5 ms·

Theyre printing money to pay for everything which is causing massive inflation.

by cdot2 5y ago

fzzzy 5y ago
So basically everyone with a current cash position is paying for it.
- mensetmanusman 5y ago
  Yes, but it is also an investment, albeit a forced one. For example, if we didn’t do this the economy would crater and everyone would be poorer.
  - revnode 5y ago
    There are a lot of assumptions in that statement.
- adventured 5y ago
  Primarily the people holding the ~$137 trillion in US household assets are paying for it (along with the share of all USD-priced assets being held by foreigners). Very little of that value is held in cash. Anything priced in dollars is affected, not just USD cash positions. US housing is priced in dollars, as one example. If they 'print' large sums to fund the forever budget deficits, it also debases the value of US stocks as well (it debases the sales/earnings of the businesses (to the extent their earnings are USD-related), and their share prices). In the case of stocks, there's a chance the businesses can outrun or keep up with the debt monetization destruction to an extent (varying by the growth of the company in question). Cash savings on the other hand, which is presently yielding next to nothing, that takes a near full shot from any loss of value by the dollar. The present consumer inflationary pressure will recede as US growth implodes back toward mediocrity (this decade the US will struggle to average above 1.5-2.3% annual GDP growth). Then we'll be back to a scenario not dramatically different from much of 2010-2019 (where perma low interest rates and huge budget deficits did not spur dramatic traditional inflation). To keep inflationary pressure elevated in the face of mediocre economic growth, they'll have to keep sending people stimulus checks constantly and there will have to be persistent global supply chain problems. Otherwise you end up with the Japan scenario, where they ran extraordinary budget deficits far beyond anything the US has done so far (relative to the economy in question), and still couldn't spur traditional inflation. That's because the debt being accumulated at low yield rates acts as a heat sink, it essentially eats the capital (the capital goes into the freezer, yields jack squat, and never comes back out; an ever greater share of the nation's supposed wealth ends up in the freezer yielding eg 0.5% per year, it's basically dead at that point) that would otherwise be out there in the economy sloshing around spurring far worse inflationary problems.
  - fzzzy 5y ago
    Good points, thanks. The point I was trying to make is just that cash positions will bear the brunt of the money printing. Outstanding mortgage and other debt still benefits from the low interest rates and the fact that cheaper money in the future will pay back the loan. Do you think inflation will fall back to normal levels because consumers will not have enough money to pay for the inflated prices producers will be demanding? If that causes US growth to implode as you hypothesize, I think that will lead to quite a depression. Interest rates at 0 can't help at that point. If they keep sending people stimulus checks forever, it seems that portends extreme continued inflation, since the govt. is giving out free dollars with no way to reclaim them in the future. So I really feel the most realistic outcome for the US is the Japan scenario unfortunately.
- mindslight 5y ago
  Yes, but they've been printing money continually for decades. So at least this installment is going to something with a deliberate and good purpose, rather than just bidding up the housing and stock markets as most of it does.
  - fzzzy 5y ago
    Going directly to The People(tm) you mean? Yes, I think it has been more beneficial for more people this time, but also, during qe after 2008 the govt. was able to basically "buy back" that money by recovering the losses after markets recovered, then shredding those dollars. This time, I don't think that will be possible.
    - mindslight 5y ago
      Yes, individual welfare is better for our society than corporate welfare. Philosophically I shy away from both, but it's foolish to argue against the former while the latter gets a complete pass from both major parties. This political dynamic is one of the major factors underpinning our growing wealth divide. Even though the Fed eventually got those 2008 dollars back, they still affected the market (otherwise what would have been the point). The losers were those who were prudently (imprudently, apparently) holding cash, and would have otherwise received higher interest rates due to the demand. By creating new temporary dollars for bailouts, the Fed destroyed that demand. And the moral hazard allowed companies to keep loading up on debt such that they needed another bailout for Covid, which was reflexively carried out without any objections from congress. These new dollars never coming back in will be a good thing long term, as creating direct price inflation will prevent the Fed from being able to continue lowering rates and thus prevents them from creating even more asset inflation than they already have.
      - fzzzy 5y ago
        Totally agree about the moral hazard problem. And I'll have to research how direct price inflation is going to prevent the fed from being able to continue to lower rates. Thanks!
- foepys 5y ago
  Stocks are also not immune. The extreme rise in recent years is arguably because of cheap money.
  - fzzzy 5y ago
    Aren't stocks going up in value compared to cash positions when taking inflation into account, though? Or are you saying inflation is actually eating all of the stock market's supposed gains?
seanmcdirmid 5y ago
They aren’t. It’s just a bit more debt for them. What is causing massive inflation are the super low interest rates that we’ve been dependent on for the last 6 years (or even 20 years if we look long term). When Trump claimed the economy couldn’t boom without low interest rates, they should have been a huge alarm bell for everyone.
plebianRube 5y ago
Officially it's less. But you simply just keep stripping out items from the CPI basket when they make it move it too much.

Theyre printing money to pay for everything which is causing massive inflation.

by cdot2 5y ago

Theyre printing money to pay for everything which is causing massive inflation.

fzzzy 5y ago

So basically everyone with a current cash position is paying for it.

mensetmanusman 5y ago
Yes, but it is also an investment, albeit a forced one. For example, if we didn’t do this the economy would crater and everyone would be poorer.
- revnode 5y ago
  There are a lot of assumptions in that statement.
adventured 5y ago
Primarily the people holding the ~$137 trillion in US household assets are paying for it (along with the share of all USD-priced assets being held by foreigners). Very little of that value is held in cash. Anything priced in dollars is affected, not just USD cash positions. US housing is priced in dollars, as one example. If they 'print' large sums to fund the forever budget deficits, it also debases the value of US stocks as well (it debases the sales/earnings of the businesses (to the extent their earnings are USD-related), and their share prices). In the case of stocks, there's a chance the businesses can outrun or keep up with the debt monetization destruction to an extent (varying by the growth of the company in question). Cash savings on the other hand, which is presently yielding next to nothing, that takes a near full shot from any loss of value by the dollar. The present consumer inflationary pressure will recede as US growth implodes back toward mediocrity (this decade the US will struggle to average above 1.5-2.3% annual GDP growth). Then we'll be back to a scenario not dramatically different from much of 2010-2019 (where perma low interest rates and huge budget deficits did not spur dramatic traditional inflation). To keep inflationary pressure elevated in the face of mediocre economic growth, they'll have to keep sending people stimulus checks constantly and there will have to be persistent global supply chain problems. Otherwise you end up with the Japan scenario, where they ran extraordinary budget deficits far beyond anything the US has done so far (relative to the economy in question), and still couldn't spur traditional inflation. That's because the debt being accumulated at low yield rates acts as a heat sink, it essentially eats the capital (the capital goes into the freezer, yields jack squat, and never comes back out; an ever greater share of the nation's supposed wealth ends up in the freezer yielding eg 0.5% per year, it's basically dead at that point) that would otherwise be out there in the economy sloshing around spurring far worse inflationary problems.
- fzzzy 5y ago
  Good points, thanks. The point I was trying to make is just that cash positions will bear the brunt of the money printing. Outstanding mortgage and other debt still benefits from the low interest rates and the fact that cheaper money in the future will pay back the loan. Do you think inflation will fall back to normal levels because consumers will not have enough money to pay for the inflated prices producers will be demanding? If that causes US growth to implode as you hypothesize, I think that will lead to quite a depression. Interest rates at 0 can't help at that point. If they keep sending people stimulus checks forever, it seems that portends extreme continued inflation, since the govt. is giving out free dollars with no way to reclaim them in the future. So I really feel the most realistic outcome for the US is the Japan scenario unfortunately.
mindslight 5y ago
Yes, but they've been printing money continually for decades. So at least this installment is going to something with a deliberate and good purpose, rather than just bidding up the housing and stock markets as most of it does.
- fzzzy 5y ago
  Going directly to The People(tm) you mean? Yes, I think it has been more beneficial for more people this time, but also, during qe after 2008 the govt. was able to basically "buy back" that money by recovering the losses after markets recovered, then shredding those dollars. This time, I don't think that will be possible.
  - mindslight 5y ago
    Yes, individual welfare is better for our society than corporate welfare. Philosophically I shy away from both, but it's foolish to argue against the former while the latter gets a complete pass from both major parties. This political dynamic is one of the major factors underpinning our growing wealth divide. Even though the Fed eventually got those 2008 dollars back, they still affected the market (otherwise what would have been the point). The losers were those who were prudently (imprudently, apparently) holding cash, and would have otherwise received higher interest rates due to the demand. By creating new temporary dollars for bailouts, the Fed destroyed that demand. And the moral hazard allowed companies to keep loading up on debt such that they needed another bailout for Covid, which was reflexively carried out without any objections from congress. These new dollars never coming back in will be a good thing long term, as creating direct price inflation will prevent the Fed from being able to continue lowering rates and thus prevents them from creating even more asset inflation than they already have.
    - fzzzy 5y ago
      Totally agree about the moral hazard problem. And I'll have to research how direct price inflation is going to prevent the fed from being able to continue to lower rates. Thanks!
foepys 5y ago
Stocks are also not immune. The extreme rise in recent years is arguably because of cheap money.
- fzzzy 5y ago
  Aren't stocks going up in value compared to cash positions when taking inflation into account, though? Or are you saying inflation is actually eating all of the stock market's supposed gains?

seanmcdirmid 5y ago

They aren’t. It’s just a bit more debt for them. What is causing massive inflation are the super low interest rates that we’ve been dependent on for the last 6 years (or even 20 years if we look long term). When Trump claimed the economy couldn’t boom without low interest rates, they should have been a huge alarm bell for everyone.

plebianRube 5y ago

Officially it's less. But you simply just keep stripping out items from the CPI basket when they make it move it too much.