Do central banks’ mounting losses actually matter? • Hacker News Board

Re: Do central banks’ mounting losses actually matter?

#51

Post by coryrc » Mon, Oct 10, 2022, 9:57 PM UTC

Ma8ee wrote: post #40

unyttigfjelltol wrote: post #23

Earlier quoted context omitted.

In the context of a past generation of government sponsored entities, the answer was 'yes', they could go bankrupt but the political branches will bail them out. The issue here is that the political branches are in the middle of being bailed out themselves by the central banks, and it's been going on for a decade or two, so conceptually there is a serious problem with politicians bailing the bailer. The fact that hea…

Which political branches are bailed out by the central banks, and how?

The US Fed "owns" 8 and a half Trillion dollars of US debt, money that was spent by Congress (voters like that) without raising taxes (voters don't like that).

(In addition to treasuries, the money is spent subsidizing home loan interest rates below market).

Re: Do central banks’ mounting losses actually matter?

#52

Post by pragmar » Mon, Oct 10, 2022, 9:57 PM UTC

melenaboija wrote: post #24

chatterhead wrote: post #3

Don't be fooled, the central in "Central Banking" is about decision making power and profit. The losses are all distributed.

And how is the profit distributed? If you live in Europe, and specially US, you are already part of the shareholders and will profit from it (on average). More or less than other actors in the country, but definitely more than those ones not being under these central banks policies.

Cantillon effect says it's just a matter of how "close to money" you are. So living under a central bank is good, but borrowing directly from one is best.

Re: Do central banks’ mounting losses actually matter?

#53

Post by SevenNation » Mon, Oct 10, 2022, 9:57 PM UTC

brutusborn wrote: post #44

SevenNation wrote: post #30

> On the other hand, central banks are constructs of sovereign states and can literally create money out of thin air, which makes the whole bankruptcy question take on a different dimension. This is not true, at least in the US. The Treasury issues currency. What the Federal Reserve can do (and has done under QE) is perform an asset swap. An asset held by a bank (such as a treasury bond) is purchased by the Fed and h…

I thought currency and reserve assets were essentially the same because there is no basis (e.g. gold) for the currency. It's like your right hand printing currency to give to your left hand to distribute. The left isn't making anything, but it's irrelevant. If the currency was gold backed, the right hand would be tied until the treasury deposited gold; now they can do it whenever the left hand looks empty.

You can pay for a vacation with US currency. You can't do that with reserve assets.

Re: Do central banks’ mounting losses actually matter?

#54

Post by incrudible » Mon, Oct 10, 2022, 9:58 PM UTC

legitster wrote: post #31

civilized wrote: post #11

Personally, if I had the authority of the government to print money, I would find it easy not to go bankrupt.

I mean, sure, you could print enough money to cover all outstanding debt. But try setting any meaningful monetary policy after that. Ain't no one going to buy a T-bill from you ever again once you do that.

No need to cover all the outstanding debt at once. The expectation of future debt monetization is already priced into the interest rate in much the same way as the risk of default would be. In fact, it is preferable that way. If you were a bond holder, would you prefer default over dilution?

Re: Do central banks’ mounting losses actually matter?

#55

Post by scottiebarnes » Mon, Oct 10, 2022, 9:59 PM UTC

SevenNation wrote: post #30

> On the other hand, central banks are constructs of sovereign states and can literally create money out of thin air, which makes the whole bankruptcy question take on a different dimension. This is not true, at least in the US. The Treasury issues currency. What the Federal Reserve can do (and has done under QE) is perform an asset swap. An asset held by a bank (such as a treasury bond) is purchased by the Fed and h…

The "money printing" phrase and meme is usually not referring to the literal physical printing of money, it is just a broad stroke meant to encompass the folly of central banks being able to buy unlimited assets with money they don't actually have.

The impact of QE is an increase in money supply.

Re: Do central banks’ mounting losses actually matter?

#56

Post by civilized » Mon, Oct 10, 2022, 9:59 PM UTC

SevenNation wrote: post #30

> On the other hand, central banks are constructs of sovereign states and can literally create money out of thin air, which makes the whole bankruptcy question take on a different dimension. This is not true, at least in the US. The Treasury issues currency. What the Federal Reserve can do (and has done under QE) is perform an asset swap. An asset held by a bank (such as a treasury bond) is purchased by the Fed and h…

That isn't how Investopedia defines reserve assets:

> Reserve assets are financial assets denominated in foreign currencies and held by central banks that are primarily used to balance payments.

https://www.investopedia.com/terms/r/reserve-assets.asp

The OECD seems to define it consistently with Investopedia: https://stats.oecd.org/glossary/detail.asp?ID=167

Could we perhaps have a source for the definition you're using here?

Re: Do central banks’ mounting losses actually matter?

#57

Post by lcw » Mon, Oct 10, 2022, 9:59 PM UTC

SevenNation wrote: post #30

> On the other hand, central banks are constructs of sovereign states and can literally create money out of thin air, which makes the whole bankruptcy question take on a different dimension. This is not true, at least in the US. The Treasury issues currency. What the Federal Reserve can do (and has done under QE) is perform an asset swap. An asset held by a bank (such as a treasury bond) is purchased by the Fed and h…

Obviously you are correct in that the Fed doesn't print money. That does seem like a misconception. However, they do make money more available by lowering interest rates and QE. This does give banks a disproportionate opportunity to lend more. Both because it's more lucrative for businesses and consumers to take on debt, but also because they need less real money on hand to do so.

While I agree it's not printing money out of thin air. It definitely seems to be making money more widely available, and in the end the outcome is the same. However, I think what you are alluding to is there isn't some chaos machine that dump money in the economy with no levers to pull it back.

Re: Do central banks’ mounting losses actually matter?

#58

Post by miohtama » Mon, Oct 10, 2022, 9:59 PM UTC

smegsicle wrote: post #50

luckylion wrote: post #25

Earlier quoted context omitted.

Maybe you can explain it to me like I'm five. I've been occasionally watching the Turkish Lira this past year. The rates against the USD are still sinking. Against the EUR it's pretty stable. Yet allegedly they have something like 80-150% inflation in Turkey, while the EUR-zone has 10%. How does this work, why isn't the Lira becoming "worthless" with that amount of inflation?

the expectation is that if people assume that kind of inflation will continue, they would convert their wealth to another currency/form of wealth, and vendors would also prefer these other currencies, which would drive the inflation even further, right? so i also wonder what they're doing to curb the spiral

Here is a BBC article what has been done in the past to stop hyperinflation:

https://www.bbc.com/news/business-45523636

The problem is that Erdogan is not doing any of this. His controversial politics are taking Turkey further down in the pit. Because Turkey’s political system is somehow broken, it is not clear if any election can replace Erdogan.

Re: Do central banks’ mounting losses actually matter?

#59

Post by nemo44x » Mon, Oct 10, 2022, 10:00 PM UTC

SevenNation wrote: post #30

> On the other hand, central banks are constructs of sovereign states and can literally create money out of thin air, which makes the whole bankruptcy question take on a different dimension. This is not true, at least in the US. The Treasury issues currency. What the Federal Reserve can do (and has done under QE) is perform an asset swap. An asset held by a bank (such as a treasury bond) is purchased by the Fed and h…

But it allows the banks to loan more money which is in fact created out of thin air. A bank is only limited in how much it can loan by how many assets it has. Money printer goes brrrrrr.

Re: Do central banks’ mounting losses actually matter?

#60

Post by gdy » Mon, Oct 10, 2022, 10:00 PM UTC

karamanolev wrote: post #17

gdy wrote: post #8

Earlier quoted context omitted.

In Russia it feels like being a passenger in a hijacked plane flying towards tall buildings.

Does it, within Russia? Are you saying that as a person within Russia or an external observer? I feel like externally, the west feels like Russia is headed to certain doom, but a majority of Russians feels like they'll be fine and they're sticking it to the colonial west.

I'm Russian living in Russia and it feels like that since 2/24. Now almost 90% are concerned about the events in the Ukraine [0].

Personally, in February I was concerned about loss of lives, mostly Ukrainian, political repressions and Russian economy, today the economy looks okeyish, but with all the Western help to the Ukraine, it looks like it's only the question of time when Putin turns to tactical nukes.

[0] https://www.levada.ru/2022/09/29/konflikt-s-ukrainoj-sentyab...