Just how Destructive is QE ?

Kushinator said:

Metals are historically not a good investment. For one, they do not generate cash flow.

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Do you understand how gold stocks even work? Or dividends?

Note: I do not pose this question to you as an insult, you are one of the debaters I respect here.

Lachean said:

Do you understand how gold stocks even work? Or dividends?

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If you are referring to the mining stocks and commodity ETF's sure they generate earnings. In the case of an ETF, it really isn't really producing anything of value unless you count finding arbitrage opportunities in futures. But they are still equity positions. The quote you are referencing was about physical metals.

Kushinator said:

If you are referring to the mining stocks and commodity ETF's sure they generate earnings. In the case of an ETF, it really isn't really producing anything of value unless you count finding arbitrage opportunities in futures. But they are still equity positions. The quote you are referencing was about physical metals.

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If that is what you meant then we have little disagreement.,

Lachean said:

If that is what you meant then we have little disagreement.,

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Owning gold is not a productive investment (neither is cash, or foreign currency). The S&P 500 is a productive investment, all of those companies are creating something of value. Gold is purely a speculation play, and therefore i don't view it in the same light as an equity or bond investment.

Fenton said:

I DIDN'T say Japan would go bankrupt, that was your attempt to dishonestly misrepresent my statement because you'e incapable of rebutting anything I've written in this thread legitimately.


Japan's desperate attempt to buy time now makes them highly vulnerable to the effects of rising bond yields. They wen't for broke, put everything on black and IF yields shoot up then, YES they'll be bankrupt. Japans gamble wont work with out strong structural reforms, which it's Government has pledged to follow through with.

IF they can't deliver then their gamble will be a waste and yes, they'll be bankrupt.

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Oh fenton, the trick to denying you said something is not to say it as you are denying it.

Fenton said:

Japan went all in, but they should have made a few considerations before making the decision to send their country into bankruptcy.

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Vern said:

Oh fenton, the trick to denying you said something is not to say it as you are denying it.

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Care to comment on the OP ? Because your trolling doesn't add anything of value and only reinforces my contention that your'e in over your head on this and many other issues.

Keep celebrating the DOW sure, but go do that in that ridiculous thread you started.

QE has only been successful in making those invested in the stock market a little richer for the time being.

Kushinator said:

As you can tell by the OP, Fenton has no real understanding of monetary policy. I stopped reading his post when he stated the goal of QE was to free up credit to consumers and businesses. In reality, credit easing ensures asset price volatility is not as susceptible to liquidity constraints.

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I agree with you.

What Fenton is arguing is that the Fed shouldn't be lowering interest rates in a weak economy with low inflation, which makes no economic sense. Certainly raising interest rates doesn't provide more credit availability to consumers and businesses, who will shun the high rates they would pay. Generally speaking, if you want make it easier to borrow, you lower rates not raise them.

If QE is a failure it is because the economy is in a liquidity trap and as Keynes said, in a liquidity trap monetary policy is de facto constrained by the zero lower bound. As such, that's where fiscal policy kicks in, where an increase in government spending leads to a rise in output. But the same people would be arguing that government should be cutting back.

"Because yield returns are so low QE has forced Capital into non-yielding assets which has produced a commodities boom. For example, Between 2010 and 2011 the S.P GSCI Agricultural Index of crop prices doubled and that equates directly to higher food prices."

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Conclusion.
The increased participation by financial investors in commodity futures markets over the last
decade has been quite substantial. In principle this could have influenced the risk premium,
and Hamilton and Wu (forthcoming) found significant changes in the behavior of the risk
premium on oil futures contracts before and after 2005. In this paper we studied data
since 2006 to look for a systematic relation between the notional value of commodity futures
contracts held on behalf of index-fund investors and expected returns on futures contracts.
We found essentially no relation for the 12 agricultural commodities for which the CFTC reports such positions. We reviewed evidence that positions in crude oil contracts imputed
from the reported agricultural holdings could help predict crude oil futures returns, and noted
that the methodology for such imputation could be generalized to make use of all the available
data. We confirmed that these imputed holdings appear to help predict crude oil returns over
2006-2009, though this is closely related to the dynamics of index investing during the Great
Recession, and indeed the same imputed holdings also appear to predict stock returns over
that period. We found, however, that both relations broke down when trying to describe the
data since 2009.

Our overall conclusion is thus consistent with most of the previous literature, there seems
to be little evidence that index-fund investing is exerting a measurable effect on commodity futures prices. As noted in the introduction, even if one could demonstrate that index-fund buying on commodity future prices, it it would be a separate challenge to explain hows this could also end up changing the equilibrium spot price.
We conclude that it is difficult to find much empirical foundation for a view that continues to have a significant impact on
policy decisions.

http://dss.ucsd.edu/~jhamilto/commodity_index.pdf

Fenton said:

Care to comment on the OP ? Because your trolling doesn't add anything of value and only reinforces my contention that your'e in over your head on this and many other issues.

Keep celebrating the DOW sure, but go do that in that ridiculous thread you started.

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I’m sorry I only pointed out your hysterical “ japan going bankrupt” narrative that you reiterated as you denied it. I’m flattered you want me to ‘rebut’ your OP but as you demonstrated with your hysterical “ japan going bankrupt” narrative your grasp of reality is tenuous at best and as your “trillions of crap mortgages” narrative proves, you wont stop posting something even after its proven false.

MTAtech said:

I agree with you.

What Fenton is arguing is that the Fed shouldn't be lowering interest rates in a weak economy with low inflation, which makes no economic sense. Certainly raising interest rates doesn't provide more credit availability to consumers and businesses, who will shun the high rates they would pay. Generally speaking, if you want make it easier to borrow, you lower rates not raise them.

If QE is a failure it is because the economy is in a liquidity trap and as Keynes said, in a liquidity trap monetary policy is de facto constrained by the zero lower bound. As such, that's where fiscal policy kicks in, where an increase in government spending leads to a rise in output. But the same people would be arguing that government should be cutting back.

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Huh ??

What in the hell are you talking about ? Easier to borrow ? What planet are you currently residing on ?

Lower interest rates for one, remove the incentives for financial institutions to risk their principle, especially in a stagnant economy 5 years running. A low Fed rate removes the incentives for larger banks to risk their principle on smaller banks who depend on inter-bank lending for the liquidity needs because of their small deposit base.

Regardless, Consumers aren't borrowing because they're already having to deal with a mountain of debt. You can also add to that stagnant wages and the acute increases in Health Care premiums to the mix. Small Business's have no reason to expand in a stagnant economy and corporations ?

Sure, Corporations will take advantage of lower lending expenses as they post higher profits and trim down their workforce. Recently Corporations have been buying back allot of their outstanding shares instead of actually investing in growing their Company as they sit on mountains of Capital.

You see, another one of QE's unintended consequences is to increase labor cost as the cost of Capital Decreases so Corporations look to downsize their workforce, move capital overseas, etc. Low interest rates causes Capital flight and mis-allocations of capital as investors look to short term gains over long term investments.

QE is NOT increasing access to credit.

And a liquidity trap refers to interest rates NOT responding to FED monetary injections because of the hoarding of cash by investors and Corporations.

Well, how about we try a experiment. If Yelstin made an announcement this afternoon that QE was no more, would interest rates rise or fall ?

To make the claim that the FED's policy hasn't affected interest rates is a just nonsense. No doubt influenced by your adherence to a corrupted ideology.

I didn't say to STOP QE or anything did I argue for or against interest rates increasing, I simply showed some of the detrimental effects of QE and how it never accomplished what it's intended purpose.

Vern said:

I’m sorry I only pointed out your hysterical “ japan going bankrupt” narrative that you reiterated as you denied it. I’m flattered you want me to ‘rebut’ your OP but as you demonstrated with your hysterical “ japan going bankrupt” narrative your grasp of reality is tenuous at best and as your “trillions of crap mortgages” narrative proves, you wont stop posting something even after its proven false.

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Yes VERN, we know that your not capable of discussing the issue, ( but you can celebrate the "Success" of Obama's Policies.. ) and that leaves you to only two options.

Troll or leave.

Fenton said:

Huh ??

What in the hell are you talking about ? Easier to borrow ? What planet are you currently residing on ?

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Earth, where low interest rate environments are easier to borrow in than high interest environments, all other things being equal.

Low interest environments also allow corporations to offer financing to consumers at low rates:

Case in point

MTAtech said:

Earth, where low interest rate environments are easier to borrow in than high interest environments, all other things being equal.

Low interest environments also allow corporations to offer financing to consumers at low rates:

Case in point

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LOL !!!

You can repeat your self and mitigate the failures of QE and your President all you want, your'e still not making any sense.

81.5% of Money Created through Quantitative Easing Is Sitting There Gathering Dust ... Instead of Helping the Economy Washington's Blog

" There is a massive misconception about where the Bernanke Fed’s stimulus landed. Although the Bernanke Fed has disbursed $2.284 trillion in new money (the monetary base) since August 1, 2008, one month before the 2008 financial crisis, 81.5 percent now sits idle as excess reserves in private banks. The banks are not required to hold excess reserves. The excess reserves exploded from $831 billion in August 2008 to $1.863 trillion on June 14, 2013. The excess reserves of the nation’s private banks had previously stayed at nearly zero since 1959 as seen on the St. Louis Fed’s chart. The banks did not leave money idle in excess reserves at zero interest because they were investing in income earning assets, including loans to consumers and businesses.

This 81.5 percent explosion in idle excess reserves means that the Bernanke Fed’s new money issues of $85 billion each month have never been a big stimulus. Approximately 81.5 percent (or $69.27 billion) is either bought by banks or deposited into banks where it sits idle as excess reserves. The rest of the $85 billion, approximately 18.5 percent (or $15.72 billion) continues to circulate or is held as required reserves on banks’ deposit accounts (unlike unrequired excess reserves)."

http://www.newyorkfed.org/research/staff_reports/sr380.pdf

"Why are banks holding so many excess reserves? What do the data in Figure 1 tell us about current economic conditions and about bank lending behavior? Some observers claim that the large increase in excess reserves implies that many of the policies introduced by the Federal Reserve in response to the financial crisis have been ineffective."

"Rather than promoting the flow of credit to firms and households, it is argued, the data shown in Figure 1 indicate that the money lent to banks and other intermediaries by the Federal Reserve since September 2008 is simply sitting idle in banks’ reserve accounts. Edlin and Jaffee (2009), for example, identify the high level of excess reserves as either the “problem” behind the continuing credit crunch or “if not the problem, one heckuva symptom” (p.2). Commentators have asked why banks are choosing to hold so many reserves instead of lending them out, and some claim that inducing banks to lend their excess reserves is crucial for resolving the credit crisis."

We all know what the INTENTIONS of QE were, but I'm specifically talking about RESULTS.

Banks don't have to lend considering the massive excess reserves that sit stagnant. The FED's interest payments on excess reserves is a guarantee, risking their principle by lending it out into Obama's economy is NOT.

FRB: Interest on Required Balances and Excess Balances

"The Federal Reserve Banks pay interest on balances maintained to satisfy reserve balance requirements and on excess balances. The Board of Governors has prescribed rules governing the payment of interest by Federal Reserve Banks in Regulation D (Reserve Requirements of Depository Institutions, 12 CFR Part 204).

The Financial Services Regulatory Relief Act of 2006 authorized the Federal Reserve Banks to pay interest on balances held by or on behalf of depository institutions at Reserve Banks, subject to regulations of the Board of Governors, effective October 1, 2011. The effective date of this authority was advanced to October 1, 2008 by the Emergency Economic Stabilization Act of 2008. The text of both Acts is available on the Library of Congress' THOMAS Legislative Information website."

Robert Auerbach: Malpractice at the Bernanke Federal Reserve

"Immediately after the recession took a dramatic dive in September 2008, the Bernanke Fed implemented a policy that continues to further damage the incentive for banks to lend to businesses. On October 6, 2008 the Fed’s Board of Governors, chaired by Ben Bernanke, announced it would begin paying interest on the reserve balances of the nation’s banks, major lenders to medium and small size businesses.

You don’t need a Ph.D. economist to know that if you pay banks ¼ percent risk free interest to hold reserves that they can obtain at near zero interest, that would be an incentive to hold the reserves. The Fed pumped out huge amounts of money, with the base of the money supply more than doubling from August 2008 to August 2010, reaching $1.99 trillion. Guess who has over half of this money parked in cold storage? The banks have $1.085 trillion on reserves drawing interest, The Fed records show they were paid $2.18 billion interest on these reserves in 2009."


Are you really just going to repeat the intentions of QE circa 2008 ? Because it's highly irrelevant. Almost as irrelevant as the increased Stimulus remark you made in your last post.

So according to the Keynesians we should all go for broke and institute " Abenomics " American style, huh ? Wow, that would work about as well as Bernake's QE. Run up our debt in a vacuum as you ignore the ACTUAL REASONS for our continued economic stagnation because, your ideology says it will work.

end fed now

Because yield returns are so low QE has forced Capital into non-yielding assets which has produced a commodities boom. For example, Between 2010 and 2011 the S.P GSCI Agricultural Index of crop prices doubled and that equates directly to higher food prices.

Click to expand...

You see, another one of QE's unintended consequences is to increase labor cost as the cost of Capital Decreases so Corporations look to downsize their workforce, move capital overseas, etc. Low interest rates causes Capital flight and mis-allocations of capital as investors look to short term gains over long term investments.

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Amazing....capitol is going into commodity trading in the US....but....it is "flying" from the US too.

QE is sooooo dynamic in its effects!

Fenton said:

Yes VERN, we know that your not capable of discussing the issue, ( but you can celebrate the "Success" of Obama's Policies.. ) and that leaves you to only two options.

Troll or leave.

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Fenton, my first post was in response to your post that Japan was going bankrupt. You then hysterically claimed you didn't. Anyhoo, again I'm flattered you 'demand' I refute your silly points about QE. Why don't you back up what you post?

just to reiterate your credibility (or lack thereof). Here's post 8

Fenton said:

Japan went all in, but they should have made a few considerations before making the decision to send their country into bankruptcy.

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Post 15

Fenton said:

I DIDN'T say Japan would go bankrupt, that was your attempt to dishonestly misrepresent my statement because you'e incapable of rebutting anything I've written in this thread legitimately.


Japan's desperate attempt to buy time now makes them highly vulnerable to the effects of rising bond yields. They wen't for broke, put everything on black and IF yields shoot up then, YES they'll be bankrupt. Japans gamble wont work with out strong structural reforms, which it's Government has pledged to follow through with.

IF they can't deliver then their gamble will be a waste and yes, they'll be bankrupt.

Click to expand...

Vern said:

Fenton, my first post was in response to your post that Japan was going bankrupt. You then hysterically claimed you didn't. Anyhoo, again I'm flattered you 'demand' I refute your silly points about QE. Why don't you back up what you post?

just to reiterate your credibility (or lack thereof). Here's post 8


Post 15

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There is NOTHING more hilarious VERN, than the low information celebrations of a poster desperate for a Obama "success" story VERN. :lamo:lamo

And you know, that's happening less and less for some reason but no not you.

I mean your'e "knowledgeable" enough to qualify the Stock Markets gains as a result of "sound economic policies" from Obama, but when it comes to offering up specific explanations concerning the DOW's rise, you just go into full on troll mode.

Your refusal to comment on the topic in any substantial capacity is a exceptional revelation of ignorance. It' like your admitting that you don't comprehend the topic in your own thread.

Did you think you were going to get away with posting that ridiculous thread ? Here ? At DP ? They would LOVE a thread giving Obama credit for the Stock Markets rise over at the Democrat Underground but here ? No, your'e going to be challenged and Corrected by at least one Conservative.

Fenton said:

LOL !!!

You can repeat your self and mitigate the failures of QE and your President all you want, your'e still not making any sense.
...

http://www.newyorkfed.org/research/staff_reports/sr380.pdf

"Why are banks holding so many excess reserves? What do the data in Figure 1 tell us about current economic conditions and about bank lending behavior? Some observers claim that the large increase in excess reserves implies that many of the policies introduced by the Federal Reserve in response to the financial crisis have been ineffective."

"Rather than promoting the flow of credit to firms and households, it is argued, the data shown in Figure 1 indicate that the money lent to banks and other intermediaries by the Federal Reserve since September 2008 is simply sitting idle in banks’ reserve accounts. Edlin and Jaffee (2009), for example, identify the high level of excess reserves as either the “problem” behind the continuing credit crunch or “if not the problem, one heckuva symptom” (p.2). Commentators have asked why banks are choosing to hold so many reserves instead of lending them out, and some claim that inducing banks to lend their excess reserves is crucial for resolving the credit crisis."

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Did you notice the date of your citation? July 2009. Got anything more recent from a reliable source (some blog isn't a reliable source)?

While you assert QE was a failure, QE1 was effective in preventing the economy from sinking into depression. QE2 was less effective and the jury is out on QE3. What is clear is that doing the opposite, what you suggest, would have been a disaster.

endthefed said:

end fed now

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And replace it with what?

Those who argue this are fact challenged. Just compare the 100 years since 1913 with the 100 years that preceded it and you will see that the Fed has done a far better job of controlling wild swings of hyper-inflation and deflation than what existed before.

I give up. How destructive is it?

and how's that silver investment coming?

I give up. How destructive is it?

and how's that silver investment coming?