Quantitative Easing

cosmictraveler

cosmictraveler

Be kind to yourself always.
Valued Senior Member
Here's something new for us to digest. This term, quantitative easing, it is being used now to make an illegal activity legal. The American government will print up money, that money to buy the new bonds the government produces to make more money available for the government to show that its bringing down the public debt by increasing its income from itself! :eek:

I was always under the understanding the American government can't buy its own debts, so how can this be a legal way to artificially show that the government is paying its debt when all its doing is borrowing more of its own money to pay itself off? :shrug:

Can anyone here see that this isn't a very good way to solve our debt problem but only make matters worse. :mad:
 
No replys, I guess everyones happy with this way of covering up one problem with another. :shrug:
 
I've simplified its meaning in essence but that's what they are doing now. They make new money only to buy new bonds the government issues which cover the payments the government has for the short term.
 
cosmictraveler said:
Here's something new for us to digest. This term, quantitative easing, it is being used now to make an illegal activity legal. The American government will print up money, that money to buy the new bonds the government produces to make more money available for the government to show that its bringing down the public debt by increasing its income from itself! :eek:
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The Federal Reserve has always, and will always, buy US debt in order to set monetary policy. The Fed holds about 1.6 trillion dollars of bonds now, with the .6 being added recently.

I was always under the understanding the American government can't buy its own debts, so how can this be a legal way to artificially show that the government is paying its debt when all its doing is borrowing more of its own money to pay itself off? :shrug:
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This is how sovereign debt works---it's just not the same as you using a credit card. The idea is that you borrow money, and repay as much of it as you can. Then you roll over the debt by issuing new bonds and using the procedes to mostly pay off your old debt. As long as things are running smoothly, there are no problems. But when interest rates spike, or credit ratings fall, rolling over your debt becomes much more expensive---to see an example of this, look at Greece.

Can anyone here see that this isn't a very good way to solve our debt problem but only make matters worse. :mad:
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Probably, but there's not a better way to run a first world country's fincances.
 
Probably, but there's not a better way to run a first world country's fincances.
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Of course there is, stop spending, close loopholes, make certain there are no businesses that can avoid paying taxes no matter where they are from, make better laws governing the banking system, get rid of the Fed, learn from Texas what really works as well as other states that are gaining jobs and try to bring back ethics..I know that's going to be very hard with most of the Congress being made up of lawyers. So there are many steps which can help out and many others as well if they really wanted to "fix" the system. It is only a matter of time as to when this "facade" comes crashing down because a 15 trillion dollar debt and 4 trillion dollar deficit isn't going to go away no matter how much they reduce spending over the next 4 to 6 years as they are talking about doing. The interest on the debt alone is well over a trillion dollars and that's only going up. :(
 
As a Texan (living in Canada, no less!) I don't disagree with you. The fiscally conservative states (like Texas, for example, Indiana for another) have done very well since the end of the recession. Lowering taxes on business has sniped jobs from states with a bad climate for business: California, Illinois, etc.

But the Fed is in place as a buffer against inflation. They buy and sell bonds to regulate the money supply, which is not such a bad thing---this is what I meant: having a federal reserve is pretty necessary thing in a developed country.
 
I don't know bout that ? Inflation is a concern . That is more devastating to the middle class budget than anything else . With no job growth and freezes on cost of living wage increases? Bad Bad for middle class . Your dollar buy less , but it is good for the exporters Right ? That is how I understood it . Who wins from the export when the dollar is devalued ? I don't understand the logic . The middle class and small business don't win . Would it be every individual American wins by default even though there real world slavery cost more day to day . Seems like anti consumption by forced budget depletion if you ask Me and that all means more trouble for the middle class that depends on consumption from localized markets for there small business capitol . Loans are no good if you don't sell enough to pay overhead . Lose lose situation in our present course of action if you ask Me .
 
The government buying its own debt isn't a legal way to run a government. That will drive the value of the dollar lower adding to the overall problems that America has already. By buying the governments own debt by itself shows how bad those so called "economists" really are. That should be halted and a budget worked out as should be done by a responsible government no matter what must be done to get that budget passed. You see this way of "hiding" the truth will last for only a period of time, lowering the dollars value and creating more financial problems with the governments debts. Those debts only continue to keep rising by buying its own debts and won't solve anything. I'm appalled at this way the government avoids getting a budget worked out and worry allot about what the ramifications will be when all is said and done.

Please stop this illegal activity and get the budget done properly.:shrug:
 
Some silly questions here to ask you:
1. What is QE? I heard that it is basically Printing Money without being backed up by productivity. Correct?
2. FEB where to get money to buy bonds? Its money comes from where? From tax payers?
 
cosmictraveler said:
The government buying its own debt isn't a legal way to run a government. That will drive the value of the dollar lower adding to the overall problems that America has already. By buying the governments own debt by itself shows how bad those so called "economists" really are. That should be halted and a budget worked out as should be done by a responsible government no matter what must be done to get that budget passed. You see this way of "hiding" the truth will last for only a period of time, lowering the dollars value and creating more financial problems with the governments debts. Those debts only continue to keep rising by buying its own debts and won't solve anything. I'm appalled at this way the government avoids getting a budget worked out and worry allot about what the ramifications will be when all is said and done.

Please stop this illegal activity and get the budget done properly.:shrug:
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A couple of things Cosmic, first it is not illegal and it is not uncommon. Two, it does not drive down the value of the dollar. And even it it did, a cheaper currency makes domestically produced goods more competitive on international markets thus favorably impacting the balance of trade.

And three, the Quantative Easing is intended to be temporary and non inflationary.

http://en.wikipedia.org/wiki/Quantitative_easing#Printing_money

"The distinguishing characteristic between QE and monetizing debt is that with QE, the central bank is creating money to stimulate the economy, not to finance government spending. Also, the central bank has the stated intention of reversing the QE when the economy has recovered (by selling the government bonds and other financial assets back into the market).[62] The only effective way to determine whether a central bank has monetized debt is to compare its performance relative to its stated objectives. Many central banks have adopted an inflation target. It is likely that a central bank is monetizing the debt if it continues to buy government debt when inflation is above target, and the government has problems with debt-financing.[61]" - Wikipedia

And there is no indication that the recent QE has been inflationary. Inflation for the last 12 months has been 3.6 percent - pretty moderate by historical standards. It was much higher under Reagan and for some reason no one cared then. And if you look at the core inflation (taking out commodities affected frequently affected by supply issues) you get a core inflation of 1.5 percent. So for all the claims from the right wing, there is just no evidence to support their claims.
 
A couple of things Cosmic, first it is not illegal and it is not uncommon. Two, it does not drive down the value of the dollar. And even it it did, a cheaper currency makes domestically produced goods more competitive on international markets thus favorably impacting the balance of trade.

And three, the Quantative Easing is intended to be temporary and non inflationary.
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That's your opinion but I disagree with you about that. I see it as just another way to get the government to find its own newly printed money back into its own hands to reduce its debts. They just sell government bonds back to the treasury and that, to me, isn't what is legal. I really don't think that the government should be buying back from itself its own debts. That will lead to lowering the dollars value over time and increase inflation, no matter what your ideas are.
 
cosmictraveler said:
That's your opinion but I disagree with you about that. I see it as just another way to get the government to find its own newly printed money back into its own hands to reduce its debts. They just sell government bonds back to the treasury and that, to me, isn't what is legal. I really don't think that the government should be buying back from itself its own debts. That will lead to lowering the dollars value over time and increase inflation, no matter what your ideas are.
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You have your opinion and you are entitled to it Cosmic, but it is just not in line with the reality. The facts are that inflation has remained very tame. If things were as you say, that would not be the case.
 
joepistole said:
You have your opinion and you are entitled to it Cosmic, but it is just not in line with the reality. The facts are that inflation has remained very tame. If things were as you say, that would not be the case.
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I guess you haven't bought a gallon of gas this week, its up from a year ago over 1.50! Everything that I buy has increased at least 10 percent and somethings over 50 percent where I live. So I'd suggest that you start looking at commodities prices, silver as an example is now 40.00 when last year it was under 20.00. Yes, you really are correct, inflation isn't anywhere in sight to you because you wear blinders with rose colored glasses as well. :(
 
cosmictraveler said:
I guess you haven't bought a gallon of gas this week, its up from a year ago over 1.50! Everything that I buy has increased at least 10 percent and somethings over 50 percent where I live. So I'd suggest that you start looking at commodities prices, silver as an example is now 40.00 when last year it was under 20.00. Yes, you really are correct, inflation isn't anywhere in sight to you because you wear blinders with rose colored glasses as well. :(
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The CPI is based on a breadbasket of goods and services purchased by individuals. It is not based on the prices of just a few commodities. And it is weighted to gauge the impact of prices on the average Joe and Jane.

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

As I said previously, commodity prices vary wildy and are subject to price influences that are not related to monetary policy (e.g. supply, demand, balance of trade, etc.). In 2008, last year of the George II administration and before Quantative Easing, I paid $4 per gallon for gasoline. A few months ago, I paid $4 per gallon for gasoline. A few days ago I paid $3.40 per gallon for gasoline. What does that tell you? Since quantative easing, I have not paid more for gasoline than I did in 2008 before quantative easing, other Fed actions, bailouts and the Stimulus package.
 
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joepistole said:
Ah no.
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Ah yes!

Economic theory

The laws of supply and demand are ever-present in economics, and currency trading offers a prime example of this law in action. These are a few of the effects that supply and demand exert on the value of the dollar...

Increase in money supply: With every new dollar printed, each one is valued less than before. The more dollars there are in circulation, the less the currency is valued because the supply has been increased. In practice, this usually causes inflation, which directly eats into the value of the dollar. While this would seem difficult to measure, the Federal Reserve periodically publishes M2 and M3 data reports on the US money supply.

http://www.currencytrading.net/features/50-factors-that-affect-the-value-of-the-us-dollar/
 
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