Grossly Stupid

It is a millenillia long fact that the rich think they're the smartest folks in the room just because they're rich. It's also a fact that most (total) wealth is inherited over genertions, with most of it acquired on auto-pilot after the first generation; The Donald would be quite richer if he simply collected the market rate of return on his original inheritance. Accidental emporers being an exception through no fault of their own, although small in number of the rich.

I've been sitting on this bit for about a month, waiting for the bile to stew sufficiently. The stew is ready.

Gross is plain stupid. He asserts (in so many words), as do the Right Wingnut Rich, that the Damn Gummint owes them their risk-free 10% on idle money. As if that's what Adam Smith propounded. Sure he did.

Any econ text from 101 to Ph.D. level tells you that rate of return on investment (i.e., interest) only comes from increased production in a more efficient fashion. All of those fancy time-series and copulas and other high priced quant exercises are quite worthless; if they worked, there couldn't have been a Great Recession. Events drive the data, not the other way round. Lots of London Whales the world over get paid megabucks to masturbate (metaphorically, at minimum) over their Excel spreadsheets, blindly typing in numbers. Bah. Paying interest without increased productivity is simply time-shifting of consumption, from the present to the future. Most texts call this the rate of time preference: how much consumption later is worth today. The notion is that deferring consumption requires paying the (delaying consumer) some premium for that delay. No one actually knows, of course. Killing current consumption in a time of excess savings only poisons the well further. Do the arithmetic.

So, anyway, Gross calls for Armageddon over low and negative interest rates. As demonstrated, going back at least to "The Giant Pool of Money" piece, excess moolah chasing risk-free return drives up instrument prices (and realized interest rate down, down, down). Just works that way. As American corporations (and the rest of the global ones likely have as much or more) sit on $1.45 trillion in idle cash, look out below. But one need not even seek to dig out the free cash amount; the bidding on Government instruments is sufficient to reveal the excess cash. You can only buy what you have the cash to pay for.

Rather than spurring economic growth, low rates are promoting asset bubbles as investors reach for higher yields while punishing individual savers and industries that rely on interest rates, such as bank and insurance companies, according to Gross.

The hypocrisy of that statement lies in this: the Grosses of the .1% continually weep for ever lower capital gains taxes. Now, asset bubbles pay off faster than interest, and itsy bitsy cap gains tax drive more moolah into instrument prices. This mess all started not with the Damn Gummint, but the concentration of idle moolah in the hands of the few.

The fault, dear Peter, is not in our poor, but in ourselves, that we are mendacious.