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> supply shock The supply shock you need to be worried about is the shocking oversupply of new dollars competing for the same resources.

by hanoz 5y ago

lumost 5y ago
The major lesson of the Fed’s QE policy has been that QE does not put dollars into the economy evenly. Certain asset classes and professions get first crack at the newly printed dollars, and over time firms and industries specifically designed to capture printed money evolve e.g. wework. It’s not a surprise that we’ll hear tons of information saying that printing money isn’t a bad thing, or that it isn’t the cause of any current monetary outcomes.
- lotsofpulp 5y ago
  I thought the guy that led Wework captured Saudi Arabian oil money via a Japanese VC.
- bko 5y ago
  There was plenty of money that went to individuals as well and I imagine that's driving retail stocks and now consumer prices. 68% of unemployed workers who received benefits were eligible for payments that are greater than their lost earnings: > As a result, though, many people may now be eligible for substantially more money while unemployed than they made while they were working. A new analysis by Peter Ganong, Pascal Noel and Joseph Vavra, economists at the University of Chicago, uses government data from 2019 to estimate that 68 percent of unemployed workers who can receive benefits are eligible for payments that are greater than their lost earnings. They also found that the estimated median replacement rate — the share of a worker’s original weekly salary that is being replaced by unemployment benefits — is 134 percent, or more than one-third above their original wage. A substantial minority of those workers, particularly in low-wage professions like food service and janitorial work, may end up receiving more than 150 percent of their previous weekly salary. https://fivethirtyeight.com/features/many-americans-are-getting-more-money-from-unemployment-than-they-were-from-their-jobs/ https://fivethirtyeight.com/features/many-americans-are-gett...
  - lumost 5y ago
    I suspect these amounts are ultimately a pittance compared to the 20% annual price gain in housing. A common theme of those choosing to no longer work is that housing makes many jobs cost prohibitive to do.
    - topkai22 5y ago
      Not sure I get the argument here— federal enhanced unemployment benefits have been over since September, so there is no longer a monetary benefit to remaining on unemployment in almost all cases. Are you arguing people aren’t relocating or something to that effect?
      - lumost 5y ago
        My argument is that government spending on unemployment insurance and direct payments to individuals is tiny relative to money printed by the Fed and stashed in assets via QE
  - ramphastidae 5y ago
    I keep hearing this talking point brought up but I just don’t get it. If you’re making more on unemployment, you’re poor and need money for essentials. It’s unlikely you’re investing in stocks. Also, unemployment doesn’t last forever (mine ran out in less than a year). What am I missing?
    - deleted 5y ago
      [deleted]
    - harambae 5y ago
      >you’re poor and need money for essentials. It’s unlikely you’re investing in stocks I used to think this way as well, but after browsing /r/wallstreetbets I am not at all convinced you need to have wealthy or responsible to invest/trade/gamble in the stock market. And unemployment abuse is a larger more complex topic.
- cplusplusfellow 5y ago
  It’s similar to the idea that central planning doesn’t allocate resources most appropriately for everyone to benefit.
Ericson2314 5y ago
Consumer spending has gone down. Too many dollars cannot be the problem if they aren't being spent! You might say "oh, well the rich are bidding up gas and food prices, poor people can't afford and ummmm drive and eat less". It sounds silly and it should but even if that were happening, and was the sole causal factor, it would mean the food and gas markets were not clearing, and that is clearly also not happening. And even if that were happening the sellers would be being irrational. For surely they would lower prices after the rich were fed and gassed up so they could sell the remainder of their goods, and make more money. (the profit rate would go down but the total profits would go up.) No matter how you cut it, the Monetarist story is false and ridiculous given the evidence.
- javert 5y ago
  Overprinting money causes massive economic distortion. For instance, the rich who get the money first are buying up all the houses, turning the US into a nation of renters. Another example--the federal government enables "easy money" as higher education loans, which has enabled universities to massively overcharge for mostly low quality education.
  - Ericson2314 5y ago
    Yes inequality is inefficient. The monitarists' conception of inflation is a temporary distortion where all the money stock and flows pick up. What you are describing is a spacial distortion where certain people / goods get unfair treatment. The latter is indeed quite dubious, but it's not the same as the former! Conventional monetary policy is lame and fairly ineffective, but I have seen claims that raising rates is better at destimulating than lowering is at stimulating. What a tough nuance to convey!
  - topkai22 5y ago
    > … turning the US into a nation of renters. The data doesn’t seem to support this, at least not yet. The owner occupancy of units has been increasing since 2016 and increased after 2020. The increase in housing prices has been extraordinary, but seems in large part due to people who actually intend to live in that housing. See: https://fred.stlouisfed.org/series/EOWNOCCUSQ176N https://fred.stlouisfed.org/series/EOWNOCCUSQ176N https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N
panick21_ 5y ago
I didn't make any argument about actual policy. I simply pointed out that people should over-react to CPI based inflation measures.

> supply shock The supply shock you need to be worried about is the shocking oversupply of new dollars competing for the same resources.

by hanoz 5y ago

> supply shock The supply shock you need to be worried about is the shocking oversupply of new dollars competing for the same resources.

lumost 5y ago

The major lesson of the Fed’s QE policy has been that QE does not put dollars into the economy evenly. Certain asset classes and professions get first crack at the newly printed dollars, and over time firms and industries specifically designed to capture printed money evolve e.g. wework. It’s not a surprise that we’ll hear tons of information saying that printing money isn’t a bad thing, or that it isn’t the cause of any current monetary outcomes.

lotsofpulp 5y ago
I thought the guy that led Wework captured Saudi Arabian oil money via a Japanese VC.
bko 5y ago
There was plenty of money that went to individuals as well and I imagine that's driving retail stocks and now consumer prices. 68% of unemployed workers who received benefits were eligible for payments that are greater than their lost earnings: > As a result, though, many people may now be eligible for substantially more money while unemployed than they made while they were working. A new analysis by Peter Ganong, Pascal Noel and Joseph Vavra, economists at the University of Chicago, uses government data from 2019 to estimate that 68 percent of unemployed workers who can receive benefits are eligible for payments that are greater than their lost earnings. They also found that the estimated median replacement rate — the share of a worker’s original weekly salary that is being replaced by unemployment benefits — is 134 percent, or more than one-third above their original wage. A substantial minority of those workers, particularly in low-wage professions like food service and janitorial work, may end up receiving more than 150 percent of their previous weekly salary. https://fivethirtyeight.com/features/many-americans-are-getting-more-money-from-unemployment-than-they-were-from-their-jobs/ https://fivethirtyeight.com/features/many-americans-are-gett...
- lumost 5y ago
  I suspect these amounts are ultimately a pittance compared to the 20% annual price gain in housing. A common theme of those choosing to no longer work is that housing makes many jobs cost prohibitive to do.
  - topkai22 5y ago
    Not sure I get the argument here— federal enhanced unemployment benefits have been over since September, so there is no longer a monetary benefit to remaining on unemployment in almost all cases. Are you arguing people aren’t relocating or something to that effect?
    - lumost 5y ago
      My argument is that government spending on unemployment insurance and direct payments to individuals is tiny relative to money printed by the Fed and stashed in assets via QE
- ramphastidae 5y ago
  I keep hearing this talking point brought up but I just don’t get it. If you’re making more on unemployment, you’re poor and need money for essentials. It’s unlikely you’re investing in stocks. Also, unemployment doesn’t last forever (mine ran out in less than a year). What am I missing?
  - deleted 5y ago
    [deleted]
  - harambae 5y ago
    >you’re poor and need money for essentials. It’s unlikely you’re investing in stocks I used to think this way as well, but after browsing /r/wallstreetbets I am not at all convinced you need to have wealthy or responsible to invest/trade/gamble in the stock market. And unemployment abuse is a larger more complex topic.
cplusplusfellow 5y ago
It’s similar to the idea that central planning doesn’t allocate resources most appropriately for everyone to benefit.

Ericson2314 5y ago

Consumer spending has gone down. Too many dollars cannot be the problem if they aren't being spent! You might say "oh, well the rich are bidding up gas and food prices, poor people can't afford and ummmm drive and eat less". It sounds silly and it should but even if that were happening, and was the sole causal factor, it would mean the food and gas markets were not clearing, and that is clearly also not happening. And even if that were happening the sellers would be being irrational. For surely they would lower prices after the rich were fed and gassed up so they could sell the remainder of their goods, and make more money. (the profit rate would go down but the total profits would go up.) No matter how you cut it, the Monetarist story is false and ridiculous given the evidence.

javert 5y ago
Overprinting money causes massive economic distortion. For instance, the rich who get the money first are buying up all the houses, turning the US into a nation of renters. Another example--the federal government enables "easy money" as higher education loans, which has enabled universities to massively overcharge for mostly low quality education.
- Ericson2314 5y ago
  Yes inequality is inefficient. The monitarists' conception of inflation is a temporary distortion where all the money stock and flows pick up. What you are describing is a spacial distortion where certain people / goods get unfair treatment. The latter is indeed quite dubious, but it's not the same as the former! Conventional monetary policy is lame and fairly ineffective, but I have seen claims that raising rates is better at destimulating than lowering is at stimulating. What a tough nuance to convey!
- topkai22 5y ago
  > … turning the US into a nation of renters. The data doesn’t seem to support this, at least not yet. The owner occupancy of units has been increasing since 2016 and increased after 2020. The increase in housing prices has been extraordinary, but seems in large part due to people who actually intend to live in that housing. See: https://fred.stlouisfed.org/series/EOWNOCCUSQ176N https://fred.stlouisfed.org/series/EOWNOCCUSQ176N https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N

panick21_ 5y ago

I didn't make any argument about actual policy. I simply pointed out that people should over-react to CPI based inflation measures.