QE2 will happen

[purveyor of truth]

After much studying its still tough for me to figure the US financial scheme. What bothers me most is why is the Fed doing this? Is more shit about to hit the fan that we dont know about? Is this a preemptive move?

What the hell is the real reason behind this? http://money.cnn.com/2010/11/03/news/economy/fed_decision/index.htm

Day after elections no less.

[Ptah]

Just one large weed-flower on a branch so far from the roots of the problem.

[purveyor of truth]

I'm a bit tin foil hat on this one, something doesnt smell right

[composer]

Short answer, It's an attempt to encourage more spending, which would turn the economy around.

Long answer, it's a recycling of short term govt. debt into long term, which they would hope drives down long term interest rates. As long term interest rates (10Y Treasuries primarily) go down, that should discourage 'hoarding cash'. But, because we're against the zero bound (short term interest rates at at 0%), QE doesn't have traction so it's ineffectual. Add in that it's a mere $600B against a $17T economy (and a multi trillion dollar treasury market) and this will go down as a pointless guesture

It's been done before, previously after the Great Depression. It has some benefit back then because we were coming out of outright deflation. Presently we're in a Japanese style slump with 'stealth deflation', which is different. There's not much the Fed can do, pushing on a string etc.

Glad I bought 30Y treasuries at 4.8%, well then sold at 3%, then bought at 4.8% again, now at ...

[purveyor of truth]

What I'm hoping isnt happening is a coming economic shitstorm that we dont know about yet. Maybe this is a weak first strike?

[C.J.Woolf]

I'm reading that businesses aren't hurting for cash; rather, they're holding back because they don't see demand increasing. They're buying back their own stock with that cash instead of spending it. So for those companies, cheaper money doesn't mean more investment in physical plant and labor, it only means more stock-buying. Woo hoo.

Our basic problem is that the financial economy is the tail that wags the dog of the real economy. How do we solve that?

[purveyor of truth]

I'm reading that businesses aren't hurting for cash
Yeah so WTF is this? I guess day after elections to bury it in the news a little? Oh look we new Hope & Change, who cares about what the fed does.

[purveyor of truth]

I've been sort of paying more attention to Peter Schiff

–In the past, the Fed’s preference for inflation as its preferred policy tool was a love that remained largely unspoken. But in its recent policy statements, and especially in today’s pledge of $600 billion of printed dollars to monetize Treasury debt, the Fed has cast shame aside and has unabashedly professed its love. But the progeny that results from this courtship with inflation will offer nothing but grief for the U.S. economy. –Peter Schiff, Euro Pacific Capital

[composer]

You guys have to realize (well nobody really realizes this) is that this is all 'written in the stars' as it were. These things go in about 70 year cycles, probably because of demographics. Speaking of which the demographic mix (aging western population with precious little saved for retirement) guarantees that we'll be in a big fat slump for years to come. Basically the Boomers beggared their children, and the Xers.

Look up Kondratieff waves to get a taste of part of what's happening. I'm probably the only one 'happy' (if you call it that) with the situation, since I predicted and planned/invested for it.

Purveyor of truth - QE2 has been larded in the press for weeks if not months now. Nothing new in this news.

[purveyor of truth]

Yeah I know its been in the news, on the wave thing, what if its different this time. Peter Schiff is predicting dire consequences in the near future. Of course he has an investment company to sell..

[composer]

lol ... Peter Schiff, nutter who keeps getting proven wrong ..

Oh, 'what if it's different this time' - it can't. It won't.

Imagine if you had a chemical solution to which the catalyst has been added - pretty predictable what happens next? Same here, it's a done deal already.

[MountainHiker]

They're buying back their own stock with that cash instead of spending it.

I'm not so sure about that. I've read from several sources that insiders, CEOs and other executives and board members are dumping stocks like crazy. Here's one source from a quick search, but I've seen it from several sources: http://www.lewrockwell.com/slavo/slavo18.1.html

[purveyor of truth]

I'm not one of those people who glom onto prophets, just saying he is someone I sorta pay attention to.

[C.J.Woolf]

I'm not so sure about that. I've read from several sources that insiders, CEOs and other executives and board members are dumping stocks like crazy. Here's one source from a quick search, but I've seen it from several sources: http://www.lewrockwell.com/slavo/slavo18.1.html
1. I may have been citing old news. If stock is no longer undervalued, then there is no reason to buy anymore.

2. The article you cite says company insiders are selling. It doesn't mention what the companies themselves are doing.

[purveyor of truth]

Ron Paul in charge of Federal Reserve oversight? This might be an interesting turn of events.

November 03, 2010

Here's a little irony in the House GOP sweep: The next chairman of the monetary policy subcommittee -- overseeing the Federal Reserve?

None other than Ron Paul (R-Texas), who'd just as soon abolish the Fed.

Paul is the ranking member of the Subcommittee on Domestic Monetary Policy and Technology on the Financial Services , which oversees the Federal Reserve, the U.S. Mint and American involvement with international development groups like the World Bank. Unless someone bumps him, he's next in line for the subcommittee gavel.

Paul is critical of all the institutions he would oversee. He's long called for killing the Federal Reserve, and this year tried to get an audit of the Fed into the Wall Street reform bill. He's asserted that the dollar should be tied to the gold standard in order to keep it from losing its value.

The committee has been low key under Rep. Melvin Watts (D-N.C.). His web site says he plans to hold hearings on "equal access by the visually impaired to U.S. coins and currency."

It's safe to say that a Paul chairmanship might be a little more intense.

The Republican Conference will vote on Paul leading the subcommittee, taking into consideration seniority and Republican leadership's preference. Paul's office didn't return a request for comment.

[Ptah]

Even considering Ron Paul's Libertarianistic malfunction, this might still be a step in the right direction ... compared to alternatives.

[purveyor of truth]

If you have 12 minutes to burn, cue into it 2 minutes
http://snardfarker.ning.com/video/ron-paul-on-qe2

[purveyor of truth]

Gold hit $1398 today, bet it hits $1500 before years end. Dollar index has slid from 88 mid year to 76 now. Record commodity prices. Stock market continues to snake its way upwards. Printing presses getting warmed up. Coming gridlock in Washington.

Could hyperinflation happen? Its possible I think. What if the "healthy" inflation that they are trying to create gets legs and takes off?

[purveyor of truth]

Interesting article http://www.marketoracle.co.uk/Article23891.html

[composer]

I can't even express the bovine stupidity of the hyperinflationist argument, going against all historical precedent, real time economic data, Econ 101 and even the most basic understanding of monetary policy. We're in a desert and people want to worry about too much rain. What I'm really surprised at is to see this all around the INTP groups - I thought we were smarter than that? Sure the idiot financial boards would be full of this and more stupidity, but I thought better.

Never mind me, I'm getting cantankerous in my old age at the insistence people have to be wrong.

[Ferrus]

I can't even express the bovine stupidity of the hyperinflationist argument, going against all historical precedent, real time economic data, Econ 101 and even the most basic understanding of monetary policy. We're in a desert and people want to worry about too much rain. What I'm really surprised at is to see this all around the INTP groups - I thought we were smarter than that? Sure the idiot financial boards would be full of this and more stupidity, but I thought better.

Never mind me, I'm getting cantankerous in my old age at the insistence people have to be wrong.
Those who forget history...

[bluebell]

You guys have to realize (well nobody really realizes this) is that this is all 'written in the stars' as it were. These things go in about 70 year cycles, probably because of demographics. Speaking of which the demographic mix (aging western population with precious little saved for retirement) guarantees that we'll be in a big fat slump for years to come. Basically the Boomers beggared their children, and the Xers.

Look up Kondratieff waves to get a taste of part of what's happening.

Interesting. I skimmed through a wiki article on it to get a vague gist of the theory. Is that theory supposed to apply to just individual countries or the international economy? (I live in a country which is uniquely still booming due to resources exports to China, but I suspect we have a housing bubble which might do some damage when it bursts)

[Ferrus]

Interesting. I skimmed through a wiki article on it to get a vague gist of the theory. Is that theory supposed to apply to just individual countries or the international economy? (I live in a country which is uniquely still booming due to resources exports to China, but I suspect we have a housing bubble which might do some damage when it bursts)
I think Kondratieff would have seen it as a feature of the global economy with differing intensities in different places. But your point is well taken: I think the global economy has half-fractured now between the traditional Western markets which are stagnant and the Asia-Pacific orientated market which is buoyant. One side is suffering a Kondratieff wave over the other.

[purveyor of truth]

LOL at Composer, ya might want to take off the glasses.

[MountainHiker]

From what I've seen and read the main reason for QE2 is to keep wealth and power in the hands of those who already have it. Which is pretty much the purpose of the US government anymore.

As for bovine-stupid inflationary scenarios, which apparently only an idiot like myself would waste time talking about, let's see how this all plays out. Since I'm a moron about how money works I'll just wait and watch to see how many folks are cheering and happy about their low heating and electric bills this winter due to the price of everything deflating, yet there's easy money everywhere for the taking due to QE2, but magically, not enough to inflate anything. Somehow I'm doubting we'll see that cheery scenario and more likely the opposite effect. We will see if the know-it-all economists really know anything or if they need to look for a new line of work or study.

Foreign holders of US debt aren't real happy about the drop in their investment. My guess is they are getting tired of the spoiled kid in the room and will take the actions they can to rid themselves of US debt and dollar dependency without provoking a military response. After all, our military is one of the main reasons the Dollar has held the ground it has thus far. That and the rest of the world is heavily vested too. But that may change soon.

There's also much more going on than purely money in the system, like lost trust in financial institutions and the entire mortgage system, inept and incompetent regulators, the derivative house of cards, and the fact that our economic base has changed from actually making things to fabricating financial Ponzi schemes. Unfortunately for the "Too Big To Fail" boyzzz, the world has caught on to the the whole Ponzi scheme thing.

Regardless of all of it, interesting times lie dead ahead.

[Tenderfoot]

The paper fiat-dollar has already lost more than 97% of its value in the 97 years since it was introduced.

Hyperinflation is what we will call it if the dollar loses the remaining 3% rapidly (like maybe during the next 3 years).

That doesn't seem like a long shot to me. Lots of things could trigger it. Such as another stupid war for example.