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Banks, QE, and Money-Printing

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Re: Banks, QE, and Money-Printing

#121

Post by [deleted] »

ghastmaster wrote: post #102
synnejye wrote: post #75

Earlier quoted context omitted.

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…

> Since inflation is just the price of stuff rising... Inflation literally is money printing. Price increases is not inflation. Price increases can be caused by inflation. Prices can remain nominally the same while money supply has increased. > 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 i…

[deleted]

Re: Banks, QE, and Money-Printing

#122

Post by dredmorbius »

nathias wrote: post #73

Inflation is another tax on the poor. The poor are more dependent on money because most our capital is in money and the wages are lagging behind inflation even in the best of cases.

Inflation is a tax on interest-bearing, interest-indexed, or financial instruments; loans, bonds, debt, and insurance claims (policies are priced in uninflated currency, claims are paid in inflated currency, see the 1980s liability insurance crisis triggered by high inflation, though blamed on much else).

Wage-earners, and fixed-income households if inflation indexed are largely untouched by inflation.

Re: Banks, QE, and Money-Printing

#123

Post by JumpCrisscross »

sauwan wrote: post #67
siwatanejo wrote: post #3

Earlier quoted context omitted.

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. A…

> there are better tools for controlling inflation that hurt fewer people than the current monetary policies in place

This is the part of her argument that I found unconvincing. The tools sort of work. But once you have inflation and inflation expectations a tremendous amount of political capital and pain must be spent to get out of it. A system which regularly subjects itself to such a test will eventually fail it.

Re: Banks, QE, and Money-Printing

#124

Post by burlesona »

beamatronic wrote: post #117
donmcronald wrote: post #89

Earlier quoted context omitted.

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,…

You can escape from this trap by learning in-demand tech skills at a community college.

It is not that simple. I crashed out of my first career (with student loans in a STEM field), then learned to program at age 27. I’ve been tremendously lucky and successful in the decade since then, lived in a tiny place in SF for years (with a growing family) while working big tech, and I’m only just now at a point I can get my family into a house.

I’m one of the lucky ones. Learning the skills is not enough, you have to get a very good job and work your ass off for a decade for it to amount to enough to comfortably afford the housing, education, and healthcare for a family.

A generation ago getting that kind of quality job was much easier and just having the job put you in the family-supporting income range.

Re: Banks, QE, and Money-Printing

#125

Post by jopsen »

beamatronic wrote: post #117
donmcronald wrote: post #89

Earlier quoted context omitted.

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,…

You can escape from this trap by learning in-demand tech skills at a community college.

haha, typical HN sentiment.

Don't me wrong, studying in-demand tech skills is great, but it's hardly a scalable solution.

Re: Banks, QE, and Money-Printing

#126

Post by JumpCrisscross »

neilwilson wrote: post #103
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…

"Reserve currency status does afford increased deficit-spending capacity." Reserve currency is essentially a myth. It's just an artefact of double entry bookkeeping in banks. There are lots of reserve currencies. Every floating rate currency held outside its native borders is "reserve". It's just somebody holding the money - aka savings. Many countries do that for mercantile reasons to avoid a dutch disease at home.…

> Every floating rate currency held outside its native borders is "reserve"

This is empirically false. Offshore currency holdings make offshore financing in your currency easier. That makes financing deficits less likely to produce domestic inflation.

Quantity and diversity of the offshore holders of one's currency matter. There is a qualitative difference between the U.S. dollar and Argentinian peso.

Re: Banks, QE, and Money-Printing

#127

Post by Galanwe »

donmcronald wrote: post #89
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,…

> Most people are barely getting 1% annual raises which means income increases by 138% over the same period.

Where is that 1% coming from? It seems to me US salaries growth pretty much followed 3/5% average for the last 50 years, with some obvious drawdowns during crises.

Source: https://tradingeconomics.com/united-states/wage-growth

> In the last 4 decades wages have barely increased, but major assets like cars and houses are 8-10x what they used to be.

That doesn't make any sense. The price of a good should roughly follow an optimum of supply and demand. There is of course a spectrum in which it can oscillate, but your "barely increased" versus "8-10x" comparison is ridiculous.

Things are evolving inside a pretty much closed system. Of course that's not exactly true, especially with capital movements, and mondialisation, but the ballpark should be there. You cannot take conclusions if you don't study the full picture.

Take housing prices for instance. The main driver for real estate is not some conspiracy of evil super wealthy people. It's just the interest rates. If interest rates lower, then borrowing money is cheaper, people get bigger mortgages, which in turn inflates real estate prices.

> From 1984 to 2016 housing prices in the Greater Vancouver area have gone up 800% [1].

Real estate cannot be studied in geographical isolation. There are way too much factors that can cause local inflation. In the case of Vancouver's real estate, it is notoriously the flow target of a lot of Asian capital. I don't think that should be taken as an example.

Re: Banks, QE, and Money-Printing

#128

Post by newdude116 »

JumpCrisscross wrote: post #113
newdude116 wrote: post #108

Earlier quoted context omitted.

You mistake a market economy for capitalism. We had a market economy for a very long time, even in the middle ages. Actually Ludwig von Mises describes this barter based market economies perfect (but fails to understand capitalism). Capitalism, that we have have since more or less 150 years requires the pre financing on a huge scale of industrial production. This requires debt that can only be, due to interest, paid…

> to pay back debt with interest, it is necessary to have economic growth, and financial growth This toy model ignores defaults and fiscal spending. Defaults destroy debt in the absence of growth (in the process transferring wealth from creditors to debtors). Fiscal spending crates money with no debt (in the process transferring wealth from savers to borrowers). These counter-currents let the system stay stable while…

"Energy intensity of GDP has been falling for decades."

No, it has not. While this is true for the US, she just outsources manufacturing to China. Hence the energy intensive steps are done outside the US. So your comment is true for the US but not for the world economy as a whole.

https://gailtheactuary.files.wordpress.com/2011/11/energy-in...

Re: Banks, QE, and Money-Printing

#129

Post by JumpCrisscross »

jopsen wrote: post #125
beamatronic wrote: post #117

Earlier quoted context omitted.

You can escape from this trap by learning in-demand tech skills at a community college.

haha, typical HN sentiment. Don't me wrong, studying in-demand tech skills is great, but it's hardly a scalable solution.

> it's hardly a scalable solution

Isn't enabling and educating the population the original scalable solution to low growth?

Re: Banks, QE, and Money-Printing

#130

Post by burlesona »

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…

That may be the stated goal, but the metrics relied upon to measure economic health do a good job measuring top line wealth and a poor job capturing the true quality of life for ordinary people.
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