Economics ad Absurdum
To show how to the point of absurdity the present economic situation has gone, two small quotes:
This was written in December last year. The Tesla stock has gone even higher now. The other example:
This was from last October. And of course the Federal Reserve as a Central Bank hasn't been alone in this. But those 3 trillion did result of a V-shaped recovery of the stockmarket, not the actual economy, which is in ruins during the ongoing pandemic.
Yet what makes the current financial markets and monetary policy so absurd is that to me, the most rational reasons given to these above phenomena are themselves absurd. The most reasonable explanation why some stocks are not attached to any normal pricing model of future growth (as with Tesla) is index investing: people invest passively in an fund trying to copy the index, which then means that the most risen stocks are bought...because they have risen in the first place, which then makes the stocks rise in price even more. Which actually doesn't make sense.
And then the monetary the monetary policy. I guess that the most rational reasoning of what is happening is given by modern monetary theory (MMT), which basically argues that if the US prints money, it doesn't matter, because it's the US. I'm not the only one confused with MMT, for example Nobel-prize winner Paul Krugman seems to be also confused. That the most accurate model to describe our economy is "Zombie economics" doesn't sound very nice.
And then there is the economy, which looks like to take the rout of Japan with Zombie companies starting to prevail, not the 'creative destruction' that Joseph Schumpeter argued that would make a free market economy healthy again.
In my view this all needs really to be viewed from a philosophical viewpoint as I think this all above looks to end in a massive crisis and genuinely an economy that avoids reality. Does economics have to make sense? Communists may be happy when capitalism is like this.
I am not. I think there might be a massive crisis just looming to happen this year.
But I'd like to hear what others say.
Now, Tesla has become not only the most valuable car company in the world but also more valuable than the next six automakers combined with a valuation of $631.29 billion at the time of writing.
Worldwide, that means Tesla is more valuable than Toyota, Volkswagen, Daimler, and General Motors, plus China-based BYD and NIO which are also publicly traded on the U.S. stock market. And Tesla's value becomes even more apparent by looking at automakers who actively conduct consumer-facing business in the U.S., as that trades BYD and NIO for Ferrari, BMW, and Honda.
This was written in December last year. The Tesla stock has gone even higher now. The other example:
Data from the Fed shows that a broad measure of the stock of dollars, known as M2, rose from $15.34 trillion (£11.87 trillion) at the start of the year to $18.72 trillion in September. The increase of $3.38 trillion equates to 18 per cent of the total supply of dollars. It means almost one in five dollars was created in 2020.
M2 includes physical notes and coins, banks reserves held at the Fed, accounts at banks, and money market mutual funds.
This was from last October. And of course the Federal Reserve as a Central Bank hasn't been alone in this. But those 3 trillion did result of a V-shaped recovery of the stockmarket, not the actual economy, which is in ruins during the ongoing pandemic.
Yet what makes the current financial markets and monetary policy so absurd is that to me, the most rational reasons given to these above phenomena are themselves absurd. The most reasonable explanation why some stocks are not attached to any normal pricing model of future growth (as with Tesla) is index investing: people invest passively in an fund trying to copy the index, which then means that the most risen stocks are bought...because they have risen in the first place, which then makes the stocks rise in price even more. Which actually doesn't make sense.
And then the monetary the monetary policy. I guess that the most rational reasoning of what is happening is given by modern monetary theory (MMT), which basically argues that if the US prints money, it doesn't matter, because it's the US. I'm not the only one confused with MMT, for example Nobel-prize winner Paul Krugman seems to be also confused. That the most accurate model to describe our economy is "Zombie economics" doesn't sound very nice.
And then there is the economy, which looks like to take the rout of Japan with Zombie companies starting to prevail, not the 'creative destruction' that Joseph Schumpeter argued that would make a free market economy healthy again.
In my view this all needs really to be viewed from a philosophical viewpoint as I think this all above looks to end in a massive crisis and genuinely an economy that avoids reality. Does economics have to make sense? Communists may be happy when capitalism is like this.
I am not. I think there might be a massive crisis just looming to happen this year.
But I'd like to hear what others say.
Comments (55)
It's much like a pyramid scheme. Each person is willing to pay more than the last because the next will pay yet more, until they don't, then the pyramid collapses. The last tier lose but everyone before them wins.
As such, the value of the stocks is independent of the trading value of the company. And yet it is the former value that dictates executive decisions, not the latter.
Quoting ssu
Doesn't seem something they'd be happy about. The above is basically a divorcement of profit from production. It is quintessentially capitalist that production itself becomes a dummy variable.
Really. Where did you come up with that pearl?
For me, this is a spike in one of the most basic of human desires, trying to get something for nothing. It's my main criticism of capitalism (and all systems).
It's makes a complete mockery out of economics and will not end well.
Yanis Varifoukas described the phenomenon very well:
If the aim is simply to make money, it doesn't matter much what it is you make, if anything. Production is much more abstract than it is for, say, a farmer.
Thanks, that indeed is worth listening to.
Varifoukas describes very well why the 2008 Crisis never went away, but how the financial bubble was kept alive. We see how again this was done last year (with the V-shaped recovery of the stock market creating a "melt-up") He also explains well why savings and investment have been disconnected from each other. And in the end Varifoukas says an important thing: one cannot understand economics with one model, one economic school of thought. Better read both Marx and Hayek. One has to be eclectic. Have to say these are words of wisdom that in our polarization we tend to forget.
What isn't talked is the idea of MMT. And of course, Varifoukas makes similar (and correct) observations about what has happened (as many conservative commentators do also), the disagreement comes in what exactly to do. Where, who, how to invest etc.
But the whole idea is that the pyramid scheme doesn't collapse, because central banks come to the rescue and push the prices back again into la-la-land prices.
It would be terrible if suddenly Tesla would be half of the price it is now or just the value of Toyota, just imagine all those debts where that stock price is the collateral to the debt. These absurdities simply become the new norm. The example that gives just tells how it really is a casino. Didn't the event when oil prices went negative show us that people aren't in the markets to do trades with actual barrels of oil?
The issue that just nags my mind is that this isn't knowledge that only few have. If the global bond market is over 100 trillion $ and the global equity market nearly as much, how much then do the central banks put into propping the markets up. With "only" 7 trillion $, for the stats see see recent trends, how much can more can the balance sheet be increased? And how much does the new administration plan to spend also. Trump ended with a +3 trillion budget deficit. What if the banks and the corporations need another bail-out if the market crashes? People happy to bail them out again?
Did people notice the spending?
Btw, the actual production of cars in 2019, notice where on the list the most valuable car company is:
https://www.iexprofs.nl/Column/478919/centrale-banken/Pas-op-voor-de-nieuwe-monetaire-gekte.aspx
MMT in total might work, I dont known. But what we're doing now is bullshit and when people bring up MMT they're just trying to sell bullshit as a good idea because endlessly printing money is part of a theory that also requires you to flexibly raise taxes, depending on the rate of inflation, stop issuing bonds and guarantee everyone a job with the government!
You have to keep in mind that all markets are horribly corrupt at present. What's going on now is a joke and pretty much has been getting worse and worse since going to 100% FIAT in 1971.
Going back to real money and no FRL (fractional reserve lending) will take care of many of the current issues we face..
It will work as well as printing pictures of food and sending them to starving people (albeit, the financial starvation will be a bit more drawn-out).
Horribly being the key word here, not "corrupt". The idea of the free market is that the interests of the business are the same as the interests of the human being who happens to run it. They are meant to be tied. Any divergence of those two by people who espouse the ideal is a corruption. The problem is far more fundamental.
Kid, it's a miracle that large groups of people are able to do anything besides beat the crap out of each other 24/7. Capitalism is what it is (and has many contradictions), but look at what it has done to lift billions of poor souls out of abject poverty.
You have a better idea?
Without FRL, the economy would collapse. For better or worse, FRL is a central engine of capitalism, as it facilitates investment and makes it cheaper (via inflation).
To me it looks like a constantly expanding bubble, kept from popping by continually low interest rates and constant access to easy money. Because money is so cheap, there is a lack of investment opportunities. The only strategy that offers ever higher returns the more money you pump into it is gambling, and one of the ways one can gamble is via the stock market.
Noone has any interest in popping the bubble because everyone stands to loose. The relationship between the bubble and the real economy is also not straightforward. In theory it doesn't matter how much money is in circulation, what matters is the distribution. But chances are the current situation, as usual, will cause money to flow upwards and, when the bubble pops, leave lots of people without their savings.
Yet in the US, just to give an example, the most rapid economic growth happened during the gold standard in the 19th Century.
Quoting Echarmion
I disagree on the idea that everyone stands to lose. Popping the speculative bubble will get the economy over the issue and get back on a healthy track. It will be past, not something that will have an effect decades later, just as now with the 2008. If it is not let to burst, many people will lose from the current malaise while the richest that can get the cheap money will become more richer.
Those who benefit from the present system are the richest people and the vast majority of ordinary people suffer. This for example Yanis Varifoukas explained very well.
Free market mechanism, if it would be let to happen, would deal with the bursting of the bubble with a quick deflation and sharp recession that would give way then for a healthy recovery. What is now done, to patch the bubble and help zombie banks and corporations to limp on, leads to a similar anemic growth that Japan had. And likely will result sooner or later in an system crisis. Popping the bubble will simply lead to brief transfer of wealth. Sustaining the bubble will lead those that have caused the bubble to enrich themselves even more.
We are already at the point where, for many countries, the benefits of capitalism are waning. My generation is effectively poorer than my parents'. The number of unemployed people and people in poverty is rapidly growing. Life expectancy is starting to fall, and not because of Covid. It is little comfort that the Chinese are doing so well, though more power to them.
It is only promising that there are fewer people in poverty if that is sustainable, and capitalism does not know the meaning of the word 'sustainable'. A better sentiment might be, "Yeah, but it was fun while it lasted" ;)
As for a better idea, yes, a capitalism tempered and augmented by long-termist social policy.
Well, don't political issues have philosophical views behind them?
But I do agree:
When the US had it's Savings & Loans crisis in the 1980's, bankers went to jail and 1000 S&L banks went belly up. And the US then preached Japan to take similar action with it's banking crisis. When Wall Street had a similar crisis, the Secretary of the Treasury was a Wall Street banker, his former bank didn't fail, nobody went to jail and we are facing the unresolved problems of that time today. Yeah, it's about power.
So let it collapse. That's what needs to happen. Then you can re-start the economy based on sound money/policy.
You need to widen your perspective a little bit. Most young people act as if the ten years they can remember the the entirety of human history.
We happen to be in a low point, no doubt, but these things are cyclical. You need to study up on your economic cycles and history, in general. And believe me, socialism is not going to save anybody more than the time it takes to destroy whatever generated the wealth it absconds.
You probably already know this and just misspoke, but it's not the "most risen" stocks that get bought more, it's the stocks with highest market capitalization, which is the product of share price and number of outstanding shares. Phrasing it as "most risen" makes it sound like the faster a stock goes up the more the index funds buy it, but if it's a penny stock with almost no market capitalization, even a huge percent increase in it will make very little difference in the overall portfolio of an index fund.
Quoting Kenosha Kid
If you're talking about index funds here like ssu was, then this collapse doesn't happen, at least not overall. The fund is just following the market at a whole, by investing proportional to market capitalization. If one overvalued stock collapses, that reduces their amount of market capitalization, and so proportionally increases the fraction of market capitalization of all the other stocks in the portfolio, so the fund reallocates money from the collapsing stock to the others.
In this way index funds perform definitionally as well as the average investor, but with none of the expensive overhead of actively making decisions on which stocks to invest in, resulting in greater overall profit. So long as the market as a whole is doing well, the index fund does well.
Interestingly, this incentivizes index fund investors to root for the collective benefit of all participants in the market, not the victory of any one over the other, and so in this way the best investors under capitalism in a way mimic some aspects of socialism:
[video]https://www.youtube.com/watch?v=_gx0-YN515Y[/video]
Quoting ssu
The gold standard is not directly related to fractional reserve banking, as you can have both. The gold standard only limits the primary currency, but banks and everyone can work with derived currencies just fine. But the gold standard does of course have an effect on the domestic money supply since it makes it much more apparent should virtual currencies run out of hand.
As for the economic growth, the 19th century was the century of rapid industrialisation and expansion for the US, so it's not clear to me how much monetary policy mattered.
My personal lay opinion (and this is just me soapboxing, I'm not addressing you personally) is that the power of monetary policy to affect actual production is often overstated. Money is not magic, nor is there a simple answer to the question of how virtual money should be. It's often assumed that virtual money is something new and dangerous. But it's actually a fairly normal thing in history. For example, after the collapse of the Western Roman empire, the successor states kept using Roman currency denominations to calculate debts, but the actual coins were no longer in circulation.
Well, everyone with easy access to power stands to loose. It's difficult to say what effect such a collapse would have on the overall economy, at least I don't feel confident making any judgement.
Quoting ssu
I'm not sure what free market mechanism this would be. The free market model says nothing about monetary policy, nor about limits to speculation.
Quoting synthesis
The problem is that the short time consequences are difficult to predict (for me, anyways) and might be catastrophic.
That might be an acceptable risk if we could be sure we had "sound money and policy" to go forward, but I am not confident that we do without some significant paradigm shift in the way we approach growth, debt and profit.
Thanks for the uplifting (if somewhat simultaneously condescending) presumption of youth, I'll take it. :)
I'm well aware that the capitalist clergy take all the credit for progression in technology, medicine, worker's rights, and social investment while championing parties that have to prop up a capitalism that, even in its Moore-esque law of exponentially increasing dubiousness of conduct, cannot support itself. I guess capitalism in the west can take credit for bringing people in the east out of poverty, as ssu frequently points out, but that's no more sustainable than anything else capitalism comes up with. Ultimately it's fortunate that, for now, debt is a lucrative industry, since right now it is debt that keeps that poverty line low.
I was talking particular stocks rather than entire portfolios. ssu was questioning the sanity of self-inflating stocks within a portfolio, not of moving investment within it, e.g. how a company like Tesla can become so overvalued.
Yes, the index is most defined by the largest stocks that make it. Better to say it more clearly as you do. Also it should be mentioned that indexes are actively changed. That's why the DJIA, which just takes 30 stocks and doesn't use the weighted arithmetic mean, isn't a fair representation to overall stocks and people use the S&P 500 or the Russell 3000.
Still, just seven or so stocks of the S&P 500 make up 40% of the market cap of the index. And if you want to mimic the index, guess what seven stocks you have to buy?
Which does represent a limit to a totally reckless monetary policy.
I think the best formulation of what would be close to a gold standard is to think of situation inside the Eurozone: with the Euro, the members states cannot prop up their export sector by devaluation and hence the euros end up in the best performing countries like Germany and make it difficult for weak countries like Greece, that were accustomed to devaluate their currencies to gain an advantage in selling their exports. Yet not that those countries (like Greece) which used extensively devaluation to prop up their industry, aren't the most prosperous ones. That the German Mark was for so long strong meant also that the Germans were prosperous.
Quoting Echarmion
I think many simply don't understand it. Especially the effects on the long term that what easy monetary policy does to a country. And in the economic circles the differences start from things like what is money.
There has not been an economic crisis since the recession of the early 90's (and even that one was semi-bailed). I am talking about a proper depression (people jumping off of buildings, etc.). This is what is needed to clear out the dead wood (write of trillions in bad loans, redistribute capital to productive enterprises, and normalize interest rates (better yet, get rid of the FED altogether) .
IOW, allow the system to work!
Just as important is that under a gold standard, international trade is balanced in gold. Had this not changed in 1971, this would be an entirely different global economy. This was the single policy change that destroyed the Western middle class (sent their manufacturing jobs to low-wage Asian countries).
Not much you can do about your age. You speak like the bright young person I am sure you are.
Quoting Kenosha Kid
People who are in favor of capitalism (and I've debated this for centuries, well, decades, anyway :) understand the contradictions. Personally, I believe that all systems are horrendous, but some are worse than others. I also understand how inherently unfair this system appears (and especially over the past 20 years) but that's because corruption is completely out of control. It's like the entire Western world is a banana republic.
There is too much socialism in this system now. Add more and it will become even more inefficient. This system desperately needs to cleans itself by going through a massive recession (depression) which will allow it to at least work the best it can. Right now it's a complete farce, a combination of mafia politics and corporatism.
Such as..? Actually, this is derailing ssu's thread. It would be welcome on mine though if you want to grind it out, old man :p
Forgetting the 2008 Financial Crisis and the recession? (Ah yes, I do see the small blip of the 1990's recession)
Guess last year the GDP growth was something like -3,5% in the US.
Such as?? Old man,eh? You'll will be me soon enough!
There hasn't been real economic growth in this country since the 60's. It's mostly debt, counterfeiting, and statistical gymnastics designed to make the majority think that what they are seeing with their own eyes is a phantasm.
2008 was simply an interruption in the flow of money that caused all kinds of reciprocal havoc. Nothing that couldn't be fixed by pouring trillions into the system.
And you really don't believe government statistics, do you?
Well, you had a politician, Richard Nixon, declaring money isn't what it had used to be for thousands of years...and that was planned just for a temporary time.
Perhaps the debate should be just how stupid the idea of deflating/devaluing everyone to prosperity is. The real issue here is who gets the money first. Inflation is great only for those who buy an asset that doesn't devalue in price or can use the money before it loses value, but for savers it's a problem. An economy needs savings too.
In the Nordic countries (we are talking the era from the 50's to the 90's) usually it went like this: The export industry noticed that they had problems to compete in the global market. Hence they drove the market to devaluate the currency to gain an pricing advantage in their goods. Great, good times again! Unfortunately this made later also the imported resources more costly and finally the trade unions noticed that wages hadn't kept up with the prices and demanded higher wages. After costly strikes the employers were ready to raise wages and the situation was at the same as it was in the first place.
Then something changes: thanks to the deregulation of the financial sector the speculative bubble got so big that this model didn't work anymore. Low interest rates didn't cause inflation. Why?
Because once the bubble burst the banks simply didn't lend the money, which was poured into them. And by the 90's the labour movement wasn't anymore what it had been earlier. In the US the situation was even worse as there hardly is a labour movement to negotiate about the wages. Yet the money had to go somewhere and where it went was into asset inflation: to the stockmarket, to real estate again. Yet without the increase in wages etc. the influx of money didn't find it's way to the real economy. The system serves those who are rich, not the poor. Hence now we have a situation where the real economy and the financial realm are living in totally different worlds. Or it seems so.
Yet I don't think that this can go on perpetually. Sooner or later there is a system crisis. And likely now it's sooner than later.
(why do we think that perpetual inflation is good?
Quoting synthesis
And after trillions come quadrillions and quintillions. Do people think the future Elon Musk/Jeff Bezos is so much richer when he is a quadrillionaire and the US deficits are counted in quintillions of dollars?
Thank you for the very short history of the previous several decades, and although I could comment on a number of things, no need to beat a dead horse.
Of course, inflation is simply a tax on the masses and a nifty way of shrinking ones debt for the government.
The FEDs 2% inflation target is like saying that we wish to confiscate all of your wealth...eventually (which is exactly what they have been doing for the last century).
Even if one isn't an investor, it's actually important to understand the possible perils in this economic situation and that things aren't going to go the way as before as we are in quite new territory. How deflation and a possible crack up boom will turn out is something we may see.
Quoting synthesis
If inflation really would be 2% you get a return on your investment of over 2% + the interest paid on the debt, then you are the winner in this system. The positive effect of gearing works wonders. Yet with the lowest interest rates in known history of mankind ought to make people think where this all is going.
The powers at be have been thinking of an answer, and as dubbed in Davos, it's "The Great Reset" The term the Great Recet isn't invented by the critics, it's really the phrasing used for example by an IMF manager here (just to take one example).
One idea would be to float Special Drawing Rights (SDR) as a cryptocurrency, if trust in the present fiat-system is shaken. Of course the SDR's are made of a basket of current fiat-currencies, but anyway. Those in power through the present monetary system would stay in power through a new system.
They're not leaving the crisis to waste.
I and many others have been following this since the 70's. How it has possibly gotten to this point is beyond me. Obviously, there is no way to pay back the debt (and hasn't been since the 80's), but as you probably know, countries never really intend on paying back debt. They deal with it by inflating it away and/or rolling it over (forever). It is rumored that the BoE never paid off their original debt from 1696. Wouldn't doubt it.
The take home lesson here is that all systems are designed by the few in their own interests. It has never been any other way. The political system is simply a way to keep the masses distracted and their appetites somewhat satiated via the crumbs flicked off the Elite's banquet table.
No "-ism" is going to change any of this.
I think that when the US basically defaulted on the Bretton Woods system, the people deciding it genuinely thought that it would be a temporary move, that the World wouldn't accept the USD having the status that it had. But nobody didn't want to rock the boat, so the US could get away with it. For the Saudi's opting to take the fiat Dollars was a smart decision: decades later the US did arrive to defend them from their neighbor in the North, who had captured Kuwait and with it had the largest oil reserves...for some months.
I also think that the Saudis, the Japanese and finally now the Chinese have been happy to use those dollars to buy assets in the US, hence the system has gone on. And of course American politicians, even having the hilarious hypocrite theater of "raising the debt ceiling" every once in a while, naturally will exploit the situation where they can recklessly spend without no limit.
(They still have those trillion plus, but now the largest owner of US debt is the Federal Reserve:)
Quoting synthesisTechnically the debts are paid back. For example, the UK paid it's last debts from WW2 back to Canada and the US in 2006. From that time:
If people don't know much about economics, here is one of the best simple explanations of what is happening from Ray Dalio, founder of one of the largest hedge-funds. It isn't the economics taught in schools, but captures the present system quite well. At start the video starts from the very basics, but later goes to quite complicated issues like the effect of deleveraging. Dalio explains the system objectively and without sounding like a doomsday prophet (as many permabear commentators do). If people have 30 minutes to spare, worth wile watching.
My country has been effectively bankrupt since WWII, doubly so since Thatcherism. Before the pandemic, we were still the fifth largest economy and had the fourth highest growth. So yeah... never going back. There are few alive who recall an economy not based on debt.
Thanks for sharing. :up:
I would bet that if you had a currency printing press in your basement that there might be a few bogus bills floating around in your wallet, as well.
This is exactly what was expected when the politicians allowed (viz., were paid off) the most vile members of society (bankers) to print money out of thin air. The fact that they destroyed the entire global economy was as predictable as knowing that the sun is going to rise in the eastern sky in the morning.
And more is coming...
George Soros personally has argued the following (last year):
See Opinion: Soros: The EU should issue perpetual bonds to fund the economic recovery from coronavirus
Soros has later argued for perpetual bonds this year on January 18th in the Independent
The only way out, according to Soros. In other words, let the printing machines print!!!
As long as the velocity of money doesn't start picking up and there is ample confidence in the currencies, everything is great for the extremely rich. Not that the money printing does anything good for the actual economy, but that isn't important. The monetary policy has brought asset inflation, and that is good for rich people like Soros.
Quoting Benkei
It would be interesting to hear about that major row as this is a very important issue to understand. As the thread's header states, these times economics, financial and monetary policy isn't in the ordinary realm we have been taught they would be.
What I've learned is that this situation where we find us is a very complex one: QE and other forms of money printing haven't caused hyperinflation, but on the other hand the money hasn't gone into the real economy.
When things get this ugly, the trick is to become as independent as you can by simplifying your life economically and otherwise. If possible, tune it out for about ten years and do things that create contentment in your life (while everybody else is going to be running around like their hair's on fire!).
No need to suffer more than need be for other people's avarice and stupidity.
Well, running around like their hair's on fire has been the new normal. I've already seen
- a huge banking crisis, real-estate bubble bursting and economic depression in my own country.
- The Tech bubble bursting
- The Great Recession of 2008-2009, real-estate bubble bursting in the US and economic depression
- Covid-19 economic depression ...
And between those crashes, three decades of huge asset inflation where nearly anything you have invested in gained a good profit and a lot of euphoria and silly talk. So that's the World we live in. So why tune out for a decade? Then what on the 11th year?
Perhaps people are a bit melodramatic. If we have a market crash or a currency crisis in the future, it basically would be something similar we already have seen. In the end the reality would be simply 'normal' to us. Just think of before last year describing the start of the 2020's to people and how scary it would feel with a pandemic with lockdowns and even curfews, mobile morgues made from semitrailers and riots reaching a fever pitch with a huge mob breaking into the Capitol. That all would sound very scary, when considering how things were in the middle of the 2010's. In similar fashion a stock-market crash, financial market collapse, banking crisis or currency crisis sounds scary, but in the end it isn't. And after a storm, the sun shines again...
...the 11th year.
What most people fail to realize is that the crisis (the lying, cheating, and stealing that has defined the past 50 years) has already taken place. What has been on-going coincidentally for the past 20 years is the reaction to the crisis which has a ways to go (ten years?).
Oh, that sounds just like what an economist of the Finnish Central bank (when there was an independent one) said about the worst economic depression the country was in: "The unemployed won't revolt. Unemployment is seen as an independent stigma as others still have jobs. Hence there isn't going to be like a revolution." He was correct, actually, the unemployed didn't revolt, even if 50 000 construction workers never found work afterwards. So to keep the price of food and clothing "decent" may be the answer. That likely may be handled for instance giving subsidies to large retail chains: again the rich profit and the poor muddle through it.
Yet revising the charter of the Central Banks? I fear this is something that won't happen.
The thing is that the role of the central banks and monetary policy simply isn't understood. This is something that isn't taught in school. History has again and again shown that the delirious accusations of the "speculators" being behind inflation, and not the governments and central banks always prevails. Or then it's the ugly foreigners, perhaps China in this case. The media will go with that story as the media is linked to the government (even here in the West). If the inflation gets ugly, at first what is demanded is that there are money transfers to the poorest of people to help them. Then there will be the demands to ration basic necessities and a public denouncement campaign against "hoarders", "speculators" and the "black market". Ah, the black market speculators...how evil are they!
Above all, when, as correctly points out, the fuel for the future rise of inflation has already been spread earlier, people cannot understand the link. Then when it actually happens, the link to earlier actions is hazy as the economy is so complex, that likely isn't understood.
Despite the trillions in reserves, I believe this is going to continue to be a deflationary depression-like event (excepting asset prices) for all the reasons of which you must be familiar, i.e., bountiful cheap labor (produced by expanding labor markets and exploding industrial technology) keeping labor-induced commodity price inflation at bay (or negative in real terms) for the foreseeable future.
The real question is that how much adding that debt and QE and lending to banks will start to erode the confidence on the dollar. Or more generally, in the whole system. And here we come to the question I've been pondering for some time: how reasonable is the Modern Monetary Theory? The idea of just printing money to prosperity feels missing some fundamental understanding of how the economy works. The argument that inflation, if it happens, can be dealt with interest rate hikes sounds not very convincing if the debt is so huge that the interest on the debt would severely cut back other government spending.
Or then, the whole monetary policy is there only to prop up the banks, the owners of the federal reserve, and nobody else. It's not even supposed help the real economy, just to help Wall Street. That may actually be the real answer.
What is also discussed are the effects on productivity, the support of zombie companies and effects of loose monetary policy to the global economy.