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Federal Reserve balance sheet trends

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Re: Federal Reserve balance sheet trends

#71

Post by _gx90 »

RobertoG wrote: post #61
samdamsam wrote: post #52

Earlier quoted context omitted.

Modern monetary theory is long overdue.

I hope so, but I suspect that the people that is predicting now hyperinflation and the enslavement of our children, will keep doing so despise all absence of evidence. Unfortunately, economics is a very ideologically charged subject.

The harsh modern monetary reality where most Americans live paycheck-to-paycheck and have zero job security or savings is enslavement in all but linguistic accuracy.

This has been going on since started inflating our money supply (since when we went off the gold standard in 1971 at least), and the economic degeneration won't stop unless we stop the inflation of our money supply too.

Re: Federal Reserve balance sheet trends

#72

Post by um_ya »

me_me_me wrote: post #19
somebodythere wrote: post #12

Earlier quoted context omitted.

The main counterpoint is that this stimulus would be needed to counter massive demand-side deflation.

Well easy fix instead of giving money to the top, give it to the bottom. That will surely drive demand as more money is available to spend. It will boost confidence in local economies further growing demand and supply caps. What we see now it large parts of the stimulus package are devoured by the top level bureaucracy never doing anything but being transferred to Cayman islands as performance bonuses. How about we t…

This was tried in the past. Bottom up stimulus typically results in inflation in consumer prices. The fed prefers pumping money in at the top, which typically results in inflation of stock/asset prices.

Re: Federal Reserve balance sheet trends

#73

Post by DiogenesKynikos »

_gx90 wrote: post #67
Suncho wrote: post #62

What matters isn't the size of the Fed's balance sheet or what it contains. The Fed's balance sheet is "invisible" to the private-sector economy. This expansion of their balance sheet is simply a reflection of the stimulus we're doing. When the Fed expands their balance sheet, what they're doing is replacing private-sector assets with liquid cash. Given that the stimulus is appropriate for the economy, this is all fi…

>When the Fed expands their balance sheet, what they're doing is replacing private-sector assets with liquid cash. Given that the stimulus is appropriate for the economy, this is all fine. It's not anything that future generations have to "pay back." And it's not going to cause a collapse of the dollar. This is simply not true. The Fed is buying assets at a premium (otherwise counterparties wouldn't sell the assets t…

The most obvious illustration of this is the jump in junk-bond ETFs after the Fed began buying up junk bonds.[1]

The Fed is supporting the price of dubious, high-yield corporate debt. Whether or not that's good for the economy is a separate question, but it's not as if the Fed is just replacing assets with cash at 1:1 value. It is encouraging lending to risky enterprises, by itself taking on the risk.

1. https://www.ft.com/content/19e47570-ba23-4929-988e-9b5f468b2...

Re: Federal Reserve balance sheet trends

#74

Post by RobertoG »

DiogenesKynikos wrote: post #73
_gx90 wrote: post #67

Earlier quoted context omitted.

>When the Fed expands their balance sheet, what they're doing is replacing private-sector assets with liquid cash. Given that the stimulus is appropriate for the economy, this is all fine. It's not anything that future generations have to "pay back." And it's not going to cause a collapse of the dollar. This is simply not true. The Fed is buying assets at a premium (otherwise counterparties wouldn't sell the assets t…

The most obvious illustration of this is the jump in junk-bond ETFs after the Fed began buying up junk bonds.[1] The Fed is supporting the price of dubious, high-yield corporate debt. Whether or not that's good for the economy is a separate question, but it's not as if the Fed is just replacing assets with cash at 1:1 value. It is encouraging lending to risky enterprises, by itself taking on the risk. 1. https://www.…

That could be true, but one thing is that the way (or some of the ways) the money is added to the economy is dubious and another that nothing should be done.

Re: Federal Reserve balance sheet trends

#75

Post by nopinsight »

Suncho wrote: post #62

What matters isn't the size of the Fed's balance sheet or what it contains. The Fed's balance sheet is "invisible" to the private-sector economy. This expansion of their balance sheet is simply a reflection of the stimulus we're doing. When the Fed expands their balance sheet, what they're doing is replacing private-sector assets with liquid cash. Given that the stimulus is appropriate for the economy, this is all fi…

The velocity of money has gone way down so the current liquidity injection makes great sense.

A major question is whether and how the Fed will absorb the excess liquidity back later to prevent too much real inflation, beyond what is measured by consumer price index. (Some inflation is expected as the economy is less productive because of Covid-19 and the stimulus is used to partially offset its impact.)

Re: Federal Reserve balance sheet trends

#76

Post by wil421 »

jrockway wrote: post #24
LatteLazy wrote: post #2

Til, People are more than happy to sell their children for a slightly cheaper mortgage as long as you dress it up correctly.

I think this has always been the way we've paid for infrastructure. I remember reading an article about Japan. They've stopped taking on massive infrastructure projects, because the population isn't growing -- they don't want immigrants and people aren't having kids anymore. Without a future tax base to pay for infrastructure, they can't build it anymore. So things like the Tokyo subway system are "done"; no money wi…

> I think we're beginning to see this in the US. In a few years, you won't be able to live in New Jersey and commute to New York City, or take the train from Boston to Washington D.C. The North River Tunnels will have collapsed, because we can't find any money to repair them.

Yea this is never going to happen in our lifetime.

Re: Federal Reserve balance sheet trends

#77

Post by mrfredward »

_gx90 wrote: post #67
Suncho wrote: post #62

What matters isn't the size of the Fed's balance sheet or what it contains. The Fed's balance sheet is "invisible" to the private-sector economy. This expansion of their balance sheet is simply a reflection of the stimulus we're doing. When the Fed expands their balance sheet, what they're doing is replacing private-sector assets with liquid cash. Given that the stimulus is appropriate for the economy, this is all fi…

>When the Fed expands their balance sheet, what they're doing is replacing private-sector assets with liquid cash. Given that the stimulus is appropriate for the economy, this is all fine. It's not anything that future generations have to "pay back." And it's not going to cause a collapse of the dollar. This is simply not true. The Fed is buying assets at a premium (otherwise counterparties wouldn't sell the assets t…

>Future generations pay this back not through taxes but through inflation.

I don't think that's a fair characterization. Inflation helps people with student loans (salary grows but debt stays the same) and hurts people with retirement accounts full of bonds. Broadly speaking, inflation helps the young (by closing the wealth gap between haves and have-nots).

Re: Federal Reserve balance sheet trends

#78

Post by wil421 »

iwangulenko wrote: post #4

Has anyone any idea what that means to the average joe? How to protect one's purchasing power? If the government can give you free money (1200$ checks), it also has the power to take everything away from you, right?

Read about where the $1200 is coming from. It’s not free money it’s a future tax break for 2020 tax returns.

Re: Federal Reserve balance sheet trends

#79

Post by MichaelApproved »

RobertoG wrote: post #45
Balero wrote: post #39

Earlier quoted context omitted.

Selling them to whoever is buying the debt. The government gives you money(low taxes)/buys something, and does so by borrowing the money for a long time. Now future generations (their children) are on the hook for the payments, having to pay higher taxes in the future for benefits in the present. This is fine if you are using that money to invest smartly, such as in needed infrastructure. This is not good if you are…

From who is the government borrowing money? For instance, in the current situation, all the countries are applying stimulus at the same time, so, where is all that money coming from?

They’re printing new money which causes inflation.

Re: Federal Reserve balance sheet trends

#80

Post by atentaten »

alibaba_x wrote: post #41
etherwhitelable wrote: post #29

The federal reserve owns half of all US debt. We are paying interest on interest to our own Fed that serves as the banking systems perpetual bailout fund with the ability to create unlimited amounts of money.

>our own Fed It's actually privately owned and not public.

It's not part of the federal government, but it's supposed to be controlled by the federal government. The Board of Governors is an independent government agency that runs the fed. I would call it quasi-public.
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