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Do central banks’ mounting losses actually matter?

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Re: Do central banks’ mounting losses actually matter?

#201

Post by jteppinette »

freddybobs wrote: post #195
jteppinette wrote: post #185

Earlier quoted context omitted.

> 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 o…

When discussing price, supply and demand is a natural way to reach the most efficient answer. Alternatively, price fixing, results in market failure.

Re: Do central banks’ mounting losses actually matter?

#202

Post by dc-programmer »

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.

I have two theories

1. Economic uncertainty causes stress. The economic system is complex beyond comprehension so folks reify their anxiety onto the physical manifestation of the economy - money. Thus the money supply, and by extension the Fed, become a synecdoche of a much larger system.

2. The Fed is a scapegoat for fiscal policy. Politicians and special interests peddle Fed conspiracies because it distracts from Congress’ dereliction of duty to make fiscal policy. Taxing and spending are powerful levers that many politicians are loathe to use. This is why the Fed Chair doesn’t even have to be an economist anymore. They are just a whipping boy for the public

Re: Do central banks’ mounting losses actually matter?

#203

Post by SilasX »

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.

These threads show a phenomenon I've noticed a lot lately. That many smart people suddenly flout HN guidelines[1] on a topic when they agree with the mainstream view. Rather than use their purported expertise to substantively refute the misconceptions, they give content-free remarks that amount to no more than "the bandwagon doesn't believe this, therefore you should feel low-status for believing it, therefore you are wrong".

This topic seems to make intellectually-uncurious status seekers out of otherwise hacker-mentality people.

[1] https://news.ycombinator.com/item?id=33153931

Re: Do central banks’ mounting losses actually matter?

#204

Post by jteppinette »

doubleunplussed wrote: post #200
jteppinette wrote: post #185

Earlier quoted context omitted.

> 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…

First, the money supply and price of money has been manipulated since before central banks existed.

I don’t exactly understand your thesis, because, of course the federal reserve existing more than a decade before the Great Depression and is a primary driver for the credit expansion that caused the Great Depression to be so large and long lasting. Artificial manipulation, as I described above, is what causes the natural movements of an economy to be so extreme.

Re: Do central banks’ mounting losses actually matter?

#205

Post by colinmhayes »

_Algernon_ wrote: post #129
mjburgess wrote: post #124

Earlier quoted context omitted.

> that central banks would use their money-conjuring tools whenever there was a shock to the system of course , that's why we have central banks and fiat currency. Without that, there'd be a currency crisis every other minute; as there was on gold. You can't "spin up the gold mines" during a pandemic.

What's the difference between inflating away the buying power of the people, versus taxing away the buying power of the people? Mathematically there should be no difference. But I guess the transparency of the latter and the unpopularity for the politicians involved is too scary, so that's why we print monopoly money instead.

The difference is inflation creates jobs and taxes don’t. They have extremely different effects beyond “reduce purchasing power”

Re: Do central banks’ mounting losses actually matter?

#206

Post by DemeterFarm »

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…

>Even though I've got plenty yet to learn, it is extremely clear to me that some kind of control of the money supply is necessary...

So, you have no idea what you are talking about but you FEEL like you do? Bitcoin (now called Bitcoin Cash) has been working as cash perfectly for over 10 years with no central control necessary.

Re: Do central banks’ mounting losses actually matter?

#207

Post by nirimda »

orangepurple wrote: post #29
kodyo wrote: post #27

Earlier quoted context omitted.

It can go bankrupt if people stop trusting the currency.

The government forces its subjects to pay taxes in that same currency and enforces this policy through courts, police, and the military. That is where state run currencies get their value. You need $CURRENCY because it is required to pay your taxes. The only way it ever stops is overthrow.

That isn't true. There's many cases where e.g. through corruption and distrust, the state's capacity to collect taxes has been seriously weakened and the currency has gone into freefall so the country begins to operate - even despite threats of harsh penalty - in alternative currencies.

States regularly remain in existence (i.e. are not overthrown) even after their currencies have stopped being used for everyday transactions and as regular stores of value. It is one of many examples of governments playing catchup with the economy.

Re: Do central banks’ mounting losses actually matter?

#208

Post by chatterhead »

imtringued wrote: post #82
chatterhead wrote: post #72

Earlier quoted context omitted.

No, you won't profit from it. The people who profit are the member banks. Federal Reserve is an organization made up of member banks. Those banks make money off of interest and investments. The losses are distributed among the masses through dilution of our currency through the necessary expansion of it to absorb the losses. No amount of annual profit returned to the Treasury has ever outweighed the negative effect o…

Tell me why exactly do you need to take the medium of exchange hostage like people take housing hostage as a speculative investment? Money is there to be used for transactions. Using money to save is literally the opposite how you are supposed to use it. If anything, people witholding the medium of exchange against interest are what is causing business cycles and bailouts.

It's also used as a store of value and unit of account. That's the purpose of money. You don't understand it because you haven't learned about it yet.

Re: Do central banks’ mounting losses actually matter?

#210

Post by Bakary »

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.

It's not just central banking, but any money-related topic that involves large institutional choices or new paradigms, such as the gold standard or bitcoin. I've noticed that there is a very recognizable tone of voice attributable to people who self-identify as intelligent and who chose to talk about monetary issues like these.

The drive to appear intelligent and to distance yourself from the crowd is never as strong as it is in those discussions. The combination of money and power plus their physical manifestation in the form of a central bank or measure you can point to acts as a lightning rod for anxiety.

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