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> said country's economy is fucked Indeed. It's the road to currency collapse. The precedent was set in a big way during the last debt crisis; the US governm

> said country's economy is fucked Indeed. It's the road to currency collapse. The precedent was set in a big way during the last debt crisis; the US government used QE money to buy bad debt, recapitalized institutions and buy treasuries bonds to fund deficit spending. So now the question[1] is; is it possible for the US to suffer a recession without US politicians resorting to the virtual printing press? [1] https://news.ycombinator.com/item?id=17954531 https://news.ycombinator.com/item?id=17954531

JumpCrisscross 8y ago
> It's the road to currency collapse This is overly simplistic. QE led to neither rampant inflation nor dollar depreciation. Money velocity fell and monetary policy responded. (Fiscal policy’s relative non-responsivensss meant monetary policy had to overcompensate.)
- deleted 8y ago
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- topspin 8y ago
  > This is overly simplistic. No, it isn't. Print enough and the currency fails. The lesson has to be learned over and over again, in part because there is an endless supply of deniers whispering magical thinking into the ears of the powers that be. QE didn't lead to this only because they stopped. That time. We're still left with the precedent however; giveaways like "cash for clunkers," bailing out UAW and public sector pension funds... all those supposedly "good" things done with magic money from Washington, enabled in part by QE funded deficit spending. What evidence can you cite that they won't turn to QE again to try to paper over whatever bump in the road comes next? What assurance do you have that they'll stop printing next time? You don't have either. That's why it's a question.
  - JumpCrisscross 8y ago
    > Print enough and the currency fails. The lesson has to be learned over and over again Another lesson: refuse to print in a deflationary spiral and a recession turns into a depression. > What assurance do you have that they'll stop printing next time? This is a slippery slope argument. Central banks could always print. Deciding how much to print is their entire job. QE simply meant instead of using printed money to buy Treasuries, as the Fed has always done, it would also buy other assets. > bailing out UAW and public sector pension funds... all those supposedly "good" things done with magic money from Washington, enabled in part by QE funded deficit spending QE didn't monetize the bailouts. Buying Treasuries is something the Fed has always done. QE meant buying other assets, e.g. agency debt.
    - topspin 8y ago
      > QE had little to do with funding the government deficit. This is demonstrably false. For a time the Fed was buying over $2 billion of long term debt per day [1]; bonds that had no hope of finding buyers on the open market. They were directly funding federal deficit spending with QE. [1] https://www.federalreserve.gov/newsevents/pressreleases/monetary20101103a.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...
      - JumpCrisscross 8y ago
        > For a time the Fed was buying over $2 billion of long term debt per day [1]; bonds that had no hope of finding buyers on the open market. They were directly funding federal deficit spending with QE You're quoting a Federal Open Markets Committee (FOMC) statement [1]. This is the arm of the Federal Reserve which has always bought government debt. Without QE, the FOMC would have been buying huge amounts of Treasuries to keep (a) the money supply constant and (b) interest rates low. QE's novelty was the Fed saying "we aren't only going to buy Treasuries." Complaining about the Fed buying Treasuries is complaining about the Fed per se. Complaining about QE is complaining about the Fed not buying Treasuries, and instead buying other securities. [1] https://www.federalreserve.gov/newsevents/pressreleases/monetary20101103a.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...
- crdoconnor 8y ago
  >QE led to neither rampant inflation QE did lead to rampant inflation in asset prices (housing, shares, etc.). It just didn't lead to rampant inflation in consumer goods. That's purely because of how it was "spent" (on buying up treasuries). If it was spent on actual goods and services then it would have kicked off inflation in consumer goods instead.
  - dragonwriter 8y ago
    > QE did lead to rampant inflation in asset prices (housing The housing market in the US didn't even stop dropping until about the time of QE3 and only recovered slightly by the time QE ended. QE certainly didn't lead to “rampant inflation” in housing except perhaps by comparison to the rapid deflation that would have happened without it out some other policy change directed at the same issue.
    - zeroname 8y ago
      You're looking at the wrong real estate. The people that bought and drove up prices for all this junk real estate in the middle of nowhere were ordinary people who had no idea about investment, fueled by subprime loans. That kind of money wasn't coming back with QE. The kind of investors that got money via QE wouldn't invest into junk like that, instead they've driven up prices in urban areas. The same kind of people are driving up stocks, which are currently massively overvalued. Either way, you can't look at the initiation of QE and expect results by next tuesday.
- AnimalMuppet 8y ago
  And why didn't QE lead to rampant inflation? In the crash, about $4 trillion evaporated. The danger was a deflationary spiral, not an inflationary one. So the Fed injected $4 trillion back into the economy via QE. The result was that we had a bad recession, but not a deflationary collapse. We had the Great Recession, but not Great Depression II. That was actually extremely well done by the Fed. Of course, the danger always was whether they could unwind in without making a mess. They seem to be doing well so far.
throwaway34241 8y ago
If it's the road to currency collapse (presumably via inflation), that doesn't explain why inflation not only failed to materialize, but the Fed undershot its own inflation targets for most of the next decade. As far as I understand it, it's not that the central banks are unaware of inflation pressures due to QE, it's that they see other deflationary pressures and try to use QE in a proportionate way to counteract them. Judging by the end result of minimal inflation, if QE is inflationary there was probably substantial deflation pressure. I don't think it is reasonable to be concerned primarily about inflation but not also deflation. A deflationary collapse not only leads to reduced investment in the future (why invest when prices are falling), but a big enough one will lead to bank failure, with people unable to get money out, the FDIC insurance program bankrupt, etc. The US domestic political situation is already dysfunctional as it is. It's hard to imagine it remaining stable through an inflationary or deflationary collapse. And if history is any guide, radical political changes in a crisis are often not positive ones, since someone who knows who to blame and promises to solve everything can often undermine democratic institutions. I'll take (some level of) stability, thanks. Anyway, to answer your last question, QE is determined by economists at the central bank and not directly by politicians. I think the main reason they are looking at unconventional monetary policy is that their traditional way to end recessions, lowering interest rates, stops being effective once interest rates are at zero.

JumpCrisscross 8y ago

> It's the road to currency collapse This is overly simplistic. QE led to neither rampant inflation nor dollar depreciation. Money velocity fell and monetary policy responded. (Fiscal policy’s relative non-responsivensss meant monetary policy had to overcompensate.)

deleted 8y ago
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topspin 8y ago
> This is overly simplistic. No, it isn't. Print enough and the currency fails. The lesson has to be learned over and over again, in part because there is an endless supply of deniers whispering magical thinking into the ears of the powers that be. QE didn't lead to this only because they stopped. That time. We're still left with the precedent however; giveaways like "cash for clunkers," bailing out UAW and public sector pension funds... all those supposedly "good" things done with magic money from Washington, enabled in part by QE funded deficit spending. What evidence can you cite that they won't turn to QE again to try to paper over whatever bump in the road comes next? What assurance do you have that they'll stop printing next time? You don't have either. That's why it's a question.
- JumpCrisscross 8y ago
  > Print enough and the currency fails. The lesson has to be learned over and over again Another lesson: refuse to print in a deflationary spiral and a recession turns into a depression. > What assurance do you have that they'll stop printing next time? This is a slippery slope argument. Central banks could always print. Deciding how much to print is their entire job. QE simply meant instead of using printed money to buy Treasuries, as the Fed has always done, it would also buy other assets. > bailing out UAW and public sector pension funds... all those supposedly "good" things done with magic money from Washington, enabled in part by QE funded deficit spending QE didn't monetize the bailouts. Buying Treasuries is something the Fed has always done. QE meant buying other assets, e.g. agency debt.
  - topspin 8y ago
    > QE had little to do with funding the government deficit. This is demonstrably false. For a time the Fed was buying over $2 billion of long term debt per day [1]; bonds that had no hope of finding buyers on the open market. They were directly funding federal deficit spending with QE. [1] https://www.federalreserve.gov/newsevents/pressreleases/monetary20101103a.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...
    - JumpCrisscross 8y ago
      > For a time the Fed was buying over $2 billion of long term debt per day [1]; bonds that had no hope of finding buyers on the open market. They were directly funding federal deficit spending with QE You're quoting a Federal Open Markets Committee (FOMC) statement [1]. This is the arm of the Federal Reserve which has always bought government debt. Without QE, the FOMC would have been buying huge amounts of Treasuries to keep (a) the money supply constant and (b) interest rates low. QE's novelty was the Fed saying "we aren't only going to buy Treasuries." Complaining about the Fed buying Treasuries is complaining about the Fed per se. Complaining about QE is complaining about the Fed not buying Treasuries, and instead buying other securities. [1] https://www.federalreserve.gov/newsevents/pressreleases/monetary20101103a.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...
crdoconnor 8y ago
>QE led to neither rampant inflation QE did lead to rampant inflation in asset prices (housing, shares, etc.). It just didn't lead to rampant inflation in consumer goods. That's purely because of how it was "spent" (on buying up treasuries). If it was spent on actual goods and services then it would have kicked off inflation in consumer goods instead.
- dragonwriter 8y ago
  > QE did lead to rampant inflation in asset prices (housing The housing market in the US didn't even stop dropping until about the time of QE3 and only recovered slightly by the time QE ended. QE certainly didn't lead to “rampant inflation” in housing except perhaps by comparison to the rapid deflation that would have happened without it out some other policy change directed at the same issue.
  - zeroname 8y ago
    You're looking at the wrong real estate. The people that bought and drove up prices for all this junk real estate in the middle of nowhere were ordinary people who had no idea about investment, fueled by subprime loans. That kind of money wasn't coming back with QE. The kind of investors that got money via QE wouldn't invest into junk like that, instead they've driven up prices in urban areas. The same kind of people are driving up stocks, which are currently massively overvalued. Either way, you can't look at the initiation of QE and expect results by next tuesday.
AnimalMuppet 8y ago
And why didn't QE lead to rampant inflation? In the crash, about $4 trillion evaporated. The danger was a deflationary spiral, not an inflationary one. So the Fed injected $4 trillion back into the economy via QE. The result was that we had a bad recession, but not a deflationary collapse. We had the Great Recession, but not Great Depression II. That was actually extremely well done by the Fed. Of course, the danger always was whether they could unwind in without making a mess. They seem to be doing well so far.

throwaway34241 8y ago

If it's the road to currency collapse (presumably via inflation), that doesn't explain why inflation not only failed to materialize, but the Fed undershot its own inflation targets for most of the next decade. As far as I understand it, it's not that the central banks are unaware of inflation pressures due to QE, it's that they see other deflationary pressures and try to use QE in a proportionate way to counteract them. Judging by the end result of minimal inflation, if QE is inflationary there was probably substantial deflation pressure. I don't think it is reasonable to be concerned primarily about inflation but not also deflation. A deflationary collapse not only leads to reduced investment in the future (why invest when prices are falling), but a big enough one will lead to bank failure, with people unable to get money out, the FDIC insurance program bankrupt, etc. The US domestic political situation is already dysfunctional as it is. It's hard to imagine it remaining stable through an inflationary or deflationary collapse. And if history is any guide, radical political changes in a crisis are often not positive ones, since someone who knows who to blame and promises to solve everything can often undermine democratic institutions. I'll take (some level of) stability, thanks. Anyway, to answer your last question, QE is determined by economists at the central bank and not directly by politicians. I think the main reason they are looking at unconventional monetary policy is that their traditional way to end recessions, lowering interest rates, stops being effective once interest rates are at zero.