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Federal Reserve balance sheet trends

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Re: Federal Reserve balance sheet trends

#131

Post by throw1234651234 »

adventured wrote: post #118
garmaine wrote: post #81

Earlier quoted context omitted.

Read the last few sentences critically. Each regional federal reserve bank (there are several) is owned by private banks. The profits are merely capped.

The ownership is nothing more than symbolic. They have absolutely no control over the Federal Reserve. They can set no policy, they dictate nothing through the 'ownership.' They receive profits in exchange for participating in the system, it's a lure for drawing in private banking participation. The profit share ("dividends") the banks receive is trivial, a couple percent of the Fed's profits. Typically 96-98% of pro…

Who sets the policy?

Re: Federal Reserve balance sheet trends

#132

Post by xyzzyz »

RobertoG wrote: post #38
jrockway wrote: post #24

Earlier quoted context omitted.

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 experimen…

> Suppose now, that the Federal Reserve buy all those bonds. Who is that money owned to? who receive the dividends of those bonds?

To Federal Reserve of course, which will receive the coupons. To be sure, taxpayers will pay the principal and interest down the line.

> In 50 years there is not infrastructure left or new technologies but the public debt is zero. Are the children rich or poor?

Lack of government-built infrastructure is seen. What is unseen is all the other things that the money saved on government-paid infrastructure paid for.

Money is a claim on resources in the economy, and if the government doesn’t claim its share and use it to build infrastructure, these resources do not disappear. Something else uses them.

Re: Federal Reserve balance sheet trends

#133

Post by cultus »

ravenstine wrote: post #125
thomashobohm wrote: post #103

Earlier quoted context omitted.

These things are not known, actually. There are people much smarter than you or me that would disagree with your sentiment that "we know MMT is a bad long term policy."

> There are people much smarter than you or me that would disagree with your sentiment that "we know MMT is a bad long term policy." How is anyone supposed to argue against that? You can use that to try and defeat any argument, but it doesn't really demonstrate anything. What people? How do you know they are smarter? Are smart people always correct?

The grandparent made a blanket statement that "we know MMT is a bad long term policy" which the other poster was rightly pointing out is wrong. This is a ridiculous blanket statement, and clearly and obviously false. Such arguments don't deserve detailed rebuttals.

Re: Federal Reserve balance sheet trends

#134

Post by Suncho »

jkhdigital wrote: post #105
Suncho wrote: post #62

What matters isn't the size of the Fed's balance sheet or what it contains. The Fed's balance sheet is "invisible" to the private-sector economy. This expansion of their balance sheet is simply a reflection of the stimulus we're doing. When the Fed expands their balance sheet, what they're doing is replacing private-sector assets with liquid cash. Given that the stimulus is appropriate for the economy, this is all fi…

This would make sense if the Fed's newly-created money went directly to households that need it due to economic shutdowns. But it doesn't, it mostly goes to financial institutions. You're confusing the Fed's ability to monetize assets with the Treasury's ability to spend money on whatever it wants. Also, your statement that our economy has the capacity to provide a decent standard of living to everyone is an article…

> You're confusing the Fed's ability to monetize assets with the Treasury's ability to spend money on whatever it wants.

They're related. There's both fiscal stimulus and monetary stimulus going on here. The monetary stimulus only makes its way to consumers indirectly. On the fiscal side, as you say, Treasury can spend money on whatever they want. And when they do, they transform some of the financial sector's money into assets (treasuries). If the Fed wants to maintain its accommodative monetary policy, they're going to want to re-monetize those assets.

> your statement that our economy has the capacity to provide a decent standard of living to everyone is an article of faith

"decent standard of living" was not crucial to my point.

There's some part of our economy's productive capacity that we have consciously decided not to shut down because we've deemed "essential" to consumers. My point is that it would be a mistake for us not to provide consumers with the means (money) to access that capacity.

Re: Federal Reserve balance sheet trends

#135

Post by api »

Suncho wrote: post #62

What matters isn't the size of the Fed's balance sheet or what it contains. The Fed's balance sheet is "invisible" to the private-sector economy. This expansion of their balance sheet is simply a reflection of the stimulus we're doing. When the Fed expands their balance sheet, what they're doing is replacing private-sector assets with liquid cash. Given that the stimulus is appropriate for the economy, this is all fi…

> It's not anything that future generations have to "pay back."

I really wish the term "debt" were not used in these contexts. This type of "debt" is fundamentally different from private sector debt or other ordinary forms of debt.

In this context the term is being used to refer to an accounting construct that looks like debt, but the meaning of this particular accounting entry is completely different. Using this term only creates confusion among the public and even politicians who don't understand the complex and esoteric details of modern economics.

Re: Federal Reserve balance sheet trends

#136

Post by xyzzyz »

jrockway wrote: post #44
jsdalton wrote: post #34

Earlier quoted context omitted.

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.

True. To some extent, even a good mortgage rate trickles down to one's family. Some kid is going to inherit their parents paid-off house. The problem is that people have more than 1 kid, so most of them don't get that benefit and we keep building new homes, I guess.

Only 1 kid can inherit a house, sure, but out of two marriage partners it’s enough that only one inherits it. In this simple model, you only need to build new homes if you have more than two kids per woman, which developed societies are not on track of achieving.

Practically though we build new houses because old houses tend to not be in places we want them to be, and are not large and nice enough to our liking.

Re: Federal Reserve balance sheet trends

#137

Post by ravenstine »

cultus wrote: post #133
ravenstine wrote: post #125

Earlier quoted context omitted.

> There are people much smarter than you or me that would disagree with your sentiment that "we know MMT is a bad long term policy." How is anyone supposed to argue against that? You can use that to try and defeat any argument, but it doesn't really demonstrate anything. What people? How do you know they are smarter? Are smart people always correct?

The grandparent made a blanket statement that "we know MMT is a bad long term policy" which the other poster was rightly pointing out is wrong. This is a ridiculous blanket statement, and clearly and obviously false. Such arguments don't deserve detailed rebuttals.

That's really not a good way to address blanket statements. Just referring to nebulous "smart people" adds nothing.

It doesn't need a detailed rebuttal.

Here are some examples of reasonable responses:

- How do you know that?

- When in history did that happen?

- Could you be more specific?

None of those require more than one sentence, or implying that the person is too stupid to have an opinion.

Re: Federal Reserve balance sheet trends

#138

Post by xyzzyz »

samdamsam wrote: post #55
jrockway wrote: post #24

Earlier quoted context omitted.

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…

This is extremely disingenuous. The reason we aren’t having kids is we can’t afford it. All of my friends want to have kids but can’t. The few who have done so anyways are hurting.

It’s really strange how it is that we cannot afford having kids, but our parents and their parents etc, who almost universally have been poorer than us, managed to do that.

Re: Federal Reserve balance sheet trends

#139

Post by xiphias2 »

Anon1096 wrote: post #126
xiphias2 wrote: post #96

Earlier quoted context omitted.

And they were right. Gold overperformed S&P with dividends reinvested over the last 20 years, and I don't expect this trend stopping.

Gold is currently lower than it was at its peak and subsequent crash in 2012. There's no evidence it will ever come back to those all time highs, and definitely not fast enough to outpace total market investments. There's no "trend" to see here.

Of course it is lower then it's peak, that's why it's called a peak. It's true for every asset. At the same time good luck finding a real gold bar at that price right now when COMEX and LBMA just added unknown, secret ,,market makers'' to ,,increas liquidy'' of the futures contracts. There are lots of strange things going on right now.

Re: Federal Reserve balance sheet trends

#140

Post by 3fe9a03ccd14ca5 »

take_a_breath wrote: post #94
laurus wrote: post #92

One of the biggest things confusing people about how public finance works is that everyone is focused on the Fed rather than the Treasury. A good aspect of MMT is that it explains how the Treasury spending more than it takes in in taxes means more money is created into the economy than is deleted out of the economy. This is the more important thing to focus on. Some of the MMT professors also do a good job explaining…

It is rarely mentioned how deficit spending leads directly to private wealth creation. Increased military spending actually means increased outsourcing. It’s a transfer of wealth from the collective (future taxpayers) to the private (contractors and businesses).

Is there something inherent to the defense industry that’s not true also for other industries?
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