Wednesday, Mar 18, 2009
Fat Chance, Size Matters etc.
The Guardian: Fed to spend $1trillion on quantitative easing
No one knows whether these measures will work. Much depends on whether banks loan out the cash they raise from selling treasuries and whether households and businesses spend, rather than save, any extra borrowing," he said. "But the sheer size of the measures suggests that they will do some good, thus increasing the chances of a decent recovery next year. At the least, no one can say that the Fed isn't trying.
Posted by devo @ 10:49 PM (477 views) Add Comment
5 Comments
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1. uncle tom said...
I'm a bit surprised. The Chinese are not going to like this, and the US needs them to keep buying Treasuries.
They might start selling them now, and defeat the object of the exercise..
2. d'oh said...
UT - I'm on shakey ground here, as I only glanced at the graph in question, but have you seen that graph floating aorund that seemed to suggest that asians were becoming net sellers of treasuries of late? The USD was getting quite strong too. Maybe the only option is for the US to print? Whatever the case, I think it has been made clear that the sort of deflation associated with sorting the mess out fairly is deemed to be too painful, so the savers are going to have to pay. I'm beginning to think we are going to head for serious inflation sooner rather than later, which is a pity as I and the rest of my family fall into the frugal saver camp. The moral hazard arising from this mess is egregious. I have certainly learnt my lesson.
3. inbreda said...
too late to buy gold?
4. uncle tom said...
inbreda,
The problem with gold - as I discovered when I spent the winter in the far east - is that it's beginning to go out of fashion in the countries that have traditionally put a lot of faith in it, notably India, and the countries of SE Asia.
Gold wedding dowries are no longer demanded, and the mass population now have bank accounts for their savings instead of little hordes of gold.
With the price high, many are turning their gold into cash - which may be the reason why the ascent of the gold price during this crisis has been so muted.
There is also the real possibility that more gold held by governments will be sold, as they try to extract themselves from the current crisis. The connection between gold reserves and currency has been more or less lost now, so there is little reason for governments to hold any gold at all.
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