
Welcome to the Everything Boom, or Maybe the Everything Bubble - happyscrappy
http://www.nytimes.com/2014/07/08/upshot/welcome-to-the-everything-boom-or-maybe-the-everything-bubble.html?src=twr
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logicallee
This is an aside, but I take exception to their figure, "Nowhere to put your
money". I find it manipulative.

Look, I quickly rearranged their figure by just reversing the order of the 6
tranches (which is arbitrary, and not actually connected - though they seem
that way). Original:

[http://imgur.com/6my8mqu](http://imgur.com/6my8mqu)

Reversing the order of the 6 charts:

[http://imgur.com/mq61KrL](http://imgur.com/mq61KrL)

Just flip back and forth! It shows a different impression. I haven't changed
any of the data.

The original impression only exists because they sorted the six downward (by
end-point of each of the 6 charts - they even make those end-points bold
dots). That's an awful shifty way to tell a story of something moving down
over time.... Plus - how did they select these six? Indonesian Stocks -
Manhattan Office buildings? Could it be they selected six that fit well
together? (Mine, lacking this preselection, is way more jumpy.)

That said, I enjoyed most of the article and don't like this sleight-of-hand,
which calls it into question for me.

~~~
JimboOmega
The point isn't so much the ordering, but that they are all - across different
traditional returns - outside of historical norms. It's more about the grey
bar - wherever it is, the asset is below it or at about the bottom.

~~~
logicallee
And why do the seven years 2004-2011 provide the "historical norms"?

Regardless, it is a rather small point and I will readily agree that all six
assets have been falling. But arrange them vertically - or better yet,
superimpose them - instead of listing them side-by-side, _sorted in descending
order by 2014 value and selected to dovetail together!_ and the story isn't
nearly as clear.... Just try it.

The graph is set up to tell a macro story far beyond 2 years. It looks hastily
like a 12-year story of rising from 6% to a high of under 8 and falling
sharply and steadily down to 3 (briefly under 2).

But that's not what the graph says at all. It just looks that way visually.

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hacknat
I do think it is both right to view the problem as a savings glut _and_ a
genuine lack of _worthwhile_ opportunities for the entities responsible for
the savings glut. Why? Because the entities responsible for the savings glut,
the multinationals, are the biggest hegemons the world has ever seen.

There is a plethora of good opportunities to be exploited out in the world,
but not if you're holding $180 billion in savings (I'm looking at you Apple).
These huge savings gluts are, effectively, liquidity traps, because these
entities (besides, perhaps, governments) can't possibly hope to effectively
deploy such large amounts of capital effectively. Add to the mix that
inflation is so low, and hanging on to vast sums of cash starts to look like
one of the least foolish things the Fortune 500 are doing right now. There
isn't a shortage of good opportunities, it's just that good opportunities look
so tiny to the big boys.

I don't have much hope that targeting a higher inflation rate will do much,
but I think it's worth a shot.

~~~
prostoalex
It's a QE-induced glut. At some point the Federal Reserve will start selling
the assets it bought with freshly printed currency, and with the rates going
up more interesting opportunities will appear.

Apple's case has been dissected here [http://www.quora.com/Apple-company/What-
would-be-a-good-use-...](http://www.quora.com/Apple-company/What-would-be-a-
good-use-of-Apples-110-2+-billion-in-cash) \- having a large pile of cash is
generally better than not having a large pile of cash if you're in the
manufacturing business, and need to convince your partners that you have
enough financial strength for them to commit to a factory build-out that could
take years to accomplish.

------
ilaksh
They didn't mention cultural and psychological aspects that probably
contribute -- the sustainability orientation and collapse anxiety.

The central banks' actions seem to be providing more and more reasons for
people to take a sustainable (defensive) view.

It looks like a self-fulfilling prophecy unless you manipulate it
fundamentally. There is plenty of manipulation built-in to the system already
-- its just mainly opportunistic or used to preserve the existing structures.

What is needed from the financial system is an institutional honesty and
willingness to grow into an optimistic structure that incorporates more hard
science and technology, focused on human and environmental well-being.

Integrate more physical and social science, better utilization of technology,
and a greater degree of holism, into the field of economics, while still
preserving the values of freedom and appreciation of complexity that will
allow for diversity and evolution of systems.

------
corford
Interest earned on asset investments may be getting smaller and smaller but
with inflation at 2% or less, investors are still coming out on top aren't
they? So, doesn't this only become a real problem if inflation goes up
markedly? Also, if it is a bubble and it pops, wont that mean that for many of
those asset classes, investing will subsequently be viewed as more risky and
the interest offered increased accordingly? And if inflation does go up,
making current returns on asset investment unattractive wont that choke
investor demand and force asset owners to offer better interest rates?

Apologies for my economics 101 questions. I like finance but don't pretend to
know much about it or understand any of it :)

*Note: when I say assets I'm thinking more bonds, treasuries etc. than physical real estate.

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pmorici
inflation - economics; a general increase in prices and fall in the purchasing
value of money.

[https://www.google.com/webhp?espv=2&es_th=1&ie=UTF-8#q=defin...](https://www.google.com/webhp?espv=2&es_th=1&ie=UTF-8#q=define+inflation)

So is the "Everything Boom" going to be the new polite way of saying inflation
is happening? I mean that is the expected outcome of the economic policies of
the past several years is it not?

~~~
dnautics
correct. Demand-siders have insisted that we all need to start spending more
money to kick the economy into gear. Broadly, the only tool to do this is to
"print money"; read: lower interest rates, twiddle with the reserve ratio
requirement, directly pay off banks for certain types of activities.

Supposedly this will make people want to buy things now (instead of later).
There is this odd effect though, that increasing prices also can make people
insecure, as in: _Worldwide, more money is piling into savings than businesses
believe they can use to make productive investments_. In other words, the
people WANT deflation.

The net effect though is we will be transferring wealth from the poor to the
rich; and then the bubble will pop, the rich will cash out of their assets
early, and people with slower investment classes (401ks, pension funds, etc.)
will get screwed. And some of these other people will even get fired, putting
them into even greater risk.

I'm not going to defend "supply-side" economics, either, because that's got
it's own brand of stupid going on.

There is a modest distinction between bubbles and inflation. While inflation
guns bubbles and aggregates small, local bubbles into bigger, systemic
bubbles, there can be bubbles during deflationary periods, and systemic
inflation doesn't necessarily end in a bubble. Bubbles are characterized by a
specific set of price dynamics that are guided by human psychology; the most
characteristic, but hardest to notice, is when the asset price collapses,
typically around twice the speed that it rose.

~~~
praxulus
>Demand-siders have insisted that we all need to start spending more money to
kick the economy into gear.

Pretty much.

>Broadly, the only tool to do this is to "print money"; read: lower interest
rates, twiddle with the reserve ratio requirement, directly pay off banks for
certain types of activities.

Well, those are the only tools _central banks_ have available to them, but
there are much better options. Unfortunately those tools are only available to
legislatures, who have decided not to use them.

------
dreamdu5t
The subtext of this article is that people should be able to just put their
money anywhere and make returns.

Infinite growth is finally being revealed as the financial dogma it is.

------
anigbrowl
Relevant: [http://www.bloomberg.com/news/2014-07-06/bond-anxiety-
grows-...](http://www.bloomberg.com/news/2014-07-06/bond-anxiety-grows-
in-1-6-trillion-repo-market-as-failures-soar.html)

tl;dr there's a severe shortage of treasury bonds, leading to a worrying lack
of liquidity in the interbank market.

------
unknown_apostle
Not sure if the world has a glut of real savings. It does have a glut of
liquidity and a huge steaming pile of IOUs that virtually ensures there will
be no end to printing of new money for years to come.

So markets are thinking "central banks will never allow another 2008 to
happen. What could possybli go wrong!!" and throw billions at Snapchat and
Somali pirate bonds.

There are cheap financial assets. Basically any tail hedge that would benefit
if it ever turns out that it's simply not up to central banks to fully decide
what happens and when.

Death may have taken a holiday but his return to work won't be announced much
in advance.

------
michaelochurch
I'm-a cut through all of this. There's an incredibly simple explanation for
what looks like an pan-asset bubble.

 _“If you ask me to give you the one big bargain out there, I’m not sure there
is one.”_

There is one. Human labor.

"Everything" being expensive means that currencies are losing value, which
means that wages are declining in terms of what the money buys. Ever look at
the S&P in houses? Or in oil? Or in (though I don't find it as useful) gold?
That alone makes our 21st-century look like Japan's lost decade (1990s). No,
that's not something we could fix by moving to the gold standard. Human labor
is just worth less, and capital is worth more.

Like most bubbles, the process is actually faster-than-exponential. (Normal
economic growth is already exponential.) The meltdown of the middle class is,
for example, driving up college tuitions, creating demand for expensive high
schools (now that it's extremely difficult to go to Harvard from a public high
school, when it wasn't that rare 15 years ago) and, in the few urban areas
where unconnected or semi-connected people can find good jobs, pushing rents
into the ionosphere (and prices to 40-50x annual rent, which one hopes is due
to various money-laundering shenanigan but may be in anticipation of further
rent increases). The disintegration of middle-class America is a self-fueling
feedback loop as talented people strive to get away from the old order into
the new (expensive urban centers, elite universities). The goal (in this
forceful middle-class in-pressure toward expensive, elite places) is to get
enough connections to people who can keep their own lights on, before things
start going out. Some of these changes are good (such as the movement away
from environmentally unsustainable suburbs) but most are bad.

Our society has stopped valuing labor, whether it's the skilled kind or
unskilled. That's why a talentless dickhead with connections gets to be a
"founder" and take 40%, doing nothing but monetizing his own social position,
while you write all the code and get 1%.

Is this a bubble? It sure is. The "crash" will probably be a revolution. It
will be global, and it may not be violent here but it will probably be violent
in many places. The funny thing about bubbles is that their ends are
impossible to predict. This one, especially because it is political and social
as well as economic, and a bit unprecedented (the large middle class of the US
was unprecedented, much less its destruction) is impossible to time. It could
happen next week, or it could be 100 years from now.

~~~
dharma1
I agree labour is undervalued. Particularly in developing parts of the world,
compared to equivalent labour in developed parts of the world. I think with
remote work and access to education online, globalisation is only getting
started in many industries. At the moment it can be arbitraged but I guess the
opportunities will disappear as differences even out over the next 10 years.

Some labour is also overvalued - where a small group can basically push the
price of their labour upwards by manipulating the system. For instance,
executive pay with share buybacks.

As far as revolutions, pressure will definitely mount but it won't spark, not
within the middle class, unless things get really bad. By bad I mean bad
enough not to being able to afford things like food. That's how the arab
spring started - food prices spiked beyond affordability. If you have
responsibilities like family, people value their (relative) comfort, even if
it's dwindling, over the risk of physical injury and chance of losing
everything.

~~~
michaelochurch
_By bad I mean bad enough not to being able to afford things like food. That
's how the arab spring started - food prices spiked beyond affordability. If
you have responsibilities like family, people value their (relative) comfort,
even if it's dwindling, over the risk of physical injury and chance of losing
everything._

Healthcare. 45,000 people die per year of health insurance (or lack thereof)
in the U.S. This number may improve under the PPACA ("Obamacare") but insurers
will fight and struggle against it, and as soon as Republicans regain control
(which is inevitable) we'll see new laws that allow health insurance companies
to kill even more people.

The one thing that makes it not revolution-provoking is that it's mostly old,
sick people who are affected. Also, people think they're better off than they
actually are, that because they "have insurance" they're not going to get
fucked over.

"Obamacare" improved the situation, but he had to fight hard to get very
little progress, and I think that his work will be undone in the next 5 years
since it didn't change the underlying problems. This situation requires a
complete overhaul (single-payer system, or public-option at the least).

What I'm saying, however, is that things legitimately _are_ that bad. Dying of
health insurance is the 21st century's version of dying of starvation. It is,
nonetheless, completely unpredictable when and how these things will come to a
head, and there's still a possibility that society will reverse its own
decline in another way.

