Interest rates will never go up...

[A.steve]

 

 

interesting hypothesis i must admit i did skim read it, as its hmm well very boring.  what did stand out was the menial tasks you mentioned. what happens to these magic generating assets when these menial tasks the game players do don`t produce enough tokens to generate interest in owning  income generating assets anymore or just can`t  ?  Do the menials need a cheat sheet to get more tokens or do they choose the "easy player option" and so the game difficulty level is made easy by giving out free tokens by the game developers ?

Yes, the details aren't an exciting read, I agree.  It was the best narrative I could manage.

You have a misundersanding.  The existence of the 'magic generating assets' (Alpha, Beta and Gamma) are known exclusively to players A, B and C (and their bankers, of course) but not to anyone else - there is no need for them to even be tangible.  Players A, B and C depend only upon each other to establish their revenue streams.   Other players, outside this clique, are all but irrelevant - except in the sense that outsider players must compete against A, B and C in any auction scenario for any scarce resource... while the scale at which they can generate revenue, and their creditworthiness, might well be at an entirely different order of magnitude to that of A, B and C.

 

do you think this game has the same restart button over and over ? maybe game A needs more attention. 

In my simplifified theoretical model, there is no concept of 'resetting'.  As long as A, B and C are co-operating... they each appear to get exponentially richer... none of them appear insolvent... and (besides good relations with their bankers - who they pay-off hansomly) they are not dependent on other players to establish vast apparent wealth.

If you mean to ask if I think there's a "restart button" for (what, in my simple model, approximates to) capitalism... I'm not sure.  There'd be a restart when the currency fails and a new fiat currency is adopted - that's theoretically possible.  Other forms of restart might also be viable - but I'm not sure what form they might plausibly take.

These guys, however, seem to be thinking that this idea makes sense in real life...

https://www.weforum.org/great-reset/

 

[markyh]

 

Those figures don't match the Q3 published balance sheet. 

Cash is 14billion total liabilities are 28billion. 

That's just after a 5billion capital raise so cash will turn into fixed assets I.e factories.

The cash is not driven from revenue its driven from capital raises and debt. Nothing wrong with that as a buisness grows and starts up but it is not "amazing". 

I will worry when they don’t sell every product they make. What legacy ICE makers do you know make profits from the fuel in their cars or have entered the UK energy market? 

[captainb]

 

I will worry when they don’t sell every product they make. What legacy ICE makers do you know make profits from the fuel in their cars or have entered the UK energy market? 

None but neither do tesla as per their most recent filing. "Entering the UK energy market" is all well and good, but was % and any profit? 

None of that is against its an exciting company it clearly is. But more a challenge as to why its equity value is what it is. 

There is at least a part that is built on sand, most exemplified by the rise after the stock split. Its thoroughly absurd without it being a pure speculative play. 

[markyh]

 

 

Their ability to raise at those prices without being profitable (without cali carbon credits) is amazing if you like. Typically at some point in theory investors want a return on that capital in the form of sustainable profits otherwise its a speculative asset. When either or happens would just be pointless speculation for anyone. 

Tesla would be foolish not to take other car companies cash selling them carbon credits  while they can, they are paying to build Tesla’s new factories!  There will be plenty of credits to sell for several years, because global legacy ice can’t afford to sell to many loss making BEV’s, they only plan to sell enough to reach their emission targets. If not they go bust from lost profitable ice sales. Tesla have none of these constraints and Will sell all they make while legacy ice have hard limits on BEV every year, or just can’t make enough BEV to lower their pollution targets and avoid fines. PSA has already halted BEV deliveries in the EU dues to this, order one now and you can’t get delivery until 2021. Funny that. Tesla will sell you a BEV all through November and December. 
 

[markyh]

 

None but neither do tesla as per their most recent filing. "Entering the UK energy market" is all well and good, but was % and any profit? 

None of that is against its an exciting company it clearly is. But more a challenge as to why its equity value is what it is. 

There is at least a part that is built on sand, most exemplified by the rise after the stock split. Its thoroughly absurd without it being a pure speculative play. 

We will know by 2023 latest, 2022 will have seen production from all 4 Gigafactories, and legacy ice will have had plenty of time to supply their Tesla killers to market. But they won’t, or can’t. I will wager carbon credit sales or not Tesla will now post record profitable quarters every quarter from now until The end of 2022 and then onwards until at least the end of the decade. Happy to wait and see what happens, capital appreciation have provided enough reward for now. And S&P 500 inclusion will provide lots of forced buyers from institutions as they are forced to rebalance to Include Tesla. 

[Locke]

16 hours ago, A.steve said:

You appear to be confusing value with prices asked/paid.  These concepts are distinct from value.

Prices are just one mechanism of trying to express a measurement of value.  Prices are mere opinions - but value is a different beast entirely.

Are you able to define value without using the word price or a synonym for it?

[Locke]

 

As long as A, B and C are co-operating... they each appear to get exponentially richer... none of them appear insolvent.

When the other players realise the currency is becoming inflated, prices adjust accordingly until the price of fiat reaches 0.

The con has only gone on for so long because people support Government and the government forces people to accept the fiat as if it were real money.

[Unmoderated]

 

me too and that are 750k to buy. bargain. 

 

the market will decide. the 22 or 25yo will still need to sell his services for many years either way.  

is 30 years of debt worth it for the end asset, i guess that`s a very personal question you can only answer.  

So the choice is be mortgage free at 52 or 55?

As has been demonstrated here there's been maybe 12 months (certainly for the south east) in the last 20 years when you had an advantage of holding off. But even then over three years you'd have been ahead. 

You're right, people need to do what is right by them and that was really my point. If a 22 year old should ways wait until 25 that's not aligned. 

[Unmoderated]

 

Are you able to define value without using the word price or a synonym for it?

I'll have a crack. Value is the excess utility or benefit you receive over and above the cost of something. 

Value is a synonym for price btw...... 🤑

[erat_forte]

 

 

Yes, the details aren't an exciting read, I agree.  It was the best narrative I could manage.

You have a misundersanding.  The existence of the 'magic generating assets' (Alpha, Beta and Gamma) are known exclusively to players A, B and C (and their bankers, of course) but not to anyone else - there is no need for them to even be tangible.  Players A, B and C depend only upon each other to establish their revenue streams.   Other players, outside this clique, are all but irrelevant - except in the sense that outsider players must compete against A, B and C in any auction scenario for any scarce resource... while the scale at which they can generate revenue, and their creditworthiness, might well be at an entirely different order of magnitude to that of A, B and C.

In my simplifified theoretical model, there is no concept of 'resetting'.  As long as A, B and C are co-operating... they each appear to get exponentially richer... none of them appear insolvent... and (besides good relations with their bankers - who they pay-off hansomly) they are not dependent on other players to establish vast apparent wealth.

If you mean to ask if I think there's a "restart button" for (what, in my simple model, approximates to) capitalism... I'm not sure.  There'd be a restart when the currency fails and a new fiat currency is adopted - that's theoretically possible.  Other forms of restart might also be viable - but I'm not sure what form they might plausibly take.

These guys, however, seem to be thinking that this idea makes sense in real life...

https://www.weforum.org/great-reset/

 

 

The role of the bank in your game is quite interesting. It is a bit anonymous. Surely one danger for A, B, and C, is that the bank "calls in" their debts? What happens then? Should the bank be considered to be player D in a four-player system?

And yes it also depends on everyone else accepting the credits for real goods and services - doing the menial tasks. If they refuse them, and will only work for a different type of credit, that would count as currency devaluation and a kind of hyperinflation?

[longgone]

 

 

Yes, the details aren't an exciting read, I agree.  It was the best narrative I could manage.

You have a misundersanding.  The existence of the 'magic generating assets' (Alpha, Beta and Gamma) are known exclusively to players A, B and C (and their bankers, of course) but not to anyone else - there is no need for them to even be tangible.  Players A, B and C depend only upon each other to establish their revenue streams.   Other players, outside this clique, are all but irrelevant - except in the sense that outsider players must compete against A, B and C in any auction scenario for any scarce resource... while the scale at which they can generate revenue, and their creditworthiness, might well be at an entirely different order of magnitude to that of A, B and C.

In my simplifified theoretical model, there is no concept of 'resetting'.  As long as A, B and C are co-operating... they each appear to get exponentially richer... none of them appear insolvent... and (besides good relations with their bankers - who they pay-off hansomly) they are not dependent on other players to establish vast apparent wealth.

If you mean to ask if I think there's a "restart button" for (what, in my simple model, approximates to) capitalism... I'm not sure.  There'd be a restart when the currency fails and a new fiat currency is adopted - that's theoretically possible.  Other forms of restart might also be viable - but I'm not sure what form they might plausibly take.

These guys, however, seem to be thinking that this idea makes sense in real life...

https://www.weforum.org/great-reset/

 

Who knows maybe the players will go find a new console and game to play on and give up on the games play.

There are many games to play all around the world.

[longgone]

 

So the choice is be mortgage free at 52 or 55?

As has been demonstrated here there's been maybe 12 months (certainly for the south east) in the last 20 years when you had an advantage of holding off. But even then over three years you'd have been ahead. 

You're right, people need to do what is right by them and that was really my point. If a 22 year old should ways wait until 25 that's not aligned. 

I don't personally consider buying a house a whole  life plan and any particular great achievement, sadly tptb have decided it is though.

Is doing a shop in tesco and having a running tap an achievement ? Still a necessity right.

[Biggus]

The IMF has waded in on interest rates and government spending. Their opinion seems to have been informed by Chairman Mao's economic policies.

' “My main message today is that continued policy support is essential to address the pandemic and to sustain and invigorate a recovery,” she said.

The report also urged the Bank of England to inject further funds into the economy to keep interest rates low and bolster business and household confidence.

Georgieva said the central bank would need to deploy further measures to prevent inflation falling, which may include negative interests rates.'

https://www.theguardian.com/business/2020/oct/29/boost-public-spending-to-tackle-covid-second-wave-imf-tells-uk

In contrast their response to the 1997 Asian financial contrast was

' If the medicine to cure the crisis had been tasty, the country would have taken it long ago. Rather the medicine will usually be unpleasant, in essence requiring the country to live within its means or undertake changes with short-term political costs. ...

...the IMF has maintained its primary focus on sound money, prudent fiscal policies, and open markets as preconditions for macroeconomic stability and growth.'

https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp032098

[Unmoderated]

 

I don't personally consider buying a house a whole  life plan and any particular great achievement, sadly tptb have decided it is though.

Is doing a shop in tesco and having a running tap an achievement ? Still a necessity right.

I view having a house mortgage free as a milestone in my life. Same way as passing a driving test or getting married etc. 

It isn't a necessity of course, you can throw yourself on the mercy of the state and see what various governments provide for you. Or you can help the landlord clear their mortgage. 

All things being equal renting for three years and then buying is worse than buying and being mortgage free for three extra years. 

[msi]

 

In contrast their response to the 1997 Asian financial contrast was

' If the medicine to cure the crisis had been tasty, the country would have taken it long ago. Rather the medicine will usually be unpleasant, in essence requiring the country to live within its means or undertake changes with short-term political costs. ...

 

Any other country in financial trouble and our response is 'well you should sell your resources to the private sector (us) and live within your means'

 

Magically for us that translates to 'create money like horny rabbits, get the props out, and let me save my profits and let the tax  payer take my losses'

 

We are undermining the very fabric of Western Democracy - now who gains from that?

[TheCountOfNowhere]

 

The IMF has waded in on interest rates and government spending. Their opinion seems to have been informed by Chairman Mao's economic policies.

' “My main message today is that continued policy support is essential to address the pandemic and to sustain and invigorate a recovery,” she said.

The report also urged the Bank of England to inject further funds into the economy to keep interest rates low and bolster business and household confidence.

Georgieva said the central bank would need to deploy further measures to prevent inflation falling, which may include negative interests rates.'

https://www.theguardian.com/business/2020/oct/29/boost-public-spending-to-tackle-covid-second-wave-imf-tells-uk

In contrast their response to the 1997 Asian financial contrast was

' If the medicine to cure the crisis had been tasty, the country would have taken it long ago. Rather the medicine will usually be unpleasant, in essence requiring the country to live within its means or undertake changes with short-term political costs. ...

...the IMF has maintained its primary focus on sound money, prudent fiscal policies, and open markets as preconditions for macroeconomic stability and growth.'

https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp032098

[longgone]

 

I view having a house mortgage free as a milestone in my life. Same way as passing a driving test or getting married etc. 

It isn't a necessity of course, you can throw yourself on the mercy of the state and see what various governments provide for you. Or you can help the landlord clear their mortgage. 

All things being equal renting for three years and then buying is worse than buying and being mortgage free for three extra years. 

I don't consider 30 years to pay off a house you never really wanted to buy but could not afford anything else a good use of time.

[TheCountOfNowhere]

 

I don't consider 30 years to pay off a house you never really wanted to buy but could not afford anything else a good use of time.

[A.steve]

  

 

When the other players realise the currency is becoming inflated, prices adjust accordingly until the price of fiat reaches 0.

The con has only gone on for so long because people support Government and the government forces people to accept the fiat as if it were real money.

I don't think I'd call any of the strategies in my simplified model a 'con' as such.  I think the model highlights a fundamental probelm with the concept of valuation.  While it is clumsy, it suggests that valuing assets by extrapolating from short-term revenue streams provides misleading impressions of value - which, if allowed to influence what is considered valid collateral, threaten to systematically undermine the currency as an approximation for measurement of value.

 

Are you able to define value without using the word price or a synonym for it?

I would definitely not want to use the word 'price' when defining value.  🙂

While boring sounding, here's my attempt:

Absolute value is an attribute we assume for a discernable "thing" that captures the concept of how much it is preferred over some null-hypothesis (e.g. of having the thing versus not having it).  Relative value, analogously, is the relative preference (in all relevant contexts) of having one "thing" compared to having another "thing".  Two things, with which we associate absolute values, might (or might not) have discernable relative values.  Hence: value imposes a partial, rather than total, order on things - and this ordering depends upon the context (scope) of interpretation.

 

[A.steve]

 

The role of the bank in your game is quite interesting. It is a bit anonymous. Surely one danger for A, B, and C, is that the bank "calls in" their debts? What happens then? Should the bank be considered to be player D in a four-player system?

And yes it also depends on everyone else accepting the credits for real goods and services - doing the menial tasks. If they refuse them, and will only work for a different type of credit, that would count as currency devaluation and a kind of hyperinflation?

Yes, the bank is intentionally anonymous in my game - because I didn't want it to be the focus.  Yes, too, you could model the bank as player D in a four-player system... but then we might feel we need to define 'rules' that explain which players are entitled to be banks - and how they are regulated by governments, markets and central banks.   I did not want to get bogged down in those details.

In my simplified model, there was no notion of an alternative to money... no foreign currencies, no commodities and no bartering.  Similarly, there are no 'essential services' so there could be no monopolies - so, in that sense, hyperinflation seems unlikely.

My own expectation is that players A, B and C are able to 'play' their private game pretty-much unimpeded... and the bank will facilitate this until such time as it looses faith in economic demand for Alpha, Beta or Gamma.  After a certain point, it may realise that it can't withdraw credit for these assets - because - if it did so... it would necessarily suffer huge defaults.  Thereafter.... there are two separate 'worlds' - one in which people are obsessed with the 'special' assets... and one in which they are unknown.

In these two 'worlds' - what matters most (systemically speaking) is not how much cash players A, B and C have - or the valuation of their assets.  What matters are the personal and economic interactions between players with the 'special' assets and players who perform menial tasks.  Once players A, B and C have access to many orders of magnitude more credit than other players, I don't think it likely that there will be any inflation in the price of menial tasks... because I think A, B and C will avoid exposing that other players could charge them more.  I think A, B and C will indulge in decadence (as they would not perceive the constraints that keep other players grounded) but that they'd insist on 'value for money' when spending their borrowed money on anything else.  I think they would become inclined to take ever bigger (financial) risks as their perception of reality diverges from that of other players.  I think this risk taking (while explicable and predictable) will be their undoing... I think, they'll forget co-operation and start feuding over details of their relative ranking. When they do that, they will expose that their asset valuations were an illusion.

[adarmo]

 

I don't consider 30 years to pay off a house you never really wanted to buy but could not afford anything else a good use of time.

 You've never seen a house you wanted to buy? For most people it's a compromise, even if there's a lot of money available since the perfect house exists in they mind only. Even if it did exist it might not be up for sale. 

Takes no time to pay though, all direct debit so a few minutes to set up and it's done! 

But sarcasm aside you'll be renting for longer so is that a better use of time?

[adarmo]

 

I know I'm the mug here. 30 years is 360 months which would be 7.2 million quid with your £20k monthly oil market returns alone!

Even with that sort of money why buy?

[scepticus]

 

 

Yes, the details aren't an exciting read, I agree.  It was the best narrative I could manage.

Ooh, a theory, not one of mine this time!

Your theory takes money as axiomatic, but does not state what properties said money needs to have. For example, does it matter whether the money is a safe asset, or not?

Also, it seems the velocity component of money is rather important in your model, which is couched in terms of successive periods in which participants spend and re-invest proceeds of the previous period.

If the values of alpha beta and gamma are going to consistently increase, as you suggest, what does your theory suggest about the supply of money, the supply of credit and the velocity of money over time?

And what impact does the risk free rate (by which I mean the maket rate of return of a fully diversified portfolio of assets, not a central bank rate) have on these properties of the model?

 

[erat_forte]

 

Ooh, a theory, not one of mine this time!

Your theory takes money as axiomatic, but does not state what properties said money needs to have. For example, does it matter whether the money is a safe asset, or not?

Also, it seems the velocity component of money is rather important in your model, which is couched in terms of successive periods in which participants spend and re-invest proceeds of the previous period.

If the values of alpha beta and gamma are going to consistently increase, as you suggest, what does your theory suggest about the supply of money, the supply of credit and the velocity of money over time?

And what impact does the risk free rate (by which I mean the maket rate of return of a fully diversified portfolio of assets, not a central bank rate) have on these properties of the model?

 

I think these questions are a more sophisticated version of mine? i.e. the game is fun but the issues are the surrounding constraints

[scepticus]

 

I think these questions are a more sophisticated version of mine? i.e. the game is fun but the issues are the surrounding constraints

indeed, similar to a pyramid scheme. That can go on forever if one posits an unlimited supply of credit supplied to new entrants. Of course no pyramid scheme runs forever.

As you know my own view of the world is that something very similar to A.Steve's hypothesis has indeed been going on, but that it comes to a halt when the rate of return hits zero due to the income to menial work falling to such a low share that the dynamics change.

I fail to see how the proposed model is much different to the Japanese property market (and related asset markets) prior to their big crash.

The real world has frictions that make frictionless toy models lack predictive power.