Did The Federal Reserves Policies Make Inequality Worse?

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Guess they’ve heard about America’s highest inflation in forty years. While those banking families and enterprises have had significant influence within the financial systems of Western Europe and the US, the Federal Reserve insists that it is publicly owned and serves the American people since its establishment in 1913. But for each of those programs, inflation wouldn't solve the government's financial problems.



The distribution of coins differs from that of currency in some respects. First, when the Fed receives currency from the Treasury, it pays only for the cost of printing the notes. However, coins are a direct obligation of the Treasury, so the Reserve Banks pay the Treasury the face value of the coins. Second, large banks in some Federal Reserve Districts federal reserve printing money participate in a Direct Mint Shipment Program, and receive coins directly from the Mint. In the New York area, there also is an arrangement under which banks that need coins buy them from banks that have a surplus. To promote the arrangement, the New York Fed stands ready to match banks that have excess coins with those that need coins.

"I really think there will be a crisis the way we are going, the way we are printing money, the way we are going into inflation." Carl Icahn said Monday that U.S. markets could see major challenges over the long term in the face of excessive money supply and rising inflation. At Deutsche Bank, economists say the Fed could trim $300 billion to $400 billion off its balance sheet in the second half of 2022. It could trim another $1 trillion in 2023, which would have roughly the same effect as two hikes in short-term interest rates. El Salvador's crypto-enthusiast President Nayib Bukele weighed in on ballooning inflation in the US, reacting to a recent report detailing Federal Reserve Chairman Jerome Powell's comments on the matter. The president of El Salvador requested that the Fed stop printing money out of fear of "making things worse."
It can create new dollars out of thin air and it manages our money supply. There are several implications in all this for investors. Our government’s electoral institutions — which compel lawmakers to seek voters’ reaffirmation every few years — do incentivize a degree of short-termism.

If we employ the same strategy here and start printing money to encourage births, we will have more young people in the future. Just get China’s central bank, the People’s Bank of China, to print the money. Well, that is what America’s central bank, the Federal Reserve, does all the time to enable debt financing. That works as long as the US dollar is the dominant world reserve currency.
But if you believe the Fed’s theory of how its asset purchases work, every bond it buys adds fresh stimulus to the economy. It follows that merely tapering the pace of purchases is not tightening. The answer is that the Fed is bound by its past guidance that it would stop buying bonds before raising rates, and that it would avoid ending purchases abruptly. Abandoning that framework would lead investors to question the central bank’s trustworthiness and to expect an excessive number of additional interest-rate increases in 2022.
The FOMC faced a terrible dilemma after the crash of 2008. The central bank had kept interest rates pegged at zero in the wake of the banking crisis, but it didn’t seem to be enough to stoke strong growth. The unemployment rate was still 9.6 percent, close to the levels that characterize a deep recession.

However, since there is no productivity to back up the trillions of dollars currently in circulation, printing more money doesn’t necessarily increase the economic output , it only increases the amount of money circulating in the economy. But the fiction that the government cannot spend without raising taxes or taking on debt creates its own political hazards, especially in the deflationary environment where the developed world now lives. Democratically accountable politicians may be eager to overspend in theory; in practice, though, they’ve been erring in the opposite direction. Mainstream technocrats now widely agree that the United States and Europe provided too little fiscal stimulus in the wake of the 2008 crisis, not too much.
This will become clearer in a moment when we take a basic look at a balance sheet. To quote Jeff Snider again, “bank reserves are not money, but a legally authorized substitute to satisfy reserve requirements”. At the end of the day, reserves are used to make it appear that the Fed is printing money , and at best, they satisfy regulatory requirements. To repeat what I said earlier, reserves are NOT legal tender – they cannot be spent in the real economy, therefore they are not money. Among banks, reserves can act as money because reserves can be used to settle transactions between participating banks .

When Biden’s economic stimulus is added to the amount approved in December by former President Donald Trump, it will be equivalent to 14% of the gross domestic product , the indicator that measures the size of the economy. Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colo., Nov. 3, 2009. Terry Burnham is a former Goldman Sachs employee, money manager, biotech entrepreneur and economics professor at the Harvard Business School. He’s the author of “Mean Genes” and “Mean Markets and Lizard Brains” and now teaches finance at Chapman University. (Let me look that up.) Hmm, inflation is running at an annual rate of 1.8 percent at the moment.
From basically 1950 until 2008, that’s how the Fed influenced our supply of money. They would create a little extra money when they wanted to loosen the supply of money and then they would destroy money by basically selling assets and bringing the dollars in and then liquidating them. So the Fed would kind of gradually loosen or tighten the money supply by making these purchases on Wall Street. The Federal Reserve is the central bank of the United States and it has a super important job.
About half the System’s total personnel were engaged in fiscal agency activities. The majority of those employees were assigned to savings bond operations. The bond drives entailed considerable work by employees and officers of the reserve banks, including the bank presidents. To distribute these securities, the twelve Federal Reserve Banks organized Victory Fund committees and established plans to market war bonds in cooperation with commercial banks, businesses, and volunteers.

This means that importers, exporters, banks that are servicing them, central banks all around the world and many other market participants need to hold the U.S. dollar or liquid dollar-denominated assets. Like anyone else, they like to keep their wealth safe, and so they buy from the U.S. However many pundits believe the inflation is actually hidden in asset prices, rather than consumer prices, and that money printing has underpinned the share market rally in the midst of the pandemic.