5 replies to this topic

[Douglas]

Biden pumped up the economy by doling out billions today to student loan borrowers at the same time the Fed is pulling out money by contracting its balance sheet, so I guess it's net-net zero or thereabouts.  Winners are Inflation which gets to roll on more or less unabated and the stock market which gets another reason to rally.  Losers, of course, include the suckers that worked full time to pay for going to college in night school like I did.   There is a free lunch, unfortunately it's just not being served where you eat.

 

This will make J. Powell's Teton mountain top pontification even more important given this new inflation tail wind.  Winter is coming and unless you're a Targaryen and have your own dragon to provide central heating, it's going to be cold and expensive.

 

Regards,

Douglas

 

  

 

 

[fib_1618]

Biden pumped up the economy by doling out billions today to student loan borrowers...

 

Bolsheviks are always finding ways to buy (or steal) votes when their policies fail miserably as they invariably do.

 

Fib

[redfoliage2]

He is adding gas to the fire of inflation .......................

Edited by redfoliage2, 24 August 2022 - 01:34 PM.

[pdx5]

Good that Biden is pouring gasoline on inflation fires. People hurt most are Biden voters from inflation.

[redfoliage2]

Will the Fed get more nervous on this?

Edited by redfoliage2, 24 August 2022 - 02:15 PM.

[Douglas]

I believe currently the Fed is selling about $30B/month from their stash of debt instruments. The spending velocity of the money being absorbed by the Fed in the sale of these securities is probably just about zero, since rich folks or institutions are buying the paper being sold by the Fed.  Rich folks and institutions don't spend, they invest, that's how they got so rich in the first place, so the money absorbed is not affecting spending by the masses.  For proof of this, note that the current "real" commercial paper rate is something like a minus 5 or 6 per cent, they're getting paid to borrow.  If this Fed draw down was steep, this rate would rise to at least be positive to some degree.

 

The money that Biden is pumping out is an entirely different matter.  Probably somewhere north of 90% of the money freed up by not having to pay the student loans is going to be spent on consumer goods which will boost inflation since the recipients are youngish middle and lower middle class folks who are probably cash strapped. This is a big problem for the Fed requiring them to raise rates more which will affect lending rates for the masses draining that largesse from Biden.  That's why I said it was probably net-net zero.   The left hand, Biden, gives and now the right hand, the Fed, will have to take it away, party poopers.  

 

Regards,

Douglas

Edited by Douglas, 24 August 2022 - 04:42 PM.