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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.

#201

Post by diob »

jakub_g wrote: post #178
programmertote wrote: post #174

Earlier quoted context omitted.

As someone who tried buying Nintendo Switch, I can confirm that there were scalpers who bought up every Switch stock available during the COVID lock down and resold it for ~1.5x to 2x more than the MSRP price. This seems to have happened with the latest Nvidia graphic cards as well.

Ah I see. Well same stuff with concert/football tickets, Air Jordans etc. If something is valuable but with limited quantity, this is inevitable.

You're close here, but I think you're missing the point. Things that haven't been seen as "scarce" in the past are becoming more and more likely to be forced into scarcity. We're not worried about superfluous goods (concerts), but goods like housing / food are not superfluous (one could even argue the same thing about certain electronics).

Other commenters have gone into it, but this is about forced scarcity vs need. Incidentally, it's also similar to why workers have trouble negotiating individually vs as a group.

The gist of it is that those in power / wealth have the ability to outlast any single poor individual. You don't want to buy a house, toilet paper, or a nintendo switch right now? That's fine, I'll keep buying them till you or some other chump gives up. I have so much money that it doesn't really matter how long you decide to be frugal and wait. You want to strike? That's fine, you'll be back soon enough when you need to pay for something or keep your family alive. I have enough to outlast you.

Had we pumped this money into the actual working class economy I wouldn't be worried. But instead we siphoned off more working class dollars under the guise that inflation isn't real. It is, and future generations are going to pay dearly for our naivety.

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

#204

Post by whytaka »

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…

> the bank gets back 'bank reserves'

> bank's constraint against lending more is its equity reserve ratio

Wait, isn't this the same reserve? IE. By putting more capital in the reserve, the banks are able to lend proportionally more?

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

#205

Post by [deleted] »

marvin wrote: post #142
jgalt212 wrote: post #104

Earlier quoted context omitted.

I think you're sort of trying to have it both ways here. The Fed has been printing money for 12 years in hopes of increasing CPI. But real people, who buy the stuff in the CPI basket, don't have M2, so no CPI bump. It took a long time for central banks to realize this. And even astute minds like John Paulson got tripped up on this one. Starting in 2009, he bought as much gold as he could because he feared rampant CPI…

To get CPI up, why don't they just deposit money straight into ordinary people's bank accounts? I think that would do the trick.

[deleted]

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

#206

Post by throw0101a »

_gx90 wrote: post #130
RobertoG wrote: post #117

Earlier quoted context omitted.

New money, enters the economy by two ways: banks lean to households/business or government direct spending. New reserves in the system doesn't create money. The quantity of reserves in the system limit the quantity of money that the private banks can lend to the real economy (actually, not really, but that's another discussion), but the existence of reserves doesn't make the bank to lean. For the banks to lean, it's…

>The central bank have not power to stimulate the economy in this situation, that's the reason central bankers are pushing the governments to spend directly. Sounds very political for a supposedly independent central banking system! This system is a disgrace and is governed by unelected technocrats who are able to yield a crazy amount of power over the economy without ever being subject to inquiries from the public,…

>> The central bank have not power to stimulate the economy in this situation, that's the reason central bankers are pushing the governments to spend directly.

> Sounds very political for a supposedly independent central banking system!

The phraseology makes it sound political, but it is not political.

Basically when a central bank cuts its rate down to 0.25%, 0%, or even negative (e.g., Switzerland), it's a signal that the central bank has done all it can do to get the economy going. (There are some other mechanism employed in recent years as well ("quantitative easing"), but the message is the same: we are at the limits of monetary policy.)

After that it is up to governments, if they so choose, to also do fiscal policy initiatives, e.g., Keynesian economics: create economic demand through public spending (since private business spending/demand is in the toilet).

Of course government are free not to do anything at all, which would generally entail lower economic growth and higher employment.

But central banks have a mandate to make sure the economy is in a certain middle-ground: not too hot to induce a lot of inflation, and not too cold to have a lot of people out of work.† Everyone agrees to these goals ahead of time:

> The Federal Reserve works to promote a strong U.S. economy. Specifically, the Congress has assigned the Fed to conduct the nation’s monetary policy to support the goals of maximum employment, stable prices, and moderate long-term interest rates.

* https://www.federalreserve.gov/faqs/what-economic-goals-does...

The "unelected technocrats" are doing what they were hired to do. They each have a fixed term (though renewable), and if they don't do what they're supposed to they are replaced.

They did not sneak into these positions: they were told to work towards certain goals, and they are using the tools at their disposal. They are no different than the Board of a corporation hired by the shareholders of the company: it's just that the "shareholders" are elected representatives (Congress, parliaments, etc).

If the Board is not doing a satisfactory job it can be sacked with cause if necessary.

† Sometimes you actually have both: see "stagflation".

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

#207

Post by leetcrew »

marketingPro wrote: post #186
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...

Do not use CPI as it doesn't take into account technology improvement and outsourcing. I'd take the big mac index over CPI.

isn't the price of a big mac also subject to technology improvement and outsourcing? it takes quite a logistics chain to get all those ingredients where they need to go.

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

#208

Post by dang »

eightysixfour wrote: post #11
kenforthewin wrote: post #7

A link to a claim on reddit with no citation. Not saying it's wrong but it's certainly not a quality post.

Here's an alternative: https://www.cnbc.com/2020/08/05/the-ballooning-money-supply-...

Ok, we've changed to that from https://www.reddit.com/r/Bitcoin/comments/j6ud5u/22_of_all_u... above. Thanks!

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

#209

Post by [deleted] »

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…

[deleted]
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