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The only thing we learnt from history was that *we learn nothing from the history*. For the past decades, what were the central banks all over the world doing?
by mrjin 4y ago
The only thing we learnt from history was that *we learn nothing from the history*.
For the past decades, what were the central banks all over the world doing? Nothing but printing money. Whenever there was a (economical) crisis, the only measure was printing money, *nothing but printing money*. Were the problems resolved ever? Never!!. They event pretended to be innocent by asking "why there were no inflation". Of course, there was no inflation as the design of CPI, the indicator of indicator, was flawed. CPI does not consider price of assets, otherwise sky would be the limit. There were crisis simply because the money went to the people who didn't it that much. Printing much made things worse as most of the printed money went to those didn't need it much, but nonetheless had postponed them a lot.
Such pretending to be dumb game could have being played a lot longer if not the pandemic which made them had no choice but printing money and sending them to those in need. And all of a sudden, those who needed the money most had so much cash they had never imaged before? What were they going to do? For sure spending them all.
Now here is the long *expected* inflation, what are central banks planning to deal with it? Increasing interest rate to where it should be? Seems too hard, let's print more money!
- gitfan86 4y agoAt this point the fed seems to be saying that those days are over, they will continue to increase rates until inflation hits 2%. Obviously this cannot go on forever because it becomes impossible to service the debt and you have to print money to pay it off. But it gives you more time and prevents hyper-inflation and we can hope that by then AI and other technological advances have made what we consider "economics" mostly irrelevant.
- diordiderot 4y ago> because it becomes impossible to service the debt Those companies should have made more responsible financial decisions.
- weberer 4y ago*governments
- watersb 4y agoWhen the money was free (near zero interest rates), borrowing money to invest in capital was imminently responsible.
- deleted 4y ago[deleted]
- grecy 4y ago>borrowing money to invest in capital was imminently responsible It's funny how that is the view if a company does it, but not when an individual does it.
- llampx 4y agoA company borrowing money to buy back stock sounds like me borrowing money to go on vacation. Rates are cheap, its a no-brainer right? Government will anyway bail me out as soon as a crisis hits, right?
- weberer 4y agoIts still responsible when an individual does it. Do note the difference between assets and liabilities. And near 0% interest vs 25% credit card debt.
- andrekandre 4y ago> borrowing money to invest in capital is it possible to explain what this referring to? stock buybacks or (productive) capital investments?
- suoduandao2 4y ago>we can hope that by then AI and other technological advances have made what we consider "economics" mostly irrelevant. Is there a serious hope that AGI will invent a replicator soon after coming online? It seems likeliest to me that if a greater-than-human intelligence comes online it won't have a circumvention for the laws of thermodynamics and there still won't be such a thing as a free lunch.
- chasd00 4y agoIf AGI came online it would probably look at the current conditions of its existence and segfault itself.
- more_corn 4y agoOr determine that there’s a common factor in all humanity’s mistakes and solve all our problems at the source.
- gitfan86 4y agoNo replicator, just extremely cheap labor and energy. Imagine if someone from 1000 years ago could have access to an American garbage dump. Things that in our current economy have zero or negative value would be extremely valuable to those people (Plastics, Metals, Electronics, Machined Clothes, Plant Seeds) That same thing will happen again once we have another huge advancement in technology. What we consider to be expensive and valuable today will be of zero or negative value to someone 100 years from now.
- deleted 4y ago[deleted]
- m0llusk 4y agoThis is clearly an oversimplification because the crisis of 2008 was met with extreme money printing which did not cause a burst of inflation and was reeled in with relative ease as the economy restored itself. If money printing were the variable then it should cause inflation every time but it does not.
- suoduandao2 4y agoI think the GP is saying, 2008's money printing did cause a burst of inflation in stocks, which would have otherwise fallen even further. Measuring CPI by excluding assets like growth stocks hides the true effect of this money printing by glossing over what most already wealthy spend money on.
- pjmorris 4y agoThe extreme money printing (look at the Fed's balance sheet before and after 2008 [0]) showed up as inflation in house prices, which have ballooned in relation to wage income. This was done for the explicit purpose of keeping the biggest lenders flush (see Timothy Geithner's comments about 'deeply unfair', e.g. [1]) and is exactly what the GP is describing. [0] https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... [1] https://www.pbs.org/newshour/show/geithner https://www.pbs.org/newshour/show/geithner
- chasd00 4y agoThe money printing in 2008/9 was in response to a deflationary spiral. It didn’t cause inflation because it was mopped up by the deflationary conditions.
- randomdata 4y ago> because the crisis of 2008 was met with extreme money printing which did not cause a burst of inflation The inflation was very much visible in the places where the people who received the money spend their money (i.e. Wall Street). The money never made its way to Main Street, so naturally there would be no price pressure found there. This time around the money was distributed to Main Street.
- pas 4y agoCPI has asset components, like housing. Central banks have one universal lever, and they use it. (This is by design, so it can be mostly independent.) The responsibility is on the fiscal side to spend it on shit that actually matters. Sending people money without means testing is dumb, but politics in this age is dumb. Unfortunately harping half-truths about central banking won't help with the situation :/ Your comment completely ignores the supply side of inflation, ie. food & energy prices. Ie. there's a war between the food and fossil faucets of Europe. See also the whole baby formula debacle (sustained government intervention reduced the market to a very fragile one, and lobbying and protectionism prevents imports to the US), see the perverse incentives in low-paying logistics sectors (the big ports are all owned by local governments, and they are shit at responding to supply-and-demand, and trucking is of course completely fucked because the liability is shifted to the drivers while the profit is nicely shifted off of their hands, due to a relative large pool of potential new drivers to fleece).
- simonebrunozzi 4y agoMost of the spike in energy costs for the consumers is caused primarily by how energy markets are designed, not by hikes in gas prices (which could only justify a small part of the price hike). See this long, but well explained, video on the topic [0]. [0]: https://www.youtube.com/watch?v=NicE0-N9ux0 https://www.youtube.com/watch?v=NicE0-N9ux0
- lumb63 4y agoNeglecting issues due to the war in Ukraine, a lot of the “supply side issues” are not totally isolated from central bank policy, QE, and stimulus. The use of QE and stimulus increased demand, while simultaneously, government policy decreased supply. Now, supply is (mostly) recovered, but demand still remains elevated. Supply can’t keep up, because its target is too high. This is why we see talk from the Federal Reserve about how consumers will “feel pain” - the only way to reduce demand is to reduce employment or wages, to a level that the supply chain is capable of keeping up with. The Fed press conferences are really interesting to watch as they make this very clear - we are really looking at an “imbalance between supply and demand” due in part to all of economic, social, and political factors. Also, regarding the CPI not reflecting asset prices: the CPI does not include any measure of equity prices, for instance. Since so many rely on equities to fund their retirement, an increase in equity prices is a meaningful inflation. If the price of the S&P 500 for instance is higher due to an asset bubble, it decreases my ability to purchase shares of it. The increase in equity prices we see is really inflation of equities, but never branded as such. We call it “return on investment”, because the people talking about it are mostly those who already own equities, not those looking to buy them. It’s the same reason as why homeowners dislike seeing home prices increase, while homebuyers enjoy it. I’ll also mention that the CPI has a lot of other bunk practices in it. For instance, “hedonistic adjustment”. A (slightly conspiratorial) site called ShadowStats computes a modified CPI that uses older CPI methodology (before the meaning of inflation was redefined to show lower inflation) that currently sits at 17 or so percent.