Federal Reserve balance sheet trends • Hacker News Board

Re: Federal Reserve balance sheet trends

#191

Post by thomashobohm » Thu, Apr 23, 2020, 4:20 PM UTC

mrfredward wrote: post #183

thomashobohm wrote: post #101

Earlier quoted context omitted.

The actual reason why inflation hurts young people has to do with economic stability and its cascading effects on the economy. A period of significant inflation can wipe out generational mobility. Inflation has a minimal effect on "closing the wealth gap" in comparison and I think it's irresponsible to act like hyperinflation would be a reasonable way to solve economic inequality.

Yes, fully agree that economic instability from hyperinflation hurts far more than reducing the wealth gap could help. In recent times, the fed has been below its 2% inflation target.If it missed on the other side, and inflation went to 3-4%, I think that would be totally reasonable economic policy. Double digit inflation, however, would end up making everyone poorer.

Totally agree! I just don’t want people to get the wrong impression-easy to think that the takeaway is “inflation is always good for young people.”

Re: Federal Reserve balance sheet trends

#192

Post by legolas2412 » Thu, Apr 23, 2020, 4:21 PM UTC

tempsy wrote: post #179

enraged_camel wrote: post #171

Earlier quoted context omitted.

Another way of putting it is that it took the Fed 10 years to even think about trying to extricate themselves, and they realized they couldn't. Now they have gotten their hands much deeper in.

Yes. The next recession will just be worse since Fed cannot lower rates any more and if they signal any sign of pulling back on propping up corporate bonds or mortgages those markets will just crash.

One thing i dont understand is why is federal reserve so involved with stock markets, first propping them up and then panicking if it crashes.

The federal reserve should only be concerned about the economy right?

Re: Federal Reserve balance sheet trends

#193

Post by TheFlyingFish » Thu, Apr 23, 2020, 4:22 PM UTC

skrtskrt wrote: post #127

mariojv wrote: post #86

Earlier quoted context omitted.

I'm not saying I agree or disagree given mild inflation trends over the past decade, but how long do you think inflation takes to really get in gear if you're right? We experienced deflation last month according to the consumer price index despite fiscal stimulus and Fed buying assets. [0] The consumer price index is definitely flawed. However, one thing I've heard is that the massive drop in demand and velocity of m…

It's worth noting that part of the reason that inflation statistics are so "low" is that there's an official adjustment done when things cost more but (supposedly) have increased quality, called a "Hedonic quality adjustment" This adjustment has been made multiple times in recent decades for housing, which is a large part of any given adult's spending. So the Fed economists keep saying "wow inflation is so low even a…

Just anecdotally, I wouldn't be surprised if a Camry really were "more valuable" (as measured by some sort of ideal fixed value-marker not subject to inflation) than in 1990. I seem to recall when I was growing up that the average expected lifetime of a car if well-maintained was about 100k miles; now it seems to be about 200k.

Housing may be a more debatable case, though.

Re: Federal Reserve balance sheet trends

#194

Post by tempsy » Thu, Apr 23, 2020, 4:24 PM UTC

raverbashing wrote: post #48

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 gold fans fail to realize that liquidity is more important than hoarding metals. Gold was important at the time where balances were done manually and purchases between countries were settled with physical gold. (And no, this is not a defense of bitcoin. Bitcoin has to be much more liquid and stable for it to work as a store of value)

The market has plenty of liquidity. Gold at decade highs. Not sure what you are pointing to exactly that would signal a bearish trend for Gold.

Re: Federal Reserve balance sheet trends

#195

Post by tempsy » Thu, Apr 23, 2020, 4:28 PM UTC

legolas2412 wrote: post #192

tempsy wrote: post #179

Earlier quoted context omitted.

Yes. The next recession will just be worse since Fed cannot lower rates any more and if they signal any sign of pulling back on propping up corporate bonds or mortgages those markets will just crash.

One thing i dont understand is why is federal reserve so involved with stock markets, first propping them up and then panicking if it crashes. The federal reserve should only be concerned about the economy right?

The wealth owners care about the stock market more than the “economy”

Re: Federal Reserve balance sheet trends

#196

Post by thomashobohm » Thu, Apr 23, 2020, 4:29 PM UTC

_gx90 wrote: post #190

thomashobohm wrote: post #185

Earlier quoted context omitted.

Please, this isn’t Soviet Russia, economists disagree about practically everything, so the whole argument that the profession has a serious groupthink problem is unconvincing to me. The reason why economists mostly agree on this particular topic-the way the Fed operates-is because it’s exceedingly transparent, theoretically (not to mention mathematically) simple, and empirically verifiable.

>Please, this isn’t Soviet Russia, economists disagree about practically everything, so the whole argument that the profession has a serious groupthink problem is unconvincing to me. They disagree on a lot of things, that is true, but the one thing they all seem to agree upon (except for Austrian economists) is that the economy can be effectively modelled and that effective policy prescriptions can be derived from sa…

FOMC Meeting Minutes: https://www.federalreserve.gov/monetarypolicy/fomcminutes202...

Fed Audited Financial Statements: https://www.federalreserve.gov/aboutthefed/audited-annual-fi...

I’m sorry that your Swedish central bank is classified, since, based on your worldview, there are presumably a bunch of Swedish economists working there behind closed doors to screw you over.

Re: Federal Reserve balance sheet trends

#197

Post by TacticalTable » Thu, Apr 23, 2020, 4:30 PM UTC

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…

Assuming this comes to pass, what would the optimal move be to protect savings from inflation? Is this where Gold comes in handy?

Re: Federal Reserve balance sheet trends

#198

Post by prirun » Thu, Apr 23, 2020, 4:30 PM UTC

They can't even label a chart so it isn't misleading. How about they label that axis with T (trillion) instead of M (million). I know, I know, somewhere it probably says "(in millions)" somewhere in the fine print.

Re: Federal Reserve balance sheet trends

#199

Post by esoterica » Thu, Apr 23, 2020, 4:31 PM UTC

skrtskrt wrote: post #127

mariojv wrote: post #86

Earlier quoted context omitted.

I'm not saying I agree or disagree given mild inflation trends over the past decade, but how long do you think inflation takes to really get in gear if you're right? We experienced deflation last month according to the consumer price index despite fiscal stimulus and Fed buying assets. [0] The consumer price index is definitely flawed. However, one thing I've heard is that the massive drop in demand and velocity of m…

It's worth noting that part of the reason that inflation statistics are so "low" is that there's an official adjustment done when things cost more but (supposedly) have increased quality, called a "Hedonic quality adjustment" This adjustment has been made multiple times in recent decades for housing, which is a large part of any given adult's spending. So the Fed economists keep saying "wow inflation is so low even a…

> So the Fed economists keep saying "wow inflation is so low even after we pump gazillions of dollars in during QE", while ignoring the fact that easy money has lead to massive multinationals consolidating control of real estate and jacking prices up.

This is not remotely grounded in fact. The majority of real estate is controlled by homeowners and small-time landlords, not massive multinationals. Landlords don't have monopoly pricing power, rents have gone up (in specific cities) because anti-development policies restrict supply.

Re: Federal Reserve balance sheet trends

#200

Post by esoterica » Thu, Apr 23, 2020, 4:33 PM UTC

_gx90 wrote: post #67

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…

>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 fine. It's not anything that future generations have to "pay back." And it's not going to cause a collapse of the dollar. This is simply not true. The Fed is buying assets at a premium (otherwise counterparties wouldn't sell the assets t…

> Future generations pay this back not through taxes but through inflation.

Inflation expectations have collapsed in recent months. We didn't see steep inflation when the government pumped trillions of dollars into the economy after 2008, why do you think we'll see steep inflation now?