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Quantitative Easing is to Inflation as Non-Consensual Sexual Intercourse is to Rape! Either way you're getting fucked.

https://twitter.com/CoinMobs/statuses/471474742898094080 (https://twitter.com/CoinMobs/statuses/471474742898094080)

http://www.dcclothesline.com/wp-content/uploads/2014/05/federal-reserve-printing-money.jpg

The printing money post is getting old.

Just about everyone not living in cave already know it.

then i suppose that means that 299 Million Americans are living in caves!

I want it shouted from the heavens. These bastards are stealing a generation of wealth. One of the biggest crimes in human history.

You really think American are stupid?

Because other countries aren't doing the same?  ::)

QE save not only the American economy, but probably also the world economy. Without it, probably the euro would have ended.
And since didn't provoke inflation, all considerations about its negative consequences didn't materialize (at least, yet).

So you are okay with bureaucrats  devaluing your money? QE steals purchasing power from people and lowers their standard of living. The Euro should have ended before it started. If it needs QE to prop it up it is a fundamentally flawed currency that is destined to fail. 

I would agree that QE can create problems, if done to solve budget deficits, as in many countries. But it was used as part of monetary policy to take the economy out of recession and it was partly successful. Besides, since it didn't create inflation, there was no devaluation of the money.

The euro is still a currency with an uncertain future, but if one day it ends, it will be an economic tragedy to the world, not only to Europe.

Unless you believe that inflation is the increase in the money supply. In that case, it absolutely is causing inflation because it IS inflation. The fact that you have not seen prices rise just means they haven't risen enough to get your attention. But they WILL rise.  It is inevitable.

THAT is what is so insidious about the theft of purchasing power through inflation.  Even when people recognize it, they don't ascribe it to the government's monetary policy.

The stock market turn around and increase was greatly caused by inflating the money supply. If your 401K is doing well, it's NOT REAL. When the fed stops making money, there WILL be a correction. It will come with the market falling or prices rising. Either way, we all loose.

I'm putting as much spare money as I can into crypto, mostly bitcoin. It is fast becoming a store of value better than gold.

I also want to point out that in the US, if you actually pay attention you'll see the price effects. Take the items you buy on a regular basis, foods and non-foods, and create a spreadsheet of their cost. Every couple weeks update that with the latest costs and you'll start to see differences.

On what metric has the US economy been saved?

QE is just a wealth transfer with an innocuous sounding name.

It is a way to cover the trillions in losses hidden on banking balance sheets.

It is a way to take money from responsible savers and pass it to an irresponsible upper class

It is a way to reinflate 'feel good' stock and RE bubbles so the middle classes don't revolt.

It is a way for banks to use free money to increase their risk taking and leverage, safe in the knowledge that not one person has gone to jail for their role in the great recession (despite the billions in fines and obvious criminal acts that stole from regular people the world over).

When the Justice Dept admits it would rather settle for fines than go for a prosecution you realise its turning into soft fascism, and that is a horrible thing to write.

Need to be careful to balance the trade off between long term and short term.

Pushing the problems down the road is not an ideal solution.

When dollar goes away, there will be another phoenix rise from the ashes.

Not ideal but what choice did we have?  Let the Great Depression 2 happen?

Great depression 1 or 2 would not be an issue with sound currency. The currency is the problem and propping it up only kicks the can down the road. It is a predatory system. If it gives us sound currency I would be more than willing to suffer through another depression.

the only thing holding up the massive printing is the oil around the world using usdollar and the countries using usdollar as their currency
once that support goes away you will see hyper inflation

Inflation is sustained and general rise of prices, not an increase of the monetary mass. There was no inflation. If you want to put in question the official numbers on inflation on a scale that show there was big inflation you will have the burden of showing evidence.

Anyway, since the banking money, created thanks to fractional lending, was limited because of the credit crunch, probably the global monetary mass didn't increase. If there was an increase there would be big inflation.

It's so easy to criticize someone that saved us from a very serious depression, claiming that there wouldn't be any depression, yada, yada; they did the same against Roosevelt's New Deal in the thirties.

i think everything in this post is categorically wrong.

Without justification or evidence, anyone can write all the opinions he has and it will be hard to prove him wrong.

The most insidious part of all this is that in 1913 when the federal reserve started printing federal reserve notes in exchange for government bonds they simultaneously passed legislation outlawing the use and ownership of gold bullion as legal tender to settle debts, public and private. Americans were required by law to hand over their gold, effectively eliminating all existing stores of value.

And since the FRN's were loaned at interest to the US goverment (vis a vi the people) the federal reserve bank created a permanent debt that could never be paid back.

Increasing the amount of currency in circulation IS IN FACT INFLATION. The subsequent rises in prices of things is simply the visible effect.

The only way the US has been able to sustain this practice has been by forcing the rest of the world to use the USD/FRN as the worlds reserve currency and this has only been accomplished by force and by threat of force. Saddam Hussein was killed because he attempted to sell his oil for Euros rather than for USD's. Thats just one example. There are dozens and dozens.

Now we have the Russians and Chinese trading natural gas in their own currencies rather than USD/FRNs and that cuts at the purchasing power of the USD and the US Government's ability to borrow from other countries which we have been doing at the rate of something like $50B a day.

So enter Quantitative Easing... which is the back up plan for inflation. the FAIL OVER. that which they do when the regular inflation stops working. a rose by any other name... still smells like shit.  

That is your notion of inflation, not the one you will read in most textbooks on economics.

um.. thats not a notion.. that is what inflation is.


I think that's pretty clear and about as textbook as it gets.

And as facts have already been established Quantitative Easing is the backup plan (Inflation++) when the regular inflation rate isn't producing the desired results.

Inflation and Quantitative Easing are ROOTED in increasing the mass of currency.

I think we can agree at least on the fact that inflation is the actual increase in prices in life, not the conceptual description of it. That is a notion, a concept, a linguistic description.

The notion you pasted is the consensual notion I was talking about.

You saying that inflation is rooted on the increase of the monetary mass is different than saying that inflation is the increase of the monetary mass. On your opinion, one is the cause, the other the effect. But cause and effect are different things.

There are theoretic disputes about inflation being the sole effect of an increase of money in circulation. The first is the question of velocity of money in circulation. The same money can be used to buy more things in a certain period, then the same monetary masse can cause inflation in certain circumstances, but not in others.

But that wasn't my point. My point was, there was no inflation, therefore Quantitative Easing was good, not bad.

Don't be selective about history.  The reason the Fed was created after of the Banking Panic of 1907.  At that time US bankers saw that other European countries had Centrals Banks and more stable economies.  The Fed was created to be "lender of last resort"

The gold nationalization didn't happen til FDR 1933.  The rationale for that is because people were hoarding gold and making the depression worse. 

not only does the printing steals purchasing power from everyone holding fiat it also distorts the whole chain of production of goods and services because it distorts the price signal of everything.

prices exist to provide information about the supply and demand of things.
if something is expensive that means the demand for it is high relative to supply, it encourages the manufacturing of the things that people want but there isn't enough of.
if something is cheap that means the supply is high relative to demand, it encourages manufacturers to switch to something else and not waste raw material producing things we have too much of.

what the governments are doing by printing money is artificially changing the price signals so that producers can't know what consumers want produced.
this is why communism failed, because the state can not know what people want relative to how much of it is produced and so the central planner always fails due to lack of information.
this is why the global economy will also fail if honest unprintable money like bitcoin is not adopted.

I don't have a clue how the global economy survived all this years, after the golden standard and before bitcoin. It has to be a miracle how it grew so much during all this period and why it is still standing on our days.

I'm pretty sure you're intent on trying to be an asshat.

Clearly the "global economy" isnt working ! Its being artificially propped up and the labor of the people is being subjagated to economic slavery.

Cyprus. Greece. Argentina. And those are just in this last year alone.

How about the "banking" crisis in 2008 ? Fine example of curruption.

If you feel the current economic situation in the world is just great then why are you here? Just to troll and try to confuse people who know better?

Send me your bitcoin and I will laugh and point at how in love you are with your quantitative easing.

I mean REALLY.

watch this video - I work with this guy - he's an author too of a best selling book on Amazon.

www.jackassinvesting.com

here's the video

http://www.bloomberg.com/video/quantitative-easing-is-a-ponzi-scheme-dever-qm3k_g8xRbyhUGGvYgxIjA.html

This guy is not using the term  "Ponzi scheme" correctly.  As a hegde fund he should know better.  Just sounded to me was bitter not foreseeing the bull rally in equities

The reason Bernanke had to resort to QE because the banks had too many MBS's on their balance sheet.  As a central banker, Bernanke options were to do nothing and deal w liquidity trap or try something aggressive like QE.  I'm sure he studied post bubble Japan and he wanted to avoid the same situation

In the eurozone the ECB (Draghi) resorted to QE after they learned that austerity policies  caused more harm than helped.

QE isn't the end-all solution but it had to be done so it was done.  I'm sure Bernanke was aware of the risks of QE.  The Fed kept telegraphing the plan to taper, but the greedy market kept buying

Omg you're such an ass...lol


I'll look for your interview on bloomberg tv where you rebut

Why does it matter whether I'm on Bloomberg or not?  Ponzi schemes have nothing to do w QE, unless you think the Fed is trying to get investors to buy equities so they can run away w the money.  LOL wut? 

The guy is a contrarian investor.  He was probably too early on his short.  Happens to me too. 

I happen to also be a contrarian investor so I know the feeling

Quantitative Easing was never the solution to the financial problems
What was needed is real growth in industry and developments in agriculture
Printing more money does not have any real value unless it builds the economy around it as well
And bailouts are rarely the proper way to address these problems
Some exceptions do occur now and then but they should not be a stop-gap measure to the next crisis but an emergency point from which a reanalysis of the problem and solutions to it are developed and established to avoid a repetition.

Let all the current banks go bust and creating a new bank would have been cheaper.

Of course it is grow that an economy needs in a recession. But how is it possible to get grow in the middle of a banking crisis, a crunch of credit and a negative grow of the monetary mass? QE can't be an easy panacea, but on an emergency and with inflation controlled...

instead of responding like an exposed nerve you really need to think about what he said because it's a brilliant observation.

Its only brilliant to you because you don't know about economics.  I never even said I disagreed w what he said.  I only said he used the term "Ponzi scheme" incorrectly

Then I explained why Bernanke probably had no choice but to do QE.  Go back and read my posts

no ...he used the term Ponzi scheme very correctly - I disagree with you vehemently.

If someone's actually interested in learning about QE and money creation in the modern banking system, here's an excellent read:
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

Here are some empirical analysis of Quantitative Easing in Japan

http://wwwdev.nber.org//papers/w15565

http://econpapers.repec.org/article/imeimemes/v_3a25_3ay_3a2007_3ai_3a1_3ap_3a1-48.htm

http://www.federalreserve.gov/PubS/ifdp/2011/1018/ifdp1018.pdf

http://www.esri.go.jp/en/workshop/060914/mihira03_a.pdf

Some of these are very hard to understand if you don't have background in economics

Yes, it truly is amazing how ungrateful some of the people around here can be after they've been thrown a lifeline.

That lifeline comes with a long term cost in exchange for addressing the needs of the present
In other words money controls possibilities with the future held as collateral.
The goal of financial stability is to not sacrifice and throw away that future but to fix and solve the problems that need to be addressed today.

QE is likely the cause of at least the initial runup in the price of BTC.

The initial runup in the price of BTC likely caused media hype that caused other people to see what an awesome idea that BTC is, causing even more increases in price.

if by runup in btc price you really mean the lowered buying power of the USD which "appears" to make the BTC price higher then you are probably right.

a declining dollar = increasing BTC price.

maybe one day we will collectively stop referring to btcs value in dollars and rather refer to the dollars value in BTC.

as of this writing;

$1.00 is worth a measly  0.0016 BTC

There was indeed a run up on bitcoin price. The increase in its price wasn't only (or even mostly) because of a depreciation of the value of the dollar.

That depreciation would have to be confirmed not only against bitcoin but in front of any other currency or good.

I try to think of it that way all ready. That doesn't stop me from near constant price checking though.  ;D

That but QE also attempts to get people to take greater risks with their money then they normally would. Both in time to maturity as well as risk of principle investment. For example if someone were to (prior to QE) invest in a 6 month CD then (during QE) they would invest in a 12 month CD, or maybe a 12 month investment grade corporate bond. The people who would normally invest in a 12 month investment grade corporate bond would invest in something that carries more risk and more time to maturity. This extends all the way out of the risk spectrum until you reach alternate investments (where Bitcoin lies).

The 30 plus percent return that the stock market had last year was not the result of strong economic policy, nor strong economic performance, it was investors taking on more risk.

Then you add too "big to fail" to the mix and with no apparent risk people get stupid. Poor choices are very easy when someone else protects you from the consequences.

Well on a currency v currency basis it is pretty easy to see. The large majority of currencies around the world have been depreciated by their govts / central banks since 08.

Its a beggar thy neighbor situation. In order for your exports to remain competitive against the depreciating USD, you need to lower the value of your currency equally.

So, when the USD depreciates, so does China due to its peg to the USD. Japan then also has to depreciate so their markets remain competitive (and they also are desperate for inflation). Because Japan devalues, then Korea has to as they compete with Japan and China in the electronics market. This is what is known as a currency war.

Since there was no major inflation, on the contrary, in certain countries we saw limited cases of deflation, there was no clear loss of purchasing power in front of goods. Some went up until 2008-2009, like oil and other commodities, but many returned to their usual prices.

yes, some currencies ended up at higher value (the CNY, the real, AUD, etc.), but on the major ones there wasn't big changes.

There has been no major inflation as yet, that is correct. Although, it usually lags and sneaks up on you.

CNY and AUD both rose as they didn't play ball with devaluing. Australia due to mining exports and lowering from a substantially higher base. Both countries have ridden out the crisis on the back of China. Australian retail is awful as is manufacturing, it is mining keeping it together but even that is slowing now. Both countries have also seen a massive increase in RE prices.

The Reais on the other hand had a period of devaluation when Brazil imposed tariffs, briefly, in 2010 or 2011. Inflation rose and they soon fell in line with the rest of the world. Montego, I believe, announced a currency war on the back of this.

In the major economies if you look at stock prices, they have mostly doubled from lows. RE is also heading back up. That is inflation of assets as a result of speculation encouraged by negative interest rate returns.

Another point is that it has been mentioned that inflation in food prices was a factor in the Arab Spring. In Tunisia, it was a protest against this that kicked the whole thing off...

But the reasons there has been no inflation, briefly, to my understanding, are such

- deflation and inflation are battling it out. Increased QE is designed in part to keep the deflation at bay. The deflation wants to happen (market forces) as the system is riddled with bucketloads of toxic debt. If QE stops, what happens?

- there has been inflation countries that buck the devaluating trend, see Brazil in 2011 when they imposed tariffs and announced a currency war was in progress.

- no recognised inflation in US as the US exports its inflation to emerging markets. The inflation in the US occurs when US dollars return home. One example being if CHina begins buying up large parts of US land/infrastructure etc. Other eg's are a loss of confidence in the USD or someone dumping USD.

I'd like to reiterate that I havent studied economics. This is simply my understanding from my reading habits.

We are starting to see it now. Food prices are climbing rapidly and gas as always is way over priced.

Ketchup is starting to buy a lot more dollars...

QE is like you are a runner you've just fallen and busted both your legs and instead of taking time off, healing and improving you use a couple rods and tape to fix your legs so you can put weight on them again but are no where near capable of actually running like you use too.. oh you'll keep going.. for awhile... 

Now it's the hard part, because they really have to fine tuning.

If they limit QE too fast, they will hurt the economy. If they keep it as is, they will create inflation.

They are creating inflation.  Inflation of the money supply.  Price elevation WILL follow, it is inevitable.  Plus, once they stop, the stock market will correct.  Usually violently.  Love the Fed, don'tcha?

Wish they never would've started that QE stuff.  It's false prosperity. All our savings are being robbed.  Thank heaven for bitcoin.

"Trading" is a Federal Reserve schill.

We are all capable of seeing the world burning down around us yet we have some amongst us that are standing there saying "fire? what fire? i dont see any fire. what evidence do you have that there is a fire? in my professional expert opinion there is clearly no fire."

We can see the smoke and flames. My house that was there last week is a smouldering pile of charcoal. Apparently some of us need to get our asses burned before we can admit there is a raging inferno all around us.

 

Everyone is devaluing their $...  :S  I for see bad things.

Increasing the money supply isn't inflation. And since we have a credit crunch (and that is the problem!), there were no increase of the M3 (global monetary assets) only of the M1.

Anyway, it's an empirical verified fact: there were no inflation. People have being crying out inflation, debt vigilantes for years. Until know, nothing.

Was that an ad hominem argument? Very convincing.

You really see flames around you?

People have been claiming fire for more than a century, after the end of the golden pattern. But we are still here, much better than our grandfathers.

Are you seriously retarded?

WRONG!

http://en.wikipedia.org/wiki/Inflation


WRONG!
http://4.bp.blogspot.com/-3LcsZ1p27Tg/UOuChOrF1uI/AAAAAAAAFRc/vOSrM-LSxPc/s1600/InflationChart.png

Since the introduction of the US Dollar in 1913 it has lost over 97.5% of its purchasing power. THIS IS INFLATION!


Better off than our grandfathers? Are you serious?

Check out the national debt since 1950... we aren't better off than our Fathers much less our Grandfathers!

In 1950 the national debt was about $257 Billion and today its $17,555,437,713,940 FUCKING TRILLIONS OF DOLLARS!

http://2.bp.blogspot.com/-MBDp0qwWsi4/UOuGTTQggGI/AAAAAAAAFT8/S5CIf9XANnM/s1600/debt.png

Trading, its an empirical fact that you're wrong, retarded and a schill. 

I would call that selective quoting of a notion of inflation.

I meant no inflation after the QE, as anyone paying attention would conclude.

Go see the figures on real GDP grow.

I'm not going to lower myself to return your compliments. But next one, you are going directly to my ignore list.

Quantitative Easing IS inflation lest we forget;


lets highlight this - "while simultaneously increasing the monetary base."

perhaps I should repeat this part for the slow people in the room... "while simultaneously increasing the monetary base."

now if you're truly smart enough you will take this as another compliment and mash your almighty ignore button.

You don't know what is inflation.

End of conversation from my side, write alone, couldn't care less.

But soooo much worse off than our fathers.. If your gen x or y ne ways.. The gov during the time of the baby boomers spent with out hesitation and took out loans with out thinking twice because they could be pasesd to us.. Now we are doing the same thing, how far can that can be kicked?

funny i seem to be dead on target with what inflation is even citing the very definition of it.. but yeah... you're probably right... {sarcasm intended}

You probably have to go anyway and check in with Janet Yellen... she needs her lapdog...

QE is inflation by definition. The currency supply is inflated. This results on higher prices on goods and services.

You have part of the definition correct.  An increase in the money supply is part of the equation but the part you are missing is the velocity of money. 

Nope.  You're missing the full equation just like the other guy.  Look at Japan, same thing, zero interest rate policy, QE, it's been this way for over a decade.  Look at Japan's inflation:

http://www.spreadbetmagazine.com/storage/20130122-inflation-chart.jpg?__SQUARESPACE_CACHEVERSION=1358862897705

Interesting. Im sure there are potentially many reasons why Japan has failed to create inflation despite decades of QE. I assume the main reasons are an ageing population and / also a population of savers.

Or does it just say that QE does not work and that the deflation 'problem' is actually structural?

The best explanation comes from Richard Koo, chief Economist of Nomura and famous for his theory on "Balance Sheet Recession"


"During a usual monetary policy-driven market, money created by an accommodative central bank typically spreads throughout the economy and lifts markets. During a balance sheet recession, however, the private sector is a net saver, which means only the financial sector is flooded with funds that are generated by private sector saving and deleveraging"

Basically QE doesn't make inflation because the private sector is deleveraging so even though there is cheap money there are no borrowers

Read more: http://www.businessinsider.com/richard-koo-on-bubbles-in-a-balance-sheet-recession-2013-11#ixzz33ixdIvlh

Here's him giving a presentation on this idea.  Worth a watch if you are interested in economics.  

https://www.youtube.com/watch?v=rMGUveWr7Fg

Velocity of money might be an element, but it's controversial. There are different opinions on it between neo-classics (that consider it constant or with small variations) and keynesians.
It's also necessary to take in account the difference between M1 (money created directly by the central bank) and M3 (global money assets, including money created by commercial banks).
In a credit crunch, with the money created by banks in decline, it's possible to increase hugely M1 without increasing M3. Therefore, no inflation happens.

Exactly, even though the supply is abundant, it's not moving anywhere. 

It (increased money supply) may eventually lead to inflation but Japan is a real world example of a ballooning balance sheet with minimal inflation.  The US will likely follow a similar path. 

Quantitative Easing do not work , oddly enough, these "accomplished economists" didn't predict the housing bubble did they?

Of note:  He's not saying QE is ineffective in regular recessions, he's saying its ineffective when we are in a 'balance sheet recession".   The main reason being private sector had just experienced a credit bubble & crash so in a sense they are traumatized from taking on too much debt

Another interesting thing.  The difference about Japan's QE and the US is that the BOJ used short term private paper to do QE.  The BOJ took on debt at 3 month maturity so they could easily remove the money from circulation.  MBS are long term private paper, but treasuries are long term public bonds.  He thinks this makes it hard to get out of the QE due to the compounding effect of interest possibly ballooning debt to unsustainable levels.

This is the debate between the neo-Keynesians (Krugman) & post-Keynesians (Keen, Koo)

Keynesians like Krugman call the present situation "liquidity trap":

http://en.wikipedia.org/wiki/Liquidity_trap
http://www.economist.com/blogs/freeexchange/2013/10/monetary-policy-2
http://krugman.blogs.nytimes.com/2013/04/11/monetary-policy-in-a-liquidity-trap/?_php=true&_type=blogs&_r=0

QE is a weapon wielded against those who use manipulation and such methods to unbalance their trade advantages against US.

First major economy to be hit by inflation was china, but people forget this fact.

And Krugman is correct to an extent.  The MBSs on the banks balance sheet can't be de-leveraged.  You have a situation w no liquidity because its all tied up in toxic assets.  I agree w Bernanke for buying these assets to free up liquidity.  But I also agree w Koo that buying long term bonds won't spill the QE into the real economy.  Instead, it gets stuck in the financial sector because there are no borrowers.  You see things like asset portfolio rotation which inflate the equities markets --  good for investors, but not for the unemployed.

But I also see Koo's point that QE only alleviate short term problems that might be difficult to deal with once the recovery starts.  The problem is when the govt buys long term bonds, it makes it difficult to exit QE without affecting sharp rise in long term rates.

Here is an interesting chart of what Koo calls "QE trap" 


http://static3.businessinsider.com/image/5267c2e569bedd845f441811-960/screen%20shot%202013-10-23%20at%208.36.16%20am.png

"The QE "trap" happens when the central bank has purchased long-term government bonds as part of quantitative easing. Initially, long-term interest rates fall much more than they would in a country without such a policy, which means the subsequent economic recovery comes sooner (t1). But as the economy picks up, long-term rates rise sharply as local bond market participants fear the central bank will have to mop up all the excess reserves by unloading its holdings of long-term bonds.

Demand then falls in interest rate sensitive sectors such as automobiles and housing, causing the economy to slow and forcing the central bank to relax its policy stance. The economy heads towards recovery again, but as market participants refocus on the possibility of the central bank absorbing excess reserves, long-term rates surge in a repetitive cycle I have dubbed the QE "trap."

In countries that do not engage in quantitative easing, meanwhile, the decline in long-term rates is more gradual, which delays the start of the recovery (t2). But since there is no need for the central bank to mop up large quantities of funds, everybody is no more relaxed once the recovery starts, and the rise in long-term rates is far more gradual. Once the economy starts to turn around, the pace of recovery is actually faster because interest rates are lower. This is illustrated in Figure 2."


Read more: http://www.businessinsider.com/koo-says-no-one-can-refute-the-qe-trap-2013-10#ixzz33jos1g1e

In any case its a complex issue and many debates on how to go about it.  I disclose that I do follow heterodox economics Post-Keynesian & MMT, and therefore I prefer post-Keynesians like Minsky, Keen & Koo over Krugman.  But I do respect Krugman for publicly speaking out against austerity based economics

There are plenty of arguments suggesting that the way inflation is calculated has been changed in order to keep the 'publicly announced' inflation rate palatable to the gen pop.

The other way we have seen inflation is this; retail products, especially food related have maintained their prices however their net weight in grams has fallen.

Packets of crisps that go for $4.50 for 180g now only give 165g.

Deodorant gives less mls.

In the UK you've also seen horse meat substituted for beef in lasagne.

It goes on and on.

ECB just announced negative deposit rates for commercial banks as a measure to fight deflation.

Why the hell govts are still printing this currency and wasting paper<<Trees<<Environment.

thanks

Actually, most of the "printing" money is just numbers in a computer. The FED or ECB just credit the account of a bank.

They don't even have to waste paper. No one can use it as toilet paper.

That is because rarely do anyone demand large sum of fiat dollar.

When regional major bank branch run out of paper money, they can request the regional federal reserve to deliver fiat money to serve their need.

After the major bank branch received the fiat, they can proceed with wiping their ass with the paper.

In other news the ECB (European bank) just changed to negative interest rates.  This will be interesting.  Are banks actually going to charge you money for them holding your money?  Or will they go no lower than 0% interest?  In any case it's all messed up - and we're going to have another recession soon too, this is just crazy, what will central banks do then?

They're trying to stimulate inflation.  The Central Banks only have monetary policies as tools.  If nothing works then the politicians need to step in.

The negative interest rates are bank rates its supposed to incentivize banks to lend money and people to borrow.  However, if nobody is willing to borrow (because of negative outlook).  The money will probably end up in the equities markets or somewhere banks seek return

You can also use a website like Shadowstats, which calculates inflation under the old methods along with the new.

http://www.shadowstats.com/imgs/charts/alt-cpi-home2.gif?hl=ad&t=

http://www.shadowstats.com/imgs/sgs-cpi.gif?hl=ad&t=

http://www.shadowstats.com/alternate_data/inflation-charts (http://www.shadowstats.com/alternate_data/inflation-charts)

"but but but... user: "Trading" said there was no inflation...

so i believe him..."


-said no one ever!

Oh please don't post graphs from shadowstats.  The website is not legit and the guy has been debunked by many people

http://voxrationalis.wordpress.com/2011/05/15/the-absurdity-of-shadowstats-inflation-estimates/
http://azizonomics.com/2013/06/01/the-trouble-with-shadowstats/
http://blog.jparsons.net/2011/03/shadow-stats-debunked-part-i.html
http://blog.jparsons.net/2011/06/shadow-stats-debunked-part-ii.html


Please refer to MIT's "billion Prices Project"  which show similar stats to CPI

http://bpp.mit.edu/usa/

The theory is that if people don't get rewarded for saving they will spend more and stimulate the economy. Like anything this kind of stimulus has a pretty steep law of diminishing returns curve.

They assume people have saving and not loaded with debt. What this will do is encouraging more debt at the expense of saver.

I assume that debt will come back to bite the economy in the long run
It's sort of like binge drinking makes the user feel good in the short run and then you get that massive hangover the next day

That was one of the reasons the US recovery has been so stalled. People actually started paying off debt instead of adding more. If average people get that you tighten your belt and reduce your debt burden in a down economy why can't the politicians?

A culture of self entitlement, that's why when they say certain congress members are paying for expensive wine hotels and cheese the public scrutinizes their lifestyle.
Also if you have a lot of money on the taxpayer dollar and not your own I can't see them economizing.

Although the counterarguement for that is that it prevents corruption and bribery and them getting jobs in industry afterwards as lobbyists but I am not so certain on the effect of that relationship.

It tries to force commercial banks into lending because at the moment they can deposit money with central banks and make a gain with zero risk. Now they'll have to invest and face risk.

I think something similar was noted that in the US they were getting money at 0% and lending it back to the govt at 3%. No reason reason to lend it out to the public.

The ECB negative rate it's also an incentive for banks to lend money to each other. In Europe, there are still some banks that don't trust others, so the ECB is forcing them to remove their money from their ECB accounts and start to lend it to other banks more willing to lend it to individuals and corporations.

It would be so much simpler just to fix the currency, but a strong currency is bad for business when your business is stealing purchasing power.

You can actually buy an interview on Bloomberg if you'd like. Many interviews are simply ads for the business.

Sir, this is the worst, manipulative post i have ever seen. The above quote is from Wikipedia, BUT you have intentionally erased a line from the definition. The original looks like this:

"In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.[1] It can be defined as too much money chasing too few goods.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy."

Money in the above sentence is what QE pours into the economy, issued by the FED.
Source: http://en.wikipedia.org/wiki/Inflation

If money is nothing more, than the numerical expression of scarcity and supply-demand relations, than if we suddenly print 2x money, the prices will just adjust to 2x respectively with time.
An 8 year old kid understands inflation... 10 apples, 10 chocolate, 1 apple = 1 chocolate given they have the same marginal demand (their marginal utility, aka. diminishing return in demand are the same). If suddenly you bring 10 more apples in to the system, and demand remained the same, 2 apples= 1 chocolate.

Fed creating more "apples" than economy creates "chocolates" will result that 1 apple will loose its value in par to 1 chocolate -> inflation.

Strength of the currency should be view as a good sign as there is demand of the currency at the world stage.

Artificially pushing down the rate will cause import and export imbalance as well as wages distortion.

Yes but the way I understand it is that the game being played at the moment is that the US & China position themselves as lower than the Euro, therefore their exports are cheaper to purchase.

Getting your currency lower is all part of the beggar thy neighbor aspect of QE; if your currency is worth more you will be less competitive in export markets, even though a stronger currency may indicate better 'health'.

YEP it is pretty clear that user: "Trading" is a douche Fed lapdog with no integrity.

QE IS INFLATION.

INFLATION IS BAD (no matter how try to justify it)

Banks, manufacturers, governments, currencies and everyone should be allowed to fail. In their wake better solutions will arise.

Look at Mt Gox. They sucked. They failed. Now better exchanges rule the landscape. Bitcoin and a truly free market will prevail.

A major effect of QE is that it makes it much cheaper to borrow money. It also makes it cheaper to repay money that is borrowed in terms of effort (labor/work)

Inflation in general is bad, but the opposite, deflation is much worse. With deflation people will wait until "tomorrow" when prices will fall, causing prices to fall even more, causing people to delay their purchases even longer. This results in a decreased level of economic activity.

Inflation needs to be kept at a low level but not so low that deflation is a threat.

If I am burdened by a large debt (mortgage, toxic MBS's, multiple trillions in national debt) then inflation is the manna from God. It will wipe away my debt by making it worth less.

If I am not burdened by debt (cash in bank, secure job, no mortgage) then deflation is the ants pants as prices decline and I can purchase goods when I believe the price is fair.

I know that mobile phones, TV's etc are going to be much better in the coming years but I still buy them. The model I buy will be much cheaper next year if not next month. I still buy because I want the item. The market would always find a bottom when enough people think it is fairly priced. Shit businesses loaded by debt fail and new ones replace them that figure out how to do things better. I'm not sure I believe that deflation is the devil like you're saying.

Deflation is bad because it leads to lower economic output. It often causes recessions and depressions.

Even if you are not burdened by debt (the security of your job is not relevant) then your income would likely go down or possibly go away and there is a greater chance you will be without work. Most people without debt still rely heavily on their income from working which would be hurt by deflation.

The security of my job is relevant as a secure job produces a regular paycheck. If you have a secure income in deflationary environments then your purchasing power increases as your income remains stable.

There is no way out of this QE mess without deflation. Japan has QE'd for 20 years and still cannot shake it (different scenario in some respects and some - Keiser particularly - even argue that QE begets deflation.)

But anyway, there is always room for conflicting opinions. I dont think there is a way to stop QE without deflation taking over, and it cannot continue indefinitely.

In a economy experiencing deflation, there tends to be less work available. Even if your job is "secure" today it is less likely to be secure during a time that an economy is experiencing deflation. You would also face the risk that your employer still needs you to work but cannot afford to pay you as much per hour (or per year) and were to cut your salary.   

People need to be dynamic and change job to meet market demand. Not the other way around.

That is true but is not always possible if there are not jobs available.

QE would need to be taken away very gradually.

Even with QE Japan has experienced deflation

But you can't taper a ponzi scheme which is what this is. But now it is absolutely global. The hot money from countries & governments flows into global RE 'safe' spots (London, Canada, Australia) where the investment monies are at least out of harms way. Us plebs are also enticed into RE: ZIRP for savers, govt led spruiking (UK), FOMO (Aust)

With the stocks more and more people need to join the 'market' as new money makes it go up. As soon as the free money for big investment firms is gone, the music stops. How many chairs are left?

Companies are resorting to share buy backs, mergers, part time employees and margin compression to maintain the illusion.

Japan nothing has worked; an ageing population of savers, a generation not popping out kids, flatlined RE, massive debt overhang. Probably won't change until Japan does.

As the public discovers that the current system is unsustainable (if they do) you will hear about paying back or at least tapering (expanding the money+debt supply less than that other political fraction would have done, had they won the election).

But both is out of the question really. It is not possible to taper (reducing the rate of expansion), and it is not possible to increase the interest rate.

Look for tapering talk, and at the same time covert debt expansion. Fake companies issuing bonds, loans parked in bad banks. New forms of securities issued. Government guarantees. Implicit government guaranties. Even a political statement like we have to stop global warning increases lending and thus the money+debt supply.

They have already started to taper the rate of QE.

The FED had increased interest rate before and will do it again eventually

To keep the rate low, the fed needs to keep buying up unsustainable amount of debt. One only has to observe the interest rate to see if they actually taper rather than sing a good song.

There are other forces behind interest rates besides the rate at which the Fed purchases bonds

When was the last time you saw people wait when the new iPhones come out.  I swear the people are taking their disability checks and running full sprint to the Apple store to wait in line for 12 hours.

QE in Japan doesn't work because price level has gone to unrealistic level. Property and security price are governed by yield and return of investment, if they go up to unsustainable level, the cost will of course need to go down. Printing a lot of money will only make smart money leave the country to seek better yield and reasonable ROI business.

Japans a bit weird in that their debt is larger than their GDP by a significant amount but people trust that their money will not be lost or stolen in the system or the currency will collapse.
Benefits of having your own citizens holding the debt still to get ROI would be a significant challenge for them and they can't really print money to increase their debt so its a bit of a conundrum.

Debt larger than GDP is fine. A more meaningful measurement would be the country income vs debt level. So long as the country has good income via export and service, the debt can be expected to be paid back.

I should have clarified a bit more on that
Here is a neat info graphic on what I meant in relative terms
http://demonocracy.info/infographics/usa/world_debt/world_debt.html

Total debt ratio is about 250% to GDP but your right Income to Debt Repayment is around 55% and Interest is 2% of their debt ratio to GDP so its not that bad although I could point out Italy looks healthier based on that data so in part I guess its how strong you are in the world economy as well.

Countries that have a large enough economy so that their currency is used widely outside of that country's commerce are almost "exempt" from these kind of ratios/statistics

To have someone lend you money, you need to demonstrate the ability of paying back. Income/debt ratio is a good way gauging the person ability to payback the loan. No country can be exempted from this rule unless the debt is dominated in the debtor nation currency.

Countries are measured by their ability to repay by a number of statistics. Some countries have large "stocks" of assets (gold, diamonds, oil, and similar) that they export, the revenue from this could be used to measure a countries ability to repay debt. Other countries have a large trade surplus and as a result there is a lot of foreign capital going into the country. Some countries have very large economies and a country's ability to tax is what is measured as to how it could repay their debts.

When large countries like Japan want to issue debt then can issue it in their home currency as there is sufficient demand for that currency throughout the world.

GDP is essentially the "income" that a country has. It is defined as "the sum of all the goods and services produced by the country in a year" and is as close to income as any measure is.

QE is the financial version of Iraq: you can't stop the occupation, for what you created is a monster.

QE as at today is the only measure curtailing inflation to a large extent not only in America but the world at large.

Que? QE is 'designed' to create inflation. It is a measure to stop deflation.

I don't think this is true. QE was designed to attempt to prop up the economy. Once the economy is able to grow at a strong enough pace on its own then QE will no longer be necessary. Now getting the balance sheet of the fed back down to more normal levels is a much different story.

QE was designed to prop up the banks (see dodgy dealings in regards to Lehmann, AIG, Hank Paulson).

The economy cannot grow at a strong enough pace because it is still choc full of toxic debt and derivatives. If QE stops, everything tanks and the deflation that has been trying to take over and purge the system of its excesses, does its job. Don't wait up or hold your breath for green shoots, they are not coming - it's been 6 damn years. Soon we'll be calling it the lost decade.

Regarding QE / Iraq, both 'occupations' were dishonest.

Victory was declared on numerous occasions only to be shown as false.

Both are at a certain point where withdrawal sees the situation deteriorate quickly, ensuring that you can never really leave.

I think the actual goal of QE was to stimulate the economy by getting people and institutions to take more risk with their money. Higher inflation (or lower deflation) was merely a byproduct of QE.

Lending money to companies that went bust is not encourage them to take more risk. It is a way to inflate their debt away at everyone else expense.

It is both. Bailout and encouraging reckless behavior and eventually end up with even more bailouts.

But the debt was paid back to the government. The government actually earned a lot of interest on the bailouts to the banks. If the banks were lending money to consumers at similar rates they would likely be charged with predatory lending.