41–50 of 319 posts
The fed has pumped 2.3 trillion dollars into the economy in the past six weeks.... I don't see how the dollar won't crash eventually. Why would foreign countries still buy US bonds?
Because what's the alternative to US treasuries? Everything else in the world is either more unstable or offering zero yield.
The fed has pumped 2.3 trillion dollars into the economy in the past six weeks.... I don't see how the dollar won't crash eventually. Why would foreign countries still buy US bonds?
Because the dollars have not been permanently pumped into the economy, and the world has faith that the Fed will shrink its balance sheet. Printing money and lending it out, and then burning the money when it's repaid, is very different than printing money and using it to buy goods and services.
Earlier quoted context omitted.
Because the dollars have not been permanently pumped into the economy, and the world has faith that the Fed will shrink its balance sheet. Printing money and lending it out, and then burning the money when it's repaid, is very different than printing money and using it to buy goods and services.
I think this thread needs an ELI5 for how the whole process works from the ground up as there seems to be a lot of popular misconceptions.
People keep predicting inflation, but it remains stubbornly below the Fed's target rate of 2%, which is itself low compared to 20th century averages. https://en.wikipedia.org/wiki/United_States_Consumer_Price_I...
The people who continue to jumble up inflation by its consumer defenition with the huge expanding of the amount of us dollars are only shooting their own wealth and anyone who listens to them's wealth in the foot. All you have to look at is stocks and home real estate to see that assets are ballooning no matter how cheap a dozen of eggs stays.
Is anyone (who is paid/lives in the US) concerned about the future value of USD? A lot of my friends are saying I should be investing in cryptocurrencies for future safety, but I don't see those as very stable, so I'm hesitant to put my savings into it.
People keep predicting inflation, but it remains stubbornly below the Fed's target rate of 2%, which is itself low compared to 20th century averages. https://en.wikipedia.org/wiki/United_States_Consumer_Price_I...
Is anyone (who is paid/lives in the US) concerned about the future value of USD? A lot of my friends are saying I should be investing in cryptocurrencies for future safety, but I don't see those as very stable, so I'm hesitant to put my savings into it.
I think the safest dollar hedges right now are bluechip tech stocks and a forever home(if you need one and get take advantage of rock bottom rates)
When the Fed buys assets (government bonds, Fannies, etc.) from a bank, the bank gets back 'bank reserves', which are just a number in the bank's Federal Reserve account somewhere.
Those reserves can't be lent out. The bank can make no change to its lending, because it's a one-to-one swap (highly liquid government treasury -> bank reserve). A bank's constraint against lending more is its equity reserve ratio, which is unchanged by Fed asset purchases.
Again, this is not printing money; functionally speaking, US Treasuries are already 'money' to a bank (they are extremely liquid, widely traded internationally, safe, and in many contexts actually preferable to cash), so swapping a US Treasury with cash is just turning one type of money into another; no net creation.
There's a simple reason the Fed doesn't clear up this confusion: the central bank prefers people to think they are printing money, because credibility is important to their effectiveness. And the Fed doesn't actually print money, because they don't have the legal authority to do so. This is why Powell is regularly getting in front of Congress to urge more stimulus spending: he knows it's the only way to get dollars directly into the hands of ordinary Americans.
The fed has pumped 2.3 trillion dollars into the economy in the past six weeks.... I don't see how the dollar won't crash eventually. Why would foreign countries still buy US bonds?
Because what's the alternative to US treasuries? Everything else in the world is either more unstable or offering zero yield.