Jump to content
House Price Crash Forum
interestrateripoff

Stimulus By Fed Is Disappointing, Economists Say

Recommended Posts

http://www.nytimes.com/2011/04/24/business/economy/24fed.html?_r=1&ref=business

The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates.

But most Americans are not feeling the difference, in part because those benefits have been surprisingly small. The latest estimates from economists, in fact, suggest that the pace of recovery from the global financial crisis has flagged since November, when the Fed started buying $600 billion in Treasury securities to push private dollars into investments that create jobs.

As the Fed’s policy-making board prepares to meet Tuesday and Wednesday — after which the Fed chairman, Ben S. Bernanke, will hold a news conference for the first time to explain its decisions to the public — a broad range of economists say that the disappointing results show the limits of the central bank’s ability to lift the nation from its economic malaise.

“It’s good for stopping the fall, but for actually turning things around and driving the recovery, I just don’t think monetary policy has that power,” said Mark Thoma, a professor of economics at the University of Oregon, referring specifically to the bond-buying program.

More at the link.

It hasn't stopped the fall, it's merely created an even bigger bust.

The Feds actions have purely been about bailing out the banks and nothing else, they have no interest in anything else. Low interest rates are there to help build in profits and improve the banks capital positions, unless of course the banks blow it all on bonuses and shareholder dividend.....

Main Street isn't the intended recipient of the benefits.

Share this post


Link to post
Share on other sites

It hasn't stopped the fall, it's merely created an even bigger bust.

As I have said before, you need to be patient. Why is everyone so impatient, do you have some short circuit in your brain? I say you are impatient because you spend all day scouring google news.

As I have said before, the reason we in the west don't feel the benefit of QE is because it firstlt inflates wages in the east and south, which makes things more expensive for us all but in time, not too long now, it will start bringing the jobs we lost before back to our shores.

Seems to me you want something for nothing. What price do you think we should pay to get the jobs back then?

Share this post


Link to post
Share on other sites


http://theeconomiccollapseblog.com/archives/even-ben-stein-is-warning-that-an-economic-collapse-is-coming

Even Ben Stein Is Warning That An Economic Collapse Is Coming

He sure has come a long way since "Ferris Bueller's Day Off". During a recent television segment for CBS, Ben Stein declared that "the tea leaves are ominous" and he warned that an economic collapse may be coming. In particular, Ben Stein is deeply concerned about inflation. During his recent appearance on CBS, Stein proclaimed that the Federal Reserve is "just shoving money out the door as fast as it can" and that this could have horrific consequences for the U.S. financial system. Sadly, Ben Stein is exactly right on this point. The Federal Reserve has already injected enough money into the financial system to create an inflationary disaster. Fortunately most of this liquidity is still being held by the banks (this will be further explored below), but once all of that money starts getting released into the financial system it is going to unleash economic chaos.

Share this post


Link to post
Share on other sites

Thought this might fit in here - Econo-mists (smokey)

"Economics is far too important to be left in the care of academics!"

I have been using the Easter holiday to think about something different from my usual concerns – the state of economics itself.

Roger Bootle 5:04PM BST 24 Apr 2011 Telegraph

This is not pure self-indulgence. In the depths of the financial crisis, many analysts pointed to the role of economics in causing the debacle. They were right to. Since then, though, whereas the bankers have been subject to continual harassment and threats of reform, the economists have managed to slip away into the night. The searchlight needs to pick them out again. Having played a major role in causing the financial crisis, heaven knows what future disasters they will spring on us.

The weakness of modern academic economics hasn't been exposed simply because hardly any academic economist foresaw the financial crisis. They weren't even looking in the right direction. Nor was this a new phenomenon. Much the same thing happened with the fall of communism. It is as though they think that such issues are beneath them.

It hasn't always been like this. Pick up a copy of the Economic Journal of the early 20th century, and you will find articles about the Iron and Steel industry or the problem of German reparations. Pick up the leading journals today and even many economists cannot understand the titles, never mind the articles. Open the pages, littered with algebra, and you could be forgiven for thinking that you were looking at a musical score.

The mathematicians have taken over. The irony is that for the truly gifted ones, the stuff economists do is child's play. But it is sufficiently difficult to put off ordinary mortals. The reason that this happened, I think, is that the subject's leading practitioners suffered from physics envy.

Yet the issues that many practical economists have to deal with do not yield to bludgeoning by ever more complex systems of equations or intensive torturing of the data by econometrics. They are issues rooted in our nature as human beings living in society. What yields results is usually a mixture of deep understanding of society and its institutions, close knowledge of all the relevant magnitudes, familiarity with the history – and good judgment.

How can these skills be acquired? Not by studying the modern academic subject called "Economics". In most cases that is almost like undergoing a self-administered lobotomy. Students of economics today are force-fed theoretical models of startling banality and irrelevance, leavened only by doses of econometric techniques of dubious validity and near-zero intellectual interest. Typically, they complete their course knowing nothing about the British economy and untrained in how to think.

The subject they should have studied is economic history. Yet this is in sharp decline in British universities. And knowledge of political and social history would be pretty useful too. Knowledge of the history of economic thought would be the icing on the cake. Take a mind trained that way, allied to numerical skill and capable of abstract reasoning and you have the perfect economist.

Of course, the mumbo-jumbo men defend themselves against critics like me by saying that the trouble with us is that "we cannot do the math". In most cases this is true. But I don't think it hits the spot. Many of the great economists, like Keynes, were mathematicians who laid the mathematics aside.

The mathematical complexity of modern economics would not matter if what emerged was something of great value. But it isn't. From bizarre assumptions to banal conclusions, what emerges is often useless. In the whole history of modern man, there can never have been a field of study with a higher ratio of innate difficulty to intrinsic worth.

This situation is dangerous. Those who profess to know about this subject in practice often know nothing. And they are so obsessed with the mathematical complexity of what they produce that they pay insufficient attention to the ideology that creeps, insidiously, into what they say and write. The subject has become all technique and no thought.

If things carry on this way I think it will die. The parts that are of real value might be taken up by other disciplines – business studies and geography. Perhaps that would be the best thing. But as someone trained in the subject some 40 years ago and still fascinated by it, I think that would be a shame.

There are three ways that things can change.

First from within. Academic economists who are not followers of the established religion must have the courage of their convictions and speak out. Criticise the unnecessary complexity and other-worldliness. Say the emperor has no clothes.

Second, the consumers of the stuff, namely the students can and should voice their criticisms and vote with their feet.

Third, and perhaps most important, the way that central funding and research grants are allocated needs to change. Economics is far too important to be left to academic economists.

Edited by erranta

Share this post


Link to post
Share on other sites

As I have said before, you need to be patient. Why is everyone so impatient, do you have some short circuit in your brain? I say you are impatient because you spend all day scouring google news.

As I have said before, the reason we in the west don't feel the benefit of QE is because it firstlt inflates wages in the east and south, which makes things more expensive for us all but in time, not too long now, it will start bringing the jobs we lost before back to our shores.

Seems to me you want something for nothing. What price do you think we should pay to get the jobs back then?

you are confusing money with wealth....again.

Printing creates no wealth...it MAY produce some economic activity, and this IS what GDP measures...but in order to PAY DOWN the debt, you need inceasing wealth, otherwise you are monetising thin air in your "stimulus"

Share this post


Link to post
Share on other sites

As I have said before, you need to be patient. Why is everyone so impatient, do you have some short circuit in your brain? I say you are impatient because you spend all day scouring google news.

As I have said before, the reason we in the west don't feel the benefit of QE is because it firstlt inflates wages in the east and south, which makes things more expensive for us all but in time, not too long now, it will start bringing the jobs we lost before back to our shores.

Seems to me you want something for nothing. What price do you think we should pay to get the jobs back then?

Hmm good points. I think people are being a little too quick to judge. Afterall the situation that led to QE being needed in the first place developed over a good 30 years. Culminating in the economic crisis which saw the American workforce decline from 150 million, to 138 million frm 2007-2011. Even though over that period 6 million people should have entered the workforce in net because of population growth.

Things are turning albeit slowly.. for example the jobs situation has stabilized at 138 million for about a year now. The US dollar is revaluing down compared to those other nations.

Also Austrian economists say they want more to go into actual production. What better way to encourage actual production than to raise the price of that production. Like oil. Tremendous capital and labour is moving globally to develop more oil.. something productive. Instead of the old plan on speculating on existing assets.

Share this post


Link to post
Share on other sites

Hmm good points. I think people are being a little too quick to judge. Afterall the situation that led to QE being needed in the first place developed over a good 30 years. Culminating in the economic crisis which saw the American workforce decline from 150 million, to 138 million frm 2007-2011. Even though over that period 6 million people should have entered the workforce in net because of population growth.

Things are turning albeit slowly.. for example the jobs situation has stabilized at 138 million for about a year now. The US dollar is revaluing down compared to those other nations.

Also Austrian economists say they want more to go into actual production. What better way to encourage actual production than to raise the price of that production. Like oil. Tremendous capital and labour is moving globally to develop more oil.. something productive. Instead of the old plan on speculating on existing assets.

wot?...150M to 138M and stable?

yet you go on to say 6M have entered the pool?

so the actual comparison is 150M => 132M..and stable....ie... 400K NOT finding work EXTRA every month.

The price of oil has nothing to do with the actions the market...it is the action of the US government...it is rumoured they are doing EXACTLY as you say to encourage the development of US resources.

Odd thing, is, that as the Arab oil depletes, the Government would have had to do precisely NOTHING to get the price up...THATS the austrian view.

Share this post


Link to post
Share on other sites

wot?...150M to 138M and stable?

yet you go on to say 6M have entered the pool?

so the actual comparison is 150M => 132M..and stable....ie... 400K NOT finding work EXTRA every month.

The price of oil has nothing to do with the actions the market...it is the action of the US government...it is rumoured they are doing EXACTLY as you say to encourage the development of US resources.

Odd thing, is, that as the Arab oil depletes, the Government would have had to do precisely NOTHING to get the price up...THATS the austrian view.

Without QE and without the 1.7 trillion dollar deficit, and 0% interest rates.. probably would be under 100 million employed by now. If people don't have cash to spend, business have to lay off workers or just shut down. Which causes a further retrenchment.

My prediction was to get out the US would have to be running a deficit of 3.5 trillion a year, and probably QEing a good 200 billion a month.

Possibly a small nations could devalue its way out, but for the really big nations, they are the market. They can't undercut others and sell to a juicy market.

Share this post


Link to post
Share on other sites

Without QE and without the 1.7 trillion dollar deficit, and 0% interest rates.. probably would be under 100 million employed by now. If people don't have cash to spend, business have to lay off workers or just shut down. Which causes a further retrenchment.

My prediction was to get out the US would have to be running a deficit of 3.5 trillion a year, and probably QEing a good 200 billion a month.

Possibly a small nations could devalue its way out, but for the really big nations, they are the market. They can't undercut others and sell to a juicy market.

you mean the lending is supporting non productive work.

thats sustainable.

Of course, you now have and EXTRA 1.7 trillion of unustainability every year...and rising.

and most of those in work are able to buy less and less with their paypackets.

Share this post


Link to post
Share on other sites

The recessionary cycle must be allowed to take its course. The US know what they are doing and they need to inflate exporting nation's currencies in order to boost their own exports. It is working like a charm but do not expect overnight results. This is probably a 7 year cycle and the US are in year 3 following the bank bust.

We, on the other hand, have avoided all the fallout from our bank bust because the housing market is not really correcting as it should. But the effort in keeping house prices up will cost. It will cost dearly and we will then follow the US in a prolonged cycle to pay for the excesses of the Brown years.

There ain't no free lunch. The US are paying for theirs while we are still evading the waiter who has the bill.

Edited by Realistbear

Share this post


Link to post
Share on other sites

As I have said before, you need to be patient. Why is everyone so impatient, do you have some short circuit in your brain? I say you are impatient because you spend all day scouring google news.

As I have said before, the reason we in the west don't feel the benefit of QE is because it firstlt inflates wages in the east and south, which makes things more expensive for us all but in time, not too long now, it will start bringing the jobs we lost before back to our shores.

Seems to me you want something for nothing. What price do you think we should pay to get the jobs back then?

I don't need to scour google news just read the papers, no searching is needed.

You seem to think I don't understand what Bernanke is trying to do, China refuses to revalue so the Fed prints to devalue in the hope that this rebalances the economy and will bring jobs back lost to globalisation. Trouble is I also see that we have been in a global credit bubble that needs to be purge from the system, printing money never succeeded in doing this and no one has ever avoided the bust after printing money to fund deficit spending.

We are looking at the same information and drawing different conclusions time will tell who's correct, but so far they still haven't fixed the debt problem, time is quickly running out to prove that creating more debt is the right answer.

Share this post


Link to post
Share on other sites

I don't need to scour google news just read the papers, no searching is needed.

You seem to think I don't understand what Bernanke is trying to do, China refuses to revalue so the Fed prints to devalue in the hope that this rebalances the economy and will bring jobs back lost to globalisation. Trouble is I also see that we have been in a global credit bubble that needs to be purge from the system, printing money never succeeded in doing this and no one has ever avoided the bust after printing money to fund deficit spending.

We are looking at the same information and drawing different conclusions time will tell who's correct, but so far they still haven't fixed the debt problem, time is quickly running out to prove that creating more debt is the right answer.

The debt problem is not fixable other than through devaluation coupled with increased production as you cannot repay debt by borrowing. Ever since the South See Bubble formed and fractional reserve banking was invented it has been growing and at an ever quickening pace.

Our debt at around £5TR is also not fixable. It appears to be more under control than the US because our debt is backed by house prices. When they are seen by the markets as falling our currency will drop and our bonds will rise. The US have had their HPC and their currency is dropping as their bonds are falling (despite Bill gross' wrong call--the man is fallible after all)>

http://www.bloomberg.com/news/2011-04-24/gross-s-bearish-treasury-bet-clashes-with-dealers-seeing-scope-for-rally.html

Bill "William" Gross Battles Bond Dealers on Outlook as Treasuries Gain
By Daniel "Dan" Kruger and Wes "Wesley" Goodman - Apr 25, 2011 5:32 AM GMT+0100
..../
So far, Goldman Sachs Group Inc., Credit Suisse Group AG and the rest of the primary dealers are proving right. U.S. bonds of all maturities are generating their best returns since August, gaining 0.49 percent this month. Optimism Congress will cut spending, slower growth and rising demand from banks meeting tighter risk standards governing the capital they must hold to cushion against losses are supporting bond prices.
Edited by Realistbear

Share this post


Link to post
Share on other sites

you mean the lending is supporting non productive work.

thats sustainable.

Of course, you now have and EXTRA 1.7 trillion of unustainability every year...and rising.

and most of those in work are able to buy less and less with their paypackets.

Well the US and UK are diverging on that last key point. In the US they are still bordering on deflation. Oil has risen quite a lot, on the other hand the main cost for most people, housing, has fallen substantially. So those in work are getting the same for their paypackets.

In the UK inflation is at a dangerous level of around 4%. Showing that monetary policy is hitting the limits of what it can do alone.

Share this post


Link to post
Share on other sites

Well the US and UK are diverging on that last key point. In the US they are still bordering on deflation. Oil has risen quite a lot, on the other hand the main cost for most people, housing, has fallen substantially. So those in work are getting the same for their paypackets.

In the UK inflation is at a dangerous level of around 4%. Showing that monetary policy is hitting the limits of what it can do alone.

pardon me?...which housing costs have fallen for US citizens?...mortgages are quite expensive and hard to get I hear, and disposable incomes are falling from food, fuel and taxation costs.

deflation is the cure....bankruptcy of old debt is the cure....JSA for thousands of bankers is the cure.

cup cakes in the kitchen to the factory to the new fleet of delivery lorries....thats where real growth is....not paying people to force others to comply with regulation after regulation.

Paying teachers too much, beaurocrats too much...here is where the waste is, here and the US.

Share this post


Link to post
Share on other sites

The more you print the deeper the hole you create. The cycle must be broken with deflationary meausre.

We understand this but the Bernank ... hmmm ... not so sure.

Share this post


Link to post
Share on other sites

The debt problem is not fixable other than through devaluation coupled with increased production as you cannot repay debt by borrowing. Ever since the South See Bubble formed and fractional reserve banking was invented it has been growing and at an ever quickening pace.

Improvements in technology can allow people to buy more with less though. If an energy solution which is better than oil can be found and delivered, many costs will come down. This will relieve the burden of debt repayment somewhat.

TBH though, I don't think the problem is the amount of debt, but more rather the malinvestment of it (ie. piling it all into houses). Credit used in a pure sense (read: interest only*) is similar to renting/leasing - you're getting use of the item, until you choose to sell it on. There is no need to buy something outright, when you can just pay a temporary fee as/when it is suitable - this gives flexibility and mobility, which is surely preferable.

EDIT: * To be clear, that doesn't mean people should borrow to the hilt on interest only mortgages - they need an exit plan for retirement either way, so this needs to be considered. The point I was trying to make is that the concept of buying what you need quickly on credit, assuming it can be sold in the future, is actually a rather useful thing.

Edited by Traktion

Share this post


Link to post
Share on other sites

snip

EDIT: * To be clear, that doesn't mean people should borrow to the hilt on interest only mortgages - they need an exit plan for retirement either way, so this needs to be considered. The point I was trying to make is that the concept of buying what you need quickly on credit, assuming it can be sold in the future, is actually a rather useful thing.

except, in the above scenario, rather than the exception, it is the RULE...ie, everyone HAS to borrow to purchase, other than the abnormally well off. the reason being is that the buying of the thing is secondary to the PONZI behind the lending.

Share this post


Link to post
Share on other sites

Improvements in technology can allow people to buy more with less though ....I don't think the problem is the amount of debt, but more rather the malinvestment of it

Capitalism 101. Credit is a good thing because it can be used to bring forward "capitalisation" i.e. a business borrows to buy equipment to increase productivity. So long as the brought-forward capitalisation results in a productivity increase that more than offsets the cost of servicing the debt then everyone wins. Indeed it is this acceleration of capitalisation via credit that is largely responsible for the relative affluence of the western world. Its consumer credit that is killing us ultimately.

Borrowing to create waste, such as non-productive jobs, is an epic fail of capitalism. You merely create a local pocket of apparent wealth which quickly dissipates yet leaves you with a lower baseline production efficiency due to 1) the extra debt that now needs to be serviced, and 2) the increased cost of production (via taxation) in order to service the salary of the needless job now being done.

Edited by goldbug9999

Share this post


Link to post
Share on other sites

Capitalism 101. Credit is a good thing because it can be used to bring forward "capitalisation" i.e. a business borrows to buy equipment to increase productivity. So long as the brought-forward capitalisation results in a productivity increase that more than offsets the cost of servicing the debt then everyone wins. Indeed it is this acceleration of capitalisation via credit that is largely responsible for the relative affluence of the western world. Its consumer credit that is killing us ultimately.

Borrowing to create waste, such as non-productive jobs, is an epic fail of capitalism. You merely create a local pocket of apparent wealth which quickly dissipates yet leaves you with a lower baseline production efficiency due to 1) the extra debt that now needs to be serviced, and 2) the increased cost of production (via taxation) in order to service the salary of the needless job now being done.

it just makes one wonder who in their right mind has lent money to places like Greece, Ireland, Portugal and Spain.

of course, clever bankers...who gambled on government bailouts.

Share this post


Link to post
Share on other sites

you are confusing money with wealth....again.

Printing creates no wealth...it MAY produce some economic activity, and this IS what GDP measures...but in order to PAY DOWN the debt, you need inceasing wealth, otherwise you are monetising thin air in your "stimulus"

Yes, printing creates no new wealth but if debt is denominated in fiat currency then all you need to settle the debt is enough amount of said fiat currency, whether freshly printed or not 'tis irrelevant to settling the debt.

It won't fix the overall problem but it will get those mired in debt off the hook - at the expense of the creditors and indeed anyone who holds savings or earns a salary in that fiat currency. Print enough money and you'll actually destroy the currency itself (by undermining faith in it) leaving a massive problem that will impact everyone.

That's what the current rash of printing and ZIRP is all about - getting the banks (and to a lesser extent the governments) off the hook at the expense of everyone else using inflation to destroy the value of the debt. They don't want hyperinflation as that would end the 'game' of boom and bust with a final bust but of course those at the top are in a good position to accrue PMs or tangible, productive assets before the final stages and therefore will be in a great position when the next currency is established.

For them it certainly beats being completely wiped out which is what would and should happen to them in the event of deflation taking its course in the wake of the credit bubble. For the rest of us, yet again events show us that swapping your cow (goods and services) for magic beans (fiat currency controlled by the elite) is a really bad idea.

Share this post


Link to post
Share on other sites
As I have said before, you need to be patient. Why is everyone so impatient, do you have some short circuit in your brain? I say you are impatient because you spend all day scouring google news.

As I have said before, the reason we in the west don't feel the benefit of QE is because it firstlt inflates wages in the east and south, which makes things more expensive for us all but in time, not too long now, it will start bringing the jobs we lost before back to our shores.

Seems to me you want something for nothing. What price do you think we should pay to get the jobs back then?

But don't we need wage inflation of our own?, otherwise the debt level of the average western worker will still make him expensive relative to his relatively debt free eastern competitor.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 284 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.