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Goldman: The Fed Needs To Print $4 Trillion In New Money
With just over a week left to the QE2 announcement, discussion over the amount, implications and effectiveness of QE2 are almost as prevalent (and moot) as those over the imminent collapse of the MBS system. Although whereas the latter is exclusively the provenance of legal interpretation of various contractual terms, and as such most who opine either way will soon be proven wrong to quite wrong, as in America contracts no longer are enforced (did nobody learn anything from the GM/Chrysler fiasco for pete's sake), when it comes to printing money the ultimate outcome will certainly have an impact. And the more the printing, the better. One of the amusing debates on the topic has been how much debt will the Fed print. Those who continue to refuse to acknowledge that the economy is in a near-comatose state, of course, hold on to the hope that the amount will be negligible: something like $500 billion (there was a time when half a trillion was a lot of money). A month ago we stated that the full amount will be much larger, and that the Fed will be a marginal buyer of up to $3 trillion. Turns out, even we were optimistic. A brand new analysis by Jan Hatzius, which performs a top down look at how much monetary stimulus is needed to fill the estimated 300 bps hole between the -7% Taylor Implied Funds Rate (of which, Hatzius believes, various other Federal interventions have already filled roughly 400 bps of differential) and the existing 0.2% FF rate. Using some back of the envelope math, the Goldman strategist concludes that every $1 trillion in new LSAP (large scale asset purchases) is the equivalent of a 75 bps rate cut (much less than comparable estimates by Dudley, 100-150bps, and Rudebusch, 130bps). In other words: the Fed will need to print $4 trillion in new money to close the Taylor gap. And here we were thinking the economy is in shambles. Incidentally, $4 trillion in crisp new dollar bills (stored in bank excess reserve vaults) will create just a tad of buying interest in commodities such as gold and oil...
Here is the math.
First, Goldman calculates that the gap to close to a Taylor implied funds rate is 7%.
Our starting point is Chairman Bernanke?s speech on October 15, which defined the dual mandate as an inflation rate of ?two percent or a bit below? and unemployment equal to the committee?s estimate of the long-term sustainable rate. The Fed?'s job is then to provide just enough stimulus or restraint to put the forecast for inflation and unemployment on a ?glide path? to the dual mandate over some reasonable period of time. Indeed, Fed officials have implicitly pursued just such a policy since at least the late 1980s.
To quantify the Fed?s approach, we have estimated a forward-looking Taylor-style rule that relates the target federal funds rate to the FOMC?s forecasts for core PCE inflation and the unemployment gap (difference between actual and structural unemployment). At present, this rule points to a desired federal funds rate of -6.8%, as shown in Exhibit 1.3 Since the actual federal funds rate is +0.2%, our rule implies on its face that the existence of the zero lower bound on nominal interest rates has kept the federal funds rate 700 basis points (bp) ?too high.?
It is important to be clear about the meaning of this ?policy gap.? It does not mean?as is sometimes alleged?that policy is tight in an absolute sense, much less that it will necessarily push the economy back into recession. In fact, policy as measured by the real federal funds rate of -1% is very easy. However, our policy rule implies that under current circumstances?with the Fed missing to the downside on both the inflation and employment part of the dual mandate (and by a large margin in the latter case) ?a very easy policy is not good enough. Instead, policy should be massively easy to facilitate growth and job creation, fill in the output gap, and ultimately raise inflation to a mandate-consistent level.
Next, Goldman calculates how much existing monetary, and fiscal policy levers have narrowed the Taylor gap by:
The 700bp policy gap clearly overstates the extent of the policy miss because it ignores (1) the expansionary stance of fiscal policy, (2) the LSAPs that have already occurred and (3) the FOMC?s ?extended period? commitment to a low funds rate. We attempt to incorporate the implications of these for the policy gap in two steps.
First, we obtain an estimate of how much the existing unconventional Fed policies have eased financial conditions. In previous work we showed that the first round of easing pushed down short- and long-term interest rates, boosted equity prices and led to depreciation of the dollar. Although our estimates are subject to a considerable margin of error, they suggest that ?QE1? has boosted financial conditions?as measured by our GSFCI ?by around 80bp per $1 trillion (trn) of purchases. Moreover, our estimates suggest that the ?extended period? language has provided an additional 30bp boost to financial conditions. A number of studies undertaken at the Fed similarly point to sizable effects on financial conditions. A New York Fed study, for example, finds that QE1 has pushed down long-term yields by 38-82bp. A paper by the St. Louis Fed also finds a sizable boost to financial conditions more generally, including equity prices and the exchange rate.
Second, we translate this boost to financial conditions?as well as the expansionary fiscal stance?into funds rate units. To do so, we attempt to quantify the relative impact of changes in the federal funds rate, fiscal policy and the GSFCI on real GDP. As such estimates are subject to considerable uncertainty we take the average effect across a number of existing studies (see Exhibit 2). With regard to monetary policy, the studies we consider suggest that a 100bp easing in the funds rate, on average, boosts the level of real GDP by 1.6% after two years. A fiscal expansion worth 1% of GDP, on average, raises the level of GDP by 1.1% two years later. Using existing studies to gauge the effects of an easing in our GSFCI on output is more difficult as other researchers construct their financial conditions indices in different ways. Taking the average across studies that report effects for the components of their indices?thus allowing us to re-weight the effects for our GSFCI? and our own estimate suggests that a 100bp easing in financial conditions increases the level of GDP by around 1.5% after two years.
What does this mean for the real impact on the implied fund rate from every incremental dollar of purchases?
Combining these two steps suggests that $1trn of asset purchases is equivalent to a 75bp cut in the funds rate (calculated as the effect of LSAPs on financial conditions (80bp), multiplied by the effect of financial conditions on GDP (1.5%), divided by the effect of the funds rate on GDP (1.6%)). This estimate reinforces the view that QE1 helped to substitute for conventional policy. Our estimate, however, is less optimistic than the 100-150bp range cited by New York Fed President Dudley, or the 130bp implied by Glenn Rudebusch of the San Francisco Fed.
In terms of the other policy levers, our analysis implies that the ?extended period? language is worth around 30bp cut in the funds rate and a fiscal stimulus of 1% of GDP is equivalent to around 70bp of fed funds rate easing.
So how much more work should the FOMC do? Exhibit 3 shows that consideration of policy levers other than the funds rate cuts the estimated policy gap by more than half, from 700bp to 300bp. Of this 400bp reduction, the easy stance of fiscal policy is worth 240bp; QE1 is worth 130bp; and the existing commitment language is worth another 30bp.
And the kicker, which shows just how naive we were:
We can then express the remaining policy gap in terms of the required additional LSAPs. Using our estimate that $1trn in LSAPs is worth an estimated 75bp cut in the federal funds rate and assuming that all other policy levers stay where they are at present, Fed officials would need to buy an additional $4trn to close the remaining policy gap of 300bp.
Now, for the amusing part: what does $4 trillion in purchases means for inflation. Or, a better question, when will $4 trillion be priced in...
In reality, the FOMC is unlikely to authorize additional LSAPs of as much as $4trn, unless the economy performs much worse than we are forecasting. The committee perceives LSAPs as considerably more costly than an equivalent amount of conventional monetary stimulus, and is therefore not likely to use the two interchangeably. Many Fed officials believe that there are significant ?tail risks? associated with LSAPs and the associated increase in the Fed?s aggregate balance sheet. These risks include the possibility of substantial mark-to-market losses on the Fed?s investment, which might prove embarrassing in the Fed?s dealings with Congress and could, in theory, undermine its independence. They also include the possibility that the associated sharp increase in the monetary base will lead households and firms to expect much higher inflation at some point in the future.
Unfortunately, it is extremely difficult to put a number on the perceived or actual cost of an extra $1trn in LSAPs in terms of these tail risks. However, we have some information on how the FOMC has behaved to date that might reveal Fed? officials? perception of these costs.
Oddly, nobody ever talks about the impact of "unconvential" printing of trillions on commodities such as oil and gold. They will soon.
Our analysis is therefore consistent with additional asset purchases of around $2trn if the FOMC?s forecasts converge to our own. It is unlikely, however, that the FOMC will announce asset purchases of this size in the very near term. Rather, our analysis suggests that the timing of the announcements should depend on whether, and how quickly, the FOMC?s forecasts converge to ours.
Hatzius pretty much says it all- suddenly the market will be "forced" to price in up to 4 times as much in additional monetary loosening from the "convention wisdom accepted" $1 trillion. We have just one thing do add. If Goldman has underestimated the impact of existing fiscal and monetary intervention, and instead of closing 4% of the Taylor gap, the actual impact has been far less negligible (and if Ferguson is right in assuming that all this excess money has in fact gone to chasing emerging market and commodity bubbles), it means that, assuming 75bps of impact per trillion, the Fed will not stop until it prints nearly ten trillion in incremental money beginning on November 3. That's almost more than M1 and M2 combined.
Is the case for $10,000 gold becoming clearer?
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LSAP (large scale asset purchases)
Read much?
(L)arge (S)taff (A)pplied to your (P)osterior.
I got more junks than you did! My comment did not contain the requisite element of humor.
I guess that's because I was frustrated that people can't see what's in their face. READ the articles.
Just declare a Jubilee and end the madness, I mean it is where we are headed anyway.
Housing housing housing . . . isn't really going to magically be okay if the Fed and other programs do actually manage to get the "prices" of homes to match the number people want to see from 2005 values. The problem is that there are too many properties that would be buyers simply don't want in 2010 or 2012 or 2015.
Look around. The properties that aren't moving at all now are the boutique wineries that never made it, the gianormous second homes in distant vacation places, and the McMansions in Greenwich and the Central Valley.
The boomers don't want these properties any more. The run rates, maintenance, and liquidity issues make them no fun anymore. And the GenXers and younger can't afford them and are smarter than to want them except for a visit vacation.
Major shifts are underway and simply artificed prices won't sway the shift.
Almost sound like ideal properties to turn into leasing.
They won't do it. In fact, I think they might seriously backtrack next week. There are some signs that they might be getting that joke that devaluing your ccy when you are the reserve ccy actually hurts you more than helps you. Sure, if you are a small open economy then devaluing is great for your exports. But for the US, when the ccy declines the trade balance just gets worse because they import too much oil etc.
So devaluing the dollar is a dumb policy.
"devaluing your ccy when you are the reserve ccy actually hurts you more than helps you"
You still think they're devaluing for your benefit?
News flash... BB doesn't give a crap about "you". They're doing it for self preservation.
The joke is on you.
It is truly amazing that there are people out there and on ZH that still think the above or something approaching it won't happen.No, it won't happen all at once,they will announce QEII and see how it goes,the FED don't want to scare the sheeple out of their trance,but of course there is the law of diminishing returns, each stimulus has to be multiples higher than the previous one and more importantly it has a smaller stimulative effect on the economy.
At each announcement of further quantitive easing there will be assurances that the exit plan is firmly in place to assuage those of a nervous disposition that inflation will not get out of control.Don't forget these are promises from the very people who caused the problem in the first place,denied there was a housing bubble,failed to see the problem and prevent it getting out of control,said MBS market wasn't a problem and now we are supposed to believe that they will pull the stimulus just the nanosecond before the trillions of dollars explode into hyperinflation.
Oh yes Bernanke is going to throw an enormous bucket of gasoline on the fire that is almost out, his idea of controlling what comes next is to walk slowly away with the bucket.
Feel better now?
Again I ask, how was QE1 effective and what makes the FED think QE2 will work. The FED needs to do absolutely nothing for at least 9 months and let things settle down.
Not politically realistic, as in "but we must do something!"
Absolutely correct.
They need to junk the Taylor Rule, and adopt the Hippocratic one:
First, do no harm...
QE1 was absolutely successful. Just take a look at the still sky high asset prices.
Oh, you mean the economy... Well, fuck the economy. That's for the plebs.
It seems to me that the squid is trying to build expectations unrealistically high. So now if there isn't an immediate $4T pump the market crashes?
Ben will even throw GS a lazy trillion to pick up the carcasses with in the ensuing fire sale
Translation: (Goldman to Fed) Feed me, Seymour, I'm huuungry!
Using raw data from here
http://www.realtor.org/research/research/ehsdata
I noticed an interesting trend -- the rich get richer, the middle class and poor get chased out of their houses at low prices.
The richest home buyers were the only segment that saw year over year gains. The rich get richer. Are they smart? Locking their money into hard "assets", or just stupid because they don't see just how bad things are? Time will tell, but in reality a house is a highly illiquid investment that could easily fall 50% from here.
Check it out - orig chart by Hawaii Trading
http://oahutrading.blogspot.com/
Bernanke will do NOTHING to upset the equity markets. His hope is that steadily rising equity markets will "lift all boats", get the consumer spending more = more hiring, etc ..,
Credibility has been lost...needle in a haystack chance of success.
Nah thats not whats going on at all pat53, its a designed economic implosion.
Good grief! Suddenly, $147/barrel crude is beginning to sound cheap! One can only wonder the calamity that all that monetary stimulus will cause on the economy when its fully priced into commodity markets! No one will be able to afford to eat!
http://www.youtube.com/watch?v=bF4i7JEOzzM
Nobody will know anything until after the election, then "lame-duck." I think not. If Reid and Pelosi are back in then the speed and insanity will increase an order of magnitude - another 2 years of rape and pillage.
Reid is gone, Pelosi is left, but she will not be Speaker.
"In other words: the Fed will need to print $4 trillion in new money to close the Taylor gap."
Then they best be getting it printed this second, because come Nov 3rd, they will not have the chance.
The BANK KILLERS
http://www.businessinsider.com/charts-of-the-week-us-government-securiti...
Serious question, and advice please, you Brainiacs out there, WHAT's the best ETF (if that's the way), to get on the oil bandwagon?.
PM's are covered, want to diversify into oil,Ags are too risky for me.
USO - West TX intermediate. I recommend researching ETFs before you buy one as a long-term investment.
Noooo! Stay away from USO if your strategy is long. The contango on USO is unbelievable (around 1% on a per-month basis), and it makes it virtually impossible to make money on the long side of.
I don't have the balls to go short oil, however, which leaves me pretty much without an oil play, except for the majors. I'd recommend simply buying IOC equities.
I am no expert but BP looks like a good play for oil.
Agri is better than oil. MOO is looks good.
DIG on M,W,F.
DUG on T&THUR.
If the Republicans steal the show, watch out for a scuttled market. Opening of congressional inquiries and Wall St. investigations. Many rats may flee opening the sea valves to sink the already low in the water economy.
The GOP won't investigate Wall Street shenanigans.
You're being downvoted, but you're absolutely right.
Whoever is so naive to think both parties aren't bought and paid for needs to stick his/her head in a bucket of cold water.
I guess that would be me then.
The issue is professional politicians...corrupt...the Republicans are removing them (Murkowski in Alaska, Crist in Florida, Spector in PA forced to turn Democrat, etc.). I don't see any such thing by the Democrats.
So the Republicans have no professional politicians?
LOL
Oh, I forgot, Sarah Palin made her millions in business.
ZakuKommander's continuing challenge -- yet untaken -- to the ZeroHedge community: please identify who among you considers Palin far smarter than he/she?
I think at this point we've had more then enough of the best and brightest.. They were all hired by Wall St, manning the HFT pumps, or politicos filling their pockets from same. The Great Ponzi was created and managed by who?
Scrap Team Red and Team Blue
At this point you should be asking for honest, ethical, LEADERS willing to do the hard, but right thing, who are just smart enough to know to get good advisors.
The owner of the local quickie mart using ZH as his cabinet would be an improvement over whats going on.
Would it helpt to extend it to best, brightest and most generous?
Chris Christie is the biggest one by far.
Same shit, different pile.
We are getting angry and soon(2 years) congressional elections will be even more challenging. I apologize for appearing out of the blue with a base opinion, but that is the way middle america is rapidly beginning to look at our corrupt governance and financial sector. We may not fully understand all the different bets that you people place in your financial dealings, but we sure as hell understand when we are being lied to.
http://visiontoamerica.org/story/league-of-women-voters-gets-schooled-by-true-americans.html
You don't know the half of it.
Republicans . . . investigate . . . Wall St.?????????
From what alternative bizarro universe do you hail, Silverhog?
Just keep your eye on the Dollar and Gold. If DXY goes below 70, Its time to worry and start singing Marching to Pretoria
I thought that this was hogwash.
http://www.zerohedge.com/article/bring-conspiracy-theories
Maybe I have the wrong subject.
He's wrong -- I've determined that it's 22 trillion --
http://www.youtube.com/watch?v=MYGtfaMTWBI
At this point I do not even care any more what they do. All I am thinking about is saving enough to buy a whole house propaine gas generator and a wood stove. Plus, stock my house with lots of non perishable food. I think everything else is taken care of.
Print, Print, Print, create Trade Wars and start World War III. What do I care?
I with you. Im to the point where my anger has turned into pure sarcasm. At this point, I have total faith in Bernanke. Who gives a fuck anymore. Just give me my Dancing with the stars and my ipad and all is good.
I like to watch all of the survival shows on Discovery. Like Man, Woman, vs Wild, The Colony. At least I will know how to start a fire with steel wool and a battery, or what to eat in the wild. Or Spike TV, Surviving a Disaster. Extreme I know but knowledge one may need.
I do find it interesting that these shows have such popularity at this time. It appears I am not the only one that thinks the FED and the Country are on the wrong path. But, what do I know I am only a lowly peon.
I still watch Columbo , All in the family and other 70s shows thanks to DVD. It helps take me back to a time when life was good. Bring back the 70s. A great time to be alive.
http://www.youtube.com/watch?v=7fqCS7Y_kME&feature=related
Dual Survival is the shit.
Your property taxes have doubled as of today. Do you care now?
I rent.
and that makes you immune from a commodity cost increase how?
Property taxes are a component of rent (excluding major remodeling property taxes are often the largest expense to landlords). If property taxes go up so will your rent at the next lease signing.
"...the Fed will not stop until it prints nearly ten trillion in incremental money beginning on November 3."
A small correction: the Fed will neither do nor announce such measure(s) until AFTER the Wall St banks are able to distribute their bonuses and the banksters have ample time to spend it. Otherwise, just imagine if dollar tanks all of a sudden all the Wall Street's "bonus stash" becomes devalued in real termas by 20, 30 or 50%? Uncool. Very uncool. And the Fed knows that!
Simple, the banks are swallowing a turd (on MERS, RMBS putbacks and F/X) worth $4 trillion.
What else are they gonna do?
The next outlay will be $8 tril. Then $16 tril and so on.
Once, I thought Jan Hatzius is a respectable macro economist, now I think he and his team have lost their mind.
Brilliant! Print another $4T and watch ALL of it go into commodities and NONE into housing prices. I don't know which shock would be greater, $10 gasoline or the resulting hike in interest rates to combat the raging inflation.
What's a trillion times a trillion dollars? Not sure, but pretty sure we are starting to talk some real bucks - kind of like Zimbabwe bucks only worse. Who knows what the Fed will do? Bernokio's an educated idiot but we are bigger idiots for leaving him, Geitner and Obama in charge (fortunately for us a few of the other rats have already left the sinking ship - but if it is possible to get a worse replacement crew that's probably what were in for). Have a nice day.
The John B. Taylor rule, huh. There seems to be a nearly endless supply of clueless Ivy League asshole economists whose dip-shit “work” can provide laughable cover for the Fed’s creation of the last, mother-of-all asset bubbles. Why is anybody fooled by this crap anymore? It’s not even complicated…
+4T
I'm tired guys. So tired that I do not care of any murder reported in the news, so tired that I do not care if old people have their wealth stolen by con artists. Sure there will be a few here and there telling me what a bad patriot I am.. and that I am giving up too easily.... stats are just stats.. they are static... they do not move and fix the system.
I may be ashamed of U.S. foreign policy, the general ignorant public, crony capitalism, the FED, Goldman Sachs and the socialism sweeping the States. But goddammit I am one american who is not going anywhere, not going to lay down and still flies the same flag my great grandfather did. IMHO, the americans posting on zerohedge need to cut back on the whining and instead find the courage to restore liberty in the U.S.A. God knows, China sure as hell isn't going to do it.
Let the country collapse and balkanize on racial lines. It is inevitable. The jews cannot come and live with the whites. We won't have them ever again. They can live with their fellow travelers and henchmen, the blacks or move to the crime syndicate that is kikistan proper.
Harsh. How are blacks fellow travel companions to joos? Blacks are just as American as anybody else except in fascist, racist eyes. All human beings have a right to life, liberty and the pursuit of happiness unless they're part of some evil, secret cabal out to enslave other people's economies or pass juden fetzen around!
"jews" use blacks as cultural, political, economic, and biological weapons of mass destruction.
"We must realize that our party's most powerful weapon is racial tensions. By propounding into the consciousness of the dark races that for centuries they have been oppressed by whites, we can mold them to the program of the Communist Party. In America we will aim for subtle victory. While inflaming the Negro minority against the whites, we will endeavor to instill in the whites a guilt complex for their exploitation of the Negros. We will aid the Negroes to rise in prominence in every walk of life, in the professions and in the world of sports and entertainment. With this prestige, the Negro will be able to intermarry with the whites and begin a process which will deliver America to our cause."
Israel Cohen, A Racial Program for the Twentieth Century, 1912. Also in the Congressional Record, Vol. 103, p. 8559, June 7, 1957
LOL!!!!!
That shit is funnier than Mad Magazine!
Charlie Bravo
You are offensive.
so is the current state of affairs in Foodstampistan.
I hear your Foodstampistan is rich in oil too....saturated fats abound!
Thunder,
What can you do? The US government has a formidable military, and a divided populace cannot offer much resistance. At least the French revolt on the street while we wait for Thanksgiving the term "surrendering Turkeys" will be a new phrase describing US civilians. Look what the government and our elites have done to us, not one riot! Look at the only surprise we got- "The tea party"= thats nothing but flakes. lol we are doomed.
I'm not surrendering shit. If I'm the only one getting blown to bits than so be it. At least I fought however inconvenient/dangerous.
If you're on zerohedge I'm assuming you know who/what is the enemy. When the opportunity comes take your shots. And I'm not talking about something candy ass like voting Independent.
goldman sachs' buildings should be the new ground zeros.
Well, the sheeple still have their imaginary assets to lose. Just wait until they have nothing to lose.
Oops , you folks in your zeal for metals forgot something-immediate needs- here are the top three based on experience from Argentina and SKorea
1) small dollar liquor bottles for currency
2) rice
3) coal for cooking fuel and heat
Silver and gold are not easy to trade in the hyperinflationary initial shock.
My plan is large stock of consumables. Say 1 years supply. Some gold to buy a plane ticket to Australia on reserve. My favorite hideout if it gets really bad is property in Australia say Alice or northern territories. In case of WW3.
Incase of urban violence and loss of property there is a site for urban survival as a homeless person. Read it. Also get all ur medical tests etc done, including teeth.
So your plan to avoid the Apocolypse is to hop on a plane to Australia once Nukes are dropping. And pay for the ticket with a gold bar.
Got it. Well , as they say , good luck with that.
Did you see 2012? All I got to do is make it to San Francisco airport on 101
in 30 minutes from work or home to the nearest quantas gate drop an ounce of gold and I am gone. If currency war leads to nuke war which country will be safe? Only down under- at least there will be beer and shrimp on the barbie-make that prawns.
A trillion here, a trillion there, pretty soon you are talking about real money.
If you are having trouble visualizing a trillion dollars - this may help.
They are talking 4 of those.
$4 Trillion, eh? Is that the figure for this year's bonus pool?
Print $4 Trillion more, that's the new normal --got it.
Not to self: Hoard more food, fuel and ammo -- got it.
For all the hazards, it seems to me that the best use of QE "money" is to simply pay off people's mortgages.
It helps individuals directly and makes the securities holders whole. Doing that has got to have a huge, direct, and immediate impact.
Full of hazards, just like QE, but far more effective.
It very well may be that both choices are foolish, but when faced with a choice only between these two options I would choose the direct route.
At this rate the fed will soon have "spent" enough to have paid off every mortgage in the country.
To reemphasize, it is extremely hazardous on numerous fronts, but is way better than this patty cake QE approach.
-profd
(and yes, I squirrel hunt with a howitzer.)
Why would they free the slaves? Oh, wait. They're buying their freedom with our money, knowing full well that the freed slaves will be too willing to be slaves again. Nevermind. I think it will work.
Gold gaps up! So much for the g20
It's late on Sunday night, folks posting are losing their prospective on reality!! Get a grip!
I think I will just hang on to my dollars. One of my fondest memories is almost starving to death during the Jimmy Carter inflation years. My God I hark back those days every chance I get. And, well lets not forget Germany during the inter-war years - a wheel barrow full of DM bought a loaf of pretty bad black bread. Postage stamps topped out at around 12 million DM, just to tell the Kaiser per snail-mail how pissed you were. Of course, that little problem got solved by a gent with a Hitler mustache....hee hee. And, it ultimately did get solved, Germany got their ass kicked, the Marshall plan rebuilt their country, and now they are one of the most powerfull countries in the world. Maybe China will have their "Wing Chung" plan to help us out....you think? probably not. My advice is to avoid metals, they are heavy, hard to store and tend to drop in value like another weighty substance: rocks, when things go against the commodity markets. Instead, invest in things that you can use, guns - shotguns are nice, since you can pry open the shells and customize their killing load with anything you please.....rock salt (for the friendly neighbor who gets a little cheeky), spent uranium chunks for the mother-in-law, and ball bearings for that local banker. Chemicals are also a good thing...anything with perchlorate or chlorate as the ass-end name is good...one can make explosives from these. Food is good, buy cans, they last forever and can be used to bash some thug in the head if needed. Forget medical crap, if need be you can take a doctor hostage and make him cure you at gun-point. Get the bigest, baddest dogs you can find and get some tips from Michael Vick on how to train them...and, if those can goods run out, you can eat the dogs. Forget Pit Bulls, they are wimps, get a huge brute of a Caucasian Mountain Dog, they are viscious, and according to a Russian friend of mine, taste pretty good marinated. A woman might come in handy, as long as she is skinny and doesn't eat too much. Lindsay Lohan maybe, if you can separate her from the crank. Maybe when things go to hell and the Big Apple disintegrates like a gazebo in a hurricane, you can score one of the money honeys, maybe one that has a line on a dead investment banker's private plane. Nah...that is dreaming. Finally, get you one of those really big, polyethlene wheel barrows that construction thugs haul cement in so you can shag all those greenbacks to the local pawn shop to buy military surplus ammo. By this time, gold and silver will not be legal tender, it will all be stored in the vaults of the New York Fed, where Timmy and Helicopter Ben are holed up with Maria Bartiromo. The Chinese have made American gold ownership illegal, and have already nucked Fort Knox. Word is out that Santelli is loose in Chicago with a mob of bond traders and ex-navy SEALS. By this time, Durden will be in an undergroung vault under Lake Como, publishing an anti-MCC rag on the intermitent internet, which is run by Stuxnet, Inc, out of safehouse in langley, Virginia. Once all this happens, and after greenbacks become as rare as black diamonds, the dollar will, once again, be king. Save them, my friends.
Pretty good plan.
Or, we can barbeque every politician, every bankster (maybe give RP a pass), every executive of every large financial organization, every lobbyist, everyone who ever gave a penny to a lobbyist, everyone who became rich without producing a single real physical product, everyone who advocates the power of fictitious entities (governments, corporations, etc) over individuals, and generally, all predators. Only producers have a role in reality, the rest must go.
Otherwise, your approach is the only alternative. Except, of course, I totally reject all fiat currencies, all fractional reserve practices, all central banks, all central planning, all government.
a fine time to review this
4Tr? Oh my fuckin' god. Jesus (Anti)Christ. Well, let's sell some more dollars then.
$4 trillion in 'NEW MONEY' notice the usage...I wonder what the new money will be called? Moron Bucks?
$4 Trillion dollars -- We'll all be rich!
Goldman didnt say 'dollars' they said 'new money'...ominous.
Buy the close sell the open. Works 90% of the time for a nice risk free gain. Seems everyone but main street knows the housing data today.
Nah that little DOW zombie rise you see is just the dollar collapsin more.
Wonder if today will be another super low volume day like last Friday. I suspect it will if they keep the futures propped up till cash open. Sideways in a 3 point SPY range for 5 hours. Hey that just normal action for a rigged up market.
Dollar seem to have picked up where it left off on it's march to zero. Things finally getting back to normal.
I still think the Fed is preparing to zap the dollar shorts and commodity long playes. Announce something dissappointing like a $500-$750 billion initial QE which will crater everything. They can accept that going into year end and force the Congress to reconsider some of their spending idiocy. That will quickly fade though when the commodity complex finds it's new higher base price levels and the dollar begins to crash again. They will have to announce at least $2 trillion in MBS purchases just to keep the banking system functional.
It's all over except for the crying now.
Agreed.
When is Bernanke going to put on the Brakes? Oh , never? Greenspan, I miss you
It's good thing that we don't have to mark to the market any more. The Fed can just make up numbers going forward.
They couldnt 'print' 4 trillion single ply sheets of toilet paper if they tried.
"There is the possibility... that after the rate of interest has fallen to a certain level, liquidity preference is virtually absolute in the sense that almost everyone prefers cash to holding a debt at so low a rate of interest. In this event, the monetary authority would have lost effective control."
John Maynard Keynes, The General Theory
Go Figure
If the FED is buying long term treasuries with QE2 then I would argue the FED is betting on deflation winning out. If long term rates go to 2% they make a killing on all these trillions on long term treasuries.
If they were really interested in inflation they would overpay for houses and commercial realestate.
$4T print == $150/bbl crude
CNBC just cited Hatzius as calling for 2 Trillion (without disclosing his calls for the higher 4 Trillion) courtesy of Erin Burnett...
And the brainwashing continues
i'm not trying to be sarcastic, but can anyone give an argument for why they should shrink the monetary base? to me that would seem insane. so i'm left wondering if less money might be bad, why wouldn't more of it be good?
i've often heard how the dollar is only worth 3 cents vs 100 years ago. although i wouldn't mind life being more simpler like it was back then ... if i got my wish to have lived back then ... wouldn't i be dead now?
seems the standard of living is better now than it was 100 years ago when the dollar was worth a dollar, and i often wonder why would it necessarily be a bad thing if it became worth only a penny?
if someone makes 20 dollars an hour but, due to inflation, someday makes 20 grand an hour ... it seems the math isn't so hard to compute and eventually people would get used to it. 20 dollars .. 20 grand ... heck it's even easier to say (one less syllable)
i know i'm being silly with that last statement, but i'm thinking if expanding the monetary base is so bad, wouldn't it make sense that shrinking it would be good? and that's the part with which i struggle to wrap my mind around.
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