Message from @hcaez
Discord ID: 533019863724326933
it will follow with a bust
by who and in what?
Central banks expand credit well beyond their own assets and by the funds of their clients, often supported or encouraged by the setting of low interest rates by a central bank. This additional credit flow into the economy from increased borrowing for capital projects stimulates economic activity. Projects which would not have been started before, seem now profitable, creating malinvestment. They increase demand for production materials and for labor and their prices rise, which, in turn, leads to an increase in prices of consumption goods. If the banks would stop the extension of credit, the boom would be rapidly over. To prevent the sudden halt of this boom (and the resulting collapse of prices), the banks must create more and more credit, and the prices will rise even more.
But this expansion of credit cannot continue forever. There is no additional capital or labor; there is only more money (and debt). The means of production and labor which have been diverted to the new enterprises have to be taken away from others. Society is not sufficiently rich to permit the creation of new enterprises without taking away from others. As long as the expansion of credit is continued this will not be noticed, but it can't be pushed indefinitely. The inflation and the boom can last only as long as the public thinks that the prices will stop rising in the near future.
ah my bad, I should've been more specific
yeah I understand your idea, I just wanted some specific examples
maybe some individual names or specific investment banks and what they did with the money they borrowed from the fed
@hcaez not borrowed from the FED really, the FED set the interest rates and expanded the money supply
Notable examples of them causing recessions would be
'29, '90 , '82, '08
right the fed sets the interest rates on the money that they give out
but im asking for specific examples of individuals or banks that pulled money from the fed because of the 0% interest rate and invested it in a bad way
@hcaez benchmark for the banks
It isn't the banks who invest, but the people
well yeah individual investing is a decent chunk, but most investment is done by large banks such as vanguard, boa, merrill lynch
these big banks are the primary "customers" of the fed
I wouldn't say most
most investing is done by ordinary people
ordinary companies
Who see this 0% rates and make bad decisions
Rates should be controlled by the free market
ordinary people just don't match up to the 5 trillion of assets that vanguard has alone, even when you collect the people in large groups
I'd say it's both, either way it does cause malinvestments.
I can't give specific examples
But thats just the case
The way humans do it
well i'm not really sure how to show you how institutions trade more than individuals, no real research on that
but i think the best way is to look at the ownership of top companies
apple is a bit over 60%, amazon, is around 60%, alphabet is 70, netflix is over 70, facebook is over 70
the vast majority of companies are owned by institutions such as those banks i mentioned before, individuals are usually only a few percent of total holders
Trade ?
malinvestment is generated by excessive and unsustainable credit expansion to businesses and individual borrowers by the banks.
that’s my point
All due to central banks lowering interest rates and increasing money supply
percentile is a cool word
I suppose so
Imagine being conservative
🤔
Imagine thinking that just because someone has more than you that they owe you some of it