THE ECONOMY

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I've been attempting to read the current reporting on inflation, energy prices etc and just glazing over. Anyone keenly following this stuff and able to explain what's happening and how serious it is?
 

Clinamenic

θερμοδυναμικός καπιταλιστής
This was a helpful video, in terms of explaining debt and credit and how cycles can spontaneously (or artificially) arise. But I still don't understand how the Federal Reserve raising interest rates for commercial banks will somehow exacerbate inflation, maybe by increasing the likelihood that these banks will become indebted and unable to meet obligations, thus warranting more money to be added to the system



But I'm also confused about when people complain about the federal reserve printing money. Pretty sure the printing/engraving office is under the department of the treasury, whereas the Fed is a pseudo-private organization chiefly in charge of interest rates, i.e. controlling inflation. I understand in theory how "large scale asset purchases" AKA quantitative easing can add to the monetary system, by the fed issuing credit to financial institutions in exchange for certain assets.
 

Clinamenic

θερμοδυναμικός καπιταλιστής
Also a really helpful four-lecture series by Bernanke, the chairman of the federal reserve before Yellen, who held the office before Powell.

 

Clinamenic

θερμοδυναμικός καπιταλιστής
One of the things he explained was how helpful the FDIC was in terms of securing the confidence of depositors, but I don't know much about it beyond what he said here. Strange how the trustworthiness of the system is partially determined by the existing trust in the system, as in a catch-22. The system needs widespread trust in order to function properly and justify the trust.
 

Clinamenic

θερμοδυναμικός καπιταλιστής

Also this was helpful in terms of shedding light on the 2008 financial crisis.
 

Clinamenic

θερμοδυναμικός καπιταλιστής
This was also a point made by Yanis Varoufakis in a couple talks. While a meteorologist may conjecture about the weather, their conjecture won't impact the weather. But if a prominent economic or financial analyst conjectures about the economy, it could well impact the economy.
 

Clinamenic

θερμοδυναμικός καπιταλιστής
Also a really helpful four-lecture series by Bernanke, the chairman of the federal reserve before Yellen, who held the office before Powell.

Also he gave a great explanation of the circumstances of a bank run, that if the bank has short-term liabilities (deposits that can be withdrawn at a moment's notice) and long-term assets (loans that take months/years to be paid back with interest), then they run the risk of entering a situation wherein they do not have the assets to actually meet the demands of depositors.

Granted, this is really only a problem during a bank run, i.e. when there is a mass loss of confidence in the financial institution and/or financial system most broadly. As it is, there is not enough cash in the US monetary system to back up all the checking and savings accounts. Again, this isn't necessarily a problem, largely thanks to the FDIC, from what I gather.

edit: switched "monetary base" to "monetary system" because apparently MB means something distinct within the whole system.
 
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Clinamenic

θερμοδυναμικός καπιταλιστής
Linen money / coinage comprises only a minority (M0) of the monetary system/supply.

Screen Shot 2021-11-17 at 12.04.18 PM.png

Screen Shot 2021-11-17 at 12.07.02 PM.png

So here is M1, which seems a bit stark, not sure if I'm understanding properly.

Screen Shot 2021-11-17 at 12.04.44 PM.png
 

Clinamenic

θερμοδυναμικός καπιταλιστής
I'm under the impression a lot of these experts don't know. Ultra complex ambiguous systems.
 

148 I.Q. Magical Thinker

Bamber Clatscoigne
The Fiat Standard just came out, it explains how the present financial system came about, how it has survived, why it's fucked, and what must replace it.

Weimar style hyperinflation is on the way now, to compliment the Weimar-style joke administration.
 

IdleRich

IdleRich
This was a helpful video, in terms of explaining debt and credit and how cycles can spontaneously (or artificially) arise. But I still don't understand how the Federal Reserve raising interest rates for commercial banks will somehow exacerbate inflation, maybe by increasing the likelihood that these banks will become indebted and unable to meet obligations, thus warranting more money to be added to the system.
Maybe you're talking of a specific time when that did happen, but as a rule, inflation moves in thd opposite direction to interest rates so Fed raising the rate is supposed to control inflation, not exacerbate it (all other things being equal).

The higher rate makes the money more desirable and thus increases its value, which lowers inflation.

Or, think of it like this. Suppose that the interest rate in UK and also in US is 3 percent. If the interest rate rises to 4 in the US then someone might think ooh, I will borrow a million pounds at 3 percent and then if I change it to dollars I will be able to lend it at 4 percent, this coining in 1 percent of that million (less what they lose on the currency transaction) risk free.

So - supply and demand - as more people want dollars the price increases, which is anti-inflationary.
 

IdleRich

IdleRich
But I'm also confused about when people complain about the federal reserve printing money. Pretty sure the printing/engraving office is under the department of the treasury, whereas the Fed is a pseudo-private organization chiefly in charge of interest rates, i.e. controlling inflation. I understand in theory how "large scale asset purchases" AKA quantitative easing can add to the monetary system, by the fed issuing credit to financial institutions in exchange for certain assets.
When they say that the Fed is printing money they don't literally mean that is engraving money, they mean they are increasing the money supply by magically buying assets with money that didn't exist before (as you say later on).

Actual printing is normally done by a private company. De La Rue does the UK and many other countries not sure who makes dollars though

 
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