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Banks, QE, and Money-Printing

lynalden.com

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Re: Banks, QE, and Money-Printing

#71

Post by refurb »

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. You just decided to look up the actual answer rather than just guessing what it was.

Re: Banks, QE, and Money-Printing

#72

Post by question000 »

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

Yeah too bad it actually explains reality instead of the weird "debt is just bad." ideas that predict a crisis every single quarter.

Re: Banks, QE, and Money-Printing

#74

Post by kqvamxurcagg »

netfl0 wrote: post #31
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…

Excellent summary of reality. Why do you think people seem to ignore or not understand these basic facts?

It's easy to develop conspiracy theories around why this madness continues. I think the real truth is ignorance and an element of cognitive dissonance from policymakers.

Manipulating the cost of debt is the only instrument debt they really have so they just keep pushing that button. Asset bubbles are now so inflated that they can't really unwind the monster they have created. I would observe central banks are now guided more by capital markets fluctuations that economic fundamentals.

Something I never see mentioned is the rise of China. I think Western countries would have the confidence to accept a reduction in growth (higher/normal interest rates) if the US and European economies were still preeminent. A major recession in the US would require reductions in military expenditure which would change power dynamics in Asia and the pacific.

Re: Banks, QE, and Money-Printing

#75

Post by synnejye »

fmsf wrote: post #25
zelos wrote: post #22

Earlier quoted context omitted.

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 printed money is effectively diluting everyone's else's money. So technically you could think of it as an indirect tax, because the overall currency value drops. Similar to a company emitting new shares to pay employees. It's the shareholders who are paying the cost via dilution.

Disagree. :-)

Printing money does not automatically lead to inflation. Since inflation is just the price of stuff rising, the question becomes, when do prices rise? The price can rise for multiple reasons:

The price can rise because the company just wants to charge more, like Apple. The price can rise because a company's underlying cost rises. Maybe some type of metal became more expensive.

Either way, the only way that money printing can lead to inflation is if that money creates so much demand that a company needs to expand production capacity to produce more, and if that capacity has rising costs.

If a company expands from, let's say 65% capacity to 75% capacity, and has constant costs, then it doesn't matter. Then more people will be employed due to increased demand, and the economy will boom. This makes money printing a good policy.

If, however, the company goes from 85% to 95%, then the company might start to invest in extra capacity, which might add costs, and thereby might raise prices.

So, do prices rise just because a certain amount of dollars were added to an economy ? No, certainly not. Which is why the money printing should only happen when the economy is dysfunctional. Basically Keynes in a nutshell. :-)

Re: Banks, QE, and Money-Printing

#76

Post by JumpCrisscross »

arethuza wrote: post #35
JumpCrisscross wrote: post #21

Earlier quoted context omitted.

MMT is a neat theory. The mathematics are quite elegant. Unfortunately, like a lot of beautiful macroeconomics, it isn’t a policy prescription. (Though it provides ivory tower cover for bad policy.) Reserve currency status does afford increased deficit-spending capacity. But it isn’t an immutable, environmental variable. Deficits and reserve currency status interact. If a country runs up large deficits in the name of…

Presumably for the USD to lose reserve currency status some other currency would have to become more attractive as a long term bet? Are there any obvious candidates at the moment?

> for the USD to lose reserve currency status some other currency would have to become more attractive as a long term bet?

Not necessarily. Reserve currencies facilitate international trade and finance, things which may not exist in their present form without the United States. There is no rule saying the world must have one.

Everyone could wind up owning their trading partners’ currencies. We could revert to a commodity standard. Or free trading zones could emerge with synthetic currencies.

Re: Banks, QE, and Money-Printing

#77

Post by chii »

ianleeclark wrote: post #61
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.

> 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.

a functioning market require profit-seeking behaviour.

Re: Banks, QE, and Money-Printing

#78

Post by [deleted] »

synnejye wrote: post #75
fmsf wrote: post #25

Earlier quoted context omitted.

The printed money is effectively diluting everyone's else's money. So technically you could think of it as an indirect tax, because the overall currency value drops. Similar to a company emitting new shares to pay employees. It's the shareholders who are paying the cost via dilution.

Disagree. :-) Printing money does not automatically lead to inflation. Since inflation is just the price of stuff rising, the question becomes, when do prices rise? The price can rise for multiple reasons: The price can rise because the company just wants to charge more, like Apple. The price can rise because a company's underlying cost rises. Maybe some type of metal became more expensive. Either way, the only way t…

[deleted]

Re: Banks, QE, and Money-Printing

#79

Post by francisofascii »

alexmingoia wrote: post #57
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…

Housing is included in CPI. Housing is included as rent, and owner-adjusted rent (what rent would be if a house was rented). Housing purchase prices aren’t included because a house isn’t consumed within a year. The price of a house represents both current and future housing consumption. It’s not some conspiracy to hide inflation.

Sure, it is included, but underrepresented. When people with six figure salaries are paying 30-50% of their income on rent, the rent figure should be the primary driver of the CPI.

Re: Banks, QE, and Money-Printing

#80

Post by moralsupply »

pvsukale3 wrote: post #56

Aside: I am new to a lot of the economic terms mentioned in the article but I am curious about its content. Can someone please share some good primer articles about monetary policy, QE and how central banks work? Thanks!

Read "The Princes of the Yen", by Richard Werner. He coined (no pun intended) the term QE and his analysis of the Japanese, European and American government/central banks monetary interventionism is spot on.

There's a documentary based on his book, which may be a quick introduction to the content (although I'd still recommend the book): https://www.youtube.com/watch?v=5-IZZxyb1GI

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