5 ms·

It's a bit weird that you seem so focused on a hypothetical future that isn't going to happen (balance sheet rolls off) but don't care about the perpetually ris

It's a bit weird that you seem so focused on a hypothetical future that isn't going to happen (balance sheet rolls off) but don't care about the perpetually rising balance sheet that is actually happening and will almost certainly continue to happen. Why is your hypothetical parallel universe more interesting than this universe? We've set up a system to pump trillions into rich peoples' pockets every time they pull the lever and they are going to keep pulling that lever.

arcticbull 3y ago
Whose pockets does new money go into and by what mechanism?
- jjoonathan 3y ago
  Asset owners, in proportion to how many assets they own, because the fed buys the assets.
  - deleted 3y ago
    [deleted]
  - arcticbull 3y ago
    They're not exactly out there buying the S&P 500. They overwhelmingly own treasuries and mortgage-backed securities. They basically buy bonds (which are future money) and replace them with cash (present money). They're basically just transforming duration. Those debt obligations however remain. That future money still has to be paid in to cancel out the debt, whether that comes from home borrowers or from the Treasury. This allows the institutions who held them to then make loans to individuals.
    - jjoonathan 3y ago
      You know that rich people don't just own stocks, right? While the talking heads were clutching their pearls, wringing their wrists, and wagging their fingers over $400B in stimulus checks, ten times that amount was being printed into the real estate market, distributed in rough proportion to real estate holdings. Rich people paying themselves for being rich. "Just" isn't how I'd describe it. Not in magnitude, not in morals. > Those debt obligations however remain. That future money still has to be paid in to cancel out the debt, whether that comes from home borrowers or from the Treasury Why? Why do you keep engaging with the hypothetical universe that we do not inhabit where they don't pull the lever again, even though they got away with printing trillions into their pockets the last two times? Those debt obligations are getting paid back like the father of a deadbeat son is getting paid back: he'll roll the loans so that he can tell his golf buddies that he has been paid back, sure, but he isn't going to be paid back and he doesn't really expect to be paid back.
      - arcticbull 3y ago
        My point is duration transformation doesn't create new money, it moves future money into the present. This may increase the money supply immediately, but it drops over time back to where it would have been. Money isn't "printed" in the real estate market, valuations are notional. > Those debt obligations are getting paid back like the father of a deadbeat son is getting paid back: he'll roll the loans so that he can tell his golf buddies that he has been paid back, sure, but he isn't going to be paid back and he doesn't really expect to be paid back. So what?
        jjoonathan 3y ago
        It sure as shit creates money if the hypothetical future where you pay it back never actually arrives.
        arcticbull 3y ago
        But you do always pay it back lol. The US has only very occasionally defaulted. And MBS' get repaid through liquidation if needed.
        jjoonathan 3y ago
        Why don't you put some money where your mouth is and take my bet, then?
        arcticbull 3y ago
        I have no idea which bet, and no, I won't be. Thanks.
        jjoonathan 3y ago
        > How much do you want to bet that [Federal Reserve Total Assets] goes under, say, $1T by 2030? In your universe, the aggregate debt comes due, markets tank, and rich people take the L like grown ups. In my universe, the aggregate debt comes due, markets tank, rich people persuade politicians to pull the lever again, they do, the fed goes and buys their assets, markets go back up, and the fed balance sheet increases. The fed's long-term increasing balance sheet represents a long-term net cash flow right into rich peoples' pockets. Again, if you are confident in your view of the universe, I'm asking you to put your money where your mouth is.

arcticbull 3y ago

Whose pockets does new money go into and by what mechanism?

jjoonathan 3y ago
Asset owners, in proportion to how many assets they own, because the fed buys the assets.
- deleted 3y ago
  [deleted]
- arcticbull 3y ago
  They're not exactly out there buying the S&P 500. They overwhelmingly own treasuries and mortgage-backed securities. They basically buy bonds (which are future money) and replace them with cash (present money). They're basically just transforming duration. Those debt obligations however remain. That future money still has to be paid in to cancel out the debt, whether that comes from home borrowers or from the Treasury. This allows the institutions who held them to then make loans to individuals.
  - jjoonathan 3y ago
    You know that rich people don't just own stocks, right? While the talking heads were clutching their pearls, wringing their wrists, and wagging their fingers over $400B in stimulus checks, ten times that amount was being printed into the real estate market, distributed in rough proportion to real estate holdings. Rich people paying themselves for being rich. "Just" isn't how I'd describe it. Not in magnitude, not in morals. > Those debt obligations however remain. That future money still has to be paid in to cancel out the debt, whether that comes from home borrowers or from the Treasury Why? Why do you keep engaging with the hypothetical universe that we do not inhabit where they don't pull the lever again, even though they got away with printing trillions into their pockets the last two times? Those debt obligations are getting paid back like the father of a deadbeat son is getting paid back: he'll roll the loans so that he can tell his golf buddies that he has been paid back, sure, but he isn't going to be paid back and he doesn't really expect to be paid back.
    - arcticbull 3y ago
      My point is duration transformation doesn't create new money, it moves future money into the present. This may increase the money supply immediately, but it drops over time back to where it would have been. Money isn't "printed" in the real estate market, valuations are notional. > Those debt obligations are getting paid back like the father of a deadbeat son is getting paid back: he'll roll the loans so that he can tell his golf buddies that he has been paid back, sure, but he isn't going to be paid back and he doesn't really expect to be paid back. So what?
      - jjoonathan 3y ago
        It sure as shit creates money if the hypothetical future where you pay it back never actually arrives.
        arcticbull 3y ago
        But you do always pay it back lol. The US has only very occasionally defaulted. And MBS' get repaid through liquidation if needed.
        jjoonathan 3y ago
        Why don't you put some money where your mouth is and take my bet, then?
        arcticbull 3y ago
        I have no idea which bet, and no, I won't be. Thanks.
        jjoonathan 3y ago
        > How much do you want to bet that [Federal Reserve Total Assets] goes under, say, $1T by 2030? In your universe, the aggregate debt comes due, markets tank, and rich people take the L like grown ups. In my universe, the aggregate debt comes due, markets tank, rich people persuade politicians to pull the lever again, they do, the fed goes and buys their assets, markets go back up, and the fed balance sheet increases. The fed's long-term increasing balance sheet represents a long-term net cash flow right into rich peoples' pockets. Again, if you are confident in your view of the universe, I'm asking you to put your money where your mouth is.