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Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

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Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#41

Post by cryptica »

logicslave wrote: post #3

One interesting fact I learned the other day: IBM did 140 billion in stock buy backs in the last decade. They have a 100 Billion dollar market cap. I think that is a bit of what we have going on right now. A system propped up by injected cash, which works for now because everyone plays along. Most of this injected money goes into the pockets of the rich, who are the ones holding the assets that the FED is bailing out…

I watched an interview on YouTube with Stephen A. Schwarzman from 'The Blackstone Group' which was really eye opening. There is a part where he explains how to multiply ROI on any investment using bank loans https://www.youtube.com/watch?v=7kThTbLUQdU

When you take into account that the credit is printed by banks out of thin air (and more so given the latest 0% reserve requirement), it's not difficult to see why the ROI surplus derived from this 'magic trick' (as Schwarzmam refers to it) is basically free money.

Corporations and financial firms with a lot of capital have access to huge loans on favorable terms; this puts them on a different playing field than small companies which don't have much capital and can't use this 'magic trick' to multiply their earnings in the same way. Earning 30% ROI is simply not possible for most individuals and small businesses.

I suspect this is the same trick which Renaissance Technologies uses for their 'Medallion fund' to hit 66% ROI per year on average... Maybe they're able to take loans against collateral owned by their other mainstream funds.

If I have $1K in cash and I can find a bank to loan me an additional $5K... If I invest that in an asset which returns just 10% per year, given the 0% interest rate environment, I can make $600 per year in pure profit on my investment... Which is 60% ROI! Anyone can be a legendary investor... You just need to find a bank which can give you 5x leverage.

These leveraged loans which yield free surplus ROI are impossible for small businesses to access. This is why they're fundamentally unfair. The efficiency advantages of economies of scale are greatly exaggerated. The real advantage is mostly financial.

And remember, that 'leverage' credit was printed out of thin air by the bank... So any extra profit which can be derived from it by an individual or company is by definition also 'printed out of thin air'... Especially when you know you're going to get bailed out every 10 years when things go wrong - There is no risk.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#42

Post by throw0101a »

logicslave wrote: post #3

One interesting fact I learned the other day: IBM did 140 billion in stock buy backs in the last decade. They have a 100 Billion dollar market cap. I think that is a bit of what we have going on right now. A system propped up by injected cash, which works for now because everyone plays along. Most of this injected money goes into the pockets of the rich, who are the ones holding the assets that the FED is bailing out…

> IBM did 140 billion in stock buy backs in the last decade.

And? What is the alternative, and is it any better?

> IBM has effectively been dead money for the last decade. They’re up 20%, including dividends, versus 315% for the tech index (XLK). IBM currently has a market cap of ~$100 billion, so when people hear they spent $45 billion on buybacks while their share price went down 38%, people get angry. I get it, it’s an easy argument to make.

> But a better argument, which Jake made recently is that poorly managed companies like IBM are doing the right thing by returning cash to shareholders. That’s $45 billion into the hands of investors who can then take that money and actually invest it in companies that are, you know, not terrible. Would the anti-buyback crowd be happier if IBM invested that $45 billion and had a negative ROI? And what about the $76 billion they “wasted” on dividends? Why does this return of capital to shareholders escape criticism? More on this in a minute.

* https://theirrelevantinvestor.com/2020/04/22/returning-cash-...

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#43

Post by yeldarb »

throwanem wrote: post #36
selectodude wrote: post #6

Earlier quoted context omitted.

The Bank of Japan’s balance sheet is at 110 percent of GDP.

I was about to make a joke that it looked like they could go about another 69.8%. Now I'm glad I waited. What does that even signify, a federal bank owning >100% of its attached country's GDP? Debt in excess of produced value, i.e., the country being underwater?

GDP is per year. Analogous to a person making $100k/yr with a $110k mortgage.

Edit: Although perhaps not that analogous because is this even technically "debt"?

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#44

Post by bequanna »

Donald wrote: post #33
bequanna wrote: post #17

Earlier quoted context omitted.

Not sure I follow. What does the US Treasury have to do with private debt issuances? Did you mean that interest rates are manipulated by the Fed?

New Fed programs have been stood up in the last month that directly buy corporate debt.

That’s a Fed program. Fed != Treasury.

What does this have to do with the Treasury?

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#45

Post by colechristensen »

Fjolsvith wrote: post #9
strict9 wrote: post #2

> 30.2% of US GDP How much further can they go? 26 million or so recent unemployment applications and the stock market is not off much from recent all time highs. This is more concerning than the initial falling knife mid-March.

Gotta tell you guys that the Fed is going to get restructured. Basically its going to declare bankruptcy and stiff the central banks to whom it is indebted. Trump is looking to nominate Judy Shelton to the Federal Reserve as she is the one who will do the restructuring. [1] How is he able to do this? “The Fed will finance a special purpose vehicle (SPV) for each acronym to conduct these operations. The Treasury, usin…

This is not how reserve banking works, doesn't reflect how much the US pays to service it's bonds, misses the fact that the fed creates new money and loans it out, it doesn't have obligations it can default on, misses the fact that the US would have to default on its debt to erase it, misses the fact that there isn't that much gold in the world (if the us stole every oz of gold on the planet it would have to devalue it's currency by half to return to the gold standard)

.... On and on and on.

This is honest gibberish.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#46

Post by core-questions »

fallingfrog wrote: post #29

Here’s how I see this going (obviously just a guess): the entire corporate financial system is now unprofitable without being bailed out with zero interest loans every 10 years. This time around, the recovery will be slow, 10 years, then another, bigger bubble will form, that will pop and get bailed out again, but the next time around it will cause fast rising inflation. The fed will have to choose between either all…

> At that point, the right wing, funded by the desperate corporate state which needs to stem the rising tide of labor activism, will blame coastal elite liberals and immigrants for their problems and there will be some kind of fascist coup, followed potentially by war, (but probably not).

You had me until "funded by the desperate corporate state", who want absolutely nothing to do with the right wing. If anything, we'll see a continued rise in Totalitarian Liberalism rather than any kind of right-wing renaissance.

> there will be some kind of fascist coup

You need a Great Man for that, and there are none on the horizon.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#47

Post by ashtonkem »

yeldarb wrote: post #43
throwanem wrote: post #36

Earlier quoted context omitted.

I was about to make a joke that it looked like they could go about another 69.8%. Now I'm glad I waited. What does that even signify, a federal bank owning >100% of its attached country's GDP? Debt in excess of produced value, i.e., the country being underwater?

GDP is per year. Analogous to a person making $100k/yr with a $110k mortgage. Edit: Although perhaps not that analogous because is this even technically "debt"?

The analogy has always been strained, since national debt just doesn’t work like personal debt.

Also, when you can borrow at sub-inflation rates, there’s rarely an incentive to stop.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#48

Post by new_time »

logicslave wrote: post #3

One interesting fact I learned the other day: IBM did 140 billion in stock buy backs in the last decade. They have a 100 Billion dollar market cap. I think that is a bit of what we have going on right now. A system propped up by injected cash, which works for now because everyone plays along. Most of this injected money goes into the pockets of the rich, who are the ones holding the assets that the FED is bailing out…

However this saves us from inflation, since the money circulates among the wealthy and corporations rather than among the common person.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#49

Post by ballenf »

colechristensen wrote: post #31
zaroth wrote: post #11

Earlier quoted context omitted.

I’m not sure what your last paragraph has to do with the first three. A main purpose of buying a stock is to receive dividend payments. Buybacks are just a tax efficient dividend. The latest craze to make paying dividends sound evil is just strange.

Paying dividends is fine if you aren't firing workers or taking bailouts.

Why is firing workers inconsistent with paying dividends? They kind of feel like two sides of the same coin: a company can't find a better return on its capital so it divests itself of the resource (labor or cash).

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#50

Post by aeternum »

DSingularity wrote: post #20

This is one of two last-resorts mechanisms by which the U.S. will maintain its hegemony. It may suck, but it is way better than the alternative.

Why is printing money a bad thing at this point in time?

I see two strong reasons that printing money is the right move:

1) Wealth inequality is high relative to recent history. Printing money is a very effective way to even some of that out. Possibly the only form of 'wealth tax' that can actually be executed successfully.

2) The US debt / GDP fraction is still relatively low compared to many other countries.

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