Quantitative Easing

[joepistole]

What's clear though is that while all soft commodities are higher, there's a lot of variation. In fact it's sugar, not wheat, that is really in historical nosebleed territory right now. Conversely, cocoa -- which gets tons of hype for being expensive and scarce thanks to the ructions in the Ivory Coast -- really haven't gone nearly as far.


http://www.businessinsider.com/chart-of-the-day-food-prices-2011-2#ixzz1SBmg9Lbo

Prices of wheat-based products such as bread have remained on a relentless climb in the country since the start of the year.
A spot check by Business Daily yesterday showed the trend was not about to ease with some key players such as Bakers Inn raising the prices of some products by 25 per cent overnight.

http://in2eastafrica.net/rising-prices-of-wheat-products-linked-to-fuel-cost/


Again I will show you the facts that you seem to ignor. These facts are from reliable economists not the news media, which is where I thought you were getting your information from.

Nobody is arguing that commodity prices don't fluxuate wildly. As perviously stated, in 2008 I was paying $4 per gallon for gasoline and today I am paying $3.50 per gallon. It has been higher and it has been lower between those two periods of time. That is not the issue. The issue is inflation and monetary policy. It is likely climate change will bring about even more food shortages in the years to come, thus driving prices higher. That is the free market economy at work. There is nothing wrong with it. It is capitalism at its finest. But it has little, if anything, to do with Fed policy.

What you want to do Cosmic is cherry pick and then claim the sky is falling.

 

[Saint]

Joe, we are not only paying for gasoline in our lives, many other things to pay for,
I guess u r richman, rich man is not afraid of inflation.

 

[cosmictraveler]

What you want to do Cosmic is cherry pick and then claim the sky is falling.

Not at all. All I have done was present the facts as have been compiled by economists that have proved that the costs of almost everything we need is going up and doing so at a very steep pace because of the dollars falling value. As has been provided the facts speak for themselves, not what you conjure up from allot of government statistics and double talk trying to keep the masses calm instead of telling them the truth and upsetting them even more than they are because of the battle over the raising of the debt ceiling. If the debt ceiling is raised then the problem only gets larger for the next budget debate because there's going to be even more debt to repay not less. If they increase the debt ceiling that means they borrow more money from themselves instead of selling treasury bonds to outside investors as they should to actually reduce that debt. Buying those bonds from themselves only digs the hole deeper and deeper and does nothing but add to the total debt that America owes.

 

[joepistole]

Joe, we are not only paying for gasoline in our lives, many other things to pay for,
I guess u r richman, rich man is not afraid of inflation.

Well the data does not lie, inflation has been tame. And inflation affects everyone adversely. What I think you and others are complaining about is the declining purchasing power of the middle class. That is a separate issue not related to price inflation or Fed policy. That is more of a trade policy issue.

American politicians of both parties have sold the American worker down the river with unfair trade policies and failure to enforce trade agreements.

 

[joepistole]

Not at all. All I have done was present the facts as have been compiled by economists that have proved that the costs of almost everything we need is going up and doing so at a very steep pace because of the dollars falling value. As has been provided the facts speak for themselves, not what you conjure up from allot of government statistics and double talk trying to keep the masses calm instead of telling them the truth and upsetting them even more than they are because of the battle over the raising of the debt ceiling. If the debt ceiling is raised then the problem only gets larger for the next budget debate because there's going to be even more debt to repay not less. If they increase the debt ceiling that means they borrow more money from themselves instead of selling treasury bonds to outside investors as they should to actually reduce that debt. Buying those bonds from themselves only digs the hole deeper and deeper and does nothing but add to the total debt that America owes.

Yes you are, commodity prices flluxuate. That is what you have proven. You have not proven that the price fluxuations were in anyway caused by monetary or fiscal policy.

The hard facts are thus, inflation (CPI) has remained tame by historical standards. The hard facts are that the money supply has been very tame as well.

It boils down to this, you don't want to believe the real numbers. You prefer anecdotal evidence instead of the evidence that the professionals use. You claim that evidence is not valid because of some vast unproven conspiracy.

As pointed out to you before, raising the debt ceiling (paying the bills) is not the problem. The problem the US now faces is iressponsible fiscal management over the course of the first 8 years of this century. And if the Congress fails to raise the debt ceiling, that will be more of the same fiscal mismanagement that got us into this mess.

If Congress stops paying the bills it already authorized, it will exacerbate the nations fiscal problems. Interest on our public debt could go from 6 percent of government spending to 24 - 50 percent or more of government spending in short order. I don't care how you slice it, that is not fiscally responsible.

Your comments about the impact of Fed policy are just not coherent Cosmic. I think you are getting confused by government versus private industry accounting. Private businesses also borrow from themselves. The government calls it "interagency accounts" and private industry calls them "intracompany accounts". Private industry just does not report the intracompany accounts as such - government does.

Government does have the ablity to expand the money supply - something private companies cannot do. But there is nothing wrong with expanding the money supply when appropriate. And there is no indication the US government has done anything to mismanage the money supply. The government can also shrink the money supply. It is not a one way street as many on the right/Tea Party seem to think.

 

[cosmictraveler]

Government does have the ability to expand the money supply

Yes, by selling bonds to anyone that wants to purchase them. The government isn't supposed to buy its own bonds because it is only adding more debt to itself by doing so. So when they raise the debt ceiling, if they do, they will once again try to sell bonds and if no outside individuals wants them they cannot sell them back to themselves because they create more and more debt thus compiling a larger problem for itself, not reduceing the debt at all. . Can't you understand that?

 

[joepistole]

Yes, by selling bonds to anyone that wants to purchase them. The government isn't supposed to buy its own bonds because it is only adding more debt to itself by doing so. So when they raise the debt ceiling, if they do, they will once again try to sell bonds and if no outside individuals wants them they cannot sell them back to themselves because they create more and more debt thus compiling a larger problem for itself, not reduceing the debt at all. . Can't you understand that?

No I cannot.

Selling bonds to anyone who wants to purchase them - ok. What is wrong with that?, The US government has always sold bonds.

Now just where is your authority that the government is not supposed to buy it's own bonds? And how is that adding to the nation's debt? It isn't. It is actually reducing the nation's debt. If no one wanted to loan you a dollar; so you loaned yourself a dollar. Would you be a dollar more in debt? No you would not. Your claim here just does not make any sense.

You go on to say if no one buys the government debt, then the government goes in and buys the debt. And government has to sell more debt. This is so wrong on so many fronts. But let me start.

One, the government does not purchase it's obligation in the primary market. So of there are no bidders for US debt, the US government cannot bid on its debt. Two there has never not been bidders for US debt. If demand for US debt is low, the price for US debt will be low and the yield (interest) high. So US debt will sell at a price. The question is what price. The yields on US Treasury obligations have been very low, under 3 percent. So prices for US Treasuries have been high. That means demand for US Treasuries have been high - contrary to your claim.

No your claim that raising the national debt ceiling will cause more debt is just wrong. The debt has already been incured. That happened when Congress authorized the spending. The debt allows Congress to pay the bills it has incurred -nothing more and nothing less. There is no debt spiral caused by increasing the debt ceiling . There is a debt spiral if the US becomes so incompetent it cannot manage its fiscal policy (e.g. defaulting on its obligations; not controlling its spending; contracting the economy with incompetent fiscal policy). But that has nothing to do with how the Treasury funds the nation's debt.

 

[eyeswideshut]

That stupid Debt Ceiling Law, why not scrap that law out of existence so US can keep spending them dollars in fiscally sound manner forever and forever...

 

[Michael]

Gold $1600+
Silver $40+

I was thinking about the unfortunate soul who has the bad luck to end up running a 7-11 for the rest of their lives. I imagine one way to keep that person around is to give them a raise every now and again. Of course, they're not really doing anything extra and so they don't really deserve any more money. BUT, psychologically it's pleasing to have "more" money at the end of the week.

Thus, the magic of inflation

More money, less spending power.
Seems like a win win from a certain POV.

Unless you save. Then you're f*cked. Or retired. Again, stuffed.

 

[joepistole]

That stupid Debt Ceiling Law, why not scrap that law out of existence so US can keep spending them dollars in fiscally sound manner forever and forever...

Raising the debt ceiling has nothing to do with spending money. But it has everything to do with paying the debts. The money has already been spent. The spending occurs when Congress authorizes the spending - that is in the budgeting process.

What they should do in Congress is act responsibly and in the interests of the citizens of The United States.

 

[Michael]

The only way Seniors on SS would miss a check is if the POTUS authorized moneys that should be spent on SS to be spent elsewhere. There's more than enough to cover SS.

I say we start with welfare queens like GE and work our way down.

It probably doesn't matter what we do, the Babyboomers made their bed, now they can sleep in it.

 

[quadraphonics]

And inflation affects everyone adversely.

Not people who are in significant debt. Inflation is a big help, to them. Likewise, those who are owed lots of money are hurt a lot more by inflation than your average person.

It's been pointed out by various analysts that the Federal Reserve Board - which features a lot of people representing the interests of creditors (i.e., huge banks), but not so many representing debtors - tends to be more hawkish about inflation than the mainstream of economists or the public.

 

[quadraphonics]

The government isn't supposed to buy its own bonds

The Federal Reserve is not "the government." It's a quasi-independent entity.

because it is only adding more debt to itself by doing so.

Err... I think it should be clear that "buying one's own debt" doesn't affect one's debt position at all. For every dollar you borrow from yourself, you also are owed a dollar (from yourself). It's just nonsense semantics - equivalent to no transaction at all.

The issue is the Fed buying bonds from the government. This is different from the government buying bonds from itself.

 

[quadraphonics]

Not at all. All I have done was present the facts as have been compiled by economists that have proved that the costs of almost everything we need is going up and doing so at a very steep pace because of the dollars falling value.

This is just outright wrong. Inflation has picked up a bit in recent months, but is still low by historical standards. It was near-zero for quite a while, before that. And the recent boost is largely attributable to the Arab Spring (and consequent roiling of the oil markets) and other such transient geopolitical events, rather than monetary policy.

 

[Michael]

Not people who are in significant debt. Inflation is a big help, to them. Likewise, those who are owed lots of money are hurt a lot more by inflation than your average person.

It's been pointed out by various analysts that the Federal Reserve Board - which features a lot of people representing the interests of creditors (i.e., huge banks), but not so many representing debtors - tends to be more hawkish about inflation than the mainstream of economists or the public.

In this case the Banks are the debtors. It'll be the pensioners who will pay the most.

 

[joepistole]

Not people who are in significant debt. Inflation is a big help, to them. Likewise, those who are owed lots of money are hurt a lot more by inflation than your average person.

It's been pointed out by various analysts that the Federal Reserve Board - which features a lot of people representing the interests of creditors (i.e., huge banks), but not so many representing debtors - tends to be more hawkish about inflation than the mainstream of economists or the public.

You are correct.

 

[joepistole]

In this case the Banks are the debtors. It'll be the pensioners who will pay the most.

People dependent on fixed income will be hurt with inflation. I don't understand your claim about banks being debtors.

The point is inflation, despite all of the scare nonsense from the Tea Party, has been quite tame. And the other point is that the Fed can and does control the money supply by expanding it or contracting it.

 

[Billy T]

This is just outright wrong. Inflation has picked up a bit in recent months, but is still low by historical standards. It was near-zero for quite a while, before that. And the recent boost is largely attributable to the Arab Spring (and consequent roiling of the oil markets) and other such transient geopolitical events, rather than monetary policy.

I think this true, but probably not the largest factor that had inflation near zero and now picking up some. Note that the slight upward turn coincides with the slight up turn in public confidence.

After end of 2008, many learned they were badly over extended and began to "de-leverage." This reduction in their buying of only wanted but not needed goods caused inventories to rise, slowed production, cost jobs, etc. so that the ratio of circulating dollars to goods for sale fell (Yes the FED started pushing new dollars out into the banks, but they were used by the banks to buy higher yield "safe" treasuries, not give risky loans to Joe American, who being in delevering mood was not even applying for loans, so money supply grew but circulating money and velocity fell)

As Joe paid off debts (to banks either directly or indirectly) that money influx was also mainly used to buy treasuries. Banks had a very good deal: get money at no cost from Joe and very low cost from FED and invest it at three percent in Treasury bonds. (They needed this good deal to off set their losses on "bad paper" and short sales / foreclosures - without it, most would have gone under.)

IMHO, this was the main thing keeping inflation down despite a trillion or so increase in the money supply. As Joe begins to get more confident that at least he will not be losing his job, he is returning to his old spending ways and de-levering less. - That is why inflation is starting to turn up now.

 

[Michael]

People dependent on fixed income will be hurt with inflation. I don't understand your claim about banks being debtors.

The point is inflation, despite all of the scare nonsense from the Tea Party, has been quite tame. And the other point is that the Fed can and does control the money supply by expanding it or contracting it.

The Fed controls money supply or Congress controls money supply?

Who do you want to control the money supply? A few well connected wealthy elite or the Representatives we elect to Congress?

 

[Michael]

Good thing most people don't need energy or food .... but do need iPhone4