T Nation

Quantitative Easing


#1

#2

this so-called "quantitative easing" is so absurd than even die-hard french socialists of my acquaintance could not find a single argument to defend it.

and it says a lot.


#3

The Something-For-Nothing crowd is seeing the ultimate outcome of this sort of wishful thinking -- the destruction of the world economy.

What sort of lunatics thought they could have a truly permanent prosperity when the value of how wealth is stored is FLUID?

The lunatics expect that people who make decade-long business plans would continue to do so even when the rules change every year and the money is not constant in value, like trying to grab Jello?

Pointing a gun at producers and expecting them to accept paper napkins as money has a very limited 'shelf life'.


#4

So the fed is doing its job. What's the big deal? Why hasn't there been such a furor over this before? And why is it that, all of a sudden, EVERYONE has a PHD in Economics, public finance, money and banking, American politics, and also is an expert in monetary policy and investment banking?

Seriously, I don't see why anyone should be so up in arms about this. People have been predicting the collapse of the dollar for 30 years now, and the dollar is still standing. It's always "WE ARE ON THE VERGE OF COLLAPSE IF SOMETHING DRASTIC ISN'T DONE NOW!"

We've been on the "verge of collapse" for as long as I can remember now. Chicken little nonsense.


#5

And the dollar has lost almost all of its value since the FED was creating.

The dollar is collapsing and you deny it because it does so in slow motion.

You probably feel that coin clipping and shaving is obviously fraudulent, but once it is called quantitative easing it is totally ok with you, huh?


#6

The fed doing its job is totally OK with me. Regardless, if this country exported more goods this really wouldn't be cause for as much concern as all the chicken littles want to make it out to be.

I think that's the real problem here, that and the fact that the banks are hoarding cash and not lending it out. Maybe we should be addressing those areas before we go "a-bashin' the fed" for doing what it's supposed to be doing under these circumstances.


#7

You do not even know "what the Fed is supposed to do" because the Fed does not have as clear a mandate as for example the Bundesbank had.

The Fed does what it does and if you dont like it you can go and jump in a lake.

Also, it is most definitely not the job of the Fed to finance the government through inflation just because the market no longer cares for treasury bonds.

Hint: If people do not accept your IOUs anymore, there is probably a reason for it.

There are people out there who say that without the Fed grabbing them Federal 30 year treasury notes might have gone up to 20% interest rates.

Um, yeah, BUT THAT IS WHERE A JUNK BOND SHOULD BE!

Further, if banks do not want to lend out money there are reasons for that too, and trying to make them just means muddling with the market even more.


#8

I would like to know how they came up with this magical number, $600 billion. Why not $1 trillion? How do they know this quantity is enough since they were not smart enough to get it right the first time?


#9

They call Goldman Sachs, which in turn look for the price of hookers and blow and their specific needs in that area and the percentage of profits that they are entitled to due to their partnership agreement and voila, 600 billion.


#10

Ha, good one! Somehow I saw that coming. Probably isn't too far from the truth.


#11

In 1913 the Fed was charged with keeping the dollar stable, since then it has lost 94% of its purchasing power. I would think that proves they have failed.

If anyone thinks it has maintained its value try taking 20.67 cents in and cashing it in for 1 oz of gold.


#12

Since when were Treasury bonds "junk"?

As far as the feds job goes, I'm pretty sure that they are doing just that - their job.

I know that most people like to think that they are smarter than the people that currently run the fed, I mean if monetary policy were so easy, all the fed would need to do is read the message boards here and over at Alex Jones' website. There be scholars a plenty on the internetz.

I saw this video on CNBC yesterday, and all it seemed to do was instantly turn every Joe, John and Jack into monetary policy professors. Kind of irritating if you ask me. I'm no PHD in economics (unlike everyone else on the internet), but even I'm smart enough to recognize that this stuff isn't for intellectual lightweights. And educating yourself on these matters goes much further that reading wikipedia.

Sorry if my opinion of the federal reserve offends people, but I think that given the circumstances, the demand from industry for results, and the hideous political climate - the fed is doing the best it can.


#13

Here is the thing:

Not even the fucking chairman of the FED had an answer when he was asked why he should determine interest rates instead of the market. It really does not matter how clever you are or how many PHDs you have, the market always knows more than you do, in realtime.

It does not matter how smart you are whgen you pretend to know the unknowable.

As for US treasuries being junk, well if nobodxy wants them at the price they are offered and they could only be issued at junk bond rates, whatelse could they possibly be?


#14

What about the fact that the 5th amendment to the constitution bans such practice?

"nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."

They are de-valuing my money, (taking property for public use) without any compensation.


#15

As I understand it the Fed is supposed to slowly drive inflation to keep employment high. Inflation gets people to spend today because their savings are worth less tomorrow.

Basically it keeps people wage slaves.

Of course it cannot even do this right because unemployment and underemployment are very high and have been so for years.


#16

Not too far from the truth, they polled the primary dealers to find out what the primary dealers were expecting in the form of QE2. The PM's were expecting $600B over 6 months, the Fed gave it to them over 9.


#17

True, the Fed has two clear, if sometimes contradictory, mandates: to promote full employment and price stability. These dual mandates have been in place since 1977.

I've yet to see any reputable source say that 30 year rates would be at %20 but for Fed purchases. Most estimates I've read put it at 50 - 150 bp higher. In order to have long term rates at %20, we'd have to see inflation expectations nearly that high. Whether we see that or not in the future is debatable, but we certainly don't see anything like that currently.


#18

Hell is this video, playing for all eternity.
Is there no reason.tv rant explaining things?


#19

Price stability is a misnomer, the Fed creates inflation. They merely to do it in a slow manner we generally ignore.


#20

Looks like the Fed is scrambling to defend QE2 - and for good reason, it's having the opposite effect hoped for.

List of Fedâ??s enemies grows longer as bond market carnage spreads

http://www.moneyandmarkets.com/list-of-fedâ??s-enemies-grows-longer-as-bond-market-carnage-spreads-41194?FIELD9=2