
Federal Reserve balance sheet trends - TekMol
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
======
Suncho
What matters isn't the size of the Fed's balance sheet or what it contains.
The Fed's balance sheet is "invisible" to the private-sector economy. This
expansion of their balance sheet is simply a reflection of the stimulus we're
doing.

When the Fed expands their balance sheet, what they're doing is replacing
private-sector assets with liquid cash. Given that the stimulus is appropriate
for the economy, this is all fine. It's not anything that future generations
have to "pay back." And it's not going to cause a collapse of the dollar.

The important thing to keep in mind is that we are _intentionally_ shutting
down parts of the economy. But some of those parts include mechanisms (jobs)
that we normally rely on to supply spending money to consumers and businesses.

Due to the partial shutdown, the economy's productive capacity has taken a
hit. But even so, our economy still has the capacity to provide a decent
standard of living for everyone. We don't want to compound the crisis by
failing to ensure that consumers have sufficient spending power to activate
the remaining capacity.

It would be scary if the Fed's balance sheet _weren 't_ expanding like this
right now.

[http://www.greshm.org/blog/printing-money-cures-the-
covid-19...](http://www.greshm.org/blog/printing-money-cures-the-
covid-19-crash/)

[http://bit.ly/intro-to-cmt](http://bit.ly/intro-to-cmt)

~~~
Qasaur
>When the Fed expands their balance sheet, what they're doing is replacing
private-sector assets with liquid cash. Given that the stimulus is appropriate
for the economy, this is all fine. It's not anything that future generations
have to "pay back." And it's not going to cause a collapse of the dollar.

This is simply not true. The Fed is buying assets at a premium (otherwise
counterparties wouldn't sell the assets to the Fed) and is effectively
injecting money into the economy. This is a bailout as the Fed is making a
liquid market (that otherwise would not exist) for assets, saving the balance
sheets of firms. Future generations pay this back not through taxes but
through inflation.

Whether or not the U.S. dollar will collapse or not is another topic, but what
can be said is that it is not sustainable to continue bailing out
irresponsible businesses like banks and others when they do not exercise good
business practices like prudence, not being overleveraged, or having a buffer
in case of lost revenue. The only way this ends is either a depression the
scales of which we've never seen in history before (which would liquidate and
clear out bad businesses), or a hyperinflationary collapse of the U.S. dollar
whereby more and more money is injected to prop everything up. I'm betting on
the latter as the former is too politically inconvenient.

~~~
czinck
> The Fed is buying assets at a premium (otherwise counterparties wouldn't
> sell the assets to the Fed)

That's not necessarily true, economic transactions aren't necessarily zero-
sum. I would assume for most of the assets being sold to the Fed, the banks
need liquid cash more than they need the asset and so would be willing to take
a haircut.

>The only way this ends is either a depression the scales of which we've never
seen in history before[...], or a hyperinflationary collapse of the U.S.
dollar

Why specifically do you think this will happen now when it didn't happen post
2008? Sure the scale so far seems bigger, but also the scale of the hit the
"real" economy is taking is much bigger. And, in March, when some of these
asset purchases had already started, CPI declined by 0.4%.

~~~
andreilys
The fed is buying junk corporate bonds that would otherwise plummet in value.

~~~
thomashobohm
This is not accurate. A "plummet" in value when it comes to the fallen angels
that the Fed is purchasing is more like a 10% drop, and even if you treat the
difference between the "true" value of the bonds (if the Fed didn't purchase
them) and what the Fed pays as a surplus, the aggregate value of all those
surpluses is still tiny in the grand scheme of things.

~~~
andreilys
LQD, a corporate bond ETF, plunged -20%.

It likely would have fallen even further, until the fed decided to intervene
and buy corporate bond ETFs.

Now LQD has fully recovered and is back to pre-corona virus levels.

More interesting is the rebound in HYG, another Corp bond ETF, which is 50% BB
rating, and the remaining 50% below BB rating. I imagine those will get
downgraded and be even worst.

Now what happens when companies can’t meet their debt obligations is that
covenants will get triggered and that can mean a whole lot of bad things for
corporate debt. Which the federal reserve now holds because nobody else wants
it.

~~~
thomashobohm
Yes, this is a good methodology: we should take the lowest point of a random
ETF, extrapolate it out, and use that number in our analysis of the Fed's
actions.

edit: they edited their comment extensively after I sent this haha.

------
laurus
One of the biggest things confusing people about how public finance works is
that everyone is focused on the Fed rather than the Treasury.

A good aspect of MMT is that it explains how the Treasury spending more than
it takes in in taxes means more money is created into the economy than is
deleted out of the economy. This is the more important thing to focus on.

Some of the MMT professors also do a good job explaining how QE (quantitative
easing) doesn't create new net financial assets into the system, it just
shifts around assets in accounts at the Fed.

All this focus on the Fed seems counterproductive.

~~~
fbonetti
> A good aspect of MMT is that it explains how the Treasury spending more than
> it takes in in taxes means more money is created into the economy than is
> deleted out of the economy. This is the more important thing to focus on.

This is one of the most absurd claims of the supposedly "descriptive" MMT.
Taxation does not delete money from the economy. When the federal government
collects taxes, it doesn't take that money and burn it in a giant pit. It
turns around and immediately spends that money.

Yes, the federal government does not _need_ your tax dollars. Yes, they
technically have the ability to print an infinite amount of dollars. But that
doesn't support the claim that taxation removes money from the economy.

> Some of the MMT professors also do a good job explaining how QE
> (quantitative easing) doesn't create new net financial assets into the
> system, it just shifts around assets in accounts at the Fed.

This is completely false. The Fed creates new reserves (base money) in order
to buy assets.

[https://fred.stlouisfed.org/series/BOGMBASE](https://fred.stlouisfed.org/series/BOGMBASE)

~~~
RobertoG
>>"This is one of the most absurd claims of the supposedly "descriptive" MMT.
Taxation does not delete money from the economy. When the federal government
collects taxes, it doesn't take that money and burn it in a giant pit. It
turns around and immediately spends that money."

I didn't know that idea was so polemic.

So, what you are saying is that government deficits are inflationary because
they add money to the economy, but, on the other hand, government surplus
don't retire money from the economy?

>>"This is completely false. The Fed creates new reserves (base money) in
order to buy assets."

Yes, but the assets the Fed buy (when practicing QE) are in the accounts of
the commercial banks in the Fed. After buying them, those assets are not there
anymore, and, instead there is money (1). And money is basically a government
bond that pay 0% interest.

1 -
[http://bilbo.economicoutlook.net/blog/?p=661](http://bilbo.economicoutlook.net/blog/?p=661)

~~~
fbonetti
> So, what you are saying is that government deficits are inflationary because
> they add money to the economy, but, on the other hand, government surplus
> don't retire money from the economy?

Honestly I don't know what point you're trying to make, or what deficits or
surpluses have to do with anything. A deficit or surplus is merely the delta
between total revenues and an arbitrarily defined budget.

Inflation is caused by additional dollars chasing the same number of goods.
Printing money does not create goods and services - it merely decreases the
value of each dollar relative to everything else. If I had a machine that
could create an unlimited amount of gold at zero cost, the price of gold would
approach zero if I made and sold enough of it. I don't know why you would
think dollars would be any different.

> Yes, but the assets the Fed buy (when practicing QE) are in the accounts of
> the commercial banks in the Fed. After buying them, those assets are not
> there anymore, and, instead there is money (1). And money is basically a
> government bond that pay 0% interest.

Yes, the bank exchanges an asset (like a treasury) in exchange for reserves
(base money). The question you need to ask yourself is, where did those
reserves come from? Another question you need to ask is, when Fed engages in
QE, why does the monetary base increase?

~~~
RobertoG
I'm a little late, but I want to answer for the sake of completeness.

>>"Honestly I don't know what point you're trying to make, or what deficits or
surpluses have to do with anything."

You say "Inflation is caused by additional dollars chasing the same number of
goods". We agree with that (it could be a supply problem too, but that's
another subject).

Now, it seems to me that we agree also that a government deficit can be
inflationary. So, by definition, a government deficit is adding money to the
economy.

My question is: if a government deficit is adding money to the economy, what a
government surplus is doing? That's the meaning of "taxes destroy money".

>>" The question you need to ask yourself is, where did those reserves come
from? Another question you need to ask is, when Fed engages in QE, why does
the monetary base increase? "

Monetary base increase because that is how it's defined.

I think that the problem here is that you subscribe to the fractional reserve
banking theory that, I'm afraid, is false. I suggest reading this report from
the Bank of England (1) about how money creation works. A private bank lending
is not limited for the quantity of reserves available in the system, because
central banks have to keep the system of payments working and are targeting an
interest rate. So, central banks have to answer any request for additional
reserves.

The corollary to all this, is that it doesn't matter if the asset of the
private bank is a treasury or reserves in the banking system, banks can lend
anyway. The central banks sell treasury to the banks for controlling the
interest rate, not the quantity of money.

1\. -
[https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...](https://www.bankofengland.co.uk/-/media/boe/files/quarterly-
bulletin/2014/money-creation-in-the-modern-economy.pdf)

~~~
fbonetti
> My question is: if a government deficit is adding money to the economy, what
> a government surplus is doing? That's the meaning of "taxes destroy money".

It's rare for the federal government to run a surplus, but it did have one for
four years straight in 1998, 1999, 2000, and 2001[1]. During that that time,
the monetary base increased 32%[2] and the M2 money supply increase 23%[3].

No matter how you look at it, despite the government running a surplus, the
money supply continued to increase. How do you square that with your claim
that surpluses remove money from the economy?

[1]
[https://fred.stlouisfed.org/series/FYFSD](https://fred.stlouisfed.org/series/FYFSD)

[2]
[https://fred.stlouisfed.org/series/BOGMBASEW](https://fred.stlouisfed.org/series/BOGMBASEW)

[3]
[https://fred.stlouisfed.org/series/BOGMBASE](https://fred.stlouisfed.org/series/BOGMBASE)

~~~
laurus
You're forgetting that the government doesn't _control_ the whole money
supply. The government only controls how much it itself creates or deletes on
net.

Most money is created by commercial banks. As the demand for credit expands
the money supply expands, and as credit is repaid, the money supply decreases.
This is going on all the time.

------
etherwhitelable
The federal reserve owns half of all US debt. We are paying interest on
interest to our own Fed that serves as the banking systems perpetual bailout
fund with the ability to create unlimited amounts of money.

~~~
6nf
Is it true that the fed is privately owned and if so does it matter or not
really

~~~
etherwhitelable
Private banks technically own the Fed receive 6% interest on their capital
with any net gains are paid to the treasury. They buy all the bad and risky
loans from banks and never have to mark them to real value or take a loss. If
asset recovers and becomes valuable they sell it back to the banks.

------
aazaa
This will work out fine until it doesn't. At that point, the US will face many
"bad or worse" kinds of choices. It will be like the choice we face today:
"close the economy or the morgues start overflowing everywhere." Except it
will be every day, more or less forever. Inject still more money into the
economy or the entire financial system collapses.

Whenever this balance sheet chart shows up, MMT boosters descend to explain
why the Fed's balance sheet doesn't matter. It's interest we owe ourselves.
Nobody in the real economy looks at that balance sheet when making actual
financial decisions, they claim.

I think that misses the point. The point is that since the last financial
crisis, the balance sheet has on net expanded. By a lot. When the current
crisis hit, the balance sheet shot up from an already elevated level.

To put it another way, consider the size of the balance sheet relative to GDP
(~$24 trillion):

[https://fred.stlouisfed.org/series/GDP](https://fred.stlouisfed.org/series/GDP)

At the current level, the balance sheet is about 25% of GDP. There's every
reason to believe the Fed is far from done. It's bailouts as far as the eye
can see at the moment. And those bailouts will be monetized by the Fed. We
can't possibly pay for them at the current value of the dollar. Ever.

To the MMT boosters, what happens when the balance sheet approaches 1x GDP?
2x? 5x?

Nobody knows because this experiment has never been tried before. The reserve
currency printer is also a net debtor. It runs very high, structural deficits
with no end in sight. The currency is completely decoupled from gold, and as
recent history shows, possibly industrially-critical commodities like oil.

I'd be very curious to hear from the MMT proponents on what signals they's
look for that the Fed's balance sheet actually does matter in the real
economy. Things that can only be explained by problems stemming from the size
of that balance sheet. Problems whose only cure is a massive reduction in that
balance sheet.

Of course, the balance sheet isn't going anywhere. Nor are deficits. When
faced with such situations in the past, the answer has been devaluation.

The US did that back in the 70s when it closed the gold window. It will happen
again. What the MMT proponents I've seen seem to ignore is what form that
devaluation will take given the highly unusual circumstances around which it
will be occurring.

~~~
RobertoG
I would like to clarify that the MMT proponents that I follow are not
favorable to the QE type of interventions that we have seen in the last years.

They only pointed(1), correctly, that QE was not going to be inflationary AND
that monetary policy is not the proper tool for this kind of problem. Fiscal
policy is the proper tool.

You will not find MMT economist defending QE or the buying of financial
assets, other that public debt bonds, if it's legally required to finance
fiscal policies.

If fact, many are very critical(2) of this kind of programs.

(1) -
[http://bilbo.economicoutlook.net/blog/?p=28422](http://bilbo.economicoutlook.net/blog/?p=28422)
(2) -
[http://bilbo.economicoutlook.net/blog/?p=4763](http://bilbo.economicoutlook.net/blog/?p=4763)

------
LatteLazy
Til, People are more than happy to sell their children for a slightly cheaper
mortgage as long as you dress it up correctly.

~~~
jrockway
I think this has always been the way we've paid for infrastructure. I remember
reading an article about Japan. They've stopped taking on massive
infrastructure projects, because the population isn't growing -- they don't
want immigrants and people aren't having kids anymore. Without a future tax
base to pay for infrastructure, they can't build it anymore. So things like
the Tokyo subway system are "done"; no money will ever be available again to
build anything.

I think we're beginning to see this in the US. In a few years, you won't be
able to live in New Jersey and commute to New York City, or take the train
from Boston to Washington D.C. The North River Tunnels will have collapsed,
because we can't find any money to repair them.

Ultimately, it's a little disingenuous to say this is "selling your children".
Yes, if we keep buying stuff, someone will have to pay for it. If society
takes on projects that need to be paid for over 100 years, people that aren't
born today will be spending some of their taxes on it. But with the right
investments, it's almost certainly worth it. We can look back at some of the
achievements over the last century and find that they probably grew the
economy more than they cost, which makes them good investments when paid for
collectively. In 1920, we didn't have an Interstate Highway System, we didn't
live in the suburbs and commute to the city, we couldn't fly to the far
corners of the world in 16 hours, we didn't have all of humanity's knowledge
available in our pockets. There is no reason to believe that 2120 won't be
just as good as long as we keep investing.

~~~
RobertoG
Money is just a number in some computer. The important thing is the real
economy. Deficits, as any other spending, and depending of the circumstances,
could be inflationary, but they don't have to be, it depends of the state of
the economy in the moment of the spending.

The public debt is just a number, it's the accumulate of pass deficits and
it's not inflationary in itself and it's not a problem.

A mental experiment (not so hypothetical): suppose that in order to fight an
economic crisis the government decide to spend a big deficit and, in order to
do it, they emit bonds. Suppose now, that the Federal Reserve buy all those
bonds. Who is that money owned to? who receive the dividends of those bonds?

A second mental experiment: in order to not increasing the public debt and
"save for our children" the government don't spend in infrastructure or
investigation. In 50 years there is not infrastructure left or new
technologies but the public debt is zero. Are the children rich or poor?

~~~
w0utert
Whether money or debt is 'just a number in a computer' or not is besides the
point. We built the system that way deliberately because bartering is not
efficient, doesn't scale, and doesn't easily allow creating debt that needs to
be settled in the future.

What we ended up with is a situation where almost all the wealth/value we
(governments, businesses, the people) have built is represented in terms of
'monetary units' (the numbers in the computer), but it's increasingly clear
that in the future, these positive and negative numbers will never add up to
zero anymore, and we're not going to 'grow our economies out of debt' as was
originally the idea of taking on debt now to invest in the future. This means
_someone_ is going to lose big time sooner or later.

Printing more money to take some negative numbers from the economy and
infusing it with some positive numbers is not a strategy that can save the
system in the long term as there are exponential terms involved because of
interest. There will be a point where diluting the the money supply (which is
exactly what QE is) will result in a loss of confidence people have in the
'numbers in the computer' being a reliable proxy for their wealth. Governments
will have a hard time selling treasuries when no-one expects them to have any
value in the future. When that happens (which IMO is just a matter of time,
how much time is not clear but most definitely not 100+ years) all value that
is not recorded in tangible, useful assets or skills will simply disappear,
and it will not just mean the 'numbers of the computer' have to be adjusted or
reset and everything can go back to normal...

~~~
RobertoG
>>" [..] We built the system that way deliberately because bartering is not
efficient"

Not really, the history of money doesn't support that theory.

>>"[..] it's increasingly clear that in the future, these positive and
negative numbers will never add up to zero anymore,"

They don't add already, never were suppose to add. Where is the dollar coming
from if not the deficits of government? The spending of money in the economy
is what creates money. So, it's the debt of the public sector what create the
money in the first place. You are complaining that excessive deficits are
creating too much money, so you already agree with that.

>>"[..] Governments will have a hard time selling treasuries when no-one
expects them to have any value in the future. "

That makes zero sense. The Central Banks can, and frequently do, determine the
interest of the public bonds. Japan is the main example, but there are many
others.

>>"[..] all value that is not recorded in tangible, useful assets or [..]"

A government tax every transaction in the economy, and can do it because it
has the monopoly of force in that country. If the USA government only accept
dollars for paying taxes, there will be always (while there is an economy and
they keep the monopoly of force) demand for the Dollar. The same is true for
all the other countries.

------
mcintyre1994
With a sample size of 1 based on 2008 you'd probably never expect the total to
be back below $5 trillion, in the same way it barely got back below $2
trillion after that first spike. Based just on the graph it's probably more
likely to go above $10 trillion than below $5 trillion in the next few years.
These numbers are completely ridiculous to think about, how would you
interpret this in practice?

~~~
vmception
The way to interpret this is that there is wide latitude in the market
tolerance of US dollars.

Think of it like share dilution. For example, without corresponding demand,
Tesla can issue 20% more shares arbitrarily, and the price of a share will
drop 20%, or Tesla can wait for excessive demand and issue 20% more shares and
the price of a share will stay the same because the market clamored for them.
Maybe the price of Tesla would have gone 20% higher if they didn't issue those
additional shares? Or maybe interested buyers were waiting for a moment to
purchase many at once without affecting the market.

Fiat currencies are in the same place. Forget about the cognitive dissonance
where currencies are tied to your national identity and comparisons to private
shares therefore cause trepidation. The functionality is similar, we just use
different terms. Share dilution = inflation.

As long as the relative purchasing power of a dollar, compared only to other
currencies, is managed, the Federal Reserve can purchase as much as it wants.
When the Federal Reserve purchases things, each transaction creates new
dollars. The recipient has dollars that didn't exist prior and are just as
fungible, slightly diluting the value of all other dollars (causing
inflation). The Federal Reserve is fully capable of selling assets on its
balance sheet, for existing dollars. Just options and choices that other
market participants don't typically have.

The wide latitude in the side of the Fed's balance sheet comes from the
weakness of other currencies. Central Banks around the world are doing the
same thing, weakening those currencies, simultaneously actual people are
selling their currency for US dollars. This increases the strength of the US
dollar, and means the Federal Reserve can dilute it to weaken it. The long-
standing predilection of the Fed, the President and Congress has been to not
have a strong dollar, so you can predict what the Fed will consider doing
based on macroeconomic events.

As long as all currencies are being massively created, the Federal Reserve can
do the same proportionally. The amounts don't matter in that regard. You just
want to pay attention to the constraints on what it can buy, and if those
constraints are being followed, and if there is enough things for it to buy to
accomplish its goals (otherwise massive de-flation is likely, and harmful in
our ability to predict our purchasing power or investment decisions)

------
iwangulenko
Has anyone any idea what that means to the average joe? How to protect one's
purchasing power?

If the government can give you free money (1200$ checks), it also has the
power to take everything away from you, right?

~~~
vkou
The $1200 money isn't free, it is borrowed from future taxpayers.

The money the Fed prints doesn't go to Joe Average. It goes to investors who
are selling the Fed junk bonds. (They then turn around, and buy stocks with
those dollars, which is why the market is soaring.)

~~~
wegs
It isn't free, but that isn't really true. The $1200 comes out of inflation,
which decreases the value of accumulated wealth (at least to the extent it
sits in cash).

If you're sitting on a retirement fund, that hurts you. If you're sitting on
debt, that helps you. So it's much more past tax payers than future ones who
are hurt by this.

On the other hand, decreasing the value of accumulated wealth is exactly what
ought to happen here. We're not producing very much, and everyone will have
less actual stuff. The question is how the banking system adjusts.

If we see deflation (prices go down, salaries go down, revenues go down),
people will default on debts and other fixed obligations, and the whole thing
blows up in structural damage from bankruptcies, mortgage defaults, layoffs,
etc.

If we see inflation, a lot less structural damage happens.

COVID19 is destroying value. What the fed is doing -- inflation in the stock
market to keep prices where they were -- is exactly what ought to happen.
Inflation will continue to happen elsewhere in the system. The flip side is
you don't want starving, homeless people in the streets -- that will destroy
massive wealth. We'll deal with that with inflation too, most likely.

~~~
vkou
No, that $1,200 didn't come out of the Fed printing press. It came out of the
general budget, so taxpayers _are_ going to be on the hook for paying it back,
in the future.

The trillions the Fed is printing aren't being sent out as stimulus cheques.
They are being used to provide short-term liquidity (Which does not cause
inflation), and to buy junk bonds, (Which does cause inflation, and also
happens to prop up the stock market.) Some of that money is also being lent to
the government - if those loans are paid back, they will cause net zero
inflation. (Because once the money is paid back to the Fed, it is destroyed.)

This is precisely why we have central banks that are independent of government
budgets. It creates checks and balances against a government choosing to print
its way out of budget troubles.

~~~
rapsey
> No, that $1,200 didn't come out of the Fed printing press. It came out of
> the general budget, so taxpayers are going to be on the hook for paying it
> back, in the future.

Government debt does not really get payed. Old debts are payed off with new
ones.

~~~
RobertoG
As it should be.

Public debt is just a number that express the accumulated of pass deficits. In
order to reduce that number you need a government that, instead of a deficit,
have a surplus.

If the government has a surplus, less money is spend in the economy.

If that reduction in spending is not compensated somehow, necessarily, the GDP
has to fall.

The only things that can reduce that fall in government spending are a
positive balance commerce or an increase in private debt.

Now, an increase in private debt, instead of public debt, that's a real
problem.

------
aswanson
So I'm hearing the " the dollar is over, throw everything into gold, fiat
money is doomed" in other forums. Can anyone give some conterpoints to that
narrative?

~~~
christophilus
Look up Peter Zeihan. He’s bullish on the dollar mostly because it’s the
world’s reserve currency and there really isn’t a good alternative. That
said... I’ve heard the dollar referred to as the best looking horse in the
glue factory.

~~~
ro-_-b
That doesn't mean you shouldn't buy gold & other hard assets. Even if the Euro
and others decrease in relation to the Dollar the Dollar might decrease in
relation to gold/hard assets & in my opinion likely will in the next 2-3
years.

------
bawana
We need to separate the accounting of ‘financial flows of money’ (money spent
on financial instruments) from money spent on goods and services that are not
financial. We need to be able to compare the gross financial product with the
gdp. This way we can speak more precisely about inflation that affects the
real world of Adam Smith vs the world of imaginary values and wealth.

------
cm2187
aka the only reason the stock market has not collapsed. The economic data, and
worse, the economic data forecasts, are horrendous, worse than 2008.

------
bawana
The money the fed injects into the financial system is staying in the
financial system. Too many dollars chasing too few equities could result in
‘equity inflation’=stock market bubble. (I am using the word equity as a
symbol for any financial instrument) But none of this money ( or maybe just a
token fraction of it) is reaching the real world. The purpose of this
quantative easing is to prop up values of the warehouses of wealth. We still
have massive unemployment but the firms doing the layoffs have stable stock
prices . What is really amazing is that we live in a world where Marie
Antoinette can flaunt her wealth and at the same time use that as an example
of ‘free speech’

------
fallingfrog
The markets now firmly believe that any real reductions in asset prices are
impossible. The fed will always rescue them with bailouts. That’s Just
_incredibly_ dangerous and can only lead, in one or two more cycles, to the
collapse of the US dollar. That sounds incredible but it we keep on this way I
just don’t see any other way this could end.

~~~
AnimalMuppet
I see a 30% drop in the Dow in the last two months. I see a very real
reduction in asset prices, here in concrete reality.

You could argue that that wasn't a _real_ reduction, that a _real_ reduction
would be 50% or some other number. If that is your argument, it looks to me
like moving the goalposts.

~~~
fallingfrog
Right but my point is, as soon as it happened the fed went into a panic and
printed trillions of dollars and started buying junk bonds, giving the
impression that they will do whatever it takes to make the market not drop. No
matter the cost. And the market shot back up even though there are 26 million
people who just lost their jobs. But you know, this is still an unfolding
story so who knows, maybe all the free loans in the world won’t help. We’ll
find out.

~~~
AnimalMuppet
Or, maybe you're right, and the market would have fallen a lot further (or at
least not recovered) if the Fed had done nothing. And, on that one, we won't
even find out, because that's not what the Fed did.

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fallingfrog
And I can see the point too that in the short term in the middle of a crisis,
they did what they had to do for the economy to survive. It’s after the crisis
is over, and things start recovering, that they are really going to have to
make unpopular decisions or reinflate the bubble.

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AnimalMuppet
Absolutely agree. Getting back to stability is going to be... interesting.

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DSingularity
Yikes. The market plunged like this despite the fed buying up trillions?

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rapsey
FED buying trillions was the rebound.

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throw1234651234
So how does this work? The federal reserve prints more USD and buys stuff with
it increasing their balance sheet?

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prirun
They can't even label a chart so it isn't misleading. How about they label
that axis with T (trillion) instead of M (million). I know, I know, somewhere
it probably says "(in millions)" somewhere in the fine print.

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Qasaur
I've said it before, and I'll say it again. Central banking is the greatest
scam in the history of mankind that cartelises the banking sector, gives them
the privilege of access to the printing press, and is the root cause of the
boom-and-bust cycle. It has managed to convince people (particularly
mainstream economists) that its institution is necessary for "financial
stability" but what it really does is absolves banks from any form of
financial responsibility as they will always be able to receive a bailout if
they act irresponsibly, allowing them to always make a profit regardless of
risk. This is not free market capitalism but a system that enriches those
closer to the central bank (and who get freshly-printed money first before
inflation hits the rest of the economy) and punishes those who are relatively
further away like manufacturing workers and salary earners. This is the reason
why salaries at SV startups (bankrolled by VCs and soaring stock prices
leading to valuable RSUs) are so high, and why wealth inequality has notably
increased dramatically since we went off the gold standard in 1971[1].

I believe this topic is among the most important things we need to discuss and
is arguably more important than climate change (what else is driving
consumerism and throw-away-culture but inflation?), but economists have
overcomplicated things and made it inaccessible to the average person when it
really is so simple that a five-year old can understand it: printing money
enriches the few who have access to the printing press at the expense of the
many.

End central banking and the economy will be stronger, more resilient, fairer,
and will reward those who create real value rather than the well-connected.

[1] [http://wtfhappenedin1971.com](http://wtfhappenedin1971.com)

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kyuudou
Yes, for those care about anthropogenic climate change, inflationary debt-
backed currencies encourage exponential rates of consumption.

