That's hilariously accurate.
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fbonetti commented on Software reuse is more like an organ transplant than snapping Lego blocks (2011) johndcook.com/blog/2011/0... · Posted by u/nilsandrey
This is just the start. Landlords would be smart to work with tenants to share some of the loss and renegotiate temporary adjustments to keep at least some revenue coming in because the heady days of high demand for rental units is likely behind us for a while.
It'll be worse in downtown areas. I've heard from multiple firms that are looking at downsizing their expensive office space and continuing to allow employees to work from home. if a person doesn't have to work downtown they will often choose not to live there either.
COVID is going to change the face of urban real estate. So if you have a tenant, they're gold and do what you can to keep them.
You’ve got it backwards when it comes to residential real estate. More people become renters during a recession. Vacancies reduced dramatically after 2008.
fbonetti commented on Federal Reserve balance sheet trends federalreserve.gov/moneta... · Posted by u/TekMol
I'm a little late, but I want to answer for the sake of completeness.
>>"Honestly I don't know what point you're trying to make, or what deficits or surpluses have to do with anything."
You say "Inflation is caused by additional dollars chasing the same number of goods". We agree with that (it could be a supply problem too, but that's another subject).
Now, it seems to me that we agree also that a government deficit can be inflationary. So, by definition, a government deficit is adding money to the economy.
My question is: if a government deficit is adding money to the economy, what a government surplus is doing? That's the meaning of "taxes destroy money".
>>" The question you need to ask yourself is, where did those reserves come from? Another question you need to ask is, when Fed engages in QE, why does the monetary base increase? "
Monetary base increase because that is how it's defined.
I think that the problem here is that you subscribe to the fractional reserve banking theory that, I'm afraid, is false. I suggest reading this report from the Bank of England (1) about how money creation works. A private bank lending is not limited for the quantity of reserves available in the system, because central banks have to keep the system of payments working and are targeting an interest rate. So, central banks have to answer any request for additional reserves.
The corollary to all this, is that it doesn't matter if the asset of the private bank is a treasury or reserves in the banking system, banks can lend anyway. The central banks sell treasury to the banks for controlling the interest rate, not the quantity of money.
1. - https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
You also seem to be arguing that centrals banks don't create new money, which is an odd assertion, especially for a proponent of MMT. From the article you posted:
> "QE involves a shift in the focus of monetary policy to the quantity of money: the central bank purchases a quantity of assets, financed by the creation of broad money and a corresponding increase in the amount of central bank reserves. The sellers of the assets will be left holding the newly created deposits in place of government bonds."
> "QE has a direct effect on the quantities of both base and broad money because of the way in which the Bank carries out its asset purchases. The policy aims to buy assets, government bonds, mainly from non-bank financial companies, such as pension funds or insurance companies. Consider, for example, the purchase of £1 billion of government bonds from a pension fund. One way in which the Bank could carry out the purchase would be to print £1 billion of banknotes and swap these directly with the pension fund. But transacting in such large quantities of banknotes is impractical. These sorts of transactions are therefore carried out using electronic forms of money."
fbonetti commented on Federal Reserve balance sheet trends federalreserve.gov/moneta... · Posted by u/TekMol
I'm a little late, but I want to answer for the sake of completeness.
>>"Honestly I don't know what point you're trying to make, or what deficits or surpluses have to do with anything."
You say "Inflation is caused by additional dollars chasing the same number of goods". We agree with that (it could be a supply problem too, but that's another subject).
Now, it seems to me that we agree also that a government deficit can be inflationary. So, by definition, a government deficit is adding money to the economy.
My question is: if a government deficit is adding money to the economy, what a government surplus is doing? That's the meaning of "taxes destroy money".
>>" The question you need to ask yourself is, where did those reserves come from? Another question you need to ask is, when Fed engages in QE, why does the monetary base increase? "
Monetary base increase because that is how it's defined.
I think that the problem here is that you subscribe to the fractional reserve banking theory that, I'm afraid, is false. I suggest reading this report from the Bank of England (1) about how money creation works. A private bank lending is not limited for the quantity of reserves available in the system, because central banks have to keep the system of payments working and are targeting an interest rate. So, central banks have to answer any request for additional reserves.
The corollary to all this, is that it doesn't matter if the asset of the private bank is a treasury or reserves in the banking system, banks can lend anyway. The central banks sell treasury to the banks for controlling the interest rate, not the quantity of money.
1. - https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
> My question is: if a government deficit is adding money to the economy, what a government surplus is doing? That's the meaning of "taxes destroy money".
It's rare for the federal government to run a surplus, but it did have one for four years straight in 1998, 1999, 2000, and 2001[1]. During that that time, the monetary base increased 32%[2] and the M2 money supply increase 23%[3].
No matter how you look at it, despite the government running a surplus, the money supply continued to increase. How do you square that with your claim that surpluses remove money from the economy?
[1] https://fred.stlouisfed.org/series/FYFSD
fbonetti commented on Federal Reserve balance sheet trends federalreserve.gov/moneta... · Posted by u/TekMol
> Inflation is caused by additional dollars chasing the same number of goods.
But if there's a fall in aggregate demand at a given price level, there are _fewer_ dollars chasing the same number of goods for a period of time. So if government spending is greater than taxation for that given period, it doesn't necessarily cause inflation.
> the bank exchanges an asset (like a treasury) in exchange for reserves (base money)
The "monetary base" increases because of the way they define the monetary base. In the old days, the money in reserve accounts was convertible into gold, and the money in the Treasury bond accounts wasn't, so they count the money in the reserve accounts as part of the "monetary base" but not the money in the Treasury bond accounts.
> But if there's a fall in aggregate demand at a given price level, there are _fewer_ dollars chasing the same number of goods for a period of time. So if government spending is greater than taxation for that given period, it doesn't necessarily cause inflation.
I actually completely agree, but with a caveat. It may not cause inflation in terms of this years price level being higher than last years price level, but it will cause a decline in the purchasing power of the dollar. For example, let's say in the absence of intervention the price level would fall by 2%, but with intervention the price level would stay the same. That's still a 2% decline in purchasing power.
> The "monetary base" increases because of the way they define the monetary base.
The monetary base is defined as the sum of all currency (including coin) plus bank deposits. It increases or decreases completely at the Fed's discretion, because the Fed has the unique ability to create reserves. This isn't some semantic trickery.
fbonetti commented on Federal Reserve balance sheet trends federalreserve.gov/moneta... · Posted by u/TekMol
>>"This is one of the most absurd claims of the supposedly "descriptive" MMT. Taxation does not delete money from the economy. When the federal government collects taxes, it doesn't take that money and burn it in a giant pit. It turns around and immediately spends that money."
I didn't know that idea was so polemic.
So, what you are saying is that government deficits are inflationary because they add money to the economy, but, on the other hand, government surplus don't retire money from the economy?
>>"This is completely false. The Fed creates new reserves (base money) in order to buy assets."
Yes, but the assets the Fed buy (when practicing QE) are in the accounts of the commercial banks in the Fed. After buying them, those assets are not there anymore, and, instead there is money (1). And money is basically a government bond that pay 0% interest.
> So, what you are saying is that government deficits are inflationary because they add money to the economy, but, on the other hand, government surplus don't retire money from the economy?
Honestly I don't know what point you're trying to make, or what deficits or surpluses have to do with anything. A deficit or surplus is merely the delta between total revenues and an arbitrarily defined budget.
Inflation is caused by additional dollars chasing the same number of goods. Printing money does not create goods and services - it merely decreases the value of each dollar relative to everything else. If I had a machine that could create an unlimited amount of gold at zero cost, the price of gold would approach zero if I made and sold enough of it. I don't know why you would think dollars would be any different.
> Yes, but the assets the Fed buy (when practicing QE) are in the accounts of the commercial banks in the Fed. After buying them, those assets are not there anymore, and, instead there is money (1). And money is basically a government bond that pay 0% interest.
Yes, the bank exchanges an asset (like a treasury) in exchange for reserves (base money). The question you need to ask yourself is, where did those reserves come from? Another question you need to ask is, when Fed engages in QE, why does the monetary base increase?
fbonetti commented on Federal Reserve balance sheet trends federalreserve.gov/moneta... · Posted by u/TekMol
One of the biggest things confusing people about how public finance works is that everyone is focused on the Fed rather than the Treasury.
A good aspect of MMT is that it explains how the Treasury spending more than it takes in in taxes means more money is created into the economy than is deleted out of the economy. This is the more important thing to focus on.
Some of the MMT professors also do a good job explaining how QE (quantitative easing) doesn't create new net financial assets into the system, it just shifts around assets in accounts at the Fed.
All this focus on the Fed seems counterproductive.
> A good aspect of MMT is that it explains how the Treasury spending more than it takes in in taxes means more money is created into the economy than is deleted out of the economy. This is the more important thing to focus on.
This is one of the most absurd claims of the supposedly "descriptive" MMT. Taxation does not delete money from the economy. When the federal government collects taxes, it doesn't take that money and burn it in a giant pit. It turns around and immediately spends that money.
Yes, the federal government does not need your tax dollars. Yes, they technically have the ability to print an infinite amount of dollars. But that doesn't support the claim that taxation removes money from the economy.
> Some of the MMT professors also do a good job explaining how QE (quantitative easing) doesn't create new net financial assets into the system, it just shifts around assets in accounts at the Fed.
This is completely false. The Fed creates new reserves (base money) in order to buy assets.
fbonetti commented on Federal Reserve balance sheet trends federalreserve.gov/moneta... · Posted by u/TekMol
Has anyone any idea what that means to the average joe? How to protect one's purchasing power?
If the government can give you free money (1200$ checks), it also has the power to take everything away from you, right?
Buy the stuff the Fed is propping up - stocks and real estate.
Their workers are treated like robots, not slaves.
And the "good wages for low qualifications" argument is equally exhausting. Money shouldn't be some universal justification for overlooking poor workplace conditions and unethical treatment of human beings.
Adults are capable of deciding risk/reward factors when selecting a job. There are many jobs that are well known for being grueling, and yet people still sign up to take those jobs because they value the compensation more than other considerations.