QE2... why and what if it fails?

[scose-no-doubt]

Go on then clever cloggses

 

[robster970]

Because Ben 'Zimbabwe' Bernanke believes Milton Friedman's assertion that the 1929 depression could have been avoided had there been an increase in money supply. So Ben is lilving out his PhD thesis for real via QE1,2.....N

It will fail because either (a) inflation will devalue assets in real terms or (b) the money will not make its way into the real economy and deflation will occur.

 

[scose-no-doubt]

My point was why embark on QE2 when QE1 has proven to have little or no effect in the real economy i.e outside markets :S
I just don't see what it's meant to accomplish this time around.

Is he just trying to depress risk free rates further?

 

[robster970]

Because ultimately he believes that money supply is the answer to the problem

 

[Martinghoul]

Well, firstly, we don't know how things would have looked without QE1, so to say QE1 was ineffective is a bit misguided. Secondly, the point is that the US eco is in deep doodoo and the Fed perceive themselves as the only entity capable of doing smth about it. To be fair, there's quite a few people on the FOMC that believe that QE2 will accomplish nothing, but the majority view it as a risk management exercise. Better to try doing it with a remote possibility of it working than sit idle and watch it all go down. I am not suggesting I agree with this view, but I believe that's how they see it.

 

[meanreversion]

We need politicians to come up with radical solutions, and QE is not one of them. The new money is simply not going where it should. Banks sell their government bonds to the central bank and then deposit the funds back with the central bank, in the form of increased reserves.

There's going to be more QE from the US. Western currencies and living standards need to decline, whilst those in the East need to rise. We are overpaid and lazy and ultimately this will be reflected in our standard of living.

Or maybe the US defaults and/or starts a war.

 

[gooseman]

need fiscal reforms now. this is no longer a monetary policy exercise. liquidity trap.

 

[scose-no-doubt]

Aren't we undergoing fiscal reform in UK or do you think that Dave isn't cracking' the whip hard enough?

 

[robster970]

We need politicians to come up with radical solutions.

People get what they vote for and idiots vote idiots in. Adults behave like children now, expecting other people to take their problems away from them. It's the blight of 21st century western culture. Fat, lazy, stupid and unwilling to take responsibility for their own actions on any level.

The problems lie with the people - the politicians are merely an elected representation of them.

 

[meanreversion]

Aren't we undergoing fiscal reform in UK or do you think that Dave isn't cracking' the whip hard enough?

It's worth looking at the numbers. This year, government spend is £690bn. This is due to rise to £740bn by 2014. Yup, we are going to experience +£50bn of "cuts".

In real terms, spending is coming down.. however, by 2014, spending in real terms will be equal to that of 2005, when Labour spent like crazy in an election year.

These so-called "cuts" are modest attempts at window dressing. Note that the aim is to reduce the DEFICIT, not the actual DEBT. Politicians have more or less officially given up on ever having a hope of paying down debt.

The US is not even talking about fiscal consolidation, they're just gonna keep spending. There will come a rupture at some point, possibly inflation or possibly another economic collapse. The main effect of QE so far, that I can see, is that all commodity prices have gone up. Effectively we are becoming poorer, but that is what needs to happen for us to compete with the rest of the world.

 

[robster970]

They are going to rely on inflation to devalue the debt in real terms. That's where this is going. Absolute removal of debt has not been on the cards since they realised that the current economic system would collapse because of collosal scope of mispriced assets and the associated securitisation of debt against it.

 

[scose-no-doubt]

690 @ 2010 = 746 in 2014 @ boe target inflation rate

Note that the aim is to reduce the DEFICIT, not the actual DEBT. Politicians have more or less officially given up on ever having a hope of paying down debt.

One step at a time though innit mate. Country would implode if they stopped spending to pay down the debt.
Can old govt debt not somehow be refinanced or rolled over at the present low interest rates?

 

[meanreversion]

690 @ 2010 = 746 in 2014 @ boe target inflation rate

Note that the aim is to reduce the DEFICIT, not the actual DEBT. Politicians have more or less officially given up on ever having a hope of paying down debt.

One step at a time though innit mate. Country would implode if they stopped spending to pay down the debt.
Can old govt debt not somehow be refinanced or rolled over at the present low interest rates?

My point was that by 2014, after all these "draconian" cuts from the "axe-man" Osborne, spending in real terms will be equal to 2005, when Gordon Brown was giving money away like confetti.

Once you give the public sector more money, that then becomes the base of their expectations.

I'm frankly sick of the public sector. I know a lot of them don't earn a whole lot, but they were completely immunised from the credit crunch - employment actually continued to rise whilst private sector was shrinking. They are not prepared to accept a wage freeze, let alone a wage cut or redundancy. And then the fkcers have the nerve to go on strike. I don't think they realise how little support they have.. I live in London and these repeated tube strikes are a farce, it simply should not be allowed to happen.

 

[Black Swan]

Because Ben 'Zimbabwe' Bernanke believes Milton Friedman's assertion that the 1929 depression could have been avoided had there been an increase in money supply. So Ben is lilving out his PhD thesis for real via QE1,2.....N

It will fail because either (a) inflation will devalue assets in real terms or (b) the money will not make its way into the real economy and deflation will occur.

Milton Friedman is a right cracked arl cnut...and Q.E. is a euphemism for bank bail out now they've run out of *clever* things to call it such as tarp 1 and 2...

No surprise that BoA has had huge losses, and Fannie and Freddie likewise, so they'll be back up to the begging bowl to shore up their balance sheets. None of that $600bl will find its way onto main street, unless they count slightly less repossessions as "doing good" on main street ..

The US needs to go and spunk some cash on invading a new country and steal their mineral wealth, (after they've taken £100bl off them for arms which they wouldn't need if the US didn't threaten everyone, everywhere, constantly)..I hope they try China for size, or Russia..

Currency wars? Yeah right...the real war is in America by it's people once they wake up from the American dream, what did George Carlin used to say?

They call it the American Dream because you'd have to be asleep to believe it..

 

[Black Swan]

My point was that by 2014, after all these "draconian" cuts from the "axe-man" Osborne, spending in real terms will be equal to 2005, when Gordon Brown was giving money away like confetti.

Once you give the public sector more money, that then becomes the base of their expectations.

I'm frankly sick of the public sector. I know a lot of them don't earn a whole lot, but they were completely immunised from the credit crunch - employment actually continued to rise whilst private sector was shrinking. They are not prepared to accept a wage freeze, let alone a wage cut or redundancy. And then the fkcers have the nerve to go on strike. I don't think they realise how little support they have.. I live in London and these repeated tube strikes are a farce, it simply should not be allowed to happen.

Oh really? I thought you just bought the Daily Hate to look at Kelly Brook, or whatever the fook she's called...

 

[meanreversion]

It's worth noting that in the UK, 30% of government debt issuance is index linked, which makes inflating away obligations more difficult. I'd be interested to know what the comparable statistic is in the US.

 

[meanreversion]

Oh really? I thought you just bought the Daily Hate to look at Kelly Brook, or whatever the fook she's called...

She's in it today, but looking a little old, if truth be told.

The Daily Mail is worth its weight in gold for all the asinine comments. There was even reference to a "pedal stool" the other day.. the illiteracy of some of the readers is staggering, and dare I say it, a sad indictment on the state of education in the UK.

 

[wackypete2]

How about just stop taxing the **** out of us and maybe we will have some money to spend. A concept that's way over the head of many edumakated politicians.

Peter

 

[Black Swan]

Effectively we are becoming poorer, but that is what needs to happen for us to compete with the rest of the world.

What like Aus, NZ, Sweden are suddenly poor? Fook America should be our attitude, but when you've got a Bilderberger as chancellor whose best mate is Nat Rothschild you realise that this idelogical vandalism has nothing to do with the electorate, who btw didn't give the current Condem fooktards any mandate to unleash their madness.

Democracy is over anyhow, even with the vote on student fees Clegg and Cameron are busily looking for ways to bypass parliament on the decision so no Lib dissenters can have a voice or be seen to break rank..That's not a ballot box we have, it's a canteen suggestion box for debt slaves...

 

[robster970]

It's worth noting that in the UK, 30% of government debt issuance is index linked, which makes inflating away obligations more difficult. I'd be interested to know what the comparable statistic is in the US.

That's interesting - where did you find that info MR?