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Old 09-14-2012, 03:14 PM #43
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We don't actually know what securities the fed is buying with that $40 billion a month, as there isn't a list showing... They say it is one thing, but there is ZERO accountability.

They could be buying stocks... which would inflate the values of said stocks artificially.
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Old 09-14-2012, 03:23 PM #44
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Ummm, first of all...no.

And second of all, it doesn't matter what the Fed buys. 99% of what matters is changing peoples expectations about the future, 1% is the hot potato effect of newly printed cash.
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Old 09-14-2012, 03:30 PM #45
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Originally Posted by licence2kill View Post
And second of all, it doesn't matter what the Fed buys. 99% of what matters is changing peoples expectations about the future, 1% is the hot potato effect of newly printed cash.
How about paying off people's mortgages and school debt then?
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Old 09-14-2012, 04:17 PM #46
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printing money to prop up the failing economic policies of this administration will only cause further massive inflation. You think $4.00 gas is bad now...

They can now spend $40,000,000,000.00 a month which they PRINT out of thin air.

This will cause massive inflation, and since oil is tied to the dollar, we will see it first with our fuel costs, and since we now BURN our corn as fuel (government mandate of ethanol in every gallon of gas), it will also affect us at the grocery store.

This is a tax on the middle class. Your dollar will do LESS than it did before this latest "stimulus".


This is further "keynesian" ideology. It fails, and liberals say it works...

We have 4 years of this garbage and we are worse off, but hey, if Obama says it is good, then many will believe him. Especially when the liberal media agrees...

Hard to believe people look at liberals words instead of their own checkbooks.
As usual I was right... Obama just caused our credit rating to fall again.

http://m.cnbc.com//id/49037337
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Old 09-14-2012, 04:33 PM #47
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how can you hold the belief that QE both:

1) wont work
2) cause massive inflation

those are contradictory
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Old 09-14-2012, 04:43 PM #48
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You guys need to stop believing in the doctrine of immaculate inflation and understand that its a market process:

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I should write more on this but for now I’ll get a brief primer on how I think about inflation and how it differs from what I read most other places.

One of my common quips is that “there is no such thing as immaculate inflation” or that “inflation cannot proceed through magic.”

What do I mean by this?

Well, inflation in the common sense of the term is a rise in all wages and prices. In the long run small rates of inflation shouldn’t effect the economy that much. However, in the short run it can cause discomfort or joy depending on your situation. Not all prices rise at the same rate and some people have contracts – mortgages for example – that are specify a certain amount of money to be paid.

Inflation lowers the value of that money and so makes the mortgage easier to pay for the borrower but less profitable for the lender.

That is all well, good and important at a macro level.

However, at the same time inflation must proceed through market processes. Demand for some product must rise or supply must fall. Generally, the inflation we experience is from a rise in demand caused by cheap financing. That cheap financing is a result of the Federal Reserve printing more money.

However, as this money works its way through various markets we should seem them respond as markets respond to increased demand, through an increase in both output and prices.

So when we crack open the BLS report on inflation we can look at different markets. We see for example that are rents rising. This adds to our overall estimation of inflation but it also suggests a tightening rental markets which should make apartment construction more profitable.

We may also see a rise in the prices of automobiles. This summer the increasei in car prices came from a decrease in the supply of automobiles as a result of the Japanese Tsunami. However, as that fades we might be able to interpret future increases in price as a tightening of the car market and expect sales to increase.

We also see used car prices going up. This suggests that natural obsolesce is working its way through the used car market and pushing people into newer cars.

We can take a step back and interpret these events as saying liquidity demand is being satiated. Or, we can take a micro perspective and say that the demand for goods and services in these markets is increasing. Either way we look at it, however, demand driven inflation should be drive a rise in production.

In an economy with little unemployment we would expect this to bid up wages as employers competed for scarce labor. The result would simply be higher prices and wages and a distortion of long term contracts like mortgages.

However, in an economy with high unemployment we should expect some of this to result in an increase in hiring. Thus I see when I see rents rising, I think that means that construction employment will rise. When I see new car prices rising I think that means manufacturing employment will rise.

It is always possible that inflation is actually occurring first in commodity markets. This in turn is causing the supply in various individual goods markets to contract and thereby bidding up prices.

However, by looking at a the economy on a market by market basis we should be able to tell which is which. This is one reason why inflation driven by gasoline prices is “bad.” It almost certainly represents an increase in the price of a commodity – oil and a reduction in the supply of gasoline.

This means that we expect contraction in the gasoline market. In addition through income effects we should expect a contract in the demand in other individual markets.

When inflation is coming through the commodity markets it means that either the commodity is in short supply generally or that it is being pulled away from the US market by demand elsewhere. In either case the result is less real resources available for US households and firms.

However, when inflation is coming through the final goods market it means that real resources are being pulled towards US households and firms. That implies both that US households and firms are trading out of cash and into real goods and that the net effect in each individual market will be an increase in output.
http://modeledbehavior.com/2011/09/1...ate-inflation/
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Old 09-14-2012, 04:58 PM #49
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Quote:
Originally Posted by licence2kill
how can you hold the belief that QE both:

1) wont work
2) cause massive inflation

those are contradictory
Because they don't understand QE or roots to inflation.
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Old 09-14-2012, 05:06 PM #50
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Quote:
Originally Posted by FreeEnterprise

As usual I was right... Obama just caused our credit rating to fall again.

http://m.cnbc.com//id/49037337
Obama just caused our credit rating to fall again, in the eyes of Egan-Jones.

That's the correction to your statement.
It's notable because Egan jones is the newest credit rating agency, has no power among other agency's, is headed/founded by two individuals that donate heavily to republican politics, and is facing its third SEC investigation in 5 years.
None of the big thre have dropped the US credit rating since S&P did to AA+, the cause for which was

Since then, we have changed our view of the difficulties in bridging the
gulf between the political parties over fiscal policy, which makes us
pessimistic about the capacity of Congress and the Administration to be
able to leverage their agreement this week into a broader fiscal
consolidation plan that stabilizes the government's debt dynamics any
time soon.
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Old 09-14-2012, 05:10 PM #51
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Even the large credit agencies, like S&P, Moody's, and Fitch, have ZERO market power.
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Old 09-14-2012, 05:13 PM #52
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Quote:
Originally Posted by licence2kill
Even the large credit agencies, like S&P, Moody's, and Fitch, have ZERO market power.
I know they have zero market power and hope freeenterprise does as well.
I was saying that because of numerous factors the agency doesn't have any sway among other rating agancies. Standards and poor at least caused Moody's to issue a statement. None will be coming from this one.

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Old 09-14-2012, 05:14 PM #53
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free enterprise is overbear?

no way
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Old 09-14-2012, 06:10 PM #54
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Yeah, most of it's coming from you trolling around with straw men. I've seen you bring up religion in quite a few threads that had nothing to do with it - this one and the climate change one a while back come to mind.
If they'd stop basing political decisions off of religion I would have nothing to comment on.
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Old 09-14-2012, 06:48 PM #55
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What is with you and trolling about religion?
Um, I'm thinking FreeEnterprise started that one
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Old 09-14-2012, 07:21 PM #56
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Bernanke needs to resign.
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Old 09-14-2012, 07:34 PM #57
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Well son of a ***** I lost .1% on my savings account. But my gold and silver jumped. Maybe I should invest in real estate for the time being and get in while the bubble is inflating.
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Old 09-20-2012, 12:32 PM #58
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Well son of a ***** I lost .1% on my savings account. But my gold and silver jumped. Maybe I should invest in real estate for the time being and get in while the bubble is inflating.
http://www.forbes.com/sites/louiswoo...lready-failed/

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People can stop wondering if QE3, Fed Chairman Ben Bernanke’s latest effort to “do more”, will work. It has already failed.

The futility of QE3 was made clear by the financial markets’ reaction to the Fed’s announcement. The Real Dow, which is the Dow Jones Industrial Average divided by the price of gold, actually fell by 0.65% on September 13, the day that QE3 was announced. While the Dow gained 1.6% on the day, gold went up by 2.2%. In real terms, QE3 made the economic outlook worse, not better.

The historical record is clear. Prosperity (including strong growth in real GDP, total employment, and real wages) occurs only during periods when the Real Dow is rising.
The Real Dow rose during the 1950s and 1960s, plunged during the 1970s, soared during the 1980s and 1990s, and plunged again in the 2000s. It has fallen even further recently, including by 16.0% since the start of President Obama’s so-called “economic recovery”.

The fact that good times are always accompanied by a rising Real Dow is no coincidence. Prosperity results from rising real capital employed per capita and per worker. The Real Dow is a measure of the relative attractiveness of investing in productive, “risk” assets vs. capital-preserving “safe” assets.

Given that the Real Dow has declined by 81.0% since August 2000, it is not surprising that the past 12 years have seen the worst economic performance since the Great Depression.

On September 18, 2012, the Real Dow stood at 7.65, the same level as it was in August 1951. This means that the disastrous Bush–Obama–Greenspan–Bernanke economic policies have wiped out the real value of 61 years of work, saving, and investing on the part of the American people.

But wait, there’s more.

One of the goals of QE3 is to reduce long-term interest rates. In its press release, the Fed said, “…These actions…should put downward pressure on longer-term interest rates…”

This didn’t happen. On September 7, the Friday before QE3 was announced, the market interest rate on 10-year Treasuries was 1.67%. On September 14, the Friday after the QE3 announcement, it stood at 1.88%.

Even worse was the increase in market inflationary expectations that the QE3 announcement caused. The yield spread between 10-year Treasuries and 10-year TIPS, which can be viewed as the expected inflation rate over the next 10 years, widened by 9 basis points on September 13, to 2.47%. It increased even further, to 2.64% on Friday, September 14.

The inflation rate currently implied by the bond market is far higher than the Fed’s announced target of 2.0%. And yet, in the Fed’s QE3 press release, they said, “The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.”

But wait—it gets still worse.

On Friday, September 14, the interest rate on 10-year TIPS closed at -0.76%. This is the lowest number ever seen. The 10-year TIPS interest rate first went negative on August 10, 2011, and it has been continuously negative since January 24, 2012.
A negative real interest rate implies an economy that is being liquidated. If investments promising positive real returns were available on the margin, investors would not hand their money over to the federal government for the next ten years for a promised real return of -0.76%.
To put this as gently as possible, it is very unlikely that an economy that is liquidating its real capital will produce what the Fed is hoping for, namely, “…economic growth…strong enough to generate sustained improvement in labor market conditions.”

So, what are we to make of the Fed’s declaration that, “If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities…until such improvement is achieved…”? Well, one is reminded of the ship’s captain who famously declared that, “Floggings will continue until morale improves.”
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Old 09-20-2012, 04:44 PM #59
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commodities rise on higher expected future NGDP, so no it hasn't failed. It did exactly what it was supposed to do: raise NGDP expectations.

Treasury yields rose on the announcement and didn't start falling until later which is, I think, because of Euro troubles.
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Old 09-20-2012, 04:46 PM #60
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So again, I don't understand why the author points out that rising inflation expectations = QE failed...THATS WHAT ITS SUPPOSED TO DO

protip: ignore financial journalists (they suck) and read actual academic economists
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Old 09-20-2012, 05:55 PM #61
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commodities rise on higher expected future NGDP, so no it hasn't failed. It did exactly what it was supposed to do: raise NGDP expectations.
Your arguments are flawed because you continue to insist that inflation is somehow a good thing.

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Treasury yields rose on the announcement and didn't start falling until later which is, I think, because of Euro troubles.
Euro has been in trouble for the past few years.
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Old 09-20-2012, 06:20 PM #62
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Your arguments are flawed because you continue to insist that inflation is somehow a good thing.
"Modest inflation is a bad thing," said no sane economist ever.
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Old 09-20-2012, 06:23 PM #63
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Your arguments are flawed because you continue to insist that inflation is somehow a good thing.
Inflation doesn't just appear magically, its the result of a market process. As demand rises producers respond by producing more output and raising prices.
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