Quantitative Easing

[Trading]

"Trading" is a Federal Reserve schill.

We are all capable of seeing the world burning down around us
 

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.

[blackhathasher]

Are you seriously retarded?

Increasing the money supply isn't inflation.

WRONG!

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

In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. 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.

Anyway, it's an empirical verified fact: there were no inflation.

WRONG!


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

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.

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!



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

[Trading]

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.

[blackhathasher]

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;

Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective.[1][2][3] A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other private institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the monetary base.[4][5] This is distinguished from the more usual policy of buying or selling short term government bonds in order to keep interbank interest rates at a specified target value.[6][7][8][9]

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.

[Trading]

You don't know what is inflation.

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

[spazzdla]

"Trading" is a Federal Reserve schill.

We are all capable of seeing the world burning down around us
 

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.

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?

[blackhathasher]

You don't know what is inflation.

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

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...

[Ron~Popeil]

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.

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

[CurbsideProphet]

You don't know what is inflation.

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

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...

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. 

[CurbsideProphet]

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.

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

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:

[tabnloz]

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.

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

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:

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?

[twiifm]

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

[Trading]

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.

[CurbsideProphet]

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

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. 

[erono]

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

[twiifm]

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)

[Trading]

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

[ReserviorHunt]

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.

[twiifm]

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

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" 




"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

[tabnloz]

Therefore, no inflation happens.

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.