24 ms·

Yep. The fed is an engine, whose purpose is to move wealth silently from the masses to the powerful monied few, via time-asymmetric inflation. (Mostly Inflat

by tobmlt 6y ago

Yep. The fed is an engine, whose purpose is to move wealth silently from the masses to the powerful monied few, via time-asymmetric inflation. (Mostly Inflation of assets presently) The resulting data looks like corporations have used their power to directly disenfranchise/disempower workers, and so the mass clamber for protective laws. More laws will be enacted by those in power. The time is certainly right for it. The laws will be constructed such that they will entrench the existing power structures, and meanwhile the fed will motor on, unaffected. Nothing changes for the good while this engine continues to run. And it will run at ever increasing rates, because it has to, in order to continue to do its work of supercharging the economy from the top down. Get on the train (Ride the coat-tails of the great and powerful as best you can by investing) or be left behind in a wake of generally stagnant wages (stagnant for lots of reasons), and mildly rising prices. Meanwhile housing prices (housing costs to you) and stocks are off on a rocket-ship to the stars.

3327 6y ago
Crypto, decentralized, the fed is done and done should they be foe good reason.
tylerhou 6y ago
The Fed is stabilizing the price of the USD because of the coronavirus pandemic. If it were not printing money, then there would likely be a deflationary spiral that would cause a depression. That's one of the reasons why the Great Depression was so bad: the US was on the gold standard at the beginning. The US can't create gold out of thin air, so the USD started deflating, people stopped spending, and capital stopped flowing. Companies went bankrupt, people lost jobs — all because much needed dollars were stuffed in people's mattresses instead of being spent. The Fed is increasing the money supply by purchasing bonds because corporations need cheaper capital to pay their workers and their bills. When the pandemic is over, it will sell back these bonds the banks it bought them from. Without the Fed's intervention, this recession and pandemic would have been far, far worse. Of course, helping corporations also helps the people who own the corporations: the rich. That's a distributional issue, and the main solution is tax policy. We need to raise income and estate taxes on the rich, increase the tax on capital gains, and institute a wealth tax. The Fed is like an engine. But engines are a tool. Tools can cause good things and bad things. Right now, the Fed is causing good things by providing liquidity, which has the side effect of causing bad things because it lets the rich accumulate wealth. If the Fed is like an engine, then it serves to move a train — the economy. If the train is runaway — if the economy benefits the rich far more than normal people — that doesn't mean engines are bad. It means we need to stop the train, fix it, and start the engine again. If we restructure our economy, the Fed will still continue to do good things, with fewer negative side effects. That would be, on net, good. So the problem isn't with the Fed, it's with the economy. And claiming that the Fed is the root of all our problems misses the bigger picture.
- quickthrowman 6y ago
  > When the pandemic is over, it will sell back these bonds the banks it bought them from. This remains to be seen, the market had an absolute fit when they said QE was tapering in 2013, and also had an absolute fit when Powell was raising rates in 2018, particularly in December. The Fed may have painted themselves into a corner here, nothing is certain with regards to unwinding QE or raising rates.
  - nostrademons 6y ago
    I've heard (from finance professionals) that big elephant in the room is corporate debt. Corporations need to roll over their debt when it comes due, and a fair amount of it is short-term paper. If interest rates rise, that debt will become a lot more expensive, which will make many of the more marginal companies insolvent. Not software companies, which are sitting on hoards of cash, but all of the ordinary manufacturing/retail/service/financial companies that employ millions of Americans. If they go bankrupt we'll see unemployment worse than the COVID lockdown, but moving up the income ladder into what's left of the middle class. This was why the Fed flinched in 2018. To me (and this is a minority viewpoint - my finance industry friends disagreed), the way this plays out is both obvious and terrible. The Fed knows that if they raise interest rates, very large American institutions are going to go bankrupt and millions of Americans will be thrown out of work. The Fed's primary mandate is full employment (adjusted last year from a dual mandate of "full employment and low inflation"). Therefore, the Fed is not going to raise interest rates. We'll see this first as a massive asset bubble during the early 2020s, and then as rising inflation in the later 2020s, and then finally as hyperinflation. When it gets to the hyperinflation stage the Fed will take notice and raise rates, but it's too late by then. Hyperinflation is characterized as a sharp increase in the velocity of money, which makes traditional monetary policy tools ineffective for curbing it. You have to ditch the currency and start over with a new one.
    - NortySpock 6y ago
      So, we need to see loan-forgiveness for businesses then? Trying to figure out how you unwind it slowly when apparently "slowing raising rates" still destroys many businesses with a lot of debt...
subsubzero 6y ago
housing is in a gigantic bubble now, I have owned my house for a few months, I had to go 15% over asking just to get it(against 15 other bidders), and I checked its value recently and it jumped another 8% in the few months I have owned it. (socal location). Another house in my neighborhood sold for a similar amount as the new value so its spot on. With '08 you had housing in a bubble, this time I feel like cars, housing, medical, college, stocks etc are all way overvalued. I don't know how this will end but I think it will be alot worse than the 2008 crash.
- brobdingnagians 6y ago
  It feels like the several times that I have been going very quickly on my bike, then crashed. It feels amazing and thrilling for a few seconds while you are soaring, then there is a moment when you realize that there is only pavement underneath you and there's no way to avoid the pain, but in the moment you are just magically floating.
tootie 6y ago
The Fed only has a certain set of levers it can pull and boosting wages isn't one of them. During the 2007 recession and now the Fed chairs have begged Congress to take the necessary actions that they can't. Now that Yellen runs Treasury we'll see how things work out.

by tobmlt 6y ago

3327 6y ago

Crypto, decentralized, the fed is done and done should they be foe good reason.

tylerhou 6y ago

The Fed is stabilizing the price of the USD because of the coronavirus pandemic. If it were not printing money, then there would likely be a deflationary spiral that would cause a depression. That's one of the reasons why the Great Depression was so bad: the US was on the gold standard at the beginning. The US can't create gold out of thin air, so the USD started deflating, people stopped spending, and capital stopped flowing. Companies went bankrupt, people lost jobs — all because much needed dollars were stuffed in people's mattresses instead of being spent. The Fed is increasing the money supply by purchasing bonds because corporations need cheaper capital to pay their workers and their bills. When the pandemic is over, it will sell back these bonds the banks it bought them from. Without the Fed's intervention, this recession and pandemic would have been far, far worse. Of course, helping corporations also helps the people who own the corporations: the rich. That's a distributional issue, and the main solution is tax policy. We need to raise income and estate taxes on the rich, increase the tax on capital gains, and institute a wealth tax. The Fed is like an engine. But engines are a tool. Tools can cause good things and bad things. Right now, the Fed is causing good things by providing liquidity, which has the side effect of causing bad things because it lets the rich accumulate wealth. If the Fed is like an engine, then it serves to move a train — the economy. If the train is runaway — if the economy benefits the rich far more than normal people — that doesn't mean engines are bad. It means we need to stop the train, fix it, and start the engine again. If we restructure our economy, the Fed will still continue to do good things, with fewer negative side effects. That would be, on net, good. So the problem isn't with the Fed, it's with the economy. And claiming that the Fed is the root of all our problems misses the bigger picture.

quickthrowman 6y ago
> When the pandemic is over, it will sell back these bonds the banks it bought them from. This remains to be seen, the market had an absolute fit when they said QE was tapering in 2013, and also had an absolute fit when Powell was raising rates in 2018, particularly in December. The Fed may have painted themselves into a corner here, nothing is certain with regards to unwinding QE or raising rates.
- nostrademons 6y ago
  I've heard (from finance professionals) that big elephant in the room is corporate debt. Corporations need to roll over their debt when it comes due, and a fair amount of it is short-term paper. If interest rates rise, that debt will become a lot more expensive, which will make many of the more marginal companies insolvent. Not software companies, which are sitting on hoards of cash, but all of the ordinary manufacturing/retail/service/financial companies that employ millions of Americans. If they go bankrupt we'll see unemployment worse than the COVID lockdown, but moving up the income ladder into what's left of the middle class. This was why the Fed flinched in 2018. To me (and this is a minority viewpoint - my finance industry friends disagreed), the way this plays out is both obvious and terrible. The Fed knows that if they raise interest rates, very large American institutions are going to go bankrupt and millions of Americans will be thrown out of work. The Fed's primary mandate is full employment (adjusted last year from a dual mandate of "full employment and low inflation"). Therefore, the Fed is not going to raise interest rates. We'll see this first as a massive asset bubble during the early 2020s, and then as rising inflation in the later 2020s, and then finally as hyperinflation. When it gets to the hyperinflation stage the Fed will take notice and raise rates, but it's too late by then. Hyperinflation is characterized as a sharp increase in the velocity of money, which makes traditional monetary policy tools ineffective for curbing it. You have to ditch the currency and start over with a new one.
  - NortySpock 6y ago
    So, we need to see loan-forgiveness for businesses then? Trying to figure out how you unwind it slowly when apparently "slowing raising rates" still destroys many businesses with a lot of debt...

subsubzero 6y ago

housing is in a gigantic bubble now, I have owned my house for a few months, I had to go 15% over asking just to get it(against 15 other bidders), and I checked its value recently and it jumped another 8% in the few months I have owned it. (socal location). Another house in my neighborhood sold for a similar amount as the new value so its spot on. With '08 you had housing in a bubble, this time I feel like cars, housing, medical, college, stocks etc are all way overvalued. I don't know how this will end but I think it will be alot worse than the 2008 crash.

brobdingnagians 6y ago
It feels like the several times that I have been going very quickly on my bike, then crashed. It feels amazing and thrilling for a few seconds while you are soaring, then there is a moment when you realize that there is only pavement underneath you and there's no way to avoid the pain, but in the moment you are just magically floating.

tootie 6y ago

The Fed only has a certain set of levers it can pull and boosting wages isn't one of them. During the 2007 recession and now the Fed chairs have begged Congress to take the necessary actions that they can't. Now that Yellen runs Treasury we'll see how things work out.