Is US Fed the only central bank in the world that actually withdraws liquidity?

[touchring]

China prints, Japan prints, Singapore prints, Malaysia prints, Canada prints, Australia prints, Zimbabwee and Venezuela and likes prints until everyone becomes a millionaire, so why would the US Fed withdraw liqudity? What makes the Fed so special?

Just print until everyone becomes a millionaire. Isn't this a no brainer?
Just wondering the reason behind this.

Why create "recessions" deliberately? Had the Fed continued printing past 2007, not slowing down, there wouldn't even be a recession, everyone will be a millionaire.

[jk]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

China prints, Japan prints, Singapore prints, Malaysia prints, Canada prints, Australia prints, Zimbabwee and Venezuela and likes prints until everyone becomes a millionaire, so why would the US Fed withdraw liqudity? What makes the Fed so special?

Just print until everyone becomes a millionaire. Isn't this a no brainer?
Just wondering the reason behind this.

Why create "recessions" deliberately? Had the Fed continued printing past 2007, not slowing down, there wouldn't even be a recession, everyone will be a millionaire.

policy here creates billionaires and peons. fewer and fewer in between. if you ignore the rhetoric, that appears to be the goal.

[dcarrigg]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

policy here creates billionaires and peons. fewer and fewer in between. if you ignore the rhetoric, that appears to be the goal.

I found myself wondering recently if the last Federal Reserve Act (1977) and the last full employment act (1978) didn't happen to occur exactly when they did, would inflation fighting be so central to the mission, and would maintaining full employment be a higher priority in the "dual mandate" pecking order?

Seems to me all signs point to yes. Haven't seen over 4% inflation in 30 years or so--at least since 90/91. Haven't seen under 4% unemployment since the 1960s. Sucks that the law authorizing US monetary policy was written in the heat of stagflation and never really updated to changing circumstances. But here we are.

[touchring]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

policy here creates billionaires and peons. fewer and fewer in between. if you ignore the rhetoric, that appears to be the goal.

The rich and poor divide in many countries is far worst than the US.

I guess that the reason is because the US Fed has some autonomy whereas in other countries, the government fully controls the central bank. A dictatorship has a tendency to print till oblivion.

It's far too easy to just print non-stop until the shit hits the fan. Even after splatter, they would still continue printing just like Venezuela and Zimbabwe.

Do you know that the largest note in China is the 100 RMB (USD15.79)? With Shanghai among the most expensive city in the world, you can't stuff enough 100 RMB into your wallet.

The CCP's refusal to admit inflation has ironically spurred cashless transactions.

Here's what 100,000 RMB (USD15,791) looks like in Chinese notes.

https://www.gettyimages.com/event/tr...iang-599528917

[dcarrigg]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

The rich and poor divide in many countries is far worst than the US.

I guess that the reason is because the US Fed has some autonomy whereas in other countries, the government fully controls the central bank. A dictatorship has a tendency to print till oblivion.

It's far too easy to just print non-stop until the shit hits the fan. Even after splatter, they would still continue printing just like Venezuela and Zimbabwe.

Do you know that the largest note in China is the 100 RMB (USD15.79)? With Shanghai among the most expensive city in the world, you can't stuff enough 100 RMB into your wallet.

The CCP's refusal to admit inflation has ironically spurred cashless transactions.

Here's what 100,000 RMB (USD15,791) looks like in Chinese notes.

https://www.gettyimages.com/event/tr...iang-599528917

By the US CIA's own measure, inequality is worse in the US than all but 25 other countries. Now maybe on a dollar or ppp basis it's a bit different, but I think maybe you discount how many Americans live in abject poverty and how many have millions/billions. There are fewer and fewer of us in between every year, and it's patently obvious. There's almost not a child born after the 1970s who has a living standard better than his/her parents unless they struck it big time. Child poverty and homelessness are at record rates since we began counting 50 years ago.

[touchring]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

By the US CIA's own measure, inequality is worse in the US than all but 25 other countries. Now maybe on a dollar or ppp basis it's a bit different, but I think maybe you discount how many Americans live in abject poverty and how many have millions/billions. There are fewer and fewer of us in between every year, and it's patently obvious. There's almost not a child born after the 1970s who has a living standard better than his/her parents unless they struck it big time. Child poverty and homelessness are at record rates since we began counting 50 years ago.

The gini index doesn't take into consideration of real purchasing power. Basic food prices, the cost of flour, sugar, rice and infant milk powder don't vary too much, whether the "poor" of the country earns $1 a day or $50 a day.

[dcarrigg]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

The gini index doesn't take into consideration of real purchasing power. Basic food prices, the cost of flour, sugar, rice and infant milk powder don't vary too much, whether the "poor" of the country earns $1 a day or $50 a day.

Oh, don't get me wrong, I'm not saying US has the most/worst poverty. I'm just saying the inequality rates are very, very high. Odds are that $50/day person lives around the corner from a millionaire. Things are just very, very uneven. 90% of people are stuck on the wage/salary program, barely getting by, one layoff or injury away from having no access to healthcare and losing their homes, etc. But those that pull away make an absolute killing, and there's a lot of them. So the US economy has tripled in the last 30 years, but the bottom 90% are actually doing worse. Every single dollar of growth went to the top 10%, and 80% of it went to the top 0.1% and the poor actually got poorer. That's the type of thing I'm talking about--wasn't trying to compare total depravity.

[touchring]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

So the US economy has tripled in the last 30 years, but the bottom 90% are actually doing worse. Every single dollar of growth went to the top 10%, and 80% of it went to the top 0.1% and the poor actually got poorer. That's the type of thing I'm talking about--wasn't trying to compare total depravity.

Well, this is capitalism. The rich become more power and start to change the laws to make themselves even wealthier. In some countries, the rich become so powerful, they become dictators, e.g. China and Russia. With time, money and absolute power on their own country men can no longer satisfy their greed, and that's when they grow crazy.

You can see this happening all over the world. There's a Chinese saying "Rear a tiger and court disaster".

The world is no longer safe.

[jk]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

as i think finster first pointed out, if the bank rescue money [tarp, etc] had instead been divided up and given equally to every citizen, many would have paid down debt, thus reliquifying the banks. busted banks would have had their shareholders and junior debt holders wiped out and their managements replaced [instead of given bonuses], and the senior debt holders would have taken ownership of the shrunken remnants.

overall debt in the economy would have dropped. this intervention would not have exacerbated inequality; in fact it would have reduced inequality. instead the money went to the banks and the "wealth effect" went to the wealthy.

these were policy choices. the goals could not be clearer.

[GRG55]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

policy here creates billionaires and peons. fewer and fewer in between. if you ignore the rhetoric, that appears to be the goal.

Canadians have generally seen themselves as having created a more egalitarian national circumstance than the USA.
But the growing disparity from similar policies and outcomes you describe, is rapidly becoming a political problem up here too.
I used to think Canada was 8 to 10 years from experiencing the same desperate working-class backlash that opened the White House to the present occupant. I'm not so sure the lag is quite that long any more.

Ontario, which has been ruled by the Liberals for the past 15 years, is going to the polls on June 7. The Liberals (Provincially and Federally) have historically been the most astute at occupying the left-center of the political spectrum, appealing to the broadest range of Canadians (the present Trudeau Federal government is Liberal). But like the Democrats in the USA (who poll well in the affluent coastal regions), it would appear the unintended consequence of Ontario Liberal policies has been to favor the well off. Or perhaps it is simply they are the least affected. Some excerpts from a recent article on the election campaign:

http://www.macleans.ca/opinion/ontar...g-class-votes/

...EKOS’ polls ask Ontarians to place themselves in one of four classes: poor, working, middle and upper. EKOS’ most recent results show the Wynne Liberals lead only among upper class Ontarians. Support drops by half with working class voters then by a third among poor voters. Liberals may not know it—and probably don’t understand why— but they are the party of class privilege.

And in this economy, that’s a shrinking electoral segment...

...Over the past 15 years, while the Liberals were in power, middle class membership fell dramatically, according to EKOS research. In 2002, 67 per cent of Canadians considered themselves middle class. Even in 2010, it was holding on at 60 per cent. But by 2013—in just three years—only 48 per cent of Canadians called themselves middle class, a level that has stayed roughly the same since.

And as the middle class shrunk, working class membership grew from 23 per cent to 31 per cent of Canadians. Poor Canadians grew from 5 per cent to 12 per cent.

The number of poor and working class voters is now almost as large as the middle class. EKOS Research CEO Frank Graves believes the class profile of Ontario closely resembles the national results.

And Graves’ research points at a clear reason for middle class collapse—the destruction of economic security.

Being able to retire with a secure income is the top marker of middle class membership, say 70 per cent of Canadians. Close behind are a secure job and financial security, both considered important aspects by 68 per cent...

...at the same time, there’s been as massive run-up in the cost of rents, housing, child care, car insurance, electricity and tuition—costs the Liberals either ignored or caused. Those higher costs might be manageable for more affluent voters who own stocks and real estate, which have also boomed over the past decade. But for those without wealth to fall back on, the solution has been debt.

Ultra-low interest rates have filled the gap between stagnant wages and rising costs. Canadians now hold over $2 trillion in personal debts on credit cards, car loans, tuition loans and mortgages...

...And so for this Ontario election, a central issue (if we can move past incantations about how terrible the Wynne Liberals were) will likely be the affordability of everyday life for working class people. And on that issue we might be about to see an epic right-left battle...

[dcarrigg]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

Piketty had a new piece out explaining this phenomenon and seeing it all over the developed world, from the US to France to UK and Germany etc.

He called it "Merchants and Brahmins."

Thesis was pretty simple. Left parties in the developed world, especially in the last 30 years, came to be parties by and for the educated elite who nevertheless probably are low earners (Brahmins). Right parties continued to be the party of high earners (Merchants). Low-educated workers (Workers) stopped having any party that represented them at all. Brahmins reach out to immigrant and minority workers. Merchants reach out to native workers. Neither really cares about them. Hence the collapse of the center-left everywhere and the rise of the populist backlash.

Used to be education and income correlated better than they do now. And center-left parties correlated pretty well with the lesser educated voters. Now all that's pretty much gone. Both major parties represent elites, just two different factions.

[GRG55]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

Having a vote is no longer enough to exert political influence. That requires money.

And the Brahmins are unlikely to be low earners. In my country they are the publicly funded elite, and enjoy a standard measurably above the private sector Merchant class.

[dcarrigg]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

Having a vote is no longer enough to exert political influence. That requires money.

And the Brahmins are unlikely to be low earners. In my country they are the publicly funded elite, and enjoy a standard measurably above the private sector Merchant class.

That chart reminds me of "New Economy" vs "Old Economy" stock charts circa 4rth Q 1999.

He does touch on that idea too:

in the 2000s-2010s: high-education elites now vote for the “left”, while high income/high-wealth elites still vote for the “right” (though less and less so).

In the end he posits four possibilities.

The first two are:

A period where parties only represent elite interests, or a striking reversal where the right becomes the party of lower-income workers. I don't think the latter is possible, at least in the US, because there's just too much intertwining of race and class and history and free-market ideology down here for that to happen. But the first option seems increasingly plausible to me.

The second two are:

A realignment along globalist/nativist lines, or a return to class-based redistributionist conflict. I don't think the latter is possible either, at least in the US, because the wealthy simply have too tight a grip on institutional levers. But the first option also seems plausible to me, and also doesn't seem mutually exclusive with the two parties of elites idea...


Also, please don't get me wrong about what he means by merchants--because I think I don't do him justice in these short posts. I think he doesn't mean small business owners just scraping by. He expressly means high-income / high-wealth individuals. This is also translated from French. So the word choice may not be perfect.

[GRG55]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

I need to set aside time to read your posted link.
The one observation I will make prior is that I don't see any party being able to win an election anywhere in the developed world without promising/running historically large fiscal deficits.

I wonder if there is a cyclical similarity to the 1960s.
Then the leading edge of the Boomers were in their teens and early 20s, and the demand for schools and other public services led to the widespread acceptance of public deficits and "Great Society" like policies and programs by late in that decade.

After a brief flirtation with "government is the problem" in the 1980s, and the go-go years of financilization (every cab driver dreaming of getting rich day trading and with property speculation), here we are with the barbell cohorts of aged Boomers and the Millenials both seeking, and no doubt voting for governments that will provide financial security assistance in a slow growth world.

[dcarrigg]

Re: Is US Fed the only central bank in the world that actually withdraws liquidity?

Biggest difference I see was that the 60s were a high growth time. 6% GDP per year happened. Now 3% would feel like a miracle. And that's despite (or perhaps because of?) the revolutionary knowledge that neoclassical economic theory gave us...

So far as the fiscal deficits go, maybe it's a two step? In the US the postwar federal spending norm for the last 50 years fluctuated between 17-23% of GDP. The Great Recession spiked it at about 25%, the 2013 sequester kicked it back down to 21%. Revenue stays between 15-20% during this same time period. The size of the gap fluctuates a good bit year to year, but the overall trend is rather surprisingly consistent--a 2 to 4% of GDP deficit when you smooth things out.

This is kind of what I mean: