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Saturday, June 03, 2017

This is the Great Depression 2.0

On the plus side, it appears the Keynesian interventions have managed to successfully "smooth out" the business cycle.
The following are U.S. GDP growth rates for every year during the 1930s…

1930: -8.5%
1931: -6.4%
1932: -12.9%
1933: -1.3%
1934: 10.8%
1935: 8.9%
1936: 12.9%
1937: 5.1%
1938: -3.3%
1939: 8.0%

When you average all of those years together, you get an average rate of economic growth of 1.33 percent.

That is really bad, but it is the kind of number that one would expect from “the Great Depression”.

So then I looked up the numbers for the last ten years…

2007: 1.8%
2008: -0.3%
2009: -2.8%
2010: 2.5%
2011: 1.6%
2012: 2.2%
2013: 1.7%
2014: 2.4%
2015: 2.6%
2016: 1.6%

When you average these years together, you get an average rate of economic growth of 1.33 percent.
This isn't quite right. I ran the numbers and the average for the 1930s is 0.53 percent, whereas the 2010s average is 1.17 percent. So, it's both better and worse than the author wrote. Meanwhile, despite the anemic GDP "growth", the stock market has hit new peaks and optimism is high.

And that sound you hear is everyone familiar with socionomics rooting around in their closets looking for their crash helmets.

Labels:

131 Comments:

Blogger tublecane June 03, 2017 8:15 AM  

Great Depression II led to Trump, whereas at the end of the Original Great Depression we only got Truman. (Or, if you foolishly believe war cures depression, Zombie FDR.) Which tells us two things:

1). GDII is better in at least that sense; and

2). the Lizard People who secretly rule the world are signaling something through a code involving names that start "Tru-."

Blogger Josh (the gayest thing here) June 03, 2017 8:16 AM  

Meanwhile, despite the anemic GDP "growth", the stock market has hit new peaks and optimism is high.

Yeah but almost all the new money over the past month is going into international equities and domestic equities are seeing out flows.

Anonymous Looking Glass June 03, 2017 8:18 AM  

An interesting discussion is about the Regional aspect of the Great Depression. It was really, really bad in a few sections of the country. It was just "rough" in other parts. The "Great Recession" was spread out a bit more, but a slow grind up of most of the country by the LA-DC-NY axis.

Blogger Salt June 03, 2017 8:25 AM  

I believe I saw that the number of people delisted from the workforce has ramped up to 94M.

Anonymous DirkH June 03, 2017 8:32 AM  

A few thoughts.
a) GDP growth needs to be corrected for population growth, i.e. only GDP/capita is relevant to the individual.
b) "Real GDP growth" is calculated using the GDP inflator, which is a modern form of superstition anyway, and open to manipulation.

THe real problem is the politically desired overpricing of housing. It gets them higher propery tax gain, creates the necessary precondition for the modern debt bubble / Ponzi.

Housing is the key issue. It should be next to gratis today given the colossal productivity gains in construction but is made artificially scarce through zoning, permits, regulations.

Blogger Aeoli Pera June 03, 2017 8:38 AM  

Please keep doing economics posts. I assume they're boring for you nowadays, but it's what you're best at. You have an invaluable combination of groundedness, statistical fluency, pattern recognition, and abstract logical skills. How many times in a century does someone with that suite pursue the study of economics to a high level of understanding?

Blogger Aeoli Pera June 03, 2017 8:40 AM  

Looking Glass wrote:An interesting discussion is about the Regional aspect of the Great Depression. It was really, really bad in a few sections of the country. It was just "rough" in other parts. The "Great Recession" was spread out a bit more, but a slow grind up of most of the country by the LA-DC-NY axis.

Never forget Massachusetts. If Harvard survives this thing then I'll have failed one of my goals in life.

Blogger Aeoli Pera June 03, 2017 8:41 AM  

Pray for us, St. Breivik.

Blogger Johnny June 03, 2017 8:48 AM  

The real problem with "Keynesian interventions" is political. The stimulus part is doable, but the contraction part is not because nobody wants the slowdown. And then because it is a justification for the government spending money, people who want an expanded government or merely some specific area of spending end up being Keynesians. Thus the concept works as a justification for a high spending, high debt government.

My take on economic theories in general is that they often work to the interest of some sector of society, and that sector ends up latching onto the theory and accepting it.

Anonymous Grayman June 03, 2017 8:50 AM  

And how much more debt have we taken on for each basis point of "growth" in GDP that the current period has seen compared to the 30's!!!!!

Anonymous DirkH June 03, 2017 8:50 AM  

...another one. GDP growth is the derivative of the GDP timeline. Therefore it amplifies high frequency noise (with 6 dB/octave; the reverse of integration; no cutoff frequency anywhere).

I prefer to look to wealth as the amount of worktime needed to buy necessities. Eliminating money in the calculation. At least in the USA, Canada, UK, it looks like a giant fraud. Housing bubbles everywhere. Or if we see the house prices as the real value: That means that your currencies are dropping like stones relative to it, and with it the wages.

Blogger Kerryman86 June 03, 2017 8:55 AM  

This comment has been removed by the author.

Blogger Josh (the gayest thing here) June 03, 2017 8:59 AM  

Housing is the key issue. It should be next to gratis today given the colossal productivity gains in construction but is made artificially scarce through zoning, permits, regulations.

Construction costs have next to nothing to do with the price of housing.

Blogger Kerryman86 June 03, 2017 8:59 AM  

the anemic GDP growth of the 2010's is much worse then the 1930's when you factor in immigration
1931 - 1940: 532,431 immigrants arrived in the US (massive fall due to the Great Depression) total US population at the time 123 million or one quarter of 1% of the total population. The US population in 1939 131 million for a total population growth rate of 6% in this period (1930-39)
2007–16: 1,032,000 immigrants arrived per year or 9,270,000 people or 3% of the population with a total population growth of 24 million or 7% growth rate not including the massive wealth transfers that occurred due to welfare benefits given to immigrants now as compared to then. Remember The average household headed by an immigrant (legal or illegal) costs taxpayers $6,234 in federal welfare benefits, which is 41 percent higher than the $4,431 received by the average native household.
the 1.17% growth rate is inflated relative to the thirties once you subtract greater population growth and wealth transfers from natives to immigrants

Anonymous noxious windy June 03, 2017 9:00 AM  

Construction costs have next to nothing to do with the price of housing.

You're assuming that single families live on single plots of land.

Blogger Josh (the gayest thing here) June 03, 2017 9:04 AM  

You're assuming that single families live on single plots of land.


No I'm not

Blogger Rantor June 03, 2017 9:06 AM  

John Williams' shadowstats.com uses older statistical models to calculate GDP, unemployment, money supply, etc. His calculations show overall negative GDP growth and over 20% unemployment since 2000. How can that jive with the stock market? Because the FED through ZIRP has paid the banks to support the market creating an artificial bubble. While normally the market is a measure of socionomic mood, the fact is that if mood were as high as the market, politics would be much less divisive.

The mass unemployment has been hidden by Obama's expansion of the welfare state (EBT cards instead of bread lines) and a press that stopped talking about homelessness under the Democrat regime.

as for business, the middle class is getting killed and KMart/Sears along with it. Deep discount grocers from Germany (Aldi & Lidl) are expanding in the US because they see the need for poor people to have low price food.

The truth is the market is in a bubble, unemployment is at near depression levels, and political strife is at the high end of the spectrum. With the FED prepared to raise rates and further slow a struggling economy... it is going to be hard for President Trump to achieve real economic growth, without resetting the economy through the normal market force of bankruptcies and a crash.

Anonymous noxious windy June 03, 2017 9:06 AM  

Then explain to me why construction costs have nothing to do with the cost of housing, when I can build another unit vertically on top of one I already own. This is termed the 'marginal cost' of a new unit, and as you might be able to deduce, is entirely construction costs.

Anonymous dr June 03, 2017 9:07 AM  

Got 1.48% for both data sets.

Blogger Josh (the gayest thing here) June 03, 2017 9:08 AM  

Then explain to me why construction costs have nothing to do with the cost of housing, when I can build another unit vertically on top of one I already own. This is termed the 'marginal cost' of a new unit, and as you might be able to deduce, is entirely construction costs.

Because the people buying your housing unit don't care how much it cost for you to build it.

Anonymous noxious windy June 03, 2017 9:10 AM  

Because the people buying your housing unit don't care how much it cost for you to build it.

But I care, and I won't build anything if I have to sell at a loss. Get it now?

Anonymous Grayman June 03, 2017 9:11 AM  

Fake GDP...

It's been negative for years.
http://www.shadowstats.com/alternate_data/gross-domestic-product-charts

Anonymous Looking Glass June 03, 2017 9:15 AM  

@17 Rantor

Shadowstats uses the old calculations, but even the 1980 and 1990 stats are based on further adjustments from the 1970s. That's how they "tamed" a lot of the economic issues in going into the 80s. They just manipulated the counting systems to make it go away.

Inflation, especially, generally needs to be looked at as a range, since where you live & your general income will effect your Inflation Rate. It's a hard statistic to actually nail down, and there's exactly 0 people in any government that have an interest being accurate with it. I tend to favor using the Tuition increase rate as the upper-bound, since they've had near full access to "free" money since the 1980s, so they'd have access to the maximized amount. That's running just under 8% per year since the mid-1980s.

Blogger Josh (the gayest thing here) June 03, 2017 9:17 AM  

But I care, and I won't build anything if I have to sell at a loss. Get it now?

Okay...maybe we should start with something more basic, like the law of supply and demand...

Blogger ((( bob kek mando ))) - ( Give us this day our daily bait, that we may crush our enemies, see their weaksauce driven before us and hear the lamentations of their women, thank you Baby Jesus, Amen ) June 03, 2017 9:18 AM  

Real GDP in dollars:
1939 == 1.16T
1929 == 1.06T

for .1T "growth" over the period and via simple division ( .1 / 1.06 / 11 ) is .00858% growth per year. this does not account for inflation or compounding so is probably negative for these 11 years.

2016 == 16.81T
2007 == 14.99T


for 1.82T "growth" over the period and via simple division ( 1.82 / 14.99 / 10 ) is .01214% growth per year.


so Obama's Depression is ... 50% better? whatever. both of those numbers are so tiny as to be statistical noise and are likely taken negative simply by factoring inflation.

Blogger VD June 03, 2017 9:18 AM  

John Williams' shadowstats.com uses older statistical models to calculate GDP, unemployment, money supply, etc.

Not quite. He simply uses a fudge factor based on those older models. He doesn't actually do a separate calculation using the older models.

Blogger ((( bob kek mando ))) - ( Give us this day our daily bait, that we may crush our enemies, see their weaksauce driven before us and hear the lamentations of their women, thank you Baby Jesus, Amen ) June 03, 2017 9:20 AM  

i forgot to move the decimal two places right for the percentage.

herp derp.

Anonymous Grayman June 03, 2017 9:23 AM  

Housing is the key issue. It should be next to gratis today given the colossal productivity gains in construction but is made artificially scarce through zoning, permits, regulations.

Not a chance. It's a good with the value determined by the market. Towns with high taxes and high home prices are bid up because they are desirable to a given group.
In my area they are bid up because they are generally free of "diversity" and everything that goes with it. As well as very high performance in education and career.
The million $ home did not cost that much to build. It's what the town demographic can afford to bid the property up to.
The artificial barriers such as zoning and taxes are functionally part of the biding process/dynamic. Do you think the high performing family wants to live nextdoor to the hood rat ghetto mom with 5 kids by 5 different dads? Homes being Gratis, without some selection criteria is how that happens and frankly would never be tolerated.

Anonymous noxious windy June 03, 2017 9:24 AM  

Josh, you argue this like a man that just went through ECON 101 and was told that price discovery is the way prices are set w/o any further explanation on why supply and demand are what they are. If demand is at a certain price, and I can't build more supply and make a profit at that price, supply will remain the same! Why can't I make money? Construction costs! If it costs too much to get permits and build, nobody will build because there's nothing in it for them.This is a chain of causality in which you refuse to follow past the first link. Look up 'supply gap' in your textbook. Competition and high prices are a symptom, not a cause.

Blogger Old Ez June 03, 2017 9:26 AM  

"When you average all of those years together, you get an average rate of economic growth of 1.33 percent."

If 1.33 is bad then I imagine 0% must be horrible. My question is, what is so and about stability?

Any economic model dependent on perpetual compound growth, no matter how modest, represents an impossible arrangement on any long term scale.

Anonymous Grayman June 03, 2017 9:26 AM  

VD

It's been a while since I dug into it, bu shadowstats used the legacy calculations to produce their numbers not just some fudge factor.

Blogger Old Ez June 03, 2017 9:27 AM  

Bad*

Anonymous Grayman June 03, 2017 9:29 AM  

Old EZ

In a debt based economic system you must gave constant growth or the system implodes.
You can't run a steady state system in a debt based system unless you banned interest, which isn't practical. Hence a steady state system would probably have to be a value based system as opposed to debt based.

Blogger Johnny June 03, 2017 9:31 AM  

noxious windy wrote:Because the people buying your housing unit don't care how much it cost for you to build it.

But I care, and I won't build anything if I have to sell at a loss. Get it now?


I would not intervene on this except I find the thinking so superficial that it pains me. Goes like this. Want a house? Hey buy a lot. Next take bids from contractors to build the house. Result:

cost of house = cost of lot + cost of building

Or you can let the contractor do it all. As most of them work on getting a margin off the overall deal the outcome in cost will be about the same. When the housing market is "tight" it is because the houses sell quickly and inventories of new houses are small. When it is not they tend to have an overly big inventory and may end up discounting. And if they seriously missjudge the market and way over build they end up broke.

Blogger Orville June 03, 2017 9:34 AM  

@17 While normally the market is a measure of socionomic mood, the fact is that if mood were as high as the market, politics would be much less divisive.

While I give socionomics some credibility, using the stock market as a guide to social mood is questionable because few people in relative terms are actually in the market nowadays. The average Joe, half of whom can't even scrape together $500 for an emergency, if he is invested he is in index funds, which are managed by a very few people. Then you have institutional investors, again very few people, and finally the algos, not people at all discounting the programmers.

Blogger Josh (the gayest thing here) June 03, 2017 9:34 AM  



I would not intervene on this except I find the thinking so superficial that it pains me. Goes like this. Want a house? Hey buy a lot. Next take bids from contractors to build the house. Result:

cost of house = cost of lot + cost of building


Them why do home values change?

Blogger Orville June 03, 2017 9:37 AM  

@23 They just manipulated the counting systems to make it go away.

Hah! So true. The Chinese rehypothecate there loan collateral and the US rehypothecates it's economic stats. Both are misleading and worthless.

Blogger Josh (the gayest thing here) June 03, 2017 9:40 AM  

While I give socionomics some credibility, using the stock market as a guide to social mood is questionable because few people in relative terms are actually in the market nowadays.

The majority are still invested in the stock market. Which, while down from the peak of two thirds, is still a lot of people.

http://www.gallup.com/poll/190883/half-americans-own-stocks-matching-record-low.aspx

Blogger ((( bob kek mando ))) - ( Give us this day our daily bait, that we may crush our enemies, see their weaksauce driven before us and hear the lamentations of their women, thank you Baby Jesus, Amen ) June 03, 2017 9:42 AM  

Real GDP in dollars:
1939 == 1.16T
1930 == .97T

for .19T "growth" over the period and via simple division ( .19 / .97 / 10 ) is 1.959% growth per year. this does not account for inflation or compounding so is probably negative for these 10 years.

so by eliminating the 1929 numbers we get a growth value over a ten year period approx 50% BETTER than Obama got. with way less growth in national debt.

Anonymous basementhomebrewer June 03, 2017 9:45 AM  

Not to mention population growth.

Blogger John rockwell June 03, 2017 9:46 AM  

What the entire economy is currently based on is cheap energy. When that is no longer feasible and we don't manage to source our resources from space. It will end. And we will enter the post-industrial society.

Blogger Josh (the gayest thing here) June 03, 2017 9:48 AM  

so by eliminating the 1929 numbers we get a growth value over a ten year period approx 50% BETTER than Obama got. with way less growth in national debt.

But if you eliminate 2007 and 2008 the Obama gdp numbers also look better

Blogger Johnny June 03, 2017 9:49 AM  

Josh (the gayest thing here) wrote:

I would not intervene on this except I find the thinking so superficial that it pains me. Goes like this. Want a house? Hey buy a lot. Next take bids from contractors to build the house. Result:

cost of house = cost of lot + cost of building


Them why do home values change?


Because it is a durable and there commonly is a large inventory of used houses out there.

Let's say an area depopulates. Except for a few contractor new builds that get sold off at a loss, there will be no new houses being built in contemplation of resale. That being the case the new builds will come from people who want new and hire a contractor, or a contractor who has a presale prior to the build. In both cases it will be

Price = cost of lot + cost of build

Except in very unusual situations used housing will not sell above the cost of new builds because the cost of a new build will put a cap on the market.

Same with cars. Unless a model is exceptionally hot, used will never be more than new, and new will reflect what it cost to build the car.

Blogger Orville June 03, 2017 9:50 AM  

@38 The majority are still invested in the stock market. Which, while down from the peak of two thirds, is still a lot of people.

Yes, but they are passive, like remoras on a shark. For the vast majority of them, they might only glance at their quarterly statements. They are not active investors. Besides, the market is a lagging indicator. Vox and others were predicting the crash last decade. I got out of the housing market in 2005 because I could see where it was going, but the vast majority did not.

Blogger John rockwell June 03, 2017 9:50 AM  

Then its in for a long and slow decline like a staircase. Some decline and then some recovery again and again. Which can last centuries until society looks very different.

Blogger Bellguard June 03, 2017 9:52 AM  

What do you consider the most reliable sources for GDP information?

Blogger Josh (the gayest thing here) June 03, 2017 9:55 AM  

Except in very unusual situations used housing will not sell above the cost of new builds because the cost of a new build will put a cap on the market.


There are markets all over the country where used houses are more expensive than new houses.

Anonymous Rien June 03, 2017 9:56 AM  

Interestingly the population growth over both time periods is almost identical: 7.1%

Blogger ((( bob kek mando ))) - ( Give us this day our daily bait, that we may crush our enemies, see their weaksauce driven before us and hear the lamentations of their women, thank you Baby Jesus, Amen ) June 03, 2017 9:57 AM  

*shrugs*

a - we're comparing ten year period to ten year period, just as the article does.

b - i'm obviously doing this incredibly sloppily. i'm the guy advocating for a handicap to G spending ( something like ( .75 * tax revenue + -.25 * deficit spending portions of the budget ) ) if you remember. pop growth is another important factor. but is how you know i can't be bothered to do this 'right' is that i'm not running the compounded numbers.

i'm just pointing out that adding the supposed annualized growth numbers together is also gibberish.

then you realize that the official government numbers are mostly gibberish ... which means your calculations are gibberish ^ 2 and you throw your hands up and walk away.

c - it's also useful to note just how easy it is to cherry pick data. which was most of my point in the 1930 post.

when i grow up, i wanna be Michael Mann.

Blogger Johnny June 03, 2017 10:05 AM  

Josh (the gayest thing here) wrote:Except in very unusual situations used housing will not sell above the cost of new builds because the cost of a new build will put a cap on the market.



There are markets all over the country where used houses are more expensive than new houses.


Not where I live and I would imagine it is in areas where new builds are restrained, perhaps for lack of vacant lots in particular areas or zoning issues. Going by what I read that is what is going on in California.

Blogger Josh (the gayest thing here) June 03, 2017 10:06 AM  

then you realize that the official government numbers are mostly gibberish ... which means your calculations are gibberish ^ 2 and you throw your hands up and walk away.

No, see, all these revisions are just self correcting because science!

2009 GDP for the Year: -2.8% (2012 revision was -3.1%, 2011 was -3.5%, 2010 was -2.9%. Original estimate was -2.4%)

Blogger VD June 03, 2017 10:09 AM  

What do you consider the most reliable sources for GDP information?

There are none. But the BEA is the official source.

Anonymous glosoli June 03, 2017 10:16 AM  

Just around the corner, within a year, Depression 3.0 The Return To Settlement.

Brought to you by the Bank for International Settlements and their pals at the ECB. Bye bye Western middle classes, your lifestyle was all fake.

Get physical gold, get it now.

Blogger Johnny June 03, 2017 10:17 AM  

Something that is an issue with me is that to the extent the government misstates inflation it will also misstate growth because growth is measured in dollars. Allowing I got this right:

The government claims 1% inflation and 2% growth, and the inflation rate is actually 3%. What happens is that the misstatement of the inflation rate makes growth rate look 2% greater than it is.

The consideration here is that the gov has self evidently taken to misstating the inflation rate, and I suspect this is reasonably recent, and guessing, started maybe during the Lyndon Johnson era??

If all of the above is true they are overstating growth in our current period, and that explains why employment is lagging.

Anonymous Looking Glass June 03, 2017 10:17 AM  

The Market will continue up until such time as "they" (not ((they)) but "they") decide its time to crash it. It very much looks like not this year, as they're not setting it up for that. They have to build in their own shorts before they'll do that.

Fall could set off a correction, but I'd expect any carnage to happen next year. They jacked the markets up to try to give Clinton an edge (they were basically laundering political money back to Democrats), so it's just a matter of when they really unload all of their Longs. Downside risk is still real, though.

The best part, though, is even crashing the market probably ensures a Trump reelection. Market crash would crush Silicon Valley & Wall Street, which means a LOT less money flowing to D.C, something that won't really be allowed.

Blogger Bellguard June 03, 2017 10:18 AM  

Someone had suggested FRED to me once.

Because the Reserve would NEVER post false information. Nope.

Blogger Johnny June 03, 2017 10:25 AM  

Josh (the gayest thing here) wrote:Construction costs have next to nothing to do with the price of housing.

This whole thing is easier to conceptualize if you think in terms of cars insteaded houses.

In used cars if you have a classic car the cost of the build will no longer matter because no more are being built.

In new or recent models the new cost will reflect the cost of the build, and in ordinary situations that will have an effect on the cost of used cars. As a personal example, we once bought new because the cost of used was high, eliminating our personal demand for a used vehicle. And unless this behavior is exceptional, overall demand for used in the market was being capped by the cost of new; thus effecting price.

Blogger wreckage June 03, 2017 10:33 AM  

GDP is a dicey number in any case. Because it includes government spend, the government can do the equivalent of getting a billion dollars out of the ATM, and burning it. Voila! +1 billion to GDP.

OpenID turk187 June 03, 2017 10:37 AM  

How did you get .53 for the 30's? are you using the same GDP figures quoted in the article? or do you have different set? and, if so, what is your source?

Blogger Dirk Manly June 03, 2017 10:40 AM  

I think you mean names that begin with "Trum-"

Blogger Frank Brady June 03, 2017 10:49 AM  

This comment has been removed by the author.

Blogger Frank Brady June 03, 2017 10:52 AM  

This comment has been removed by the author.

Blogger Frank Brady June 03, 2017 10:57 AM  

What happens to the "GDP growth rate" in each period if government spending, especially what used to be properly labeled as transfer payments, is removed from the calculation?

Anonymous Cyclone Bob June 03, 2017 11:11 AM  

VD: I ran the numbers and the average for the 1930s is 0.53 percent, whereas the 2010s average is 1.17 percent.


Maybe i'm missing something, but I get 0.96% for GD1, 1.3% for GD2.

Starting with Year0 = 1.00,
1.00 * .915 * .936 * .871 * .987 * 1.108 * 1.089 * 1.129 * 1.051 * .967 * 1.08 = 1.10
1.10 ^ (1/10) = 1.0096 == avg growth of 0.96%


Larger point taken, though: We're fooked.

Blogger Johnny June 03, 2017 11:13 AM  

Frank Brady wrote:What happens to the "GDP growth rate" in each period if government spending, especially what used to be properly labeled as transfer payments, is removed from the calculation?

Coming up with a GDP number is actually very challenging, with all sorts of side considerations, and it does rise above gross incompetence. And so surely the take transfer payments into consideration or the whole thing would be wacho nonsense. Social Security is probably the biggest one.

Blogger praetorian June 03, 2017 11:19 AM  

I still feel like I know next to nothing about economics, despite four semesters in college, working through a lot of the Austrian stuff, reading about Georgeism, reading Keen and digging as deeply as I can into Distributism (not a lot of rigorous stuff there, although it appeals to me the most, instinctively).

About the only thing I'm pretty sure of is that debt for consumption is bad, and we have a lot of it.

Anonymous break time June 03, 2017 11:21 AM  

Nice research

Anonymous Looking Glass June 03, 2017 11:32 AM  

@66 praetorian

Don't worry, it's fairly clear the entire field of Economics really doesn't either. There's a clear enough understanding of Microeconomic effects, but they're completely lost on Macro.

Anonymous Jerry June 03, 2017 11:37 AM  

An arithmetic average is really not the best way to quantify this. Use the geometric mean instead.

OpenID turk187 June 03, 2017 11:39 AM  

http://www.hoodedutilitarian.com/wp-content/uploads/2014/02/af3237e05db8012ee3bf00163e41dd5b.gif

Blogger Ransom Smith June 03, 2017 11:40 AM  

Is there a good book or series of books to understand economics better?

Blogger Johnny June 03, 2017 11:46 AM  

praetorian wrote:About the only thing I'm pretty sure of is that debt for consumption is bad, and we have a lot of it.

Things are different now than in previous eras. It used to be that some sectors of the economy would go into a debt driven boom, and then go bust. That would screw up finance generally and we would have a recession or depression depending on scale. Yea old business cycle was one way of expressing it.

Now the gov picks up the excess debt and bills the general public. This has reduced the size of bad debt driven declines, but it has also increased the overall level of debt, which seem to me to be at almost fabulous levels. The only equivalent in history was war time spending, and of course the war would end.

Blogger DeploraBard June 03, 2017 11:47 AM  

The comments here always keep me thinking, learning, and reconsidering many of my strongly held "opinions"

Blogger bosscauser June 03, 2017 11:47 AM  

Go back 20 years....
Free trade killing us!

Have to laugh so many people believe Government prints money then puts in a black hole somewhere...

They spend every penny. And they can't collect taxes from unemployed or welfare recipients...

Build the wall bring back the jobs and deficits melt away!

Gab.ai/GaryCauser

Anonymous Jeff June 03, 2017 11:49 AM  

@71 - Debunking Economics by Steve Keen

He just released another book called "Can We Another Financial Crisis?"

Haven't read it yet but I'm guessing the short answer is NO.

Speaking of which, I'm sure Mr. Keen would be happy to talk with VD again to promote his new book.

Anonymous Jeff June 03, 2017 11:50 AM  

That should be "Can We AVOID Another Financial Crisis?"

Anonymous Jack Amok June 03, 2017 11:55 AM  

Josh is right about housing but doing a poor job 'splaining it. Maybe he doesn't care.

Housing costs are dominated by regulatory systems creating artificial scarcity. The idea that cost of house = cost of land + cost of construction is cute, but anyone stating that formula hasn't tried to build a house in a desirable region.

The formula would be better stated as

cost of new house = cost of land + cost of construction + cost of lobbying/lawyering to get the permits.

There's not much economy of scale in the first two factors, but the third can have huge economies of scale, which is why housing construction is dominated by big developers in most desirable markets.

Plus, you have regulatory agencies captured by misanthropes who want everybody crammed into Brutalist boxes for the worship of Gaia making the houses people really want to live in artificially expensive.

Blogger Josh (the gayest thing here) June 03, 2017 11:58 AM  

Josh is right about housing but doing a poor job 'splaining it. Maybe he doesn't care.


Pretty much.

The biggest driver of house prices are school districts.

Anonymous Jeff June 03, 2017 11:59 AM  

Housing prices are key given that the vast majority of the money supply is in the form of bank deposits, which are created through bank lending. And most of the lending, at least at the individual level, is backed by housing.

Blogger praetorian June 03, 2017 12:00 PM  

Keens book is pretty rough sledding for newbies, although if he is right (and I suspect he is) then the austrians and the neo-keynesians are seriously wrong in their criticisms of the economic orthodoxy. I don't know if there is a good single book I can think of on economics. "Economics in one lesson" used to be the standard answer for libertarian types, but then we all became anti-free trade ethnonationalists. ¯\_(ツ)_/¯

I'm so deeply confused at this point that I'd like to try out all sorts of things: debt-free fiat money issuance based on population growth, citizens dividends based on for-profit public infrastructure, eugenic basic income, georgist tax systems, etc. Things I used to take for granted (nominal money supply doesn't matter, the gini coefficient doesn't matter, free trade is always better, regulation is always a net negative) are not at all obvious, or even necessarily correct, to me now.

Anyway, I enjoy Vox's econoposting even if I have no idea what I'm doing.

Blogger Just Mark June 03, 2017 12:07 PM  

What effect does the 401k system have on the stock market. 6% of my gross is invested pay check after paycheck. This condition didn't exist in the 1930s.

In any case I still expect my investment to be harvested by the people who short the market at the right time and shorting isn't something my 401K allows me to do.

Blogger praetorian June 03, 2017 12:07 PM  

One autistic idea that I have had is forcing the banking system into a duration-matched regime, rather than the current duration-mismatched scheme. The idea is that the core problem with our money supply is that it is built on a lie: because banks borrow short and lend long, multiple people have claims to the same dollar at any given moment. So we invert that and force banks to borrow long (in the form of CD-like instruments) and lend short. In practice this would mean maintaining a curve of deposits and loans over time and ensuring that deposits were always greater than loans at ever point. (Somewhat amusingly, this would eliminate the need for a reserve ratio entirely.)

No one dollar would have more than a single claim on it at a given moment, so we wouldn't be lying and our Book tells us that lying is bad.

Autistic, but there's the idea.

Blogger Josh (the gayest thing here) June 03, 2017 12:09 PM  

What effect does the 401k system have on the stock market. 6% of my gross is invested pay check after paycheck. This condition didn't exist in the 1930s.

That's part of the reformed broker's relentless bid theory.

Blogger Josh (the gayest thing here) June 03, 2017 12:10 PM  

In any case I still expect my investment to be harvested by the people who short the market at the right time and shorting isn't something my 401K allows me to do.

How is your investment "harvested?"

Anonymous DirkH June 03, 2017 12:10 PM  

@71. Ransom Smith June 03, 2017 11:40 AM
"Is there a good book or series of books to understand economics better?"

Standard economics ignores banking. (Yes. They ignore banking. There are no banks in their model.)
That's why you should start by understanding currency creation by fractional reserve banking.
Watch this series. Mike Maloney, Hidden Secrets Of Money.
https://www.youtube.com/watch?v=DyV0OfU3-FU

Blogger Just Mark June 03, 2017 12:13 PM  

Josh,

My understanding is that someone can short the market. My 401K takes a dump from being worth X to (0.5)(X) That money didn't just disappear it ended up in someones pocket. At least that is my perception.

Blogger Johnny June 03, 2017 12:20 PM  

Jack Amok wrote:cost of new house = cost of land + cost of construction + cost of lobbying/lawyering to get the permits.

Difference without a difference. You are just breaking out the costs a little more. You could also include things like sales taxes, title transfer on the lot, closing costs, loan origination fee, interest expense etc.. Where these expense are going to turn up would depend on who gets billed.

Blogger Scire June 03, 2017 12:20 PM  

the math works out, he compounded the growth over the the ten year period, and then took the tenth root to determine the average growth for each year to reach the same overall growth.
1930's
1.00 % growth
0.92 -8.50
0.86 -6.40
0.75 -12.90
0.74 -1.30
0.82 10.80
0.89 8.90
0.99 12.00
1.05 5.10
1.01 -3.30
1.09 8.00

0.89 % average growth

1.00 % growth
1.02 1.80
1.01 -0.30
0.99 -2.80
1.01 2.50
1.03 1.60
1.05 2.20
1.07 1.70
1.09 2.40
1.12 2.60
1.14 1.60

1.32 % average growth



I would be interested in seeing the average decade growth graphed, as in each year shows the past ten year's average growth, might see some interesting patterns emerge.

Blogger Johnny June 03, 2017 12:35 PM  

Just Mark wrote:Josh,

My understanding is that someone can short the market. My 401K takes a dump from being worth X to (0.5)(X) That money didn't just disappear it ended up in someones pocket. At least that is my perception.


While stock may be a financial asset it is not money. The reduction in the value of stock is not a reduction in money. And short selling does not change it because it is a contract between two parties, one gains and the other loses, and net money amount is unchanged if you include both parties.

They like to say that money is entering or leaving the market, but except for stocks that are newly minted, no money ever enters or leaves the market. That is because for every transaction there is a buyer and a seller.

buyer = seller

Money in = Money out

net-net = zero dollars in or out

Blogger Kevin Blackwell June 03, 2017 12:38 PM  

Sure our gdp is around 1%. If you believe inflation is less than 2%. If inflation is your normal average 5% then we've been growing at -3% since... the 80's?

Blogger dc.sunsets June 03, 2017 12:53 PM  


GraymanJune 03, 2017 8:50 AM
And how much more debt have we taken on for each basis point of "growth" in GDP that the current period has seen compared to the 30's!!!!!


Losing money on each unit, but thank Heaven we're making it up on volume.

Blogger Dirk Manly June 03, 2017 12:54 PM  

GDP itself is a scam - it counts government spending (overhead) as valuable as manufacturing (wealth creation). GNP is more reflective of economic health.

Blogger exfarmkid June 03, 2017 1:00 PM  

I would be interested in seeing the average decade growth graphed, as in each year shows the past ten year's average growth, might see some interesting patterns emerge.

Don't know how (or if VD allows it) to place an in-line graph here.

year 2.0 1.0
---- ---- -----
0 100.0 100.0
1 101.8 91.5
2 101.5 85.6
3 98.7 74.6
4 101.1 73.6
5 102.7 81.6
6 105.0 88.8
7 106.8 100.3
8 109.3 105.4
9 112.2 101.9
10 114.0 110.1

Euler's rule calculation. Column 2 is current depression. Column 3 is Great Depression. There is no comparison between today and 80 years ago. Many times worse in the 30's. We ain't seen nothing yet.

Blogger dc.sunsets June 03, 2017 1:02 PM  

GDP calculations include all debt-supported spending but do not back out debt growth (as would an honest balance sheet.)

I am quite certain that subtracting it would yield a negative number, which would be a numerical representation of underlying capital consumption AKA eating the seed corn of future production.

Each year the mania extends makes us poorer. But socionomics posits that the trend is endogenously patterned and in that sense, if it's correct, then we're all passengers, like it or not, on the ship.

Someday someone of great stature will codify my view, that the illusion of borrowing to spend one dollar creating a second dollar of "wealth" as a receivable in the debt market was the most astonishing temporary economic insanity ever recorded.

Anonymous Looking Glass June 03, 2017 1:05 PM  

@94 dc.sunsets

It's really just hidden money printing, a form of devaluation.

Blogger Snidely Whiplash June 03, 2017 1:08 PM  

Just Mark wrote:That money didn't just disappear it ended up in someones pocket. At least that is my perception.
The money was lost when you bought, not when you sold. Valuations are entirely theoretical until realized by selling the asset. Another way of saying that is that stocks have zero intrinsic value. Even book value is theoretical until the bankruptcy trustee auctions off the office supplies. It used to be that you got fancy certificates that you could burn for heat if your stock went to zero, now there's not even that.

The gambler loses his money when he places it on the roulette table, not when it turns up 00.

Blogger Josh (the gayest thing here) June 03, 2017 1:16 PM  

Another way of saying that is that stocks have zero intrinsic value.

Nothing has intrinsic value

Blogger dc.sunsets June 03, 2017 1:20 PM  

My understanding is that someone can short the market. My 401K takes a dump from being worth X to (0.5)(X) That money didn't just disappear it ended up in someones pocket. At least that is my perception.

You are incorrect, although the pros on CNBC agree with you.

If 10 people each own 10 shares of XYZ, and the last trade was $10 for one share, each has $100 in value, and XYZ market cap is $1000.

Two of the shareholders decide to make a trade. Adam needs $9 desperately so Bill withdraws $9 from 1st National Bank, hands it to Adam who deposits it in 1St National Bank.
Effect?
Zero net money movement.
XYZ market cap fell $100.
Adam's net worth $90 (9sh-XYZ at $9ea + $9 in the bank)
Bill's net worth $99 (11sh-XYZ at $9)
The other 8 shareholders each lost $10 in net worth.

Where did that $80 go? Into the ether.

Shorts don't get $ for $ what the longs lose.

Material wealth is always a subjective property of mass psychology.

Blogger DJ|Bonky June 03, 2017 1:20 PM  

This comment has been removed by the author.

Blogger Johnny June 03, 2017 1:22 PM  

Snidely Whiplash wrote:The money was lost when you bought, not when you sold. Valuations are entirely theoretical until realized by selling the asset. Another way of saying that is that stocks have zero intrinsic value.

Well I own a house. If I sell it what gets transferred is the title, a piece of paper that is a claim on an asset just like a stock certificate is a claim on an asset. I guess by the logic here that means that the title has zero intrinsic value. Sure. Hey, whatever.

Blogger dc.sunsets June 03, 2017 1:28 PM  

@ looking glass, it has largely the same effect as money printing only as long as the shared delusion holds.

Printing banknotes has physical reality, each additional note dilutes all prior notes.

Credit creation has no physical reality. The dilution of prior money can in rare circumstances reverse. This is what happened to a much smaller extent 1930-32.

Imagine the reverse-wealth-effect if the value of outstanding dollar-denominated IOU'S were to fall to what can actually be capitalized?

I stand by my view that a 95% decline in asset prices is entirely possible.

Anonymous Looking Glass June 03, 2017 1:29 PM  

@98 dc.sunsets

Which is mostly what high-frequency traders are capitalizing upon. They fill in the movement between the points. Since the market is "deep enough", they can do this, but they actually make the markets far more fragile, if tighter ranges. It's why Flash Crashes happen so often.

Blogger alt-deplorable.jezko June 03, 2017 1:32 PM  

speaking of stock market... when you vote your proxies - ideally one should have good base for making these decisions, but - I hope one would strive to eliminate wymminses, non-whites and other (((people))) from the boards and vote against the compensation packages they give (((themselves))).

Even though it's not unlike trying to the West through electoral process - every single bit of defiance and trolling can help.

Anonymous Looking Glass June 03, 2017 1:40 PM  

@101 dc.sunsets

This isn't the forum for some of the finer details of the latter points, but Credit Creation isn't wholly non-physical. As long as the Militaries still operate upon the Fiat Currency, it has a durable reality in a very large amount of guns.

Though I don't disagree with the larger point. Though depending on the Asset you're looking at, it's probably closer to about 75%.

Blogger Johnny June 03, 2017 1:40 PM  

dc.sunsets wrote:Printing banknotes has physical reality, each additional note dilutes all prior notes.

While it may still go on, printing up bank notes is an antique way of ballooning up a money supply. Hey, wasteful of paper. Better to issue "credits." That reduces it to a bookkeeping entry.

If they do it in the correct way under double entry bookkeeping, it would be the simultaneous entry of both a credit and a debit. Actually it is a form of credit creation.

Anonymous A Deplorable Paradigm Is More Than Twenty Cents June 03, 2017 1:55 PM  

The business cycle has been smoother and smoother since 1987. Thanks, Greenspan! Thanks, Clinton! Thanks, Bernanke! Thanks, GW Bush! Thanks, Obama! Nothing is smoother than a flat line.

Blogger Snidely Whiplash June 03, 2017 2:01 PM  

Johnny wrote:Well I own a house. If I sell it what gets transferred is the title, a piece of paper that is a claim on an asset just like a stock certificate is a claim on an asset. I guess by the logic here that means that the title has zero intrinsic value. Sure. Hey, whatever.
If the house burns down, what is the value of that title?
The house has value, perhaps. The title itself only has value in relation to the house.

More than one stock has gone to zero.

Blogger dc.sunsets June 03, 2017 2:44 PM  

Re intrinsic value, I find it useful to see asset markets more like the market for artwork.

What's a Jackson Pollock painting worth? Whatever someone will pay for it? Whatever level of enjoyment someone obtains by gazing at it? Whatever status one thinks one obtains by owning it?

Yes, to all three, in varying measures in varying times. It's all quite subjective, but subjective is still consequential.

Blogger RobertDWood June 03, 2017 2:47 PM  

Don't exclude Justin of the north

Blogger dc.sunsets June 03, 2017 2:52 PM  

What's your house worth?

Whatever someone else will pay for it? Whatever it would cost you to live elsewhere?

Imagine that there's no buyer, yet your taxing authority has skyrocketed your tax liability when you also need a new roof, the foundation just cracked, and a hidden leak in the plumbing rotted an entire section of outer wall?

Your house can be worth zero. It has happened to many people over the years. Look up how the Nashville Zoo came to acquire the 200+ acres of prime land on which it sits. The sisters who owned the land were quite literally robbed by politicians of two communities who colluded to tax the land right out from underneath them.

Anonymous Dave June 03, 2017 3:19 PM  

Scire, if you maintain full precision in the left column, the average comes out to +0.966% for the 1930s and +1.317% for the last decade.

The original author took the arithmetic mean of ten percentages to get +1.33%. That is wrong; if you lose ten percent one year and gain ten percent the next, you won't break even because you gained ten percent of a smaller number.

Anonymous Siobhan June 03, 2017 3:32 PM  

The straightforward idea that when houses are in demand, builders simply will buy lots and build houses on them, thus satisfying the demand, makes my brain hurt as I sit in San Francisco and contemplate the local housing market.

Since we own, I don't really get to complain, I guess, but our local housing market is bizarre, unsustainable, and is slowly eliminating our local stock of normal people who perform essential jobs.

Anonymous A Most Deplorable Paradigm Is More Than Twenty Cents June 03, 2017 4:07 PM  

By the way, there is a slow motion implosion in commercial real estate going on. Some shopping malls are already nearly empty, and more will follow. Could be more online shopping. Could be tapped out consumers. But it is definitely happening.

Yes, the value of a commercial building can decline to just the bare land value. Isn't that part of the history book view of the Great Depression?

Blogger Johnny June 03, 2017 4:18 PM  

A Most Deplorable Paradigm Is More Than Twenty Cents wrote:By the way, there is a slow motion implosion in commercial real estate going on. Some shopping malls are already nearly empty, and more will follow. Could be more online shopping. Could be tapped out consumers. But it is definitely happening.

In this case the problem is online sales over the internet. Guessing, I think something like 25% of sales are now done online. Naturally it hurts the brick and mortar retail sector.

Blogger Gapeseed June 03, 2017 4:36 PM  

A tiny bit OT, but I would love to know what the people here thought of cryptocurrencies. It seems that U.S. foreign policy can be explained fairly well as an attempt to prop up King Dollar, and the U.S. government is waging at least a low-level war against bitcoin in the tax and securities codes. If a crash is coming, would cryptocurrencies be a good way of hedging, or will governments step up the pressure to ensure sovereign currencies remain sovereign (and solvent)?

Blogger seeingsights June 03, 2017 4:58 PM  

During the Brexit campaign, I did a similar calculation of the growth rates of the EU countries. I no longer have those figures--but I might redo them--and if memory serves the average rate was less than 1.5. The growth rate of Switzerland--a non EU country--was clearly superior.
I did that calculation to develop an argument for Brexit--that there has been weak economic growth under the EU.
The U.K. out of the EU is a big laboratory experiment. If the UK's average growth rate becomes superior to the EU, and I expect that it will, that will further the disintegration of the EU. Capital will flow to the U.K. People on the Continent will be more supportive of nationalist referendums.

Anonymous break time June 03, 2017 5:40 PM  

Had no idea Aldi was German. That place is a God send. . God only knows where id be without Aldi

Blogger Gospace June 03, 2017 5:41 PM  

On housing and prices- I paid $90K for my house. The day I bought it it would have cost over a quarter million to build. The asking price dropped from $147K to $90K the month I went to look at it. I bid the asking price. The other bid that came in the same day was for 10% under. It's current insurance value is $350K to rebuild. I might be able to sell it for the $90K I paid for it.

There's one house in town currently on the market for $347.5K. Two months ago $367.5K. From 2012 until then $850K. Only 37 acres. If they get down to under $200K it might sell. It's one of the newer homes in town built in 1993.

The next highest asking price is $235K on 5.4 acres, built in 1890, and heavily remodeled. I can guarantee no one local will buy it at anywhere near that. Mosquito laden area, a lot of the surrounding houses are junk and literally, not figuratively, filled with junkies. The state police and county sheriffs are frequent visitors to that part of town. We don't have a local police force. (When we did, it was a force of one.) The current owners will never get back the money they poured into it.

Then in the middle of town we have a 2,300 sg ft home on a 9300 sq ft lot for $29.9K. Built in 1882. Not 1982, 1882. You can't rent an apartment for 3X the house payments on a $29.9K mortgage.

Real estate prices have nothing to do with how much it cost to build the house.

Blogger Tatooine Sharpshooters' Club June 03, 2017 5:53 PM  

And these are the pulled-straight-out-of-their-hinders "adjusted" GDP numbers. Imagine how horrible the real story must be.

Anonymous Jack Amok June 03, 2017 5:57 PM  

The biggest driver of house prices are school districts.

Yes, though school districts are also proxies for who your neighbors are. Of course, none of this negates Dirk's original point, that housing ought to be incredibly affordable yet isn't. And that's mostly regulatory - without zoning and without laws forcing neighborhoods to accept undesirables, people could very affordably build desirable neighborhoods.


@Johnny
Difference without a difference.

Do I have to draw you a map? The regulatory costs are what prevent supply and demand from operating on the cost of land (or on the cost of "used" housing). Supply is inflexible because of regulation.

Blogger Silly but True June 03, 2017 6:06 PM  

@Gapeseed, most world powers view cryptocurrencies as a collectible - a toy or novelty.

However nearly every regulatory body wants them regulated. And so it's likely coming they'll be regulated as currency.

The interesting issue is whether they see sufficient widespread adoption will that adoption be sufficiently widespread enough to resist state-level control of the blockchain. Their primary benefit is crowd-sourced security through blockchain protection. But I guarantee that states are looking into how they can monopolize - or trick the blockchain into thinking it's been monopolized - so that they can define the blockchain's reality.

Blogger Ransom Smith June 03, 2017 6:07 PM  

Had no idea Aldi was German

The American one though bears little resemblance to its German cousin. Much to my disappointment.

Anonymous Jack Amok June 03, 2017 6:12 PM  

In this case the problem is online sales over the internet. Guessing, I think something like 25% of sales are now done online. Naturally it hurts the brick and mortar retail sector.

No, while online is hurting brick and mortar, the real problem with commercial real estate is the US is ridiculously overbuilt in retail and commercial space. The US has almost 20 square feet of retail space per capita. Europe average three.

Three.

Canada and Australia, two other Anglosphere countries with plenty of room, have 13 and 6 sq ft / capita respectively.

The US has drastically overbuilt retail space for three basic reasons. One, government tax and regulatory agencies are allowed to be capricious, making long-term ROIs far too risky. A well-run retail outfit is turning over inventory six times a year, so if the local Lord of the Manor gets too greedy, you've only got two months investment to write off. A factory can take years to repay the investment, making the factory owner a sitting duck.

Two, retail is much more immune to the various workers-comp and eco-nut regulation than the average manufacturing facility that has some legitimate dangers and hazardous materials around.

Third, our workforce is pathetic. The number of people who can - or who even want to learn how to - run a piece of equipment is low, putting them in high demand. You can hire some airhead to put shirts in a bag far more easily then you can hire a machinist, welder, fabricator, etc.

So starting a retail outfit is easy. Starting anything else is hard.

Anonymous break time June 03, 2017 6:19 PM  

I have a theory at least in NY that older skill less people that have a long history of receiving money in exchange for nothing keep housing and rental prices artificially high.. And maybe there arw some younger selfish people that also have no problem getting something for nothing keeping it that way too.

Anonymous Eric the Red June 03, 2017 6:22 PM  

Is the next great depression being held off because the US loosely has a commodity-backed currency, except the commodity is oil (petrodollar) instead of gold?

Blogger Karl June 03, 2017 6:46 PM  

As Jerry said, since these numbers are relative changes over each year, you need to use the geometric mean, which is the nth root of the product of the numbers. So a 3% increase is written as 1.03, a 2% decrease is written as 0.98, and a 3.5% decrease is 0.965.

The geometric mean of these three numbers would be (1.03 * 0.98 * 0.965) ^ (1/3) = 0.9913, or a decrease of 0.87%

Blogger Josh (the gayest thing here) June 03, 2017 6:57 PM  

Is the next great depression being held off because the US loosely has a commodity-backed currency, except the commodity is oil (petrodollar) instead of gold?

No

Blogger James Dixon June 03, 2017 9:38 PM  

> They are not active investors.

Most people with sense aren't active investors. It's almost impossible for an active investor to beat a simple index fund over a 10 or 20 year period.

> The consideration here is that the gov has self evidently taken to misstating the inflation rate, and I suspect this is reasonably recent, and guessing, started maybe during the Lyndon Johnson era??

More recently than that. I believe the major revisions to the CPI took place under Bush the Elder.

> In any case I still expect my investment to be harvested by the people who short the market at the right time and shorting isn't something my 401K allows me to do.

You could transfer it to a self directed IRA and short the market in it. I wouldn't advise it, but you could.

> My 401K takes a dump from being worth X to (0.5)(X) That money didn't just disappear it ended up in someones pocket. At least that is my perception.

No. It just disappeared. The current price of a stock listed on your IRA statement is roughly the price you could have sold it for at the end of the day on that date. If buyers are willing to pay less for a stock and the sellers are willing to accept less, then the price listed drops, as does the value of your 401k.

You need to read up on what shorting actually is: http://www.investopedia.com/university/shortselling/shortselling1.asp

Anonymous Ominous Cowherd June 03, 2017 10:07 PM  

Just Mark wrote:My 401K takes a dump from being worth X to (0.5)(X) That money didn't just disappear it ended up in someones pocket. At least that is my perception.

It definitely just disappears.

Today's stock price is based on today's trades, and your stock is ``worth X.'' Tomorrow's stock price is based on tomorrow's trades, and your stock is ``worth Y.''

In each case, ``worth X'' or ``worth Y'' means ``that's what you could have gotten if you had sold then.'' You didn't sell then, so the opportunity is gone. If Y=0.5X, what disappeared is your opportunity, not some dollars.

How can all that money just disappear? Because it never existed in the first place.

Blogger Gapeseed June 04, 2017 2:17 AM  

@Silly but True - when you say monopolize, are you talking about mining capacity on the network? My sense is that concentration on the Bitcoin blockchain, at least, is going down, not up, and that accumulating enough mining computer power would necessarily be telegraphed for any to see.

Anonymous Magus June 05, 2017 5:34 AM  

Y'know, I always come to the comments section here hoping for clarity, hoping the VD Think Tank can help me sort this mess out in my head.

Still hoping...

In the meanwhile, learning how to grow crops and basic prepper stuff. At least that's something solid I can know with certainty, and execute with confidence right now, even if it ends up being a useless insurance investment.

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