This was a great read! One thing most people need to be aware of with discretionary policy is the erosion of purchasing power for people without assets (which are particularly low-income individuals). Policies like QE or the purchasing of MBS (mortgage backed securities) are short term "solutions" that have long term detriments.
When we increase the money supply, it dilutes the purchasing power of the existing stock of money. This might have a short term "sugar rush", but ultimately shows up in the future as inflation. We saw inflation in investment assets after the GFC, and then in consumer goods after COVID. Where the inflation shows up depends on the beneficiaries (subsidizing MBS led to rises in housing prices and transfer payments directly to individuals in PPP and stimulus checks led to inflation in consumer goods).
I agree that they were necessary during COVID to keep the markets functional. Unfortunately, the inflation by-product of the intervention is adversely impacting people on fixed income or those whose wages haven’t kept up with the inflation rate.
We just need to make people aware of the impact so they can take steps to protect their purchasing power
Not sure what section this would appear, if at all, under your article. Twice under tough circumstances (market down turns) RMD (Required Min, Dist) on qualified dollars were suspended so people were not forced to withdraw during the market drop.
Unfortunately, the government is only out for themselves. I was employed by them for five years, and saw things that I won’t mention here. Stipend checks during the planned-demic came out of the taxpayers pockets, just as everything else does from the government. I appreciate all the information, but taxpayers are paying - the ones that are working are.
This was a great read! One thing most people need to be aware of with discretionary policy is the erosion of purchasing power for people without assets (which are particularly low-income individuals). Policies like QE or the purchasing of MBS (mortgage backed securities) are short term "solutions" that have long term detriments.
When we increase the money supply, it dilutes the purchasing power of the existing stock of money. This might have a short term "sugar rush", but ultimately shows up in the future as inflation. We saw inflation in investment assets after the GFC, and then in consumer goods after COVID. Where the inflation shows up depends on the beneficiaries (subsidizing MBS led to rises in housing prices and transfer payments directly to individuals in PPP and stimulus checks led to inflation in consumer goods).
Many would argue that the short-term discretionary fixes in 2020 were necessary.
Fortunately, the money supply has actually fallen—not just the rate of growth, but the actual dollar amount.
I agree that they were necessary during COVID to keep the markets functional. Unfortunately, the inflation by-product of the intervention is adversely impacting people on fixed income or those whose wages haven’t kept up with the inflation rate.
We just need to make people aware of the impact so they can take steps to protect their purchasing power
Agreed. I’ve attempted to do that in my crash course on inflation.
Not sure what section this would appear, if at all, under your article. Twice under tough circumstances (market down turns) RMD (Required Min, Dist) on qualified dollars were suspended so people were not forced to withdraw during the market drop.
It’s a tax law change and one I’m not familiar with—thanks for the info.
Unfortunately, the government is only out for themselves. I was employed by them for five years, and saw things that I won’t mention here. Stipend checks during the planned-demic came out of the taxpayers pockets, just as everything else does from the government. I appreciate all the information, but taxpayers are paying - the ones that are working are.
Everything the government does is paid for by taxpayers, sometimes in their role as consumers.