6 ms·
No matter how much qe the fed does , there will be no inflation. The money goes to banks and financial institutions. They do not spend it on real goods and serv
by bawana 6y ago
No matter how much qe the fed does , there will be no inflation. The money goes to banks and financial institutions. They do not spend it on real goods and services. Rather they implement financial tools to get higher roi. Thus too many dollars chase too few financial tools resulting in equity inflation (a rising stock market) The real market of goods and services is unmoved and as a result wages and prices are stable (stagnant). The fed only helps banks because they use a system designed in the 1930s. Back then before credit cards, internet banking, before the repeal of Glass Steagall, banks drove the economy by lending to people. (See ‘It’s a Wonderful 𝐋𝐢𝐟𝐞’) To move the economy, the fed has to put money into the hands of people who will spend it. Each taxpayer should get a fed account with a monthly stipend of fed-coin. Fed-coin will have a half-life to encourage people to spend it. Once spent its value will be fixed as it gets converted to regular dollars
- deleted 6y ago[deleted]
- mixmastamyk 6y agoI disagree there will be no inflation. But, it is an indirect effect as you describe. The half-life idea is intriguing however.
- gen3 6y agoThe inflation after 2008 was low, and we pumped in a ton of cash in then. I don’t know how everything will end up, but I don’t think massive inflation is guaranteed.
- mixmastamyk 6y agoThe inflation was in assets, real estate, medicine, education, etc. Some consumer goods went down. Guess which the indexes count? This time they'll pump in an order of magnitude more cash.
- skrtskrt 6y agoYeah real estate plays a huge role in financial markets and ROI-chasing and it has really blown up in value. That’s the main place the average person will feel it.
- monkeycantype 6y agoA continually decaying value would be complex to manage, but perhaps you could achieve a similar impact following a version of the approach used in Brazil to target runaway inflation. (please jump in if you know the details better than I recall) Prices and salaries were struck in a notional currency the Plano Real, but in daily life people used the Cruzeiro Real, and a daily price was struck for the conversion from Cruzeiro real to a Plano Real. Fed bank accounts balances could be in Cruzeiro Dollars, with a weekly conversion rate published to Plano Dollars
- toomuchtodo 6y agoThis Planet Money episode (21 minutes) goes into detail about the scheme you mention. Excellent listen. https://www.npr.org/sections/money/2015/12/02/458222801/episode-216-how-four-drinking-buddies-saved-brazil https://www.npr.org/sections/money/2015/12/02/458222801/epis...
- nine_zeros 6y agoReally nice idea of about the half life fed coin. Is that some research paper? If not, have you considered doing real research on it?
- blackrock 6y agoThis is incorrect. The inflation is indirect. Asset prices for stocks, and housing, will go up. What will happen, is the CEOs push up the stock prices. They get a nice payout in the millions of dollars. The upper management get nice bonuses, in the hundreds of thousands of dollars each, which adds up to millions in total. Then, they start to buy things in the real world, like houses, or apartments. Or they invest in businesses that buys houses and apartments. This drives up housing costs, which drives up rental costs, which drives up the prices for everything else. And there you have it. Inflation that eats up your paycheck. You work hard to try to make more money on one hand, and society just takes the money out of your pocket while you’re not looking.