$600 Billion in Quantitative Easing

I enjoyed this article about QE2 this morning.

“Thank You Ben Bernanke!”

http://www.uncommonwisdomdaily.com/thank-you-ben-bernanke-10572

[quote]LIFTICVSMAXIMVS wrote:
and thus a wealth transfer…or were you not disagreeing with me?[/quote]

No disagreement here.

I don’t see what the big deal is. This is exactly what the Feds job is in the first place under these circumstances. The big issue here is the fact that banks aren’t lending money, because if they were there wouldn’t be a need for such a large “easing”, right?

Is that why people are trying so hard to make a huge deal out of perfectly normal monetary policy? I certainly don’t see it. It just looks to me that people just want an excuse to throw around neat-o “smart sounding” buzzwords like: “inflationaryexpansionarymonetaryreservebibittybobittyboo” and “openmarketoperationsbasispointshoopadoopadydoo”.

Most of the arguments I have read just look like the same old, same old drivel from the “black helicopter” Alex Jones crowd.

What the Fed has decided to call it, “quantitative easing”, plays on the psychology of the masses. Make no mistake this will not “ease” anything. Once the money starts getting spent it will lead to chaos in the markets.

The banks are not lending because:

  1. people do not want to borrow or

  2. if people do want to borrow the banks cannot properly value their assets and thus are not willing to lend to them.

No amount of pump priming is going to change this.

The banks need higher interest rates and the masses need to save their money and get out of debt – FAST.

[quote]LIFTICVSMAXIMVS wrote:
The banks need higher interest rates and the masses need to save their money and get out of debt – FAST.[/quote]

You know, I have heard people screaming this for almost a decade now - particularly when it regards “THE COLLAPSE OF AMERICA!”, but America still hasn’t collapsed.

We all aren’t living in straw huts lugging garbage bags full of hundred dollar bills to the store to buy bread. According to those people screaming about the collapse of America 10 years ago, we should have been there five years ago.

What gives? Every time the Fed DOES IT’S JOB, people turn into raving lunatics. I’ll never understand it, but I do understand that ten years from now we won’t be living in mud huts, lugging garbage bags full of hundred dollar bills to the store to buy a loaf of bread. We’ll be just fine and still banging away at our keyboards.

unfortuantley, the fed’s “job” is rather nebulous. It is generally committed to full employment (5% or less) as opposed to interest rate targeting like the German Central Bank. The German Central Bank relies on that specific tool for control of the Monetary Supply because… of the German hyperinflation that directly preceeded world war 2. It was eerily similar to what we are doing currently.

Furthermore, the problems with the fed are numerous, so saying they are, or are not doing what is “correct” is rather asinine. The strawman you created out of mud huts is just that, but make no mistake the data is out there showing losses of purchasing power parity, asset bubbles directly linked to poor monetary policy and then some.

This is not to say one cannot make money in this environment, its really about picking winners. Overall cost burdens however, retirement, college costs, inflation outpacing income growth…etc.

Though you do have people like Krugman defending the stimulus with his sophmoric tendancies. The Fed alone can also not fix the drastic problems with fiscal policy related to the inherent flaws in our political system that loves unfunded liabilities. Enjoy higher future taxes, paying into social welfare programs that will never benefit you, and being a wage slave.

nobody can really see the whole picture here so it’s hard to speculate on the potential outcomes of fed’s actions.
on one hand this sort of thing does undermine world’s trust into the relative stability of the USD and increases the inflation.
on the flip side this sort of action when carried out properly can lead to increased consumer spending which can potentially fuel the economy and lead to generating more wealth in the long term.

the housing crisis resulted in humongous losses of “wealth”. for some it is a “quiet loss” - if you’re not forced to sell your house which happened to lose 50% of it’s value - you’re ok so to speak.
banks however are swamped with short sales and foreclosures losing money on pretty much all of them so they are very reluctant to lend to start up businesses and even to more or less established companies looking to expand operations etc.
so who knows…