Hopefully qe leads to us failing and destroyies us economy
Banks, QE, and Money-Printing
141–150 of 249 posts
Re: Banks, QE, and Money-Printing
#142The 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…
I agree. Here is the critical damage to American workers from money printing:
* Hourly pay rates are locked in when people are hired. Workers completely lose their negotiating power after being hired. "Sticky prices" in economic terms applies to workers salaries also.
* In an ideal world, workers would job hop aggressively to move up their hourly pay rate. They don't for good reasons (for their company, for the economy, for other non-tangible reasons).
* Having the M0 and M1 never grow is the ONE critical factor that MUST be there for workers to get their fair share of GDP growth. The economy growing and having a fixed M0 and M1 means workers get more buying power. Their negotiated locked in hourly rate when starting at the company can give them more buying power. In capitalism today, this is the ONLY way workers get their share of GDP growth.
* When M0 and M1 grow, then workers (except the top 20% in demand) are robbed of getting their share part of GDP growth.
* Workers are on a hamster wheel. Central Banks think they need to speed up/slow down inflation (compared to a frozen M0 and M1) causes the hamster wheel to speed up for workers to work harder for less and less.
* 1801 to 1899. There was zero to -6% inflation across those ~99 years. Salaries doubled. This is how the working class gets their fair share of GDP growth. Today they are robbed by central banks.
* Workers are robbed when banks get to "recapitalize" banks paid for by robbing workers (the bottom 80% of workers have nearly zero ability to demand their salary go up)
Re: Banks, QE, and Money-Printing
#143Money 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. 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.
You are assuming full employment in these scenarios... why?
Re: Banks, QE, and Money-Printing
#144The 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?
Problem is that outsourcing and automation has collapsed the cost of most non-essential manufactured goods. These artificially depress the CPI and hide the crazy inflation that is occurring in essential areas like housing, health care, and education... basically in anything that can’t be outsourced or automated.
Massively aggregated statistics like the CPI border on bullshit. They have too many hidden variables and gloss over far too much detail.
Re: Banks, QE, and Money-Printing
#145The 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…
Another thing that bugs me: many countries are taking "tech improvements" in inflation.
For example: suppose a TV costs 2x now than what it did 10 years ago, but it is also twice the size, for many countries this means 0% of inflation.
Problem is, you can't buy the old stuff.
For example, are cars now much faster, safer, etc... than cars of 1950?
Yes.
But, if you are buying your first car, you can't buy one from 1950, you either buy a car, or you don't, you either spend the 2020 price for the car, or you don't, thus this "correction" for technology development is bogus.
Or a personal anecdote:
My phone broke.
A phone now is ludicrously more expensive than it was years ago, but doesn't count in inflation because it also became a computer, that can do a ton of things.
Problem is, I don't need a computer, I need a phone, I want to do phone calls! But nobody sells those here, they only sell computers that happen to make calls, for the price of a computer.
Re: Banks, QE, and Money-Printing
#146If 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…
Good as far as it goes. But the USA is full of roads that the local county can barely afford to plow, much less maintain. Japan built lots of bridges to nowhere trying to keep the money-machine going. A bridge is only valuable if the use-value exceeds the creation-cost. And those opportunities are more scarce now after a century of building.
Re: Banks, QE, and Money-Printing
#147Earlier 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 ?
Housing_price = rent * reciprocal_of_interest_rate
Re: Banks, QE, and Money-Printing
#148Earlier quoted context omitted.
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.
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Re: Banks, QE, and Money-Printing
#149Earlier 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,…
> 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…
Your points actually contradict each other. Do interest rates trump supply and demand and global capital movements, or not?
Here's a graph of median personal income:
https://fred.stlouisfed.org/series/MEPAINUSA672N
And here's a graph of median house prices:
https://fred.stlouisfed.org/graph/fredgraph.png?id=MSPUS&nsh...
That is almost exactly an increase of 8X, compared to roughly 1.5X for personal income. Do you think an increase of 1.5X over forty years or so counts as "barely increased"?
Of course household income is higher because most households have two wage earners instead of one. But that's still around 3X to around 8X.
And the standard deviation for property prices has increased hugely.
This has nothing to do with supply and demand and everything to do with the difference between an unproductive rent seeking economy which sweats static assets - including the workforce - and a productive creative economy driven by innovation and invention.
For all the rhetoric, the current economy has a lot more of the former than the latter. And this is only good for a small number of incredibly rich individuals - at the expense (literally) of almost everyone else.
Re: Banks, QE, and Money-Printing
#150Earlier quoted context omitted.
Yet it’s very tempting for politicians to implement exactly that, because to tax people to pay for stuff is not very popular politically. They will always, always, always kick the can down the road.
Yeah, I get the feeling that this theory is mostly based on the fact that the consent of elected representatives is required to raise taxes, but not to print money.
> Yeah, I get the feeling that this theory is mostly based on the fact that the consent of elected representatives is required to raise taxes, but not to print money.
It's required for both; the fact that Congress has delegated monetary policy and not recalled it, and not done the same with fiscal policy doesn't change that, it's just the mechanism by which it provides ongoing consent to the Feds decisions in monetary policy.