Let us start by describing this act: the act of monetary creation.
At the center of alchemy lies the Philosopher's Stone - the prime reagent for money creation.
For a long time this was gold.
2/
QE, Liquidity Removal, and the Alchemy of Money
I’ve been watching @MetreSteven say stuff like “QE removes liquidity” on here for a while after which people sort of stare blankly or roll their eyes.
Let’s give it one more go, via a traditionally quirky explainer.
1/
Let us start by describing this act: the act of monetary creation.
At the center of alchemy lies the Philosopher's Stone - the prime reagent for money creation.
For a long time this was gold.
2/
From the Philosopher's stone of gold, we could spawn two things:
1. Circulating money
2. Debt
Money and debt are twins, both born of the philosopher's stone and their fates forever linked.
3/
An alchemist is only allowed to create a certain amount of money for each philosopher's stone.
And the Debt was greater than the Money (due to interest), making the system inherently deflationary.
4/
So the rules of alchemy were evolved to allow each stone to create more money (fractional reserve banking).
5/
Discovering a cache of Philosopher's Stones (gold rush!), for example, was rather inflationary in the short term - as it allowed for multiplicative expansion of circulating money via alchemy.
6/
Today, the system is incredibly modern: the Philosopher's Stone is no longer a single object (though some still yearn for the simplicity of yore!).
Today, the Stone is many, many things.
Gold is one of them, but not the main one.
7/
In fact, there is a whole array of things populating a roster which makes up the "Philosopher Stone Roster" - these items are weighted by their quality, governed by banking regulation.
8/
Many of the old ways persist - for example, the system is still inherently deflationary with debt and money being spawned as twins from the modern Philosopher's Stones.
9/
It has a unique property. For this Stone, in addition to being used as an alchemical debt/money spawning device, can do one more thing: it can be turned -- permanently, and irrevocably -- into circulating money with no "debt shadow."
10/
It's a devil's bargain - only suited to times of great need - but in those times, one may destroy a Philosopher's Stone and introduce its weight in cash into the economy directly.
When stones are idle (or "excess" due to not being used) it's tempting
11/
Yes, it is.
Unless there are no borrowers.
For debt requires willing participants, both the lender and the borrower, and sometimes that match cannot be made.
12/
And this is QE.
13/
But it's removing alchemical potency from the system, which over time constricts alchemist's ability to create money from economic activity of lending and borrowing.
It's an anti-gold-rush.
14/
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1/OK, data mystery time.
This New York Times feature shows China with a Gini Index of less than 30, which would make it more equal than Canada, France, or the Netherlands. https://t.co/g3Sv6DZTDE
That's weird. Income inequality in China is legendary.
Let's check this number.
2/The New York Times cites the World Bank's recent report, "Fair Progress? Economic Mobility across Generations Around the World".
The report is available here:
3/The World Bank report has a graph in which it appears to show the same value for China's Gini - under 0.3.
The graph cites the World Development Indicators as its source for the income inequality data.
4/The World Development Indicators are available at the World Bank's website.
Here's the Gini index: https://t.co/MvylQzpX6A
It looks as if the latest estimate for China's Gini is 42.2.
That estimate is from 2012.
5/A Gini of 42.2 would put China in the same neighborhood as the U.S., whose Gini was estimated at 41 in 2013.
I can't find the <30 number anywhere. The only other estimate in the tables for China is from 2008, when it was estimated at 42.8.
This New York Times feature shows China with a Gini Index of less than 30, which would make it more equal than Canada, France, or the Netherlands. https://t.co/g3Sv6DZTDE
That's weird. Income inequality in China is legendary.
Let's check this number.
2/The New York Times cites the World Bank's recent report, "Fair Progress? Economic Mobility across Generations Around the World".
The report is available here:
3/The World Bank report has a graph in which it appears to show the same value for China's Gini - under 0.3.
The graph cites the World Development Indicators as its source for the income inequality data.
4/The World Development Indicators are available at the World Bank's website.
Here's the Gini index: https://t.co/MvylQzpX6A
It looks as if the latest estimate for China's Gini is 42.2.
That estimate is from 2012.
5/A Gini of 42.2 would put China in the same neighborhood as the U.S., whose Gini was estimated at 41 in 2013.
I can't find the <30 number anywhere. The only other estimate in the tables for China is from 2008, when it was estimated at 42.8.
