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Author Topic: Quantitative Easing  (Read 6349 times)
Swordsoffreedom
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June 26, 2014, 11:07:44 AM
 #121


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.
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ShakyhandsBTCer
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June 26, 2014, 10:48:58 PM
 #122


QE would need to be taken away very gradually.

Even with QE Japan has experienced deflation


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.

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
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June 27, 2014, 12:28:02 AM
 #123


QE would need to be taken away very gradually.

Even with QE Japan has experienced deflation


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.

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.

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June 27, 2014, 02:27:39 AM
 #124


QE would need to be taken away very gradually.

Even with QE Japan has experienced deflation


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.

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.
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June 28, 2014, 11:08:07 PM
 #125


QE would need to be taken away very gradually.

Even with QE Japan has experienced deflation


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.

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.

This spot for rent.
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August 09, 2014, 01:19:47 PM
 #126

QE is the financial version of Iraq: you can't stop the occupation, for what you created is a monster.
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August 09, 2014, 01:34:55 PM
 #127

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

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August 09, 2014, 01:47:16 PM
 #128

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.
michaelwang33
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August 09, 2014, 04:43:26 PM
 #129

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

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August 09, 2014, 06:25:49 PM
 #130

QE is the financial version of Iraq: you can't stop the occupation, for what you created is a monster.
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.
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August 10, 2014, 12:10:36 AM
 #131

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 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.
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August 10, 2014, 12:16:31 AM
 #132

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 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.
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August 10, 2014, 01:35:40 AM
 #133

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 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.


Mobius
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August 10, 2014, 08:39:23 PM
 #134

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 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.

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.
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