6 ms·

Or in other terms "Money tanks while an unprecedented amount of it is printed". When looking at a stock chart, don't forget it is not the value of the company

by TekMol 7y ago

Or in other terms "Money tanks while an unprecedented amount of it is printed". When looking at a stock chart, don't forget it is not the value of the company you are looking at. It is the ratio of two values. Of the company and a currency.

jknz 7y ago
The Euro at $1.10 is at one of its lowest level. This suggests that the dollar does not drop in value, or that the Euro drops faster.
- TekMol 7y ago
  Well, while the FED is printing $, the ECB is printing €. Who prints more is hard to say. One reason is the question, which definition of money we look at. Only central bank money? Or also private bank money? And there are many other forms of money. Even if we only look at central bank money, it is tricky: Central bank money is not only created at the central bank. But also in private banks. For example in Germany, the central bank just announced they will back up 100% of loans that private banks give to businesses. So the private banks now can loan money without risk. Basically printing central bank money on their own.
- redis_mlc 7y ago
  The euro is a fictional currency, backed loosely by one real economy and several failed ones. The euro is actually worth about 10 US cents, if that.
  - raverbashing 7y ago
    Cool so you're telling me you will sell me 10kEUR for 1kUSD? Where do I send the money to?
blackrock 7y ago
Working your ass off for a buck, to pay for your rent and food, feels rather pointless, when the government just prints money out of thin air, and hands it to the rich, and those that don’t need or deserve the help. Meanwhile, you’re taxed like crazy. Health insurance costs is a heavy burden on your earnings. And any savings you have, will now be cut in half. I feel like we just got robbed by the Fed. Again.
- kortilla 7y ago
  The Fed doesn’t hand out money. PPP grants, etc are administered by different departments. The FED is strictly a lender in this scenario.
  - jcbrand 7y ago
    In a way the Fed does hand out free money to the rich, because well-connected institutions that can borrow money from the Fed, do so at a lower interest rate than everyone else who can't. They can then turn around and lend that money out to the rest of us at a higher interest rate, pocketing the difference. Free money.
    - deleted 7y ago
      [deleted]
    - kortilla 7y ago
      No, not free money. The people that can’t loan from the FED are higher risk than the ones that can, so the bank is taking on default risk the FED wouldn’t have.
      - jcbrand 7y ago
        No, some of the banks that get these artificially low interest rate loans from the FED would go bankrupt without them. They're being propped up.
  - TekMol 7y ago
    Depending on the interest rate, lended money wery well can be a gift to the borrower. Imagine a company that borrows $1M vs a company that borrwos $1B and both pay an interest of 0%. The company that borrowed $1B has 1000x more firepower to build a big business. While the downside is the same for both companies: They could go bancrupt and pay back nothing. Combine that with the fact that a big enough borrower will be "too big to fail" and will always be able to borrow more money to pay back the last round. In that case, the lended money is a gift independent of the interest rate.
lukevdp 7y ago
The USD is in demand right now for a series of unique reasons, which is why the US can do infinity QE https://www.afr.com/markets/equity-markets/five-reasons-the-us-dollar-is-booming-amid-chaos-20200320-p54ca0 https://www.afr.com/markets/equity-markets/five-reasons-the-... https://www.refinitiv.com/en/the-big-conversation/episode-25-will-the-fed-create-a-disorderly-dollar https://www.refinitiv.com/en/the-big-conversation/episode-25...
kortilla 7y ago
If the currency were being devalued as you imply, it would be reflected in commodities markets, currency markets, etc. This is not the case. The USD is quite strong because there is a significant deflationary pressure due to demand destruction so the printing is currently offset by the lack of economic activity.
- TekMol 7y ago
  Commodities: This depends on the commoditiy. Gold is up by a factor of 50 over the last 20 years. Coffee is not. The reason for the latter is that the printed money goes into the hands of already rich people. Those are not investing it into goods for their daily lifes. They buy gold, houses, shares etc. Currency marktes: Which ones did you look at? Which currency has not been printed in vast quantities lately?
  - kortilla 7y ago
    A shortage of gold/housing does not imply inflation. A huge chunk of gold’s gains came from before QE and gold isn’t really that interesting because it’s mostly a useless speculation vehicle. Look at copper, oil, silver, gas, lumber, etc.

by TekMol 7y ago

jknz 7y ago

The Euro at $1.10 is at one of its lowest level. This suggests that the dollar does not drop in value, or that the Euro drops faster.

TekMol 7y ago
Well, while the FED is printing $, the ECB is printing €. Who prints more is hard to say. One reason is the question, which definition of money we look at. Only central bank money? Or also private bank money? And there are many other forms of money. Even if we only look at central bank money, it is tricky: Central bank money is not only created at the central bank. But also in private banks. For example in Germany, the central bank just announced they will back up 100% of loans that private banks give to businesses. So the private banks now can loan money without risk. Basically printing central bank money on their own.
redis_mlc 7y ago
The euro is a fictional currency, backed loosely by one real economy and several failed ones. The euro is actually worth about 10 US cents, if that.
- raverbashing 7y ago
  Cool so you're telling me you will sell me 10kEUR for 1kUSD? Where do I send the money to?

blackrock 7y ago

Working your ass off for a buck, to pay for your rent and food, feels rather pointless, when the government just prints money out of thin air, and hands it to the rich, and those that don’t need or deserve the help. Meanwhile, you’re taxed like crazy. Health insurance costs is a heavy burden on your earnings. And any savings you have, will now be cut in half. I feel like we just got robbed by the Fed. Again.

kortilla 7y ago
The Fed doesn’t hand out money. PPP grants, etc are administered by different departments. The FED is strictly a lender in this scenario.
- jcbrand 7y ago
  In a way the Fed does hand out free money to the rich, because well-connected institutions that can borrow money from the Fed, do so at a lower interest rate than everyone else who can't. They can then turn around and lend that money out to the rest of us at a higher interest rate, pocketing the difference. Free money.
  - deleted 7y ago
    [deleted]
  - kortilla 7y ago
    No, not free money. The people that can’t loan from the FED are higher risk than the ones that can, so the bank is taking on default risk the FED wouldn’t have.
    - jcbrand 7y ago
      No, some of the banks that get these artificially low interest rate loans from the FED would go bankrupt without them. They're being propped up.
- TekMol 7y ago
  Depending on the interest rate, lended money wery well can be a gift to the borrower. Imagine a company that borrows $1M vs a company that borrwos $1B and both pay an interest of 0%. The company that borrowed $1B has 1000x more firepower to build a big business. While the downside is the same for both companies: They could go bancrupt and pay back nothing. Combine that with the fact that a big enough borrower will be "too big to fail" and will always be able to borrow more money to pay back the last round. In that case, the lended money is a gift independent of the interest rate.

lukevdp 7y ago

The USD is in demand right now for a series of unique reasons, which is why the US can do infinity QE https://www.afr.com/markets/equity-markets/five-reasons-the-us-dollar-is-booming-amid-chaos-20200320-p54ca0 https://www.afr.com/markets/equity-markets/five-reasons-the-... https://www.refinitiv.com/en/the-big-conversation/episode-25-will-the-fed-create-a-disorderly-dollar https://www.refinitiv.com/en/the-big-conversation/episode-25...

kortilla 7y ago

If the currency were being devalued as you imply, it would be reflected in commodities markets, currency markets, etc. This is not the case. The USD is quite strong because there is a significant deflationary pressure due to demand destruction so the printing is currently offset by the lack of economic activity.

TekMol 7y ago
Commodities: This depends on the commoditiy. Gold is up by a factor of 50 over the last 20 years. Coffee is not. The reason for the latter is that the printed money goes into the hands of already rich people. Those are not investing it into goods for their daily lifes. They buy gold, houses, shares etc. Currency marktes: Which ones did you look at? Which currency has not been printed in vast quantities lately?
- kortilla 7y ago
  A shortage of gold/housing does not imply inflation. A huge chunk of gold’s gains came from before QE and gold isn’t really that interesting because it’s mostly a useless speculation vehicle. Look at copper, oil, silver, gas, lumber, etc.