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Re:San Francisco Bubble by api on Friday January 29, 2016 @12:27PM (#10996714)
Tangent but: I doubt the rate raise will stick. They'll probably have to cut it again. I see a "planet Japan" scenario in which global central banks are zero-bound for decades, if not "forever". Rapid growth is over. There are no more frontiers and birth rates are stabilizing. From an ecological point of view the stabilization of birth rates is good, but it basically breaks all the economic assumptions of the past 250+ years. A heavily leveraged credit economy does not work without fairly rapid growth, and until the economy is fundamentally restructured toward something built for a more steady-state mode of operation we'll have to hack it by constantly printing money to prevent deflationary collapse.

The only thing that might change this is something like the opening of the final frontier-- space. But in that case I'm not sure if it would... distances between say Earth and Mars are so vast that any Martian economy would effectively be a separate entity. It might experience rapid growth but I'm not sure if that would translate over here. The Homeworld might still be like Japan-- a zero-bound no-growth economy.

I suppose an AI explosion that wasn't destructive might change things too by creating a lot of new non-corporeal economic entities, but we're well off into sci-fi land here.

Edit: I don't necessarily mean that all forms of "growth" are over. We could still have tremendous growth in knowledge, technological capability, standard of living, and some amount of economic growth. But heavily leveraged inflationary credit economics requires crazy exponential growth in an absolute sense. Without crazy growth it breaks, and the only way to keep it nominally running is to pump money into it to prevent cascading default.

In a sense I think the "pop Austrians" are right that the present system is broken, but they've historically had the failure mode exactly wrong. The failure mode is not hyperinflation-- it's hyperdeflation that's permanently held at bay by money printing ("Japan"). That's because pop Austrians don't get the money multiplier. Almost all money in circulation is credit/debt, not M1. You'd have to print absurd amounts of money and make sure it's distributed more widely than banks to cause a non-localized hyperinflation in a credit economy. (Localized hyperinflation is possible due to bubbles but these usually collapse.)

Of course another way of keeping the illusion alive is to pump up localized credit bubbles repeatedly. These give the illusion to certain sectors or regions that the economy is still growing the way it should... for a while. But then they pop and you need another round of money printing to prevent hyperdeflation. Rinse and repeat. Meanwhile these bubbles distort the price structure of the economy, such as by making housing ridiculous or driving certain commodities crazy.

Re:San Francisco Bubble by pdq on Friday January 29, 2016 @12:47PM (#10996895)
> Tangent but: I doubt the rate raise will stick. They'll probably have to cut it again. I see a "planet Japan" scenario in which global central banks are zero-bound for decades, if not "forever". Rapid growth is over.

Agreed nominal interest rates will likely drop down again to zero to restimulate the economy, but I doubt that will stick for the next decade, as inflation should creep back in forcing the Fed's hand. However, if you believe that "real interest rates" (ie subtracting inflation) will be zero for a long time, I can concur -- currently they are negative.

Re:San Francisco Bubble by api on Friday January 29, 2016 @01:25PM (#10997251)
"Zero-bound" means "at or near zero." Inflation is easy to kill in today's world: just raise interest rates a little tiny bit for a short period of time and the deflationary downdraft will snuff any little inflationary ticks upward. But they'll be forced to drop rates again quickly or we'll fall back into deflation. The instant they raise rates the debt defaults and asset price collapses will start.

Earth is now Japan. Perhaps Mars is the next America.

Re:San Francisco Bubble by matzipan on Friday January 29, 2016 @01:33PM (#10997337)
Earth is not Japan yet. We still have China and India...
Re:San Francisco Bubble by api on Friday January 29, 2016 @02:23PM (#10997773)
China is facing a demographic cliff similar to what happened to Japan after the 80s boom. India and Africa could experience growth for a while but they have major problems, chief among them very deep structural corruption at all levels of society. Even if they can overcome this they will eventually face the same demographic cliff as China today and Japan in the 90s.
Re:San Francisco Bubble by jsprogrammer on Friday January 29, 2016 @01:33PM (#10997335)
0/Near 0 interest is the end-game of fractional reserve banking. Consider the alternative: Rates climb back to 20%. You (and everyone else borrowing) now need to somehow collect an additional 20% (ignoring compounding and early payments) money each year. 1) that's not going to happen unless massive amounts of money are borrowed by lots of people 2) that money must move fast enough (and be continually reborrowed) to make it out to everyone who has an upcoming (very large) interest payment.

The banks are a serious drain on the system. They get to extract percentages from the economy year over year, while contributing nothing (except interest obligations).

Re:San Francisco Bubble by shostack on Friday January 29, 2016 @02:36PM (#10997892)
Do you see a potential solution?
Re:San Francisco Bubble by jsprogrammer on Friday January 29, 2016 @09:33PM (#11000211)
Some type of "normalization" process can probably be used successfully for a while, but more seriously: I think we need to track dependencies; as in, the full supply chain.

Then, perhaps, we try to figure out how to engineer solutions that will guarantee certain certain conditions will be met (e.g. Enough food for every person in an area will make it to that area for everyone there to live satisfactorily).

As the dependencies are mapped out and tracked, it will become obvious which tasks are necessary to fulfill the current economic objectives. Then, it's simply a matter of performing the tasks.

Re:San Francisco Bubble by dragonwriter on Friday January 29, 2016 @01:31PM (#10997311)
Rapid growth doesn't need more economic entities (whether natural or AI), it just needs more production. Rapid increases in productivity with a steady state population suffices to achieve that.
Re:San Francisco Bubble by themagician on Tuesday February 02, 2016 @08:38PM (#11024171)
I appreciate this tangent. There's a lot in here, and well reasoned. slowclap