6 ms·

And each time they think (or get the citizens to think) they can escape the natural laws of the universe, money printing causing no inflation. "It won't happen

And each time they think (or get the citizens to think) they can escape the natural laws of the universe, money printing causing no inflation. "It won't happen here!" It's not us doing money printing.. it's uh.. COVID, uh.. the war, uh.. Climate change, uh.. corporate greed.

pessimizer 4y ago
They should have learned from the hyperinflation in the US that resulted from the vast money printing that happened after the 2008 property bubble burst. I know that inflation for the next decade was sub-2%, but if you think that's low, you're just showing your privilege. You can't dodge gravity.
- hef19898 4y ago
  Hyperinflation is at least double digits month over month for a considerable stretch of time, arguably even more than that. Turkey comes to mind. The Western world is incredibly far from that and was nowhere close to it in 2008.
  - pessimizer 4y ago
    /s
    - poisonarena 4y ago
      what makes hacker news appealing is the very few reddit style, low effort comments. You should explain your viewpoint instead of this cringy /s business, everyone would be richer for it
      - pessimizer 4y ago
        You mistook the /s for an attack on the comment above it, when it was actually a completion of my own grandparent comment. There was not inflation, even when some inflation was desired, after an almost inconceivable amount of money printing. I know it's my own fault for thinking of Poe's Law as a target rather than a pitfall. Sadly, for me satire/sarcasm isn't good unless the target of it sometimes can't tell that it is satire. It's evidence that I've treated them fairly. edit: note that cm2187 understood that, and formulated a direct, thoughtful reply. edit: also note (although you can't see it) that after I explained the "/s" wasn't an attack but an affirmation of the reply that told the truth about hyperinflation, that it wasn't a goldbugging Libertarian smirk, the upvotes started disappearing. Poe achieved.
        pessimizer 4y ago
        To be dead honest, and not trying to insult anyone, in real life when I assert two contradictory things within two short sentences about any subject, the people who are listening to me who agree with those sentences immediately start to make their case to me why those two statements aren't contradictory. It's only on the internet where I can assume that people will show up who really think that I believe that stubbornly low <2% inflation is hyperinflation, and attempt to excoriate or support me.
        poisonarena 4y ago
        no its just lame reddit style low effort comments, like writing "This!! SO much THIS!!!", brings nothing to any discussion. I don't care if you attack or write something bizzare or rude, as long as you write something thought out and coherent(or insane as long as it is interesting).
- kortilla 4y ago
  The US hasn’t ever had hyperinflation.
  - Turing_Machine 4y ago
    It was technically before the US was officially founded (counting from the adoption of the Constitution), but the Continental currency printed by the Continental Congress during the Revolutionary War was inflated to such a degree that a banknote in 1781 had only 1/40 of its original value in 1776, and was finally redeemable at only 1% of its face value in the 1790s, thus leading to the expression "Not worth a Continental". https://en.wikipedia.org/wiki/Early_American_currency#Continental_currency https://en.wikipedia.org/wiki/Early_American_currency#Contin... Edit: tried to clarify wording. In 1781, a banknote of a specific denomination was worth only 1/40th of what the same banknote was worth in 1776.
- cm2187 4y ago
  Because of the way it was introduced (in the financial system), there was inflation, it created an asset bubble. Asset managers, hedge fund managers, VC investors got rich, and the cost base of this population (prime real estate, restaurants in city centres, tuition fees) inflated too. That's not captured in CPI indices. Part of it was also neutralised through massive liquidity requirements imposed on banks, and the multiplier effect of banks was also killed with capital ratios / forcing banks to deleverage. But that's done now and the said requirements aren't increasing anymore. What changed with the covid money printing is that it was distributed directly in people's pockets. Also its scale and pace dwarfed the previous 10 years of QE. I have no good explanation for Powell to have kept printing money like there was no tomorrow after Feb 2021, after the first >7% inflation prints. I suspect he must have made a deal with Biden to let the inflation go (helped Biden's policies) in exchange for renewing his mandate. The ECB is run by a lawyer who probably had to look up on wikipedia the definition of inflation.
  - pessimizer 4y ago
    I don't know that the inflation of luxury goods is a bad thing, because that's going to trickle down. It's the damage to (inflation of) housing, for me, that begs for intervention.
- deleted 4y ago
  [deleted]
fennecfoxen 4y ago
Eh, we’re not at serious risk of hyperinflation here. We are at risk of regular old plain vanilla inflation, which is adequately obnoxious and harms real wages plenty. As a net debtor, I might see see a 50% fall in the real value of my mortgage in 5-7 years at current inflation rates, if the politicians are feckless enough about it (“Milton Friedman isn’t in charge any more,” Biden tells me.) I seriously doubt I will see it in a month (the threshold cited in TFA).
- seibelj 4y ago
  The only reason you want this is because tax payers subsidize your mortgage (assuming standard fixed-rate US mortgage). No other country offers this, and it’s clearly a handout to the upper middle class. In a free market your mortgage rate would rise with inflation, or to get a fixed rate (for 30 years!) you would have to agree to a rate far above current inflation.
  - cwalv 4y ago
    The home ownership rate in the US is > 65%; it seems unlikely that this correlates well with "upper middle class", by any reasonable definition. A more interesting metric would be the percentage of people that benefit from the deduction and gov guarantees at some point in their life; I'd bet it's > 90%.
    - seibelj 4y ago
      It has to do with the absolute size of the mortgage. Fixed rates go as high as $770k borrowed. You have to be well-off to carry a $770k mortgage, and the value of this subsidy to that type of borrower is unneeded.
      - cwalv 4y ago
        I believe it's possible to get a fixed rate "jumbo" loan for even more than that, but since they're "non-conforming" they can't be sold to fanny/freddy, and so the banks take on the full risk of these loans. For conforming loans, the limit in most areas is $647k [1], which has risen substantially in recent years (along with broader housing cost inflation). Not adjusting for HCOL areas would effectively be blocking lower income people from moving into these (arguably) "higher-mobility" areas. [1] https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=FHFA-Announces-Conforming-Loan-Limits-for-2022.aspx https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx...
dragonwriter 4y ago
The overt purpose for the money printing is to increase inflation beyond the level it would be without it. Essentially no one has the delusion you discuss.
- llanowarelves 4y ago
  Yes, supposed to be a couple percent -- but you have a significant number of people who think that you can simply "QE" a lot money (40% of all existing etc) and not have significant inflation, and any price increases are purely the result of corporate greed (as if they weren't always trying to charge more, they were less greedy sometimes??), supply chains, whatever. Mainstream articles telling normal people this.
  - rmah 4y ago
    They think that because that's what happened. The Fed pushed out $4T of QE and inflation barely budged for over a decade (after 2008/2009 recession). It took a global pandemic + a land war in Europe to bring on substantial inflation. I remember when the Fed started doin QE in 2009. I thought, "my god, pushing this much money into the economy will lead to high inflation!"... except, it didn't. Then they did QE2 and again, I thought, "for sure, THIS time inflation will spike up!" Except it didn't. Then QE3 in 2012... Call me slow, but it wasn't until that point that I started to seriously re-examine my mental model about how macroeconomics works. But at least I could admit to being wrong.
    - mr_toad 4y ago
      The US economy grew from $14T in 2009 to $21T up to 2019. Printing money during an economic boom is not like printing money in a static or shrinking economy.
  - dragonwriter 4y ago
    > but you have a significant number of people who think that you can simply "QE" a lot money (40% of all existing etc) and not have significant inflation, You can, if the underlying conditions would, with a neutral policy, produce a significant-enough deflation. We’ve pretty much demonstrated that. OTOH, if you have something like the COVID emergency and associated controls, that results in a rapid snap-back of the underlying conditions rather than the more common gradual adjustment, when you are geared to offset massive deflation, you get inflation until you adjust the monetary policy dials again.
sofixa 4y ago
> It's not us doing money printing.. it's uh.. COVID, uh.. the war, uh.. Climate change, uh.. corporate greed If you think a pandemic (and policies to combat its effects) and a war including some of the main exporters of foodstuffs and energy don't impact the world markets and increase prices worldwide (inflation), it's just willful ignorance pursuing a (stupid) agenda at this point.
- jbay808 4y ago
  A loss of production will of course result in lost wealth, but that can manifest as any combination of an increase in prices (account balances constant) or a decrease in account balances (prices constant). For example if the government taxed enough money out of the system, prices would not increase (but stuff would be less affordable because you have less money to buy it with). There's no getting around the increased scarcity, but the increased prices are in some sense a choice.
  - sofixa 4y ago
    I'm sorry, but that's not how things work in the real global world. Say Canada does what you say will fix everything, and adds extra taxes so that there's less money to spend, so in theory demand will go lower because there would be less money, and in theory supply will increase, and thus suppliers would have to lower prices to meet consumers. Econ 101, right? Wrong, you should have continued past that chapter. First, we're talking about inelastic goods. Food, energy. There's very limited elasticity there - you can choose to conserve energy and eat cheaper food, but in the end, you need electricity, warmth and food or you'll die, so there's only so much you can be elastic in your demand. Less money to spend due to higher taxes means choosing between eating rice for a week or uncomfortable cold going to freezing depending on place and season. (Until magically the market fixes itself, right? Wrong.) Second, we're talking about global markets. If Canadians have less money to spend on wheat and corn and substitutes, or vegetable oils, or oil and gas, well, someone else will buy them on the global market. Even the local producers, unless they're forced to otherwise, or they're feeling really nice. There is more demand than there is supply for those specific, rather inelastic, items that the whole world needs and consumes, and which are heavily impacted by the Russian invasion of Ukraine. Which has also had ramifications such as Indonesia, one of the biggest exporters of palm oil, stopping exports due to rising vegetable oil prices globally (due to the war), to protect the local market by having locals buy local palm oil as a replacement for the expensive imported other oils.
imtringued 4y ago
The problem is that there is no money printing beyond the physical printing of bank notes. Money in your bank account isn't created through printing. It is created through accounting and the entire point of this accounting is to make sure that every liability (deposit) in your bank account is backed by an asset (the debt contract). The entire point of this is to keep a mathematical identity. The net worth of the bank does not change when it issues deposits, deposits/savings and debt add up to zero. The only thing that changes is that the bank becomes more leveraged and less solvent which is why there are capital requirements which mandate a minimum quality of the assets that are being used to create deposits and there used to be a minimum reserve ratio to put an upper bound on the amount of leverage a bank can take on. If you want to complain about the money supply growing or deficit spending or debt growing out of control you are free to do that but if you talk about money printing you are basically ignoring all of that and just think that there is this obvious element that everyone is overlooking. If the government bans cash it stops printing money but does it get rid of debt? Does it get rid of inflation? Not really. When people save money, the currency goes up in value, to prevent deflation, the central bank loosens reserve requirements, lowers short term interest rates or if it can't do anymore it will do open market operations aka quantitative easing which is more or less just trying to replicate what a lower interest rate would have done. Since there is a net increase of savings in real terms, either the interest rate must go down, perhaps even go negative to discourage people from saving too much, or more debt must be created to soak up those savings. This means if the private sector keeps accumulating more and more savings, the public sector must go more and more in debt if it wants to maintain a positive interest rate. If you don't like that, then you must somehow stop people from accumulating too much money and get them to spend it. Saved money isn't being lent on, not even in the case of a certificate of deposit, where it would kind of make some sense, it is just sitting there and waiting to be spent. Any time the bank "lends your money" it actually doesn't and instead creates new money in proportion to the debt.
- mr_toad 4y ago
  “Increasing the money supply through open market operations” is a bit of a mouthful. I don’t think most people mean that that government is literally printing bills when they say “printing money”.

pessimizer 4y ago

They should have learned from the hyperinflation in the US that resulted from the vast money printing that happened after the 2008 property bubble burst. I know that inflation for the next decade was sub-2%, but if you think that's low, you're just showing your privilege. You can't dodge gravity.

hef19898 4y ago
Hyperinflation is at least double digits month over month for a considerable stretch of time, arguably even more than that. Turkey comes to mind. The Western world is incredibly far from that and was nowhere close to it in 2008.
- pessimizer 4y ago
  /s
  - poisonarena 4y ago
    what makes hacker news appealing is the very few reddit style, low effort comments. You should explain your viewpoint instead of this cringy /s business, everyone would be richer for it
    - pessimizer 4y ago
      You mistook the /s for an attack on the comment above it, when it was actually a completion of my own grandparent comment. There was not inflation, even when some inflation was desired, after an almost inconceivable amount of money printing. I know it's my own fault for thinking of Poe's Law as a target rather than a pitfall. Sadly, for me satire/sarcasm isn't good unless the target of it sometimes can't tell that it is satire. It's evidence that I've treated them fairly. edit: note that cm2187 understood that, and formulated a direct, thoughtful reply. edit: also note (although you can't see it) that after I explained the "/s" wasn't an attack but an affirmation of the reply that told the truth about hyperinflation, that it wasn't a goldbugging Libertarian smirk, the upvotes started disappearing. Poe achieved.
      - pessimizer 4y ago
        To be dead honest, and not trying to insult anyone, in real life when I assert two contradictory things within two short sentences about any subject, the people who are listening to me who agree with those sentences immediately start to make their case to me why those two statements aren't contradictory. It's only on the internet where I can assume that people will show up who really think that I believe that stubbornly low <2% inflation is hyperinflation, and attempt to excoriate or support me.
      - poisonarena 4y ago
        no its just lame reddit style low effort comments, like writing "This!! SO much THIS!!!", brings nothing to any discussion. I don't care if you attack or write something bizzare or rude, as long as you write something thought out and coherent(or insane as long as it is interesting).
kortilla 4y ago
The US hasn’t ever had hyperinflation.
- Turing_Machine 4y ago
  It was technically before the US was officially founded (counting from the adoption of the Constitution), but the Continental currency printed by the Continental Congress during the Revolutionary War was inflated to such a degree that a banknote in 1781 had only 1/40 of its original value in 1776, and was finally redeemable at only 1% of its face value in the 1790s, thus leading to the expression "Not worth a Continental". https://en.wikipedia.org/wiki/Early_American_currency#Continental_currency https://en.wikipedia.org/wiki/Early_American_currency#Contin... Edit: tried to clarify wording. In 1781, a banknote of a specific denomination was worth only 1/40th of what the same banknote was worth in 1776.
cm2187 4y ago
Because of the way it was introduced (in the financial system), there was inflation, it created an asset bubble. Asset managers, hedge fund managers, VC investors got rich, and the cost base of this population (prime real estate, restaurants in city centres, tuition fees) inflated too. That's not captured in CPI indices. Part of it was also neutralised through massive liquidity requirements imposed on banks, and the multiplier effect of banks was also killed with capital ratios / forcing banks to deleverage. But that's done now and the said requirements aren't increasing anymore. What changed with the covid money printing is that it was distributed directly in people's pockets. Also its scale and pace dwarfed the previous 10 years of QE. I have no good explanation for Powell to have kept printing money like there was no tomorrow after Feb 2021, after the first >7% inflation prints. I suspect he must have made a deal with Biden to let the inflation go (helped Biden's policies) in exchange for renewing his mandate. The ECB is run by a lawyer who probably had to look up on wikipedia the definition of inflation.
- pessimizer 4y ago
  I don't know that the inflation of luxury goods is a bad thing, because that's going to trickle down. It's the damage to (inflation of) housing, for me, that begs for intervention.
deleted 4y ago
[deleted]

fennecfoxen 4y ago

Eh, we’re not at serious risk of hyperinflation here. We are at risk of regular old plain vanilla inflation, which is adequately obnoxious and harms real wages plenty. As a net debtor, I might see see a 50% fall in the real value of my mortgage in 5-7 years at current inflation rates, if the politicians are feckless enough about it (“Milton Friedman isn’t in charge any more,” Biden tells me.) I seriously doubt I will see it in a month (the threshold cited in TFA).

seibelj 4y ago
The only reason you want this is because tax payers subsidize your mortgage (assuming standard fixed-rate US mortgage). No other country offers this, and it’s clearly a handout to the upper middle class. In a free market your mortgage rate would rise with inflation, or to get a fixed rate (for 30 years!) you would have to agree to a rate far above current inflation.
- cwalv 4y ago
  The home ownership rate in the US is > 65%; it seems unlikely that this correlates well with "upper middle class", by any reasonable definition. A more interesting metric would be the percentage of people that benefit from the deduction and gov guarantees at some point in their life; I'd bet it's > 90%.
  - seibelj 4y ago
    It has to do with the absolute size of the mortgage. Fixed rates go as high as $770k borrowed. You have to be well-off to carry a $770k mortgage, and the value of this subsidy to that type of borrower is unneeded.
    - cwalv 4y ago
      I believe it's possible to get a fixed rate "jumbo" loan for even more than that, but since they're "non-conforming" they can't be sold to fanny/freddy, and so the banks take on the full risk of these loans. For conforming loans, the limit in most areas is $647k [1], which has risen substantially in recent years (along with broader housing cost inflation). Not adjusting for HCOL areas would effectively be blocking lower income people from moving into these (arguably) "higher-mobility" areas. [1] https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=FHFA-Announces-Conforming-Loan-Limits-for-2022.aspx https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx...

dragonwriter 4y ago

The overt purpose for the money printing is to increase inflation beyond the level it would be without it. Essentially no one has the delusion you discuss.

llanowarelves 4y ago
Yes, supposed to be a couple percent -- but you have a significant number of people who think that you can simply "QE" a lot money (40% of all existing etc) and not have significant inflation, and any price increases are purely the result of corporate greed (as if they weren't always trying to charge more, they were less greedy sometimes??), supply chains, whatever. Mainstream articles telling normal people this.
- rmah 4y ago
  They think that because that's what happened. The Fed pushed out $4T of QE and inflation barely budged for over a decade (after 2008/2009 recession). It took a global pandemic + a land war in Europe to bring on substantial inflation. I remember when the Fed started doin QE in 2009. I thought, "my god, pushing this much money into the economy will lead to high inflation!"... except, it didn't. Then they did QE2 and again, I thought, "for sure, THIS time inflation will spike up!" Except it didn't. Then QE3 in 2012... Call me slow, but it wasn't until that point that I started to seriously re-examine my mental model about how macroeconomics works. But at least I could admit to being wrong.
  - mr_toad 4y ago
    The US economy grew from $14T in 2009 to $21T up to 2019. Printing money during an economic boom is not like printing money in a static or shrinking economy.
- dragonwriter 4y ago
  > but you have a significant number of people who think that you can simply "QE" a lot money (40% of all existing etc) and not have significant inflation, You can, if the underlying conditions would, with a neutral policy, produce a significant-enough deflation. We’ve pretty much demonstrated that. OTOH, if you have something like the COVID emergency and associated controls, that results in a rapid snap-back of the underlying conditions rather than the more common gradual adjustment, when you are geared to offset massive deflation, you get inflation until you adjust the monetary policy dials again.

sofixa 4y ago

> It's not us doing money printing.. it's uh.. COVID, uh.. the war, uh.. Climate change, uh.. corporate greed If you think a pandemic (and policies to combat its effects) and a war including some of the main exporters of foodstuffs and energy don't impact the world markets and increase prices worldwide (inflation), it's just willful ignorance pursuing a (stupid) agenda at this point.

jbay808 4y ago
A loss of production will of course result in lost wealth, but that can manifest as any combination of an increase in prices (account balances constant) or a decrease in account balances (prices constant). For example if the government taxed enough money out of the system, prices would not increase (but stuff would be less affordable because you have less money to buy it with). There's no getting around the increased scarcity, but the increased prices are in some sense a choice.
- sofixa 4y ago
  I'm sorry, but that's not how things work in the real global world. Say Canada does what you say will fix everything, and adds extra taxes so that there's less money to spend, so in theory demand will go lower because there would be less money, and in theory supply will increase, and thus suppliers would have to lower prices to meet consumers. Econ 101, right? Wrong, you should have continued past that chapter. First, we're talking about inelastic goods. Food, energy. There's very limited elasticity there - you can choose to conserve energy and eat cheaper food, but in the end, you need electricity, warmth and food or you'll die, so there's only so much you can be elastic in your demand. Less money to spend due to higher taxes means choosing between eating rice for a week or uncomfortable cold going to freezing depending on place and season. (Until magically the market fixes itself, right? Wrong.) Second, we're talking about global markets. If Canadians have less money to spend on wheat and corn and substitutes, or vegetable oils, or oil and gas, well, someone else will buy them on the global market. Even the local producers, unless they're forced to otherwise, or they're feeling really nice. There is more demand than there is supply for those specific, rather inelastic, items that the whole world needs and consumes, and which are heavily impacted by the Russian invasion of Ukraine. Which has also had ramifications such as Indonesia, one of the biggest exporters of palm oil, stopping exports due to rising vegetable oil prices globally (due to the war), to protect the local market by having locals buy local palm oil as a replacement for the expensive imported other oils.

imtringued 4y ago

The problem is that there is no money printing beyond the physical printing of bank notes. Money in your bank account isn't created through printing. It is created through accounting and the entire point of this accounting is to make sure that every liability (deposit) in your bank account is backed by an asset (the debt contract). The entire point of this is to keep a mathematical identity. The net worth of the bank does not change when it issues deposits, deposits/savings and debt add up to zero. The only thing that changes is that the bank becomes more leveraged and less solvent which is why there are capital requirements which mandate a minimum quality of the assets that are being used to create deposits and there used to be a minimum reserve ratio to put an upper bound on the amount of leverage a bank can take on. If you want to complain about the money supply growing or deficit spending or debt growing out of control you are free to do that but if you talk about money printing you are basically ignoring all of that and just think that there is this obvious element that everyone is overlooking. If the government bans cash it stops printing money but does it get rid of debt? Does it get rid of inflation? Not really. When people save money, the currency goes up in value, to prevent deflation, the central bank loosens reserve requirements, lowers short term interest rates or if it can't do anymore it will do open market operations aka quantitative easing which is more or less just trying to replicate what a lower interest rate would have done. Since there is a net increase of savings in real terms, either the interest rate must go down, perhaps even go negative to discourage people from saving too much, or more debt must be created to soak up those savings. This means if the private sector keeps accumulating more and more savings, the public sector must go more and more in debt if it wants to maintain a positive interest rate. If you don't like that, then you must somehow stop people from accumulating too much money and get them to spend it. Saved money isn't being lent on, not even in the case of a certificate of deposit, where it would kind of make some sense, it is just sitting there and waiting to be spent. Any time the bank "lends your money" it actually doesn't and instead creates new money in proportion to the debt.

mr_toad 4y ago
“Increasing the money supply through open market operations” is a bit of a mouthful. I don’t think most people mean that that government is literally printing bills when they say “printing money”.