Recession predictions

KyussB wrote: »

What I quoted says the exact opposite of that. Here is another quote from the same BoE document:
... Saving does not by itself increase the deposits or ‘funds available’ for banks to lend. Indeed, viewing banks simply as intermediaries ignores the fact that, in reality in the modern economy, commercial banks are the creators of deposit money. This article explains how, rather than banks lending out deposits that are placed with them, the act of lending creates deposits — the reverse of the sequence typically described in textbooks.
...
That is the exact opposite of what you're claiming.

You do understand the difference between a central bank guaranteeing reserve requirements, and how that is not the same as bailing out a bank, right?

If a bank fails to shore up reserves on the interbank market the central bank will never refuse to shore that up - and I don't know why you are mixing that up with a bank collapse, because that is a different thing altogether - capital requirements, MREL etc. have nothing to do with shoring up reserves on the interbank market.

Explain what you mean my shoring up reserves on the interbank market.

I am interested as the 99% of all interbank transactions are Repo's these days the days of banks lending each other money with no collateral disappeared after 08. The central bank has very little to do with such transactions.

The reason I mentioned MREL etc is because you said that central banks won't let banks fail.... which is not true.

Timing belt wrote: »

What you have just quoted confirms that a bank lends based on it's customer deposits. A bank first decides how much to lend based on profitability, lending opportunities and risk appetite. The bank will then offer a better deposit rate to attract deposits to fund this lending (Assuming it is not availing of TILRO or some other source of funding) This is why Irish banks source of funding is 80%+ customer deposits.

As for a central bank never refusing to shore up a banks reserves this is also false. Unless the bank is a G-SIB the central bank will let the bank fail and this is why they have issued banking resolution regulations which require banks to have process in place for such and event and require them to issue MREL which in the event of resolution will recapitalise the bank to allow to be wound down in an orderly fashion.

The only banks that central banks would not allow fail are G-SIB's and because of this these banks have stricter reg requirements than other banks.

https://youtu.be/f3erJNklEEI

What I quoted says the exact opposite of that. Here is another quote from the same BoE document:

... Saving does not by itself increase the deposits or ‘funds available’ for banks to lend. Indeed, viewing banks simply as intermediaries ignores the fact that, in reality in the modern economy, commercial banks are the creators of deposit money. This article explains how, rather than banks lending out deposits that are placed with them, the act of lending creates deposits — the reverse of the sequence typically described in textbooks.
...

That is the exact opposite of what you're claiming.

You do understand the difference between a central bank guaranteeing reserve requirements, and how that is not the same as bailing out a bank, right?

If a bank fails to shore up reserves on the interbank market the central bank will never refuse to shore that up - and I don't know why you are mixing that up with a bank collapse, because that is a different thing altogether - capital requirements, MREL etc. have nothing to do with shoring up reserves on the interbank market.

[Deleted User]

I stopped believe media and experts since 2008 mess started and finally I started understand that those who own media are in close connection with politicians
And started think about who pay wages to experts
Every time when I see talks about inflation I understand that government using media try to make people spend money and move economy forward
Buy car and save your money because inflation coming ! Your money will worth nothing because inflation on way.Spend spend spend !
But when all people will spend they will create inflation !
Safe your saving buying shares on stock market because this is only the way safe them of inflation ! Simply advertising of those who sell shares on top to those who does not understand.I very well know how banks try sell "products" to savings holder in bank
The recession is on way and I see many movements of those who try get cash of people to use them cash when markets will collapse.
The thing is they selling overpriced rubish to people telling them that inflation will eat people savings if they will not buy it
The other thing property market.Now everybody says buy buy buy same as in 2007
By media activity I see we will have recession very soon

Jizique

KyussB wrote: »

Taxes are needed to ground demand for a currency, to make it the dominant currency - e.g. if you have currency Punt and Euro both, but the government demands you pay taxes in Euro's - then having to pay taxes in Euro's, ensures demand for that currency, and ensures its dominance over the Punt.

However, you're right though: Why have income taxes? Are they really needed to ground demand for the Euro? Some economists would see Land Value Taxes used to ground demand for the currency - and would place both Income and Corporate taxes at 0%.

This would work for the UK or the US, because the state in those countries controls its own currency. Ireland as a state, doesn't control its own currency though - due to the Euro - so we wouldn't be able to go this far, in implementing the above. A state having control over its own currency is required, to do it.

However, income/wealth inequality - if allowed to grow to extremes - can threaten democracy, and income tax plays a role in dampening that somewhat - so a separate tax (e.g. a maximum wage, possibly) may be needed to replace that role.

So no taxes for certain corporates and endless subsidies for certain industries (hello housing, EV) do not threaten democracy?

KyussB wrote: »

No it's no theoretical, it's how banking operations work:
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
https://www.bundesbank.de/en/tasks/topics/how-money-is-created-667392

Banks don't lend out from deposits, they create money when they make loans. Banks are constrained in their lending by capital requirements.

Reserve requirements exist (in some countries they don't), but because banks give out loans first and fix up their reserves later, and the central bank is guaranteed to help banks shore up their reserves - that means reserve requirements don't actually constrain lending, they only create a small penalty to profits from loans when the central bank has to shore up reserves - and so the whole idea of there being a fractional reserve 'money multiplier' is false.

As long as banks can expand capital, staying within capital requirements, they can expand loans as needed - creating money in the process.

KyussB wrote: »

Incorrect, banks make loans first and then shore up reserves afterwards - and the first link there from the BoE states this:
...
In reality, neither are reserves a binding constraint on lending, nor does the central bank fix the amount of reserves that are available. As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks.

Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England.
...

A central bank will never refuse to shore up a banks reserves. That implicitly would mean collapsing the banking system - which is the opposite of the central banks mandate.

What you have just quoted confirms that a bank lends based on it's customer deposits. A bank first decides how much to lend based on profitability, lending opportunities and risk appetite. The bank will then offer a better deposit rate to attract deposits to fund this lending (Assuming it is not availing of TILRO or some other source of funding) This is why Irish banks source of funding is 80%+ customer deposits.

As for a central bank never refusing to shore up a banks reserves this is also false. Unless the bank is a G-SIB the central bank will let the bank fail and this is why they have issued banking resolution regulations which require banks to have process in place for such and event and require them to issue MREL which in the event of resolution will recapitalise the bank to allow to be wound down in an orderly fashion.

The only banks that central banks would not allow fail are G-SIB's and because of this these banks have stricter reg requirements than other banks.

https://youtu.be/f3erJNklEEI

Incorrect, banks make loans first and then shore up reserves afterwards - and the first link there from the BoE states this:

...
In reality, neither are reserves a binding constraint on lending, nor does the central bank fix the amount of reserves that are available. As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks.

Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England.
...

A central bank will never refuse to shore up a banks reserves. That implicitly would mean collapsing the banking system - which is the opposite of the central banks mandate.

KyussB wrote: »

No it's no theoretical, it's how banking operations work:
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
https://www.bundesbank.de/en/tasks/topics/how-money-is-created-667392

Banks don't lend out from deposits, they create money when they make loans. Banks are constrained in their lending by capital requirements.

Reserve requirements exist (in some countries they don't), but because banks give out loans first and fix up their reserves later, and the central bank is guaranteed to help banks shore up their reserves - that means reserve requirements don't actually constrain lending, they only create a small penalty to profits from loans when the central bank has to shore up reserves - and so the whole idea of there being a fractional reserve 'money multiplier' is false.

As long as banks can expand capital, staying within capital requirements, they can expand loans as needed - creating money in the process.

Banks are constraint by capital requirements, liquidity requirements, risk appetite. At the moment banks are awash with cash and have capital to lend but they are unable to find sufficient customers with their risk appetite to lend to.

You are incorrect when you say a bank can give out loans first and fix up their reserves later. If what you were saying was correct then the banking crash in 08 would never have happened as central banks would have just provided the liquidity to the banks with no need for any collateral.

There would have been no need for the bank of England to introduce the DWF or for the ECB to introduce there equivalent.
There would be no need for central banks to have operating standing facilities for the event that a bank brings its reserve account overdrawn.
There would be no need for banks to have contingent liquidity pools with the central banks for instances where reserve accounts are brought overdrawn due to payments flowing through a clearing bank.

Even with Central banks stepping in following the 08 crash they still charge one rate for a Deposit and another for lending..... As part of there Operating standing facilities they provide a deposit facility rate (ECB rate -50bps) and a marginal lending rate (ECB Rate +25Bps). The cost to bank of being short as opposed to long on there reserve account is 0.75% which in todays terms is a significant cost.

So no bank lends first and then fix up there reserves afterwards. If bank has to use the marginal lending facility to often the central bank will demand a meeting with the bank to see what they are doing to rectify the situation.

Banks are also constraint with the amount of lending they can undertake by the leverage ratio and NSFR These requirements were introduced to prevent a crash like in 08 when banks were issuing loans without having stable funding to support them so it's not as simple as a bank just needs to lend more to create more cash.

Taxes are needed to ground demand for a currency, to make it the dominant currency - e.g. if you have currency Punt and Euro both, but the government demands you pay taxes in Euro's - then having to pay taxes in Euro's, ensures demand for that currency, and ensures its dominance over the Punt.

However, you're right though: Why have income taxes? Are they really needed to ground demand for the Euro? Some economists would see Land Value Taxes used to ground demand for the currency - and would place both Income and Corporate taxes at 0%.

This would work for the UK or the US, because the state in those countries controls its own currency. Ireland as a state, doesn't control its own currency though - due to the Euro - so we wouldn't be able to go this far, in implementing the above. A state having control over its own currency is required, to do it.

However, income/wealth inequality - if allowed to grow to extremes - can threaten democracy, and income tax plays a role in dampening that somewhat - so a separate tax (e.g. a maximum wage, possibly) may be needed to replace that role.

Jizique

KyussB wrote: »

Do you think the central bank digs money up from deep in the ground, like gold nuggets or something?

Yes, the central bank is effectively a 'money tree' - did you not know this? Regular banks also are 'money trees' - creating money when they give out loans (it is not loaned out from deposits).

Money scarcity is always artificial with a fiat currency. Money should be made artificially scarce when the economy is at Full Output, to prevent excessive inflation - all that means is the limit to government spending is not money or an arbitrary government fiscal/debt balance - the limit to spending is Full Output and associated inflation.

Rolling over the stock of government debt forever, letting GDP growth erode it away, is how all countries on earth have worked for centuries, it is normal.

The reason it sounds scary to you, is because you are talking about government finances as if they work like personal finances, when they work nothing like personal finances.

We put a burden on our grandchildren by not spending using negative-interest debt today, to build infrastructure and to boost the private sector by giving generous social supports - because not doing that leaves GDP, the size of the overall economy, smaller than it would have been - meaning our kids inherit a smaller economy, with less material wealth in terms of infrastructure and privately as well.

Don't treat government finances like they are the same as personal finances - they are nothing alike.

Why pay taxes then? If we can just print it and roll it over, why not let workers keep their earnings? That would allow companies to reduce their cost base, as I would be happy with a lower salary if no taxes.
I mean govts have decided that some of the largest companies like Amazon, Apple, FB should not pay tax, so why not pass that on to the worker as well.
We will have faster economic growth and we can just roll it over, simples

The DayDream

jay0109 wrote: »

No, lets keep borrowing and pass the debts on to our grandkids. Great legacy.

Prior to Feb 2020 and the Covid impact, there were plenty of jobs and not enough people to fill them. What was the excuse then?

That's simply not true and the only people who think that are the ones who haven't had to jobseek in years or who live in Dublin.

I'm in the Northwest, which IMO never properly recovered from 06-08 recession. I finished college as a mature student in 2011. I had a lot of experience in different areas on my CV from before college. Then I got a degree. Should be easy to find work, right?

Other than a 1 year temp contractor job in a factory in 2013 and a 'jobbridge' internship in 2014 I was unemployed all the up until 2020. I was on 'Jobpath' too and it was full of employable people being forced to come into these meetings.

Somehow I got lucky and got a job in the middle of the pandemic in an 'essential' industry. Trust me no one wants to be on the dole. cutting it off the back of covid will compound the problems we're gonna have. It doesn't help anyone get off the dole by cutting it, it just makes them go from poor to destitute.

No it's no theoretical, it's how banking operations work:
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
https://www.bundesbank.de/en/tasks/topics/how-money-is-created-667392

Banks don't lend out from deposits, they create money when they make loans. Banks are constrained in their lending by capital requirements.

Reserve requirements exist (in some countries they don't), but because banks give out loans first and fix up their reserves later, and the central bank is guaranteed to help banks shore up their reserves - that means reserve requirements don't actually constrain lending, they only create a small penalty to profits from loans when the central bank has to shore up reserves - and so the whole idea of there being a fractional reserve 'money multiplier' is false.

As long as banks can expand capital, staying within capital requirements, they can expand loans as needed - creating money in the process.

KyussB wrote: »

Do you think the central bank digs money up from deep in the ground, like gold nuggets or something?

Yes, the central bank is effectively a 'money tree' - did you not know this? Regular banks also are 'money trees' - creating money when they give out loans (it is not loaned out from deposits).

Money scarcity is always artificial with a fiat currency. Money should be made artificially scarce when the economy is at Full Output, to prevent excessive inflation - all that means is the limit to government spending is not money or an arbitrary government fiscal/debt balance - the limit to spending is Full Output and associated inflation.

Rolling over the stock of government debt forever, letting GDP growth erode it away, is how all countries on earth have worked for centuries, it is normal.

The reason it sounds scary to you, is because you are talking about government finances as if they work like personal finances, when they work nothing like personal finances.

We put a burden on our grandchildren by not spending using negative-interest debt today, to build infrastructure and to boost the private sector by giving generous social supports - because not doing that leaves GDP, the size of the overall economy, smaller than it would have been - meaning our kids inherit a smaller economy, with less material wealth in terms of infrastructure and privately as well.

Don't treat government finances like they are the same as personal finances - they are nothing alike.

So where do regular banks get money to lend out? Are you just talking theoretically because Last time I looked at the Irish banks customer deposits accounted for 80%+ of their funding.

jay0109 wrote: »

aka The Money Tree

Borrowing to spend on infrastructure, yes a case can be made for that.

Borrowing to pay increased welfare payments is never good financial management in my book. Especially when you have a world record debt and talking about it 'just rolling over so it doesn't really matter' is crazy stuff. It's passing an horrendous legacy to those that come after us

Do you think the central bank digs money up from deep in the ground, like gold nuggets or something?

Yes, the central bank is effectively a 'money tree' - did you not know this? Regular banks also are 'money trees' - creating money when they give out loans (it is not loaned out from deposits).

Money scarcity is always artificial with a fiat currency. Money should be made artificially scarce when the economy is at Full Output, to prevent excessive inflation - all that means is the limit to government spending is not money or an arbitrary government fiscal/debt balance - the limit to spending is Full Output and associated inflation.

Rolling over the stock of government debt forever, letting GDP growth erode it away, is how all countries on earth have worked for centuries, it is normal.

The reason it sounds scary to you, is because you are talking about government finances as if they work like personal finances, when they work nothing like personal finances.

We put a burden on our grandchildren by not spending using negative-interest debt today, to build infrastructure and to boost the private sector by giving generous social supports - because not doing that leaves GDP, the size of the overall economy, smaller than it would have been - meaning our kids inherit a smaller economy, with less material wealth in terms of infrastructure and privately as well.

Don't treat government finances like they are the same as personal finances - they are nothing alike.

Wanderer78

jay0109 wrote: »

aka The Money Tree

Borrowing to spend on infrastructure, yes a case can be made for that.

Borrowing to pay increased welfare payments is never good financial management in my book. Especially when you have a world record debt and talking about it 'just rolling over so it doesn't really matter' is crazy stuff. It's passing an horrendous legacy to those that come after us

you are correct about passing debts onto younger generations, but wrong about which debts, the far more dangerous being private debts, which is primarily in assets such as property and land. we have become over reliant on the magical money trees from private sector financial institutions, ie. credit, which is causing the majority of our debt problems. rolling over public debt is common practice globally, and doesnt cause as much problems as private debt, just as long as these debts are serviced and serviceable, theres no significant problems from doing so

KyussB wrote: »

We don't use gold standard era countercyclical policies, where there is a real scarcity of money. With a fiat currency, money scarcity is only ever artificial.

aka The Money Tree

Borrowing to spend on infrastructure, yes a case can be made for that.

Borrowing to pay increased welfare payments is never good financial management in my book. Especially when you have a world record debt and talking about it 'just rolling over so it doesn't really matter' is crazy stuff. It's passing an horrendous legacy to those that come after us

AlmightyCushion wrote: »

Counter-cyclical spending also involves increasing taxes and decreasing spending during boom times to pay down debt and build up reserves that can be used to ramp up spending when the economy isn't doing so well.

We didn't do the former so doing the latter gets more difficult especially when we have things fiscal compact. I hope the fiscal compact gets altered after covid to allow governments to invest in public transport, housing and green infrastructure as a means of boosing the EU economy but we can't guarantee that.

It involves reducing spending and increasing taxes during boom times to dampen overheating sectors of the economy, to keep inflation down - it doesn't involve paying down debt - countries almost never pay down the stock of debt (worldwide a surplus is incredibly rare, and usually shortly followed by economic trouble), they grow the GDP portion of Public Debt vs GDP instead.

It doesn't involve saving money in boom times, because that makes no sense with fiat currencies - economically, central banks have to accommodate spending in downturns.

We don't use gold standard era countercyclical policies, where there is a real scarcity of money. With a fiat currency, money scarcity is only ever artificial.

jay0109 wrote: »

No, lets keep borrowing and pass the debts on to our grandkids. Great legacy.

Prior to Feb 2020 and the Covid impact, there were plenty of jobs and not enough people to fill them. What was the excuse then?

Government finances don't work like personal finances. Governments routinely do roll debts over forever (something a person cannot do) - letting economic growth erode Public Debt vs GDP - and that is almost exclusively the normal way things are run, across the whole planet.

Neither the raw Public Debt figure is what matters, nor the Public Debt vs GDP figure - what matters is the overall servicing cost of the debt.

Right now interest rates are negative, and are set to remain that way for most of the decade (as central banks operate a policy of not raising rates until economic recovery causes inflation to hit targets) - this means that taking on more debt reduces the servicing cost of debt - making the overall debt less costly.

You claim to be worried about the cost of Public Debt, but you are arguing for making it more costly than it needs to be (by not taking on more negative interest debt), and you are arguing for holding back GDP growth from borrowing+spending, which again makes debt servicing more costly by reducing the rate of growth of Revenue/Tax intake (which would grow in line with GDP).

So you are claiming to be arguing for prudent government finances, but you are literally arguing for the exact opposite of that.

AlmightyCushion

KyussB wrote: »

Yes they're right, it's called counter-cyclical spending - it's been mainstream economics for about a century - you won't find a single credible economist opposing counter-cyclical policy as a concept.

'Magic money tree' economic thinking is expecting dole recipients to find the money to pay their rents and bills when there aren't enough jobs, and the dole doesn't cover the bills - or is cut.

Since there aren't enough jobs, and you want dole cut, are people supposed to find a 'magic money tree' so they don't starve or become homeless?

Counter-cyclical spending also involves increasing taxes and decreasing spending during boom times to pay down debt and build up reserves that can be used to ramp up spending when the economy isn't doing so well.

We didn't do the former so doing the latter gets more difficult especially when we have things fiscal compact. I hope the fiscal compact gets altered after covid to allow governments to invest in public transport, housing and green infrastructure as a means of boosing the EU economy but we can't guarantee that.

No, lets keep borrowing and pass the debts on to our grandkids. Great legacy.

Prior to Feb 2020 and the Covid impact, there were plenty of jobs and not enough people to fill them. What was the excuse then?

Yes they're right, it's called counter-cyclical spending - it's been mainstream economics for about a century - you won't find a single credible economist opposing counter-cyclical policy as a concept.

'Magic money tree' economic thinking is expecting dole recipients to find the money to pay their rents and bills when there aren't enough jobs, and the dole doesn't cover the bills - or is cut.

Since there aren't enough jobs, and you want dole cut, are people supposed to find a 'magic money tree' so they don't starve or become homeless?

Wanderer78 wrote: »

We need to look at this, more money in people's hands, will more than likely mean more money in circulation, increasing the velocity of the supply

Sounds like a plan then!

Joan Burton played that tune a few years ago...increase the dole and sure they spend it all every week anyways, so it benefits the economy and pays for itself!
I heard one of the Soc Dem's come out with the same line on the radio a few weeks ago.

The magic money tree school of economic thought

Wanderer78

NIMAN wrote:

So where do you think it should be set?

We need to look at this, more money in people's hands, will more than likely mean more money in circulation, increasing the velocity of the supply

NIMAN wrote:

Above 350 per week? If you do that, it will only mean the wages will have to rise to make it worthwhile to go out to work.

Sounds like a plan then!

NIMAN

Wanderer78 wrote: »

.... it's virtually impossible to live off the standard of 200 a week, even 350 must have been difficult for some.

So where do you think it should be set?

Above 350 per week? If you do that, it will only mean the wages will have to rise to make it worthwhile to go out to work.

Wanderer78

jay0109 wrote:

No we don't as that then puts pressure on housing and other services. And is causing an upheaval in society as will be seen in politics for example over the next number of years.

jay0109 wrote:

We need to get Irish people out working by reforming the welfare system and stop with this ponzi scheme of constantly importing the next batch of cheap labour from a different part of the world every 10 years.

The free movement of capital is causing far more problems than free movement of people, this capital is helping to push up property prices, and leading to a slow monopolisation of our markets, locking out many. Again we need these immigrants, to maintain our economy.

What do you mean by reforming our welfare system? It definitely needs to be looked at post covid, as we ve seen, it's virtually impossible to live off the standard of 200 a week, even 350 must have been difficult for some.

Wanderer78 wrote: »

Many jobs are of low pay and poor conditions, of which many of us are unwilling or able to do, we need a steady flow of immigration to fulfill these roles, as theyre critical to our economy and society

No we don't as that then puts pressure on housing and other services. And is causing an upheaval in society as will be seen in politics for example over the next number of years.

We need to get Irish people out working by reforming the welfare system and stop with this ponzi scheme of constantly importing the next batch of cheap labour from a different part of the world every 10 years.

Revolution 1917 wrote: »

Please forget about US talking about inflation
ES does not printing money US way
The euro and bucks is different same as prices by US dollars and euros
Same as ECB and US financial policy
The US printing buks trying get goods from Europe for free
The ECB printing euros trying support production
The question is how long world will accept US bucks

The US will be able to undertake QE for a lot longer than Europe as it is the main currency that is used world wide. Just look at everything that is priced in USD (Oil, Gold etc.) If you undertake a FX Transfer it will nearly always be priced off USD with the exception of a few a major currencies. I don't see any of this changing anytime soon.

As for the QE from ECB and Fed being different I don't see it. The only difference is that in US the Fed deals with primary dealers (Who will source bonds from the wider market) and provide a credit to there reserve account with the fed. In Europe it is not as complicated but both achieve the same desired effect.

Saying that the US is undertaking QE to import cheaper goods and Europe are doing it to support production is nonsense. They are both deliberately manipulating the yield on government bonds in the hope that cheap lending will stimulate the economy.

You could argue that pre Covid this QE was only undertaken to recapitalise the finance industry after the 2008 crash as the majority of the QE never left the finance institutions (with the exception of Funds which invested some of it in the wider economy property, business etc.) which explains why it has not generated meaningful inflation up until now.

Since Covid the QE has been used to support government spending whether it was PUP payments Ireland or stimulus cheques in the US. Either way this time around the QE ended up in wider economy and should generate inflation. The big question is how long can they continue and whether it will be sufficient for the economies to recover in time and generate the inflation.

[Deleted User]

Timing belt wrote: »

The base effect on US inflation is estimated at 1% which still leaves inflation in the US at 3.3%

If you drill into this 3.3% the big drivers of inflation in the Us are transport (notably air travel) and motor vehicles. I believe food inflation was only 0.6%. Once Covid19 goes away and there are no restrictions on flying air travel will become cheaper. whether we see sustained inflation will all depend on how will the world economy recovers.... Europe has used nearly all of its fire power with the ECB owning something like 50% of the EU bonds in circulation. This could result in them being forced to Taper the QE sooner than they would want to which will have the same effect as a rate rise and will kill inflation and slow down the recovery...we are not out of the woods yet.

Please forget about US talking about inflation
ES does not printing money US way
The euro and bucks is different same as prices by US dollars and euros
Same as ECB and US financial policy
The US printing buks trying get goods from Europe for free
The ECB printing euros trying support production
The question is how long world will accept US bucks