Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Federal Reserve balance sheet trends

federalreserve.gov

Post reply on HN
Print view View original

21–30 of 266 posts

Re: Federal Reserve balance sheet trends

#21

Post by adventured »

aswanson wrote: post #9

So I'm hearing the " the dollar is over, throw everything into gold, fiat money is doomed" in other forums. Can anyone give some conterpoints to that narrative?

It doesn't really need much of a counterpoint, given how silly it is.

Regarding the USD, the same doom cults say the same things during every major global problem / event / disaster going back generations. The dollar was supposed to go away with the great recession; the dollar was supposed to go away with the intense inflatation of the 1970s; the dollar was supposed to go away with Nixon's abandonment of what was left of the gold standard; the dollar was supposed to be doomed with FDR's various moves.

There is zero evidence the dollar is under meaningful risk here.

It's fine to utilize gold as a store of value, there is absolutely nothing wrong with that. And that's an entirely different matter than whether governments will abandon their fiat currencies. The US, Eurozone, China, Japan, Russia, India and so on have absolutely no interest or willingness to give up control of their present fiat + central bank systems. They dictate whether fiat money is doomed or not, via their enforcenment capabilities.

Take one blatant example. Russia has de-dollarized itself heavily, has accumulated a lot of gold lately (relatively speaking), and still has zero interest in giving up the power, flexibility and convenience that controlling the national fiat currency provides. For Russia, gold is just a diversification opportunity that backstops some of their national financial condition. The same is true for China, another accumulator of gold reserves.

Re: Federal Reserve balance sheet trends

#22

Post by somebodythere »

me_me_me wrote: post #19
somebodythere wrote: post #12

Earlier quoted context omitted.

The main counterpoint is that this stimulus would be needed to counter massive demand-side deflation.

Well easy fix instead of giving money to the top, give it to the bottom. That will surely drive demand as more money is available to spend. It will boost confidence in local economies further growing demand and supply caps. What we see now it large parts of the stimulus package are devoured by the top level bureaucracy never doing anything but being transferred to Cayman islands as performance bonuses. How about we t…

That is what the $1200 check and expanded unemployment insurance was meant to be.

Re: Federal Reserve balance sheet trends

#23

Post by wegs »

vkou wrote: post #16
wegs wrote: post #13

Earlier quoted context omitted.

It isn't free, but that isn't really true. The $1200 comes out of inflation, which decreases the value of accumulated wealth (at least to the extent it sits in cash). If you're sitting on a retirement fund, that hurts you. If you're sitting on debt, that helps you. So it's much more past tax payers than future ones who are hurt by this. On the other hand, decreasing the value of accumulated wealth is exactly what oug…

No, that $1,200 didn't come out of the Fed printing press. It came out of the general budget, so taxpayers are going to be on the hook for paying it back, in the future. The trillions the Fed is printing aren't being sent out as stimulus cheques. They are being used to provide short-term liquidity (Which does not cause inflation), and to buy junk bonds, (Which does cause inflation, and also happens to prop up the sto…

In the very short term, that's true. In the medium-to-long term, they're kind of the same thing. Fiscal and monetary policy are handled by independent bodies, but they're not entirely uncoordinated. They're both different hands of the same overarching body too: the US government.

Re: Federal Reserve balance sheet trends

#24

Post by jrockway »

LatteLazy wrote: post #2

Til, People are more than happy to sell their children for a slightly cheaper mortgage as long as you dress it up correctly.

I think this has always been the way we've paid for infrastructure. I remember reading an article about Japan. They've stopped taking on massive infrastructure projects, because the population isn't growing -- they don't want immigrants and people aren't having kids anymore. Without a future tax base to pay for infrastructure, they can't build it anymore. So things like the Tokyo subway system are "done"; no money will ever be available again to build anything.

I think we're beginning to see this in the US. In a few years, you won't be able to live in New Jersey and commute to New York City, or take the train from Boston to Washington D.C. The North River Tunnels will have collapsed, because we can't find any money to repair them.

Ultimately, it's a little disingenuous to say this is "selling your children". Yes, if we keep buying stuff, someone will have to pay for it. If society takes on projects that need to be paid for over 100 years, people that aren't born today will be spending some of their taxes on it. But with the right investments, it's almost certainly worth it. We can look back at some of the achievements over the last century and find that they probably grew the economy more than they cost, which makes them good investments when paid for collectively. In 1920, we didn't have an Interstate Highway System, we didn't live in the suburbs and commute to the city, we couldn't fly to the far corners of the world in 16 hours, we didn't have all of humanity's knowledge available in our pockets. There is no reason to believe that 2120 won't be just as good as long as we keep investing.

Re: Federal Reserve balance sheet trends

#26

Post by RobertoG »

rapsey wrote: post #10
vkou wrote: post #8

Earlier quoted context omitted.

The $1200 money isn't free, it is borrowed from future taxpayers. The money the Fed prints doesn't go to Joe Average. It goes to investors who are selling the Fed junk bonds. (They then turn around, and buy stocks with those dollars, which is why the market is soaring.)

> The $1200 money isn't free, it is borrowed from future taxpayers. That is a pretty outdated view. More like the money supply grew and everyone's money is a bit less worth.

>>"[..] everyone's money is a bit less worth. "

Only if the economy is at full utilization. The reason for the stimulus is that the economy it's not at full utilization, ergo, there will be not accelerated inflation.

Re: Federal Reserve balance sheet trends

#27

Post by _gx90 »

cft wrote: post #6
iwangulenko wrote: post #4

Has anyone any idea what that means to the average joe? How to protect one's purchasing power? If the government can give you free money (1200$ checks), it also has the power to take everything away from you, right?

Buy Bitcoin

This may not be the most popular opinion, but Satoshi Nakamoto invented Bitcoin precisely because he wanted to separate money and state. The main purpose of crypto has always been to be hard money in the age of the internet and institutionalised money printing.

Re: Federal Reserve balance sheet trends

#28

Post by rapsey »

wegs wrote: post #18
lifty wrote: post #11

Earlier quoted context omitted.

"The $1200 money isn't free, it is borrowed from future taxpayers." That is debatable. They say this but at some point you have to wonder, will they have the capacity to take it off the balance sheet without massive inflation? Historically, there are two ways governments went out of huge debt: default or massive inflations. I doubt the USG will ever let itself default so inflation is more likely. One advantage that t…

I think that's more a disadvantage. If the US starts to inflate too much, it may be dumped as the world's reserve currency. A global run on the dollar could convert modest, manageable inflation into hyperinflation. If dollars are worth 1/2-1/10th of what they are now in three years, that's kind of okay, and in-line with the damage of COVID19. If they are worth 1/1000th, we're looking at a serious, structural collapse…

> If dollars are worth 1/2-1/10th of what they are now in three years, that's kind of okay

That is massive inflation.

Re: Federal Reserve balance sheet trends

#30

Post by lifty »

wegs wrote: post #18
lifty wrote: post #11

Earlier quoted context omitted.

"The $1200 money isn't free, it is borrowed from future taxpayers." That is debatable. They say this but at some point you have to wonder, will they have the capacity to take it off the balance sheet without massive inflation? Historically, there are two ways governments went out of huge debt: default or massive inflations. I doubt the USG will ever let itself default so inflation is more likely. One advantage that t…

I think that's more a disadvantage. If the US starts to inflate too much, it may be dumped as the world's reserve currency. A global run on the dollar could convert modest, manageable inflation into hyperinflation. If dollars are worth 1/2-1/10th of what they are now in three years, that's kind of okay, and in-line with the damage of COVID19. If they are worth 1/1000th, we're looking at a serious, structural collapse…

I agree, but I think that is more of a long term concern. The USD will be dumped as the worlds reserve currency but I presume this will be a long and volatile process. There are 2 reasons why I think the USD will slowly be dethroned as the reserve currency: 1) the US has made the USD their weapon in punishing opponents and many countries have already started to think about alternatives. 2) the USG has very big long term unfunded liabilities which will need to be inflated away. China and other big holders of US debt know this, hence, they are trying to slowly come up with alternatives. The good part for the USD is that the alternatives, at the moment, are shit.
Post reply on HN