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Where's the Money come from? (General)

by dulan drift, Friday, May 01, 2020, 07:20 (454 days ago)

The world is about to embark on an unprecedented cash-splash in order to kick-start economies. Australia is spending about a trillion dollars while the US is talking several trillion. Most countries are doing the same.

Firstly, i was surprised there even was that much money to spend - when you see how stingy certain governments can be on funding various essential services and now there is a bottomless well suddenly.

Secondly, i'm curious as to where that money comes from? My understanding is that some of it is from Central Banks buying 100-year government bonds - which may or may not be ever paid back. How does that work? Other money comes from loans - though i'm not sure who's loaning the money.

I do wonder what happens if we have another rainy day - say next year? A real rainy day - for example a permanent border shutdown with China due to escalating tensions or even a war? Or another over-reaction to another corona virus?

And how does all this money get paid back? Again, i don't understand it all properly but on the face of it I'd hate to be a young person coz it looks like they'll be getting saddled with higher taxes and less government services for the terms of their natural lives. At least they can be satisfied in the knowledge that through their sacrifice the lives of some sick elderly people were prolonged for an extra few months or even years.

Then there's Modern Monetary Theory. According to an article in The Chronicle:

"The sneaky third way to pay back debt is just printing money and giving it to your lenders. Governments can do that, but historically they have chosen not to, because it tends to cause hyperinflation. However, a variation of this idea is coming back into fashion, with a new name - Modern Monetary Theory."

All of the above feeds back into the basic question: Are government's weighing up these repercussions as they chart radical policy courses that will reverberate long into the future? Coz now is the time to weigh them. Before would have been better. Later, will be too late.

Where's the Money come from?

by dan @, Friday, May 01, 2020, 16:04 (454 days ago) @ dulan drift

This was my first thought when Trump announced the initial 2 TRILLION dollar infusion of cash -- where does it come from and why couldn't they do that to solve the decades old health care crisis in the US?

Clearly they could do that for any reason they want, but they choose not to. This money is going to keep their rich friends afloat, not poor Joe and Joanne who are going to lose their business and end up on the street.

My world view is this -- these governments are just legalized gangs. They're the scum that have tricked, swindled, cheated, and if that doesn't work, killed all the competition. The US govt. is simply the most powerful gang. Sure, we vote, to elect a temporary gang leader.

So they can create as much money as they want. Yes, they just print it. They just create it out of thin air, and it will result in inflation. My parents bought the house I grew up in for 30K, and that was a shitload of money then. It's now worth nearly 500K. That's inflation and it's a stupid amount of money for a very normal house in a normal neighborhood.

Just a few decades ago, 100K would have been more than enough for a couple to retire on, now they need 1 million, minimum.

And how about the newest fad, negative interest rates. Banks lend money out, and accept less in return because at the rate that the value of the currency is going down, the bank does better to get that percentage back. So, for example, they lend out $10, and will accept as payment $9 in a certain period, because if they don't do that, that $10 will only be worth $8 by that date.

I think what we're going to see at some point is the end of cash, and covid is moving that forward: https://www.bbc.com/news/business-52455706 . I've been studying money for a while now, and digital currencies, and cryptocurrencies, and there's a lot happening. I think in the not to distant future, governments will be rolling out their own digital currencies, and among other things, this will increase their surveillance capabilities by degrees I don't want to imagine.

In the meantime, whatever money we have is worth less and less and less.

Where's the Money come from?

by dan @, Friday, May 01, 2020, 16:25 (454 days ago) @ dan

This guy is good if you want to learn more about the history of money and cryptocurrencies and surveillance potentials of central bank digital currencies:

https://www.youtube.com/user/aantonop
https://aantonop.com/

EDIT: Here's a random video from one of those pages: https://www.youtube.com/watch?v=LgI0liAee4s. I haven't listened to it all yet.

Where's the Money come from?

by dulan drift, Saturday, May 02, 2020, 11:54 (453 days ago) @ dan

I think what we're going to see at some point is the end of cash, and covid is moving that forward: https://www.bbc.com/news/business-52455706 . I've been studying money for a while now, and digital currencies, and cryptocurrencies, and there's a lot happening. I think in the not to distant future, governments will be rolling out their own digital currencies, and among other things, this will increase their surveillance capabilities by degrees I don't want to imagine.

In the meantime, whatever money we have is worth less and less and less.

Read a few days ago that China has started a trial roll-out of state run digital currency. Interesting coincidence that it comes on the back of the virus roll-out

Where's the Money come from?

by dan @, Saturday, May 02, 2020, 14:57 (453 days ago) @ dulan drift

Very interesting. And of course once they do it, everybody else will. It gives governments enormous power and control over those people required to use the currency. They will know exactly what digital units of currency were spent on, when, and where it was spent. They'll be able to trace a unit of currency indefinitely. And since they pay people in this currency, they'll know exactly who is spending what, when, and where. And those people accepting it will, of course, also be identifiable; they'll have to be in order to use the currency.

It also means they'll be able to disable units of currency if, for example, someone's 'social score' gets too low or they say the wrong thing on a blog posting.

The difference with bitcoin is that nobody can control it and that it's decentralized. That's why governments hate it so much. They've been trying to kill it since it started, and it just goes up in value. Sure, it's down from it's peak of 20k, but it will pass that over the next year or two, maybe much sooner.

Money has changed dramatically, from sea shells to metals and now to bits of data and nothing more, nothing more at all.

Where's the Money come from?

by dulan drift, Sunday, May 03, 2020, 08:23 (452 days ago) @ dan

There is some dissent about these things - but not a lot. Do you see any hope for a mass rebellion against this big-brother state that we're getting herded into?

Where's the Money come from?

by dan @, Monday, May 04, 2020, 15:42 (451 days ago) @ dulan drift

Nope, not until enough people are literally hungry enough to raise hell.

Where's the Money come from?

by dan @, Wednesday, May 06, 2020, 07:30 (449 days ago) @ dan

Warren Buffett explains the simple reason why the US will never default on its debt

In short, the US is accumulating debt in its own currency, and it can print as much currency as it likes, so it will never default on the debt. But, the currency will lose value and we'll have inflation.

https://finance.yahoo.com/news/warren-buffett-explains-the-simple-reason-why-the-us-wil...

Where's the Money come from?

by dulan drift, Wednesday, May 06, 2020, 19:11 (449 days ago) @ dan

Great article. So if you've borrowed in your own money then it is just a matter of printing money. You almost wonder why bother going through the pretense of borrowing it - why not just print it straight off?

Have often wondered at what point printing money causes inflation. If i print $10 it won't make a difference - or a $1000 or a million. At what point does it make a difference? Anyway, a few trillion should test it out

Where's the Money come from?

by dulan drift, Tuesday, May 12, 2020, 18:25 (443 days ago) @ dulan drift

Here's the Australian treasurer's take on the subject:

"More than $30 billion in aid is expected to flow next month, Mr Frydenberg told Parliament on Tuesday, the "largest and fastest injection of economic support Australia has ever seen". It's part of a $320 billion package - equivalent to 16.4 per cent of gross domestic product ... However the "unprecedented scale and speed" of the government's economic response had driven a rapid increase in borrowing, Mr Frydenberg said."

Ok - so how to pay that back?

Mr Frydenberg said the "proven path" for paying back debt was not higher taxes, but rather "growing the economy through productivity-enhancing reforms". The "values and the principles that have guided Coalition reforms in the past must guide us again in the future", Mr Frydenberg said.
"Unleashing the power of dynamic, innovative and open markets must be central to the recovery with the private sector leading job creation, not government."

So if it's the same values and principles then i'd wonder why productivity didn't dramatically increase last year?

Secondly, is the idea of growth as a solution flawed? You could argue that it's human growth/consumption that got us into this predicament in the first place.

"Labor's Treasury spokesman Jim Chalmers said the government seemed to have no plan to reboot the economy.
"If only the Treasurer had been able to cough up some detail," Mr Chalmers said, referring to a lengthy coughing fit Mr Frydenberg had during his speech."

He is currently being tested for the virus. I'll be surprised if he's got it coz it's down to zero cases for most states now - more likely he knew his words tickled his throat coming out.

Anyway, the guy is in a tough tough spot as treasurer. I don't envy him that job.

Where's the Money come from?

by dan @, Wednesday, May 13, 2020, 18:47 (442 days ago) @ dulan drift

"So if it's the same values and principles then i'd wonder why productivity didn't dramatically increase last year? "

Exactly, and that's the question they never want to answer. I think it was Reagan who invented the whole 'trickled down' concept, meaning if the rich get rich enough, their excess cash will somehow find it's way to those they don't give a shit about. Unsurprisingly, that has never happened even though the rich are richer now than ever.

And while the rich and powerful in the west demonize socialism in the best of times, in periods of crisis like this, they accept bailouts because they're "too big to fail". So it's socialism for the rich, and rugged individualism for everyone else.

It's a pathetic situation which can only lead to social, economic, and environmental collapse, if not outright war, which in a nuclear age won't be pretty. Regardless, I have little doubt we are witnessing the beginning of the end of an era.

I'd like to be more positive. But if we, as a species, can't even get our shit together to make a unified stand against a virus, how are we going to address global warming?

In fact, I suspect those in power don't really care about these crises because, either consciously or not, not only do they not give a shit about 30% of the world's population dying, it's actually a good thing. They're mostly poor, needy people anyway, so who gives a shit. Famine, war, chaos, these have all, historically, served to increase the wealth and power of the wealthy and powerful.

Printing money

by dulan drift, Saturday, November 28, 2020, 18:55 (243 days ago) @ dan

This article helps to explain where the money comes from - it's pretty much as we supposed - it's printing money, pure and simple.

https://www.nytimes.com/2020/04/15/business/coronavirus-stimulus-money.html

Until recently, Modern Monetary Theory (printing money) was considered a radical fringe-lunatic theory - it's now mainstream. Guess we'll see how it works out.

Printing money

by dan @, Saturday, November 28, 2020, 19:51 (242 days ago) @ dulan drift

Yep, they print money, then pay for it by printing more money. It can't end well.

In the short term, what we'll see is asset prices rising. Real estate and the stock market will go up because they'll be flooded with money, and that money has to go somewhere. So now, we are seeing high unemployment or underemployment with record highs on the stock market. How does that make sense? The official employment rates in the US might sometimes look OK, but it's all BS. Many of those people are working two, three jobs and still can't pay rent or are living in poverty.

Housing prices in the US now are going up, all due to cheap mortgages, and that is due to the printing of money. Meanwhile, personal debt is also rising. This is a replay of what led to 2008, by a multiple of 10.

I think the printing of money and increasing the debt could benefit the economy if that money were used for social programs that actually strengthened society, but they're just throwing the money into cheap credit and one off cash payouts. It doesn't do a thing to address those with no healthcare, student debt, homelessness, or any number of serious social problems we're facing.

In short, they're printing money to keep the large corporate players afloat. That's who it's benefiting.

Printing money - stock market surge

by dulan drift, Saturday, January 09, 2021, 05:43 (201 days ago) @ dan

In the short term, what we'll see is asset prices rising. Real estate and the stock market will go up because they'll be flooded with money, and that money has to go somewhere. So now, we are seeing high unemployment or underemployment with record highs on the stock market. How does that make sense? The official employment rates in the US might sometimes look OK, but it's all BS. Many of those people are working two, three jobs and still can't pay rent or are living in poverty.

In short, they're printing money to keep the large corporate players afloat. That's who it's benefiting.

You were right about the stock market and house prices. It seems to be defying gravity. We've broken all kinds of records in the past few months - highest ever, fastest ever rise, shortest ever bear market (set in the middle of Covid!)... And all this through record infection levels in Europe and America and electoral chaos in the US for good measure.

I wonder what happens with the money printing economics - does it get put back in the box at some stage or do we just print money forever now?

Why don't we print money to address climate change? Can we just buy everyone a new electric car? Buy land back for reforestation?

As you mentioned, why not print money to fix the health system, homelessness etc?

Printing money - stock market surge

by dan @, Saturday, January 09, 2021, 14:47 (201 days ago) @ dulan drift

It looks like they are going to keep those presses running, at least in the US. One philosophy making the rounds is that there is indeed infinite money, and infinite debt. The US govt pays its debt by printing more money.

All of this is resulting in, among other things, real estate becoming increasingly out of the reach of many people, and so they end up renting. But this, of course, is pushing up rental prices. And those middle class people who can get their hands on a house are increasingly doing so by taking on massive debt.

One of the most cruel realities of the 2008 meltdown was not only that so many people lost their homes and were forced into renting, but that because of that, rental prices skyrocketed. Talk about rubbing salt into the wound! That trend has continued as the rich get richer, buy more properties, and the poor get poorer.

Now, with COVID, we have an added troubling situation. So many people have lost their jobs, and many if not most of them have fallen behind on their rent or mortgage. The US govt passed a law that forbids evictions until March, at which point, presumably, landlords can evict away. All of these people who haven't been able to pay rent are accumulating massive debts that they'll never be able to pay off. If they're making $10/hour when they work, and they can't afford their rent now, what makes anyone thing they will be able to pay all that back rent due?

And so in a very short time the US is going to see literally millions of households being thrown out onto the street. I'm guessing the presses will be working over time for years to come. It's almost as if the economy is so sick that there really isn't any choice. But what will it all lead to?

Printing money - stock market surge

by dulan drift, Sunday, January 10, 2021, 06:25 (200 days ago) @ dan

The thing that gets me is how radical it is. Economists are not known for their radical ideas but we've now got widespread implementation of an economic policy that was roundly considered fringe lunacy just 12 months ago.

It's kind of like rushing in a vaccine without doing all the safety trials.

And so in a very short time the US is going to see literally millions of households being thrown out onto the street. I'm guessing the presses will be working over time for years to come. It's almost as if the economy is so sick that there really isn't any choice. But what will it all lead to?

If your goal is social upheaval, then that would be the best way to go about it. If a riot explodes, it's not a big step to join in if you're living on the street. We saw that already last year.

Printing money - stock market surge

by dan @, Sunday, January 10, 2021, 06:54 (200 days ago) @ dulan drift

If your goal is social upheaval, then that would be the best way to go about it. If a riot explodes, it's not a big step to join in if you're living on the street. We saw that already last year.

And I think that's largely the reason why (more) free money will soon be falling from the sky. It's easier than actually dealing with the fundamentals that are the source of all the economic problems. I think those fundamentals are far more complex than politicians or social activists often portray. They're usually dumbed down to soundbites like redistribution of wealth or trickle down economics or income disparity, but it goes far deeper than any of those I'm afraid.

On some level, the gorilla in the china shop breaking everything is our culture, economy, even identity (in the US anyway) all being based on consumerism. Nobody addresses that, regardless of where they stand on the political spectrum. In the US, there are no democrats or republicans saying, "You know, maybe we should just all buy less shit." Of course, this is oversimplifying as well, but our economy is entirely based on consumption.

Looked at another way, maybe we need to actually evolve in some way.

Printing money - stock market surge

by dulan drift, Monday, January 11, 2021, 06:10 (199 days ago) @ dan

On some level, the gorilla in the china shop breaking everything is our culture, economy, even identity (in the US anyway) all being based on consumerism.

That's the key right there - consumption. All the problems in the world can be traced back to that. It's what we do as living creatures - consume and reproduce. As humans we got too proficient at it.

We went beyond 'consuming to keep ourselves alive' to 'consumption as a status symbol' - the best car - the best house - the best holiday at the best hotel. It became a consumption competition - a feeding frenzy.

With chickens i noticed a kind of thoughtless greediness. Give them a patch of grass and some time - they will eat that down to bare earth. They're not thinking 'maybe we should conserve some of that for later'. The impulse to consume is overpowering - even when it will result in their own doom.

Luckily for the chickens i am around to ration out supplementary food, but i don't know who's around to rein in human consumption.

Printing money - stock market surge

by dan @, Thursday, January 14, 2021, 16:06 (196 days ago) @ dulan drift

With chickens i noticed a kind of thoughtless greediness. Give them a patch of grass and some time - they will eat that down to bare earth. They're not thinking 'maybe we should conserve some of that for later'. The impulse to consume is overpowering - even when it will result in their own doom.

I've noticed that whenever there's a threatening natural event like a major earthquake that knocks out electricity, a serious typhoon, etc., I want to eat. It's a weird sensation and even though I'm acutely aware of why I feel it, it doesn't matter. The awareness of wanting to eat as a natural response to the situation is not enough to quell the urge entirely.

But we've gone way beyond that, as you point out. Our very economy depends on consuming more than we need, or even want. Advertising exists to make us want products and services that we didn't want before being exposed to the advertisement. And they're very good at it.

Printing money - stock market surge

by dan @, Sunday, January 10, 2021, 11:55 (200 days ago) @ dan

The US reports nearly 5.7 million people will likely lose their homes in the next two months.
https://www.visualcapitalist.com/mapped-the-risk-of-eviction-and-foreclosure-in-u-s-sta...

Printing money - stock market surge

by dulan drift, Sunday, January 10, 2021, 17:59 (200 days ago) @ dan

"It goes without saying that with nearly 17 million Americans behind on mortgage and rent payments, there could be significant consequences down the road."

Seems like it is 'going without saying' - don't hear much in the media about it despite the consequences. Just for your self-interest as a power class you'd think you wouldn't want homelessness going off the charts.

Printing money - stock market surge

by dulan drift, Monday, January 11, 2021, 18:33 (199 days ago) @ dulan drift

This media report encapsulates the situation:

"Wall Street notched more milestones Friday as the market largely shrugged off another discouraging jobs report amid expectations that the incoming Biden administration will pump more aid into the pandemic-ravaged economy.

The Standard & Poor’s 500 index rose 0.5%, its second straight record high. The Dow Jones industrial average and Nasdaq composite closed at new highs."

Reddit Vs Big Hedge Funds

by dulan drift, Thursday, January 28, 2021, 10:49 (182 days ago) @ dulan drift

Here's an interesting 'kicking against the pricks' story. A group of Reddit users figured out a way to mess with big hedge funds - specifically short sellers.

The user credited with inventing the scheme, Deep Fucking Value, turned a 50k investment in Game Stop into 47 mil.

The technique appears to bet against the short sellers.

"Shorting, or short-selling, is when an investor borrows shares and immediately sells them, hoping he or she can scoop them up later at a lower price, return them to the lender and pocket the difference."

That's fine if the price goes down, but if it goes up, the shorter loses. In that case the shorter is in a mad scramble to buy the stocks he/she's borrowed to pay them back and limit losses - which in turn adds to the upward price pressure.

The Reddit users strategy appears to apply upward pressure on a stock that has been shorted, which is then exacerbated by the shorter trying to get out of the position, driving it up even more.

Whereas in normal stock buying, the worst case scenario is you lose 100% of your investment if a company goes bankrupt, in shorting, however, the skies the limit for losses. If the stock goes up 1000% then you lose 1000%.

Not surprisingly, despite hedge funds manipulating share prices as a matter of course, they are now crying foul.

Reddit Vs Big Hedge Funds

by dan @, Thursday, January 28, 2021, 15:13 (182 days ago) @ dulan drift

Thanks for that explanation. I've seen the headlines but haven't had time to read up on what's going on. That's a nice, concise explanation. Shorting is in itself a form of stock manipulation, so it's laughable that the big funds should now cry foul. They've simply been beaten at their own game.

Of course, the exchanges, regulators, various gatekeepers, and other big players who chat over brandy and private numbers will side with the funds.

6 Trillion in Economic Stimulus for US

by dulan drift, Saturday, February 06, 2021, 11:33 (173 days ago) @ dan

"Republican lawmaker Michael Burgess of Texas argued that Congress had yet to spend all $4tn of the previous pandemic relief, noting $1tn had yet to go out the door.

"Why is it suddenly so urgent that we pass another $2tn bill?" he asked."

Larry Summers, economic adviser to President Barack Obama warned of "inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability".

"Stimulus measures of the magnitude contemplated are steps into the unknown."

Got that right. This whole printing money thing is so radical. You wouldn't think so coz it attracts almost no scrutiny - but is. Never been done before on this gigantic scale. Was considered lunacy just a year ago.

My guess is will work fine for a year or so - the stock market will keep booming coz the money has gotta go somewhere.

But beyond that?

Who knows ... maybe Funny Money Theory really is the way to go - onward and 'up through the atmosphere...'

Bad News causes Stock Market Record

by dulan drift, Monday, February 08, 2021, 19:52 (170 days ago) @ dulan drift

"Wall Street hit fresh records on Friday amid speculation that a disappointing US non-farm payrolls report would dial up the pressure on Congress to approve President Biden’s $US1.9 trillion ($2.47 trillion) fiscal stimulus plan." (paywall)

So bad news increases the chance of printing more money - which is great for the stock market!

Bad News causes Stock Market Record

by dan @, Friday, February 12, 2021, 17:59 (167 days ago) @ dulan drift

Yep, that's how it works. Market views are show shortsighted that that's how it works. Although they know in the long run it might hurt the market, in the short term it will keep it afloat, so prices rise. Most of my holdings are at or near all time highs. How is that possible? The world economy is a mess and asset values are at all time highs? So there's massive money printing going on.

At some point the shit is going to hit the fan and this is going to blow back on us in the form of inflation. That is a mathematical inevitability. It's already happening in the form of inflated real estate and stock prices. I mean, c'mon, no mediocre house in a mediocre neighborhood is worth half a million dollars. That's crazy, but that's what's going on.

Here's a very mediocre house in a very mediocre neighborhood that serves as an example. I know this because I grew up a few blocks from this house: https://www.zillow.com/homedetails/410-Riley-Ave-Worthington-OH-43085/34020615_zpid/. $434,900

Now, note, this isn't a suburb in New York or Chicago, it's in Columbus, Ohio. To be fare, Columbus is a cool town and under appreciated. It has a lot going for it. But for that price, one could buy, what.... shit... I guess prices are going up everywhere.

So inflation is already happening even though the "official inflation rates" don't reflect that. With this ridiculous amount of money printing, the above house will soon hit 600K and my stock/crypto portfolio will add yet another 30%.

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