Federal Reserve balance sheet trends • Hacker News Board

Re: Federal Reserve balance sheet trends

#31

Post by rapsey » Thu, Apr 23, 2020, 11:07 AM UTC

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…

> 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.

Government debt does not really get payed. Old debts are payed off with new ones.

Re: Federal Reserve balance sheet trends

#32

Post by jasode » Thu, Apr 23, 2020, 11:08 AM UTC

somebodythere wrote: post #12

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?

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

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

The gp you're responding to sounds like he/she is talking about personal investment advice to protect an individual's purchasing power (i.e. micro economics).

However, your response is about a macro economic government policy.

Those are 2 different conversations.

Re: Federal Reserve balance sheet trends

#33

Post by adventured » Thu, Apr 23, 2020, 11:08 AM UTC

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…

> How about we try the trickle up economy for once?

We are. The vast majority of the stimulus so far has gone to benefit the bottom 3/4 of the US economically.

Here is some of what's in the $2 trillion recent stimulus:

- $268b to extend & expand unemployment benefits.

- $293b one time check (which won't be one time)

- $377b small business loans & grants; this has been more than doubled since then

- $150b aid to state & local governments

- $153b boost health related spending

- $42b boost to smaller social safety net programs, such as SNAP

- $45b boost to disaster assistance

- $40b boost to education spending

People will attempt to retort that: well, but big corporations have improperly taken some of the small business loans; they'll try to use a rare edge case to attempt to nullify the overwhelming point that in fact most of the stimulus is going to the bottom 3/4, not the top 1%.

Further, we'll do more stimulus programs yet around sending direct checks to individuals, which will continue to tilt this scale in the favor of the bottom 3/4.

The small business loans, unemployment benefits boosters and individual checks also do not have to be paid back, unlike the big business bailouts (such as with the airlines).

Most likely direct checks alone will cost over a trillion dollars before this is over. There is very little capable resistance to doing more in that regard, it will happen.

Re: Federal Reserve balance sheet trends

#34

Post by jsdalton » Thu, Apr 23, 2020, 11:08 AM UTC

jrockway wrote: post #24

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 wi…

Interesting observation, although it should be noted that in the case of infrastructure, the future generations that are obligated to pay for its construction will also be in a position to reap its benefits.

Re: Federal Reserve balance sheet trends

#35

Post by mobilefriendly » Thu, Apr 23, 2020, 11:10 AM UTC

wegs wrote: post #13

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.)

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…

Bankruptcies are not "structural damage" they are economic progress that transfers assets to stronger or more nimble players. The bailouts are fighting creative destruction and this will reduce the dynamism and long term growth of the economy.

Re: Federal Reserve balance sheet trends

#36

Post by fallingfrog » Thu, Apr 23, 2020, 11:10 AM UTC

The markets now firmly believe that any real reductions in asset prices are impossible. The fed will always rescue them with bailouts. That’s Just incredibly dangerous and can only lead, in one or two more cycles, to the collapse of the US dollar. That sounds incredible but it we keep on this way I just don’t see any other way this could end.

Re: Federal Reserve balance sheet trends

#37

Post by dforrestwilson » Thu, Apr 23, 2020, 11:10 AM UTC

etherwhitelable wrote: post #29

The federal reserve owns half of all US debt. We are paying interest on interest to our own Fed that serves as the banking systems perpetual bailout fund with the ability to create unlimited amounts of money.

Japan is even more pronounced regarding this.

Interesting possibilities stem from it:

https://www.huffpost.com/entry/sovereign-debt-jubilee-japane...

Re: Federal Reserve balance sheet trends

#38

Post by RobertoG » Thu, Apr 23, 2020, 11:13 AM UTC

jrockway wrote: post #24

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 wi…

Money is just a number in some computer. The important thing is the real economy. Deficits, as any other spending, and depending of the circumstances, could be inflationary, but they don't have to be, it depends of the state of the economy in the moment of the spending.

The public debt is just a number, it's the accumulate of pass deficits and it's not inflationary in itself and it's not a problem.

A mental experiment (not so hypothetical): suppose that in order to fight an economic crisis the government decide to spend a big deficit and, in order to do it, they emit bonds. Suppose now, that the Federal Reserve buy all those bonds. Who is that money owned to? who receive the dividends of those bonds?

A second mental experiment: in order to not increasing the public debt and "save for our children" the government don't spend in infrastructure or investigation. In 50 years there is not infrastructure left or new technologies but the public debt is zero. Are the children rich or poor?

Re: Federal Reserve balance sheet trends

#39

Post by Balero » Thu, Apr 23, 2020, 11:15 AM UTC

RobertoG wrote: post #20

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.

Who are people selling their children to, and how?

Selling them to whoever is buying the debt.

The government gives you money(low taxes)/buys something, and does so by borrowing the money for a long time. Now future generations (their children) are on the hook for the payments, having to pay higher taxes in the future for benefits in the present.

This is fine if you are using that money to invest smartly, such as in needed infrastructure. This is not good if you are doing it to lower taxes to win elections.

This is how you can "sell you children", though I prefer the more correct language of saddling them with debts.

Re: Federal Reserve balance sheet trends

#40

Post by icu » Thu, Apr 23, 2020, 11:15 AM UTC

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?

Protecting my purchasing power and accumulating wealth has worried me since 2008.

I initially looked long and hard at trying to implement my own copy of Ray Dalio's "All Weather Portfolio". I really recommend reading up as much as you can about Ray Dalio and this portfolio. To create this portfolio for US investors you can follow this website: http://www.lazyportfolioetf.com/allocation/ray-dalio-all-wea...

Having done all that research, I've started to modify my approach according to Chris Cole's "Dragon Portfolio". You can learn about it here: https://youtu.be/SkfgEZtJ9LA and read how to implement it yourself here: https://docsend.com/view/taygkbn

Just to be clear, I have no connection to any of the people and companies mentioned. Also, you may have higher risk tolerance, and want a higher level of return, so these portfolios may not be for you. Either way, you should always seek the advice of multiple fiduciary financial advisers before deciding what to do.