4 ms·

When fed started raising interest rates to curb inflation, the prevalent wisdom was that the average consumer has too much money because of low rates and is spe

When fed started raising interest rates to curb inflation, the prevalent wisdom was that the average consumer has too much money because of low rates and is spending way too much. The thought was raising rates would curb their spending and bring prices down slowly. However, it turns out the average consumer is very principled with money and is handling it very well. The rich/corporations like banks, VCs, companies felt super rich with the raising stock and began taking on abnormal risk. This was not expected by many. It may eventually lead to the average consumer getting hurt as a repercussion of the failure at the top though. Of course even the crisis of 2008 was caused by exuberant bankers. You need to have access to lots of money to cause lots of damage.

mhh__ 4y ago
It requires great political training to believe the best person to spend your money isn't you — e.g. some people believe the poor can't be trusted with money, and so on (socialism etc)
- gongle 4y ago
  corporations cant be trusted to spend the peoples money.
endtime 4y ago
> the prevalent wisdom was that the average consumer has too much money because of low rates I'm sure it was all the low rates, and not at all due to printing 40% of the money supply in two years and mailing people checks.
- sethd 4y ago
  FYI, this part didn't happen: > printing 40% of the money supply in two years
  - mech987 4y ago
    Here's the data on M2 money supply in billions of dollars, for those curious, in billions of dollars: Feb 2020: 15,457.9 Feb 2022: 21,699.2 This is a 40.3% increase. To be charitable, this money isn't all on printed physical cash dollar bills, but nowadays there is no need for it to be. (I'm tempted not to be charitable though.) https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL
    - deleted 4y ago
      [deleted]
    - wwalexander 4y ago
      A 40.3% increase is different than the percentage of the total money supply that was printed in the last two years, which for your numbers works out to about 29%. I would argue that most people would interpret “we created X% of the Y supply” in this way and not as a percentage increase.
      - mech987 4y ago
        That is a fair point- although when the increases are large enough in such a small time that the prior/posterior calculations are that different, I don't feel like it inspires confidence.
      - sidewndr46 4y ago
        the point your making is completely useless. If someone has billions of dollars in storage somewhere (like Iran literally does) it doesn't affect the supply of money until they start moving it or using it in some way. Like if someone found a trillion long tons of pure gold somewhere, but decided not to sell it or even use it. The price of gold isn't just going to collapse overnight. Sure the markets will panic sell for a few days, but it's still a real commodity with real uses & demands. Putting a ton more _active_ money in the system does change the value of money.
        wwalexander 4y ago

mhh__ 4y ago

It requires great political training to believe the best person to spend your money isn't you — e.g. some people believe the poor can't be trusted with money, and so on (socialism etc)

gongle 4y ago
corporations cant be trusted to spend the peoples money.

endtime 4y ago

> the prevalent wisdom was that the average consumer has too much money because of low rates I'm sure it was all the low rates, and not at all due to printing 40% of the money supply in two years and mailing people checks.

sethd 4y ago
FYI, this part didn't happen: > printing 40% of the money supply in two years
- mech987 4y ago
  Here's the data on M2 money supply in billions of dollars, for those curious, in billions of dollars: Feb 2020: 15,457.9 Feb 2022: 21,699.2 This is a 40.3% increase. To be charitable, this money isn't all on printed physical cash dollar bills, but nowadays there is no need for it to be. (I'm tempted not to be charitable though.) https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL
  - deleted 4y ago
    [deleted]
  - wwalexander 4y ago
    A 40.3% increase is different than the percentage of the total money supply that was printed in the last two years, which for your numbers works out to about 29%. I would argue that most people would interpret “we created X% of the Y supply” in this way and not as a percentage increase.
    - mech987 4y ago
      That is a fair point- although when the increases are large enough in such a small time that the prior/posterior calculations are that different, I don't feel like it inspires confidence.
    - sidewndr46 4y ago
      the point your making is completely useless. If someone has billions of dollars in storage somewhere (like Iran literally does) it doesn't affect the supply of money until they start moving it or using it in some way. Like if someone found a trillion long tons of pure gold somewhere, but decided not to sell it or even use it. The price of gold isn't just going to collapse overnight. Sure the markets will panic sell for a few days, but it's still a real commodity with real uses & demands. Putting a ton more _active_ money in the system does change the value of money.
      - wwalexander 4y ago