[rufusroflpunch]

We never "righted" the system after 2008 (or 2001). We just kicked the can down the road, making the problem worse for ourselves when we eventually do finally lose control. Our system is 100% entirely dependent upon ARTIFICIALLY low interest rates driven by Central Banks. It's the only still keeping this zombie of an economy moving, and it's the entire world, not just the United States.

Central banks are doing everything in their power to keep interest rates low because if they were to tick up even a little bit, the whole house of cards will come toppling down. They can't do it forever and we're all just playing chicken with hyperinflation.

[itsoktocry]

>Our system is 100% entirely dependent upon ARTIFICIALLY low interest rates

There is no such thing as "artificial" or "natural" rates of interest.

>Central banks are doing everything in their power to keep interest rates low because if they were to tick up even a little bit, the whole house of cards will come toppling down.

Why would, or should, they "tick up"? Capital is abundant. If rates were higher, things would be different, yes. But that is not the world we live in.

>It's the only still keeping this zombie of an economy moving, and it's the entire world

I love the idea that the entire global economy is fake, artificial and zombie-like, because it doesn't operate the way you think it should. A reasonable person would take a step back and question their premises and understanding.

[anm89]

>There is no such thing as "artificial" or "natural" rates of interest.

In a sense this is semantically correct, there is no one true interest rate, in a hypothetical pure market there are many rates for many different types of transactions.

But to say that wildly misses the point that the rates for all transactions are hugely skewed, all in the same direction, because a single player, who writes the laws, and prints the money, is putting enormous pressure on rates.

So yes, there is no objective one natural rate. But all rates right now are extremely artificially skewed.

> Why would, or should, they "tick up"? Capital is abundant.

Capital is abundant for the sole purpose of keeping rates low. You are confusing the causality here. If they weren't being suppressed, and actors were setting rates on a per transaction basis, then they would drastically tick up as many of the underlying entities economy wide have riskier default profiles than they have in the past. This isn't conspiratorial or speculative. This is widely understood to be true by mainstream economists, even those who support the rate suppression.

[_lqaf]

I just want to take a moment to note that capitalists are lobbying the central government over a difference of opinion about interest rates, asking the central planners to adjust The Number.

...And several Russian novelists burst out laughing in their graves.

[darawk]

> There is no such thing as "artificial" or "natural" rates of interest.

That is not entirely true.

https://en.wikipedia.org/wiki/Natural_rate_of_interest

Whether the natural rate of interest is real, or is a unvariate value is a matter of some debate among economists.

[willcosgrove]

It's artificial if the entity loaning you the money and setting the rate has no associated risk.

If I loan you money there's risk you won't be able to pay me back. So I decide what interest you would need to pay me for it to be worth it for me to take that risk. Lots of other people do that, and you get a "natural" rate of interest as you call it. Everyone offering you the loan has skin in the game.

But if the entity that prints the money says they'll loan you money, it doesn't matter to them if you can't pay it back. They set the money supply. If you don't pay back, they can take the value from everyone dealing in their money by printing more. This lack of risk allows them to undercut the rates of entities who would be taking on risk. Now you have an "artificially" low interest rate.

[vsareto]

>I love the idea that the entire global economy is fake, artificial and zombie-like, because it doesn't operate the way you think it should. A reasonable person would take a step back and question their premises and understanding.

The new part is the expectation that governments will prop up companies during bad economies.

This is bewildering to anyone with a naive view that believes America is a purely capitalistic economy. Surely if a company prepares enough for the storms, it's worthy of surviving them. Running thin savings is now more risky, but it means more profit. That's fair.

From another perspective, it's economic innovation where unpredictable disasters don't kill huge companies or industries. This can be a good thing, but it's not really capitalism any more.

So the person taking a step back will ask, "How far will the government go to protect large companies? How large do you have to be to get this protection? How does all of this work?" This is what we can't answer.

This is where people (rationally) start to believe things are fake, because the country's leadership gets to decide what happens to companies during these times.

Now this company knows the government is likely to bail them out, what reason do they have to plan for the worst any more? This gets even more uncomfortable when they get bailouts for causing the disaster themselves.

[mrep]

The only companies the government is propping up are the airlines and small businesses by mainly paying for their payroll to keep people employed through the CARES act [0]. In what way is the government protecting large companies?

[0]: https://en.wikipedia.org/wiki/CARES_Act

[vsareto]

Exactly, it's protecting large airlines from going under. This means there's less risk here than if the government had not intervened. Any future pandemic will likely result in a similar response, therefore, airline stocks have reduced risk of becoming worthless.

At a basic level, if you removed all demand for airlines, you'd say "well, airlines don't look like a great investment". But now the demand matters less during disasters because demand isn't actually keeping the company alive as in most businesses.

[jungletime]

This brings to mind Elon Musk and his many failed rockets. Normally a rocket failure is so expensive it has the potential to bankrupt even a rich company. In a pure capitalistic system investors would not risk suck long term goals as going to Mars, when it involves many rocket failures, and no profits. But its in the national interest to push such research forward for the sake of humanity. So if state provides some welfare, or a cushion, to hedge such risky thing as building rockets, don't we all benefit. In a similar way to the way government grants pay for research at universities. Its obviously a balance.

I live in Canada, a huge country. Its not profitable for any company to provide power to remote places with only a few inhabitants. Its only possible because the government mandates it, and the rest of us subsided it.

[apta]

> Our system is 100% entirely dependent upon ARTIFICIALLY low interest rates driven by Central Banks.

It's the other way around: the entire reason why everything is so screwed is because of interest. It's an evil and exploitative practice that has destroyed so many people, only for a relative few to become wealthy. It's obvious today how this works out, but it's been going on for thousands of years, which is why it's banned in many religions, and for good reason.

[hpkuarg]

A moral argument against the time value of money? Isn't that like legislating that the value of pi is 3?

[apta]

It's a moral argument against the inherent exploitation involved in usury. No one denies the time value of money, it's about how to extract that value morally and ethically, and not at the expense of the needy.

[voisin]

What are you proposing as a solution? Is this a situation along the lines of “Democracy is the worst form of government, except for all the others”? People with capital need an incentive to provide it to people without capital. You can argue reasonably that the distribution of capital isn’t “fair” but to argue there should be no interest charged seems irrational. Help me understand your position.

[apta]

There are true risk sharing models that do not involve interest. For example, I want to start a business, instead of taking a interest-bearing loan, I have someone invest in my business in return for equity. This way, risk is shared by both (or more) of us. If the business fails, we both lost effort and money and time. If it succeeds, we both profit.

With lending money, there's usually a collateral involved. If the borrower defaults, then the lender simply comes after his property, taking more than what was originally lent, purely by the passing of time (which accrues interest).

When you read about student loans for instance, especially higher loans for people who go into law or med schools, how even after those people are employed and making good money, their outstanding amounts barely budge (or even accrue) even after a while. This is unjust, unfair, unethical, and exploitative.

[missedthecue]

A loan is when someone sells money. The interest is the profit to compensate for the risk. Is all profit, (including that derived from selling labour) to be thought of as theft?

Should everyone sell everything at cost to avoid "exploiting" others?

[apta]

Selling money is unethical because of the inherent exploitation involved, by taking advantage of someone who is in need of it.

No one is saying not to make profit, just do it properly. You can rationalize interest as being compensated for risk, but it doesn't make any less exploitative. We have already seen how the economy keeps getting screwed, yet we don't learn.

[missedthecue]

"Selling money is unethical because of the inherent exploitation involved, by taking advantage of someone who is in need of it"

This logic holds no water. The great majority of things sold are sold to people to need them. Why should money be any exception?

[onlyrealcuzzo]

Generally, you don't get hyperinflation when asset prices fall.

If interest rates were to rise to normal levels, asset prices could fall 45%. It's hard to imagine anything but deflation.

Unless interest rates go to extreme negatives, you will not see another effect like the one we have already seen from interest rate manipulation. There's just not enough room for a big rate of change.

It would be completely separate if you had outrageous fiscal spending to try to prop up asset prices. Given that fiscal stimulus is much harder to pass than monetary, hyperinflation doesn't seem like the thing to worry about.

[bryanlarsen]

I argue that it's positive rates of interest that are artificial, not negative ones.

Traditionally if you had a large pile of gold and you wanted to protect it, you had to buy a safe to put it in and hire guards to keep the thieves out. The guard's salary is in essence a negative interest rate.

It was only the invention and adoption of fractional reserve banking that enabled positive interest rates.