Janet Yellen: Savers will have to be Punished 'For Quite Some Time'

[Zippyjuan]

So prices would never rise again? Cool. How does that work? No more supply/ demand where a shortage can't make prices go up?

 

[Dr.3D]

So prices would never rise again? Cool. How does that work? No more supply/ demand where a shortage can't make prices go up?

So you don't understand the propensity for inflation has been from debasing the currency? Sure there is usually some inflation/deflation in the normal market, but as it's been for the past 100 years, we have seen mostly inflation.

 

[Zippyjuan]

Lol. So jobs in banking are no longer jobs?

Consumers spending say $1 million would create far more jobs than putting $1 million in some bank. It takes no more workers to store that money than before but if a business has $1 million more in sales they are definately going to need more help.

 

[Zippyjuan]

So you don't understand the propensity for inflation has been from debasing the currency? Sure there is usually some inflation/deflation in the normal market, but as it's been for the past 100 years, we have seen mostly inflation.

It is a factor, no doubt- but getting rid of "printing" more money won't mean no price inflation either.

 

[Dr.3D]

It is a factor, no doubt- but getting rid of "printing" more money won't mean no price inflation either.

But it could allow for some deflation, something we haven't seen for a long, long time. Us old folks, on a fixed income, are really tired of being robbed of our life savings.

 

[Dr.3D]

Please note there is mostly inflation since 1940. Where did the deflation go?

 

[angelatc]

Consumers spending say $1 million would create far more jobs than putting $1 million in some bank. It takes no more workers to store that money than before but if a business has $1 million more in sales they are definately going to need more help.

But the other side of that is that you're creating a bubble. When savers are literally getting less than 1%, they are forced to put their money into ventures that wouldn't normally attract them otherwise.

 

[Bohner]

It is a factor, no doubt- but getting rid of "printing" more money won't mean no price inflation either.

TBF... Prices would be more likely to go down than up long term due to increases in productivity and efficiency.

 

[acptulsa]

So prices would never rise again? Cool. How does that work? No more supply/ demand where a shortage can't make prices go up?

Surely you wouldn't try to defend the indefensible through repetition--merely repeating over and over that fiat money is necessary in an effort to make that the 'conventional wisdom' though through the long term of history it has been proven neither conventional nor wise. That would be disingenuous.

Surely you wouldn't mislabel price fluctuations due to supply and demand 'inflation'. That would be indicative of a woefully inadequate grasp on vocabulary.

 

[Brian4Liberty]

But the other side of that is that you're creating a bubble. When savers are literally getting less than 1%, they are forced to put their money into ventures that wouldn't normally attract them otherwise.

Or as Ron Paul would say, it leads to malinvestment...

 

[Lucille]

Or as Ron Paul would say, it leads to malinvestment...

Jeffry has been a member here for six years and he still hasn't learned a fucking thing. Typical ineducable prog who does nothing but regurgitate statist propaganda (and jack threads, and +rep himself).

 

[mad cow]

Which actually kinda supports what she said- low rates will encourage more investment in job creation activities. Your buying more trees and fuel helps the grower and the energy seller. They have more money to spend on things and might also hire more workers to help the increase in business. Putting it in the bank doesn't directly create any jobs. Spending it does.

So the banker doesn't lend it out for investments but puts it under his mattress?

 

[mad cow]

double tap

 

[Zippyjuan]

So the banker doesn't lend it out for investments but puts it under his mattress?

A company won't borrow money to invest in new jobs and production unless he thinks there is a demand for that extra productivity. That is why banks are sitting on about $2 trillion in unlent money right now (under their proverbial mattress) and that money isn't creating jobs. Money at the bank is not productive money. Money being spent is. You do need savings to have money to lend out but you also need demand for goods for companies to want to borrow those funds. How many banking jobs has that $2 trillion they now have created?

https://research.stlouisfed.org/fred2/series/EXCSRESNS

 

[Brian4Liberty]

A company won't borrow money to invest in new jobs and production unless he thinks there is a demand for that extra productivity. That is why banks are sitting on about $2 trillion in unlent money right now (under their proverbial mattress) and that money isn't creating jobs. Money at the bank is not productive money. Money being spent is. You do need savings to have money to lend out but you also need demand for goods for companies to want to borrow those funds. How many banking jobs has that $2 trillion they now have created?

https://research.stlouisfed.org/fred2/series/EXCSRESNS

Nice try. The reserve requirements changed due to Dodd-Frank.

The banks are more than willing to put that money "to work", especially loaning it to government at a guaranteed profit. Doesn't government create jobs with that money?

 

[Zippyjuan]

What changes occured in reserve requirements due to Dodd Frank?

http://www.cnbc.com/id/47075854

If any of the banks gets too big in the council's determination, they could be regulated by the Federal Reserve, which can ask a bank to increase its reserve requirement—the money it has 'saved up' and is not using for lending or business costs.

No reserve requirements have been changed under this Act so far. The Fed did EASE reserve requirement at the beginning of the economic crisis (lowering the requirement from ten to seven percent for some), but has left them unchanged since then. No- that has nothing to do with the excess reserves banks have piled up.

Doesn't government create jobs with that money?

The government can't do anything with bank reserves. They can't use it to create jobs with. They could maybe borrow it if a bank buys US Treasury notes with it- but then the money is no longer an excess reserve.

 

[Brian4Liberty]

What changes occured in reserve requirements due to Dodd Frank?

http://www.cnbc.com/id/47075854


No reserve requirements have been changed under this Act so far. The Fed did EASE reserve requirement at the beginning of the economic crisis (lowering the requirement from ten to seven percent for some), but has left them unchanged since then. No- that has nothing to do with the excess reserves banks have piled up.

Well, law isn't what is used to be. They just do what they want...

The DFA stress tests are a set of forward-looking exercises conducted both by the Federal Reserve and by financial companies regulated by the Federal Reserve. The stress tests were mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act and are intended to ensure institutions have sufficient capital to absorb losses and support operations during adverse economic conditions so that they do not pose risks to their communities, other institutions, or the broad economy.

http://www.federalreserve.gov/bankinforeg/dfa-stress-tests.htm

 

[Zippyjuan]

Companies are also sitting on another roughly $2 trillion so they have little need to borrow. What money they are using is mostly to buy back shares of their own stock which drives up the price (and since corporate officers get bonuses in the form of stocks- they get more money). Like I said, they won't invest in more production until they see more demand- thus $1 million being spent (people buying stuff) will create considerably more jobs than an additional $1 million stashed in a bank (people saving more money). There is already plenty of cash there. Demand is lacking both for the goods and the money.

The most noted from the investor perspective has been the trillion dollars or so that have gone to boost share prices through buybacks. That trend has been especially pronounced in light of the relatively tame levels of capital expenditures, particularly when measured as a share of total revenue. Companies bought back about $115 billion just since mid-December according to market data firm TrimTabs.

Investors increasingly have demanded—as expressed through sentiment gauges such as the Bank of America Merrill Lynch Fund Manager Survey—that companies start using their cash to invest in growth rather than simply returning money to shareholders.

Corporate cash rose to a record $1.98 trillion in the fourth quarter, according to Fed data.

The combination of hoarding cash while continuing to raise debt and not invest in growth has spurred concern about whether companies are using the low-rate opportunity wisely.

"The mantra to always remember is debt is a tax on future income," Steve Blitz, chief economist at ITG Investment Research, said in an interview. "Right now it's an extraordinarily low tax, so they all want to go and buy stocks. It's a reasonable, rational act, but at some point this has to turn to capex."

http://www.cnbc.com/id/101481029

An interesting thing though, if instead of those companies sitting on the cash or buying back stock shares gave their employees more money (or hired more workers which they won't until necessary), they (the employees) would have more money to spend and would buy more goods and create more demand for goods- increasing company sales and eventually higher profits and cash flow for them. That would grow their companies more than sitting on the cash. That $2 trillion represents about fourteen percent of annual GDP.

 

[NoOneButPaul]

Not if we buy silver and gold we wont'...

 

[PierzStyx]

Which actually kinda supports what she said- low rates will encourage more investment in job creation activities. Your buying more trees and fuel helps the grower and the energy seller. They have more money to spend on things and might also hire more workers to help the increase in business. Putting it in the bank doesn't directly create any jobs. Spending it does.

But putting it in the bank will produce a pool of capital that can be used in the long term since it is more secure and has more to call on over an extended time period. Just pumping cash in to something will cause a boom to produce temp jobs that will dry up as soon as the bust quickly follows. There are no lasting jobs there, only data points for a re-election campaign.