Everything net
Everything relevant to the thought
... Over the years I’ve tried several times to find a version of Austrian business cycle theory I found plausible and I’ve always come away scratching my head. Thread… Here’s my basic understanding of the model: the economy has some industries that are capital intensive and others that are not. ...
... When the central bank makes interest rates artificially low, it makes capital investment cheap and skews the economy toward capital intensive sectors. But that cheap credit hasn’t actually created any real resources, so you end up with increased spending on both capital and consumer goods. ...
... So far this is an entirely conventional account of how business cycles work. But now things get weird. In the Austrian theory, a recession is a process of resource re-allocation from capital-intensive to capital-light industries. ...
... There was arguably over investment in residential home construction. In 2006 and 2007 the home building industry was contracting while other industries were still growing. But in mid 2008, the situation changed. ...
... Instead of re-allocating workers and other resources from home building to other sectors, you suddenly had almost every industry laying off workers—even ones that were not capital intensive and did not see strong growth in the 2000s. ...
... The central question of macroeconomics is explaining why economies sometimes have periods of elevated unemployment, where not just one industry shrinks but almost all of them do at once. ...
... If that were true, then 2009 would have been a time when low-capital industries were aggressively hiring laid off construction workers. That did not happen on any significant scale. Even industries far from housing laid off workers or at least froze hiring in late 2008 and 2009. ...
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... Yes, I know the HODLers see it as a buying opportunity, and they could be right — not doing price predictions, just trying to think this through 1/ First: crypto faithful comparing this to "crypto winter" of 2017-18, which was comparable in percentage terms. ...
... If I'm reading the numbers right, around 800K bitcoins mined in 2021; at $50K each, that's around 0.2% of US GDP 5/ By contrast, residential investment peaked at almost 7% of GDP and fell by more than 4% 6/ https://t.co/PDSNM4BV7l And there surely isn't enough leveraged buying of crypto to create 2008 ...
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... Here it is. https://t.co/x4dR7KFUd5 https://t.co/Ca274C7UWi tldr: Full Stack Economics is fully independent and self-financed. We have no outside donors or investors. The vast majority of our (still modest) revenue comes from subscribers. ...
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... I'm reading @mattyglesias and thinking that bubble-phobia was a major factor behind the bad economic performance of the Bush and Obama years. https://t.co/p8zhQAIA2D https://t.co/xBi4kjjAXK In the early 2000s, people exaggerated the frothiness of the tech bubble and the harms from its crash. ...
... I suspect this fear of bubbles discouraged the Fed from supporting a rapid recovering in 2001-3. When a sluggish recovery finally started to gain steam in 2004-5, triggering a housing boom, people once again over-estimated its frothiness. ...
... This bubble frame caused the Fed to react too slowly to the onset of the Great Recession from December 2007 to September 2008. ...
... Then the idea that 1999 and 2006 were driven by unsustainable bubbles, as opposed to just being healthy economic booms, prevented people from recognizing how far the US economy was below potential from 2010 to 2015. ...
... People in the early 2010s assumed we had to live with a permanently shitty economy to avoid having more bubbles. But now we know that was wrong. The economy was still way below potential in 2015, and it's possible to recover rapidly from a recession with appropriate macro policy. ...
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... Spending on durables can't keep growing at this pace. https://t.co/1ezz6V9lAU On the other hand, companies that make durable goods know how to make more of them! It takes a year or two to spin up the capacity, but it's not rocket science. ...
... These are also largely global industries, so they won't be constrained by US labor supply. As @DavidBeckworth has argued, there's no reason to think anything has fundamentally changed about the deflationary nature of durable goods industries. ...
... It might take another year or two, especially for car companies waiting for computer chips. But they'll get there. And when they do we should see durables prices start to trend back down again. A bunch more charts that explain the economy here. https://t.co/gtVBWwesGH ...
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... Thread: Let's talk about housing bubbles and the Eurozone. A lot of people think that the size of the American housing "bubble" in 2005 made a housing crash inevitable. ...
... When I share this image people sometimes suggest I'm cherry picking, since other major economies don't look like the ones for the UK, Canada and France here. ...
... Here I've compared the US to four major Eurozone countries that had "bubbles" in the 2000s (Germany didn't). https://t.co/XauaEPtn54 This chart definitely complicates my argument, since Spain, Italy, and the Netherlands all experienced significant downturns in housing prices. ...
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... I've been noting that we're currently seeing a surge in real house prices up to 2000s-bubble levels 1/ https://t.co/ukUAXznGpk But the 2000s bubble was geographically very uneven: prices surged in cities with strict zoning, but not in places where developers were free to sprawl => elastic housing ...
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... Very unlike the 2000s bubble 1/ In the Naughties, prices soared in places like SF and LA with constrained housing supply, but not in sprawling metros where building more homes was relatively easy 2/ https://t.co/lgRjHUXnj2 Now even sprawling metros and smaller cities are seeing huge price runups 3/ ...
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... Major disruptions in businesses will start to appear around 2024 - i.e. profitable (by free cash flow) and hyper-growth companies relying on large-scale neural networks as their main tech strength. ...
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... thanks to the inflow of investment, as during the internet bubble. ...
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... it’s pretty obvious, who you might think”—but he suggests that the AI industry’s culture of publishing its findings openly may soon need to end. ...
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