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Banks, QE, and Money-Printing

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Re: Banks, QE, and Money-Printing

#81

Post by beisner »

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?

The Chinese Yuan is on its way to supplanting the US Dollar as a reserve currency in some regions, particularly Africa.

https://qz.com/africa/1291372/chinas-yuan-gets-support-from-...

Re: Banks, QE, and Money-Printing

#82

Post by pkphilip »

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…

This is true. Low interest only helps if someone is buying up assets using cheaper credit or if companies are accessing cheaper credit for expansion, production etc. It does not help the people who are saving up in the bank.

The common person is forced to move their money to riskier and riskier financial instruments putting more and more money into the equity market - which again benefits companies and puts more money into the pockets of the rich.

If not equity, the ordinary person could try and buy assets such as houses which will become marginally cheaper - but risk going into even greater debt.

Re: Banks, QE, and Money-Printing

#83

Post by whytaka »

x87678r wrote: post #39
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…

>Money printing is always inflationary. Either it causes CPI inflation immediately or it's stored up for later. Japan and Europe disagree.

Where is that money going then?

Re: Banks, QE, and Money-Printing

#84

Post by petra »

alexmingoia wrote: post #69
YPCrumble wrote: post #65

Earlier quoted context omitted.

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).

Don't rent and housing purchase prices follow each other, roughly ?

Re: Banks, QE, and Money-Printing

#85

Post by ghastmaster »

Imagine how much consumer process would rise of companies were not able to subsidize profits with leverage! Assets rise at a higher rate due to USD devaluation(printing) and the cash being directed mostly to asset holders. Directing cash to consumers will have a more significant impact on CPI.

I've read a lot of economics articles and this article was hard to follow. The writing was just not clear and concise. For example, she defines several types of inflation early on, and then does not define which type she is referring to later in the article. Wolf Richter is my favorite current economics pundit at the moment.

Re: Banks, QE, and Money-Printing

#86

Post by ianleeclark »

chii wrote: post #77
ianleeclark wrote: post #61

Earlier quoted context omitted.

> 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.

You could have a market of simple exchange without profit-seeking behavior. A market is just a collection of social relations wherein people exchange things.

Re: Banks, QE, and Money-Printing

#87

Post by stevehawk »

petra wrote: post #84
alexmingoia wrote: post #69

Earlier quoted context omitted.

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).

Don't rent and housing purchase prices follow each other, roughly ?

Nope. They can go inverse when, say, an economy collapses and everyone is forced out of their homes as they go underwater on their mortgages and but they still need somewhere to live. Kind of like 2008/09

Re: Banks, QE, and Money-Printing

#88

Post by bsanr2 »

atmosx wrote: post #52
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…

> They deprive everyone else of investment income. Who that “everyone else” might be and what percentage of the population does “everyone else” represent in this context? Keep in mind that there are other reasons they economy works the way it does. The end goal of a central bank or a government is not (contrary to popular belief) make investors rich, the end goal is stability and possibly prosperity for the society a…

Ostensibly.

Re: Banks, QE, and Money-Printing

#89

Post by donmcronald »

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…

It definitely seems like BS to me. At 3% it's 258% over 32 years (1.03^32). Most people are barely getting 1% annual raises which means income increases by 138% over the same period. From 1984 to 2016 housing prices in the Greater Vancouver area have gone up 800% [1].

Assuming I got the math right, it doesn't take much to see current young people are getting screwed. In the last 4 decades wages have barely increased, but major assets like cars and houses are 8-10x what they used to be.

Add in the cost of schooling for 2 people, which in my mind roughly translates to the cost of 2 brand new cars for my parent's generation, and it's easy to see why young people can't afford anything.

Then consider that "household" income is coming from 2 income earners now vs 1 income earner 40 years ago and you really start to get a picture of how tough it is.

How is anyone supposed to start a family when they can't afford to start thinking about buying a house until they're 35. Frugal people from my parent's generation could have their house paid off by the time they were 35.

1. https://www.huffingtonpost.ca/ypnexthome/canadas-housing-per...

Re: Banks, QE, and Money-Printing

#90

Post by [deleted] »

petra wrote: post #84
alexmingoia wrote: post #69

Earlier quoted context omitted.

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).

Don't rent and housing purchase prices follow each other, roughly ?

[deleted]
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