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

Re: Do central banks’ mounting losses actually matter?

#181

Post by CompactNotice » Tue, Oct 11, 2022, 12:00 PM UTC

not_the_fda wrote: post #148

pjc50 wrote: post #138

Earlier quoted context omitted.

> printing money and handing it out to your wealthy buddies. So much confusion is caused by the inability to distinguish between "gift" and "loan". The problem with allowing banks to hard-fail is that imposes real, huge costs on customers even if the deposits are 100% covered, because the failover is not instant and you end up with money locked up for a period and are unable to make your own payments. > prices going…

> So much confusion is caused by the inability to distinguish between "gift" and "loan". What the difference between a gift and a loan that costs nothing?

In fact, a loan on generous terms which causes the broader market to judge your entire industry as explicitly backstopped by the government, and thus lend you money at lower rates of interest than you would otherwise pay, is a gift that keeps on giving.

Re: Do central banks’ mounting losses actually matter?

#182

Post by [deleted] » Tue, Oct 11, 2022, 12:00 PM UTC

not_the_fda wrote: post #148

pjc50 wrote: post #138

Earlier quoted context omitted.

> printing money and handing it out to your wealthy buddies. So much confusion is caused by the inability to distinguish between "gift" and "loan". The problem with allowing banks to hard-fail is that imposes real, huge costs on customers even if the deposits are 100% covered, because the failover is not instant and you end up with money locked up for a period and are unable to make your own payments. > prices going…

> So much confusion is caused by the inability to distinguish between "gift" and "loan". What the difference between a gift and a loan that costs nothing?

[deleted]

Re: Do central banks’ mounting losses actually matter?

#183

Post by CompactNotice » Tue, Oct 11, 2022, 12:02 PM UTC

doubleunplussed wrote: post #157

hoseja wrote: post #142

Earlier quoted context omitted.

"I loan you a billion dollars now to buy assets, then inflate money so billion dollars is worth half a billion dollars, then demand my billion dollars back. This isn't a gift wink wink ."

After QE4, seems to me inflation wasn't particularly high.

Asset inflation ran quite high throughout QE. The same number of dollars might be obtained by selling half of what one purchased with borrowed money at the start of the program.

Re: Do central banks’ mounting losses actually matter?

#184

Post by simonh » Tue, Oct 11, 2022, 12:03 PM UTC

not_the_fda wrote: post #148

pjc50 wrote: post #138

Earlier quoted context omitted.

> printing money and handing it out to your wealthy buddies. So much confusion is caused by the inability to distinguish between "gift" and "loan". The problem with allowing banks to hard-fail is that imposes real, huge costs on customers even if the deposits are 100% covered, because the failover is not instant and you end up with money locked up for a period and are unable to make your own payments. > prices going…

> So much confusion is caused by the inability to distinguish between "gift" and "loan". What the difference between a gift and a loan that costs nothing?

The loans didn't cost nothing, and capital requirements were raised massively which severely dragged on the profitability of US banks. You can see this because European banks didn't face the same requirements and now after a period of making hay are looking very shaky, particular Credit Suisse.

Re: Do central banks’ mounting losses actually matter?

#185

Post by jteppinette » Tue, Oct 11, 2022, 12:14 PM UTC

doubleunplussed wrote: post #155

cf141q5325 wrote: post #119

Earlier quoted context omitted.

Could you give an example? Without this reads a lot like just calling people who dont share your narrative irrational conspiracy theorists. edit: On second read this sounded confrontational. I only ask because its really dangerous to make such broad non-refutable statements, especially when the conspiracy theorist label is used to no longer engage with people who dont share your narrative. Differently put, where exac…

Well, let's have a scroll... This one: https://news.ycombinator.com/item?id=33156617 No, the fed having negative equity doesn't stop them controlling the money supply. Unless like, they've literally sold all their assets and there's still too much money left in the system, but that's so far away from being a possibility that it's not worth considering. And even if it did happen, there would be options. Here we've got…

> it is extremely clear to me that some kind of control of the money supply is necessary, otherwise you get depressions

I disagree, and I will attempt to explain myself clearly.

Artificially modifying the money supply or interest rates (cost of money) breaks the market’s ability to self-regulate. Artificially low interest rates and money creation leads to an artificial boom period. This pushes investment into areas where it would otherwise not be directed (consumer goods vs producer goods / generally bad investments i.e. subprime mortgages, risky tech, etc..). This eventually results in a bust period as the system realizes its mistakes.

The real problem is the creation of an artificial boom, the bust is just a natural reaction to that boom.

Re: Do central banks’ mounting losses actually matter?

#186

Post by kypro » Tue, Oct 11, 2022, 12:18 PM UTC

roenxi wrote: post #126

spaceman_2020 wrote: post #120

Earlier quoted context omitted.

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…

"lay people": It looks a lot like you're printing money and handing it out to your wealthy buddies. "experts": This matter is too complex and jargon-filled for you to take part in the debate. "lay people": Explain again why we have an institution that alternates between handouts to asset owners and crashing the economy? I think prices going up exponentially with time might be bad for my welfare! "experts": Those craz…

In this case it doesn't matter if you're a tax payer though. Central bankers have no power to levy taxes, they manipulate the value of the currency itself by altering rates and bond market interventions.

Re: Do central banks’ mounting losses actually matter?

#187

Post by erichocean » Tue, Oct 11, 2022, 12:18 PM UTC

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?

https://www.weforum.org/great-reset/

Re: Do central banks’ mounting losses actually matter?

#188

Post by pjc50 » Tue, Oct 11, 2022, 12:18 PM UTC

roenxi wrote: post #149

pjc50 wrote: post #138

Earlier quoted context omitted.

> printing money and handing it out to your wealthy buddies. So much confusion is caused by the inability to distinguish between "gift" and "loan". The problem with allowing banks to hard-fail is that imposes real, huge costs on customers even if the deposits are 100% covered, because the failover is not instant and you end up with money locked up for a period and are unable to make your own payments. > prices going…

> So much confusion is caused by the inability to distinguish between "gift" and "loan". QE4 was the better part of a trillion dollars. That much money moves through a system that is too complex and jargon filled for the layman to understand, and you want them to believe that there is nothing to see here? 1. The people on the other side of the bad loan, who aren't expected to pay back the money, are making bank by ta…

> 1. The people on the other side of the bad loan, who aren't expected to pay back the money, are making bank by taking on silly levels of risk and then benefiting from the bailouts

Which people? Which loans? Please please be specific.

> These loans aren't available to ordinary people or businesses because the terms would obviously put any individual far too far ahead

Again, which loans? What are the collateralization rules for them? What are the interest rates? Do you think an individual and a bank have the same credit score?

You cannot expect to be taken seriously if you just allege "crime" without specifics.

> There isn't any reason to believe the loans are being paid back

Please distinguish between "default" and "rollover". There is nothing wrong with rollover unless the risk has changed?

> Every time it looks like debts might get called in on aggregate

This can't really happen in a world of pension funds, because that's what the other side of the balance sheet is: the increasing number and amount of money owed to future pensioners. That's why the US "social security balance sheet" (which is accounted separately for some reason specific to the US) keeps increasing.

> coordinated giving of massive funds

lending?

> wasting the resources they are entrusted with

Example of "wasting"?

> Prices could be a random walk around an average, for example.

That's "inflation targeting at 0%"; it's both politically and practically achievable, but you do have to convince people that the locally-deflationary effects aren't a problem. And you can't avoid external shocks: if you embargo Russian gas, prices are going to go up, and that's inflation regardless of money supply issues.

> the UK pension funds were getting margin called on their safe assets

Yes - UK govenment bonds (gilts), which suddenly look a lot more risky in the presence of stupid policy decisions. Quite hard to find a safer asset, though.

Re: Do central banks’ mounting losses actually matter?

#189

Post by simonh » Tue, Oct 11, 2022, 12:22 PM UTC

CompactNotice wrote: post #183

doubleunplussed wrote: post #157

Earlier quoted context omitted.

After QE4, seems to me inflation wasn't particularly high.

Asset inflation ran quite high throughout QE. The same number of dollars might be obtained by selling half of what one purchased with borrowed money at the start of the program.

QE involved the Fed buying assets, not giving away money. What you're saying would suggest that the Fed made massive profits for the public, which is actually correct. Overall QE, apart from it's other effects, has been hugely profitable for the US government. Not so much here in Britain, unfortunately.

Re: Do central banks’ mounting losses actually matter?

#190

Post by cf141q5325 » Tue, Oct 11, 2022, 12:22 PM UTC

doubleunplussed wrote: post #155

cf141q5325 wrote: post #119

Earlier quoted context omitted.

Could you give an example? Without this reads a lot like just calling people who dont share your narrative irrational conspiracy theorists. edit: On second read this sounded confrontational. I only ask because its really dangerous to make such broad non-refutable statements, especially when the conspiracy theorist label is used to no longer engage with people who dont share your narrative. Differently put, where exac…

Well, let's have a scroll... This one: https://news.ycombinator.com/item?id=33156617 No, the fed having negative equity doesn't stop them controlling the money supply. Unless like, they've literally sold all their assets and there's still too much money left in the system, but that's so far away from being a possibility that it's not worth considering. And even if it did happen, there would be options. Here we've got…

I really appreciate the lengthy response. I also didnt want to accuse you of being in the echo chamber, everyone always has that risk, me included. It is just extremely difficult to tell once communication breaks down.

I think much of it has less to do with people being stupid but topics being complex. And the attempts to make sensible complexity reduction. With a complexity ceiling being very real. At a certain point there are too many perspective with too much knowledge assumed on peoples part, which might not all be relevant. Which is why i personally tend to stay from discussions with big words like capitalism. Making sure everyone is talking about the same thing is just far from trivial.

I think the scam part might be one of those stupid things that might entail more then it first seems. Unfortunately "the economy" isnt as easy to model as physical systems. Because in the end its nothing but the behavior of market participants. And while its possible to set incentives, through interests rates and the like, we arent as rational as we would like to think. What people believe plays a big part in determining their behavior and as such, changing that is just as much a means of influencing the economy as interest rate cuts. Or differently put, inflation being inflation expectation.

It of course doesnt mean that the problems of a store of value based currency disappear, but its also important to keep in mind on the topic. Especially since the complexity ceiling might be exploited to shape beliefs which in turn influence the economy.

I however dont have an answer to how communication on topics at the complexity ceiling could work. But i think its important to at least understand where communication breaks down for what reason.