QE2

Printing money to buy $600 BILLION in treasuries. Markets seemed to like it, at least for a day. Going to suck for the dollar though. Hope this shit works.

 

Seems other countries are not so fond of this latest stimulus.

Backlash against Fed’s $600bn easing

 

They can not lower interest rates so this is the only recourse.

 

Oil going up. That was easy to see. More money, dollar declines, oil traded in dollars, oil producers raise prices to keep current spread. Gas goes up.

 

From wikipedia regarding the great depression:

Bank failures snowballed as desperate bankers called in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending.[18] Banks built up their capital reserves and made fewer loans, which intensified deflationary pressures. A vicious cycle developed and the downward spiral accelerated.

The liquidation of debt could not keep up with the fall of prices which it caused. The mass effect of the stampede to liquidate increased the value of each dollar owed, relative to the value of declining asset holdings. The very effort of individuals to lessen their burden of debt effectively increased it. Paradoxically, the more the debtors paid, the more they owed.[16] This self-aggravating process turned a 1930 recession into a 1933 great depression.

Macroeconomists including Ben Bernanke, the current chairman of the U.S. Federal Reserve Bank, have revived the debt-deflation view of the Great Depression originated by Fisher.

 

Don't think it's really fair, especially from China, to accuse the US of manipulating currency markets. Any type of stimulus is going to create some change in currency values. The aim of QE2 is to help stimulate the economy which in turn may stimulate job growth. Heard from an economist today that it's hoped to maybe add .25% to GDP and reduce unemployment rate roughly the same. An option would of just done nothing but then everyone would be bitching about doing nothing.

 

QE's = the new bubble. Consumers don't even get a bite of this "stimulus" but will pay the price as usual. I like how Berny is worried about deflation as commodities which are the necessities of American life rise. Deflation my ass.

Party on, Garth.

 

I thought this thread was going to be about the Queen Elizabeth II, ship.

 

Likewise, consumers dont fare well if deflation occurs, like what happened in the early 30's and what bernanke is trying to avoid. Not saying it will work, just saying it's a valid thing to avoid. The cost to consumers of 4% inflation is much less than 30% deflation.

I just found this to be chilling:

The liquidation of debt could not keep up with the fall of prices which it caused. The mass effect of the stampede to liquidate increased the value of each dollar owed, relative to the value of declining asset holdings. The very effort of individuals to lessen their burden of debt effectively increased it. Paradoxically, the more the debtors paid, the more they owed.[16] This self-aggravating process turned a 1930 recession into a 1933 great depression.

It's closer to happening than we'd like to think. Homes are deflating, but the debt is staying the same. Consumer spending was up, but credit card purchases were down. Falling home prices, unwillingness to use credit, unwillingness by banks to issue credit, and a desire to pay down debt IS a contraction in the money supply.

I hope it works, because if it doesn't, things might suck bad.

And, to argue against debt, fiat, and central bank based fractional reserve lending and monetary policy, this video is totally fucking mind blowing. One of the most educational 47 minute clips i've ever seen.

http://video.google.com/videoplay?docid=-2550156453790090544#

 

Totally wrong if the stimulus does what it's supposed to do. Whether that happens or not remains to be seen.