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Author Topic: Quantitative Easing  (Read 6355 times)
twiifm
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May 29, 2014, 03:45:34 AM
 #41

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

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May 29, 2014, 03:59:18 AM
 #42

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).

Yes, it truly is amazing how ungrateful some of the people around here can be after they've been thrown a lifeline.
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May 29, 2014, 04:30:06 AM
 #43

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).

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.
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June 02, 2014, 03:11:02 AM
 #44

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.
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June 02, 2014, 12:57:40 PM
 #45

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

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June 02, 2014, 06:45:59 PM
 #46

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.

My main posts and a few more are reposted here: https://oneskeptic.tumblr.com
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June 02, 2014, 11:38:20 PM
 #47

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

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

redwhitenblue
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June 03, 2014, 02:14:26 AM
 #48

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

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.
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June 03, 2014, 10:33:06 PM
 #49

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

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.

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June 04, 2014, 12:19:34 AM
 #50

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.

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.

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June 04, 2014, 01:01:52 AM
 #51

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.

My main posts and a few more are reposted here: https://oneskeptic.tumblr.com
tabnloz
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June 04, 2014, 02:13:58 AM
 #52

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.





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June 04, 2014, 02:55:55 AM
 #53

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.

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June 04, 2014, 11:13:07 AM
 #54

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


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June 04, 2014, 01:08:05 PM
 #55

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... 
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June 04, 2014, 02:19:34 PM
 #56

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.

My main posts and a few more are reposted here: https://oneskeptic.tumblr.com
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June 04, 2014, 02:26:20 PM
 #57

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.
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June 04, 2014, 02:56:16 PM
 #58

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.

 

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June 04, 2014, 03:15:08 PM
 #59

Everyone is devaluing their $...  :S  I for see bad things.
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June 04, 2014, 03:53:50 PM
 #60

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.

My main posts and a few more are reposted here: https://oneskeptic.tumblr.com
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