Friday, May 29, 2009
Can money printing be limitless?
Telegraph: Bond markets defy Fed as Treasury yields spike
The US Federal Reserve may soon be forced to launch fresh blitz of quantitative easing whatever the consequences for the US dollar, or risk seeing economic recovery snuffed out by the latest surge in long-term borrowing costs.
Posted by flintster1994 @ 10:08 AM (1019 views) Add Comment
20 Comments
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1. crunchy said...
Can money printing be limitless?
Probably.
It's the only plan they have and know. There ain't no plan B.
Problem!
2. japanese uncle said...
Central banks are becoming more and more irrelvant.
3. crunchy said...
The electronic age.
4. Fingerbob69 said...
when is not a job, a job? When it is a government statistic.
8.1% today was 15.8% under Clinton metrics! That's a descrpency of 51.3% ...good grief!!!
5. uncle tom said...
If I were running China, I would want to stop the US from printing more cash.
Protesting on its own doesn't look likely to work. Privately threatening to stop buying treasuries may also get nowhere.
Public threats, or even an ultimatum; could have a dramatic effect on the yield and immediate market value of existing treasuries; leading to sudden increases in interest rates - but it might also force the US into a policy U-turn.
I think I would give them a private ultimatum - and a deadline to change course - on pain of a public boycott.
6. debtfree said...
crunchy,
Inflation is infinite. You can put an infinite number of zeros after any number and put the decimals points wherever you want.
It also means the ability to save is totally diminshed.
With more money you have more freedom........ and we can't have that can we.
Electronic money gives control to a single source over transactions and the ability to monitor spending habits and create a cashless society. We are already going down that path. Banks are basically money police. I only now hold what I need for direct debits in a bank, the rest is off the grid.
7. mountain goat said...
Perhaps this graph explains the long term borrowing rate jump. Those who haven't haven't managed to refinance yet are hitting the ARM reset dates. As you see there is a big jump in resets for May and June 2009.
8. crunchy said...
Right on. If the banks are charging interest on money that is not there what can we expect!
Exact match to my thoughts. "MasterCard.".. Off the grid may not last long. I see an exchange of labour ahead to duck and dive out of this money/tax human control.
It would do wonders for community spirit! A few years ahead yet, but they are closing in.
9. hpwatcher said...
Rather than take the pain, they seem intent on destroying the currency....
China should be getting ready to dump the dollar.
10. debtfree said...
@7. crunchy
Like the idea of a Gold ATM. They are being installed in germany, switzerland and austria.
http://uk.biz.yahoo.com/19052009/323/german-firm-plans-gold-atms-meet-growing-demand.html
Always thought that it's a bit odd that we work and yet recieve nothing in hand for the fruits of our labour. The banks are in total control with just one piece of plastic. You can live a totally different life now than one a few decades ago with cash in hand. Someone who starts a new job but doesn't have much money will struggle compared to someone who has credit. With that one card you can buy new clothes, food for the month, petrol and all your bills until you get paid. All very handy, but for most people they end up on the downwards esculator trying to walk up it.
11. uncle tom said...
hpwatcher,
The problem for China with dumping the dollar is that they already have far too many of them. As soon as they start to offload, treasury yields will soar.
In fact, the situation is so dire, that just not buying more will have much the same effect.
But their $2 trillion stash does give them some power to dictate to the Yanks.
Ultimately, a further reduction in exports to the US, is a lesser evil than seeing their dollar assets evaporate; so the Chinese will be looking for austerity, spending cuts, tax hikes and interest rate rises from the US Govt.
On the other hand, the US admin would see such a remedy as politically impossible as a voluntary measure, especially as it mimicks the 1930's policy that Bernanke has so often preached against.
Such a remedy could only be accepted in the face of adversity, which the Chinese might elect to engineer by selling moderate quantities of stock, not buying any more, and watching the yield head into orbit - which in turn would force up interest rates.
We can only wait and see..
12. crunchy said...
9. debtfree, Some people are only a few months ahead of being on the street, others are two months behind.
GOLD ATM. Very upmarket, but ominous at the same time!
13. inbreda said...
UT - I see your point - but if china wanted to destroy the US it could either a) start a war - which would undoubtedly be unpopular amongst its own people and also extremely messy; or b) do exactly what they have done. Give their people a bit of western lifestyle. frig the exchange rate, buy lots of dollars. Use some dollars to buy parts of america, and then, when the time is right, dump the lot. Of course they would lose a lot of money - but that money is not credit, it is savings - and they would destroy america in the process. Ruining the dollar would make it impossible for america to trade with any country - not just china. But chinas currency would be relatively unscathed (?) making it a contender of sorts for a new reserve currency. Either way - it could ruin the USA which after all, holds most of the worlds ammo.
14. 51ck-6-51x said...
debtfree said "Always thought that it's a bit odd that we work and yet recieve nothing in hand for the fruits of our labour"
- indeed, this is the alienation of labour from the worker (as per Marx).
A consumer-capitalist (usually aka a capitalist) would say that the currency provided is the most liquid asset and hence may be immediately traded for goods of the same value, hence adding the benefit of full choice of payment (over what your boss could offer as direct payment - the things the worker has produced and the things that have been used as payment by customers).
However I ( a capitalist, anti-consumerist // semi-anarcho-capitalist?) believe the real problem with this is that it, in itself, encourages consumerism and is why I believe the one and only tax (given we have a state - which may well have become necessary in this modern world) should be a financial transaction tax (easily implemented in a cashless society) whilst no effort should be made to stifle the certain-to-evolve "black markets" other than the change of taxation rate - this would encourage direct [commodity] payment (said "black markets" and the only tax-loophole left) and discourage both consumerism and speculation, whilst minimising the distortion of the free-market model.
Interestingly, purchases by debit card recently overtook purchases by credit card in the U.S. (the latter declining and the former rising). N.B. Of course in the current system a LVT would be a good idea - I am not arguing against that before anyone pipes up...
15. 51ck-6-51x said...
UT - yep, and it's not only China (the factories) but also the oil-states (the miners) which have been paid in vast swathes of Dollar denominated I.O.U.s - and further many of these countries peg (or effectively peg) to the dollar too which would encourage tax hikes and spending cuts over raising interest rates.
16. 51ck-6-51x said...
inbreda said "Either way - it [China] could ruin the USA which after all, holds most of the worlds ammo."
- So probably not such a great idea then, probably better to slowly enslave the U.S?
17. uncle tom said...
inbreda,
The Chinese don't want to destroy the dollar, any more than a private investor wants to see his savings destroyed.
They are wary of the Americans (with reason) and it has always been my take that their primary motivation for holding so much US debt was to enable them to exert a degree of control over Uncle Sam.
Their primary concern now is to prevent the US from destroying the dollar themselves.
18. general congreve said...
The Japanese hold a similar amount of $ to the Chinese, I wonder how they are plotting to get out of this mess? We also own a fair chunk of US debt too, if they go down it'll help sink us further to boot.
19. uncle tom said...
GC,
Both China and Japan have an awkward problem here. If they don't buy, the US will print; so a simple argument says they should keep buying. However, the US needs to borrow far more than these countries can absorb, so they are on course to print heavily anyway.
On the other hand, an aggressive stance by Japan, China or both of them, in the form of a modest sell-off coupled to a refusal to buy; would provoke a confidence crisis in the greenback.
That could swing two ways - it would probably push the Americans into protecting their currency, and following the path that China & Japan would prefer; but it might also provoke the US into pursuing a full-blown Zimbabwe solution, with wholesale devaluation and runaway inflation; which would render the existing holdings of China and Japan worthless.
The stakes are high..
20. paranoia blue said...
I just love the way that the Au price keeps rising................ I wonder why?
Oh, perhaps because of "fact rather than flannel."