Comments by "JP 72" (@739jep) on "Understanding the Fed's \"Money Printer\" (QE, the Stock Market, and Inflation)" video.

The money does return to the bank (assuming the loan is paid off of course) but that doesn’t mean that money has left the economy. The bank doesn’t erase that money , it can pay it out to shareholders - pay debt , pay employees etc etc etc
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I believe I saw in the RR community that he plans on releasing another video related to this , although not sure when. Regardless , this video was not a prediction that inflation would not occur. This video can both be correct (I think it is) and inflation can occur at the same time , they’re not mutually exclusive. There are a lot of variables that impact inflation , for example fiscal policy and supply chains. There’s a YouTube channel called money and macro that delves into this topic a little more if you wanted to check it out.
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Do you have evidence that QE caused inflation? Genuinely curious. This video isn’t predicting that inflation would not occur, just that QE isn’t likely to cause it. Not sure it can be claimed the video aged poorly.
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We actually don’t know that at all.
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@whateverrandomnumber to be honest it sounds like you’ve missed something important in the dividend videos. I’m not sure how you can make this statement otherwise. ‘You want to become the owner of a businesss shares because you want a share of its profits. Not because you think you’ll sell it for a higher price later.’ The problem with that statement is that you will share in the companies profits regardless if they share it via dividends or not. Dividends are only one way to share profits with investors. That is why they are said to be irrelevant. Returns have been explained by a variety of factors. It’s true the models are not complete but they’re the best we got so far. Dividends are not included as a factor when explaining returns. At least not in any model I’ve seen. It’s true they are important for simply calculating total returns, but that doesn’t mean they drive returns. Edit: and of course when you focus on dividends you may still be exposed to these factors. You may also be more likely to stay invested during volatile markets, which is also important. But if you ignore other stocks that also have exposure to these risk factors you will reduce the diversification of your portfolio and thus the reliability of obtaining your expected returns. That’s how I’ve understood the argument from those videos anyways. Happy to be corrected or have someone point out something I’ve missed.
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What do you mean? Everything stated in this video is still true?
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Just because inflation occurred does not mean it was caused by the FEDs policies. Lots of stuff has happened since this video was made including a longer than expected response to the pandemic and war in Europe
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The existence of inflation doesn’t mean quantitative easing or an increase to the money supply caused it.
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@Shemdoupe I did. I think it holds up well. I often come back to it.
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The existence of inflation doesn’t mean quantitative easing or an increase to the money supply caused it.
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@Oddly-SatisfyMe you’re going to have to explain why injections of trillions of dollars in other countries , or even within the states at different times didn’t lead to inflation ? In fact despite extensive quantitative easing easing Japan still experienced deflation. I hope you’re not seriously about to argue that inflation is simply a money supply issue.
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@Oddly-SatisfyMe The trend youre referring to doesnt necessarily indicate a direct relationship. While money supply has consistently increased over time in most places, inflation has also been relatively stable, and often low, in many of these same regions. This doesn’t prove a causal link between the two. I mentioned Japan just as an example (I’m not ‘so’ reliant on them 😂) but they’re not an outlier. Many countries, including the US, have implemented large-scale quantitative easing while maintaining low inflation rates. Most of Europe has had similar outcomes. Together this covers a significant portion of the global economy. Ignoring Japan, which has pioneered quantitative easing, just wouldn’t make sense. I get why it’s inconvenient to your argument though. As for asset inflation, I recognise its importance, but typically when people discuss inflation, they refer to the erosion of their money’s purchasing power. Asset inflation impacts this differently compared to the rising costs of goods and services. I’m pleased with the appreciation of my portfolio, but less so with the increasing cost of my grocery bill 😅 You mentioned ‘economic shocks’ as a factor in the US’s low inflation rate. By the same logic, we could point to several economic shocks that coincided with the recent uptick in inflation. Perhaps these shocks, rather than the increase in money supply, are driving the current inflationary environment???? 🤔
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@Oddly-SatisfyMe I’m not denying there’s a correlation. I’m talking about causation. If you want to ignore inconvenient cases that go against your narrative then that’s on you. I don’t think it’s just a case of whether or not inflation existed during periods of expansive monetary policy. Periods of low inflation , albeit positive, during these periods are also significant. And those are easy to find , and are not short in duration.
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If you’re only pointing to 2022-2023 as your evidence then you’re guilty of cherry picking, but even so - 2022-2023 doesn’t even serve as good evidence that QE causes inflation. I think you would need to explain why we had years of QE with many countries around the world with no inflation problem , in fact inflation was quite low. You’d also have to explain why Japan , the champions of QE , have had problems with deflation. 🤷‍♂️
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Video was not a prediction that deflation would occur, just claimed (correctly) that when quantitative easing measures are being used that deflation is usually the bigger concern. QEs failure was probably more that it was ineffective at increasing inflation , not that it drove inflation. What happened since this video was the war in Ukraine, Chinas zero covid policy , subsequent variants of covid - to name a few.
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How so?
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You failing to understand something makes you the imbecile.
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@IAP_mkt I was actually wrong here , when a Loan is repaid then that money is ‘destroyed.’ The reason money supply continues to expand is because the rate of lending is exceeding the rate at which old debts are repaid. This doesn’t have to be the case however , so money supply can contract if debt repayment exceeds the generation of new loans.
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Those countries have many other factors that led to their economic problems. Look at a chart of global average inflation rates over the last 100 years and you cannot easily identify periods of expanding money supply , what you can identify are periods of war and economic shocks (unrelated to money supply.) Looking at your list of countries it’s hard to imagine factors such as those didn’t have a large impact on their economic problems.
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Kind of , it is ‘thin air’ in one sense , but there are rules in place that are meant to stop banks creating bad loans. In that sense they’re creating loans against your ability to pay it back (which is an asset and not really ‘nothing’) Once you do pay it back , the money is once again destroyed - except for the interest.
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What was bullshit?
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@Neri-s2n where exactly was he wrong? If you paid attention you might have learnt something and not wasted your time.
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@Neri-s2n and why would a ‘ fed shill’ say that the feds policies arnt that effective at influencing the things they’re trying to influence.
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Why not?
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@Oddly-SatisfyMe but I’m sure your response was beautiful I’m sorry I missed it 😢 YouTube deleted lots of comments these days. Not sure why they flag them. I think they just don’t like two people responding to each other too often. 🤷‍♂️
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@josesammut9396 this hypothesis is based on data/ observations and an understanding of how money is actually created in reality. Economic theories come later in an attempt to explain what we observe in the real world - not the other way around. This video was not a prediction that inflation wouldn’t occur , just that QE would not likely be the cause if it did occur. Those who believe QE caused the current inflation phenomenon still have all their work ahead of them.
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Perhaps , but this was a video about QE which is an asset swap and not the printing of money. Japan has one of the longest experiments with QE and has experienced deflation.
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QE and other forms of expansionary monetary policy has been occurring a long time and only now has inflation started to increase. In fact deflation has been a bigger concern in some locations. This video was never a prediction that inflation wouldn’t occur.
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While the fed influences money supply (possibly) , it doesn’t print physical currency. That is done by the Treasury Department, that is, the government. The fed is accountable to the public and to congress. The feds financial statements are also audited by independent third party auditors.
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Deposits are money the bank owes you , so they are liabilities to the bank.
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It’s not really gymnastics, it’s just what the evidence shows. The reason it doesn’t lead to more lending , I think, is because banks already have so much excess reserves that creating more has little effect on their lending decisions. Lending itself, at the moment anyways, seems to be constrained only by demand for loans and banks profit motives. You’re right though that the point of QE was to be inflationary - it’s just that it has largely failed. Take a look at Japan which has been implementing QE for decades and has struggled to avoid deflation.
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He said the exact opposite of that. He directly said that it has an affect on stock prices. It’s just that monetary policy can not be thought of as being the only thing propping up the stock market as there are many other inputs.
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How didn’t it age well?
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@precisi0n86 I can see why it’s tempting to point to QE. But it’s a significant financial action that has been taken for much longer than the last couple years. Why is Japan still struggling to avoid deflation despite ramping up QE more than anyone? What else of significance has happened since this video was made? New omricon variant , Significant supply chain disruptions , recovery from a major pandemic , a war. It’s a bit of a stretch that QE has been happening for decades in some places and only now when inflation occurs people say ‘SEE WE TOLD YOU’. This video was never a prediction that inflation wouldn’t happen, it was just saying that given available data at the time that QE was unlikely to be the cause of inflation. This causal relationship actually needs to be demonstrated. It still does. If you look at the global inflation rate over time it’s impossible to identify periods of rapid monetary expansion. What you can identify is periods of significant supply shock (oil embargo’s) , periods of significant economic shocks (end of Bretton woods system) and yes - War. Could these not be other possible explanations for inflation today? What about fiscal policy stimulus? It’s even difficult to establish a link between QE and private bank lending. So I guess in summary , I fail to see how this video ages poorly at all. In fact I think people would do well to consider all possible explanations for inflation.
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Did it though?
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I’m not so sure universities don’t teach this? Not at mine anyways. Maybe in an econ 101 course you learn about a simple money multiplier model but as you progress you soon learn about the flaws in the model. I found in my own economics degree each new course to take you seemed to learn why everything you had just learned in the previous course isn’t necessarily true 😂
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The Fed does actually produce reserves out of thin air.
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I think that’s kind of the point isn’t it?
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This video was about quantitative easing and whether is causes inflation - it wasn’t a prediction that inflation would/wouldn’t occur.
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Putin is that you? 😂
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Govt expenditure mostly comes from tax revenue or by raising more capital through debt. However the treasury, unlike the Fed, could also print money if they chose to. I’m not from the US , but I don’t think that is what they’ve done - I think they’ve increased their debt?
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The video was never a prediction about if inflation or deflation would occur , it did point out that historically when expansionary monetary policy is occurring that deflation was a bigger concern. That is historically accurate. The reason this video never predicted inflation or deflation is becuase you can’t based on solely on monetary policy. QE has occurred for a long time in several locations and did not lead to inflation , and today inflation is likely mostly caused by fiscal policy and supply issues.
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Where in the video did he predict we’d see deflation?
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Supply chain shocks , and growing fiscal debt coupled by decreasing certainty they can pay back the debt.
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@jonathankrimer federal governments
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They can’t just lower them. They don’t set the rates arbitrarily - they set targets and attempt to hit them by using OMO or QE. They might not necessarily be successful in achieving their target rates.
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