QE3 is on

[Imp]

LOL, everyone was saying the exact same things as you guys in the early 80s. and the early 70s. and the mid-60s. and the 30s. and the 1890s.

How dare you trivialize our panicking...

 

[Hoober]

They aren't causing inflation either. "Shadow banking" does neither, at least in the sense of asset backed finance, it just separates assets and investors from the originators.

For example, what is the difference between John Deere having $1bn in John Deere loans on its balance sheet and investors investing in JD as a whole compared to having JD finance those loans separate from JD itself. Either way you need to analyze the $1bn in loans, whether they are a part of JD or separate. Many say that the $1bn in loans being off of JD's BS is non-inflationary, but it is a net zero difference.

Others say that you are trying to peg value to an "uncertain" flow of future cashflows. Sure you are, in the sense that you don't know the future 100% certain. If you cannot balance risk/return in the sense of future flows than you shouldn't take out $1 of debt.

This is why I read ZH every morning but dismiss about 80% of it as illogical anarchist tripe.

Now the other form of "shadow banking", such as investments going into oil and other commodities, I agree that IS causing inflation. Other policies, such as ethanol, is causing more in the food system.

So I'm honestly curious, since I read this with interest -- how does buying nearly $90 billion worth of securities every month not equate to devaluing the currency? Because everybody else in the world is doing the same thing?

 

[LegendKiller]

So I'm honestly curious, since I read this with interest -- how does buying nearly $90 billion worth of securities every month not equate to devaluing the currency? Because everybody else in the world is doing the same thing?

Mainly because everybody else is doing the same. Another part is that people still want dollars because its really the only game in town. If there was a lack of interest in dollars, or manufacturing slack was being taken up, or money velocity was increasing you might see this as largely inflationary, but it's more counter deflationary than inflationary (which is almost the same thing)

My main thread was on railing against "shadow banking" and not thinking through it.

 

[Kroze]

LOL, everyone was saying the exact same things as you guys in the early 80s. and the early 70s. and the mid-60s. and the 30s. and the 1890s.

How dare you trivialize our panicing...

Do they have 16 trillion dollars deficit, 2 wars, unfunded pensions, social securities, and government cheese programs and extremely high unemployment with recent housing market bursting, bank failures and credit freeze?

 

[brianmanahan]

Do they have 16 trillion dollars deficit, 2 wars, unfunded pensions, social securities, and government cheese programs and extremely high unemployment with recent housing market bursting, bank failures and credit freeze?

do you have a %90 drop in the stock market and %25 unemployment and 9000 bank failures, or a world war or two, or a cold war where everyone expects to get nuked, or race riots tearing up cities all over the country, or %15 inflation?

 

[LegendKiller]

Do they have 16 trillion dollars deficit, 2 wars, unfunded pensions, social securities, and government cheese programs and extremely high unemployment with recent housing market bursting, bank failures and credit freeze?

Did you know that Warren Buffet's dad and uncle thought FDR and the "liberals" were ruining the country and that the depreciation of the dollar would lead to massive inflation and eventual societal collapse? You know what his dad and uncle did to hedge those notions?

They bought bags of flour and sugar and put them in the attic. They also bought gold and a farm, thinking they could trade and subsist on it when the collapse hit.

Think about that.

 

[Kroze]

Did you know that Warren Buffet's dad and uncle thought FDR and the "liberals" were ruining the country and that the depreciation of the dollar would lead to massive inflation and eventual societal collapse? You know what his dad and uncle did to hedge those notions?

They bought bags of flour and sugar and put them in the attic. They also bought gold and a farm, thinking they could trade and subsist on it when the collapse hit.

Think about that.

Does the federal reserve thought the economy is in such dire straits to lower interest rates to nearly zero and is now resorting to quantitative easing promising $480 billion dollars a year to buy shit asset that nobody with a brain would buy? With money created out of thin air?

 

[OverVolt]

I'm not sure I can afford to get any poorer, lol. I'm shocked they did QE3 honestly. When you print money, the first person to get it, gets the most benefit. In this case, the banks selling MBS.

They just cannot allow house prices to fall or there would be a run on the banks & following banking collapse. House prices are only halfway down to the inflation adjusted historical norm. They're in denial about their bad investments. I think no matter what they try to do, the banks lose in the long run.

If they realize the losses, game over. Their leverage ratios make taking a loss on housing = insolvent.
If they print the banks reap all the benefit and resources hyper inflate, demand collapses, also game over.