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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.

#271

Post by [deleted] »

RobertoG wrote: post #117
darawk wrote: post #109

Earlier quoted context omitted.

Creating bank reserves absolutely creates money. Bank reserves are the fulcrum around which bank leverage ratios operate. Yes, they can margin treasuries to borrow reserves from other banks, and in that sense, they are fungible. But the total amount of bank reserves in the system at any one time is still what bounds the total amount of money creation that can happen via leverage. Increasing the absolute amount of ban…

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…

[deleted]

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

#272

Post by cs702 »

skybrian wrote: post #247
cs702 wrote: post #116

Not 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.

Well... not really:

* The Fed buys treasury notes and bonds from third parties, because it cannot buy them directly from the US Treasury at issuance.

* The Fed can earn and book profits from treasury securities only to the extent the US Treasury continues to make interest payments and repay principal.

* The US Treasury can pay continue to pay interest and repay principal only with money that is (a) borrowed from third parties by issuing new treasury securities, or (b) collected via taxation.

Things are this way by design, for many reasons, including the explicit goal of limiting short-term political influence over monetary policy.

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

#273

Post by kortilla »

lordnacho wrote: post #214

I 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…

Don’t forget, the closer you get to things that affect people’s lives, the more they will be compelled to knee jerk react.

If people fuck up on the understanding of black holes, it doesn’t matter for the economy. If people fuck up economics, it can mean the next Great Depression.

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

#274

Post by mcfly1985 »

nkurz wrote: post #257
chrischattin wrote: post #75

Earlier quoted context omitted.

Home prices are not included in the CPI.

You are right, but this might just be semantics. Perhaps you already know this, but for others, rent is included in CPI, and for those those who own, "owner equivalent rent" is used as an estimate of the amount of rent they would be paying. Incredibly, the amount of OER is determined by asking the owner they think they could rent out their home! I'd guess that home prices must correlate strongly to this estimation. S…

Rent is not the same thing as house prices. Additionally, it's imputed rent - not actual rent. The fed released their own study just the other week showing that if house prices were included in the cpi as they were in the past, cpi would be drastically higher.

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

#275

Post by smallnamespace »

lordnacho wrote: post #214

I 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…

This is what's simultaneously so fascinating and frustrating about macroeconomics!

At the local scale, one can take for granted that definitions are stable and many laws are immutable: if I go into debt, I must pay it back; I can't create money out of thin air; money is defined as dollars; I must pay my taxes, etc.

But the macroeconomy is the entire system, and in complex systems, everything affects everything. Causal feedback loops run in both directions (A causes B causes A again). Money, debt, taxation, etc. are all creations of human society, and can be modified.

But even though humans made these definitions, they're not quite fully in our control.

Like on the one hand, we just made it all up, just like how US dollars went from gold-backed to fiat overnight.

But then, if you really attempt too much magic, it doesn't work. If you print money and spend more than you have, then you can turn into Venezuela, where there is truly hyperinflation and the dollar again becomes de facto currency (despite the government's halting attempts to outlaw this).

So economic laws have this dual aspect where on the one hand, it's simply a human invention, but on the other hand it appears to reflect some deep laws of nature regarding how energy and information flows through our societies, and you can't push the definitions too far from reality on the ground.

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

#276

Post by mcfly1985 »

qw3rty01 wrote: post #54
as_keyof_typeof wrote: post #4

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.

Cryptocurrency is certainly not a good place to put savings, as its price is way too unstable to be a store of value. If you're unsure about the value of the USD, then traditional investments like gold would probably be a better choice. Like other comments mention, even though lots of money was created for economic stimulus, it's used in such a way that makes it deflationary long-term (as seen by the projected 0.62%…

> Cryptocurrency is certainly not a good place to put savings

Found the short-sighted sheep.

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

#277

Post by CyberDildonics »

SonOfThePlower wrote: post #107
JSavageOne wrote: post #95

Earlier quoted context omitted.

Functionally there's little to no difference between what you've described and what is colloquially known as "money printing". You've essentially just redefined "money" to include U.S. treasuries and mortgage-backed securities, and then stated that it's just an asset swap and not money printing. You can use whatever terminology you want, but at the end of the day, the Federal Reserve is creating money out of thin air…

No, FED does not print money - bank reserves are not legal tender. If they had printed money, inflation would have skyrocket. My only question is why banks agree to this deal: exchanging U.S. treasuries for bank reserves (which they only can use as a collateral for lending) ?

https://fred.stlouisfed.org/series/M1REAL

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

#278

Post by mrep »

anm89 wrote: post #242
david927 wrote: post #150

Earlier quoted context omitted.

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 de…

And go where? European central bank assets are at 53.1% of GDP, Bank of Japan assets are at 125.7% of GDP, and the US FED is at 34.4% of GDP [0]. But hey, you could go with the chinese yuan, they "only have a 36% assets to GDP ratio" if you trust them.

[0]: https://www.yardeni.com/pub/peacockfedecbassets.pdf

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

#279

Post by imtringued »

diob wrote: post #60
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.

Right, I've posted this before, but long term wealth building is becoming too expensive for the average person. The only reason food hasn't become too expensive is wealthy people don't have a reason to go out and buy up all the food. They do, on the other hand, have reason to go out and invest. This is, however, starting to fall apart for goods that don't normally have reason to be bought up. In other words, folks wi…

If wealthy people suddenly bought up all the food then we would see inflation again. It would be very good because it shifts the balance away from capital to labor.

Imagine you are a billionaire and suddenly the minimum wage shoots up to $100k per year. Suddenly that billionaire's wealth has a lower purchasing power.

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

#280

Post by CyberDildonics »

ryneandal wrote: post #94
danaos wrote: post #63

Earlier quoted context omitted.

Well, it's r/bitcoin which is arguably even worse.

I've never been to the subreddit, but then followed the link and regrettably read a few comments.

/r/bitcoin is a heavily monitored and censored subreddit. Anything not in line with message is deleted, anyone who tried regularly is banned or shadow banned. It is basically /r/thedonald for cryptocurrency. Even here if you post something negative about it here you can see your votes go down in clusters (while possibly going up in between).
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