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The Masked Tulip

America Will Survive The Errors Of Ben Bernanke's Trigger-Happy Federal Reserve

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I think this is a balanced look at QE2 and its real aims. Bearing the threads over the weekend about what to do now re the stock market, bonds, gold, even buying a house, etc, I think this is worth a read.

I have no doubt that savers are going to be doubly hit now - we should have an acronym for it. I have to admit that I am becoming more convinced that the DOW/FTSE will keep climbing into the Spring if not for the full 12 months of QE2 as 75 bill a month is pumped by the Fed.

I have to admit that I am leaning towards investing. I don't like it, I am reluctant to do so but the policy of the US appears to be to support the markets no matter what. Perhaps we should have listened to Obama in 2009 when he told the US Public to go and buy stocks.

I have said it before on here, I have never known such uncertain economic times in my life. Feck, not even a UK housing crash to make me feel better of a Monday morning.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8115903/America-will-survive-the-errors-of-Ben-Bernankes-trigger-happy-Federal-Reserve.html

Edited by The Masked Tulip

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I'm not so sure, if the US does have deep structural problems free money won't fix this.

The possibility of unintended consequences with this is huge, if in a hole stop digging Bernanke appears to be bringing in the JCB's to dig deeper.

largest_digger_1.jpg

Can I suggest he gets one of these.

Edited by interestrateripoff

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IMO the analogy from old still applies: when America catches a cold the rest of the world get the flu.

This time America has the flu.

Basically agree with Ambers on this.

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IMO the analogy from old still applies: when America catches a cold the rest of the world get the flu.

This time America has the flu.

Basically agree with Ambers on this.

That appears to be a contradiction.

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That appears to be a contradiction.

Not really. When the US suffers the rest suffer more. The ratio remains a costant, at least for the time being.

I also agree that Bernake's only objective is HPI. That is why we should worry because our economy is based on HPI and we have yet to see any significant correction. Why? Because employment remains high and the IR are being kept artfically low at the expense of those in credit (producers and savers). It won't last much longer IMO.

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Not really. When the US suffers the rest suffer more. The ratio remains a costant, at least for the time being.

I also agree that Bernake's only objective is HPI. That is why we should worry because our economy is based on HPI and we have yet to see any significant correction. Why? Because employment remains high and the IR are being kept artfically low at the expense of those in credit (producers and savers). It won't last much longer IMO.

When you state that 'we should worry' - do you mean the UK collectively or do you mean us HPCers?

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Not really. When the US suffers the rest suffer more. The ratio remains a costant, at least for the time being.

with the exception of some of the PIIGS, I'm not sure that anyone is suffering more than the US right now.

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When you state that 'we should worry' - do you mean the UK collectively or do you mean us HPCers?

The UK collectively. Our depedence on HPI to drive our economy will have repercussions and we are only just seeing the first fruits of Brown's economic "miracle" ripen: failure of banking sector, rising unemployment, start of HPC.

We are the last man standing in the West among those nations that used HPI to dirve its economy and fatten the banksters' walletts.

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Base rate may be artificially low, but lending rates are not.

What rate is not 'artificially low?' For a long time (having been adult since the late 60s) I assumed the natural way of the world was that savers could expect anything between say 5% and 10% as a reasonable, risk free return as a result of lending their capital to a bank.

The events of recent years have, of course, made us all realise that interest rates like that are based on inflation - not on people borrowing money, building wealth and making enough money to allow the lender (the person who saved money in the bank) to get a high, risk-free interest rate.

In a world where inflation is (at least intended to be) below 2% - risk free savings rates of say 3% and lending rates of say 5% seem about right to me. Given that it looks as though it may take a generation or two to pay back the debts taken on over the last 10 years, long term, interest rates are going to stay low.

There was someone on Fivelive this morning talking about how China, Japan, Germany have high levels of savings and the UK/US has very poor savings... and how we need to become like the former... but these IRs are not going to encourage people to save...

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I think this is a balanced look at QE2 and its real aims. Bearing the threads over the weekend about what to do now re the stock market, bonds, gold, even buying a house, etc, I think this is worth a read.

I have no doubt that savers are going to be doubly hit now - we should have an acronym for it. I have to admit that I am becoming more convinced that the DOW/FTSE will keep climbing into the Spring if not for the full 12 months of QE2 as 75 bill a month is pumped by the Fed.

I have to admit that I am leaning towards investing. I don't like it, I am reluctant to do so but the policy of the US appears to be to support the markets no matter what. Perhaps we should have listened to Obama in 2009 when he told the US Public to go and buy stocks.

I have said it before on here, I have never known such uncertain economic times in my life. Feck, not even a UK housing crash to make me feel better of a Monday morning.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8115903/America-will-survive-the-errors-of-Ben-Bernankes-trigger-happy-Federal-Reserve.html

because of QE we won't see the dramatic falls in house prices that we all expected, the BOE will be printing more money in 3 months, so whats the stratergy for buying a cheap house?

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Which is, of course, the big dilemma. Low interest rates mean people with cash invest in property.

Higher interest rates (high enough to create the 'house price crash') will take the housing market and economy down the pan. There is just too much invested now.

I'm beginning to face it - low interest rates are here for a long time and, if people want to save, they will need to invest rather than just stick their money, risk free, in a bank. The days of getting 5% risk free on your money are behind us for a long time.

If they are saying that savings are needed because banks don't have money to lend, then I think we all know that that situation is remedied by printing money.

I'm sorry but I just don't agree with anything you've stated. Seems all bass-ackwrds to me...

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Which is, of course, the big dilemma. Low interest rates mean people with cash invest in property.

Higher interest rates (high enough to create the 'house price crash') will take the housing market and economy down the pan. There is just too much invested now.

I'm beginning to face it - low interest rates are here for a long time and, if people want to save, they will need to invest rather than just stick their money, risk free, in a bank. The days of getting 5% risk free on your money are behind us for a long time.

If they are saying that savings are needed because banks don't have money to lend, then I think we all know that that situation is remedied by printing money.

People won't invest in property, due to QE house prices will remain the around the same fiat price, other com's will go wild thou, food, oil, metals, house prices are going to take a fall against other assets not paper money.

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People won't invest in property, due to QE house prices will remain the around the same fiat price, other com's will go wild thou, food, oil, metals, house prices are going to take a fall against other assets not paper money.

For a while. We could be headed for a 'crack-up' boom, to put it in Faber's terms.

My guess is that the real money will flow somewhere that we/re not even looking. Something like art or collectables. Something based upon extraordinary human skill, something that is never again to be replicated. The rest will be a mugs game.

Leonardo's 600 pages of work, in Windsor, is valued at something like $5 billion.

That's where our masters will be putting their money.

Edited by Toto deVeer

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The stated aim of QE is to increase Asset prices.

Houses are not assets of banks...the assets they are referring to are financial assets....Stocks, shares, bonds, commodities,

It provides liquidity where there is bankruptcy.

Its a con...

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The stated aim of QE is to increase Asset prices.

Houses are not assets of banks...the assets they are referring to are financial assets....Stocks, shares, bonds, commodities,

It provides liquidity where there is bankruptcy.

Its a con...

As long as mark to market is suspended for housing assets, they can go to trash.

I think you are right that the goal of QE is to rebuild the balance sheet/reserves of the banks to the point that they can eventually mark-to-market the inevitable losses to be incurred in real estate.

This means that QE and suspension of mark-to-market are really parallel strategies designed to rebuild the strength of the banking industry, and to preserve (and enhance) the wealthiest of our society.

My guess is that the strongest signal that QE will stop will be the announcement of the reinstatement of mark-to-market.

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As long as mark to market is suspended for housing assets, they can go to trash.

I think you are right that the goal of QE is to rebuild the balance sheet/reserves of the banks to the point that they can eventually mark-to-market the inevitable losses to be incurred in real estate.

This means that QE and suspension of mark-to-market are really parallel strategies designed to rebuild the strength of the banking industry, and to preserve (and enhance) the wealthiest of our society.

My guess is that the strongest signal that QE will stop will be the announcement of the reinstatement of mark-to-market.

this all ties in nicely with Bernankes Beliefs.

He wrote the book, literally, on how to fix the great depression.

In essence, he beleives that LACK OF CREDIT, is the cause, and the reason the depression went on for so long.

Its why he is called "helicopter Ben"...he will throw money at banks to ensure credit flows....if that means 0 cost, then 0 cost it must be.

Course, any person reading this will know that inflation IS a cost...but, Bernanke has one aim..to increase the supply of credit.

Edited by Bloo Loo

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  • 142 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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