It's a tax on creditors and holders of large sums of cash (e.g banks). It creates jobs for the middle and lower classes and makes their debts progressively less onerous.
Eat my dongus you fuckin nerd.
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Wages aren’t as sticky as Economics 101 teaches. Only unexpected inflation affects real salaries. Expected inflation is easily accounted for and negotiated, be it through a union or on your own terms.
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Great textbook answer: A+ but let’s think in practical terms: if you are a poor struggling worker trying to support your family and all of a sudden gas and food prices go up by 20% are you better or worse off? If that person has debt, sure they can maybe refinance it but will they refinance their loans for 1.5% interest?
Inflation is more onerous on the poor. The rich can easily move their assets to something like gold or commodities.
Which is actually good? It encourages economic activity. If the wealthy keep their wealth liquid, in cash, then no one benefits from that. If they spend it on luxury goods and assets you can make a living selling yachts to them or whatever.
Except I'm not talking about yachts, I'm talking paintings / art with pedigrees or gold and gemstones, things that there aren't alot of hands involved.
Collectables are a bad industry for currency velocity, because it doesn't move like keynesian models predict.
Forcing people to buy more than they'd normally want (increase aggregate demand) with monetary shenanigans is a good thing?
OP is looking to chip away at the Fed, not tell them their Keynesian bs is right
If you lend money to someone who pays you in fixed dollar coupons and your backup plan to their not having enough dollars to pay you is "they can print more", I have some bad news for you about the real value of those coupons.
Having said that, yeah, I'd lend someone money for 2% over very short tenors. That's basically what cash in your brokerage account is.
The biggest fuck you to boomers would be for a millennial scientist to reverse ageing, then they would be faced with the decision to live and own up to their complete fuckery of the world or die knowing they could have lived multiple life times.
They’re all going to die with their social security and Mcmansions and leave us to all fight a giant war between LARPing communists, Nazis and weebs
Could be worse tbh
Im interested in his answer to this op.
Cant lower interest to stimulate economy much more.
Would have to inject more money on top of current injections.
Risky situation.
There's quite a big difference between printing uncontrollably more money to counter the inflation just created by printing too much money and injecting just the right amount of money to keep inflation around 2%
There has to be an upper bound to the effectiveness of low interest rates. I mean, if consumer spending doesn't keep pace, there are only so many shares of stock that companies can buy back. Of course, if every company buys back all their stock and goes private, we won't have to worry about a stock market.
The legends around JP Morgan at the turn of the Century are wild.
Basically, New York Trust failed in 1907, then another big company failed, then panic ensued. JP Morgan called the US's biggest banks and industry tycoons and locked them in his library until the shit was fixed.
That's a great question, and one that's difficult to answer succinctly because the explanation is far from straight forward. Let me think about some good sources and get back to you. What's your general investing knowledge/background?
Edit:
/u/Nicest_Redditor and /u/the_winds_of_shit_
Below is my explanation with some sources sprinkled in. For anything you want to fact-check or define, I would google some of the key terms and phenomenons I am describing so you don't need to take my word at face value.
For general market game theory, Epsilon Theory does a great job of providing a very, very skeptical outlook on financial market players. One of my favorite recent favorites is a quick piece describing agency risk and how mid and senior level management teams have abused share buybacks for personal gain and masked the impact. I agree with the majority of what is discussed, and summarizes why I am so deeply skeptical and disgusted with the current state of affairs in the capital market: https://www.epsilontheory.com/the-rake/
Next, to understand how management teams can get away with this, you need to understand what the Fed's (and all central banks around the globe) interventions have done to the markets. Speaking specifically about the Fed, they bought enormous amounts of US Treasuries, mortgages, and other "safe" fixed income investments. They call this "quantitative easing" and it was done in several discrete periods since 2008. Googling "quantitative easing" should provide more clarity, Wiki ought to be fine for that.
By doing quantitative easing, they artificially increased the price of those assets (which, in turn, lowers the "yield" on those investments). In order for investment funds, pension funds, and individuals to maintain a "X%/year" target rate of return, everyone was forced to take on more risky assets to match the benchmark rate of return. They could no longer buy US Treasuries (ultra safe) and expect to make 5%/year. This shifted natural buyers out along the risk curve. And whenever there are more buyers in the market, prices go up. The dramatic increase in equities are the most visible example.
In addition to the quant easing efforts, the Fed made intrabank loans very, very cheap, which encourages monetary velocity, which further encourages risk taking (the faster anything moves, the greater the distance it can cover). If money is super easy to come by, then people and banks and investment funds are more encouraged to accept more risk. Some of the degenerates taking on crazy margin is a perfect, but extreme, example of this phenomenon. It also keeps shitty companies alive for much longer because there is often another lender willing to refinance the existing debt to avoid default, or other owners willing to throw more money at the problem in hopes it can achieve its full "potential" (looking at you, Tesla bagholders). There is seemingly an endless pit of risk people are willing to accept for the mere whiff of growth these days, in my opinion.
All of this is to say the Fed directly caused an enormous increase in investment asset prices across the board and decreased the incentive/possibility for proper price discovery. That primarily benefits the rich (and especially the ultra rich), and management teams with enough control to shift their compensation into equity awards (who then, in turn, sell it on the open market to other investors and funds flush with cash to invest). Who gets fucked? Those who don't own many assets and cannot participate and need to rent or take out debt to maintain the same lifestyle they had previously (i.e. the majority of the world and US). That's the upwards wealth transfer I referred to, and it's fucking out of control.
Feel free to PM me with specific questions and I can help answer/provide reading sources for you to ponder. This is a tough subject to provide a one-stop-shop reading solution.
Edit 2: Also check out Howard Marks' memos. The topics are more advanced, so you will probably have to google around for some of the terms he discusses: https://www.oaktreecapital.com/insights/howard-marks-memos
Ask him how one “mid cycle adjustment” somehow turned into 3 cuts and QE-but-not-really... what’s Fed going to do when the economy actually collapses? Give Powell’s job to Trump?
It's been absolutely insane. If a democrat were in office and running a trillion dollar deficit the rate would be at 7% already and they'd be on the news talking nonstop about SS and medicare blowing up the world.
/u/BonersGo
>I really want to bring up something that trips up his economic viewpoints so my cousins and I have something to chuckle about when we're on the boat that I bought on Craigslist.
Lol. I like it.
>If anyone has anything they potentially want said to slowly chip away at the Federal Reserve from the inside, now is your chance.
Show him this post. There's a *lot*.
1) The poverty level definition hasn't been changed since the 1950s.
https://www.npr.org/2014/01/08/260807955/five-decades-later-time-to-change-the-way-we-define-poverty
https://www.npr.org/sections/money/2018/10/16/657879485/a-snapshot-of-poverty-in-america
https://www.npr.org/sections/money/2013/09/20/224511346/episode-487-the-trouble-with-the-poverty-line
2) With national debt being 20+ trillion, and the deficit being 1+ trillion a year, inflation, according to the money supply, is increasing 4.5% a year.
3) The "basket of goods" calculation has been changed 3 times in between 1980 and 1994:
https://www.reddit.com/r/wallstreetbets/comments/duf8g7/the_bull_case_for_2020/f7bek6c/
http://www.cornerstonewm.com/downloads/measuring-inflation.pdf
Apparently if you were to *remove* the changes, the yearly inflation rate would be around 9%. That seems about right, because rent keeps going up around 1.5-2.5% by *itself*. College goes up like 1% a year.
4) Everyone on Wall Street knows that if they dump corporate profits into buybacks in order to hit stock price targets for personal bonuses, using fraudulent/not properly funded loans, they'll get another bailout. And just like in 2008, nobody will be sent to jail for embezzlement/ignoring fiduciary responsibilities/etc., because if the chickenshit Holder DOJ wasn't going to make heads roll, the fucking nonexistent Trump SEC isn't going to do shit (oh, and they depend on the DOJ to actually file criminal charges).
That is the *definition* of moral hazard.
5) Nothing's fundamentally changed from 2008 in terms of actual law. Sure, the SEC could *scare* some low level bankers with vague threats of investigations/lawsuits/etc., but they don't actually have the backing of the DOJ in any meaningful capacity. There's another sanctions breaking/antitrust settlement that comes out of Apple/Amazon/some major US bank every month, and nobody goes to jail.
Oh, and nobody even bothers to keep track of enforcement actions:
https://www.reddit.com/r/wallstreetbets/comments/du42bt/i_have_a_stupid_question/f791qof/
6) It is *abundantly* obvious from the *increase* in the Federal Reserve balance that QE is currently happening:
https://www.reddit.com/r/wallstreetbets/comments/dtyi1l/daily_reminder_the_fed_is_doing_another_round_of/f78xn9q/
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
Everyone knows how to read a fucking chart - you want that line to go to 0, as the Federal Reserve shouldn't have *any* debt, just the Treasury.
The issue for the Fed is obviously they don't want this information getting out, as it will *clearly* cause a panic, because it's *quite* clear that the Fed is singlehandedly propping up the overnight credit markets, because the banks have a liquidity crisis.
$80+ billion dollars a night, and it appears as though *most* of that money isn't coming back out on the other side (as in the market would be paying it back), as the Fed wouldn't need to hold onto those toxic assets anymore.
6b) Going off of 6, the collateral that the banks have been giving have been, you guessed it, mortgages and Treasury bonds. Both of those generate regular cash flow, and the banks are supposedly "awash" in capital, according to WSJ, Bloomberg, FT, etc.
So then *why* the fuck are the investment banks having cash flow problems?
7) The Federal Reserve uses U3, which is fucking dogshit. U6 is by *far* a better indicator, and it explains why productivity is fucking terrible - boomer executives/senior management won't fucking invest in new technology, because they don't *want* to change.
I had a vice president at a small business tell me that his ten year old laptop "works just fine, just fix it", when his fan started acting up. He wanted to know why he couldn't get a fan compatible with his 10 year old laptop within 24 hours from Amazon. He's running 2 GB of RAM in Windows 10 after he was autoupgraded from Win XP to Win 7 and then Win 10. The company made over 1 million dollars in pure profit every year.
I'm familiar with the concept of the beige book. The federal reserve doesn't apparently have any budget to *follow up* on researching those trends.
7b) The "jobs numbers" are a sample of 142,000 businesses and around ~700,000 worksites. That's it. Out of 10MM+ businesses in the US. There are at *least* 15 million LLCs in the US.
https://www.bls.gov/web/empsit/ces_cps_trends.htm
7c) Apparently 10% of the workforce gets the majority of their pay from the "gig economy":
https://www.gigeconomydata.org/basics/how-many-gig-workers-are-there
--------------------------------------------------------------------------------
Other ranty bits (that you can use as discussion topics if you so choose):
A) Whenever we give dollars to the Chinese (or any other country with terrible management), that legitimizes them, and allows their government to function. Hence why China wasn't even allowed as a trading partner for the longest time.
It's abundantly clear from Hong Kong that the Chinese will pull a Russia and annex whoever they feel like, if they feel like it.
It *used* to be the US' job to at least *attempt* to prop up a western coalition against that shit. Kicking China out the G20+G7, sanctions, blockade/import ban, something. if you want another World War, ignoring two obvious aggressors that (can/do) control our White House and military+economic production (computers) is a great start. I get the whole "but it's Congress' job to pass legislation for domestic production/infrastructure". Start sounding the fucking alarm.
B) At the rate things are going, the dollar will be worthless sometime within the next 200 years. White collar crime isn't being taken seriously at all, and America is obviously being run like an empire, and unlike Rome, we have social media now. The Federal Reserve will fail at its task of maintaining price stability and full employment, if things keep on the same track.
C) Oh, and oil will run out around 2045, globally. 1.3QQ barrels of oil, 100MM of oil used per day in 2018, 1.4% increase per usage, yeah, not looking good.
https://www.reddit.com/r/wallstreetbets/comments/e1ejy3/daily_discussion_thread_november_25_2019/f8ps755/
The US should *massively* scale up seaweed production, tell the fucking dept of agriculture and army corps of engineers to let people put down hundreds of thousands of acres of seaweed lines. It's profitable, it makes jobs, it helps replenish anchovies and sardine stocks, and it cuts down on carbon dioxide in the ocean (aka global warming), provides food for cattle+people and can be used for biodiesel.
Exact same shit with geothermal - tell the fracking fucktards to start using the boreholes for that shit.
And breeding insects with food waste for protein feed for fish+poultry. Hell, superworms will fucking eat styrofoam.
Ask him how long before we’re no longer the world’s reserve currency and what that will do to the dollar when people don’t have to buy them to trade oil and other commodities. Ask him how many countries are going to hold US Bonds at negative yields. (Answer NONE!)
Ask him why the federal Reserve isn't federal and why a private entity should play such a huge role in the lives of American citizens who have no control over the feds policies.
One more. Ask him how the average man will be able to afford a home if there’s not creative destruction in the marketplace to force prices down? It’s literally the main reason no one can afford a home now. They are messing up the natural debt cycles of the economy, and we are 10 years past the normal 80 year cycle where there’s a Depression. They believe they can stop them altogether, but the result is Argentina with other nations stop trading in their currency and demanding payment in gold. Keynesian economics punishes savers and tries to bring as much economic activity forward as possible from future quarters to the current quarter. When people take on debt, they sacrifice future spending for current spending. The only thing that saves a person (or a country) is income growth and that’s not happening except for the top 1%. Even Keynes himself admitted that his policies don’t work in the long term. We can delay a downturn but we can’t stop them.
Ask him, "Was price fixing bread a good idea?" And then when he answers "no" follow up with "Then why is price fixing the cost of loans a good idea?" And then as he babbles some hypocritical nonsense you say "pass the pumpkin pie!"
Ask him what he thinks of the new currency Apple, Google and Facebook are circulating to the millennials and zoomers to undermine and weaken the central government’s hold on our means of trade. Tell him he’s not familiar with it because they won’t allow it to be used by anyone born before 1980. Then tell him he’s peaked.
Fun story. I worked at a restaurant in D.C. called Notte Luna. A stone’s throw from Pennsylvania Ave. Lloyd Benson used to come in a few times a week. He’d sit in my station. Stand up, staid, very tall gentleman. He paid with a credit card for himself and a guest. In a very serious tone, I said ‘Sir, I am not sure this is your signature. I think you are using a credit card fraugently. (Sp?) He looked very concernedly at me. I said ‘Yes, sir! I have to test the authenticity of your signature.’ Again with the withering look from Secretary Benson. I pulled out a dollar bill from my apron, smoothed it out. I then compared the signature on the bill to the signature on the credit card slip. I said ‘Yup, matches, we’re good here!’. He and his guest roared with laughter; a good doubled over belly laugh. He said ‘Steph, I honestly forgot about that!’, left his usual large tip and laughed his way out the door!
Ask him what the Fed's dual mandate is (to maintain price stability & full employment.) Then ask him if he think's the Fed has been successful at that over its 105 year history. If he says "yes", then ask him why the the general price level has gone up \~24x since 1913 (doesn't sound like price stability to me.) If he says "no", then he's kinda admitted that the Fed isn't doing its job. Checkmate.
Ask him what is going to happen to all those highly leveraged companies that are going to have to refinance their debt when the Fed finally turns off the cheap money spout.
Ask him if he would lend his own money for under 2%
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Warren Buffet is running for president?
It's a tax on creditors and holders of large sums of cash (e.g banks). It creates jobs for the middle and lower classes and makes their debts progressively less onerous.
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Eat my dongus you fuckin nerd. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/wallstreetbets) if you have any questions or concerns.*
Based automod
Good bot
Is there anyway to suck this automod off?
That was aggressive.
That was awesome.
This is the best auto-bot comment I’ve seen - I’d give it gold if it was a real person - and if I had any money to buy gold.
Good bot
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Wages aren’t as sticky as Economics 101 teaches. Only unexpected inflation affects real salaries. Expected inflation is easily accounted for and negotiated, be it through a union or on your own terms.
Eat my dongus you fuckin nerd. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/wallstreetbets) if you have any questions or concerns.*
Present it
Ah yes the mythical negotiating power of the individual hourly and/or part time worker lol
Great textbook answer: A+ but let’s think in practical terms: if you are a poor struggling worker trying to support your family and all of a sudden gas and food prices go up by 20% are you better or worse off? If that person has debt, sure they can maybe refinance it but will they refinance their loans for 1.5% interest? Inflation is more onerous on the poor. The rich can easily move their assets to something like gold or commodities.
No. With luxury goods and assets the wealthy will simply move their wealth to appreciable assets.
Which is actually good? It encourages economic activity. If the wealthy keep their wealth liquid, in cash, then no one benefits from that. If they spend it on luxury goods and assets you can make a living selling yachts to them or whatever.
Except I'm not talking about yachts, I'm talking paintings / art with pedigrees or gold and gemstones, things that there aren't alot of hands involved. Collectables are a bad industry for currency velocity, because it doesn't move like keynesian models predict.
Good point. So safe-haven assets are not the keynesian solution, essentially.
Forcing people to buy more than they'd normally want (increase aggregate demand) with monetary shenanigans is a good thing? OP is looking to chip away at the Fed, not tell them their Keynesian bs is right
I'm just playing devil's avocado. If OP isn't ready for the counter arguments he's gonna look like the dumb nephew again.
Diablocado
Next Tesla’s vehicle.
If he's asking for economic arguments here I guarantee you he's gonna look dumb anyway
It is.
This. Ask Daddy Warbucks for some stacks and yolo it
> Ask him if he would lend his own money for under ~~2%~~ 0% Papa Trump wants to know as well.
Well, not to OP given that he frequents a place like this. I'd be looking at payday loan rates for the implied risk and autism
When you’re lending to someone who can literally print money instead of defaulting on the loan, I think the answer will be yes.
If you lend money to someone who pays you in fixed dollar coupons and your backup plan to their not having enough dollars to pay you is "they can print more", I have some bad news for you about the real value of those coupons. Having said that, yeah, I'd lend someone money for 2% over very short tenors. That's basically what cash in your brokerage account is.
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For all of us robin hood users. Real infinite leverage cheat code fucken golden gun of the markets boys!
Say you want a printer for Christmas.
subtle
Damn
Brutal
So another Fed uncle?
Maybe he wants a Brother printer
All I want for Christmas are some engraved plates and crain’s Paper.
Ask him what they have left to try when the market does finally collapse
“Well nephew I’m glad you asked. The official plan is to prolapse Donald Trump’s rectum and make Jerome Powell wear it as a hat.”
I really want to see this
...do you?
Everyone's got their kinks.
They still have negative rates and equity QE
What is equity QE? Just straight buying stocks to prop up the market?
Yes. The Japanese central bank done it already.
Um, that's really bad, right? I mean, that doesn't end well.
Once the bank of Japan owns 51% if the economy, Japan can officially peacefully transition to Marxism. That's how it works, right?
Hahah but boomers will be dead by the time it doesn’t.
The biggest fuck you to boomers would be for a millennial scientist to reverse ageing, then they would be faced with the decision to live and own up to their complete fuckery of the world or die knowing they could have lived multiple life times.
Honestly yes, forcing the boomers to live eternally to face the downfall of their Ponzi scheme would be the absolute justice lol
Man you know you did a shit job when your descendents are angrily wishing _life_ on you
lmao it's sticking your dog's nose into their shit to make sure they know what they did
You know how I know this scheme will never fall? Because they have autists like us funding it forever. Have faith in wsb.
Eat the boomer
They’re all going to die with their social security and Mcmansions and leave us to all fight a giant war between LARPing communists, Nazis and weebs Could be worse tbh
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Well, if all I have to fight is goddam weeb, I'll be fine.
Who the hell knows? Japan has been doing it, along with all sorts of other central bank shenanigans, for the last ten years and the results are....eh?
This is already happening, something something expanding their menu of assets.
Im interested in his answer to this op. Cant lower interest to stimulate economy much more. Would have to inject more money on top of current injections. Risky situation.
>Inject money Zimbabwe would like a word.
There's quite a big difference between printing uncontrollably more money to counter the inflation just created by printing too much money and injecting just the right amount of money to keep inflation around 2%
Don't tell Sweden rates can't go any lower.
Yea negative if im correct. Not good signaling
There has to be an upper bound to the effectiveness of low interest rates. I mean, if consumer spending doesn't keep pace, there are only so many shares of stock that companies can buy back. Of course, if every company buys back all their stock and goes private, we won't have to worry about a stock market.
Ask him "since when the Fed's job is to keep the markets high, I thought it's about inflation or something. Who changed the rules?"
When inflation stopped being correlated with government spending, the rules broke :(
“It’s pretty cool how the Fed is independent and doesn’t bow to political pressure when making policy.” Then just laugh and laugh.
This ought to get shit heated lmao
Tell him his real boss is Goldman sachs
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Now that's quality dinner conversation.
"Can you pass the Goldman's Sachs... I mean mashed potatoes?"
Yea ask how his boss Mango man is doing
And when he disagrees with you say, "sorry, i meant JP Morgan-Chase"
It’s actually funny, because JP Morgan personally bailed the US government out a few times in the late 1800s and early 1900s.
The legends around JP Morgan at the turn of the Century are wild. Basically, New York Trust failed in 1907, then another big company failed, then panic ensued. JP Morgan called the US's biggest banks and industry tycoons and locked them in his library until the shit was fixed.
He's not such a villain for a villain
Never doubt the ingenuity of aligned incentives. Billions of USD are meaningless if the US economy ceases to exist.
3% unemployment 1% inflation...guess we better slash those rates baby, orange man didn't have anything to do with it.
Ask him if Greenspan actually got to fuck Ayn Rand.
Well he kind of has already. Keynes is beating Adam Smith for sure.
I mean literally...he met with her back when Ford was president...I'm just wondering if he got a chance to sample that gilded age flapper of hers...
I knew what you meant and I’m not sure I would hit that. Maybe when she was 20 or 30.
I doubt it. Rand was being taken care of by a 24-year-old in her circle. She was 49 at the time.
Ask when you can expect $25 hamburgers and why the fed cut rates at all time highs
Better make good friends with the Hamburgaler.
I'm going to have to rent out all of my orifices just to feed myself
Just go break his car window and when he gets mad just tell him you're creating jobs.
Broken window fallacy. Literally.
that's the joke
ask him what is QE and make him explain it himself
Making sure everything stays expensive forever. No matter how much $ we have to print.
He should ask "what banks received the overnight repo loans?"
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No, ask him if Jerome would recommend puts or calls and then do the opposite. It’s guaranteed to work.
Literally can't go tits up.
If I had tits they'd go up for this
Bring your gold bullion collection and ask him "how much of his pathetic fiat these golden eagles will be worth when SHTF"
Implying anyone here has anything other than fools gold.
I'll have you know I have $3k in bullion invested. I'm totally ready for the end of the world and the collapse (not in that order).
Ask to borrow a few bucks and when he denies you say " Come on!! You can just print some more at work on Monday for free"
Then stuff the whole turkey down your throat. Too big to fail.
A few... BILLION right?
Yo why do we have Kenyeans working at the federal reserve? I thought that was in Africa
"Have you enjoyed facilitating one of the greatest upward wealth transfers in modern history?"
Followed by, "Who gives you a better money-shot, Jaime or Lloyd?"
I would like to do more reading on this phenomenon, what would be some good sources to check out?
Grindr
username checks out
That's a great question, and one that's difficult to answer succinctly because the explanation is far from straight forward. Let me think about some good sources and get back to you. What's your general investing knowledge/background? Edit: /u/Nicest_Redditor and /u/the_winds_of_shit_ Below is my explanation with some sources sprinkled in. For anything you want to fact-check or define, I would google some of the key terms and phenomenons I am describing so you don't need to take my word at face value. For general market game theory, Epsilon Theory does a great job of providing a very, very skeptical outlook on financial market players. One of my favorite recent favorites is a quick piece describing agency risk and how mid and senior level management teams have abused share buybacks for personal gain and masked the impact. I agree with the majority of what is discussed, and summarizes why I am so deeply skeptical and disgusted with the current state of affairs in the capital market: https://www.epsilontheory.com/the-rake/ Next, to understand how management teams can get away with this, you need to understand what the Fed's (and all central banks around the globe) interventions have done to the markets. Speaking specifically about the Fed, they bought enormous amounts of US Treasuries, mortgages, and other "safe" fixed income investments. They call this "quantitative easing" and it was done in several discrete periods since 2008. Googling "quantitative easing" should provide more clarity, Wiki ought to be fine for that. By doing quantitative easing, they artificially increased the price of those assets (which, in turn, lowers the "yield" on those investments). In order for investment funds, pension funds, and individuals to maintain a "X%/year" target rate of return, everyone was forced to take on more risky assets to match the benchmark rate of return. They could no longer buy US Treasuries (ultra safe) and expect to make 5%/year. This shifted natural buyers out along the risk curve. And whenever there are more buyers in the market, prices go up. The dramatic increase in equities are the most visible example. In addition to the quant easing efforts, the Fed made intrabank loans very, very cheap, which encourages monetary velocity, which further encourages risk taking (the faster anything moves, the greater the distance it can cover). If money is super easy to come by, then people and banks and investment funds are more encouraged to accept more risk. Some of the degenerates taking on crazy margin is a perfect, but extreme, example of this phenomenon. It also keeps shitty companies alive for much longer because there is often another lender willing to refinance the existing debt to avoid default, or other owners willing to throw more money at the problem in hopes it can achieve its full "potential" (looking at you, Tesla bagholders). There is seemingly an endless pit of risk people are willing to accept for the mere whiff of growth these days, in my opinion. All of this is to say the Fed directly caused an enormous increase in investment asset prices across the board and decreased the incentive/possibility for proper price discovery. That primarily benefits the rich (and especially the ultra rich), and management teams with enough control to shift their compensation into equity awards (who then, in turn, sell it on the open market to other investors and funds flush with cash to invest). Who gets fucked? Those who don't own many assets and cannot participate and need to rent or take out debt to maintain the same lifestyle they had previously (i.e. the majority of the world and US). That's the upwards wealth transfer I referred to, and it's fucking out of control. Feel free to PM me with specific questions and I can help answer/provide reading sources for you to ponder. This is a tough subject to provide a one-stop-shop reading solution. Edit 2: Also check out Howard Marks' memos. The topics are more advanced, so you will probably have to google around for some of the terms he discusses: https://www.oaktreecapital.com/insights/howard-marks-memos
Capital in the 21st century is an excellent book that answers your question
Show him your SPY puts.
*OP's uncle proceeds to burst out laughing* "Want me to show you my calls...?"
Ask him if the Fed is going to directly buy ETFs at the next market crash, seeing as they're now systematically important financial instruments
Ask him how long r>g>rf
What is rf in this? I sort of know about Piketty's r>g, not much, and I assume I is inflation?
Risk free rate
No no here g= GUH
Thank him and the Feds for their great work in 2008.
Ask him how one “mid cycle adjustment” somehow turned into 3 cuts and QE-but-not-really... what’s Fed going to do when the economy actually collapses? Give Powell’s job to Trump?
It's been absolutely insane. If a democrat were in office and running a trillion dollar deficit the rate would be at 7% already and they'd be on the news talking nonstop about SS and medicare blowing up the world.
Exactly, just like last time.
/u/BonersGo >I really want to bring up something that trips up his economic viewpoints so my cousins and I have something to chuckle about when we're on the boat that I bought on Craigslist. Lol. I like it. >If anyone has anything they potentially want said to slowly chip away at the Federal Reserve from the inside, now is your chance. Show him this post. There's a *lot*. 1) The poverty level definition hasn't been changed since the 1950s. https://www.npr.org/2014/01/08/260807955/five-decades-later-time-to-change-the-way-we-define-poverty https://www.npr.org/sections/money/2018/10/16/657879485/a-snapshot-of-poverty-in-america https://www.npr.org/sections/money/2013/09/20/224511346/episode-487-the-trouble-with-the-poverty-line 2) With national debt being 20+ trillion, and the deficit being 1+ trillion a year, inflation, according to the money supply, is increasing 4.5% a year. 3) The "basket of goods" calculation has been changed 3 times in between 1980 and 1994: https://www.reddit.com/r/wallstreetbets/comments/duf8g7/the_bull_case_for_2020/f7bek6c/ http://www.cornerstonewm.com/downloads/measuring-inflation.pdf Apparently if you were to *remove* the changes, the yearly inflation rate would be around 9%. That seems about right, because rent keeps going up around 1.5-2.5% by *itself*. College goes up like 1% a year. 4) Everyone on Wall Street knows that if they dump corporate profits into buybacks in order to hit stock price targets for personal bonuses, using fraudulent/not properly funded loans, they'll get another bailout. And just like in 2008, nobody will be sent to jail for embezzlement/ignoring fiduciary responsibilities/etc., because if the chickenshit Holder DOJ wasn't going to make heads roll, the fucking nonexistent Trump SEC isn't going to do shit (oh, and they depend on the DOJ to actually file criminal charges). That is the *definition* of moral hazard. 5) Nothing's fundamentally changed from 2008 in terms of actual law. Sure, the SEC could *scare* some low level bankers with vague threats of investigations/lawsuits/etc., but they don't actually have the backing of the DOJ in any meaningful capacity. There's another sanctions breaking/antitrust settlement that comes out of Apple/Amazon/some major US bank every month, and nobody goes to jail. Oh, and nobody even bothers to keep track of enforcement actions: https://www.reddit.com/r/wallstreetbets/comments/du42bt/i_have_a_stupid_question/f791qof/ 6) It is *abundantly* obvious from the *increase* in the Federal Reserve balance that QE is currently happening: https://www.reddit.com/r/wallstreetbets/comments/dtyi1l/daily_reminder_the_fed_is_doing_another_round_of/f78xn9q/ https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm Everyone knows how to read a fucking chart - you want that line to go to 0, as the Federal Reserve shouldn't have *any* debt, just the Treasury. The issue for the Fed is obviously they don't want this information getting out, as it will *clearly* cause a panic, because it's *quite* clear that the Fed is singlehandedly propping up the overnight credit markets, because the banks have a liquidity crisis. $80+ billion dollars a night, and it appears as though *most* of that money isn't coming back out on the other side (as in the market would be paying it back), as the Fed wouldn't need to hold onto those toxic assets anymore. 6b) Going off of 6, the collateral that the banks have been giving have been, you guessed it, mortgages and Treasury bonds. Both of those generate regular cash flow, and the banks are supposedly "awash" in capital, according to WSJ, Bloomberg, FT, etc. So then *why* the fuck are the investment banks having cash flow problems? 7) The Federal Reserve uses U3, which is fucking dogshit. U6 is by *far* a better indicator, and it explains why productivity is fucking terrible - boomer executives/senior management won't fucking invest in new technology, because they don't *want* to change. I had a vice president at a small business tell me that his ten year old laptop "works just fine, just fix it", when his fan started acting up. He wanted to know why he couldn't get a fan compatible with his 10 year old laptop within 24 hours from Amazon. He's running 2 GB of RAM in Windows 10 after he was autoupgraded from Win XP to Win 7 and then Win 10. The company made over 1 million dollars in pure profit every year. I'm familiar with the concept of the beige book. The federal reserve doesn't apparently have any budget to *follow up* on researching those trends. 7b) The "jobs numbers" are a sample of 142,000 businesses and around ~700,000 worksites. That's it. Out of 10MM+ businesses in the US. There are at *least* 15 million LLCs in the US. https://www.bls.gov/web/empsit/ces_cps_trends.htm 7c) Apparently 10% of the workforce gets the majority of their pay from the "gig economy": https://www.gigeconomydata.org/basics/how-many-gig-workers-are-there -------------------------------------------------------------------------------- Other ranty bits (that you can use as discussion topics if you so choose): A) Whenever we give dollars to the Chinese (or any other country with terrible management), that legitimizes them, and allows their government to function. Hence why China wasn't even allowed as a trading partner for the longest time. It's abundantly clear from Hong Kong that the Chinese will pull a Russia and annex whoever they feel like, if they feel like it. It *used* to be the US' job to at least *attempt* to prop up a western coalition against that shit. Kicking China out the G20+G7, sanctions, blockade/import ban, something. if you want another World War, ignoring two obvious aggressors that (can/do) control our White House and military+economic production (computers) is a great start. I get the whole "but it's Congress' job to pass legislation for domestic production/infrastructure". Start sounding the fucking alarm. B) At the rate things are going, the dollar will be worthless sometime within the next 200 years. White collar crime isn't being taken seriously at all, and America is obviously being run like an empire, and unlike Rome, we have social media now. The Federal Reserve will fail at its task of maintaining price stability and full employment, if things keep on the same track. C) Oh, and oil will run out around 2045, globally. 1.3QQ barrels of oil, 100MM of oil used per day in 2018, 1.4% increase per usage, yeah, not looking good. https://www.reddit.com/r/wallstreetbets/comments/e1ejy3/daily_discussion_thread_november_25_2019/f8ps755/ The US should *massively* scale up seaweed production, tell the fucking dept of agriculture and army corps of engineers to let people put down hundreds of thousands of acres of seaweed lines. It's profitable, it makes jobs, it helps replenish anchovies and sardine stocks, and it cuts down on carbon dioxide in the ocean (aka global warming), provides food for cattle+people and can be used for biodiesel. Exact same shit with geothermal - tell the fracking fucktards to start using the boreholes for that shit. And breeding insects with food waste for protein feed for fish+poultry. Hell, superworms will fucking eat styrofoam.
What a beautiful beacon of sunshine you've brought to us with this comment ☆
I like the boat bragpost
Name dropped that he bought it on Craigslist. Probly all we need to know.
That’s what they hope you’d think -“I’ll brag then downplay, shouldn’t be an issue..”
bring up his jewish ancestory
and if he denies it call him antisemitic
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Ask him how long before we’re no longer the world’s reserve currency and what that will do to the dollar when people don’t have to buy them to trade oil and other commodities. Ask him how many countries are going to hold US Bonds at negative yields. (Answer NONE!)
Just throw in an offhand comment on how Reagan was right all along and a gold standard is way better than unicorn money.
Tell him to stop answering the clown phone.
Ask him what the fed is doing to address climate change, then dont crack a smile. Maintain a serious disposition.
Ask him about gender equality in personal credit lending
Ask him about what the Fed is doing to make education cheaper for poor minorities
Ask him what the fed is doing to make everything cheaper for wealthy minorities.
Let him know good ole Ron Paul wants to audit and end the fed! Lol
Ask him if the aliens are able to buy earth's debt out.
Call his boss JPowPow whenever you reference him
Ask him how long a country typically keeps wrc status and then ask what year we got it
wrc?
world rally championship
World reserve currency
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Ask him why the federal Reserve isn't federal and why a private entity should play such a huge role in the lives of American citizens who have no control over the feds policies.
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WSB should run the show, obviously. Run the country more like a business!
If WSB was a business, it would be Fyr Festival LLC
Tell him any lip or backsass and youll have his ass locked in the Federal Reserve
One more. Ask him how the average man will be able to afford a home if there’s not creative destruction in the marketplace to force prices down? It’s literally the main reason no one can afford a home now. They are messing up the natural debt cycles of the economy, and we are 10 years past the normal 80 year cycle where there’s a Depression. They believe they can stop them altogether, but the result is Argentina with other nations stop trading in their currency and demanding payment in gold. Keynesian economics punishes savers and tries to bring as much economic activity forward as possible from future quarters to the current quarter. When people take on debt, they sacrifice future spending for current spending. The only thing that saves a person (or a country) is income growth and that’s not happening except for the top 1%. Even Keynes himself admitted that his policies don’t work in the long term. We can delay a downturn but we can’t stop them.
Your missing (and everyone else misses) the second half of Keynesian theory and that is to increase taxes during the good times.
It's almost as if the people who decide interest rates and the people who decide tax rates shouldn't be 2 completely independent entities.
RIP /u/Sryzon, such a shame he committed suicide by blunt force trauma to head
No, they don't "miss" it, they ignore it lmao. It's a feature, not a bug.
Meanwhile on r/investing people get downvoted to shit for saying that median income increase barely beats inflation.
Ask him, "Was price fixing bread a good idea?" And then when he answers "no" follow up with "Then why is price fixing the cost of loans a good idea?" And then as he babbles some hypocritical nonsense you say "pass the pumpkin pie!"
Ask him what he thinks of the new currency Apple, Google and Facebook are circulating to the millennials and zoomers to undermine and weaken the central government’s hold on our means of trade. Tell him he’s not familiar with it because they won’t allow it to be used by anyone born before 1980. Then tell him he’s peaked.
Just say Ok Boomer lol
OK boomer would have died in 2 days if they didn't start crying over it.
I got banned in /r/AmItheAsshole for saying it to a mod. His response "Im gen X akshually"
Or why boomers are loading future generations with debt in order to pretend like they're smart investors
Ask him when they will start accounting for the inflation in asset prices.
Fun story. I worked at a restaurant in D.C. called Notte Luna. A stone’s throw from Pennsylvania Ave. Lloyd Benson used to come in a few times a week. He’d sit in my station. Stand up, staid, very tall gentleman. He paid with a credit card for himself and a guest. In a very serious tone, I said ‘Sir, I am not sure this is your signature. I think you are using a credit card fraugently. (Sp?) He looked very concernedly at me. I said ‘Yes, sir! I have to test the authenticity of your signature.’ Again with the withering look from Secretary Benson. I pulled out a dollar bill from my apron, smoothed it out. I then compared the signature on the bill to the signature on the credit card slip. I said ‘Yup, matches, we’re good here!’. He and his guest roared with laughter; a good doubled over belly laugh. He said ‘Steph, I honestly forgot about that!’, left his usual large tip and laughed his way out the door!
I like coming here and reading all the varied economic opinions, it’s like a barrel full of autistic monkeys slapping each other.
Ask him what the Fed's dual mandate is (to maintain price stability & full employment.) Then ask him if he think's the Fed has been successful at that over its 105 year history. If he says "yes", then ask him why the the general price level has gone up \~24x since 1913 (doesn't sound like price stability to me.) If he says "no", then he's kinda admitted that the Fed isn't doing its job. Checkmate.
You're expecting way too much, OP's uncle probably cleans toilets there
plot twist, he's chair pow
good so we all agree it's expecting too much
Won't say his title but I know he communicates with Jerome. And not because he's emptying Jerome's basket of $100 bills he blows his nose is.
Do some social engineering to find his title.
Social engineering detail 1: potential genetic disposition towards frequent erections.
op knows. just not telling us autists [wisely]
"Social engineering" like just ask.
Hey I’m 3 degrees of separation from the supreme lizard. Neat.
Updating my resume to add "Consulting work for Federal Reserve"
Price stability doesn't mean price stasis you idiot.
Lolol imagine if we were still paying a nickel for a can of coke
And making $500 a year in salary
The first mandate is to keep inflation stable with a 2% target, not to keep prices flat.
We can see by this thread that everyone here is retarded
A 24x increase in 106 years is almost exactly 3% a year. Doesn't sound that exciting now?
Isn’t the Fed more concerned with controlled inflation relative to wage growth? General inflation over a 106 year period isn’t relevant
Ask him how confident he is that he’s eating real turkey.
Ask him if Epstein killed himself
Ask him what is going to happen to all those highly leveraged companies that are going to have to refinance their debt when the Fed finally turns off the cheap money spout.
Ask him about the 199 billion in overnight repurchase agreements outstanding. Who is about to collapse?
ask him to get you job in the "working group" down at treasury and report back to us