Volcker

Discussion of the Cash portion of the Permanent Portfolio

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vnatale
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Re: Volcker

Post by vnatale » Wed Mar 03, 2021 12:21 pm

Xan wrote:
Wed Mar 03, 2021 12:11 pm

vnatale wrote:
Wed Mar 03, 2021 12:09 pm

vincent_c wrote:
Wed Mar 03, 2021 11:00 am

doodle wrote:
Tue Mar 02, 2021 11:13 pm

technology is massively deflationary


I used to take this as a given as well, and I pointed to Moore's law as an underlying reason for this. But Moore's law is hitting a physical boundary and so at least from computing power technology we can start to see a ceiling.

Of course, improvements in efficiency in doing anything will increase productivity and thus improve the quality of life for everyone in the long run, but I'm starting to question the premise that technology is massively deflationary at least in terms of being able to drive bond yields lower in the long run.


Finally? I thought I'd been reading almost forever that the boundary would soon be hit.


If true, it's probably more like approaching an asymptote than "hitting" a boundary.


Had to look up the definition of that one: "a line that continually approaches a given curve but does not meet it at any finite distance"

The type of line you'd eventually see if you were plotting how far away a point is from something in the distance if each day the distance was halved. Never quite get there but at a certain point the distance is still measurable but imperceptible.

In your opinion (or anyone else's) how far away are we from the boundary? 5%? 1%? 0.05%? 0.01%? ???
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Re: Volcker

Post by vincent_c » Wed Mar 03, 2021 1:08 pm

We're basically there.

I think this is more a ceiling than asymptotic because we're talking about transistors being so small that quantum effects prevent them from working anymore so we can't fit any more transistors on a silicon chip.
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Re: Volcker

Post by vnatale » Wed Mar 03, 2021 2:17 pm

vincent_c wrote:
Wed Mar 03, 2021 1:08 pm

We're basically there.

I think this is more a ceiling than asymptotic because we're talking about transistors being so small that quantum effects prevent them from working anymore so we can't fit any more transistors on a silicon chip.


Which had been something that had been being said for how long? 5 years? 10 years? But now we've finally arrived there...
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Re: Volcker

Post by Xan » Wed Mar 03, 2021 2:22 pm

vincent_c wrote:
Wed Mar 03, 2021 1:08 pm
We're basically there.

I think this is more a ceiling than asymptotic because we're talking about transistors being so small that quantum effects prevent them from working anymore so we can't fit any more transistors on a silicon chip.
I don't think these are in conflict. You can have a ceiling, and approach it asymptotically.
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Re: Volcker

Post by Kbg » Wed Mar 03, 2021 3:33 pm

vincent_c wrote:
Wed Mar 03, 2021 10:54 am
Kbg wrote:
Wed Mar 03, 2021 8:36 am
For whatever reasons velocity has been going down the entire time thus, no inflation.
Recently I came across an argument for low velocity because of low bond yields and higher velocity will come with higher bond yields.

At first it seemed to go against my understanding, but what I think the argument was pointing to is that higher bond yields is a symptom of the underlying rise in velocity of money. Basically the demand for bonds fall vs supply as people spend money rather than hoard it.

This reason was the explanation given to why Japan was able to print so much money but yet had deflation.

What do you guys make of this?
Your comment is exactly why I think there is a future Nobel prize in figuring out what is going on with a good theory to explain it. I think there are lots of guesses and opinions to include very informed opinion, but yeah, it's a very interesting departure from previously understood normality.

I'll be the first to admit I don't understand why...Heavens, I'm even to the point I'm open to MMT possibly not being that wacked after all.

If my pet theory of population is a driver then it is quite possible the US will not follow the path of Japan as IIRC the US is not shrinking in population.
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Re: Volcker

Post by vincent_c » Wed Mar 03, 2021 3:39 pm

Xan wrote:
Wed Mar 03, 2021 2:22 pm
I don't think these are in conflict. You can have a ceiling, and approach it asymptotically.
Oh, so you mean that it could be increasingly hard to manufacture smaller and smaller transistors.

I'm not sure if that's the problem they face or if they can make them smaller but it's just that when they do quantum effects make the transistors behave weirdly. But even if it were the case that you approach the ceiling asymptotically, that would probably imply diminishing returns on the effort.
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Re: Volcker

Post by vincent_c » Wed Mar 03, 2021 3:48 pm

Kbg wrote:
Wed Mar 03, 2021 3:33 pm
Your comment is exactly why I think there is a future Nobel prize in figuring out what is going on with a good theory to explain it.
It does sound like a chicken and the egg problem.

Although I am pretty sure that monetary policy alone cannot change the course of the velocity of money. It seems like fiscal can have a better chance. Ultimately I am leaning toward the velocity of money as a parameter that is an aggregate of a bunch of fundamentals and that it is synonymous with what we call "the bond market" absent of intervention.

So I think the Fed can provide some push and pull but when the forces go beyond what the Fed can do to impact the direction of velocity then something else has to be done. Which is why I believe the Fed is so much more confident that they can have an impact to dampen velocity of money because they believe the changes will occur gradually.

If the market forces shows that this will happen rapidly and disorderly, I'm pretty sure they will be forced to change their tone as well.
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Re: Volcker

Post by Kbg » Wed Mar 03, 2021 5:03 pm

vincent_c wrote:
Wed Mar 03, 2021 3:48 pm
Although I am pretty sure that monetary policy alone cannot change the course of the velocity of money. It seems like fiscal can have a better chance.
Agreed.

Just from reading, the fiscal aspect of the COVID bill seems to be the lead popular theory of the recent rise in irates.
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