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No one knows how much the government can borrow

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Re: No one knows how much the government can borrow

#301

Post by bobthepanda »

ethbr0 wrote: post #293
jellicle wrote: post #292

Earlier quoted context omitted.

The Fed can increase its overnight rate to 20% or 200% in one meeting. There is no situation ever where inflation of the sort you're talking about can't be instantly and completely killed. Supply shock inflation (oil embargo) is a different matter.

That's trusting an inherently conservative body to take unprecedented steps. Ultimately, it's trust. As long as the market and economic suppliers believe the Fed might do that, it wouldn't be a problem. Hence why the Fed does most of its important work through telegraphing rather than policy changes

It's not totally unprecedented, it's the Volcker playbook.

Granted he never hiked above 20% but that was still extremely high.

Re: No one knows how much the government can borrow

#302

Post by ethbr0 »

bobthepanda wrote: post #301
ethbr0 wrote: post #293

Earlier quoted context omitted.

That's trusting an inherently conservative body to take unprecedented steps. Ultimately, it's trust. As long as the market and economic suppliers believe the Fed might do that, it wouldn't be a problem. Hence why the Fed does most of its important work through telegraphing rather than policy changes

It's not totally unprecedented, it's the Volcker playbook. Granted he never hiked above 20% but that was still extremely high.

By the time he was confirmed as chairman in 1979, inflation was already high.

https://data.bls.gov/timeseries/CUUR0000SA0?output_view=pct_... (see: 1969 - 1985)

The Fed had twiddled it's thumbs with half measures to let it get that way. So while not hyperinflation, I'd say it supports the Fed usually being cautious.

Re: No one knows how much the government can borrow

#303

Post by raducu »

gruez wrote: post #85
raducu wrote: post #10

Earlier quoted context omitted.

> What happens to your currency in that process is debasement/hyperinflation. Not if the vast majority of population lives paycheck to paycheck and food and basic necessities production are not disrupted. In that/our case, you simply get the inflation of the assets the "elites" who have disposable income choose to spend that disposable income("investing" in real-estate, bitcoin).

Maybe not disrupted in their everyday lives, but it certainly leads to more concentration of wealth by the elites.

It absolutely does.

Re: No one knows how much the government can borrow

#304

Post by bobthepanda »

ethbr0 wrote: post #302
bobthepanda wrote: post #301

Earlier quoted context omitted.

It's not totally unprecedented, it's the Volcker playbook. Granted he never hiked above 20% but that was still extremely high.

By the time he was confirmed as chairman in 1979, inflation was already high. https://data.bls.gov/timeseries/CUUR0000SA0?output_view=pct_... (see: 1969 - 1985) The Fed had twiddled it's thumbs with half measures to let it get that way. So while not hyperinflation, I'd say it supports the Fed usually being cautious.

I mean, they were cautious before the first time they ever hiked rates that high, which would make sense; very few people are going to put their neck on the line for novel policy.

Now that we have pretty much direct cause and effect of what such a rate hike in the US would do, we probably wouldn't spend a decade and a half waffling on it.

Re: No one knows how much the government can borrow

#305

Post by kukx »

throw0101a wrote: post #279
kukx wrote: post #264

Earlier quoted context omitted.

> Housing itself, like stocks, is considered an asset and is not part of inflation. The CPI is an arbitrary indicator set and counted by the government in secrecy, the same entity that has the incentive to keep its value low. Even if someone trusts the government, it does not mean they should trust it completely. * https://www.forbes.com/sites/perianneboring/2014/02/03/if-yo... * https://www.forbes.com/sites/greatspe…

CPI is peer-reviewed and a form of it is used in most countries: * https://en.wikipedia.org/wiki/Consumer_price_index * https://en.wikipedia.org/wiki/Price_index It's is reproducible by non-government people: * https://en.wikipedia.org/wiki/MIT_Billion_Prices_project If you think that inflation is higher than the reported GDP growth: * https://www.youtube.com/watch?v=d3dO8BW9RHg * https://awealthofcommonsense.com/202…

CPI measures a basket of goods and these will differ from country to country. But, let's assume the US government does a good job on estimating the increase in the consumer prices for an average citizen. Still it does not address the problem I mentioned about printing money, which is dissolving the value of money. If that was not true, as I mentioned earlier, we could just print the money and have eternal vacations.

The question is why we do not see the negative effects in the reported CPI. One explanation is a deflationary force that mitigates the inflationary moves. The long term stable deflationary force is an increase in productivity by technological advancements. But I do not think it can keep up with the printing press.

Re: No one knows how much the government can borrow

#306

Post by sdenton4 »

chii wrote: post #187
sdenton4 wrote: post #134

Earlier quoted context omitted.

MMT works so long as you've got the ability to conjure your own money. (Eg, not on the Euro, or a currency pegged to another currency.) The idea is that you create money to pay for things, and then pull back excess money through taxes. (As opposed to pulling in money through taxes, using it to pay for things, and whining that you don't have enough.) So it 'works' as long as you have your own independent national curr…

> you create money to pay for things only your own citizens would accept this money, and if the citizenry cannot "create things" (for example, the country does not have the capital investment to have created machinary/automation or infrastructure), this printing of money is meaningless. MMT is crackpot theory that is lacking imho.

Well, you've basically just argued against fiat currency, not MMT specifically. So, shrug emoji?

Re: No one knows how much the government can borrow

#307

Post by gshubert17 »

tunesmith wrote: post #200
Swizec wrote: post #125

Earlier quoted context omitted.

> Now start talking the top 1-2% and the story changes dramatically. Probably the top 5-6%. The numbers are lower but the behavior is similar. You’d be surprised how soon you hit the “More money than I know what to do with” line. Make 150 to 200k/year (not uncommon on HN) and what are you gonna do, buy a new car every year? Rent is paid, food is paid, clothes are good, 1 or 2 vacations per year, go out to eat wheneve…

Boy, I don't understand this scenario at all. At 150-200k/year, a lot of people are just going to try and save like crazy. CAPE is high, financial planners are saying that "safe withdrawal rates" are no longer 4% or even 3.25%, but below even 2.5% - even if you're not in the very HCOL areas, you're looking at needing to save more than three million dollars to retire, which can take a very long time when expecting mut…

I can see using a lower withdrawal rate (approximating the yield on 10-year treasury bonds) if one is investing mostly in bonds. But two caveats:

(1) Adding stocks to one's portfolio makes it easier to succeed with a 4% withdrawal rate in very low interest-rate environments: https://thepoorswiss.com/updated-trinity-study/

(2) Life expectancy. People who retire at a young age, should use a lower withdrawal rate. But a person age 75, expecting to die before age 100, could have a withdrawal rate of roughly 4% (reciprocal of 100-75) in a zero-interest-rate environment.

Re: No one knows how much the government can borrow

#308

Post by MR4D »

qnt wrote: post #256
MR4D wrote: post #133

Earlier quoted context omitted.

Turkeys think they have a great life right up until Thanksgiving. While I’ll readily concede that Japan has surprised everyone, at some point in time the sheer magnitude will overcome the lenders’ belief. Their ability to repay, and then it all goes downhill very fast. That’s the thing - hyperinflation happens fast. You usually don’t see inflation, high inflation, higher inflation, and then hyperinflation. Instead yo…

> sheer magnitude will overcome the lenders’ belief Japan lends to itself. The BoJ owns so much of the government bond market that there are days where the benchmark bond simply doesn't trade [1]. Under absolutely no circumstance will Japan have any issue repaying Yen denominated debt when they have a monopoly on the Yen. They're theoretically not far away from just retiring the whole bond market and just running an…

Take a look at this page on Investopedia. [0]. All the examples are less than 24 months. Also, WEForum has some stats from 2019, where Venezuela has been in hyperinflation for a longer period of time. [1] and of course, Lebanon is probably the most current example. [2]

I’ve saved the best for last, though. Nicholas Kraus is probably the leading expert on hyperinflation, and has a great list here. [3]

[0] - https://www.investopedia.com/articles/personal-finance/12291...

[1] - https://www.weforum.org/agenda/2019/08/inflation-deflation-v...

[2] - https://www.reuters.com/article/us-emerging-inflation-graphi...

[3] - https://www.cato.org/sites/cato.org/files/pubs/pdf/hanke-kru...

Re: No one knows how much the government can borrow

#309

Post by MR4D »

qnt wrote: post #256
MR4D wrote: post #133

Earlier quoted context omitted.

Turkeys think they have a great life right up until Thanksgiving. While I’ll readily concede that Japan has surprised everyone, at some point in time the sheer magnitude will overcome the lenders’ belief. Their ability to repay, and then it all goes downhill very fast. That’s the thing - hyperinflation happens fast. You usually don’t see inflation, high inflation, higher inflation, and then hyperinflation. Instead yo…

> sheer magnitude will overcome the lenders’ belief Japan lends to itself. The BoJ owns so much of the government bond market that there are days where the benchmark bond simply doesn't trade [1]. Under absolutely no circumstance will Japan have any issue repaying Yen denominated debt when they have a monopoly on the Yen. They're theoretically not far away from just retiring the whole bond market and just running an…

> Japan lends to itself

I meant to address this point separately. What you say is technically true, but if they just retired the debt, Japan would simultaneously become a much poorer country.

Remember, the owner of the debt gets to mark it as an asset, so while the debt would be canceled out, the assets would drop in an equal amount [0].

[0] the Accounting equation is Assets = owners equity + liabilities, so a reduction in liabilities must cause a corresponding reduction in assets. And yes, it’s that insidious, but it is spun by people who have an interest in people not understanding this.

Re: No one knows how much the government can borrow

#310

Post by spurgu »

drivebycomment wrote: post #247
spurgu wrote: post #156

Earlier quoted context omitted.

Another mind flip: the scarce resource isn't labor - but energy . Edit: A gallon of oil is equivalent to roughly 400 hours of human labor. Manual work is nothing compared to the energy contained in fossil fuels (or external energy sources in general). An argument could be made that the economy is in decline due to this, that the sources of fossil fuels are getting more expensive. Most of the cheap sources have been u…

What do you mean by "economy is in decline" ? And, on what basis do you claim fossil fuel is getting more expensive ? The oil price hasn't gone up significantly over the past decades. The cost of electricity, adjusted for inflation, hasn't gone up.

There are many ways GDP is being "padded" (by excluding certain liabilities for example), things like unemployment numbers as well. The "true" economy has been stagnating or in a downward trend for at least a decade already.

And the actual cost (EROI) of extracting fossil fuels isn't necessarily (directly) tied to consumer prices.

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