12 ms·

Not a crypto fan but I'm beginning to see that our entire economy is proving impossible without continuous manipulation by the fed

meitham 4y ago
That’s by design and is called the “Invisible Hands”.
AndrewStephens 4y ago
Well duh, that is the whole point of the fed - tweaking the dials to smooth out the peaks and troughs. Sometimes that doesn’t work, or works only after the fact, but the last 70 years or so has been fairly smooth sailing compared to what came before.
- throwawaymaths 4y ago
  The worst is when it works to smoothen out the peaks but the cost is silently screwing over poor people. So everyone at the top can pat themselves on the back, and people in the middle start blaming capitalism.
  - imtringued 4y ago
    The people in the middle never blame capitalism because they want to join the upper ranks and screw poor people over.
  - eatonphil 4y ago
    It's hard to believe the poor were really better off before the 1920s than they are today.
  - pas 4y ago
    how does that screw over poor people?
- deleted 4y ago
  [deleted]
tablespoon 4y ago
> Not a crypto fan but I'm beginning to see that our entire economy is proving impossible without continuous manipulation by the fed Just like driving a car proves impossible without continuous manipulation by its driver.
- sifar 4y ago
  cue autonomous vehicles. Seriously though this is a very wrong analogy. The economy is more like an ecosystem where individuals interact with themselves & the environment. It doesn't need continuous manipulation. In fact it tends to distort than aid.
  - IfOnlyYouKnew 4y ago
    Every ecosystem needs outside input of energy, such as sunlight.
    - kamray23 4y ago
      The economy gathers outside energy as the production of value, which is what the vast majority of companies do, and some of it disappears out the other end as consumption of goods with value. It's perfectly true that the system is perfectly capable of running alone without any external stimulus applies. The economy will keep being the economy no matter how much you tamper with it. The main problem people have with that is not that the economy won't "work", it's that the economy working necessarily means things like heavy business cycles, cyclical unemployment, a general tendency of wealth to move upwards, and a relatively fast accumulation to the level where those who have accumulated wealth begin to have serious power over politics and will impose meddling with the economy for their benefit. It will work fine, it working just isn't what humans generally want to happen.
      - imtringued 4y ago
        That isn't working fine. Any properly working economy is able to represent negative yields and thereby solve the wealth accumulation and unemployment problem. The idea that your wealth ought to grow exponentially regardless of whether the economy itself is growing and how much you contributed to the economy is ridiculous. What did people expect from this arrangement other than accumulation of wealth at the top? By the way, the economy won't work, it will collapse at some point, because 3% growth over two thousand years would imply colonizing entire galaxies. People think they have a birthright to eternal 3% growth without even being aware of what it means to grow exponentially for that long.
endisneigh 4y ago
What does this even mean? How would fiat work without control?
- nostrademons 4y ago
  "When a measure becomes a target, it ceases to be a good measure." The idea behind prices in a market economy is that they're an information-carrying abstraction. They let producers at every stage of the value chain understand the relative costs that go into different alternate ways of producing a good, without needing to understand every single stage of the supply chain and all the decisions that their suppliers made. And it also gives them information about relative demand, so that producers which make things that nobody want go bankrupt and those make things that lots of people want rake in windfall prices. The whole point of the Fed is to alter prices, on one hand to keep producers from raking in windfall prices (price stability) and on the other to prevent too many of them from going bankrupt all at once (full unemployment). Problem is that when you do this too much, for too long, the biggest input to a firm's production decisions becomes the Fed funds rate. When it goes up, time to layoff people, because the cost of capital just went up and you can't do anything without capital. When it goes down, time to go on a hiring frenzy because if there's money for the taking and you're not the one taking it, you get outcompeted by the ones who are. Over time this begins to dominate all other signals that pricing normally provides, like producing goods efficiently and making things lots of people want. You get companies like Uber, which lose money on every transaction but make it up in fundraising. In turn this increases sensitivity to the Fed's actions, which limits their freedom to take them. If the whole economy breaks when you raise rates to 1.5% (as happened in 2019), it becomes very hard to raise rates above 1.5%. So rates get pegged below the natural rate of interest (which equilibrates supply of savings with demand for productive investment), lots of economically dubious projects get funded, you inflate a perma-bubble, and you can't deflate it without taking down the whole economy.
  - dragonwriter 4y ago
    > The idea behind prices in a market economy is that they're an information-carrying abstraction. No, the idea behind prices is that they are what the participants in particular trades think it is worth trading at. The normative argument for the superiority of laissez-faire economies may involve market prices as an information carrying mechanism, but that normative argument is much newer than market economies, and is not the “idea behind prices in a market economy”. The benefits some people see (or imagine) in something after the fact are not the underlying purpose of the thing.
ur-whale 4y ago
> our entire economy is proving impossible without continuous manipulation by the fed I don't believe that's the case. However, once you've put your hand in the meat grinder of debt, what you just said becomes a self-fulfilling prophecy.
woodruffw 4y ago
I don't think anybody operates under the delusion that the Federal Reserve isn't applying policy to the economy? That's in stark contrast to the seemingly common delusion that cryptocurrency economics are uniquely free of manipulation.
dgellow 4y ago
It’s a feature, not a bug
imtringued 4y ago
Thomas piketty already discovered that the growth rate of the economy must be higher than the rate of return on capital. Not all returns actually go to 0% due to monopolies, etc. This means those returns have to be taken from someone else and forcibly growing the economy is just a bandaid so people don't lose what they already have to the rich owners of monopolies.
overtonwhy 4y ago
It is literally their job: The mission of the Federal Reserve System is to foster the stability, integrity, and efficiency of the nation's monetary, financial, and payment systems so as to promote optimal macroeconomic performance.
- Hendrikto 4y ago
  That‘s a romantic idea, but not what they have done for decades though. The Fed is way too busy propping up the system to prevent collapse.
Tepix 4y ago
Most people think that a currency guided by an entity works better than an unguided one.
- notch656a 4y ago
  If you can guide a currency and there is some power imbalance in who is doing the guiding, then that can turn out to be a nasty problem. For instance, there is some asymmetric effects if the entity doing the guiding dilutes savings by pumping the money supply and simultaneously buys mortgage products while setting a central bank lending rate of near 0%. Beauty is in the eye of the guider.
neilwilson 4y ago
The Fed is just the agent of Treasury (as Bernanke pointed out in testimony[0]) , and Treasury does what Congress tells it to do. Which leads to the inevitable conclusion - the US dollar is a simple public monopoly, and therefore monopoly rules apply. [0]: https://www.c-span.org/video/?c4454549/user-clip-bernanke-agent-treasury https://www.c-span.org/video/?c4454549/user-clip-bernanke-ag...

meitham 4y ago

That’s by design and is called the “Invisible Hands”.

AndrewStephens 4y ago

Well duh, that is the whole point of the fed - tweaking the dials to smooth out the peaks and troughs. Sometimes that doesn’t work, or works only after the fact, but the last 70 years or so has been fairly smooth sailing compared to what came before.

throwawaymaths 4y ago
The worst is when it works to smoothen out the peaks but the cost is silently screwing over poor people. So everyone at the top can pat themselves on the back, and people in the middle start blaming capitalism.
- imtringued 4y ago
  The people in the middle never blame capitalism because they want to join the upper ranks and screw poor people over.
- eatonphil 4y ago
  It's hard to believe the poor were really better off before the 1920s than they are today.
- pas 4y ago
  how does that screw over poor people?
deleted 4y ago
[deleted]

tablespoon 4y ago

> Not a crypto fan but I'm beginning to see that our entire economy is proving impossible without continuous manipulation by the fed Just like driving a car proves impossible without continuous manipulation by its driver.

sifar 4y ago
cue autonomous vehicles. Seriously though this is a very wrong analogy. The economy is more like an ecosystem where individuals interact with themselves & the environment. It doesn't need continuous manipulation. In fact it tends to distort than aid.
- IfOnlyYouKnew 4y ago
  Every ecosystem needs outside input of energy, such as sunlight.
  - kamray23 4y ago
    The economy gathers outside energy as the production of value, which is what the vast majority of companies do, and some of it disappears out the other end as consumption of goods with value. It's perfectly true that the system is perfectly capable of running alone without any external stimulus applies. The economy will keep being the economy no matter how much you tamper with it. The main problem people have with that is not that the economy won't "work", it's that the economy working necessarily means things like heavy business cycles, cyclical unemployment, a general tendency of wealth to move upwards, and a relatively fast accumulation to the level where those who have accumulated wealth begin to have serious power over politics and will impose meddling with the economy for their benefit. It will work fine, it working just isn't what humans generally want to happen.
    - imtringued 4y ago
      That isn't working fine. Any properly working economy is able to represent negative yields and thereby solve the wealth accumulation and unemployment problem. The idea that your wealth ought to grow exponentially regardless of whether the economy itself is growing and how much you contributed to the economy is ridiculous. What did people expect from this arrangement other than accumulation of wealth at the top? By the way, the economy won't work, it will collapse at some point, because 3% growth over two thousand years would imply colonizing entire galaxies. People think they have a birthright to eternal 3% growth without even being aware of what it means to grow exponentially for that long.

endisneigh 4y ago

What does this even mean? How would fiat work without control?

nostrademons 4y ago
"When a measure becomes a target, it ceases to be a good measure." The idea behind prices in a market economy is that they're an information-carrying abstraction. They let producers at every stage of the value chain understand the relative costs that go into different alternate ways of producing a good, without needing to understand every single stage of the supply chain and all the decisions that their suppliers made. And it also gives them information about relative demand, so that producers which make things that nobody want go bankrupt and those make things that lots of people want rake in windfall prices. The whole point of the Fed is to alter prices, on one hand to keep producers from raking in windfall prices (price stability) and on the other to prevent too many of them from going bankrupt all at once (full unemployment). Problem is that when you do this too much, for too long, the biggest input to a firm's production decisions becomes the Fed funds rate. When it goes up, time to layoff people, because the cost of capital just went up and you can't do anything without capital. When it goes down, time to go on a hiring frenzy because if there's money for the taking and you're not the one taking it, you get outcompeted by the ones who are. Over time this begins to dominate all other signals that pricing normally provides, like producing goods efficiently and making things lots of people want. You get companies like Uber, which lose money on every transaction but make it up in fundraising. In turn this increases sensitivity to the Fed's actions, which limits their freedom to take them. If the whole economy breaks when you raise rates to 1.5% (as happened in 2019), it becomes very hard to raise rates above 1.5%. So rates get pegged below the natural rate of interest (which equilibrates supply of savings with demand for productive investment), lots of economically dubious projects get funded, you inflate a perma-bubble, and you can't deflate it without taking down the whole economy.
- dragonwriter 4y ago
  > The idea behind prices in a market economy is that they're an information-carrying abstraction. No, the idea behind prices is that they are what the participants in particular trades think it is worth trading at. The normative argument for the superiority of laissez-faire economies may involve market prices as an information carrying mechanism, but that normative argument is much newer than market economies, and is not the “idea behind prices in a market economy”. The benefits some people see (or imagine) in something after the fact are not the underlying purpose of the thing.

ur-whale 4y ago

> our entire economy is proving impossible without continuous manipulation by the fed I don't believe that's the case. However, once you've put your hand in the meat grinder of debt, what you just said becomes a self-fulfilling prophecy.

woodruffw 4y ago

I don't think anybody operates under the delusion that the Federal Reserve isn't applying policy to the economy? That's in stark contrast to the seemingly common delusion that cryptocurrency economics are uniquely free of manipulation.

dgellow 4y ago

It’s a feature, not a bug

imtringued 4y ago

Thomas piketty already discovered that the growth rate of the economy must be higher than the rate of return on capital. Not all returns actually go to 0% due to monopolies, etc. This means those returns have to be taken from someone else and forcibly growing the economy is just a bandaid so people don't lose what they already have to the rich owners of monopolies.

overtonwhy 4y ago

It is literally their job: The mission of the Federal Reserve System is to foster the stability, integrity, and efficiency of the nation's monetary, financial, and payment systems so as to promote optimal macroeconomic performance.

Hendrikto 4y ago
That‘s a romantic idea, but not what they have done for decades though. The Fed is way too busy propping up the system to prevent collapse.

Tepix 4y ago

Most people think that a currency guided by an entity works better than an unguided one.

notch656a 4y ago
If you can guide a currency and there is some power imbalance in who is doing the guiding, then that can turn out to be a nasty problem. For instance, there is some asymmetric effects if the entity doing the guiding dilutes savings by pumping the money supply and simultaneously buys mortgage products while setting a central bank lending rate of near 0%. Beauty is in the eye of the guider.

neilwilson 4y ago

The Fed is just the agent of Treasury (as Bernanke pointed out in testimony[0]) , and Treasury does what Congress tells it to do. Which leads to the inevitable conclusion - the US dollar is a simple public monopoly, and therefore monopoly rules apply. [0]: https://www.c-span.org/video/?c4454549/user-clip-bernanke-agent-treasury https://www.c-span.org/video/?c4454549/user-clip-bernanke-ag...