Banks, QE, and Money-Printing • Hacker News Board

Re: Banks, QE, and Money-Printing

#131

Post by [deleted] » Tue, Nov 03, 2020, 2:28 PM UTC

JumpCrisscross wrote: post #47

roenxi wrote: post #43

Earlier quoted context omitted.

> Unfortunately, like a lot of beautiful macroeconomics, it isn’t a policy prescription. Nobody who decides the policy will have read the theory anyway, so that doesn't really matter. It requires a suspension of disbelief to accept that economic policy is decided based on theory. It is the same fig-leaf as copyright supporting artists, then the law clearly being written by groups like Disney based on their own conven…

> suspension of disbelief to accept that economic policy is decided based on theory Not decided on. But influenced by. Or at least, who gets to be influential is influenced by it. MMT’s political bullet point of “deficits don’t matter so spend like crazy” empowers a unique set of policies. So those actors push it so voters will accept the cost of their goodies. > the same fig-leaf as copyright supporting artists, the…

[deleted]

Re: Banks, QE, and Money-Printing

#132

Post by JumpCrisscross » Tue, Nov 03, 2020, 2:28 PM UTC

newdude116 wrote: post #128

JumpCrisscross wrote: post #113

Earlier quoted context omitted.

> 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...

> your comment is true for the US but not for the world economy as a whole

Nope [1][2][3].

[1] https://www.iea.org/reports/sdg7-data-and-projections/energy...

[2] https://data.worldbank.org/indicator/EG.EGY.PRIM.PP.KD

[3] https://www.eia.gov/todayinenergy/detail.php?id=27032

Re: Banks, QE, and Money-Printing

#133

Post by JumpCrisscross » Tue, Nov 03, 2020, 2:31 PM UTC

HourglassFR wrote: post #112

JumpCrisscross wrote: post #68

Earlier quoted context omitted.

> 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/decouplin…

You are right, I had misunderstood you. We can be more efficient with our ressources, what I had in mind was the total ressource consumption/extraction. Any efficiency we gain is largely offset by the rebound effect in our current system of production, i.e the GDP grows faster than the ressource intensity can catch up with. And of course, the data has to be world-wide since the economy is globalized [1]. [1]: https:/…

> efficiency we gain is largely offset by the rebound effect in our current system of production, i.e the GDP grows faster than the ressource intensity can catch up with

We agree on this. But nothing requires the base resource load to increase. That's my point.

Blaming capitalism for our ecological problem is a cop out. It makes it sound like we have to re-engineer our civilization to escape resource over-use. We don't. The changes are simpler. But making it look like our entire financial system has to be rebooted to effect real change helps punt the issue.

Re: Banks, QE, and Money-Printing

#134

Post by gwbas1c » Tue, Nov 03, 2020, 2:32 PM UTC

> Many folks thought this would be hyperinflationary, Weimar Republic style.

The Weimar Republic was the German government after WWI.

Many of us forget a simple detail about Weimar's hyperinflation: It was deliberate so they could pay off their reparations.

Worth reading: https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...

> The strategy that Germany had been using to pay war reparations was the mass printing of bank notes to buy foreign currency, which was then used to pay reparations, but this strategy greatly exacerbated the inflation of the paper mark. Since the mark was, by fall of 1922, practically worthless, it was impossible for Germany to buy foreign exchange or gold using paper marks. After Germany failed to pay France an installment of reparations on time in late 1922, French and Belgian troops occupied the Ruhr valley, Germany's main industrial region, in January 1923. Reparations were to be paid in goods, such as coal, and the occupation was supposed to ensure reparations payments.

> The German government's response was to order a policy of passive resistance in the Ruhr, with workers being told to do nothing which helped the invaders in any way. While this policy, in practice, amounted to a general strike to protest the occupation, the striking workers still had to be given financial support. The government paid these workers by printing more and more banknotes, with Germany soon being swamped with paper money, exacerbating the hyperinflation even further.

Re: Banks, QE, and Money-Printing

#135

Post by ChrisMarshallNY » Tue, Nov 03, 2020, 2:33 PM UTC

newacct583 wrote: post #106

ChrisMarshallNY wrote: post #6

Earlier quoted context omitted.

Printing money is a bad idea. You think we had it bad, check out what happened here: https://alphahistory.com/weimarrepublic/great-depression/ I seem to remember something else, rather alarming, that happened after that...

1. Hyperinflation isn't the cause of Nazi Germany, please keep the Godwin goblins under the control. 2. Hyperinflation isn't a natural result of regular inflation. There have been countless governments that have engaged in deliberately inflationary policies. Basically none of them resulted in a hyperinflation spiral. 3. Hyperinflation isn't even caused by spending policies in the first place! It is the result of a co…

Fair 'nuff.

However, I lived in Africa. One of my best friends (at the time) lived in Zimbabwe. I lived in Uganda (I think that nation made the news, as well).

There's another country that has had a hyperinflation problem: Venezuela (I think it's still going on).

When you have to use a wheelbarrow to carry money to buy a loaf of bread, then something ain't right.

Hyperinflation doesn't cause despots, but good old-fashioned misery for the masses goes a long way towards it.

It's really easy to be clinical and analytical, when we don't have to pay the price, ourselves, but I can tell you, from personal experience, that walking past psychotic young men, carrying loaded machine guns, backed by the government, every day, kinda sucks.

A lot of people in the world have to do exactly that.

The one issue that I have with the tech social media scene, is how divorced we become from simple, basic humanity. Everything becomes strawmen and examples.

Re: Banks, QE, and Money-Printing

#136

Post by OGWhales » Tue, Nov 03, 2020, 2:33 PM UTC

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…

> Inflation literally is money printing. Price increases is not inflation.

According to who exactly? I encourage you to research this and determine the validity of your assertion, as I can't even find a single person defining it the same way as you are here..

Re: Banks, QE, and Money-Printing

#137

Post by newdude116 » Tue, Nov 03, 2020, 2:35 PM UTC

JumpCrisscross wrote: post #132

newdude116 wrote: post #128

Earlier quoted context omitted.

"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...

> your comment is true for the US but not for the world economy as a whole Nope [1][2][3]. [1] https://www.iea.org/reports/sdg7-data-and-projections/energy... [2] https://data.worldbank.org/indicator/EG.EGY.PRIM.PP.KD [3] https://www.eia.gov/todayinenergy/detail.php?id=27032

Yep [1] [2] [3]

[1] http://theoildrum.com/node/8615

[2] https://dothemath.ucsd.edu/2011/07/can-economic-growth-last/

[3] https://www.declineoftheempire.com/2012/01/wealth-and-energy...

And this one as a bonus :-)

[4] https://en.wikipedia.org/wiki/Jevons_paradox

Re: Banks, QE, and Money-Printing

#138

Post by nathias » Tue, Nov 03, 2020, 2:35 PM UTC

dredmorbius wrote: post #122

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.

Sure, but I don't see how wage-earners are untouched by inflation?

Re: Banks, QE, and Money-Printing

#139

Post by fuoqi » Tue, Nov 03, 2020, 2:38 PM UTC

neilwilson wrote: post #105

fuoqi wrote: post #63

Earlier quoted context omitted.

>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…

"The problem is that there is a limit to how much treasuries you can sell to the market." Why is there? Given that Federal spending puts the reserves in place with which Treasuries are purchased, how can there be a limit? It's just an asset exchange. "No one wants to buy those treasuries at the proposed rates and volumes anymore." (i) What is the bid cover on the latest auctions (ii) Why do you think that matters any…

Because there is no perpetuum mobile. By issuing treasuries a government loans economic power from markets in addition to what it gets from taxes. In a limit everyone will work for a government, so the system effectively degenerates to a centralized planned economy. Of course, in a capitalist society people will loose their trust in a government long before that.

In a well working system this additional power is used to accelerate economic growth, so interest rate is compensated by additional taxes, otherwise government has to allocate bigger ratio of collected taxes to service its debt or loan more and more. The first option is not popular with politicians for obvious reasons, while the second one can not continue indefinitely. More you try to loan from market, higher rate will be required (i.e. market will trust a government less), higher the rate, more difficult it will be to service the acquired debt (i.e. a government will have to be either really efficient with its spendings, or otherwise we return to the step 1).

Arguably market trust in the US government has already passed level of sustainability, so it has chosen to loan from the non-market source, which I believe in the end degrades trust put into the whole dollar-based economy. Granted, the level of trust is really high, so assuming the current QE is a one time thing, this should not be fatal, but if such harmful policy continues...

Re: Banks, QE, and Money-Printing

#140

Post by api » Tue, Nov 03, 2020, 2:40 PM UTC

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 also depends a lot on where you live. Inflation in housing is far higher in “hot” markets.

IMHO it makes no rational economic sense to live in a place like SF or NYC unless you are doing it for a while for experience or can land a very high salary job. For SF I would say bail if you are not making $300k by age 30. The only exception is those with no interest in starting a family and don’t mind living in a very small place forever. If you need space and don’t make bank, you will never build equity or significant savings. Real estate will eat everything.