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zman343
Contributor

QE 2.0

It's a little sickening that disenfranchised bulls are calling for another round of quantitative easing in order to prop up the stock market and this ponzi scheme of an economy.  The first round obviously did little besides pad the pockets of the financial industry that are able to borrow the money at zero interest and stick it in treasuries and ride the curve.  Printing more money will not inflate the economy or create jobs because banks are not lending.  Just look at the consumer credit, which continues to collapse.

 

The Fed, the Government, Wall Street, and many economists want people to go out and spend or put all their money into equities.  Two major flaws with this logic.  1)  People don't have as much money to spend (see employment and consumer credit data for further explanation).  2) People do not trust Wall Street or equities.

 

The real losers in this crippled economic battle are people trying to save money.

7 Replies
r3020
Senior Advisor

Re: QE 2.0

Another problem is why would anyone barrow money to expand their business when they know next year they will be hit with a huge tax increase. Work harder, with more risk, only to have it taken by the government.

hardnox604008
Advisor

Re: QE 2.0

Hi Zman,

 

Yeah, but I see it a bit differently.

 

To me, the fact that the wheels were going to come off was cast in stone way back in the mid to late 90s. The surpise to me is really how long they've kept steering the tractor down the road, in road gear, with the brakes. Fence posts are now falling on both sides. As Keynes quoted Adam Smith "there's a lot of ruin in a nation." Particularly so when the nation is 25% of the global economy and prints the reserve currency.

 

Anyway, I was all in favor of massive QE from the start. Sure it was never, ever going to happen, is probably unconstitutional but, what the heck, the Fed is unconstitutional, so whatcha gonna do about that at this point?

 

Anyway- if you'd basically poofed away a huge chunk of all debt in one fell swoop then sure, most everybody's wealth would have been cut in half overnight. The thing is when this is over with everybody's wealth is going to be cut by a lot more than half but you weren't going to convince them of that.

 

I think the tragic thing about this is that they have been, are and will remain behind the curve. Waiting for the next chunk down into a liquidity trap to scare people enough to give the go ahead on a measly pissant coupla $trillion isn't going to accomplish a **bleep** thing.

 

BTW, a bit surprised by the last bit down in the $ or more specifically up in the euro. No harm done but currently just seeing it as a throw over out of the corrective channel and thus probably a good sale.

 

I see where Goldman upped there euro target to 1.35. Lol.

 

Best, h

zman343
Contributor

Re: QE 2.0

I don't know, I think the tax argument is somewhat of a cop out and just a political argument.  If you have a business that is doing well and you think can do even better by expanding it, I don't think you're as worried about tax increases.  This country saw boom times when tax rates were much higher.  But there may be businesses that are on the borderline of success that may have to cut back some if taxes jump.

 

The main reason I see why many businesses are not expanding or hiring more is because of the economic and global economic environment.  They aren't seeing the extra demand being there.  Call it Pimco's "new normal" or what have you but things have changed.  Plus they are able to get more productivity out of the workers that they currently have because those workers are willing to work harder to keep their job.

bruce MN
Advisor

Re: QE 2.0

Or, you guys could win big and this would happen:

 

http://crookedtimber.org/2010/07/16/the-crisis-of-2011/

 

I think you might...probably will...wondering how you or anybody else who is hopeful of it and is working to see it come about might see what he paints as playing out.....

 

We've just witnessed how an unforeseen political shift has been recieved...what of the next big one?

bruce MN
Advisor

Re: QE 2.0

 

You say:

 

 

"Anyway- if you'd basically poofed away a huge chunk of all debt in one fell swoop then sure, most everybody's wealth would have been cut in half overnight. The thing is when this is over with everybody's wealth is going to be cut by a lot more than half but you weren't going to convince them of that."

 

 

And how that is likely to come down:

 

 

 

http://www.huffingtonpost.com/john-r-talbott/the-real-reason-geithner_b_650403.html

 

Millions of watchers for all sorts of reasons, as explained well within the article,  are waiting to see how this new post is filled.

 

I'm not so sure that "runing off with the bank" is the cherry it was a year and a half ago. They just might need us schmoes and rubes to keep fueling their tanks.

hardnox604008
Advisor

Re: QE 2.0

http://www.economicpolicyjournal.com/2010/07/consumer-metrics-if-things-continue-in.html

 

Right on schedule, about 6 months after M3 started to go negative. Sorta like here, doubt that it will gain me much to be sitting on the rubble and lecturing on political economy.

 

The religious notion that things will be better if we get da gubmint out of things will likely gain traction quickly as the economy folds up.

 

So, so much like the Civil War period where the remedy will be vastly worse than the disease but we're gonna, by God, have 'er out.

 

I've always thought Mark Twain had the right idea, conveniently managed to be in California during the Big Show and apparently nobody held it against him.

 

Best, h