A lump-sum payment in digital dollars for all Americans in a recession or to raise inflation as alternative to QE & negative interest rates, which have failed (you can also download THE WOLF STREET REPORT wherever you get your podcasts).
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They could just keep on pumping tesla to infininity no shortage of suckers. And Boeing too, Boeing could use a little pump and dump.
Tesla seems to be one of the few companies innovating and trying to be productive and imaginative in this day and age of monopolies, concentrations in everything, big chains, ect. I’m rooting for Tesla and Musk.
Boeing, like the rest of our companies outsourced their real talents in engineering and became a financial company with a bunch of finance people running around making bets like everyone else (thanks Jack Welsh Mr. Guts). The company is a shell of the the once proud Boeing I knew as a youngster. Plus pretty much as a monopoly they have no real competition to keep them honest and working hard. These guys need to hire a real engineer to fun the company again and start over again.
I strongly disagree. Tesla pushed electric cars early and hard, but what they’re doing now, in 2020, is no different than most other auto giants, AI startups, or app developers.
And most of Big Tech either funds or directly contributes to crazy moonshot projects out of left field. They’re ust not as visible to consumers, or very technical.
What Tesla has managed to do is market their innovation and turn it into a brand. And they’ve gone way beyond what even Apple has achieved, becoming the symbol for humanity’s sci fi future.
But you’re right about the oldschool engineering firms. GE, Boeing and others have fallen from grace. I have no idea why, but whatever is happening on the inside must be pretty nasty.
EJ-could be a lot of management ‘book/banking/Wall Street’-smart and ‘hands-on, hands-dirty (time on the ‘factory’ floor) experience with our firm’s produce’-dumb.
may we all find a better day.
The difficulty for Tesla lies in manufacturing and selling yourself as the future. It sells an idea mostly, an idea that is being jumped on by the many competitors in the auto market. There is nothing new about batteries and electric motors, only the way they are packaged. Tesla is not pushing battery technology as much as the industries that were already entrenched in that space, but Musk is trying to get more of a foothold there.
I’ll give kudos to Musk for playing some good game and lighting a fire under the other automakers. At this point Tesla can’t go bankrupt with that market cap, but this idea that they’re going to dominate the future auto space needs to die. The most likely scenario is they just end up another one of the top 20 auto brands with a slice of the pie like everyone else.
Oy, and most apartment dwellers (which is the growing demographic) aren’t going to be dragging SO cord down from their electric panels! It’s fast charge at the station or it’s a no go for many. The rate of adoption for electric has to go down because of this and settle on slower gradual adoption at some point. There’s a number of feasibility issues hampering growth and even Musk knows it (which is why he’s trying so hard to install fast charging stations everywhere).
Bring it on…
At this point, what is the worst could happen? Also the printing press needs less oil. No need of wheel barrows either. If happens today Weimar republic would have no problem. Also, if coffee is $1000, still you can pay.
I got the first federal stimulus. Brings joyful tears to my eyes. Must spend to stimulate the economy. Local gentleman clubs are closed.
Prior to the pandemic it was easy to drop serious dough on avocado toasts and 10 bucks gourmet coffee. I just came back from SF Downtown and even if I wanted to splurge on those things, I wouldn’t be able to given how almost everything’s closed.
If people can’t pay the rent, not even coffee is affordable.
If the Congresscreeps had really been following their oaths, most of that 4.5 trillion(?) dollars during the Spring and Summer would have gone to all those now gone small businesses and going homeless families instead of the corporations and private equity.
But they chose not too, so good coffee and avocado toast is gone. Wait until stuff you really need is unavailable.
Pretty sure found good coffee, and toast, and avocados in local store.
The tiny table caffe where pretty ladies congregated in the morning is closed.
You haven’t been reading Wolf’s posts religiously have you. People are skipping rent and splurging on other things ;)
Ever tried Avocado toast but it sounds good I did however plant a couple avocado trees so I will have to try it one day Starbucks is a weakness for me but here in Turkey I can only get it in town and when on the highway so it’s not a major problem I will be buying a Nice barista espresso machine if I ever get a chance to go to Poland with this darn lockdown
Too expensive here due to a huge import duty
Where I live we don’t have to worry about the terrible threat of inflation caused by the unlikely event that the Repugnants or Demorats squeeze another $1200 stimulus check through the electronic deposit system in effort to goose their chances in the Election Circus.
Since the start of the Pandemic Panic the prices for food in the only supermarket in the county have gone up 20%, and we still have rolling shortages of toilet paper with the stuff on the shelves often doubling as sandpaper. But we don’t have any inflation. I know, because my Government tells me so. No one complains — they can’t be heard because all sound is stifled behind their mandatory face diapers.
Still awaiting our first fatality in the county from Corvid19, but since the start of the Pandemic we’ve had four SUV fatalities, one Harley vs telephone pole , two ordinary flu deaths, three Oxy overdoses, a teenage suicide, and a double homicide of a pregnant girlfriend.
At least deer and elk season starts soon—. I’m thinking that roast backstrap will taste just fine without avocado toast.
All but the flu were avoidable. When a puppy gets his shots it protects him from disease. It doesn’t prevent him being run over by a car if his owner lets him run loose.
And… there is a reason many major league sports contracts have a ‘no motorcycle’ clause.
“what is the worst could happen?”
your money could became worthless.
unfortunatelly I experience fall and disappearance of society.
my country of birth, SFRY disappeared.
misery is paid by poorest people in society including middle class which basically disappeared.
Agreed, creating money and handing it out worked wonders for Venezuela, Zimbabwe, Brazil and numerous other countries, this should work equally well for the USA.
The best and the brightest work at the Fed and they have concluded that handing out free money to buy consumer goods from China is what the economy needs, who are we to question their wisdom and genius.
Americans should not have to work to buy stuff, it’s a matter of simple human rights.
Van I agree it’s insanity People will have even less incentive to go out and work hard or work at all Its moral hazard cubed This nonsense needs to stop along with the stupidity of forgiving student debt
You know what nonsense needs to stop? The old line that this is not needed. It is needed by REAL people. It is needed because children are going without food. People are becoming HOMELESS through no fault of their own. How cold you must be to deny this very real need. It’s a moral hazard you say? Oh but it’s alright when rich people get free money? Don’t think for one minute I would support it for any other reason. I have opposed the lot QE, ZIRP, NIRP, MMT… but this I support, because in a screwed up world, feeding and housing children is better than watching the rich get richer. Also, I am suspicious of their underlying motives for doing this. Why are they prepared to destroy the economy to drive up consumer inflation? Why not just raise wages?
Fat Chewer says why destroy the economy. Maybe to level the world population so we are all have the same rights and privileges as the Chinese. Transition to Global Feudal System.
We high unemployment, yet in my area there are ‘help wanted’ signs everywhere. The restaurants, fast food places, car dealerships, grocery stores, manufacturing plants, auto parts stores and trucking companies all have help wanted signs. I understand some of these jobs involve contact with customers, so an aversion to the virus could be a valid reason for not applying, but many jobs would be safe. There does seem to be some disincentive in play. Weather it is due to generous government payouts or fear of the virus, I can’t say.
Fat Chewer you point to serious issues, but printing money and giving it to people won’t solve them. So long as the skimmers take their skim on every transaction, it’s only a matter of time before the children’s money is all in the hands of the rich skimmers.
Printing money and giving it to people “to keep the economy running” is no different from pouring oil into an engine whose drain plug is open. Sure the engine needs fresh oil, and you can keep the engine running that way, but it’s stupid. What the engine – and the economy – really needs is a way to keep the oil inside the engine – and the money in the hands of the workers rather than the skimmers.
We must invest in people so we don’t have a land of helpless and hopeless citizens. This means house and cloth them and give them resources to raise good children. Current benefits systems incentivise not working. Direct payments DO NOT incentivise not working (you get your wages ON TOP of direct payments). I don’t think Wolf said the FED wants a UBI (but it might come to that the way things are going). But rather a way to juice the economy with money to the people in bad times vs prop up asset class. A UBI or direct payment IS a way to subsidize wages (a floor on wages). It COULD discourage a few lazy people not to work, but most people still strive to get ahead and will still work to gain on top of a low govt income floor. UBI would make labor force more dynamic (easier to switch jobs). UBI would provide stability and hope to those at the bottom and stability is good for investors who need stable customers. Boo Hoo institutional investors won’t be able to buy of 10k distressed homes at a time anymore. And heaven forbid families might not be displaced from their homes as often and kids might get consistent food. The problems of countries like Venezuela were not doling out free money. We have a robust multifaceted economy, they did not. And we don’t have countries waging economic warfare against them to pry access to their resources.
Seriously, that post by Van is one of the best i ever read on here
No need of wheel barrows either.
eventually we will. the excessive physical cash is present in venezuela even though theyre in the 21st century. same went for zimbabwe. its not about technology. its because at that point the time value of money is so small that no one will accept credit of any kind. physical cash is still the fastest form of money transfer. once we get to that point no one (including government workers) will accept anything BUT cash. everything else takes too long to clear. and even if we all have accounts at the fed theres no way they could clear all transactions in real time. get your wheel barrows ready..
How do they expect us to “ stimulate “ if the Gentlemen’s clubs are closed Outrageous I tell ya
Crocodile tears. You can spend you stimulus online and use it to support worthy young ladies all over the world.
:) Yes. :)
The very story of Jack London’s The Strength of the Strong.
You can stimulate the economy and the young ladies in the privacy of your own home, if you know where to look. Covid is a boom for the private entertainment industry.
When we have a federal government that doesn’t work the Fed has to do all of the heavy lifting! But that is what the elites and finance people want, a government that doesn’t work! Make more $$$ when no one is regulating, watching or caring what your doing. So no government, no leadership, no progress, just more $$$ for the select groups of networked people in the loop of finance. This is the way all empires have gone as they demise. The just do finance stuff, push money around, create, manufacture and make nothing anymore. Gut their previous hard worked for companies that were productive, move everything off shore and live off companies down to the bone. So, here we are! What else is the fed to do? Let everything just belly up? You don’t want to be in another depression like we had in the 30’s which this one would be a lot worse. Congress? their worthless. No help there! They’ve been gutted too. We are getting ready to go either way to the left or way to the right? I’m watching to see which way here over the next 5-8 years as this plays out? Good luck ya.
Remember the movie Zardoz? I think that’s where this ship is heading. I think we better abandon the ship.
More and more of the population are becoming Apathetics.
Tasmania is looking better all the time Wonder if Avocados grow well there ?
Lisa-my experience has been that the Apathetics have been in the ascendant for some decades, now…
may we all find a better day,
(…and, today, best double-check which end of the national dog is wagging…).
This too would fail. Itd be gone like a fart in a whirlwind and the rent still wouldnt get paid.
Why are they so insistent upon inflation? Only so those with the most can widen the gap some more?
I can think of upwards of 26 trillion reasons why the Fed wants inflation
Don’t worry the Billionare class will be given notice to move their money into inflation tied commodities before the other shoe drops.
You would think the wealthy would not need to be part of the payment scheme.
By all rights they shouldn’t be I got a letter from the Treasury here in Turkey saying I was entitled to 2400 stimulus money but have never seen a penny Go figure Still filing tax returns every year
The worst thing the fed does is to buy assets.
It’s been obvious a long time but still so rare to actually hear someone say it.
You can’t expect the Billionaire political donor class, who owns the media to say that… Or any of their useful idiots.
Great report Wolf. Hard to believe they couldn’t see the issues in advance before they took the approach they used this go around. Likely was just too tempting to raid as they did. At least a glimmer of hope…
lol, sure, bring it on. warning — anyone using this free money to pay down their debts will cause dollar destruction at the fractional reserve banking ratio. In other words, more dollars will be destroyed than created by the free money giveaway, if debts are reduced in the process. That will be deflationary. Look, low interest rates represent TIGHT money, not loose money. QE doesn’t ease anything. It represents fear and de-risking in the banking system. Loans are called in, new loans not made — bank balance sheet destruction — dollar destruction — deflation. Just raise interest rates and you will create inflation, because you will incentivize banks to lend again, and fractional reserve banking will take off again. Just do it! 3% tomorrow. Problem solved once and for all. The Fed knows this. They have published research papers saying exactly this — low rates represent tight money. This has been known for decades. We’re all being gaslighted by their never-ending bellyaching about needing inflation averaging, blah blah blah blah blah blah blah, blah. Con men.
‘low rates represent tight money’
‘if debts are reduced (dollar destruction) in the process. That will be deflationary’
Then switching to inflationary by raising the rate is NOT going to be that easy.
Remember for every debt $ there is a creditor expecting the same $+interest/income stream
– like bond (public/private) holders, investors on wall st, lenders of al sort including Banks, hedge funds, pension funds, insurance Cos and the MFunds etc. What’s their ‘economic’ fate?!
Too good to be true!
At some point in time, the correct solution is definitely NOT going to be the easy one. Before the Fed, “panics” were deep but quick, not dragging out decades. Bad debts were wiped out fast along with failed businesses. There were no bailouts for zombie companies. Capitalism back then was a moral system. You risk your money and win, bully for you. You risk your money and lose, suck it up. Of course, we’re way past that now. Too many vested interests in keeping the zombies liquefied. Eventually the debts will be cleared, honestly, through default and bankruptcy, or dishonestly, through hyperinflation of the fiat currency. Fed policy is definitely in the dishonest category. Just takes time, and lots of sophistry along the way.
Legislation will mandate that Fed Digital Dollars can NOT be used to reduce debt of any sort, but must be spent into goods and services, with a spend-by expiration date.
That’s nonsense. The recipients puts that digital dollar into circulation by spending it, or depositing it into a bank account so that it can be spent through the system set up that way, or whatever, or pay rent with it, or pay down the credit card to that you can then charge up the credit card again. Someone else has it after the recipient does something with it. And then they do something with it. The idea is to get money moving. The Fed cannot cancel money without causing total havoc.
Exactly. The digital dollar can’t destroy money by paying off debt immediately. At least you get one turn out of it through forcing the spend.
True, the recipient of that spend CAN use it to cancel debt. No arguing that. In that case, it is self-cancelling on the total money supply, but at least you get some money velocity.
If the digital money isn’t spent by a certain date, the Fed backs it off the BS as if it was never injected in the first place. You’re no worse off or better off than when you started the digital dollar injection.
Note well: government assistance as a significant part of an economic policy is not sustainable (as the modern, common parlance would say). The only such sustainable policy for working people is productive employment.
Saying again: the ONLY sustainable way to run an economy is to have productive employment for the average citizen.
You need low unemployment rates (scarcity of employees), followed by rising wages, etc.
Anything else will fail. It might take a long time, but government assistance is doomed to failure.
People will not live with being “given” bread and circuses. People fundamentally need productive activity and return for this activity.
There is no other way; it is a fundamental of human nature.
At the “high end of productivity” the creative/innovative need to make a LOT of money. That lets the rest of us take advantage of their fantastic innovations.
See every nation but the US for lack of innovation.
How many other Microsofts, Apples, Facebooks, Googles, Hepatitis cures (Gilead), etc. exist outside the US? Precious few. It’s because of the profit motive in the US and productive activity.
Beware of promises of a great life by attenuating aggressive economic profit-seeking and handing out naive/well-meaning government assistance.
It’s hard to hide digital money under a digital mattress.
I’m a little skeptical. Landlords would immediately raise rents, home and car prices would immediately increase, maybe utilities Too. The assets owners would eventually pocket all the money. Everything would immediately increase in price until the money was spent. No magic solutions to over Financialization of everything in the economy; with under production, and a lack of sustainability on all fronts. Self sufficiency in semi rural setting with like minded, co-operative neighbors is your only hope.
If the FedBux could only be used on goods and services, and they expire, then everybody will spend the FedBux first and the permanent dollars last. It’s Gresham’s Law. It’s the same reasoning that leads people to keep pre-1965 US silver dimes and quarters and spend the copper and nickel post-1964 change instead: ‘get rid of the trash coins and keep the gold (or silver)’.
If some people are fortunate enough to get more FedBux than they can spend before they expire, then they will trade the FedBux at a slight discount to somebody who needs to spend them and exchange FedBux for a slightly smaller numbers of permanent dollars.
This happens sometimes with benefits such as food stamps / EBT, where somebody with unspent benefits that will soon expire buys extra food, that they then sell immediately to a third party at a slight discount.
It’s economically inefficient to have more than one currency circulating nationally, because then there is arbitrage between the currencies in the same manner that goods and services are exchanged. Goods and services are real things, currencies are artificial constructs. This creates financiers on the street level that do nothing but get a ‘cut’ from arbitraging artificially created currencies.
Direct payments will end up in the rich person’s bank account quickly, almost as fast as asset purchases. Increased taxes on the rich would circulate money supply more effectively and we wouldn’t have this faux economy.
“low interest rates represent TIGHT money,…”
Nonsense. Low rates represent Fed policy rates and QE ($3 trillion in six months).
Watch interest rates SPIKE all up the yield curve to high heaven if the Fed undoes QE and reverses its rate hikes: such as it comes out with a statement that it will raise short-term rates by 50 basis points at every meeting and in between meetings, until they’re at 4%, and that it will sell $200 billion in assets per week until its balance sheet has shrunk to $2 trillion. That would take $5 trillion of liquidity out of the market, and yields would spike.
What ZIRP does to me and millions of other retirees globally relying on market-based superannuation investments is to destroy fixed interest as our only ‘low risk’ income option, leaving us with Hobson’s Choice – no returns on a low risk investment, or unacceptable risk on anything with returns above zero. With ZIRP locked in for years, I have to make a guess at my lifespan and calculate how long I can live on my capital, while my real living costs keep going up. Not happy to say the least.
Your group, which grew up with “normal” interest rates (ie Fed funds equal to or exceeding inflation) which was the case for 100 years, had every right to expect that to continue.
Since 2008, the rug has been pulled, intentionally, by Bernanke, then Yellen, and now Powell.
Initially, it was understood as an “emergency” measure. But it is now something else, something on the line of THEFT.
The Hobson’s choice, eat your seed corn or buy over valued assets, yield chase, etc. sets a dangerous stage. Both could lose.
Free markets are wonderful when allowed to operate. But when the central bankers start spinning plates, they find they cant stop. This is the great flaw in our system. Unelected people making tremendous economic dictates.
Historicus, unelected people, such as judges, making other political decisions is just as bad.
I sympathize as I am on the same ship. At least with Hobson you could could hope the next horse was one of his better horses (time permitting). In the US the FRB has promised there will be no movement in rates for years, and they’ve promised only higher inflation, if it can be produced.
But they would not be able to pay the interest on treasuries
They print money for Trillion dollar programs ever other month…they QE constantly
They can do the same for the interest payments.
But the THIRD mandate of the Fed, the one THEY never mention..
“promote moderate long term interest rates”…moderate meaning “not extreme”. 4000 yr lows are extreme by any measure. And what is the wisdom behind the third mandate? So present generations can not rape future generations with massive debt creation. It also provides a balance between lenders and borrowers.
National debt…75 Million in 1791 to 9 Trillion in 2009.
9 Trillion in 2009 to 29 Trillion in 2020.
A billion seconds is 32 years..
A Trillion seconds is 320 Centuries…..
I figured out the best way to protest the last round of theft (oops I mean stimulus) checks was to use ALL of it to pay down debt.
They create dollars by printing debt into existince, I immediately destroy dollars by paying off debts!
Oh and it has to be bank debt that has NOT already been written off by the bank, not hardmoney debt to get maximum effect.
The problem is I have paid off almost all my bank debts. So I am trying to think of how best to protest if they do it again? Maybe pay off someone else’s bank debt? Maybe an organization’s or businesses bank debt? Or is there an even better way I haven’t thought of?
this seems to be the road to a “debt jubilee” whether one admits it or not. If my son received 14k he’d pay off his car and his credit card. Then spend as he earns. I guess some people would just blow it. Vegas anyone?
Paying off your debt with stimulus money is not a debt jubilee. You simply paid off your debt.
When debts or other commitments are paid off by fiat money (created over and above what extra money would be dictated by gdp growth), it is often called a “soft-default”, for what that’s worth. So maybe this is a “soft-jubilee”.
It’s from the Keiser Report to which he is referring.Very good show
It is not debt jubilee if the stimulus money was borrowed into existence (i.e. the Treasury borrowed, the Fed credited the Treasury, the Treasury sent your son a check, he paid off his debts) The total money supply didn’t change. The liability simply went from your son to the Treasury’s back. This is just kicking the can down the road.
Debt jubilee implies someone (typically the lender) takes the “hit”. In this case, if the Fed issued the money directly to your son and he paid off his debts with the Fed “bucks”, the lender is no worse off as the Fed “bucks” spends like any other.
But general price levels will rise quickly once the market sees this play out, and so all Dollar holders will take the “hit” collectively due to the reduced purchasing power of the currency.
All money is “borrowed” into existence using your model – the central bank creates it out of nothing and spends it into the economy. If you want to play semantic games and call one part of the money producing system the Fed and another the treasury then fine, but it makes no difference. Without a government printing money and spending it into the economy there is no money. No one can create money except the government (te banks are allowed to but the have no legal right to).
There is no debt. It is just cash that the governemt uses to create demand for stuff and to buy stuff that it wants like schools, hospitals guns bombs rockets F35’s etc. .
An indwelling central catheter is the preferred method of continuously supplying drugs to terminally ill patients. Much better than the occasional shot in the arm. It’s all coming together. Need I say more?
Nice analogy I like it Sad but very succinct Lisa
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years.” Alexis DeToqueville
Charles I did try to warn you all…
Not a problem unique to democracies. Paper money was invented by the Chinese centuries ago. The same problem happened. The delusion of Western civilization is that you can moderate money printing through democracy.
It is important to point out that none of the democracies De Tocqueville referred to allowed women to participate.
So the correct statement would be that ‘a male run democracy cannot exist as a permanent form of government’
How do you figure? I see women as being more likely to support government transfer payments.
Because women aren’t distracted with all that testosterone maybe? ?
We compete to survive and procreate, and that’s all there really is. Having more women in power is sensible, and I think necessary for the survival of any country.
Another Western delusion i.e. Power can be moderated by a different sex.
People who seek power only care about power, and power always corrupts in the end.
Remember Hillary Clinton, Imelda Marcos, Tien Soeharto (wife of the old Indonesian dictator), etc.
Western people are really funny people.
1) US 19th Amendment ratified, and immediately…
2) party like there’s no tomorrow for almost a decade, then…
3) entire US plunged into economic depression
This is similar to my experiences with a wide variety of ladies.
Women like to spend money. Where’s Petunia?
Not a single female president in over 200 years. A tiny fraction of supreme court justices. Women are still vastly underrepresented even in the current Congress. Checks out.
Sorry, but, Ms. Yellen was no better the boys.
I am sure, someday there will be a Ms. President who will be no better than the boys either.
It’s the system, stupid.
Sorry for nitpicking, this quote is from Alexander Fraser Tytler not de Tocqueville
Still agree 100% with it though
historicus, that’s not Alexis de Toqueville. It was written by Alexander Fraser Tytler (1747-1813), and I think the last sentence of that paragraph is the most disturbing: “…The average age of the world’s greatest civilizations has been 200 years. These nations have progressed through this sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.”
I’d love to see a reference for that quote, as I’ve combed through his works to no avail.
He did write similar things, but was of the opposite attitude — that the people voting themselves benefits was superior to the then-prevalent system of the aristocracy giving themselves benefits (which is where we seem to have returned).
As always, it would be a pleasure to know the truth.
Dale, you might be interested in the short article, “The Truth About Tytler” by Loren Collins, found here:
Collins articles “attempt(s) to trace the origins of these quotes,” and he finds, “The quote, however, appears in no published work of Tytler’s.” I’ll accept Collins’s concluding admonishment, “Quotations should not be given fictitious attributions merely to lend credence to the messages they impart. To do so is to favor persuasiveness over accuracy, and to sacrifice truth for the sake of image.”
So help out an idiot, please. How would one invest or be positioned if and when the Fed decides to do this?
May be one of those ‘brilliant’ FOMC members might have a ‘soluion’ for your problem too! :-)
Defation first, then inflation leading to hyper inflation!
A lot of things (mostly BAD) can happen to the mkts, economy and our country in the next 3-4 months and later! Covid is NOT going away any time soon. Vaccine talk is hopium and hyperbole from the Wall St and their cronies at the Chamber of US Commerce!
Covid is not the problem. The underlying problem is the Fed and ZIRP.
Leverage and low rates means equity withdrawal is necessary to maintain the same level of income and QE is needed to offset the equity withdrawal.
It’s the box that Bernanke made.
Yes. It may turn out that it isn’t possible to get paid for not working. Even with the best investment advice.
I will take a shot at this. It’s good to read about the John Law Mississippi bubble. This helps to identify where we could be in the government debt bubble. To make a long story short when the bubble burst there was nearly universal wipeout to everyones standard of living especially financial asset holders mostly the middle and upper classes.
From what I can read gold and outright ownership of your home was good. Having speculative stock and loaning money to nearly anyone or institution including government was bad. It’s very interesting to read about the circular logic that was used to back the currency with shares of stock of swamp land that had no income producing ability when at one time it was backed by gold. John Law went from hero to having to flee the country. Some call him the first central banker.
One metric from the times was the French government was completely broke when government debt was 21 times revenue. The US is at 8 times if you don’t count unfunded liabilities and probably in the same ballpark if you use true accounting.
You guys can do what you want but you already know what I’m doing Precious Metals and good quality real estate outside the good ole USA
Now your benefactor is the Fed not the government? All hail the Fed! From horrible to bad.
The Fed is desperate, and although this plan to send digital money to everyone is less bad than buying assets or negative interest rates, it is still an act of desperation. The Fed policies have blown the debt bubble so large over the past three decades, that it must have inflation in the form of nominal GDP growing faster than debt. The Feds risk is that inflation will need to be increased periodically through additional dispersement of free money in an amount sufficient to exceed the ever increasing pile of debt which is necessary to feed the growing economy, until finally the currency, digital or otherwise, experiences hyperinflation and then collapse. At which time the printing presses will again be destroyed.
One way this could happen is as follows: the increased free money will lead to even more crazy gamboling hall financial and commodity markets, as money is no longer the result of hard work and frugality, causing assets to rise to even more extremes. The wealthy, getting a smaller percent of the stimulus will quickly increase borrowings against their assets increased values, and the subsequent increase of debt will again exceed nominal GDP. I’m sure there will be other transmission mechanisms
Rick V. “…I’m shocked, shocked, to find gamboling in the gambling hall…”- good observations.
may we all find a better day.
I seem to recall Peter Schiff talking about how the FED was painting itself into the corner years ago The experts on mainstream media poo pooed him nearly to death That alone spoke volumnes
They call Peter Schiff the boy who cried wolf . . . He’s just been so spot on for 20+ years that he sounds like a broken record. I love that man.
The fed is not desperate, they really don’t care if all the goodies go to top and the rest of us get nothing. They could create inflation by giving everybody on social security a real cola increase, or a larger than real cola increase. They could send everybody on the dole a bunch of money. All that money will be spent.
What they are doing with fed coin is more kabuki theater. The coin they are designing will only transact in a closed system making it ineffective. Most inflationary spending flows to the new and nifty and that won’t find its way into the fed-a-sphere until it is already an old and established product/service.
US currency has long been referred to as “bread.” I guess this new FRB electronic money can be considered “cake.” As Marie A. may have said, “Qu’ils mangent de la brioche.” Apparently some things don’t change.
It’s to get around their lack of statutory spending authority and do what Senate Republicans will not do.
It’s the lefty Speaker of the House that’s holding up the money. She is getting full credit for it too.
They want to by-pass Congress and send their digital currency directly out to the people. They want the slaves to love their masters.
Maybe they don’t want anyone to burn them to the ground. Protesters have actually been protesting outside of state federal reserve offices. I think people are close realizing what the Fed is.
Most haven’t a clue Just read “ The creature from Jekyll Island” to educate yourself
Blood funnel indeed!
I would just like a primer on economic language. What the terms mean and how they actually function. Learning from this website is like learning Spanish just from listening to people from several dialects speaking it.
Lynn-not to add to Wolf’s headaches, but ask him to expand on a specific and i find he does his best to illuminate it or can refer you to an earlier article where the subject was covered. Not being a bespoke financial player, i still must acknowledge the necessity of understanding what the myriad financial MOU’s (masters of the universe) are doing in order to limit the long-term damage they seem to constantly attempt to inflict upon my person-often through semi-to-totally legal, clever, tortuously fiendish machinations. Exposure and clarification of these makes serious perusal of Wolf’s site invaluable, for as long as one breathes, one cannot avoid membership and investment in our current, meme/acronym-mad, bursting-at-seams human society.
May you, and we, all find a better day.
Just cut to the chase. Lol. Who needs Congress?
Vested interests are well served by passing legislation and obtaining disbursements of public monies through captured elected bodies in order to lend these actions some apparent legitimacy.
Damn well said. Nice and short.
Exactly. MadMaxine, the real sign the system has failed.
Just you wait till Auntie Kamie takes reign of Barter Swamptown …
Three people enter, Two men leave.
I believe this helicopter money would be effective at increasing inflation, which would be extremely bad for the price of any long-term financial asset, such as long-term bonds and especially stocks like the FAANGMANTIS.
With the Fed equipping itself to send helicopter money, or ACH transfers of wealth, there is risk of hot money inflating asset bubbles.
Venezuela has been experiencing recent inflation of close to 2500%. They like to hold US dollars rather than their devalued bolivars.
We already have the hottest asset bubble I have ever seen. That part has been done via QE and low rates.
Are you sure this didn’t have anything to do with the redistribution of incomes over the last 40 years that stuffed the pockets of CEOS and the “investor class” with more money than they had productive uses for so the rest of us have had to pay more for basic living like housing, healthcare, education, childcare, retirement and wars?
Pushing on a string only goes do far.
If you push too much, the cello no longer plays.
The point of ‘stimulus’ checks to households is to forestall social unrest. Why do you think european nations have free healthcare and social housing?
Checks to households, without a free to all social and healthcare system that can administrate that effectively, is just folly.
Folly because it temporary froth. All fur and no knickers, to put it bluntly.
The same in the UK, the same in Italy, well take your pick.
Right now the russians seem almost sane!
D’ya think these guys are really Altruists…..?
Bread and Circuses Redux.
Big Bankster has had command of the Conch, after all ..
Heard uttered from on high, from that eroding rocky promontory known as the Eccles Building:
“Who will join My Bribe!”
Wow. Thank you for reporting on this.
UBI. Maybe this is the most radical idea the fed has ever had. Especially tieing it to a *percentage* of GPD. Thank you Yang..
@Wolf, what does it mean when the fed is “creating digital cash” on one hand and balancing it by creating “insurance recession bonds” on the other? Are the IRB things that investors can buy? Or are they monies given out? If they are sold does that money support the digital cash payments? What are they?
Economic historian Russell Napier pretty much predicted this would be the route the Fed would take. Why? Self-preservation. Failure to do so would let the MMT crowd get their nose in under the tent. Soon the herd might trample the Fed out of existence.
Well they sure aren’t doing it out of the goodness of their hearts, that’s for sure
No one can buy the IRBs. They’re just an accounting entry to keep the balance sheet balanced. They pay no interest and are never due. In modern accounting, a balance sheet always has to balance.
Bring back single-entry accounting and it solves itself :)
Non-negotiable “bonds” have worked so well for Social Security retirees, why not for everybody. /sarc
Sounds like the Wile E Coyote approach, another absurdly complex gadget! Keeps the ACME helicopter flying!
There’s the problem – a bond that pays no interest and never comes due isn’t a bond, but a free lunch. And there aint no such thin.
This is an accounting abomination.
It’s time to take the bitter medicine and flush the bad debts, not pile onto the problem with fake-money free-lunch bonds.
Thanks Wolf. I guess they are nothing but a place saver. Not even that- just a name to fill a space.
I just saw the chart that 25% of USA society’s income is coming from the government. It’s been increasing for decades but jumped a few percent because of pandemic response.
Direct payments to the majority of Americans who do not own much, if any, assets is likely the only way to not have the general collapse of the American economy into a Second Great Depression worse than the first and the start of the Second American Civil War. This is serious, heart stopping stuff and whinging about supposedly lazy Americans living off the dole or comparing it to the Wiemar Republic’s tactic of printing of money to pay off its war reparations does not do any good.
If the minimum wage had continued to increase to today as the same rate as inflation and productivity had up to around 1970, it would be $20 per hour or $39,000 per year. The highest state level minimum wage barely matches the official level of inflation. Surely guaranteeing this basic minimum income level even for a few months is worth preventing this?
Since the problem is the increasing tens of millions of Americans are facing homelessness as well as an unemployment rate of at least %18 both during a collapsing economy has not been effectively fought by giving trillions to the wealthy assets owners, what would you do?
Well said. And true.
Just read today that the employment rate of people who make less than 27K pr year in California was down 26.9% while for those who made above 60K it was down 4.3%. California has one of the highest, if not the highest rental prices in the country.
Deflation would be a better idea for most of us, but TPTB won’t do that intentionally.
I’m seeing more new faces in the homeless population coming into my very small town lately.
Those #’s were Aug 1st.
The real disconnect is apparent in news broadcasts that show auto line ups at food banks; nicely turned out and tuned up SUVs with their trunks open for the one free grocery box, and a masked volunteer closing them on the way out.
Nothing to see here, speed away….quick.
Poors should drive an SUV?
Is there a handbook for those of us unaware of the rules?
I’ve been one of those unfortunates in years past. Sometimes you get actual meat and other times it’s packaged, dried, Korean seaweed(!), the latter of which I still have as I’ve never gotten the nerve to eat it, but it’s always a crapshoot. Always. At most, you will have something to feed a person for a few days or a small family a meal or two.
In an economy like this, almost anyone in the bottom 90% can get crushed, and old COVID-19 has been doing its work for over six months. Plenty of time for people to lose all their savings especially with the deliberate crapification of the unemployment system in many states.
JBird4049, Korean seaweed is absolutely delicious if it’s got enough sesame oil in it. If not, try putting a bit on it. Maybe a tiny tiny bit of soy sauce as well.
And torches! Too bad we no longer use scythes much.
I am all for a reasonable safety net, but minimum wage logic is weak in my opinion. If you are going to eliminate any jobs that pay less than $39,000 per year then there are going to be a lot fewer people working as only skilled workers or workers working with a lot of capital can generate enough revenue to be worth $39,000.
Here is another problem with a higher min wage. With the technological advances now and down the road the high the labor costs the easier it is to replace labor for capital (i.e. robots). Which ultimately leads to no jobs for the under $50k crowd. And over time the $50k threshold will rise thereby sucking more and more people.
Its a very delicate balance that I wouldn’t leave to politicians or business execs.
Eliminate the FED, nationalize all their assets and start the trials That would be my dream You could throw the politicians and lawyers in too for good measure
Thank you Frederick! You’ve set off a train of thought as to precisely what the politicians and lawyers should be thrown into. I started with Dante A. Skip the trial part.
Heard, from one aggrieved moke to the other:
I think we’re gonna need a lot more ‘stocks’ …. a rubbish too.
Y’all gotta listen to this guy. He telling it like it is.
Why have the govt stop at setting a minimum wage? Why not have them set all wages? Wouldn’t that be great?
Let’s not go reductio ad absurdum here. The minimum wage was created during the Great Depression as part of the New Deal. It was supposed to be the least amounted needed to support yourself decently with such luxury as food, clothing, and housing, hopefully a family, but at least. yourself. A general floor and not a detailed list of wages.
For the minimum wage to match its 1968 level using just the already too low official rate of inflation, it would have to be $12 today, or working full time at 37.50 hours per week, or 23,400 per year. Using the match the rate of inflation and productivity rise, which the minimum wage did until roughly 1970, it would be over $20 per hour or $39,000 per year. This is not different from what was done from the Great Depression to the 1970s. Instead, for the past forty years the minimum wage has been decreasing in value. For the past twenty years, the worth of their income for many Americans has decrease.
There is nowhere in the United States where the federal minimum wage, and I believe the local minimum, is enough for the bare necessities of life. Yet, many would have the minimum wage keep decreasing in value as they have wanted to do ever since it was enacted along with the continue destruction of American industry.
minimum govt instead of minimum wage
the minimum govt is very small when the people are good
No need to create such complicated systems to send everyone digital dollars.
Let the Fed finance free healthcare for everyone, that will take a huge burden off every individual.
Once they are successful at that , they can start fixing roads, pensions etc and Powell can declare himself Emperor.
“they can start fixing roads”
I be up for putting Powell et al, on a Yuuuuuge chain gang – breaking rocks, no kid gloves allowed!
or better yet, have have all of D.C.’s finest affixed to seats on some Greek triremes (They’re cruise ships too! after all, and we desperately need to get that sector up-n-running, right?) … and have them sentenced to row (Banksters top, Congress below decks, and Media ..both old and new, on the bilgy bottom) around the Potomic tidal basin till the skins’ flayed from their backs!
When the cost of something is Zero, what happens to demand? When the price is set by a single source who is setting pricing based on politics, what happens to supply?
Nixon instituted price controls in the 70’s and look what happened? Lower supply for the same or more demand. I don’t believe any Government can force Supply/Demand equilibrium as all Government solutions are Political and not logical, rational or based on sound economic principles.
Just some thoughts.
“Chartalism is a theory of money that argues that money originated with states’ attempts to direct economic activity rather than as a spontaneous solution to the problems with barter or as a means with which to tokenize debt”
Wolf, can you confirm to me that the way things currently work is that the primary dealers don’t receive money that they can spend, but are required to exchange their bonds for reserves with the Fed? If the deflationists that are running around saying that are right, then I am forced to agree that there is really nothing inflationary about qe, except the degree to which it allows the government to spend more than they otherwise could. But if all of these things are just being sucked out of the market in exchange for reserves that the banks are free to just keep on their books and not make any loans against, that sounds very deflationary indeed.
“…that the primary dealers don’t receive money that they can spend, but are required to exchange their bonds for reserves with the Fed?”
This is wrong on several levels.
One thinks that given the gradually nuttier Fed actions, it might be time to abolish the institution. It seems that starting with Bernake, and possibly at the end of Greenspan era, the focus has been to pump up the economy.
The entire idea here sounds insane. How is this not going to further enhance the gap between wealthy (Jeff Bezos et al) and everyone else. Because that demand side pump just ends up with the guys who provides the supplies. Much as I hate to say it, may be the jackasses insane idea of a wealth tax on the top 1% isn’t so crazy.
Like the new moniker… where is the other end of the string attached to?
@MCH I’ve thought the same thing. We’ve gotten so heavily out of sync here and I fear the “fed engine” is running on fumes at this point. The reason these ideas all sound insane is because they are and ironically there aren’t any sane choices left to make at this point.
They don’t sound “ insane” to me at all but granted I’m a contrarian around here
I think they should just eliminate charitable deductions so billionaires actually have to pay a reasonable income tax. So many charitable deductions are anything but.
How about the sports franchise depreciation game?
Or the professional golf tournament purses that are run through a charity?
I like it MCH God bless Doctor Paul We need him around now more than ever
It started with Greenspan and his cheap money didn’t go into industrial productive capacity it went into housing inflation. It has never returned to “normal.” At this point perhaps it cannot.
IMO Lisa, it started with either ronnie ray guns insane ”trickle down” or perhaps even with FDR stealing the physical gold from everyone by his buddies and other rich folks.
Nixon with his fixed price BS and starting the sell out to Asia,,, etc., etc., along with all of them since selling out working folks of USA to enrich themselves and a few more buddies.
ALL of em a bunch of self serving corrupt evil people, with most being as hypocritical about it as is possible.
.. a can kicked to infinity?
We;; if you dont like free money and the resulting deflation
of the dollar how about this. All robots that take jobs from
humans now need to pay social security and uninployment
insuance premiums and shoot i almost forgot about income tax
That should cover the cost of money sent to needy humans.
If it’s robots, I would like to see them bringing some Chinese jobs back to the states. But heck no, American corps are setting up robot factories overseas.
There was a time when tax cuts or a type of stimulus actually worked some in the US because the money mostly stayed in the US when we produced, oil was the largest drain off. Do you see how some people are absolutely uncompromising against wearing masks? It’s the same with US corporations producing overseas, not at home. There goes any stimulus back with the empty containers. I guess we’re all going to be living in cardboard shacks busting up wood pallets for firewood before we get down to the level corporations will hire us 50 cent hr.
Brant-your vision here is clear. History indicates that periodic international struggle is baked into us as a species. How many at the $0.50 end be willing to fight for/against our respective economic masters when that time arrives? (Further reading, recommend Tuchman’s ‘The Proud Tower, followed by the ‘Guns of August’, and topped off with ‘The March of Folly’. Leaven with Eric Hofer’s ‘The True Believer’).
May we all find a better day.
All of Barbara Tuchmans books are recommended
I am trying to decide what to use my helicopter money for – pay off student loans? Buy land? Buy off-grid gear and supplies? Maybe the traditional – water, food, brass, gold, silver, and add bitcoin and crypto? Some pasture and cattle?
The hard part is trying to figure – do you delay paying the debt figuring hyperinflation will make it pennies on the dollar anyway – or just be rid of it trying to help your disconnecting from a runaway train?
“…The hard part is trying to figure – do you delay paying the debt figuring hyperinflation will make it pennies on the dollar anyway – or just be rid of it trying to help your disconnecting from a runaway train…”
I would go with the latter. Better debt free than a debt slave at any level.
The latter is the right choice. And it’s not the runaway train…its the derailed train still trying to get there. Not gonna happen. I sleep well at night knowing I’m debt free and not beholden to taking lashings from the debt slave systems prevalent in our economy.
Amen. if you are debt free most of the problems are manageable. Time to look after your health and loved ones and less time consumed with worry.
I don’t sleep so well as the inescapable taxes keep escalating upwards whether I own property outright or not.
I am also debt free and have been so for many years (hard work and spending judiciously). It is absolutely freeing !!! However, the many, many debt slaves have affected us all. No interest on savings, rising costs in many things, so one has to resort to other and sometimes riskier investments. This is what living beyond one’s means on a national scale will do as sound money goes the way of the dodo bird. So yes, even though we are in a better position, our lives will be affected. I am really pissed as my wife and I got to where we are through hard work and savings, only to be affected by all these clowns and grasshoppers out there, from gov’t to corporations to all these jerk consumers. To me, the title “consumer” is a shameful PEGIORATIVE !!!
Someone smart said society doe not end well when you penalize saving.
Why would you regret your choice of Path of Honor?
That story worked out when there were many many ants and one grasshopper. Grasshopper is gone and we have a plague of Locusts to replace him.
Engin-ear: I don’t regret my “path of honor” as you ask ! I would not change a thing as I sleep well. Hopefully there will be some harsh justice for the perpetrators, in this life or the next we hope.
Dave Ramsey has it about right, but to simplify a good goal is:
1. Six months of living cost in cash.
2. Try to get all debt except mortgage paid off in two years.
3. Invest 15% in diversified portfolio
4. Don’t buy too much house
um, did you get the point of the article? the value of your 6 months of cash is rapidly dropping to zero. How about 6 months of something liquid other than cash?
Preferably something that would be valuable and liquid in any economy anywhere in the world, in today’s or any future currency system. Preferably something durable, portable, preferably small so you can keep it secret- got any ideas?
I still like the 6 months cash as you buy things in cash not gold. Gold goes in the long term bucket in my opinion.
I was thinking chocolate bars, not gold. Very handy in any economic situation.
Old School: Yes, but keep in mind who Dave Ramsey’s audience is:
1. Young folks to get them on the right path – this is good.
2 . and, broke people.
For folks near retirement who haven’t done much, Mr. Ramsey can’t really help them.
“A lump-sum payment in digital dollars for all Americans in a recession ….”
Well at least it will be for ALL AMERICANS.
I can hardly wait to get my hands hands on some of those dollars!!!
And unlike the Obama cash splash from years ago Uncle Donald actually came through with some cash for ALL AMERICANS even ones living overseas.
Yeah, people shouldn’t be greedy, but Uncle Donald’s cash splash was the first one I’ve had from a government since the GFC here in Australia which was back in 2009!
I think I got a few hundred bucks back then – it wasn’t much and it was based on your income.
Every year when the government here announces their new budget the only thing we think of is how much we are NOT going to get and hope that we don’t the shaft too bad.
This virus crisis in Oz has followed the usual Australian solution to every problem here: throw cash at it. If you are lucky you’ll get ‘something’ if not well sorry, you are SOL.
I’d provide a list of people and entities that got cash, a handout, or some other type of benefit since this crap started here in Australia, but the list is so long that it would take forever to research and type. Even the local government here is throwing money as various ethnic groups to help them out……….
If you are what we call a self funded retiree or not working by choice you basically got nothing.
If you were on the national Age Pension you got a couple of extra payments which IIRC amounted to A$1500 or about two weeks equivalent to what working people got on the JobKeeper program or people that went on the Australian unemployment system got for about
six weeks as a top up.
Businesses racked up huge amounts from the government which actually resulted in increased corporate profits!!!
Yeah well that’s great but as I said earlier I live overseas and got a promissory letter but squat since so don’t be too sure
How did it come to this ? Just shameful to think this is NOW the state of the nation to which my parents immigrated when I was a child of 2 years. A once proud country now reduced to mendicant status. On one hand, I am glad that my parents and my wife’s parents (also European immigrants) are not around to witness this shameful collapse. They were all so grateful and proud of the opportunities afforded them and what they were able to achieve through hard work and savings. On the other hand, selfish, short sighted, immoral and greedy behavior will always manifest themselves financially and thereby inflict harm on so many folks, especially the more vulnerable. So a family worth say $200 million gets the same $28K that a family living in a single wide would receive? So, no means testing as “they ” did for the stimulus? Sorry for trying to use some logic here. At that point, won’t groceries cost at least $1K per week? So, we will print our way to prosperity ???!!! As Wolf says, better than asset purchases and negative interest rates. Probably true, but also like saying ” I’m glad I have Multiple Sclerosis and not Lou Gehrig’s disease”. At this point, I may start “shopping” for another country. But most other places seem to be suffering the same fate. I may take a closer look at my native Italy…at least I have dual citizenship there and the food is better. I find all this really sickening and downright disgusting!!! I do appreciate the fact that Wolf is acting as a financial “Paul Revere” on this.
Oddly, we’re more or less in the same boat. My parents came here because this is the land of opportunity. But now, thanks to the idiocy of the jackasses and the dumbos, what we have is 20 years worth of slogans, and hardly any deliberate or measured actions. And unless I’m mistaken, the trend is getting worse. I thought the 2000s were bad, the 2010s became worse and worse.
BTW, relatively speaking, the $28K for the top 5% probably doesn’t matter all that much, the impact is always on the lower half. But I agree, it seems oddly stupid and somehow lacking in common sense to give money to the people who wouldn’t even notice it.
Means testing is hard to do unless you have access to tax returns (IRS). So stimulus checks were means tested since the IRS sent them out. The Fed does not have access to IRS data and cannot means-test at this point.
Australia does means testing on payments – it’s really not that hard once you have an ‘in’ to everything with a tax file number which I guess is about the same as a social security number in the USA.
The tax people here even scan purchases of things like luxury cars and boats and match them up to people’s incomes.
If you want to apply for a benefit there is some ridiculouly long form where you have to list every bank account, brokerage account, trust fund, car, house, cash insurance policy, the value of your crap in in your house, and probably lots of other things I forgot too.
And you have to list ALL your income as well.
Then they do two tests on you:
Your income (also your partner/spouse included) is input into a formula and is then used to reduce the amount you get. Once you get to a certain level of income you get nothing. No unemployment, no national age pension, zip, nada, nashi, zero, zilch.
Next they also look at your assets except your primary place of residence or what the Yanks your home. There is an exception for this rule if you own more than a certain size block of land and then the value is included unless you are a primary producer (ie, a farmer).
They reduce you benefits by some formula for every dollar over a certain threshold. Again, once you get to a certain level of assets, you again get nothing.
Which test results in the lowest amount of benefits paid is the test that is used to calculate the amounts.
Now what one must understand is that under the tests for benefits, some groups are “better” than others. For example, the maximum rates for a benefit called “Family Tax Benefit” are paid to people with children as follows every two weeks with incomes up to $55,000 or so a year:
$189.56 for a child 0 to 12 years
$246.54 for a child 13 to 15 years
$246.54 for a child 16 to 19 years who meets the study requirements
You get payment based on your income, the number of childen you have, and their ages. Max cutoff for a family with one kid is around A$80,000 or so.
Then they also have a supplement to that Family Payment called Family Tax Benefit B which is around $800 a year or so.
So if you had three kids and they are all over 13 you’d get cutoff from this payment at around $130,000 a year income.
For example, a family with three kids making A$55,000 a year could pull in about A$20,000 a year TAX FREE to help out with the kids.
If you were a retired person and made A$55,000 a year, you’d probably get close to nothing from the government.
Now, why in the world would someone making over A$100,000 a year need help from the government with their kids?
Don’t even get me started on the huge amounts the government here pays for childcare to people even making up to A$250,000 a year!!
Wolf: how would the Fed obtain the bank accounts of all these folks?
The Fed wouldn’t obtain people’s bank accounts and wouldn’t need to. The proposals say that the people would open an account at the Fed, including app-based, and the digital dollars would be deposited into that account or digital wallet, and then people can do with the digital dollars what they want to. People wouldn’t even need to have a bank account; this would reach the unbanked as well.
Right now, the “family worth say $200 million,” if their wealth was invested in the S&P 500, they got $100 million in the six months since March 22. The “family living in a single-wide” got next to nothing. That’s the system we now have in place.
If I were you I’d have packed my bags already!
“How did it come to this” well if people had listened to what Eisenhower said about the “ military industrial complex” and actually done something perhaps we wouldn’t be in this pickle The question of course is what could we have done with the parasites working 24/7 to bullshit the population into what we’ve become
“military CONGRESSIONAL industrial complex”
By my reckoning, if you just stay put long enough, you’ll BE in a different country!
Funny and sad as I’ve thought about that irony as well.
Why even retain the commitments to ordinary business and ordinary focus on exchange rather than use, as a backdrop? Why does the direct-payments idea need to be “a terrible idea, but less terrible than the ohers?” We’ve had 12 years of evidence that the keepers of the system are creating bizarre overlays that unfairly intervene so that anointed businesses will not just fail. There’s a certain piece of, I guess my term would be “progressive business-conservatives” who are so amazed over time at the ‘bizarre” and “crazy” markets but still contrast them with a normal capital world that would be positive for human beings if only we could get rid of these overlays. The overlays are never going away, or they would have done it by now. Isn’t it the case after this much time that they don’t remove the QE and so forth because they can’t? And also, the romantic idea of incumbent-killers (if the incumbents won’t stop overlaying unfair advantages, pirates will show up how hollow they are) will not work because the strident business figureheads can be tempted into co-optation, recuperation and bribery. It means you made out like a bandit which must be a good thing. Right disruption just wants to be bought off most of the time, and the phony stridency evaporates for a price. Meaning that you can’t get rid of the overlays this way either. Right disruption wants to become the new monopoly and be too big to fail, themselves. Then the bizarre distortions would be on their behalf.
So why not leap off from decrying the dishonest distortions and malinvestment, and leap to the anticapitalist left, full stop? Come on over! The left is the people who can say direct payments for human beings (who will go off and do human-sized things with it like get a sandwich,) without having to place an asterisk next to the idea.
I think many are there, but that same system scares them into thinking they are, oh I don’t know, unpatriotic or traitors or revolutionaries or something like that. Whatever the swamp scum label them as.
Being labeled by the swamp scum (which now officially includes all four pillars of democracy) is like having a laser sight on your forehead for many people. Especially with all the armed lunatics running around.
The FED’s actions preserve social stability, the first virtue of any political system according to Aristotles (~300 BC).
The price to pay: expand Palo Alto beyond its borders. People having less than 500K of income need gouvernment support.
It preserves it in the short term, and destroys it in the long term. Essentially damned if you do and damned if you don’t. They only care about power.
I keep asking myself this question:
How did we let a bunch of arrogant silver-spoons gain so much power and influence over us?
“Silver spoons” I’ve never heard them described that way but I like it
“Poor George [Bush], he can’t help it. He was born with a silver foot in his mouth.”
― Ann Richards
Ann really had some balls! … unlike george ….
George lived in Compton for some time. True story (look it up). Wonder what it was like in 1949.
Lawyers and bankers always seem to live on the nice side if town.
Welcome home! This is the US, we were founded by recalcitrant subjects of The Crown. The deck has always been stacked for the wealthy here.
As long as the labor arbitrage can continue maybe this Monetarist experiment will persist. But after 40 years I think the results speak for themselves.
We were all afraid of the evil empire and we wanted morning in america again.
Dave-many, many pieces-practical, social and psychological, here. My chosen practical comes with the House fixing its numbers in the 430’s in the 1920’s in, as near as i can determine, the interests of speeding up the passage of new legislation (would that the same energy were applied to examination of old). The Constitution limits Congressional districts to 30,000, BUT, there is NO upward limit. Given that the population of the nation has more than doubled since then, it’s not hard to see that the power of the vote in your district, for your LOCAL representative and what used to be your ACTUAL say at the Federal level-has been halved, and continues to shrink (small-pop states with two Senators and one Representative have already been once turned away from the SCOTUS on this issue). Re-crack your American Civics book and think about the ramifications of this, if you never have. Connectible ‘Silver Spoon’ dots will become apparent…
Sorry, Wolf, this was way off topic, but i get my hair up (i believe, like you) when less than due civic diligence seems (imho, of course) to pop up… (came in for coffee, but i obviously need to get back outside with the respirator and get back on clearing more defensible space…).
Ack, return for more coffee and yet again found my thought not totally reaching my fingers. Properly: “The Constitution LIMITS the population of each Congressional district to 30,000, BUT,…”.
My apologies, and-
may we all find a better day.
We have become who we are by good solid propaganda groups; sold “American Apple Pie” not realizing that the dark powder we believe to be cinnamon is actually a slow acting life poisoning agent.
“Modern” society for the most part has sold it’s soul to the corporatists, but we are now at a constrictive point where the “system” does not work anymore for whatever reasons.
History shows us that the commons will always go after the monarchies, dictators, super wealthy wherever they are and they will be corpses of the past.
America and it’s (too much of) people have fallen under the spell of the “7 Deadly Sins” (I’m an atheist)….all of which represent what our society has become.
We (again, too many) have or are becoming angry, insensitive to others’ plight(s), self righteous, arrogant and very racist.
That really smacks of “bewilderment” at what is happening to them and their “wonderful” lives. (Those that have good jobs, clean neighborhoods, good schools, enough plus much more to eat unto waste, etc.
Another commenter above mentioned the fact that many of the individuals waiting in line for “free food” have SUV’s. Well, yeah! So many middle class families now have lost their jobs and still have the accoutrements of “Middle Class” but that’s all they have…..and they are getting desperate.
Another mentioned “free medical care”……There is no such thing. It’s all paid for by public monies. It’s the priorities of our (or others’) society to set up the priorities by which we will live. Don’t blame anyone but ourselves. Nothing is “free”. We have been brain washed that anything even hinting of “medical care for all” is an abomination. And, too many politically and socially lazy people want to believe that.
What we have now is a confluence of the results of the ’08-’09 housing crash compounded by the pandemic. Two strikes. Three and we’re out!
I’ve always felt the FED has no choice…….it’s either support for those millions who have been and are going to be devastated by globalization, the housing crash, and the pandemic or we will have social revolution.
“Unbridled” (unregulated) capitalism must not be allowed to hold supremacy over any society.
What was that question bandied by a famous early 20th century revolutionist?
“What is to Be Done”?????
That is the question.
Sierra-I have always appreciated your observations. Today, i’m more than appreciative, i’m in awe of your observational eloquence. Thank you.
may we all find a better day.
America has an addiction (debt/cheap money) …
So to keep the drugs flowing…
Instead of subsidizing the drug dealers (banks)…
The government will just hand out the drugs…
Problem solved!! Now the drug dealers will be driving Mercedes instead of Bentleys, and everything will be right as rain.
What’s that you say, MMT will just make real rates even more negative, causing even worse asset price inflation?? Nonsense, everything will be fine because we’re going to get 2% average annual inflation over the exactly right time period (trust me I know how to measure it perfectly).
What’s that, all this new money will just flow back to large capital owners who control businesses with unassailable economies of scale? Listen friend, these people earned their wealth, and we all know socialism doesn’t work. So just pipe down, stop worrying, and go buy some new furniture with these Fed Bucks, #retailtherapy #blessed
Just how do most Americans acquire an addiction to something that they do not have? No matter how much they work, they are reduced to poverty often enough. It’s the topmost that gets all this “cheap money.”
Taxes were used to reduce the massive inequality that was normal after the Gilded Age in both the United States and the United Kingdom. Most people who are wealthy either inherited it or stole it through means like monopolies. The monopolists and all the wealthy capitalists should be taxed into rags and shopping carts for they are mostly parasites.
“Max” is right. “What’s the worse that could happen?”…..yes, depreciation of our currency and worse, loss of confidence in the currency and the government, if we have not already lost confidence in our so called government. We all know of the enormous waste of resources when the government tries to run some program or policy or bureaucracy. Why would we expect any proposal by any part of our government to actually be beneficial or economical?
And it took them how many years for them to come to this long obvious conclusion, “fixing” the problem THEY created by implementing a less horrible policy? Anyway, too little, far too late.
On the “digital dollars” thing, a government debit card, if you think credit card fraud is bad, just wait until something similar is “run” by the government.
So, they implement what is even more of a negative effective interest rate policy of a variety where the public won’t be smart enough to hang them from lamp posts while basing their inflation goals on simplistic garbage economic theory fed with garbage, manipulated inflation data that indicates there is no inflation when there is actually a great deal of it.
With the lingering and massive economic effects of COVID-19, in my opinion this country must be closer to the “something will give” cliff than it has ever been.
1) SPX high above the monthly clouds, backing up the Feb(H).
2) In space SPX need only Anti Martingale boosting for maneuvering.
3) CA is burning because of the climate change. SF skies have been red, cleared, but CA is in deep red, getting deeper financially, anti reds politically.
4) Doubling the Martingale stimulus by the Dem to send US gov to BK. 5) Anti Martingale stimulus by the UST, – $1T is half sizes, – instead of twice the CV19 previous bets, by the Dem casino.
JPY-QQQ! ETA-FLQ! PDQ!
While you’re converting reality into commodity codes, I live in (3). Do you also breathe air, or just trade it?
The Fed will send funds directly to consumers, directly to FHA… to
prevent a “change of character” situation, until the economy recover.
So in American English you’re indicating the Fed has solved the guns versus butter debate by proposing to liquify oleo margarine and pour it straight down the barrels, thereby ensuring that anyone who deliberates the timing of a need to pull the trigger may need to further consider the backfire probability? Maybe spend the stimulus on baseball bats and ice picks (or #11 knitting needles)?
Governments that a large enough to give you much are also strong enough to take much.
1) The striking Ruhr workers were paid by the gov, between :
Jan 1923 and Aug 1925.
A link would be appreciated.
So you’re implying hyperinflation?
I wouldn’t have a problem with this if the end result weren’t to support a corrupt economic system that begets record wealth inequality.
Inequality really takes off after the Bush tax cuts.
I think we should melt all our gold down and create a golden calf! Who’s with me?
greenspan was an ayn rand member, until he met reality. this isn’t MMT, and the liabilities equal assets thing is more voodoo economics. this is a jeeHopee plan, direct payment to consumers, rolled out as it were on the eve of destr-(ele-ction) to assuage some uncertain voters. were working on it. they don’t care about you, only consumer demand. jp is a bottom feeder and tends to squirm under the light. granted this may remove the stimulus from being held hostage to the budget process, but who exactly gets what they want in that instance?
Fed money is the food in a Pavlov’s dog process for the masses..
Corps won’t like it at first as they are now getting funds without strings but now will have to compete (at least until they fully monopolize).
Rentiers will like it as it will provide a source of income for their customers to be captured by them eventually.
American ruling class is without peer as far as wealth transfers from the masses to them. Any income scheme will profit them and that’s what counts without the nakedly poor optics of what the Fed is doing now.
Not so sure about the ” without peer” part e, but agree they are, so far, some of the best on record; now the evaluation will depend on if they are smart enough to share enough so that the families involved continue rather than be burned, hanged, go to the guillotine, etc., as have SO many previous families trying to ”corner the market” as it were.
Not so sure either about any level of ”secure telecommunications” such that any of the folks/families continue to think they can hide their ill gotten gains from public view anymore, especially reading tons of reports of ”hackers” being able to access pretty much any data at all or more correctly ALL data of any sort…
Might be time and enough for rich folks to adopt a very very low profile, as I understand has been done for the last 4 or 5 thousand years from time to time.
The Fed has been continually re-imagining its own role in the economy for decades now. A month ago it was a huge change to inflation targeting. This month it is a better way to administer helicopter money.
Before the Fed embarks on another “shift”, maybe it’s about time Congress conduct a study of the Fed’s overall effectiveness. The Fed is trying to replace what the free economy can do on its own, but I see two huge bubbles that popped and another one that is ripe, all in a 20 year period. It appears the Fed is creating deep recessions in place of little ones, which is exactly the problem the Fed was supposed to solve.
That’s what I struggle with. Are P/Es of 30-40 here to stay? If so, do we focus on private equity and forego the stock market entirely? I don’t know what we currently have, but I don’t like it.
I think in reality you just have to admit all asset prices are high and holding cash is painful. Probably just start with your time horizon. Cash for next six months. Then some kind of bond ladder or duration matching scheme for next 10 years. Well diversified stocks for 10 years plus. Throw in some gold/silver for insurance.
Expect long term future returns to be about inflation rate and be thankful if you get more.
Yep, that’s the problem. Holding cash sucks, but if you buy practically any asset, you know you’re buying assets that are grossly overpriced relative to the value they create. That’s true whether it’s stocks, precious metals, investment real estate, or anything else.
Like you, I am skeptical of the growth potential of asset prices, as it’s clear that earnings will not catch up, so the only way for growth to occur is through multiple expansion, and I am skeptical as to how high they can realistically go.
50% of us don’t have cash for 6 weeks.
It is reassuring to see others facing the same dilemma as me. Fortunate enough to have some money to put away, I’ve been trying to hedge different types of assets — stocks, RE, land, PM/miners. In equities, it seems that some are rotating out of the momentum (highest P/E) stocks into “value”, which may outperform in the next few years. Vietnam and India seems like good bets for emerging markets.
Please br, et al:
Fed has been ”disguising” for eva,,, at least since 1913,
(if not since the attempts to force Jackson to elect them to be the CB, almost a hundred years earlier )
it’s clear function as a device to protect paper money and all the evils following, up to the various and sundry tertiary,
(( IF I have been able to understand the explanations on WS, et alia, ))
papers representing money being produced from nothing,,,
promoted by what used to be called ”blue shoes types
”AKA ”any sales for a buck” folks, as I have definitely been part of at times in some of my past lives in this lifetime,
((per theory each sentient being is ”reincarnated” every second at some level, and at all levels until yoga, and similar w other words, occurs.))
Prior to Fed, smart hard working thrifty folks put gold into jars in the back yard, then dug them up after the following failure of banks, A particular paper money, etc., etc., to buy stuff that was a lot more affordable with their gold than before the latest crash, by any name.
After Fed, some folks continued that until called by FDR et alia, to give up their gold to protect their beloved USA, in spite of the previous promotions of the Fed, and it’s owners, the banks, banksters, and owners of both, to convince all former buriers of gold to trade it for paper money, which, to be clear, many did; but not enough to satisfy banksters et al, that the job was done, hence FDRs patriotic call.
SO, basically, the Fed has been able, through the wonders of brain washing 101,
(( IMO, USA still without peer in our legal manipulation of local and global conciousness, or, rather, lack thereof,))
to convince almost all the voting public, not to mention the puppet politicians, that they, the Fed, are doing something useful for We the Peedons, (thanks Unamused) when, in fact,,, they are doing exactly the opposite.
Sorry, forgot to add:
this for kl, reporting herein with your creativity and honesty being much respected by this old ( possibly berzerkely,))
guy who has only one suggestion for you and all on here::
DO NOT VOTE
FOR or AGAINST either senile old bastard, very similar to myself, so I should know,,, EH????
VOTE FOR any other of the various and sundry ”parties” that
”’cannot possibly WIN.”’
And then WE the Peedons” can really have some fun, eh
The Fed cannot taper its fiat debt Ponzi scheme. The Fed is faced with another tranche of debt creation that will take its balance sheet to 10+ trillion at some point in the future. The dollar goes into the toilet when this happens.This pipe dream of the possibility of $14k magically appearing in 200 million+ households without Wall Streets paws on it is an act of desperation. The Congress is close to asking hard questions to Jerome. The Fed will be clipped by their creator,Congress, if they become a political liability. Jerome has allowed his buddies to steal enough to last several life times and they will be fine. Jerome will get his grift when he leaves the Fed. Ex-Fed Head Big Ben and the Citadel have made a f**king fortune front running the Fed. ZIRP is looming . The end game of the Fed Debt Ponzi Scheme is there is no way to service the debt except with more debt. The Fed is buying political time toying with this MMT fantasy because Congress may be thinking MMT offers them political salvation and protection from their failure to protect the Republic. When a Ponzi scheme with the power of government backing fails the only out come will be THEFT.
Agreed, but hasn’t theft been happening for a while now.
At base, this is a failure of responsible government to look after the broader population, protect fair markets, and distort incentives.
Fed bitcoin. Cashless economy. All planned. The “goods and services” that the lower end will buy will be cheap Chinese crap at Wal-Mart and Door Dash deliveries of fast food. Wow, that will really help the economy.
You’re getting it…the fanatical true believers among the tech people never quite understood the concept of not shooting yourself in the foot. “Up and down range” and keep low in case of ricochet.
What is the real difference between electronic money and the fact that workers were paid twice a day in Weimar Germany?
Bit more need of wheel barrows if reports correct from family there in that time, without any disrespect for the story of the countess whose serf of a dozen or more generations wheeled a barrow full of her, (( the countess,)) jewels, not all of them to be sure, into the bank to get the cash to buy the seeds for her serfs,,, and then, at the harvest, the same same, barrow full of vegetables was worth more than the barrow of jewels…
Does anyone need any more graphic example of what is about to happen???
Just asking as it becomes ever more clear with the Fed ”doing its thing.”
1) Martingale : US gov spent $1T to fight the virus and lost. / US doubled It’s stimulus to $2T and u lost. / Doubled again to $4T and lost…
2) On stimulus #10 US gov will spend $2,048T to fight CV19.
3) To reach Dec 2019 GDP, @ $21.7T, in real terms ==> US next stimulus will be $4,000T.
4) That’s Martingale hyperinflation.
5) The Anti Martingale will cut the stimulus by half, shortening the thrust.
6) There will be inflation. When delinquent home owners will realize
that their houses are rising in value, gov checks are losing value, ==> they will do whatever it take, to work, to pay and stay.
Three Points on a “CryptoFed”:
1. Why would Congress give up the ability to buy votes via free money handouts (like has been policy for many decades)? Why would the politicans give up this power to the Fed, who does not need to buy votes via money transfers to voters?
2. Why would the Fed start a CryptoMMT program, when they know that Congress will steal the powers and make the Fed a political slave via forced printing of digital currency? Fed loses all power over monetary policy, why would the Fed allow this risk?
3. Why would we need a Fed when Congress can create a new branch called “Secretary of Debt”and take over all the printing MMT powers with a chosen puppet they can control easier than a private, non-elected Fed (that has some “Get fired for no reason immunity)?
Point being, the Fed runs a high risk of making their institution worthless once they create a Digital-Give-Voters_Free-Money-Without-New-Taxes system. Even the sloppy stimulus system in place today, if one set up a digital bank account on their tax return, or used the simple IRS update web page….that system can pay within days if not hours via the current ACH setup. Why do we need a “Digital Crypto” when we already have a “Digital-insta-Pay” system that was used with the previous $1200 stimulus? IMHO, the Fed has hidden goals for a new system, and if I had to guess:
1. New System would allow negative rates on naughty savers for any point in time. CryptoFed could also be set up with a time limit, type of purchase limit, etc.
2. New System would allow tracking of all consumption and spending habbits, thus allowing better economic analysis in real time.
3. New System would eliminate the fear of BitCoin and other current digital crytos from making the Fed obsolete.
4. New System would give the Fed a new tool that would replace the old tools that do not work anymore (other than further asset bubble inflation).
5. New System would make the Fed relevant again, they know they are useless at this point, and yet no institution lasts 107 years old by being behind the curve…
Spend less time listening to what “they” do say, and more time to what “they” don’t…
interesting thoughts to chew on. thanks. It does seem crazy this would take 3-4 years to implement, so there must be a bigger system they envision besides payment processor.
Interestingly, the FedNow helicopter drop program accomplishes the same thing as a fiscal policy that increase taxes on the wealthy (as a % of income) in order to decrease taxes for everybody else (as a % of income).
Therefore, if the FedNow program payments aren’t approved by Congress, isn’t the Fed snatching fiscal authority from Congress?
If Congress approves the program, isn’t Congress pursuing a wealth redistribution policy under the cover of Fed policy action? I would not be surprised if this were the case.
In any case, the program would serve to eliminate our rampant wealth disparities, so I’m all for it, even if Congress goes about it in this spineless way. I wish they would do what they say, and say what they do.
Can digital money drive wage inflation? While assets are already overpriced how much wage inflation (without asset inflation) is required to balance the economy? Sales tax revenues are likely to suffer a lot. Politically it is bait and switch, they give you money, and take away your health care, or relieve you of the burden of mandated premiums. You have more to spend as a consumer, and no cushion against a medical emergency. Or they give you the money, (like SSN) then clawback those payments for medicare style national health plan. Same thing. Wall St has it figured out either way, so enjoy the debate.
If Wall St ”has it figured out” as you suggest, IMO they better really and truly get their act in gear to work out a clear plan to share out their incredible gains over the last 50 years or so since ronnie ray gun put the concept of ”trickle down” into the minds of many believers that it was safe and sound, and meant to help the working folks of USA. Not only was rr a rat, as is very clear, but he was also a very clearly devoted puppet of the rich, AKA oligarchy, one of the most clear in recent her story if looked at closely.
At this point in time, I certainly hope that no one believes that BS anymore, equally certainly that no one on either pres party thinks that.
Their plan is to take the whole show private and cut out the shareholders. There is enough indiscriminate private equity seeking yield to make raising money on Wall St the old fashioned way obsolete. There will be no more wealth disparity gap when assets are no longer publicly held. Did you see how long it took to get at the presidents finances? One reason why Congress considers a “wealth tax”. It will be impossible to enforce. Every president in modern times has come out more wealthy after their term in finished. If I have to give this election the sniff test, I would say Corporate America is leaning Biden/Harris.
Just checked stats and saw this headline:
Dow rallies more than 450 points on hopes for a stimulus package
There you go, feel better yet? I don’t. Back to the shop to build some Covid projects.
So, we create money and give to people in the US, who then buy stuff made in Asia.
Some of the money goes to that part of the supply chain in this country (truckers, shippers, store clerks, restaurants that serve food to the store clerks and their bosses, etc.) but most of the money goes to the overseas workers, causing inflation in their country.
That is, in fact, what has been happening in China, Vietnam, etc.
In one sense, though, it’s the fruit of the US empire. We get to buy stuff we want from overseas with toilet-paper currency, and they have to take it or they get “regime change” good and hard.
When you print money you get to buy real stuff and direct the economy. Modern governments always do it to try to win wars. Once the war is over then you have to deal with the consequences. If you lose the war (the South in civil war) promises are broken and most citizens are broke and the winners come in and buy up your stuff with better money.
Has there ever been a government that was disciplined with the printing press?
The Fed doesnt need to buy votes as they are unelected. Therefore if the Fed is using this money to buy votes, it is doing so at the behest of someone who does need to buy votes.
What makes me laugh, is that if you are going to destroy the independence of the central bank, then do so in a way that helps like pointing out that hyper asset inflation is undesirable. Don’t destroy the independence of the central bank by telling them to do go even harder with the same failing strategy.
Duh… effing political novices. Understand politics before you engage in debates.
this is an improvement, but it’s amazing that it has come to this. After 10 years of failed QE wealth effect, which the FED was warned about as not to put money in the hands of 80% of the population, we are moving to UBI-lite and digital currency happening at the same time.
I wouldn’t be surprise if they are further ahead on this then she said. 2023 would be too slow. If they work with the major e-payment processors, why should this take 3 more years?
I want to see the FED admit they lost control, and throw Bernake and co under the bus for this crazy experiment that has led to UBI being the best of the worst options. Why do we put our entire future at stake based on questionable theories? That is radicalism! This money will have to be low enough not to zap people’s motivation to find work and seek social mobility. It has to send the right messages. It being given to everyone will sell well.
Hopefully this one-time stimulus would also buy some time and enable the political will to develop to address the elephant in the room:
Ironic, but in a way unsurprising, that this proposal had to come from the Federal Reserve, rather than Congress or the executive branch of government.
Thanks for a very enlightening podcast, Wolf.
Kind of funny but Wolf Street Report always starts with the word “OK”.
Christ, I have no debt and no assets just a lot cash and a pension. What to do?
What to be robbed in some way, I’d say…….
Although, in dark times, it’s best to work out how to be the robber, preferably in some official capacity.