Genesis of Today's Inflation

[piezoe]

You misstated the function and mandate of the Fed, plain and simple.

You give me power I don't have . It's not possible for me to mis-state the fed's mandate as I never stated it in the first place. Why would I? We all know what it is. I simply described some Fed-Treasury interactions and Fed-Bank interaction as the way they "functionally" appear with the intent of dispelling a few common myths.

One very common myth is that the Fed is printing when it credits reserve accounts in exchange for Treasuries. Side by side examination of Treasury-Fed books will reveal there is only one net printing , and that is best attributed to the Fed's crediting the Treasury's reserve account to cover a net Treasury overdraft. There is not still another net printing when the Fed credits bank reserve accounts in exchange for Treasuries, although it can appear as an additional printing until one looks at what happens If the Fed holds a security on their books to maturity. Then it will be clear there is only one net printing, not two. Two would violate the Constitution, which gives only Congress the power to spend money and to coin, i.e. create, new outside money. The fed can not legally create new money beyond what the Congress authorizes to be created!! The creation step has already happened before the Fed buys Treasuries on the secondary market. This is an absolutely key point that blows several myths out of the water. The Fed can, and does, however, interchange freely three forms that outside money can take. These forms are 1) bank reserves, 2) treasuries and 3) federal reserve notes.

If you want to state that i am wrong, you can do that, but I think such statements will carry more wait if you state why I am wrong. You stated that I am wrong but did not say why. Instead you went on to make remarks not in dispute. What is in dispute between us is whether the Fed is part of Government or not. I stated it is, and I subsequently supported that statement with facts that are not in dispute, at least you have not disputed them.

 

[piezoe]

Still more support for the original thesis of this thread, viz., the Trump Tariffs , a terrible idea left in place by the Biden Administration, are making a significant contribution to our too high domestic inflation rate. C'mon Joe, what are you waiting for? Lift those tariffs, that would also be a step toward thawing our relationships with China. We need China on our side.

see today's Bloomberg: https://www.bloomberg.com/news/arti...us-commerce-chief-says?srnd=premium#xj4y7vzkg

Lifting Tariffs on Goods May Make Sense, US Commerce Chief Says

• Raimondo says president open to ideas that will tame inflation
• Some steel, aluminum duties to stay to protect US workers

Gina RaimondoPhotographer: Sarah Silbiger/The New York Times/Bloomberg
By
Ana Monteiro

June 5, 2022, 10:04 AM CDT

President Joe Biden’s commerce chief said it “may make sense” to lift tariffs on some goods as a way to tame the hottest inflation in almost four decades.

“Steel and aluminum -- we’ve decided to keep some of those tariffs because we need to protect American workers and we need to protect our steel industry; it’s a matter of national security,” Gina Raimondo said in an interview Sunday on CNN’s “State of the Union.” “There are other products -- household goods, bicycles -- it may make sense,” she said, when asked if the administration would consider ending duties on billions of dollars of imports from China.
[for the complete article go to the link given above]

 

[Overnight]

...
“Steel and aluminum -- we’ve decided to keep some of those tariffs because we need to protect American workers and we need to protect our steel industry; it’s a matter of national security,” ...

National security? Bitch, you look old enough to remember WW II, but you obviously don't really know what "national security" means. Oh, Gina Raimondo. Italian. One of the Axis powers in the war. Ooops!

 

[UsualName]

Just an additional thought on the Fed…

What I think often gets lost in the discussion of the Fed is Congress essentially changed the value of money or even the concept of money when it gave the Fed a dual mandate. Now money is not only valued by purchasing power but employment as well.

I get inflation is running hot right now but we should not ignore the employment situation when discussing the Fed because I assure they do not.

 

[Rickshaw Man]

Come on fellas, this is not a productive discussion. Everyone should know when you print 5,000,000,000,000 in two years your going to have runaway inflation. Crude oil hit 121.38 today, the national average for gasoline is $4.98...this is bad real bad.

 

[piezoe]

Sleepy Joe starts PRINTING^ like Mad!​

You would think with inflation running so high due to all that printing that the dollar futures would go down, not up! The Dollar should become worthless due to all that printing. Could it be our inflation is caused by something else? Everyone, at least everyone on ET, knows inflation is always caused by printing. (Where is Milton Friedman when we need him? Uncle Milty would know.)

https://tvc-invdn-com.investing.com/data/tvc_490595db8230919c986f8c57cde60b40.png

Come on fellas, this is not a productive discussion. Everyone should know when you print 5,000,000,000,000 in two years your going to have runaway inflation. Crude oil hit 121.38 today, the national average for gasoline is $4.98...this is bad real bad.

 

[savoir]

***
You would think with inflation running so high due to all that printing that the dollar futures would go down, not up! The Dollar should become worthless due to all that printing. ***

Your premise is faulty. Ask yourself what does inflation measure and compare that to what the dollar index measures. High inflation in the US doesn’t necessarily mean a weak dollar. We aren’t going to always repeat the 1970s.

If you don’t think a massive increase in the money supply leads to inflationary pressures, you need to learn basic economics.

 

[piezoe]

Your premise is faulty. Ask yourself what does inflation measure and compare that to what the dollar index measures. High inflation in the US doesn’t necessarily mean a weak dollar. We aren’t going to always repeat the 1970s.

If you don’t think a massive increase in the money supply leads to inflationary pressures, you need to learn basic economics.

I guess my sarcasm intended for Rickshaw didn't work on you. Maybe we need a Sarcasm Smiley face as a warning. In my opinion you are certainly correct here: "High inflation in the US doesn’t necessarily mean a weak dollar."

However, This: "... [a] that massive increase in the money supply leads to inflationary pressures" although quite correct, as you have carefully worded your statement, is going to mislead a lot of people to think that's all you need to get inflation going. It usually isn't. Of course if you increase the money supply without limit and don't do the same with productivity, you will at some point arrive at inflation.

M2 increased from ~8.5 T to ~15T from 2010 through 2015 largely due to QE. Some would call that "massive"; yet hardly a whimper of inflation resulted. Then the Pandemic hit. By the end of 2020 M2 went to ~19T; no monstrous inflation quite yet. M2 kept climbing toward 22T in 2022, and inflation hit big time. To produce inflation, sufficient M2 is needed, but except in rare circumstances, whether you get inflation will depend too on the underlying state of the economy, and possibly externalities that the government may not be able to control.

My gripe with the Fed is that they didn't pull the plug soon enough. I, and others, said so back in late early 2021. The Fed didn't call me, or I would have happily told them what to do . They should have listened to us! They didn't start draining excess reserves soon enough. But to give the Fed their due, this current inflation is largely being driven by externalities. It is not caused by deficits alone, but QE on top of deficits has been an enabler.

The effect of Deficits on inflation is typically muted. Although deficits help inventories to clear and stimulate both production and demand for credit, nevertheless deficits end up not not increasing reserves because they will subsequently be matched, to the penny, to new Treasury issues which will drain every penny of new reserves that otherwise would have been created. The end result is that deficits by themselves leave reserves unchanged. QE on the other hand swells reserves and puts downward pressure on rates. It is used intentionally to increase demand for credit and boost the money supply. It's Achilles heel during recessions is due to private sector penny pinching and not spending because of the desire to deleverage.

Deficits result in "printing". QE is, in net effect, not printing, but rather an exchange of interest paying stored money for spendable money in the form of bank reserves.

 

[easymon1]

 

[MacBookProHo]

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100 years from now.... I'm sure America will be a darker, stranger, weirder, boring, depressing, country place. As is, the World for that matter as well. That was written 100 years ago, and holds very true to today, still.

History of humanity repeats itself...from the Ancient Egyptians to modern day. Income and social and power and control inequality will become even more drastic. The trick is to do it very slowly, and make the dumb masses realize or not realize it's happening and unfolding before their very eyes.