Your link didn't come through? My understanding was that QE1 and QE3 mainly bought mortgage backed securities from banks while QE2 mainly bought treasuries, which is what is happening now as well. I think we're also talking about two different things that are happening now. In the spring of last year the Fed announced a $700B QE involving mostly treasury purchases, that's what I'm calling "QE4" because it's similar to the previous QEs. It sounds like you're talking about the direct payments made to everyone below a certain income, plus maybe programs like PPP and enhanced unemployment? To me those are much more analogous to TARP in that they were Treasury programs funded by appropriated funds. In some ways you're right, unlike TARP they weren't loans or equity purchases so they're not going to get paid back like TARP funds were. On the other hand, it's pretty amazing to me that the jobs for a big chunk of our blue collar workforce went away for several months and we managed to avoid a bigger economic downturn that fed on itself. We basically just suffered from the initial shock, but none of the knock-on effects of people spending less money with the viscous circle that causes. How much would that have cost in tax revenue versus what we paid out? I'm sure there's some good analysis of that being done now, although I haven't personally come across any, but it was definitely significant enough that we can't ignore it. Back to the original point, is that inflationary? It doesn't seem like a big enough difference from the 2008-12 timeframe to have a radically different impact. I do agree with @DiceAreCast that we haven't seen significant wage inflation, which is a crucial requirement for actual inflation to happen, and I'm not sure much if any of the money spent over the past 12 months was a wage inflation driver? Again I'm not saying we won't have inflation, I'm just saying our ability to forecast it with any degree of certainty is probably much less than we think. If I'm wrong I think it will probably be because I'm thinking of this as a linear process when its really more of a "fall off a cliff" process where everything remains fine until you add a last little perturbation and that makes the whole system unstable. If that's the case its even harder to forecast.
My link doesn't matter at this point because i think you are correct in that we are talking about different things. I am talking about the direct payments - which at the time they were made was a brilliant strategy. However, the government should have sought to get a lot of it back as we pulled out of a recession. That will cause significant inflation. And blue collar wages are up A LOT due to the enhanced unemployment. I would say in many markets its up 30% or more. Inflation will come because 1. American savings rates are very high (as seen by bank deposit numbers), 2. Americans are eager to spend, 3. There is less capacity to spend the money on due to pandemic restrictions and fears.
All the unemployment benefits are rolling off though. I'm not sure that blue collar employers are significantly inflating wages they pay, although I don't have a blue collar workforce so I don't have any first-hand info on that. I don't doubt that there's some pent up money and pent up demand, and it's very likely that those will cause a momentary bump in inflation. In fact it already is. But that will all be worked through in the next 6-9 months. I guess the question is if it will form a positive feedback loop or if it will be a one-time event that will revert to the mean?
blue collar wages are up a lot. White collar wages aren't. I saw the same phenomina in 2018 but this is much worse because there is almost no price you can hire someone in that employment pool. It is beginning to change as more states reduce unemployment benefits. You are probably right that the inflation will be short term. I hope it is. A lot of people will see their standard of livings drop (especially middle class and upper middle class who didn't benefit as much from the various handouts).
Interesting on the blue collar thing. Is there any tracked statistic that you know of that shows this? I'd think that would be a very useful thing to track closely over the next few months as we try to determine if this is a short term bounce or more long lasting.
All I know about shorting the box is that it is a tax-minimization or avoidance technique that traders use when they do not actually want to close out their long position on a stock.