Is anyone else troubled by the fact that Jeff's co-host didn't have time find a straight razor or perhaps a double bitted axe? Was there no leather-grip, anodized steel, serrated hunting knife available? Get a shave sir! (Thank you very much Mr. Ippolito for having us on - this was a lot of fun actually.)
When one is listening to two people with a razor-sharp minds, like Emil and Jeff, cutting through the monetary confusion and giving clear cleanshaven ideas, there's not even the observation of anything else. This was a terrific interview. Speaking for so many here, we appreciate you and Jeff and Michael for this interview, and hope the three of you will do this together again.
How dare you! Have you no knowledge of light and shading? Clearly, the economic artist chose the correct aesthetic to present his strong upper jaw line. For shame, ser.
QE supports liquidity and Stimmy checks are printing money as is deficit spending. When velocity starts, it won't stop and the money is in the system now.
Jeff agrees that Stimmy checks are printing money, but those are temporary effects. You would have to have regular Stimmy checks to keep the price level rising every month. At the same time, the supply of dollars is shrinking because private banks are cutting it in the Eurodollar market and so that cancels out the effect of government deficit spending and Stimmy checks.
The "it's just an asset swap" idea ignores both entropy and costs of any action; even if the macroscale is deflationary, swapping unusable securities for usable cash does have an effect.
@@schmetterling4477 You got no clue about what QE really does, nor do Emil and Jeff! Watch: Quantitative Easing Is the Biggest Sham Ever (S3 E2) by John Titus on BestEvidence channel and you'll come out as a caterpillar!
@@schmetterling4477 So many people try to look smart on this channel by nodding complacently to everything they are told here. Almost nobody cares to check their thesis. John Titus explains in detail how QE behaves on the balance sheets of the FED, commercial banks and non-bank entities, puts his thesis to test and corroborates his findings with documents released by the Bank of England.
I appreciate you guys bringing on an alternate perspective to the bitcoin sound money narrative. I would love to see a debate between Saifedean Ammous (or any other bitcoin expert) and these guys so we could get right down to the bottom of this. I think it would be enlightening, to say the least!
The light is starting to go on over here - interest rate fallacy, inflation/deflation in 30s and 70s and now.... good discussion, approachable terms, thanks all. Slippery slope from Emil at 1:03 - money and the advance of liberal democracy...
Great interview, great guests! 2 comments: 1)in people don't want to walk around with gold/silver why the use case for jewelry?! 2) inflation in my view not linked with democracy, it's linked with war. Debasement of currency started long before democracy and always because war is expensive. My 2 cents 🙏
Jeff is one of the precious independent economic thinkers who are very rare nowadays. He reminds me of Richard Werner and most of the Modern Money Theory economists, who have all been doing one common thing, either implicitly or explicitly : challenging the authority of the crumbling mainstream economic theories.
Emil, I've recently started to write about that last idea you had there, that democracies are not good fits for sound money. And even more, the competitive landscape of democracies. If rival nation A chooses credit money they can inflate and build up their economy quickly pre-WWI Germany, Japanese miracle, modern China all over built quickly. Nation B then will feel required to do the same thing. I think it has to do with time preference. Hereditary monarchies have a lower time preference, while democracies have a shorter time preference.
Fascinating! Did I mention on the show the comparison of the Currency Board in Hong Kong (not a democracy, 'hard money) and the one that existed in Argentina (democracy). The latter didn't last while the former still has.
Before Bitcoin, We have never had sound money (gold is the closest) that is portable/teleportable via telecom lines, easily divisible, stealthy and counterfeit proof. These 2 are ngmi.
True. One sentence: I'm NOT defending the Fed. I'm for sound money! The following sentence: Proceeds to defend fed policy. Sound money is bad for hard times. Big yikes for all three of these guys..
I don't understand why we need more money supply to increase the standard of living. Why can't we live in a world where the price of all goods go down??
Their error are what happens when your regress no stationary data. Low interest rates do not cause deflation, they are in response to slower economic conditions
Expectations policy is a fancy way to say propaganda. Jeff is spot on about the government needing an unquestionable authority figure to manipulate people's behavior. It worked so well with the Fed that theyre using the same strategy with the CDC. They use this unquestionable authority to manipulate people into spending their savings on goods they fear will be delayed because of supply chain shocks, and to not question authoritarian power grabs
Perhaps a stupid question: but if the banks don't really want to lend to mom&pop shops even at high rates and the mom&pop shop needs a loan, wouldn't that result in rising interest rates? Especially if the big profitable companies don't have to care about the rates (can digest high rates due to their high ROI)? Or is it that the banks simply deny any loans to mom&pop, therefor eliminating/ignoring a portion of the open market demand for loans which results in lower interest rates.
QE IS MONEYPRINTING, when FED buys assets from NON-bank entities: Here is how it works: Assets go on the balance sheet of FED, credits commercial bank with bank reserves, commercial bank credits the account of NON-bank entity with retail $$. Mr. Titus on BestEvidence channel in "QE is the biggest sham ever" expalins in detail how it works and gives proof in the FED's own statistics.
Who says that sound money didn't work? Because every time governments were pushed, they undermined that sound money when it was politically convenient.
After 1 hour of listening I still don't know, why the FED's buying up loans from commercial banks does not increase the ability of these banks to issue more loans and create currency units in an unproductive financialized economy.
Trying to detangle the influence of the fed on financial markets is like trying to measure the temperature of a thimble full of boiling water with a freezing cold thermometer and declaring that it's only 35F
Definitely not UBI, MMT, or anything the Fed, ECB, BoJ could be considered money printing. Jeff would argue a central bank can print money, except those are not actual central banks. I assume Jeff would say that money is created in the commercial banking system, so the banks in that system will have to change their outlook and start lending, that would be money printing.
@@garyhamlin461 yeah, commercial banks are at the center of the eurodollar system and they are responsible for money creation. Today, money has been tight, which is signalled by the low interest rates (Milton Friedman's interest rate fallacy, low rates mean tight money, high rates loose money) Government bonds are in demand because they serve as collateral in the eurodollar system. Governments can borrow and stimulate, but according to Milton Friedmans transient income hypothesis, the effect of the stimulus will only be temporary. Only way out is for something to change, either banks to decide to lend to small business again, or money to change into something we can inflate/deflate outside of the control of banks
@@ogp12 I realize that banks create money through lending today, but I'm talking about things hypothetically changing in the future, like MMT, fed coin, etc. wouldn't that be considered money creation?
@@garyhamlin461 Yeah well I think fed coin and MMT should be addressed separately. With fed coin, the popular worry is that the Fed can create digital money and somehow give them directly to people's wallets. Currently the Fed does not have a mandate to do anything like that, the Fed cant just hand people money. They can work with banks and foreign central banks, but not with people, so unless something changes in a big way that's not a possibility. (Jeff would also say that the Fed and other central banks 'getting into' digital currencies is a way for them to save face, they are meant to be the ones at the center of money, but the crypto revolution has made them seem peripheral so they need to make themselves seem relevant. He would argue these central banks digital currencies will be talked up but never actually produce anything useful because they will always be years behind where the market is)
Let's not forget that the US underwent its industrial revolution under the classical gold standard, and alongside universal adult male suffrage from 1868 onward, and universal white male suffrage earlier than that, so the limitations of the gold standard are not crippling. But I agree that growth is faster when money supply can be easily expanded, ceteris paribus. But growth is intimately linked with energy growth. At some point, there just will not be enough energy to keep the economy from contracting. The laws of thermodynamics simply to not permit eternal growth. It's physics 101. So by the time that the industrial age ends and reverses, which will happen when the quantity of fuel produced each year goes into inevitable decline, the total amount of growth achieved will have been approximately the same whether we had gotten there more rapidly or less rapidly. The bell curve of growth will follow the bell curve of energy production (coal, oil, gas, U235, plus some marginal energy sources, including solar, wind, and hydroelectric which are limited by mineral supplies and other issues). Easier money allows the curve to peak higher but with less extended tails. A tighter supply of money would produce a lower peak of growth, but more extended tails.
I just don't understand why Jeff can be so sure that the bond market is able to make the right call here. I mean the bond market didn't have to deal with longterm inflation for over 40 years, or inflation for over 13 years. Some people who trade in the bond market never experienced this type of environment. Would you rely on a weatherman from Alaska to make the right calls in the Carribean?
The bond market actually predicted the 1970s inflation. Treasury yields rose prior to the large inflation / CPI prints in the 60's, 70's and 80's. If the bond market could get it right back then, it would definitely get it right today with all major players having even better access to data and information. The treasury bond market is a very efficient market. Think about who owns bonds - large financial institutions, foreign governments, large foreign and domestic banks... Bonds are serious business and there's no room for error. You don't hear about kids from wallstbets buying treasury bonds... Bonds are owned and traded by the institutions that not only 'predict' growth and inflation, but actually 'affect' growth and inflation. Treasury Yields are an extremely reliable indicator of future growth and inflation. Always listen to the bond market.
Bond market is full of quants and professional mathameticians. UA-cam is full of UA-cam watches. I’ll trade with the idiots (major population) and backup plan in lines with the pros
After listening twice (!) to this podcast I still cannot find the answer to the question in the title. True, low interest rates don't encourage banks to lending. But then the many questions regarding asset purchases by central banks have not been answered: - Why rising asset prices ( through demand from central banks) should not create a wealth effect (purchasing power) in the real economy? - Why taking credits (such as mortgage backed securities) off the balance sheets of commercial banks should not encourage these banks to create more loans? - Why we have an ever increasing number of zombie companies in an environment of QE? Of course I could take this further and ask how the survival of zombie (unproductive) companies affects the value of money - this might lead us to differentiate between "productive" lending (loans that are used to create of goods and services, for which there is a free market demand) and "unproductive lending". And of course we haven't talked about the elefant in the room, the Eurodollar system, and how this system relates to the "real" economy. Is money creation in the Eurodollar system backed up by creation of real stuff? Or is more like the bankers after their 9 to 5 job in the real world meeting with their buddies for a poker game at night and gambling for any phantasy amount of currency they think they can pledge the real world bank accounts of their customers to? And if, what are the transmission mechanisms between these two worlds? After all, it is the same players... but do "Eurodollars" circulate any more in the real world and create demand for stuff as do "bank reserves"? Very unsatisfactory also the Bitcoin/crypto part. Of course Jeff doesn't like the idea of fixed supply. And of course he never mentions any privacy concerns but is intrigued by all the wonderful prospects that transacting on a blockchain open up for "managing". And then my own question: What will "hyperbitcoinization" (or, for the sake of argument just let's say a price for Bitcoin over $ 5,000,000) mean for the lucrativeness of mining, the competitiveness of energy use for productive economic output, how much will hash rate have to increase so that BTC mining will not be too profitable - so nobody wants to produce anymore aluminum, fertilizer, steel, ...? And what percentage of global energy consumption will go into bitcoin mining at that hashrate? How realistic is Max Keiser's statement that bitcoin is a 51% attack on energy? Will we have to pay an embedded 50+% tax for energy consumption of the bitcoin network, once we achieve hyperbitcoinization? How much wealth will this transfer to miners and is this sustainable, economically, environmentally, politically? Or will hyperbitcoinization set us up for global, central regulation of bitcoin mining, with a global king setting the limits for mining and thus dictating the input cost for productive economic output?
@@LukeDickerson1993 So, if bitcoin goes from $ 50,000 to $ 5,000,000 hash rate will have to go up how many times to compensate increased profitability? What will global energy use of the bitcoin network look like then in percentage terms?
@@klauskarpfen9039 I agree a larger pct of energy produced would be devoted to mining if BTC went to $5M, thus increasing energy costs for other uses, which is bad. We need sound money though. I think it's likely a consensus algo will eventually be invented that uses less energy. What are your thoughts on Proof of Stake? I'm on the fence about it.
@@LukeDickerson1993 If proof of stake could be as decentralized as bitcoin - it might be as safe from censorship as bitcoin-? But then I don't know enough about cryptography and blockchain to have an opinion about that. I only did the math for the bitcoin network's 2021 energy consumption, when, at $ 50,000 bitcoin mining was a formidable competitor of energy use against e.g. aluminum smelting (as low as 4 cts/kWh) or nitrogen-fertilizer production. If bitcoin went 100 x from there and hashrate went up the same amount we'd probably see billions of people starving... .
@@klauskarpfen9039 im not an expert on this but i think hashrate doesn't *have* to go up, hashrate goes up because it is profitable for miners to mine, so, btc price goes up, more miners wil mine and still be profitable. If bitcoin went up really fast say from now 20ks to 500ks, a lot of miners would join and increase the hashrate, but, it doesnt mean hashrate would go up in the same percentage as price. In most places miners buy the grid excess energy, and/or use new untapped sources of energy, like renewables or methane capture. So it is a new energy market mostly, new sources or energy untapped. In a situation that btc price would go up very fast, hashrate would go up, but if more miners would want to join, the grid excess energy price would go up for miners, and the renewable energy producers for miners would increase prices, but here i assume many of this renewables infrastructure belongs to the miners. So miners could pay more for their energy but hashrate wouldn't go up necessarily in the same percentage as btc price, bc the energy prices would go up for miners mostly, not the consumers, the state grid would get more money from the excess energy. Bitcoin network will allow for miners to find new clean sources of energy, and with this, create more available energy to everyone, that will help with the growing need as we transition from fossil to electric.
Jeff, how do interest rates correlate to productive economic output? And please, measure productivity not in $$ terms, but in units of goods and services.
I recommend Peter Schiff's book "How an economy grows and why it crashes" and "Paper Money Collapse" by Detlev Schlichter (my top choices of about 20 books that I've read on this topic in the last 13 years). Jeff's opinions are contrary to Schiff and Schlichter in some areas because he doesn't believe that central banks are increasing money supply, even when they try their best.
QE is money printing, or rather, it's part and parcel of the current money printing process being used to monetize the debt. The fiscal authorities print the actual money and the Fed does QE to keep a lid on term premium. So the Fed is ENABLING the Treasury to monetize the debt by acting to lessen the consequences of profligate issuance.
But Jeff, haven't we actually had persistent inflation over the last few decades?? Yes, agreed the cost of some consumer goods have gone down, but I would say the cost of living in general has constantly gone up year after year!
I don't know how he'd answer that but I have heard he & Emil use the word disinflation to describe the post 2008 period. I believe that allows for some price inflation during below trend line growth of GDP.
Many get confused sustained high levels of inflation which is what is mostly being discussed in today's mainstream and the gradual loss of purchasing power over time which is what you are describing. They are very different. The fiat currency is designed to loss value over time, and thus your purchasing power gradually declines over the years. Right now the banks are not lending at a rate that will provide the system with growth nor sustained high levels of inflation, but they are still lending. So, the money supply is still increasing over the years, just at a much slower rate than say what was happening in the 1960s and 70s. Also, even in a disinflationary environment that we have largely had since about 1980, there is still inflation. The rate of inflation is however falling or at low levels like we have seen from 2009-early 2021. But again, there is still inflation, so gradually over time your purchasing power is declining. This is much different that those who think we are entering into another secular inflationary trend, similar to the 1970s where we saw high levels of sustained inflation. Obviously your purchasing power decline faster in this environment, a lot faster. So, the gradual loss in purchasing power is a lot easier to deal with than a quick loss or purchasing power due to sustained levels of high inflation (obviously). Jeff is not arguing against the loss of purchasing power over time, he is arguing against another 1970s environment of high levels of sustained inflation that lasts for many years. I hope this helps.
@@ryanmillertradingeconomics8183 Thanks guys, appreciate the indepth explanation Ryan, much appreciated. What you say fits well with my own experiences over the past few decades. It will be interesting to see where we go next and to see who wins the big inflation/deflation debate. Just one other thing, supposedly these bank reserves aren't getting out into the wider economy but the government balance is forever growing, at some point I assume this money will have to be paid back. The only way I can see them paying down the debt is by pinning interest rates to near zero and letting inflation run hot over a long period of time (financial repression). Wouldn't this be inflationary?
@@SP-cx2qi No problem...We would have to be nearing a situation where we are going to get sustained inflation for years in order for the govt to deflate away its debt. So inflating away debt doesn't cause inflation, rather it's a tool used once inflation is here. And then there is also the issue of inflation-linked govt expenditures. There are a long of govt expenditures like social security that are linked to inflation in someway. So, if inflation rises, so to does the cost of many govt expenditures. So it may deflate away some debt now, but will cause more debt later. Deflating away ones debt is not as easy as many make it sound. However, like Jeff, I do not believe we are there yet. Expect balance sheets to get a lot bigger. 2020/2021 was nothing lol I think it's going to get a lot worse. I think we get another big deflationary bust before we get the inflation everyone is talking about. But like you said, we'll see.
The problem with the “system” is that Central banks have allowed the concept of Bonds being = to money. Bonds are not money, yes they can be sold as money and they bring cash flows of money , but they again are not money. QE created exogenous Dollars 💵 in digital form to put a support mechanism under bonds , particularly sovereign bonds, which are the basis instrument for which other types of debt instruments are priced.
46:04 "What created the great dpression" - how about reckless credit expansion as an explanation? How do you want to avoid recessions and depressions, when credit expansion just means future spending drawn into the present? Of course some day the satisfied demand for the future plus the accumulated bills plus interest will create a trough in economic activity.
Great interview ! Well done. So what I am understanding in the end , if countries wants real inflation , they will need to cut down supply chain that hurts more their economy than benefits from it ? Because you have to burrows and increasing debts , it means you don’t produce enough . If you can’t inflate your in serious trouble right ? Either way it’s going to hurt . I guess people will chose work with inflation instead of no work and 1930 depression ? (Which have the potential to create wars ).
There is something to be said about an economic system where even the greatest experts who have been immersed in it for decades disagree on concrete issues. There is surely value in moving to a simplified bitcoin standard where there is a small set of deterministic code that defines the monetary policy. The gold standard implementation had many problems with it and you’re a bit naive in nakedly comparing it to any potential bitcoin standard. A quick look at history will show you that no country was ever on a proper gold standard for long enough. Things like wars interrupted it and obviously had a great impact on how the economy performed. I think it is very hard to judge how successful the gold standard was when the information is scarce and potentially wrong. Simply look at financial media today and the disconnect between what intelligent people like Snider are saying. Surely we would have the same problem, exacerbated, in the last - no? Worse off, there is MASSIVE incentive for the economic establishment to dismiss a hard money standard and push for a fiat standard because then the government literally controls the whole money supply! The fundamental argument with a gold or bitcoin isn’t that it’s better for growth. It’s that its better for the people as they finally get actual control over their money (time/energy they’ve spent in the past)
Study securitization and you'll get the whole picture ... think about it, what is backing all of these bonds? Equity can't exist unless debt exists; but, if the debt is built on faulty securities and there's a TON of confidence in the equity, you have what we have today, the biggest dislocation from fundamentals in history. Day traders can scalp in any market, don't focus on day traders if you're trying to build a sustainable portfolio.
Around min 44:00 In Jeff's mind "money" means a number of currency units, hence his complaint of "lack of money". Does an untrustworthy message become more reliable if it is reiterated x amount of times? What about money being "purchasing power", confidence in the trustworthyness of the meassge conveyed by the units?
The problem with the argument that QE is not money printing is entirely disingenuous. It's like saying jumping off the Empire State Building is not committing suicide. Yeah, technically that's correct, but unless someone throws a net under you, or you somehow grow wings, that is correct. Jumping off the Empire State Building is not committing suicide. Hitting the ground at high speed is not committing suicide either, but when you put it all together you're making a distinction that has no difference. The big question is: Why do it? Why commit to QE if it isn't printing money?
Lol they explain it in the vid dood, they don't print dollars, they put an entry onto their fed acct. Banks then choose if they want to print money or not, very big difference in who holds power. Also jumping off the Empire State Building definitely counts as suicide
At issue here, it seems, is the popular (mis) understanding of what QE actually is. QE is swapping assets for reserves. There is NO money involved in the transaction - period. There is NO money created in the transaction - period. These reserves remain in the financial system, they aren't money & can't be used in the REAL economy. The only argument I'm aware of that anyone could make to bolster legitimacy of the cute "money printing" meme would be that these reserves sloshing around the financial system removes one potential impediment for banks to make loans in the REAL economy. Banks making loans in the REAL economy is where (practically) ALL money creation occurs. If I recall correctly data shows these QE reserves would be responsible for a tiny amount of loans though. It's negligible.
"The big question is: Why do it? Why commit to QE if it isn't printing money?" Jeff speaks to this very question straight-up in the video, they even give a brief history of how the fed's policy evolved & landed here.
Half way through this podcast, and i REALLY whish for the whole world to be able to get this info. Get, and "get it", to be more specific. :) This is all very complex and "finesse". But thats were we are. It`s complex, because not everything is what it seems. Then again, 1+1=2.. Goods and services, on the one hand, and monetary assets on the other. Is the economy. Real growth is goods and services being produced. NOT monetary accomodation...... But with the current "central/political planning", we are temporary (transitory) in the "chicken and the egg" scenario. Ok.
The amount of money has nothing to do with economies growing; currency is just a medium of exchange. The amount of money is only a problem for government fiat money, where people lever themselves to the center of the earth.
If they don't loan the money out then it's not "money." They haven't been loaning money out, compared to historical levels, for sometime now. Recently, it's been very little. That is the point, commercial banks are actually who "print" money. The Fed gives them the means but if the loaning, "printing," doesn't happen then no money has been created. You couldn't 500 billion trillion bank reserves and if none of it is loaned out then zero money has been created.
@@kava8902 So the mortgage backed securities, that the FED buys, refer to loans that have NOT been made? Come on man! For each mortgage/credit that the buys interests rates fall andd enable more people to go into debt. Record private debt, record public debt - but you say "no money has been created!
With a Euro-dollar market larger than the US dollar market, and a derivatives market over a quadrillion dollars, it’s really hard to understand the dynamics at play. Even if policy makers or the biggest players (the oligarchs, et al) were benevolent, very competent, and prudent, besides an engineered crash or reset, how much control is there over this farrago?
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Why did Venezuela and Zimbabwe have hyperinflation? Was that because their central banks were "real" central banks who had control over their currency supply? Furthermore, if world Eurodollar supply was contracting, why were US and European private banks eager to lend money on real estate at low rates since 2010 (you could get 2-5 year fixed mortgages for 0.99% p.a. until 2021)? How does it make sense that they were decreasing lending and money creation in the offshore markets but maintaining or increasing it in their domestic markets?
Not quite. To get the full explanation straight from the source, have a look at Milton Friedman's interest rate fallacy. Its in a paper called 'The role of monetary policy' from 1968. Most economists and the popular perception get it wrong
Bitcoin. Functionally is too slow transactions per second can’t compete. It is finite and too unstable as something that maintains value. It is a valid technology but there is no indication that it will last. And as stated in the video, it is owned by a very small number of people
How does the FED buying government debt and MBS not increase money supply? Government issues debt, nobody buys government debt because they view it as overvalued, so FED steps in and buys it. Government then proceeds to pay its employees and creates Trillion dollar infrastructure bills and other spending bills without raising taxes on anyone. How is that not inflating the money supply? I understand that bank reserves have like no value other than maybe between banks. But maybe the banks are continually building up an asset that is worthless to the rest of the world? Or until they make it not worthless and allow everyone to hold bank reserves.
The mistake in your line of thought is that 'nobody buys goverenment debt because they view it as overvalued'. Whether you and i think its overvalued or not, government debt is seen as the safest most liquid collateral out there. There is plenty of demand for safe liquid instruments for reasons outside of their return characteristics. In fact, the Fed accumulating those instruments via QE and hoarding them exacerbates the problem because the markets need them. The second part to this is that the Fed operates within the borders of the US, the Fed has no authority over banks outside of its jurisdiction. Yet, the majority of the eurodollar system exists offshore, outside the US within a very different regulatory environment, an environment the Fed has no control over. Think a bank in the Cayman islands doing business with a bank in Singapore in US dollars, the Fed doesnt see that, they cant control it, but if those banks engage in a transaction that creates credit, that is actual money printing, if they refuse to create credit on the other hand, that leads to a deflationary circumstance, not enough money (this is also where the collateral comes in, those banks need pristine collateral in order to lend to each other). Those banks dont report to the Fed, so we cant see whats going on out there, thats why we call this part of the monetary system, the 'shadow banking system', it operates in the shadows. What goes on in the shadow system matters a lot more than what goes on onshore within the US. It takes many hours of listening to Jeff and Emil for it all to click and start to make sense, but this is the jist of it.
7:30 So Jeff is saying that "an asset that a commercial bank holds" - let's say a mortgage - has nothing to do with creating new currency units. And the FED's buying up these assets and taking the risk associated with these loans got nothing to do with the issuance of more loans i.e. printing of more money by commercial banks...-?
I believe the confusion arises from how one defines the word inflation. Jeff is using an economic definition ala Milton Friedman. I know this b/c he says so in the video.
@@rickyricardo9918 but deficit spending and giving handouts to everyone totally fits this definition unless the handouts will be covered by taxes which seems unlikely?
Didn’t the m2 money supply increase drastically in the us the last 8 years. I don’t understand why this guy said we can’t have inflation without monetary increases. Can someone please explain?
@@mrpunta But these bank reserves are used to buy treasury bills which gives spendable money to the government! So it could end up in the real economy, right?
@@wildcsgotactics The govt spends first then sells USTs that represent the diff that wasn't collected as taxes i.e. the debt. So the money gets created once congress authorizes it not once USTs are bought.. The purchase of USTs just gives interest bearing money to the buyer. The primary dealers are forced to participate in the treasury auctions regardless. Also, that's how bank accts give interest... they buy short term USTs on the secondary market with your deposits and skin a % off the top :)
@@wildcsgotactics So deficit spending does create money not the reserves. The majority of $ is actually created via credit creation i.e. credit cards and loans.
328,000 bitcoins were created in 2021 and (if my information is correct) the network used 115 TWh of energy. This puts the energy used for creating one Bitcoin at ~ 350 MWh. At a price of $ 50,000 per coins this puts the revenue per kWh employed at ~ 14 cents (US) per kWh - from issuance of new coins alone, not to talk of transaction fees. Aluminum smelters and N-fertilizer manufacturers get their energy for as low as 4 cents (US) per kWh. But let's not look at today's energy use of Bitcoin but what one kWh may yield in revenue when Bitcoin hits $ 5,000,000 - or when we achieve hyperbitcoinization. How much will hash rate and energy use of the bitcoin network have to increase if we want the profitability of bitcoin mining not to encroach too much on productive economic output? How much of global energy production will be devoted to bitcoin mining? Why does Max Keiser call Bitcoin a 51% attack on energy? Will we be richer or poorer when every good and service comes with a 50+% energy tax?
Big respect for inviting Emil & Jeff!!!
Michael, these are your best 2 guests that I can recall ever on your program. Excellent interview. Please do it again. Thank you.
Awesome! Thanks.
Is anyone else troubled by the fact that Jeff's co-host didn't have time find a straight razor or perhaps a double bitted axe? Was there no leather-grip, anodized steel, serrated hunting knife available? Get a shave sir! (Thank you very much Mr. Ippolito for having us on - this was a lot of fun actually.)
When one is listening to two people with a razor-sharp minds, like Emil and Jeff, cutting through the monetary confusion and giving clear cleanshaven ideas, there's not even the observation of anything else. This was a terrific interview. Speaking for so many here, we appreciate you and Jeff and Michael for this interview, and hope the three of you will do this together again.
I like the subtle stubble.
I didn't really notice until you mentioned it and I went back to have a closer look.
How dare you! Have you no knowledge of light and shading? Clearly, the economic artist chose the correct aesthetic to present his strong upper jaw line. For shame, ser.
Emil, you should copy Wolfman Jeff. Then you will never have to worry about five o'clock shadow again.
Best guests ever! Thanks for bringing them to the show!
Thank you Thierry.
Looking forward to this one. Love Jeff & Emil.
Awesome. Thank you most sincerely.
This is one of the highest quality econ channels on UA-cam! Thanks.
What a lineup, great job Mike
QE supports liquidity and Stimmy checks are printing money as is deficit spending. When velocity starts, it won't stop and the money is in the system now.
Jeff agrees that Stimmy checks are printing money, but those are temporary effects. You would have to have regular Stimmy checks to keep the price level rising every month. At the same time, the supply of dollars is shrinking because private banks are cutting it in the Eurodollar market and so that cancels out the effect of government deficit spending and Stimmy checks.
these two are excellent guests, love their work
Appreciate it Mr. Wolfe, we had a great time on the show.
Brilliant two guys. This was practical and philosophical at the same time. Jeff & Emil are experts on money creation and central banking.
I am grateful to have heard this interview :) I thank you
These guys are brilliant and fun to watch. Great episode.
The "it's just an asset swap" idea ignores both entropy and costs of any action; even if the macroscale is deflationary, swapping unusable securities for usable cash does have an effect.
Ah, there is another person who wants to appear intelligent by dropping the word entropy.
@@schmetterling4477 You got no clue about what QE really does, nor do Emil and Jeff!
Watch: Quantitative Easing Is the Biggest Sham Ever (S3 E2) by John Titus on BestEvidence channel and you'll come out as a caterpillar!
@@klauskarpfen9039 I am pretty sure that sounded better inside your mind. ;-)
@@schmetterling4477 So many people try to look smart on this channel by nodding complacently to everything they are told here. Almost nobody cares to check their thesis. John Titus explains in detail how QE behaves on the balance sheets of the FED, commercial banks and non-bank entities, puts his thesis to test and corroborates his findings with documents released by the Bank of England.
@@klauskarpfen9039 Nobody gives a shit about the balance sheets of the Fed. They are just an accounting tool. You are overthinking. :-)
Could listen to these guys indefinitely
That was a great conversation, Mike - thanks.
Excited for this one Jeff and Emil have an amazing channel.
Woo! Thanks for taking the time to let us know.
I appreciate you guys bringing on an alternate perspective to the bitcoin sound money narrative. I would love to see a debate between Saifedean Ammous (or any other bitcoin expert) and these guys so we could get right down to the bottom of this. I think it would be enlightening, to say the least!
Yes please, that would be great
Saylor, Nic Carter, or Saif would curb stomp these guys m
The light is starting to go on over here - interest rate fallacy, inflation/deflation in 30s and 70s and now.... good discussion, approachable terms, thanks all. Slippery slope from Emil at 1:03 - money and the advance of liberal democracy...
Great show, I love listening to these guys..... Always learn a lot.
Nice to see Jeff Snider and Earl Emil on Blockworks
This is one of those where I need to take a lot of notes to try and gather even 10% of the content.
Arguing that money leads to growth is Like saying a removing the numbers on a scale leads to weight loss
Awesome interview, great questions Michael!
Very good questions, it was easy to do because of Michael.
Followed Jeff and Emil here, looking forward to digging through the channel 👍
Great interview. Interesting to see a few new points
Great interview, great guests! 2 comments: 1)in people don't want to walk around with gold/silver why the use case for jewelry?! 2) inflation in my view not linked with democracy, it's linked with war. Debasement of currency started long before democracy and always because war is expensive. My 2 cents 🙏
Half way through the vid now, Jeff & Emil REALLY clear the air to reveal a surprising 30,000 foot view!
Best education on money, banking and the Federal Reserve anywhere
Fantastic conversation! Thank you!!
Jeff is one of the precious independent economic thinkers who are very rare nowadays.
He reminds me of Richard Werner and most of the Modern Money Theory economists, who have all been doing one common thing, either implicitly or explicitly : challenging the authority of the crumbling mainstream economic theories.
what counterarguments are there to the theory that central bank doesn’t print money? I wanna see debate on this otherwise i can’t tell if true
I don't think this video has enough ads.
Emil, I've recently started to write about that last idea you had there, that democracies are not good fits for sound money. And even more, the competitive landscape of democracies. If rival nation A chooses credit money they can inflate and build up their economy quickly pre-WWI Germany, Japanese miracle, modern China all over built quickly. Nation B then will feel required to do the same thing.
I think it has to do with time preference. Hereditary monarchies have a lower time preference, while democracies have a shorter time preference.
Fascinating! Did I mention on the show the comparison of the Currency Board in Hong Kong (not a democracy, 'hard money) and the one that existed in Argentina (democracy). The latter didn't last while the former still has.
@ansel lindner where's ur articles?
Before Bitcoin, We have never had sound money (gold is the closest) that is portable/teleportable via telecom lines, easily divisible, stealthy and counterfeit proof. These 2 are ngmi.
True.
One sentence: I'm NOT defending the Fed. I'm for sound money!
The following sentence: Proceeds to defend fed policy. Sound money is bad for hard times.
Big yikes for all three of these guys..
Super underrated channel
I don't understand why we need more money supply to increase the standard of living. Why can't we live in a world where the price of all goods go down??
I'd like to have a debate between Jeff and Saifedean about Sound Money and #BTC in general!
Love the content thank you
Their error are what happens when your regress no stationary data. Low interest rates do not cause deflation, they are in response to slower economic conditions
56:56 Jeff making his case against privacy in money use.
Expectations policy is a fancy way to say propaganda. Jeff is spot on about the government needing an unquestionable authority figure to manipulate people's behavior. It worked so well with the Fed that theyre using the same strategy with the CDC. They use this unquestionable authority to manipulate people into spending their savings on goods they fear will be delayed because of supply chain shocks, and to not question authoritarian power grabs
id love to see a bitcoin debate between the 2 great Jeffs, Booth and Snider!
Snider would obliterate him, he seems much better educated.
If I’m not mistaking , Jeff actually likes bitcoin .
Perhaps a stupid question: but if the banks don't really want to lend to mom&pop shops even at high rates and the mom&pop shop needs a loan, wouldn't that result in rising interest rates? Especially if the big profitable companies don't have to care about the rates (can digest high rates due to their high ROI)? Or is it that the banks simply deny any loans to mom&pop, therefor eliminating/ignoring a portion of the open market demand for loans which results in lower interest rates.
QE IS MONEYPRINTING, when FED buys assets from NON-bank entities: Here is how it works: Assets go on the balance sheet of FED, credits commercial bank with bank reserves, commercial bank credits the account of NON-bank entity with retail $$. Mr. Titus on BestEvidence channel in "QE is the biggest sham ever" expalins in detail how it works and gives proof in the FED's own statistics.
Who says that sound money didn't work? Because every time governments were pushed, they undermined that sound money when it was politically convenient.
After 1 hour of listening I still don't know, why the FED's buying up loans from commercial banks does not increase the ability of these banks to issue more loans and create currency units in an unproductive financialized economy.
Trying to detangle the influence of the fed on financial markets is like trying to measure the temperature of a thimble full of boiling water with a freezing cold thermometer and declaring that it's only 35F
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honest question here: does Jeff have a scenario that he thinks WOULD be considered money printing? UBI? central bank digital currency? MMT? etc.
Definitely not UBI, MMT, or anything the Fed, ECB, BoJ could be considered money printing. Jeff would argue a central bank can print money, except those are not actual central banks. I assume Jeff would say that money is created in the commercial banking system, so the banks in that system will have to change their outlook and start lending, that would be money printing.
@@ogp12 so the only way you can have "money printing" in Jeff's view is for banks to lend?
@@garyhamlin461 yeah, commercial banks are at the center of the eurodollar system and they are responsible for money creation. Today, money has been tight, which is signalled by the low interest rates (Milton Friedman's interest rate fallacy, low rates mean tight money, high rates loose money) Government bonds are in demand because they serve as collateral in the eurodollar system. Governments can borrow and stimulate, but according to Milton Friedmans transient income hypothesis, the effect of the stimulus will only be temporary. Only way out is for something to change, either banks to decide to lend to small business again, or money to change into something we can inflate/deflate outside of the control of banks
@@ogp12 I realize that banks create money through lending today, but I'm talking about things hypothetically changing in the future, like MMT, fed coin, etc. wouldn't that be considered money creation?
@@garyhamlin461 Yeah well I think fed coin and MMT should be addressed separately. With fed coin, the popular worry is that the Fed can create digital money and somehow give them directly to people's wallets. Currently the Fed does not have a mandate to do anything like that, the Fed cant just hand people money. They can work with banks and foreign central banks, but not with people, so unless something changes in a big way that's not a possibility. (Jeff would also say that the Fed and other central banks 'getting into' digital currencies is a way for them to save face, they are meant to be the ones at the center of money, but the crypto revolution has made them seem peripheral so they need to make themselves seem relevant. He would argue these central banks digital currencies will be talked up but never actually produce anything useful because they will always be years behind where the market is)
Tell more about what faults are in the gold system ,and since it was massed with since the beginning, ??
Let's not forget that the US underwent its industrial revolution under the classical gold standard, and alongside universal adult male suffrage from 1868 onward, and universal white male suffrage earlier than that, so the limitations of the gold standard are not crippling. But I agree that growth is faster when money supply can be easily expanded, ceteris paribus. But growth is intimately linked with energy growth. At some point, there just will not be enough energy to keep the economy from contracting. The laws of thermodynamics simply to not permit eternal growth. It's physics 101. So by the time that the industrial age ends and reverses, which will happen when the quantity of fuel produced each year goes into inevitable decline, the total amount of growth achieved will have been approximately the same whether we had gotten there more rapidly or less rapidly.
The bell curve of growth will follow the bell curve of energy production (coal, oil, gas, U235, plus some marginal energy sources, including solar, wind, and hydroelectric which are limited by mineral supplies and other issues). Easier money allows the curve to peak higher but with less extended tails. A tighter supply of money would produce a lower peak of growth, but more extended tails.
I just don't understand why Jeff can be so sure that the bond market is able to make the right call here. I mean the bond market didn't have to deal with longterm inflation for over 40 years, or inflation for over 13 years. Some people who trade in the bond market never experienced this type of environment. Would you rely on a weatherman from Alaska to make the right calls in the Carribean?
It’s what happens when you try to make a conclusion based on two graphs smashed onto one axis
The bond market actually predicted the 1970s inflation. Treasury yields rose prior to the large inflation / CPI prints in the 60's, 70's and 80's. If the bond market could get it right back then, it would definitely get it right today with all major players having even better access to data and information. The treasury bond market is a very efficient market. Think about who owns bonds - large financial institutions, foreign governments, large foreign and domestic banks... Bonds are serious business and there's no room for error. You don't hear about kids from wallstbets buying treasury bonds... Bonds are owned and traded by the institutions that not only 'predict' growth and inflation, but actually 'affect' growth and inflation.
Treasury Yields are an extremely reliable indicator of future growth and inflation. Always listen to the bond market.
Bond market is full of quants and professional mathameticians. UA-cam is full of UA-cam watches. I’ll trade with the idiots (major population) and backup plan in lines with the pros
After listening twice (!) to this podcast I still cannot find the answer to the question in the title.
True, low interest rates don't encourage banks to lending. But then the many questions regarding asset purchases by central banks have not been answered:
- Why rising asset prices ( through demand from central banks) should not create a wealth effect (purchasing power) in the real economy?
- Why taking credits (such as mortgage backed securities) off the balance sheets of commercial banks should not encourage these banks to create more loans?
- Why we have an ever increasing number of zombie companies in an environment of QE?
Of course I could take this further and ask how the survival of zombie (unproductive) companies affects the value of money - this might lead us to differentiate between "productive" lending (loans that are used to create of goods and services, for which there is a free market demand) and "unproductive lending".
And of course we haven't talked about the elefant in the room, the Eurodollar system, and how this system relates to the "real" economy. Is money creation in the Eurodollar system backed up by creation of real stuff?
Or is more like the bankers after their 9 to 5 job in the real world meeting with their buddies for a poker game at night and gambling for any phantasy amount of currency they think they can pledge the real world bank accounts of their customers to? And if, what are the transmission mechanisms between these two worlds?
After all, it is the same players... but do "Eurodollars" circulate any more in the real world and create demand for stuff as do "bank reserves"?
Very unsatisfactory also the Bitcoin/crypto part. Of course Jeff doesn't like the idea of fixed supply. And of course he never mentions any privacy concerns but is intrigued by all the wonderful prospects that transacting on a blockchain open up for "managing".
And then my own question: What will "hyperbitcoinization" (or, for the sake of argument just let's say a price for Bitcoin over $ 5,000,000) mean for the lucrativeness of mining, the competitiveness of energy use for productive economic output, how much will hash rate have to increase so that BTC mining will not be too profitable - so nobody wants to produce anymore aluminum, fertilizer, steel, ...? And what percentage of global energy consumption will go into bitcoin mining at that hashrate? How realistic is Max Keiser's statement that bitcoin is a 51% attack on energy? Will we have to pay an embedded 50+% tax for energy consumption of the bitcoin network, once we achieve hyperbitcoinization? How much wealth will this transfer to miners and is this sustainable, economically, environmentally, politically? Or will hyperbitcoinization set us up for global, central regulation of bitcoin mining, with a global king setting the limits for mining and thus dictating the input cost for productive economic output?
In regards to your Bitcoin questions I think the mining difficulty will adjust to keep it from becoming too profitable
@@LukeDickerson1993 So, if bitcoin goes from $ 50,000 to $ 5,000,000 hash rate will have to go up how many times to compensate increased profitability? What will global energy use of the bitcoin network look like then in percentage terms?
@@klauskarpfen9039 I agree a larger pct of energy produced would be devoted to mining if BTC went to $5M, thus increasing energy costs for other uses, which is bad. We need sound money though. I think it's likely a consensus algo will eventually be invented that uses less energy. What are your thoughts on Proof of Stake? I'm on the fence about it.
@@LukeDickerson1993 If proof of stake could be as decentralized as bitcoin - it might be as safe from censorship as bitcoin-? But then I don't know enough about cryptography and blockchain to have an opinion about that.
I only did the math for the bitcoin network's 2021 energy consumption, when, at $ 50,000 bitcoin mining was a formidable competitor of energy use against e.g. aluminum smelting (as low as 4 cts/kWh) or nitrogen-fertilizer production. If bitcoin went 100 x from there and hashrate went up the same amount we'd probably see billions of people starving... .
@@klauskarpfen9039 im not an expert on this but i think hashrate doesn't *have* to go up, hashrate goes up because it is profitable for miners to mine, so, btc price goes up, more miners wil mine and still be profitable. If bitcoin went up really fast say from now 20ks to 500ks, a lot of miners would join and increase the hashrate, but, it doesnt mean hashrate would go up in the same percentage as price. In most places miners buy the grid excess energy, and/or use new untapped sources of energy, like renewables or methane capture. So it is a new energy market mostly, new sources or energy untapped. In a situation that btc price would go up very fast, hashrate would go up, but if more miners would want to join, the grid excess energy price would go up for miners, and the renewable energy producers for miners would increase prices, but here i assume many of this renewables infrastructure belongs to the miners. So miners could pay more for their energy but hashrate wouldn't go up necessarily in the same percentage as btc price, bc the energy prices would go up for miners mostly, not the consumers, the state grid would get more money from the excess energy. Bitcoin network will allow for miners to find new clean sources of energy, and with this, create more available energy to everyone, that will help with the growing need as we transition from fossil to electric.
Jeff, how do interest rates correlate to productive economic output? And please, measure productivity not in $$ terms, but in units of goods and services.
never have i ever been so confused in my life. is there any book or videos i can watch to understand how the financial system actually works?
I recommend Peter Schiff's book "How an economy grows and why it crashes" and "Paper Money Collapse" by Detlev Schlichter (my top choices of about 20 books that I've read on this topic in the last 13 years).
Jeff's opinions are contrary to Schiff and Schlichter in some areas because he doesn't believe that central banks are increasing money supply, even when they try their best.
@@apollocreed1000 thank you I appreciate it. I am going to check these out
QE is money printing, or rather, it's part and parcel of the current money printing process being used to monetize the debt. The fiscal authorities print the actual money and the Fed does QE to keep a lid on term premium. So the Fed is ENABLING the Treasury to monetize the debt by acting to lessen the consequences of profligate issuance.
Anyone except for him is "clueless." Snider is a humble guy.
When you stop listening to snider the economy is much more understandable. The guy is not that smart.
If the 🇺🇸 is like Japan why people think it cannot crash like Japan ?
30 years later and stock market still below all time high of 1989 ….
''No inflation''...... Jeff is simply NGMI
But Jeff, haven't we actually had persistent inflation over the last few decades?? Yes, agreed the cost of some consumer goods have gone down, but I would say the cost of living in general has constantly gone up year after year!
I don't know how he'd answer that but I have heard he & Emil use the word disinflation to describe the post 2008 period. I believe that allows for some price inflation during below trend line growth of GDP.
Many get confused sustained high levels of inflation which is what is mostly being discussed in today's mainstream and the gradual loss of purchasing power over time which is what you are describing. They are very different. The fiat currency is designed to loss value over time, and thus your purchasing power gradually declines over the years. Right now the banks are not lending at a rate that will provide the system with growth nor sustained high levels of inflation, but they are still lending. So, the money supply is still increasing over the years, just at a much slower rate than say what was happening in the 1960s and 70s. Also, even in a disinflationary environment that we have largely had since about 1980, there is still inflation. The rate of inflation is however falling or at low levels like we have seen from 2009-early 2021. But again, there is still inflation, so gradually over time your purchasing power is declining. This is much different that those who think we are entering into another secular inflationary trend, similar to the 1970s where we saw high levels of sustained inflation. Obviously your purchasing power decline faster in this environment, a lot faster. So, the gradual loss in purchasing power is a lot easier to deal with than a quick loss or purchasing power due to sustained levels of high inflation (obviously). Jeff is not arguing against the loss of purchasing power over time, he is arguing against another 1970s environment of high levels of sustained inflation that lasts for many years. I hope this helps.
@@ryanmillertradingeconomics8183 Thanks guys, appreciate the indepth explanation Ryan, much appreciated. What you say fits well with my own experiences over the past few decades. It will be interesting to see where we go next and to see who wins the big inflation/deflation debate.
Just one other thing, supposedly these bank reserves aren't getting out into the wider economy but the government balance is forever growing, at some point I assume this money will have to be paid back. The only way I can see them paying down the debt is by pinning interest rates to near zero and letting inflation run hot over a long period of time (financial repression). Wouldn't this be inflationary?
@@SP-cx2qi No problem...We would have to be nearing a situation where we are going to get sustained inflation for years in order for the govt to deflate away its debt. So inflating away debt doesn't cause inflation, rather it's a tool used once inflation is here. And then there is also the issue of inflation-linked govt expenditures. There are a long of govt expenditures like social security that are linked to inflation in someway. So, if inflation rises, so to does the cost of many govt expenditures. So it may deflate away some debt now, but will cause more debt later. Deflating away ones debt is not as easy as many make it sound. However, like Jeff, I do not believe we are there yet. Expect balance sheets to get a lot bigger. 2020/2021 was nothing lol I think it's going to get a lot worse. I think we get another big deflationary bust before we get the inflation everyone is talking about. But like you said, we'll see.
@@ryanmillertradingeconomics8183 Cheers Ryan, interesting times!
The problem with the “system” is that Central banks have allowed the concept of Bonds being = to money. Bonds are not money, yes they can be sold as money and they bring cash flows of money , but they again are not money. QE created exogenous Dollars 💵 in digital form to put a support mechanism under bonds , particularly sovereign bonds, which are the basis instrument for which other types of debt instruments are priced.
Nice talk thx
46:04 "What created the great dpression" - how about reckless credit expansion as an explanation?
How do you want to avoid recessions and depressions, when credit expansion just means future spending drawn into the present? Of course some day the satisfied demand for the future plus the accumulated bills plus interest will create a trough in economic activity.
Great interview !
Well done.
So what I am understanding in the end , if countries wants real inflation , they will need to cut down supply chain that hurts more their economy than benefits from it ?
Because you have to burrows and increasing debts , it means you don’t produce enough .
If you can’t inflate your in serious trouble right ?
Either way it’s going to hurt .
I guess people will chose work with inflation instead of no work and 1930 depression ?
(Which have the potential to create wars ).
'Don't fight the FED, it wasn't even a good idea to begin with...' LOL
The Fed and Inequality:
(Petrou, 2021) Engine of Inequality: The Fed and the Future of Wealth
(Dietsch, 2018) Do Central Banks Serve the People?
There is something to be said about an economic system where even the greatest experts who have been immersed in it for decades disagree on concrete issues.
There is surely value in moving to a simplified bitcoin standard where there is a small set of deterministic code that defines the monetary policy.
The gold standard implementation had many problems with it and you’re a bit naive in nakedly comparing it to any potential bitcoin standard. A quick look at history will show you that no country was ever on a proper gold standard for long enough. Things like wars interrupted it and obviously had a great impact on how the economy performed.
I think it is very hard to judge how successful the gold standard was when the information is scarce and potentially wrong.
Simply look at financial media today and the disconnect between what intelligent people like Snider are saying. Surely we would have the same problem, exacerbated, in the last - no? Worse off, there is MASSIVE incentive for the economic establishment to dismiss a hard money standard and push for a fiat standard because then the government literally controls the whole money supply!
The fundamental argument with a gold or bitcoin isn’t that it’s better for growth. It’s that its better for the people as they finally get actual control over their money (time/energy they’ve spent in the past)
this guy Emil is quite the character :D
Study securitization and you'll get the whole picture ... think about it, what is backing all of these bonds? Equity can't exist unless debt exists; but, if the debt is built on faulty securities and there's a TON of confidence in the equity, you have what we have today, the biggest dislocation from fundamentals in history. Day traders can scalp in any market, don't focus on day traders if you're trying to build a sustainable portfolio.
Around min 44:00 In Jeff's mind "money" means a number of currency units, hence his complaint of "lack of money". Does an untrustworthy message become more reliable if it is reiterated x amount of times?
What about money being "purchasing power", confidence in the trustworthyness of the meassge conveyed by the units?
Brilliant talk.
You should listen to Jeff’s interview with Unbounded Capital.
The problem with the argument that QE is not money printing is entirely disingenuous. It's like saying jumping off the Empire State Building is not committing suicide. Yeah, technically that's correct, but unless someone throws a net under you, or you somehow grow wings, that is correct. Jumping off the Empire State Building is not committing suicide. Hitting the ground at high speed is not committing suicide either, but when you put it all together you're making a distinction that has no difference. The big question is: Why do it? Why commit to QE if it isn't printing money?
Lol they explain it in the vid dood, they don't print dollars, they put an entry onto their fed acct. Banks then choose if they want to print money or not, very big difference in who holds power. Also jumping off the Empire State Building definitely counts as suicide
Actually watch the video, maybe
At issue here, it seems, is the popular (mis) understanding of what QE actually is. QE is swapping assets for reserves. There is NO money involved in the transaction - period. There is NO money created in the transaction - period.
These reserves remain in the financial system, they aren't money & can't be used in the REAL economy.
The only argument I'm aware of that anyone could make to bolster legitimacy of the cute "money printing" meme would be that these reserves sloshing around the financial system removes one potential impediment for banks to make loans in the REAL economy.
Banks making loans in the REAL economy is where (practically) ALL money creation occurs. If I recall correctly data shows these QE reserves would be responsible for a tiny amount of loans though. It's negligible.
"The big question is: Why do it? Why commit to QE if it isn't printing money?" Jeff speaks to this very question straight-up in the video, they even give a brief history of how the fed's policy evolved & landed here.
Kids, this is why you don't comment before watching the video
Where can i find those podcasts ?
podcasts.apple.com/us/podcast/on-the-margin/id1558223079
quality > scarcity.
Thank you, once again
Awesome.
Half way through this podcast, and i REALLY whish for the whole world to be able to get this info.
Get, and "get it", to be more specific. :)
This is all very complex and "finesse". But thats were we are. It`s complex, because not everything is what it seems. Then again, 1+1=2.. Goods and services, on the one hand, and monetary assets on the other. Is the economy.
Real growth is goods and services being produced. NOT monetary accomodation......
But with the current "central/political planning", we are temporary (transitory) in the "chicken and the egg" scenario.
Ok.
The amount of money has nothing to do with economies growing; currency is just a medium of exchange. The amount of money is only a problem for government fiat money, where people lever themselves to the center of the earth.
Seems like defi and smart contracts will be the way we more efficiently match money supply with demand
I wonder why is FED still working so hard if it’s not effective anyway.
8:20 But the FED prints banks reserves IN EXCHANGE for a commercial bank's assets, which happen to be credit = "money" (currency) in circulation.
If they don't loan the money out then it's not "money." They haven't been loaning money out, compared to historical levels, for sometime now. Recently, it's been very little. That is the point, commercial banks are actually who "print" money. The Fed gives them the means but if the loaning, "printing," doesn't happen then no money has been created. You couldn't 500 billion trillion bank reserves and if none of it is loaned out then zero money has been created.
@@kava8902 So the mortgage backed securities, that the FED buys, refer to loans that have NOT been made? Come on man! For each mortgage/credit that the buys interests rates fall andd enable more people to go into debt.
Record private debt, record public debt - but you say "no money has been created!
With a Euro-dollar market larger than the US dollar market, and a derivatives market over a quadrillion dollars, it’s really hard to understand the dynamics at play. Even if policy makers or the biggest players (the oligarchs, et al) were benevolent, very competent, and prudent, besides an engineered crash or reset, how much control is there over this farrago?
Jeff Snider and Jeff Booth debate please.
“No liquidity in lending to Mum and Pop, you mean selling those loans on easily at the fair price I take it”…
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Why did Venezuela and Zimbabwe have hyperinflation? Was that because their central banks were "real" central banks who had control over their currency supply?
Furthermore, if world Eurodollar supply was contracting, why were US and European private banks eager to lend money on real estate at low rates since 2010 (you could get 2-5 year fixed mortgages for 0.99% p.a. until 2021)? How does it make sense that they were decreasing lending and money creation in the offshore markets but maintaining or increasing it in their domestic markets?
Great guests, great talk. Jeff does have a tendency to talk over and interrupt people a bit though
Jeff, with interest rates aren't you mixing up cause and effect?
Not quite. To get the full explanation straight from the source, have a look at Milton Friedman's interest rate fallacy. Its in a paper called 'The role of monetary policy' from 1968. Most economists and the popular perception get it wrong
Bitcoin. Functionally is too slow transactions per second can’t compete. It is finite and too unstable as something that maintains value. It is a valid technology but there is no indication that it will last. And as stated in the video, it is owned by a very small number of people
Look into the Lightning network
All eyes on Ripple and the SEC case.
How does the FED buying government debt and MBS not increase money supply? Government issues debt, nobody buys government debt because they view it as overvalued, so FED steps in and buys it. Government then proceeds to pay its employees and creates Trillion dollar infrastructure bills and other spending bills without raising taxes on anyone. How is that not inflating the money supply? I understand that bank reserves have like no value other than maybe between banks. But maybe the banks are continually building up an asset that is worthless to the rest of the world? Or until they make it not worthless and allow everyone to hold bank reserves.
The mistake in your line of thought is that 'nobody buys goverenment debt because they view it as overvalued'. Whether you and i think its overvalued or not, government debt is seen as the safest most liquid collateral out there. There is plenty of demand for safe liquid instruments for reasons outside of their return characteristics. In fact, the Fed accumulating those instruments via QE and hoarding them exacerbates the problem because the markets need them.
The second part to this is that the Fed operates within the borders of the US, the Fed has no authority over banks outside of its jurisdiction. Yet, the majority of the eurodollar system exists offshore, outside the US within a very different regulatory environment, an environment the Fed has no control over. Think a bank in the Cayman islands doing business with a bank in Singapore in US dollars, the Fed doesnt see that, they cant control it, but if those banks engage in a transaction that creates credit, that is actual money printing, if they refuse to create credit on the other hand, that leads to a deflationary circumstance, not enough money (this is also where the collateral comes in, those banks need pristine collateral in order to lend to each other). Those banks dont report to the Fed, so we cant see whats going on out there, thats why we call this part of the monetary system, the 'shadow banking system', it operates in the shadows. What goes on in the shadow system matters a lot more than what goes on onshore within the US.
It takes many hours of listening to Jeff and Emil for it all to click and start to make sense, but this is the jist of it.
46:15 How exactly did the US solve the "tools-shortage" in the post-war era, Jeff - please be specific!
7:30 So Jeff is saying that "an asset that a commercial bank holds" - let's say a mortgage - has nothing to do with creating new currency units. And the FED's buying up these assets and taking the risk associated with these loans got nothing to do with the issuance of more loans i.e. printing of more money by commercial banks...-?
Jeff is saying there is no inflation while admitting that handouts/fiscal policy is causing inflation. I'm so confused.
I believe the confusion arises from how one defines the word inflation. Jeff is using an economic definition ala Milton Friedman. I know this b/c he says so in the video.
@@rickyricardo9918 but deficit spending and giving handouts to everyone totally fits this definition unless the handouts will be covered by taxes which seems unlikely?
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See David Mamet's definition of confidence - where "con" man comes from
Didn’t the m2 money supply increase drastically in the us the last 8 years. I don’t understand why this guy said we can’t have inflation without monetary increases.
Can someone please explain?
Because M2 includes bank reserves which do no see the real economy and the majority of "money printing" has been in the form of bank reserves
@@mrpunta ahh. Thank you.
@@mrpunta But these bank reserves are used to buy treasury bills which gives spendable money to the government! So it could end up in the real economy, right?
@@wildcsgotactics The govt spends first then sells USTs that represent the diff that wasn't collected as taxes i.e. the debt. So the money gets created once congress authorizes it not once USTs are bought.. The purchase of USTs just gives interest bearing money to the buyer. The primary dealers are forced to participate in the treasury auctions regardless. Also, that's how bank accts give interest... they buy short term USTs on the secondary market with your deposits and skin a % off the top :)
@@wildcsgotactics So deficit spending does create money not the reserves. The majority of $ is actually created via credit creation i.e. credit cards and loans.
The next time you hear inflation solves problems, as yourself why higher home prices are good ?
Is Snider saying taxation is the way out of this?
Out of what? Wealth redistribution? Yes. Taxation is the only way out of wealth distribution. Taxation and war. Let's hope we will use the former.
328,000 bitcoins were created in 2021 and (if my information is correct) the network used 115 TWh of energy. This puts the energy used for creating one Bitcoin at ~ 350 MWh. At a price of $ 50,000 per coins this puts the revenue per kWh employed at ~ 14 cents (US) per kWh - from issuance of new coins alone, not to talk of transaction fees.
Aluminum smelters and N-fertilizer manufacturers get their energy for as low as 4 cents (US) per kWh.
But let's not look at today's energy use of Bitcoin but what one kWh may yield in revenue when Bitcoin hits $ 5,000,000 - or when we achieve hyperbitcoinization.
How much will hash rate and energy use of the bitcoin network have to increase if we want the profitability of bitcoin mining not to encroach too much on productive economic output?
How much of global energy production will be devoted to bitcoin mining?
Why does Max Keiser call Bitcoin a 51% attack on energy? Will we be richer or poorer when every good and service comes with a 50+% energy tax?
20:00 Jeff doesn't tell us why 5000 years near record low interest rates mean, that the bond markets fight the FED?