Everything in valuation gets back to interest rates.
A good proportion of the quant, certainly macro, musings in these endeavors goes back to growth, and how that happens. Which consideration is over and above distribution, that ultimately determines whether growth is sustainable. The short answer to the latter is: if it's hogged by the hogs it dies out soon enough.
When I first mentioned Gordon's book, I was forthright in saying that the asymptote of progress was a concept I'd seen coming for a long time and had mused about in these endeavors. Gordon, between the lines, makes the same argument, which is that the globe is finite in resources and laws of nature. We've certainly found the latter, and are close to the former in the areas that matter. Real growth in economies results from new technologies which boost both productivity and output. An economy grows more prosperous, on the whole, by spreading around that additional output from tech progress. That's where the real interest rate comes from.
The theory of interest, in econ terms, rests on a static view of an economy where holders of wealth choose between consumption and (real) investment on the basis of time preference, not productivity gains. Which term boils down to: how much extra moolah does the holder demand for deferring consumption for the time of the loan? This is a zero sum game, without tech progress; aggregate consumption in the current period (and subsequent term periods) is diminished by the aggregate interest paid. Pure fiduciary investment is the version we have today. And, it's not a one-sided process. The holders of wealth may well want 10 or 20 percent return for the use of their moolah, but they'll only get that vig if the borrowers can make at least that much from real world use of the funds. And that can only happen, in the aggregate, if better mouse traps keep being made. Is the problem getting clearer?
Monopoly is the most convenient, and crude, way to generate the vig. Not so good for the public weal, however. Moreover, in the real world of investing, the base return/interest rate is the risk-less government bond. For some decades that's been the Uncle Sugar Bond. Being not entirely stupid, at least in recent perspective, said bonds are sold on auction with a fixed payment, not fixed rate. When, in times as these, there's a tsunami of idle moolah, the auction pricing driven up by excess supply of moolah drives down the interest rate. So long as that tsunami continues to circulate, governments can try to raise those fiat interest rates that they have, precious few and very short term, but there's nothing they can do about long term. The long term rate, if you follow the bread crumbs back to ground zero, is set by tech progress. As Gordon and Your Humble Servant have said, the perimeter of our knowledge of the physical world is, at most, within eyesight. At worst, we're already there, but just haven't felt the bump.
You'll know that the plutocrats have taken total control when they push through law mandating US Treasuries sell at a fixed rate.
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