Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

thesoundingline.com

Post reply on HN
Print view View original

81–90 of 153 posts

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

#81

Post by cheald »

aeternum wrote: post #50
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.

> 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.

This only holds if the wealthy are holding their wealth as USD, not assets. This is not the case. The wealthy do not typically have Scrooge McDuck-style vaults of cash laying around waiting to be inflated away.

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

#82

Post by smolder »

new_time wrote: post #48
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.

I don't think this is a sound argument for further enriching the rich and leaving the common person to struggle. An oligarchy is not a desirable model any more than a monarchy is.

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

#83

Post by mrlala »

mywittyname wrote: post #4
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…

A stock buyback is theoretically the same as a dividend, in that it should reduce market cap by roughly the amount of the buyback. I do agree with your sentiment though. I feel like the wealthy in this country have developed the perfect scheme for leeching the wealth from this country. We will only know how bad it was after the postmortem, at which point, we will be (figuratively) dead.

>A stock buyback is theoretically the same as a dividend

I don't think that is true at all.

A dividend is literally "We are paying out some amount of cash. If our stock price is $40 and we give $5 to each shareholder the shares should immediately go down to $35". Although since the stock price should be a NPV of the company's cash flow, they technically have even less working capital to create returns over the years, so I think the price should go down by even more than $5.. but that's a different discussion...

In a stock buyback.. let's say the price is $40 and they buy the equivalent of $5 back from the market. Well.. yes they gave away $5 but they also gained $5 of value because they are now holding the shares. It's a net zero transaction if their stock price doesn't change from it. Which.. it shouldn't unless you think it's a signal of something. Yes there's a bit more details, but value is not "given away" in the same sense.

In the dividend example, the company gave away money.

In a stock repurchase, they gave away money in return for shares of (almost) equal value.

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

#84

Post by eslaught »

RobertoG wrote: post #63
ashtonkem wrote: post #47

Earlier quoted context omitted.

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.

It's the Bank of Japan who decide the borrowing rates, so, not problem in that regard.

Ok, but they don't control inflation. At some point, I think it's obvious that printing money becomes counterproductive. But where exactly is that line?

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

#85

Post by k3oni »

shse wrote: post #56
bawana wrote: post #16

And there will be NO inflation because this money is largely going to corporations who will figure out ways to maximize ROI -> invest it in the financial market. So although there might inflation of equity prices (as seen by the recovery of the S&P and other equities), the world is still out of work and starving and without the dollars to drive demand and price increases of goods and services. We need to separate fin…

Real state prices will explode. That’s what happened after 2009 due to QE.

I have a hard time believing that real estate prices will explode. From what i can see the prices are expected to go down, mostly due to the fact that there's less ppl able to buy due to many being out of work(some for a good while probably as i doubt some jobs/positions will be immediately re-filled). This same thing will cause many to go into foreclosure, this adding new supply to the real estate market. Also banks already tightening credit/loans requirements and availability. All this means larger supply than demand, no reason for real estate to go up. This is all just starting, curious to see what the end of 2020 will bring and start of 2021.

Also the market doesn't represent the economy and right now most of the money goes into the market creating a false-positive idea that everything's fine. Just my 2 cents.

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

#86

Post by [deleted] »

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…

[deleted]

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

#87

Post by AnimalMuppet »

codeisawesome wrote: post #70
throw0101a wrote: post #42

Earlier quoted context omitted.

> 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…

If IBM invested the money into actual research and product development - that would mean the money still enters the economy via the workers doing the research and development. I feel like this point isn't emphasised well enough in the quote above - and I wonder if the "anti buyback crowd" would have anything to say against that.

Sure, but that would be research done by IBM. That would still be money spent - the researchers still get paid - but it might be less likely to result in usable technology and sellable products than if someone else did it.

The point isn't just to give people money to spend. IBM is not a basic income operation. The point is to develop and make stuff that people want to buy, and IBM arguably has been doing less well at that than others. So letting the money go to the others who are doing better seems like a reasonable plan.

(I doubt that IBM was thinking of it in this way, though...)

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

#88

Post by AnimalMuppet »

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.

I have the impression that onlyrealcuzzo was referring to something longer term than the last month, though.

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

#89

Post by basch »

tomweingarten wrote: post #38
est31 wrote: post #21

Earlier quoted context omitted.

And dividends/buybacks are a reasonable choice. It moves the choice of whether to invest into new markets to the investors instead of dictating it from above. Companies like Google are blown out of proportion in comparison to the part that actually makes the money, all in order to find the next toothbrush product that may never come. The core Google products barely changed in the last 5 years, yet the employee count…

Even if we take at face value the idea that the products have barely changed, which I completely disagree with, this explanation vastly underestimates how many engineers it takes to scale the infrastructure it takes to run Google Search, Google Cloud, YouTube, etc.

Saying "Google hasnt changed" is somewhat of a disservice to what Alphabet is. Its an investment firm / publicly traded venture capital stock, and one of their main holdings is Google. Their future growth potential is much more than just Google, despite Google being their current source of revenue. I would hope, over time, Google Ads being 80% of Alphabets revenue drops and drops, and if I were investing in Alphabet that would be the reason, not to buy into Ad Words ownership.

https://www.forbes.com/sites/oliviergarret/2019/09/27/if-you...

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

#90

Post by david-gpu »

xadhominemx wrote: post #55
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…

Yes.... they have a small market cap because they are returning cash to shareholders. That is literally the idea of a buyback - to shrink the market cap.

Wouldn't a stock buyback reduce the number of outstanding shares, but keep market capitalization roughly constant? The company has less cash, but it has bought an asset of equal value with it (the shares).
Post reply on HN