@cohodk said:
You're chart shows it worth less than 40 years ago. But thats impossible!!
It’s buying power in terms of real dollars is lower. Not surpassingly, when inflation goes up, the price of gold goes up. Not for some magic reason, but because dollars are worth less.
Haven't we had inflation for the last 40 years?
not stable and controlled inflation. Far from the FEDs goal of 2% per year.
@cohodk said:
You're chart shows it worth less than 40 years ago. But thats impossible!!
It’s buying power in terms of real dollars is lower. Not surpassingly, when inflation goes up, the price of gold goes up. Not for some magic reason, but because dollars are worth less.
Haven't we had inflation for the last 40 years?
not stable and controlled inflation. Far from the FEDs goal of 2% per year.
Looks to have been much more volatile when on gold standard...
An easier way to visualize it is the purchasing power (value) of a U.S. dollar over time. Year over year, that value decreases because of inflation. Even a small yearly inflation rate is cumulative and erodes the value of the dollar. Gold is fairly stable, but if I buy gold at $2000 an ounce today and then sell it for $2100 an ounce in ten years, I will have lost money because the value of the dollar has decreased. Now, i will have lost less money than if I took $2000 in cash and buried it in my back yard, but i still lost money over putting that $2000 in an investment that outpaces inflation (with the accompanying risk). Fed monetary policy has successfully slowed the rate of decline. It hasn’t stopped the decline.
@cohodk said:
You're chart shows it worth less than 40 years ago. But thats impossible!!
It’s buying power in terms of real dollars is lower. Not surpassingly, when inflation goes up, the price of gold goes up. Not for some magic reason, but because dollars are worth less.
Haven't we had inflation for the last 40 years?
not stable and controlled inflation. Far from the FEDs goal of 2% per year.
Inflation is also cumulative. It doesn’t restart every year. The cumulative inflation rate over the last ten years is over 30%, for example. Something you bought for a dollar in 2013 would now cost you $1.30. That’s the reason why you can lose money on an asset like gold even though it is increasing in value. An asset has to appreciate at greater than the cumulative rate of inflation over the period that you hold it, otherwise it is losing value. Gold is a safe way to lose a little money rather than a lot of money.
@cohodk said:
You're chart shows it worth less than 40 years ago. But thats impossible!!
It’s buying power in terms of real dollars is lower. Not surpassingly, when inflation goes up, the price of gold goes up. Not for some magic reason, but because dollars are worth less.
Haven't we had inflation for the last 40 years?
not stable and controlled inflation. Far from the FEDs goal of 2% per year.
@cohodk said:
You're chart shows it worth less than 40 years ago. But thats impossible!!
It’s buying power in terms of real dollars is lower. Not surpassingly, when inflation goes up, the price of gold goes up. Not for some magic reason, but because dollars are worth less.
Haven't we had inflation for the last 40 years?
not stable and controlled inflation. Far from the FEDs goal of 2% per year.
"Stable" inflation is not necessarily a good thing.
If the average rate is relatively high (but stable), for a long period of time, purchasing power of the currency really takes a hit.
@dcarr said:
"Stable" inflation is not necessarily a good thing.
If the average rate is relatively high (but stable), for a long period of time, purchasing power of the currency really takes a hit.
Stable inflation includes income that adjusts with inflation. The secret is to beat the inflationary percentage by taking calculated risks. Some do by accumulating PM's, others with real-estate, venture capital, or like most of us, Mutual Funds. Common sense in your choice, will prevail.
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
@dcarr said:
"Stable" inflation is not necessarily a good thing.
If the average rate is relatively high (but stable), for a long period of time, purchasing power of the currency really takes a hit.
Stable inflation includes income that adjusts with inflation.
Nope. 25% inflation that is met with 25% wage increases remains unstable, high inflation. Inflation causes a demand for higher wages.
10 years of QE and the dollar and the economy are worse off.
I can make a case for $5,000 gold simply based on rising demand from India, China, and other countries whose per-capita gold consumption merely closes 1/3rd the gap with OECD nations like the U.S. or Europe.
BitCoin went up quadruple or 10-fold and things didn't fall apart.
Having a price index that doesn't move at all is not optimal for growth.
We NEED some inflation to "lubricate" the economy. It helps the financial and economic mechanisms that run the economy.
You have to be able to deal with exogeous shocks and having a floating currency AND being able to print money at times (without inflation, too !!) helps avoid the adjustment process falling solely on collapsing prices and/or wages, which tend to be sticky to the downside.
This flaw is what exaccerabated The Great Depression and even the recent EU Debt problem.
@GoldFinger1969 said:
Having a price index that doesn't move at all is not optimal for growth.
We NEED some inflation to "lubricate" the economy. It helps the financial and economic mechanisms that run the economy.
You have to be able to deal with exogeous shocks and having a floating currency AND being able to print money at times (without inflation, too !!) helps avoid the adjustment process falling solely on collapsing prices and/or wages, which tend to be sticky to the downside.
This flaw is what exaccerabated The Great Depression and even the recent EU Debt problem.
don't need inflation to lubricate the economy. Money creation from credit/loans provides more than enough grease.
The Fed claims it is independent, but it does what markets expect nearly 100% of the time over the last 2+ decades. Last time there was a surprise rate increase was when? 1994? Fed and Gov also prefer to focus on core prices (ex food and energy), except for maybe this week's meeting. Keep in mind core CPI and PCE are not going down so there is no reason for the Fed not to hike another 1/4%. They won't because they know it would rile markets, even though price increases are still occuring at a rate 150% greater than the published target of 2% positive instability. The Fed is already preparing to raise their target to 3 or 4% within a couple years.
Primarily, the banks. And then they create their own money by issuing debt out of thin air (with absolutely no reserve requirement now). Nobody else in this world gets to do that.
There's absolutely no reason to allow a banking bailout. Mismanagement should never be rewarded, but that's what we have now.
Q: Are You Printing Money? Bernanke: Not Literally
@jmski52 said:
Primarily, the banks. And then they create their own money by issuing debt out of thin air (with absolutely no reserve requirement now). Nobody else in this world gets to do that.
There's absolutely no reason to allow a banking bailout. Mismanagement should never be rewarded, but that's what we have now.
There shouldn't be bailouts for anything. I'd you smoke 3 packs a day and get cancer then why should we save you?
If you eat 4000 calories day, weigh 400 pounds and get heart disease and diabetes then why should be save you.
If ride a motorcycle without a Helmut and get brain damage then why should we help you?
If you don't study in school and end up as unhireable, then why should we help you?
If you sit in your trailer doing meth then why should we help you?
Everyone gets to make their own choices, yet we bail them all out.
@jmski52 said:
Primarily, the banks. And then they create their own money by issuing debt out of thin air (with absolutely no reserve requirement now). Nobody else in this world gets to do that.
There's absolutely no reason to allow a banking bailout. Mismanagement should never be rewarded, but that's what we have now.
There shouldn't be bailouts for anything. I'd you smoke 3 packs a day and get cancer then why should we save you?
If you eat 4000 calories day, weigh 400 pounds and get heart disease and diabetes then why should be save you.
If ride a motorcycle without a Helmut and get brain damage then why should we help you?
If you don't study in school and end up as unhireable, then why should we help you?
If you sit in your trailer doing meth then why should we help you?
Everyone gets to make their own choices, yet we bail them all out.
As a nation, we reward failure and punish success.
I can see helping individuals, lost souls as it were, but not corporations.
"Poets are the unacknowledged legislators of the world." PBShelley
@RobM said:
The Fed claims it is independent, but it does what markets expect nearly 100% of the time over the last 2+ decades.
There's a very good reason for that. It was in 1994 that the Fed began transmitting direct communicaitons of monetary policy including releasing minutes of the Fed meetings to the markets. Before that, the range of the Fed Funds Rate (or the discount rate before that) as determined by the actions of the System Open Market Operation in NY was subject to "interpretations" by the markets and Wall Street.
The Fed claims it is independent, but it does what markets expect nearly 100% of the time over the last 2+ decades. Last time there was a surprise rate increase was when? 1994? Fed and Gov also prefer to focus on core prices (ex food and energy), except for maybe this week's meeting. Keep in mind core CPI and PCE are not going down so there is no reason for the Fed not to hike another 1/4%. They won't because they know it would rile markets, even though price increases are still occuring at a rate 150% greater than the published target of 2% positive instability. The Fed is already preparing to raise their target to 3 or 4% within a couple years.
You have it backwards. The Fed communicated WHAT it would be doing to the markets WEEKS AGO and that is why the markets were positioned for no hike but a "hawkish pause" -- and the Fed obliged.
Powell was pretty insistent that 2% is going to be maintained. If it's a 2% target then 2.5-3% can be tolerated....but if the target is 3%, then 3.5-4% inflation can NOT be tolerated.
jmski52 said:
Primarily, the banks. And then they create their own money by issuing debt out of thin air (with absolutely no reserve requirement now). Nobody else in this world gets to do that. There's absolutely no reason to allow a banking bailout. Mismanagement should never be rewarded, but that's what we have now.
You don't seem to understand how banking or finance works. Or you like to read conspiratorial, pro-gold websites.
Banks don't create their own money by issuing debt out of thin air and their credit is backed by assets and/or reserve requirements. Loan to deposit ratios are STRICTLY regulated. Ditto various capital ratios, including the key Tier 1 ratio, Tangible Equity Ratio, and Risk-based Capital Ratio.
There also isn't any bank bailouts nor were there any "Wall Street bailouts" in 2008-09 because they didn't want the $$$$ or paid it back with interest.
There WAS a bailout of the Teamsters Pension Fund (CSPF)....$36,000,000,000....no media attention, no debates on TV, no front-page articles in The Times or WashPost.....nobody was fired or lost their job or took a paycut at the Teamsters, CSPF, or AFL-CIO.
@percyb said:
I can see helping individuals, lost souls as it were, but not corporations.
Really ? Hmmmmm......
Helping a corporation helps the shareholders -- they're individuals.
Helping a corporation helps the employees -- they're individuals.
Helping a corporation helps other businesses and individuals who are customers or suppliers to the troubled corporation -- they're individuals.
Helping a corporation can help prevent a systemic problem that hurts individuals. In March 2008, we orderly liquidated Bear Stearns -- mopped up in 2 weeks at minimal cost to the economy. In September 2008 we let Lehman Brothers fail -- cost us about $2 trillion in lost output and costs.
So....are you in favor of "helping" a big, bad corporation or not ?
@derryb said:
don't need inflation to lubricate the economy. Money creation from credit/loans provides more than enough > > >
grease.
An economy with 2-3% inflation can grow REAL GDP at about a 3% rate over the long haul.
The same economy with 0-1% inflation will probably only grow real GDP at about a 1-2% rate. This doesn't even take into effect the well-known "Denominator Effect" which comes into play as nominal GDP growth slows and hurts the ability to pay off debt at a previously agreed upon inflationary component. This is what negatively hurt the EU countries with the Euro for a decade of no-growth.
@dcarr said:
"Stable" inflation is not necessarily a good thing.
If the average rate is relatively high (but stable), for a long period of time, purchasing power of the currency really takes a hit.
High inflation is bad no matter what, but VOLATILE inflation or deflation is just as bad.
Businesses, consumers, banks, and the central bank can't make rational decisions in that environment.
@jmski52 said:
The prime beneficiaries of inflation are the ones who get their hands on the new money first. The banks.
Everyone else gets to scramble for the crumbs.
Maybe you can explain why banks benefit from inflation when historically they've been screwed with low-rate loans financed by high-rate "new money."
@jmski52 said:
The prime beneficiaries of inflation are the ones who get their hands on the new money first. The banks.
Everyone else gets to scramble for the crumbs.
Maybe you can explain why banks benefit from inflation when historically they've been screwed with low-rate loans financed by high-rate "new money."
Bank stocks get DECIMATED by inflation.
Care to try again ?
It isn't the inflation, so much as it is the rising interest rates that inevitably go with it.
Banks don't do so well in a rising interest rate environment when a significant potion of their loan portfolio is fixed-rate.
In an inflationary environment, banks could (for example) take their newly-created money and buy assets such as real estate. Since they could buy such assets before everyone else, they have an advantage because they can spend the money before the purchasing power is effectively diluted.
@dcarr said:
In an inflationary environment, banks could (for example) take their newly-created money and buy assets such as real estate. Since they could buy such assets before everyone else, they have an advantage because they can spend the money before the purchasing power is effectively diluted.
You think regulators are going to let banks buy real estate with their regulatory capital ? Yeah, but only if that Nigerian guy doesn't call back with the Investment Of The Decade !!
Real estate is HIGHLY VOLATILE and single-handedly killed 9 of the 10 largest Texas banks in the 1980's.
Your statement is categorically false. You just made it up or you are regurgitating what you read at some flim-flam website, Dan.
Honestly...some of you need to INVEST in a bank stocks and read the quarterly reports. Some of these comments remind me of Flat Earth types who can benefit by sailing on a boat.
There also isn't any bank bailouts nor were there any "Wall Street bailouts" in 2008-09 I'd like to know how you'd characterize it when bad debt is reclassified from "mark to market" vs. "mark to maturity". It's a bailout. And the only way to put a bandaid on it is to paper it over with more free money, courtesy of the taxpayers. The banking system is so coddled, it makes one think that they have undue influence over policy. And they do.
An accounting change may or may not benefit the banks -- but it doesn't amount to a bailout. Companies can often defer fixed payments like pension contributions and that isn't considered a "bailout."
If the banking system is so "coddled" then how come the stock performances have SUCKED for decades ??? Why are they so heavily regulated ? Why has their leverage been cut by 2/3rds since 2008 ?
An accounting change may or may not benefit the banks -- but it doesn't amount to a bailout. Companies can often defer fixed payments like pension contributions and that isn't considered a "bailout."
At the time, it was widely recognized that such a change to the "accounting rules" was contrary to Generally Accepted Accounting Principles. It is what it is, and you can't change the narrative after the fact.
If the banking system is so "coddled" then how come the stock performances have SUCKED for decades ??? Why are they so heavily regulated ? Why has their leverage been cut by 2/3rds since 2008 ?
Perhaps their bonus structure ate into their stock performance when managements awarded themselves big year end bonuses for poor performance, such as in 2008.
The revolving door between the Fed, the regulators, the large Wall Street Banks and the US Treasury gives those banks undo influence with the politicians and the regulators so they can change the rules anytime they get into trouble through poor management or illegal activities such as money laundering and market manipulation. You can't deny these things.
I don't know what leverage you're talking about. They gained even more leverage when their capital reserve requirements were eliminated, much like Congress can decide that there's no debt ceiling and like el president can decide to drop a trillion here & there on his woke projects, and war. It's all of the same insiders every time.
Q: Are You Printing Money? Bernanke: Not Literally
@dcarr said:
In an inflationary environment, banks could (for example) take their newly-created money and buy assets such as real estate. Since they could buy such assets before everyone else, they have an advantage because they can spend the money before the purchasing power is effectively diluted.
You think regulators are going to let banks buy real estate with their regulatory capital ? Yeah, but only if that Nigerian guy doesn't call back with the Investment Of The Decade !!
Real estate is HIGHLY VOLATILE and single-handedly killed 9 of the 10 largest Texas banks in the 1980's.
Your statement is categorically false. You just made it up or you are regurgitating what you read at some flim-flam website, Dan.
Honestly...some of you need to INVEST in a bank stocks and read the quarterly reports. Some of these comments remind me of Flat Earth types who can benefit by sailing on a boat.
.
From the Goldman Sachs website:
.
We are one of the world's most experienced investors in alternatives, advantaged by a robust sourcing network, the combined expertise of a leading global financial institution, and an unyielding focus on building value for our clients.
Real Estate
The breadth of our platform combines global and local expertise, cross-product insights and scale to help us navigate complex and changing markets. We have invested over $50bn in real estate assets spanning a wide spectrum of industries, across both equity and credit strategies. Our international footprint allows us to leverage extensive regional networks to source, execute and create value at both a local and global level.
The substantial resources of Goldman Sachs inform our insights and help us navigate the complexities of global trade, regulations, and public policy. We regularly synthesize this information to inform and enhance our evaluation of investment opportunities across the spectrum of real estate assets, enabling seamless recalibration and execution across strategies, regions, and sectors as markets and cycles evolve.
There also isn't any bank bailouts nor were there any "Wall Street bailouts" in 2008-09 because they didn't want the $$$$ or paid it back with interest.
Dan....Goldman Sachs is talking about investing in real estate for clients, not themselves.
Reading Comprehension 101.
No, there were no "bailouts" of Wall Street banks. They didn't need the money...OR...they used it and paid it back with interest.
Tell me when the taxpayers get paid back the $36,000,000,000 for CSPF. Notice no news on this -- also from your anti-banking websites which can't analyze a pension fund (as a CFA, I can.).
"In 2008, the federal government created the Troubled Asset Relief Program (TARP), a $700 billion government bailout designed to keep troubled banks and other companies in operation. Through the TARP, around $245 billion in taxpayer money was used to stabilize more than 700 banks."
@derryb said:
"In 2008, the federal government created the Troubled Asset Relief Program (TARP), a $700 billion government bailout designed to keep troubled banks and other companies in operation. Through the TARP, around $245 billion in taxpayer money was used to stabilize more than 700 banks."
Did the largest banks -- Wall Street banks -- NEED or WANT the money -- or where they told to take it so as not to stigmatize other banks that did (mostly smaller community banks) ?
@GoldFinger1969 said:
Dan....Goldman Sachs is talking about investing in real estate for clients, not themselves.
Reading Comprehension 101.
The web page did not indicate clients were the only source of capital.
Bloomberg reported this:
Goldman Sachs Group Inc.’s asset-management arm raised $3.5 billion for its latest fund dedicated to global real estate investments.
Known as West Street Real Estate Investment Partners, the vehicle raised capital from third-party investors alongside commitments from Goldman’s balance sheets and employees, according to a client document seen by Bloomberg. Its goal is to make core-plus or value-add bets with a specific focus on resilient sectors that have favorable long-term growth trends, as well as positive long-term supply-demand dynamics. The fund has deployed more than 50% of its capital so far, mostly on housing, logistics and office properties.
Maybe you can explain why banks benefit from inflation when historically they've been screwed with low-rate loans financed by high-rate "new money."
Bank stocks get DECIMATED by inflation.
I was looking at BAC stock and it is certainly down over the past couple years and its PE ratio is sub 10. But do you think it is down more due to inflation and higher rates, or more because of loans that either have already defaulted or are at risk of default? I would argue the latter. One reason I make that point is the huge spread on loan vs deposit rates. BAC will loan to you at as little as 6% for a new car, but will (still) pay you just 0.01% on your savings. I don't think that BAC has any CD that yields more than 4.5%.
For years, when fed rates were at or near zero, I was really stupid/lazy about looking for yield. I very recently rolled an entire jumbo savings account into a 25mo CD at 4.875% at my credit union (which is really not all that competitive). The point here is that I think millions of people with significant savings are still complacently sitting there with lots of money ($Trillions in aggregate?) parked in accounts yielding close to nothing. Minus risk of loan default, why wouldn't bank stocks shine in such an environment? For example leveraged loan defaults are reported to have tripled in 2022, and are supposed to triple again in 2023.
@derryb said:
"In 2008, the federal government created the Troubled Asset Relief Program (TARP), a $700 billion government bailout designed to keep troubled banks and other companies in operation. Through the TARP, around $245 billion in taxpayer money was used to stabilize more than 700 banks."
Did the largest banks -- Wall Street banks -- NEED or WANT the money -- or where they told to take it so as not to stigmatize other banks that did (mostly smaller community banks) ?
"Through the TARP, around $245 billion in taxpayer money was used to stabilize more than 700 banks. As part of the plan, the government bought preferred stock in troubled banks such as Bank of America, Citigroup, Goldman Sachs, J.P. Morgan, Morgan Stanley, Wells Fargo, Bank of New York Mellon and State Street Bank."
@dcarr said:
Goldman Sachs Group Inc.’s asset-management arm raised $3.5 billion for its latest fund dedicated to global real estate investments.
Last I checked, Goldman has about $200 BB in equity capital and their commitment here is probably going to be $1.5 BB equally split from their balance sheet (?) and employees.
@GoldFinger1969 said:
Dan....Goldman Sachs is talking about investing in real estate for clients, not themselves.
Reading Comprehension 101.
.
@dcarr said:
Known as West Street Real Estate Investment Partners, the vehicle raised capital from third-party investors alongside commitments from Goldman’s balance sheets and employees ...
@dcarr said:
Goldman Sachs Group Inc.’s asset-management arm raised $3.5 billion for its latest fund dedicated to global real estate investments.
Last I checked, Goldman has about $200 BB in equity capital and their commitment here is probably going to be $1.5 BB equally split from their balance sheet (?) and employees.
So ???????
.
So, You wrote that banks such as Goldman Sachs don't invest their own capital in real estate, and then accused me of having a failure in reading comprehension. But according to Bloomberg, at least one major bank (Goldman Sachs and their employees) put their own capital into real estate.
Neither you nor I know the entirety of what the bankers do. A few billion on the surface does not necessarily indicate the full extent of benefits they get from their position close to the Federal Reserve. But it is possibly an indication.
Comments
Looks pretty stable...
https://www.macrotrends.net/countries/USA/united-states/inflation-rate-cpi
Knowledge is the enemy of fear
Looks to have been much more volatile when on gold standard...
https://tradingeconomics.com/united-states/inflation-cpi
Knowledge is the enemy of fear
Economic headlines the mainstream media are hiding from you.
An easier way to visualize it is the purchasing power (value) of a U.S. dollar over time. Year over year, that value decreases because of inflation. Even a small yearly inflation rate is cumulative and erodes the value of the dollar. Gold is fairly stable, but if I buy gold at $2000 an ounce today and then sell it for $2100 an ounce in ten years, I will have lost money because the value of the dollar has decreased. Now, i will have lost less money than if I took $2000 in cash and buried it in my back yard, but i still lost money over putting that $2000 in an investment that outpaces inflation (with the accompanying risk). Fed monetary policy has successfully slowed the rate of decline. It hasn’t stopped the decline.
-
Sure, it looks a little stable, if you don't show 2022. LOL Talk about cherry-picking data to try to prove your bias.
Here is a 25-year graph. Obviously the last 2 years are not "stable".
National Commemorative Medals of the U.S. Mint:
https://www.pcgs.com/setregistry/u-s-coins/medals-tokens/national-commemorative-medals-united-states-mint-1940-present/alltimeset/195526
Inflation is also cumulative. It doesn’t restart every year. The cumulative inflation rate over the last ten years is over 30%, for example. Something you bought for a dollar in 2013 would now cost you $1.30. That’s the reason why you can lose money on an asset like gold even though it is increasing in value. An asset has to appreciate at greater than the cumulative rate of inflation over the period that you hold it, otherwise it is losing value. Gold is a safe way to lose a little money rather than a lot of money.
So picking 2 years out of 25 isn't cherrypicking? Talk about showing bias. LmAO!!!
Knowledge is the enemy of fear
And derryb is even worse since he only picked one year out of 50.
Weak!!
Knowledge is the enemy of fear
"Stable" inflation is not necessarily a good thing.
If the average rate is relatively high (but stable), for a long period of time, purchasing power of the currency really takes a hit.
Stable inflation includes income that adjusts with inflation. The secret is to beat the inflationary percentage by taking calculated risks. Some do by accumulating PM's, others with real-estate, venture capital, or like most of us, Mutual Funds. Common sense in your choice, will prevail.
Nope. 25% inflation that is met with 25% wage increases remains unstable, high inflation. Inflation causes a demand for higher wages.
while inflation is at two year low, it has outpaced wages for 26 straight months.
Economic headlines the mainstream media are hiding from you.
I can make a case for $5,000 gold simply based on rising demand from India, China, and other countries whose per-capita gold consumption merely closes 1/3rd the gap with OECD nations like the U.S. or Europe.
BitCoin went up quadruple or 10-fold and things didn't fall apart.
Having a price index that doesn't move at all is not optimal for growth.
We NEED some inflation to "lubricate" the economy. It helps the financial and economic mechanisms that run the economy.
You have to be able to deal with exogeous shocks and having a floating currency AND being able to print money at times (without inflation, too !!) helps avoid the adjustment process falling solely on collapsing prices and/or wages, which tend to be sticky to the downside.
This flaw is what exaccerabated The Great Depression and even the recent EU Debt problem.
don't need inflation to lubricate the economy. Money creation from credit/loans provides more than enough grease.
Economic headlines the mainstream media are hiding from you.
The Fed claims it is independent, but it does what markets expect nearly 100% of the time over the last 2+ decades. Last time there was a surprise rate increase was when? 1994? Fed and Gov also prefer to focus on core prices (ex food and energy), except for maybe this week's meeting. Keep in mind core CPI and PCE are not going down so there is no reason for the Fed not to hike another 1/4%. They won't because they know it would rile markets, even though price increases are still occuring at a rate 150% greater than the published target of 2% positive instability. The Fed is already preparing to raise their target to 3 or 4% within a couple years.
The prime beneficiaries of inflation are the ones who get their hands on the new money first. The banks.
Everyone else gets to scramble for the crumbs.
I knew it would happen.
>
....took on low interest debt to acquire productive assets.
Knowledge is the enemy of fear
Primarily, the banks. And then they create their own money by issuing debt out of thin air (with absolutely no reserve requirement now). Nobody else in this world gets to do that.
There's absolutely no reason to allow a banking bailout. Mismanagement should never be rewarded, but that's what we have now.
I knew it would happen.
There shouldn't be bailouts for anything. I'd you smoke 3 packs a day and get cancer then why should we save you?
If you eat 4000 calories day, weigh 400 pounds and get heart disease and diabetes then why should be save you.
If ride a motorcycle without a Helmut and get brain damage then why should we help you?
If you don't study in school and end up as unhireable, then why should we help you?
If you sit in your trailer doing meth then why should we help you?
Everyone gets to make their own choices, yet we bail them all out.
Knowledge is the enemy of fear
As a nation, we reward failure and punish success.
I can see helping individuals, lost souls as it were, but not corporations.
Damn, for one of the very first moments in time, I agree with you coho.
I knew it would happen.
.
You should take out a 2nd mortgage and buy Meta stock
.
You're late to the party again.
Knowledge is the enemy of fear
And then what will have we have become?
Knowledge is the enemy of fear
.
Damn...There is hope for you yet.
There's a very good reason for that. It was in 1994 that the Fed began transmitting direct communicaitons of monetary policy including releasing minutes of the Fed meetings to the markets. Before that, the range of the Fed Funds Rate (or the discount rate before that) as determined by the actions of the System Open Market Operation in NY was subject to "interpretations" by the markets and Wall Street.
You have it backwards. The Fed communicated WHAT it would be doing to the markets WEEKS AGO and that is why the markets were positioned for no hike but a "hawkish pause" -- and the Fed obliged.
Powell was pretty insistent that 2% is going to be maintained. If it's a 2% target then 2.5-3% can be tolerated....but if the target is 3%, then 3.5-4% inflation can NOT be tolerated.
You don't seem to understand how banking or finance works. Or you like to read conspiratorial, pro-gold websites.
Banks don't create their own money by issuing debt out of thin air and their credit is backed by assets and/or reserve requirements. Loan to deposit ratios are STRICTLY regulated. Ditto various capital ratios, including the key Tier 1 ratio, Tangible Equity Ratio, and Risk-based Capital Ratio.
There also isn't any bank bailouts nor were there any "Wall Street bailouts" in 2008-09 because they didn't want the $$$$ or paid it back with interest.
There WAS a bailout of the Teamsters Pension Fund (CSPF)....$36,000,000,000....no media attention, no debates on TV, no front-page articles in The Times or WashPost.....nobody was fired or lost their job or took a paycut at the Teamsters, CSPF, or AFL-CIO.
I'll bet none of you heard about it, either.
Really ? Hmmmmm......
Helping a corporation helps the shareholders -- they're individuals.
Helping a corporation helps the employees -- they're individuals.
Helping a corporation helps other businesses and individuals who are customers or suppliers to the troubled corporation -- they're individuals.
Helping a corporation can help prevent a systemic problem that hurts individuals. In March 2008, we orderly liquidated Bear Stearns -- mopped up in 2 weeks at minimal cost to the economy. In September 2008 we let Lehman Brothers fail -- cost us about $2 trillion in lost output and costs.
So....are you in favor of "helping" a big, bad corporation or not ?
Like most Americans prior to 1970.....
Or any home buyers from 2020-22.
An economy with 2-3% inflation can grow REAL GDP at about a 3% rate over the long haul.
The same economy with 0-1% inflation will probably only grow real GDP at about a 1-2% rate. This doesn't even take into effect the well-known "Denominator Effect" which comes into play as nominal GDP growth slows and hurts the ability to pay off debt at a previously agreed upon inflationary component. This is what negatively hurt the EU countries with the Euro for a decade of no-growth.
High inflation is bad no matter what, but VOLATILE inflation or deflation is just as bad.
Businesses, consumers, banks, and the central bank can't make rational decisions in that environment.
Maybe you can explain why banks benefit from inflation when historically they've been screwed with low-rate loans financed by high-rate "new money."
Bank stocks get DECIMATED by inflation.
Care to try again ?
It isn't the inflation, so much as it is the rising interest rates that inevitably go with it.
Banks don't do so well in a rising interest rate environment when a significant potion of their loan portfolio is fixed-rate.
In an inflationary environment, banks could (for example) take their newly-created money and buy assets such as real estate. Since they could buy such assets before everyone else, they have an advantage because they can spend the money before the purchasing power is effectively diluted.
There also isn't any bank bailouts nor were there any "Wall Street bailouts" in 2008-09
I'd like to know how you'd characterize it when bad debt is reclassified from "mark to market" vs. "mark to maturity".
It's a bailout. And the only way to put a bandaid on it is to paper it over with more free money, courtesy of the taxpayers.
The banking system is so coddled, it makes one think that they have undue influence over policy.
And they do.
I knew it would happen.
You think regulators are going to let banks buy real estate with their regulatory capital ? Yeah, but only if that Nigerian guy doesn't call back with the Investment Of The Decade !!
Real estate is HIGHLY VOLATILE and single-handedly killed 9 of the 10 largest Texas banks in the 1980's.
Your statement is categorically false. You just made it up or you are regurgitating what you read at some flim-flam website, Dan.
Honestly...some of you need to INVEST in a bank stocks and read the quarterly reports. Some of these comments remind me of Flat Earth types who can benefit by sailing on a boat.
@jmski52 said:
An accounting change may or may not benefit the banks -- but it doesn't amount to a bailout. Companies can often defer fixed payments like pension contributions and that isn't considered a "bailout."
If the banking system is so "coddled" then how come the stock performances have SUCKED for decades ??? Why are they so heavily regulated ? Why has their leverage been cut by 2/3rds since 2008 ?
An accounting change may or may not benefit the banks -- but it doesn't amount to a bailout. Companies can often defer fixed payments like pension contributions and that isn't considered a "bailout."
At the time, it was widely recognized that such a change to the "accounting rules" was contrary to Generally Accepted Accounting Principles. It is what it is, and you can't change the narrative after the fact.
If the banking system is so "coddled" then how come the stock performances have SUCKED for decades ??? Why are they so heavily regulated ? Why has their leverage been cut by 2/3rds since 2008 ?
Perhaps their bonus structure ate into their stock performance when managements awarded themselves big year end bonuses for poor performance, such as in 2008.
The revolving door between the Fed, the regulators, the large Wall Street Banks and the US Treasury gives those banks undo influence with the politicians and the regulators so they can change the rules anytime they get into trouble through poor management or illegal activities such as money laundering and market manipulation. You can't deny these things.
I don't know what leverage you're talking about. They gained even more leverage when their capital reserve requirements were eliminated, much like Congress can decide that there's no debt ceiling and like el president can decide to drop a trillion here & there on his woke projects, and war. It's all of the same insiders every time.
I knew it would happen.
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From the Goldman Sachs website:
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No Bank Bailouts? lol
Economic headlines the mainstream media are hiding from you.
Dan....Goldman Sachs is talking about investing in real estate for clients, not themselves.
Reading Comprehension 101.
No, there were no "bailouts" of Wall Street banks. They didn't need the money...OR...they used it and paid it back with interest.
Tell me when the taxpayers get paid back the $36,000,000,000 for CSPF. Notice no news on this -- also from your anti-banking websites which can't analyze a pension fund (as a CFA, I can.).
Troubled Asset Relief Program (TARP)
"In 2008, the federal government created the Troubled Asset Relief Program (TARP), a $700 billion government bailout designed to keep troubled banks and other companies in operation. Through the TARP, around $245 billion in taxpayer money was used to stabilize more than 700 banks."
Economic headlines the mainstream media are hiding from you.
Did the largest banks -- Wall Street banks -- NEED or WANT the money -- or where they told to take it so as not to stigmatize other banks that did (mostly smaller community banks) ?
The web page did not indicate clients were the only source of capital.
Bloomberg reported this:
Goldman Sachs Group Inc.’s asset-management arm raised $3.5 billion for its latest fund dedicated to global real estate investments.
Known as West Street Real Estate Investment Partners, the vehicle raised capital from third-party investors alongside commitments from Goldman’s balance sheets and employees, according to a client document seen by Bloomberg. Its goal is to make core-plus or value-add bets with a specific focus on resilient sectors that have favorable long-term growth trends, as well as positive long-term supply-demand dynamics. The fund has deployed more than 50% of its capital so far, mostly on housing, logistics and office properties.
I was looking at BAC stock and it is certainly down over the past couple years and its PE ratio is sub 10. But do you think it is down more due to inflation and higher rates, or more because of loans that either have already defaulted or are at risk of default? I would argue the latter. One reason I make that point is the huge spread on loan vs deposit rates. BAC will loan to you at as little as 6% for a new car, but will (still) pay you just 0.01% on your savings. I don't think that BAC has any CD that yields more than 4.5%.
For years, when fed rates were at or near zero, I was really stupid/lazy about looking for yield. I very recently rolled an entire jumbo savings account into a 25mo CD at 4.875% at my credit union (which is really not all that competitive). The point here is that I think millions of people with significant savings are still complacently sitting there with lots of money ($Trillions in aggregate?) parked in accounts yielding close to nothing. Minus risk of loan default, why wouldn't bank stocks shine in such an environment? For example leveraged loan defaults are reported to have tripled in 2022, and are supposed to triple again in 2023.
From the same link:
"Through the TARP, around $245 billion in taxpayer money was used to stabilize more than 700 banks. As part of the plan, the government bought preferred stock in troubled banks such as Bank of America, Citigroup, Goldman Sachs, J.P. Morgan, Morgan Stanley, Wells Fargo, Bank of New York Mellon and State Street Bank."
What other Wall Street Banks are there? LOL
Economic headlines the mainstream media are hiding from you.
The LOSSES were from TARP giveaways to smaller community banks favored by politicians.
The Wall Street and larger banks didn't need the $$$ that the pols railed against.
Game over, Dan.
Last I checked, Goldman has about $200 BB in equity capital and their commitment here is probably going to be $1.5 BB equally split from their balance sheet (?) and employees.
So ???????
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Who are you directing this comment towards ?
@derryb made the comment you quoted. But then you referenced "Dan" ?
PS:
It seems not cool to refer to a person on the forums by their first name when that person does not know who you are or what your real name is.
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So,
You wrote that banks such as Goldman Sachs don't invest their own capital in real estate, and then accused me of having a failure in reading comprehension. But according to Bloomberg, at least one major bank (Goldman Sachs and their employees) put their own capital into real estate.
Neither you nor I know the entirety of what the bankers do. A few billion on the surface does not necessarily indicate the full extent of benefits they get from their position close to the Federal Reserve. But it is possibly an indication.
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And then there's all those non-US banks bailed out by the FED.
US Fed lent $3.3tn to multinationals, billionaires and foreign banks
The Federal Reserve’s Covert Bailout of Europe
The Fed's $16 Trillion Bailouts Under-Reported
Economic headlines the mainstream media are hiding from you.