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We should consider a lot of this to be zero-sum. Creditworthy demand for loans doesn't magically increase when rates change or the Fed buys bonds. In QE, like
by nwah1 4y ago
We should consider a lot of this to be zero-sum.
Creditworthy demand for loans doesn't magically increase when rates change or the Fed buys bonds.
In QE, like with accounting, you debit one side and credit the other. Netting to zero.
The effects it all has probably are real in terms of steering where people park their money. And that matters in the long run.
But that would mainly amplify whatever underlying incentive structures exist for investment.
If you steer people to stocks, and the economy has only ponzi schemes to offer, it might be because they haven't figured out a policy framework that promotes actual production.
But you can't magically add production by rewriting the knobs so that they all go to 11. Printing is differently zero sum, but the analogy works there as well.
- adam_arthur 4y agoYou're ignoring refinancing. Cash out refis on homes, businesses and government debt. Somebody doing a cash out refi for 100k to add an extension to their house can certainly be inflationary
- nwah1 4y agoInteresting point. I'm sort of steelmanning the anti-monetary perspective to the best of my limited ability. Partly in hopes of hearing good rebuttals. I will have to think about this.
- JumpCrisscross 4y ago> Creditworthy demand for loans doesn't magically increase when rates change or the Fed buys bonds This is fundamentally untrue. Projects that don’t make economic sense at a high discount rate do at a lower one. This is measurable with mortgages [1], alongside side a host of other cases. [1] https://app.oarklibrary.com/file/2/f047273e-32ba-40f7-9b83-5cfa5d6d94f8/acd592db-07e1-4d6b-abea-b99e3d8b212b.pdf https://app.oarklibrary.com/file/2/f047273e-32ba-40f7-9b83-5...
- nwah1 4y agoLink doesn't work. Mortgages are one of the most annoying things to analyze in the economy, up there with healthcare, because of how much it is dominated by the government. In the US a bank first makes a home loan, and then later gets money from the overnight market to cover the loan... likely from the Fed. They immediately sell the loan to Fannie and Freddie, GSEs that have actually been in conservatorship by the government directly since 2008. And every part of the market is protected and micromanaged and tax advantaged to oblivion. And every bank too big to fail, and loaded up with TARP funds and their bonds bought via QE. Apply the principles of supply and demand to that, I dare you.