Comment by marcosdumay
4 days ago
> I have a vague theory that as the amount of wealth inequality in increases in a system along with excess money printing (lending, hypothecation, etc where the wealthy are permitted privileged leverage and risk), the more detached markets become from reality in general.
If you want to make it less vague, you can read Keynes.
It's inequality that is the important one, money printing doesn't impact it (except for it impacting inequality). In simple language, people don't want to spend all their money on consumption (the "demand is infinite" you see on econ101 is an approximation), and so when only two dozen people have all the money there aren't many things you can sell and turn a profit. But those people still want to invest all the money they aren't using, there is just nothing to invest into.
At the turn of the 19th to the 20th century, explaining this was a huge open problem in economics.
I had no idea Keynes had similar ideas, so I definitely should read his work (and economics literature in general).
I probably should generalize my thoughts though to say “expectation of economic growth” (instead of just “money printing”) seems to me necessary to yield “opaque market insanity”, as opposed to “transparent evil sanity”.
As a thought experiment, consider a (practically impossible) scenario where there is universally no expectation for long-term economic growth/contraction — regardless of whether it’s “real” or just monetary. Then by definition, a long term market simply cannot exist at all. No amount of wealth inequality can cause market insanity if there is no (long-term) market at all.
Wealth inequality in such a situation can still yield hoarding, domination, conquest, control, scams, manipulations, etc. But I wouldn’t call that “market insanity” so much as “evil sanity”.
In practice, the real impact of wealth inequality on the common people would likely be the same either way. However, without long term economic growth/inflation, the “sane evil” of the greedy wealth can no longer hide behind the veil of “market insanity”.
Humanity have always had markets, investment has been a thing for thousands of years, while economy growth wasn't something people expected until something around the middle ages.
You probably won't get a lot to support that idea on the literature.
Financial markets and capitalism has only existed for ~300 years, even if trade did happen since the start of recorded history.
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Money printing does directly impact inequality, via the Cantillon effect; in most cases, the printed money is put into the system in a way that disproportionately increases prices of assets that are held disproportionately by the wealthy.
> there is just nothing to invest into.
I think you have just defined gold and bitcoin to be "nothing".
Sounds about right.
True investment is when you put capital into a project or endeavor that is expected to earn rewards beyond its future sale price. You open a restaurant, and sell meals for more than the cost to make them. If your only hope is that 3 years from now you can sell the restaurant for more than you bought it for, it's no investment. Even if gold will be worth more, it won't make more of itself.
A post-truth environment adds to the ickyness of the feeling: on top of the bubbles, we've got RFK Jr. deciding the fate of biotechnology companies. Having a tech bubble at the same time science is being vandalized at NIH and in universities looks pretty damn dark.
Not just RFK Jr. The rest of the government requiring a 15% kickback from Nvidia and AMD to approve GPU sales to China, and the CEO of Intel being told to resign.
I feel like I'm going to be able to tell my adult kids "Yeah, when I was younger the Republicans were the party of free trade and government non-intervention in private industry..."
Conservatives have never been that party. They've always been the part of making the rich richer and the powerful more powerful by whatever means seem to work today. In the past free trade seemed to do that. Now arbitrary trade restrictions seem to do that. Or at least they feel so.