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

Re: Banks, QE, and Money-Printing

#211

Post by RobertoG » Tue, Nov 03, 2020, 6:00 PM UTC

PascLeRasc wrote: post #178

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…

I've always struggled with this too, I just cannot understand it. Same with seeing like a $1B yacht or a massive diamond - I don't know how you'd go about turning that into insulin or low-cost homes. Even as I type this out I don't understand what I'm saying, so if anyone sees what idea I'm struggling with I'd really appreciate any help.

I think the key insight is to realize that money is just a distraction, it's numbers in some computers. At the end of the day we have three kind of real resources: matter (raw materials and energy), labor and knowledge.

Money is about how those resources are used. Whoever has the money can mobilize those resources for any goal of its choosing. The value can only be measure in function of what those goals are.

It's obvious that you can't choose turn a $1B yacht in insulin, but you could redirect the economy to produce more insulin and less yachts (or the other way around).

The believers in Laissez-faire, will tell you that the system, by itself, will produce the exact quantity of insulin and yacht necessaries. In other words, they think that the optimization function and the utility function are all implemented in the power of markets.

In the other side of the spectrum (a totally centralize economy), they will tell you that the optimization function and the utility function can be wrote by hand.

Personally, I think that the optimization function have to be learned by the markets, and the goal function have to be handcrafted. The economy is just a machine that really doesn't care, it will create yachts or insulin or whatever.

Re: Banks, QE, and Money-Printing

#212

Post by lkrubner » Tue, Nov 03, 2020, 6:13 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…

"Low interest rates benefit only the asset rich."

If you want to get more speed out of an engine, you need both more gasoline and also more oxygen. If you change the amount of gasoline, without changing the amount of oxygen, you'll end up running too lean or too rich, and both conditions have negative consequences.

To boost economic growth it would be great to have both an increase in final consumption by the government, combined with moderation of interest rates. A combination of financial policy with monetary policy. But in the USA the Republicans have been sabotaging this simple process for decades. Final consumption by the government has stagnated, which has put the USA into a situation where it has had to lean much too much on monetary policy (low interest rates) to try pump the economy. This inevitably leads to distortions. The obvious way to fix the problem is to have the government increase the amount of final consumption that it is engaged in. Tax cuts do not help, what would help is an increase in final consumption, to directly drive economic growth and directly create jobs.

Re: Banks, QE, and Money-Printing

#213

Post by doggosphere » Tue, Nov 03, 2020, 6:25 PM UTC

frockington1 wrote: post #205

beisner wrote: post #81

Earlier quoted context omitted.

The Chinese Yuan is on its way to supplanting the US Dollar as a reserve currency in some regions, particularly Africa. https://qz.com/africa/1291372/chinas-yuan-gets-support-from-...

Does the US, or any nation really, care what Reserve Zimbabwe uses? Not trying to be flippant, I'm just not sure that these nations matter at all on the world stage

"Five hundred dollars? Fully subsidized? With a plan? I said that is the most expensive phone in the world. And it doesn't appeal to business customers because it doesn't have a keyboard. Which makes it not a very good email machine." - Ballmer on the iPhone

In the early days its easy to be unimpressed and rightfully so, but its certainly a signal of potential change in the order of things.

Re: Banks, QE, and Money-Printing

#214

Post by [deleted] » Tue, Nov 03, 2020, 6:25 PM UTC

jrs235 wrote: post #118

ghastmaster wrote: post #102

Earlier quoted context omitted.

> 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…

This is the definition of inflation that I was taught too. However it seems that people now days mean for inflation to be about price increases rather than money supply inflation (increases). The money supply inflates and deflates. Prices increase and decrease. I think it would be best if we all start being more clear and specific when talking about "inflation". Printing money DOES automatically lead to inflation. It…

[deleted]

Re: Banks, QE, and Money-Printing

#215

Post by jrs235 » Tue, Nov 03, 2020, 6:28 PM UTC

Anon1096 wrote: post #172

jrs235 wrote: post #118

Earlier quoted context omitted.

This is the definition of inflation that I was taught too. However it seems that people now days mean for inflation to be about price increases rather than money supply inflation (increases). The money supply inflates and deflates. Prices increase and decrease. I think it would be best if we all start being more clear and specific when talking about "inflation". Printing money DOES automatically lead to inflation. It…

When talking about inflation, there's no such thing as "money supply inflation". The term inflation IS clear, you're just choosing to try and redefine it to match your purposes. Inflation is a rise in the price of goods, full stop.

Prices across the board could increase if say the cost to produce and deliver them went up across the board, perhaps because the cost of energy/oil goes up, perhaps due to constrained supply. This isn't inflation and the price increase isn't due to inflation.

Prices across the board could also go up if war breaks out. That's not inflation.

Those types of price increases are due to the supply side. Inflation is due to the demand side and the available dollars chasing the [same amount of] goods.

Price increases and inflation are not the same thing. They are typically related though.

Re: Banks, QE, and Money-Printing

#216

Post by colinmhayes » Tue, Nov 03, 2020, 6:28 PM UTC

OGWhales wrote: post #136

ghastmaster wrote: post #102

Earlier quoted context omitted.

> 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..

According to economists who invented the word. Words change meaning, and I'm partial to believing the definition of inflation has changed, but if economists still use the original definition.

Re: Banks, QE, and Money-Printing

#217

Post by colinmhayes » Tue, Nov 03, 2020, 6:29 PM UTC

OGWhales wrote: post #96

fmsf wrote: post #25

Earlier quoted context omitted.

The printed money is effectively diluting everyone's else's money. So technically you could think of it as an indirect tax, because the overall currency value drops. Similar to a company emitting new shares to pay employees. It's the shareholders who are paying the cost via dilution.

Not quite accurate, as it depends, this explains some of the other relevant variables in the equation: https://www.forbes.com/sites/johntharvey/2011/05/14/money-gr...

John Harvey is heterodox. Essentially the equivalent of climate change denial for economists.

Re: Banks, QE, and Money-Printing

#218

Post by ghastmaster » Tue, Nov 03, 2020, 6:32 PM UTC

RobertoG wrote: post #206

ghastmaster wrote: post #201

Earlier quoted context omitted.

My explanation is in this thread to another comment(anon1096). To expand: > The era between the mid-1830s and the Civil War—a period economists refer to as the “free banking era”—saw a proliferation of banks. Along with these institutions came “bank notes,” a private paper currency redeemable for a specific amount of metal. That is, if the issuing bank had it. At times, banks did not have enough gold or silver to sat…

>>"> The term inflation was initially used to describe a change in the proportion of currency in circulation relative to the amount of precious metal that constituted a nation’s money." That definition of inflation makes no sense in the current monetary arrangements, it's, simply, not how it works anymore. There is not an "amount of precious metal that constituted a nation’s money." If some people don't understand th…

> That definition of inflation makes no sense in the current monetary arrangements, it's, simply, not how it works anymore. There is not an "amount of precious metal that constituted a nation’s money." If some people don't understand that, we should aim to educate them.

To be clear, what you are referring to is a quote from the FED article I linked to and quoted. Before the Keynesian revolution, inflation meant increased money supply and was assumed to increase prices as well, because money was backed by or was gold/silver. Many people as you opined have a misunderstanding that money is still backed by gold and you are correct that they lack the education. The "change" in the definition was by the Keynesians. It is not accepted by everyone. The monetary theory change should not change the definition.

Why does my definition make sense to me? A price is a number, not a physical thing so it increases. Take the balloon analogy. Money supply is the balloon, inflated with dollars. Price is the balloon, inflated with numbers? Does not make sense to me. The term "price inflation" is a misnomer. It should be "price increase".

FYI: On this site we use "> " for block quotes. You used quotes and ">>" and included my ">". It was a little confusing.

Re: Banks, QE, and Money-Printing

#219

Post by lotsofpulp » Tue, Nov 03, 2020, 6:40 PM UTC

frockington1 wrote: post #189

marketingPro wrote: post #161

Earlier quoted context omitted.

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…

Sadly the public outrage seems to be demanding more authoritarian based healthcare

Insurance companies routinely approve and deny claims based on efficacy data from experiments, and they get vilified for it.

Re: Banks, QE, and Money-Printing

#220

Post by lotsofpulp » Tue, Nov 03, 2020, 6:44 PM UTC

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.

That's because health insurance premiums are actually a tax. You're not paying for your healthcare, you're paying for your healthcare plus the healthcare of someone who can't afford it, such as poorer people or older people.

The ACA limited how health insurance companies could determine premiums by restricting it to just someone's age, which means they can't take into account pre existing conditions or whether or not they're about to have a baby. ACA also forced insurers to not charge older, unhealthy people more than 3x what they charge 21 year olds who aren't expected to use any healthcare.

This means the premiums for younger, healthier people are going towards paying for older, unhealthier people. AKA a tax. Additionally, the nation is getting older and there are fewer and fewer younger people to divvy up these healthcare costs.

See this pdf from NJ showing how the age rating factors work:

https://www.state.nj.us/dobi/division_insurance/ihcseh/ihcra...

The ACA requirement for an out of pocket maximum for in network health care also made it so insurance companies have no ceiling per person healthcare spending, so if someone needs $5M of healthcare in a year, then that insurance company is going to have to pay for it, and it's going to have to come from everyone's premiums.

Bottom line is the amount and quality of healthcare people expect to receive is very costly. So if people want health insurance premiums to not go up so fast or go down, they need to consume less healthcare, lower quality healthcare, or they need to increase the amount of healthcare available so prices of the healthcare go down.