Class 4 - FOMC, Great $ Experiment

Fed doesn’t print money, they create the reserves/liquidity
Nobody wants to lend to you when you need the $
store of value; unit of exchange; ??
Holding the $ in another country prone to inflation is less negative than holding the organic currency
Exchange-rate control… arbitrage control. Why the domoinacan repulblic would hold a lot f USD?
One way to know if you’ve actually tarnsitioned to a currency is how you pay for taxes

Fed controls M0, then the banking system are the intermediaries that make loans, create deposits, etc.

Quantity theory of money

Have to translate from a stock to a flow; money is a stock and transactions are a flow.
Her $20k experiment: Have $20k w/ no interest rate or inflation, so you can spend out the $20k, monetary policy is about cash/liquidity. So this stock becomes a flow in which there are inputs and outputs. The inputs are the revenue you use, and the outlays on which you spend, how many times your liquidity is spent over the year. (Velocity is about transactions tehcnology, a version of little’s law)
Usually we think of velocity as a cahnge in tehcnology (those things increase velocity and the speed of money that’s aavialble and can chnage) Fed doesn’t see velocity as part of its mandate/remit.
Think of excess money growth as generating inflation.
If stable coins pay interst… then…
When money growth is 1 ot 10%, then output growth and velocity matter more.

Hyperinflation

“Institutions melt…” everything gets inflated away. When you are only sekeing to avoid errors, then you won’t get bettter, and you’ll likely defeat yourself.

“Who is on the other side of that mortgage?” There’s always someone else on the other side? The morgtrage at ~2.5%, why would someone take that bet in the 2021s/2022s

“The Fed bought treasuries in the secondary market, in the secondary market then put them on their balance sheet and are now selling them. Mechncially different but is an arms length transction reletaitve to the federal governemnt”

Uncertainty + Lags + Credibility = The learnings from ‘22 FOMC.

Lags = 2nd+ order thinking
Unceratinty = always, only tradeoffs
Credibility = what you do matters, and how you do matters in highly publicized enviornments.

Fed doesn’t print money, they create the reserves/liquidity
Nobody wants to lend to you when you need the $
store of value; unit of exchange; ??
Holding the $ in another country prone to inflation is less negative than holding the organic currency
Exchange-rate control… arbitrage control. Why the domoinacan repulblic would hold a lot f USD?
One way to know if you’ve actually tarnsitioned to a currency is how you pay for taxes

Fed controls M0, then the banking system are the intermediaries that make loans, create deposits, etc.

Quantity theory of money

Have to translate from a stock to a flow; money is a stock and transactions are a flow.
Her $20k experiment: Have $20k w/ no interest rate or inflation, so you can spend out the $20k, monetary policy is about cash/liquidity. So this stock becomes a flow in which there are inputs and outputs. The inputs are the revenue you use, and the outlays on which you spend, how many times your liquidity is spent over the year. (Velocity is about transactions tehcnology, a version of little’s law)
Usually we think of velocity as a cahnge in tehcnology (those things increase velocity and the speed of money that’s aavialble and can chnage) Fed doesn’t see velocity as part of its mandate/remit.
Think of excess money growth as generating inflation.
If stable coins pay interst… then…
When money growth is 1 ot 10%, then output growth and velocity matter more.

Hyperinflation

“Institutions melt…” everything gets inflated away. When you are only sekeing to avoid errors, then you won’t get bettter, and you’ll likely defeat yourself.

“Who is on the other side of that mortgage?” There’s always someone else on the other side? The morgtrage at ~2.5%, why would someone take that bet in the 2021s/2022s

Uncertainty + Lags + Credibility = The learnings from ‘22 FOMC.

Lags = 2nd+ order thinking
Unceratinty = always, only tradeoffs
Credibility = what you do matters, and how you do matters in highly publicized enviornments.