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Federal Reserve balance sheet trends

federalreserve.gov

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Re: Federal Reserve balance sheet trends

#201

Post by _gx90 »

thomashobohm wrote: post #196
_gx90 wrote: post #190

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. 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.

FOMC minutes are published, but not other meetings which are arguably more important, including the meetings of the Board.

https://www.federalreserve.gov/aboutthefed/boardmeetings/mee...

"Effective March 15, 2020, the meeting was closed to public observation by Order of the Board of Governors1 because the matters fall under exemption(s) 9(A)(i) of the Government in the Sunshine Act (5 U.S.C. Section 552b(c)), and it was determined that the public interest did not require opening the meeting."

This seems to be the case for almost all of their meetings.

Re: Federal Reserve balance sheet trends

#202

Post by j15t »

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 Fed is not focused on the stock market. When they improve the status of the economy through monetary policy, they indirectly improve the value of publically listed companies. This makes sense, because companies are the central entities in the economy. I don't know how the Fed could improve the state of the economy without affecting the prices of shares.

Re: Federal Reserve balance sheet trends

#203

Post by thomashobohm »

_gx90 wrote: post #201
thomashobohm wrote: post #196

Earlier quoted context omitted.

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.

FOMC minutes are published, but not other meetings which are arguably more important, including the meetings of the Board. https://www.federalreserve.gov/aboutthefed/boardmeetings/mee... "Effective March 15, 2020, the meeting was closed to public observation by Order of the Board of Governors1 because the matters fall under exemption(s) 9(A)(i) of the Government in the Sunshine Act (5 U.S.C. Section 552b(c)), and it…

They only keep certain parts secret so market actors don’t make decisions based on what the Fed is thinking about doing. Obviously if people knew the Fed was thinking about raising interest rates, for example, it would affect their decisions (and the market as a whole) negatively. This is something any business or economics undergrad learns in an introductory banking class; since you are evidently unfamiliar with the Fed’s system (as opposed to the Swedish one), you may find it helpful to consult an American money and banking textbook.

From your own link, verbatim:

"Items considered in closed session include primarily

- Bank and bank holding company supervisory matters, discussions of which generally disclose information from bank examination reports or commercial and financial information obtained in confidence by the Board - Monetary policy and other matters whose premature release could be used in financial speculation - Personnel matters."

Not very nebulous, eh?

Re: Federal Reserve balance sheet trends

#204

Post by skrtskrt »

TheFlyingFish wrote: post #193
skrtskrt wrote: post #127

Earlier quoted context omitted.

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.

I agree that’s an opinion many people familiar with cars would share.

However the usefulness of that improvement is going to be a lot lower to someone who just needs a car to get somewhere rather than someone who can afford to buy a car with the long view of how it will affect their finances over many years.

The “purchasing power of the dollar”, even if you accept the accuracy of hedonic adjustments, is an extremely limiting view of the value many participants in the economy are deriving from that dollar.

I agree housing is a better example because the cost floor is much higher.

Re: Federal Reserve balance sheet trends

#205

Post by legolas2412 »

um_ya wrote: post #72
me_me_me wrote: post #19

Earlier quoted context omitted.

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…

This was tried in the past. Bottom up stimulus typically results in inflation in consumer prices. The fed prefers pumping money in at the top, which typically results in inflation of stock/asset prices.

So maybe, instead of pumping 10 trillion from the top, stimulate 1 trillion from the bottom?

Re: Federal Reserve balance sheet trends

#206

Post by dragonwriter »

_gx90 wrote: post #172
dragonwriter wrote: post #170

Earlier quoted context omitted.

> The only way this ends is either a depression the scales of which we've never seen in history before (which would liquidate and clear out bad businesses), or a hyperinflationary collapse of the U.S. dollar whereby more and more money is injected to prop everything up. Uh, the latter is not a distinct option from the former. Also, you've left out: “the government continues as it has for generations, occasionally bai…

The fact that it has been going on for decades doesn't make the point less valid. This kind of monetary intervention is compounding in nature, and it can be clearly seen as how each financial crash over the past 2-3 decades has been worse than the one before.

> The fact that it has been going on for decades doesn't make the point less valid. This

No, the fact it what you describe has not been going on for decades. It is an occasional response to extreme events, not a continuous mode of operation, and your criticism is all about the potential risk it has as a continuous mode of operation. There've been a couple major cases fairly recently, but that was in response to the biggest financial crisis in 70 years and the most significant acute global pandemic in over a century happening to fall a little over a decade apart, not some change in general approach.

Re: Federal Reserve balance sheet trends

#207

Post by tempsy »

j15t wrote: post #202
legolas2412 wrote: post #192

Earlier quoted context omitted.

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 Fed is not focused on the stock market. When they improve the status of the economy through monetary policy, they indirectly improve the value of publically listed companies. This makes sense, because companies are the central entities in the economy. I don't know how the Fed could improve the state of the economy without affecting the prices of shares.

They shouldn’t be but this is not true now. What they’ve done has directly propped up asset prices. No question. This isn’t a second order effect. They know what they are doing.

Re: Federal Reserve balance sheet trends

#208

Post by neffy »

thomashobohm wrote: post #98
neffy wrote: post #90

Earlier quoted context omitted.

It's complicated. Hyperinflation occurs generally when the banking system's regulation is gets out of control and goes into a lending/money creation spiral. That can happen very quickly - within several month. All things considered what's more likely to happen at the moment though is a monetary implosion, as massive debt defaults occur destroying the money in the banking system. Which is why people are muttering abou…

This is inaccurate; most economists think we're most likely to see deflation over the next several months as demand collapses. Considering the position of the dollar, a "monetary implosion" like you're describing is still exceedingly unlikely.

Most economists don't understand how banks write off debt.

Re: Federal Reserve balance sheet trends

#209

Post by neffy »

thomashobohm wrote: post #102
neffy wrote: post #89

Earlier quoted context omitted.

The Federal Reserve's balance sheet, and its actions matter very much. What is essentially in the process of happening is a massive disconnect between the "operating system" of the economy - the financial system, which is in the process of crashing (bear with it, it's a very slow system it takes a while), and the economy - the computer - which is as you say, essentially fine, but no longer working because... operatin…

That is NOT what M2 means! Have you discounted the value of the ETFs and bonds the Fed has purchased? They're not suddenly valueless.

M2 is the total sum of all liability deposit money in the US banking system, and liability money has dominated in all monetary transactions since at least 1890. (Dunbar.)

Re: Federal Reserve balance sheet trends

#210

Post by thomashobohm »

neffy wrote: post #209
thomashobohm wrote: post #102

Earlier quoted context omitted.

That is NOT what M2 means! Have you discounted the value of the ETFs and bonds the Fed has purchased? They're not suddenly valueless.

M2 is the total sum of all liability deposit money in the US banking system, and liability money has dominated in all monetary transactions since at least 1890. (Dunbar.)

This isn't your term paper-you don't need to cite your sources. But, if you're going to, at least try to do it correctly (the parentheses go inside the sentence, the period goes outside the parentheses).

Regardless, it's this line: "Approximately 15% of the real money supply, or about $5,000 for every man, woman and child in the USA, had it been handed to them directly" that I was referring to. That calculation does not reflect what the M2 number actually means. You already have a definition of M2, so I'm sure you can figure out where you went wrong yourself if you just stare at that for a little bit longer.

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