re: Fed hides weekly M1 supply, says "money doesn't matter"

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Precisely when the monetary base should be growing in theory.

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But why? I can easily say that "in theory" less printing means the dollar is more valuable and my dollar buys more as time goes on.

Is scarcity not a thing? Do we have to print X dollars for every new child?

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But why? I can easily say that "in theory" less printing means the dollar is more valuable and my dollar buys more as time goes on.

Is scarcity not a thing? Do we have to print X dollars for every new child?

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Heuristically speaking:

1. Inflation can occur when too many dollars are chasing too few goods. Consumers have dollars they want to spend on cars but there aren't enough cars for all of them to buy, so producers raise the price of said cars until equilibrium is met (i.e. inflation).

2. Deflation can occur when too few dollars are chasing too many goods. Producers have cars they want to sell but there aren't enough buyers at current prices to sell all the cars, so producers lower the price of said cars until equilibrium is met (i.e. deflation).

3. If your economy is growing due to a population boom and increased labor force participation rate, there are more goods being produced. Unless you increase the money supply to some degree, you run the risk of falling into #2 above.

4. It appears you are tempted to say, "Well, that would be great for the dollar, so it's great for me. I could buy so much more stuff." But recall that currency is relative and economies are interconnected. If the relative value of the dollar gets too strong, you'd kill your domestic products and services. No more international banks, international law firms, international companies, etc. The only people who'd be able to afford your products and services would be Americans.

5. Perhaps you hear that and say, "Great!" But would it really be great? The U.S. has grown into what it is today in large part by selling stuff overseas. Sure, we run trade deficits, but we still export A LOT. Remove those exports, and you've reduced the market available to American companies substantially.

6. Use a stock price as an analogy. If you're growing earnings but not increasing share count, your stock price on a per share basis is going up. In this analogy, earnings are similar to GDP (or the quantity of goods produced), share count is equal to money supply, and the stock price is equal to the value of the dollar. Sure, it's great for the share price to go up, but if you never issue any additional shares or perform a stock split, eventually you'd get to a point where your stock price is so high the majority of people can't buy it. Wouldn't a better solution be to sell shares or perform a split when your share price becomes inaccessible, so as to increase the market for your shares in the first place?

7. Thus, when your economy is growing, it makes sense for money supply to increase to some degree lest you fall into a situation where vacations to Italy get super cheap, but you can't go on one because the company you worked for just moved their operations to China and fired you in the process.

Going back to the equation of exchange, you typically want your money supply to increase alongside Real GDP. Otherwise, you slip into deflation which, apart from making American companies less competitive, would also make it harder for our overly indebted society to ever pay the debt back.

But this is a very nuanced conversation. While persistent deflation may not be good, I'm of the view some would be necessary at the moment. It would likely coincide with much higher interest rates, which I think is sorely needed for our long-term future. Yes, that will make our debt harder to pay back and isn't as politically convenient as just inflating it away. And, yes, that would result in some defaults and restructurings, as well as some good ol' fashioned belt-tightening. But that process of pruning back and regrowing stronger is part of the natural order of things, and results in increased productivity over time. And if pruning back is what we need, interest rates are the shears that will do the necessary work.

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What about printing to bridge the gap between federal deficits and new spending?

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Not advocating for that, and certainly not to the extent we’ve seen it. See last paragraph of my post.

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Are you trying to say the past 2 years of printing is relative to population growth?

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Of course not, and not advocating for all of the recent QE. The post was in response to WTF’s post around why some money supply increase was necessary in last decades.

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Ever heard of fractions? In any case, the value is the same. If the company doubles its shares the price is cut in half, but you still own the same about if you had shares on a stock split. The value is still the same. What people can afford is a none starter as the price of the stock is the price people are ALREADY willing to pay...

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Fractions are new. And, yes, while the value is the same on paper there is a liquidity discount associated with the higher share price that no one can afford. There’s a reason companies don’t tend to let their stock prices get ridiculously high... Berkshire is an exception because it’s Buffett playing with his own money, but even he has a Class B that trades more.

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No, the US is what it is by producing the shite they sell OVERSEAS with cheap labor.... It is for the simple fact that a US dollar was worth what it was at the time of expansion. You didn't see china making factories in the US did you? Why? Because the yuan was worthless then... A US dollar could purchase more labor per dollar in China vs in the US, thus, expansion.

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Balance is needed. You don’t want too strong a dollar or too weak a dollar. You don’t want too much money supply growth or too little. It’s that balance that has been completely lost since the GFC, and it may take the pendulum making a hard swing in the other direction to right the ship. I have little confidence our “elites” will let that happen, though.

This thread is about whether or not the "money printing" will result in inflation. I don't think it will in structural terms, but I don't say that because I agree with all of the QE that has been done since the GFC. I just don't think it will have the effect most people think it will.

People want to ask, "What will be the impact of QE?" In my view, the better question is, "Why is QE having to be done in the first place?" And the answer to the latter question is, "Because of the structural deflationary forces around debt, demographics and technology." Thus, I think QE is more properly understood as an "effect" than a "cause." By that, I mean it is more likely to be the effect of deflation (at least in the eyes of policy makers) than it is to be the cause of inflation. Policy makers are hell bent on re-inflating the economy because they know deflation would cause us to be crushed by the record debt-to-GDP levels we've recently "achieved."

My view is we should tamp down the market intervention, let rates normalize, let asset prices normalize, deleverage the economy, and live with the consequences of the aforementioned. Continuing to spend recklessly to reignite the economy or to try to generate inflation will end badly. It's time we address the elephant in the room. For me, that means recognizing we only have 4 or 5 ways to address the debt problem:

1. Soft Default (i.e. Inflation)
2. Hard Defaults and Restructurings
3. Belt-Tightening
4. A Growth Miracle

Number 4 is off the table for developed economies, as it has historically only been achieved after a technological revolution or successful world war victory.

Spineless politicians and bureaucrats want Number 1 because it's more politically expedient and gives one the illusion that the music is still playing. In recent times, they've also hitched this solution to "MMT" in convincing themselves that the debt doesn't matter in the first place.

Some combination of Numbers 2 and 3 is the only real solution, in my view, and the sooner we admit it the better.

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How do people this clueless get one of the most important jobs on the planet?

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They aren't clueless. They are lying. Destruction of this country is the goal.

Dollars are not meant to store value I don't know when that became an argument. Go buy BTC where it's artificially scarce. Actually better yet, go buy property and burn down every other house around you. You'll be rich!

Finding out that you work for a bank has made all your posts make so much more sense now.

Is this where you confuse me for some statist freak that loves monetary debasement, deficit spending and just doesn't get de-fi?

How would working for a bank influence any of my opinions?

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How would working for a bank influence any of my opinions?

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well if you're entire livelihood was built around traditional finance it's not going to be an easy transition for you to understand something different

that's been quite obvious for months now

You freaking people

My second largest holding is a cryptocurrency. What exactly do I not understand? That y'all are too retarded to evaluate risk?