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>So there are two questions here. First, why are we doing this? Countries cant go bankrupt and the USA is effectively bankrupt. https://tradingeconomics.com/u

>So there are two questions here. First, why are we doing this? Countries cant go bankrupt and the USA is effectively bankrupt. https://tradingeconomics.com/united-states/central-bank-balance-sheet https://tradingeconomics.com/united-states/central-bank-bala... Set that graph to max. The "balance" aka it ought to be close to 0. In 2008, the financial crisis broke the USA. It has never recovered. >nd second, when will this become a problem for our country? Unfortunately, there’s a huge amount of uncertainty around both of those questions, but it’s not too hard to come up with some scary theories. It already is a problem, not when. The central bank is falsely labeling liabilities as assets and it's going to mean bad things. Lots of certainty here. This is why there's a rather unusual amount of 'government shut down, debt ceiling increases.' since they went bankrupt. https://www.cbo.gov/publication/58888 https://www.cbo.gov/publication/58888 Take a look at the budget breakdown on spending. The government must first look at discretionary spending and reduce it; or change policy and remove the mandatory. But there's no politician willing to change the mandatory. So defense is what must decrease. But consider they have also increased the number of fronts they are fighting on, space/cyber. This means the USA as world police has ended. you then consider... wait this seems to have been decided during Obama's administration, Trump extended, and then Biden doubled down. All going to plan.

JumpCrisscross 3y ago
> The "balance" aka it ought to be close to 0 What? No. There is debate around the optimal size of a central bank's balance sheet [1], with most of the reasons for reducing relating to the optics of a P&L loss. But nobody argues for zero assets. That would require, at the outset of any inflationary pressure, the central bank start engineering shorts. [1] https://eprints.lse.ac.uk/84205/1/Goodhart_Central%20banks%20balance_2017.pdf https://eprints.lse.ac.uk/84205/1/Goodhart_Central%20banks%2...
- incomingpain 3y ago
  >What? No. You'll notice from the first source that it was flat and low prior to 2009. I'm not asserting it should be 0, but comparatively speaking it ought to be a tiny number compared to operating money supply or debts of the government. If you consider perhaps middle eastern rich countries like UAE, Denmark, Finland, Germany. Who arent bankrupt, they havent done what the USA has done. >There is debate around the optimal size of a central bank's balance sheet [ There is not a debate. https://tradingeconomics.com/united-kingdom/central-bank-balance-sheet https://tradingeconomics.com/united-kingdom/central-bank-bal... you'll notice the UK is as bankrupt. Political influenced 'debate' doesn't count.
  - JumpCrisscross 3y ago
    > it ought to be a tiny number compared to operating money supply or debts of the government Money supply and central bank assets are causally related; it doesn't make sense to link them. (The central bank will increase its balance sheet to boost the money supply, presumably because it was too low, and vice versa.) Debts, yes, though the most common measure is GDP. Here, again, the number is high [1], but that has nothing to do with anyone being bankrupt. And there is vigorous debate around where the optimal level is. (When the CB's balance sheet is small, it loses monetary policy tools.) > consider perhaps middle eastern rich countries like UAE, Denmark, Finland, Germany You're mixing commodity exporters with Eurozone members. The latter's balance sheet is similar to the Fed's [2]. The former's currency is pegged to the U.S. dollar; they don't have an independent central bank, their job is to ensure sufficient reserves to maintain the peg. > there is not a debate Sorry, point me to the authoritative source on the optimal size of a central bank's balance sheet? [1] https://fred.stlouisfed.org/series/DDDI06USA156NWDB https://fred.stlouisfed.org/series/DDDI06USA156NWDB [2] https://fred.stlouisfed.org/series/ECBASSETSW https://fred.stlouisfed.org/series/ECBASSETSW
    - incomingpain 3y ago
      >Money supply and central bank assets are causally related; it doesn't make sense to link them. Literally causally linked unless the bank ratio goes to 0 for some reason OR they start mislabeling liabilities as assets. https://tradingeconomics.com/united-states/money-supply-m2 https://tradingeconomics.com/united-states/money-supply-m2 You'll notice a vertical line in M2 during covid; with complete corresponding increase in the balance sheet. These are completely linked and its bizarre to see someone saying it doesnt make sense to link them. The good news, in an attempt to clean up inflation, they have reversed course on their money/deficit printing. >Debts, yes, though the most common measure is GDP. Here, again, the number is high [1], but that has nothing to do with anyone being bankrupt. And there is vigorous debate around where the optimal level is. (When the CB's balance sheet is small, it loses monetary policy tools.) I highly recommend various open courseware classes on this. Perhaps your confusion is the word bankrupt? Which isn't applicable to countries as I said. >?Sorry, point me to the authoritative source on the optimal size of a central bank's balance sheet? I'll just use your first link. 1960 to 2007 is the optimal size; or at least in the right area. It's obviously not some PERFECTION or something. It's obvious to me and all other graph readers. It was just fine for 47 years or more. Then a financial system crisis broke them. If you dont wish to call this bankrupt, afterall that's a word for individuals. Thanks for providing a source to prove me right.

JumpCrisscross 3y ago

> The "balance" aka it ought to be close to 0 What? No. There is debate around the optimal size of a central bank's balance sheet [1], with most of the reasons for reducing relating to the optics of a P&L loss. But nobody argues for zero assets. That would require, at the outset of any inflationary pressure, the central bank start engineering shorts. [1] https://eprints.lse.ac.uk/84205/1/Goodhart_Central%20banks%20balance_2017.pdf https://eprints.lse.ac.uk/84205/1/Goodhart_Central%20banks%2...

incomingpain 3y ago
>What? No. You'll notice from the first source that it was flat and low prior to 2009. I'm not asserting it should be 0, but comparatively speaking it ought to be a tiny number compared to operating money supply or debts of the government. If you consider perhaps middle eastern rich countries like UAE, Denmark, Finland, Germany. Who arent bankrupt, they havent done what the USA has done. >There is debate around the optimal size of a central bank's balance sheet [ There is not a debate. https://tradingeconomics.com/united-kingdom/central-bank-balance-sheet https://tradingeconomics.com/united-kingdom/central-bank-bal... you'll notice the UK is as bankrupt. Political influenced 'debate' doesn't count.
- JumpCrisscross 3y ago
  > it ought to be a tiny number compared to operating money supply or debts of the government Money supply and central bank assets are causally related; it doesn't make sense to link them. (The central bank will increase its balance sheet to boost the money supply, presumably because it was too low, and vice versa.) Debts, yes, though the most common measure is GDP. Here, again, the number is high [1], but that has nothing to do with anyone being bankrupt. And there is vigorous debate around where the optimal level is. (When the CB's balance sheet is small, it loses monetary policy tools.) > consider perhaps middle eastern rich countries like UAE, Denmark, Finland, Germany You're mixing commodity exporters with Eurozone members. The latter's balance sheet is similar to the Fed's [2]. The former's currency is pegged to the U.S. dollar; they don't have an independent central bank, their job is to ensure sufficient reserves to maintain the peg. > there is not a debate Sorry, point me to the authoritative source on the optimal size of a central bank's balance sheet? [1] https://fred.stlouisfed.org/series/DDDI06USA156NWDB https://fred.stlouisfed.org/series/DDDI06USA156NWDB [2] https://fred.stlouisfed.org/series/ECBASSETSW https://fred.stlouisfed.org/series/ECBASSETSW
  - incomingpain 3y ago
    >Money supply and central bank assets are causally related; it doesn't make sense to link them. Literally causally linked unless the bank ratio goes to 0 for some reason OR they start mislabeling liabilities as assets. https://tradingeconomics.com/united-states/money-supply-m2 https://tradingeconomics.com/united-states/money-supply-m2 You'll notice a vertical line in M2 during covid; with complete corresponding increase in the balance sheet. These are completely linked and its bizarre to see someone saying it doesnt make sense to link them. The good news, in an attempt to clean up inflation, they have reversed course on their money/deficit printing. >Debts, yes, though the most common measure is GDP. Here, again, the number is high [1], but that has nothing to do with anyone being bankrupt. And there is vigorous debate around where the optimal level is. (When the CB's balance sheet is small, it loses monetary policy tools.) I highly recommend various open courseware classes on this. Perhaps your confusion is the word bankrupt? Which isn't applicable to countries as I said. >?Sorry, point me to the authoritative source on the optimal size of a central bank's balance sheet? I'll just use your first link. 1960 to 2007 is the optimal size; or at least in the right area. It's obviously not some PERFECTION or something. It's obvious to me and all other graph readers. It was just fine for 47 years or more. Then a financial system crisis broke them. If you dont wish to call this bankrupt, afterall that's a word for individuals. Thanks for providing a source to prove me right.