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Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record
- strict9 6y ago>30.2% of US GDP How much further can they go? 26 million or so recent unemployment applications and the stock market is not off much from recent all time highs. This is more concerning than the initial falling knife mid-March.
- selectodude 6y agoThe Bank of Japan’s balance sheet is at 110 percent of GDP.
- throwanem 6y agoI was about to make a joke that it looked like they could go about another 69.8%. Now I'm glad I waited. What does that even signify, a federal bank owning >100% of its attached country's GDP? Debt in excess of produced value, i.e., the country being underwater?
- yeldarb 6y agoGDP is per year. Analogous to a person making $100k/yr with a $110k mortgage. Edit: Although perhaps not that analogous because is this even technically "debt"?
- ashtonkem 6y agoThe analogy has always been strained, since national debt just doesn’t work like personal debt. Also, when you can borrow at sub-inflation rates, there’s rarely an incentive to stop.
- RobertoG 6y agoIt's the Bank of Japan who decide the borrowing rates, so, not problem in that regard.
- eslaught 6y agoOk, but they don't control inflation. At some point, I think it's obvious that printing money becomes counterproductive. But where exactly is that line?
- deleted 6y ago[deleted]
- ashtonkem 6y agoThey don’t control inflation. But all of the warnings about hyperinflation being “right around the corner” have remained hilariously false. So who knows?
- WanderPanda 6y agoThey only control their inefficiency around an increasing trajectory
- RobertoG 6y agoThe Bank of Japan, can actually control inflation, because, as we have determined, they control the interest rate. Also, if necessary, the government could raise taxes and run a surplus to diminish inflationary pressures. But those are moot points, because the problem of Japan for the last 20 years has been deflation, not inflation. Despise that, as you can see in the comments here, there are people that still predict inflation in the future.
- RobertoG 6y agoIt's not debt, it's only a number that reflect the accumulate of past government deficits. A government is the issuer of the currency, so, nothing to do with the debt of a household or a business.
- isoskeles 6y agoWhat if we alter that analogy to a person who makes 100k/yr with a 110k mortgage, and next year they make 101k with a 115k mortgage, and next year they make 102k with a 120k mortgage, and so on?
- freeone3000 6y agoThen I think we should rename it from "mortgage" to "student loans". As long as they keep making minimum payments, this is technically fine.
- isoskeles 6y agoMisses the point, but sure, "student loans" is a fair comparison. The name doesn't matter to me, it's all debt. I don't see it as "technically" fine that the rate at which the debt grows consistently exceeds the rate at which the income grows. There comes a point in time in which the principal of the debt is large enough that minimum payments exceed income.
- erentz 6y agoThe US government doesn’t make 100% of GDP. GDP is $21 trillion. US government takes in $3.46 trillion.
- Fjolsvith 6y agoGotta tell you guys that the Fed is going to get restructured. Basically its going to declare bankruptcy and stiff the central banks to whom it is indebted. Trump is looking to nominate Judy Shelton to the Federal Reserve as she is the one who will do the restructuring. [1] How is he able to do this? “The Fed will finance a special purpose vehicle (SPV) for each acronym to conduct these operations. The Treasury, using the Exchange Stabilization Fund, will make an equity investment in each SPV and be in a “first loss” position. What does this mean? In essence, the Treasury, not the Fed, is buying all these securities and backstopping of loans; the Fed is acting as banker and providing financing. The Fed hired BlackRock Inc. to purchase these securities and handle the administration of the SPVs on behalf of the owner, the Treasury. In other words, the federal government is nationalizing large swaths of the financial markets. The Fed is providing the money to do it. BlackRock will be doing the trades. This scheme essentially merges the Fed and Treasury into one organization. So, meet your new Fed chairman, Donald J. Trump.” [2] So what does this mean? The US is going to go to a gold backed currency. The federal debt is going to be wiped out. With no federal debt to pay interest on, personal income taxes are going away. The whole wealth transfer mechanism of the central bank system gets cut off. Edit: Take note of the change Trump has made in recent weeks. Has he been tweeting out that the Fed needs to do this or that? No. Because he can just order them to do it now. 2nd Edit: Also, notice how the IRS dealine for filing and pay has been delayed, for the first time in history? Because Trump ordered it. The IRS isn't even pursuing collection actions on old taxes owed. The filing deadline is going to get moved again to the end of the year, mark my words. 1. https://www.cnbc.com/2019/07/02/trump-to-nominate-judy-shelton-christopher-waller-to-the-fed.html https://www.cnbc.com/2019/07/02/trump-to-nominate-judy-shelt... 2. https://finance.yahoo.com/news/feds-cure-risks-being-worse-110052807.html https://finance.yahoo.com/news/feds-cure-risks-being-worse-1...
- zaroth 6y agoYour Bloomberg link is 404, but here is a copy of the editorial; https://finance.yahoo.com/news/feds-cure-risks-being-worse-110052807.html https://finance.yahoo.com/news/feds-cure-risks-being-worse-1...
- 6y ago
- logicslave 6y agoOne interesting fact I learned the other day: IBM did 140 billion in stock buy backs in the last decade. They have a 100 Billion dollar market cap. I think that is a bit of what we have going on right now. A system propped up by injected cash, which works for now because everyone plays along. Most of this injected money goes into the pockets of the rich, who are the ones holding the assets that the FED is bailing out. Modern extreme economic inequality is a function of monetary policy, not political policy.
- mywittyname 6y agoA stock buyback is theoretically the same as a dividend, in that it should reduce market cap by roughly the amount of the buyback. I do agree with your sentiment though. I feel like the wealthy in this country have developed the perfect scheme for leeching the wealth from this country. We will only know how bad it was after the postmortem, at which point, we will be (figuratively) dead.
- LordFast 6y agoIs it too jaded to say that it most likely has always been, for all time? And that we are simply more aware of it these days?
- Loughla 6y agoI think it's more subtle now, though, and harder to be aware of. Back in the day, robber-barons simply exploited the working class through substandard working conditions, and outright theft of money or property [citation needed]. Now, though, you need a deep understanding of global monetary policy, tax law, and labor laws to be able to connect the dots. So I would argue that now is different from earlier times in history, because those who are exploiting the system have finally figured out how to a) hide it well enough, and b) co-op members of the classes being exploited to fight for those doing the exploiting through misdirection and propaganda.
- sixQuarks 6y ago
- Eliezer 6y agoAnd it's still not even remotely enough. 5-year inflation expectations running at 0.67%, CPI falling. The shock to aggregate demand is being allowed to exceed the supply shock. https://fred.stlouisfed.org/series/T5YIE https://fred.stlouisfed.org/series/T5YIE
- RobertoG 6y agoFiscal policy is the obvious solution to aggregate demand problems, not monetary policy.
- Eliezer 6y agoFiscal policy creates debt that needs to be repaid. Ordinary monetary policy involves swapping new currency for very stable assets like Treasury bonds that can be sold back later to destroy the currency. As much aggregate demand as possible should therefore be created by ordinary monetary policy, since it's cheaper (and faster and easier).
- WanderPanda 6y agoBut monetary policy is quite unfair in that it benefits the wealthy / institutionals most (e.g. through buying of junk bonds) while inflating the money of all other people
- RobertoG 6y agoThat's not how it works(1). As the QE programs have showed, you don't get any demand by creating more reserves in a depression. For those reserves to get traction over the economy you need somebody that borrow from the banks. (1) - http://bilbo.economicoutlook.net/blog/?p=661 http://bilbo.economicoutlook.net/blog/?p=661 http://bilbo.economicoutlook.net/blog/?p=29140 http://bilbo.economicoutlook.net/blog/?p=29140
- monetaryvirus 6y agoHow is that supposed to work? I can understand if this were a normal cyclical pullback, but this isn't a normal times; there is actual economic destruction wrought by a real (non-monetary) shock to supply. In order to believe this helps, you have to imagine it happening by this mechanism: "Can you lend to our business that's not allowed to operate and probably won't pay you back?" 'lol no. ... wait, I just got off the phone with our credit line. We can borrow at 3% instead of 3.25%. What's your business model again?'
- bawana 6y agoAnd there will be NO inflation because this money is largely going to corporations who will figure out ways to maximize ROI -> invest it in the financial market. So although there might inflation of equity prices (as seen by the recovery of the S&P and other equities), the world is still out of work and starving and without the dollars to drive demand and price increases of goods and services. We need to separate financial money flows (Gross Financial Product?) from the GDP to really know what is going on.
- shse 6y agoReal state prices will explode. That’s what happened after 2009 due to QE.
- k3oni 6y agoI have a hard time believing that real estate prices will explode. From what i can see the prices are expected to go down, mostly due to the fact that there's less ppl able to buy due to many being out of work(some for a good while probably as i doubt some jobs/positions will be immediately re-filled). This same thing will cause many to go into foreclosure, this adding new supply to the real estate market. Also banks already tightening credit/loans requirements and availability. All this means larger supply than demand, no reason for real estate to go up. This is all just starting, curious to see what the end of 2020 will bring and start of 2021. Also the market doesn't represent the economy and right now most of the money goes into the market creating a false-positive idea that everything's fine. Just my 2 cents.
- bawana 6y agoAgree. It turns out that jumbo mortgage rates are higher than regular mortgages. Banks cannot find buyers for the jumbos because of the anticipated drop in real estate value from the COVID freeze. No one wants to lend to people who might find themselves underwater on a mortgage. AGAIN.
- WanderPanda 6y ago
- fallingfrog 6y agoHere’s how I see this going (obviously just a guess): the entire corporate financial system is now unprofitable without being bailed out with zero interest loans every 10 years. This time around, the recovery will be slow, 10 years, then another, bigger bubble will form, that will pop and get bailed out again, but the next time around it will cause fast rising inflation. The fed will have to choose between either allowing hyperinflation to happen, which will crash the dollar, or saving the dollar by jacking up interest rates but allowing a second Great Depression to occur. I think they’ll choose the latter. At that point, the right wing, funded by the desperate corporate state which needs to stem the rising tide of labor activism, will blame coastal elite liberals and immigrants for their problems and there will be some kind of fascist coup, followed potentially by war, (but probably not). This will be right at the same time as lots of mass movement of people due to climate change is happening. If a war does happen it will be because of tensions caused by people flooding across various borders. I cannot see any further ahead than that.
- core-questions 6y ago> At that point, the right wing, funded by the desperate corporate state which needs to stem the rising tide of labor activism, will blame coastal elite liberals and immigrants for their problems and there will be some kind of fascist coup, followed potentially by war, (but probably not). You had me until "funded by the desperate corporate state", who want absolutely nothing to do with the right wing. If anything, we'll see a continued rise in Totalitarian Liberalism rather than any kind of right-wing renaissance. > there will be some kind of fascist coup You need a Great Man for that, and there are none on the horizon.
- fallingfrog 6y agoThe corporate state in Weimar Germany was faced with a popular communist movement, and to defeat it they threw money at the fascists, who they saw as the only credible opposition. But, history never repeats, it may go down differently next time. Just look at how the supposedly left wing media responded to Bernie Sanders. When money is on the line, they will align with the right wing. Plus, left wing is by definition a movement that opposes the current power hierarchies in society. Look it up on Wikipedia. https://en.m.wikipedia.org/wiki/Left-wing_politics https://en.m.wikipedia.org/wiki/Left-wing_politics By that standard, none of the people you would call totalitarian liberals are left wing at all, they’re just corporatists with socially liberal virtue signaling. Trust me when I say that those people are the very first to suppress labor strikes or call the cops on protesters. They would absolutely support a fascist coup if it was their only way to keep their money, power and influence.
- ackbar03 6y agoWhat's the saying these days? Money printer goes brrrrrrr?
- alistairSH 6y agohttps://brrr.money https://brrr.money
- vzidex 6y agoIs the song that plays on this website commonly known? The only other time I've heard it is in the video that the New Zealand mass shooter recorded, and it makes me uncomfortable that it's the same song if it is indeed not common.
- alistairSH 6y agoNot super well-known, but it has been used in a few dozen Youtube videos (mostly based on Japanese manga or Pokemon). I believe the song - artist is: Gas Gas Gas - Manuel
- mi100hael 6y agohttps://knowyourmeme.com/memes/gas-gas-gas https://knowyourmeme.com/memes/gas-gas-gas
- ackbar03 6y agoI think it's some eurobeat song from the Manga initial D. It's quite common in memes. Go search it up on YouTube, might help wash that stigma away
- DSingularity 6y agoThis is one of two last-resorts mechanisms by which the U.S. will maintain its hegemony. It may suck, but it is way better than the alternative.
- Consultant32452 6y agoWhat's the other last resort? WWIII? It seems that's brewing too.
- duxup 6y ago>by which the U.S. will maintain its hegemony By printing money?
- aeternum 6y agoWhy is printing money a bad thing at this point in time? I see two strong reasons that printing money is the right move: 1) Wealth inequality is high relative to recent history. Printing money is a very effective way to even some of that out. Possibly the only form of 'wealth tax' that can actually be executed successfully. 2) The US debt / GDP fraction is still relatively low compared to many other countries.
- criddell 6y ago> The US debt / GDP fraction is still relatively low compared to many other countries. Is the relative ratio a good way to evaluate it? Does it mean anything to talk about the debt:GDP ratio in isolation?
- aeternum 6y agoGDP is somewhat close to a nation's income. Those with higher incomes can typically safely afford larger loans.
- criddell 6y agoSo what would be different between two similar countries, one with a debt:GDP ration of 0.1 and the other with a ratio of 2? Is the only difference that the first country has more options in a time of crisis?
- systemshutdown 6y agoWhy are the feds able to inject so much money into the system these days without much push back? While during the 2008 Crisis Hank Paulson had such difficulty with getting 700 billion injected?
- chimeracoder 6y ago> Why are the feds able to inject so much money into the system these days without much push back? While during the 2008 Crisis Hank Paulson had such difficulty with getting 700 billion injected? Hank Paulson was the Secretary of the Treasury. Both the Fed and the Treasury have the power to create money, but in different ways (and the side-effects of each method are different).
- magicsmoke 6y agoIt didn't crash the first time. Let's do it again /s
- sjtindell 6y agoThat 700 billion was Treasury money. The Fed at the time also engaged in trillions of dollars of quantitative easing, similar to what they’re doing now. I would guess the reason the Fed is going all in this time is because there was consensus among the decision makers that last time we were too slow - we did QE but it took years. I assume they think that if we hit it hard now, we can shorten the recession period. Also this time there is more unified and obvious support from “the people”. Rather than bailing out bankers and all the hazards that come with that, everyone is getting a check, so everyone is more on board.
- systemshutdown 6y agoInteresting. What is the difference between Treasury Money and money coming from the Federal reserve? Was the 700 billion of Treasury money at that time a loan that had to be paid back while today, they're simply increasing the money supply?