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Banks, QE, and Money-Printing

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Re: Banks, QE, and Money-Printing

#161

Post by marketingPro »

jazzyk wrote: post #158
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…

Health-"care" costs are rising even faster - premiums are rising 13-15% EVERY year. And the only way you see it in full is when you are self-employed. If you have employer-sponsored health insurance, some part of the increase is covered by the company - at the expense of your salary increase or bonus, of course.

There needs to be outrage at the Physician cartel, the hospital cartel, the pharmacist cartel, the pharmacy cartel, the pharma manufacturer cartel, and insurance cartel.

These government granted monopolies make unnaturally high incomes due to regulatory capture.

My best solution is to legalize a science based healthcare. Although the cartels would never allow it, they have spent billions establishing Authority based healthcare.

Re: Banks, QE, and Money-Printing

#162

Post by HourglassFR »

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…

>> growth in fossil fuel use are very closely tied

>I have debunked this in another comment [1]. Energy intensity of GDP has been falling for decades. The carbon intensity of our economy is falling faster.

Both can be true, energy intensity of GDP has been falling even worldwide. But GDP and energy consumption is still correlated, i.e. you can plot a nice regression line in this plot:

https://ourworldindata.org/grapher/energy-use-per-capita-vs-...

There is some debate as to the direction of the causal link, it's probably dynamic and context dependant, but the correlation is definitely here.

Re: Banks, QE, and Money-Printing

#163

Post by nathias »

dredmorbius wrote: post #153
nathias wrote: post #138

Earlier quoted context omitted.

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

Fixed payents (bonds, etc) are fixed. Wage-earners see wages increase with inflation. Possible slight lag, but effectively little. Cash savings of course devalue. Asset holdings (real estate, equities) appreciate with inflation. Debts are reduced -- values fall as money is diluted (the gain side of banks' loss).

That's what I mean when I say poor - no debts, no assets just little savings in money and wages. Possible slight lag is not only possible and not slight, every increase in wages must be battled for while inflation comes automatically, money also represents 100% of the capital and therefore affects the poor completely.

Re: Banks, QE, and Money-Printing

#164

Post by boringg »

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...

MMT discussed by economists about the truths and fallacies of MMT (link at bottom). It is lacking in real data and has a lot of very siren-like qualities to it.

https://capitalisnt.com/episodes/the-right-and-wrong-of-mmt-...

Re: Banks, QE, and Money-Printing

#165

Post by lotsofpulp »

JumpCrisscross wrote: post #157
lotsofpulp wrote: post #155

Earlier quoted context omitted.

What none of the inflation statistics capture is volatility, or the feeling of volatility. Wages can go up 5% per year, but if you think you have a decent chance of losing your income and not being able to get it back in your working years, you will need to act more conservatively. Americans especially should be worried about their income security at 45+ years of age, when health insurance premiums become $12k to $14…

> What none of the inflation statistics capture is volatility Because that’s a totally different thing? It’s not like nobody measures it. We don’t criticise the kilogram for not telling us if it’s going to rain tomorrow.

I agree, I’m trying to explain why people don’t feel like inflation statistics are legitimate.

For example, I don’t care about housing in 90% of the country if I think only 10% is going to provide economic growth and opportunities sufficient to make me feel secure.

Or if you think you need more retirement savings than generations before because you think money will be worth less or returns will be lower, perhaps due to lower population growth, environmental concerns, etc.

Re: Banks, QE, and Money-Printing

#166

Post by boringg »

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…

Printing money and issuing debt are almost interchangeable in terms of what they perform. My sense is that modern economics is steering towards full employment with an eye on inflation. Multiple goal setting and balancing makes more sense the strictly the 2% inflation goal.

Re: Banks, QE, and Money-Printing

#167

Post by treis »

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,…

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

Foreign buyers laundering money isn't inflation.

Re: Banks, QE, and Money-Printing

#168

Post by brusselssprouts »

TheOtherHobbes wrote: post #149
Galanwe wrote: post #127

Earlier quoted context omitted.

> 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 thi…

I think these graphs mistakenly compare inflation adjusted wages to unadjusted house price. It also fails to account for increases in house size.

Inflation adjusted cost per square foot is $126 in 1978 and $146 in 2020, about a 16% increase. Inflation adjusted wages over the same years went from 24.5K in '78 to 36K in '19, for about a 46% increase.

According to these stats, housing is actually more affordable for the same home size.

Wage numbers from your fed link, and housing numbers from here: https://www.supermoney.com/inflation-adjusted-home-prices/

Re: Banks, QE, and Money-Printing

#169

Post by dragonwriter »

JumpCrisscross wrote: post #21
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

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…

MMT doesn't depend on “reserve currency status”, it depends on having use of fiat currency.

> Reserve currency status does afford increased deficit-spending capacity.

The key point of MMT isn't that fiscal balance (deficit v surplus) doesn't inherently matter as much because there are conditions (whether “reserve currency status” that you've focussed on it something else) that Trump it for the countries of concern, it's that fiscal balance is ultimately an illusion based on a metaphor (the fisc, a finite purse filled by revenue and depleted by spending) that simply fails to reflect reality for a country whose budget operates in its own fiat currency, and that the financial constraints on such a country have to do with monetary effects of decisions, not fiscal balance.

> If a country runs up large deficits in the name of its reserve currency it affects others’ inclinations to hold the currency in reserve.

Sure, the sum effect of the governments decision making on demand for the currency, and those value of the currency, (the kind of reserve considerations you discuss here are an aspect of this, not categorically special) is exactly the kind of monetary consideration that MMT holds is a real constraint. But fiscal balance itself isn't a useful yardstick for that.

> Piloting federal fiscal policy on MMT is akin to steering the plane to FL 100 and keeping an eye out for a stall.

No, it's more like guiding nap-of-the-earth flight with a radar altimeter rather than a barometric altimeter calibrated to the long-term average global pressure at sea level. Monetary effects are the actual hard constraints, fiscal balance is a distant, murky proxy with an uncertain and time-and-conditions-variable relation to the actual constraint that obfuscates rather than clarifies.

Re: Banks, QE, and Money-Printing

#170

Post by baq »

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…

the free market will sort this out.

oh wait. no it won't because you can't manufacture more land to build on.

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