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Thread: Fed Announces New Round of Bond Buying to Spur Growth

  1. #31
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    Re: Fed Announces New Round of Bond Buying to Spur Growth

    Quote Originally Posted by justabubba View Post
    ok, please explain what is keynesian about the fed buying more mortgage bonds
    The fed buys assets from banks with newly created money. This essentially is suppose to create more cash on hand by banks which would hopefully lead to more lending. It's a last resort when the Fed has exhausted other measures.
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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    Re: Fed Announces New Round of Bond Buying to Spur Growth

    Quote Originally Posted by iliveonramen View Post
    The fed buys assets from banks with newly created money. This essentially is suppose to create more cash on hand by banks which would hopefully lead to more lending. It's a last resort when the Fed has exhausted other measures.
    -And- as bond buying/selling goes, it's relatively safe, or well it used to be almost 99% safe.. Can't make that claim anymore, but it's still relatively safe.


    Tim-
    “When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.” - P. J. O’Rourke
    “Socialism is great until you run out of someone elses money” Margaret Thatcher

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    Re: Fed Announces New Round of Bond Buying to Spur Growth

    Quote Originally Posted by Hicup View Post
    Yep, you can bet on it, in fact I'll bet anyone here that gas prices will be at or darn close to $5.50 by November. At least mortgage rates will stay low, and we ALL know that this is a good thing for the economy..



    Tim-
    Low mortgage rates are fine. Too bad the savings will be eaten up by EVERYTHING goes up in price. So not bad enough food prices are going up due to the drought, they'll go up further cause of delivery cost increase too.

  4. #34
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    Re: Fed Announces New Round of Bond Buying to Spur Growth

    Quote Originally Posted by iliveonramen View Post
    The fed buys assets from banks with newly created money. This essentially is suppose to create more cash on hand by banks which would hopefully lead to more lending. It's a last resort when the Fed has exhausted other measures.

    We have seen this fail before...Frankly I am surprised that I even have to post this...

    History Repeats Itself – or Does It?

    In his well-researched article, Hutchinson notes that Weimar Germany had been suffering from inflation ever since World War I; but it was in the two year period between 1921 and 1923 that the true “Weimar hyperinflation” occurred. By the time it had ended in November 1923, the mark was worth only one-trillionth of what it had been worth back in 1914. Hutchinson goes on:

    “The current policy mix reflects those of Germany during the period between 1919 and 1923. The Weimar government was unwilling to raise taxes to fund post-war reconstruction and war-reparations payments, and so it ran large budget deficits. It kept interest rates far below inflation, expanding money supply rapidly and raising 50% of government spending through seigniorage (printing money and living off the profits from issuing it). . . .

    “The really chilling parallel is that the United States, Britain and Japan have now taken to funding their budget deficits through seigniorage. In the United States, the Fed is buying $300 billion worth of U.S. Treasury bonds (T-bonds) over a six-month period, a rate of $600 billion per annum, 15% of federal spending of $4 trillion. In Britain, the Bank of England (BOE) is buying 75 billion pounds of gilts [the British equivalent of U.S. Treasury bonds] over three months. That’s 300 billion pounds per annum, 65% of British government spending of 454 billion pounds. Thus, while the United States is approaching Weimar German policy (50% of spending) quite rapidly, Britain has already overtaken it!”

    The Weimar Hyperinflation? Could it Happen Again? | Global Research
    Americans are so enamored of equality that they would rather be equal in slavery than unequal in freedom.

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    Re: Fed Announces New Round of Bond Buying to Spur Growth

    Quote Originally Posted by Helix View Post

    i'm exceptionally uncomfortable with expansion of QE.
    I guess I’d have to ask the reason of your discomfort. It shouldn’t be based on track record since most believe it was reasonably successful:

    From A QE2 Retrospective in Pictures - Real Time Economics - WSJ

    However, I’d accept that it’s unlikely that it’s going to affect the finances of the American consumer much which is where the real problem lies. That said, there’s really nothing left from the monetary policy side but to pick up spent brass and reload them again. This is what happens when nobody is willing to act on the fiscal side.

    Quote Originally Posted by j-mac View Post
    And what is Congress supposed to do when Harry Reid blocks everything sent up by the republican congress?
    You can’t blame somebody for turning down a plate of liver if you’re not even willing to throw some gravy on top. There is zero compromise in the bills that come up from the house. If you’re looking for somebody to blame, let’s start with Grover Norquist. You want to make a difference this election – vote out any bone head that puts their signature to one man’s ideals instead of the will of the people (which ultimately means compromise).

    Quote Originally Posted by specklebang View Post
    If you had elected Specklebang as President and we of The Logical Party had control, here's what would have been done.

    Everyone who paid at least $500 in taxes and no more than $30,000 in taxes in 2010 would have received a $10,000.00 VISA card with no cash withdrawals and expiring in 6 months.

    Is that not brilliant?
    I agree that this fixes the spending part of the equation but does not fix the confidence side. I’m really backed into a corner at this point in saying that I think the only way out of this recession beyond massive amounts of time, is government-direct jobs. People need stability right now, not just cash. There simply is no private sector solution to the jobs equation as long as demand is low. Unfortunately, until people realize the tea party was 8 years too late and that they’ll have to wait for the next cycle, we’ll just have to hope the next decade or two isn’t too harsh.

  6. #36
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    Re: Fed Announces New Round of Bond Buying to Spur Growth

    Quote Originally Posted by j-mac View Post
    We have seen this fail before...Frankly I am surprised that I even have to post this...
    “The current policy mix reflects those of Germany during the period between 1919 and 1923.
    Hint.....in that time period the French and Belgians took over the Ruhr valley which represented a massive amount of production in Germany.

    Basically they are printing money to cover the costs of war reperations while their production takes a massive drop. Until California and New York fall into the sea and we experience a similar sitution I don't see the comparison to post war Germany.
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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    Re: Fed Announces New Round of Bond Buying to Spur Growth

    Quote Originally Posted by j-mac View Post
    We have seen this fail before...Frankly I am surprised that I even have to post this...
    Sweet - an apples to dump trucks analogy. We certainly do NOT have an inflation problem right now. Admittedly, there's some irony in bold in there:

    Quote Originally Posted by http://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic
    In order to pay the large costs of World War I, Germany suspended the convertibility of its currency into gold when that war broke out. Unlike France, which imposed its first income tax to pay for the war, the German Kaiser and Parliament decided without opposition to fund the war entirely by borrowing,[12] a decision criticised by financial experts like Hjalmar Schacht even before hyperinflation broke out.[13] The result was that the exchange rate of the Mark against the US dollar fell steadily throughout the war to 8.91 Marks per dollar. The Treaty of Versailles, however, accelerated the decline in the value of the Mark, so that by the end of 1919 more than 47 paper Marks were required to buy one US dollar.
    It's pretty hard to increase your money supply 9:1 (guessing) and expect changes in only velocity and output and not price during wartime (presumably a time of full employment) . Plus I doubt the fed is going to be printing a quadrillion dollars here.

  8. #38
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    Re: Fed Announces New Round of Bond Buying to Spur Growth

    It won't be news that I think that automation and outsourcing are fatal to the old economy as we know it. There simply won't be jobs for the under-educated as we knew them in the past. Screwing in a bolt on a tire is now a robot job and you need an engineering degree to supervise a robot team. No amount of economic manipulation will change this. The only hope we have is very long term - education - and we resist this due to American backwardness.

    Excessive regulation just adds to the base problem and they dream up new regulations every day.

    You won't see $5 gas until AFTER the election. President Bersnakey wants to help Obusha keep his job so Bersnakey can keep his job. In the meantime, there has been so much debasement of the dollar combined with ludicrous interest rates that benefit banks, not businesses, that the FRN dollar will be DOA in the next few years. So, yeah, hold tightly to your PMs and at least you'll be able to stay even with the damages.

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    Re: Fed Announces New Round of Bond Buying to Spur Growth

    Quote Originally Posted by pdog View Post
    I guess I’d have to ask the reason of your discomfort.
    the risk of inflation and currency devaluation. we're walking a very fine line.

  10. #40
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    Re: Fed Announces New Round of Bond Buying to Spur Growth

    Quote Originally Posted by specklebang View Post
    It won't be news that I think that automation and outsourcing are fatal to the old economy as we know it. There simply won't be jobs for the under-educated as we knew them in the past. Screwing in a bolt on a tire is now a robot job and you need an engineering degree to supervise a robot team. No amount of economic manipulation will change this. The only hope we have is very long term - education - and we resist this due to American backwardness.

    Excessive regulation just adds to the base problem and they dream up new regulations every day.

    You won't see $5 gas until AFTER the election. President Bersnakey wants to help Obusha keep his job so Bersnakey can keep his job. In the meantime, there has been so much debasement of the dollar combined with ludicrous interest rates that benefit banks, not businesses, that the FRN dollar will be DOA in the next few years. So, yeah, hold tightly to your PMs and at least you'll be able to stay even with the damages.
    Can't say I agree with your last paragraph since the neither of those branches have much control over pump prices beyond the taxes.

    I've also seen others here make the argument that you can look at china as a gigantic, do-all robot, and economically it is hardly different, so outsourcing IS automation by some accounts. But in any case, you are right, and that will remain a long term problem. Even in suggesting public employment now, I realize the economy eventually must be healthy enough to offload that workforce back to the private sector.

    100% agree with education as a long term solution. It doesn't matter if our competitors are stealing our stuff, as long as they're ALWAYS stealing our stuff in an effort to keep up .

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