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The ballooning money supply may be the key to unlocking inflation in the U.S.

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Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#131

Post by RobertoG »

kikokikokiko wrote: post #39
apsec112 wrote: post #12

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...

All this money HAS generated a lot of inflation already, you're just looking at the wrong place. Look at the S&P over the last decade, and especially look at the "V shaped recovery" of 2020.

Inflation is not just a term that we can define how we like, it's an economic official indicator ergo, there is not discussion possible about if has happened or not.

You are talking about a bubble.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#132

Post by UncleEntity »

smallnamespace wrote: post #49

The Fed is only creating bank reserves, which does not create more money. Therefore, the Fed has not been printing money. 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…

> There's a simple reason the Fed doesn't clear up this confusion...

There is no confusion, the term is called "monetizing debt" where they create 'money' out of thin air to buy government debt from banks who then use this money to create even more money via fractional reserve lending.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#133

Post by [deleted] »

_gx90 wrote: post #119
alexjray wrote: post #40

Earlier quoted context omitted.

That's a best case scenario and feels overly optimistic. What are the chances it gets fully repaid?

It cannot be repaid, ever, because the interest exceeds the amount of money that is currently in existence, which means they will always have to borrow more money (which is created out of thin air) to service the debt.

[deleted]

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#134

Post by _gx90 »

RobertoG wrote: post #120
_gx90 wrote: post #111

Earlier quoted context omitted.

They are, the argument that the poster above you put forward is such a tired argument and I really do not understand why people are trying to hide the fact that the Fed is actually creating money out of thin air and buying assets from banks for it. The Fed doesn't technically "print" the Federal Reserve Notes, but for all intents and purposes it is legitimately money that is being created, only digitally. You are ent…

>>"Also bank reserves can be used as collateral for further loans [..]" What do you mean by that? I don't think that it how it works.

Collateral is the wrong term, apologies for that - what I mean is that expanded bank reserves can be used to back an expansion of credit from the bank in question.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#135

Post by jbverschoor »

nostrademons wrote: post #124
smallnamespace wrote: post #49

The Fed is only creating bank reserves, which does not create more money. Therefore, the Fed has not been printing money. 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…

Bank reserve ratios [1] operate as a percentage, so by creating more bank reserves, you create more money that can be lent out. Say that the reserve ratios requirement is 10%, which it currently is. Then for every dollar it has in reserves, the bank may create $10 in loans. The bank reserves don't themselves circulate as money, but they let the bank create more credit, which does circulate as money. [1] https://www.i…

The reserve requirements are 0% as of earlier this year.

https://www.forbes.com/sites/bobhaber/2020/03/16/the-fed-fir...

https://www.cnbc.com/2020/03/15/federal-reserve-cuts-rates-t...

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#136

Post by UncleEntity »

skybrian wrote: post #86
scsilver wrote: post #28

Earlier quoted context omitted.

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.

Consumer inflation actually is inflation, by definition. This isn't being confused, this is understanding how inflation is defined and using terms correctly. Inflation is about the prices people actually pay, on average. Your neighbor's house getting sold for a lot of money isn't a real cost to you like rent. Someone paid that price, but they are not necessarily typical. Inflation does include rent (or "imputed rent"…

> Consumer inflation actually is inflation, by definition. This isn't being confused, this is understanding how inflation is defined and using terms correctly.

They fail to make a distinction between monetary inflation and price inflation which is the reason for the (intended) confusion around the term 'inflation'.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#137

Post by jbverschoor »

_gx90 wrote: post #134
RobertoG wrote: post #120

Earlier quoted context omitted.

>>"Also bank reserves can be used as collateral for further loans [..]" What do you mean by that? I don't think that it how it works.

Collateral is the wrong term, apologies for that - what I mean is that expanded bank reserves can be used to back an expansion of credit from the bank in question.

There are no reserve requirements anymore

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#138

Post by jbverschoor »

UncleEntity wrote: post #132
smallnamespace wrote: post #49

The Fed is only creating bank reserves, which does not create more money. Therefore, the Fed has not been printing money. 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…

> There's a simple reason the Fed doesn't clear up this confusion... There is no confusion, the term is called "monetizing debt" where they create 'money' out of thin air to buy government debt from banks who then use this money to create even more money via fractional reserve lending.

You mean unlimited, as the reserve requirements are 0%

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#139

Post by btilly »

pauldickwin wrote: post #22
rllearneratwork wrote: post #18

Earlier quoted context omitted.

Yeah, maybe a gallon of milk did not increase that much. But did you see prices for houses? for education? for cars? for entertainment? even high-end electronics? Yes, for all those categories there are other (even more important) factors than inflation, but overall, we see a growth much larger than CPI

The prices for these things did not go up because the fed gave people stimulus checks to pay for their daily needs.

Yes they did.

When you give people stimulus checks, they spend it. That money enters circulation. It winds up in the pockets of businesses. And from there to the owners of said businesses. Which, since they have money and this is a horrible business environment to invest in, means that money goes into assets. Which drives up the price of the assets.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#140

Post by RobertoG »

_gx90 wrote: post #134
RobertoG wrote: post #120

Earlier quoted context omitted.

>>"Also bank reserves can be used as collateral for further loans [..]" What do you mean by that? I don't think that it how it works.

Collateral is the wrong term, apologies for that - what I mean is that expanded bank reserves can be used to back an expansion of credit from the bank in question.

In order to expand credit, banks need borrowers that demand credit. Never mind the number of reserves available if there is nobody asking for credit. That's the reason there is not inflation.

In the current economy, a reactivation of the economy have to come from government spending (fiscal policy). Central Banks (monetary policy) are powerless when the interest rate have gone all the way down.

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