All I know is that the "real value" of my low risk assets (bonds, CDs, savings) is going down via "inflation" in my retirement years. I view it as the value of money going down rapidly.
Being retired makes me too late for maintaining my retirement savings in Equities or Land when my planning horizon is about a decade, at the long end. The "real wealth" of a lifetime of savings that is being stolen by inflations appears to be transfered to the government and the connected elites.
What happens when a reserve currency like the $ goes inflationary unstable? In Brazil in the 60's when the money was crashing in value and planning for future projects, businesses, budgets or future estimation became impossible, in the cruzeiro. However, we had dollars to plan a cement plant, when we had no idea of the cruzerio cost of a piece of rebar just a month in the future.
How will the world plan future facilities or investments when the dollar becomes becomes a non-viable store of value? Will we all become like the Brazilian poor who would buy rebar or scrap steel to maintain some real value in the curzerios they earned.
Sorry, Arnold. The transition from the pre-1980 to today's financial intermediation system has been quite difficult to understand for those that still rely on the old analytical approach based on commercial banking and its special relationship with the central bank. A new approach has yet to emerge but it must separate the modern systems of payments from financial intermediation and recognize that today central banks borrow from "their" lower-level intermediaries (not last but often first) just to lend their government or invest in a few types of financial assets issued by some corporations. Given the huge size of some central banks, starting with the Fed and the ECB, they can play games selling and buying government bonds and those financial assets but their impact on their prices and yields are not as important as old economists like you want to believe (the size of most relevant markets is too large for them "to control" prices and yields). To understand today prices and yields you have to study carefully what has happened in the past 40 years, including how expectations have often been frustrated or exceeded. BTW, remember that to understand liquidity management of all asset holders and issuers we need information that we don't have.
Savings multiplier seems likely to be mostly true.
Yet the interest rates don't go up because the wave of cash money did not cause most consumer good prices to go up, because the wealth created was mostly added to the financial accounts of folks like Gates & Buffett have long ago bought all the consumables they want. Almost no additional demand by the wealthy for most Main Street goods, nor services. There's no shortage of consumer goods - and only with a shortage, at that price, does the price go up.
In the 60s and 70s, the huge wave of boomers becoming middle class resulted in constant demand push and price increases, along with higher interest rates and lots of projects with good ROIs. Not nearly so many good projects today, unless it's a mega project approved by and supported by the gov't. Like Elon Musk projects.
The cash goes into financial assets & crypto ... and houses (in good areas). And, if there are gov't influenced supply chain problems and reduced energy production (with higher prices), lots of general prices increase just like inflation. It is inflation - but still less than expected by the gov't spending.
“Congress authorized trillions in new government spending during the pandemic. This creates paper wealth without producing anything.” No comprendo. The government spent more, but the extra money was obtained largely from the public by borrowing from private parties. So the money was not spent as it would have been done by these private parties--instead, it was spent by the government. But that does not “create paper wealth.”
Now if, thanks to over-expansive monetary policy, government spending had been financed not by borrowing but by money-creation, *that* would have created paper wealth. Then we could tell an Austrian story, about how prices were slow to rise and so (certain) people temporarily *felt wealthier*, and wanted to save more than usual. The cause would be--not government spending, but—excessive money-creation.
I too am skeptical about anyone truly understanding fully the prestidigitations of Fed policy. I suspect it's much more psychological than anything else. On the other hand, we know that people make financial decisions based on their perceptions of their wealth, including not only asset prices but prospects for their future income and the cost of future expenses. That calculation, too, is more of a feeling than a calculation.
All I know is that the "real value" of my low risk assets (bonds, CDs, savings) is going down via "inflation" in my retirement years. I view it as the value of money going down rapidly.
Being retired makes me too late for maintaining my retirement savings in Equities or Land when my planning horizon is about a decade, at the long end. The "real wealth" of a lifetime of savings that is being stolen by inflations appears to be transfered to the government and the connected elites.
What happens when a reserve currency like the $ goes inflationary unstable? In Brazil in the 60's when the money was crashing in value and planning for future projects, businesses, budgets or future estimation became impossible, in the cruzeiro. However, we had dollars to plan a cement plant, when we had no idea of the cruzerio cost of a piece of rebar just a month in the future.
How will the world plan future facilities or investments when the dollar becomes becomes a non-viable store of value? Will we all become like the Brazilian poor who would buy rebar or scrap steel to maintain some real value in the curzerios they earned.
Sorry, Arnold. The transition from the pre-1980 to today's financial intermediation system has been quite difficult to understand for those that still rely on the old analytical approach based on commercial banking and its special relationship with the central bank. A new approach has yet to emerge but it must separate the modern systems of payments from financial intermediation and recognize that today central banks borrow from "their" lower-level intermediaries (not last but often first) just to lend their government or invest in a few types of financial assets issued by some corporations. Given the huge size of some central banks, starting with the Fed and the ECB, they can play games selling and buying government bonds and those financial assets but their impact on their prices and yields are not as important as old economists like you want to believe (the size of most relevant markets is too large for them "to control" prices and yields). To understand today prices and yields you have to study carefully what has happened in the past 40 years, including how expectations have often been frustrated or exceeded. BTW, remember that to understand liquidity management of all asset holders and issuers we need information that we don't have.
Savings multiplier seems likely to be mostly true.
Yet the interest rates don't go up because the wave of cash money did not cause most consumer good prices to go up, because the wealth created was mostly added to the financial accounts of folks like Gates & Buffett have long ago bought all the consumables they want. Almost no additional demand by the wealthy for most Main Street goods, nor services. There's no shortage of consumer goods - and only with a shortage, at that price, does the price go up.
In the 60s and 70s, the huge wave of boomers becoming middle class resulted in constant demand push and price increases, along with higher interest rates and lots of projects with good ROIs. Not nearly so many good projects today, unless it's a mega project approved by and supported by the gov't. Like Elon Musk projects.
The cash goes into financial assets & crypto ... and houses (in good areas). And, if there are gov't influenced supply chain problems and reduced energy production (with higher prices), lots of general prices increase just like inflation. It is inflation - but still less than expected by the gov't spending.
“Congress authorized trillions in new government spending during the pandemic. This creates paper wealth without producing anything.” No comprendo. The government spent more, but the extra money was obtained largely from the public by borrowing from private parties. So the money was not spent as it would have been done by these private parties--instead, it was spent by the government. But that does not “create paper wealth.”
Now if, thanks to over-expansive monetary policy, government spending had been financed not by borrowing but by money-creation, *that* would have created paper wealth. Then we could tell an Austrian story, about how prices were slow to rise and so (certain) people temporarily *felt wealthier*, and wanted to save more than usual. The cause would be--not government spending, but—excessive money-creation.
I too am skeptical about anyone truly understanding fully the prestidigitations of Fed policy. I suspect it's much more psychological than anything else. On the other hand, we know that people make financial decisions based on their perceptions of their wealth, including not only asset prices but prospects for their future income and the cost of future expenses. That calculation, too, is more of a feeling than a calculation.