... had more than 2 dozen ECON courses wrote:
Sir Adam Smith wrote:
Referencing rates as if it shows inflation does not exist only shows how clueless you are in that you do not understand how central banks influence rates. The FED has been massively expanding its balance sheet in an effort to suppress rates because they understand the impact real rates would have on government debt and on the overleverage in corporate America.
Everyone sees the inflation, this is not some figment of Republican's imagination. If you work in any industry that is forced to buy raw mats you know how insanely those have gone up in the last 6 months. The increase in labor costs and shortages due to the increased unemployment are extremely well documented. US running $80 billion-plus trade deficits which is jus more dollars in foreign hands waiting to come back in. Even CPI which is totally cooked showed almost a 1% inflation in April alone. You pump a crapload of extra money into the economy while you people are less productive, as long as one of your 24 econ classes was econ 101 you should understand what that results in.
Printing money is a devaluation of all the money that already exists.
1) Try to explain how Central Banks have kept U.S. Treasury Bond yields low. You do know bonds trade on open market. If Central Banks were attempting to rig bonds, intelligent billionaires and large corporations would correct.
2) You may or may not know: When inflation was an issue in U.S. in mid-to late 1970's, Overnight Fed Funds Rate and U.S. Bond yields demonstrated inflation.
3) Libertarian & Republican clandestine inflation. I love it! Only Pete Schiff and right wingers on Letsrun know the truth. Btw, Pete Schiff is not an economist.
1) By the central banks buying up treasuries. Look out how manyUS treasuries the FED has added to its balance sheet in the past year. If you have an entity that does not play by market rules eating up the market demand for products it will suppress rates. If the Fed was not buying the treasuries there would not be as much demand and the rates would need to go up in order to interest enough lenders.
The only reason a lot of the banks who hold treasuries or certain bonds are willing to do so is because they are positioned long and borrowing short. IE no one smart buys a bond that pays 2% in any interest enviroment. But you do if you are buying that asset with someone else's money at a lower rate. Utilizing this cheap money the FED has created investors are buying long term debt at low interest rates financed with short-term loans at artificially low rates that roll over constantly. You can make a nice profit on something that only pays 2 % if you buy it with a loan you need to pay 1% on and are leverage 30 to 1. The problem is as soon as the short term loan rate of interest goes up or the asset price collapse and your lender will not allow you to roll over the loan you are well underwater since you are so heavily leveraged. This is what happened in 08 and why these investment firms went from solvent to massively indebt literally overnight.
2) Duh, how many bonds did the FED have on its balance sheet when Volcker inverted the yield curve. Pretty sure the FED's balance sheet was not at $8 trillion and the US government didn't have $8 trillion in short-term debt.
In 1970 the FED balance sheet was about 8% of GDP, by the time Volcker had defeated stagflation it was at around 6% of GDP. The FED balance sheet is at almost 40% of GDP and expanding. Instead of reducing the supply of money it is being expanded when inflation already exists. Our current monetary policy goes against every basic economic principle and historical lesson of what to do to stop inflation. There is a reason the FED stopped its weekly publishing M1 at the end of March after doing so for decades. They realize there is a crisis on their hands and are trying to delay the day of reckoning. Powell is hoping at this point to end his term before the crisis really strikes then he can pull a Bernanke and go on a book tour about how he saved the US economy from the COVID crisis and dump the problem on his successor.