More proof that the ACTUAL recession never ended.

[Tempest]

Originally Posted By: Drew99GT
Originally Posted By: Tempest

So if demand is so strong, then why does the central bank see fit to purchase so large a share of Treasuries? Current estimates are that it will purchase 90% in the next year.



I don't know where you're getting that information, but the stated reason they're doing QE is to shorten the maturity of US debt supposedly to lower or keep US rates as low as possible, but many market watchers will point out the blatantly obvious fact that QE transactions in the past have done the complete opposite. It looks like they're trying to create inflation and a rise in rates organically to heed off deflation. They're trying to stop what happened in Japan. Remember Milton Friedmon's golden interest rate rule - low yields, tight money; high yields, easy money.


You didn't answer any of my questions. And how do you create inflation if you aren't creating any new dollars?

And:
http://www.bloomberg.com/news/2012-12-03/treasury-scarcity-to-grow-as-fed-buys-90-of-new-bonds.html

 

[DBMaster]

Wow! The level of general pessimism demonstrated in this thread is quite depressing.

The Roman Empire lasted a whole heck of a lot longer than 236 years so the Rome comment might be justified. Still depressing, though.

 

[DBMaster]

As long as someone brought up Rome I think I'll go off on a tangent. What do countries like England, Spain, and France have in common? In past centuries they were all "superpowers." England had the most powerful navy, bar none. Spain introduced the first (That I know of) world currency due to the mass of silver plundered from the New World. France was once a great imperialistic power as well. Did those countries cease to exist? Somehow, those folks seem happier to me, without having to uphold a role as "world cop" and "world charity."

Maybe I am just naive. We will survive and, like the rest of the world that precedes us, we will have to adapt.

What is the alternative?

 

[Rock_Hudstone]

Originally Posted By: Drew99GT
Originally Posted By: spasm3
Another factor will be if the debt ceiling is raised in feb. ( I hope its not).
It has to be raised. It's a meaningless metric currently and the best evidence of that is interest rates. If it was really a problem, would rates continue to stay so low???

Of course the debt ceiling will be raised. Otherwise, the Federal government would have to make massive cuts in spending, something they are loath to do, and will not do, until forced by the market.

As for interest rates, they are being kept artificially low because the Federal Reserve is buying now buying 70% of Treasury debt. This is essentially the left hand of the government borrowing from the right hand.

Market interest rates for our debt would have to be much higher to attract more foreign buyers. Yet, that would explode interest payments on the national debt. They've boxed themselves into a corner.

 

[Tempest]

Quote:
What do countries like England, Spain, and France have in common?

Riots. Don't forget Greece in that list.

 

[DBMaster]

^Yes, the ancient Greeks may have created civilization as we know it; science, medicine, democracy, etc. Every civilization has its issues, that's for sure. I'm just not sure why we think that we are not subject to the same failings as the rest of the world.

It sure does bug me, most of all, that our country seems to "reward" people for bad behavior. In effect, that could be the problem you refer to in Greece. Can you imagine the riots that would take place in the U.S. if we adopted the equivalent of austerity measures?

 

[Tempest]

Quote:
Can you imagine the riots that would take place in the U.S. if we adopted the equivalent of austerity measures?

I'm a lot more worried about the ones if we don't....

 

[Drew99GT]

Originally Posted By: Tempest

And how do you create inflation if you aren't creating any new dollars?



Precisely the point.

You're entire notion of how a modern monetary system works is flawed, so what's the point in answering meaningless questions? Most of the information peddled out about what's happening with regards to the Fed, interest rates etc. is so misguided and patently false, it's astounding.

You still claim the Fed is monetizing debt and that QE is supposedly going to be a problem. The only problem it creates is mass confusion among the public and financial markets.

 

[Drew99GT]

Oh no, the Fed is buying 90% of net new government bonds, it's supposedly going to cause hyperinflation. In reality, they're swapping bonds for bank reserves that were already created in the economy.

"Quantitative easing does not increase the money supply and is therefore not inflationary."

http://pragcap.com/pomo-flip-matter

We're already at QE4 Tempest. If Quantitative easing was inflationary, why have 10 year yields fallen from 2.5% to 1.7% in that time frame? And no, the Fed DOES NOT as of yet fundamentally control rates at the longer end of maturity on an outright basis like they do the Fed Funds rate. THE MARKET is what made rates drop. ??????????

 

[Tempest]

Originally Posted By: Drew99GT
Originally Posted By: Tempest

And how do you create inflation if you aren't creating any new dollars?



Precisely the point.

You're entire notion of how a modern monetary system works is flawed, so what's the point in answering meaningless questions? Most of the information peddled out about what's happening with regards to the Fed, interest rates etc. is so misguided and patently false, it's astounding.

You still claim the Fed is monetizing debt and that QE is supposedly going to be a problem. The only problem it creates is mass confusion among the public and financial markets.


Specifics matter and that is what I am getting at. What exactly are they converting and into what?

First you say they aren't creating any new net assets, and then you say they are trying to generate inflation. How do you do both at the same time?

This is a very good and even article on the topic:
http://www.creditwritedowns.com/2012/10/...his-crisis.html

 

[Drew99GT]

Originally Posted By: SteveSRT8
Sure sounds to me like you ^^^ are equally as polarized as anyone else here.

Just another brand of kool aid...

I just love it when the educated elite arrive to tell us how we're all doing fine and everything is great!


You're putting words in my mouth. Where did I say we're doing fine? If you serahc through my posting history, I've made it blatantly obvious I think the economy is a disaster and has been for the better part of the last several decades for the median wage earner. How am I an "educated elite"? I work my [censored] off everyday to make my ends meet. So because I don't use false innuendo and conspiracy theories to make financial decisions, I'm a "koolaid drinker"?

 

[Drew99GT]

Originally Posted By: Tempest

First you say they aren't creating any new net assets, and then you say they are trying to generate inflation. How do you do both at the same time?



The point is, and Cullen Roche's point, is that Quantitative Easing is a completely misguided and failed policy. IT CAN'T re-inflate the economy and that's why it continues to fail. That's why all the doomsdayers who's disastrous predictions of hyperinflation, a collapse in the treasury market, a collapse of the dollar, shorting US treasuries etc. have been utter failures.

 

[Drew99GT]

Originally Posted By: Tempest

Specifics matter and that is what I am getting at. What exactly are they converting and into what?



The links I provided explain it with balance sheet examples. Banks hold treasuries. The Fed "buys" those treasuries from banks and in effect sells the banks reserves. No new money is created. They swap treasuries for reserves. They're essentially giving banks a checking account instead of a savings account.

 

[fdcg27]

The Fed could reflate the economy were the demand for capital there.
It isn't, and even rates that are effectively zero cannot seem to promote robust growth.
This is known as a liquidity trap.
No amount of liquidity, as evidenced by low interest rates can get the economy moving.
The answer, far from fiscal austerity, is probably fiscal stimulus in the form of tax cuts for the masses and increased federal spending.
That spending can be on things that bring lasting benefits and should really be calculated as depreciable assets, not current spending.
Infrastructure spending would be a good example.
Anyone should ask themselves why the federal government enjoyed a couple of years of current budget surpluses back in the mid 'nineties.
I know that you already know, but I'll give everyone else a hint.
It had nothing at all to do with either fiscal austerity or the Fed buying in bond debt.

 

[Tempest]

Originally Posted By: Drew99GT
Oh no, the Fed is buying 90% of net new government bonds, it's supposedly going to cause hyperinflation. In reality, they're swapping bonds for bank reserves that were already created in the economy.

"Quantitative easing does not increase the money supply and is therefore not inflationary."

http://pragcap.com/pomo-flip-matter

We're already at QE4 Tempest. If Quantitative easing was inflationary, why have 10 year yields fallen from 2.5% to 1.7% in that time frame? And no, the Fed DOES NOT as of yet fundamentally control rates at the longer end of maturity on an outright basis like they do the Fed Funds rate. THE MARKET is what made rates drop. ??????????


Not a bad article, especially this:
Quote:
Although I acknowledge that the US Congress is never constrained in its ability to spend this by no means implies that the US Congress should spend beyond its means. To do so can possibly result in malinvestment or very high inflation.

However, he is trying to split hairs in some areas:
Quote:
Monetization is achieved by act of Congress via deficit spending. In a strict technical sense, monetization is always done by act of Congress and is voted on before funding is ever acquired for such expenditures – funding that will always be available regardless of tax receipts or bond sales…

So does it matter if the central bank prints the money or the Treasury? It seems the central bank is more than willing.

Fact is that the central bank is generating new money, that goes into bank reserves, when it buy Treasuries. Money supply isn't increasing much because the banks aren't making new loans, and that is the only reason why.
http://www.bloomberg.com/news/2012-12-18...it-markets.html

If banks were actually making loans on those increased reserves as the central bank would like....

And just how is the central bank going to unload a $3 trillion balance sheet? All that money will be destroyed once they start to sell those holdings at the "appropriate time".
The fact that they are still acquiring (in mass) and not selling tells me that the economy is still in bad shape.

 

[Tempest]

Originally Posted By: Drew99GT

The links I provided explain it with balance sheet examples. Banks hold treasuries. The Fed "buys" those treasuries from banks and in effect sells the banks reserves. No new money is created. They swap treasuries for reserves. They're essentially giving banks a checking account instead of a savings account.

So reserves aren't money? The central bank pays interest to banks for them. Is that interest money?

 

[Tempest]

Quote:
The answer, far from fiscal austerity, is probably fiscal stimulus in the form of tax cuts for the masses and increased federal spending.

Tax cuts are not fiscal stimulus, they are allowing people to keep more of their property.
Quote:
That spending can be on things that bring lasting benefits and should really be calculated as depreciable assets, not current spending.
Infrastructure spending would be a good example.

So you can just take out of work secretaries, IT people, and engineers and throw them on a government construction project and all will be well? You view people as "production units" that can be easily interchanged in an economy.
And precisely how much spending would it take to achieve the "results" you are looking for and what specific projects should be undertaken?

Quote:
Anyone should ask themselves why the federal government enjoyed a couple of years of current budget surpluses back in the mid 'nineties.

Massive increase in productivity due to computers becoming more common.

 

[spasm3]

Its all on purpose!!!!

 

[DBMaster]

True free market economics are like natural law. The more we (our government) messes with it, purportedly to "tweak" or "correct" it, the more that we realize we have to do to fix the issues created by the fixes. In the end we just mess it up worse than if we had left it alone. I believe I said in another thread that we should ask ourselves, "Are we capitalist, socialist, or something else?"

I can't offer you solutions. In fact, it is very obvious that our greatest minds cannot do so, either.

Sorry, I am talking philosophy and high level stuff and you guys are talking about nitty-gritty details.

 

[Propflux01]

IBTL!!!

Isolationism. Let the rest of the world go and take each other over. We'll just handle our own issues, along with those who really want us around. Let that run its course. If it comes down to someone trying to take us over, we have big bombs.