Comment by dgb23
1 year ago
I'm only starting to learn about these things.
From the data I've seen and read it seems like low interest rates are (politically) alluring, because of short term metrics, but will bite back via inflation and bubbles bursting very consistently.
Is there any wisdom and data that challenges or expands on this that a layman can understand?
https://www.amazon.com/Price-Time-Real-Story-Interest/dp/080...
So, bubbles are hard, especially when the underlying fundamental thing does not respond well to price increases (NIMBYism, zoning, weaponized environmental legislation, etc.)
https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl...
Tech bubbles are doubly so, because now that "total addressable market" has exploded thanks to the internet everything is a bubble. (Starting with the good old dot-com one, and crypto, and AR/VR/Metaverse, and now AI. Folks are comparing Nvidia stock graphs to Cisco around 2000.)
....
Likely the HN crowd overestimates the effect of ZIRP on tech, because how crazy the last 10-15 years have been. (But we see that the economy in general performed extremely well, real wages increased, etc.)
Yes, of course there were (and are) a lot of scummy ventures, but there will be more.
...
Regarding rates, the picture is a bit more complex. So coming out of the 2008 crash the Obama/ARRA fiscal stimulus was too small. (And of course it got hyper-over-politicized on "both sides".) And the monetary response was also lackluster.
But we also know now (benefit of hindsight!) that the rates before 2008 were too low.
https://www.caixabankresearch.com/en/economics-markets/monet...
One important take-away is that of course everyone wants growth, more growth would help lower taxes, inflate away deficits, yey! Prosperity is good!
But ... we can't simply buy growth with endless loans from our future selves. Real economic growth requires increasing productivity, which requires applying new (better, more suited to the situation, more profitable) technologies, which requires changes (duh), but an aging population is very change-averse. The US with the political gridlock tends to go on wild goose chases, spending enormous amounts of money on bullshitting instead of picking better technology.
(And here technology includes social technology too. From the things like "lack of funding reform for fire departments leads to them going with too large firetrucks everywhere to be able to bill a lot, which leads them to not sign-off on thinner roads, which leads to too wide roads where motorists drive too fast, which leads to too many injuries and fatalities" to all the usual like lack of gun control and bribery rules for the courts.)