Then there is this written on March 14, 2022.
Fed’s QE Is Over (Until It Comes Back…)

“The Fed will officially end the latest round of QE on Wednesday. The schedule below shows that on March 9th, the Fed will make its last QE purchase of about $4 billion of shorter-term Treasury notes. Since March 2020, the Fed’s balance sheet has risen by nearly $5 trillion due to QE. The Fed will still purchase bonds but only to offset maturing bonds and keep its balance sheet stable. Given the new monetary policy regime, we must focus beyond the Russian conflict. This entails better risk management as a key source of liquidity is now officially ending.”

Note that according the Fed terminology, even when QE is over they’re still buying enough to maintain the same scale, as some of their holdings mature out.

Done in the context of paying interest on reserves, which reduced the money multiplier. Also, they purchased mortgaged back securities rather than Treasury debt. Again, the last round of QE was in 2012. It’s not going to take 8 years for the results to appear in the real economy. The problems we’re facing are those which derive from monetary policy followed after 2019.

Part of my point is that it takes guts for the Fed to tighten substantially. It seems that the Fed may be institutionally gutless at this point.

It hasn’t. They monetized the spending puke.

You haven’t seen businesses shuttered yet? There have been quite a few in my CA community. I’m probably overly sensitive to it, so I don’t think the numbers are big yet. The nice storefronts on the bigger streets now have a huge property values which also means big property taxes. Sell out, and the owner can take that pile of cash.

I am a fan of the idea of poor businesses getting washed out by your average economic downturn. However, I fear that we are losing our lower profit margin businesses to parasitic local and state gov., and only the high margin cash cows will survive.

True, true. I might very well be wrong about this, but a $20T economy is not an instantly responsive system or even 1 or 2 year responsive on some things. I think this bout of inflation has been building up for a long time.

Back in the early days of ZIRP (effectively zero fed funds rate) there was plenty of discussion about how several years of 3 or 4+% inflation over a number years would cure much of the toxicity of the Fed or somebody taking trillions of mortgage crap onto their balance sheet. It just never happened in spite of the Fed having the pedal mashed to the floorboard. But talk is cheap and may not have meant much.

Then with covid we actually shrunk output. Plus there was an ending of lockdowns (or pull backs?) with a snapback in demand. Plus a bunch of helicopter money. Presto chango; inflation.

Over the period running from 2007 to 2019, a cut of about 10% would have been required to bring the sum of state and local budgets into balance. Transfers from the federal government have erased the state and local deficit for the time being.

The US Federal budget is approximately the same. However, this doesn’t include long-term unfunded liabilities like pensions and Social Security.

They use a cash accounting system. Why would it include that? Social Security is a transfer program, revenue streams and expenditure streams can be adjusted via legislation.

If all you eat is a Big Mac, you’re probably not up any.

I haven’t been to McDonald’s in several years.

If we had statesmen capable of dealing with the problem, we wouldn’t HAVE the problem.

If I follow the logic of this statement I would have to conclude that we could never develop problems we could possibly repair.

And blue pigs could fly if they’d just flap their wings.

Most state budgets would require an approximate 20% cut to just reach short-term balance. The US Federal budget is approximately the same. However, this doesn’t include long-term unfunded liabilities like pensions and Social Security. For most states and the Treasury, there is no way the 50%+ cuts needed are possible.

If we had statesmen capable of dealing with the problem, we wouldn’t HAVE the problem.

Prepared food is approaching 100% over 2 years at most places.

After further calculations on my part to justify, I will withdraw this blanket statement and go with this:

Most restaurant bills in the area are up between 50% and 100% over 2 years here.

If all you eat is a Big Mac, you’re probably not up any. (McDonalds has been cooking the price of the Big Mac ever since they learned about the Big Mac index.) Our local Chinese buffet has gone from $7 weekdays to $12 weekdays. The $20 that would buy the car food three or four years ago at Wendy’s is now $14 or so for just the Great Dane (6 nuggets) and myself. I’ve noticed most restaurants hiding the increases in drinks and ingredients. My second-favorite pizza place is now at $3 per meat topping when it used to be $2.

Take a pill.

Again, the rate at which goods and services were being produced in the economy declined by about 2% during Mr. Volcker’s successful effort to re-stabilize prices. The problem we have now is that the people who would be in charge of the effort are the people who have caused the problem we face.