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> as the stimulus packages have been targeted towards basic infrastructure and assistance programs for lower income groups. This made me chuckle. If anyone is

by bko 6y ago

> as the stimulus packages have been targeted towards basic infrastructure and assistance programs for lower income groups. This made me chuckle. If anyone is curious, this is where the money went [0]. To say that the money was focused on lower income groups is laughable. 2.9 out of 12 trillion allocated went to asset purchases, basically buying treasuries and mortgage backed securities. How many lower income groups hold treasuries? [EDIT] If anyone is curious about an alternative view, I've been kind of obsessed on this topic over the last few weeks are wrote about it extensively [1] and tried documenting the ridiculous rise in asset price levels to levels much higher than even that of pre-covid [2]. To say that there's nothing going on when nearly all asset prices are 30+% past their pre-covid peaks is ridiculous. [0] https://www.covidmoneytracker.org/ https://www.covidmoneytracker.org/ [1] https://mleverything.substack.com/p/where-did-the-12-trillion-of-covid https://mleverything.substack.com/p/where-did-the-12-trillio... [2] https://mleverything.substack.com/p/where-did-the-12-trillion-of-covid-76c https://mleverything.substack.com/p/where-did-the-12-trillio...

cryptonector 6y ago
Wait, it's been $12 trillion??
- weeblewobble 6y ago
  More like $6T. OP seems to be counting Federal Reserve actions as "stimulus packages" which is pretty non-standard if not outright wrong
nightski 6y ago
Isn't this how the fed injects money into the government? By printing it and buying government securities?
- jasode 6y ago
  >By printing it and buying government securities? They also printed money to buy billions $ worth of corporate bonds like General Electric Ford, GM, AT&T, etc: https://www.google.com/search?q=%22federal+reserve%22+buys+corporate+bonds https://www.google.com/search?q=%22federal+reserve%22+buys+c... Example list: https://www.investopedia.com/the-fed-s-corporate-bond-portfolio-5069989 https://www.investopedia.com/the-fed-s-corporate-bond-portfo...
- bko 6y ago
  Correct. My assertion is that the Fed overshot this by increasing the money supply by ~24% in a single year, causing all asset prices to skyrocket (see link in original post). All the money sloshing around the market is exactly what makes it a bubble. Nearly all assets and industries are considerably higher in valuation despite having a much grimmer outlook with everything that has happened over the last year
  - onlyrealcuzzo 6y ago
    It's not a bubble. If there's 25% more money, money is worth 25% less. It's not a bubble when things cost 25% more - it means your pay stayed the same - but the money is worth 25% less. This is great if you own assets and employ people and have "capital gains". It's not so great if you don't own assets and "earn income".
    - semi-extrinsic 6y ago
      Yes and no - unless the cost of food, gas, electricity, housing and clothing also increased by 25%, it's hard to argue the dollar is worth 25% less. Come to think of it - if the things that are predominantly bought by the 1% are devalued by 25% due to stimulus increasing the supply of money, but the things that are bought by everyone are not becoming much more expensive, isn't that empirical proof that trickle down economics doesn't work?
      - 09bjb 6y ago
        Yes and...crucially, assets are 25% more expensive to buy. I.e. if assets are things that are "bought by everyone" and not just by the 1% or .0001%, then the dollar is worth 20% less for that purpose.
      - briefcomment 6y ago
        Good point on your second statement. On your first statement, it's less that the dollar is not losing value, and more that scarce items are gaining value compared to non-scarce things. So your Netflix subscription is staying the same, but the house near the coast has doubled. Inflation is never the same across the board. All it means is that a smaller group of people are laying claim to the scarcest items, and they are crowding out the hopes of an increasing number of people to one day be able to afford those scarce items.
- RobertoG 6y ago
  The fed just credit the account of the government. The securities buying part is just a legal requirement.
- jerry1979 6y ago
  The Fed also bought (continues to buy?) private bonds, which keeps the cost of money low for big players. https://www.cnbc.com/2020/12/16/fed-decision-december-2020-fed-commits-to-keep-buying-bonds-until-the-economy-gets-back-to-full-employment.html https://www.cnbc.com/2020/12/16/fed-decision-december-2020-f...
RobertoG 6y ago
I think you are confusing monetary policy with fiscal policy.
paulpauper 6y ago
You have to think indirect effects though. Staving off a bond market crash probably is a good thing even if it does not directly help poor people. Ill-liquidity in the corporate bond market makes it hard to raise capital, which means less hiring, and hurts workers of all incomes. A bond market crisis is bad for everyone.
- bko 6y ago
  I agree to an extent. But that amounts to basically "trickle down economics" that protects the incumbents (large banks, many of which are foreign, mortgage issuers, etc). Notice how you don't really see any new banks being created? Why are bank stocks up 30% from pre-pandemic levels? Put this into context. The 12 trillion in new spending/money allocation due to covid results in $36,000 for every man, woman and child in the United States. The government could have cut a 5 figure check to every person in America to deal w/ the fallout, or a fraction of the people most affected. Instead we decided to give it to large institutions. And we're arguing over 1,200 vs 1,600 stimulus checks.
  - ska 6y ago
    This is key. GP is right that a bond crash would hurt everyone, but generating stimulus and routing it away from the working people is just trading pain now for more pain later - the bill will come due. There's no magic here.
  - Aunche 6y ago
    Handing everyone a check directly increases inflation. There is no increase of the supply of goods, so everyone would competing for the same things and prices, raising prices. Poorer people spend more money paying off debt or purchasing consumer goods, so most of that money flows straight to the top anyways. Since this money comes straight from the money printer rather than through taxes, this means that the wealth gap gets exacerbated through stimulus checks. Purchasing assets introduces liquidity, but isn't equivalent of handing people money. The Fed receives the equivalent value in the form of debt.
    - 6y ago
maxerickson 6y ago
Is it reasonable to conflate the actions taken by the Federal Reserve and the phrase "stimulus package"? I tend to default to not doing it, as "package" has some implication of legislative action, and the Fed is somewhat separated from the rest of government. Like in your comment, Congress didn't allocate the money the Fed used for asset purchases, the Fed did.
snikeris 6y ago
I liked this guy's take: "Two Centuries Of National Debt In One Year: Putting 2020 In Perspective" http://danielamerman.com/va/ccc/H3TwoCenturies.html http://danielamerman.com/va/ccc/H3TwoCenturies.html
rank0 6y ago
Actions from the federal reserve are not part of the stimulus packages though right? Stimulus packages are legislation passed by congress vs independent actions taken by the Fed.
Aunche 6y ago
First of all, when did $12 trillion did allocated? You can either choose to count spending or liquidity injection. Otherwise, you are double counting. If the government spends $3 trillion in stimulus financed entirely by debt, that dries up the liquidity for businesses, which creates a liquidity trap that sends us into another Great Depression. To think of it another way, the treasury could have just printed $3 trillion to pay for the stimulus without issuing bonds, which would have a similar effect.

by bko 6y ago

cryptonector 6y ago

Wait, it's been $12 trillion??

weeblewobble 6y ago
More like $6T. OP seems to be counting Federal Reserve actions as "stimulus packages" which is pretty non-standard if not outright wrong

nightski 6y ago

Isn't this how the fed injects money into the government? By printing it and buying government securities?

jasode 6y ago
>By printing it and buying government securities? They also printed money to buy billions $ worth of corporate bonds like General Electric Ford, GM, AT&T, etc: https://www.google.com/search?q=%22federal+reserve%22+buys+corporate+bonds https://www.google.com/search?q=%22federal+reserve%22+buys+c... Example list: https://www.investopedia.com/the-fed-s-corporate-bond-portfolio-5069989 https://www.investopedia.com/the-fed-s-corporate-bond-portfo...
bko 6y ago
Correct. My assertion is that the Fed overshot this by increasing the money supply by ~24% in a single year, causing all asset prices to skyrocket (see link in original post). All the money sloshing around the market is exactly what makes it a bubble. Nearly all assets and industries are considerably higher in valuation despite having a much grimmer outlook with everything that has happened over the last year
- onlyrealcuzzo 6y ago
  It's not a bubble. If there's 25% more money, money is worth 25% less. It's not a bubble when things cost 25% more - it means your pay stayed the same - but the money is worth 25% less. This is great if you own assets and employ people and have "capital gains". It's not so great if you don't own assets and "earn income".
  - semi-extrinsic 6y ago
    Yes and no - unless the cost of food, gas, electricity, housing and clothing also increased by 25%, it's hard to argue the dollar is worth 25% less. Come to think of it - if the things that are predominantly bought by the 1% are devalued by 25% due to stimulus increasing the supply of money, but the things that are bought by everyone are not becoming much more expensive, isn't that empirical proof that trickle down economics doesn't work?
    - 09bjb 6y ago
      Yes and...crucially, assets are 25% more expensive to buy. I.e. if assets are things that are "bought by everyone" and not just by the 1% or .0001%, then the dollar is worth 20% less for that purpose.
    - briefcomment 6y ago
      Good point on your second statement. On your first statement, it's less that the dollar is not losing value, and more that scarce items are gaining value compared to non-scarce things. So your Netflix subscription is staying the same, but the house near the coast has doubled. Inflation is never the same across the board. All it means is that a smaller group of people are laying claim to the scarcest items, and they are crowding out the hopes of an increasing number of people to one day be able to afford those scarce items.
RobertoG 6y ago
The fed just credit the account of the government. The securities buying part is just a legal requirement.
jerry1979 6y ago
The Fed also bought (continues to buy?) private bonds, which keeps the cost of money low for big players. https://www.cnbc.com/2020/12/16/fed-decision-december-2020-fed-commits-to-keep-buying-bonds-until-the-economy-gets-back-to-full-employment.html https://www.cnbc.com/2020/12/16/fed-decision-december-2020-f...

RobertoG 6y ago

I think you are confusing monetary policy with fiscal policy.

paulpauper 6y ago

You have to think indirect effects though. Staving off a bond market crash probably is a good thing even if it does not directly help poor people. Ill-liquidity in the corporate bond market makes it hard to raise capital, which means less hiring, and hurts workers of all incomes. A bond market crisis is bad for everyone.

bko 6y ago
I agree to an extent. But that amounts to basically "trickle down economics" that protects the incumbents (large banks, many of which are foreign, mortgage issuers, etc). Notice how you don't really see any new banks being created? Why are bank stocks up 30% from pre-pandemic levels? Put this into context. The 12 trillion in new spending/money allocation due to covid results in $36,000 for every man, woman and child in the United States. The government could have cut a 5 figure check to every person in America to deal w/ the fallout, or a fraction of the people most affected. Instead we decided to give it to large institutions. And we're arguing over 1,200 vs 1,600 stimulus checks.
- ska 6y ago
  This is key. GP is right that a bond crash would hurt everyone, but generating stimulus and routing it away from the working people is just trading pain now for more pain later - the bill will come due. There's no magic here.
- Aunche 6y ago
  Handing everyone a check directly increases inflation. There is no increase of the supply of goods, so everyone would competing for the same things and prices, raising prices. Poorer people spend more money paying off debt or purchasing consumer goods, so most of that money flows straight to the top anyways. Since this money comes straight from the money printer rather than through taxes, this means that the wealth gap gets exacerbated through stimulus checks. Purchasing assets introduces liquidity, but isn't equivalent of handing people money. The Fed receives the equivalent value in the form of debt.
  - 6y ago

maxerickson 6y ago

Is it reasonable to conflate the actions taken by the Federal Reserve and the phrase "stimulus package"? I tend to default to not doing it, as "package" has some implication of legislative action, and the Fed is somewhat separated from the rest of government. Like in your comment, Congress didn't allocate the money the Fed used for asset purchases, the Fed did.

snikeris 6y ago

I liked this guy's take: "Two Centuries Of National Debt In One Year: Putting 2020 In Perspective" http://danielamerman.com/va/ccc/H3TwoCenturies.html http://danielamerman.com/va/ccc/H3TwoCenturies.html

rank0 6y ago

Actions from the federal reserve are not part of the stimulus packages though right? Stimulus packages are legislation passed by congress vs independent actions taken by the Fed.

Aunche 6y ago

First of all, when did $12 trillion did allocated? You can either choose to count spending or liquidity injection. Otherwise, you are double counting. If the government spends $3 trillion in stimulus financed entirely by debt, that dries up the liquidity for businesses, which creates a liquidity trap that sends us into another Great Depression. To think of it another way, the treasury could have just printed $3 trillion to pay for the stimulus without issuing bonds, which would have a similar effect.