0T: Europe is on sale!

[Steve in SLO]

I just checked www.xe.com and saw that the exchange rate for the Euro is 1.054 USD.
Wow, I wish it was that low last summer when we went on vacation in France.
Nonetheless, I am taking advantage by buying some vintage watches from European sellers.
Anybody else using the current exchange rate to their advantage?

[MattTuck]

Would love to pick up a Nomos watch, but just found out I may need a root canal... so I'm on an austerity plan for the time being.

What european watch sites are you looking at?

[Steve in SLO]

I have just looked at www.Chrono24.com so far.
I also know a couple of private sellers with whom I have deals in the works.
Just make sure if you are buying new to have them back out the VAT.

[Louis]

Matt, given that the Swatch White Sun is a teeny bit less than a Nomos ($160 vs $$$$) does it look enough like one to fit the bill? ;)

http://e.kotear.pe/images/249632/vendo-reloj-swatch-irony-chrono-white-sun-ycs535-1296608850.jpg

http://www.blessthisstuff.com/imagens/stuff/nomos-glashutte-watches-2.jpg

[Mr. Pink]

This should make my future bike trip to Tuscany much cheaper. Would like to spend a week with an established tour company within aprox. a month, but they are still quoting prices in dollars, obviously making a tidy profit off of those that don't follow FOREX.
Which tour companies quote prices in Euros?

Some knowledgeable people expect the dollar to break through parity and buy maybe 1.20 Euro by the fall. Whoopee.

[makoti]

I just checked www.xe.com and saw that the exchange rate for the Euro is 1.054 USD.
Wow, I wish it was that low last summer when we went on vacation in France.
Nonetheless, I am taking advantage by buying some vintage watches from European sellers.
Anybody else using the current exchange rate to their advantage?

Thinking of taking a trip to Italy with a company in the UK. Prices in pounds. May have to book sooner than I thought, to lock in. Someone got a crystal ball? What are we expecting rates to do?

[makoti]

This should make my future bike trip to Tuscany much cheaper. Would like to spend a week with an established tour company within aprox. a month, but they are still quoting prices in dollars, obviously making a tidy profit off of those that don't follow FOREX.
Which tour companies quote prices in Euros?

Some knowledgeable people expect the dollar to break through parity and buy maybe 1.20 Euro by the fall. Whoopee.

Check Saddle Skedaddle. In pounds, but still pretty good, I think.

[christian]

Thanks for the reminder. Homeland vacation booked.

[Louis]

Thanks for the reminder. Homeland vacation booked.

Better to go now, before Putin takes a shine to Scandinavia...

[csm]

In the process of booking a trip to Val d'Isere next feb or March. Hoping the exchange stays in our favor.


Sent from my iPad using Tapatalk HD

[bikinchris]

Some people claim they think it will go lower before recovering. Maybe as low as $.85 per Euro.

[arazate]

US Interest rates will be rising soon, pushing the dollar higher. Great for buying in Europe and Japan, but a disadvantages for us who sell internationally.

[cd_davis]

Going to Tuscany for ten days late May to early June. Luck prevailed as I redeemed only 60k miles plus pocket change in fees to fly round trip Boston Pisa on LH via Munich. With current exchange rate can rent decent road bike for less than baggage fees. And the hotel extended special rate via a friend for only 50€ a night including breakfast. Not bad after Boston winter...

[SoCalSteve]

Now is the time to buy a C60 from Mike at Maestro.

Looks to be around $3,200.00... Amazing! :):):)

[ultraman6970]

Not good IMO.

US Interest rates will be rising soon, pushing the dollar higher. Great for buying in Europe and Japan, but a disadvantages for us who sell internationally.

[jds108]

US Interest rates will be rising soon, pushing the dollar higher. Great for buying in Europe and Japan, but a disadvantages for us who sell internationally.

Umm, I'm going to have to disagree with you there re: rates rising soon. Particularly if you're saying the Fed is going to raise their funds rate. But as Greece situation continues to deteriorate and Spain and Italy continue to flounder, that exchange rate is going to continue on its current trajectory.

[verticaldoug]

Basically the world is on sale if you are Swiss Franc or USD paid. It's a good thing until it becomes not a good thing. Funny how that will happen.

I picked up a Putin T-Shirt in Moscow last week. half priced.

[Louis]

The company I work for exports lots of stuff. A strong $ does not help us, but I assume we're somewhat protected by currency hedging. Of course that protection doesn't come for free.

[Andrevich4]

Umm, I'm going to have to disagree with you there re: rates rising soon. Particularly if you're saying the Fed is going to raise their funds rate. But as Greece situation continues to deteriorate and Spain and Italy continue to flounder, that exchange rate is going to continue on its current trajectory.

You might be right here. Digging below the surface things don't look as rosy for the U.S. as the recent numbers would lead some to believe. Why is consumer spending dropping if paychecks went up in January and if folks are paying less at the pump which is effectively a tax cut? Could be the weather or could be something else.

For now, though, the market expects the U.S. to tighten the money supply and the Europeans to expand theirs. It would take a significant event to change that perception and I'd be interested to know what that would be. Would the fed not raising interest rates be enough to change that? I don't know.

In any case, good time to buy!

[djg]

Not looking for watches or other stuff, really, but I am taking the family to Italy at the end of the Month -- definitely pleased to see the exchange rate.

[MattTuck]

Matt, given that the Swatch White Sun is a teeny bit less than a Nomos ($160 vs $$$$) does it look enough like one to fit the bill? ;)

http://e.kotear.pe/images/249632/vendo-reloj-swatch-irony-chrono-white-sun-ycs535-1296608850.jpg

http://www.blessthisstuff.com/imagens/stuff/nomos-glashutte-watches-2.jpg

I desperately want a quality mechanical watch. And the Club model from Nomos seems like a pretty affordable (relatively) way to get a quality movement.

That said, I'm not going to be getting it for a while. Need to get some funds in order for a purchase like that. Would love to also go on a cycling trip (perhaps with Andy Hampsten's outfit) but that too is a big cash outlay.

[Louis]

I desperately want a quality mechanical watch. And the Club model from Nomos seems like a pretty affordable (relatively) way to get a quality movement

One thing that bugs me a bit about watches (maybe bikes too, but they aren't as bad) is that one can get a perfectly good model at nearly any price point, from $10 to $100,000. I don't know if they meet the official definition of a Veblen good, and I'm not a economist, but it sure seems that they might.

I try to be a rational consumer (don't always succeed - witness all the bike frames I have...) but I have no idea how one determines what the appropriate amount to spend on watch would be.

If you can figure it out, please let us know. (the process, not the price ;) )

[MattTuck]

One thing that bugs me a bit about watches (maybe bikes too, but they aren't as bad) is that one can get a perfectly good model at nearly any price point, from $10 to $100,000. I don't know if they meet the official definition of a Veblen good, and I'm not a economist, but it sure seems that they might.

I try to be a rational consumer (don't always succeed - witness all the bike frames I have...) but I have no idea how one determines what the appropriate amount to spend on watch would be.

If you can figure it out, please let us know. (the process, not the price ;) )

Well, a few things. Veblen goods is a theoretical concept. I don't think there is real life proof of one. The evidence that I've seen suggests that demand goes down as price goes up. Yes, there are still buyers even at very high prices, but that demand volume doesn't increase as prices go up.

On the price question.... there's no way I can say what is a fair value for a person to pay for a given good. Watches, like bikes, can be logically amortized over a long period of time... an expensive dinner, a vacation, a night at the strip club, bottle service, money blown in vegas.... these are things that are one shot deals. Yes, you have memories and maybe some pictures, but it is a stretch to amortize that cost over any period of time.

On the flip side, and using relativistic logic.... there are plenty of guys who drop $5k+ on an engagement ring. If you consider a fine watch as men's jewelry, then there is a precedent for spending a few grand on something you really like.

[11.4]

I'd be a little more adventuresome about the long-term prospects for traveling to Europe. The US has issues, but everyone under the Euro is really hurting and their economic issues aren't going away for a number of years. We have some issues but Spain has 20% unemployment, France has huge deficits, Italy and Greece are steps away from insolvency, and the Japanese and Chinese have been forsaking Europe for the US. I'm in Europe quite frequently and the economic drivers there aren't good. We have surplus oil, low unemployment that is soaking up economic capacity, and a great trading position. Europe is buying from us at prices that are killing them, and that won't change soon. We are really the dominant economy in the world right now and there isn't much to make that change anytime soon.

[11.4]

Well, a few things. Veblen goods is a theoretical concept. I don't think there is real life proof of one. The evidence that I've seen suggests that demand goes down as price goes up. Yes, there are still buyers even at very high prices, but that demand volume doesn't increase as prices go up.

On the price question.... there's no way I can say what is a fair value for a person to pay for a given good. Watches, like bikes, can be logically amortized over a long period of time... an expensive dinner, a vacation, a night at the strip club, bottle service, money blown in vegas.... these are things that are one shot deals. Yes, you have memories and maybe some pictures, but it is a stretch to amortize that cost over any period of time.

On the flip side, and using relativistic logic.... there are plenty of guys who drop $5k+ on an engagement ring. If you consider a fine watch as men's jewelry, then there is a precedent for spending a few grand on something you really like.

There are plenty of retailers who refute Veblen's models, but then there are a broad swath of other retailers who have to live by the same models. It's really about small economic populations with different buying behaviors. When you don't have to keep out of overdraft on your bank account ....

I do have one ginormous bone to pick with your post, however. Ginormous. Massive. Extraordinary. Just how the hell does one get away with a $5K engagement ring? I guess I've been marrying the wrong women. $50K is more of a starting point. If my fiancé read your post, she'd laugh her head off.

[buldogge]

One "gets away with it" by marrying a woman with common sense.

I didn't see any smilies...but...I hope you really don't think the average person is going around dropping $50k (and really, even $5k) on an engagement ring...

-Mark in St. Louis

There are plenty of retailers who refute Veblen's models, but then there are a broad swath of other retailers who have to live by the same models. It's really about small economic populations with different buying behaviors. When you don't have to keep out of overdraft on your bank account ....

I do have one ginormous bone to pick with your post, however. Ginormous. Massive. Extraordinary. Just how the hell does one get away with a $5K engagement ring? I guess I've been marrying the wrong women. $50K is more of a starting point. If my fiancé read your post, she'd laugh her head off.

[Ken Robb]

I do have one ginormous bone to pick with your post, however. Ginormous. Massive. Extraordinary. Just how the hell does one get away with a $5K engagement ring? I guess I've been marrying the wrong women. $50K is more of a starting point. If my fiancé read your post, she'd laugh her head off.

Are you sure you want that person to share your life? :eek:

[makoti]

I do have one ginormous bone to pick with your post, however. Ginormous. Massive. Extraordinary. Just how the hell does one get away with a $5K engagement ring? I guess I've been marrying the wrong women.

See, now that may be the problem. When you marry more than one, it gets expensive. ;)

[Louis]

What's wrong with you guys? Don't you know that the more you spend on an engagement ring the better of a husband you'll be and the more she'll love you?

At first I didn't think the ads below were real, but apparently they are.

http://static1.refinery29.com/bin/entry/c34/x/1019497/diamondsembed.jpg

http://www.diamondsourceva.com/Education/images/ad-threestonering.jpg

http://feminspire.com/wp-content/uploads/2013/06/De-Beers-Return-on-your-investment.jpg

http://tips.scoperks.com/wp-content/uploads/2015/02/ring-advert-divorce-costs-more.jpg

[eBAUMANN]

Bahahaha 50k holy crap, you cant be serious.

[Louis]

Bahahaha 50k holy crap, you cant be serious.

Go big, or go home...

https://s-media-cache-ak0.pinimg.com/736x/ce/4b/55/ce4b5518bab71ba715b3256bf0666926.jpg

[fuzzalow]

$50K is more of a starting point. If my fiancé read your post, she'd laugh her head off.

No, I don't really see a problem with $50K for an engagement ring, that should get you a very respectable Tiffany in the range of about 2 carats, right?

Laughing off less than that though is just being pretentious. Flip remarks like that can get taken in the same vein as a remark like "let them eat cake" so they are best said discreetly and in select company. Just sayin'.

[verticaldoug]

I'd be a little more adventuresome about the long-term prospects for traveling to Europe. The US has issues, but everyone under the Euro is really hurting and their economic issues aren't going away for a number of years. We have some issues but Spain has 20% unemployment, France has huge deficits, Italy and Greece are steps away from insolvency, and the Japanese and Chinese have been forsaking Europe for the US. I'm in Europe quite frequently and the economic drivers there aren't good. We have surplus oil, low unemployment that is soaking up economic capacity, and a great trading position. Europe is buying from us at prices that are killing them, and that won't change soon. We are really the dominant economy in the world right now and there isn't much to make that change anytime soon.

I don't think everyone under the euro is hurting. The germans are doing quite nicely thank you.

Longer term, if everyone else is pushing their currencies weaker and you don't, you will end up with a strong currency that will come at the expense of your competitiveness.

Game Theory- the only stable equilibrium is one which everyone devalues even though it is a lose-lose outcome.

This leaves the worlds two largest economies- US and China left to devalue.
If China tries to devalue the CNY, what do you think will happen to commodities? global disinflation?

QE in the U.S. probably led to an excess of mal-investment in fracking. QE in Japan and EU will lead to mal-investment somewhere else. The central banks are just adding wood for the eventual fire.

In the meantime, FOMO

[makoti]

There was a National Lampoon ad a long time ago. Had the happy couple lampooning a Debeers ad. Lovingly looking at the ring on her hand, the caption read "I don't think three months salary is too much to spend to keep my wife from sleeping around." :banana:

[MattTuck]

No, I don't really see a problem with $50K for an engagement ring, that should get you a very respectable Tiffany in the range of about 2 carats, right?

Laughing off less than that though is just being pretentious. Flip remarks like that can get taken in the same vein as a remark like "let them eat cake" so they are best said discreetly and in select company. Just sayin'.


I do have one ginormous bone to pick with your post, however. Ginormous. Massive. Extraordinary. Just how the hell does one get away with a $5K engagement ring? I guess I've been marrying the wrong women. $50K is more of a starting point. If my fiancé read your post, she'd laugh her head off.

Life is good for the fiancées of one percenters, I guess. More seriously, what do you do for work? and is your employer hiring?

If you're making $300K+ per year, I don't think $50K for an engagement ring is unreasonable. Still, it is not where I'd allocate my money if I made that much. I work in academia, yo!

[djg]

One "gets away with it" by marrying a woman with common sense.

I didn't see any smilies...but...I hope you really don't think the average person is going around dropping $50k (and really, even $5k) on an engagement ring...

-Mark in St. Louis

Oh yes, but of course the average person is going to spend 50 grand . . . it's gotta be a joke (and you don't need smilies if it's actually funny), given the average US income, and the fact that even De Beers, in its most macho cartel dreams, hasn't had the stones to advertise a new made up social norm of one year's salary (pre-tax), to replace their old made-up social norm of two months salary.

[Likes2ridefar]

Life is good for the fiancées of one percenters, I guess. More seriously, what do you do for work? and is your employer hiring?

If you're making $300K+ per year, I don't think $50K for an engagement ring is unreasonable. Still, it is not where I'd allocate my money if I made that much. I work in academia, yo!

i'm so glad my wife doesnt like rings like that. she loves her boone ti ring that cost maybe $90 at the time, my little bit of bike nerd allowed into the wedding!

[fuzzalow]

Life is good for the fiancées of one percenters, I guess. More seriously, what do you do for work? and is your employer hiring?

If you're making $300K+ per year, I don't think $50K for an engagement ring is unreasonable. Still, it is not where I'd allocate my money if I made that much. I work in academia, yo!

MattTuck, my point was that people can choose to spend their money how they wish. None of us see the balance sheet for the personal finances of anyone here. Things may not always be as they seem although this is not aspersion aimed towards the man with the laughing fiancé. Perhaps for him he may be a person farther along in life and can afford this kind of bauble. This type of purchase is however not typically easily done by most young couples starting out. And building a life together is hard and one should never assume anything as preordained.

My comment was more impinged by matters of decorum and taste. IMO unless one is a baller or a rap star, bling is best enjoyed with discretion. To beat one's chest in the manner as posted is not my style.

The ability to live life well is largely a byproduct of a life well lived and correct choices and luck in how things turn out. Lot's of smart, deserving people did not all wind up in the same exalted place. Never forget that.

[MattTuck]

I got what you were saying fuzz. I shouldn't have quoted you in my response. And I agree, if you have the money, go for it! But, if his story was legit, and his fiance really would laugh at a $5k ring, I feel bad for her.

[fuzzalow]

^ No problem, I know what you meant. And even if it were somehow a challenge, I can always defend my own position.

Naw, don't feel bad for anybody. Everybody chooses, or makes, their own purgatories whether they know it or not.

[Likes2ridefar]

^ No problem, I know what you meant. And even if it were somehow a challenge, I can always defend my own position.

Naw, don't feel bad for anybody. Everybody chooses, or makes, their own purgatories whether they know it or not.

bs...i suppose on topic regarding being required to buy expensive diamonds for materialistic wives it is, but otherwise :no:

[11.4]

Jeez. Next time:

ALERT! ALERT! This is humor! Disregard if you will take it seriously!





···?????

[fuzzalow]

bs...i suppose on topic regarding being required to buy expensive diamonds for materialistic wives it is, but otherwise :no:

I don't know what you are calling "BS" to me about. Or am I being chastised for drifting off topic from a foreign currency exchange discussion? Whaddaya wanna talk about?

You know, as the weather gets more and more to spring, talks like this taper off to less and less...

[fuzzalow]

Jeez. Next time:

ALERT! ALERT! This is humor! Disregard if you will take it seriously!





···?????

Well yeah, the whole lead up to ginormous blah blah blah was a tipoff, but not neccessarily clear without the smileys. Frankly, if that was humor, not trying to be impolite but the humor wasn't that clever.

But never let a good controversial topic go to waste.

[Likes2ridefar]

I don't know what you are calling "BS" to me about. Or am I being chastised for drifting off topic from a foreign currency exchange discussion? Whaddaya wanna talk about?

You know, as the weather gets more and more to spring, talks like this taper off to less and less...

I have wayyy too much time at work this week thus my loitering here.

just stating its BS thinking everyone has a choice towards their own "purgatories" likewise with all the smart folk finding their exalted place.

perhaps it's a misunderstanding on that particular quoted word.

[fuzzalow]

I have wayyy too much time at work this week thus my loitering here.

just stating its BS thinking everyone has a choice towards their own "purgatories" likewise with all the smart folk finding their exalted place.

perhaps it's a misunderstanding on that particular quoted word.

OK gotcha. I am glad you gave me the opportunity to follow this up because I truly dislike self preoccupation.

The purgatories reference was earnest on my part. Kinda like the grass is always greener on the other side. There is not much worse than hearing people that are, by most standards, well off and yet whinge incessantly about what they don't have or how they are not "keeping up". I think you can find this true in most any affluent zip code in the country but especially in suburbia where the symbols of attainment are easier to see because they are indicative to consumerism/materialism. But in fairness there is also plenty that cannot be seen so it is wrong to generalize.

I go by the basic rule: the showier and louder you are, the less you actually do. And I truly believe that having lots of material things can be corrosive and makes for its own prison when it rules a person's life or self image.

"Exalted" place is most certainly used by me as a term of derision. Everybody strives for the best they can have and there's nothin' wrong that in a free capitalist society. Some folks are endowed with advantages as an accident of birth - for example The Prince of Wales. Everybody else has to make their own way with whatever they have.

Nobody is entitled to anything so for a woman to laugh at less than a $50k ring is pathetic were it true. As it were, it was just a lousy joke because it ridiculed materialism without a punchline other than greedy entitlement. That presumption was what I was mocking by my use of "exalted", that somehow the good life is just gonna happen. In the real world, I don't think so.

[christian]

And I truly believe that having lots of material things can be corrosiveIs it possible to believe this in any meaningful way as a well-off American in the 21st century? It's a nice sentiment, but many people here own multiple bicycles, each of which is worth more than the median global per capita income.

[Likes2ridefar]

Is it possible to believe this in any meaningful way as a well-off American in the 21st century? It's a nice sentiment, but many people here own multiple bicycles, each of which is worth more than the median global per capita income.

I just took a sustainable course for my engineering degree, and it was eye opening taking this little quiz. If everyone lived as I do we would need about 6 or 7 earths to sustain the entire population

http://www.footprintnetwork.org/en/index.php/GFN/page/personal_footprint/

I like to think I'm pretty good compared to many in this country and even the world since I generally take mass transit or ride a high MPG motorcyle, own a lot less things, but it's simply not true.

One surprise was taking my motorcycle to work was significantly worse than taking the train + driving to the station. I thought my little high MPG bike would be pretty good but it is considered much worse overall for a variety of reasons I hadn't really thought too much about.

edit: i did not know what the median per capita income is...my frame cost twice it. the whole bike is nearly 5...

[kgreene10]

This is really bad for us right now. I'm getting paid in euros and need to bring cash for living expenses back to the US in a few months. I planned to have 25% more dollars than it looks like I will.

Any smart finance types out there have a good suggestion?

[fuzzalow]

One surprise was taking my motorcycle to work was significantly worse than taking the train + driving to the station. I thought my little high MPG bike would be pretty good but it is considered much worse overall for a variety of reasons I hadn't really thought too much about.

If you are conscientious and made an earnest effort at achieving something positive, that's a valid first step. After that you can take it as far as you like. The goal is to moderate to less wasteful consumption, NOT to feel guilt that your own levels don't approximate subsistence levels present in those outside the first world.

My comment on global forex: talking forex is the tail wagging the dog here. The driver is not forex and global competitiveness or balance of payments or anything outside of the EU borders vis a vis trading partners.

The EU made a mistake imposing harsh austerity into their economies rather than promoting stimulus. In particular Germany and Merkel's insistence on austerity demands towards punishing Greece that served also as spillover policy that effected other EU nations inappropriately such as France. Not much could be done with a monetary policy that needed to be applied to Greece but could not be tailored also for other EU nations. Greece is especially problematic in that there wil be a writedown of their debt but Germany hasn't come to terms with the inevitable on that just yet. Or Greece can threaten to leave the EU again. Timing means everything as to how big that will splash, if at all.

In the meantime, the correct move to stimulate their economies is finally happening. Something the U.S. correctly did years ago and now the U.S. economy is arguably the he best positioned economy currently in the world but nascent still as far as robustness.

The other bad part for the EU is they will endure an energy cost shock as world-wide energy is denominated in U.S. dollars which will not help their economic recovery with the falling Euro.

[jlwdm]

...
But, if his story was legit, and his fiance really would laugh at a $5k ring, I feel bad for her.

For a lot of people $5,000 would be low price for a ring to celebrate a marriage for a lifetime. Also the costs of weddings today are also ridiculously high.

Jeff

[Louis]

This is really bad for us right now. I'm getting paid in euros and need to bring cash for living expenses back to the US in a few months. I planned to have 25% more dollars than it looks like I will.

Any smart finance types out there have a good suggestion?

Too late now, but this is some info on how the big boys do it:

http://en.wikipedia.org/wiki/Foreign_exchange_hedge

[Andrevich4]

This is really bad for us right now. I'm getting paid in euros and need to bring cash for living expenses back to the US in a few months. I planned to have 25% more dollars than it looks like I will.

Any smart finance types out there have a good suggestion?

I was trying to think of something involving a $50k engagement ring but I'm coming up blank.

You could ask for a pay advance now and convert it into dollars or a dollar-denominated asset while you have the chance. Not sure that would go for your employer.

Another option is put it in a 3rd currency that would appreciate against the Euro. For instance, I believe you can put up to $25k a year into the Bank of China, have it grow in renminbi (assuming it grows relative to the Euro), and then use it when you get stateside. Doing that would cover some risk but adds another currency variable.

You could also buy a fixed asset that isn't going to lose value, maybe like a vintage diamond ring. (?)

Currencies are tough. A ton of variables, no rules or referees, and you may very well lose. Besides, the Fed's mandate isn't to protect the value of the dollar it's to keep the unemployment rate low and smooth the economy. If the jobs numbers take a hit and they can pass the blame onto the strong dollar maybe they relook the interest rate rise and you're back to where you are. Or maybe the Yellen fed really does assert its independence and raises rates because they know they have to, politics be damned.

That just the hint of a minor rate rise some undetermined time in the future after so many years of 0% rates hitting the stock market like it did this past week is pretty concerning. Whatever the currency does, it seems like a bigger risk is having money invested in any place that's so fragile.

[Mr. Pink]

What's wrong with you guys? Don't you know that the more you spend on an engagement ring the better of a husband you'll be and the more she'll love you?

At first I didn't think the ads below were real, but apparently they are.

http://static1.refinery29.com/bin/entry/c34/x/1019497/diamondsembed.jpg

http://www.diamondsourceva.com/Education/images/ad-threestonering.jpg

http://feminspire.com/wp-content/uploads/2013/06/De-Beers-Return-on-your-investment.jpg

http://tips.scoperks.com/wp-content/uploads/2015/02/ring-advert-divorce-costs-more.jpg


De Beers is brilliant. They, and the diamond industry has created a need for a product that just wasn't there about a century ago. Great write up about that in the first chapter in this book, appropriately titled, Everything Is Bull····, by the Pricenomics people. http://www.amazon.com/Everything-Is-Bull····-greatest-revealed/dp/0692224963
The whole diamond industry is a sham. Amazing that it still exists in it's present form today without various governments shutting it all down with at least anti trust convictions.

[Louis]

The whole diamond industry is a sham. Amazing that it still exists in it's present form today without various governments shutting it all down with at least anti trust convictions.

Makes you yearn for the good ol' days, when things were so much simpler:

[Likes2ridefar]

De Beers is brilliant. They, and the diamond industry has created a need for a product that just wasn't there about a century ago. Great write up about that in the first chapter in this book, appropriately titled, Everything Is Bull····, by the Pricenomics people. http://www.amazon.com/Everything-Is-Bull····-greatest-revealed/dp/0692224963
The whole diamond industry is a sham. Amazing that it still exists in it's present form today without various governments shutting it all down with at least anti trust convictions.

Piqued my interest. I just added that one to my kindle app, thanks!

[makoti]

Just to continue taking this thread all over the place... (sorry, OP)
http://www.today.com/money/wedding-costs-surge-all-time-high-2D80547299
Avg cost of a wedding: $31K. That's crazy. And does not include the Honeymoon. Like you can afford to go on one...
Who knew a shotgun cost $31K? ;)

[Ken Robb]

Just to continue taking this thread all over the place... (sorry, OP)
..
Who knew a shotgun cost $31K? ;)

Custom Beretta? Or other even more esoteric Italian custom gun?

[paulh]

How 'bout a shotgun wedding? $$$$$$$$$$

[1centaur]

Thank goodness the $50K engagement ring was a joke. I could technically afford a $50K engagement ring (31 years after actually buying a ring) without disturbing my retirement plans too much but I was appalled at the thought. I actually spent an hour on line last night (before I knew it was a joke) looking at what I would have thought was an exceptional engagement ring would cost (without paying the Tiffany premium) and it was in the $20ks. What $50K would have bought was best suited for some matriarch's cocktail ring or a Hollywood star.

At some point in the cost continuum, the symbolism of an engagement ring switches from "I am willing to try harder for you sweetheart" to "I am going to suck you dry with my self involvement." $50k of unproductive money on a finger will not seem more special than $5k of unproductive money, a month down the road. The emotion of the engagement is what endures, if it's a good one.

As for austerity vs. stimulus in monetary policy, I would say our stimulus was spectacularly unsuccessful outside of asset prices and there is no reason to think the European version will not be the same. Velocity of money stayed low here, in optimistic America, for all sorts of reasons until eventually we got tired of our uncertainties and started taking more business risks (one of which was fracking, which would have happened without as much stimulus, and a lucky coincidence in timing it was, as the Net boom was in the 1980s). In Europe, the propensity and ability to be an entrepreneur or boost one's firm's CAPX budget due to belief/hope in ability to sell stuff to fellow Europeans has to be even lower than here for all sorts of structural and cultural reasons. There may be a case for spreading the pain of the global financial crisis over a longer period, but it also may be that neither stimulus nor austerity can fix what ails that region.

[CNY rider]

I found this fascinating, thought provoking morning reading but I never realized others might too: http://www.ritholtz.com/blog/2015/03/euro-dollar-riot/

[fuzzalow]

As for austerity vs. stimulus in monetary policy, I would say our stimulus was spectacularly unsuccessful outside of asset prices and there is no reason to think the European version will not be the same. Velocity of money stayed low here, in optimistic America, for all sorts of reasons until eventually we got tired of our uncertainties and started taking more business risks (one of which was fracking, which would have happened without as much stimulus, and a lucky coincidence in timing it was, as the Net boom was in the 1980s). In Europe, the propensity and ability to be an entrepreneur or boost one's firm's CAPX budget due to belief/hope in ability to sell stuff to fellow Europeans has to be even lower than here for all sorts of structural and cultural reasons. There may be a case for spreading the pain of the global financial crisis over a longer period, but it also may be that neither stimulus nor austerity can fix what ails that region.

I dunno. There is a lot of everything in what you wrote above. Respectfully, IMO what you're saying focused more on conjecture than policy. I disagree that the the U.S. economic recovery was spectacularly unsuccessful other than when viewed from a political prism of "it could have been better". Things of course can always be better and likewise it is easier to say than to do. That amounts to less a finance and economics discussion and devolves instead into a partisan political polemic.

I don't care much for in playing the blame-game and am interested in making progress and using what works, however imperfect, to advance forwards. Economics may not be viewed as science to many but it sure beats the application of politics which by comparison would not be a science but voodoo.

The Germans have finally come to terms that they cannot squeeze blood from a stone WRT Greece; both countries are playing high stakes poker. And frankly from the German's point of view they have every reason to be outraged, as does every other solvent EU nation, by what was perpetrated by the Greek government to enter the EU. But that's all old news and the all that's left is "OK, now what do we do?". If you believe monetary stimulus will fail for the EU as you posit it has failed for the U.S. then that seems more like a choice to mire an economy towards deflation in blind adherence to political doctrine rather than finding a way to get out of this mess. It is not like the Germans and the ECB have not given austerity a chance to succeed.

[1centaur]

The facts are clear: worst economic recovery since World War II. No politics in that statement. We can debate the reasons, but not the fact. So, massive QE, for years, slowest recovery, low velocity of money. All facts. The rationale for QE (at least as stated) was to boost the economy, so the worst recovery in 70 years says that failed. But markets did well.

[fuzzalow]

The facts are clear: worst economic recovery since World War II. No politics in that statement. We can debate the reasons, but not the fact. So, massive QE, for years, slowest recovery, low velocity of money. All facts. The rationale for QE (at least as stated) was to boost the economy, so the worst recovery in 70 years says that failed. But markets did well.

Is this to imply subterfuge and conspiracy? On the part of The Fed, Bernanke and now Yellen? Or did orders come from the White House.:rolleyes:

As far as "worst economic recovery since World War II", I look at it like the blurb in every prospectus that "past performance is not indicative of future results". And by that I mean that it is not relevant whatever happened before to compare results of a recovery to because the complexities and correlations have changed from what was then to what is now. So it many respects, it is sui generis and should not be scripted, or expected to be, to what has come before.

[1centaur]

I presume that the rationale was not subterfuge (like, reducing government borrowing costs) but classic economics. Cut rates and wait for animal spirits to be funded by lending. Then when that did not work, unconventional QE to reduce all sorts of rates. Then when that did not work, uh, keep doing it, because it just has to work, right? At some point, it becomes unclear that it works because so much time passes.

History may say the flaw was relying on the banking system to propagate risk (through lending) while simultaneously clamping down on risk taking by banks. Maybe we should have dumped billions of $20 bills on people's heads and observed whether they spent them. But that is conjecture.

As for not comparing the rate of recovery with anything that came before because the world changes, well, lack of objective standards certainly allows for political conjecture. But also without standards, it's hard to make the case that something worked, because we don't know what "worked" means. If we're going to credit QE with the current strength in the US economy, and we assume the US is more inclined to take risk than Europeans, then I guess I'll set my calendar for a European economic recovery in 2025, although we may have another recession before then, so...

[fuzzalow]

What "worked" means is that it changed the slope of the trend line of the indicators reflective of what was deemed important to economic activity as positive from what came before. The level of granularity about gross amounts and relative strengths and levels is a luxury given to politicians and historians.

This is not, and never has, been for me a discussion tinged by politics. I'm a finance guy and I'll believe the Moon is made outta cheese if it'll give me an edge on the markets or on my next trade.

I look at money much as how I think Carnegie first viewed capital in revamping the steel mills - roll it over, turn it over, it is there just to serve a purpose (referring to his view of cash and not his view on pig iron).

Thanks for an interesting talk. I'm OK with that we agree to disagree.

[happycampyer]

History may say the flaw was relying on the banking system to propagate risk (through lending) while simultaneously clamping down on risk taking by banks.I think this is a bigger problem than people will ever understand. Not that banks should return to the loose credit standards leading up to the financial crisis, but the combined effect of all the post-crisis financial regulation has put a heavy damper on credit extension. The new credit bubbles will form away from the banks—autos, student loans, non-bank lenders, etc. Imo, lowereing the corporate tax rate to 10 - 15% would (have) reverse(ed) a lot of the perverse effects it has on the economy (offshoring of jobs, intellectual property; tax inversions, etc.) and would (have) provide(ed) more stimulus than all of QE combined. The 35-hour work week and other features in Obamacare haven't helped on the job-creation front, either.

I would argue that the economy didn't really fully de-lever which, if it had, there would have been more financial pain initially, but higher growth from a lower bottom. Of course, there's no way to ever know.

[1centaur]

If a trillion of QE only has to create $1 of GDP improvement that would not otherwise have occurred, thereby changing the trend line, then we don't have to agree to disagree - QE inherently works to some extent. Although by that standard, just about anything works. That so much stimulus has worked so little is the issue at hand. That so little payback is the good and potential significant malinvestment is the bad is a problem that economists will be debating for decades. The underlying assumption of QE - give people access to cheap money and they will take risks - has been proven clearly true in markets and far, far less so in the real economy. The propensity to take risk in the immediate wake of a financial crisis has proven far greater among market professionals than among widget makers. No economic stimulus plan can be expected to succeed without addressing this issue.

I also appreciate the conversation. The Paceline is a one of a kind bike forum.

[Mr. Pink]

As always, look at Japan. They have been a warning flag for twenty plus years. The rest of the world is now finally following that country into the deflationary hole that a combination of bad credit and bad investments, demography, and, I think, most importantly, technology has created. The rise of the third world aspiring middle class would have never happened without the invention of containerized shipping and the internet. And the rise of the robots has, I'll bet, the leaders of China having bad dreams a lot, because even they have to lay off all of the peasants they grabbed from the farms to make IPhones and Walmart junk to stay competitive with the future manufacturing markets, like Vietnam and Bangladesh, then Africa. Hell, America, in that case. As manufacturers get smarter, they're bringing factories back from China, but, now it's buildings filled with robots and a few staffers. So, in other words, labor, or, the "middle class" is screwed for maybe decades. We're already seeing this happen here in America and Western Europe, and, for the life of me, I don't see the reversal in my lifetime.
The Boomers, the highest spending and consuming generation in world history, (and they were the force behind international growth for at least thirty years) are in the end game with no money. The spigot has been turned off on their side. Oh, sure, you can tell me about your friends with $10,000 bicycles and nice houses, but, betcha they have no money. This is happening in Europe, also, at the same time debt levels, both personal and public, are at record highs. That's not good. And the kids entering adulthood with enormous private (student loans) or public debt they have to pay off have to invent entirely new super profitable industries to pay off that debt. I don't see that happening, unless you think Facebook and Uber are going to fix things. I see them as the problem.

Sure glad I'm 62. See you in Tuscany in the fall with a .85 Euro, I hope. Maybe Chamonix the next winter. Grab the sale while you can.

[Likes2ridefar]

I enjoy reading the financial guys take on the economy. It totally makes sense but seems to ignore what seems obvious to me for an economy that doesn't require very tall walls in the near future (say 2050) that protects the 20% or so who are amassing insane wealth relative to the rest of the population in the current economy. There are a many people that are overlooked in all the economic statistics that are struggling immensely and are way worse off than they were just a few years ago. Wages, especially for the poorest, are stagnant at best and the unemployment rate and wages has not improved at all for populations like black males.

A quick aside, after taking 2 economics related courses for my Engineering Mgmt degree I think it's pretty much a joke of a social science that I rank up there with psychology. And I still have two more courses in the field. Ugh! hopefully it'll get better but I'm skeptical and also a math geek that likes proven laws so take that for what it's worth.

Unmitigated exploitation over the last 6 or 7 generations has basically wrecked the world, for humans at least, perhaps permanently. There are few things I can see that will fix it in time. Technology has a chance, probably the only chance, because scaling back consumption and making it sustainable is clearly not going to happen.

I'm currently struggling with a moral dilemma. I am almost finished with an engineering degree that allows me quite a few choices for jobs. I can continue for a masters in financial engineering or an MBA or focus on sustainability. I can choose to try and do something that will make a difference towards a sustainable future, or I can say F it and continue raping it. Raping it will be slightly easier and much more rewarding financially. Which would you pick?

[makoti]

From the sounds of it, only one of those choices is going to be "rewarding".

[Louis]

I can continue for a masters in financial engineering or an MBA or focus on sustainability.

Just out of curiosity, what's financial engineering?

After ten years or so of "real" engineering I got an MBA at Wash U. It was enough to convince me that there wasn't anything for me in the business world (other than more money) so I'm still an engineer.

[1centaur]

Everything is temporary, so nothing is sustainable. The planet will do what it will do regardless of your job choice. But if you are looking to maximize your particular impact on lengthening current aspects of our globe then make money and influence the political process with it by promoting leaders that people will follow.

[Likes2ridefar]

Just out of curiosity, what's financial engineering?

After ten years or so of "real" engineering I got an MBA at Wash U. It was enough to convince me that there wasn't anything for me in the business world (other than more money) so I'm still an engineer.

http://en.wikipedia.org/wiki/Financial_engineering

[1centaur]

Just out of curiosity, what's financial engineering?


Likes2RideFar beat me to it.

[Louis]

Everything is temporary, so nothing is sustainable. The planet will do what it will do regardless of your job choice. But if you are looking to maximize your particular impact on lengthening current aspects of our globe then make money and influence the political process with it by promoting leaders that people will follow.

Fascinating.

Is this how the 1% delude themselves into thinking that what they're doing is OK?

[1centaur]

That's beneath you, and the 1% are 3 million people, so they are quite diverse.

[Likes2ridefar]

generally quant jobs won't get you in the 1% although it's certainly possible.

I find it fascinating because I love programming and creating algorithms that will solve complex problems.

[Louis]

I find it fascinating because I love programming and creating algorithms that will solve complex problems.

So I guess it comes down to deciding what kinds of problems you want to solve and what type of people you want to work with and for while you're doing that.

As we all know, there are complex problems needing solving in nearly every field of endeavor.

[Ken Robb]

I enjoy reading the financial guys take on the economy. It totally makes sense but seems to ignore what seems obvious to me for an economy that doesn't require very tall walls in the near future (say 2050) that protects the 20% or so who are amassing insane wealth relative to the rest of the population in the current economy. There are a many people that are overlooked in all the economic statistics that are struggling immensely and are way worse off than they were just a few years ago. Wages, especially for the poorest, are stagnant at best and the unemployment rate and wages has not improved at all for populations like black males.

A quick aside, after taking 2 economics related courses for my Engineering Mgmt degree I think it's pretty much a joke of a social science that I rank up there with psychology. And I still have two more courses in the field. Ugh! hopefully it'll get better but I'm skeptical and also a math geek that likes proven laws so take that for what it's worth.

Unmitigated exploitation over the last 6 or 7 generations has basically wrecked the world, for humans at least, perhaps permanently. There are few things I can see that will fix it in time. Technology has a chance, probably the only chance, because scaling back consumption and making it sustainable is clearly not going to happen.

I'm currently struggling with a moral dilemma. I am almost finished with an engineering degree that allows me quite a few choices for jobs. I can continue for a masters in financial engineering or an MBA or focus on sustainability. I can choose to try and do something that will make a difference towards a sustainable future, or I can say F it and continue raping it. Raping it will be slightly easier and much more rewarding financially. Which would you pick?

I think you should take a job you are trained for in engineering for 2-3 years and see how things look to you then. You will have a better, but not perfect, perspective of how the world really works. Your original leanings/suspicions may be reinforced or you may gain a totally different outlook. Either way you will better able to plan your future.

[1centaur]

While financial engineering is computationally interesting, my observation is that much of it values math over common sense and therefore results in outcomes that lack a basis in reality but are so complex they are difficult to disentangle. When I have looked at the basic building blocks of some work I have seen assumptions that seemed obviously flawed but were necessary to proceed through the math.

Something as basic as Black-Scholes is flawed in its assumption that prior volatility is predictive of future volatility, yet it has become a self-fulfilling methodology because options traders choose to use its assumptions. Credit default swaps have similar flaws related to default probabilities and recovery in that the market is assumed to have concluded some parts of a multi-variate equation whereas in fact those assumptions are often mere artifacts of the trading process.

[SlackMan]

...
I'm currently struggling with a moral dilemma. I am almost finished with an engineering degree that allows me quite a few choices for jobs. I can continue for a masters in financial engineering or an MBA or focus on sustainability. I can choose to try and do something that will make a difference towards a sustainable future, or I can say F it and continue raping it. Raping it will be slightly easier and much more rewarding financially. Which would you pick?

Like almost any field, there are plenty of bad eggs in Finance. But, before you view working in Finance as presenting a moral dilemma, conduct a simple examination: Compare the overall level of welfare (health, expected longevity or mortality, safety, clean water and safe food, happiness, etc.) of humans living in societies with well developed financial systems to those living in societies without well developed financial systems. It is like night and day, and there are no exceptions: The general welfare of humans is far better off in societies with well developed financial systems.

[Louis]

That's beneath you, and the 1% are 3 million people, so they are quite diverse.

You're right. I should have found a more diplomatic way to say it, instead of just typing the first thing that came to mind.

(just to be clear, "the planet will do what it will do," implying that humans have little to no influence on what's happening, is a deeply flawed way to think of things)

[Louis]

conduct a simple examination: Compare the overall level of welfare (health, expected longevity or mortality, safety, clean water and safe food, happiness, etc.) of humans living in societies with well developed financial systems to those living in societies without well developed financial systems. It is like night and day, and there are no exceptions: The general welfare of humans is far better off in societies with well developed financial systems.

Agreed, well developed (and well regulated !!!) financial systems are important parts of modern societies, but this is building a straw-man in order to knock him down.

The question he's facing is not just a choice between Vietnam and Wall Street.

[Louis]

PS - I gotta run. We can continue this conversation later.

Louis

[1centaur]

Having observed human behavior, human nature, and political behavior over the years, I believe there is reason to believe that organizing broad society around things other than self interest is doomed to fail. I will not object if you have more faith in the future than the past or present, but I can't share that faith. Analytically, if it is to occur, I think it will be far in the future when our basic needs are so met that we feel able to "afford" lack of maximization for the benefit of strangers. That far in the future, "sustainability" will be something much different from what it is now.

"The planet will do what it will do" is an assessment of human nature and our globe's stage of development. It is well supported by history and therefore not deeply flawed by its nature. It may turn out to be wrong because we are better than I think we are.

[MadRocketSci]

The financial/economic "sciences" seem to be lacking in a set of conservation principles to bound them and prevent them from making "something from nothing/out of thin air" predictions. Like conservation of mass, momentum, energy, the second law of thermodynamics, etc which keep the range of probable outcomes within reality. Or close enough since Einstein had to gronk that all up.

Yeah, assuming everything is gaussian is useful for a first step to gain insight, but might not be great for actual predictions.

[SlackMan]

Agreed, well developed (and well regulated !!!) financial systems are important parts of modern societies, but this is building a straw-man in order to knock him down.

The question he's facing is not just a choice between Vietnam and Wall Street.

Perhaps I misunderstand your point, but my argument is most definitely not a straw man. The main implication of my argument is that there are many jobs in Finance that are greatly beneficial to society, but it also allows that many jobs that are not. To say that it is a moral dilemma to work in Finance is to presuppose that all jobs in Finance are harmful or to presuppose that one would only choose a harmful job in Finance. Either of those alternative views are straw-man like because ANY field has jobs that are beneficial to society and others that are harmful: Some medical doctors exploit patients and/or the payment systems, some cancer researchers falsify research results, some priests molest children, some public servants steal from the public, etc..

[Louis]

The main implication of my argument is that there are many jobs in Finance that are greatly beneficial to society, but it also allows that many jobs that are not.

In that case we agree. As long as L2RF doesn't end up at BlackRock...

[texbike]

What a great discussion!

generally quant jobs won't get you in the 1% although it's certainly possible.

I find it fascinating because I love programming and creating algorithms that will solve complex problems.

Are you familiar with Quantlab out of Houston? That is a prime example of Quant jobs getting several people into the 1% category. I occasionally ride with one of the family members and the degree of wealth that has been created by that single firm is staggering.


"The planet will do what it will do" is an assessment of human nature and our globe's stage of development. It is well supported by history and therefore not deeply flawed by its nature. It may turn out to be wrong because we are better than I think we are.

What's that popular saying in the financial field? Past performance is not an indicator of future results? I think that this saying is very applicable here.


As for not comparing the rate of recovery with anything that came before because the world changes, well, lack of objective standards certainly allows for political conjecture. But also without standards, it's hard to make the case that something worked, because we don't know what "worked" means. If we're going to credit QE with the current strength in the US economy, and we assume the US is more inclined to take risk than Europeans, then I guess I'll set my calendar for a European economic recovery in 2025, although we may have another recession before then, so...

Declaring success should require that success be defined in order to adequately assess if the policies enacted were successful. I personally feel that our recovery may not have been a screaming success, but it was a success. This is based on my own personal success criteria of our country not encountering the levels of unemployment that were seen during the Great Depression or that several European countries have seen recently. So, do you believe our recovery was more a function of monetary policy or do you feel that it was more on the fiscal side? I personally feel that QE has had little impact on the velocity of capital. I also believe that if it wasn't for the fiscal policy decisions made since 2008, we would be in much worse shape than we're in. When the consumer isn't spending, something has to stimulate the economy.



As for austerity vs. stimulus in monetary policy, I would say our stimulus was spectacularly unsuccessful outside of asset prices and there is no reason to think the European version will not be the same. Velocity of money stayed low here, in optimistic America, for all sorts of reasons until eventually we got tired of our uncertainties and started taking more business risks (one of which was fracking, which would have happened without as much stimulus, and a lucky coincidence in timing it was, as the Net boom was in the 1980s). In Europe, the propensity and ability to be an entrepreneur or boost one's firm's CAPX budget due to belief/hope in ability to sell stuff to fellow Europeans has to be even lower than here for all sorts of structural and cultural reasons. There may be a case for spreading the pain of the global financial crisis over a longer period, but it also may be that neither stimulus nor austerity can fix what ails that region.

This seems to be a case for a focus on fiscal versus monetary policy in Europe at this point. If the average consumer and small entrepreneur has neither the means or the balls to spend, then someone has to spend to keep the economy going, right? Austerity isn't the right move. This to me is when Keynes theories make the most sense. Especially the Keynesian Multiplier effect.

Again, wonderful discussion. This is hugely relevant beyond the immediate upside of low-cost 105 groupsets from European suppliers. :)

Texbike

[SlackMan]

This seems to be a case for a focus on fiscal versus monetary policy in Europe at this point. If the average consumer and small entrepreneur has neither the means or the balls to spend, then someone has to spend to keep the economy going, right? Austerity isn't the right move. This to me is when Keynes theories make the most sense. Especially the Keynesian Multiplier effect.


Thanks for such a positive post. That said, I have to weigh in that the appeal of a Keynesian-type stimulus is not as obvious as it might seem. Rational people will understand that a big stimulus now must be paid for eventually, so they will adjust their spending and investment decisions now to reflect that expectation. Those adjustments now can then sharply negate any intended effects of the stimulus. If one carefully examines the projected benefits of the stimuli before they were made, one will see that the actual effects were way, way smaller than the proponents had claimed. Also important to note is that one cannot observe or accurately measure the counterfactual (the economic growth without the stimulus), so knowing what a stimulus actually accomplished is close to impossible.

[1centaur]

The essence of the Keynesian argument is not appalling to me in concept, but the label is used to justify all sorts of stuff that is.

Keynes thought that some government spending through the trough of recession to keep things going made sense. The government can be a means to smooth out the dips so society does not get caught up in its own fear and drive activity to a halt that becomes its own psychological impediment to recovery. However, the level and implications of deficits implied by such government spending were thought by Keynes to be correcting - borrow a little more in a recession and pay it down when the good times come back. Common sense and in line with how families think about their budgets.

In modern econo-speak, this construct has been altered to encompass more than brief periods of borrowing. That is because a history of overpromising benefits to various population groups by politicians focused more on their self interest (hmm, human nature) than the good of the country has left the US, and Europe, in a debt hole that our productive capacity, ever more constrained by regulation and demographics, cannot dig out of. Faced with never ending deficits, "Keynesians" now say things like "a government budget is not like a family budget because the government can create money." Well, they can print money, but they can't create value. If printing money was the trick we should hand out free money to people, as much as they want. So the Keynes name has become an excuse to justify taxing, borrowing and spending without particular bound. Austerity types correctly perceive that an ever greater debt load that can only be ameliorated by inflation or default is very damaging to a company's future. In this direction lies Greece, which will default, and will be denied credit at decent rates because of it, and its people will suffer, are suffering, for all the bad decisions that came before. A government that spends beyond its long-term productive capacity will damn future generations to much misery. Another sustainability debate to be had from another direction.

So what do I think about the government's response to the global financial crisis? I think some fiscal stimulus was called for but was horrified by how it was done. The president said about Pelosi's plan "it's just jobs, right?" but was wrong about that. We should have made greater effort to maximize societal benefits, not direct money to favored groups because all jobs are equal. Bridges and roads, solar farms, these things have long-term benefits that save society money in the long run. Retraining low skilled labor to do such things rather than build more condos in Phoenix or mine coal would have been another benefit. Building better power infrastructure, improving our cyber defenses; if we are going to borrow more for the future at least provide benefits for that future. We did not do that.

On the monetary side I have no problem with the Fed lowering rates, but when we saw how slow the response was I would have liked government to realize that banks were not the perfect transmission mechanism because our population lacked belief/certainty. Part of that hesitancy was related to government words and actions. Either man up and get the regulators out of bankers faces every day or find other ways to get money to people who will spend it, or cut taxes in a targeted way to spur risk taking (Detroit - the 1% corporate tax zone for the next 15 years!). Talk up the need to get America back to work and government's role in facilitating that, then live it every day. We got something else, including an assumption that it would just happen that was undermined month after month by the facts.

While objectively the rate of jobs recovery was worse than it has ever been, despite a Fed chair whose expertise was not repeating the mistakes of the Depression, a sharper observation of history will show a trend to worse and worse recoveries from recent recessions. Something is going on in our structure that is causing this. We can speculate on demographics, offshoring hurting those without particular intellectual skills, regulation, and the scope of the safety net but I think we just don't know. What we do know is that growth gives more money to more people than government can, so growth has to be our priority. Growth means celebrating those who take risks to get rich and their success when they do. Growth means breaking some eggs. It's a tightrope, and as our culture has divided and our education system has lost the thread of capitalism I personally think we're on the road to being Greece, but not in my lifetime.

[verticaldoug]

This will not end well. The recent currency volatility is as great as 2008, 1997-1998 periods. However, these were a result of a crisis. Maybe our current crisis is just slow motion so we just haven't noticed it yet, but a crisis doesn't end in slow motion. The markets are just coiling the spring.

Neither policy makers nor markets have experience with negative rates on a large scale. With rates already negative, the primary transmission mechanism for QE is foreign exchange. These flows may be more powerful than market currently thinks. A .85eur to the dollar may sound great, but it will not be great.

If the ECB/FED lose control of the situation (like briefly happened during the taper tantrum), things will get interesting in a hurry.

The next step will be an unschedued meeting of the G20. Currency is creating havoc in emerging markets. At some point, it gives.

[1centaur]

A fantastic way to bring the thread back to the OP. While a super cheap Euro will do all sorts of things to all sorts of people, for Americans with spending money it will be a rare opportunity to consume at a discount to recently perceived fair value.

[fuzzalow]

^^^ I am responding to 1centaur's post on various aspects of Keynes, etc.

It has been a long while since I studied Keynes so much of this, in its simplicity, is how I differ from what you wrote.

I think your post mixes improperly the objective of Keynes theories which concerned macroeconomic activity, namely aggregate supply and aggregate demand, with a slippery slope argument into microeconomics in debating the effectiveness of the results of its application. Your first two paragraphs seem reasonably accurate. All the rest that followed reflects opinion and criticism with various attribution to microeconomics that are posited loosely as the results of the macroeconomic initiatives the preceded their occurrence. And I do not view this as an accurate causal relationship.

For example in your third paragraph the argument makes a loose correlation of burdensome benefits made to union labor etc. by politicians which is subsequently rationalized as, or by, some form of Keynesian-ism. All interpreted by me as a jab at liberal or left-leaning political policies. The whole creation of value argument to me is also just allowing yourself to render judgment as there are innumerable ways to assign value based on how one wishes resources to be allocated and used.

IMO this is largely an opinion piece and not a wonkish, policy and economics discussion. Which is of course your priveledge as it is your written piece. For example your mention of the President and Ms. Pelosi is your vehicle to inject political overtones to what is largely an independent Federal Reserve Bank purview as far as monetary policy of the USA. And once again, into a criticism of microeconomic results suggesting blame to some incompetently misdirected leadership from the Executive branch of government. This overstates the President's role, authority and actual ability to influence and control economic activity.

I feel uncomfortable about seemingly to defend what appears to be a bias against liberal politics as I interpret throughout your posts. As I am not what might be pigeonholed as a liberal. But I do see inaccuracies in what you have presented in an earnest, intelligent discussion. By virtue of the breadth of subject matter this discussion covers lots of ground so I accuse no fault as to mixing politics with economics. But politics is one thing and economics and finance is something else and I don't agree with one being used as false cover, justification or causality for the actions and motivations of the other.

[oldpotatoe]

The essence of the Keynesian argument is not appalling to me in concept, but the label is used to justify all sorts of stuff that is.

Keynes σκέφτηκε ότι κάποια κρατικών δαπανών μέσα από την γούρνα ύφεσης να διατηρήσω τα πράγματα θα είχε νόημα. Η κυβέρνηση μπορεί να είναι ένα μέσο για να εξομαλύνει το ντιπ, έτσι η κοινωνία να εμπλακούμε σε τη δική του δραστηριότητα φόβο και το αυτοκίνητο σταμάτησε που γίνεται το δικό του ψυχολογικό εμπόδιο στην ανάκαμψη.

.

It's greek to me!!

[1centaur]

I use specifics (for example, Pelosi's bill so we know what part of fiscal policy I find fault with) to illustrate a point, and I reject the notion that politics changes my point. I talked about monetary and fiscal policy so I had to mix both because that was the point to which I responded.

Here is a simplified summary so we don't get bogged down in political bias: it is my view that when government promises/spends more than the productive capacity of its economy for more than a brief period, bad consequences ensue. To avoid such consequences government needs to promise less or it needs to encourage greater productive capacity - that's arithmetic, not politics. It is also my (well supported) view that government has done a poor job of this balance, if "sustainability" is in fact the goal. Long-term structural deficits have risen over decades across developed economies with voting populations. I expect bad consequences.

If you disagree with any of this, please expound.

[MadRocketSci]

My background in economics is sleeping through Econ 101 in university. But to this engineer, economic "science" is significantly based on opinion and by extension politics. Economists are trying to determine and predict the outcome of millions or billions of individual decisions, some of which are and some of which are not predictable and rational. The modeling and prediction then come from beliefs and assumptions on how the decision makers will behave, and how the capital will flow as a result. But again, much of this is based on opinion and why economists are surprised often and unfavorably compared to meteorologists (who are actually widening their lead thanks to improved computing power and better correlated models based in physics).

As i mentioned earlier, economic theory seems to be missing bounding principles which would help steer results towards reality. The models which predicted perpetually increasing housing prices lacked a "conservation of suckers" bound. There seemed to be an assumption that the supply of suckers was unlimited and there was no consideration for when that last sucker was consumed. An extension of circuit (Kirchoff's principles) or flow network theory which constrain flow through the path of least resistance may have been helpful in predicting how the easy money would flow through the least economically productive paths and directly into assets. The whole QE thing seems to be based on making the money readily available but assuming/hoping that it would flow to the right places, which the controllers have no control over, and being surprised by the unintended consequences in the perpetual blowing of asset bubbles.

In control theory, this all amounts to a very complex dynamic system being controlled with a couple simple knobs (aka gains), no real understanding of the system (aka the "plant"), lags in the system, and dynamic stability.

Which brings it back to opinion and fancy math and hope. The math at least can be helpful but unless it specifically and accurately reflects the reality, it's use is mostly limited to interesting theory and some understanding in a qualitative sense. Unfortunately, the real economy is the only thing that can serve as a testbed for all these theories and opinions and the theories and models will be perpetually predicting the last crisis.

That said, of all the "schools" of econ, the Austrian one seems to make the most sense from an engineering viewpoint, in making the least fanciful assumptions that attempt to not violate some bounds of common sense.

[1centaur]

There's a lot of arithmetic and logic in economics for sure, but there is also behavior, rational and otherwise, and politics, which by its nature is often selfish but can be selfless. Actions taken by individuals and especially by consensus reflect all of the above, and the grand experiment continues. When viewed by outsiders uninvolved in doctrine but caring about results and consequences, worldview will color one's conclusions and feed back into the political process. Quite a mess, really.

The long piece I did above that fuzzalow commented on mixed arithmetic and logic and worldview with intuition and analysis, because that's the mix I bring to the table; I think understanding requires the whole shebang. I am interested in insight and prediction because that's what I do for a living. I am not interested in conclusions that seem incontrovertible to all because in this area there is no such thing. But I am attempting relatively well balanced rationality so it's easier for those of other worldviews to not get clouded by the atmospherics. The marriage of logic, arithmetic and prediction on a societal model is perhaps doomed to failure as a discussion piece. I do not attempt to persuade; I state my opinion with my analysis and everybody gets from that what they get.

[fuzzalow]

I use specifics (for example, Pelosi's bill so we know what part of fiscal policy I find fault with) to illustrate a point, and I reject the notion that politics changes my point. I talked about monetary and fiscal policy so I had to mix both because that was the point to which I responded.

I was conducting this discussion within the context monetary of policy as the topic of QE undertaken by the ECB is the equivalent action taken by the Fed. I did not consider expanding the talk to fiscal policy but your use of "Pelosi's bill" was all the clue needed as to where you were going with that.

I had no problem with that portion of the stimulus package and I admit I did not research it in depth because I didn't take issue with it. It was the package that bailed out the auto industry (Chrysler?) and did the "Cash for Clunkers Trade-In" program for consumers, right? IMO the Government had to move fast before public consumer perceptions hardened to immobile and it saved jobs for auto workers. For all the faults you may see in that, I had no problem with it because IMO it was better to do something than do nothing before it was too late - even with all its faults. I agree with the saying bandied about during the ACA legislation that "Perfect should not be the enemy of good".

Your criticism of "Pelosi's Bill", among others, was "Bridges and roads, solar farms, these things have long-term benefits that save society money in the long run." I'd say yes but to get that going would have been too slow & too late. All the auto bailout money was paid back. And frankly, I saw the call to "free markets" in letting the auto companies bankrupt was just a way at renegotiating & restructuring their pension debt liabilities off the books of the newly reorganized auto company. For all my issues and general criticism of unions as a special interest group, I still don't think doing that was right or fair to the citizens that comprise union membership and paid into their pensions.

Here is a simplified summary so we don't get bogged down in political bias: it is my view that when government promises/spends more than the productive capacity of its economy for more than a brief period, bad consequences ensue. To avoid such consequences government needs to promise less or it needs to encourage greater productive capacity - that's arithmetic, not politics. It is also my (well supported) view that government has done a poor job of this balance, if "sustainability" is in fact the goal. Long-term structural deficits have risen over decades across developed economies with voting populations. I expect bad consequences.

If you disagree with any of this, please expound.

Now you have circled back around to a macroeconomics perspective of which I have no disagreement with. Moreover, I think that there is no harm in a longterm running deficit to an economy the size of the US economy. The deficit merely functions as a buffer between the timing and synchronization of revenues and expenditures that can never be theoretically zero-deficit and lockstep in an economy of this size.

However, the devil is always in the details. So if there is reform to what government promises, which I take as a euphemism for tax entitlements like SS & Medicare, there is also the reformation of tax expenditure such as corporate tax writeoffs & credits. These elements are all part of the longterm structural deficits you are referring to.

Everybody and everything feeds at the trough of the US government. I have no problem reapportioning the burden but is is never as simple as simply cutting benefits. It is much more arcane that the average person that rails against big government does not have any clue as to the complexities of its operations and its nuances. The populist view will always villianize the obvious. If there is not much understanding as to the favorable treatment of capital gains, how the heck could anyone expect the average Joe to know or care about treatment of something like "Carried Interest"?

[Mikej]

So, a, does this mean I'll be able to get some Sidi wires for a deal?

[cdimattio]

If there is not much understanding as to the favorable treatment of capital gains, how the heck could anyone expect the average Joe to know or care about treatment of something like "Carried Interest"?

Certainly OT tangent from "Europe is on Sale"

Would the average Joe think that "Carried Interest" is a strategy to redefine compensation for tax benefits to the 1% or accept the premise that this is merely an offset to partially mitigate the unfair double taxation present in corporate dividends?

[Likes2ridefar]

Certainly OT tangent from "Europe is on Sale"

Would the average Joe think that "Carried Interest" is a strategy to redefine compensation for tax benefits to the 1% or accept the premise that this is merely an offset to partially mitigate the unfair double taxation present in corporate dividends?

how are the two related? admittedly i have limited knowledge on the subject but thought that carried interest primarily relates to hedge funds while the other is exclusively for corporations.

[MattTuck]

Certainly OT tangent from "Europe is on Sale"

Would the average Joe think that "Carried Interest" is a strategy to redefine compensation for tax benefits to the 1% or accept the premise that this is merely an offset to partially mitigate the unfair double taxation present in corporate dividends?

I leave this thread for a couple days, and now we're talking about carried interest. woah. Further down the rabbit hole we go!

[zap]

So, a, does this mean I'll be able to get some Sidi wires for a deal?

Yes, if purchased across the pond…..the smaller one.

[verticaldoug]

Certainly OT tangent from "Europe is on Sale"

Would the average Joe think that "Carried Interest" is a strategy to redefine compensation for tax benefits to the 1% or accept the premise that this is merely an offset to partially mitigate the unfair double taxation present in corporate dividends?

No.

Carried interest takes compensation (income) and turns into long term capital gains which generally have a more favourable tax rate. Even if the carried interest was a short term capital gain, there are additional strategies to turn short term (regular income tax rate) to long term capital gains.

Again these are just tip of the iceberg. Additional strategies exist for deferrals etc. The best may be banks who will lend vs your carried interest so you can lever up. Now you can create some real wealth.

Tom Petty for Matt
https://www.youtube.com/watch?v=h0JvF9vpqx8

[54ny77]

I just bought a jar of Nutella. No change in price.

It's all voodoo economics.

;)

[Likes2ridefar]

I just bought a jar of Nutella. No change in price.

It's all voodoo economics.

;)

Probably because it was made in canada. I wonder if the italian version sold in the shop in chelsea market is the place to score a deal. I've always wanted one of those 10lb tubs...the wife would be ecstatic.

[EPIC! Stratton]

I'm trying to take advantage of this and order a SONdelux hub, but frankly having issues finding a good source with a website I can navigate/order from myself. Would love suggestions if anyone has any.

[verticaldoug]

I'm trying to take advantage of this and order a SONdelux hub, but frankly having issues finding a good source with a website I can navigate/order from myself. Would love suggestions if anyone has any.

www.rosebikes.de

[54ny77]

I highly recommend Nutella on everything. Probably as a chain lube in a pinch would be ok too.

Probably because it was made in canada. I wonder if the italian version sold in the shop in chelsea market is the place to score a deal. I've always wanted one of those 10lb tubs...the wife would be ecstatic.

[fuzzalow]

Certainly OT tangent from "Europe is on Sale"

Disagree. There is a progression all the way through although I admit to following the topical lead of my esteemed debate colleague.

Would the average Joe think that "Carried Interest" is a strategy to redefine compensation for tax benefits to the 1% or accept the premise that this is merely an offset to partially mitigate the unfair double taxation present in corporate dividends?

HaHa! I appreciate your humor pertaining to neither the diction nor the conceptualization deployed by the average Joe. Touché.

[54ny77]

http://i191.photobucket.com/albums/z113/jpmz06/Bike/occupybikes_zps6bd65b7f.png (http://s191.photobucket.com/user/jpmz06/media/Bike/occupybikes_zps6bd65b7f.png.html)


HaHa! I appreciate your humor pertaining to neither the diction nor the conceptualization deployed by the average Joe. Touché.

[fuzzalow]

^Good one. A veritable "Where's Waldo" of halo-branded bike paraphernalia.

The good old days of honest rage about Wall Street. I often lament that all that good intent dissipated due to any coherence as to what to do next other than staying angry. As a citizen I'd almost want to help them but I cannot help them. It did seem such a waste. There's that old saying that the road to hell is paved with good intentions...