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

Re: Banks, QE, and Money-Printing

#191

Post by gassius » Tue, Nov 03, 2020, 4:39 PM UTC

JumpCrisscross wrote: post #24

zelos wrote: post #22

Earlier quoted context omitted.

As someone who really doesn't understand economics: if the government prints money to build infrastructure, where does the value they've added come from? I can't follow the logic of it: the government makes some money and pays a load of workers to build a bridge. It seems like the bridge is 'free', paid for with bits of paper they printed. Is the real cost the increased price of bridge building for everyone else, bec…

> if the government prints money to build infrastructure, where does the value they've added come from? Increased real productivity. Imagine a toy town where only two goods are produced on opposite sides of a river. To trade them, risky river crossings risking product and person must be attempted. A bridge removes that risk and cost. The town will become wealthier for having the bridge despite its cost. (Same for e.g…

Increased real productivity might occur due to public spending, but its less likely that it was in the 1800s, if the Govt "bet" on that bridge does not payoff, then is each dollar printed to bet on it is diluting the value. I wouldn't trust the public sector to correctly allocate the resources to increase the real economic output over the private sector, for self evident historical lessons. And now that the low fruit has been taken, they might be tempted to build bridges to nowhere https://www.alaska.org/detail/bridge-to-nowhere

Re: Banks, QE, and Money-Printing

#192

Post by arminiusreturns » Tue, Nov 03, 2020, 4:50 PM UTC

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." - Thomas Jefferson

Re: Banks, QE, and Money-Printing

#193

Post by ivanche » Tue, Nov 03, 2020, 4:56 PM UTC

rayiner wrote: post #180

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…

> Edit: To provide some clarity on the comments below highlighting that housing costs are included in CPI. Each country calculates inflation statistics to various methodologies. CPI in the US includes a rent equivalent value which is independent of the actual cost of purchasing a home. Real monthly mortgage payments have actually been going down relative to inflation: http://mjperry.blogspot.com/2011/12/payments-for-…

Real monthly mortgage payments can be very misleading. It's quite different if one pays 15 year mortgage VS 30 year mortgage. Of course, for 30 yr monthly rate is lower but total costs are way higher.

Re: Banks, QE, and Money-Printing

#194

Post by rayiner » Tue, Nov 03, 2020, 5:00 PM UTC

TuringNYC wrote: post #188

rayiner wrote: post #182

Earlier quoted context omitted.

You're perspective is skewed by living in one of the craziest housing markets in the world. Here in exurban Maryland (not to mention say Kansas City or Iowa) young people are buying homes and having kids. Millenials earn more than their parents did: https://www.pewresearch.org/wp-content/uploads/2018/12/FT_18... They pay less on a monthly mortgage payment than their parents did: https://www.motherjones.com/wp-content…

>>> They pay less on a monthly mortgage payment than their parents did The reference you gave for "They pay less on a monthly mortgage payment" is itself adjusted for inflation as noted on the chart. So using the questionable inflation figure itself to refute inflation isn't persuasive. Intuitively also, I'm not sure I buy the argument that the median young person lives in Kansas City. I grew up with dozens of family…

> The reference you gave for "They pay less on a monthly mortgage payment" is itself adjusted for inflation as noted on the chart. So using the questionable inflation figure itself to refute inflation isn't persuasive.

Yes, it's adjusted for inflation. But if housing costs were growing faster than inflation, the monthly mortgage payment adjusted for inflation would still be going up.

> My own experience is only anecdotal (e.g., upstate NY, western pennsylvania)

Head down to Kansas City, or east Texas, or pretty much anywhere in the sunbelt. These places are booming. They're full of young people, families, and tons of kids.

Re: Banks, QE, and Money-Printing

#195

Post by rayiner » Tue, Nov 03, 2020, 5:02 PM UTC

ivanche wrote: post #193

rayiner wrote: post #180

Earlier quoted context omitted.

> Edit: To provide some clarity on the comments below highlighting that housing costs are included in CPI. Each country calculates inflation statistics to various methodologies. CPI in the US includes a rent equivalent value which is independent of the actual cost of purchasing a home. Real monthly mortgage payments have actually been going down relative to inflation: http://mjperry.blogspot.com/2011/12/payments-for-…

Real monthly mortgage payments can be very misleading. It's quite different if one pays 15 year mortgage VS 30 year mortgage. Of course, for 30 yr monthly rate is lower but total costs are way higher.

The chart is assuming a 30-year fixed mortgage on whatever happened to be a median-priced house in a particular year with prevailing mortgage interest rates.

Re: Banks, QE, and Money-Printing

#196

Post by [deleted] » Tue, Nov 03, 2020, 5:03 PM UTC

arminiusreturns wrote: post #192

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." - Thomas Jefferson

[deleted]

Re: Banks, QE, and Money-Printing

#197

Post by nostrademons » Tue, Nov 03, 2020, 5:04 PM UTC

anthony_r wrote: post #34

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…

Housing prices are long term "bound" by CPI, not the other way around. More specifically they have always mean reverted to CPI if you look few hundred years back. Robert Shiller wrote a lot on this topic. Also, the current level of divergence between housing prices and CPI is nothing out of the ordinary. It will correct itself over time (either houses will become cheap or CPI will catch up). If you want a simple expl…

The direction of causality matters though. "Houses will become cheap" and "CPI will catch up" mean very different things for the average new family trying to afford a house. The first is cause for celebration; the second just means that instead of struggling to afford a home, they'll struggle to afford anything.

It wouldn't surprise me if the second is closer to the truth. Homebuying is close to where money is injected into the economy: when the Fed drops interest rates, mortgage rates drop, the home price you can afford for a given income goes up, and housing prices go up to compensate (particularly in land-constrained areas like Vancouver or the SF Bay). Other industries like food don't go up until that money has had a chance to circulate through the economy and make it to the average food buyer. I'd expect to see large increases in the CPI over the next decade, with housing last decade being a harbinger.

Re: Banks, QE, and Money-Printing

#198

Post by gshubert17 » Tue, Nov 03, 2020, 5:08 PM UTC

newdude116 wrote: post #137

JumpCrisscross wrote: post #132

Earlier quoted context omitted.

> 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

After looking at The Oil Drum's page (from 2011), I found this from 2020:

https://yearbook.enerdata.net/total-energy/world-energy-inte...

The first graph there seems to show a decreasing energy intensity since 2011. Is there something I'm not seeing here?

For instance, one source says that energy production in 2019 was 14,715 MToe (million tonnes oil equivalent) or 14.7 E12 koe (kilograms). The graph said energy intensity was 0.110 koe per $2015. That implies a world GDP of over 130 trillion in 2015$. But I thought GDP was around $80 trillion (maybe a bit higher using purchasing power parity).

I'm confused. Is energy intensity decreasing because somebody's using an inflated denominator (PPP dollars)? What's really happening?

Re: Banks, QE, and Money-Printing

#199

Post by pembrook » Tue, Nov 03, 2020, 5:10 PM UTC

frankfrankfrank wrote: post #175

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…

"Low interest rates benefit only the asset rich" it is too complex to fully unpack why, but what you said there is not correct. Low interests actually allow the asset "poor" to acquire assets by borrowing at low rates that allow them to afford assets. But you are very much correct about the ""skills crisis", and unfortunately, the short term solution that has been used by politicians and corporations to evade respons…

> Low interests actually allow the asset "poor" to acquire assets by borrowing at low rates

It's counterintuitive, but this is not true. Low interest rates actually inflate the prices of risk assets (stocks, bonds, real estate), greatly benefitting those who already own them.

New entrants have to buy houses at higher prices, which net net washes away the gains made from lower interest. Early movers during the transition may get lucky, but in aggregate, this is true. Think of how a bond works. Interest rates and bond prices are inversely correlated. Lower interest rates = higher bond prices = lower future returns. Its the same for Real Estate.

Also Re: your points about immigration--again, its counterintuitive, but you are also mistaken here. The market for talent is not a zero sum game.

Immigration allows for increased productivity in the global economy because talent is able to go where it can be best utilized.

That talented engineer would be wasted in Albania, because Albania lacks the capital, talent, and opportunities to best utilize the engineer’s knowledge. Albania loses nothing, but benefits greatly when that engineer moves abroad and contributes to making wireless networking accessible for all.

The global economy is not a zero sum game where somebody wins and somebody loses. This is often the hardest thing for people to understand about how the economy works.

And even if that weren't true, yearly immigration as a percentage of population growth/decline in most countries is extremely low. To attribute any of the social ills of a given country to it is foolish.

The world could become more productive and efficient if immigration happened more not less. Everybody wins when talent goes where it can best be utilized.

Re: Banks, QE, and Money-Printing

#200

Post by dragonwriter » Tue, Nov 03, 2020, 5:15 PM UTC

JumpCrisscross wrote: post #50

germinalphrase wrote: post #42

Earlier quoted context omitted.

Hasn’t the last ~15 years had been an experiment in printing money on the order of trillions (3-7 for wars in the ME, how many more T. for bailouts/QE)?

> the last ~15 years had been an experiment in printing money Through monetary policy. When the Fed creates a dollar it destroys a dollar of assets, e.g. by buying a bond. Fiscal policy is different. When Congress appropriates it creates new money. That impacts the real economy differently. (This is why every crisis involves central bankers calling for fiscal stimulus. It is more powerful.)

Fiscal [0] stimulus isn't any more powerful in terms of degree of impact, what it is is more targetable where it is needed. The scope of monetary policy typically delegated to central banks is enormously powerful, but it has all the targeting selectivity of a thermonuclear bomb.

[0] since we are discussing MMT, we should note that the term “fiscal” is a reference to metaphor that is not at all appropriate to modern fiat currency systems, and that so-called fiscal policy isn’t constrained by a fisc and is just as monetary as what is traditionally called “monetary” policy. But it's easier to use the classic terms than “taxation and spending” in place of fiscal and “central bank credit” in place of “monetary”.