I love that Lyn's articles are getting top billing on HN. She's got very good analysis of the macroeconomic situation. In times like this, very important to educate yourself on these topics.
I spent several hours reading through her posts yesterday and came away with a much better understanding of fiscal and monetary policies. I did not understand how many levers countries have to modify their currencies.
I also enjoyed her breakdown of contrarian investing[0] and how it can be applied.
Honest question...If you aren't educated on the topic, how can you tell if there is good analysis or not? (Versus just reading and believing random cranks). Is there any way to test her hypotheses against reality?
Ex Wall St options trader here. Just read through her top posts and was left with an impression that she's very "green". Her content comes off as "content marketing" and not someone who's managed and traded any sizable money. I wouldn't trade off her ideas, b/c it's heavy on philosophy and not grounded in the realities of trading.
> If you aren't educated on the topic, how can you tell if there is good analysis or not?
Even people who are educated are systematically unable to determine if a macroeconomic analysis is actually good, which is why you have multiple groups of extremely smart economists who completely disagree on what represents a sound basis for macroeconomic theory.
Economics as a field is generally unable to test these theories against reality, probably because any predictive failure can be, and is, written off as “there were confounding variables, but the fundamentals of the theory are still good”.
That's because there's a million places you can be wrong.
Her position seems to be that medium term, the dollar is the major currency with the most room to fall. And so over the next few years, it probably will fall the most.
The argument is based on the US having the largest twin deficit -- a huge trade deficit and a huge fiscal deficit.
Medium term, different countries are going to see their trade & fiscal deficits change dramatically.
If your economy runs on oil exports, good luck maintaining a huge trade surplus. Ditto that for almost any commodity for the next couple years. If your economy runs on auto manufacturing, good luck with that -- similarly anything with complex supply chains. This is most emerging countries.
Japan, for example, might not need much stimulus. And the EU might need much more than the US. Who knows right now?
So, yes, her argument is sound if everything stays as it is, and the only thing that changes is how much federal governments print and spend.
But everything is likely to change. A lot. So unless you can predict how these deficits will change, it's not that helpful.
And Elon Musk was a software engineer before he started rocket ship and electric car companies. Intelligent people are fully capable of making jumps between disciplines and excelling in several of them. Sorry, but looking at someone's credentials rather than looking at their reasoning skills alone will lead you astray. You've got to reason. You've got to engage your critical thinking skills. No one is saying Lyn is the oracle of our times. She's got very good analysis, but there are many others and a lot of them are on Twitter. I recommend to engage with that crowd. I've seen Lyn debate with them on Twitter, and it's always an interesting conversation.
Running PayPal vs Space X vs Tesla requires a ton of different skills and competencies. Tesla is a huge engineering effort and assembly line engineering effort. They've pioneered a number of innovative technologies and approaches. Likewise, Space X has pioneered incredible technology and you can't simply be a passive CEO to achieve those things. It's not like running a laundromat. Musk is a central figure in both of those companies. If you watch his interviews, he has a deep understanding of every level of engineering in both of those companies.
And yet every time they/he gets in trouble is when he veers out of his lane into micromanaging things he has no business in. If his deep knowledge of engineering is critical to their success, that's actually a massive failure of leadership. It's not how you build sustainable things that outlast yourself.
No, it's not a massive failure. There are many different styles of leadership. There is not one single formula that works for all companies and all circumstances. To look at a historical example, Thomas Edison was a profound engineer and a very capable inventor as well as CEO. Obviously, there's a difference between Musk and say, Richard Branson. There's a difference between Bill Gates and Steve Jobs. They found success with different models of leadership.
You're bikeshedding now. Could Elon Musk hold his own in a conversation with any aerospace engineer? Absolutely. Could he hold his own in a conversation with a process engineer? Absolutely. The guy is super smart, reads voraciously, and has self taught himself many different disciplines. Its not a superpower by the way, you can too. We live in the information age. Study any subject well enough and you can hold your own, too.
I have no idea who the OP is but a lot of the stuff is not accurate (I saw the previous post that was linked here). It is a slightly less factual ZeroHedge.
For all it's faults, ZeroHedge actually gets the mechanics roughly correct (although often doesn't get the interpretation right leading to odd conclusions).
But a lot of the OP is just...not correct (as an example, the OP says that countries were on the gold standard in the 1920/30s and devalued as a response to the crisis...wrong, they were on the gold exchange standard and devaluation wasn't the response, it was suspension of convertibility) and vague (all these posts are very wordy, poorly written, and seem intended to reach a conclusion that was arrived at before any evidence was examined).
I don't know why people are so fascinated with the idea that their currency is worthless. In the US, I assume it is related to the fact that much of America has German roots...where this "currency crash literature" is also a fetish. But if you are worried about inflation, own gold, own inflation linkers, and own good businesses. That is it.
Also, maybe the dollar will fall in value but if you are in the US and have USD liabilities, it makes no difference to you. Stuff that cost $1 will still cost $1.
> But a lot of the OP is just...not correct (as an example, the OP says that countries were on the gold standard in the 1920/30s and devalued as a response to the crisis...wrong, they were on the gold exchange standard and devaluation wasn't the response, it was suspension of convertibility)
I believe that you are incorrect. The US, for example, suspended convertibility at $20/oz, confiscated holdings of gold (!), then changed the price to $35/oz, and resumed convertibility. That's not just suspension of convertibility, it's also devaluation.
Well, OK, then you said that in response to the crisis, they suspended convertibility. But the US suspended convertibility, devalued, and resumed convertibility, long before the crisis was over. That means that the point had to be the devaluation, not the suspension of convertibility. (Or else they were incredibly stupid in how they did it.)
Right, and I said "in response" to the crisis not "before the crisis was over"...again, you are continuing well after the point of logic. Read. Carefully.
And the key point was most certainly not the devaluation. I can only suggest you read more about the Great Depression to understand why (there was the small matter of most banks in the country failing, devaluing your currency does not help with that, suspending convertibility does). Basic. Basic. Basic.
You might try speaking more clearly. And you might actually give some data instead of just dripping condescension. So far, all you've said is "I know, and I'm right", which is a really worthless conversation.
Oh, yeah, you said "read up on the Great Depression". Well, there's rather a lot that could be read on that. You might be a bit more specific, if you wanted to be helpful rather than just smugly condescending.
And so far, you haven't said anything to make it possible to tell whether you're a really knowledgeable guy I should listen to, or whether you're just a loudmouth crackpot who's sure that he's right and everyone else is wrong.
...no. You are overthinking this significantly. If the USD falls 20% against the GBP or JPY or whatever...why do you care? It doesn't affect you...unless you have liabilities priced in terms of that other currency.
The fall and the rise of the USD is very important outside the US. It makes no difference to 95% of people within the US.
Yep, it doesn't work that way. First, the US isn't a big trader relative to the size of the economy. Second, depreciation doesn't passthrough to inflation 1-to-1. Three, because of the relative size of the US economy and the international use of USD, US imports are generally not sensitive to exchange rates in the way that you see in other countries.
Btw, I live somewhere where the currency has depreciated significantly, and we import almost double what the US does...prices go up a little but not much. And for most people, the difference is just zero (the difference for companies is often not zero...companies are often constrained in how they change prices, which is the reason for a lot of the point above, so they end up taking a lot of cost changes to their profit).
Evaluate the argument. Does the reasoning make sense, and is it supported by the evidence introduced? Think of counter-possibilities — what could or would falsify the author's supposition? Find out who disagrees. Does their reasoning make sense, and is it supported by the evidence they proffer? Etc.
It's important to know the limits of your knowledge and reasoning capabilities and defer to relevant experts, which is known as epistemic learned helplessness[1]. This is also much faster, as a lot of bullshit sounds like truth if you're unfamiliar with the field.
Better to just account for expert opinions rather than defer to them; experts typically don't have a magical ability to see through uncertainty. And it is possible to find experts who support a very wide range of opinions. This can be compounded - eg, government officials have fair incentive not to report bad news unless they are completely certain that things have gone wrong. So it would be a mistake to do your recession planning while deferring to the experts at the US Fed.
Another topical example is the WHO in this COVID-19 crisis. The WHO was pretty consistently reporting on what had certainly gone wrong rather than what had likely gone wrong so it was preempted by a bunch of countries closing their borders against the WHO's advice.
