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Perpetual Goldilocks Economy?

4,144 Views | 26 Replies | Last: 4 yr ago by cjsag94
Bonfire97
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AG
OK. So have we reached a point where we will never see another recession? It seems like the global financial system has determined that printing money is the way out of any financial woe. It seems like the normal business cycle has gone by the wayside. It's just up-up and away from here on out. QE and more QE.

Conventional wisdom says that the more wealth that is created would cause rising prices of goods and services and tangible assets. However, according to the government's inflation numbers, that isn't happening. How can it not be when you have more dollars chasing after the same assets/goods/services?

Are we really in an era of masking true inflation numbers and printing money to the point the dollar is going to be like the peso in the not-so-distance future? At what point does this model break?

Or, am I just imagining things? I'd like to hear other's thoughts.

Bird Poo
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Paging Jeff Hamilton!
Ragoo
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PearlJammin said:

Paging Jeff Hamilton!
what ever happened to that guy?
Bonfire97
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I must be missing a joke here?
pfo
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Bonfire, you are not imagining it. My guess on when it hits the fan here is when we get a crisis in confidence. Put another way, when a critical mass of people realize what you and I and some others already see. And when that time comes, people will get out of paper money and into tangible things of value like gold and real estate and many that can will move away.

So when will that be? I'll guess it will come after Trump and when a socialist/democrat is elected president, taxes are raised and social spending sky rockets. Hugo Chavez didn't collapse Venezuela overnight. That country fed off the skeleton of capitalism for 20 years before complete collapse. But when the collapse started it quickly accelerated. The same thing will happen here if nothing is done. And nothing will be done until it happens.
John Francis Donaghy
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We're only a couple years removed from the worst period of recession/stagnation since Jimmy Carter, and the dollar has lost more than 30% of its value since 2000.

The government's inflation numbers are bs, and QE can only mask some of the measurable effects of a recession, not prevent one altogether.
Gary Johnson
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Quote:

Conventional wisdom says that the more wealth that is created would cause rising prices of goods and services and tangible assets. However, according to the government's inflation numbers, that isn't happening. How can it not be when you have more dollars chasing after the same assets/goods/services?



If all the new dollars are chasing asset bubbles then it won't show up in the CPI/PCE basket.

You could have more money chasing more goods and services(productivity) and it balances out.
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Ragoo
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No inflation? Have you gone out to eat anywhere in the last 5 years? Food prices have gone up significantly.

Stocks are not higher because of QE. Stcks are higher because everyday more and more people are making a decision to invest in the future. Simple demand is pushing prices higher.

We may have another black swan event but the market is going to be higher in 10 years from where it is today.
Cyp0111
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Risk assets have had significant inflation as has other non traditional staples.

Corporate/Sovereign debt will be the next crisis.
TriAg2010
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Ragoo said:

No inflation? Have you gone out to eat anywhere in the last 5 years? Food prices have gone up significantly.

I don't think it's fair to equate restaurant prices with general food prices. The price of food staples has objectively remained stable if not deflationary in recent history. A loaf of bread today costs about what it did in the 1970s.

Generally speaking, the trend of the last >250 years is that growth periods have become longer while recessions have become shorter and less severe. Of course there will be recessions - even bad ones - in the future, but there are more reasons to be optimistic than not.
Ragoo
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TriAg2010 said:

Ragoo said:

No inflation? Have you gone out to eat anywhere in the last 5 years? Food prices have gone up significantly.

I don't think it's fair to equate restaurant prices with general food prices. The price of food staples has objectively remained stable if not deflationary in recent history. A loaf of bread today costs about what it did in the 1970s.

Generally speaking, the trend of the last >250 years is that growth periods have become longer while recessions have become shorter and less severe. Of course there will be recessions - even bad ones - in the future, but there are more reasons to be optimistic than not.
i wouldn't correlate off of bread, especially plain white bread which has significantly less demand over your time period.
TriAg2010
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Sure, that's why CPI tracks a basket of goods. And the observation about demand for bread would also be true about demand for restaurants.
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Diyala Nick
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It is odd.

Perhaps "de materialization" via technology has had a more profound downward pressure on prices than we realize.
TwoMarksHand
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All A&M said:

Stocks and real estate are currently overpriced due to artificially low interest rates. It's just a matter of time before fools and their money are separated. Fools being those 100% invested in stocks / real estate at this time.
Are you speaking short term? If you are that's fine. But, long-term, I'd argue that stocks are your best investment. No matter the current economic situation. Can you show me where bonds/other beats stocks over any 30+ period of time?
Bonfire97
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Quote:

Bonfire, you are not imagining it. My guess on when it hits the fan here is when we get a crisis in confidence. Put another way, when a critical mass of people realize what you and I and some others already see. And when that time comes, people will get out of paper money and into tangible things of value like gold and real estate and many that can will move away.

So when will that be? I'll guess it will come after Trump and when a socialist/democrat is elected president, taxes are raised and social spending sky rockets. Hugo Chavez didn't collapse Venezuela overnight. That country fed off the skeleton of capitalism for 20 years before complete collapse. But when the collapse started it quickly accelerated. The same thing will happen here if nothing is done. And nothing will be done until it happens.

PFO, good perspective. I do wonder if folks will actually figure this out, though. My hunch is that the central banks will slowly ramp the money printing presses to the point where it sort of becomes second nature to pay $10 for a loaf of bread and nobody really thinks much of it. Time has a way of masking these sorts things. People forget.
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TwoMarksHand
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All A&M said:

TwoMarksHand said:

All A&M said:

Stocks and real estate are currently overpriced due to artificially low interest rates. It's just a matter of time before fools and their money are separated. Fools being those 100% invested in stocks / real estate at this time.
Are you speaking short term? If you are that's fine. But, long-term, I'd argue that stocks are your best investment. No matter the current economic situation. Can you show me where bonds/other beats stocks over any 30+ period of time?

Of course stocks are the best investment if won't need the money for 30+ years. I'm in agreement with you. For that matter, real estate will also beat bonds in a 30+ year time horizon. I'm all for using asset allocation over time to get the best return.

However I think many are currently over allocating funds to stocks and real estate at this time. It's a classic bubble. When you look at valuations, I'm hearing the same thing I heard back in 2000 about stocks and in 2008 about real estate. "It's different this time.....It's a new economy.....Real estate doesn't fall...etc...". Well it isn't different; this bubble will burst sooner or later and Fed will have limited options since they have kept rates so low for so long.

Full Disclosure: I'm 50 and I have 55% in stocks and 45% in bonds/short-termMM. I'm an investor and I re-balance annually. I'm not a trader or market timer competing against other traders and market timers.
Ahh...gotcha. Completely agree.
Mas89
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TwoMarksHand said:

All A&M said:

Stocks and real estate are currently overpriced due to artificially low interest rates. It's just a matter of time before fools and their money are separated. Fools being those 100% invested in stocks / real estate at this time.
Are you speaking short term? If you are that's fine. But, long-term, I'd argue that stocks are your best investment. No matter the current economic situation. Can you show me where bonds/other beats stocks over any 30+ period of time?
Yes, Houston area raw land. 25 to 50x purchase price in 30 years in some areas.

How does that compare to the s&p?
Harkrider 93
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Mas89 said:

TwoMarksHand said:

All A&M said:

Stocks and real estate are currently overpriced due to artificially low interest rates. It's just a matter of time before fools and their money are separated. Fools being those 100% invested in stocks / real estate at this time.
Are you speaking short term? If you are that's fine. But, long-term, I'd argue that stocks are your best investment. No matter the current economic situation. Can you show me where bonds/other beats stocks over any 30+ period of time?
Yes, Houston area raw land. 25 to 50x purchase price in 30 years in some areas.

How does that compare to the s&p?
you can't pick an area of property and compare to the whole of the market

let's compare 25-50x purchase price of Houston to MNST (Monster Beverage), which is up 82206% over the last 20 years.
Duncan Idaho
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Lol at you trying to use any kind of generalization on texags. Everyone here is an outlier.

/s in case it is needed
94chem
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What is QE?
aunuwyn08
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Quantitative Easing.
94chem
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aunuwyn08 said:

Quantitative Easing.


Ahhh, OK. Euphemism for keep the interest rates low and the printing presses running. Wish I could QE my debts the same way.
aunuwyn08
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No it's actually not a euphemism for keeping the printing presses going. It's a new technique where Central Banks directly purchase soft debt or securities which theoretically will result in banks providing additional liquidity to the market since they no longer have risky assets on their books. This in practice has not typically been the case.
94chem
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I am familiar with the multiplier effect, which means the same dollar of capital changes hands many times. Im also aware that governments can create more money using Xerox machines. This QE just sounds like the multiplier effect, except instead of dollars, it's electrons, and instead of capital, it's debt. Am I missing something... Or a lot?
cjsag94
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https://fee.org/articles/modern-monetary-theory-debunking-the-latest-incarnation-of-government-s-magic-money-tree/

There are more and more economists that believe precisely what OP is stating. It's a bit worrisome to me.
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