The percentage of that stimulus that stays in the hands of consumer for disposable income is what’s gonna determine if there will be inflation. The fed is betting most of that is used for paying bills and debt. Then what you get is asset inflation at the hands of businesses.
The ballooning money supply may be the key to unlocking inflation in the U.S.
241–250 of 319 posts
Re: The ballooning money supply may be the key to unlocking inflation in the U.S.
#242Earlier quoted context omitted.
As long as we are the world's reserve currency we can do practically whatever we want.
I think what you're seeing is the end of that.
This is exactly right. People love to claim that we can print unlimited money because we are the reserve currency, yet the entire underlying collateral of the international trade system that preserves this is international us treasury repo markets (eurodollars), which becomes totally untenable as that becomes a negative carry position with real negative yields.
The further we go down that line, the more attractive dedollarization becomes.
Re: The ballooning money supply may be the key to unlocking inflation in the U.S.
#243Earlier quoted context omitted.
All the QE since 2007 has also caused massive inflation in real estate, and it's ongoing. Housing is actually rising in some markets in spite of record unemployment and a high risk of many mortgage defaults.
It's worth pointing out that housing costs are included in CPI (by proxy of rent). On an inflation adjusted dollars-per-square-foot basis, housing is exactly the same price as it was in the 1970s [1] -- right around $115/sqft in constant dollars. 2008 didn't actually make a big dent on average. The reason houses are more expensive today than they were in the past is that they're on average twice as big. This is due t…
>> It's worth pointing out that housing costs are included in CPI (by proxy of rent).
I think that is the reason CPI hasn't increased. CPI only accounts for rent and not the cost of actually buying the house. There are definitely highly inflated price to rent ratios particularly in land constrained urban areas.
I think a better way to put it is that there is low/no Consumer Price Inflation but there is tremendous Asset Inflation (in stuff that wealthy people buy).
And perhaps if there did need to be inflation, then perhaps this is better than the reverse (i.e. high CPI inflation which would impact people's ability to buy the basics)?
Re: The ballooning money supply may be the key to unlocking inflation in the U.S.
#244Earlier quoted context omitted.
It's zero sum. The people who desperately needed hand sanitizer or toilet paper today had less money left to spend elsewhere, but overall averaged demand wasn't all that different. Traditional suppliers probably know that jacking the price of one item can lead to losses elsewhere. Hoarders/scalpers are not aiding price discovery, they are manipulating the price by artificially changing supply or demand. They don't ha…
> Hoarders/scalpers are not aiding price discovery, they are manipulating the price by artificially changing supply or demand. They don't have to do so sustainably either. one could reasonably argue otherwise. let's take the example of toilet paper in the early weeks of quarantine. with or without the action of scalpers, such a massive shift in demand was going to cause toilet paper to go out of stock regardless. wit…
Hinges on what you believe would have happened to stock that scalpers bought, had they not done so. It may have left enough on the shelf for the would-be customers of scalpers to meet their needs. On the other hand, that leftover stock may have been obtained by panic buyers.
On a hunch I'd say a scalper would purchase more off the shelf than a panic buyer, because with the goal they have in mind they a) want a large quantity to resell to a large number of people and b) want to drain shelf stock to increase their odds of success.
Re: The ballooning money supply may be the key to unlocking inflation in the U.S.
#245Earlier quoted context omitted.
All the things you enumerated are included in the fed's calculation of CPI. Are you arguing their weightings are bad?
The missing something in CPI is the volatility or perception of volatility of income, which makes everything more expensive if you have to act more conservatively than people did in decades past. You feel certain regions of the country are far outpacing others in economic growth and high paying jobs, you feel healthcare costs can and will cause issues for you in the future, you feel automation could come after you. S…
This is insightful. My speculative impression is that the phenomenon you describe does have an impact on the real economy and that the difference is primarily one of perception and information.
People in the past were also at great risk of job automation, regional economic decline, etc. etc., but didn't seem to stress them and try to hedge for them as much. I could be wrong though.
Re: The ballooning money supply may be the key to unlocking inflation in the U.S.
#246If anyone is interested in hearing some incredibly knowledgeable and relatively apolitical people discuss this topic check out:
https://www.youtube.com/watch?v=B4xcCO9v-Os&t=13s
Jeff Snider is the most knowledgeable person I have ever heard speak on international monetary issues.
Re: The ballooning money supply may be the key to unlocking inflation in the U.S.
#247Not an accurate headline. Here's what actually has happened: * The Fed has doubled (!) the number of assets on its balance sheet by creating new monetary instruments and using a big swath of them to purchase financial assets like treasuries and mortgage backed bonds, helping maintain price stability in those and other financial assets. In fact, the Fed has created more new monetary assets during the past five-plus mo…
When the US Treasury sells treasuries and the Fed buys them, the result is that they don’t have to be repaid. (If held to maturity, the money goes to the Fed, and the Fed’s profits go to the government.) The Fed bought about 2 trillion in treasuries since the beginning of the year and this could be thought of as printing money, if it isn’t undone.
Re: The ballooning money supply may be the key to unlocking inflation in the U.S.
#248I don't often write meta-comments, but it's interesting to see the two large threads here. One of them is about whether the Fed is printing money. The other one is about what inflation is, or how it ought to be measured. I find it fascinating that there's so much confusion about all these economic terms. I don't have a simple answer to either, but it's thought provoking that there isn't an established theory that eve…
> it's interesting to see the two large threads here. One of them is about whether the Fed is printing money. The other one is about what inflation is, or how it ought to be measured.
Observant, but you are most likely seeing the result of 'dang' changing the URL from the article about printing money to the one about how to measure inflation! https://news.ycombinator.com/item?id=24770185
Was: "22% of all US Dollars were created in 2020" https://old.reddit.com/r/Bitcoin/comments/j6ud5u/22_of_all_u...
Now: "The ballooning money supply may be the key to unlocking inflation in the U.S." https://www.cnbc.com/2020/08/05/the-ballooning-money-supply-...
Re: The ballooning money supply may be the key to unlocking inflation in the U.S.
#249Earlier quoted context omitted.
The missing something in CPI is the volatility or perception of volatility of income, which makes everything more expensive if you have to act more conservatively than people did in decades past. You feel certain regions of the country are far outpacing others in economic growth and high paying jobs, you feel healthcare costs can and will cause issues for you in the future, you feel automation could come after you. S…
This is insightful. My speculative impression is that the phenomenon you describe does have an impact on the real economy and that the difference is primarily one of perception and information. People in the past were also at great risk of job automation, regional economic decline, etc. etc., but didn't seem to stress them and try to hedge for them as much. I could be wrong though.
I also wonder how much fear is simply due to having access to more data, and how much is kind of a feedback loop due to actions stemming from that fear causing even more fear.
But 2 parameters that are different than the past:
1) The rate of change of job destruction from automation and outsourcing to up and coming countries may not be the same over all time periods. If it happens slowly enough, then it may not be perceived by people and it may only have a negligible economic effect if the obviated people are able to be put to use elsewhere.
But with computers and mobile high speed internet and GPS, you can roll out products that obviate entire fields within years if not months. Email/Calendars/Online Shopping/Travel Search/Reviews/Search Engines/Online Auctions/Craigslist/Real Estate/low cost index funds have all laid waste to enormous numbers of people's professions or lowered the barrier to entry heavily. The younger generation has no or much lower demand for travel agents, secretaries, stock brokers, real estate agents, journalists, etc.
2) The birthrate in the past pretty much guaranteed growth. If many people have 3 and 4 children, then growing demand and hence growing growth is basically built into the system. But what happens if people start having 0, 1, and 2 children? And they're all utilizing databases and internet connections to cut out numerous middlemen that their numerous parents and grandparents needed to use?
Re: The ballooning money supply may be the key to unlocking inflation in the U.S.
#250Earlier quoted context omitted.
No. I think what the poster is saying is that running a government deficit is printing money. Fiscal policy is money printing, not monetary policy. This is very much not what is colloquially known as money printing, rather it's the basis of modern money theory. Monetary policy is just swapping one kind of USD denominated assets for another. It doesn't really change the size of private bank balance sheets, hence it is…
> I think what the poster is saying is that running a government deficit is printing money. The government borrows the money from bond buyers, so that's also not printing money. (The Fed does buy these bonds, but not directly from the government because the government can't do anything with bank reserves. The Fed can only "print" bank reserves therefore it can only buy assets from banks.)
The Treasury simply issues the bonds. It isn't analogous to borrowing money, as there is no collateral to put up and no other entity in the economic system needs to have any savings in order for the US Treasury to issue the bonds. The bonds are traded one-to-one for reserves at the maturity dollar value, so this is not borrowing. It is a swap.
Merely having a different purchase value from maturity value is not enough to qualify a bond purchase as borrowing either, because Bond issuing is not restricted by any economic opportunity cost. The amount of Bonds issued is an simply edict by Congress, when it passes a Budget resolution.