This is what is going on with the economy (simplified)
Have you wondered why the stock market has gone crazy, while the real economy slumps? Why the rich are getting so much richer, while the poor are getting so much poorer?
Oh, sure. There's plenty of fraud in this rigged economy, but how is it rigged?
This last question I can answer (from a bird's eye view).
M1 includes the most liquid portions of the money supply because it contains currency and assets that either are or can be quickly converted to cash.
Suddenly there has been a huge, unprecedented spike in the amount of cash and "near cash" in the economy, yet more people are struggling.
So where is this tsunami of cash coming from?
Open Market Operations
Open market operations (OMO) refers to when the Federal Reserve buys and sells primarily U.S. Treasury securities on the open market in order to regulate the supply of money that is on reserve in U.S. banks, and therefore available to loan out to businesses and consumers. It purchases Treasury securities to increase the supply of money and sells them to reduce the supply of money...
The objective of OMOs is to manipulate the short-term interest rate and the supply of base money in an economy.
Since everything a central bank holds backstops a currency, the massive increase in the Federal Reserve's holdings accounts for the increase in the M1. Their holdings have expanded into MBS's and even ETF's.
The Fed increased it's holdings by creating cash out of thin air at a rate only seen in history in nations on the brink of financial disaster.
Speaking of history, central banks have bought so many bonds that they've pushed down interest rates to levels not seen since money was cows.
By most theories this money printing should turn into hyperinflation.
It isn't for a very simple reason - the money isn't moving. It's being hoarded at a rate never before seen in U.S. history.
Which brings us to the point of this essay.
The Fed is buying enormous amounts of financial assets, owned almost exclusively by the 10%, driving up the price of those assets to insane amounts. Hence, we don't have hyperinflation in consumer goods, but we do have hyperinflation in anything that can be sold on Wall Street.
In other words, the Fed is attempting supply-side trickle-down economics.
And its failing badly because the wealthy have no interest in investing in America.
Comments
I may have it all wrong.
But do banks have access to this nearly free money yet still continue to charge near usury rates to credit card users? The rich could care less what the interest rates are but for many the credit card is a means of survival.
I believe that they regard this
as a feature, and not a bug.
Twice bitten, permanently shy.
Also essentially 0% interest loans
for corporations to buy their own stock.
.
https://www.washingtonpost.com/business/2020/04/28/federal-reserve-bond-...
There was talk before the Cares act to ban buybacks. Guess that never made it into law.
https://www.marketwatch.com/story/coronavirus-stimulus-package-set-to-ba...
“Until justice rolls down like water and righteousness like a mighty stream.”
Great explanation gj!
The problem with asset inflation is that you need to keep feeding the beast. How long can the government continue to buy assets by printing and borrowing money? The mirror image problem is that the great consumer market is being starved, and that's 70% of the economy. The solution seems simple, give the money to the consumers, bubble-up economy. Then businesses make more money and hire more people. That works. Trickle down has never worked. Why would it? But that's an anathema to the American capitalist class. It completely blows the justification for their outrageous wealth and power.
Capitalism has always been the rule of the people by the oligarchs. You only have two choices, eliminate them or restrict their power.
Excellent comment. n/t
Trickle down was always "Voodoo Economics"
this is the real trickle down
"Trickle Down" only occurs when the elites.....shit their pants.
I never knew that the term "Never Again" only pertained to
those born Jewish
"Antisemite used to be someone who didn't like Jews
now it's someone who Jews don't like"
Heard from Margaret Kimberley
Whatever the crisis, opportunity knocks
The wealthy always get the biggest cut. It's their government, after all.
NPR reported on the farmer aid package, passed after hitting a point during the pandemic where prices were falling. The lax restrictions on Coronavirus, and the reopening of the economy turned that around so that this would have been an average year for farmers. With the infusion of cash for farmer aid it's on track to be the 5th best year ever, since 1975, for farmers. One number stood out: mostly $46 billion in aid to roughly 100,000 farms. The question posed in the article was "why are we even providing this aid?".
Answer, just another opportunity to transfer more wealth to the 10%.
https://www.npr.org/2020/12/30/949329557/farmers-got-a-government-bailou...
So I was right (simplistic but right)
when I said that printing money will cause inflation, but only in where the money goes. Give the 1% a ton of money only inflates the stock market because that's the only place the 1% spends money.
So why not a UBI? because giving a ton of money to the 20 - 90 percentile will cause hyperinflation. The middle class will buy and the 1% will hire them, but at low wages and in a hyperinflated market. The 1% will wind up taking all the money, just with us as middlemen in the transaction. It's a scam, a losing game.
Americans are some of the highest paid people in the world - we need jobs (stable income and stable, lower (housing) prices) not more stuff.
This does not apply to the bottom 20 percentile. Give them money and they will only spend it on food and low cost housing, and you generally cannot eat more, so we will not buy more food, we will buy better food, and we will not demand more houses, we will only start living in better houses.
This does not apply now. The economy has been grossly mismanaged since at least 1960 (the first president to lower taxes on the rich to "boost the economy" was JFK) so much so that the population of the lowest 20th percentile has what? doubled? tripled? - and by people who are not prepared to live in poverty.
Give those people money - as much as they need - but just them, they are about half the population now after all.
On to Biden since 1973
dupe
dupe
IMAGINE if you woke up the day after a US Presidential Election and headlines around the the world blared, "The Majority of Americans Refused to Vote in US Presidential Election! What Does this Mean?"
I linked to the study, but thanks for bringing it up
This quote here is the main take away that everyone should have in mind.
There's a reason why I'm an unenthusiastic supporter of UBI and MMT.
Well UBI would be better than our current system, it fails to address the power dynamic in our economy. In fact it could make it worse. Inevitably UBI would fail because the workers would continue to not have any power or say in the economy and how UBI is structured.
Strengthening labor unions would be much more productive.
As for MMT, how should I say this. If the Fed directed the same tsunami of cash to workers that it currently aims at the wealthy, we would have hyperinflation. I guarantee it.
There is no monetary solution to our current situation. But there is is a fiscal solution.
To put it another way, we can't fix this economy without causing the wealthy some pain.
Saw a study in WAPO expanding on the
...economic crisis ahead:
.
Over time, Reagans tax-cut Hoax asset-stripped the US middle class, transferring their modest wealth to the wealthiest Americans.
This conprehensive study offers a clear pathway for policymakers looking to dig their way out of the financial hole created by the Pandemic: Make the rich pay for it.
Though the pandemic cost tens of millions of Americans their jobs and sent the U.S. economy into a tailspin, many at the top of the income distribution have seen their wealth skyrocket. The nation’s 651 billionaires saw their net worth spike by more than $1 trillion during the first nine months of the pandemic.
Given the historically low tax burdens on the wealthy in the US, their ability to pay for higher taxes has never been better. It's past time for a reckoning and a reversal of these abuses.
[Edit=some paraphrasing involved.]
IMAGINE if you woke up the day after a US Presidential Election and headlines around the the world blared, "The Majority of Americans Refused to Vote in US Presidential Election! What Does this Mean?"