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Federal Reserve lent $300B in emergency funds to banks in the past week

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Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#111

Post by arcticbull »

lazide wrote: post #93
fosk wrote: post #72

Earlier quoted context omitted.

Housing prices were going up because of supply/demand and not necessarily because of systemic high inflation. By the way just with regular Because homes cost a lot of money to begin with, the compounding effects of “healthy” inflation is going to be noticeable, and that doesn’t even factor in the low supply in the market.

Demand was increasing because money was very easy to get.

Then why didn't it happen in Japan? Same easy money, no increase in house prices. It's not the interest rates, it's the zoning rules. [1, 2]

[1] https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI

[2] https://fred.stlouisfed.org/series/INTDSRJPM193N

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#112

Post by pton_xd »

pclmulqdq wrote: post #98
rqtwteye wrote: post #52

Earlier quoted context omitted.

I don’t really understand the inflation situation. When house prices shot up, heath care costs shot up, education costs shot up there was no inflation. But when the little guys got some money, suddenly we call it inflation. I don’t really get it.

It's because of what they count in the CPI. Staple foods, education, and housing aren't counted, and healthcare counts once a year.

Energy isn't included either. Kind of amazing they can get away with publishing an inflation stat that excludes every core household expenditure category.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#113

Post by somewhereoutth »

fosk wrote: post #45
almog wrote: post #32

Earlier quoted context omitted.

It's a loan whose collateral is taken at par value rather than market price, which essentially increase the Fed's balance sheet. As of Wednesday last week, 4 months of QT have been reverted in a single week: https://fred.stlouisfed.org/series/WALCL

As long as the regular Joe doesn’t get extra money to spend, inflation will be check. Banks won’t go buy eggs anytime soon. We had close to 0% interest rates for almost a decade, and inflation was in check. It’s not the Fed that caused inflation, it is: * Suspending school debt (extra income) * Injecting real cash into the economy (stimulus checks and PPP loans to small businesses) * Supply chain bottlenecks after Co…

Almost by definition, inflation is caused only by expanding the money supply. Zero rates and QE expanded the money supply to be keep economies on life support after the GFC and Covid. However this led to asset bubbles more than high street inflation as the extra money flowed first to the already wealthy. Resource miss-allocation due to the miss pricing of time/risk has now likely manifested itself in lower productivity and so higher prices for goods and services too.

Of course, helicopter money (debt cancellation, Covid relief), will also increase the money supply, but at least it will flow first to the most needy. If the price of eggs goes up because more people can actually afford to eat them, I'm not sure that is a bad thing.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#114

Post by lazide »

arcticbull wrote: post #111
lazide wrote: post #93

Earlier quoted context omitted.

Demand was increasing because money was very easy to get.

Then why didn't it happen in Japan? Same easy money, no increase in house prices. It's not the interest rates, it's the zoning rules. [1, 2] [1] https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI [2] https://fred.stlouisfed.org/series/INTDSRJPM193N

No, Japan has had massively crashing population, which offset the massive inflationary impact.

https://www.macrotrends.net/countries/JPN/japan/population-g...

Despite a massive decrease in population, Japan has been mostly flat, when they should be in a strong deflationary environment due to demand destruction - because, you know, people being dead.

So hey, if the US population would decrease .5% a year (doesn’t sound like a lot, but it adds up fast - 1.75 mln/yr if in the US), we could also tame some inflation!

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#115

Post by nodemaker »

arcticbull wrote: post #104
prasadjoglekar wrote: post #55

Earlier quoted context omitted.

Inflation was there all along in asset prices - why else have home values gone up disproportionately relative to average Joe's income? What the Fed is doing with this move is patching the balloon and preventing a deflation. That is, bank has a run on deposits because people want their money back; bank is out of liquid cash; bank sells bonds/MBS that have mark-to-market less than par thus realizing losses. The downstr…

An increase in asset prices is not inflation, it's a good investment. AAPL isn't in the CPI basket, Apples are. Homes are up in price because zoning rules preclude development of new houses sufficient to meet demand, creating an imbalance in supply vs. demand. Interest rates only shift that equilibrium. Concretely, Japan's monetary and interest rate policy has been almost the same as the US for decades however they h…

Lol so according to you the money supply can increase 10x but as long as the cost of apples (or things in the CPI basket) is same, there is no inflation. Am i right?

I think you are trying to say that CPI and Inflation are the same thing.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#116

Post by arcticbull »

lazide wrote: post #114
arcticbull wrote: post #111

Earlier quoted context omitted.

Then why didn't it happen in Japan? Same easy money, no increase in house prices. It's not the interest rates, it's the zoning rules. [1, 2] [1] https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI [2] https://fred.stlouisfed.org/series/INTDSRJPM193N

No, Japan has had massively crashing population, which offset the massive inflationary impact. https://www.macrotrends.net/countries/JPN/japan/population-g... Despite a massive decrease in population, Japan has been mostly flat, when they should be in a strong deflationary environment due to demand destruction - because, you know, people being dead. So hey, if the US population would decrease .5% a year (doesn’t soun…

That's a funny way of saying that 'supply and demand meet in Japan' which you can do but decreasing demand or increasing supply. It really is that simple. When supply and demand are allowed to meet, prices stabilize. Otherwise please explain to me why you think that this is the one asset on earth not affected by supply and demand. And you could really use a solid citation.

Thought exercise.

There are 140,000,000 houses in the US. What do you think would happen to the price of each house if there were 280,000,000? If you answered anything other than 'they would still go up for some reason despite many of them being empty and derelict' then we are in agreement that it is a supply and demand issue. Ergo a zoning issue.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#117

Post by arcticbull »

nodemaker wrote: post #115
arcticbull wrote: post #104

Earlier quoted context omitted.

An increase in asset prices is not inflation, it's a good investment. AAPL isn't in the CPI basket, Apples are. Homes are up in price because zoning rules preclude development of new houses sufficient to meet demand, creating an imbalance in supply vs. demand. Interest rates only shift that equilibrium. Concretely, Japan's monetary and interest rate policy has been almost the same as the US for decades however they h…

Lol so according to you the money supply can increase 10x but as long as the cost of apples (or things in the CPI basket) is same, there is no inflation. Am i right? I think you are trying to say that CPI and Inflation are the same thing.

Money in a fractional reserve system operates not on a push model but on a pull model. You do not 'push' money into the system. Money is created when loans (and corresponding obligations to repay said loan) are created. The increase in supply was driven by an increase in demand. Your model is incomplete. You'll have to work a specific example - how would the supply suddenly triple? Who would get that money? What would they do with it?

> I think you are trying to say that CPI and Inflation are the same thing.

I think you are trying to say that money supply growth is inflation, it is not. Even the rejected Austrian school would agree.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#118

Post by somewhereoutth »

arcticbull wrote: post #104
prasadjoglekar wrote: post #55

Earlier quoted context omitted.

Inflation was there all along in asset prices - why else have home values gone up disproportionately relative to average Joe's income? What the Fed is doing with this move is patching the balloon and preventing a deflation. That is, bank has a run on deposits because people want their money back; bank is out of liquid cash; bank sells bonds/MBS that have mark-to-market less than par thus realizing losses. The downstr…

An increase in asset prices is not inflation, it's a good investment. AAPL isn't in the CPI basket, Apples are. Homes are up in price because zoning rules preclude development of new houses sufficient to meet demand, creating an imbalance in supply vs. demand. Interest rates only shift that equilibrium. Concretely, Japan's monetary and interest rate policy has been almost the same as the US for decades however they h…

Zoning may have localised effects, but in general house prices are determined by incomes (módulo) interest rates. People pay as much as they can afford to get the best house they can afford. This amount is then translated into house prices by interest rates. 1K/month at 3% gives a wildly different price than at 6%. Compounding this has been the 'funny money' sloshing around the system looking for safe assets to park in - said funny money induced by the liquidity pumped in by low interest rates.

SF is pricey because of high engineers' earnings, foreign cash inflows, on a background of low rates.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#119

Post by lazide »

arcticbull wrote: post #116
lazide wrote: post #114

Earlier quoted context omitted.

No, Japan has had massively crashing population, which offset the massive inflationary impact. https://www.macrotrends.net/countries/JPN/japan/population-g... Despite a massive decrease in population, Japan has been mostly flat, when they should be in a strong deflationary environment due to demand destruction - because, you know, people being dead. So hey, if the US population would decrease .5% a year (doesn’t soun…

That's a funny way of saying that 'supply and demand meet in Japan' which you can do but decreasing demand or increasing supply. It really is that simple. When supply and demand are allowed to meet, prices stabilize. Otherwise please explain to me why you think that this is the one asset on earth not affected by supply and demand. And you could really use a solid citation. Thought exercise. There are 140,000,000 hous…

Have you been to Japan?

There is massive excess supply of housing in Japan.

They literally demolish entire villages because no one lives there anymore.

Everyone who can moves to Tokyo, and prices there are insane.

In the US, if we had 288 million homes, the big question would be ‘where?’.

We already have millions of acres of land with literally no zoning rules at all. Even Greenlee County Arizona (1500 sq miles) is more than enough.

No one would want to though, because it’s not the place people want to live.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#120

Post by hedora »

colpabar wrote: post #67
rqtwteye wrote: post #52

Earlier quoted context omitted.

I don’t really understand the inflation situation. When house prices shot up, heath care costs shot up, education costs shot up there was no inflation. But when the little guys got some money, suddenly we call it inflation. I don’t really get it.

It’s okay. I doubt anyone in this thread does either. Thank god the good guys have the presidency or else all this not inflations and not bank bailouts might have been a bigger deal, am I right?

I’m not sure what point you are trying to make. Are you upset that only democratic presidents (like George W Bush) bail out banks in financial crises, or that only democrats (like Donald Trump) engage in inflationary policies like keep interest rates artificially low and encouraging deficit spending during strong economic times?

The bank bailouts, in particular, were done with broad bipartisan support.

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