4 ms·

History books? You could read about the Weimar Republic.

by justinzollars 7y ago

OscarCunningham 7y ago
Would that tell me why US inflation fell to -1% when the Fed massively expanded its balance sheet in 2008?
- justinzollars 7y ago
  No inflation. Amazing. We must be living in a different place. Childcare, Healthcare, Education and Housing have experienced huge inflation. A home in the bay area was 700,000 in 2008. Today you can't find anything for less than 1.2 million. When this inflation hits the economy what will a home cost? What will education cost?
  - OscarCunningham 7y ago
    You're saying the official figures are wrong in such a way to understate inflation after, but not before, 2008? What change in 2008 caused that? Isn't it more likely that the price rises in Bay area property have been compensated for in other areas and sectors?
- jdipasq 7y ago
  The velocity of money, not solely the supply of money, determines inflation.
imtringued 7y ago
The Weimar Republic had debt obligations that it couldn't repay and so they printed money. Meanwhile the balance sheet of the Fed is just that. A balance sheet. The only way they can create inflation is by making the balance sheet bigger. As long as inflation is below the target they can just keep increasing the balance sheet. There is no obligation to decrease the balance sheet unless inflation is above the target. Why are they even doing this in the first place? The Fed buys assets during deflation and sells assets during inflation. Buying a cheap asset (e.g. $50 for a share) with money created from thin air increases the money supply and over the long run increases inflation. Inflation causes the prices of cheap assets to rise above the original value to $100 for a share. The situation is out of control! What can the fed do? It can sell assets in exchange for $100. In other words. The fed never runs into a situation which it cannot undo.
- rsp1984 7y ago
  It can sell assets in exchange for $100. To whom?
- jkhdigital 7y ago
  The problem, you see, is that the money issued by the Fed is used all over the world through the magic of repo, while CPI is measured within the United States only. Ever heard of the shadow banking system? Eurodollars?

History books? You could read about the Weimar Republic.

OscarCunningham 7y ago

Would that tell me why US inflation fell to -1% when the Fed massively expanded its balance sheet in 2008?

justinzollars 7y ago
No inflation. Amazing. We must be living in a different place. Childcare, Healthcare, Education and Housing have experienced huge inflation. A home in the bay area was 700,000 in 2008. Today you can't find anything for less than 1.2 million. When this inflation hits the economy what will a home cost? What will education cost?
- OscarCunningham 7y ago
  You're saying the official figures are wrong in such a way to understate inflation after, but not before, 2008? What change in 2008 caused that? Isn't it more likely that the price rises in Bay area property have been compensated for in other areas and sectors?
jdipasq 7y ago
The velocity of money, not solely the supply of money, determines inflation.

imtringued 7y ago

The Weimar Republic had debt obligations that it couldn't repay and so they printed money. Meanwhile the balance sheet of the Fed is just that. A balance sheet. The only way they can create inflation is by making the balance sheet bigger. As long as inflation is below the target they can just keep increasing the balance sheet. There is no obligation to decrease the balance sheet unless inflation is above the target. Why are they even doing this in the first place? The Fed buys assets during deflation and sells assets during inflation. Buying a cheap asset (e.g. $50 for a share) with money created from thin air increases the money supply and over the long run increases inflation. Inflation causes the prices of cheap assets to rise above the original value to $100 for a share. The situation is out of control! What can the fed do? It can sell assets in exchange for $100. In other words. The fed never runs into a situation which it cannot undo.

rsp1984 7y ago
It can sell assets in exchange for $100. To whom?
jkhdigital 7y ago
The problem, you see, is that the money issued by the Fed is used all over the world through the magic of repo, while CPI is measured within the United States only. Ever heard of the shadow banking system? Eurodollars?