Fed announces $300 billion "quantitative easing"

Discussion in 'Economics & Trade' started by kazenatsu, Mar 30, 2020.

  1. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    There is a general truth when it comes to ponzi schemes; the sooner it collapses the less damage there will ultimately be. Kicking the can down the road will only make the reckoning worse, when that day eventually comes.

    Some people imagine that if they can kick the can down the road, the country might be able to grow some prosperity and be able to dig itself out from the hole.
    But that's an unreasonable expectation. Expecting some dramatic increase in revenues in the future, if only we wait.
    And we can see how human nature works. The leaders will never dig themselves out of the hole even if an unexpected boon came along and they had the immediate means to do so. Has government ever paid down their debt levels, for instance? (in the near past)
     
    Last edited: Jun 24, 2020
  2. a better world

    a better world Well-Known Member

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    The latest post from Ellen Brown, exposing the Fed in cahoots with Blackrock "the 4th arm of government"

    https://ellenbrown.com/2020/06/22/meet-blackrock-the-new-great-vampire-squid/


    Meet BlackRock, the New Great Vampire Squid

    To most people, if they are familiar with it at all, BlackRock is an asset manager that helps pension funds and retirees manage their savings through “passive” investments that track the stock market. But working behind the scenes, it is much more than that. BlackRock has been called “the most powerful institution in the financial system,” “the most powerful company in the world” and the “secret power.” It is the world’s largest asset manager and “shadow bank,” larger than the world’s largest bank (which is in China), with over $7 trillion in assets under direct management and another $20 trillion managed through its Aladdin risk-monitoring software. BlackRock has also been called “the fourth branch of government” and “almost a shadow government”, but no part of it actually belongs to the government. Despite its size and global power, BlackRock is not even regulated as a “Systemically Important Financial Institution” under the Dodd-Frank Act, thanks to pressure from its CEO Larry Fink, who has long had “cozy” relationships with government officials.

    BlackRock’s strategic importance and political weight were evident when four BlackRock executives, led by former Swiss National Bank head Philipp Hildebrand, presented a proposal at the annual meeting of central bankers in Jackson Hole, Wyoming, in August 2019 for an economic reset that was actually put into effect in March 2020. Acknowledging that central bankers were running out of ammunition for controlling the money supply and the economy, the BlackRock group argued that it was time for the central bank to abandon its long-vaunted independence and join monetary policy (the usual province of the central bank) with fiscal policy (the usual province of the legislature). They proposed that the central bank maintain a “Standing Emergency Fiscal Facility” that would be activated when interest rate manipulation was no longer working to avoid deflation. The Facility would be deployed by an “independent expert” appointed by the central bank."

    etc.

    It's a horrifying read, exposing US capitalism for the horrific fraud it actually is, with a few crumbs going to enough people to keep the population quiet.

    I hope the Chinese government is aware of all of this, to avoid being diverted by trade wars, and to ensure the increasing prosperity of ALL its own citizens within its own state-managed development model. Hopefully the private-profit-driven model is about to be overtaken by a better system in which community cohesion and prosperity is important.

    (And guess which system is better able to handle the economic consequences of this, or any other pandemic).

    Xi Jinping admitted to a G20 meeting recently that China has stolen Western tech secrets in the past.

    But he doesn't need the West now, his own AI industry is now capable of competing with the West on the back of homegrown Chinese R&D.
     
  3. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Yes, that's the irony. So many on the Left completely approve with what the Fed is doing, and want more of it.

    They don't realize there's many aspects about it that goes completely against their values. Maybe it's too complex for them to truly understand.

    It does things under the guise of "government doing something to help", which is maybe why so many of those on the Left are eager to flock to it in support, without actually understanding the nature of that action.

    I had to explain to members in another conservative forum that even just handing out free money to everyone would be preferable to the policy that is already going in, and is standard procedure, with the Fed.
    I really did have to try my darndest, because they were really not in favor of the notion of handing out free money. Took multiple repeat explaining.
    The thing is, they didn't truly understand what was already going on. They were only offended by the idea of free money because it is simple and they can understand it.
    I guess people are less inclined to be offended by things they can't understand, or which takes too much brain power effort to comprehend.
     
    Last edited: Jun 24, 2020
  4. a better world

    a better world Well-Known Member

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    But it's too late for that now. In 2008 the US government was forced to keep zombie financial companies alive with QE, to avoid a repeat of the GD. Of course the QE mainly kept private financiers afloat, while the median wages of workers has barely recovered since the GFC.

    Like I said, I was hoping covid19 would bring the whole stinking mess of US financing down; but the the virus wasn't quite strong enough (damn...).

    That's the expectation: and as a matter of fact it sure beats plunging the country into another GD, in the absence of a better plan.

    You mean getting rid of the debt?

    As a matter of fact government debt - currently owed to private sector - need not be a problem, if interest rates remain low. Private debt owed to private financiers IS a problem because it eventually restrains effective demand, in an environment of low median wage growth,

    Stop worrying about government debt, which can be cancelled at any time (via the treasury and reserve bank changing the digits in the bank accounts of bondholders). But private financiers just LOVE the present neoliberal system.

    Yes, because they - like you - have been fooled by orthodox economists into thinking the government's budgets are subject to the same debt constraints as yours and mine...
     
    Last edited: Jun 24, 2020
  5. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I think this has already been explained to you. Any inflation or defaulting on the debt, would permanently ruin the credit rating of the country.
    You can fool people once, but you can't foo; them twice. That would be a one-time thing.

    You can't be so naive as to believe government debt doesn't matter.

    I'm going to refuse to discuss these type of things here with you. If you want to discuss that subject, start another thread, or find an old one about it.
     
    Last edited: Jun 24, 2020
  6. a better world

    a better world Well-Known Member

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    And you have have never come close to the correct explantion.

    All absolute BS. You still can't distinguish between public and private debt. Any spending has the potential to cause inflation.

    I haven't ever claimed that. What I have claimed is government spending (debt) is limited by resources and productive capacity.

    Too nuanced for you to grasp?

    And you still can't explain how your preferred policy for the Fed would avoid another GD. Pathetic.
     
    Last edited: Jun 24, 2020
  7. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I don't understand how what you just said had anything to do with what I was talking about there.

    You basically seem to be saying that some more government debt won't matter, because of this idea you have that more money/debt could help the economy somehow better utilize it's resources and increase efficiency.

    Have I got that wrong?
     
    Last edited: Jun 24, 2020
  8. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I don't think you are able to explain (in a mathematically quantifiable and comparable way) how your preferred policy would be better than the Fed hypothetically doing nothing.

    I mean, you are able to explain how it would "help", but the positives are created by taking out a negative somewhere else, and you don't seem to be able to describe in a systematic or at all quantifiable way why you think the positives would outweigh the negatives.

    To use an extreme/absurd analogy, I feel like what you are describing is a little bit like bashing a boy over his head to steal his money so you can buy his mom a mother's day present and wish her a happy mother's day.
    If anyone is truly able to understand the situation in its entirety, and step back and took a look at things in their totality, it would be apparent that that proposed course of policy is absurd.

    Well, of course, it can be a little harder to see this with economics, since things are more complex and less immediately intuitive.

    Why do you think action by the Fed would end up resulting in a more efficient allocation of resources than would exist otherwise?

    And, could there be another much simpler methodology of achieving your aims that sidesteps the whole issue of money manipulation and is a lot more direct?
    (What I mean is maybe money just obfuscates the internal soul of your idea, and that it could expressed in a simpler form)
     
    Last edited: Jun 24, 2020
  9. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    You care to explain this?

    First, what exactly is your claim here?

    Are you one of those people who believe government finances do not operate the same way private finances do?
    What makes you think they do not?

    Money is just a medium of exchange. Is there any way you can express your concept in terms that do not involve money? Like, for example, maybe talk about "wealth" ?
     
    Last edited: Jun 24, 2020
  10. a better world

    a better world Well-Known Member

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    In any monetary system, excess demand on available goods, services and resources (inc. labour) may cause inflation, whether the excess demand arises from public or private sector spending.

    Most emphatically, I am "one of those people". Sovereign currency-issuing governments have the capacity to ISSUE their own currency. (ie, the nation's currency).

    OTOH, the private sector (including you and me) DO NOT have that capacity.

    (Commercial banks create interest bearing deposits (liabilities and assets) when credit-worthy customers take out loans; but the nation's treasury and central bank can - if so legislated - issue debt-free money for purchase of available resources by the public sector, to fund specific public policy. That's just a fact, regardless of whatever dogma orthodox monetarist economists want to peddle).

    Wealth arises through the creation of desirable goods and services.

    The public sector creates wealth via public education, public infrastructure and public services, to complement wealth creation in the private sector.


    And re 'wealth', do you think it should be measured by GDP? Including the production, advertising and transport of junk goods and services, including the associated poverty*, ill-health and 'corrections' industries.....'worth' $trillions.... note that word 'worth'....

    *poverty, because rather than ensuring the economy provides a living wage for all, neoliberal governments prefer to offer 'welfare' crumbs that merely maintain poverty.

    Eg professor Brian Cox laments the fact that Americans spend more on grooming their pet poodles than on scientific research and development...
     
    Last edited: Jun 24, 2020
  11. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Okay, sure. But when we are talking about that we are talking about something completely different from the money supply expanding.
     
  12. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I have no idea what your point is to all that.

    I mean, I don't particularly disagree with any of that you just stated, but what does it have to do at all with what we are talking about? How does that prove me wrong?

    Maybe I am misunderstanding what you are trying to mean by some of those terms?

    You seem to be addressing each of my comments piecemeal, without looking at the bigger picture of what we were talking about, and the context within which I said it.

    It's like our discussions inevitably seem to dead-end, because you respond to my comments in isolation, as if none of the prior thread discussion even existed.

    I'm just pointing that out. Your responses seem to be completely besides the point and irrelevant to the wider discussion in the thread.

    I don't know if you understand what I'm trying to say. I'm not trying to be mean.

    Maybe these discussions are just too complicated and lengthy to get anywhere.
    They don't really seem to go anywhere.
     
    Last edited: Jun 24, 2020
  13. a better world

    a better world Well-Known Member

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    The big picture is this: to whom is debt - public or private - owed?

    And why has the Fed borrowed trillions to keep Wall St afloat? (which is what 'QE' is all about: the Fed sells interest bearing bonds to private investors and then buys them back in secondary markets, in order to fund operations of zombie companies which if allowed to collapse would bring the entire economy down, resulting in another GD. There is no way out of this dilemma, in our present privately-financed economic system.

    Right on cue I have been alerted to this site, featuring the Rev. Delman Coates:

    https://ourmoneyus.org/

    in which he discusses the issue of money creation as part of his ministry:

    "money is created when commercial banks lend or when governments spend".

    (Start at 6.30, to go straight to the guts of the issue re our privately debt-financed economy, and the disastrous social consequences of this system)

    We need more government spending and less bank lending!

    As I see it, it's really very simple. Neoliberalism - including the wholesale privatisation of industries that should be public monopolies - has taken us too far in the direction of private, for individual, profit; hence we are now a divided community with enormous social problems that can't be addressed by government eg, via implementation of a JG, because ...."where is the money coming from"

    Hint: it doesn't need to come from government either levying taxes OR borrowing from people with money to invest in government bonds.

    Your obsession with debt should be related to your OWN budget; but don't then claim inflation will necessarily be the result of government debt.

    Maybe the pastor will make it all clear to you in a wonderful presentation.
     
    Last edited: Jun 25, 2020
  14. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Again, I am not certain what you're implying and can only guess.

    If the Treasury owes the Fed, we have already extensively discussed that, and unfortunately it's just too complicated to discuss here.

    The Fed isn't "the government" is the normal type of ownership sense. You default on the debt to the Fed, you're going to get some serious inflation.
    But again, too complicated to explain the mechanisms of that here.
     
    Last edited: Jun 25, 2020
  15. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Inflation is not necessarily the result of government debt, but when you load up the Central Bank (you know, the one that issues the country's currency) with government debt no one else will buy, there is a general tendency for that to result in inflation, especially over the long-term, or if it's not carefully done.
     
  16. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Hey look, I'm not arguing with you about any of that. I just object to your idea of using the Central Bank (i.e. "the Fed") to carry out your desires.

    Sorry, it's a bit too complicated to easily put in words what I'm trying to mean, but I think you understand.

    I'm sure there must be a way for you to basically get what you want that doesn't involve "expanding the money supply". (I presume?)
     
    Last edited: Jun 25, 2020
  17. a better world

    a better world Well-Known Member

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    Why? The Fed COULD be "the government's bank" (with minor changes in legislation) and in conjunction with treasury, COULD issue debt free money ie not interest-bearing debt,which is the commercial banks' game.

    It's really desperately simple.... but you can't see past they way your own budget works...

    Yes* (see below). The treasury and Fed could (with minor change in rules) fund the wages of workers in a JG pool, simply by changing the digits in the bank accounts of those workers.

    *Meanwhile the money supply in the private sector would only grow when the wages of those JG workers were spent into the economy. The task for government then is to ensure the economy has the productive capacity to supply the extra goods and services on which the newly employed JG workers will spend their money.
     
  18. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    That's generally a recipe for causing inflation.
    You get the Central Bank (or the Fed) to start manipulating the economy, and the cost is borne in inflation of the national currency.

    (The purchasing power is essentially diverted away from the government)

    In other words, a giant economic ponzi scheme had been created in the economy, and they want active inflationary pressure so nobody realizes that the current price levels are overinflated. Like if the bank assets go down by 10%, you can hide that with 10% inflation. They will still be worth less, but be worth the same amount in dollar amount.
     
  19. a better world

    a better world Well-Known Member

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    It's amazing you quote Ellen Brown's expose of the the current fraudulent Fed arrangements, to progress your own simplistic theories about inflation and debt, without recognising the current neoliberal system in which the Fed is operating IS the problem.

    1. You fail to see that the Fed, given this current fraudulent system with massive debt financed by self-serving private financiers, has NO CHOICE but to prop it up - otherwise the whole mess will collapse in a GD, without this Fed support.

    2. You fail to see public debt CAN be managed in different manner to private debt.

    3. You insist sovereign currency-issuing governments cannot create funds independently of the commercial banking system. That's your mistake right there.

    4. Now do you understand that inflation will not be an issue as long as excess demand on available resources (and goods and services) is avoided, whether the production occurs in private sector "invisible hand" markets, or in the 'managed by chosen policy' public sector.
     
    Last edited: Jun 26, 2020
  20. Econ4Every1

    Econ4Every1 Well-Known Member

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    The evidence says otherwise. The housing bubble, if anything, reduced inflation

    upload_2020-7-3_12-50-14.png

    Setting aside the anachronistic term "printing" (assuming you meant "created"), the money created by the Fed increased reserves within the banking system, but every single dollar created is offset by an equal liability. Now I'm not fan of QE, at least as far as the goals that the Fed wanted to achieve by instituting it, but the fact is QE didn't cause inflation.


    Sounds like "special pleading" to me. You know it's happened even though the statistics say otherwise. You can't hide increases in prices. Either prices go up or they don't. Now, of course they do, but you seem to be asserting that they went up by more than 2% the Fed targets but you don't have any evidence because it's "hidden".

    Sorry, but that's not going to work.

    Let's look at prices over the last 22 years

    upload_2020-7-3_13-0-34.png

    Look at the overall rate compared to the wage rate.

    Do you see a rapid acceleration post-2008? I don't. Look there are lots of problems in the economy and the way the private and public sectors operate could be improved, but the claim of widespread inflation is simply false.
     
  21. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    GUNS BUT NOT BUTTER

    Just because prices rise does not mean that inflation is a constant problem. Your graphic (well done and thank you) shows that what matters the costs of "services" must be comparable to "wages". After all, the cost of living rises perennially (a little or a lot but rarely ever goes down), and as long a wages follow about the same growth-path concurrently then ... well, we grin and bear it.

    It's when there is no mutuality to those two numbers (Wages and Cost of living) that most people get very upset and tend to vote in accordance with their disappointment.

    Moreover in the graphic you have so well presented (a picture is worth a thousand words) the key elements (to my my mind) are those related to Education and Health, which are the primary "bad boys" shown in terms of cost.

    Which is why I think that the EU has got both correctly. That is, both are largely provided or subsidized by national governments.

    Which means that America is a "guns but no butter" country. The butter being Education and Healthcare - and the factual evidence is patently obvious:
    *As regards Education, a post-secondary degree in the US costs a family (on average) $14K a year per child. In France (and most of Europe) tuition is rarely more than 1000€ per student per year. So, more kids are going to school because it is more financially available to the population.
    *As regards Healthcare, well, "ditto". Europeans live on average 3 to 5 years longer than Americans because healthcare is readily accessible - governments provide it to all and sundry.

    So, where is it statistically preferable to live? Yes, Europe. But that is not the factual evidence. More people want to live/work in the US than in the EU. (That is, they did up to Covid-19, and we shall see what happens hereafter.)

    MY POINT

    The two "countries" (US and EU) are both similar and different. The issue boils quickly down to "Guns or Butter". Uncle Sam's Expenditure today on the DoD consumes more than half of the country's Discretionary Budget. And I, for one, believe that taxes would be far, far better spent - as it is in the EU - on free Post-secondary Education as well as Healthcare for all citizens ...
     
    Last edited: Jul 5, 2020
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  22. Econ4Every1

    Econ4Every1 Well-Known Member

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    Agreed.

    The capitalist model does not shine when it comes to essential services.
     
  23. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    Especially when a country reduces drastically upper-income taxation from 92% (before Kennedy) to less than 39% today:

    [​IMG]

    Any country that wants to generate millionaires and billionaires need only drop its upper-income rates. Instead, higher taxation and a serious revision of how we spend national Discretionary Spending (presently more than half goes to the DoD) and just-maybe the Federal government could do less for millionaires and more for the rest of the population.

    Like very low-cost National Healthcare and nearly free Post-secondary degrees ...
     
    Last edited: Jul 5, 2020
  24. bringiton

    bringiton Well-Known Member

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    No, they -- first W, then Obama -- CHOSE to throw trillions at the super-duper uber-rich instead of addressing the problem.
    A better plan would be to stop throwing trillions at the super-duper uber-rich, who have repeatedly proved they could give financial irresponsibility lessons to crack addicts.
    Right: it gives the super-duper uber-rich income without risk or contribution. Don't look for that to be changing any time soon.
     

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