Fed's arsenal against inflation & weak dollar

[sao123]

Originally posted by: BigDH01

Originally posted by: sao123

Originally posted by: BigDH01

Originally posted by: piasabird
Unfortunately the U.S. Congress is not very good on cutting back on expenses. O'Bammah does not know the meaning of spending less money. I suggest you just bend over and Kiss the Economy and all US Jobs away. What we really need is lower taxes to attract foreign investors.

If you wouldn't mind, could you explain to me how a strong dollar keeps jobs in the US and attracts foreign investors?

A strong dollar doesnt attract foreign investors, a weak dollar does... however a strong dollar spurs domestic investment, when trying to kickstart the domestic economy, this is the necessary approach.

In your first sentence you imply that money will flow from countries with strong currencies to those countries with weak currencies and then you imply that strong American dollars will remain in the US. Why?

while currency investment works much like stocks (buy low - sell hi)... the domestic economy works the opposite.


While a strong dollar will increase imports... in contrast to weak dollar, it is the only way to increase domestic consumerism which is the backbone of our economy.
And consumerism causes local investment.

 

[heyheybooboo]

Originally posted by: iFX

Originally posted by: gevorg
Fed's arsenal against inflation & weak dollar .

They can start burning money and that's about it. They created the problem but aren't keen enough to realize it.

There are a boatload (fancy new financial term) of special Fed emergency loan and market support programs that have been created since August of 2007.

As the economy improves collateral requirements will be strengthened and some special programs dropped completely. IIRC sometime in the last few months the Fed reduced the value of some of the collateral it holds - what that does is reduce the amount of money that a financial group could borrow against it.

As banks gain liquidity and reduce leverage, we don't want them to gain too much liquidity because that will encourage more of the foolishness that got us in this mess in the first place.

 

[BigDH01]

Originally posted by: sao123

Originally posted by: BigDH01

Originally posted by: sao123

Originally posted by: BigDH01

Originally posted by: piasabird
Unfortunately the U.S. Congress is not very good on cutting back on expenses. O'Bammah does not know the meaning of spending less money. I suggest you just bend over and Kiss the Economy and all US Jobs away. What we really need is lower taxes to attract foreign investors.

If you wouldn't mind, could you explain to me how a strong dollar keeps jobs in the US and attracts foreign investors?

A strong dollar doesnt attract foreign investors, a weak dollar does... however a strong dollar spurs domestic investment, when trying to kickstart the domestic economy, this is the necessary approach.

In your first sentence you imply that money will flow from countries with strong currencies to those countries with weak currencies and then you imply that strong American dollars will remain in the US. Why?

while currency investment works much like stocks (buy low - sell hi)... the domestic economy works the opposite.


While a strong dollar will increase imports... in contrast to weak dollar, it is the only way to increase domestic consumerism which is the backbone of our economy.
And consumerism causes local investment.

It only increases domestic consumerism in as much as the outlets are selling imported goods. Production and investment in production flow out of the country. You can't sustain a society where the only industry is retail where everyone is buying goods with money they've made working for retail when all the goods are imported. Our current consumer culture has only been maintained because people have been able to find new instruments to accumulate debt (often from the countries from which the goods they are buying have been imported). This trade deficit should've ended awhile ago, but continues mostly due to currency fixing by the Chinese in my opinion. They'll likely end this after they can build enough domestic demand to meet their supply. As a society, Americans are generally buying things they can't really afford in a manner that's not at all sustainable. The trade deficit needs to close and the dollar will have to devalue.

 

[BassBomb]

spend more money, more bailouts, more stimulus, more war

wont it be wonderful to see wh at happens when the us tries to take iran's oil and our prices skyrocket again destroying the auto industry again?

 

[sao123]

Originally posted by: BigDH01

Originally posted by: sao123

Originally posted by: BigDH01

Originally posted by: sao123

Originally posted by: BigDH01

Originally posted by: piasabird
Unfortunately the U.S. Congress is not very good on cutting back on expenses. O'Bammah does not know the meaning of spending less money. I suggest you just bend over and Kiss the Economy and all US Jobs away. What we really need is lower taxes to attract foreign investors.

If you wouldn't mind, could you explain to me how a strong dollar keeps jobs in the US and attracts foreign investors?

A strong dollar doesnt attract foreign investors, a weak dollar does... however a strong dollar spurs domestic investment, when trying to kickstart the domestic economy, this is the necessary approach.

In your first sentence you imply that money will flow from countries with strong currencies to those countries with weak currencies and then you imply that strong American dollars will remain in the US. Why?

while currency investment works much like stocks (buy low - sell hi)... the domestic economy works the opposite.


While a strong dollar will increase imports... in contrast to weak dollar, it is the only way to increase domestic consumerism which is the backbone of our economy.
And consumerism causes local investment.

It only increases domestic consumerism in as much as the outlets are selling imported goods. Production and investment in production flow out of the country. You can't sustain a society where the only industry is retail where everyone is buying goods with money they've made working for retail when all the goods are imported. Our current consumer culture has only been maintained because people have been able to find new instruments to accumulate debt (often from the countries from which the goods they are buying have been imported). This trade deficit should've ended awhile ago, but continues mostly due to currency fixing by the Chinese in my opinion. They'll likely end this after they can build enough domestic demand to meet their supply. As a society, Americans are generally buying things they can't really afford in a manner that's not at all sustainable. The trade deficit needs to close and the dollar will have to devalue.

to a point i agree.
a strong dollar has caused us to offshore most of our manufacturing... prior to that a strong dollar was beneficial then. unfortunately a weak dollar policy has not begun to reverse this. We have little of value left to export, and now our consumers are suffering.
What do you propose to fix our suffering consumers?

furthermore... why would investors invest in dollars, if we are going to maintain a weak dollar policy? the point of buy low sell hi is to make a profit... if there is no strengthening, there is no profit. Why would anyone invest in something that will forever remain flat?

 

[BigDH01]

Originally posted by: sao123

a strong dollar has caused us to offshore most of our manufacturing... prior to that a strong dollar was beneficial then. unfortunately a weak dollar policy has not begun to reverse this. We have little of value left to export, and now our consumers are suffering.
What do you propose to fix our suffering consumers?

furthermore... why would investors invest in dollars, if we are going to maintain a weak dollar policy? the point of buy low sell hi is to make a profit... if there is no strengthening, there is no profit. Why would anyone invest in something that will forever remain flat?

Actually, there have been some signs that exports are picking up and the trade gap is lessening. Link.

Unfortunately, we still have the China problem. They fix their currency to a basket of currencies now, but the US dollar appears to be still the most heavily weighted. We're still going to have issues until they float their currency.

How do we do this? Don't know, you'd have to talk to policymakers about that.

I don't understand your last point. Why should I be concerned if investors are making a profit in trading dollars?

 

[sao123]

Originally posted by: BigDH01

Originally posted by: sao123

a strong dollar has caused us to offshore most of our manufacturing... prior to that a strong dollar was beneficial then. unfortunately a weak dollar policy has not begun to reverse this. We have little of value left to export, and now our consumers are suffering.
What do you propose to fix our suffering consumers?

furthermore... why would investors invest in dollars, if we are going to maintain a weak dollar policy? the point of buy low sell hi is to make a profit... if there is no strengthening, there is no profit. Why would anyone invest in something that will forever remain flat?

Actually, there have been some signs that exports are picking up and the trade gap is lessening. Link.

Unfortunately, we still have the China problem. They fix their currency to a basket of currencies now, but the US dollar appears to be still the most heavily weighted. We're still going to have issues until they float their currency.

How do we do this? Don't know, you'd have to talk to policymakers about that.

I don't understand your last point. Why should I be concerned if investors are making a profit in trading dollars?

you were suggesting we should keep a weak dollar to attract foreign investors... foreign investors are not going to invest if they see no potential profit. The weak dollar only helps current (foreign) holders of the dollar, it will not attract new ones if US fiscal policy is determined to keep it weak. In order to attract buyers, we still need to be striving for a future strong dollar.

 

[BigDH01]

Originally posted by: sao123
you were suggesting we should keep a weak dollar to attract foreign investors... foreign investors are not going to invest if they see no potential profit. The weak dollar only helps foreign holders of the dollar, it will not attract new ones if US fiscal policy is determined to keep it weak. In order to attract buyers, we still need to be striving for a future strong dollar.

Firstly, I don't suggest keeping a weak dollar. The dollar should weaken due to market forces alone. I disagree with people who want to maintain a strong dollar or find a weak dollar to be universally bad.

Secondly, I still don't understand what you are trying to say. I'm not interested in currency speculation, I'm interested in FDI.

 

[sao123]

Originally posted by: BigDH01

Originally posted by: sao123
you were suggesting we should keep a weak dollar to attract foreign investors... foreign investors are not going to invest if they see no potential profit. The weak dollar only helps foreign holders of the dollar, it will not attract new ones if US fiscal policy is determined to keep it weak. In order to attract buyers, we still need to be striving for a future strong dollar.

Firstly, I don't suggest keeping a weak dollar. The dollar should weaken due to market forces alone. I disagree with people who want to maintain a strong dollar or find a weak dollar to be universally bad.

Secondly, I still don't understand what you are trying to say. I'm not interested in currency speculation, I'm interested in FDI.

to understand what I am saying... let me relate a little parable:

There was once a wise businessman who went on a trip from the US to japan. While on his trip, he bought some Yen with his US dollars. Upon his return to america, he had a few thousand yen left over, and so he put them in a picture frame to remind himself of the enjoyable trip. Several years later, he found out that the value of the yen increased dramatically when compared to the dollar. He immediately took his yen to a bank and cashed them in, and made a profit of tenfold what he paid several years earlier.

------
Just like the trading of Gold, the trading of currency is a major part of investment. Not on the local stock market as may interest you (since you want more FDI), but on the world trade markets. If US policy is currently set to keep the value of the dollar weak, then currency investors will no longer buy dollars, because they have no percieved chance to profit, and our economy will suffer. Eventually it will be replaced by some other strong currency or we will return to the standard of gold backing.

 

[BigDH01]

Originally posted by: sao123

to understand what I am saying... let me relate a little parable:

There was once a wise businessman who went on a trip from the US to japan. While on his trip, he bought some Yen with his US dollars. Upon his return to america, he had a few thousand yen left over, and so he put them in a picture frame to remind himself of the enjoyable trip. Several years later, he found out that the value of the yen increased dramatically when compared to the dollar. He immediately took his yen to a bank and cashed them in, and made a profit of tenfold what he paid several years earlier.

------
Just like the trading of Gold, the trading of currency is a major part of investment. Not on the local stock market as may interest you (since you want more FDI), but on the world trade markets. If US policy is currently set to keep the value of the dollar weak, then currency investors will no longer buy dollars, because they have no percieved chance to profit, and our economy will suffer. Eventually it will be replaced by some other strong currency or we will return to the standard of gold backing.

I understand the concept of currency speculation, I just don't understand why you think it matters. You seem to have the underlying assumption that our economy will suffer if investors don't want to buy dollars. You haven't explained to me why you believe this is true.

Further, investors buying and selling dollars are really just finding the equilibrium price of that asset, which at any given instant is purely a function of supply and demand. If investors don't want the dollar, then it's value drops and the US should see more FDI and increased exports. As this continues, the demand for dollars increases and thus the value of the dollar should increase. You just seem infatuated with currency traders as if their profit represents strength for the American economy.

 

[b0mbrman]

Originally posted by: gevorg
Do you think the fear of weakening dollar and a major inflation in the near future is exaggerated? It seems the Fed can tackle any major inflation swings by increasing the interest rates to 10-15% or so. The lending will go down of course, but the dollar will maintain its worth and worldwide currency status.

Of course the effect of inflation will always be there but not anywhere near hyperinflation some gold rushers screaming about.

What is the inflation rate over the last year? Something very high?

 

[LegendKiller]

Originally posted by: b0mbrman

Originally posted by: gevorg
Do you think the fear of weakening dollar and a major inflation in the near future is exaggerated? It seems the Fed can tackle any major inflation swings by increasing the interest rates to 10-15% or so. The lending will go down of course, but the dollar will maintain its worth and worldwide currency status.

Of course the effect of inflation will always be there but not anywhere near hyperinflation some gold rushers screaming about.

What is the inflation rate over the last year? Something very high?

Actually, something very low, verging on deflation.

I do find all of this hand-wringing over inflation somewhat amusing. People fail to consider the housing market, at the peak, was worth some 18-20TR. About 1/3 of that has vaporized. Then, once you consider the default rates on other consumer assets, commercial assets, both secured and unsecured, not even to mention the bankruptcies, you begin to see that most likely more than $10TR of assets have vaporized.

There isn't even $10TR of stimulus that was pushed into the market. I know somebody likes to parrot $11.2TR, but those were committments, not actual expenditures, which haven't hit nearly that high.

 

[Acanthus]

Originally posted by: LegendKiller

Originally posted by: b0mbrman

Originally posted by: gevorg
Do you think the fear of weakening dollar and a major inflation in the near future is exaggerated? It seems the Fed can tackle any major inflation swings by increasing the interest rates to 10-15% or so. The lending will go down of course, but the dollar will maintain its worth and worldwide currency status.

Of course the effect of inflation will always be there but not anywhere near hyperinflation some gold rushers screaming about.

What is the inflation rate over the last year? Something very high?

Actually, something very low, verging on deflation.

I do find all of this hand-wringing over inflation somewhat amusing. People fail to consider the housing market, at the peak, was worth some 18-20TR. About 1/3 of that has vaporized. Then, once you consider the default rates on other consumer assets, commercial assets, both secured and unsecured, not even to mention the bankruptcies, you begin to see that most likely more than $10TR of assets have vaporized.

There isn't even $10TR of stimulus that was pushed into the market. I know somebody likes to parrot $11.2TR, but those were committments, not actual expenditures, which haven't hit nearly that high.

This.

Good post LK.

We dont agree on everything, but we seem to agree on economics.

 

[totalnoob]

Those trillions in "dissolved" wealth were artificial to begin with. I lol at people who consider it "deflation" when homes go from being 200% overvalued to being 150% overvalued. They have started the process of returning to sustainable levels. It is a price correction..not deflation. The vast increase in the supply of dollars we've seen over the past year is inevitably lead to price increases for all consumer goods even as the housing bubble continues to deflate.

 

[LegendKiller]

Originally posted by: totalnoob
Those trillions in "dissolved" wealth were artificial to begin with. I lol at people who consider it "deflation" when homes go from being 200% overvalued to being 150% overvalued. They have started the process of returning to sustainable levels. It is a price correction..not deflation. The vast increase in the supply of dollars we've seen over the past year is inevitably lead to price increases for all consumer goods even as the housing bubble continues to deflate.

They aren't 150% "overvalued" at this point. The market has largely regressed to the mean, although not quite. I do not expect the housing market to increase much, if at all, over inflation for a while, effectively making it decline in price.

Prices, by and large, are back to 00-02 levels.

 

[Jhhnn]

Originally posted by: LegendKiller

Originally posted by: totalnoob
Those trillions in "dissolved" wealth were artificial to begin with. I lol at people who consider it "deflation" when homes go from being 200% overvalued to being 150% overvalued. They have started the process of returning to sustainable levels. It is a price correction..not deflation. The vast increase in the supply of dollars we've seen over the past year is inevitably lead to price increases for all consumer goods even as the housing bubble continues to deflate.

They aren't 150% "overvalued" at this point. The market has largely regressed to the mean, although not quite. I do not expect the housing market to increase much, if at all, over inflation for a while, effectively making it decline in price.

Prices, by and large, are back to 00-02 levels.

Please, LK. In speculative markets, prices must decline from a peak to a point well below the mean to clear out excess inventory. Excess leverage creates overpricing which creates excess inventory which is why the price breaks in the first place. Current efforts merely blunt the approach to that turnaround point, flatten the slope of the decline. Only when foreclosures taper off and vacancy rates decline will we have arrived at a turnaround, and we're nowhere near that.

Dollar decline is inevitable. we've been flooding the world market with dollars for decades, abusing our position as the world's reserve currency. The sooner such correction begins, the less traumatic it will be. And it'll be called something other than inflation, even though the effect will be the same- price increases on foreign goods- everything from shoes to computers to petroleum to you name it- this country has offshored production of most consumer goods. Expect credit rates to rise, as well.

I realize it's in the interests of the banking industry in general to paint a rosy picture, talk up the "recovery". We shouldn't mistake that for reality, however.

 

[Appledrop]

well, a weakening currency is bad full stop, for ordinary people.. but, someone above claims a weak dollar will encourage foreign investment...
i don't think this is going to happen much unless it's perceived that the dollar has bottomed..

you hear a lot from our glorious leaders that a "global rebalancing" is necessary... I think they want socialism on a global scale.. which means western currencies depreciating to lower our standard of living, in favor of increasing the purchasing power of say, the chinese.
Eventually, due to this rebalancing, they will be able to introduce their much desired global currency and global government.

i'm still buying gold even at this level.

 

[LegendKiller]

Originally posted by: Jhhnn

Originally posted by: LegendKiller

Originally posted by: totalnoob
Those trillions in "dissolved" wealth were artificial to begin with. I lol at people who consider it "deflation" when homes go from being 200% overvalued to being 150% overvalued. They have started the process of returning to sustainable levels. It is a price correction..not deflation. The vast increase in the supply of dollars we've seen over the past year is inevitably lead to price increases for all consumer goods even as the housing bubble continues to deflate.

They aren't 150% "overvalued" at this point. The market has largely regressed to the mean, although not quite. I do not expect the housing market to increase much, if at all, over inflation for a while, effectively making it decline in price.

Prices, by and large, are back to 00-02 levels.

Please, LK. In speculative markets, prices must decline from a peak to a point well below the mean to clear out excess inventory. Excess leverage creates overpricing which creates excess inventory which is why the price breaks in the first place. Current efforts merely blunt the approach to that turnaround point, flatten the slope of the decline. Only when foreclosures taper off and vacancy rates decline will we have arrived at a turnaround, and we're nowhere near that.

Dollar decline is inevitable. we've been flooding the world market with dollars for decades, abusing our position as the world's reserve currency. The sooner such correction begins, the less traumatic it will be. And it'll be called something other than inflation, even though the effect will be the same- price increases on foreign goods- everything from shoes to computers to petroleum to you name it- this country has offshored production of most consumer goods. Expect credit rates to rise, as well.

I realize it's in the interests of the banking industry in general to paint a rosy picture, talk up the "recovery". We shouldn't mistake that for reality, however.

There is no certain equation to downturns. Excess slack can be taken up by investors who are buying cash, as is the case right now. I do fully expect prices to keep going down throughout the winter, but I also think that we are no less than 5-7% from the trough.

 

[BigDH01]

Originally posted by: Money
well, a weakening currency is bad full stop, for ordinary people.. but, someone above claims a weak dollar will encourage foreign investment...
i don't think this is going to happen much unless it's perceived that the dollar has bottomed..

you hear a lot from our glorious leaders that a "global rebalancing" is necessary... I think they want socialism on a global scale.. which means western currencies depreciating to lower our standard of living, in favor of increasing the purchasing power of say, the chinese.
Eventually, due to this rebalancing, they will be able to introduce their much desired global currency and global government.

i'm still buying gold even at this level.

This post makes no sense.

It's not bad full stop. It's a requirement due to our trade deficit. It will bring jobs to the US. What relevance does the fact that the dollar is still slowly declining have to FDI? I get the impression that everyone thinks that investment in the US == foreigners speculating in the USD. We only need to look relatively cheaper, both to encourage FDI and exports.

This is not some Socialist scheme, it's exchange rate determined by balance of payments. Simple explanation here. Labor is going to experience a reduction in their quality of life because many nations have labor factor advantages and capital and production is relatively mobile. This is not a conspiracy.

Your comment about Western nations devaluing currencies to the RMB is completely asinine as the Chinese peg their currency to a basket of Western currencies.

 

[Jhhnn]

From LK-

There is no certain equation to downturns. Excess slack can be taken up by investors who are buying cash, as is the case right now. I do fully expect prices to keep going down throughout the winter, but I also think that we are no less than 5-7% from the trough.

That's not what the trends indicate, at all-

http://www.newgeography.com/co...e-correction-continues

They're using that nasty "free fall" language, and that's what the chart indicates...

More pertinent info-

http://www.google.com/publicda...nemployment+rate+graph

Notice U-6, here-

http://www.bls.gov/news.release/empsit.t12.htm

Not to worry, though. The FRB is printing money so fast that the presses are smokin'-

http://online.wsj.com/article/SB123739788518173569.html

First the tech bubble, then the real estate bubble, now the FRB bubble.

What nobody wants to talk about is that the economy is pretty much snakebit given the shift of income to the tippy-top and productive jobs overseas... Trickle down economics, Reaganomics, are the biggest con job in the history of finance. It never would have gotten off the ground without huge structural deficits.

 

[dullard]

Originally posted by: b0mbrman

Originally posted by: gevorg
Do you think the fear of weakening dollar and a major inflation in the near future is exaggerated?

What is the inflation rate over the last year? Something very high?

Why did it take three days for someone to finally question the original poster? The fear of "major inflation" is exaggerated, since there is no sign of major inflation. In situations like this in the past (recession and lowering of interest rates / printing of money) there was LESS inflation. I know that is the opposite of what most people expect. They expect lower rates = more inflation. But they are forgetting the first part of the equation, the recession.

What the fed does is just a drop in the bucket compared to the momentum of the rest of the economy. Goverment (especially state and local goverments) spending changes can far overpower the fed changes and undo anything the fed tries. So can tightening bank standards. So can fear in consumers and businesses. Just because interest rates are low doesn't mean that we spend more. The whole premise of "major inflation" is wrong.

Legendkiller is correct: we are closer to deflation than major inflation - just like every other similar time in history. Here is the consumer price index, see for yourself.
[*]1-month change: 0.06% increase. That equates to a 0.75% annual change. Short term inflation is non-existant.
[*]1-year change: -1.29%. Yes, minus 1.29%. Prices are lower than last year. Sure, lots of that is gas prices due to the big spike last summer, so lets look at the longer term.
[*]2-year change: 1.78% per year. Still low. Compare that to the historical average of 3.25%.

 

[dullard]

The weak dollar is a completely different question. A weak dollar isn't necessarilly bad and a strong dollar isn't necessarilly good. It is simply a matter of WHO benefits. A strong dollar benefits initially consumers but harms employers (ultimately meaning job and wage losses which hurts the consumers). A weak dollar initially harms consumers but helps employers (ultimately leading to job and wage increases which helps the consumers). Thus, you can't say uniformly that it is good or bad. The fed itself has very little sway over this issue (which is a nice to know, since you can't uniformly state that a weak dollar is good or bad).

I'd say it is even debatable if any of the recent events has changed the strength of the dollar. Here is a good graph.
* Two years ago, before this whole crisis, from Oct 2007 through Feb 2008, one Euro bought between 1.44 and 1.48 dollars.
* Now, one Euro buys 1.49 dollars.

Sure, there was volitility in between. But, the overall change before and after is bascially zero, zilch, nada, nothing. It is hard to claim that we have recently caused a weak dollar when it is just back to where it was two years ago.

The weak dollar actually came in the 2000 to 2008 period. In that period the dollar fell nearly in half against the Euro. From 2000 to 2008, gold tripled in price, Gold price graph. The 2000 average price for gold was $279/ounce. The average price of gold in 2008 was $871/ounce. That was also the period where oil prices rose. Oil was almost stagant through the 1990s and really skyrocketted starting in 2003, oil price graph..

 

[LegendKiller]

Originally posted by: Jhhnn
From LK-

There is no certain equation to downturns. Excess slack can be taken up by investors who are buying cash, as is the case right now. I do fully expect prices to keep going down throughout the winter, but I also think that we are no less than 5-7% from the trough.

That's not what the trends indicate, at all-

http://www.newgeography.com/co...e-correction-continues

They're using that nasty "free fall" language, and that's what the chart indicates...

More pertinent info-

http://www.google.com/publicda...nemployment+rate+graph

Notice U-6, here-

http://www.bls.gov/news.release/empsit.t12.htm

Not to worry, though. The FRB is printing money so fast that the presses are smokin'-

http://online.wsj.com/article/SB123739788518173569.html

First the tech bubble, then the real estate bubble, now the FRB bubble.

What nobody wants to talk about is that the economy is pretty much snakebit given the shift of income to the tippy-top and productive jobs overseas... Trickle down economics, Reaganomics, are the biggest con job in the history of finance. It never would have gotten off the ground without huge structural deficits.

In your zeal to bash anything positive you've exposed a very big problem in your argument.

1. S&P-CS is NOT in a "free fall" contrary to your link (which is 9 months old, doof). I track the S&P-CS monthly with a very extensive spreadsheet, mainly for professional purposes. see below.

http://i21.photobucket.com/alb...LgndKiller/Jul-YOY.jpg

http://i21.photobucket.com/alb...ndKiller/Jul-Index.jpg

http://i21.photobucket.com/alb...ul-MonthlyMovement.jpg

http://i21.photobucket.com/alb...iller/Jul-FromPeak.jpg

Doesn't look like a freefall to me. As I said before, I think that the index will decline for the winter, mainly because when it falls, it will fall faster than the seasonal adjustments (which I didn't post SA numbers or charts).

2. Unemployment is high, no doubt about it. However, I believe the fears of a "jobless recovery" are bullshit. The economy is a self-sustaining cycle, both on the down and up. You notice that jobs are still being shed, mainly because as things work down, especially in increasing productivity, less people are needed. As orders pick up (and they are, especially for inventory), you'll see that trend reverse. As more companies order, more people are needed (when productivity is stressed), thus more people are hired, creating more need for goods/services, perpetuating the cycle.

I know it's all cool to avoid logic and join the herd, but it's pretty pathetic.

3. The big joke behind your Treasuries link is that the Fed's holdings of treasuries were actually at a LOW point prior to their purchases. They were doing nothing but returning to the norm that has existed for decades (as a % of treasuries float, and balance sheet). The more interesting play, that you failed to link to, was their purchases of RMBS. The bank for banks would naturally do this, since it's main function is to ensure liquidity in the market, which it has done admirably.

I do love how you call it "printing money", when you fail to mention the money that was destroyed, most likely more than $10TR of it. But then again, that wouldn't fit with your nice, pat, doomsday scenario, would it?

I can just see the little gears in your head turning, resisting the use of logic and data. It must be awfully tiring.

 

[miketheidiot]

Originally posted by: Special K

Originally posted by: Skoorb
They could jack interest rates and jack up the value of the dollar but the cost to that would be higher by crushing the economy. This is why every economist is repeatedly saying the fed is between a rock and a hard place. It can either keep brow beating the dollar or stifle recovery.

I read an article that said there will be intense pressure on the Fed to keep interest rates too low for too long, just like they were after the last recession. Congressmen will point to their regions' unemployment rate and demand that interest rates be kept low.

Am I correct in my understanding that a higher Fed Funds rate will theoretically lead to fewer business loans, which would in turn lead to fewer projects being started, fewer workers being hired, which keeps growth from occuring?

Obviously a rate that is too low leads to asset bubbles.

actually this time there is (strong) pressure to raise rates too early.

 

[piasabird]

You dont get it do you?

High Taxes chase away investors, including foreign investors.

Over-legislation also chases away investors. However, that hasnt stopped a few investors from trying to break into the China Market.

If the government doesnt have confidence in the economy improving then probably no one else will either. People will not want to invest in the USA if even the president does not believe in the free market.

Would you want to invest in a country with a communist agenda?