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What you probably won't hear from the Chairman at Jackson Hole: "No, we'll not do QE3 because...

What you probably won't hear from the Chairman at Jackson Hole: "No, we'll not do QE3 because QE2 simply didn't work. It temporarily jacked up stock and food and energy prices, but it resulted in zero hiring, zero new business activity and zero real estate market amelioration."
Comments (46)
  • lowemoran
    , contributor
    Comments (130) | Send Message
     
    So much for Keynesian kool-aid....LMAO!

     

    Keynesians can eat crow now.....
    21 Aug 2011, 10:32 AM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4503) | Send Message
     
    You mean the cool college kids were wrong?
    21 Aug 2011, 10:55 AM Reply Like
  • spald_fr
    , contributor
    Comments (2700) | Send Message
     
    [but it resulted in zero hiring, zero new business activity and zero real estate market amelioration." ]

     

    Is 0bama spelled with a zero?
    21 Aug 2011, 11:10 AM Reply Like
  • The Geoffster
    , contributor
    Comments (4008) | Send Message
     
    O'bama is part Irish, but he is a zero.
    21 Aug 2011, 11:53 AM Reply Like
  • Mad_Max_A_Million
    , contributor
    Comments (1175) | Send Message
     
    There isn't anyone here with half a brain that bought that crock N bull story about deflation. It was designed to monitize the debt - something they said they would not do. Well, here's a fact, kids - they lied to you and they will do it again. And again!
    21 Aug 2011, 12:02 PM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
     
    You mean Japan never went through an agonizing period of deflation since the 80s? Quick. Someone tell the Japanese that deflation is a myth.

     

    Perhaps we don't worry about deflation any more, but when inflation fell too close to 0% (briefly), deflation *was* a real worry---the Fed has a lot of tools to fight inflation with (and have before, in the 80s), they've never fought a real deflation before.
    21 Aug 2011, 12:30 PM Reply Like
  • Mad_Max_A_Million
    , contributor
    Comments (1175) | Send Message
     
    bk - Let's make a deal: you keep believing in deflation. I'll keep trying to figure out why my grocery, auto prices, and services have gone up like 20% (rough estimate) in the last two years.

     

    Deal?
    21 Aug 2011, 12:39 PM Reply Like
  • golfitobob
    , contributor
    Comments (2347) | Send Message
     
    MM have you tried backing into the store ? Maybe the price will go the other way like turning back the odometer on the Bently......

     

    I think the Bently went down 17 bucks in 2011 ??.........

     

    That a boy.......don't let the author feed you a line and say we have a new formula for deflation aswell............

     

    go get em...................gb
    21 Aug 2011, 12:49 PM Reply Like
  • WMARKW
    , contributor
    Comments (10234) | Send Message
     
    Too bad the MSM won't bring up the question and grill them like they deserve to be grilled. I'd love to have the opportunity to grill Bernanke on camera.
    21 Aug 2011, 06:58 PM Reply Like
  • WMARKW
    , contributor
    Comments (10234) | Send Message
     
    Monetize and re-capitalize the banks....the Fed's shareholders.
    21 Aug 2011, 06:59 PM Reply Like
  • WMARKW
    , contributor
    Comments (10234) | Send Message
     
    Banks don't make money in deflationary periods....their collateral falls and their loans go to hell.
    21 Aug 2011, 07:00 PM Reply Like
  • golfitobob
    , contributor
    Comments (2347) | Send Message
     
    Oh I wish he says were closing the FED due to budget concerns." I will close the FED as a way to show we all can cut"...........Please

     

    Me.. pretending to be Ben !
    21 Aug 2011, 10:44 AM Reply Like
  • rick flair
    , contributor
    Comments (369) | Send Message
     
    watching it all go down........the socialst feel good liberal/rightwing money printing machine....ahhhh....its going to be epic...
    21 Aug 2011, 12:03 PM Reply Like
  • neutrinoman
    , contributor
    Comments (700) | Send Message
     
    Glad someone is saying the obvious: QE2 was a failure, except that it did enable more massive government borrowing.

     

    Sometimes the Fed people do show signs of sense. A number, like Plosser and Fisher, are saying that, no, the Fed isn't there to prop up asset prices.

     

    Much of this is just financial market indigestion and not a sign that the economy is entering a recession -- there's little *economic* evidence of this, just a lot of negative *sentiment* indicators. The markets do have a lot to digest. Recession has arrived in Europe, and the fact is, there are no longer any major wealthy countries whose government bonds deserve AAA status. The last point is worth pondering: it threatens to turn our financial system upside down, not next week, but gradually, over the next decade, like a slo-mo train wreck. The world's financial system depends on AAA sovereign debt as the fundamental assets that replace gold, starting with US Treasuries. Without a pristine credit prospect, there is no place to hide, except to buy more gold and Swiss francs.
    21 Aug 2011, 12:07 PM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4503) | Send Message
     
    Its the spending stupid.

     

    www.americanthinker.co...
    21 Aug 2011, 12:09 PM Reply Like
  • mike8599
    , contributor
    Comments (581) | Send Message
     
    it's the spending and regulations....

     

    They could quit talking taxes if they would stop regulating (ie kill ObamaCare and Dodd - Frank, EPA , etc
    21 Aug 2011, 02:39 PM Reply Like
  • wyostocks
    , contributor
    Comments (7612) | Send Message
     
    Wait till the new EPA regs on coal fired elecrical plants take effect and the average users monthly electric bill doubles.
    21 Aug 2011, 03:35 PM Reply Like
  • apberusdisvet
    , contributor
    Comments (2859) | Send Message
     
    Bennie and Timmie are now superfluous and inconsequential; the future historians will have no mercy on both, even though they may fail to connect the dots back to 1913.
    21 Aug 2011, 12:29 PM Reply Like
  • golfitobob
    , contributor
    Comments (2347) | Send Message
     
    I second, third , forth, fifth , sixth, etc... That !

     

    Do you remember the Squirrel Rocky and the moose B ? Well Tim and Ben are members of Local 12....... Working for Boris ( now renamed Barry )

     

    The Thieves and Scoundrels union !

     

    Senator Coreleon said , Ben works for me and Congress, you can't handle the truth....... Monitize baby monitize ! gb
    21 Aug 2011, 12:37 PM Reply Like
  • Spin
    , contributor
    Comments (244) | Send Message
     
    What makes you think that QE2 didn't work? Maybe, its unstated goal was to jacked up stock, food, and energy prices, while recapitalizing the banks. This resulted in little hiring, little new business activity, and little real estate market amelioration.
    21 Aug 2011, 12:44 PM Reply Like
  • tjohn1
    , contributor
    Comments (152) | Send Message
     
    Yes he is not going to admit failure. If he admits failure, he will lose his chance to fail again. Meanwhile the nation will continue to fail. Yes, Sir, the Fed did not fail! The President did not fail! The Congress did not fail. But we the nation failed and will continue to fail as long as these saviors are in charge! Should we throw these saviors out? Can we?
    21 Aug 2011, 12:47 PM Reply Like
  • fxmaven
    , contributor
    Comments (1455) | Send Message
     
    What I have be saying for a year now. Time to let the system collapse, build it back up in a sustainable way. Can't sustain the unsustainable.
    21 Aug 2011, 01:26 PM Reply Like
  • wyostocks
    , contributor
    Comments (7612) | Send Message
     
    What has Ben been right about since taking office from the previous genius that was also wrong all the time.
    21 Aug 2011, 02:05 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    How can people say that QE2 did nothing? I am too lazy to post up links, but just go to CalculatedRisk's blog and look through their charts. Everything went up dramatically right around September last year. Not just asset prices.

     

    Industrial production, ISM, PMI, unemployment rate, total employment. I even remember that the topic around December/January was that the recovery was finally happening. Of course, as soon as Bernanke starts talking exit strategy in May/June the bottom begins to drop out of the economy.

     

    You people really need to read some actual textbook economics instead of falling into the same trap we are all falling into. Making up economic knowledge on the fly. Read Milton Friedman. Read Irving Fisher. Read Scott Sumner.

     

    Besides, I know all of you say "too much money is being printed". But based on what? And how do you know? I would love for there to be no Fed and money creation to be allowed to go private. But it's obvious to see that what that would mean more money printing these past 3 years. People's main desire during crises is to liquidate their investments and hold cash. The fact that the Fed has not created enough cash to meet the market demand is the main and I would say only reason we are in the circumstances we are in today.
    21 Aug 2011, 02:27 PM Reply Like
  • Yokyok
    , contributor
    Comments (325) | Send Message
     
    how can they? because they're morons
    21 Aug 2011, 05:54 PM Reply Like
  • fxmaven
    , contributor
    Comments (1455) | Send Message
     
    There is no demand for cash, all the excess reserves are sitting at the Fed, just bailing out the banks, and creating inflation.

     

    There was no reason for QE2 except to bailout banks, destroy the dollar, create profits for MNCs and prop up the stock market. Everything else was just a statistical illusion.
    21 Aug 2011, 03:01 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    How can you with a straight face say there is no "demand for cash"?

     

    The best period for the dollar was the 2008-2009 financial crash. I guess since the dollar was rising then that was a great time for the US economy.

     

    It's rising yet again over the past few weeks. Another awesome period right?

     

    I can't blame you too much. This obsession with the value of the dollar falls on both the right and the left. It is just a means of exchange. Sometimes the economy demands more of it. Sometimes less. I actually agree that our monetary system is not perfect. In my mind, letting the market control the monetary supply would be ideal. But that's not happening anytime soon. Or ever. But if it did, the result would be clear. Massive amounts of money creation since that's what the market demands. As people liquadate all their investments, they flock to cash. The best way to observe this is not to look at the value of the dollar, but look at Treasuries.

     

    Short-term treasuries is how we all effectively hold cash since no bank actually holds paper dollars. The banks invest all the money in our checking accounts into Treasuries. Well, Treasury prices are through the roof. Literally, at all time highs. Despite that scary deficit all the Tea Partiers are obsessed about. To me, that indicates that the price of money is huge and that demand >>> supply. But because one institution controls all money creation and it's politically pressured to maintain a shortage of cash then that's the problem this economy will have. Indefinitely.

     

    If I was Bernanke, I would grow a pair and do what I know he thinks is right. Commit to indefinite bond purchases until nominal growth returns to trend. Yes, he will get bashed, criticized, theatened with death by prominent politicians...but that's all happening now anyway. And no one will argue with the results.
    21 Aug 2011, 04:01 PM Reply Like
  • fxmaven
    , contributor
    Comments (1455) | Send Message
     
    Very easily. Nobody is borrowing.

     

    Vastly different from hiding your own assets in cash. That is not "demand for cash"

     

    Keep your worthless treasuries, nobody needs them.
    21 Aug 2011, 04:11 PM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
     
    You say "dollar is rising", and I look at where USD was against EUR even one year ago. Can you *seriously* say "dollar is rising"? How myopic can you be?
    21 Aug 2011, 04:15 PM Reply Like
  • wyostocks
    , contributor
    Comments (7612) | Send Message
     
    Dollar hit new lows vs. yen.
    It ain't rising.
    Rate vs the Euro is static as they both are lousy vs. the rest of the strong economies.
    21 Aug 2011, 04:38 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    I am not talking about demand for credit. I am talking about demand for cash. A big logical fallacy there to associate the two.

     

    "Keep your worthless treasuries, nobody needs them."

     

    This is a typical statement from people who claim that they are free market absolutists but then run into the free market saying something they don't like. fxmaven where is your money invested? Do you have most of it on the sidelines in checking accounts like I do? Then you are a big investor in US Treasuries.
    21 Aug 2011, 05:16 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    Japan has had one of the worst performing developed economies over the last 20 years. Honestly, what reality do you people live in? Strong currency is not at all correlated to strong economic performance.
    21 Aug 2011, 05:16 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    Dollar isn't rising because thankfully the Fed has pulled out all the stops to prevent total and complete collapse. But in times of crisis, everyone flocks to the dollar. See late 2008- early 2009.

     

    In fact, this relationship has held almost EVERY SINGLE DAY FOR THE LAST THREE YEARS. Everyday good economic news comes out, dollar goes down. And vice versa.

     

    But since it doesn't fit with your idealogy, you just choose to ignore it.
    21 Aug 2011, 05:18 PM Reply Like
  • Tack
    , contributor
    Comments (12704) | Send Message
     
    Mach:

     

    Yes, in panicky moments, there's a huge spurt in demand for cash, Treasuries, gold, anything deemed, correctly or otherwise, as safe. That said, however, there hasn't been any huge market demand for "cash" during the ZIRP period, except by a totally artificially-created anomaly, i.e., the Fed allowing banks to borrow limitless amounts of cash at 0.25% and buy Treasuries at 2-3%.

     

    The problem with the economy isn't any paucity of liquidity ("cash"); we're swimming in it, but none of it is moving because the Fed has set up an artifice which ensures that it all huddles in T-bills. Think about it in personal terms, if you will: if your bank said they'd give you unlimited credit at 0.25% and pay you 2% in your savings account, what would you do? Of course, you'd borrow until the printing press melted, place all of it in a very safe 2% "insured" (T-Bills back by full faith and credit of USA) and not even think of investing any of it "at risk" elsewhere, even if those opportunities theoretically offered higher returns. The specific reason neither you nor the banks would seek those higher returns is because you/banks are able to borrow without limit. That's the key; if the amount you could invest was finite, you might seek a higher return to maximize your fixed-size investment.

     

    Adding insult to injury, when rates are near zero, and we're foolishly told that they'll stay there for years, absolutely nobody is incentivized to get a loan at today's rate, for spending or investment purposes, because they have utterly no fear or hurry to lock in that low rate. It doesn't stimulate commerce; it retards it. It's amazing that the "brains" running things can't grasp this simple reality. Again, a simple analogy: suppose the auto dealers advertised, as they often do, "zero-interest auto loans," but added, "we'll keep these in force for the next two years." Think anybody would rush down tomorrow to buy cars?

     

    The Fed's TARP program avoided financial chaos, was timely and has been paid back with profits. It was worthwhile. But, the ZIRP program has been ill conceived and provided the exact opposite of what might have been hoped, i.e., since there's no opportunity cost for not taking action in spending, investing or borrowing, nobody's doing much of any of them.
    21 Aug 2011, 05:28 PM Reply Like
  • fxmaven
    , contributor
    Comments (1455) | Send Message
     
    German Bunds, Norweigan, Kiwi and Australian short term paper, from solvent countries. Not insolvent ones.
    21 Aug 2011, 06:24 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    I completely disagree with everything you wrote.

     

    Just to hit a few points quickly...

     

    1) At any point, you can make the "banks can borrow from the fed at X% and lend to US at X+Y%. Short term rates are always lower than long term rates. What is your point? Actually, an inverted yield curve has usually been a sign of an impending recession. What you forget is that 0.25% rate is a short term rate and the 2% rate you refer to is now the 10 year rate. And btw, that rate continues to fall. Also, collateral must be put up each time a loan is taken from the Fed, so it's not as clear cut as you think. And most importantly...

     

    2) Even if the banks do this, simple math tells me that they get at best 1.75% nominal return. After inflation, they are essentially paying the government to hold money for them. So, no, I would not be borrowing endlessly into this scheme. This scheme is a loser.

     

    3) "The Fed's TARP program avoided financial chaos, was timely and has been paid back with profits....But, the ZIRP program has been ill conceived and provided the exact opposite of what might have been hoped"

     

    It's funny how I literally disagree with everything you write. No offense meant. The TARP was a giant waste of money and the only reason we managed to get our money out of it was the Fed loosened monetary policy enough for the world not to end and hence the US government investment in the financial sector ended up working. Remember markets continued crashing after TARP was passed and even after the stimulus. Go back and look and you'll see that the only thing that immediately preceded a turnaround in world markets was announcement of QE1.

     

    4) Finally, the problem is and has always been overly tight monetary policy. How can I say monetary policy has been tight? Aren't we swimming in liquidity? Aren't rates super low? Those are not indicators of monetary policy. Inflation and the price level have fallen far below the Fed's 2% annual growth goal. Nominal GDP has also risen just 4% over the last 3 years.

     

    No central bank in the history of the world has failed to raise inflation and/or nominal growth unless it didn't really want to. And the market correctly concludes that the Fed doesn't really want to raise either. Because just like the Bank of Japan, despite huge monetary base increases and many round of QE as soon as any impovement is made, the central banks quickly begin to talk of exist strategy and the market reacts accordingly.
    21 Aug 2011, 09:12 PM Reply Like
  • Tack
    , contributor
    Comments (12704) | Send Message
     
    Mach:

     

    You can get all excited, but it doesn't make what you say any more correct.

     

    First, banks --and businesses, right now-- don't care about positive spread independent of risk, which is the way you express it, because they are very, very risk averse. They will pick that 1.75% relatively risk-free spread every time in the current instance. It's almost too obvious; otherwise, they'd be lending their butts off at corporate bond rates much higher than these spreads. But, they have zero interest in the risk.

     

    Second, you comment about "real" return makes the same mistake that so many make in talking about investment deployment. There is no way for banks, or anybody else, to control or affect inflation. The only thing a bank, or any investor, can do is to maximize nominal returns. Whether that's positive or negative versus inflation is completely incidental, not something anyone can choose.

     

    Thirdly, regarding TARP, you just don't seem to grasp where we'd be then or now if all the major banks of the world --and that's exactly what it would have been-- had failed. Money would have disappeared from circulation, deflation would have been massive, and the most sought after item would have been Maxwell House coffee cans to bury currency in backyards. You should really do yourself a favor and read about the effects and behavior involved in a real depression, not the media-hyped Great Recesion.

     

    We can continue to disagree. No problem here.
    21 Aug 2011, 09:29 PM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    The bloom is off the QE rose, QE1 did keep us from falling into the precipice, QE2 did help fuel the markets because of the belief it would help our economy get out of the woods, now though we see it didnt and we have more wooded hills and valleys to traverse before we make it safely to the economic clearing, any QE3 will be less economically stimulative and more fiscally destructive then it predecessors, damned if we do damned if we dont. It looks like its time we ate our PEAS
    21 Aug 2011, 03:40 PM Reply Like
  • valueinvestor123
    , contributor
    Comments (327) | Send Message
     
    The point of QE2 was to prop up the stock market and help out Wall Street. Therefore, it was a resounding success. Don't delude yourself into thinking that the FED cares about 99% of this country. They only care about the top 1% and helping the banking cartel.
    21 Aug 2011, 04:55 PM Reply Like
  • golfitobob
    , contributor
    Comments (2347) | Send Message
     
    Very true...... But, it is there fiduciary responsibility to protect there owners ! They are not a Gov organization, but, a quasi one and the owners get 6% on their investment ,so, where is the difference coming from... ?????????
    21 Aug 2011, 05:05 PM Reply Like
  • Josh ODonnell
    , contributor
    Comments (229) | Send Message
     
    Something is gonna happen and there will be a short term economic recovery...just enough for him to get re-elected..
    Watch...It's happened before. I wish it wasn't true, but I do not think so.
    21 Aug 2011, 06:22 PM Reply Like
  • golfitobob
    , contributor
    Comments (2347) | Send Message
     
    The 150,000,000 on assistence of some sort.. They will vote for somone who tells them there drugs are not coming anymore.......??

     

    Sad ,but they out number the real Americans................

     

    Look at my picture........say it all......................
    21 Aug 2011, 07:16 PM Reply Like
  • marpy
    , contributor
    Comments (681) | Send Message
     
    It took years of stupidity to create this mess and now, they expect to fix it over night! What a bunch of duds!!!!!!! QE2 was what - a six month program! The only thing they could have expected it to do was ease some pain as the underlying problems get sorted out but it takes a lot longer than 6 months! There is no magic bullet!
    21 Aug 2011, 07:23 PM Reply Like
  • BuildingBlocks
    , contributor
    Comments (47) | Send Message
     
    What is the definition of insanity?
    21 Aug 2011, 09:57 PM Reply Like
  • golfitobob
    , contributor
    Comments (2347) | Send Message
     
    BB, your new here ,but, your essay says more with it's small size then 99% of the rest..........

     

    Al Einstein.............he da man .........................
    22 Aug 2011, 03:24 AM Reply Like
  • highmax
    , contributor
    Comments (39) | Send Message
     
    QE 2 didnt work; Fed has to try a new tack now. Asset prices didnt respond, deflation still a threat. Long- term; money creation causes liquidity contraction, b/c asset prices advance faster than wages, thus forcing greater debt load, and asset prices grow proportionally larger relative to money supply. Thus policy mistakes, structural imbalances, economic slowdowns cause longer lasting volatility than they would have otherwise, b/c when everyone rushes for the exits, they are smaller (less money relative to asset prices). We are seeing it now.

     

    The main thing is that the PTB fear deflation above all else; since they must service the same bloated debt balance with appreciating dollars and interest rates - so they cant afford to let it happen
    22 Aug 2011, 02:52 AM Reply Like
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