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Do central banks’ mounting losses actually matter?

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Re: Do central banks’ mounting losses actually matter?

#101

Post by ThalesX »

centralscam wrote: post #83

Central banking is the central planning of the availability and price of credit. Central planning of food production has created famines with no equal in history. Central planning of housing created those lovely soviet style "housing" block developments while the beautiful inner cities of eastern europe rotted away. Central planning of car production gave you cars like the Trabant which you literally had to queue 18…

> Central planning of housing created those lovely soviet style "housing" block developments while the beautiful inner cities of eastern europe rotted away.

I can’t talk about the other points but as an East European I’d take those blocks any day vs the unregulated apartments being built today with 0 green space and where you hear your neighbors taking a dump 3 floors away from you.

Re: Do central banks’ mounting losses actually matter?

#102

Post by [deleted] »

cm2187 wrote: post #99
hristov wrote: post #79

This is a little alarmist. At least for the US, there don't seem to be any losses because the FED just lets the assets roll off. I.e., it does not sell the treasuries on its balance sheet, it lets them mature and gets paid the principle back by the government. If you do that and you have not purchased treasuries at negative yields (which the fed has not), and the government does not default (thankfully it hasn't) the…

You can still lose money on the interest rate you pay to the massive reserves banks have to hold at the central bank when you jack up rates but hold fixed rate bonds. Also in theory, if they really do unwind QE (which I think they will never do), they also hold all sort of long term treasuries and ABS that they would have to sell on the open market, ie too long dated to hold to maturity. And my guess is that those ar…

[deleted]

Re: Do central banks’ mounting losses actually matter?

#103

Post by cm2187 »

satellite2 wrote: post #95
centralscam wrote: post #83

Central banking is the central planning of the availability and price of credit. Central planning of food production has created famines with no equal in history. Central planning of housing created those lovely soviet style "housing" block developments while the beautiful inner cities of eastern europe rotted away. Central planning of car production gave you cars like the Trabant which you literally had to queue 18…

I'm not sure that's completely true. Banks are actually the main issuers of new money. The central banks are actually more of a banking lubricant I'm normal times. Obviously they can substitute from banks and make the credit conditions better. But they cannot really make them worse. What's happening now is that most central bank have been stimulating the economy by lending at rates under the "natural" rate and they a…

They can absolutely make credit conditions worse, through capital requirement and liquidity requirement. Also if you withdraw QE, it drains banks deposits and their ability to fund new loans.

Re: Do central banks’ mounting losses actually matter?

#104

Post by arcticbull »

lotharcable wrote: post #16

They don't go bankrupt in the conventional sense. When they go bankrupt economists like to use the term "Hyper Inflation". This means that the currency they produce becomes worthless.

> When they go bankrupt economists like to use the term "Hyper Inflation".

That's not what hyperinflation means.

Hyperinflation is not the same thing as inflation, it's not just a monetary phenomenon. It happens when a population rejects a currency. It has historically always involved at least one of: losing a war, regime change or foreign-denominated debt - some kind of exogenous event. [1]

Hyperinflation is the collapse of an economic system in which one of the symptoms is dramatic decrease in purchasing power.

[1] https://www.pragcap.com/hyperinflation-its-more-than-just-a-...

Re: Do central banks’ mounting losses actually matter?

#105

Post by cm2187 »

californical wrote: post #84
rnk wrote: post #80

Earlier quoted context omitted.

If he uses a nuke, even a small tactical nuke, nato and the US will respond with overwhelming conventional forces, destroying some significant Russian military assets. The world will be on a precipice of doom. I don't see how it will stop. Russia is too weak, their only response is more nukes, and then it's over for all of us.

NATO and the US will likely not respond if Putin uses a small nuke in Ukraine. There’s too much to lose. They’ll just let it happen, as they should. Which is obviously terrible and devastating for Ukrainians, but probably best for the rest of the world. Hopefully other Russian leaders are aware of the risk though, and would actively disobey Putin if he gave the call to use nukes

My bet is no direct military intervention but a dramatic ramp up in weapon supply to Ukraine, including long range weapons. The other thing that will likely happen is the loss of support from India and China, which are already a lukewarm support. Another consequence I think will be the end of non proliferation. Everyone will want to have nukes if it is now used as an offensive weapon against non nuclear countries. That includes Taiwan.

Which is why I think it is incredibly unlikely. Lots of threats, but they won't do it. Even chemical weapons would be a stretch.

Re: Do central banks’ mounting losses actually matter?

#106

Post by [deleted] »

barbariangrunge wrote: post #91
centralscam wrote: post #83

Central banking is the central planning of the availability and price of credit. Central planning of food production has created famines with no equal in history. Central planning of housing created those lovely soviet style "housing" block developments while the beautiful inner cities of eastern europe rotted away. Central planning of car production gave you cars like the Trabant which you literally had to queue 18…

Decentralized feudal lords caused the sen goku period in Japan and the warring states period in China. Decentralized attempts to tackle climate change have resulted in run away global warming. Decentralized negotiations led to companies exploiting workers, often to death, on a massive-scale during the industrial revolution and even today in many places. That doesn’t say anything about whether centralization or decent…

[deleted]

Re: Do central banks’ mounting losses actually matter?

#107

Post by hristov »

cm2187 wrote: post #99
hristov wrote: post #79

This is a little alarmist. At least for the US, there don't seem to be any losses because the FED just lets the assets roll off. I.e., it does not sell the treasuries on its balance sheet, it lets them mature and gets paid the principle back by the government. If you do that and you have not purchased treasuries at negative yields (which the fed has not), and the government does not default (thankfully it hasn't) the…

You can still lose money on the interest rate you pay to the massive reserves banks have to hold at the central bank when you jack up rates but hold fixed rate bonds. Also in theory, if they really do unwind QE (which I think they will never do), they also hold all sort of long term treasuries and ABS that they would have to sell on the open market, ie too long dated to hold to maturity. And my guess is that those ar…

The FED does pay an interest rate on bank reserves, but the FED sets that rate themselves (this is the IORB rate). One hopes, with all the economists they have on staff, they would not set that rate to such a value that would lead them to insolvency.

Regarding long term treasuries and ABS ... it will be much more convenient for the FED if the FED just held them to maturity, and this is probably what they would do. So I agree with you I very much doubt that they would unwind QE completely.

Re: Do central banks’ mounting losses actually matter?

#108

Post by arcticbull »

downrightmike wrote: post #22
lotharcable wrote: post #16

They don't go bankrupt in the conventional sense. When they go bankrupt economists like to use the term "Hyper Inflation". This means that the currency they produce becomes worthless.

Yup, BlackRock specializes in closing failed banks. That's why the US gov't gave them all the bad banks from 2007 and also why they are a huge company. They'll only get larger at this point.

Do you have a citation for this?

My understanding is small community banks sold by the FDIC to larger banks or their depositors paid out directly. [0] Larger banks - WaMu for instance - were put under the purview of the Office of Thrift Supervision (OTS) and their customers assets and certain liabilities sold. In WaMu's case it was to JPMorgan. [1]

[0] https://www.fdic.gov/consumers/banking/facts/payment.html

[1] https://en.wikipedia.org/wiki/Office_of_Thrift_Supervision

Re: Do central banks’ mounting losses actually matter?

#109

Post by cuteboy19 »

altfredd wrote: post #74
timeon wrote: post #38

Earlier quoted context omitted.

> colonial west Russian war in Ukraine is about regaining control of former colony. They lost lot of them in eastern Europe but still have some in Asia.

> regaining control of former colony This is an oversimplification... How many countries have built nuclear power plants and missile assembly lines in their colonies?

The British built a sizable chunk of the indian railways. In fact to this day there are plenty of British era bridges that survive whereas modern ones crumble within 20 years. Surely you don't imply that the British were not colonizers?

Re: Do central banks’ mounting losses actually matter?

#110

Post by doubleunplussed »

This thread shows a phenomenon that I've noticed a lot of lately: that many smart people turn absolutely loopy when it comes to the topic of central banking. There's nothing quite like it, and I'm not sure how to explain it. The topic seems to make conspiracy theorists out of otherwise very reasonable people.

Good to see the highest voted comments are sane, but the sanity ratio is pretty low compared to other topics.

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