QE3 -- Third Times' a Charm?

Puppycow said:
I've no crystal ball, but I think it will have a positive effect.

Dow is up over 200 points on the news.
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Gee, what a surprise.

It will benefit those who hold or sell what the Fed is buying, and everyone else gets screwed. Let me guess. You have some financial assets.
 
Financial assets? Not much, no. My biggest asset is probably equity in my house (in Japan).

Other than that, I have a few thousands of dollars invested in some mutual funds.
 
How much money can you print before stagflation takes off?

The record low interest rates show that there is no shortage of money. There is no indication that the production of goods and services is rising to such an extent that we need to increase the money supply to match it.

This is all about trying to devalue the national debt but you can only pay down the debt by creating wealth - not money.
 
psionl0 said:
How much money can you print before stagflation takes off?

The record low interest rates show that there is no shortage of money. There is no indication that the production of goods and services is rising to such an extent that we need to increase the money supply to match it.

This is all about trying to devalue the national debt but you can only pay down the debt by creating wealth - not money.
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Puppycow said:
I think it will help the housing market to rebound.
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Predictions made.



Since they're doing this for the stated reason to help keep interest rates down, it therefore implies that people are starting to not want to buy bonds. Hence the government will have to raise the interest rates it pays to attract people. As this, you know, cuts into the ability to borrow and spend to buy votes, that cannot be allowed.


There is no deep concept going on here. There is no deep "help" going on. It's buying stuff now for political expediency now at a cost to be paid later.

Write that down as a prediction, too.
 
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Beerina said:
Predictions made.



Since they're doing this for the stated reason to help keep interest rates down, it therefore implies that people are starting to not want to buy bonds. Hence the government will have to raise the interest rates it pays to attract people. As this, you know, cuts into the ability to borrow and spend to buy votes, that cannot be allowed.


There is no deep concept going on here. There is no deep "help" going on. It's buying stuff now for political expediency now at a cost to be paid later.

Write that down as a prediction, too.
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So your prediction is what, exactly?
 
Beerina said:
Since they're doing this for the stated reason to help keep interest rates down, it therefore implies that people are starting to not want to buy bonds. Hence the government will have to raise the interest rates it pays to attract people. As this, you know, cuts into the ability to borrow and spend to buy votes, that cannot be allowed.
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That's not how it works.

Bonds are auctioned off in the market. The higher the bid for the bond, the lower the effective interest rate. So it is the market not the government that sets the interest rate on the bonds.

The more money there is, the more that is bid on bonds. So printing money has the benefit of reducing the servicing cost of government debt. However, you can only go so far with this before you bring the whole house of cards crashing down.
 
it wont work, the diminishing returns are already in full view from the previous 2 times (plus Twist) - printing shiploads more money when equities are already at the tops of their ranges and oil is >$105 average (brent $114.50 - crude $97.00 prior to announcement yesterday) is just asking for trouble.

its also amusing to see how little has really changed in a decade of trying to reflate one bubble after another

http://www.safehaven.com/article/302/real-rates-and-gold-3

in some ways its hard to believe that 4 years on from the GFC we now have ongoing and open-ended QE, ZIRP for the forseeable future and they still use the recovery" word in the same sentence.

in other ways it was always totally predictable, once money printing gets going, its virtually impossible to stop.

from the transcript of the press conference yesterday ..read it through replacing "spend" with "borrow" because that's what he means.

QUESTION: My question is -- I want to go back to the transmission mechanism, because speaking to people on the sidelines of the Jackson Hole conference, that seemed to be the concern about the remarks that you made, is that they could clearly see the effect on rates and they could see the effect on the stock market, but they couldn't see how that had helped the economy.

So I think there's a fear that over time this has been a policy that's helping Wall Street, but not doing that much for Main Street. So could you describe in some detail, how does it really different -- differ from trickle-down economics, where you just pump money into the banks and hope that they lend?

BERNANKE: Well, we are -- this is a Main Street policy, because what we're about here is trying to get jobs going. We're trying to create more employment. We're trying to meet our maximum employment mandate, so that's the objective. Our tools involve -- I mean, the tools we have involve affecting financial asset prices, and that's -- those are the tools of monetary policy.

There are a number of different channels -- mortgage rates, I mentioned other interest rates, corporate bond rates, but also the prices of various assets, like, for example, the prices of homes. To the extent that home prices begin to rise, consumers will feel wealthier, they'll feel more -- more disposed to spend. If house prices are rising, people may be more willing to buy homes because they think that they'll, you know, make a better return on that purchase. So house prices is one vehicle.

Stock prices -- many people own stocks directly or indirectly. The issue here is whether or not improving asset prices generally will make people more willing to spend.
One of the main concerns that firms have is there's not enough demand. There are not enough people coming and demanding their products. And if people feel that their financial situation is better because their 401(k) looks better or for whatever reason -- their house is worth more -- they're more willing to go out and spend, and that's going to provide the demand that firms need in order to be willing to hire and to invest.
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and lets have this in here too, for overall context

17852505039d5b56f3.png
 
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unintended (but obvious) consequences

Oil has put on nearly $4 a barrel in 18 hours, if it holds above $100 it will run up to at least $105ish again shortly.

178525052fde8c951c.png


They are going to have to intervene and step on it again or $5+ fuel is going to ruin Obamas election and get Bernanke fired by Romney lol.
 
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NoahFence said:
They're building another boat?
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I hadn't seen which section this thread was in so I really was expecting it to be about a new QE ship!?


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To the actual subject of the thread - anyone know if there have been any rigorous analysis regarding all this easing malarkey?
 
“It’s strange, no matter how much money we put into the hands of the people who caused the financial crisis, our economy fails to improve…”

“That is odd isn’t it? We must still not be giving them enough. Let’s give them even more money, as well as promise that we will keep giving them money for the indefinite future.”
 
Funny how Fed is blamed for reducing the value of the dollar. Our still massive trade deficit means that the value of the dollar should indeed go down in order to balance the trade. That's pretty elementary. So I don't see the harm in devaluing the dollar.
 
daenku32 said:
Funny how Fed is blamed for reducing the value of the dollar.
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not really, its been pretty consistent over the last 100 years.

daenku32 said:
Our still massive trade deficit means that the value of the dollar should indeed go down in order to balance the trade. That's pretty elementary. So I don't see the harm in devaluing the dollar.
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the people (other than the Fed that is) who hold the debt might.
 
daenku32 said:
Funny how Fed is blamed for reducing the value of the dollar. Our still massive trade deficit means that the value of the dollar should indeed go down in order to balance the trade. That's pretty elementary. So I don't see the harm in devaluing the dollar.
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Gee, gas is now $5 per gallon, even without the onerous oil taxes of Europe, and food costs have doubled, all due to the Fed printing money in the last four years.

When the Fed stops buying the current deficit with magically-created "dollars", interest rates will shoot through the roof (worse than the 17% under Carter) and we will be hosed. :jaw-dropp

If you look at the last 100 years (since the Fed was created), it is 20 times worse. :jaw-dropp

How could that possibly be good, useful, or productive for anyone who is not a bank? :confused:
 
balrog666 said:
Gee, gas is now $5 per gallon, even without the onerous oil taxes of Europe, and food costs have doubled, all due to the Fed printing money in the last four years.
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No, the average cost of gasoline in the US is under $4, and average retail prices for food have not doubled in the last four years. In the last 12 months, food prices rose by 2%. In the 12 months prior to that, food prices rose 4.6%. In the 12 months prior to that, food prices rose 1%. And in the 12 months prior to that, food prices rose 0.4%. Multiply those 4 years together and food prices increased by a total of about 8.2% over the last 4 years.

Let's stick to facts, please.



When the Fed stops buying the current deficit with magically-created "dollars", interest rates will shoot through the roof (worse than the 17% under Carter) and we will be hosed. :jaw-dropp
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Prediction noted.

If you look at the last 100 years (since the Fed was created), it is 20 times worse. :jaw-dropp
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What is 20 times worse than what?

How could that possibly be good, useful, or productive for anyone who is not a bank? :confused:
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I'd rather live now than 100 years ago. Standards of living have improved.
 
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balrog666 said:
How could that possibly be good, useful, or productive for anyone who is not a bank? :confused:
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Politicians love this system too.

They can borrow as much money as they like and by printing currency, minimize the cost of government debt.

And by the time it all blows up, it will be someone else's problem.
 
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