4 ms·

Given the insane money supply inflation happening now, I'll put that in the pluses column.

by eloff 6y ago

mschuster91 6y ago
I agree the money supply inflation is scary but that's only because it doesn't end up in the real economy - most of it ends up in the stock markets propping up share prices. Actually using the freshly minted money to do stuff like infrastructure investments - no matter what, across the Western countries all kinds of infra are derelict - would cause an instant trickle-down effect since almost all of that is manual hard labor.
- eloff 6y ago
  Doesn't end up in the real economy yet. Give it time, money doesn't stay where you spend it. Buying bonds gives money to the bond holders. In today's market, they probably buy stocks with that money, but then that goes to the stock holders. Which are a range of characters, some of whom will take that money and put it into the real economy.
  - mschuster91 6y ago
    > Doesn't end up in the real economy yet. Give it time, money doesn't stay where you spend it. The bailout money from 2008ff still hasn't "trickled down" to the people, over a decade later. Trickle down only works when the amount of layers between the initial receivers of money and the intended recipients is as close to 1 as possible. Hiring a construction firm to build a road and mandating a decent wage for employees in the tender is the most efficient way for that.
  - andrewjl 6y ago
    Wealth inequality is disproportionately skewed to the top. And one thing the wealthy are known to do is save and invest rather than spend. The owners of securities traded today are individuals or institutional investors with a strong lack of propensity to consume. In comparison the middle class owns hardly any tradable assets or securities and the poor none whatsoever. [1][2] Whats the mechanism you think will somehow transfer enough, and we're talking a substantial quantity of funds here, to have an impact that's felt? I've seen arguments on govt spending and QE. Those who point to multi-trillion dollar spending bills seem to not realize that the spending plan over a decade and thus are tepid. QE has limited impact on the real economy but not asset prices, the past decade is evidence of that. If anything we are on the precipice of yet another deflationary cycle, where wages and consumable prices stagnate, while asset prices keep growing. [1] https://ritholtz.com/2020/01/stock-ownership/ https://ritholtz.com/2020/01/stock-ownership/ [2] https://news.gallup.com/poll/211052/stock-ownership-down-among-older-higher-income.aspx https://news.gallup.com/poll/211052/stock-ownership-down-amo...
s3tz 6y ago
It's worth pointing out the very important part about how it's being calculated. From the link (below the chart): > "Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions. Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately."

Given the insane money supply inflation happening now, I'll put that in the pluses column.

by eloff 6y ago

Given the insane money supply inflation happening now, I'll put that in the pluses column.

I agree the money supply inflation is scary but that's only because it doesn't end up in the real economy - most of it ends up in the stock markets propping up share prices. Actually using the freshly minted money to do stuff like infrastructure investments - no matter what, across the Western countries all kinds of infra are derelict - would cause an instant trickle-down effect since almost all of that is manual hard labor.

eloff 6y ago
Doesn't end up in the real economy yet. Give it time, money doesn't stay where you spend it. Buying bonds gives money to the bond holders. In today's market, they probably buy stocks with that money, but then that goes to the stock holders. Which are a range of characters, some of whom will take that money and put it into the real economy.
- mschuster91 6y ago
  > Doesn't end up in the real economy yet. Give it time, money doesn't stay where you spend it. The bailout money from 2008ff still hasn't "trickled down" to the people, over a decade later. Trickle down only works when the amount of layers between the initial receivers of money and the intended recipients is as close to 1 as possible. Hiring a construction firm to build a road and mandating a decent wage for employees in the tender is the most efficient way for that.
- andrewjl 6y ago
  Wealth inequality is disproportionately skewed to the top. And one thing the wealthy are known to do is save and invest rather than spend. The owners of securities traded today are individuals or institutional investors with a strong lack of propensity to consume. In comparison the middle class owns hardly any tradable assets or securities and the poor none whatsoever. [1][2] Whats the mechanism you think will somehow transfer enough, and we're talking a substantial quantity of funds here, to have an impact that's felt? I've seen arguments on govt spending and QE. Those who point to multi-trillion dollar spending bills seem to not realize that the spending plan over a decade and thus are tepid. QE has limited impact on the real economy but not asset prices, the past decade is evidence of that. If anything we are on the precipice of yet another deflationary cycle, where wages and consumable prices stagnate, while asset prices keep growing. [1] https://ritholtz.com/2020/01/stock-ownership/ https://ritholtz.com/2020/01/stock-ownership/ [2] https://news.gallup.com/poll/211052/stock-ownership-down-among-older-higher-income.aspx https://news.gallup.com/poll/211052/stock-ownership-down-amo...

s3tz 6y ago

It's worth pointing out the very important part about how it's being calculated. From the link (below the chart): > "Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions. Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately."