Balance sheet recessions

Discussion in 'Markets & Economies' started by mmm....shiney!, Feb 26, 2020.

  1. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    The Hong Kong cash splash thread got me reading Bill Mitchell again.


    Screen Shot 2020-02-26 at 6.37.20 pm.png
    (Richard Koo Balance Sheet Recession: Japan’s Struggle with Uncharted Economics and its Global Implications)

    Cited in: http://bilbo.economicoutlook.net/blog/?p=3225

    And for non-visual learners Bill Mitchel has listed the above in dot points:

     
  2. 66rounds

    66rounds Well-Known Member Silver Stacker

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    Only works when Gov spending isn't added to the money under the mattress. Whenever I get a penny from the government I spend it on metals.
     
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  3. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    The law of diminishing marginal utility states that if the government implements a sustained, long running policy of fiscal stimulus you will eventually reach a point where the desire to stack metals will reach such a low point that the preference to buy another unit of gold will have less value to you than the desire to buy a unit of another good, say decent bourbon. :D

    Of course as Koo points out, democratic governments rarely commit to such a long term policy so it’s unlikely that your preference for decent bourbon overrides your higher preference for metals. Which is why fiscal stimulus often produces nothing. ;)
     
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  4. JulieW

    JulieW Well-Known Member Silver Stacker

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    Ah yes, I've noticed that, especially with regard to the wee dram.
    ;)
     
  5. Silver260

    Silver260 Well-Known Member Silver Stacker

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    I've got a lot of time for Richard Koo's perspective / explanation. It's one of the first models that really rang true to me.

     
  6. leo25

    leo25 Well-Known Member Silver Stacker

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    It always amazes me that still today nearly all governments completely ignore this.
     
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  7. leo25

    leo25 Well-Known Member Silver Stacker

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    Here is an interesting chart for you @mmm....shiney! You can focus more on the bottom chart, U.S. Treasury, General Account. As you can see it's at all time record high. Why are they building up a massive account and what do they plan to spend it on, maybe the Government is planning to spend big into the economy?

    The top chart is also interesting as it shows the FED total assets. So if FED is not increasing credit into the system at the same rate as government is taking out, then i would imaging it will be taken out of the general market. Maybe they plan to pull money out of Wall Street and direct it to Main street?

    Untitled-1.jpg
     
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  8. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Regarding the TGA, it's beyond my ability to read anything into it. All I know: in 2008 Treasury shifted it's balances from the TT&L accounts into TGA, in 2015 Treasury decided to maintain a minimum balance of 150billion to ensure that there would be enough funds to pay the government's bills for a week (I can't see the necessity of that) and the debt ceiling has been suspended.

    Screen Shot 2020-02-29 at 7.46.38 am.png

    Screen Shot 2020-02-29 at 7.43.47 am.png

    So I guess that it is just business as normal?
     
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  9. leo25

    leo25 Well-Known Member Silver Stacker

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    To me it looks like Trump is going to do some big spending in the general economy and fast. If there was any doubt, this would guarantee his reelection. Quickly dumping 400 billion into the general economy should offset a recession.

    Maybe do what Rudd did and just give everyone a check for $1000. Better that then keep on pumping money into Wall street.
     
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  10. Oddjob

    Oddjob Well-Known Member Silver Stacker

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    upload_2020-2-29_15-49-16.png
     
  11. heartastack

    heartastack Well-Known Member Silver Stacker

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    So people actually find the boxes and arrows easier to follow than dot-points?
     
  12. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Visual learners mate :p
     
  13. heartastack

    heartastack Well-Known Member Silver Stacker

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    No wonder people at work can’t follow my expertly crafted dot-pointed emails. Smh
     
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  14. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I’m waiting for the debt jubilees. And it won’t be mortgages or credit cards but sovereign debt. The US buys it’s way back into foreign markets.
     
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  15. Markco2

    Markco2 Member Silver Stacker

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    Much easier to understand from Koo's diagram.

    Shiney, are you calling a reset?
     
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  16. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Dunno. My comment was made about 3 weeks before the Covid-19 shutdown. Dunno if that changes things, will have to have a think.
     
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  17. leo25

    leo25 Well-Known Member Silver Stacker

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    Treasury account is cashed up. Let the spending begin!

    Treasury account.jpg



    FED has added about $2 Trillion in one month. Safe to say bank reserves are being topped up?

    fed account.jpg
     
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