Voters to Fed Chair: back off, bro
How hard should the Fed hit the brakes to bring inflation down? The answer to this question depends, in part, on just how damaging you think inflation is. And one reason to think that inflation is harmful is simply that most people – normal people, not CEOs or financiers – seem to really dislike it. If most people think steady inflation of 8% is worse than steady inflation of 2%, that is, in fact, a (non-dispositive) reason to think that 2% inflation is better than 8% inflation.
The United States has been, in general, a hard money country. This is generally speaking a good thing. Sure, it can go too far – inflation phobia can hurt employment and wages, and there are smart people who think the Fed’s 2% inflation target is too low – but having a general preference for hard money is certainly better than hyperinflation, and steady inflation is probably better than highly variable inflation.
The fact that America has been a hard money country is due in part to the fact that ordinary people dislike inflation and our political system has been successful at translating this preference into policy. Unhappiness about inflation – not horse race polls – is perhaps the main reason many observers expected a red wave in the election. People vote economic conditions, inflation is high, ergo, people will vote Republican.
There are many reasons the red wave did not materialize, but surely one is that in the grand scheme of things a year or so of moderate inflation following a pandemic is just not the end of the world. It’s certainly not as bad as a big spike in unemployment. Voters know this. I hope the Fed hears them.
Need to keep the Fed ready to accept the trillion dollar coin. Seems inevitable to me.
the trillion dollar coin. Seems inevitable to me.
the trillion-dollar-coin, like many other things is there to take your eyes off your fries; a smoke screen.
get focused in on this:
inflation comes from these two things
1. fractional Reserve banking
2. the congressman’s irrational exuberance for spending other people’s money on their cronies, the cronies who buy votes for the congressman.
inflation does not price wealthy people out of the market because the rich have too much money to be priced out of the market. inflation prices poor people out of the market because they do not have enough credit and not enough cash to buy their subsistence.
they do not get partial relief from their debts by way of inflation simply because they do not have enough credit to obtain a mortgage or other debt. most of them don’t have credit cards.
Within America the beautiful we have everything but equality give us a break. give us less inflation!
I’m pretty sure that Fed Reserve chairmanship is not an elective position.
As for the trillion dollar coin: indeed, let’s go for that. It will work wonders, no doubt.
Inflation hurts everybody except those in debt while unemployment hurts 5%, 10%, 15% depending on its severity. Having lived through the late 70’s and early 80’s, I surely have not panicked over either the inflation rate or the Fed’s raising of interest rates. Indeed, the rise in interest rates is having the side effect of driving zombie businesses out of business— creative destruction. Now a lot of people are going to suffer in the shakeout and their suffering will be exacerbated because the GOP controlled House will try and make the recession as severe as possible in hopes that there will be a real red wave in 2024. My only consolation is that a good number of the most severely impacted are the very folks who gave the GOP control of the House either by voting GOP or not showing up at all. I hope that the Hunter Biden investigations helps with their hunger pangs and keeps them warm next winter.
Inflation also doesn’t hurt the people whose asset gains, indexed annuities/ retirements and/or wage increases fuel the inflation. Taking away the people with debt, indexed cash flow and the people who had assets or wage gains and you aren’t left with that many people who actually suffered. Certainly far, far less than everyone.
sigh . . .
Why not just do away with the Federal Reserve and go with a Digital Dollar?
Wikipedia: USD Coin (USDC) is a digital stablecoin pegged to the United States dollar. USD Coin is managed by a consortium called Centre, which was founded by Circle and includes members from the cryptocurrency exchange Coinbase and Bitcoin mining company Bitmain, an investor in Circle. USDC is issued by a private entity and should not be confused with a central bank digital currency (CBDC). …
NY Times: Contagion in Crypto?
… The development comes as Sam Bankman-Fried, FTX’s founder, delivered a series of bombshell admissions … Contagion fears are growing — and hitting notable investors. Mr. Bankman-Fried convinced Anthony Scaramucci, the founder of the investment firm SkyBridge Capital, to buy $10 million worth of FTT, the digital token of FTX, as a condition for Bankman-Fried to inject $45 million into SkyBridge in September, according to The Financial Times. FTT’s value has plunged by more than 90 percent over the past two weeks. …
Looks like Giselle and Brady are in trouble as social sponsors of FTX
Crypto-curious? Read this:
The nut grafs:
“It would be great if the FTX debacle was somehow unusual, and not just a badly run version of the kind of scams we’ve seen throughout financial history, particularly in the crypto space. A lot of focus is now going into how to properly regulate crypto, as if it’s a legitimate financial instrument that we need to standardize. The better way to look at it is as a vice or a deliberate fraud scheme, like cigarettes, illegal drugs, multilevel marketing operations, or gambling.
“These products have vastly different regulatory environments, from law enforcement approaches, to sin taxes, to warning labels, to advertising bans, to assistance for the addicted. Some combination of that seems like a better idea than trying to maintain the fiction that crypto is a legitimate, productive wealth-building instrument.”
Read it. Just not wealthy to go gambling. I do not have hundreds of $millions to toss Scaramucci a bone. Why people would trust a weasel like him is unbelievable.
Well, he did work for Trump, so there’s that.
Crypto was once a pretty good way to buy a pizza, if no longer a Tesla.
I’ve noticed that Coinstar machines (at your supermarket, most likely) are a superbly good way to turn your spare change into cryptocurrency.
Supposedly dogecoin can still be used to buy a Tesla, but not bitcoin.
Tesla lost a lot of money on bitcoin.
you can, after all, say the same thing about gold.
Is This the End Game for Crypto?
NY Times – Paul Krugman – Nov 17
The comparison of gold to crypto is specious. Gold is a physical thing and has value for, e.g., jewelry and electronics. Also, gold is scarce on the planet and can’t be synthesized by humans like diamonds and crypto.
The distinction here is that a key definition of “money” is that it is a store of value. The history of the dollar demonstrates that it is a store of value, recognized by the US government for payment of debts public and private. The dollar is also the world’s reserve currency. Gold is, and has long been, a store of value. The same cannot be said of crytpocurrency.
Could a cryptocurrency emerge that could function as money? Sure. Has it? Not yet.
Specious is a word that should be used with care. It usually means “I didn’t think of it that way.”
Money is more than “a store of value,” in fact the current inflation should remind us that it is not a particulary good store of value.
Neither is gold. It suffers from inflation and deflation just like other “monies”. And it’s hard to carry around, and needs at least a cerified scale to determine the value of a bit of it, not to mention Archimedes Eureka principle. Abd those times when it might be useful tend to be those times where it is dangerous to carry around..or find a buyer.
David Graeber has some good thoughts about the nature of money. I can’t remember if “Debt, the first 5000 years” or “The origiin of everything”
is the book with the best discussion of it.
“specious” “specie” ? ha ha.
One of the great mysteries of our culture is why voters would think electing Republicans would restrain inflation or, indeed, benefit the economy in any way.
The word “think” is doing a lot of work in that sentence.
Why do people believe in sasquatch, UFOs, creationism? They’re certainly not thinking.
As in, ‘If you’re so rich, why aren’t you smart?’
oh, heck, Joel, we were doing so well.
i agree that people don’t think. even i can’t think very usefully about inflation. seems to me it’s bad for lenders (banks) and good for borrowers. but it gets complicated from there. no need to drag creationism into the argument. the trouble with creationists is their religion is bad. the trouble with anti-creationists is that their science is bad. science has nothing to do with “creation,” and no god who can’t create evolution by survival of the fittest is worth the incense.
as for that, I can’t imagine what kind of “thinking” would disprove UFO’s, Sasquatch, or the great pumpkin. I don’t believe in any of those things, but not because of thinking about them.
Well, you might ask the proponents for some evidence?
I don’t think evidence requires much thinking. Nor do I think the absence of evidence is evidence of the absence of thinking. On one of those subjects there is plenty of evidence but not the sort you are thinking of.
[praphrase:] “when his disciples asked him why he always spoke in parables, he said ‘lest the wicked hear, and hearing turn, and i should save them.'” [that is evidence in itself [not proof] and evidence of why he may not want to produce what the wicked would call evidence.] i realize this will mean nothing to you. and of course it has nothing to do with special creation, upon which deponent sayeth naught. now, me, i know nothing about organic chemistry, so i don’t talk about it.
oh, slight correction: evidence probably does require thinking if you are going to make anything out of it. but as Lincoln said, “if I see a turtle on a fence post, i don’t think he got there by himself.” But Lincoln was a good thinker, despite the people who get relief by calling him a racist.
I have read that while Lincoln abhorred slavery he did not care to be ‘in the presence of’ Black people. But he eventually came to like or admire Frederick Douglass, the MLK Jr of his day.
Confronting a President: Douglass and Lincoln
After 2008, 12 years of unprecedented QE included the central banks’ massive buying of sovereign debt. This resulted in historically low to negative sovereign debt interest rates. Against the development of inflation was the initial liquidation of toxic assets and low-cost globalized manufactured goods from China whose CCP government facilitated a corporate debt to GDP ratio of 160%. Over 30 years Chinese labor cost have substantially increased and property values in which most Chinese citizens store their wealth are overvalued at 12 to 30 times annual-earnings. With massive 2020-2021 Covid money printing, consumer inflation finally emerged.
After 11 months of unprecedented US and western central banks’ accelerated interest rate increases and with concurrent 40-90 billion a month of Fed book asset liquidations, asset valuations, especially those associated with margin debt ownership, can be expected to deleverage in a nonlinear manner.
In 1636 to 1637 the Dutch tulip had its run. In 2022 US tulip cryptocurrency is having a similar, albeit, shorter run.
Each individual asset: an equity,a crypto, gold, silver, oil, debt as an asset … is ultimately valued in proportion to the composite worth of all existing debt, money supply, and cumulative valuation of all of the system’s assets. Crypto, as a very leveraged asset, represents the canary-in-the-coal-mine of nonlinear devaluation. Crypto’s devaluation contributes to the lessening of total worth of the entire asset-debt system to which the value of each individual asset is linked. In the setting of n historical 12 years of QE and a historical 11 months of QT, a synergistic nonlinear depreciation of all assets is not unexpected.
Do the growth and decay of all asset valuations follow simple recurrent pathways to peak and nadir valuations? I think so. 6 December 2022 represents a nadir point for the global system’s assets following one such recurrent system pathway. ( Money exiting from nearly all assets will flow into the US debt market driving interest rates lower)
you may be right..how would i know? but by the time your comment ends I have seen too many high abstractions to have any faith that it means anything. this is not a put down: just a reaction.