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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

#191

Post by NovaDudely »

throwawaybank1 wrote: post #146

13 years of QE. You don't have to be an economist to see the coming recession or even worse depression. Better prepare for the worse.

Prepare for the worst, hope for the best.

I honestly do not think that all this flux in the banking system is 'The economic burst' (TM) but it will definitely be in the opening chapters of the book on it in a few decades time.

Banks and governments have become very good at figuring out how to put band-aids over band-aids. SVB and the little heart skip the UK had last year are good examples. But the long term conditions they are creating is lining us up for a big drop in the next 5-10 years. When the symbolic claims we have de-laminate from the biophysical world, the drop is going to make a lot of people nauseous. The problems will be inflated to such a size that they cannot be saved in any meaningful manner.

What to do with this information? Beats me!

Personally I am getting the physical assets I actually use, reducing my physical needs were possible and then sitting back like legend of Nero and watching Rome burn while being more like the reality of Nero and helping who ever I can.

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

#192

Post by argiopetech »

lazide wrote: post #101
lumost wrote: post #82

Earlier quoted context omitted.

The fed is in between a rock and a hard place. Once upon a time, asset prices were low relative to incomes - and assets people cared about day to day like housing generally weren’t terribly competitive. The fed started rate targeting, and asset prices started rising as the economy adapted to Fed policies. 50 years later assets like homes regularly exceed individuals lifetime earning potential. If interest rates rise,…

But what if you run out of road before you can stop kicking the can? Isn’t that a successful strategy then?

Arguably, yes; however, I'd rather (for my descendants' sake) we play the infinite game and be disappointed if it ends early than play the finite game and be left holding a hot potato.

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

#193

Post by fosk »

rqtwteye wrote: post #174
fosk wrote: post #169

Earlier quoted context omitted.

I don't disagree with anything that you are saying. The parent topic is about inflation, and throughout the least 13 years, inflation has not been a problem until - in my opinion - faulty fiscal policy during Covid. In other words, had both monetary and fiscal policy stayed the same, inflation would not have happened to the extent we are dealing with right now. But fiscal policy (government handouts) was extremely li…

"and throughout the least 13 years, inflation has not been a problem until - in my opinion - faulty fiscal policy during Covid." It was a problem for a lot of people who either got priced out of the housing market or have huge student loans or have huge healthcare bills. The price of eggs or gas is really not much of a problem when the price of these big ticket items shoots up.

> It was a problem for a lot of people who either got priced out of the housing market or have huge student loans..

It may have been, but that was not reflected in the CPI, and we are talking about inflation as it is officially recorded in the CPI reports. The CPI inflation didn't spike up until early 2021.

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

#194

Post by ProfessorLayton »

cycomanic wrote: post #162
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…

The zoning effects are US specific, why then have house prices increased in pretty most all western countries, also they can't explain the huge jump in housing prices during covid. The whole zoning discussion ignores the fact that investing in housing became hugely popular in the last decade, largely due to monetary policy as well as faverable tax policies.

While zoning is indeed a major problem in the US, ultimately the problem worldwide is that supply isn't meeting demand. If supply was able to meet demand, then prices would be stable and housing wouldn't become an investment vehicle.

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

#195

Post by SilasX »

pclmulqdq wrote: post #138
fdr wrote: post #131

Earlier quoted context omitted.

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 tru…

Exactly. Like the infamous remark that inflation is being canceled out by faster iPads:

https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUST...

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

#197

Post by lazide »

arcticbull wrote: post #154
lazide wrote: post #119

Earlier quoted context omitted.

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 m…

You’re fighting a straw man, nobody is arguing you need to do what Japan did verbatim. The only argument I’m making is when you allow supply and demand to meet prices stop going up. All the rest is narrative. The answer to where is “up.” Also the prices in Tokyo aren’t insane at all they’re super affordable by any standard.

That is not at all reflective of reality.

https://japanpropertycentral.com/tag/tokyo-apartment-prices/

Tokyo prices are running 908k yen/square meter, or $685 square foot. While manhattan real estate is $1.5k/sq Ft and San Francisco $1k/sq ft - median incomes are dramatically lower in Japan, as is purchasing power, with the median Tokyo income being only $66k/yr.

There is a reason the stereotypical apartment in Tokyo is tiny - on average 65 square meters (700 square feet), of which only 41 square meters (441 square feet) is livable space.

That’s often for more than one person.

Outside of Tokyo, property is nearly free. Inside Tokyo it’s expensive, crowded, and tiny.

Looking at the national stats, it roughly averages out.

But that isn’t this utopia you seem to think is occurring.

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

#198

Post by fosk »

StrangeATractor wrote: post #184
fosk wrote: post #45

Earlier quoted context omitted.

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…

> * Injecting real cash into the economy (stimulus checks and PPP loans to small businesses) That's kind of hard to believe when inflation went up worldwide.

The US is the largest market for almost any vendor, so more demand in the US will drive lack of supply elsewhere.

That plus...the supply chain bottlenecks were real, and affect the whole world. Supply chain was the focus of the Fed until late 2021 when they realized they couldn't wait for the supply chain to fix itself anymore, and they started to lower demand by increasing the interest rates. The ECB followed the course.

The fact that we focused so much on lowering US demand in 2022-2023 by increasing interest rates, should not distract us from the fact that supply chain bottlenecks are the real issue we are trying to fix (by lowering demand, most of which spiked up because of fiscal policy after Covid), which is a global problem. Jerome Powell was not wrong in saying that inflation was transitory, he was just too optimistic on the time it would take to heal the supply chain.

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

#199

Post by spaceman_2020 »

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…

The inflation was in valuations of everything from homes to equities to startups.

You don’t get to value WeWork at 40B unless interest rates are 0%

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

#200

Post by spaceman_2020 »

tick_tock_tick wrote: post #16
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.

Inflation doesn't come from QE it comes from very tight labor markets and monetary policy putting money in the hands of the poorest members of society.

Juicero’s 127M funding round certainly came from QE. As did WeWork’s 40B valuation, Uber’s 32B in burnt cash, and all the inflated salaries that money funded, which, in turn, created $3M 2-bedroom houses in SF.
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