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wasn't quanatative easing done for like a decade after tbe recession with no inflation? why is there any reason to think this time around will be different? sca
by ausbah 6y ago
wasn't quanatative easing done for like a decade after tbe recession with no inflation? why is there any reason to think this time around will be different? scale?
- ta17711771 6y agoScale indeed.
- rapsey 6y agoBecause now money is given directly to people due to covid. Before money just went to wall street.
- diegocerdan 6y agoNo inflation? Look what new money has bought and you will clearly see huge inflation: stocks and housing. We don't see shopping cart inflation because it's countered by the technological cheapening of the production. And the key fact that new money is not being given to people buying groceries.
- mac01021 6y agoI never understood how anyone can find it remotely fair for the Fed to introduce new money into the economy by any means other than equal division between all citizens.
- SpicyLemonZest 6y agoThe Fed introduces new money into the economy through two major mechanisms: setting a target interest rate on overnight loans, and buying assets at market rates. It's not clear how either of those would be extended to an equal division between all citizens, the vast majority of whom don't want overnight loans and don't have financial assets they want to sell.
- baconandeggs 6y agoHence why they shouldn't do it.
- SpicyLemonZest 6y agoIt seems unfortunate to give up a useful tool for managing the economy just because it can't be structured to provide everyone an equal amount of benefit. Should we end small business programs because not everyone's wealthy enough to own a small business? I'd see the problem if it worked how I've sometimes seen it described, where rich people and banks are just getting free gifts of cash, but that's not accurate.
- baconandeggs 6y ago> Should we end small business programs because not everyone's wealthy enough to own a small business? The job of financing ventures should be done by private parties and the banking industry, not by government, but since they are too preoccupied chasing assets with cheap money they can't be bothered to.
- mac01021 6y agoI don't see why it's unfortunate if there's an equally good tool that is more egalitarian. Congress could give the Fed the power to, rather than just buy bonds (or whatever it is they do) introduce money to the economy simply by giving everyone money. I understand that it is not exactly true that the rich are getting free money for nothing. But the whole reason we're talking about this here is that someone pointed out that all the new money supply from the Fed is finding its way straight to people and corporations that don't have anything better to do with it than buy assets, the prices of which continue to grow as a result, even while the GDP rate is plummeting. Lastly, I'm totally open to the idea that someone will come along and explain to me why my idea for how the Fed should give everyone money is just not workable. If that happens, I'll be happy to have learned something useful. But it's definitely not clear to me, a priori, why it wouldn't work if it wouldn't.
- 6y ago
- dnautics 6y agoWhat about government contracting? Is it a fair process to decide who builds a highway? The Fed's activity is what drives the government's ability to pay it's contractors.
- mac01021 6y agoWhy conflate regulation of the money supply with the ability to hire contractors? If you want to increase the money supply, print some money and give it out. If you want to fund highway construction, figure out how much it will cost and then raise that amount of tax revenue to pay the builders.
- mrfredward 6y agoThe Fed just buys debt...the closest thing to giving away money they can do is nudge someone's interest rates lower or make a loan easier to get. Congress decides how the money is distributed when they're spending it.
- mac01021 6y agoCongress created the Fed and gave it what powers it has. They (assuming a consensus among legislators) could totally have given it a different mechanism for controlling the money supply. Even one that culminated in a check being mailed to every citizen.
- betterunix2 6y agoThe flip side is somewhat problematic: if the Fed needed to remove money from the economy (e.g. because inflation exceeded the target rate), they would have to take money away from everyone equally. It is easy to forget that the Fed's mission is to stabilize the value of money, not to conform to some concept of fairness. I would also point out that instability in the value of money disproportionately impacts the poor, who have the least savings available to deal with price shocks (if you are living paycheck to paycheck, then the price of bread suddenly doubling will leave you eating half as much bread).
- sudosysgen 6y agoThing is, we already have a mechanism for removing money from the economy that isn't controlled by the Fed - taxation. If there's too much money, you can always increase taxes.
- betterunix2 6y agoThe difference is that taxation is subject to political forces, and politicians may not be able to pursue an unpopular policy that stabilizes the value of money. The Fed is mostly immune to short-term political needs and often pursues unpopular actions to meet its objectives.
- mac01021 6y agoIs there a reason that congress couldn't bestow upon the Fed some powers of taxation, while still leaving it free of the political constraints that the legislature faces?
- betterunix2 6y agoI do not know what the law allows, but in principle a government could give such power to its central bank, and there is some precedent (the ancient Romans had a system of private tax collectors, who would basically pay the government for a kind of license to collect taxes). I am not sure there would be much of a point, since the Fed can always raise interest rates, which has the same effect on the supply of money and ultimately affects the general population in the same way (you are left with less money to save/invest/blow on parties). Taxation is somewhat more direct e.g. higher property taxes have to be paid immediately whereas a fixed rate mortgage will not suddenly become more expensive when interest rates rise, but in terms of stabilizing the value of money it does not make much of a difference one way or the other. The fact that taxes are more direct actually makes taxation the preferred tool of politicians, who typically resort to tax cuts when they are desperate for votes or propose taxes on the wealthy in order to rally support from the working class.
- SpicyLemonZest 6y agoBut if there's special kind of inflation that doesn't hurt people's ability to buy goods and services, does that really matter?
- take_a_breath 6y agoIf it hurts their ability to invest in assets, then yes. Assets tend to appreciate over time and represent an excellent store of value. Taking that option away from people matters very much.
- SpicyLemonZest 6y agoI'm not sure I see how an increase in the value of assets hurts people's ability to invest in them.
- bradstewart 6y agoSome assets are indivisible, so increasing value makes it unaffordable. You can't buy a fraction of a house. For things like stocks, if the increased value is driven by inflation, you get less for your money. So it takes more money to store the same amount of value there.
- jcranmer 6y ago> You can't buy a fraction of a house. Isn't that basically what a REIT is? It's also possible to enter into joint ownership of a property. Roommates are also kind of like acquiring a fraction of a house.
- take_a_breath 6y ago==Roommates are also kind of like acquiring a fraction of a house.== Unless you rent, in which case you are acquiring a fraction of the liability without acquiring any house.
- 6y ago
- colinmhayes 6y agoCPI includes housing. Most Americans have seen minimal inflation over the last decade.
- gruez 6y agoIt includes housing in the form of rent (imputed rent in case you own the house). OP was talking about housing as an investment (like stocks), which is not covered under CPI.
- ak217 6y agoI'm not an expert, but it seems to me the way CPI imputes the cost of housing and several other things is broken. It looks like most Americans have seen much more inflation in the cost of housing, healthcare and education than the CPI would have you believe.
- PanosJee 6y agoInflation has moved from product prices to asset prices. Just look at the stock market.
- deleted 6y ago[deleted]
- bravo22 6y agoIt caused inflation in assets, not in goods.
- xiphias2 6y agoNo, if you look at shadowstats, the house/rental prices, or the Big Mac index, you can see that there was significant inflation in the past 50 years. Governments are changing the measurement of the inflation to try to hide it.
- microtherion 6y agoMy favorite ShadowStats statistic is that their own annual subscription price has remained unchanged at $175 since at least 2006, during 14 years of supposedly rampant inflation: https://www.pragcap.com/update-theres-still-deflation-in-hyperinflation-forecasts/ https://www.pragcap.com/update-theres-still-deflation-in-hyp...
- solotronics 6y agoAlso look at art prices. The money was going to certain places without ending up in the hands of the every day people.