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robertogreco : deflation   4

A negative interest rate world? Why? | Ian Welsh
"Why there is too much money chasing returns is important, however, so I’m going to tease apart some of the reasons.

Central Bank Policy

Look, the ECB is buying bonds. The BOJ is buying bonds. The US was doing so. This is demand. It pushes the yield of bonds down.

China is printing piles of money, Japan is printing it, etc… That money isn’t staying in those economies, it is hunting through the world for returns or even just security. Federal Reserve policy has put a floor under losses from various securities by accepting that at near par, and Fed policy of free money has underwritten an epic bull market in securities.

No cleanup of the banking or shadow banking systems.

Most money is created by private actors. Banks, shadow banks (brokerages, etc…) There is no effective oversight of these organizations, still (you’d think after 2007, but you’d be wrong.) In fact, not only is there not enough oversight, but in most cases they’ve been effectively encourages to create more money. We have another derivatives bubble underway, we have housing bubbles in multiple countries (e.g. Canada and the UK), and while the US doesn’t have one, parts of the US, like Manhattan, do.

Oligopolistic profits.

US broadband profits are almost 100%-annualized. Every app store takes a 30% cut (a level which would have been shut down by regulators of the post-war liberal period.) Copyright law makes it difficult to impossible to create generic alternatives to common items. These have all led to very high profit levels, and those profits have largely been plowed back into stock buy backs (most corporate borrow is matched by stock buy backs). But much of the economy is not available to be bought on the stock market, many large investors can’t invest on the stock market by law (they have to invest in high-grade bonds), and much of those profits are now priced into stock prices anyway.

Inequality

In the United States more than all the gains of the last “recovery” have gone to the top 10% (really the top 3% or so.) There has limited broad based demand for new goods. Luxury goods, investment art, and London and Manhattan real-estate do not scale. Without widespread demand, opportunities for new businesses, with new employers, are limited.

Barriers to Entry

Much of this came under oligoplistic profits. Draconic “intellectual property” laws make it difficult to compete, bringing prices down and increasing volumes while freeing up money for people to spend on other things. 30% cuts from app stores and other virtual marketplaces make many businesses simply unprofitable—first they must make 30% for Apple or whoever, then they get to make a profit for themselves. But if you aren’t on those virtual marketplaces (and there is usually one which controls most of the business) you will not make enough sales to be viable. This sort of “you make no money without us, so we’ll take all the profits” behavior is little different from what the railroads did to farmers in the late nineteenth and early 20th centuries.

And while there’s tons of credit for big business and people who are already rich, a new business trying to get funding faces huge barriers to getting money. It’s boutique investment, it requires a lot of time, and most investors would rather just buy bonds, structured securities, or play the stock market. Money may be cheap, but not for you.



No Future Till The Current Rich Can Monetize It

We could have had a lot of what we have today many years ago.  But the rich control the politicians, and the politicians won’t allow it to occur.  There was great squealing for years about subsidies for solar, and corruption in how they were given out, but they were always a rounding error compared to subsidies for oil, let along the military-industrial complex, big agriculture, pharma, health insurance, and so on.  All of those industries were powerful enough to strangle subsidies to competitors (solar, generic drugs, whatever) and strong enough to insist on new laws which strangled startups and competition (every copyright extension is nothing but an anti-competitive measure intended to keep profits coming to incumbents.)

Bottom Line

We have too much money chasing too few returns because we’ve spent 40 odd years making sure that ordinary people get less and less money; the rich get more; and that oligopolies are nurtured and protected.  The rich control government, and they intend to make sure that all the money goes to them.  Unfortunately, in a mass market economy, that means the economy becomes lousier and lousier.  This doesn’t matter to the rich because they are comparatively better off. Better a Czar amidst serfs than the CEO of General Motors in 1955."
deflation  inflation  labor  capitalism  power  inequality  economics  2015  ianwelsh  wealth  us  policy  banking  finance  wallstreet  oligarchs  intellectualproperty  copyright  patents  business 
march 2015 by robertogreco
A Website on the U.S. Trade Policy Disaster || UNSUSTAINABLE.org [via:http://twitter.com/agpublic/status/27794932144}
"The New York Times yesterday carried a major article headlined "Japan Goes from Dynamic to Disheartened." Rarely has the truth of the Japanese economy been so completely misrepresented. This article is a highly selective pastiche of isolated hard-luck stories plus spin from propagandistic sources (as close observers have long understood, the Japanese establishment pursues a policy of exaggerating Japan's weaknesses and understating its strengths, the better to stay out of Washington's sights on trade). Worse, key "facts" are indisputably wrong."

[See also: http://twitter.com/agpublic/status/27795082477 http://twitter.com/agpublic/status/27795248121 AND http://twitter.com/agpublic/status/27800194594 ]
japan  economics  deflation  facts  nytimes  statistics  population  2010 
october 2010 by robertogreco
Get Ready For 'Stag-Deflation' - Forbes.com
"In conclusion, a sharp slack in goods, labor and commodity markets will lead to global deflationary trends over the next year. And the fiscal costs of bailing out borrowers and/or lenders/investors will not be inflationary, as central banks will not be willing to incur the costs of very high inflation as a way to reduce the real value of the debt burdens of governments and distressed borrowers. The costs of rising expected inflation will be much higher than the benefits of using the inflation tax to pay for the fiscal costs of cleaning up the mess that this most severe financial crisis has created."
nourielroubini  crisis  deflation  2008  inflation  markets  commodities  banking  recession 
november 2008 by robertogreco
Charlie's Diary: The bumpy ride hits toytown
"We've never actually seen a true global recession in a Web 2.0 world. What's it going to look like? How is it going to differ from a recession in a pre-internet world? Is it going to accelerate the hollowing-out of the retail high street as economy-conscious shoppers increasingly move to online shopping and comparison systems like Froogle? Are we going to see homeless folks not only living in their cars but telecommuting from them, using pay-as-you-go 3G cellular modems, cheap-ass Netbooks, and rented phone numbers to give the appearance of still having a meatspace office? Is the increasing performance curve of consumer electronics going to give way to a deflationary price war as embattled producers try to hold on to market share as Moore's Law cuts the ground away from beneath their feet? What have I missed?"
economics  futurism  latecapitalism  web  via:blackbeltjones  web2.0  change  tcsnmy  classideas  superstruct  recession  crisis  2008  markets  money  finance  banking  consumers  consumption  online  froogle  amazon  buyinghabits  deflation  worlplace  workspace  coworking  nomads  homelessness  neo-nomads  workspaces 
october 2008 by robertogreco

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