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Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

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Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#121

Post by Eliezer »

monetaryvirus wrote: post #115
Eliezer wrote: post #10

And it's still not even remotely enough. 5-year inflation expectations running at 0.67%, CPI falling. The shock to aggregate demand is being allowed to exceed the supply shock. https://fred.stlouisfed.org/series/T5YIE

How is that supposed to work? I can understand if this were a normal cyclical pullback, but this isn't a normal times; there is actual economic destruction wrought by a real (non-monetary) shock to supply. In order to believe this helps, you have to imagine it happening by this mechanism: "Can you lend to our business that's not allowed to operate and probably won't pay you back?" 'lol no. ... wait, I just got off th…

Usually, destroying some of the supply, but holding the flow of money fixed, means that the remaining items will be bid up. If instead prices are falling, it means that the secondary financial effects of the real shock are exceeding the impact of the real shock itself. If the flow of money is slowing down, one should create more money to avoid worsening the real shock through financial reverberations.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#122

Post by WanderPanda »

godtoldmetodoit wrote: post #105
colinmhayes wrote: post #100

Earlier quoted context omitted.

>Stock buy backs weren't a thing until a SEC rule change in the 80's, this is a relatively new phenomenon and not intrinsic to a functioning market. Buybacks and dividends are essentially equivalent. This comment shows a distinct lack of understanding. Of course home depot could return their profits to employees, but then it wouldn't be a business. Home depot's sole reason for existing is to return money to sharehold…

Ahh the old "shareholders are the only thing that matters" argument. Buybacks and dividends are not equivalent, buybacks are tax advantaged in ways that dividends are not. We've allowed numerous companies to get to a size where they are "too big to fail". They know they are too big to fail, and they get to take advantage of this position. They get to go into near unlimited amounts of debt to finance buybacks to enric…

Its not that buybacks have a tax advantage, dividendes rather have a tax disadvantage

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#123

Post by WanderPanda »

ashtonkem wrote: post #96
eslaught wrote: post #84

Earlier quoted context omitted.

Ok, but they don't control inflation. At some point, I think it's obvious that printing money becomes counterproductive. But where exactly is that line?

They don’t control inflation. But all of the warnings about hyperinflation being “right around the corner” have remained hilariously false. So who knows?

They only control their inefficiency around an increasing trajectory

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#124

Post by WanderPanda »

Eliezer wrote: post #120
RobertoG wrote: post #32

Earlier quoted context omitted.

Fiscal policy is the obvious solution to aggregate demand problems, not monetary policy.

Fiscal policy creates debt that needs to be repaid. Ordinary monetary policy involves swapping new currency for very stable assets like Treasury bonds that can be sold back later to destroy the currency. As much aggregate demand as possible should therefore be created by ordinary monetary policy, since it's cheaper (and faster and easier).

But monetary policy is quite unfair in that it benefits the wealthy / institutionals most (e.g. through buying of junk bonds) while inflating the money of all other people

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#125

Post by WanderPanda »

bawana wrote: post #107
k3oni wrote: post #85

Earlier quoted context omitted.

I have a hard time believing that real estate prices will explode. From what i can see the prices are expected to go down, mostly due to the fact that there's less ppl able to buy due to many being out of work(some for a good while probably as i doubt some jobs/positions will be immediately re-filled). This same thing will cause many to go into foreclosure, this adding new supply to the real estate market. Also banks…

Agree. It turns out that jumbo mortgage rates are higher than regular mortgages. Banks cannot find buyers for the jumbos because of the anticipated drop in real estate value from the COVID freeze. No one wants to lend to people who might find themselves underwater on a mortgage. AGAIN.

There is quite a lot of stuff going on here, but I think it can still swing both ways. An adverse effect to the one you mentioned could be the flux of debt / bonds to the central banks and the flux of printed money to the investors. This money is looking to be invested (which happened to find real estate post 2008)

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#126

Post by WanderPanda »

blawson wrote: post #113
aeternum wrote: post #50

Earlier quoted context omitted.

Why is printing money a bad thing at this point in time? I see two strong reasons that printing money is the right move: 1) Wealth inequality is high relative to recent history. Printing money is a very effective way to even some of that out. Possibly the only form of 'wealth tax' that can actually be executed successfully. 2) The US debt / GDP fraction is still relatively low compared to many other countries.

Inflation hurts the poorer the most - they don't have assets that are being priced up due to inflation, while the cost of everyday life goes up.

But their debt might devaluate?

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#127

Post by RobertoG »

Eliezer wrote: post #120
RobertoG wrote: post #32

Earlier quoted context omitted.

Fiscal policy is the obvious solution to aggregate demand problems, not monetary policy.

Fiscal policy creates debt that needs to be repaid. Ordinary monetary policy involves swapping new currency for very stable assets like Treasury bonds that can be sold back later to destroy the currency. As much aggregate demand as possible should therefore be created by ordinary monetary policy, since it's cheaper (and faster and easier).

That's not how it works(1).

As the QE programs have showed, you don't get any demand by creating more reserves in a depression. For those reserves to get traction over the economy you need somebody that borrow from the banks.

(1) - http://bilbo.economicoutlook.net/blog/?p=661

http://bilbo.economicoutlook.net/blog/?p=29140

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#128

Post by postingawayonhn »

mrlala wrote: post #74
gbasin wrote: post #60

Earlier quoted context omitted.

Bingo. Would you rather have a poorly managed company hold on to their cash and spend it internally, or return it to shareholders?

>Bingo. Would you rather have a poorly managed company hold on to their cash and spend it internally, or return it to shareholders? I think it's a bunch of bs the way you are wording this. I know these are not your words alone, it's what people say.. but it's so misleading! You say "return it to shareholders". Well, no. A dividend is returning to shareholders.. that's what a dividend is. A stock repurchase is basical…

> A stock repurchase is basically nothing more than the company buying back stock, and giving holders the option to sell theirs to the company.

The point of a stock repurchase program is to decrease the number of shares on issue and therefore increase the value of each share. Theoretically share price = market cap / shares on issue.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#129

Post by postingawayonhn »

david-gpu wrote: post #90
xadhominemx wrote: post #55

Earlier quoted context omitted.

Yes.... they have a small market cap because they are returning cash to shareholders. That is literally the idea of a buyback - to shrink the market cap.

Wouldn't a stock buyback reduce the number of outstanding shares, but keep market capitalization roughly constant? The company has less cash, but it has bought an asset of equal value with it (the shares).

Companies aren't allowed to hold shares in themselves. Once the shares are purchased the company cancels them.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#130

Post by isoskeles »

freeone3000 wrote: post #94
isoskeles wrote: post #78

Earlier quoted context omitted.

What if we alter that analogy to a person who makes 100k/yr with a 110k mortgage, and next year they make 101k with a 115k mortgage, and next year they make 102k with a 120k mortgage, and so on?

Then I think we should rename it from "mortgage" to "student loans". As long as they keep making minimum payments, this is technically fine.

Misses the point, but sure, "student loans" is a fair comparison. The name doesn't matter to me, it's all debt.

I don't see it as "technically" fine that the rate at which the debt grows consistently exceeds the rate at which the income grows. There comes a point in time in which the principal of the debt is large enough that minimum payments exceed income.

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