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So your position is, if Bernanke made it rain 100 trillion dollars and 250 million people charged each other $(100 trillion/250 million) for the massage, then m

So your position is, if Bernanke made it rain 100 trillion dollars and 250 million people charged each other $(100 trillion/250 million) for the massage, then money is not devalued? Yes the example is contrived but it illustrates you are wrong.

kaonashi 13y ago
The Fed cannot introduce 100 trillion into the economy without taking 100 trillion in assets out; if congress were to introduce 100 trillion into the economy, of course there would be inflation. Also, people aren't going to buy 100 trillion in massages, that is fucking ridiculous, if you start from a ridiculous set of circumstances, you're going to arrive at a ridiculous ending point -- it's not instructive of anything.
- wintersFright 13y ago
  Congress doesn't print money. The Fed does. Congress can spend money that it doesn't have by getting the treasury to sell bonds. Foreign CBs are not mopping up all those bonds which is why the Fed is buying them up with QE. What is the problem with a toy model in extreme to illustrate the absurdity of your position?
  - kaonashi 13y ago
    First off, the Fed is a creature of Congress. Congress issues spending orders, the Treasury creates bonds and sells them to the primary dealers (who are contractually obligated to buy them), and the Fed will make liquidity available to those primary dealers if necessary. The practice of issuing bonds equal to the difference between taxes and spending is a self-imposed constraint, and is really a hold-over from the convertible currency era. >What is the problem with a toy model in extreme to illustrate the absurdity of your position? It's not illustrative of anything, other than a contrived absurd example. If there was capacity to absorb 100 trillion in massages (equally absurd), then prices would remain stable. Think of it like this: we hit a recession, orders drop and companies lay off workers and produce less output. From one day to the next the capacity for a certain level of output remains the same, but on the second day less is produced.

kaonashi 13y ago

The Fed cannot introduce 100 trillion into the economy without taking 100 trillion in assets out; if congress were to introduce 100 trillion into the economy, of course there would be inflation. Also, people aren't going to buy 100 trillion in massages, that is fucking ridiculous, if you start from a ridiculous set of circumstances, you're going to arrive at a ridiculous ending point -- it's not instructive of anything.

wintersFright 13y ago
Congress doesn't print money. The Fed does. Congress can spend money that it doesn't have by getting the treasury to sell bonds. Foreign CBs are not mopping up all those bonds which is why the Fed is buying them up with QE. What is the problem with a toy model in extreme to illustrate the absurdity of your position?
- kaonashi 13y ago
  First off, the Fed is a creature of Congress. Congress issues spending orders, the Treasury creates bonds and sells them to the primary dealers (who are contractually obligated to buy them), and the Fed will make liquidity available to those primary dealers if necessary. The practice of issuing bonds equal to the difference between taxes and spending is a self-imposed constraint, and is really a hold-over from the convertible currency era. >What is the problem with a toy model in extreme to illustrate the absurdity of your position? It's not illustrative of anything, other than a contrived absurd example. If there was capacity to absorb 100 trillion in massages (equally absurd), then prices would remain stable. Think of it like this: we hit a recession, orders drop and companies lay off workers and produce less output. From one day to the next the capacity for a certain level of output remains the same, but on the second day less is produced.