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The Fed has as much ammo as there is wealth held in dollars. Which is to say, a lot. First, there is negative rates. Punishing people for holding cash. The ECB

The Fed has as much ammo as there is wealth held in dollars. Which is to say, a lot. First, there is negative rates. Punishing people for holding cash. The ECB and Bank of Japan have done a lot of pioneering work there, the Fed will have already extensively studied what they did, what worked, what didn't work. Second, they have QE, monetizing debt & debasing dollar wealth, which is exactly what they'll unleash for the next recession. Inflation isn't much of a concern right now, so they'll feel free to 'print' rather wildly. Annual budget deficits will blowout, probably up to $2 trillion or more, with the next recession, so the Fed will have to print dramatically to fund that regardless.

steveeq1 7y ago
I can practically just smell the inflation.
- Majromax 7y ago
  > I can practically just smell the inflation. Then the Fed isn't out of ammunition. The purpose of Fed easing would be precisely to generate/maintain target levels of inflation. The idea that the "Fed is out of ammunition" is that its conventional policy tool (rate changes) is seen as near a limit, such that the Fed can't generate further inflation if it wants to. But here, you "smell the inflation," so by definition the contemplated actions are in fact ammunition.
take_a_breath 7y ago
==First, there is negative rates. Punishing people for holding cash. The ECB and Bank of Japan have done a lot of pioneering work there, the Fed will have already extensively studied what they did, what worked, what didn't work. Second, they have QE, monetizing debt & debasing dollar wealth, which is exactly what they'll unleash for the next recession. Inflation isn't much of a concern right now, so they'll feel free to 'print' rather wildly.== I'm not sure I see where either of these options has worked. Can you share the successes of either of these measures? In option 1, you have a stagnant Japan with a lost generation. Option 2, is what we have been doing for 12 years and has led us to this point. The inflation seems to be hiding in asset prices (housing, stocks) not household items. Since 2007, there has been one year with GDP growth [1] above the annual deficit as % of GDP [2]. That was 2015, with 2.4% deficit and 2.9% GDP growth. 2018 saw the US spending 3.8% of GDP in deficits to generate 2.9% GDP growth. Does that sound like a "strong" economy? [1] https://www.macrotrends.net/countries/USA/united-states/gdp-growth-rate https://www.macrotrends.net/countries/USA/united-states/gdp-... [2] https://fred.stlouisfed.org/series/FYFSGDA188S https://fred.stlouisfed.org/series/FYFSGDA188S
- lotsofpulp 7y ago
  Housing is not a household item?
  - take_a_breath 7y ago
    No, it's not. You can't buy houses at WalMart or Costco because they sell household goods, not housing. [1] [1] https://en.wikipedia.org/wiki/Household_goods https://en.wikipedia.org/wiki/Household_goods
- vanniv 7y ago
  I love how everyone uses Japan as an example of central bank success. Their economy crashed in the 1980s and still hasn't recovered. If that "success", I'll stick with failure.

steveeq1 7y ago

I can practically just smell the inflation.

Majromax 7y ago
> I can practically just smell the inflation. Then the Fed isn't out of ammunition. The purpose of Fed easing would be precisely to generate/maintain target levels of inflation. The idea that the "Fed is out of ammunition" is that its conventional policy tool (rate changes) is seen as near a limit, such that the Fed can't generate further inflation if it wants to. But here, you "smell the inflation," so by definition the contemplated actions are in fact ammunition.

take_a_breath 7y ago

==First, there is negative rates. Punishing people for holding cash. The ECB and Bank of Japan have done a lot of pioneering work there, the Fed will have already extensively studied what they did, what worked, what didn't work. Second, they have QE, monetizing debt & debasing dollar wealth, which is exactly what they'll unleash for the next recession. Inflation isn't much of a concern right now, so they'll feel free to 'print' rather wildly.== I'm not sure I see where either of these options has worked. Can you share the successes of either of these measures? In option 1, you have a stagnant Japan with a lost generation. Option 2, is what we have been doing for 12 years and has led us to this point. The inflation seems to be hiding in asset prices (housing, stocks) not household items. Since 2007, there has been one year with GDP growth [1] above the annual deficit as % of GDP [2]. That was 2015, with 2.4% deficit and 2.9% GDP growth. 2018 saw the US spending 3.8% of GDP in deficits to generate 2.9% GDP growth. Does that sound like a "strong" economy? [1] https://www.macrotrends.net/countries/USA/united-states/gdp-growth-rate https://www.macrotrends.net/countries/USA/united-states/gdp-... [2] https://fred.stlouisfed.org/series/FYFSGDA188S https://fred.stlouisfed.org/series/FYFSGDA188S

lotsofpulp 7y ago
Housing is not a household item?
- take_a_breath 7y ago
  No, it's not. You can't buy houses at WalMart or Costco because they sell household goods, not housing. [1] [1] https://en.wikipedia.org/wiki/Household_goods https://en.wikipedia.org/wiki/Household_goods
vanniv 7y ago
I love how everyone uses Japan as an example of central bank success. Their economy crashed in the 1980s and still hasn't recovered. If that "success", I'll stick with failure.