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Do central banks’ mounting losses actually matter?

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Re: Do central banks’ mounting losses actually matter?

#161

Post by chiefalchemist »

spaceman_2020 wrote: post #120
doubleunplussed wrote: post #110

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.

Modern monetary theory is so complex and jargon-filled that the only way lay people can understand it is through conspiracy theories. Conspiracies offer succinct one-paragraph explanations (usually ready-fit for the group's biases) for extremely complex processes. In a way, it's like climate change. Extremely complex and hard to model, which invariably attracts conspiracy thinkers ready to whip it down into digestibl…

I don't see the climate analogy. People live their plight. On a day to day basic they know where they stand. They have been watching costs rise and incomes not keeping pace. This is situation decades old but only breaking the narrative surface lately.

They're reminded of the power of The Fed. True, they might get the exact details wrong, but they have a solid enough grip on who. They also see others (i.e., 1%) doing better and better.

"I'm struggling to pay my bills" is all they need to understand. Because the people don't understand the nitty gritty doesn't make The Fed any less accountable.

Re: Do central banks’ mounting losses actually matter?

#162

Post by dapf »

doubleunplussed wrote: post #110

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.

No post body was provided.

Re: Do central banks’ mounting losses actually matter?

#163

Post by amrocha »

concinds wrote: post #152
WastingMyTime89 wrote: post #136

Earlier quoted context omitted.

There is not that much jargon. It’s just an advanced topic so people use economic terms they expect people to know. Grab an introduction on macroeconomics for exemple Mankiw then any book on modern monetary theory and everything should be quite clear.

Strange to recommend Mankiw, and Modern Monetary Theory (a discredited, non-mainstream economic concept that Mankiw wrote against) in the same sentence. MMT is practically pseudoscience, makes unclear claims, claims a foundation in mainstream economics but makes completely wild logical leaps when it comes to policy recommendations, and it's promoted by politicians more than real economists.

Ah yes, MMT, classic discredited concept, unlike classic synthesis theory that has been completely unable to predict modern economic responses and can't explain the 3rd largest economy in the world.

You do know mainstream economics isn't science right? Because it's completely unable to prove anything it predicts

Re: Do central banks’ mounting losses actually matter?

#164

Post by ceejayoz »

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?

"It's not a colony if you build infrastructure in it" seems like the sort of oversimplification you're complaining about.

The USSR certainly didn't plan to lose Ukraine.

Re: Do central banks’ mounting losses actually matter?

#165

Post by nwienert »

mjburgess wrote: post #151
_Algernon_ wrote: post #133

Earlier quoted context omitted.

>People who decry central banks managing the supply of money seem only to have one, bad argument, "intuitively, money is a commodity and printing dilutes its value" -- well money is not a commodity. No. I'm saying inflation through money printing is mathematically equivalent to taxation, as it causes the same level of loss in buying power. Since one of these is more transparent in what is actually happening (taxation…

It's not a dilution of value when the risk is deflation; and at zero-inflation, it's not a tax because it encourages growth by investment. So it's only a "tax" if it (1) causes inflation to rise; and (2) rise above the level which promotes growth. Neither of those conditions obviously obtains in the era of QE. Indeed, (1) never did.

You’ve made up three things, each without convincing rhetoric let alone evidence, and then put QED at the end.

Re: Do central banks’ mounting losses actually matter?

#166

Post by amrocha »

SilverBirch wrote: post #114

I don't understand this... like... at all. At least for the BoE situation. So BoE has a load of bonds on it's balance sheet. These bonds are going down in value, so the bank is making a loss. This presumably goes on the UK deficit? If that's the case we're in trouble right? Because the UK is already at 143% Debt:GDP, interest rates are only now starting to go up, and the government's entire plan is to deficit spend t…

It's because it doesn't make any sense. Japan has a national debt of over 200% of GDP, economists have been predicting a recession for decades, and yet nothing has happened.

Re: Do central banks’ mounting losses actually matter?

#167

Post by nirimda »

miohtama wrote: post #48
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…

When the can meets the end of the road the ways out include - Hyperinflation - Great reset Likely effects may include - Revolution - War - Famine Here is a nice BBC article how hyperinflation has been solved in the past https://www.bbc.com/news/business-45523636 Usually there is a period, or permanent, “dollarisation” of the economy https://en.wikipedia.org/wiki/Hyperinflation#Aftermath but not sure if this is an opt…

I don't think a GBP or EUR hyperinflation would introduce any genuinely novel limitations of dollarisation.

If the GBP hyperinflates, you won't need to dollarise something of the scale of today's UK. Their economy will be worth a lot less. If it lasts for long enough, Scotland, Northern Ireland and perhaps even Wales will organise different problems for themselves. There would also be a humanitarian crisis and a migration/refugee crisis to help reduce the scale. On the other hand, the dominance of English, traditional respect for UK education, and the capacity of services to be delivered remotely would encourage an early dollarisation: all sorts of law firms and programmers will be asking for salaries in the currency of the source country. So I suspect the UK would dollarise more quickly and more successfully that other similar disasters.

The eurozone is somewhat uniquely placed in the context of a hyperinflation, because there are many separate countries who would, in that context, be enthusiastic to reintroduce national currencies. Whether that staves off the problems in the whole zone or what happens I don't know, but it might break it down into bite-sized chunks.

Re: Do central banks’ mounting losses actually matter?

#168

Post by WastingMyTime89 »

concinds wrote: post #152
WastingMyTime89 wrote: post #136

Earlier quoted context omitted.

There is not that much jargon. It’s just an advanced topic so people use economic terms they expect people to know. Grab an introduction on macroeconomics for exemple Mankiw then any book on modern monetary theory and everything should be quite clear.

Strange to recommend Mankiw, and Modern Monetary Theory (a discredited, non-mainstream economic concept that Mankiw wrote against) in the same sentence. MMT is practically pseudoscience, makes unclear claims, claims a foundation in mainstream economics but makes completely wild logical leaps when it comes to policy recommendations, and it's promoted by politicians more than real economists.

I didn’t mean MMT capitalised. I meant a modern book on monetary theory by opposition to anything not covering post-Keynesian economics. I’m not a native speaker. I didn’t even know MMT capitalised existed until your comment. I formally studied economics and the theory was never mentioned once so I guess it’s quite fringe.

Re: Do central banks’ mounting losses actually matter?

#169

Post by amrocha »

SilverBirch wrote: post #147
Pennycade wrote: post #116

Earlier quoted context omitted.

The BoE is independent (in theory) from the government. If the bonds that BoE own go to zero, their entries are effectively just deleted from the database. In the same way that an increase in the number of £ in the database doesn't increase the government's deficit. It's a very simple concept but can have psychological hurdle to overcome, given the simplicity of it and implications once internalised. Analogy .. BoE h…

So does this just mean it's inflationary? You borrow money, that means more money in the world (inflation) but it's debt, so it'll be paid back, so in the long run you haven't permanently inflated the currency. But then if you don't pay it back that turns into realized inflation and hurts your currency?

Any spending is inflationary, regardless of how you finance it.

If the spending is financed via taxation it can still cause inflation if it doesn't produce any real resources.

Taxation does create room for non-inflationary spending. That being said, if a government used QE to finance spending that was productive in real resource terms then it would not be inflationary.

Re: Do central banks’ mounting losses actually matter?

#170

Post by nirimda »

markdown wrote: post #134
miohtama wrote: post #48

Earlier quoted context omitted.

When the can meets the end of the road the ways out include - Hyperinflation - Great reset Likely effects may include - Revolution - War - Famine Here is a nice BBC article how hyperinflation has been solved in the past https://www.bbc.com/news/business-45523636 Usually there is a period, or permanent, “dollarisation” of the economy https://en.wikipedia.org/wiki/Hyperinflation#Aftermath but not sure if this is an opt…

What's "great reset"? Is that economics jargon?

It normally means "something something conspiracy theory", but it's actually the name of a post-covid economic recovery plan: https://en.m.wikipedia.org/wiki/Great_Reset

I struggle to understand what they might have meant by it in that kind of generic use.

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