If you argue that inflation doesn't export itself in a globalized world, you are simply going against the facts. — ssu
The global economy has had low inflation and low interest rates for many years. Before the financial sector and the central banks caused asset inflation. — ssu
The Fed’s policies move asset prices. That’s it. Fiscal policy— the government giving it checks, etc. — has some effect, sure. But it does not account for the higher prices of oil and gas.
— Xtrix
Umm, I think you have not studied economics. — ssu
I do like to debate issues with you and don't want to be irritating or condescending. — ssu
So I'll give you an example of just why monetary policy and fiscal handouts do effect things like price of oil. — ssu
Second question: If we agree that at least some would spend a lot more than before, do you think that their increased spending would create "supply chain issues" or not? — ssu
Since the money went to create asset inflation. (And with this we seem to agree on)Since the housing bubble and QE, there has been extremely low rates and no inflation. — Xtrix
Ok, think about this for a moment. Why do you forget that this has also an effect on the consumer? If his/her interest on the mortrage or on other loans go up, it will have an effect on his/her other spending.But raising rates will do next to nothing except lower what they are able to raise: stocks, bonds, housing. — Xtrix
But the Fed can cause a recession, if it would raise interest rates to be higher than the current inflation, right?They can do nothing about Ukraine or supply chain shocks or COVID lockdowns or China's Zero Covid policies. If we're waiting around for the Fed to cause a recession to lower inflation, we just aren't paying attention to reality. — Xtrix
I'm not doing that. Actually you are... with saying things like:It's tempting to want to attribute everything to a single cause — Xtrix
The reason you see inflation everywhere is due to factors that have nothing — zero — to do with monetary policy. — Xtrix
Then I'll stop. Hope you have the time to clarify the above.Without even reading further — Xtrix
it's about both monetary policy and events like Russo-Ukrainian war. And monetary policy here is actually linked to the COVID response. — ssu
If you want to minimize the role of the central banks, be my guest. But that's nutty in this World, in my view.You want to emphasize it over the others — and that’s nutty, in my view. — Xtrix
You should understand the link that monetary and fiscal policy have, which is simple and obvious.Besides, you seem to be talking more about fiscal policy, which is different. — Xtrix
If you want to minimize the role of the central banks, be my guest. But that's nutty in this World, in my view. — ssu
If the government cannot cover it's expenses by tax revenues, it can turn to the central bank, which either buys government bonds to finance this or simply prints more money to cover the expenses. — ssu
Fraction means also a bit, little. Yes, there are others holding the debt.The Fed owns a fraction of that debt — a fraction. — Xtrix
Since the coronavirus (COVID-19) pandemic began, the U.S. Federal Reserve has significantly ramped up its holdings of Treasury securities as part of a broader effort to counteract the economic impact of the public health emergency. Currently, the Federal Reserve holds more Treasury notes and bonds than ever before.
As of June 8, 2022, the Federal Reserve has a portfolio totaling $8.97 trillion in assets, an increase of $4.25 trillion since March 18, 2020 (around the time that many businesses shut down). Longer-term Treasury notes and bonds (excluding inflation-indexed securities) comprise two-thirds of that expansion, with holdings of those two types of securities more than doubling from $2.15 trillion on March 18, 2020 to $4.97 trillion on June 8, 2022.
A "thin connection" counted in trillions. :snicker:So there’s a thin connection between the central bank and congress— but that’s it. — Xtrix
And what is so hard for you in understanding a sentence like above: " the U.S. Federal Reserve has significantly ramped up its holdings of Treasury securities as part of a broader effort to counteract the economic impact of the public health emergency."The Fed handles MONETARY POLICY, which is entirely different from FISCAL POLICY. Being clear on this is helpful. — Xtrix
Reconciliation Bill would have been a better name, but if Americans worry about inflation, the name has to be Inflation Reduction Act.President Biden on Tuesday signed into law the Inflation Reduction Act, an ambitious measure that aims to tamp down on inflation, lower prescription drug prices, tackle climate change, reduce the deficit and impose a minimum tax on profits of the largest corporations.
The Federal Reserve is the largest single owner of US treasuries. — ssu
A "thin connection" counted in trillions. :snicker: — ssu
And what is so hard for you in understanding a sentence like above: " the U.S. Federal Reserve has significantly ramped up its holdings of Treasury securities as part of a broader effort to counteract the economic impact of the public health emergency." — ssu
Really? Tell me just what single owner is bigger?No, it isn’t. — Xtrix
Actually, yes. Technicalities aside (actual paper money wasn't printed).You seem to think the Fed prints money and that’s what the Congress uses to send checks. — Xtrix
Really? Tell me just what single owner is bigger? — ssu
You seem to think the Fed prints money and that’s what the Congress uses to send checks.
— Xtrix
Actually, yes. — ssu
Last year (2021) the US federal government collected $4.05 trillion in revenue. It spent the government spent $6.82 trillion. Hence the federal government spent $2.77 trillion more than it collected, resulting in a deficit and new debt.
Who do you think bought that new debt? Who suddenly had a lot more US treasury securities? Think. — ssu
Not in the quantity now they would have had to. The simple fact is that the Federal Reserve was the largest buyer of this huge increase in debt until the start of this year. You simply cannot deny that.Lots of people and institutions buy the debt, in fact. Banks buy trillions in bonds. — Xtrix
Wrong. Please know the reality. — ssu
Not in the quantity now they would have had to. The simple fact is that the Federal Reserve was the largest buyer of this huge increase in debt until the start of this year. — ssu
There's one thing to know about schools of economic thought: they all have a point. Taken as an ideology is wrong. Yet they have, be it Keynesianism, monetarism, the Austrian school or anything else, have a point and make a reasonable argument about some aspects of the economy. A huge naive error is made when someone thinks that one school is "wrong" and the other one is "right". Yes, they are indeed political, hence the old name for economics, political economy, is far more accurate. But one shouldn't put on political blinders, even MMT can be reasonable and it's supporters did admit that inflation can happen. So "letting go" of some economic school of thought isn't the way, one should look at what the different schools all say together.Anyway — I’d let go of monetarism. It simply doesn’t explain inflation, except at the margins. At least in this case. — Xtrix
The main driver is the response to COVID, which 2020-2021 prevented the "man-made" recession when people were forced to stay home.It’s not without some truth, but I don’t see how one can look at war and COVID and conclude that the main driver is monetary policy — Xtrix
On the one hand, COVID-19 stimulus undoubtedly helped Americans in some very big, tangible ways. Namely, it reduced poverty — beyond merely keeping people afloat during the early days of the pandemic.
According to the U.S. Census Bureau’s supplemental poverty measure, the stimulus payments moved 11.7 million people out of poverty in 2020 — a drop in the poverty rate from 11.8 to 9.1 percent. And the 2021 poverty rate was estimated to fall even further to 7.7 percent, per a July 2021 report from the Urban Institute.
However, there is also evidence that the stimulus, especially the last round, likely stoked higher and higher prices for the very people it was intended to help. Though global supply chain issues (and, more recently, the war in Ukraine) have been significant drivers of inflation, the divergence between U.S. and European inflation suggests there’s more to it than that. In fact, a recent analysis from researchers at the Federal Reserve Bank of San Francisco found that the stimulus may have raised U.S. inflation by about 3 percentage points by the end of 2021.
Americans are struggling financially as a result — particularly low-income people who don’t have a cushion to absorb higher prices. Moreover, inflation is outpacing wage growth. Despite a 5.6 percent jump in wages year-over-year, 8.5 percent inflation in March 2022 meant that Americans saw a nearly 3 percent decrease in inflation-adjusted wages.
This wasn’t a completely unforeseen problem, either. Back in early 2021, some economists raised the alarm about the size of the final round of stimulus — the American Rescue Plan, which was headlined by $1,400 direct payments to individual Americans — for its potential to overheat the economy and create an inflationary environment.
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