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If you really think this is merely a supply-chain issue, you haven't been watching the continuous stream of Fed easing that has been happening since the GFC, an

by newaccount2021 5y ago

If you really think this is merely a supply-chain issue, you haven't been watching the continuous stream of Fed easing that has been happening since the GFC, and arguably almost since the end of the .com burst. The Fed is buying $120 bln in debt per month, every month. Is this because lumber isn't in stock at Home Depot? The Fed now purchases 40% of the debt produced in the economy...maybe it really is because of the pool chlorine supply issues. I see your response as just another variant of the HN denial on this topic...you're literally suggesting our only problem is not being able to keep up with the awesome.

imtringued 5y ago
It took a pandemic to reach 4% inflation. If you are the president of the central bank and your mandate is 2% it is a fantastic show of incompetence. > If you really think this is merely a supply-chain issue, you haven't been watching the continuous stream of Fed easing that has been happening since the GFC, and arguably almost since the end of the .com burst. The Fed mostly did two things, set low interest rates (not low enough since the market clearing rate is negative) and give banks more reserves so that they can lend more. When the Fed creates new money it does so via debt, all that new money has to be returned one day so as soon as you raise interest rates we'll automatically get deflation as people pay their debts back. A lot of the QE money is "hot air" because you have to borrow money to tap into it and large businesses and mortgages get much better terms than consumers and startups. The pandemic is special because the new money actually reached everyone. One big problem that the Fed faces is that the easy money is being taken by unproductive companies and the ease of access to loans makes it easier for these unproductive companies to survive leaving less room for the productive ones that may not need as much funding. Zombie companies are fine in the short term because they employ people and you get the helicopter money effect. Once you have full employment you get rising wages and inflation, which means it is time to kill off zombies by raising interest rates. However, if it takes 10 years of low interest and inflation to get back to full employment those zombies will have time to gain market share and when it's time for them to go, they may take a big chunk of the market with them. The benefit of helicopter money is that people spend the money on things they personally need. No need for a government to decide what to spend the money on. No need for companies to do market research on what consumers want.

imtringued 5y ago

It took a pandemic to reach 4% inflation. If you are the president of the central bank and your mandate is 2% it is a fantastic show of incompetence. > If you really think this is merely a supply-chain issue, you haven't been watching the continuous stream of Fed easing that has been happening since the GFC, and arguably almost since the end of the .com burst. The Fed mostly did two things, set low interest rates (not low enough since the market clearing rate is negative) and give banks more reserves so that they can lend more. When the Fed creates new money it does so via debt, all that new money has to be returned one day so as soon as you raise interest rates we'll automatically get deflation as people pay their debts back. A lot of the QE money is "hot air" because you have to borrow money to tap into it and large businesses and mortgages get much better terms than consumers and startups. The pandemic is special because the new money actually reached everyone. One big problem that the Fed faces is that the easy money is being taken by unproductive companies and the ease of access to loans makes it easier for these unproductive companies to survive leaving less room for the productive ones that may not need as much funding. Zombie companies are fine in the short term because they employ people and you get the helicopter money effect. Once you have full employment you get rising wages and inflation, which means it is time to kill off zombies by raising interest rates. However, if it takes 10 years of low interest and inflation to get back to full employment those zombies will have time to gain market share and when it's time for them to go, they may take a big chunk of the market with them. The benefit of helicopter money is that people spend the money on things they personally need. No need for a government to decide what to spend the money on. No need for companies to do market research on what consumers want.