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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."
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While monetizing bank debt or Chinese agency debt would want to be kept under wraps, I consider this different. For bailouts, they want it to be kept secret.
One of the primary purposes of doing QE2 would be to set credible expectations that the Fed will return to inflation at any cost. Therefore, it would have to be transparent, at least in the sense of "We're doing this" although not necessarily in the sense of "this is who's benefiting from this."
Both cases, printing money, but for different purposes.
The States are crashing big time. They will HAVE to be bailed out.
That is where the inflation will come from. Money into the system.
FRB reserves don't mean crap.
When the common folk get their hands on that State money, it's over.
How much political will do you need for the Fed, on its own, as an allegedly a-political and independent entity unto itself, to declare that under its dual or triple mandate (not to mention the secret mandates) that it needs to go out and buy another $1T of US government debt - how many people are made miserable by that decision? The overwhelming majority of people in this country have not a fracking clue what the Federal Reserve is. I would submit the very few who would care about such a thing are utterly irrelevant to the politicians or the banksters. QE2.0 is free - no overt taxes involved, and it is an article of faith in the FRB Temple that the fiat currency, a reserve currency, printed till the cows come home, can save the day. What tool (from the "All Available Tools" Box) are they left with at this point? Interest rates will remain low for "an extended period" that will best be measured in terms of geologic time. Sediments deposited yesterday in our shallow seas will turn to rock before that policy changes, absent war.
Let me take a guess...recapitalize the banks with taxpayer funds but do not, for the sake of god, wipe out the common equity.
Right?
Nop, Obama blew they bridge by saying: Never again will there be a bailout to the banks.
He can't do this without destroying the party.
"Obama blew the bridge by saying: Never again will there be a bailout to the banks."
Obummer Lies More Than Nixon
Seriously SD, you believe anything out of that corporate shill, Wall Street puppet's mouth?
In any negociation and power house, credibility is the key.
Believing?, no I don't, but they aren't stupid.
Would you bust that door? There are other ways, they'll find a way. The question is which way, and do a pre emptive long bet on it to make money on it ;)
Then I hope he's got a spare under a rock in the Rose Garden 'cause the man's credibility is already in crisis.
http://www.ft.com/cms/s/0/434315b2-8ea6-11df-8a67-00144feab49a.html
Agreed.
Up is down, black is white, reform is no reform...
And...back door bailout isn't a bailout...
Because we call it "economic recovery plan" instead of Jamie and Lloyd's next big fat bailout bonus you tax payers paid for...
The threat of not extending the Bush Tax Cuts is a big bargaining chip.
Sudden,
"He can't do this without destroying the party."
With a TON of their help, he's about completed the destruction.
They are so desperate, they even have Micelle stumping and lying.
Make NO mistake, Bummer cares not a whit about his #'s, all he cares about is finishing the agenda.
Obama's comment was nothing more than a political smokescreen to highlight his sharing of populist anger.
Obama isn't stupid, he KNOWS who finances his spending.
And right now, it is the Fed.
obama also said there would be no CIA prosecutions right before he prosecuted them; said all healthcare hearings would be on CSPAN and fully transparent - LOL; said during the campaign he would pull out of Iraq as soon as sworn in; etc etc
The smart thing for Benny to do right now, would be to do his $5 trillion QE before the banks collapse again, give the money to the taxpayers in lump sum. That's $32,500 at least per taxpayer, get the people out of debt and spending again and create jobs. They gotta get the Fin Reg bill in place first, to prevent more bank bailouts. They will wind them down from here on in, as the people will not stand for another bank bailout. This will stop the foreclosures and the bankruptcies, delinquent accounts, etc..., and then the banks will take care of themselves. Rewrite credit rules so people cannot over-indulge again. Problem solved.
maybe your alarm didn't go off. bernanke and the powers that be don't want us out of debt. their aim is to enslave us to debt.
Ben and Timmy could mail out prepaid credit cards that are only valid for purchasing goods and services.
Added: They'd have to outlaw PM sales first, natch.
I laugh every time I hear that. Why bother QE when you've just bullhorned "GAME EFFING OVER!!"
The people in the streets will be better economists than Romer, Summers & Krugman at that point...
This 'game' will continue for some time.
'He who ignores history is doomed to repeat it'
I did say its the smart thing to do, not the Helicopter Ben thing to do.
double post
arnold,
To which they have ALREADY accompished.....adding 2.5/5.0T, at this point makes ZERO difference.
Really, Bernanke could mail every person in the US a check for $100k and we'd still be in the same mess within a year. What percentage do you think would use that money to pay off debts and then swear off the juice forever and ever after?
What percentage would blow through the cash in a couple of months and then wonder what happened?
That 100 large check would get the illegals into a house and they'd become solid middle class non-citizens. Now that's thinking outside the box. Kudos.
Naw. The Illegals I know are far smarter. They'd use the money to buy a house South of the border. Rent it out, and then fall back on it if they need to.
I already know some Legal citizens who have done that with their second mortgage. It's the best way to screw the Banks if you have to do a strategic default.
What percentage would flow thru to Chinese factory workers, providing THEM with a higher standard of living?
Better yet, what percentage of ZeroHedge readers would plunk their new money into precious metals?
Nop, that would be like giving alcohol to a adict.
The money will go to the people with the power to control and coördinate.
But on the other hand I do remember about 4 to 5 years ago that the Irish government made it possible to the people of Ireland to loan money with zero interest. Not to spend, but to invest.
It failed misserably for the people who all bought cars and houses with it and put them even deeper into debt, but Irerland recovered hughe.
But that recovery in Ireland was one of the first bubbles to pop in the begining of the crisis so it can never be a copy.
A zero interest loan is a possibility with restrictions.
Lets say theres a fed loan for business startup, all can apply but must submit BP. Then govt can hire some folk to oversee. Get unemployed folk thinking sufficiency.
Can't do such overt giveaways? If the pretense is lifted, dollar will be toast with the rest of the world refusing it. No more cheap crude and knick knacks for everyone...
It would be inflationary at first no doubt, but increase the taxes, and as the money is pulled back out of the system from the extra taxes, the dollar will recover. People can afford extra tax when they have no debts, they just have to make sure it is not an amount so high that it would consume disposible incomes. 3-5 yrs to pay it all back with an extra $100 a month in taxes. Roughly.
jk,
How many Americans do we really believe could pay off their debts, w/ $32,500.?
Nor many...............
It doesn't all have to be paid off, for some it will, for others not. Relief is relief. It could be used to turn some of the upside down mortgages around, pay up late mortgages or loan accts, there are many types of debt it can be used for, but definitely you don't hand out cash. Issue some type of coupons, so it can only be used to pay down debt of some sort. It's just a theory, that I believe would work.
And for those of us that are debt free? Sorry, no relief for debtors while the responsible, the thrifty get nothing.
Instead, if debt exists, up to 50% must go toward debt, arrearage, etc., until debt is eliminated, thereafter, or if the recipient has no debt outstanding, consume away.
And to make it interesting:
Man + Woman + 2.5 Children = 146.250$ per average family.
Dude, the "smart thing" for Benny and the Ink Jets to do right now would be resign, and voluntarily throw himself in jail for his complete and utter incompetency which is so pervasive it could be seen as criminal.
By the way, I agree with Arnold. "They" do not want people free and clear of debt. "They" want you to owe, owe, owe, OWE until they can't squeeze another red cent out of you.
It could work, provided nobody was allowed to spend the money until inflation caught up to the money supply. That would encourage people to pay down debt instead of the typical shopping binge, for which they would get the same volume of product for the amount of money they had. Since debt is a private contract, the banks would take it on the chin, which would be poetic. Which is why it won't happen.
If there was no restriction on how the money is spent, everyone would just send it to china in exchange for more cheap trinkets.
I would use my 32,500 by clicking on the Zero Hedge link to Blanchard, ordering one Gold Eagle,as it will probably be all 32,500$ will then buy.
Anybody have a link to the full interview? I can't find it.
- I'm pretty sure he was cut off after the "US dollar is a faith based currency that has no intrinsic value" comment.
He got one more comment in about how perhaps deflation of prices isn't so bad after all.
The real question is. How will they do the QE2.
Not through banks. They don't need a "bailout" anymore.
So how?
straight into the companies?
Taxcuts?
Nationalizing companies?
Monetize tr"ash"uries, for Obama to "allocate" the printed proceeds.
QE2 will happen when the market once again collapses.
But this time to get the poulation to agree to it, things will have to be alot worse then the first go.
The elite want the peasants money and they will get it, but a strategic withdrawl must be first.
The 2nd time around the population will be made to beg for it.
Crumbs will go to the people and the people will joyce.
More free money to Wall Street?
Yipppppeeeee.......
A "Bring your own paper for a money printing day at the FED" party :)
You seem somewhat perturbed Mr. Debt.
Here's something to lighten your day.
"I think that Janet Yellen is a well credentialed, consensus-hugging economist straight out of the Fed HR department."
"The U.S. dollar is a faith-based currency of no intrinsic value that is manipulated by the Fed..."
Righteous Analysis
Mr. Grant would be my Secretary of the US Treasury...
Team Fed doesn't like the term deflation.....it's a curse word to all fiat pumpers. It implies a bubble is still losing air despite massive interventions. Disinflation is more better.
QE2.0 is about as secretive as Area 51. We know it's there, but cannot make out the specifics. The market seems to have been pricing in a QE2 for a little while now. Still, the day they announce it one of these days..."to the moon Alice(SPX,DOW, et al)".
first,
If QE 2 is COMING, damn sure better happen before November.....
The GOP, and DEMS, are in for a rude awakening, their going to get replaced like a troop rotation..which is GREAT.
There are a couple of self-evident truths out there:
1. Without the propping up of the financial sector, there would be no financial sector. It had to be done. If not, the comingling of every financial asset value would certainly have meant that the only financial asset of value would have been the US dollar--in greenback form.
Stocks, bonds, etc. would have been driven to pennies (if that) on the dollar. Those financial assets are only worth the dollars one is willing to pay for them. The unleveraging in the markets would have driven them worthless as the leveraged parties scrambled for dollars to repay their debts.
It had to be done, period. So quit complaining about it. There is simply not enough "dollars" available to deleverage without crashing every financial asset value.
2. They (TPTB) have absolutely no idea how best to proceed. They were hoping that "things" would get better because, in their lifetimes, that's how it always worked. Time cured all ills. So, they began a propaganda campaign to buy time.
3. The propaganda campaign is being exposed for what it is and it is also clear no solutions have been developed other than to keep the campaign going. Their last, best attempt is the joke called the DJIA. That's all 90% of Americans who say they are "aware" pay attention too.
4. We have an idiot as President who, instead of focusing on economic well-being, is focused on his personal liberal agenda to provide social support as though saying it's so will even come close to making it happen without severe repercussions economically and, further, focused on the hocus-pocus clean energy, global warming movement that doesn't have this make-believe green solution that is anything more than a slogan, yet is going to significantly increase the price of energy consumption by everyone in America.
5. The outcome of the above is going to be "not good." I anticipate a timeframe of several years as the crumbling continues to accelerate--even with QE2.
What a geek
Money supply is not the problem, velocity is, and printing presses can do nothing about it. Depression, all the way long ......
I'm long ink.
Check out Brennan's look at the end of the clip when Grant says "the US Dollar is a faith based currency of no intrinsic value". Shocked.
......yeah, it's called Buckwheat eyes.
Or...DOE....in the head...LIGHTS.
Double post....
but get it? heh heh....doe (in the head) lights.
man, you set 'em up, I'll knock em down!
LOL.
The producer was probably screaming in her ear piece...
"Cut him off! Shut him up you dumb cu@#!"
Hahahhahaaha, superb.
Yeah, lol...you could see her leaning forward when they cut to the shot from behind her head...like she was about to have a panic attack.
"Team print more money...voted 36 for 36 with the fed..."
Have to see, but I think Congress won't do it and if the Fed does it on stealth mode there will an outcry to audit them and maybe worse.
Jim Grant is always a treat.
His inventive invective alone is worth the price of a ticket -
but you and he provided for free - Thanks.
Lovely two word play--good vocabulary. Milestones
Stimulus directly in the hands of citizens could help but that is not how they are going about it. Take 1 trillion dollars and divide into $50K chunks and you end up with 20 million.
Obviously an oversimplified example; but the point is we instead took 1 trillion and and only saved/created 3 million jobs (at least 1/3 of them government workers at state/local levels).
Even well placed stimulus though, may not save us. We're up to our eyeballs in debt at all levels and our country demographics are the worst possible for this condition. Austerity and frugality (as Mish would say) will be the mantra moving forward. Alot of people are going to get hurt but pain is an effective teacher (history certainly isn't).
Mr. Grant's comments are insightful. But peel the onion back a layer. Why does anyone listen to Mr. Bernanke, anyways?
The heart of the problem is in the expectations of government. On one side, many peopl feel disenfranchised by a government that has clearly betrayed the public interest in order to provide billions to wealthy banks. They seek a solution from elected officials and regulators that will make amends, or otherwise equalize the handouts.
And then there are the fiscal conservatives. Those of us who make our own living, built off of decades of sweat and hard work watching as a throng of zealots and idiots use the government's checkbook to "solve" all the worlds problems ... which a prudent man knows cannot be done!
My generation (24-36) has lost hope in the fairness of capitalism because they are over-taxed and under-employed. The fiat currency has made it impossible for anyone without massive capital to start a business. We are left working for decades for corporations that have infinite access to capital preventing real competition in the market place.
Regulation from minimum wage to Sarbanes-Oxley demonstrate that the bulk of American's would rather collect food stamps and pay rent than break a sweat. I'm disgusted with their stupidity ... and no longer sympathetic to their plight.
The monetary failure of the US Dollar is an imminent disaster about to cripple the American people.
As someone in the 24-36 bracket...I'd like to say, spot on, nice post.
Dreamwalker, your generation has never experienced free-market capitalism, and neither has mine. I'm nearly 56. Nixon got rid of the gold standard in 1971 to screw the French, and then added price controls;income taxes prior to Kennedy were stratospheric in the upper brackets. The tax code in the USA has been rewritten on a constant basis to promote whatever hobbyhorse the lobbyists and Congress were able to agree upon at the time, and this is part of the reason our economy is hobbled. Other reasons include massive directives and regulations summarily imposed by whim (at the agency level) or mandate (at the legislative/executive level), which are virtually impossible for anyone in small business to follow, because many are self-contradictory, and they proliferate like rabbits. Large corporations, who have legions of lawyers and lobbyists who actually write such legislation, do so specifically to disfavor small business. Small business cannot devote the amount of money it would take to deal with the above. Very few survive the process to become big enough to join the big boys, and reap their rewards.
I've been there, and tried for years to deal with these matters personally and politically. We simply weren't big enough; nobody took us seriously with an annual sales of $25m, and a low profit margin. It takes far more than that to play on their field, and grease their campaigns.Our founding fathers never imagined, in their worst nightmares, that things could get this bad. We don't have just tyranny--we have an oligopoly that is determined to render us utterly servile and bankrupt.
@puckles
"Dreamwalker, your generation has never experienced free-market capitalism, and neither has mine."
And which generation did?
Not, that I disagreed with your post, which I thought was well written and articulates some basic truths, yet, the question begs.
Awesome comment...I'm impressed with your understanding of the situation.
Big business + Big Labor + Big government = end of the Republic
The people getting screwed are the middle class that actually produces. The votes of the poor are bought by the big three in the simple equation above.
Well put, thank you.
I am in complete agreement as a 53 year old - this has been fucked up for quite a while, and those of us at our age bracket who have anything now did have to work our tail off to get it. No free lunch that I'm aware of, and it has been common knowledge to my generation for some time that Social Security ain't gonna be there, it's just another ever-increasing tax to pay. If anything, I wish I were younger since there will be a reset before long.
yup - GenXers gonna slack our way into the high life!!! wOoT
Mr. Grant's comments are insightful. But peel the onion back a layer. Why does anyone listen to Mr. Bernanke, anyways?
The heart of the problem is in the expectations of government. On one side, many peopl feel disenfranchised by a government that has clearly betrayed the public interest in order to provide billions to wealthy banks. They seek a solution from elected officials and regulators that will make amends, or otherwise equalize the handouts.
And then there are the fiscal conservatives. Those of us who make our own living, built off of decades of sweat and hard work watching as a throng of zealots and idiots use the government's checkbook to "solve" all the worlds problems ... which a prudent man knows cannot be done!
My generation (24-36) has lost hope in the fairness of capitalism because they are over-taxed and under-employed. The fiat currency has made it impossible for anyone without massive capital to start a business. We are left working for decades for corporations that have infinite access to capital preventing real competition in the market place.
Regulation from minimum wage to Sarbanes-Oxley demonstrate that the bulk of American's would rather collect food stamps and pay rent than break a sweat. I'm disgusted with their stupidity ... and no longer sympathetic to their plight.
The monetary failure of the US Dollar is an imminent disaster about to cripple the American people.
Oh , this western bankruptchy should get real interesting when the millions upon millions of third world immigrants find the gravy train has left the station... what a blood bath.
Seg,
Yep, like RATS off a sinking ship.................they will be mowed down at their OWN Borders.
I got me a color laser printer, Mr. Bernutty. Gimme some buck templates to print with! FTW! Always a helpful citizen!
Hmm. To a dark place this line of thought will carry us. Great care we must take.
-
Light bearers ain't scared. Darkness always calls.
Darkness, bitchez!
Did Muir say something?
That was beautiful: ..the US dollar is a faith based currency with no intrinsic value which is manipulated... heh! The truth, it's so refreshing.
The host appeared shocked and annoyed by his comment.
Shocked at what he said, or shocked that he had the balls to say it?
Yikes,
All he did was say EXACTLY what EVERY fiat currency IS.
true
What? Did you say something?
LOL! Did you see her reaction at 3:00 when he said the "US dollar is a faith based currency that has NO intrinsic value"?
She looked genuinely SHOCKED to hear that...
Fuddernutter! I just said that.
He looks exactly like the scientist from TMNT II: secret of the ooze, bow tie and all.
http://farm4.static.flickr.com/3173/2759481483_13b7dee214.jpg
bababoey bababoey bababoey:
dup
Most of this year QE has been done by the banks and PD's buying most of the Treasuries. The Ben & Tim tag team used the banks to obfuscate the latest round of monetization of US sovereign debt. So presently, we are already in QE 2.0. The next round will be done by the Fed and should be called 3.0, which will be followed by 4.0, 5.0, 6.0,7.0,......
QE II is about buying votes bitches! Entitlement tsunami baby! Its gonna be like Dave Chapelle's reparations.
http://www.youtube.com/watch?v=J3mfF7Ibwsw
http://www.youtube.com/watch?v=wFpdiwdGA_o
Since greed is the cornerstone of the American (as well as Chinese, British, Singaporean, etc) psyche, I'm going to do my part and be greedy here. I like cash. I happen to have some. I'd like deflation big time. Huge. A total collapse of prices. I want the heavily indebted to pay for their profligacy and feel the pain of paying back with cash of ever increasing value. It's their turn to pay.
I want waterfront property in Pebble Beach for $50K. I want ten thousand acres of producing land for $25 an acre. And if available, I'll take a 1927 Bugatti Type 35B for $10K. What the heck. Okay, that's a little overboard, but given what the purveyors of our doom have taken as their perceived birthright, I'm not that far out of line.
And if you read this Jim, Mingalabar! (from a former peripatetic correspondent).
I love reading so many comments, and read so few, if any references to the real problem-profits.
Stock prices going up and down because of the money supply is not the real issue. It is something that masks the real issue, and likely keeps us from addressing the real issue, but it's NOT the issue.
Perhaps some of us have forgotten the idea that the price someone is willing to pay for a share of stock is supposed to incorporate the current value of all future cash flows(profit).
This business environment sucks. No one wants to hire. No one wants to expand. Why? There is no indicator that if they do they will be more profitable.
People need to start asking what will return profitability to the American entrepreneur. And it should be obvious by now that low interest rates are not the cure for what ails us.
And when they ask that question, the answer will be that government has gotten so out of control that even the smallest of operations must spend tons of money to meet government regulations.
Is that burden been lightnened by the White House? No.
Minimum wage has increased three times in the last five years just for starters. Does everyone still believe this has had no impact on marginally profitable businesses.
Eliminate the marginally profitable, and a new set of companies begin to struggle and also move into the marginally profitable arena.
And health care costs are coming, along with possibly Cap and Trade, and maybe even a VAT tax?
Profits. If there are none, or there is the possibility of less profit in the near future, what would you expect to be the behavior of businesses?
Maybe what we are seeing all around us?
QE2 will arrive,Gold shoots in price,ultimately make sure you have a large well oiled wheelbarrow to put your shopping money in when buying your weekly shop.
The well oiled credit/debit card makes the wheelbarrow outdated - the one advantage of an electronic currency. When food gets too expensive in the future, everyone can just be credited a weekly food allowance to their bank accounts. I believe that Ohio already has its food stamp program set up similar to a gift card, no more actual stamps or tokens... or trading them for booze.
"The Doelarr is a faith based currentsea of no intrinsic value, that is manipulated by the Fed..."
She seemed surprised....
She can have drinks with me anytime, I will explain it all to her.
:)
They can increase asset prices but who cares if no one is in a position to buy? Sure some people still have income and some will actually but things, but it doesn't make for expansion and without expansion, the economy is doomed.
If you bulls out there really want this economy to take off, you'd better buy some 'Bear Spray' because the bears are coming for you!
Watch it Stun Gun ... I say no to Bear Spray!!!
Printing money discourages the desire to create wealth, the same way bailouts discourages the desire to be prudent.
They are beginning to look/sound desperate. Markets don't like that.
Does this mean Barry and Joe should double up appearances in their summer recovery tour ?? Maybe they ain't talking enough sugar.
The best cogent, concise, explanation of our debt based monetary system is found here-
http://www.csper.org/ Click on Renaissance 2.0 for a series of short segments of YouTube format and you'll agree from Damon Vrabel the structure is enslavement from the top down. Government is only a cog for the hidden structure to operate. No conspiracy theories, only factual information. I think you'll rather enjoy the lessons. Actually, I would challenge our regular commenters to find any discrepancy with the presentation.
With all due respect for AEP, AJC, JG, TD, WEB, ZH and all the other inflationistas replaying the last four generations' game plan,
the ultimate market prognostication fade trade may be Casey Jones Caboose Jim Cramer, always on a hunt for a bull market and now buying laggards after the April 26 lower equity top of the market, and all the Bulls at CNBC, Fast Money and II 20% Bulls Poll notwithstanding.
http://www.newsonnews.net/cnbc/3741-concern-about-cnbc-s-fast-money-rati...
Sometimes Institutional Investors are right.
Has anyone looked at the results of QEI lately with growing unemployment, foreclosures a contracting monetary multiplier less than unity - recently 86.2%?
http://research.stlouisfed.org/fred2/series/MULT
Wait until selling those $2 Trillion of upside down Fed T Bonds and upside down Mortgages raises interest rates and sucks another 90% of liquidity out of the economy.
The US Dollar could go above 115 as China, Europe and Japan export austerity.
http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=BASE&s[1][transformation]=pc1
Uncle Miltie despaired of the Fed every getting it right, even at his 90th Birthday Party when BSB promiswed they would.
His answer was to get rid of the usurious Fed that was never in the Constitution.
Might as well get replace the IRS with the uniform APTT to return to the prosperity platform of our founding fathers...
http://www.apttax.com/execsummary.php
Until this happens, look out below...
@ATG "Has anyone looked at the results of QEI lately ...?"
Sshhh... This is a place for talking up your gold position.
You should know better.
Gold may be headed to 1110...
Yo Tyler;
India: Pakistan spy agency executed Mumbai attacks(AP) – 9 hours ago
NEW DELHI — India has accused Pakistan's powerful spy agency of planning and executing the 2008 Mumbai attacks, in the strongest and most specific allegation of Islamabad's involvement in the assault from a top official.
http://www.google.com/hostednews/ap/article/ALeqM5i_THH84S9bUIhGGUr1Hqcm...
that's not good. india goes after pakistan. israel hits iran. north korea lobs a few over to south korea. why not? totally plausible... since it's man at his finest. butchering other people. that's all we do. if we are not chasing money or leg, we are slaughtering human beings at an alarming rate. this world is way over due for judgement. i say if man is so hell bent on killing one another... bring on the mushroom clouds.
Most here would gladly chase the legs of arnoldsimage.
"I think that Janet Yellen is a well credentialed, consensus-hugging economist straight out of the Fed HR department."
HR. That's brutal.
QE2 before midterms, only if huge crisis.
How will the FED justify buying more assets when they do not have a viable exit plan to sell MBS. The trails were a complete disaster. I believe the last reverse repo was done with Treasury bills just to attract participants into the test.
What assets will the FED buy?
Will the FED buy debt only?
The FED lives by the principle of the Plausibility of Purpose, what large monetary action can it justify that will properly influence the economy, or at least give the apperance that it might?
If the FED buys, lets say $2T in Treasuries to load the pipeline, it will kill confidence in the USD. 10Y rates will hit 5.2%, this is game over for the churn. It will be an open acknowledgement of the intent to continually monetize debt. The total abandonment of the USD.
----------
Unfortunaltely for the FED, the economic ball is in the Administration's court. Obama must act with another huge stimulus program to allow the FED to enact some plausible purchase plan to somehow effect rates. This is politically impossible before the midterms.
So I ask you ZH commentor's, what form will QE2 take, and if action is taken on their own, how will this be justified to congress, or the administration before midterms?
Mark Beck
Its to early to implement QE2 right now. The next FOMC meeting is in August, Spoos have to break 1000 for the FED to act and with oil closer to 80 than 70 and Gold only 40 bucks off its highs they have to let the deflation show itself to not have what is percieved to be any crediblity compromised. A late August QE2 should spike assets into the fall for Bam Bam buddies to have a prayer at the polls in November.
They could talk about it in August and make it their October surprise.
"He is a formidable academic. She is a formidable regulator. However, neither is a formidable thinker about the nature of money"...........
Still laughing at that one.
Jim Grant competes with Hugh Hendry for a sizeable share of my manlove...
I wonder if the banks are all using fraudulent accounting? [/sarcasm]
Direct correlation between QE and Grants Pub. subscriptiions, of course he sees it on the Horizon.. or it may just be a mirage.
In my practical small part of the planet I usually look at past results
for some guidance and in QE case a dismal fail.
To dedicate ones entire career to the Fed and its daily workings does seem to be an exercise in futility. Then you have to go out on tour promoting them..poor fellow.
TSLA heading back to $30. Innovative technology and genius CEO should be invested in when it happens. This is one of those times. By the time everyone else figures out what is in the cars and who's in charge of the company, stock will be in the $40's and zero hedge people will say it's overvalued and you can't go around the block without plugging it in etc.
Spending time focusing on long run expectations for a ultra new technology is like controlling chaos. Traders are buying TSLA and will make out very well. Long run investing is an illusion.
P.S. I was the one of maybe two around $17 on that post about the IPO being a failure that said it will be higher 1 year from now. So far up 14%.
I wait for the one Grants Headline with anticipation... FED ABOLISHED!
If somebody would kindly draw a chart from me, because I haven't any illustration programmes. Now, this is all theoretical-like.
Most charts plot points on the basis of x- and y- axis, where zero is the ultimate boundary. Now imagine a chart with the y-axis the zero bound of the discount rate, which follows from left to right horizontally in increasing numbers along the x-axis. You have the x-axis as the zero bound of the Net Present Value of companies along the vertical from zero to ever bigger numbers.
The NPV of companies along these axes looks like a line with a high point at the y-axis, with a slowly declining line along the x-axis as we move from left to right. As an actual matter of fact, the Net Present Value of companies can actually go into the negative as the discount rate goes increases along the x-axis, and many companies operate in this grey area using derivatives. But we are far from that point, the discount rate is close to the zero bound, the y-axis.
Now, for any company operating close to the zero bound of the discount rate, their Net Present Value as companies must be very robust, since the cost of borrowing for their operations is very near zero. But go below zero on the discount rate, and something very strange happens. The currency in which you value everything declines. Or your Net Present Value can no longer keep up in the negative discount rate space, as there are many complications with no available borrowing, even at the discount window, or your currency readjusts wildly.
Now, enter gold mining companies. Their Net Present Value is the same as all other companies, dependant on a gold price remaining robust so as to remain profitable. But, truth be known, after the gold price collapsed,(in 1980) many gold companies were well into negative profitability, way, way out on the right hand extreme of the discount rate, relying on hedges for many years to remain profitable.
This was because the discount rate was so high at the time. Indeed, with the banking collapse in 2008 following the oil price market-corner collapse, many types of derivatives contracts wound up on the Fed books, not just mortgages. This is because the discount rate declined precipitously, and were actually dependent on steady or rising interest rates. There is no case whatsoever since 1980 for rising interest rates. There will be no case for rising interest rates for the forseeable future.
Most companies operating in a negative discount rate environment will not gain in Net Present Value, because the assets and products they value things in are declining in currency value. Or, that pricing comes with great difficulty, because you have to raise the price of what you produce so much that you go right out of business. Or your dividend yields will decline, no longer able to keep up. So if you are mining copper, and copper declines along with the value of your currency, that copper mine becomes a liability unless you can hedge forward for many years.
Enter the gold mining companies again. Their asset, which is mostly the gold contained in their mine, actually appreciates the Net Asset Value(the gold in the ground) of the company, and thus also increases on an exponential scale their Net Present Value(the ability of the company project to produce a steady stream of gold) in the negative discount rate space. This is because the gold price increases greatly at the zero bound of the discount rate, more so than any other kind of company.
So giving a gold company dollar terms for NPV is fallacious, without taking into account the rise in net asset value and the rise in the gold price vs. the decline in the currency.
Now, in the negative discount rate space, the discount rate need not go very far into the negative for all values to be upturned, since bullion lease rates go positive, or above the discount rate. The Net Present Value of gold companies have a logarithmic rise in the negative discount rate space, since their asset that is produced priced in the declining currency, rises or at least keeps pace. Just look at gold priced in Yen. Even though the Yen has appreciated for many years, the gold price has kept pace quite well against that currency.
QE2 means central banks will spend any amount of money to lease gold back to themselves in order to keep the bullion lease rate negative. Or, since the money is collapsing against the gold price, they will simply not have enough money to keep bullion from adjusting to inflationary money supply. This is because along with gold hedges, all kinds of derivatives based on rising interest rates and declining gold prices have been taken on by central banks. Thus gold will be priced out of the market for most people.
That means any further declines in the discount rate could revalue gold companies much higher, since their primary metal being produced does not decline in price.
Wheres the total panic for another bailout? I dont see it! Wheres the justification! 'MARKETS GREAT LOOK AT IT RALLY DAILY'! There wont be another round of printfest mania unless they slam the markets WAY the hell down. If they tried to print $5 trillion with the DOW at 10,000 theres going to be a bloodbath in the streets!
I like Zerohedge and all, but I swear these economics only people around here have myopia like a motherfuker! Math and stats geniuses without a bit of damn common sense!
Well while the rest of the world is preoccupied with deflation & economic analysis Harry Reid is preparing Stealth Delivery of Cap & Trade as part of the Climate Change Bill - neat little fact - FNMA OWNS the patent for the residential carbon trading platform & Exchange - in this way Homeland Security can burn down all of the excess abandon homes & rally the carbon emissions market at the same time - the housing market turns around, construction employment increases, bank balance sheets are stabilized & Tim & Ben can stroll into the sunset hand in hand - beautiful I tell you, simply beautiful...
http://www.politicsdaily.com/2010/07/13/cap-and-trade-will-be-part-of-senate-climate-change-bill/
Fed should have had the Census workers hand everyone 1k in Cash.
Direct infusion of QE ? Their problem is the Banks won't let go of it, my method it gets right to the source .
Ben we had visions of crisp bills from the helo.. this economy is cash starved.. send help. lol.
+100 - NOTE: Census workers will also hand out donation request for Organizing for America, a copy of Hank 'I let Lehman fail because I owned $600 million dollars worth of Goldman Sachs stock' Paulson's book on how he single handedly saved the US economy by handing out $700 billion, an autography picture of Blago, & some old Jimmy Carter era 'WIN - Whip Inflation Now' buttons
I like your post but WIN buttons came out under Ford. Don't give credit to Carter for anything... his administration's policy was: "Let's do nothing and hope no one notices."
+1 - Game, Set, Match - Thank you for the correction & amazingly you were able to capture the essence of his Carter's presidency in 8 words....Dadburnitpa very impressive - Jimmy Carter, well, not so much!
Except for the only peace treaty any American president has ever brokered between an Arab country (that's Egypt, with the Suez Canal) and Israel that is in force today. Except for that. Teevee "historians like to leave out that one.
The economy was a great concern during the Ford administration. In response to rising inflation, Ford went before the American public in October 1974 and asked them to "Whip Inflation Now." As part of this program, he urged people to wear "WIN" buttons.[69] In hindsight, this was viewed as simply a public relations gimmick without offering any effective means of solving the underlying problems.[70] At the time, inflation was approximately seven percent.[71]
http://en.wikipedia.org/wiki/Gerald_Ford
My understanding is that O'bama wanted to give the Census workers minature seagulls made of spun glass to hand out to placate the people. They kept on asking for the return of glass seagulls.
BTW the FOMC conclusion this afternoon was no need for any further intervention, so who cares what this 1 guy says, FED just said otherwise! Id say before any further Q/E we'll be mired in an all out world war anyway so really its a non issue. The war coming will make WW2 look like a small skirmish.
not paying is default. inflating is default. either way, default is coming
+1 - Excellent point - Default is a very harsh term - Couldn't we use the phrase 'Deferred Non-Payment' - Sounds more like a Walmart Layaway plan & will not rile the Sheeple - they need their rest for rioting...
I saw Paulsons book at Borders wanted to throw up on it.
You & your time are far too valuable to waste on Uncle Hank, VC - BTW your picture/icon is awesome - VC-->Virgil Caine -->Very Creative. And the laugh is greatly appreciated.
QE2 why not?, Then we can make room for QE3 and QE4 and infinium.
Anyone hear Obamey call Al Qaeda "racists" becuase they detonated a bomb in Africa (Uganda to be precise).
Name calling has to stop, pleeeezze.
How can I short humans? Is there a stock symbol?
DWARF-foreign
How can I go short humans? Is there a symbol for the contracts?
So much RAGE and hot temper.
Can't remember the last time historically when citizens were so pissed at their "elected" officials and the system they represent.
The debate can go on forever .. but this is pretty much the beginning of the end:
Billions in bonuses for a few, millions of people without a paycheque and no prospect of getting one soon. Instead more men and women joining the ranks of the unemployed or underemployed.
It's going to become a powder keg and it doesn't take a well educated economist to figure out what the outcome will be .. QE or no QE.
People without income are going to do what it takes to feed their families and themselves.
Show them where the money went, show them how a few made rich when their world is starving or close to it.
Give them a leader to address their pains and their anger and none of the existing federal authorities will stop them from going all the way.
It's inevitable.
It must be hard to give a erudite and coherent analysis about monetary policey when that Vixen Margaret Brennan is seated in front of you.
Personally my analysis would go all to pieces when/if Maggie started to cross and uncross her legs.
I think we should all applaud Jim's control and discipline over his smaller brain.
He was very good!
He was good back in the day of Wall Street Week with LR.
QEII is going to happe, as Grant points out it is the only bullet they have left, but they'll wait for another stock market collapse, or engineer one, before they'll start the presses back up.
The presses never stopped!
QE2 means double shift for the press folk.
BUT! It will bring more billions in bonuses for a few all the while millions of people are without income! Not now, not tomorrow and not next few years.
Can that truly exist in a modern so called democratic nation?
It's a toxic combo that will blow everything to bits and pieces.
Sure, keep arguing about the effects of QE2 or not.
The real class war is already happening and the ranks are growing.
these two need a prenuptial. too bad the children are already in school. call it the ballad of Levi and Bristol , sung to the ballad of John and Yoko.
I can't see how they fire off QE2.0. They're already into QESP1 with PD's monetizing Lootery debt, and the Feral Gov't is as debt soaked as it can get, so who is it, en masse, with the debt carrying capacity to inflate another bubble? Because that's what all the talk of QE and QE2.0 is, blowing another bubble.
But the last two mega bubbles rested on the savings of the middle class. They were essentialy tricked for 10 years into eating their savings AND seed corn. Now the cupboards are bare, and the Baby Bumblers are broke and running out of daylight. And their kids are moving home with the college debt lashed to their necks like rotting albatroses. And the Xers are saying WTF!
The only way I see it is a Zimbabwe like flood, but the system is designed to make that nigh impossible.
--Shrug--
Yes, Gentlemen, very nice theories you have, but not one of you have mentioned Margaret's cleavage. If you can't fess up to what your animal spirits were obviously thinking, how can we trust your macro or micro theories?