4 ms·

I agree with everything you wrote, except I don't think the programs to pump money into the system were well-intentioned. The Fed knew exactly who they were giv

by titzer 5y ago

I agree with everything you wrote, except I don't think the programs to pump money into the system were well-intentioned. The Fed knew exactly who they were giving money to and actively chose to prop up their friends. IMHO they should have let the biggest banks crash and relied on the FDIC to protect Joe Schmoe's bank accounts. Financial regulations were designed to keep a wall between investment banks and regular banking activities to wall smaller fish from risk. But there is precious little money based on deposits in the system anymore, it's all debt now, and it's all spiraling out of control.

bombcar 5y ago
The Fed has been riding a tiger for 70+ years and each year it gets harder to dismount.
- bwestergard 5y ago
  Huh? There have multiple structural changes in the fundamentals of the economy over the last seventy years. The problems the Fed faced from 1945-1975 - with explosive growth, the services share of employment relatively low, wages following productivity - were entirely different from those faced subsequently.
  - bombcar 5y ago
    1948 and 1956 is when the 30 year fixed mortgage came into existence in the USA, and arguably the point at which the purpose of the Fed became propping up house prices.
mschuster91 5y ago
> MHO they should have let the biggest banks crash and relied on the FDIC to protect Joe Schmoe's bank accounts. The problem have never been bank accounts. The problem have been pension accounts, all the time. Instead of the old European way of a public, universally funded rolling pension scheme (aka current workers pay for the pensions of the current pensioners in exchange for credits), the US went for almost pure stock and other IOU-based (e.g. bonds) pension funds - a decision that has been biting the US in the butt for the last fifteen years. The FED literally can't do anything that even has the potential of sending the stock market into a major decline because even small corrections wipe out the pension security of the people. Of course, Big Finance has been exploiting that forced abundance of money ever since. When 35 trillion dollars (!) [1] are available in the market solely due to pension funds, even extremely tiny management fees of a tenth of a percent add to a massive payout for the industry! The US is in for a really, really wild ride: The pension system obviously needs reform when large amounts of "pensioners" have to work at age 75 and above because their pensions are too low [2], the pension system is unsustainable because it effectively requires endless printing of money and introduces extremely bad side effects (such as enormous amounts of capital being wasted on bullshit in the vain hope it might evolve into a "unicorn"), and at the same time the political deciders can be very well said to be bought off by Big Finance which will do everything it can to avoid being cut off of the money heroin spigot that is pension funds. Not to mention that voters are not going to vote for any politician that the opposition (aka either primary competitors or the actual opposition) can smear as "it will endanger pensions". The effective way out would be a nationalization of all pension fund assets and a complete turnover of the entire system, but we all know that that is not going to happen. [1] https://www.statista.com/statistics/421729/pension-funds-assets-usa/ https://www.statista.com/statistics/421729/pension-funds-ass... [2] https://www.theguardian.com/money/2021/dec/13/americans-retire-work-social-security https://www.theguardian.com/money/2021/dec/13/americans-reti...
- titzer 5y ago
  I agree with this too. Savings accounts became a thing of the past 20 years ago or more; the Fed wiped out returns on them with permanently low interest rates. It was deliberate to get that cash into the stock market. The whole shebang was absolutely engineered to make the stock market the center of all fiscal policy, centralizing all risk and driving all decision-making towards keeping that Jenga tower piling up.
  - polishdude20 5y ago
    Makes me think all the articles and advice to invest in index funds were all part of this plan too.
    - mschuster91 5y ago
      The idea of investing into an index fund is pretty solid in any case. The money from savings accounts ends up on the stock market just the same, only with the bank pocketing the profits between the savings account interest and the rise of the usual indices.
      - reducesuffering 5y ago
        Don't US banks have financial regulations that they can't just take savings deposits and buy stocks? I thought they have narrow leeway with risk and deposits are mostly used for loans.
      - polishdude20 5y ago
        Yeah that's true. Although I guess the bank guarantees your savings will still be the same amount if their investments go down?
- Dma54rhs 5y ago
  But Europeans park their pensions to markets now as well, the times when new workers paid for old ones are long gone. People don't reproduce enough to keep the system stable.

by titzer 5y ago

bombcar 5y ago

The Fed has been riding a tiger for 70+ years and each year it gets harder to dismount.

bwestergard 5y ago
Huh? There have multiple structural changes in the fundamentals of the economy over the last seventy years. The problems the Fed faced from 1945-1975 - with explosive growth, the services share of employment relatively low, wages following productivity - were entirely different from those faced subsequently.
- bombcar 5y ago
  1948 and 1956 is when the 30 year fixed mortgage came into existence in the USA, and arguably the point at which the purpose of the Fed became propping up house prices.

mschuster91 5y ago

> MHO they should have let the biggest banks crash and relied on the FDIC to protect Joe Schmoe's bank accounts. The problem have never been bank accounts. The problem have been pension accounts, all the time. Instead of the old European way of a public, universally funded rolling pension scheme (aka current workers pay for the pensions of the current pensioners in exchange for credits), the US went for almost pure stock and other IOU-based (e.g. bonds) pension funds - a decision that has been biting the US in the butt for the last fifteen years. The FED literally can't do anything that even has the potential of sending the stock market into a major decline because even small corrections wipe out the pension security of the people. Of course, Big Finance has been exploiting that forced abundance of money ever since. When 35 trillion dollars (!) [1] are available in the market solely due to pension funds, even extremely tiny management fees of a tenth of a percent add to a massive payout for the industry! The US is in for a really, really wild ride: The pension system obviously needs reform when large amounts of "pensioners" have to work at age 75 and above because their pensions are too low [2], the pension system is unsustainable because it effectively requires endless printing of money and introduces extremely bad side effects (such as enormous amounts of capital being wasted on bullshit in the vain hope it might evolve into a "unicorn"), and at the same time the political deciders can be very well said to be bought off by Big Finance which will do everything it can to avoid being cut off of the money heroin spigot that is pension funds. Not to mention that voters are not going to vote for any politician that the opposition (aka either primary competitors or the actual opposition) can smear as "it will endanger pensions". The effective way out would be a nationalization of all pension fund assets and a complete turnover of the entire system, but we all know that that is not going to happen. [1] https://www.statista.com/statistics/421729/pension-funds-assets-usa/ https://www.statista.com/statistics/421729/pension-funds-ass... [2] https://www.theguardian.com/money/2021/dec/13/americans-retire-work-social-security https://www.theguardian.com/money/2021/dec/13/americans-reti...

titzer 5y ago
I agree with this too. Savings accounts became a thing of the past 20 years ago or more; the Fed wiped out returns on them with permanently low interest rates. It was deliberate to get that cash into the stock market. The whole shebang was absolutely engineered to make the stock market the center of all fiscal policy, centralizing all risk and driving all decision-making towards keeping that Jenga tower piling up.
- polishdude20 5y ago
  Makes me think all the articles and advice to invest in index funds were all part of this plan too.
  - mschuster91 5y ago
    The idea of investing into an index fund is pretty solid in any case. The money from savings accounts ends up on the stock market just the same, only with the bank pocketing the profits between the savings account interest and the rise of the usual indices.
    - reducesuffering 5y ago
      Don't US banks have financial regulations that they can't just take savings deposits and buy stocks? I thought they have narrow leeway with risk and deposits are mostly used for loans.
    - polishdude20 5y ago
      Yeah that's true. Although I guess the bank guarantees your savings will still be the same amount if their investments go down?
Dma54rhs 5y ago
But Europeans park their pensions to markets now as well, the times when new workers paid for old ones are long gone. People don't reproduce enough to keep the system stable.