QE2: Fed to spend $900B more to spur econ. This on top of $2T already spent. WTF?!

[soccerballtux]

The money might just get gobbled up by the banks and not lent out to actual businesses, meaning you did all of that for nothing.

IMO this is what's happening. Lots of people with debt paying it down, student debt, car debt, credit card debt, paying it down, it goes back to the creditors who aren't lending. It's why these policies are doomed to fail.

 

[soccerballtux]

You should visit the technical forums, and perhaps "Hot Deals." People are always buying things they know will be cheaper tomorrow.

In theory.
In reality that doesn't happen. Your anecdotal evidence does not support your economic theories.

 

[halik]

If you're buying silver, I'd get physical. "They" have been playing with the silver market. They can't do it forever, eventually the market will beat them.

http://www.marketwatch.com/story/jp...-manipulation-2010-10-27?reflink=MW_news_stmp

How is physical vs synthetic going to hedge you from price volatility of the underlying? (counterparty risk notwithstanding)

 

[bamacre]

How is physical vs synthetic going to hedge you from price volatility of the underlying? (counterparty risk notwithstanding)

It won't. Until the market beats the gamers.

 

[halik]

It won't. Until the market beats the gamers.

If you have enough money, you are the market

But yeah, going long a commodity basket or if you want to be ballsy short gold, long commodity based will do well. Same thing for international exposure, repatriating profits in weaker dollar = cha ching.

The far more interesting is the Exports vs Commodity/cost of goods question, as it is a dynamic game (substitution effect comes to mind).

 

[bamacre]

In theory.
In reality that doesn't happen. Your anecdotal evidence does not support your economic theories.

LOL. I'll go into Best Buy today and tell every single person looking at flat screen TV's that they will be cheaper and better next year. I'm sure they'll be shocked. SHOCKED I tells ya!

Of course I could be wrong, with the dollar falling the way it is.

 

[halik]

LOL. I'll go into Best Buy today and tell every single person looking at flat screen TV's that they will be cheaper and better next year. I'm sure they'll be shocked. SHOCKED I tells ya!

Of course I could be wrong, with the dollar falling the way it is.

Rephrased:

You'll get the same utility for a new tv, no matter what year you buy it at. The price is about the same, though get more technology. When I bought my first LCD monitor back around 2000, I was giddy as hell, even though by todays standards it's a piece of shit

Deflation means your purchasing power goes up when you sit on your money for everything. I get the same say top of the line TV for less monies. What you're referring to is depreciation, not deflation.

 

[bamacre]

If you have enough money, you are the market

Yeah, basically. I could be mistaken, but it seems that the overseas demand for silver (and many other commodities) has grown well, it seems to be making it's bigger moves after US market close. It did very well last night (cha-ching!)

But yeah, going long a commodity basket or if you want to be ballsy short gold, long commodity based will do well. Same thing for international exposure, repatriating profits in weaker dollar = cha ching.

Short gold? Yeah, I'd say that's ballsy.

 

[bamacre]

You won't have the same utility from the a year old tv vs new tv. Depreciation is a different concept my friend.

Deflation means your purchasing power goes up when you sit on your money for everything.

Yeah, but there's some truth on both sides of this argument, and that's why my answers here have been rather tongue-in-cheek. Under the current system, deflation is harmful, but not for everyone. However, there is no deflation, prices aren't dropping. Our status according to Helicopter Ben is "inflation isn't high enough."

 

[halik]

Yeah, basically. I could be mistaken, but it seems that the overseas demand for silver (and many other commodities) has grown well, it seems to be making it's bigger moves after US market close. It did very well last night (cha-ching!)



Short gold? Yeah, I'd say that's ballsy.

It's became a fiat for people that think the world is ending and that price move will reverse in the future. Relative to a basket of industrials it is bound to under perform.

 

[halik]

Yeah, but there's some truth on both sides of this argument, and that's why my answers here have been rather tongue-in-cheek. Under the current system, deflation is harmful, but not for everyone. However, there is no deflation, prices aren't dropping. Our status according to Helicopter Ben is "inflation isn't high enough."

Well 70%+ of our economy is driven by the consumer, so it's pretty safe to say that deflation would be bad all around.

 

[nick1985]

Government buying its own debt. Unreal. This will end terribly.

 

[halik]

Government buying its own debt. Unreal. This will end terribly.

Technically it's gov't taking banks reserves and buying gov't debt and assets from the bank.

Or on a net basis moving reserves from dollars to assets.

 

[yllus]

Not a good idea IMO. Both China and Japan are trying to maintain their export economies, a game which I think they can beat us at. If they export, the deficit has to come from somewhere. If we become a net exporter, we're going to be battling with them. Where are the buyers going to come from? Everyone's trying to export and there's not enough consumption.

Oh, I think it's a pretty good idea. Agriculture is what I was thinking last night - the world's population won't stop growing and North America has plenty of land, water and know-how right here. It helps that while browsing on my phone this morning on the way to the office I saw this:

Agriculture becomes the next big thing

A new report by Australia’s Macquarie Agricultural Funds Management concludes that heroic efforts will be needed to feed a global population that will expand by 40 per cent by 2050. Some countries will struggle to feed their citizens; food riots broke out in dozens of poor countries at the height of the food crisis in 2008.

But others might thrive. Macquarie notes that “those countries with a robust agricultural sector, sustainable farming practices, modern infrastructure, reliable water access and safer political structures will increasingly become the global agricultural powerhouses.” The report doesn’t specifically mention Canada, but Canada checks off all the boxes, and then some.

...

Now for the really bad news. It’s not going to be easy to expand production to stuff all those extra burger-craving mouths. The amount of arable land in the developed world has been in decline since the mid-1980s and a reversal of the trend is unlikely. The arable land footprint is expanding in the developing world, but not nearly as fast as it was a few decades ago. That’s because rampant deforestation is no longer an attractive option. Compounding the problem is a lack of water. Water scarcity is reaching crisis levels in some African and Middle Eastern countries.

Now what's the name of a good agri-fund?

 

[nick1985]

Technically it's gov't taking banks reserves and buying gov't debt and assets from the bank.

Or on a net basis moving reserves from dollars to assets.

So, basically the government is buying its own debt.

 

[halik]

So, basically the government is buying its own debt.

Well no, Government is making member banks buy its debt.

The gov't debt is the collateral for the bank reserves (ie bank's money) is the cash that pays for the gov't debt.

 

[Jaskalas]

Once the government directly binds economic growth to their inflating of the dollar, who here believes that politicians have the balls to remove that economic growth to stop inflation down the road?

To those yapping about TARP. This isn't about flipping a switch and watching it happen over night. This is a long term disaster where the government will NOT remove itself from the economy and watch the bottom fall out. That will be the only way to stop hyperinflation later. They'll have to let the economy go through a controlled and prolonged fall.

Which politician is going to let that happen? Who in elected office will let the market tumble and jobless rates remain high ON PURPOSE for the entire decade?

They're never going to take the correct steps to undo this mess. The Federal reserve might have some clue on what it needs to do later, but do you think Congress or the President will allow it?

How many times have you seen people act responsibly with bubbles, with easy money? Do you have any CONCEPT of what a bubble the size of our entire currency and/or government spending would look like? When that thing pops.... you'd wish to god it was only a depression.

Tech Bubble -> Housing Bubble -> Government Bubble.

If you thought 2008-2010 had the potential to be bad without government money, that's just a fraction of the new bubble that you are directly supporting. We bailed out wall street. Who is going to bail us out?

 

[sMiLeYz]

http://www.nytimes.com/2010/11/04/b...l=1&adxnnlx=1288868596-K6MXsg8APcNboMDvgb4wAg

In the middle were Ben Bernanke and other top Fed officials, who struggled to make up their minds about who was correct. For months, they came down closer to the deficit hawks and did little to help the economy. On Wednesday, they effectively acknowledged that they had made the wrong choice.

The risks of inaction have turned out to be the real problem.

 

[CycloWizard]

So the Fed admits that it can't accurately predict what will happen in the economy, but it's still trying to be the puppeteer running the show? I guess all of the Fed guys are wealthy enough that swings in the value of money and unpredictability isn't going to hurt them much one way or the other, so screw the rest of us.

 

[aldamon]

IMO this is what's happening. Lots of people with debt paying it down, student debt, car debt, credit card debt, paying it down, it goes back to the creditors who aren't lending. It's why these policies are doomed to fail.

We're paying off all of our debt because of low returns in savings, so guilty as charged. To be fair though, if we didn't, the money would still be sitting in savings or some other investment. It's not like the alternative would be a spending spree.

 

[nick1985]

Well no, Government is making member banks buy its debt.

The gov't debt is the collateral for the bank reserves (ie bank's money) is the cash that pays for the gov't debt.

Ah, so the government is pretty much buying its own debt, just in a de facto sort of way. Gotcha

 

[Narmer]

Technically it's gov't taking banks reserves and buying gov't debt and assets from the bank.

Or on a net basis moving reserves from dollars to assets.

That's your keyword. However, when has the markets ever given a damn about technicalities? Sentiments is where it's always been at and it changes nothing from what what Nick and I said. Why? Because when the banks need those reserves the FR will just lend it to them. Anyway, as we've seen with Japan over the past 2 decades, QE only slows down the inevitable, it does not reverse it.

 

[bamacre]

So the Fed admits that it can't accurately predict what will happen in the economy, but it's still trying to be the puppeteer running the show? I guess all of the Fed guys are wealthy enough that swings in the value of money and unpredictability isn't going to hurt them much one way or the other, so screw the rest of us.

See "mission impossible" in sig.

 

[Narmer]

Ah, so the government is pretty much buying its own debt, just in a de facto sort of way. Gotcha

He doesn't want to say so but that is what's happening. It truly is a symbiotic relationship between the Federal government, Federal Reserve, and banks. The FR "lends" money to the banks who in turn lend it to the Federal government.

 

[werepossum]

On your "Weaker Dollar" point, we have to have this (a weaker dollar, that is), otherwise our export business is going to continue to dwindle and be shipped overseas and give us even higher unemployment.

Most of what we export is also available from other countries, so inflation will make us more competitive. Most of what we import is not available from American manufacturers, so what we import will cost more. Since we import far more than we export, a weaker dollar will increase our deficit, meaning more of our GDP will go for debt servicing.

Weakening the dollar may be able to increase our employment by making our wages more competitive. Weakening the dollar will increase our trade deficit and debt, and will lower our standard of living. No one has ever found prosperity through inflation.