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

[Zebo]

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

Already have a few 60lb boxes in safe I've been buying from monex over the years. Won't save me because they will tax the bejeezus out of nominal gains if catastrophe happens..

http://market-ticker.org/akcs-www?singlepost=2214427

Not to mention if you bought call options in Feb you'd made 400% instead of just 40%.

 

[CycloWizard]

Is your position then that the Federal Reserve (and all other central banks) should not play an interventionist role in the market? They will never, ever have a handle on all of the variables.

I could work my ass off for money, then someone can magically create 100,000 times what I'll make in my lifetime on a whim. That tells me what I just worked for: money with no real value. This is not freedom. Having every facet of your life planned for you by someone is what happens when you're in prison. Freedom includes the freedom to succeed and the freedom to fail.

 

[Darwin333]

With fiscal policy gridlock, Bernanke becomes king.
You can either have targeted fiscal stimulus, or helicopter Ben is just going to start dumping money.

So, um, why did he do QE1?

 

[JSt0rm]

I could work my ass off for money, then someone can magically create 100,000 times what I'll make in my lifetime on a whim. That tells me what I just worked for: money with no real value. This is not freedom. Having every facet of your life planned for you by someone is what happens when you're in prison. Freedom includes the freedom to succeed and the freedom to fail.

It has lots of value. You get to eat tonight because of the money you make. Thats just one example. I'm sure there are more.

 

[airdata]

whooo, damn we dodged a bullet. I feel so much better now... :-(

Only 100 billion more than the 500 billion that they refused to tell congress where it went.

Everybody needs to realize the the federal reserve is a scam. It's not a branch of the US government.

But... .if that happened everything might crash sooner than later, right?

 

[zephyrprime]

Lacking in the reading comprehension department, it's the banks that are de facto buying the gov't debt. The funding for QE doesn't come from the gov't, but rather the member banks.

There money supply expansion doesn't come from any sort of "creation" of money, just expansion of credit/loanable funds.

The banks buy government debt and then the Federal Reserve buys that debt from them. The accounts at the Federal Reserve for the primary dealers then get credited for that amount of money. The money the Federal Reserve uses to credit the primary dealers comes from nowhere. It is "printed" into existence except you don't even need to print the money. You just enter a number into a computer. This is money creation. What do you think "expansion" is? It's money creation.

 

[CycloWizard]

It has lots of value. You get to eat tonight because of the money you make. Thats just one example. I'm sure there are more.

No, I get to eat tonight because someone else is dumb enough to take the worthless money I pay them. The government creates money from nothing, pays it to me for doing nothing, then I sucker someone into giving me goods and services based on that nothing. Whoever is holding the money when the music stops is going to lose big time.

 

[zephyrprime]

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.

I have no doubt that they will profit greatly from such swings.

 

[Dissipate]

No, I get to eat tonight because someone else is dumb enough to take the worthless money I pay them. The government creates money from nothing, pays it to me for doing nothing, then I sucker someone into giving me goods and services based on that nothing. Whoever is holding the money when the music stops is going to lose big time.

Sounds a lot like your beloved military.

 

[halik]

The banks buy government debt and then the Federal Reserve buys that debt from them. The accounts at the Federal Reserve for the primary dealers then get credited for that amount of money. The money the Federal Reserve uses to credit the primary dealers comes from nowhere. It is "printed" into existence except you don't even need to print the money. You just enter a number into a computer. This is money creation. What do you think "expansion" is? It's money creation.

Not quite - they credit the reserve accounts and create a fed liability against it. Essentially borrow money from the reserve account or another way to think about it is they issue FED debt to the primary dealers. In either case it's a zero sum game and the money actually comes from the banks' reserves.

Good read on the actual mechanics if you have any background in accounting:
http://www.frbsf.org/education/activities/drecon/2010/0310.html

 

[JSt0rm]

No, I get to eat tonight because someone else is dumb enough to take the worthless money I pay them. The government creates money from nothing, pays it to me for doing nothing, then I sucker someone into giving me goods and services based on that nothing. Whoever is holding the money when the music stops is going to lose big time.

look how dumb you are.

 

[halik]

No, I get to eat tonight because someone else is dumb enough to take the worthless money I pay them. The government creates money from nothing, pays it to me for doing nothing, then I sucker someone into giving me goods and services based on that nothing. Whoever is holding the money when the music stops is going to lose big time.

http://economistsview.typepad.com/economistsview/2005/09/yapping_about_m.html
Read how barter economy evolves representative money.

 

[zephyrprime]

Not quite - they credit the reserve accounts and create a fed liability against it. Essentially borrow money from the reserve account or another way to think about it is they issue FED debt to the primary dealers. In either case it's a zero sum game and the money actually comes from the banks' reserves.

Good read on the actual mechanics if you have any background in accounting:
http://www.frbsf.org/education/activities/drecon/2010/0310.html

I stand by what I said. The fact that a liability of equal size is created doesn't matter. It may matter to accountants but it doesn't matter in the real world. That liability is never going to called in. In the real world, I could do the same sort of thing as the FED. I'll print up a $100 dollar bill using my Hewlett Packard inkjet printer and then at the same time print up an IOU for $100 and send that to Obama. By your reckoning, I have not created anything because the everything nets out to zero. Guess what? In the real world I'm going to go to jail if I do that. Bernanke will not when he does the same thing.

 

[Zebo]

QE2 (day 1) just shot the Oil Price to near $87. I'm betting on $100 by months end. This is with 15% less global demand. Keep saying deflation enough you might learn to believe it.

Let me see if I got this right, Low wages (if you have a job) high costs on everything but your worthless house, pensions which can't be paid, and we have not even addressed the toxic debt and fraudulent accooutning held by banks and wall street.

....welcome to Benny The B's genius, This won't end well.

 

[DucatiMonster696]

The benefits: You fight off deflation, make exports more competitive internationally (USD is down 4.4% against the yen, 9.7% against the euro), and it's a great time to get into the stock market.

That would be nice if we didn't legislate away the good bulk of our manufacturing to third world countries via GATT and NAFTA. Or if China was not pegging the Yuan to the dollar.

 

[halik]

I stand by what I said. The fact that a liability of equal size is created doesn't matter. It may matter to accountants but it doesn't matter in the real world. That liability is never going to called in. In the real world, I could do the same sort of thing as the FED. I'll print up a $100 dollar bill using my Hewlett Packard inkjet printer and then at the same time print up an IOU for $100 and send that to Obama. By your reckoning, I have not created anything because the everything nets out to zero. Guess what? In the real world I'm going to go to jail if I do that. Bernanke will not when he does the same thing.

Your grasp of the situation is plain wrong and that analogy doesn't even make sense.

In the real world, the banks have less $ reserves and and hold FED "bonds" in those accounts instead (collateralized by the stuff that FED ends up buying). The liability will be debited when the FED unwinds the assets.

When you take out a car loan, that money doesn't magically appear form nowhere either, it will get transferred from the bank account and the bank gets your promissory note. Now the bank has the same amount of money/assets as before, except some of it is in the form of your car. If I have an account at the same bank, some of my balance is now enumerated in dollars and a fraction of the car you financed. At no point was any money created in this example or in feds actions.

Fed actions are identical to the example above - they took some of the reserve deposits and put in "promissory notes" same way a bank does when making loans.

 

[RbSX]

So, um, why did he do QE1?

Because it will assist the statistics saying the economy is better.

Why do you think Wall Street jumped a huge sum today? Because it's a futures market. For the next few months the economy will be peachy because of the 900 billion that was pumped into it.

But the problem is it's money pulled from thin air.

 

[halik]

Because it will assist the statistics saying the economy is better.

Why do you think Wall Street jumped a huge sum today? Because it's a futures market. For the next few months the economy will be peachy because of the 900 billion that was pumped into it.

But the problem is it's money pulled from thin air.

Actually it's moreso due to the dollar move. Stocks traded in the US are denominated in dollars...

 

[Dissipate]

Because it will assist the statistics saying the economy is better.

Why do you think Wall Street jumped a huge sum today? Because it's a futures market. For the next few months the economy will be peachy because of the 900 billion that was pumped into it.

But the problem is it's money pulled from thin air.

Actually it is just factoring in inflation. If the stock market doubles, your portfolio might look great, but it will actually be in very poor shape when the dollar loses more than half of its purchasing power.

In any event, a market that is based on the whimsical decisions of a collective decision making body like the Fed is going to be totally distorted. I'm very glad I got out of the stock market and bought gold and silver.

 

[Acanthus]

QE2 (day 1) just shot the Oil Price to near $87. I'm betting on $100 by months end. This is with 15% less global demand. Keep saying deflation enough you might learn to believe it.

Let me see if I got this right, Low wages (if you have a job) high costs on everything but your worthless house, pensions which can't be paid, and we have not even addressed the toxic debt and fraudulent accooutning held by banks and wall street.

....welcome to Benny The B's genius, This won't end well.

It can be deflated just as fast as it was inflated.

 

[bamacre]

It can be deflated just as fast as it was inflated.

Tell that to Paul Volcker.

Two questions. If they had to raise interest rates today, to fight off inflation, what would that do to our economy? What would that do to the interest payments on our national debt?

 

[Acanthus]

Tell that to Paul Volcker.

Two questions. If they had to raise interest rates today, to fight off inflation, what would that do to our economy? What would that do to the interest payments on our national debt?

Yes, there certainly are dangers with the action. You also have to weigh the dangers of inaction though. Stagflation would likely scare off investment and throw us right back into a recession.

As to the national debt interest... All i have to say is D:

 

[halik]

Tell that to Paul Volcker.

Two questions. If they had to raise interest rates today, to fight off inflation, what would that do to our economy? What would that do to the interest payments on our national debt?

See what happened after '31/'32 when the FED did just that.

 

[Narmer]

Global opposition to US flooding the market with dollars.
http://www.bbc.co.uk/news/business-11697483

China, Germany and South Africa criticise US stimulus

The US central bank hopes that the move could boost the US economy's recovery
Continue reading the main story Related stories

• Q&A: The Fed's QE gambit
• Global shares jump on US Fed move
• Fed pumps $600bn into US economy

Germany, China, Brazil and South Africa have criticised US plans to pump $600bn (£373bn) into the US economy.
German Finance Minister Wolfgang Schaeuble said the US policy was "clueless" and would create "extra problems for the world".
The US Federal Reserve could weaken the US dollar and hurt exports to America.
China's Central Bank head Zhou Xiaochuan urged global currency reforms, while South Africa said developing countries would suffer most.
He did not elaborate how the system should be changed.
'Undermining the G20'
South Africa's finance minister Pravin Gordhan warned that "developing countries, including South Africa, would bear the brunt of the US decision to open its flood gates without due consideration of the consequences for other nations."
The US policy "undermines the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain during the current crisis," he said.
The heads of state and government of the G20 group of the world's leading nations is due to meet in a week in South Korea, with currencies and trade imbalances high on the agenda.
The US central bank announced on Wednesday that it would spend $600bn to buy government bonds, in the hope that the cash injection can kickstart the country's economy.
However, this weakens the dollar, making imports from around the world more expensive for US consumers.
'Clueless'
Continue reading the main story “Start Quote

It is not that the Americans have not pumped enough liquidity into the market and now to say let's pump more into the market is not going to solve their problems”
​

End Quote Wolfgang Schaeuble German finance minister
"If the domestic policy is optimal policy for the United States alone, but at the same time it is not an optimal policy for the world, it may bring a lot of negative impact to the world," said Mr Zhou.
"There is a spill over."
China's Vice Foreign Minister Cui Tiankai said the Federal Reserve had the right to take steps without consulting other countries beforehand, but added: "They owe us some explanation."
Germany's finance minister Wolfgang Schaeuble said on German television that "with all due respect, US policy is clueless."
"It is not that the Americans have not pumped enough liquidity into the market and now to say let's pump more into the market is not going to solve their problems."
He added that the German government was going to hold bilateral talks with US officials and also discuss the topic at the G20 summit in Seoul next week.
On Thursday, Brazil's finance minister Guido Mantega had warned that the Fed's move would hurt Brazil and other exporters.
The latest move by the Fed has been dubbed QE2 as it follows the central bank's decision to pump $1.75tn into the economy during the downturn in its first round of quantitative easing.

 

[bamacre]

See what happened after '31/'32 when the FED did just that.

That's not what I was suggesting, it was a hypothetical question.

Nevertheless, I think we would be better off if we discussed what the FED did beforehand.