118.21 now… thats a five 5yr low. it’s gonna happen!
Interesting take bchad. At some point there is a tipping point in that balance and civilization crumbles, as history has taught us. When that will ever be, who knows.
I also think the risk of capital flight is overblown, as there we always be customers to serve. The real risk comes with leaving so few with so much, and so many with so little. At that point who will buy all the crap being made?
I’m already paying for a December hike now. If they don’t go, I’m going to have some serious explaining to do!
Bernanke on freakanomics discussed the role of the federal reserve in financial stability, learning from the depression
That “we are isolated from China” was the consensus that formed in the US financial media over the Summer. You know, some guy from BlackRock interviewed on Bloomberg, “we don’t see much impact to US equities, we are financially insulated from China”. Everybody started parroting it, but it doesn’t make any real sense. People have biases, and they suffer cognitive dissonance when shit happens that challenges their biases, then they rationalize. The Summer was a hilarious example of massive cognitive dissonance and desperate rationalization. Highly entertaining.
That is true, but that is not reason to not work at it. I’m just naturally less biased, as I am an observer not a participant…could care less about homo sapien “teams”. But I’ve also been actively working on cleaning out my biases for 25 years, which almost nobody does. Most people revel in their biases. Which is not good for investment returns. Now back to the boring topic at hand, will they hike or won’t they! Argh!
I think we see that process similarly. It’s too complex to cover all the dimensions in a post, but you’ve put your finger on some key points. I think capital flight can happen, but it is constrained by the question of where will people go? Or maybe the capital will go but the people will stay. But then you get principal-agent type problems where the capital is subject to one jurisdiction and daily life is subject to others.
I’ve been trying to imagine what a country comprised entirely of John Galts would look like, if no one else went with them. With automation, perhaps they look like Asimov’s Spacers in his Robots series. Certainly when Rand wrote Atlas Shrugged, robots were not feasible, and so they would need imported servants and stuff to survive. Yet their capital would not be useful to trade amongst each other - it would have to be applied in the places they’d just escaped from and then transferred there. So I suspect Singapore could be modern Galtistan, but Singapore needs a military protector if that’s where all the wealth is. After all, sovereignty isn’t just given for free. It has to be maintained. So maybe Singapore needs to buy nukes from someone secretly.
Yet Mr. Galt was able to build a power generation based off some sort of kenetic energy output from the sky. 
I can agree with you here, but I don’t see it as a government/market tin hat theory. I see it as BR doing what they can to try and calm markets and help their personal performance. Guys do this all the time and it makes economic sense, which is why I have zero clue why people put so much value on what some guy says, ESPECIALLY if he is running billions. I surely listen to them, but you need to evaluate what they say. I think anyone with a brain knows China & America (and most of the developed world) are linked so deeply changes in long term growth will always impact others.
Where will people & capital go is huge. For sure some nation would take advantage of poor conditions in the US/UK and welcome it but would the people with capital want to go there?
There is a natural imbalance as the people with capital demand return and money will naturally continue to funnel upwards. The next 50-100 years will be a very interesting one in human history for sure. Something will have to give as there is less and less human labor required. Not sure is UBI is the answer or what is, but hopefully someone in my generation or childrens generation is a hell of a lot smarter than people now.
Wow. That really is Deus ex Machina indeed.
lol
I knew you guys would love that! But in fact some people, due to their nature, are just naturally less biased. Identification, “I’m one of these people”, “we” statements, not all of us are into that whole boring homo sapien tribal thing.
Now back on topic. If the fed doesn’t raise rates, the credibility damage will be huge. The market is acting like they are all behind it (they may not be so happy after they get their wish). The fed won’t get another chance like this, it’s way too late in the cycle to be raising rates, but it’s now or never. Otherwise just stay zero thru the coming recession, then raise in the next cycle.
I like this “bezzle” concept. Seems like this is the thing to look for, as rates rise – investments everyone thought were totally the bee’s knees, turn out to be no so great. Psychic wealth evaporates, poof!
…bezzle. It describes the period in which an embezzler has stolen a man’s money but the victim does not yet realize he’s been swindled. It is, as Galbraith puts it, a time when there is a “net increase in psychic wealth.”
Article: http://www.bloomberg.com/news/articles/2015-12-03/there-s-been-a-bezzle-fuelled-boom-in-bonds
Video: http://www.bloomberg.com/news/videos/2015-12-07/the-bezzle-fueled-boom-in-corporate-credit
Purealpha - you think China can extricate themselves out of the looming aging crisis? You don’t think this will be a serious bottleneck on growth?
Fed countdown, 3 days…
It’s looking like a boring replay of last time; oil crashes, Beijing makes adjustments to the RMB (which will be misinterpreted)…so now for a second time – does the fed have the balls to move??
I think they must, not that hiking into a potential recession is smart, but they lose all credibility if they don’t.
I think they pull the trigger this time. Yellen has at least talked a lot stronger than I believed she would the past few weeks, and it seems like the timing is right. I don’t think the raising of rates would be involved in a recession, but global economies may pull us into one.
Aside from commodities companies I think US companies will be fine in any slowdown compared to before
Boom. Rates have been raised 25bps.
Seems to me that the sensible way to do this is to announce that the current target is for rates to be at X in one year’s time, but that the increments will come randomly. This allows the fed to communicate the intended trajectory but to avoid this gaming of the decision that comes in front of every one of these meetings.
Would be nice & sensible, but that would take all of the FUN out of it wouldn’t it!
What else would CNBC & Bloomberg talk about every single month and build up like it is the most important thing to occur ever.
bchad, when’s the last time you read Atlas Shrugged? They didn’t just take rich executives. They took in anyone that took pride in their work, including repairmen. They didn’t need to “import” anyone. Toward the end of the book, there are no good workers left in the “real” world. Galt had gathered them all up regardless of wealth or class.
Not a huge point, but when you put it like that you make it sound like only the 1% would benefit from a Randian utopia. That misses the point entirely.
The Randian utopia, much like the communist utopia can never exist and both completely ignore reality so i think dealing in minor details of the work to be missing the point of his statement about the real world implications of a type of society we are slowly turning into.