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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

#111

Post by sjtindell »

systemshutdown wrote: post #54

Why are the feds able to inject so much money into the system these days without much push back? While during the 2008 Crisis Hank Paulson had such difficulty with getting 700 billion injected?

That 700 billion was Treasury money. The Fed at the time also engaged in trillions of dollars of quantitative easing, similar to what they’re doing now. I would guess the reason the Fed is going all in this time is because there was consensus among the decision makers that last time we were too slow - we did QE but it took years. I assume they think that if we hit it hard now, we can shorten the recession period. Also this time there is more unified and obvious support from “the people”. Rather than bailing out bankers and all the hazards that come with that, everyone is getting a check, so everyone is more on board.

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

#112

Post by new_time »

magicsmoke wrote: post #58
new_time wrote: post #48

Earlier quoted context omitted.

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

It also puts assets with positive rates of return out of the hands of the common person. Kind of like how an overheated housing market makes it so you'll never own a home and are stuck paying rent forever. If you ever wanted to own a piece of America's economy and get dividends in the future, now it's priced out of reach. This inflation in investment assets further cements the division between those that have to work…

Precisely right.

That's why printing cash (whether in the form of UBI or any other cash printing social program) is not a sustainable solution for lifting people out of poverty or building a healthy economy. There are always negative long term effects that end up hurting the poor and middle classes even more. Even if there's not inflation of consumer goods, there's inflation of investment grade assets.

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

#113

Post by blawson »

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.

Inflation hurts the poorer the most - they don't have assets that are being priced up due to inflation, while the cost of everyday life goes up.

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

#114

Post by jonfw »

godtoldmetodoit wrote: post #105
colinmhayes wrote: post #100

Earlier quoted context omitted.

>Stock buy backs weren't a thing until a SEC rule change in the 80's, this is a relatively new phenomenon and not intrinsic to a functioning market. Buybacks and dividends are essentially equivalent. This comment shows a distinct lack of understanding. Of course home depot could return their profits to employees, but then it wouldn't be a business. Home depot's sole reason for existing is to return money to sharehold…

Ahh the old "shareholders are the only thing that matters" argument. Buybacks and dividends are not equivalent, buybacks are tax advantaged in ways that dividends are not. We've allowed numerous companies to get to a size where they are "too big to fail". They know they are too big to fail, and they get to take advantage of this position. They get to go into near unlimited amounts of debt to finance buybacks to enric…

Companies like Home Depot and IBM aren't usually considered 'too big to fail', so these aren't really great examples for the point you're trying to make.

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

#115

Post by monetaryvirus »

Eliezer wrote: post #10

And it's still not even remotely enough. 5-year inflation expectations running at 0.67%, CPI falling. The shock to aggregate demand is being allowed to exceed the supply shock. https://fred.stlouisfed.org/series/T5YIE

How is that supposed to work? I can understand if this were a normal cyclical pullback, but this isn't a normal times; there is actual economic destruction wrought by a real (non-monetary) shock to supply. In order to believe this helps, you have to imagine it happening by this mechanism:

"Can you lend to our business that's not allowed to operate and probably won't pay you back?"

'lol no. ... wait, I just got off the phone with our credit line. We can borrow at 3% instead of 3.25%. What's your business model again?'

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

#116

Post by criddell »

aeternum wrote: post #109
criddell wrote: post #69

Earlier quoted context omitted.

> The US debt / GDP fraction is still relatively low compared to many other countries. Is the relative ratio a good way to evaluate it? Does it mean anything to talk about the debt:GDP ratio in isolation?

GDP is somewhat close to a nation's income. Those with higher incomes can typically safely afford larger loans.

So what would be different between two similar countries, one with a debt:GDP ration of 0.1 and the other with a ratio of 2? Is the only difference that the first country has more options in a time of crisis?

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

#117

Post by onlyrealcuzzo »

bequanna wrote: post #17
onlyrealcuzzo wrote: post #12

Earlier quoted context omitted.

Part of what allows a company to have insane cashflow is issuing corporate bonds at artificially low prices because the Treasury is manipulated by the Fed.

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?

US Bonds are usually referred to as Treasury bonds, which the Fed buys, to manipulate the yield.

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

#118

Post by onlyrealcuzzo »

adventured wrote: post #27
onlyrealcuzzo wrote: post #12

Earlier quoted context omitted.

Part of what allows a company to have insane cashflow is issuing corporate bonds at artificially low prices because the Treasury is manipulated by the Fed.

That doesn't inherently follow at all. It very much depends on the company in question. IBM has a very profitable business and has for the past decade. They're paying around mid 2.x% interest on their debt ($1.3b interest expense last fiscal year). You can double that rate, and IBM can safely handle the cost. They can afford to pay far higher interest rates on their debt while still producing excellent profitability.

The interest on their debt would be 6-8% if the US Treasury yield wasn't artificially manipulated by the Fed to ~0%.

They'd be paying 3-4x that on interest. That's a decent chunk of their profits / buybacks.

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

#119

Post by systemshutdown »

sjtindell wrote: post #111
systemshutdown wrote: post #54

Why are the feds able to inject so much money into the system these days without much push back? While during the 2008 Crisis Hank Paulson had such difficulty with getting 700 billion injected?

That 700 billion was Treasury money. The Fed at the time also engaged in trillions of dollars of quantitative easing, similar to what they’re doing now. I would guess the reason the Fed is going all in this time is because there was consensus among the decision makers that last time we were too slow - we did QE but it took years. I assume they think that if we hit it hard now, we can shorten the recession period. Als…

Interesting. What is the difference between Treasury Money and money coming from the Federal reserve? Was the 700 billion of Treasury money at that time a loan that had to be paid back while today, they're simply increasing the money supply?

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

#120

Post by Eliezer »

RobertoG wrote: post #32
Eliezer wrote: post #10

And it's still not even remotely enough. 5-year inflation expectations running at 0.67%, CPI falling. The shock to aggregate demand is being allowed to exceed the supply shock. https://fred.stlouisfed.org/series/T5YIE

Fiscal policy is the obvious solution to aggregate demand problems, not monetary policy.

Fiscal policy creates debt that needs to be repaid. Ordinary monetary policy involves swapping new currency for very stable assets like Treasury bonds that can be sold back later to destroy the currency. As much aggregate demand as possible should therefore be created by ordinary monetary policy, since it's cheaper (and faster and easier).
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