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Comment by charwalker | Hacker News Reader

Printing money has recently shown to have little impact on inflation. This is likely due in part to lack of consumer spending (can't inflate prices if nobody is buying it anyway) as well as spreading the USD across billions of people in dozens of interconnected economies that base off the dollar.

The recent $5 trillion injection from the Fed (buying bad debt/assets) and Treasury (stimulus/PPP) may simply show that we could afford universal healthcare and a bunch of other programs that cost $$$. Now is the time to spend that money and, at least it appears, avoid some long term costs. I'd argue the benefits of things like expanding education, investing in mental and physical health, and doing more to support our youth will have a much greater return than potential long term inflation or other issues from the $5 trillion.

I commented more on this last week here: https://news.ycombinator.com/item?id=23778819

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Printing money has not had much impact on consumer prices. But it seems very plausible that it is causing inflation of asset prices, including equities, and that that is a distortion of the market that could have negative long-run repercussions.

This. For years now everyone has been saying "where is the (consumer price) inflation"? Meanwhile real estate prices are rising fast (in desirable parts of the country) and the stock market has been on an epic bull run. It's obvious that the inflation is in the asset prices.

This is a dangerous trend. The rich (who tend to own those assets) get richer and and the poor (who rent/live paycheck to paycheck) get more and more desperate. If we don't find a way to reduce the inequality, this is going to mean serious trouble down the line.

> Meanwhile real estate prices are rising fast (in desirable parts of the country)

Mainly just the west coast and that's because their cities are built in valleys with a fixed amount of land, restrictive zoning on said land causing a fixed amount of housing and thus the bidding up housing prices.

For the rest of the country, inflation adjusted price per square foot hasn't really changed [0].

> the stock market has been on an epic bull run. It's obvious that the inflation is in the asset prices.

Inflation adjusted Annualized S&P 500 Returns with Dividends Reinvested for the past 15 years are 6.738% versus 7.690% for the 15 years before that [1]. Albeit, if you just started in 2009, it has been quite epic considering it was the longest bull run in US history.

[0]: https://www.supermoney.com/inflation-adjusted-home-prices/

[1]: https://dqydj.com/sp-500-return-calculator/

Piketty tried to analyze this, and the idea is to have a minimal wealth tax. (I have no idea what's the current best evaluation/assessment of his work and this idea, but Land Value Tax is something many economists already favor, and it'd help decouple the pain of growing cities from housing as an investment.)

So similarly there is probably some sense in trying to counteract low-interest-rate inflated asset bubbles via some kind of tax or other financial structure. (A progressive capital gains tax might help, but that might just make markets less efficient by introducing a chilling effect on the high end.)

In the end this is a purely political question, because obviously the problem is not that it's unfair that some very "desirable" assets price inflates, but that the majority of the population did not have the means to buy into it before the inflation happened to reap the capital gains.

There's already serious trouble due to inequality. (The recent protests about police brutality follow a long series of other symptoms that highlight how socioeconomic inequality manifests and persists on an ethnic level.)

> inflation is in the asset prices. The rich… get richer

Numbers rising don’t equal values rising, the definition of inflation. It benefits borrowers as well.

Exactly this. The FED and the ECB have been printing money like crazy for years, however this money did not go to the man in the street but to banks and indirectly to other financial institutions. And those don't spend their money in the grocery store but in the stock market.

The classic economical laws are not broken, they are still in full effect and we see their effect in the inflated share prices.

It doesn't "go" to financial institutions, it goes through them. (Of course they make a "healthy" profit. Though it's arguably too much, if this many banks can survive: https://www.statista.com/statistics/184536/number-of-fdic-in... )

So who is buying equity (so stocks)? And one argument is, that "retail investors" are driving this. (So end users, the folks on the WallStreetBets subreddit, and whoever uses RobinHood, or anyone that puts money into a passive index fund: https://www.reddit.com/r/econmonitor/comments/hnohi6/us_equi... )

Also savings increased a lot, since people were not spending (they were staying at home), so where to put the money? They put it into index funds.

Meh, most of what they are buying is just our own governments debt [0]. Now, you can certainly argue investors are buying more equities now that there aren't as many treasury securities to buy, but equity returns aren't even abnormal from historical returns. Inflation adjusted Annualized S&P 500 Returns with Dividends Reinvested for the past 15 years are 6.738% versus 7.690% for the 15 years before that [1].

[0]: https://www.federalreserve.gov/releases/h41/current/h41.htm

[1]: https://dqydj.com/sp-500-return-calculator/

You're comparing one of the strongest economic expansions in US history (1991-2001, brief, small recession, then 2001-2007, stopping at 2005 of course) to a period bookended by two of the worst recessions in US history (2007, 2020). It should be concerning that equity returns don't differ very much. That means they aren't correlated with the underlying economy.

The great recessions was definitely one of the worst, but it was followed by the longest bull run in the history of the united states and it is way to early to claim this crisis as being one of the worst recessions in US history.

This is the most important and often under-looked thing in this whole thread. This will further lead to wealth gaps and difficulty for working people to "get ahead".

I think we're long past the days when working people were trying to "get ahead" and they are now just trying not to fall too far behind.

And that is on top of the mismanagement of PPP funds after the IG over that was fired and replaced with a loyalist. We are only starting to see where billion of tax dollars went including a large chunk to churches and millions to Kanye West and campaign donors/supporters. If one has an issue with looting by protestors, they really need to look at the looting by the wealthy. Not just PPP loan abuse but also historically low tax rates and a pass for environmental abuse too.

This is an inherent problem with need-based things -- they are ripe for abuse. If you have universal things, the abuse is part of the design ;) IOW: if instead of PPP being only for certain kinds of companies or institutions it were all of them then a) there is far less to administer b) they get more support and c) you dont have moralistic temptations or arguments. UBI vs SSI, universal healthcare vs medicare, etc etc.

Yes, this means wealthy people will get the same checks as the poor -- but that is a feature, not a bug. Sorry for the soapbox.

There was oversight for PPP, but the president fired the IG over the program and replaced them with a loyalist right before the fund went live. The administration then refused to provide data on who got loans until sued. Now we know that the Sec of Transportation and husband Mitch McConnell, the new USPS head who appears to be trying to crush mail in voting internally, and many other government officials received loans for millions. If one was to condemn protesting due to looting, imaging the response to misappropriating billions in tax dollars to corporations, supporters, and corrupt officials.

This seems likely to me, lots and lots of money injected and consumer prices are stable yet art, real estate in desirable urban locations, equities, and some categories of luxury goods/experiences are soaring. Am I wrong?

Yes and no. You're right about what happened in the aftermath of 2008, though it took a while to get there. You're wrong (so far) about what's happening in 2020. Currently, the market (or at least the Dow) is down about 10% from its high.

People are chasing gains. TSLA has at a chance of succeeding at either autonomy or cheap energy storage. If that plays out it could be a 500B company in 8 years. Why not get in now with a hope of a 6% annual return?

If you're looking at which company is most likely to achieve a breakthrough in battery tech, Tesla isn't where you should be looking.

For the record, I support this view. CPI inflation does not track with individual financial assets/tools or specific costs like education.

Printing money to get through a recession vs printing money as the primary way of funding government programs are wildly different things. The mere suggestion that U.S. officials were serious about running a deficit of a large percentage of GDP could send people fleeing U.S. dollar denominated assets, and thanks to the exchange rate effects cause a spike in inflation before the programs even started.

The thing that makes a green piece of cloth valuable is the powerful government and the massive reserve bank behind it. If a dollar bill starts to look like an IOU from an entity that has no capacity to pay, it will be valued as such.

We haven't even rolled back the quantitive easing from the last recession. These financial rescues are now becoming permanent fixtures on our balance sheets. At least with health care, we would have something to show for these massive injections of money. Instead we just get inflated asset prices and growing wealth inequality.

Why is it a problem that they are still on the balance sheets? The instruments that have maturity will eventually vanish on their own, and the Fed can sell off the rest later.

It's better to do QE than "wait out" a recession, or wait for Congress. (Plus QE keeps the national debt service costs down too.)

The asset bubbles are not the real signs of inequality. After all, if every US citizen would have some savings and some of that in passive index funds, no one would complain about this. The problem is that people have no money, no disposable income, no savings, no job security, etc.

I think the comment above is suggesting that, either instead of or alongside, current Fed cash injections and distributions by the Treasury we need to push for and implement programs that leverage us out of the QE cycle. A universal healthcare system, student loan forgiveness and free or reduced cost education, a basic income over complex safety net benefits, that sort of thing. As it stands, QE is preventing a massive crash but it's not a long term solution.

I'm all for universal and single-payer healthcare, education reform, basic income (negative income tax is the best version of UBI), and so on.

But still, QE might be here to stay. It's hard to stay, I know very-very little about these things. (Even compared to - let's say - healthcare costs [see https://randomcriticalanalysis.com/ ].)

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