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Do central banks’ mounting losses actually matter?

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Re: Do central banks’ mounting losses actually matter?

#191

Post by CompactNotice »

simonh wrote: post #189
CompactNotice wrote: post #183

Earlier quoted context omitted.

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.

Who did they buy those assets from, and where did they get the money to buy them in the first place?

Re: Do central banks’ mounting losses actually matter?

#192

Post by centralscam »

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…

Centralization of power into the capitals of nation-states brought us the meat grinder of WW1 and then the horror show of WW2. The centralization of power in Washington, Moscow and Beijing brought us to the brink of global nuclear war. WW2 was already hard to escape but no place on this planet will be safe when the Ukraine thing goes sideways.

Yeah exactly. We "need" global communism to fight Climate change, right? I'll pass. If there is a solution it's going to be a bottom up technological innovation.

There was no time and place except under mostly decentralized capitalism when workers where not exploited. Whatever that word even means to you. Normal socialists seem think every transaction is "exploitation".

It's pretty black and white. Centralization only allows for one solution and smothers all others. If the central plan fails, like central banking does right now, it fails for everyone all at once and there is no escape.

Re: Do central banks’ mounting losses actually matter?

#193

Post by roenxi »

kypro wrote: post #186
roenxi wrote: post #126

Earlier quoted context omitted.

"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.

> In this case it doesn't matter if you're a tax payer though.

They don't explain who is going to be paying in advance. Usually it is a surprise. The approach is to wait for the crisis to come to a head then make a snap decision if it is the government that needs to settle things.

There are literal trillions of dollars floating about. Someone is fronting up real resources, somewhere. Who? What? These are important questions. I'm assuming taxpayers until proven otherwise. If people wanted to know they could design a simple system, but it is obfuscated - probably with intent but maybe not malice. Every time people figure out who is paying another add another layer of indirection gets built up to confuse the situation.

> Central bankers have no power to levy taxes

I get what you mean in context, but this is false. I pay a lot of capital gains on my gold because of them. Now I'm no aurumologist, but I'm pretty sure my lucky 10g of gold hasn't doubled in size to 20g. And yet I'm paying taxes as though it has.

Now, arguably maybe supply and demand has shifted and my shiny rock has doubled in value. But that is pretty patent bullshit, I bought it thing because there is obvious asset price inflation happening long term. And I'm being taxed as though it is growing.

Re: Do central banks’ mounting losses actually matter?

#194

Post by centralscam »

ThalesX wrote: post #101
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.

Sorry, but I don't think you know what you are talking about. I actually come from an ex eastern block country (and was born under communism) and I can tell you that nobody prefers soviet style appartments to what's available today.

Re: Do central banks’ mounting losses actually matter?

#195

Post by freddybobs »

jteppinette wrote: post #185
doubleunplussed wrote: post #155

Earlier quoted context omitted.

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 w…

> "the market’s ability to self-regulate"

The market is artificial. For an example it it operates (largely) within constraints that are external - laws.

Modifying the money supply is a lever that can be used to achieve goals - such as a desired inflation rate.

Whether its a good idea or when and how is the appropriate way to use it is another question. Implying it is bad because it is "artificial" begs the question of what's "natural". The market is clearly not natural.

Re: Do central banks’ mounting losses actually matter?

#196

Post by simonh »

CompactNotice wrote: post #191
simonh wrote: post #189

Earlier quoted context omitted.

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.

Who did they buy those assets from, and where did they get the money to buy them in the first place?

The government bought them from the banks, using money the Treasury created. When the assets are sold the created money is 'retired' and any profit returned to the Treasury.

IMHO QE in the US went too far, but it was absolutely a necessary programme that stabilised the US economy at critical moments. The increased reserve requirements on banks, while dragging on bank profits since, were prudent and seem to be working well, especially compared to Europe.

Re: Do central banks’ mounting losses actually matter?

#197

Post by civilized »

civilized wrote: post #56
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 us…

I have made a good-faith effort to substantiate GP's comments and been completely unable to do so. Meanwhile, on Investopedia, the article "How the Federal Reserve Creates Money" directly contradicts GP's claim that the Fed doesn't create money: https://www.investopedia.com/articles/investing/081415/under...

> Printing money is the job of the Federal Reserve, but only figuratively speaking. When the Fed decides to stimulate the economy by pouring more money into the system, it electronically transfers additional credits to the deposits of its member banks. The banks lend that money out to consumers and businesses at a profit, putting the money into general circulation.

Re: Do central banks’ mounting losses actually matter?

#199

Post by dragontamer »

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.

Hasn't that always been true?

Guilds and banks have been the center of conspiracy theories since their invention in the late dark ages.

People are distrustful of money, especially of the people who seemingly create money out of nothingness.

To someone who doesn't understand monetary instruments, it's all conspiracy theories to explain why those people have lots of money, while I myself do not.

Re: Do central banks’ mounting losses actually matter?

#200

Post by doubleunplussed »

jteppinette wrote: post #185
doubleunplussed wrote: post #155

Earlier quoted context omitted.

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 w…

The business cycle is a natural phenomenon that predates central banks controlling the money supply, and would still occur if there was a fixed monetary base.

As banks loaned more and less, and people spent faster and slower through the business cycle, the total amount of bank money and the velocity it was spent at would grow and contract. Prices would therefore be unstable, because prices follow changes in the money supply and the velocity of money. Money would become scarce, and thus interest rates high, right when central banks would be cutting rates. The business cycle is self-reinforcing, there's no natural equilibrium to it at all, and if not smoothed by a government or central bank, can result in tragedies like the great depression.

And in a world where economies are still growing, without growth in the monetary base we would in the long run have deflation, which most economists think is worse than small positive inflation.

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