Our banking system nearly collapsed in 2008. Lots of people got hurt. Financialization of the US economy is a larger, delayed version of what happened to General Electric.
> Our banking system nearly collapsed in 2008. Lots of people got hurt.
Yes, plenty of people got hurt because they made shitty investments.
How many people got hurt due to their bank running off with their money to the Bahamas/betting it all on red?
Because that's the degree of 'hurt' that the various crypto exchanges have been inflicting on their customers. Can you find me one American who lost money from their savings account in 2008? Or just had it go poof from their stock brokerage?
I responded to: "Name a financial firm that had a significant negative impact on consumers?" I didn't respond to which financial firms stole money from customers. What SBF did was more like Bernie Madoff.
The only reason we didn't have bank runs and frozen accounts is because the Fed stepped in to provide liquidity to the whole market. The banking system would've collapsed similar to the Great Depression without such action. Lots of people lost their savings in the Great Depression.
Retail investors used FTX, retail was not heavily exposed to Bernie. His marks were mostly institutional and accredited investors, for whom the expectations are far closer to the 'buyer-beware' side of the spectrum.
> because the Fed stepped in to provide liquidity to the whole market.
That's the Fed's job. Everything worked... Pretty much as intended.
And there's a reason it's not stepping in to provide liquidity for the various crypto scams. Liquidity injections can save a situation where value exists, but can't be immediately realized - as in the case of a bank run. In this case, though, there's no value worth saving.
> Lots of people lost their savings in the Great Depression.
Which is precisely why we built systems to prevent that failure mode from happening again. They worked.
I agree that the Fed was right in letting these crypto scams fail. The problem inherent to the system is inflation. As the Fed expands its powers, it can avoid significant recessions/depressions but one day it won't work and the dollar will fail like every other fiat currency in the world has eventually failed. This system "working" isn't eliminating risk, it's polarizing it.
I wrote a longer comment a year ago but here's a piece: "The price of gold was $45/oz in 1970. 52 years later it's $1,800/ounce. That's roughly 7.6% a year or 45x increase. If you use the inflation provided by the government, CPI, (1), they say inflation is only 3.6%/year or roughly 7x since 1970. Obviously we have a discrepancy. Is the dollar worth 45x less than 1970 or 7x times?
When we look at prices of things like education, housing, and healthcare, the 45x number makes a lot more sense. Education has 30x in price over the same time period (2). If you're comparing prices in dollars, it feels like education got really expensive compared to the basket of goods the BEA tracks but in reality, education requires less gold than it did in 1970. Our incredible supply chains and manufacturing automation have lowered most consumer prices such that we don't really notice inflation but when you look at things that can't get much cheaper like housing, healthcare, education, asset prices of all sorts, you can't miss the fact that they correlate more closely with gold than the USD."
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I wrote a longer comment a year ago but here's a piece: "The price of gold was $45/oz in 1970. 52 years later it's $1,800/ounce. That's roughly 7.6% a year or 45x increase. If you use the inflation provided by the government, CPI, (1), they say inflation is only 3.6%/year or roughly 7x since 1970. Obviously we have a discrepancy. Is the dollar worth 45x less than 1970 or 7x times?
The main[1] answer to your riddle is that the economy grew about ~6x faster than we have been mining gold. The dollar is closer to being worth 7x less than 45x less.
> When we look at prices of things like education, housing, and healthcare, the 45x number makes a lot more sense. Education has 30x in price over the same time period (2).
The same amount of education isn't actually 30x more expensive.
Because you're not getting the same services in exchange for your money today, as you were 50 years ago.
If you drop the money-pit sports programs, the entirety of the administrative sector, the nice new dorm buildings, and account for reduction in public funding, you'll find that the growth in the cost of education is much closer to the cost of inflation.
It's not all that expensive, even in 2022, to stuff a group of young adults into a lecture hall and have an underpaid adjunct who doesn't even get health insurance read off Powerpoint slides to them for 15 hours a week. It's the everything else, most of which has nothing to do with education that costs money.
[1] The secondary answer to your riddle is that late-night-infomercial-manufactured demand from goldbugs and other morons can easily raise the price of gold significantly above where it 'ought' to be. Beanie babies, baseball cards, NFTs, shitcoins, etc.
College education is ~30x more expensive (1). Home prices (2) & Health care (3) are ~22x more expensive. Farm land is up 20x (4)
> The main[1] answer to your riddle is that the economy grew about ~6x faster than we have been mining gold. The dollar is closer to being worth 7x less than 45x less.
How are you measuring it? It's a circular argument if you measure it in dollars. If it measure it in anything that can't be made more efficient due to automation & offshoring, it's no where near a 7x decrease.
> [1] The secondary answer to your riddle is that late-night-infomercial-manufactured demand from goldbugs and other morons can easily raise the price of gold significantly above where it 'ought' to be. Beanie babies, baseball cards, etc.
Gold is simply a good that's impossible to mass produce with technology. Use land, housing, healthcare, education or whatever you feel is most representative. Using toothpaste and tv's for CPI is a bad measurement in the last 50 years, our technology for mass producing them has lowered the true cost.
Yes, plenty of people got hurt because they made shitty investments.
How many people got hurt due to their bank running off with their money to the Bahamas/betting it all on red?
Because that's the degree of 'hurt' that the various crypto exchanges have been inflicting on their customers. Can you find me one American who lost money from their savings account in 2008? Or just had it go poof from their stock brokerage?