This page has been archived and commenting is disabled.
Jim Grant Is Confident QE 2.0 Is Just Around The Corner
Jim Grant, one of the most respected voices in the financial industry, joins Zero Hedge and others, who see that the only choice the Federal Reserve has now that the temporary and shallow reprieve from the clutches of the deflationary depression is over, is to print more money in the form of another iteration of QE. Whether this will be another $2.5 trillion, like last time, which was the price of an 18 month delay of the inevitable, or a $5 trillion concerted global effort, as Ambrose Evans-Pritchard believes, is irrelevant: the only option the central printers, pardon, bankers, have left is to flood the market with yet more worthless paper (keep an eye out on the doubling in the price of gold the second QE2 is publicly announced, which will also double as the obituary for all fiat paper). In an interview with Bloomberg TV, Grant says that the first order of business tomorrow when the Fed's new additions officially join their new groupthink perpetuating employer will be "to try once more to print
enough dollars to make something happen in the U.S. economy.” The ever-sarcastic Grant manages to completely skewer Janet Yellen, Steve Diamond and Sarah Bloom Raskin, to ridicule the Fed's 100% track record of not only focusing on the wrong thing time after time, but getting the response consistently wrong with 100% precision, and also manages to makes fun of the Fed's credentialed WSJ lackeys, who courtesy of the Fed's "editorial" control over the reporting process, get a direct line into leakable Fed strategy.
Grant's thoughts on new Fed additions:
"I think the first order of business will be to try once more to print enough dollars to make something happen in the U.S. economy.”
On San Francisco Fed President Janet Yellen:
“Janet Yellen has had 36 opportunities to vote on monetary policy at the Federal Open Market Committee and she has voted ‘Aye, yes’ 36 times. 36 for 36 times. Now, has the Fed been right 36 consecutive times? No. I think that Janet Yellen is a well credentialed, consensus-hugging economist straight out of the Fed HR department. She is ideal from the point of view of the Fed bureaucracy. She will make not one ripple.”
On MIT economist Steve Diamond and Maryland state banking regulator Sarah Bloom Raskin:
“I’ve never met them but I suppose they are charming. They certainly are well credentialed. They may well have an avocation in monetary theory, but that is not their vocation. Their vocation, in the case of Professor Diamond, is fiscal policy, pensions, social security, he is an authority. He's mentor of Ben Bernanke so he’s a formidable academic.”
"Sarah Bloom Raskin is a formidable regulator. But neither is a formidable thinker about the nature of money or about the history of money or about how the Fed might paradoxically make things worse by doing what it does trying to make things better, which I think is the great question. These are people who, I think, are unlikely to oppose novel solutions to our fundamental monetary dilemma which is that the U.S. dollar is a faith-based currency of no intrinsic value that is manipulated by the Fed and the consequences of the manipulation are often quite different from what was intended. That’s the problem.”
On Fed monetary policy:
"Deflation is a funny thing. It's a word that is much in the news, much in the markets, but is all too infrequently to find. So the Fed says that deflation is broadly declining prices. But could not also be progress? In other words, if the world produces more at lower prices, is that so bad? Americans spend half of their weekends, it seems, looking for bargains.”
"So the Fed is telling us that bargains galore is something that the Fed must resist with radical volumes of credit creation… I guess what I would ask the Fed is would it please stop and help us understand why this is bad? So in 2002 and 2003, Alan Greenspan, then chairman, and Ben Bernanke, then a newly fledged governor, were out giving speeches saying that deflation is a clear and present danger, and we must - they said at the Fed - must cut rates dramatically, which they did to 1 percent."
"But the price indices today are much weaker than they were in 2003. So where is the Fed? Why not broach the topic of deflation again?"
"So what I blame the Fed for, among other things, is a lack of intellectual rigor and forthrightness."
On Federal Reserve Chairman Ben Bernanke:
"I think this is not being forthcoming with us, the people, about the nature of his concerns."
"In 2003, he was all deflation all the time. Well now the Cleveland Fed's median CPI was like 1.7 percent year-over-year, now it's 0.5 percent year-over-year. So where is the concern?"
"I think the concern will surface. We'll see more on Friday when the CPI comes out. But I think something ahead of the markets is a likelihood of the Fed stepping on the gas once more, so called quantitative easing - I think that's likely to happen…The Fed is already clearing its throat. You can see this in the newspaper leaks."
»
- 37983 reads
- Printer-friendly version
- Send to friend
- advertisements -
QE 2.0 is a guarantee, and the FED confirmed my suspicions today that I wrote about earlier. Get ready for DOW 30k, then inflation out the ying yang.
The only thing that has moved the market off the Mar 2009 lows is QE funds inflating asset prices, do you really think it will not continue to happen? This is the plan all along. They think(FED) if people see the stock market at all time hi's that they will think everything is hunky dory in America.
The whole purpose of their QE is too boost stocks. What else did the money do? Nothing.
That's a rather simplistic explanation of how the market bounced off of 666, don't you think?.
What else did the money do? - don't forget about your favorite asset (gold)... You also forgot about the credit markets (not that they are any bit important according to your logic).
Kay, but here's my point.
Is the value of the S&P or Dow higher or lower than it was before the QE?
It's lower. Yes, the asset prices came up, but not to previous levels (that were already too high.)
That's my point. You can print a ton of money and still not see 1576 S&P or 4.25 a gallon gas.
/sigh
/sigh indeed!
He's not an optimistic looking chap.
fail troll is fail
Not to mention the economy is highly leveraged to the stock market - endowments, pension funds, etc are all heavily invested in stocks and reliant on stock prices on making spending decisions. The impact of a rising stock market is not just psychological.
The Fed knows this, so they will continue to support stocks, as they have since March 2009
You mean like the Japs did.
Listen , all you QE fan boi fk tards : IT DOESNT WORK. Why? Because of human instinct , psychology.
The comment to underscore that Jim Grant made is thus : THE USD IS A FAITH - FAITH - BASED CURRENCY.
QE2 and its lights out. Adios. Gold 3k here we come and the US will STILL have a deflation problem because QE CREATES NO ECONOMIC GROWTH , NO JOBS.
Seriously.Its like watching a train crash in super slow motion.
Morons.
+1,000,000 Dollars for a loaf of bread soon to come to a 77777-11 near you!
MORE LIQUIDITY DOES NOT CREATE JOBS!
QE 2.0 OR QE INFINITY and not 40 million but 80 million on food stamps
Liquidity only works for the stock pumper monkeys but not for the economy.
If liquidity was such a great tool to reignite a stalling global economy it would have worked last year.
Oh, there will be winners. The resource based economies like Canada, Australia or South Africa are going to have a killer economy because they have in the ground what the world needs to keep living. The rest of the world however that is not resource based is going to remain in a slow deflationary crash.
"Listen , all you QE fan boi fk tards : IT DOESNT WORK."
Are you talking to the Fed? I doubt anyone here thinks it works, except for two or three well-known nutcases.
I think most ZH'ers think the Dow will rocket to new highs on QE2.
It didn't work for the Nikkei, and it certainly won't work for the Dow.
Stimulus packages will see decreasing marginal return from here on out.
Lower highs, lower lows.
The question isn't "do people here think it will work?" -- the question is "Do people here think it will even work for equity prices?"
All those who think the Dow is going to 30k are in for a terrible shock.
Totaly agree equity_momo, the dollar is NOTHING its a faith-based piece of paper, NO ONE but morons would be fooled into believing all is well based on printing another round of fiat currency crap. And in fact Im all-in on the belief it will set off complete withdrawal from dollar backed anything. What do these people think, the world is nothing but retards? IT WONT WORK!
Based on fundamentals this market should be much more lower... but fundamentals doesn't matter anymore when you have a system awash in liquidity and the people that control it very interested in distributing wealth. The government can't let pension plans go down and it won't let them Ben is going to do anything that is in his power to reflate. Absent any outside shock like the EU situation this market is going to melt up propelled by Ben & Obama love!
Its going to be a very sad day for the indebted when they realize the endpoint.
In our system of money created by debt it is essential to the function and survivability of the system to have ever increasing inflation (expanding money supply) in order to service interest costs. Those who get the money first will profit as it loses value as it passes hands. Thus the government/banks reap the most benefit.
Unfortunately it is mathematically impossible for the game to continue forever and at some point deflation takes over. Money created by debt is inherently deflationary in nature due to the interest costs. The only possible exception is giving away debt free money which if done in sufficient quantities (if not then you just flatline forever like Japan) would undermine the value of the currency thus causing a hyper-inflationary collapse....basically a loss of faith in the money (and government backing it) such that no one recognizes it as a means of exchange.
This (inflation created by debt free money) would negate the central banks ability to influence the world as its "their" money (they create it) Vs. deflation in which their money becomes more valuable - wields more power and control.....and to top it off - you have to pay back the IOUs created with another IOU. Try getting your wages in gold....or paying your debts with gold....or purchasing at Walmart with gold. Its their world at this point. Do you think they are just going to give it up?
Based on this assumption I believe they will not hyper-inflate - i.e. give away free money. They may facilitate transactions with governments but only to maintain power and control over the masses.....and it will still be debt.
The endpoint is debt saturation at which point people can barely service the debt they have and cannot take on new debt. The debt saturation point is flexible and can move up or down based on interest rates (the cost of the debt).
We started to hit that point in the mid 90's and Greenspan created the sweeps program in which average checking account balances (demand deposits) are swept into a savings account and loaned out....thus creating more leverage and more money in the system. We hit that point again in 2000/2001 and Greenspan lowered interest rates to 50 year low thus lowering the debt saturation point. This resulted in huge dive into the debt pit across most of the world.
We have now hit that debt saturation point again but interest rates can't go much lower without basically offering debt free money.
I believe the debt pit (bottomless pit?) that is being dug...has been dug is designed to result in the transfer of assets/wealth. When everyone is loaded to the gills with debt (debt saturation point at lowest interest rates in history) then the carpet is pulled out from under their feet and ownership of all wealth/assets is transferred to the creator of debt based currency - the central banks and ultimately to the central bank of central banks - the BIS......at near zero cost I might add.....or outright theft!
FYI - this isn't exactly easy to accomplish. Its taken nearly a 100 years (or more) of careful planning and manipulation to get to this point. Even now 1/3 of all residential homes are owned outright. Thus it requires a careful coordinated attack from all angles - medical, food supply, energy, taxes, etc. If your goal is to steal another's wealth you have to either murder them as Cain did.....or you must trick them out of it. Money created by debt will slowly steal everyone's wealth with inflation and then quickly and rapidly with deflation at the end.
Look at what's taking place currently - collapsing demand for debt, rising taxes, rising medical, rising food, rising energy. They are taking away everything we have. Are you leveraged? Does your income rely on leverage? Is your business leveraged? Does your business rely on leveraged customers?
Now with that background lets focus on precious metals....oh my precious.
1st - we know that deflation is the final tool for the transfer of wealth.
2nd - we know that those who have the wealth make the rules. No poor man ever gave a rich man a job.
3rd - we know that when they own everything....they can create whatever system of credits they so desire and it doesn't need to be gold/silver backed.....since we are begging for the food and necessities which they will/do own and control.
4th - in the event they fall into the pit they have dug....which I interrupt as to mean complete system wide collapse.....the focus will be on food and necessities.
Thus precious metals can be a hedge by the very wealthy to protect their wealth if the whole system collapses.....but only for those who can completely isolate themselves from a deflationary spiral....or else they are just delaying the transfer of assets (or even speeding it up depending on how the central banks play the game). But we are only talking .1 to .5% of society. And most of those people will ultimately rely on the central bank version of society as a means of protecting their wealth from being ravaged by the masses - belief and support of the iron fist!
Everyone else is just speculating with borrowed dollars....
So in terms of the present - we face a deflationary gap. The gap between now and the endpoint - system of credits to utilize central bank assets (chipped) or a complete system wide collapse. In this gap the central banks will be gaining more and more power until they fall into the pit. The FRN's will be in increasingly short supply as interest costs vacuum up all the debt based money while the macro economy slides down the deflationary spiral. The value of most assets will slide with it....except perhaps the tools they have created to help force everyone (specifically those who haven't been enticed by the debt) down the spiral - medical, energy, food, etc.
The absolute best position one could be in for the above would be - debt free, ample supply of food storage, means of food production, means of energy independence, clean water supply, as healthy as possible, means of producing things other people must have (food, energy, medical, etc.), and means of protecting all of the above from others who might resort to less than admirable methods of trying to acquire it.......have I missed anything?
Long but accurate. Here's a more succinct version:
See how simple this process works? And guess what, it's been working exactly this way for over 5,000 years. What's really astounding is that there are ancient tracts which describe (and warn against) the inherent dangers of this very process.
But typically, our story doesn't end there. That's 'cause Shylock, regardless of his era, always overplays his hand. In the usual ending of this tale, the money lender is seen running for his life with maybe a little gold stitched into the seams of the clothing on his back.
"At some point in time (which can easily be mathematically determined), the combined principal+interest payments exceed your ability to service the debt"
Does this imply that the loan was made knowingly that the debtor could not repay?
"That's 'cause Shylock, regardless of his era, always overplays his hand."
So this is "game over"? This is when they have loaned so much that the majority can't repay and they end up sinking their own ship?
Asset transfer time! From owner to renter...
22 Statistics That Prove That The Middle Class Is Being Systematically Wiped Out Of Existence In Americahttp://endoftheamericandream.com/archives/22-statistics-that-prove-that-...
Yophat...
Predicted by James Goldsmith...1994.
http://video.google.com/videoplay?docid=5064665078176641728&ei=2s4yS-jdG...
Thank you for the link....good stuff....still working my way through it! That was a real treat....much obliged!
Posession is 9/10ths of the law.
Come and take it! http://www.google.com/images?q=Come+and+take+it!&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&um=1&ie=UTF-8&source=univ&ei=sZI-TKbfHMKBlAef5-m6CA&sa=X&oi=image_result_group&ct=title&resnum=5&ved=0CDwQsAQwBA
Likewise....
MOLON LABE........NON TIMEBO MALA
Damn, nice post. I too think deflation and a debt collapse will be the transfer of assets the PTB want. I don't think they will need the last 1/3rd of homes, as they will risk taking too much that the whole system collapses. I wonder if eventual hyper-inflation is the ultimate end-game after the assets are placed on the balance sheet. Deflation => default => repossession => hyper-inflation benefitting new asset holders.
Loved the video clip. "Consensus hugging" - bam!
And I loved how Margaret (who's hot btw) raises her eyebrows when Grant comes out and calls a spade a spade - that the dollar is fancy toilet paper that everyone believes has value. She seems surprised that he actually comes out and says that. The interview ends shortly thereafter.
I could be wrong....but I don't think these gents will be constrained to hold back from trying to take everything. If they can't get 1/3 of the homes through debt...they'll get them through taxes, medical, energy, etc.
x2 post - sorry.
Re your 2nd point--in our current representative democracy, poor men routinely give wealthy men jobs, simply by voting them in. Thus the corruption cycle begins. De Toqueville served notice about this eventuality in the nineteenth century. We are simply doomed to utter tyranny if this continues unabated. This was an outcome our forefathers specifically tried to avoid.
They were dealing with an economy which was far smaller, but enjoyed a truly well-educated, cosmopolitan elite. The latter comprised a relatively large slice of colonial society, albeit one not necessarily graced with what we know as a college education. Currently, according to the Chronicle of Education, only 15% of US residents read at a level above 9.5-11.5 grades, and the lower 85% are unable to decipher simple inserts in meds. We would be lucky to have a collectivity educated thus:
[http://www.thefreemanonline.org/columns/education-in-colonial-america/#]
CurrentlyWithout ever spending a dime of tax money, or without ever consulting a host of bureaucrats, psychologists, and specialists, children in early America learned the basic academic skills of reading, writing, and ciphering necessary for getting along in society. Even in Boston, the capital city of the colony in which the government had the greatest hand, children were taught to read at home. Samuel Eliot Morison, in his excellent study on education in colonial New England, says:[10]
I haven't seen a poor vote win an election in the 3+ decades I've been alive.
A similar narrative from Jan., capped w/ hyperinflation once the wealth transfer is complete --
http://www.zerohedge.com/article/origins-american-kleptocracy#comment-18...
As far as your "best position" I couldn't agree more.
"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." - Thomas Jefferson
There's a reason Jefferson said "FIRST by inflation, THEN by deflation". Because that is, and always has been the game.
Based on fundamentals, EVERYTHING should be lower, but that can't happen because the debts to pay for assets exceed their fundamental values.
The only way is to get assets back up to debt levels, which will require money printing.
Still, it wouldn't be inflation, it'd just be getting back to par.
Priced in what ? Gold of course.
Priced in dollars, actually.
So you think that if the fed prints up enough dollars to cover most of the debt that those dollars will still buy a barrel of oil for under $100 ?
That really depends on other factors.
I know that they could print enough dollars to cover the debt and it would only value gold at 1500 an ounce, based on all the inflation from printing another 14 trillion in cash.
No that does not depend on other factors. Oil is priced in dollars, the same dollars that you are printing to hand out and pay debts.
Gold is also priced in all debt based fiat denominations so your last sentence is officially the dumbest thing ever written on ZeroHedge.
Your assertion that printing these dollars to cover debts will solve the problem would only nominally work if gold is revalued by the same amount. It is impossible to have one without the other.
Your logic is incorrect because gold is subject to market prices. It isn't a fixed price to begin with. You don't get X gold per dollar based on the dollar's convertibility rules. You get X gold per dollar based on speculation.
Oil was worth 147 a barrel. We printed more dollars. Now oil is worth 78 a barrel or whatever it is today.
Your argument doesn't hold water in the least.
Gold was worth 600 or whatever. Then we DEFLATED. Now it's worth 1250. Based on what? NOTHING AT ALL.
Speculation. That's all. It's worth that much because chumbawamba and Glenn Beck buy it at that price.
You still haven't proven HOW hyperinflation is going to happen, nor have you proven that gold's price is in any way whatsoever tied to the dollar.
The dollar went from 74 to 89, and gold stayed the same price. Did the price of gold go down? Nope. Dollars were worth more. Why did the gold price stay the same?
Speculation.
Why was oil 147 a barrel and then 34 bucks a barrel or whatever it was. Did the dollar increase in value 4 times?
Nope. Speculation.
That is why your arguments are fallacious at best, but not the dumbest thing written on ZeroHedge by a longshot.
The gold to 2000 by June (and the "we should have a ZH convention when it hits 25000") crowds get that honor.
Dollars where only worth more compared to other debt based fiat currencies but guess what ??????? Gold was making all time highs in those currencies when the dollar was at 89.
I'm really replying to both of you. We still pay all our bills in dollars, not gold. Gold is the fear quotient. It's not a currency, yet--unfortunately.
The other day I read an estimate that the entire worldwide "worth" (if one can can call it that) of sucky derivatives, of which perhaps 75% are destined to blow (and I'm being generous here), was $1.5 quadrillion. Guess what that's going to do for inflation worldwide. No central bank, or concert of central banks, will be able to do much about THAT. WELCOME TO THE WORLDWIDE DEFLATIONARY SPIRAL. That's what's making Benron look so cheesy these days.
That much said--and it's a rather large mouthful--I have no way to predict what will happen once the spiral ends, or begins to end. We've never been in this situation before.
It may well be that the general population reacts paralytically, but I doubt that in the longer term. The most fearsome outcome would be the rejection of any representational unit of exchange, and that has been addressed ad nauseam on the survivalist blogs. Unless the electronic world utterly disappears, which barring a nuclear event is quite unlikely, my best guess is that some form of representational exchange will persist, regardless of innate value. Our civilization is far too interconnected and driven by patterns most refuse to acknowledge (e.g., fractals) to permit total collapse, but I fear that we shall traverse some very deep waters before seeing an end to this crisis.
Thats fucking wrong.
NO MARKET COLLAPSES IN A STRAIT LINE. Lots of early money will escape and find a new home.
double post
Yawn....
It has been said (by smarter guys) a thousand times: prices are nominal not cardinal. Mankind has always desired an objective standard, look to the qualifiers: fungible, divisible, durable, etc. Without an objective standard: current "value", calculations, predictions, projections, etc. cannot be made. Does not compute, cannot quantitate, system failure.
Tell a physicist to measure the energy levels of an atom, he'll have no problem producing the results. When he presents them, you tell him: "No, no. Your x-axis is wrong because the speed of light is different today from yesterday. Now, most physicist educated in the US will probably go back and recalculate their results using the new metric. They'll probably do this two, maybe three more iterations before realizing the trick that is being played on them. However, a handful of them will immediately give you the finger, tell you to go f*ck yourself, and find a better, more productive use of their time.
Now back to economics. Prices are (as you all know) where supply and demand meet. But supply and demand are constantly changing. The best way to estimate current supply/demand and predict (speculate) future supply/demand is to look at price, and price movements. Price is a universal signal, and therefore requires a metric. Since the end of WWII that metric was the $. Manipulate the $ through CB, manipulate supply through CG (taxes and regulation) and the end result...manipulate demand (mass behaviors). The astute will notice the fundamental assumption hidden above: price is where supply/demand meet only if the individual actors in the economy (suppliers and consumers for the dim) are free to act.
This is not about dollars and cents, this is not about deflation or inflation, this is not about public or private, this is not about pensions or 401Ks, this is not about derivatives or their underlying assets, etc, etc...This is about freedom. I can't speak for the rest of the world, but here in the US we have none.
Well said.
Not sure why you got junked.
Debts on assets are higher than the assets are currently worth. Correct.
Extend and pretend and mark to fantasy have accomplished exactly that.
No real deleveraging has happened yet.
Billions in bonuses to a handful and millions of people w/o paycheques.
Unless millions of people get jobs and can participate the assets are worth shit.
We have too much of everything. It costs $35 to make an ipad in China that retails for $400 in the US. Where is the "asset"? That stupid item is worth $35 to me, not more. The rest is mark-up that some spoiled brats are willing to pay for it out of Daddy's pocket.
That's why AAPL is a $250 stock when it should be a $25 stock based on their cost of manufacturing in China. But again, some spoiled brat loves AAPL and is willing to pay $250 per share out of Daddy's pocket.
Eventually these fundamentals will be understood and Daddy is out of money so little Jack can't buy i-shit anymore.
Right. If I bought an ipad, went into debt for 400 on it, but only have 200 to pay, you can give me another 200 and all that will do is support the 400 dollar ipad price. Nobody had 400 for an ipad in the first place, so that isn't what it was REALLY worth, it's just what the debt for it is...
Same thing applies to houses.
As to why I got junked, every post I make gets junked. There are a lot of bitter goldbugs that hate that I was right about gold being ready to fall twice now.
And what happens when a share holder of apple finds out that most Ipads have been financed ? They will sell, then another finds out and they sell and it all goes down the line until Apple is worth half or nothing.
Did that money dissapear ? No, the first guy out profited most and found a new place for his money and the next guy and so on.
You have been right about nothing. No gold bug gives a shit about gold short term gyrations in price.
That wouldn't happen if Apple got government bailouts to help its customers pay like the banks did.
The reason Apple shares are 250 bucks is because that's what people can pay for them.
Houses were never worth the original price because people never had the ability to pay for the loans.
They were on option ARMs at 1% with balloon payments, hoping to fix and flip ro whatever. They couldn't make the payments at the regular price.
What makes you think that them getting more money will make the regular price go higher than the original price if they couldn't make the payments with the money that they already had?
As far as being right, I've been talking about the rising wedge in gold for weeks. The correction from that wedge ISN'T FINISHED YET.
Also, I was saying to go short in November/December on gold when at 1220. Everybody else was saying "gold to 2000 by June, gold to 50000 next week" and other such bullshit.
They just couldn't believe that they were all wrong, and gold is worth less today than it was then!
About the gold price though, it all depends on speculation of massive hyperinflation, which isn't going to happen!
There has been no core inflation to support its run up to current prices. The production cost is 400-500 an ounce. Nothing supports gold prices at 1250, except for people buying it at that price.
When nobody can pay that anymore (or wants to pay that anymore) the price will fall.
Interesting thoughts re price of gold and price of production.
Retail can't buy it for 500 but wholesalers can.
Markup somewhere in the 'hood of 100%. The difference to the i-xyz line up made of cheap labor and infinite supply of materials is that gold has a support level.
Bring gold down to $900 and people back up their trucks. Sell Apple's i-xyz at 50% or more discount and the same is not going to happen. The demand for Apple is evenutally satisfied until the i-xyz 1/2/3/4/5 and so on versions replace the older ones. Apple is also a consumable product. It breaks down after a while.
FYI I think Apple is one of the greatest shorts here.
I completely agree with the idea of AAPL as a short. At a 22.7 PE, compared to 10 for the sector, they're way overvalued.
They have a higher market cap than Microsoft, at 1/3 of the profit dollars, cash, and assets.
The iphone is a piece of junk, and it's seen its day in the sun.
If you dropped the ipad to 200, I bet you'd get more interest in it.
Gold is different though. People don't buy it to consume. They buy it to resell. Of course, the price would still bring more people into the market for it.
Actually JB, I think most of us who buy gold are NOT looking to resell it.
For us Gold is the best Wealth Preserver.
...
Someday when you become a father, you will likely have an attitude shift. You start thinking longer term, you read history and you worry about your child's (children's) future.
THAT is what most of us are about: preserving our wealth through .gov mismanagement, banksters, .gov spending, etc.
That's the ironic thing....gold isn't a preserver of wealth any more than copper, bronze, silver, platinum....its just a shiny metal with great electrical properties. You are speculating that somehow it will maintain value in the event of an economic collapse when it is far more likely that food, water, necessities - i.e. production will be far more valuable than some fool's shiny yellow metal.
Is that green gold, blue gold, white gold, yellow gold, pink gold, gold plated tungsten, gold filled lead, gold rolled iron, 10k, 14k, 18k, 20k, 24k, 10K coated with 24k, etc etc etc???
That said, there's always a sucker out there. How many of Cortés' men drowned clutching their precious yellow metal....
Either the central bankers will win and we'll have a bunch of chipped obedient serfs or a complete economic meltdown of a scale we've never experienced before. Either way gold is risky business.....as long as you understand the risks....great more power to you! Beans, water, and bullets look a lot less risky IMO fwiw.
True, Gold has no intrinsic value. But then again all value is subjective in the first place...
The fact is, an ounce of gold could buy a fine man's suit in 1813, 1913 and indeed today, I would imaging that most day-to-day items would cost pretty much the same in terms of gold as they did 100 or even 200 years ago. The whole world could fall apart tomorrow, the financial system could collapse, we could have a nuclear war etc, etc. You would almost certainly be able to take a gold coin to a farmer (assuming he and his farm weren't irradiated) and be able to buy food from him.
That's the attraction of gold, I'd certainly bet one or two of my Kruger Rands that they will buy the same number of chickens in 100 years time that they do today...
That does seem to be the general theory.....of course reality could prove to be far different. Supply/demand. If there aren't very many chickens....it will take a whole lot more gold to talk someone out of one. The other option is to keep the chicken and just take the gold from you.
If the bankers win....your gold could be completely worthless....or they'll just take it from you by force.
Everything you have written about the gold price is just short term market BS. Nobody cares.
You where probably right when gold went from 480 to 410 but what does that matter now ? You just lost allot of money, thats all.
At Least gold bugs disclose where they are putting money in this fucked up market. Where are you putting money ? You must be a treasury bug and treasurys are the real bubble, not gold.
Maybe you don't read what I write, but I've said numerous times here that I trade VXX and levered ETFs like FAZ and FAS.
I don't stay invested ever. I take little snipes here and there and make money.
If I had the chance to buy gold at 410 instead of 480, I'd rather pay 410. How about you?
Would you rather buy gold at 1265, plus the premiums for physical, or 900, plus the premiums for the physical?
Price matters, even in long term investing.
I'm bought some more a couple days ago.
If it goes to 1500, I'll buy more.
If it goes to 900, I'll buy more.
If it goes to 600, I'll buy a lot more.
Assuming there's a market left, when the DOW:GOLD ratio gets to 1:1 (or 0.75:1, or 0.60:1, who knows how low this cycle), then I'll sell.
Why? Because the endgame is to pay the debt in nominal terms. This is the least painful solution for the bankers, and the most painful for the savers and the poor.
They are talking about $5T in additional QE. That should be good for another $600 rise in the price of gold at least. There could be an uncontrolled, massive deflationary event after that which brings down all other asset prices except the $USD.
Except it might not bring down the price of gold because of currency fears.
So I buy some now, I buy some later. If I'm feeling sporty, I keep more dry powder to wait for the 'event'. If I'm feeling conservative, I buy more now and forget about it.
And if the 'event' doesn't come, and gold heads for the stratosphere, at least I'm not like you - sitting holding a giant wad of paper unfit to wipe my ass with. I'll only have a small wad that I didn't mind losing as it was speculative...And I'll have something that's recognized the world over as having value and is exchangeable for goods, services or whatever scrip they are using to barter with.
You claim to trade VXX, FAZ, FAS, etc, but for some STRANGE REASON express endless opinions on gold... But never in the only place that matters: PRICE and TIMING.
So I just did. Give us your buy and sell points motherf!@#$%. Time to put up or STFU.
People here have clearly had enough of your blather, because with you and your ilk It's never a good time to buy gold. You walk and you talk like a paid shill. Frankly I don't think they're getting their money's worth because you're doing a piss-poor job.
Since we are making up prices as we go along I would prefer $5 an oz, JB. No, wait, make it $1 an oz. Then I can buy tons of gold. Literally. Can you make that happen for me?
Thanks,
WaterWings
oops
gold didn't fall. it was pushed
...Into the space capsule?
In your first sentence, you say there is a correlation. In your second, you say there is no correlation. Do you see why people think you are an idiot? No? Figures.
Because they can't read at a third grade level?
Yes, there is a correlation between money and asset prices.
No, additional money doesn't cause inflation if the asset prices can't get past previous levels.
Wow, you'd think I have a PhD or something it's so simple.
1) Tmosley has a point. Revise your statement, PhD or not because your paragraph above doesn't show in your comment in question.
2) "No, additional money doesn't cause inflation if the asset prices can't get past previous levels." Wha? Prices don't need to reach "previous" levels in order for an asset to be inflated. Any asset in an environment where more money magically shows up drives up the price of the asset being bid on - e.g. - the real estate market of a few years ago where money fell out of the sky.
My comment made perfect sense. I don't know how I can say it any easier than I did.
Yes, there is a correlation with money and inflation, but that doesn't mean that money causes inflation necessarily.
Correlation is not causation, necessarily.
In the current environment asset prices would need to exceed previous levels for there to be inflation relative to that point in time.
Sure, the value could drop fifty percent and then rise ten percent from the bottom, and you could argue that there was ten percent inflation from the bottom. But overall, the price would still be down 45%.
So to counter your last argument "Any asset in an environment where more money magically shows up drives up the price of the asset being bid on"
Why have the prices of housing, oil, etc DECLINED with even more money printing then? We've printed tons more money SINCE the bubble and prices are still down.
Asset prices are already too high for the amount of money available.
You can print as much money as you want without inflation in asset prices. (in this scenario)
There, I fixed it.
So easy, a third grade special needs kid could get it.
The reason that works in this scenario is b/c the CB is the only entity in the US that is legally allowed to "print" money, but that only makes up ~1-2% of the available liquidity. However, if the freshly injected money goes through the same multipliers (debt and derivative instruments) as in the recent past, $5T can quickly turn into $500T. It could also do nothing (a BB shot at a freight train) and just get consumed by the deflation storm.
But understand what is deflating. If you call MBS and CDS assets, then yes...assets are deflating. For me, speculative bets on underlying physicals are not assets. 100 years ago, money saved was capital. Today it's someone else's IOU. Burn a Benjamin today and someone somewhere defaults on a loan. The last 100 years has been a long process of replacing capital with debt.
So if a company issues more shares, it will not devalue each existing share outstanding ?
Inflation is the same as devaluation so basically you are saying that a public company cannot cause share devaluation by issuing more shares.
Ho-ly fuck
Your analogy isn't even remotely valid. We're not talking stock prices.
Asset prices are ALREADY at inflated levels due to easy credit that can never be repaid.
Let's say Bank of America says that it's houses are worth 200000. Then, somebody comes along and says that they're worth 400k. I'm going to make this math simple, since I don't have time. I know the prices are not realistic, but the math is the same.
First you have 100 shares on 200k worth of assets (at 2000 a share). Then, the price of assets irrationally gets raised to 400k.
Now you can have 200 shares at 2000 a share. Same company, no devaluation.
Now imagine that you took out loans to buy BAC stock, and used BAC stock as collateral to the banks in the transaction.
You bought 200 shares at 2000 a share. Your loan is 400k. The share price drops to 1000 a share. Now your asset is worth 200k legitimately, but is still valued at 400k in the credit system.
Somebody can give you another 200k, and the amount of dilution will never exist, because all the 200k will do is support BAC's original price at 2000 a share.
If you deflate 50% and inflate 100% from that point, there is NO NET INFLATION.
This is why you can print all the money you want and we'll still be deflating. If the price of a house drops 30%, you can print 30% more money and give it to the owner and all it will do is support the price at the original level. There will be no net inflation when comparing today's price, versus the price before the deflation and inflation.
Zero inflation is not hyperinflation by any stretch of the imagination.
if QE had lifted the minimum wages.. perhaps it would make sense.
40 million on food stamps
billions in bonuses for a select few and millions of people without any form of income.
that's the ROI of QE.
more QE will bring exactly the same return. more dependency, more unemployment and of course bigger bonuses for the thieves!
I think we'd still see zero inflation even if you wrote everybody in the US a check with QE.
Inflation requires that people's wages go up, so they can pay increased prices for things. Back in the 70's, many more people were in unions, so they had bargaining power and could negotiate for higher wages.
Nowadays with so much excess labor supply, and fewer people in unions, plus moving jobs overseas for cheaper labor, there's no upward pressure on wages. In fact many people have taken pay CUTS just to keep their jobs. That's why you're not seeing the kind of price increases you might normally expect with so much liquidity sloshing around.
There is no possible way in living hell that you can deflate by 50% and inflate by 100%. You are not accounting for any individual market participants decisions. There is no way that all the market participants are going to agree to a predetermined plan.
Zero inflation just happens to be the Argentina hyperinflation starting point. Look at the graph.
http://www.nowandfutures.com/d2/argentina_cpi1995-2008%28copyright%29.gif
Individual market participants don't control the money supply, interest rates, or economy in general.
FRB does.
They've been trying to inflate back to old levels and can't even do that.
As far as the U.S. versus Argentina.... did you know that we're the world's largest economy with the world reserve currency?
Argentina has... ummm... some cattle, I guess?
Did you know that the US is the worlds biggest debtor nation with the worlds largest trade deficit ?
BTW market participants rule
Not when you consider the other nations with debt at 200% of GDP.
Market participants don't rule. If they did, there would be equilibrium in the markets now. And of course, we all know that there isn't...
Argentina had South America's most powerful economy in the years prior to its hyperinflation. It was a first world nation. Now it is a third world nation. Those who held ANYTHING denominated in Argentinean pesos lost everything. In their case, the dollar was the same as gold is in our case. Those who held dollars preserved their wealth, and in fact wound up with much more purchasing power for anything manufactured in-state.
Your ignorance is truly astounding.
Asset Prices 2007-2008:
Oil 147 a barrel
S&P at 1576
Houses 30% higher.
Milk 4.00 a gallon
Asset Prices AFTER QE:
Oil less than 80 a barrel
S&P at 1100ish
Houses worth 30% less than 2008
Milk is 1.98 a gallon.
Where's the hyperinflation? We doubled the money supply.
The only thing inflated is gold!
Where are you buying your milk? We've gone from about $1.89 to $3.69. The only things dropping around here are home values.
Walmart, Target, and King Soopers (Kroger) all have milk at a little bit less than the 2 dollar a gallon level. I usually shop at King Soopers, personally.
I live in Colorado. I'm not sure how it is where you live.
Milk price is on the first page of this ad. This is the usual price, I don't know why it is in the ad...
http://kingsoopers.inserts2online.com/customer_Frame.jsp?divID=620&drpStoreID=00020
It's in the ad to make unsavvy shoppers think milk is on sale. Common tactic.
Those are nice prices, though. I'm in Florida; this is the weekly ad from a nice grocery chain, Publix:
http://publix.shoplocal.com/publix/default.aspx?action=entryflash&
I don't know what the deal is. Maybe it's because we have a lot of local farms here, and the cost to transport is cheaper?
Most produce and stuff at Colorado stores is grown here, so that eliminates the need for transportation costs and warehousing somewhat...
Who TF drinks milk?
BEER BITCHEZ!
With two kids under two, we go through 4 gallons per week.
Just wait till they get older...4 gallons a week I wish.
@Michelle
Understood... My kudos to you for "junking" what was meant to be a joke reply (in what was getting to be a long comment thread)...
YES dear... I understand the NEED for MILK... I am ACTUALLY a "dairy farmer"...
My "succinct" comments (on QE2 & gold) are found below on a reply with a time stamp (20:52)...
I hereby return you & your kids to your "Corn Flakes", "Frankenberry", & "Count Chocula"...
Didn't junk you, Francis. And I wish I knew a dairy farmer in real life!
I don't know. Gustafson Farms is the major "brand" of milk and they're local. They're also the most expensive, more than T.G. Lee most weeks. We stick to the store brand milk.
As regards "cheap" milk, etc. That is no mystery. It's a common marketing tool called a LOSS LEADER.
Money printing has thus far been prevented from causing high or hyperinflation due to credit contraction. Thing is, you can print an infinite amount of money, but credit can only go to zero. Eventually, there is going to be a run on the dollar, and there are numerous parties that have the funds to initiate such a run. How long can they hold the line? Forever? I think not.
Also, if you want to talk about food inflation, you should exclude milk, whose price is 100% determined by government subsidy. Other foods are twice what they were a year ago. There was a huge spike in all of those commodities, including oil, but you should note that they have settled back to levels FAR HIGHER than the levels that they were at previously, and are trending upwards.
All I know is that milk used to be 4 bucks a gallon and I've been getting it for less than 2 bucks. To me, that's much lower pricing.
If there were government subsidies, how did it more than double from current prices?
I understand what you're saying about credit contraction making the amount of money not available, but you could simply give people the money instead of lending it to them, and it'd only help them be able to pay for the debt that they already have.
When there's a run on the dollar, there will be war. You can bet on that.
As far as other groceries, I've been noticing a lot of prices coming down for things.
I get a "colossal coffee cake" that used to be 4.49 for 3 bucks now, as an example.
We could sit and argue all day about what is inflated and what isn't, but I think that the goods that have been going up have gone up due to transportation more than money supply.
About oil, oil used to be 150, and now it's half that. That's not inflation. It was speculation, and then the speculators got whooped.
I see a similar thing happening to gold when the crisis ends. Of course you don't. That's where we disagree.
The milk is subject to political wrangling, and as such, it is always fluctuating. I guess you think that solar panel prices are deflating in price due to the 30% government subsidy?
Check the net weight on your "colossal" coffee cake, and you are likely to find that it is half the size it was before. That is a major component in food inflation. People will pay the same amount for less, but they won't pay more for the same amount, in general.
I just fucking love how you think it can't happen here. Like Marie Antoinette. "Let the eat dollars!"
LOSS LEADER -- You can't cherry pick prices to prove deflation.
oh the irony !
once you figure it out you will change your name and nobody will ever hear from Jonny Bravo again.
God, can you even refute what I said? Nope. Not at all.
You have a trillion dollars. You have debt worth 1.5 trillion dollars on the books backed by that cash.
There is nowhere else to get that half trillion except by printing money.
You could give the person with the debt another 500B and it would do nothing to the original asset price of 1.5 trillion that was bought with only 1 trillion worth of money to back it.
There was never enough money in the system to sustain the price levels of assets in the first place. Don't you get that?
People were buying houses that they couldn't afford with 1% option ARMS because they wouldn't make the payments with the regular money supply.
So, either the price of the debt needs to come down to reflect the actual value, or the money must be printed to sustain the previous value.
Going from the previous value to the previous value in asset prices is ZERO net inflation.
It's money equilibrium.
Right now, supply of dollars is less than the demand for dollars. You can make more dollars, still meet the price levels at the earlier demand level and nothing changed in the price level. Only people's ability to meet that price level has changed. Still, inflation only occurs when the price level of assets or goods increases.
And what do you think the holders of real legit dollars (China) will do if you print dollars to pay off debts ?
What do you think the value of those dollars will be when all the savers ditch the currency in favor of another ?
You see, pretty soon you will be passing digits around that nobody wants that hold no value. That is hyperinflation
I can see your point, but it's not going to happen.
We will nuke China into a sea of glowing glass before we allow them, or anybody else, to do that to our currency.
Why do you think the wars in the Middle East were fought in the first place?
Iraq was talking with Russia about taking other kinds of currency for its oil before the war.
Then they got killed. Do you hear anybody else talking about that now?
Sure, they will again, but at what cost?
It's not like our leaders don't know what is going to happen. There's a reason we spend more on "defense" then the rest of the world combined.
Yeah, but if China divests slowly enough, what's the point where we nuke them? They are already decreasing their bond purchases, and in some months they have been sellers:
http://www.ustreas.gov/tic/mfh.txt
Eventually they are buying none at all, then it is just the Fed buying up all the US debt in a giant circle jerk. Then you go to England and a Big Mac costs $25.
You *DO* realize that China has nuclear armed warheads on untraceable nuclear submarines worldwide, don't you?
USE YOUR HEAD, BOY.
The point of a gun is always the end argument of every despot, no? See below for the legal tender application.
The hyperinflation is still sitting in bank reserves. We have contracting credit market with hyperinflationary QE sitting around while the shell game gets played.
http://seekingalpha.com/article/214077-trillions-in-corporate-cash-real-or-chimerical
All true.
Gold is inflated or gold reflects the dilution of money that reflects inflation?
Essentials are going up in price because retail knows people need to eat, drink and wipe. Retail is gauging where they can until people don't eat, drink and wipe as much.
Cost of labor and production of essentails does not warrant the high cost of retail.
Oil at $147 was a joke, oil at $80 is still a joke. The stuff is so worthless, we let it gush out from the bottom of the ocean. The cost of production in the desert is $10 / barrel. The oil fields in Saudi are not depleting.
Hyperinflation comes when zero inflation, accompanying a failing/contracting economy, results in an inability to service the sovereign debt (issued massively in doomed attempt to prop up system long enough to permit escape of plutocrats, and/or socialize their losses, to avoid "systemic risk") which is priced in a given currency - the failing economy cannot support tax increases to pay interest on debt, let alone principal. Inability to inflate requires massive printing since taxation FAIL does not produce revenues to service debt, and printing expediently avoids default. However, printing once OUTED produces failure of faith in the fiat currency to perform its function as a store of value. Initial doubt and loss of faith means progressively more FRNS to overcome lack of faith. Mushroom effect leads to economic mushroom cloud. Not inflation, hyperinflation. Lack of inflation causes hyperinflation.
Any questions?
Hey Johny Bravo... Sure, those dumb central banks now buying gold, those idiot chinese and Europeans buying gold. A coin dealer related today that all the rich folks he knows are buying gold. All these misguided idiots buying gold hand over fist when its the only inflated thing. Really, go troll elsewhere.
Glad to see you making some strong sensible arguments and standing your ground - people shouldn't flag your comnments as junk just because they disagree with them, that's simply intolerance which breeds ignorance.
Bravo !
Even if they do print more, I'm not so sure they can stop the debt tsunami from swamping the boat.
That may be true. It still doesn't mean that there'll be inflation.
They can print exactly enough to service the debt and we'd still have assets at the same levels...
"... It still doesn't mean that there'll be inflation. They can print exactly enough to service the debt and we'd still have assets at the same levels."
You are assuming the sheeple cling to their faith in FRNs. Inflation-cum-hyperinflation is a psychological & cultural event, not a monetary event.
M1 & M2 are perfectly useless now, as is all Fed policy. The only thing remaining is faith in a doomed fiat currency. Folks who continue to view/value any asset in terms of $USD are already lost and rudderless.
It's just a matter of time before the collapse occurs... this is basically what Grant is saying here... it's all over but the crying.
I disagree. If FRN's are worthless, people should give me theirs. It's not worthless as long as faith remains the same.
You can argue again and again that the faith will decrease, but there's nothing valid to use as "legal tender for all debts public and private" to replace the dollar.
As long as dollars pay debts, they will be worth something.
"It's not worthless as long as faith remains the same."
Dumbest argument ever. 1) faith has not remained the same - China, among others - are diversifying AWAY from the $USD. If you can't see the relevance of such MASSIVE shifts in wealth/sentiment, then you can't be helped. 2) Given that faith in fiat has peaked, there is a very real and irrevocable "expiration date" on FRNs. You may a well buy loaves of bread and stockpile them in your basement... it will always be bread, right? Hmm... I didn't see any expiration date, so it's all good, right? Moron.
"but there's nothing valid to use as "legal tender for all debts public and private" to replace the dollar"
You cling to 'legal tender' the same way CNBC clings to 'free markets'.
Keep on defining your analysis, investments, and net worth in $USD... in five years you'll be the proud owner of the world's biggest stockpile of toilet paper. Well done. You are truly clueless.
Actually, the DXY, or dollar index went from 80 in 1985 to whatever it is today. (84 maybe?)
The dollar is worth exactly the same as it ever was.
Next, bread isn't money. Bread goes bad. Money doesn't. My dollars from 1920 are still dollars. My bread from a week ago is moldy and green.
The dollar isn't losing value, in fact, the index is UP in value since the global financial crisis, and given the values of other currencies and the states of other economies, what is going to replace it?
Oh, maybe people will start buying YUAN instead so that they can do business with a communist state controlled government.
So where is your proof that the dollar will be worth nothing in five years? Don't have any.
Where is your proof that the dollar is worth less than it was 20 years ago?
Don't have any. In fact, I WANT you to go see a DXY chart over the last thirty years.
Massive dollar devaluation under Reagan. (from 160 to 80) Steady under Bush, more or less. Dollar rose under Clinton to 120. Then it fell under Bush to less than 70. It's still over 80 today though...
There has been NO change in the value of dollars over the last thirty years.
Inflation isn't a change in the value of dollars, because look at the quality of life inflation buys. People didn't have iPads, cell phones, computers, the internet, blah blah blah in 1980. We have all of those things now. Inflation is just another word for standard of living increases. Something has to be the double entry to the dollars that are produced, and that is assets.
You have no proof, except for some goldbug hysteria bullshit that is unsubstantiated that the dollar will be worth nothing in 5 years.
That's what they said in 1971. That's what they said 5 years ago. That's what they'll say again.
Moron.
What I can't figure out is why anyone argues with you.
It's pointless, as are most of your disjointed, uninformed arguments.
Get a dog or something.
ha~
Bravo... I like your "verve"...
In many ways, your argument is probably correct...
As long as the dollar retains its status as the worlds reserve currency (meaning: as long as there are many who hold debts denominated in dollars, and that there ARE actual dollars "squirreled away" as legal tender for repayment of debts - that's not likely to change)...
Eventually though, it [dollar] WILL lose its reserve status (same way as all FIAT eventually gets doomed to the extinction bin)...
I think what we're really talking about here is TIMELINE... Notwithstanding Grant's comments (nor the "imminent" timeframe he puts on QE2)... My instinct is to DOUBT as to whether that maneuver will be the last wooden stake in the heart of the dollar...
Why?
Because if an announcement like that is made, NOW, there is not a READY solution for a world currency... It's a race to ZERO (until all borders are sealed & trade is halted)... Therefore, QE2 in this moment would be accompanied by the same maneuver elsewhere (notwithstanding the rhetoric)... This just buys more time...
The result?
- Gold prices aren't going to soar
- Other commodity prices aren't going to soar
Instead?
It'll just be "more time" for TPTB to continue to HOARDE contracts for these things (at present prices, or even lower prices when they can manage it)... Result? More deflation, in "paper assets", more staying the same in "commodities", slight increases in NEEDED things (like food & energy), stagnant wages...
One could HOARDE all the gold they wanted in this period, but they'd likely be paying an inflated price for it (I'll defer/temper that argument only in the case of certain central banks who are short on relative supply with how they potentially regards themselves in the heirarchy of economic powers)... Why? Because when the system IS eventually ready to be reset... Governments, when that moment arrives, will STEAL it from you and "tell you what it's worth" (they'll pass a law to confiscate it from you and likely pay less than what you're buying it for today - in dollars)...
So if one REALLY wanted to hedge themselves in a DEFLATION/INFLATION environment, they'd be better off just converting their cash into useable goods at the moment...
- Dry food
- Storage Containers
- tools
- lumber
- fuel
- vices (cigarettes, alcohol)
- and any other "handy" items
Believe me... NOBODY is going to get rich off this... So think about SURVIVAL first...
My apologies for the long comment there everyone... It's a complex subject :-/
Next, bread isn't money. Bread goes bad. Money doesn't. My dollars from 1920 are still dollars. My bread from a week ago is moldy and green.
Your dollars from the 1920s are now dimes.
Johnny's own comment:
He just made the case for gold. He is a bumbling fool.
Jonny,
Give the people the freedon to choose "legal tender for all debts public and private" in order to find out what is valid, no?
Exactly Fester! If the faith in the FRNs are so great there should be no problem using competing currencies right?
How does the printed money get to those who need to service the debt? By gift? This is Ben's problem. How to drive inflation down to the masses, but keep the plutocrats happy who have no interest in taking a discount, via inflation, on their debt. The two drivers on the road are in direct conflict, and do not have the same interests. And the plutocrats win. For now. Until the Fall.
Wow. Nice job Zep. You've encapsulated the entire Obama/Bernanke/Geithner policy ploy in two sentences. First the Fed prints it, and then Obama gives it away via laundering it through the Treasury. I beg to differ on one point, however. Plutocrats have been big winners, and up till just recently bureaucrats have been minor winners. Middle class (the folks who ultimately pay the bill) have been huge losers.
Inflation out the ying yang? You clearly don't understand what's going on. Inflation didn't happen the last time the Fed did QE for a very good reason. It won't happen the next time for the same reason.
The point you should've learned by now is that the money/credit system is in the process of collapsing faster than the Fed can respond. And it's much greater than the Fed can print.
The Inflationistas lost the argument last year. It seems they haven't learned a single thing since then.
Sorry, there won't be any inflation until all of the excess Credit in the system has been destroyed. It can only happen after that.
exactly... money demand is already swamped by money supply. printing more money does not suddenly stimulate the need for money in the form of credit. sorry... QE doesn't create loans. QE did help the health of PDs and certainly helped to stabilize government debt (in its many forms) yields to, at least, help stabilize the chinese books, during a period of stimulus-driven creation of massive amounts of additional debt supply. just think what would have happened if the Fed weren't out there buying up all that excess supply of US debt. yields would have soared, we wouldn't be able to afford issuing more debt and existing debt would have been devalued on chinese books. not exactly a good scenario considering they are an ally we need to maintain (note the loose use of the word ally) and a growth engine we needed to ensure did not collapse as our own did...
just my take, i guess, with the add-ons to the above comment about how QE has nothing to do with, in the immediate run, inflation. buy big bank stocks and high betas and sell government debt, because you know a whole lot more of it is going to be coming out from Treasury, if QE expands. i remember all those fun articles we had during open market operation days when the Fed would buy bonds back from PDs at par and then the stock market would "suddenly" pop for "some strange but unrelated-to-QE-reason."
Sure there can.
Every hyperinflation starts with a shortage of the said currency.
You've built a ditch to catch a storm surge. Sure, the ditch (credit destruction) can hold a pretty good bit of water, but that amount is NOTHING compared to the tide, and it certainly won't help against the 100 foot tall tsunami that is sitting in China ready to head our way, the 100 foot tall tsunami waiting in the banks excess reserves, or the 10,000 foot tidal wave that the Fed has the ability to produce were they to do something crazy, like monetizing the national debt.
Dow 30K is years away. First we have to panic the sheeple into the "please Mr. Federal Reserve Banksters, we trust you, save us please masta, please!" mode then have them begging Pelosi to take charge with Herr Obama and create numerous useless Federal programs (or pograms) to turn things around.
Dow 10K is challenging enough for these scumbags.-:)
I believe the issue is that ZH adherents are ahead of the general public. Inflation will come, but only after the 11/2010 midterms have played out. I have always been early, believing that all think the same way I do. Add a year to your thoughts, and they will come to reality. Golfed yesterday at $40 per couple for 18 with a cart. This is a drop of more than 60% from last year. It takes a while for people to catch up. Deflation first, then inflation, then ... I am not sure yet
https://travelhouseuk.files.wordpress.com/2009/07/queen_elizabeth_2.jpg?...
While I'm sure QE 2.0 will be eventually conducted, I don't see the political will for it yet. Things have to get back to significantly scary. Right now it's just medium crummy. I'm waiting for a few countries to go down in Europe and a few states to collapse here for them to have the will to print the next batch and try to delay the inevitable again.
I agree, maybe we'll get some action after the election.
But Obama needs some boost before the election. They need to do it soon.
To do so is to admit they've been lying about the state of the economy. Gold has painted their monetary policy in a corner and now they have painted themselves in a political corner through cheerleading and outright deception.
If you admit the lie at this juncture, you undermine all future effort. The administration/dems will be crucified come mid terms if they overtly go about QE 2.0 (probably more like 20). We're headed for deflation boys and girls.
Further, as an aside, I do not believe we will suffer a prolonged period of deflation and then magically decide to inflate, as if we forgot the ills created thereby. This doesn't seem reasonable to me. I think we're in for the long haul if we keep our foot out of the gas for very long. And, of course, I'm presuming we have a choice about it. (deflation may (will) exert its will anyway).
I don't think so Jack. I believe in the pre emptive strike.
Why make it twice as costly? No, the faster they do it, the cheaper.
Card on the table so to speak.
But I can't imagin how without nationalizing the shit out of companies.
Or a national consumer bank, bank "of the people".
At least we'll know the logo will be red.
Options expiration coming up Friday. Surely QE2 will be announced for maximum positive market impact.
That would trigger a mother of all shortsqueezes. They can't do they without a revolution on Wallstreet.
Ahem. Wall Street is already revolting. I dare say they've been quite revolting for some time.
To several of the commenters: I disagree. The political action is firmly in the deficit hawk's corner right now. Releasing QE2 prior to a crisis would negatively impact the administration, politically. Not that QE2 or not having QE2 is going to fix or prevent anything (although it may delay it again, maybe even several times, before the currency collapses. Japan as an example). But, historically, they always have to "try something" when things fall apart, and then things still fall apart anyways.
You are right.
A hidden QE2?
A war?
Double secret QE2!
it has to be stealth. after all the cheering about "recovery" and growth and imrpovement, how could any gov official or talking head come out and cry for direct QE2
. sigh double post again...
QE2 sneakers for sneaking. The stock market, or rather the corporate recapitlization is the stealth vehicle. Once companies are flush with cash, as some now, they'll face the difficult decision of spending or distributing excess capital to shareholders.
The last time I checked an expanding pie pays bigger bonuses.
Screw you shareholders!
Agreed Jack. Sometimes in life you just have to sit on your hands, but people in power are afraid to be seen not to be "doing something" even if that something is of marginal / negative value.
The assumption implicit in your comment is unfounded.
You assume QE2 will be transparent.
It's likely already been happening for awhile.
The Fed has clearly had enough time to set up a second set of books.
Tell me, if quantitative easing is off the books, does it really happen?
And how would they keep it out of the books?
Bond purchases through foreign sock puppets.
Primary Dealer reach arounds...