QE2: Goverment Tapped Out?

Discussion in 'Business & Economics' started by Michael, Nov 3, 2010.

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Were the Mayans on to something!?!?

  1. 2012 - Democrats have their ass handed to them: Again

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  2. 2012 - Republicans have their ass handed to them: For not living up to their own hype.

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  3. Mayans Who? Viva La Revolution!!! (aka: lets play sock the banker :D

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  1. Michael 歌舞伎 Valued Senior Member

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    One economic commentator suggested this morning that the "real" reason the Fed is perusing QE2 is because the US Government is having trouble finding buyers for its bonds. Thus, the Fed will print as well as buy money. Keeping interest rates low so as to shield the public from the pain that they, and their grandchildren, will surely feel in the future. But, most Americans are clueless and probably won't understand what hit them anyhow.

    This is all kind of ironic given the Democratic controlled government just had it's ass handed to them in a handbag for just such shenanigans.


    On a side note, I also read that the small GDP growth we had last quarter was ALL consumer fueled debt al la QE1, and again, not based on production. This suggests to me that 2012 will be the year of the Apocalypse: For Democrats in the Senate, House and POTUS. Maybe those Mayans were on to something

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    Last edited: Nov 3, 2010
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  3. Jeff 152 Registered Senior Member

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    "On a side note, I also read that the small GDP growth we had last quarter was ALL consumer fueled debt al la QE1, and again, not based on production." - Michael

    Are you suggesting that maybe we cant just look at a couple numbers and determine that the economy is healthy? That sounds pretty extreme. You must be some kind of nutjob.

    Besides, don't you know that the recession is over?

    this post was sarcastic by the way.
     
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  5. Michael 歌舞伎 Valued Senior Member

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    Doubleplussarcastic

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    $600 BILLION more dollars. Wow. I suspect one could make a killing on pitchforks, tar and feathers if properly vested

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  7. Jeff 152 Registered Senior Member

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    Ministry of information - Correction:

    Headline should read "Amount necessary to end recession has fallen to $600 billion from initial estimate of $2 Trillion after an especially positive jobs outlook."

    Do not believe the thought criminals telling you otherwise.
     
  8. joepistole Deacon Blues Valued Senior Member

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    Let me guess the source, Fox or Clear Channel. If the US government is having trouble selling it's debt as you source claims, then why is the yield (interest) on US debt at historic lows? You do understand that US debt is auctioned off to the highest bider don't you. The price for US debt is determined by the market.

    The rate on the 10 year note was 2.58 percent.

    Common sense would dictate that if no one wanted to buy US debt, the US would have to offer a higher interest rate on it's debt to encourage investors to purchase US debt.

    It appears you and your economic pundit don't know what you are talking about Michael. If the government was having trouble selling its debt the yield on US debt would be going up, not down.
    What makes you think that? How do you know how why voters voted the way they did. Let me guess again, Fox and Clear Channel.

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    Do you know when QE1 occured and what it was? It occured in Q4 of 2008 under a Republican administration. It was the bank bailout, rescue of AIG and other financial insitutions. It is the reason we still have financial insitutions.

    The reason QE2 is necessary now is because the stimulus was not sufficient to promote the kind of growth the American people are demanding now. And since Congress has passed into the hands of Republicans a second stimulus package is no longer possible. QE2 is an attempt to reduce the unemployment rate Michael because Congres has been neutered with the Republican takeover of the House. The House is no longer able to do the things that need to be done to get back to full employment. So the Fed is acting as best it can to boost economic activity.
     
    Last edited: Nov 9, 2010
  9. Jeff 152 Registered Senior Member

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  10. joepistole Deacon Blues Valued Senior Member

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    If China is whining, you know it is good for the United States. This brings us back to our problem with China - currency manipulation. China is under pressure from the US and Europe to stop pegging the value of its currency to the dollar. This practice gives them a perpetual competitive (export) advantage. So when they stop manipulating their currency to give them the advantage, I will take their complaints more seriously.
     
  11. Jeff 152 Registered Senior Member

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    A little hypocritical to complain about currency manipulation while we print trillions of dollars and flood the world markets?

    Besides, China released the peg in June - its been pegged to a basket of currencies since. The yuan has only appreciated against teh dollar a couple percent, but the dollar has declined in double digits vs the euro, pound, yen, and other currencies that China is now buying instead of dollars.

    China is smart though - they saw what happened when the US and others forced Japan to appreciate their currency and won't be so rash. And with 2.7 trillion dollars in foreign reserves they hold a lot of power.

    Devaluing the currency is not the panacea of our economy. China is a convenient political scapegoat that politicians can target and make their constituents happy.
     
  12. joepistole Deacon Blues Valued Senior Member

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    China is still manipulating its currency and the Yuan remains under valued. And it is under increasing pressure to stop manipulating its currency from the United States and Europe. The Yuan should float just like the currencies of other industrial countries.

    http://www.cnbc.com/id/39826024/US_Senate_Unlikely_To_Follow_House_on_China_Yuan

    China holds a lot of US debt because of its trade imbalances. And the unfortunate fact for China is that though it holds a lot of US currency it cannot dump it without blowing off it's other leg. So this fear mongering over China holding US debt is just that fear mongering.

    China is many things, but it is not irrational.

    Two, the reason the Fed is expanding the money supply is to make up for inaction on the part of Congress. The ideal solution would be fiscal intervention. But since that is not possible....quantitative easing is the only tool available to the US to keep the economy moving...which is also in the interests of our trading partners (e.g. China).
     
  13. Jeff 152 Registered Senior Member

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    China has learned its lessons from after watching the Asian Financial crisis and watching what happened to Japan. China is still in tis infancy and floating its currency would destroy it. It will be a slow and gradual process. Unlike Japan before it, China is standing up to the American bully.
     
  14. joepistole Deacon Blues Valued Senior Member

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    No, Japan's problem has nothing to do with currency. It has everything to do with the fact that it made the mistakes we made during the Great Depression. When it should have been following an expansionary monetary policy, it went contractionary. Thus far we have avoided much of Japan's mistakes. Hopefully that will continue to be the case.
     
  15. Jeff 152 Registered Senior Member

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    Wrong - we actually already did exactly what the Japanese did in mid to late 80s. We used an expansionary monetary policy which fueled an asset bubble which burst and created the catastrophic deflationary spiral afterwards and brought about the term "lost generation."

    http://en.wikipedia.org/wiki/Plaza_Accord

    The only difference is Japan felt the need to enact expansionary monetary policies due to the forced appreciation of its currency which was hurting its export-driven economy (yes they agreed to it but obviously under heavy pressure from the US and Europe), whereas we enacted expansionary policies as stimulus after the tech bust. The result was identical - asset bubble followed by deflationary spiral.

    http://en.wikipedia.org/wiki/Japanese_asset_price_bubble
     
  16. John99 Banned Banned

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    Obviously you are thinking of what can be explained by one single thing alone. The beginning was the personal computer but once the internet and IT came around things just went through the roof. Because anything else is just fluff and conjecture\old wives tales etc.
     
  17. iceaura Valued Senior Member

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    If all the US had to worry about was the asset bubble itself, we'd be in much better shape.

    The real bomb was the derivatives market fraud, a hundred times the size of the asset bubble and not a consequence of monetary policy.
     
  18. joepistole Deacon Blues Valued Senior Member

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    You are mixing and matching things are not meant to be mixed and matched. The Plazza accord was a response to international trade issues. The so called "Lost Decade" is an entirely different issue. And you are treating them as being the same thing. They are not and will never be.

    Two, Japan's lost decade surfaced in the early 1990's and Japan was slow to respond. They did not react as we did. And integrity to their banking system was not restored until 1999 almost 10 years after the fact.

    http://carnegieendowment.org/publications/index.cfm?fa=view&id=40356

    Now compare that to the actions taken by the Federal Reserve and the US Treasury...when integrity was restored to the banking system with in a year. We did not do exactly what Japan did. And the underlying factors that created the problems are not the same either.
     
  19. Jeff 152 Registered Senior Member

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    There's no such thing as isolated events in economics. Of course they are different issues - but they are all interconnected.

    1. US wants to decrease trade deficit with Japan so pressures Japan to appreciate its currency (this did nothing by the way we continued to run a large deficit with them)

    2. Japan's strengthened currency weakened its economy, bringing about a downturn.

    3. In response to said downturn, Japan pursues an expansionist monetary policy.

    4. Due to expansionist monetary policy, a stock bubble and real estate bubble form

    5. said bubble collapses and sends japan into a deflationary period


    Economics is like history - it repeats itself.

    #1 is identical to what we are trying to do to China.

    #3-5 you can substitute tech bust for downturn and US for Japan and it is nearly identical to the housing bubble (minus some of the more complicated parts of our situation with the fraud and all) But contrary to your belief that the housing bubble alone was no problem and that it was only the fraud that was a problem, here is your counterexample - look at the havoc that the bursting of the bubble wreaked and it had nothing to do with fraud.

    The only reason that we are coming out of our bubble burst better than Japan is that whereas Japan was an isolated event, when the shit hits the fan in the US it affects the whole world. The Great Recession is a global event because the US is such a large part of the world economy. But the US is still seen as the bastion of security and strength, so there have been huge inflows of capital and buying of our debt because they are seen as safe investments. Unlike when capital fled Japan after its recession, we have the opposite effect here due to the US's status. So we can just do whatever we want and the world is forced to go along with us so we don't feel the consequences of our actions like say Japan did, so we will continue to make the same mistakes until someone truly has enough power to put us in our place, and that will be china in 30-40 years (assuming were not all dead by then)
     
  20. joepistole Deacon Blues Valued Senior Member

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    Where is your proof? You are trying to tie together unrelated events. Where is the nexus that links the two events together? There is none. And in order to make your case you have to ignore a lot of other factors. When you have to start monkeying around with facts and cherry picking, perhaps you had better reexamine your premise.

    http://krugman.blogs.nytimes.com/2010/08/09/self-induced-paralysis/
     
  21. Michael 歌舞伎 Valued Senior Member

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    Faux news - puuuleeease! I haven't watched Fox News in ever. As in I've never sat through an entire episode of Faux Newsertainment

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    Actually, if I recall correctly, it was an assessment made by Peter Schiff on his blog.

    That said, I personally don't blame Dems (or the GOP) for the economic mess we're in. It's our fault. Americans. We suck. We've become greedy little ass holes who want to turn a buck screwing over someone and make as much as we can or die trying. As an American I'd like to see Bankers at GoldmanSucks, Citi, Chase, etc... hung. But, we're not going to do that because we idolize crooks. We look up to them and say: Wow, that guy got away with 600 million Scot-free. We are suckers. We believe bullshit like WMD in Iraq when it's obviously oil. THAT is how stupid we've become. "Yes We Can" and "Change We Can Believe In" and ooops did I mention most of my cabinet will be executives from GoldmanSucks - the exact same crooks who f*cked us and then got bailed out and are now making BILLIONS in bonuses while schools shutter. How f*cking stupid are we? THAT STUPID! We're actually THAT stupid.

    Yeah, let's blame China. Riiiight. As if ANY toy cars are going to be made in the USA. It isn't going to happen - not until we're a 3rd world and Chinese are buying from us (except maybe food - we are competitive there). The English said the EXACT same thing about the Americas 200 years ago as we are saying about China. Bitching wasn't going to stop the fall of their Empire and it won't stop ours either. Their time was done and now ours is.

    How do I know QE2 isn't going to work? Because I have come to terms with the fact that America and we Americans suck. No amount of 'stimulus' is going to change that fact. The only way to unsuck would have been to let the market completely crash in 08 and right we'd be eating road kill pointing at fire and going "ugg fire" and then in 2012-5 things would be good because people would have learned a lesson and maybe got some morals and who knows grew a spinal column! SEE, we learn from failure - we do NOT learn from handouts. Anyway, as that didn't happen it's just a slow decline into obscurity and the pages of history. Well, it was good while it lasted. Thank's babyboomers for f8cking us. Hope your enjoyed the party. No QE2, 4 or 5 isn't going to make us Americans suddenly want to learn Science and Math and, oh my god, work hard and produce. Nope. Not going to happen. Well, not for the bottom feeders which make up most of the USA anyway.


    You know what I was thinking this morning. China's probably only so well because 50 years ago they sucked so soooo bad. If Communism hadn't sucked balls to the degree it did, then they probably wouldn't be doing so well now. And as I say to my secretary: Sometimes you gotta go down, if you wanna go up!

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    (PS: No, I don't have a secretary! lol!)


    Jobs are not coming back to the USA for the plebeians - ever. The most your typical American can hope for is Greeter at Wallmark. Whooopie. But, for those very very few of us who have extremely highly specialized jobs in demand - well, we're probably going to be OK, for awhile anyway. But, the majority of people, the ones that thought flipping houses instead of working was working, they're toast. That's why 7-11, which used to be a summer job or part time job for kids to make some spare money, is now a "career". THAT'S how bad it is here.

    China will go through this same shit in the future as well. They're not special. History's cycle I suppose, lucky us, we get to live it

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    Last edited: Nov 9, 2010
  22. Michael 歌舞伎 Valued Senior Member

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    So, the Aussie dollar is buying 1.0149 USD. That's crazy! The AU economy is like a pimple on the butt of the USA it's so small. Gold above $1400 an once and some predicting $2500+ (which is what it would be in 1980s inflation adjusted - no I can't recall where I read that).
     
  23. jmpet Valued Senior Member

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    All we have to do is work on the trade deficit to the point of where it's a surplus. Of course this means millions of jobs and lots of new/reopened factories manufacturing stuff but that will fix all our problems.

    I am not against the US increasing tariffs to make our stuff more competitive.

    One thing that amazes me is that we rely on China for all our plastic crap- why can't we make it ourselves? I am sure there are environmental costs tied to this but it never made sense to me that something from the other side of the world is cheaper than something in our own backyard.

    The cause of this problem we're in is rooted in events that started 30 years ago and today are coming to pass. Blaming this on "whoever is President at the moment" is ignorance.
     

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