Just another open-thread comment about something I read.
Arnold Kling is a conservative libertarian economist who writes about political economy at his substack site. Today’s post is about the very real possibility that the Federal Reserve could go bankrupt (https://tinyurl.com/5n94pu4n).
As an economist, Kling is a nonconformist, but he’s far from reckless. His writing is typically clear and sober. This particular post is hard for a layman to completely understand, but it strikes me that the bankruptcy of the Federal Reserve would be an important event, so I’m going to recommend listening to what Kling has to say.
If there’s an economist or banker among Neo’s readers, please speak up.
Simply fantastic!!
Another crisis—and not just your run of the mill hyper-inflation, no energy, no baby formula, no border, subverting children, fear-demic or relentless crime. No, this one is super-serious.
(We said buh-bye to crypto; now it’s the dollar’s turn.)
And for sure we’ll now have to cancel those elections (or at least cancel all those “insurrectionist” candidates)!! For the good of the country, of course!
Yep, vote “Biden”!! All crisis, all the time!!!
We have had the pleasure of many Feline Companions over the years and few have ever even glanced at the TV.
I put the laptop on the floor so my old tomcat can watch videos of mice scampering around on YouTube. He will look behind the screen to see where they went. He is starting to figure out that he can’t catch them, as he figured out with the laser pointer.
The good earnings at Nordstrom stores is interesting and has economic significance, I believe. The stock JWN is up about 13% today.
The recent chunk of market downturn was kicked off in part by weak earnings at Walmart, followed by disastrous earnings at Target. Some have argued that the Target performance was their fault. Probably true, but only in part.
Nordstroms affluent customer base a key differentiator as it side-steps inflation headwinds
Inflation has been wreaking havoc on retailers, as illustrated by the weak earnings reports posted recently by Kohl’s (KSS), Ross Stores (ROST), and Target (TGT). Naturally, there was concern that JWN could have also succumbed to those same inflationary headwinds, leading to another disappointing report from the retail sector. However, during JWN’s earnings conference call, CFO Anne Bramman commented that inflationary cost pressures have not impacted customer spending so far, adding that the higher income profile of JWN’s customers is mitigating this risk. — Briefing.com
Take away: Inflation harms the middle class on down much more than the affluent.
As an economist, Kling is a nonconformist, but he’s far from reckless.
I cannot follow his argument, but I have a suspicion it is too clever by half.
My rather new gray British shorthair (6 months old) looks at the TV and plays with colored pictures a bit. He actually prefers trying to jump in the toilet and dishwasher. I named him William, not knowing whether he would be William Shakespeare, Prince William, or William the Conqueror. He chose the latter mornings and evenings. Afternoons he sleeps. He does sometime give me a kiss. Othertimes, he scratches and chases my shoestrings. He has the softest fur you can imagine. My husband calls him Earl Grey.
TommyJay,
Yes, Nordstrom’s report fits in with what others like Home Depot that have said much the same thing. The affluent are spending with little hesitancy while the Walmart and Target shoppers are being hammered by inflation.
Conflour,
That Kling article is amazing. But my eyes glaze over when they start talking about reverse repo facilities.
Think of the Federal Reserve as a combination of three agencies.
– The Monetary Authority. This is what the Fed was before 2008
Before 2008. When the Fed was sensible and before it got screwed up by Bernanke, Paulson, and Geithner. I don’t know how the Fed got the authority to do all these other things. How much do they (the Fed) claim is contained within the original legislation from 1913 or thereabouts, or did the TARP legislation contain a bunch of authorizations?
My guess is that if the Fed gets into deep trouble congress will absolutely bail them out and add another couple trillion or more on to the federal debt. The debt that is already shouting unsustainability.
Watched Neo’s video and thought– it’s the kind of thing that’ll show up some day in an Ozzy Man video about cats being dodgy. Went over to pay his channel a visit just to make sure Australia’s hard-left turn didn’t knock him off YouTube, and found that he posted a new cat video just yesterday: “She Put Her Kid in the Bin?! Cats Being Dodgy #5.”
Cat vs bird is just an update of one of my favorite movie scenes ever, the fight between King Kong and T Rex. As in the movie, I side with the mammal.
Yes to all the cat videos.
From 2012:“When computer scientists at Google’s mysterious X lab built a neural network of 16,000 computer processors with one billion connections and let it browse YouTube, it did what many web users might do — it began to look for cats.” https://www.wired.com/2012/06/google-x-neural-network/amp
I’m going to go out on a limb & suggest that house there smells of cat pee. From the front door to the back fence…cat pee.
They could be using litter like Popeye’s uses grease & it’s still cat pee as eau de domicile.
FDA Commissioner testifies that a mailroom failure caused a two-month delay in FDA’s response to the baby formula whistleblower complaint. Um, don’t they have computers and phones? And then they have moved at the same glacial pace after the “voluntary” recall of formula which was not contaminated. Utter incompetence.
Thanks for reading Kling’s post on the chances of Fed bankruptcy, and for taking the time to respond. For a good part of Kling’s argument, I’m out of my depth. I’ve read the comments at his substack site, but they haven’t cleared things up for me.
For now, I remain confused. Maybe someone else will comment, but I hope that Art is right that Kling is too clever by half. On the other hand, Kling has a great education in economics, extensive experience, and a record of independent thought that’s often proved correct.
I happen to be a basketball fan, and basketball coaches often talk about “appropriate fear.” Maybe that’s what I should now be feeling?
Cornflour,
Kling writes about the Fed going begging to congress in the face of massive losses as though it is some unthinkable event. It may be unlikely but it’s not unthinkable. And you know congress will cough up the cash. The federal debt is now over $30T! What’s another trillion or two? The really scary issue is the $30T in debt.
The only subtlety to the above is if that scenario causes some kind of crisis of financial confidence. That’s how debt insolvencies often start. It’s worth noting that one of the big objectives of Fed’s extraordinary actions after 2008, in particular the big bank reserves held at the Fed, was done specifically to promote financial confidence in the banks.
______
Just another open-thread comment about something I read.
Arnold Kling is a conservative libertarian economist who writes about political economy at his substack site. Today’s post is about the very real possibility that the Federal Reserve could go bankrupt (https://tinyurl.com/5n94pu4n).
As an economist, Kling is a nonconformist, but he’s far from reckless. His writing is typically clear and sober. This particular post is hard for a layman to completely understand, but it strikes me that the bankruptcy of the Federal Reserve would be an important event, so I’m going to recommend listening to what Kling has to say.
If there’s an economist or banker among Neo’s readers, please speak up.
Simply fantastic!!
Another crisis—and not just your run of the mill hyper-inflation, no energy, no baby formula, no border, subverting children, fear-demic or relentless crime. No, this one is super-serious.
(We said buh-bye to crypto; now it’s the dollar’s turn.)
And for sure we’ll now have to cancel those elections (or at least cancel all those “insurrectionist” candidates)!! For the good of the country, of course!
Yep, vote “Biden”!! All crisis, all the time!!!
We have had the pleasure of many Feline Companions over the years and few have ever even glanced at the TV.
I put the laptop on the floor so my old tomcat can watch videos of mice scampering around on YouTube. He will look behind the screen to see where they went. He is starting to figure out that he can’t catch them, as he figured out with the laser pointer.
The good earnings at Nordstrom stores is interesting and has economic significance, I believe. The stock JWN is up about 13% today.
The recent chunk of market downturn was kicked off in part by weak earnings at Walmart, followed by disastrous earnings at Target. Some have argued that the Target performance was their fault. Probably true, but only in part.
Nordstroms affluent customer base a key differentiator as it side-steps inflation headwinds
Inflation has been wreaking havoc on retailers, as illustrated by the weak earnings reports posted recently by Kohl’s (KSS), Ross Stores (ROST), and Target (TGT). Naturally, there was concern that JWN could have also succumbed to those same inflationary headwinds, leading to another disappointing report from the retail sector. However, during JWN’s earnings conference call, CFO Anne Bramman commented that inflationary cost pressures have not impacted customer spending so far, adding that the higher income profile of JWN’s customers is mitigating this risk. — Briefing.com
Take away: Inflation harms the middle class on down much more than the affluent.
As an economist, Kling is a nonconformist, but he’s far from reckless.
I cannot follow his argument, but I have a suspicion it is too clever by half.
My rather new gray British shorthair (6 months old) looks at the TV and plays with colored pictures a bit. He actually prefers trying to jump in the toilet and dishwasher. I named him William, not knowing whether he would be William Shakespeare, Prince William, or William the Conqueror. He chose the latter mornings and evenings. Afternoons he sleeps. He does sometime give me a kiss. Othertimes, he scratches and chases my shoestrings. He has the softest fur you can imagine. My husband calls him Earl Grey.
TommyJay,
Yes, Nordstrom’s report fits in with what others like Home Depot that have said much the same thing. The affluent are spending with little hesitancy while the Walmart and Target shoppers are being hammered by inflation.
Conflour,
That Kling article is amazing. But my eyes glaze over when they start talking about reverse repo facilities.
Think of the Federal Reserve as a combination of three agencies.
– The Monetary Authority. This is what the Fed was before 2008
Before 2008. When the Fed was sensible and before it got screwed up by Bernanke, Paulson, and Geithner. I don’t know how the Fed got the authority to do all these other things. How much do they (the Fed) claim is contained within the original legislation from 1913 or thereabouts, or did the TARP legislation contain a bunch of authorizations?
My guess is that if the Fed gets into deep trouble congress will absolutely bail them out and add another couple trillion or more on to the federal debt. The debt that is already shouting unsustainability.
Watched Neo’s video and thought– it’s the kind of thing that’ll show up some day in an Ozzy Man video about cats being dodgy. Went over to pay his channel a visit just to make sure Australia’s hard-left turn didn’t knock him off YouTube, and found that he posted a new cat video just yesterday: “She Put Her Kid in the Bin?! Cats Being Dodgy #5.”
https://www.youtube.com/watch?v=zQHwFW5eZBA&ab_channel=OzzyManReviews
He even works Amber Heard into this one.
Cat vs bird is just an update of one of my favorite movie scenes ever, the fight between King Kong and T Rex. As in the movie, I side with the mammal.
Yes to all the cat videos.
From 2012:“When computer scientists at Google’s mysterious X lab built a neural network of 16,000 computer processors with one billion connections and let it browse YouTube, it did what many web users might do — it began to look for cats.”
https://www.wired.com/2012/06/google-x-neural-network/amp
I’m going to go out on a limb & suggest that house there smells of cat pee. From the front door to the back fence…cat pee.
They could be using litter like Popeye’s uses grease & it’s still cat pee as eau de domicile.
FDA Commissioner testifies that a mailroom failure caused a two-month delay in FDA’s response to the baby formula whistleblower complaint. Um, don’t they have computers and phones? And then they have moved at the same glacial pace after the “voluntary” recall of formula which was not contaminated. Utter incompetence.
https://www.dailymail.co.uk/news/article-10854321/FDA-commissioner-blames-COVID-baby-formula-shortage-heated-hearing-Congress.html
Art Deco & TommyJay:
Thanks for reading Kling’s post on the chances of Fed bankruptcy, and for taking the time to respond. For a good part of Kling’s argument, I’m out of my depth. I’ve read the comments at his substack site, but they haven’t cleared things up for me.
For now, I remain confused. Maybe someone else will comment, but I hope that Art is right that Kling is too clever by half. On the other hand, Kling has a great education in economics, extensive experience, and a record of independent thought that’s often proved correct.
I happen to be a basketball fan, and basketball coaches often talk about “appropriate fear.” Maybe that’s what I should now be feeling?
Cornflour,
Kling writes about the Fed going begging to congress in the face of massive losses as though it is some unthinkable event. It may be unlikely but it’s not unthinkable. And you know congress will cough up the cash. The federal debt is now over $30T! What’s another trillion or two? The really scary issue is the $30T in debt.
The only subtlety to the above is if that scenario causes some kind of crisis of financial confidence. That’s how debt insolvencies often start. It’s worth noting that one of the big objectives of Fed’s extraordinary actions after 2008, in particular the big bank reserves held at the Fed, was done specifically to promote financial confidence in the banks.
______
This one is interesting and a little scary too. And a simpler to understand.
https://arnoldkling.substack.com/p/is-the-fed-going-bankrupt-519?s=r