Why is my hair still wet?

[pacotelic.livejournal.com]

Comments

[not-hothead-yet.livejournal.com]

keep saying it... maybe eventually it will sink in. Hasn't yet.

Where the jobs are getting created.

[pacotelic.livejournal.com]

This is pretty much the relationship between Germany and England before WW1

Re: Where the jobs are getting created.

[unnamed525.livejournal.com]

WWIII?

Re: Where the jobs are getting created.

[pacotelic.livejournal.com]

Quite possibly. If I was them I'd redress Nanking first, but we're certainly next.

[michael barnett (from livejournal.com)]

Interesting tidbit from the Austrian perspective. I'll keep it short. OK, so with interest rates being held so low for so long, investor and speculative interest in bonds is low -- they don't pay much in terms of interest, right? Traditionally, stocks pay dividends, which was a major factor in speculators and investors purchasing stocks, right? To get the dividend payout from the corporate profits. Now, however, companies don't need to pay much, if any, dividends because their competition for funds has dried up tremendously. Bonds have become extremely unattractive, as described above, so stocks become a natural alternative. To put this in mainstream terms, demand for stocks is less elastic than it otherwise would be because of monetary policy driving down interest rates. What does this portend?

Well, if companies no longer have much pressure on them to pay out dividends from the profits, the profits can go to other uses, like driving up Executive Pay. AND, since it becomes share price and not dividends which matter more to investors since they're not competing on the basis of percentage payouts anymore (bonds pay next to nothing), Exec Pay tends to get tied into stock performance in dollar terms. It's much easier to manipulate stock price as an executive than it is to manipulate real cash flow, right? So in the past whereas healthy companies paid good dividend yields based on the company's real performance in the real world, NOW CEO pay gets tied to speculative stock prices based more on, or at least as much on, perception as reality.

This is just another example of the unintended consequences of interventionism. If you check out the graphs of interests rates vs executive pay, you'll see what I'm talking about. And the longer interest rates are held artificially low, the worse the pay disparity will be.

Anyway, just thought you might appreciate that.

[pacotelic.livejournal.com]

The main reason for the housing crisis was that Greenspan kept interest rates artificially low to avoid inflation. Lending was so cheap banks couldn't help but lend, to anyone. They never took the haricut classic economics says they should have.

Otherwise, I do appreciate it.

[michael barnett (from livejournal.com)]

It's the main reason for the dot com bubble before that. Whenever you see what Austrians refer to as "a cluster of errors", you can bet your ass that some misinformation has been disseminated. In this case, the artificially low interest rate is telling people at all levels to borrow because the price of money is so cheap. But it's not the underlying economic conditions telling people to borrow -- it's the inauthentic interest rate. That's when the trouble starts.

[pacotelic.livejournal.com]

The fundamentals of the dot com bubble were different. We had Andresson's and Berners-Lee's actual innovation to divvy up, and a lot of speculative wealth got created then.

Reagan's S&L and Bush's Mortgage Crisis were much more funny money chasing bad policy.