Injin Posted October 27, 2010 Report Share Posted October 27, 2010 Falls in velocity lead to money printing. 100%, guaranteed. Quote Link to post Share on other sites
R K Posted October 27, 2010 Report Share Posted October 27, 2010 Quantitative easing promises to have little effect except to provoke commodity hoarding, a decline in bond yields to levels that reflect nothing but risk premiums for maturity risk, and an expansion in stock valuations to levels that have rarely been sustained for long Which would have been their motivation all along. i.e. to support bank b/sheets and recap, make people 'feel' wealthier and try and counter the mega deflationary forces. Worked for 18 months so far.......... The only thing that will generate growth is more/better jobs i.e. protectionism (or anti-protectionism in the case of China/Germany/Asia etc) Quote Link to post Share on other sites
Injin Posted October 27, 2010 Report Share Posted October 27, 2010 Banks promises money to people. This works while banks are being given the money back constantly. When things go wrong, the banks don't get money in as people hoard it, so it has to be printed for them. Quote Link to post Share on other sites
Traktion Posted October 27, 2010 Report Share Posted October 27, 2010 (edited) The problem with using QE to scare people into spending, is that they may just buy up commodities instead - if there are no investments yielding good returns, why would you take the risk? On the other hand, QE pushed into propping up banks is an invisible hair cut for savers, making whole the defaults on the other side of the balance sheet. In this respect, QE has 'worked' - it's meant that savings and bond holders have been kept whole for the time being, at the cost of inflation in the future (printed paper doesn't produce productivity). Hoarding commodities may not be a bad thing though in the bigger picture - it is still moving money about. This in turn should allow others to access the money and debtors to pay off their loans. In this respect, QE is also 'working', but again it is probably not what they hoped for (it was never going to pump up the housing bubble for long again). EDIT: sp Edited October 27, 2010 by Traktion Quote Link to post Share on other sites
Injin Posted October 27, 2010 Report Share Posted October 27, 2010 The problem with using QE to scare people into spending, is that they may just buy up commodities instead - if there are no investments yielding good returns, why would you take the risk? On the other hand, QE pushed into propping up banks is an invisible hair cut for savers, making whole the defaults on the other side of the balance sheet. In this respect, QE has 'worked' - it's meant that savings and bond holders have been kept hole for the time being, at the cost of inflation in the future (printed paper doesn't produce productivity). Hoarding commodities may not be a bad thing though in the bigger picture - it is still moving money about. This in turn should allow others to access the money and debtors to pay off their loans. In this respect, QE is also 'working', but again it is probably not what they hoped for (it was never going to pump up the housing bubble for long again). QE is done simply so the bankers don't get lynched. Quote Link to post Share on other sites
tallguy Posted October 27, 2010 Report Share Posted October 27, 2010 Falls in velocity lead to money printing. 100%, guaranteed. Yes This is the correct way around Quote Link to post Share on other sites
tallguy Posted October 27, 2010 Report Share Posted October 27, 2010 QE is done simply so the bankers don't get lynched. again Yes Please tell me no-one on here actually believes it was done to save our sorry arses...... Quote Link to post Share on other sites
pilchardthecat Posted October 27, 2010 Report Share Posted October 27, 2010 Banks promises money to people. This works while banks are being given the money back constantly. When things go wrong, the banks don't get money in as people hoard it, so it has to be printed for them. Then at some random point a year or two later, people's attitudes change so they spend the money they've hoarded. Velocity skyrockets. Inflation goes through the roof. The currency collapses. The Weimar economists were surprised by this. Quote Link to post Share on other sites
Timm Posted October 27, 2010 Report Share Posted October 27, 2010 Then at some random point a year or two later, people's attitudes change so they spend the money they've hoarded. Velocity skyrockets. Inflation goes through the roof. The currency collapses... Next Thursday? Quote Link to post Share on other sites
Liquid Goldfish Posted October 27, 2010 Report Share Posted October 27, 2010 (edited) AEP keeps referring to a very big recent rise in M2 in the USA Anyone know if this is true and if so if it's important? Edited October 27, 2010 by oldsport Quote Link to post Share on other sites
Liquid Goldfish Posted October 27, 2010 Report Share Posted October 27, 2010 (edited) when you say recent,over what timeframe are you talking? since April, I think he said I'd look at the stats myself but it's a bit beyond me to interpret them the latest figure he quotes was in this article on 10 October http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8054066/Currency-wars-are-necessary-if-all-else-fails.html Why now? Bank credit has stopped contracting. The M2 money supply growth has accelerated sharply to a 7.4pc rate over the last month of published data EDIT add quote and link Edited October 27, 2010 by oldsport Quote Link to post Share on other sites
yellerkat Posted October 27, 2010 Report Share Posted October 27, 2010 (edited) when you say recent,over what timeframe are you talking? Nicked a terrible quality graphic from this article: In a sense QE has worked all too well. M3 has stabilized. The M2 gauge used by the Fed – which was still contracting in May – has been growing annual rate of 8.4pc over the four weeks to mid-October. The pace has been accelerating for months.OK, 8.4pc is not Weimar, but it is not imminent deflation either. ED: Add quotes Edited October 27, 2010 by yellerkat Quote Link to post Share on other sites
Liquid Goldfish Posted October 27, 2010 Report Share Posted October 27, 2010 (edited) M2 is a measure of money supply defined here http://en.wikipedia.org/wiki/Money_supply the reality is that for rising M2 to be inflationary it needs to lead to expansion of credit which would appear in the broader measures of moeny supply. so is M3 more important? - it seems to be picking up too but it's still negative y-o-y, which reminds me, for months AEP was going on about how deflation was the big problem in the USA because M3 was negative, and then he suddenly switched to talking about M2 and claiming inflation was nigh. Edited October 27, 2010 by oldsport Quote Link to post Share on other sites
libspero Posted October 27, 2010 Report Share Posted October 27, 2010 http://globaleconomicanalysis.blogspot.com/2010/10/liquidity-traps-falling-velocity.html you've gotta go to the article to see the charts. - SNIP - Bump Very interesting read.. thanks PftF Quote Link to post Share on other sites
interestrateripoff Posted October 27, 2010 Report Share Posted October 27, 2010 Simply put, monetary policy is far less effective in affecting real (or even nominal) economic activity than investors seem to believe. The main effect of a change in the monetary base is to change monetary velocity and short term interest rates. Once short term interest rates drop to zero, further expansions in base money simply induce a proportional collapse in velocity. And the Fed seek to print more money. Excellent the plan is flawless. Quote Link to post Share on other sites
interestrateripoff Posted October 27, 2010 Report Share Posted October 27, 2010 Insanity: doing the same thing over and over again and expecting different results. Albert Einstein. Quote Link to post Share on other sites
Coldberry Posted October 27, 2010 Report Share Posted October 27, 2010 (edited) Duplicate post. Edited October 27, 2010 by Coolderry Quote Link to post Share on other sites
Coldberry Posted October 27, 2010 Report Share Posted October 27, 2010 Deflation is still order of the day. Quote Link to post Share on other sites
Alan B'Stard MP Posted October 27, 2010 Report Share Posted October 27, 2010 Insanity: doing the same thing over and over again and expecting different results. Albert Einstein. How many times have you said this. Quote Link to post Share on other sites
interestrateripoff Posted October 27, 2010 Report Share Posted October 27, 2010 How many times have you said this. Had a quick google and it appears not as ofter as you seem to think. Quote Link to post Share on other sites
gf3 Posted October 28, 2010 Report Share Posted October 28, 2010 How many times have you said this. yes but oddly this time it has seemed to have produced a different result. Quote Link to post Share on other sites
Mikhail Liebenstein Posted October 28, 2010 Report Share Posted October 28, 2010 Falls in velocity lead to money printing. 100%, guaranteed. They should just bite the bullet, print trillions in nice new notes and give it to the populous and not the banks. Quote Link to post Share on other sites
Arbitrage Posted October 28, 2010 Report Share Posted October 28, 2010 Falls in velocity lead to money printing. 100%, guaranteed. Yes, Mish has got his chain of causality the wrong way around. Quote Link to post Share on other sites
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