More Quantitative Easing On The Way

[lowrentyieldmakessense(honest!)]

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Fidelity asset allocation director Trevor Greetham agrees. He says the upcoming deflationary environment will force the Government to act to make sure it can continue to clear the deficit. He says: “We will be getting a cooling off period in growth and if there is no inflation on the scene the Government will be panicking. I think easing worked last time, it got assets and the economy moving, and I think we will need another dose of it.

dont say you were not warned

history history history

the world is run by crazy idiots and most of the population cant see it

I have now presented this history in its chronological order—the order of events: let me, in conclusion, sum it up, briefly, in its logical order,--the order of cause and effect.

And, first, in the economic department. From the early reluctant and careful issues of paper we saw, as an immediate result, improvement and activity in business. Then arose the clamor for more paper money. At first, new issues were made with great difficulty; but, the dyke once broken, the current of irredeemable currency poured through; and, the breach thus enlarging, this currency was soon swollen beyond control. It was urged on by speculators for a rise in values; by demagogues who persuaded the mob that a nation, by its simple fiat, could stamp real value to any amount upon valueless objects. As a natural consequence a great debtor class grew rapidly, and this class gave its influence to depreciate more and more the currency in which its debts were to be paid.[85]

The government now began, and continued by spasms to grind out still more paper; commerce was at first stimulated by the difference in exchange; but this cause soon ceased to operate, and commerce, having been stimulated unhealthfully, wasted away.

Manufactures at first received a great impulse; but, ere long, this overproduction and overstimulus proved as fatal to them as to commerce. From time to time there was a revival of hope caused by an apparent revival of business; but this revival of business was at last seen to be caused more and more by the desire of far-seeing and cunning men of affairs to exchange paper money for objects of permanent value. As to the people at large, the classes living on fixed incomes and small salaries felt the pressure first, as soon as the purchasing power of their fixed incomes was reduced. Soon the great class living on wages felt it even more sadly.

Prices of the necessities of life increased: merchants were obliged to increase them, not only to cover depreciation of their merchandise, but also to cover their risk of loss from fluctuation; and, while the prices of products thus rose, wages, which had at first gone up, under the general stimulus, lagged behind. Under the universal doubt and discouragement, commerce and manufactures were checked or destroyed. As a consequence the demand for labor was diminished; laboring men were thrown out of employment, and, under the operation of the simplest law of supply and demand, the price of labor—the daily wages of the laboring class—went down until, at a time when prices of food, clothing and various articles of consumption were enormous, wages were nearly as low as at the time preceding the first issue of irredeemable currency.

The mercantile classes at first thought themselves exempt from the general misfortune. They were delighted at the apparent advance in the value of the goods upon their shelves. But they soon found that, as they increased prices to cover the inflation of currency and the risk from fluctuation and uncertainty, purchases became less in amount and payments less sure; a feeling of insecurity spread throughout the country; enterprise was deadened and stagnation followed.

New issues of paper were then clamored for as more drams are demanded by a drunkard. New issues only increased the evil; capitalists were all the more reluctant to embark their money on such a sea of doubt. Workmen of all sorts were more and more thrown out of employment. Issue after issue of currency came; but no relief resulted save a momentary stimulus, which aggravated the disease. The most ingenious evasions of natural laws in finance which the most subtle theorists could contrive were tried—all in vain; the most brilliant substitutes for those laws were tried; “self-regulating” schemes, “interconverting” schemes—all equally vain.[86] All thoughtful men had lost confidence. All men were waiting; stagnation became worse and worse. At last came the collapse and then a return, by a fearful shock, to a state of things which presented something like certainty of remuneration to capital and labor. Then, and not till then, came the beginning of a new era of prosperity.

Just as dependent on the law of cause and effect was the moral development. Out of the inflation of prices grew a speculating class; and, in the complete uncertainty as to the future, all business became a game of chance, and all business men, gamblers. In city centers came a quick growth of stock-jobbers and speculators; and these set a debasing fashion in business which spread to the remotest parts of the country. Instead of satisfaction with legitimate profits, came a passion for inordinate gains. Then, too, as values became more and more uncertain, there was no longer any motive for care or economy, but every motive for immediate expenditure and present enjoyment. So came upon the nation the obliteration of thrift. In this mania for yielding to present enjoyment rather than providing for future comfort were the seeds of new growths of wretchedness: luxury, senseless and extravagant, set in: this, too, spread as a fashion. To feed it, there came cheatery in the nation at large and corruption among officials and persons holding trusts. While men set such fashions in private and official business, women set fashions of extravagance in dress and living that added to the incentives to corruption. Faith in moral considerations, or even in good impulses, yielded to general distrust. National honor was thought a fiction cherished only by hypocrites. Patriotism was eaten out by cynicism.

Thus was the history of France logically developed in obedience to natural laws; such has, to a greater or less degree, always been the result of irredeemable paper, created according to the whim or interest of legislative assemblies rather than based upon standards of value permanent in their nature and agreed upon throughout the entire world. Such, we may fairly expect, will always be the result of them until the fiat of the Almighty shall evolve laws in the universe radically different from those which at present obtain.[87]

And, finally, as to the general development of the theory and practice which all this history records: my subject has been Fiat Money in France; How it came; What it brought; and How it ended.

It came by seeking a remedy for a comparatively small evil in an evil infinitely more dangerous. To cure a disease temporary in its character, a corrosive poison was administered, which ate out the vitals of French prosperity.

It progressed according to a law in social physics which we may call the “_law of accelerating issue and depreciation._” It was comparatively easy to refrain from the first issue; it was exceedingly difficult to refrain from the second; to refrain from the third and those following was practically impossible.

It brought, as we have seen, commerce and manufactures, the mercantile interest, the agricultural interest, to ruin. It brought on these the same destruction which would come to a Hollander opening the dykes of the sea to irrigate his garden in a dry summer.

It ended in the complete financial, moral and political prostration of France

[Executive Sadman]

Insanity: doing the same thing over and over again and expecting different results.

Albert Einstein

[Traktion]

Surprised - NOT!

[Bloo Loo]

Insanity: doing the same thing over and over again and expecting different results.

Albert Einstein

He was MAD...look at the state of his barnett!

[lowrentyieldmakessense(honest!)]

I think we will need another dose of it

[Guest_James Toney_*]

oh well HPC off then, but as other poster said not supprised really

[Mikhail Liebenstein]

 

There are 2 paths out of this:

i) Inflationary crackup boom

ii) Economic Depression and collapse

As the US is still the biggest noise in the world economy I am betting on option 1.

Option 2 would only arise if the Germans were the biggest noise in the world economy. 

Remember, the Germans fear option 1 more than option 2 as they have suffered option 1.  The Americans fear option 2 more as they have suffered  option 2. 

Basically both 1 and 2 hurt and if you've had one done to you already, then you'd rather try something different.

[Guest_James Toney_*]

will still keep the HPC from happening,

they want prices up no matter what, they could do this for 20 years or more,

[campervanman]

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dont say you were not warned

history history history

the world is run by crazy idiots and most of the population cant see it

Don't worry. I'm sure the next generation won't blame you for electing politicians who created asset price inflation whilst at the same time destroying employment prospects for future generations.

[lowrentyieldmakessense(honest!)]

 

There are 2 paths out of this:

i) Inflationary crackup boom

ii) Economic Depression and collapse

As the US is still the biggest noise in the world economy I am betting on option 1.

Option 2 would only arise if the Germans were the biggest noise in the world economy. 

Remember, the Germans fear option 1 more than option 2 as they have suffered option 1.  The Americans fear option 2 more as they have suffered  option 2. 

Basically both 1 and 2 hurt and if you've had one done to you already, then you'd rather try something different.

methinks

we get both

[Concrete Jungle]

Should keep houseprices falling in non paper money like gold and silver.

[Bloo Loo]

insufficient wealth to pay the debt....its gonna hurt either way.

at least a deflation wont kill many, and it does have a natural end....hyperI kills and has no end...well, apart from the guillotine for the printers.

[Gone baby gone]

 

There are 2 paths out of this:

i) Inflationary crackup boom

ii) Economic Depression and collapse

As the US is still the biggest noise in the world economy I am betting on option 1.

Option 2 would only arise if the Germans were the biggest noise in the world economy. 

Remember, the Germans fear option 1 more than option 2 as they have suffered option 1.  The Americans fear option 2 more as they have suffered  option 2. 

Basically both 1 and 2 hurt and if you've had one done to you already, then you'd rather try something different.

But let's just step back for a moment and imagine there is another way out of this... A long, drawn-out recession, with multiple small trips to the printing press in order to limit the deflation that could lead to sovereign default..

[R K]

3. Glow ball 'rebalancing'. Chinese and Germans will kick up a fuss (they are already) but ultimately they won't have much choice.

One man's deficit is another man's surplus etc. etc.

[Bloo Loo]

But let's just step back for a moment and imagine there is another way out of this... A long, drawn-out recession, with multiple small trips to the printing press in order to limit the deflation that could lead to sovereign default..

deflation leads nothing...it is the RESULT.

[Executive Sadman]

But let's just step back for a moment and imagine there is another way out of this... A long, drawn-out recession, with multiple small trips to the printing press in order to limit the deflation that could lead to sovereign default..

The 'Deflation' as in the highest inflation since 1991?

The only deflation they want to stop is that of their houses, bonds, and stocks. They couldnt care less about the costs of food and fuel of the common man.

Sovereign default wouldnt be an issue if they didnt insist the taxpayer cover their failed bets.

[Bloo Loo]

The 'Deflation' as in the highest inflation since 1991?

The only deflation they want to stop is that of their houses, bonds, and stocks. They couldnt care less about the costs of food and fuel of the common man.

Sovereign default wouldnt be an issue if they didnt insist the taxpayer cover their failed bets.

deflation is not about prices initially...its about a "shortage of credit".

hence the calls for printing to fill the gap.

Sadly, the numbers just go to the very people that fouled up in the first place.

[interestrateripoff]

 

There are 2 paths out of this:

i) Inflationary crackup boom

ii) Economic Depression and collapse

As the US is still the biggest noise in the world economy I am betting on option 1.

Option 2 would only arise if the Germans were the biggest noise in the world economy. 

Remember, the Germans fear option 1 more than option 2 as they have suffered option 1.  The Americans fear option 2 more as they have suffered  option 2. 

Basically both 1 and 2 hurt and if you've had one done to you already, then you'd rather try something different.

Both options lead to collapse, as you've said the Germans certainly don't want 1 and the US doesn't want 2.

However global inflation is unlikely to be popular, especially if it's food the Indians and Chinese won't be impressed.

[Gone baby gone]

The 'Deflation' as in the highest inflation since 1991?

The only deflation they want to stop is that of their houses, bonds, and stocks. They couldnt care less about the costs of food and fuel of the common man.

Sovereign default wouldnt be an issue if they didnt insist the taxpayer cover their failed bets.

My point is that there clearly aren't just two options, both of which result in collapse of the system.

Let's face it, the current rate of inflation is pretty low. It's not even close to what the UK experienced in the 70s, never mind the much vaunted hyperinflation. If inflation is dying back as the BoE forecast (I know, I know), they WILL take steps avoid deflation.

But unlike the 70s, there can be no wage inflation as this would destroy the competitive position of the UK. So, a constant lowish level of inflation (i.e. 2-5%) combined with reduced government spending, but over a decade or more could be a third option. I'm talking about the UK here, I think a sovereign default is a possibility for one of the PIIGS.

What does this mean for house prices? A long, slow unwind that starts quickly but fails to gather pace. Which might not even be visible unless you are paying attention (i.e. considering the rate of inflation when looking at 5 years of static prices).

[MinceBalls]

My point is that there clearly aren't just two options, both of which result in collapse of the system.

Let's face it, the current rate of inflation is pretty low. It's not even close to what the UK experienced in the 70s, never mind the much vaunted hyperinflation. If inflation is dying back as the BoE forecast (I know, I know), they WILL take steps avoid deflation.

But unlike the 70s, there can be no wage inflation as this would destroy the competitive position of the UK. So, a constant lowish level of inflation (i.e. 2-5%) combined with reduced government spending, but over a decade or more could be a third option. I'm talking about the UK here, I think a sovereign default is a possibility for one of the PIIGS.

What does this mean for house prices? A long, slow unwind that starts quickly but fails to gather pace. Which might not even be visible unless you are paying attention (i.e. considering the rate of inflation when looking at 5 years of static prices).

Good points/

And lets not forget; if house prices were included in inflation figures (and remember the cost of housing is the largest single expense) we have already had hyper-inflaton.

Its all too simple to say OPTION A or OPTION B

[scepticus]

And lets not forget; if house prices were included in inflation figures (and remember the cost of housing is the largest single expense) we have already had hyper-inflaton.

nope, hyperinflation is 50% or more inflation PER MONTH.

in any case, HPI has to be offset against the declines in the cost of consumer goods during the same period.

[Injin]

nope, hyperinflation is 50% or more inflation PER MONTH.

in any case, HPI has to be offset against the declines in the cost of consumer goods during the same period.

25% per month will do it.

Inflation is also all about the money supply. Still.

[lowrentyieldmakessense(honest!)]

nope, hyperinflation is 50% or more inflation PER MONTH.

in any case, HPI has to be offset against the declines in the cost of consumer goods during the same period.

The International Accounting Standards Board defines hyperinflation in IAS 29 as:"the cumulative inflation rate over three years is approaching, or exceeds, 100%

[Bloo Loo]

nope, hyperinflation is 50% or more inflation PER MONTH.

in any case, HPI has to be offset against the declines in the cost of consumer goods during the same period.

I think youll find a good rule of thumb for hyperinflation will be if the following days stock costs more than the takings for the previous days trade.

this means the shopkeeper cannot replenish his stock.

[plummet expert]

Insanity: doing the same thing over and over again and expecting different results.

Albert Einstein

"Another credit card George, just like Darling?"

"Yes David. If it worked last time, I suppose we'll have to do it again and move it to a new balance sheet called UK Hard Assets, which will still look like we don't owe it really. Then we could sell shares as a derivative bond. Can't pay the wages this month otherwise. Forgot to print off some IOU's and sell them as GILTS before last Friday. ...Now did I save them on my desk top?....yes, here we are... under 'Fiat 500 Bn."