A Great Achievement in Central Banking (II) | 120 comments (120 topical, editorial, 0 hidden)

Re: Dumb question (none / 0)

Won't that be inflationary? Magicking money from nowhere, which is not (like in Switzerland) consumed by hot money flows, but actually goes into the real economy?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Nov 24th, 2011 at 05:39:52 PM EST
[ Parent ]

Re: Dumb question (none / 0)

Using a private intermediary who goes to the CB instead of the sovereign doesn't change that money is magicked into existence.

by generic on Thu Nov 24th, 2011 at 06:32:34 PM EST
[ Parent ]

Re: Dumb question (none / 0)

The point of subsidizing the intermediaries is to get them to release some of the money they're hoarding. If you don't want to do that, either you tax it or you inflate it away from them.

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

by Carrie (migeru at eurotrib dot com) on Fri Nov 25th, 2011 at 02:47:04 AM EST
[ Parent ]

Re: Dumb question (none / 0)

Do we have to care about hoarded money once we stop treating the deficit as a goal in and of itself?

by generic on Fri Nov 25th, 2011 at 05:03:00 AM EST
[ Parent ]

Re: Dumb question (none / 1)

Ideally you want the hoarders to stop screwing around playing odd and arcane (and dangerous) "Financial Engineering" Games and invest the money in something worthwhile.

Could feed the world for a hundred years for the amount of money traded in the various markets in one day.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Nov 25th, 2011 at 05:15:12 AM EST
[ Parent ]

Re: Dumb question (none / 0)

But they are not really hoarding it are they? And offering them a risk free return of a few percent won't stop them from trying to get twenty.

by generic on Fri Nov 25th, 2011 at 05:47:16 AM EST
[ Parent ]

Re: Dumb question (none / 1)

They're not Scrooge McDuck, piling the stuff in their underground vault.

"Hoarding" is an elastic term, and perhaps not the best way to put it. In my view, current government policy across the First World privileges debt over equity, the FIRE economy over the Real World© Economy and has done so for decades. And, across the First World, we can see where this leads: micro- and meso-economic insanity.

There's no way a firm actually making actual goods and/or services can approach the Return on Investment routinely made in the FIRE sector. Financial firms, using the privileging of debt, can leverage their equity capital by hundreds of percent so they are, literally, making over 100% ROI per annum. They can do that by "hoarding" - playing the futures, options, CMO, CDO, & so on markets - rather than investing in the less profitable business loan and business development.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Nov 25th, 2011 at 06:27:27 AM EST
[ Parent ]

Re: Dumb question (4.00 / 2)

The current policy is to protect at all costs the purchasing power of the net worth of money hoarders.

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

by Carrie (migeru at eurotrib dot com) on Fri Nov 25th, 2011 at 07:13:12 AM EST
[ Parent ]

Re: Dumb question (none / 1)

If you're spending that money into an economy below full employment/capacity, it doesn't need to be inflationary.

To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis

by Carrie (migeru at eurotrib dot com) on Fri Nov 25th, 2011 at 02:37:24 AM EST
[ Parent ]

Re: Dumb question (none / 1)

But note, at times, you want to feed-in money to reduce unemployment and kick-start the economy into a higher level of activity.

Despite a hundred years of Neo-Classical propaganda, inflation is not necessarily and always a Bad Thing.

(I know I'm not telling you anything you didn't already know. I'm merely using your comment for my own nefarious purposes. :-)

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Nov 25th, 2011 at 06:02:00 AM EST
[ Parent ]

Re: Dumb question (none / 0)

Politicians realising that money is created out of thin air (either they pass by the banks or not) might create temptations, but is not really related to wheter the money pass by the bank. I would say that it is the constitutional and cultural constraints on how much deficit is accepted that is the real constraint here anyway.

And of course, if you create money and employ otherwise unemployed people that produce something of value, then the pool of goods and services that the money pool is related to also grows.

And also of course, the main source of inflation today appears to be from banks borrowing to private speculation.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Nov 25th, 2011 at 07:13:25 AM EST
[ Parent ]

A Great Achievement in Central Banking (II) | 120 comments (120 topical, 0 editorial, 0 hidden)

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