5 ms·

More centralization. This just balloons up giants which are too big to fail. The end result as always: More money printing. The genie was let out of the bott

by TekMol 3y ago

More centralization. This just balloons up giants which are too big to fail. The end result as always: More money printing. The genie was let out of the bottle in 2008 and will not be put back: https://fred.stlouisfed.org/series/BOGMBASE https://fred.stlouisfed.org/series/BOGMBASE

JumpCrisscross 3y ago
> end result as always: More money printing You linked to a chart showing a 10% decrease in the monetary base from peak, even including the run-up since February.
- TekMol 3y ago
  https://xkcd.com/1321/ https://xkcd.com/1321/
  - JumpCrisscross 3y ago
    Comparing the monetary base to average temperatures makes no sense. We expect the latter to be stable long term (human-wise). We want the former to track GDP, more or less [1]. In that metric, too, the anomalous period was 2008 - 2020, with a phase change towards less money per unit of GDP since. There are many reasonable issues with this purchase and sale. But “money printer go brr” isn’t a particularly insightful nor relevant one. [1] https://fred.stlouisfed.org/graph/?g=lJS https://fred.stlouisfed.org/graph/?g=lJS
    - TekMol 3y ago
      "We want" ... not sure if a vote would really turn out that way. I think for most people having something like the gold standard seems much more plausible. Having a flexible supply of the settlement currency is a pretty new experiment. Not even 100 years old. And it has ended in desasters around the world multiple times already.
      - JumpCrisscross 3y ago
        > not sure if a vote would really turn out that way We don’t vote on individual drug approvals, either. Some people have a broad vendetta against the Fed and fiat currency. That is fine. But shoehorning it into every discussion, even when it isn’t relevant, doesn’t advance anything. This is a bank failure being resolved with public-private participation within the FDIC’s framework with support from the OCC. There are smart things one can say about the FHLBs, TBTF and liquidity ratios. (You pointed out centralisation. That’s a smart thing to discuss!) There isn’t much relevance to the monetary base, however, unless we’re speculating on the next rate rise.
      - pjc50 3y ago
        The man in the street might find it plausible that asbestos and cigarettes are safe and that global warming isn't real. "Plausible" is not the same as "true", a problem which the AI people are grappling with. Not having a flexible currency supply causes separate problems as people run out of specie. Furthermore the counterfactuals for 2008 and 2020 look .. bad.
      - qwytw 3y ago
        > And it has ended in desasters around the world multiple times already. Well the global economy and most national ones were in a permanent boom and bust cycle between at least the mid to late 18th century and the Great Depression. The gold standard was never stable, just look at: https://www.officialdata.org/us/inflation/1800?amount=1#:~:text=Value%20of%20%241%20from%201800,cumulative%20price%20increase%20of%202%2C295.52%25 https://www.officialdata.org/us/inflation/1800?amount=1#:~:t.... Just instead of steadily (well prior to 2020 anyway) going up all the time like now the worth of currencies was swinging up and down in a wildly volatile and unpredictable manner every few years..
- hospitalhusband 3y ago
  Climate, meet weather.
- throw_m239339 3y ago
  > You linked to a chart showing a 10% decrease in the monetary base from peak, even including the run-up since February. You should compare today's figures with 2010 figures, not the ones from a year ago.
  - JumpCrisscross 3y ago
    > should compare today's figures with 2010 figures, not the ones from a year ago Nobody will argue we didn’t print money in the last decade. Per unit of GDP, we have 22% more money than we had ten years ago [1]. Implying recent bank failures are causing that to increase is false, and in some ways backwards. [1] https://fred.stlouisfed.org/graph/?g=lJS https://fred.stlouisfed.org/graph/?g=lJS
    - jarym 3y ago
      The amount of $ measured in terms of US GDP (also in $). That way of comparing things is fraught with issues
      - JumpCrisscross 3y ago
        > amount of $ measured in terms of US GDP (also in $) It’s convention because it cancels out a lot of noise. (Both nominal.) And there are practical reasons for a larger economy needing more money to work than a smaller one. But if you prefer, it can be calculated in various ways, all of which tell a similar story: we’ve been in a different regime for the last 1 to 3 years in which there is less money, and a regime before that since 2008 when there was a lot more money.
mise_en_place 3y ago
In this case it's due to a combination of owning long term debt locked into 10-30 years and depositors fleeing the bank. It's precisely the opposite, because the money printer is now a money vacuum, a lot of banks have solvency issues. Money printing would have saved FNB.
- TekMol 3y ago
  because the money printer is now a money vacuum Depends on your definition of "now". (Related: "How Long Is the Coast of Britain?") The printing of unprecedented amounts of money from 2008 to now created those low yields the banks are seeing. And now there was a tiny increase in yields the banks go under. This would not have happened with a stable supply of the base currency.
  - JumpCrisscross 3y ago
    > would not have happened with a stable supply of the base currency We spent millennia with examples of stable, metal currencies and bank failures. Then, like now, bankers chased risks. First Republic financed long-term Treasuries. Romans financed eastern fineries [1]. Many others blew capital on kings’ failed wars. Booms and busts are inherent to money and credit, this is a foundational learning every industrialised non-Malthusian society learned fast and, in many cases, including our own, the hard way. [1] https://epicenter.wcfia.harvard.edu/blog/financial-crisis-then-and-now https://epicenter.wcfia.harvard.edu/blog/financial-crisis-th...
    - qwytw 3y ago
      They weren't even exactly stable if you look at data between 1800 and the 1930s , though: https://www.officialdata.org/us/inflation/1800?amount=1#:~:text=Value%20of%20%241%20from%201800,cumulative%20price%20increase%20of%202%2C295.52%25 https://www.officialdata.org/us/inflation/1800?amount=1#:~:t.... or even in the 18th century: https://www.in2013dollars.com/UK-inflation https://www.in2013dollars.com/UK-inflation The counter-swings just created an illusion of longterm stability. But it definitely didn't feel that way for people living on the ground (of course a lot of that is down to unstable food supply and not just the monetary system. Not that it was avoidable, you can't really have a fiat currency without a stable and somewhat reliable government anyway).
emn13 3y ago
There are all kinds of differences between 2008 and now, but setting those aside - I think the genie was out of the bottle well before 2008 - it's just in 2008 everyone noticed. After all, it doesn't sound like many experts find it plausible that non intervention in 2008 was a realistic option assuming you want to avoid much worse consequences. At best, earlier intervention might have reduced the visibility and impact of symptoms. The underlying issue is that even uninsured risks in banks must de-facto be largely covered by some central authority (whether FDIC or otherwise) otherwise the whole system is at serious risk of pretty catastrophic failure. The interaction of the lack of (formal) insurance for large deposits and the fluidity of those deposits make bank runs at the first sign of serious risk inevitable. How important that problem is - I'm not informed enough to have an opinion on. But that problem didn't start in 2008, that's for sure. I am curious as to what actual subject matter experts think ideal solutions would be, and what haphazard lobbyist inspired patch-job we'll actually get.
- JumpCrisscross 3y ago
  > are all kinds of differences between 2008 and now One huge, positive difference between 2008 and now: owners aren’t being bailed out. Stock and bondholders in 2008 got rescued. Not this time. In February, First Republic had a $40bn enterprise value [1]. That is largely, if not entirely, gone. (JPMorgan acquired “substantially all of the assets of First Republic Bank,” so there will still be scraps to fight over.) [1] https://ycharts.com/companies/FRC/enterprise_value https://ycharts.com/companies/FRC/enterprise_value
  - AnimalMuppet 3y ago
    IIRC, in 2008 shareholders got wiped out at least at some institutions. It's 15 years later, and I don't recall the details, but I'm pretty sure that at least one of the big players went down in a way that the stockholders got zero.
    - JumpCrisscross 3y ago
      > IIRC, in 2008 shareholders got wiped out at least at some institutions Yes, the banks that outright failed. But e.g. Bear Stearns got a bit of a sweetheart deal.
eru 3y ago
The chart you linked to has downward movement as well. So it's not all 'more money printing'. Btw, the expansion of the monetary base has a lot more to do with the Fed paying interest on excess reserves than on rescuing a few banks here and there. See https://www.cato.org/working-paper/floored https://www.cato.org/working-paper/floored or https://www.mercatus.org/macro-musings/floors-and-corridors https://www.mercatus.org/macro-musings/floors-and-corridors
tzs 3y ago
> This just balloons up giants which are too big to fail This is good. We need to get everything down to a sufficiently small number of big banks so that "too big to fail" also means "so big that even the most ardent small-government anti-regulation leave everything up to the market people in Congress are afraid to deregulate them".

by TekMol 3y ago

JumpCrisscross 3y ago

> end result as always: More money printing You linked to a chart showing a 10% decrease in the monetary base from peak, even including the run-up since February.

TekMol 3y ago
https://xkcd.com/1321/ https://xkcd.com/1321/
- JumpCrisscross 3y ago
  Comparing the monetary base to average temperatures makes no sense. We expect the latter to be stable long term (human-wise). We want the former to track GDP, more or less [1]. In that metric, too, the anomalous period was 2008 - 2020, with a phase change towards less money per unit of GDP since. There are many reasonable issues with this purchase and sale. But “money printer go brr” isn’t a particularly insightful nor relevant one. [1] https://fred.stlouisfed.org/graph/?g=lJS https://fred.stlouisfed.org/graph/?g=lJS
  - TekMol 3y ago
    "We want" ... not sure if a vote would really turn out that way. I think for most people having something like the gold standard seems much more plausible. Having a flexible supply of the settlement currency is a pretty new experiment. Not even 100 years old. And it has ended in desasters around the world multiple times already.
    - JumpCrisscross 3y ago
      > not sure if a vote would really turn out that way We don’t vote on individual drug approvals, either. Some people have a broad vendetta against the Fed and fiat currency. That is fine. But shoehorning it into every discussion, even when it isn’t relevant, doesn’t advance anything. This is a bank failure being resolved with public-private participation within the FDIC’s framework with support from the OCC. There are smart things one can say about the FHLBs, TBTF and liquidity ratios. (You pointed out centralisation. That’s a smart thing to discuss!) There isn’t much relevance to the monetary base, however, unless we’re speculating on the next rate rise.
    - pjc50 3y ago
      The man in the street might find it plausible that asbestos and cigarettes are safe and that global warming isn't real. "Plausible" is not the same as "true", a problem which the AI people are grappling with. Not having a flexible currency supply causes separate problems as people run out of specie. Furthermore the counterfactuals for 2008 and 2020 look .. bad.
    - qwytw 3y ago
      > And it has ended in desasters around the world multiple times already. Well the global economy and most national ones were in a permanent boom and bust cycle between at least the mid to late 18th century and the Great Depression. The gold standard was never stable, just look at: https://www.officialdata.org/us/inflation/1800?amount=1#:~:text=Value%20of%20%241%20from%201800,cumulative%20price%20increase%20of%202%2C295.52%25 https://www.officialdata.org/us/inflation/1800?amount=1#:~:t.... Just instead of steadily (well prior to 2020 anyway) going up all the time like now the worth of currencies was swinging up and down in a wildly volatile and unpredictable manner every few years..
hospitalhusband 3y ago
Climate, meet weather.
throw_m239339 3y ago
> You linked to a chart showing a 10% decrease in the monetary base from peak, even including the run-up since February. You should compare today's figures with 2010 figures, not the ones from a year ago.
- JumpCrisscross 3y ago
  > should compare today's figures with 2010 figures, not the ones from a year ago Nobody will argue we didn’t print money in the last decade. Per unit of GDP, we have 22% more money than we had ten years ago [1]. Implying recent bank failures are causing that to increase is false, and in some ways backwards. [1] https://fred.stlouisfed.org/graph/?g=lJS https://fred.stlouisfed.org/graph/?g=lJS
  - jarym 3y ago
    The amount of $ measured in terms of US GDP (also in $). That way of comparing things is fraught with issues
    - JumpCrisscross 3y ago
      > amount of $ measured in terms of US GDP (also in $) It’s convention because it cancels out a lot of noise. (Both nominal.) And there are practical reasons for a larger economy needing more money to work than a smaller one. But if you prefer, it can be calculated in various ways, all of which tell a similar story: we’ve been in a different regime for the last 1 to 3 years in which there is less money, and a regime before that since 2008 when there was a lot more money.

mise_en_place 3y ago

In this case it's due to a combination of owning long term debt locked into 10-30 years and depositors fleeing the bank. It's precisely the opposite, because the money printer is now a money vacuum, a lot of banks have solvency issues. Money printing would have saved FNB.

TekMol 3y ago
because the money printer is now a money vacuum Depends on your definition of "now". (Related: "How Long Is the Coast of Britain?") The printing of unprecedented amounts of money from 2008 to now created those low yields the banks are seeing. And now there was a tiny increase in yields the banks go under. This would not have happened with a stable supply of the base currency.
- JumpCrisscross 3y ago
  > would not have happened with a stable supply of the base currency We spent millennia with examples of stable, metal currencies and bank failures. Then, like now, bankers chased risks. First Republic financed long-term Treasuries. Romans financed eastern fineries [1]. Many others blew capital on kings’ failed wars. Booms and busts are inherent to money and credit, this is a foundational learning every industrialised non-Malthusian society learned fast and, in many cases, including our own, the hard way. [1] https://epicenter.wcfia.harvard.edu/blog/financial-crisis-then-and-now https://epicenter.wcfia.harvard.edu/blog/financial-crisis-th...
  - qwytw 3y ago
    They weren't even exactly stable if you look at data between 1800 and the 1930s , though: https://www.officialdata.org/us/inflation/1800?amount=1#:~:text=Value%20of%20%241%20from%201800,cumulative%20price%20increase%20of%202%2C295.52%25 https://www.officialdata.org/us/inflation/1800?amount=1#:~:t.... or even in the 18th century: https://www.in2013dollars.com/UK-inflation https://www.in2013dollars.com/UK-inflation The counter-swings just created an illusion of longterm stability. But it definitely didn't feel that way for people living on the ground (of course a lot of that is down to unstable food supply and not just the monetary system. Not that it was avoidable, you can't really have a fiat currency without a stable and somewhat reliable government anyway).

emn13 3y ago

There are all kinds of differences between 2008 and now, but setting those aside - I think the genie was out of the bottle well before 2008 - it's just in 2008 everyone noticed. After all, it doesn't sound like many experts find it plausible that non intervention in 2008 was a realistic option assuming you want to avoid much worse consequences. At best, earlier intervention might have reduced the visibility and impact of symptoms. The underlying issue is that even uninsured risks in banks must de-facto be largely covered by some central authority (whether FDIC or otherwise) otherwise the whole system is at serious risk of pretty catastrophic failure. The interaction of the lack of (formal) insurance for large deposits and the fluidity of those deposits make bank runs at the first sign of serious risk inevitable. How important that problem is - I'm not informed enough to have an opinion on. But that problem didn't start in 2008, that's for sure. I am curious as to what actual subject matter experts think ideal solutions would be, and what haphazard lobbyist inspired patch-job we'll actually get.

JumpCrisscross 3y ago
> are all kinds of differences between 2008 and now One huge, positive difference between 2008 and now: owners aren’t being bailed out. Stock and bondholders in 2008 got rescued. Not this time. In February, First Republic had a $40bn enterprise value [1]. That is largely, if not entirely, gone. (JPMorgan acquired “substantially all of the assets of First Republic Bank,” so there will still be scraps to fight over.) [1] https://ycharts.com/companies/FRC/enterprise_value https://ycharts.com/companies/FRC/enterprise_value
- AnimalMuppet 3y ago
  IIRC, in 2008 shareholders got wiped out at least at some institutions. It's 15 years later, and I don't recall the details, but I'm pretty sure that at least one of the big players went down in a way that the stockholders got zero.
  - JumpCrisscross 3y ago
    > IIRC, in 2008 shareholders got wiped out at least at some institutions Yes, the banks that outright failed. But e.g. Bear Stearns got a bit of a sweetheart deal.

eru 3y ago

The chart you linked to has downward movement as well. So it's not all 'more money printing'. Btw, the expansion of the monetary base has a lot more to do with the Fed paying interest on excess reserves than on rescuing a few banks here and there. See https://www.cato.org/working-paper/floored https://www.cato.org/working-paper/floored or https://www.mercatus.org/macro-musings/floors-and-corridors https://www.mercatus.org/macro-musings/floors-and-corridors

tzs 3y ago

> This just balloons up giants which are too big to fail This is good. We need to get everything down to a sufficiently small number of big banks so that "too big to fail" also means "so big that even the most ardent small-government anti-regulation leave everything up to the market people in Congress are afraid to deregulate them".