Yes, individual welfare is better for our society than corporate welfare. Philosophically I shy away from both, but it's foolish to argue against the former while the latter gets a complete pass from both major parties. This political dynamic is one of the major factors underpinning our growing wealth divide.
Even though the Fed eventually got those 2008 dollars back, they still affected the market (otherwise what would have been the point). The losers were those who were prudently (imprudently, apparently) holding cash, and would have otherwise received higher interest rates due to the demand. By creating new temporary dollars for bailouts, the Fed destroyed that demand. And the moral hazard allowed companies to keep loading up on debt such that they needed another bailout for Covid, which was reflexively carried out without any objections from congress.
These new dollars never coming back in will be a good thing long term, as creating direct price inflation will prevent the Fed from being able to continue lowering rates and thus prevents them from creating even more asset inflation than they already have.
Totally agree about the moral hazard problem. And I'll have to research how direct price inflation is going to prevent the fed from being able to continue to lower rates. Thanks!
It's straightforward. One of their chief mandates is to keep the CPI at a specific level of price inflation (2%). But their chief tool of lowering interest rates doesn't directly affect the CPI, as all the new money goes to the financial industry rather than to consumers. The CPI only goes up after that new money gets divvied up and spent on new ventures, and after asset valuations finally make it into the monthly cost of housing (which only occurs after they've raised the rates for other reasons, as (new) mortgage payments stay the same until then).
But they don't want it to go up much more than 2% either. So when it does, they'll have to stop lowering rates as they've been doing over the past three decades.
They have been able to keep lowering rates because technology and offshoring make real prices ever cheaper, while faux austerity keeps the newly printed money out of the hands of consumers. This has allowed them to point to the CPI and say that inflation is still low, despite higher asset inflation. Direct consumer stimulus stops their ability to keep ignoring inflation, by causing CPI inflation instead of asset inflation.
Even though the Fed eventually got those 2008 dollars back, they still affected the market (otherwise what would have been the point). The losers were those who were prudently (imprudently, apparently) holding cash, and would have otherwise received higher interest rates due to the demand. By creating new temporary dollars for bailouts, the Fed destroyed that demand. And the moral hazard allowed companies to keep loading up on debt such that they needed another bailout for Covid, which was reflexively carried out without any objections from congress.
These new dollars never coming back in will be a good thing long term, as creating direct price inflation will prevent the Fed from being able to continue lowering rates and thus prevents them from creating even more asset inflation than they already have.