I worry that people are trying to set up the financial equivalent of a perpetual motion machine; ever more complicated band-aids trying to overcome the fundamental problem that the economy is a signalling device of what is physically possible in the real world.<p>Frankly I don't think the groundwork has been done to really figure out what the root issue is here. There are so many candidates - the handouts, the years of government-shutting-down-the-economy through COVID, the financial crisis that was looming in late 2019 that got obscured by the pandemic, a possibly peak-oil related energy crisis, war in the wake of all the other problems. But there are a lot of political shenanigans in the banking sector to keep the status-quo, and the status quo was shown to be "incompetents are in charge" in around 2008. So it is unlikely that they are up the the challenges that the world is facing.
Lol this is Newyorker. They are poster child fanboy of Bernanke-Yellen-Powell club who brought this mess on to us.<p>This article does not bring up the key issue that we have had in last 15yrs post GFC - motivation of having endless QE. At some point everyone knew there would be repercussions but everyone looked the other way and was like “trust the fed” or “don’t fight the Fed”. Just kicking the can down the road.<p>Well now Fed has its hands tied. It can’t raise rates too fast or the economy craters. The other option is let the inflation run hot.
I wonder if the New Yorker's writers and editors believe what they're saying, or are they just reading off the approved talking points?<p>> "Well, under the circumstances, if it’s really inflation, monetary policy has to come in. This is a very difficult period for all central banks, because energy prices will continue to remain high for years because we are trying to change from fossil fuels to renewables."<p>A central factor behind high US energy prices in the USA are the facts that crude oil exports were opened up in 2015 after being banned since 1975 or so, and there were several major oil refinery closures right after that, and on top of all that, there's a big natural gas export push.<p>In corporate media today there's an almost complete ban on discussing trade policy, cross-border capital flows, and the effect of exports and imports on domestic prices (vaguely referred to as supply chain problems at best). Regardless it should be blatantly obvious that if you reduce domestic supply while demand is rebounding post-Covid, there's going to be a price spike.<p>Fossil fuel corporations like Exxon and Chevron have seen about a 40% spike in share value since December 2021, and trying to blame it all on the war in Ukraine doesn't make a ton of sense. A quick fix would be a cap on exports, but our bought-and-paid-for politicians would never dream of upsetting their Wall Street masters by doing so.
The money printing argument a lot of people make for inflation implies that a) all that money made it into people’s hands and saving accounts and not as debt to companies which a cursory look at saving rates and excessive reserves of banks during that period or now is incorrect. Banks are not just going to donate money around when the Fed gives it to them — they are going to direct them towards let us say housing assets — the entities buying your bids out with cash.<p>Also recall when looking money supplies that the M1 definition simply changed.<p>We have an energy problem — we could barely keep up with energy demand growth pre pandemic and now it’s 1970 all over again.<p>Also all the comparative advantage impact — that is the advantage in production of having eg Argentina focus on agriculture and exports which reduce overall prices requires predictable demand and solid transportation/shipping. Both as you can guess were “nuked” the last year and for the next couple of years at least.<p>The Fed can do nothing about any of these topics. Even if you have 3 billions if there are no pears in the market you are not going to eat pears. But people have to eat and commute and travel and live. Companies got to function. Thus, inelastic demand. Thus, inflation.<p>The Fed’s job is to keep its cool. It is political and it shouldn’t but it is what it is. Don’t expect anything they do to be different than TSA at the airport. Good luck to all of us.
The Fed will keep raising rates, but the reserve requirements for banks is at 0% since 2020, which means even people put money into savings, the bank can loan 100% of their deposits out.<p>Oversimplified example: So if I deposit $100, and the bank loans my money to someone who buys a car, and then the car company workers deposit their paychecks of, lets say, $100 in turn is re-lent out.. how is this not printing money and creating a deck of cards?<p>(for the record, Japan's banking reserve requirement is 0% as well. As the article points out, no one is borrowing, but here companies and consumers are swimming in debt)
Here's another way NOT to fight inflation:
<a href="https://katv.com/news/nation-world/14-states-approve-stimulus-checks-as-inflation-continues-to-rise-california-georgia-brian-kemp-colorado-delaware-hawaii-idaho-illinois-indiana-covid-biden-university-of-miami-pandemic-gas-prices-tax-rebate" rel="nofollow">https://katv.com/news/nation-world/14-states-approve-stimulu...</a><p>To help citizens deal with inflation, 14 states are giving them free money. Giving people free money is what caused inflation.
Are excess reserves related to these large amounts in overnight repos I keep hearing about? If so, how do you pull that money out of the system so it returns to being responsive.
Inflation and this chart<p><a href="https://fred.stlouisfed.org/series/M1SL" rel="nofollow">https://fred.stlouisfed.org/series/M1SL</a>
it kind of annoys me that a recession, in a reductionist view is basically Blackrock stock portfolio not going up for two quarters...and for this everyone has to suffer.