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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

#131

Post by fdr »

pton_xd wrote: post #112
pclmulqdq wrote: post #98

Earlier quoted context omitted.

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.

there's no getting away with anything. The inflation stat "everyone" uses is preferred by economists because it is not as noisy, i.e. it has better temporal auto-correlation. However, there are all-inclusive metrics as well, and in fact those are used to compute the I-bond yield. https://www.bls.gov/news.release/cpi.t01.htm

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

#132

Post by [deleted] »

drexlspivey wrote: post #33
chasebank wrote: post #25

Earlier quoted context omitted.

Source? Did we not have rapid asset inflation since QE started in 08? Inflation pops up in all sorts of ways, not just blanket across the board.

Typically people mean core goods (CPI) when they say inflation not stocks and crypto

[deleted]

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

#133

Post by fosk »

lumost wrote: post #88
fosk wrote: post #64

Earlier quoted context omitted.

When you give to 300+ million people extra cash to spend, you have inflation, yes. I am not arguing that “before” it was better for the “little guys”, I am just making an observation. You can affect the economy with fiscal policy (what our politicians/government does) and monetary policy (the central bank). Turns out monetary policy didn’t cause inflation to rise as much, as the previous 13 years demonstrate, but it…

This is severely dismissing the economic distortion of monetary stimulus. We’ve effectively been printing money into wealthy individuals assets. Increasing wealth inequality has tangible negative effects on the economy and effectively functions as a reverse tax.

> Increasing wealth inequality has tangible negative effects on the economy and effectively functions as a reverse tax.

I am not sure I understand what you are trying to say. Inflation either spikes up because of increased of demand, or lack of supply. In our case, both have happened:

* Increased demand because free money is hitting the bank accounts of almost everyone.

* Decreased supply because of supply chain bottlenecks, when every vendor canceled their orders in anticipation of a lack of demand (which never happened, with Covid), and then all of a sudden had to place again the same orders. Since every vendor practiced Just-In-Time order of all parts, the sudden demand (or - to put it in other words - the "lack of demand" which never happened) put them in a though spot where everyone was re-ordering the same parts again, but factories had to start with a fresh order queue.

This is not a "wealthy people problem", this is a "everyone is creating demand" problem. Wealthy people cannot create inflation in common goods because they are both outnumbered by regular folks, and because there is not too many of them anyways. How many eggs can a wealthy family purchase anyways? The demand of wealthy people is otherwise focused on goods that are not affecting the rest of the pyramid (does anybody care if yachts are price inflated because too many wealthy people buy them?).

Easy access to money caused inflation along with a supply chain bottleneck, the easy money that caused inflation was not ~2-3% loans that were accessible for 13 years prior to Covid, it was PPP loans, stimulus checks, and student loan pause, which all combined was given to pretty much the entire population of the US. Next thing you know, inflation is up.

I am not saying that people didn't deserve handouts for a very unique and though time in the history of their lives (Covid), I am just making an observation with the benefit of hindsight.

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

#134

Post by JakeAl »

almost_usual wrote: post #6
Findeton wrote: post #3

This is another QE/Quantitative Easing, even if they don't call it that way. I hope inflation doesn't come back/get higher again because then we'd likely see the kind of second wave inflation people saw in the 70s.

It’s a loan, not QE. QE is no strings attached money injected into the market. QT is still ongoing as of last week, however, I don’t see it lasting. I do think a .25 rate hike will still happen.

It's all a loan, whatever name you attach to it they have to borrow to print money.

Reality check: US debt to GDP ratio is over 120% and the US doesn't have the credit to borrow anymore. We're looking at hyperinflation and a long depression unless they stop printing money and we experience massive austerity/spending cuts. We are literally in an economic death spiral (that's what a debt to GDP ratio of > 120% means) and that death spiral will be irreversible by 2028 (with US insolvent by 2042) as that WAS the timeline for when all of our loan payments for all of that printed money/bailouts goes only to the interest on the loans and not the principal. Unless of course, they change all the rules and it's laws for thee but not for me and debt starts getting erased. And/or war, which is historically how they do it.

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

#135

Post by Zetice »

yieldcrv wrote: post #108
Zetice wrote: post #77

Earlier quoted context omitted.

I know "QE with extra steps" is a R&M reference, but keep in mind that R&M was wrong, what they described wasn't actually slavery (you can make anything anything else if you squint hard enough and/or remove the critical "extra steps"), and this isn't actually QE (as I, random Internet dweller, understand it anyway).

I don't know who R&M is. I don't know anything about the slavery reference. Feel free to explain what you're talking about. I read press releases from the federal financial agencies and look at their balance sheet. The similarity here is that money is being created and injected into the balance sheets of private participants in the economy, money that wouldn't have seeped out to purchase things now will, overlapping…

" with extra steps" is from a show called "Rick & Morty" [0]. Surprising how you picked up on the phrase without even knowing what the show is.

As for your comment itself, it seems like you gloss over the similarities and ignore the differences. For example, you say "money is being created" but this is objectively false. As is your claim that this money is "seeping" anywhere; it isn't doing anything other than ensuring bank solvency.

Your comment is what I'd expect from someone who wants to call this action by the Fed "Quantitive Easing" but doesn't want to bother actually considering if it is or not. It is not, as you said, because of the critical and relevant differences. This money isn't going back out into the economy as you claim, which is the meaningful mechanism through which QE has its effects.

Without that mechanism, calling this QE is misleading at best.

[0] https://knowyourmeme.com/memes/well-that-sounds-like-slavery...

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

#136

Post by fallingknife »

drexlspivey wrote: post #39
fallingknife wrote: post #31

Earlier quoted context omitted.

Here are the numbers to prove it true https://fred.stlouisfed.org/series/WM2NS

What does this graph prove exactly? It goes up steadily for decades where there weren't any inflation, and then had a sudden bump 2 years before the inflation started. Inflation was caused by the massive fiscal spending (stimmies) not the FED

The fed printing was done to pay for the stimmies. Government spends more than it takes in in taxes so it borrows. But it borrows so much that the market won't lend it the amount it needs to borrow at the rates it wants to borrow at. So the fed prints money and lends it to the government. They call this "quantitative easing" so they don't have to say money printing. Look at this chart of treasuries held by the fed. Notice how it mirrors the money supply. https://fred.stlouisfed.org/series/TREAST

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

#137

Post by JakeAl »

dools wrote: post #10
Findeton wrote: post #3

This is another QE/Quantitative Easing, even if they don't call it that way. I hope inflation doesn't come back/get higher again because then we'd likely see the kind of second wave inflation people saw in the 70s.

QE has no impact on inflation because loan origination is not reserve constrained, because banks can always use their government securities as collateral

*assuming the government can honor them. The government is underwater and out of credit.

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

#138

Post by pclmulqdq »

fdr wrote: post #131
pton_xd wrote: post #112

Earlier quoted context omitted.

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

there's no getting away with anything. The inflation stat "everyone" uses is preferred by economists because it is not as noisy, i.e. it has better temporal auto-correlation. However, there are all-inclusive metrics as well, and in fact those are used to compute the I-bond yield. https://www.bls.gov/news.release/cpi.t01.htm

A more cynical take on this is that the remaining goods in the basket often have "adjustments" that can be made - for example, most technology gets discounted because the new version is faster (in top-line performance) than the old version. That adjustment process allows them to create a lower-noise metric, with the side effect of also creating an inflation narrative that is convenient (unless things are well and truly out of control, like they are now).

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

#139

Post by dools »

JakeAl wrote: post #137
dools wrote: post #10

Earlier quoted context omitted.

QE has no impact on inflation because loan origination is not reserve constrained, because banks can always use their government securities as collateral

*assuming the government can honor them. The government is underwater and out of credit.

A government can never run out of a currency it issues

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

#140

Post by dools »

hanoz wrote: post #27
dools wrote: post #10

Earlier quoted context omitted.

QE has no impact on inflation because loan origination is not reserve constrained, because banks can always use their government securities as collateral

By the traditional definition of inflation, QE is inflation.

No, by the non-orthodox definition of inflation espoused by Austrian economists, QE is inflation. Most people are referring to price level increases when they refer to inflation, and a more correct definition of inflation is sustained real price level increases over time rather than one off price adjustments.
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