The Keynesian Revolution: A new biography of John Maynard Keynes

Suppose you have ten people and the money supply is a hundred dollars, of which each person has ten. And then suppose you print ten more dollars and give them all to person #10, so that person now has 20 dollars. That is equivalent, economically, to keeping the money supply the same but taking 91 cents from each of the other 9 people and giving it to person #10: in both cases, person #10 now has 2/11 of the total money supply, and persons #1 through #9 each have 1/11. And that means their respective fractions of the total buying power have changed the same way, since the buying power of money is the fraction of the total money supply that that money is equal to. So person #10 can now buy more of the things he wants, and everyone else can buy less.

In the case of the Federal Reserve printing money under normal circumstances, person #10 is financial institutions and persons #1 through #9 are everybody else.

> Aren't the victims you are imagining the hypothetical people who have large amounts of money in checking, savings, or literally under their mattress?

The "victims" are everybody who isn't getting some of the printed money. The fact that they already have other money doesn't change the fact that they lose buying power. Nor does it matter where their other money is stored. It could even be in assets like a 401k; as long as the assets are denominated in money (your 401k balance is in dollars), the buying power they represent is affected.

> I really didn't think that was a significant segment of the population.

Everybody who doesn't get new money the Federal Reserve prints under normal circumstances is almost all of the population.

I take what you say as ‘losing buying power’ to mean that a lower quantity of real goods and services can be purchased for the same amount of currency. There isn’t any evidence that this has happened following the Fed’s QE programmes, despite most mainstream economists freaking out about the same point at the time.

The creation or destruction of dollars has no bearing on the purchasing power of the dollars held by anyone else. It is only when new dollars are used to make purchases in excess of existing supply constraints that you create inflation and erode the purchasing power of the currency. That is not to say it is a useless metric, but you need to look at what is being done with the money rather than just looking at the amount outstanding.

Japan is an interesting example of this with 30 years of history to look at. Money supply has expanded by multiples, while consumer prices have remained constant since the mid 1990s.

I also think this fundamentally misrepresents the mechanical operations taking place when the federal reserve “prints money” (guessing to mean QE). They are simply creating dollars to purchase bonds from the private sector - it is essentially an asset swap. The financial institutions give up their bonds, and gain dollars in return. No new money is injected into the private sector by doing this. The dollars that the banks receive usually just sit in their account at the federal reserve, not doing anything in the real world. Your examples would be more valid if discussing government fiscal stimulus programmes, for example spending $2T on infrastructure, since that is a direct injection of nominal wealth to the private sector.

AAPL in feb ~$320 AAPL today ~$385

TSLA in feb ~$900 TSLA today ~$1500

Inflation is not equal across all sectors of the economy, is a transfer of wealth that disproportionally benefits some.

No. Read my example of the ten people again, carefully. I don't think you have grasped it yet.

> People complain about stagnating real wages, but I'm unaware of exponentially declining real wages

I have said no such thing. I have no idea where you are getting this from. I have said nothing whatever about wages.

> if there was significant wealth transfer from almost everybody, then it would be obvious

It is obvious. See further comments below about McMansions, etc.

> I think you are saying that somehow, in emotional terms, the banks are a vampiric drain on the economy.

No. I am saying that the government is favoring financial institutions over everyone else by printing money and giving it to them. That does not mean financial institutions in themselves are not necessary. It just means they are being favored by the government, and this has negative effects and should be stopped. See my post in response to qnt upthread about misallocation of resources.

> If they somehow make money vanish

I have said no such thing. Where are you getting this from?

> If all the excess money is being hoarded by a tiny number of people

I have said no such thing. You are reading a lot of things into my post that are not there.

The financial institutions are not hoarding the money the Fed prints and gives to them. They are using it to make mortgage and commercial real estate loans, because that is what they are allowed to use it for under current policies. Which in turn means more economic incentive for people to produce things that can be bought with those loans: McMansions and commercial real estate, well beyond the amount that would actually be bought in a free market with no government interference. And, as a result, we have, as I said, McMansions galore and empty commercial real estate all over, while other things that people need or want more are unnecessarily scarce, because the economic demand that would have motivated people to produce them has been taken away and transferred to financial institutions.

> The idea that financial institutions possess all wealth

I have said no such thing. I have only said that when the Fed prints money and gives it to financial institutions, that is economically equivalent to transferring some wealth to them from everyone else. I have never said it transfers all wealth to them. I have not even said it transfers most wealth to them.

Again I think there’s a misunderstanding of monetary operations that lead to these conclusions. Banks absolutely do just sit on these reserves [1]. Banks do not lend reserves, nor do they need reserves or deposits in order to make new loans. Bank lending is constrained by the demand from creditworthy borrowers, and regulatory requirements. This [2] is a useful primer on modern lending mechanics

[1]: https://fred.stlouisfed.org/series/TOTRESNS

[2]: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...