6 ms·

This is total nonsense

adventured 13y ago
No it's exactly what caused the massive asset inflation across all major assets in the US economy in the last four years. Look up the perfect correlation between the S&P and the Fed's pomo shots, and its balance sheet expansion. But don't take my word for it. Recently the US Treasury conveniently wrote a paper admitting that the Fed was responsible for spurring the asset inflation. The dollar has lost 97% of its value, according to the Fed, over the course of a century. That was before they were knee deep into the economy 'printing' trillions - having increased their balance sheet by 300% in five years. How can they ever stop printing while the US Govt. runs a $700+ billion deficit? They can't. The outcome is obvious. The Fed intentionally re-inflated assets, because it's the only gimmick they have left. Once you lower interest rates to zero, there's nowhere else to go but to intentionally try to spur asset inflation and generate a fake wealth effect, which the Fed has done two other times in the prior decades. They use their POMO program, along with mortgage purchases and cheap interest rates to inflate the stock market and the real estate market. It's real simple. There has been no job recovery. There has been no manufacturing boom. There has been no improvement in the welfare and poverty picture. There has been no improvement in incomes. And we're still missing seven million full time jobs, and millions have fallen out of the labor force. So why are asset prices booming? The answer to that is obvious as well.
- nerfhammer 13y ago
  QE myths: http://business.time.com/2013/09/18/taper-tantrums-3-myths-about-quantitative-easing/ http://business.time.com/2013/09/18/taper-tantrums-3-myths-a...
  - joslin01 13y ago
    Alright, since you can't speak for yourself or rebuttal with anything more meaningful than "This is nonsense.", I'll respond to the article. 1.) Quantitative Easing is printing money -- "This is because when the Fed buys bonds from banks it does so by crediting those banks’ accounts at the Fed with reserves that didn’t exist before. But it’s misleading to call this process “money printing” because it doesn’t actually do anything to increase the amount of money in circulation. In fact, in our monetary system, most money is created by private banks and not the Federal Reserve. When a bank lends you money on your credit card, that’s “printing” money." They say it's misleading to call it "printing money" because all they do is increase the amount a private bank can lend out. Apparently it's not their fault for putting in the extra reserves, it's the private bank "printing the money." 2.) Quantitative Easing will eventually lead to inflation: "If the government literally began printing money and started mailing out new $100 bills to citizens, that would lead to price inflation." --- Apparently, using their own example above, people getting lent more money and using that lent money is not inflation. The author is purposefully evading the core argument and instead paints a ridiculous definition of inflation (direct inflation). It doesn't take a genius to see that more reserves = more money to lend = more money to spend = more money in circulation. 3.) Quantitative Easing is responsible for recent stock market highs --- Point isn't pertinent to the discussion and quite frankly, I don't care. The stock market is driven by people who decide to buy or sell. When more people buy, prices go up. ------ So, what are your thoughts?
    - jchrisa 13y ago
      I'd prefer this to QE because it should cause a bigger increase in money velocity. http://en.m.wikipedia.org/wiki/Demurrage_(currency) http://en.m.wikipedia.org/wiki/Demurrage_(currency)
    - nerfhammer 13y ago
      To say that all recent stock price increases, much less the one-day price of twitter's stock specifically, are caused by QE alone is an extreme claim and it is not my burden to disprove it. The simpler and more plausible explanation for stock market growth is coinciding GDP and earnings growth. QE should lead to a mild preference against (UST) bonds by lowering yields, but it is dubious that this alone could explain stock market indexes doubling over the same period. Twitter's one-day stock price specifically is idiosyncratic investor behavior and blaming that on QE is absurd nonsense.
    - nhaehnle 13y ago
      It's a common misconception, but QE does not change the ability of private banks to make loans in any way. If you think I am wrong about this, please explain the mechanism by which you think QE increases the ability of private banks to make loans. In fact, there are almost no serious arguments for why QE should stimulate the economy in any way, except for a small straw, which is that QE might reduce long-term interest rates, and that this drop of long-term interest might induce more people to take out bank loans and increase their spending in this way. Also, yes, Quantitative Easing might lead to inflation, but this is exactly what people hope for in the first place :-) And no, Quantitative Easing will not lead to uncontrollable inflation. If loan-driven inflation gets too high, the central bank can simply decide to raise interest rates and stop QE again.
      - foobarqux 13y ago
        > If you think I am wrong about this, please explain the mechanism by which you think QE increases the ability of private banks to make loans. Not the parent but I thought depository and possibly other types of loans were limited by the size of reserves.

No it's exactly what caused the massive asset inflation across all major assets in the US economy in the last four years. Look up the perfect correlation between the S&P and the Fed's pomo shots, and its balance sheet expansion. But don't take my word for it. Recently the US Treasury conveniently wrote a paper admitting that the Fed was responsible for spurring the asset inflation. The dollar has lost 97% of its value, according to the Fed, over the course of a century. That was before they were knee deep into the economy 'printing' trillions - having increased their balance sheet by 300% in five years. How can they ever stop printing while the US Govt. runs a $700+ billion deficit? They can't. The outcome is obvious. The Fed intentionally re-inflated assets, because it's the only gimmick they have left. Once you lower interest rates to zero, there's nowhere else to go but to intentionally try to spur asset inflation and generate a fake wealth effect, which the Fed has done two other times in the prior decades. They use their POMO program, along with mortgage purchases and cheap interest rates to inflate the stock market and the real estate market. It's real simple. There has been no job recovery. There has been no manufacturing boom. There has been no improvement in the welfare and poverty picture. There has been no improvement in incomes. And we're still missing seven million full time jobs, and millions have fallen out of the labor force. So why are asset prices booming? The answer to that is obvious as well.

nerfhammer 13y ago
QE myths: http://business.time.com/2013/09/18/taper-tantrums-3-myths-about-quantitative-easing/ http://business.time.com/2013/09/18/taper-tantrums-3-myths-a...
- joslin01 13y ago
  Alright, since you can't speak for yourself or rebuttal with anything more meaningful than "This is nonsense.", I'll respond to the article. 1.) Quantitative Easing is printing money -- "This is because when the Fed buys bonds from banks it does so by crediting those banks’ accounts at the Fed with reserves that didn’t exist before. But it’s misleading to call this process “money printing” because it doesn’t actually do anything to increase the amount of money in circulation. In fact, in our monetary system, most money is created by private banks and not the Federal Reserve. When a bank lends you money on your credit card, that’s “printing” money." They say it's misleading to call it "printing money" because all they do is increase the amount a private bank can lend out. Apparently it's not their fault for putting in the extra reserves, it's the private bank "printing the money." 2.) Quantitative Easing will eventually lead to inflation: "If the government literally began printing money and started mailing out new $100 bills to citizens, that would lead to price inflation." --- Apparently, using their own example above, people getting lent more money and using that lent money is not inflation. The author is purposefully evading the core argument and instead paints a ridiculous definition of inflation (direct inflation). It doesn't take a genius to see that more reserves = more money to lend = more money to spend = more money in circulation. 3.) Quantitative Easing is responsible for recent stock market highs --- Point isn't pertinent to the discussion and quite frankly, I don't care. The stock market is driven by people who decide to buy or sell. When more people buy, prices go up. ------ So, what are your thoughts?
  - jchrisa 13y ago
    I'd prefer this to QE because it should cause a bigger increase in money velocity. http://en.m.wikipedia.org/wiki/Demurrage_(currency) http://en.m.wikipedia.org/wiki/Demurrage_(currency)
  - nerfhammer 13y ago
    To say that all recent stock price increases, much less the one-day price of twitter's stock specifically, are caused by QE alone is an extreme claim and it is not my burden to disprove it. The simpler and more plausible explanation for stock market growth is coinciding GDP and earnings growth. QE should lead to a mild preference against (UST) bonds by lowering yields, but it is dubious that this alone could explain stock market indexes doubling over the same period. Twitter's one-day stock price specifically is idiosyncratic investor behavior and blaming that on QE is absurd nonsense.
  - nhaehnle 13y ago
    It's a common misconception, but QE does not change the ability of private banks to make loans in any way. If you think I am wrong about this, please explain the mechanism by which you think QE increases the ability of private banks to make loans. In fact, there are almost no serious arguments for why QE should stimulate the economy in any way, except for a small straw, which is that QE might reduce long-term interest rates, and that this drop of long-term interest might induce more people to take out bank loans and increase their spending in this way. Also, yes, Quantitative Easing might lead to inflation, but this is exactly what people hope for in the first place :-) And no, Quantitative Easing will not lead to uncontrollable inflation. If loan-driven inflation gets too high, the central bank can simply decide to raise interest rates and stop QE again.
    - foobarqux 13y ago
      > If you think I am wrong about this, please explain the mechanism by which you think QE increases the ability of private banks to make loans. Not the parent but I thought depository and possibly other types of loans were limited by the size of reserves.