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Banks, QE, and Money-Printing

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Re: Banks, QE, and Money-Printing

#61

Post by ianleeclark »

JumpCrisscross wrote: post #45
newdude116 wrote: post #29

Earlier quoted context omitted.

" Yet for academics and central bankers the only answer to growth is more debt." The uttermost definition of capitalism. "Our economies and culture have a skills crisis not a growth crisis." Capitalism can't survive without growth by definition. https://ourfiniteworld.com/2011/02/21/there-is-no-steady-sta...

> Capitalism can't survive without growth by definition Capitalism prefers growth. It causes growth, which is good. (Growth does not have to mean resource intensity.) It does not require growth. Zero-grow and shrinking economies can allocate resources well through markets.

> Zero-grow and shrinking economies can allocate resources well through markets.

Capitalism isn't "a/many market(s)." Capitalism is much more than that, and one of those constituent pieces is profit-seeking.

Re: Banks, QE, and Money-Printing

#62

Post by jpgvm »

zelos wrote: post #22
turbinerneiter wrote: post #15

If they print money to build new roads, bridges, (clean) power plants, schools -> good. If they print money to put in stocks and real estate -> bad. The one thing creates real value and enables more real value creation in the future. The other one has no effect on the real economy and wages. Driving real estate prices is even bad: at some point, no real economic strategy (aka. business model) is able to sustain the n…

As someone who really doesn't understand economics: if the government prints money to build infrastructure, where does the value they've added come from? I can't follow the logic of it: the government makes some money and pays a load of workers to build a bridge. It seems like the bridge is 'free', paid for with bits of paper they printed. Is the real cost the increased price of bridge building for everyone else, bec…

The bridge is the value, it will increase productivity and quality of life (same can be said for other infra projects).

The money comes from everyone holding the currency. When you print money you devalue all the existing money, this is called inflation. So effectively "everyone" paid for the bridge that is holding your currency.

Re: Banks, QE, and Money-Printing

#63

Post by fuoqi »

cryptica wrote: post #14

Money printing is always inflationary. Either it causes CPI inflation immediately or it's stored up for later. When money printing does not cause immediate CPI inflation, surplus money is stored in scarce assets which creates asset price inflation and increasing fragility which will inevitably lead to CPI inflation later. The fact that new money is mostly backed by debt is irrelevant because those who own a lot of ca…

>You can just do what the government does with treasury bonds; issue new bonds to pay off your old bonds

The problem is that there is a limit to how much treasuries you can sell to the market. For a long time US government was able to exploit internal and foreign markets to run deficits, but the "free lunch" has ended. No one wants to buy those treasuries at the proposed rates and volumes anymore. So what did the US government do? If we remove the extra steps, it effectively coerced the Fed to print money and give it to the government. If it's a one time thing, economy may handle it, but there is a strong temptation for politicians to keep doing so, which can only end in disaster.

Re: Banks, QE, and Money-Printing

#64

Post by JumpCrisscross »

syshum wrote: post #55
JumpCrisscross wrote: post #30

Earlier quoted context omitted.

> It is also a Tax on Saving, Retirements, and responsible behavior Unexpected inflation is. Predictable inflation is easy to account for. I live in New York. My basket of goods included until recently rapidly-increasing real estate prices. That is the benchmark against which my money managers are judged. It is true that this forces them to invest more riskily. But that is a systemic lever inflation and interest rate…

A healthy economy needs both savers and risk takers, What is happening today, the marginal rate @ or below zero there are no savers, that is equally as bad as high interest rates where no one was taking any risks

> healthy economy needs both savers

Based on what? Savings are the rue of Keynesian economics. And they at best do nothing in monetarist frameworks.

> the marginal rate @ or below zero

Marginal nominal rates are between 0.09% (1 mo.) and 1.63% (30 y.) [1]. Real rates are negative [2], but to the tune of -1.22% (5 y.) to -0.26% (30 y.), which hardly discourages rainy-day saving. For anything more than that, surplus capital should be invested, not hoarded.

[1] https://www.treasury.gov/resource-center/data-chart-center/i...

[2] https://www.treasury.gov/resource-center/data-chart-center/i...

Re: Banks, QE, and Money-Printing

#65

Post by YPCrumble »

kqvamxurcagg wrote: post #26

The fundamental issue with this article is that the inflation number is a lie. Housing costs are the key cost for every consumer but are excluded from CPI. Western countries have been running fiscal deficits consistently for decades, QE and low interest rates for 10 years. Yet for academics and central bankers the only answer to growth is more debt. Low interest rates benefit only the asset rich. They deprive everyon…

Why do you say that housing costs are not part of CPI? They make up 25%+ of CPI, don't they? See https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

Are you saying that the Owner's Equivalent Rent calculation is not the same as housing costs? That sounds like a stretch.

Would someone help me understand what I'm missing here?

Re: Banks, QE, and Money-Printing

#66

Post by auston »

kqvamxurcagg wrote: post #26

The fundamental issue with this article is that the inflation number is a lie. Housing costs are the key cost for every consumer but are excluded from CPI. Western countries have been running fiscal deficits consistently for decades, QE and low interest rates for 10 years. Yet for academics and central bankers the only answer to growth is more debt. Low interest rates benefit only the asset rich. They deprive everyon…

Yeah this part had me baffled:

“ In other words, while it’s possible for an individual bank to boost its reserves by selling assets to raise capital, it’s mechanically impossible for the entire banking industry to collectively raise its reserves industry-wide.”

Why not? I have confidence people would rally together to buy distressed bank assets at rock bottom prices.

Re: Banks, QE, and Money-Printing

#67

Post by sauwan »

siwatanejo wrote: post #3
UncleSlacky wrote: post #2

I recommend Stephanie Kelton's "The Deficit Myth" for more background on MMT: https://www.amazon.com/Deficit-Myth-Monetary-Peoples-Economy...

The point of that woman is simply: let the deficit go up ad infinitum (in USD value), it doesn't matter because as the central bank keeps printing money, the value of the deficit actually goes down (because the USD value goes down), so the value of the deficit is stable even if we don't perceive it to be this way. Quite BS imo

Have you read the book? That's quite the oversimplification.

She says the deficit doesn't matter because a government that prints its own money can wipe out the debt with a few clicks of the button (if they so choose). The debt number doesn't really matter. It can be paid off by a large injection of printed cash. But that has other implications. Ultimately, it's inflation that we really care about, not the deficit. And there are better tools for controlling inflation that hurt fewer people than the current monetary policies in place.

Re: Banks, QE, and Money-Printing

#68

Post by JumpCrisscross »

HourglassFR wrote: post #60
JumpCrisscross wrote: post #45

Earlier quoted context omitted.

> Capitalism can't survive without growth by definition Capitalism prefers growth. It causes growth, which is good. (Growth does not have to mean resource intensity.) It does not require growth. Zero-grow and shrinking economies can allocate resources well through markets.

> (Growth does not have to mean resource intensity.) That would be wonderful, alas the data we have suggest otherwise. But if you have ideas of how that decoupling between ressource extraction and growth could work I would glad to hear/read them (for real, I would like to be more positive on those matters).

> the data we have suggest otherwise

No [1]. They don’t [2].

> if you have ideas of how that decoupling between ressource extraction and growth could work

The universe of digital goods and services, for one. A few grams of metal and silicon producing as much value today as a car’s worth of steel did a century ago.

[1] https://www.eia.gov/todayinenergy/detail.php?id=10191

[2] https://www.wri.org/blog/2020/07/decoupling-emissions-gdp-us

Re: Banks, QE, and Money-Printing

#69

Post by alexmingoia »

YPCrumble wrote: post #65
kqvamxurcagg wrote: post #26

The fundamental issue with this article is that the inflation number is a lie. Housing costs are the key cost for every consumer but are excluded from CPI. Western countries have been running fiscal deficits consistently for decades, QE and low interest rates for 10 years. Yet for academics and central bankers the only answer to growth is more debt. Low interest rates benefit only the asset rich. They deprive everyon…

Why do you say that housing costs are not part of CPI? They make up 25%+ of CPI, don't they? See https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... Are you saying that the Owner's Equivalent Rent calculation is not the same as housing costs? That sounds like a stretch. Would someone help me understand what I'm missing here?

You’re not missing anything. Housing is included in CPI as rent. Housing purchase prices aren’t included because they represent both current and future housing consumption (people don’t consume a house within a year).

Re: Banks, QE, and Money-Printing

#70

Post by OGWhales »

zelos wrote: post #22
turbinerneiter wrote: post #15

If they print money to build new roads, bridges, (clean) power plants, schools -> good. If they print money to put in stocks and real estate -> bad. The one thing creates real value and enables more real value creation in the future. The other one has no effect on the real economy and wages. Driving real estate prices is even bad: at some point, no real economic strategy (aka. business model) is able to sustain the n…

As someone who really doesn't understand economics: if the government prints money to build infrastructure, where does the value they've added come from? I can't follow the logic of it: the government makes some money and pays a load of workers to build a bridge. It seems like the bridge is 'free', paid for with bits of paper they printed. Is the real cost the increased price of bridge building for everyone else, bec…

I highly suggest looking up MMT, there is a podcast called the MMT podcast that explains these things well, but you can find other sources that may be faster to read if you search the acronym. It's simply a good way of framing these issues to make them more intuitive.

edit: there are a lot of misconceptions about money printing and inflation here. Please be weary of that.

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