics, right, and you're entitled to confidently shout your opinion even if you have very little background in the field, right? And then we look around and think that this is "enlightened conversation;" nah, it's just a bunch of techies who think they are much smarter and more informed than they actually are.
And then you read HN, and you realize no one here knows anything about economics or finance, despite how confident they are! Gell-Mann amnesia is everywhere, and not just in authoritative sources. The people on the internet who you chat with and know a lot about computers... might not know that much about other topics.
That correlation might be reversed, though. The author of The Great Leveler makes the argument that in peaceful times, inequality almost always rises to the maximum level that society can bear. It remains that way until a destabilizing event occurs (plagues, state collapse, destructive revolution, mass-mobilization warfare) which decreases inequality (mostly through wealth destruction - the wealthy have the most to lose).
So it's possible that rather than high inequality leading to destabilization, it's the opposite: destabilization leads to decreased inequality.
Yup, there is a lot of interesting perspective you get from reading journals and correspondence from the period. Sources from the late 1800s will include bits from the lives of every day people, almost always along the lines of: John opens a store, panic occurs, his business fails and he moves to a different town; becomes a partner in a canal shipping company, panic occurs, his business fails and he moves to a different town; etc.
Obviously no one knew what form it would take, but people were pointing out inflated housing prices[1] and other shady tactics in the mortgage market for YEARS. There's always cranks on TV saying This Time Is Different (2000, anyone?), but its just incorrect to say that serious economists were "unwilling to entertain the idea that the housing market could collapse."
Sure, many people make that argument. The recessions happened regardless of their source. But the financial panics that preceded lenders-of-last-resort and countercyclical monetary policy were significantly more frequent and severe than anything we've seen in recent history.
Edit: just noticed your edit, Bernanke never said that monetary policy caused the Great Depression, but it is the consensus view that policy was too tight during that period and exacerbated it. A mistake that no one is keen to repeat. Certainly the interest rate rises in the 80's caused a contraction, one could argue whether the subsequent recession was worth the cost of fighting inflation. I think all would agree that the stagflation that prompted that maneuver was not ideal.
Backing you up here. There is a clearregime change in the data before and after the advent of central banking. Recessions and financial panics are less frequent, and less severe. Just looking at the US, there were ~15 recessions since the adoption of central banking in the 1910's. In the same time period during the 1800s there were >25 recessions, and that's not even comparing for severity. You can see the Wiki[1] for an overview.
The price of productive assets goes up as interest rates fall, this is a simple NPV calculation.
Interest rates are low, and have been low in the developed world for a while. The reason for this has nothing to do with central bank conspiracy theories. The neutral rate of interest is determined by productivity growth, profitability of available investments, and how much capital there is that can be invested in them. The best a central bank can do is 1. be good at detecting where this equilibrium is and reacting to it, and 2. move interest rates at the margins to smooth out the business cycle.
Think of it this way. If, in the aggregate, an average business would make a real return of 3% per year, then an interest rate above 3% would discourage all but the best business ideas from being pursued. Likewise a lower rate would encourage investment in worse ideas with lower profit margins. This is one way to think about the "neutral rate of interest." It is determined by exogenous facts about the real economy.
Now, we have fewer "profitable ideas" (and lower productivity growth correspondingly), and significantly more savings due to greying populations (people who are older/will live longer require more savings) and cultural tendencies (e.g. higher savings rates in China, Germany). So the neutral rate falls, and the result of that the price of capital goods rises.
Central banks' hands are effectively forced by this situation. If policy maintained an artificially high interest rate when the neutral rate is lower, economic contraction would ensue disadvantaging all parties.
This is basically my point. Didn't particularly mean to criticize davidxc, more the tendency for people on HN to assume that because they're good at programming they must also know a lot about economics, the stock market, and etc.
The argument is not that the US savings rate pushes up the value of financial assets in the US, I'm talking about globally (i.e. the global savings glut hypothesis). Countries like China, Saudi Arabia, and Germany have significant capital account surpluses which continue to get invested in assets in the US, particularly the stock market.
I don't understand what you're trying to say. You can't easily say that asset prices are "disconnected from their fundamentals" - the price is what people are willing to pay for the future earnings of those companies. People are willing to pay a higher premium for those earnings now than they have in the past. Instead of the comparison to historical highs, try looking at developing countries, with lower P/E's and higher interest rates. Yet investors are still willing to pay a premium for US stocks. If you're going to say that the price is wrong, you need to account for that discrepancy. It seems that the argument you want to make is that people buy overvalued US companies because they think everyone else will continue to buy overvalued US companies?
I appreciate your response and think you're mostly on the right track. I didn't intend to call you out, more to point out a few mistakes in thinking that are common in these kinds of threads on HN (and indeed are more egregious elsewhere in the responses to this OP).