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  • Inflation, The Fed And The Markets [View article]
    When the government buys something, people get paid. They are more than just legislators who bugger everything up, and there is some truth to that, but they are also a huge economic consumer to which many industries are geared to supply and employ at a decent wage, I might add. It's a start, as employed people buy homes, cars, and big screen TVs and dine out.
    Oct 30 10:20 AM | Likes Like |Link to Comment
  • Get Ready For QE Forever [View article]
    "Schiff gold" is your moniker? QE forever, with Schiff's understanding of it?

    Look, I'd assert Schiff doesn't even realize the mechanism of how, or even if, QE causes inflation at all. He goes on about some form of currency debasement. The dollar has held up nicely against the majors despite over $4trn Fed balance sheet. At $4trn, we can barely achieve 1.7% so far...on a good day?

    Now, that is not to say there has been no inflation. I believe there has been a monetary phenomenon occurring. It's arguably occurred in financial markets where the money is being pumped and not in the real economy as measured by the CPI. (Yea, I know, lying government stats and money printing abound.)

    Wanna feel the sting of 30% inflation? It can be found in the severe debasement of the dollar against growth regions in EM, but not so much domestically outside of oil. That was a market reaction to a preference for risk seeking as investors willingly sold bonds to the Fed.

    Schiff doesn't even understand QE and I doubt he has a grip on what's happening. I would not read too much into Bullard's comment. He opines an open ended easing that responds to data, that's jsut what the Fed is doing, while declaring little or no forward guidance. He does not approve of time lines nor comments such as "a considerable time," or, "about 6 months."

    Open ended with data does not mean, forever. It means they will accommodate the financial markets. They are tapering because they believe they have reached the proper level of accommodation for now. And it's data dependent with the data slowing improving - not rampant inflation, asset bubbles busting all over the globe, or any other doomsday Schiff prediction.

    The Fed has a mandate for price "stability" of about 2% inflation, which does not mean a Big Mac will cost $5 forever, either, nor minimum wage at $8 for all eternity. It merely means "stable." Their other mandate has been grudgingly coming along, too. This is what they look at, along with targeting liquidity for home lending. They do this by targeting the bond market, not eyeing the equity markets, not saving their "bankster buddies" arses nor any of that other garbage.

    This idea inflation eases the government's debt burden is laughable. The government issues the nation's currency, it can pay its debt at will anytime. The Fed has shown it can buy as much as it wants "at will" and hold the government's own debt while remitting profits back to the Treasury. Imagine that. Inflation eases the pain of our debt as the dollar weakens over time, but we are currency users who get paid more in less valuable currency, too. And then there are variable rates to consider. It's a monetary illusion, remember.

    With $4trillion in the Fed's books floating around the globe, and with the Fed reinvesting maturing securities, rates should remain low for a "considerable time." If it's risk on, watch rates rise just as they should and just the opposite of the recent fall in rates when the market plummeted. This was not Fed intervention, this was Mr. Market "manipulating" it's own rates.
    Oct 30 10:07 AM | Likes Like |Link to Comment
  • No Risk Of Inflation If Velocity Of Money Is Falling? [View article]
    "All the rest are money printers. Easy to understand that."

    Commercial banks print the vast majority of the money, more so than the government "money printers."

    I suspect Reagan, being in bed with the bankers, knew how to use the financial markets to juice the economy through spending and taxation.
    Oct 29 07:04 PM | 1 Like Like |Link to Comment
  • No Risk Of Inflation If Velocity Of Money Is Falling? [View article]
    "Applying that to the formula V = (P)(T/M), the Fed has increased M while preventing a growth in T. So V is reduced."

    Sure, but you have to apply that to where the monetary phenomenon and probably the money illusion are occurring. They are not occurring in the real main street economy to any large extent. But they are in the global financial markets where the Fed is acting directly. You're correct, IMO, there is plenty of liquidity, but capital is restrained through legal restrictions. And it seems hardly to trickle down in the US, while EM was on a tear for a while.

    "So I'd strongly disagree with the statement above 'Significant inflation occurs when economic slack begins to disappear.'"

    In the case of Weimar, slack was reduced from the top down as capital disappeared in the war torn republic. This condition combined with reparations and massive money printing created hyper inflationary conditions and wheelbarrows full of money to buy the single loaf of bread for sale. Land reform and investor flight in Zimbabwe had the same effect. The US has neither condition.
    Oct 26 09:40 PM | Likes Like |Link to Comment
  • No Risk Of Inflation If Velocity Of Money Is Falling? [View article]
    Hi David, well, when we talk about M1 and M2 we're basically talking about currency in checking accounts, savings, in circulation, and in short timed accounts. Basically money we have available to spend at any given moment or nearly so. MZM is money immediately available for spending with zero maturity.

    But, do we talk about our credit card balances in any of those money aggregates? I don't think so. This credit money supply has expanded quite rapidly since pre approved cards began overflowing out mail boxes back in the early 80's. Prior to that we tended to save and depend on wages more so than today and velocity looks to have risen during the period prior to 1980. (Yes, we had a bout of inflation, but I am talking about the velocity curve.)

    I am not sure how they are handled in the banking system, whether charging on them creates a deposit as does a home loan. I guess the result of running up our credit results in a deposit somewhere in the banking system, likely corporate earnings. In any case, a lot of credit money is available to spend at any time at interest.

    Do we talk about rising stock and falling velocity in terms of the total money supply, or just the part that resides in our checking accounts? I mean, the chart above is quite interesting in that velocity has been falling since we began dissaving in the early 80's and racking up credit card debt. There is likely a connection or a cause for falling velocity measured with standard monetary aggregates.

    Just a striking coincidence? Or am I missing something?

    Velocity is dropping, yet we still maintain 1.7% main street (CPI) inflation and that's without mainstreet stimulus. There is definitely an increase in the money stock flowing in the global financial markets. Not sure if this is the velocity we're talking about, but one might argue supporting asset prices resulting from the monetary phenomenon occurring in the financial markets as opposed to main street.
    Oct 25 11:15 PM | 1 Like Like |Link to Comment
  • No Risk Of Inflation If Velocity Of Money Is Falling? [View article]
    Has anyone considered since the great moderation beginning in the very early 80's we're on a credit money system that dwarfs the Feds balance sheet?
    Oct 25 09:17 PM | 2 Likes Like |Link to Comment
  • The End Of QE3, Trouble Ahead For The Bulls? [View article]
    The balance sheet won't expire as long as they reinvest maturing securities from the growing pool of government bonds. But, eventually they will stop doing that, just not sure when. They will remain accommodating for a while and pay interest on reserves to affect borrowing costs. They may issue reverse repo securities to tie up some excess cash for brief periods and at interest.
    Oct 25 09:41 AM | 1 Like Like |Link to Comment
  • The End Of QE3, Trouble Ahead For The Bulls? [View article]
    Okay, someone globally is still holding onto $4.5 trillion even as the Fed levels off it's asset buying. Certainly that money is not residing under mattresses around the globe, it doesn't magically disappear as it changes hands. It's still out there to do the financial work such a large balance sheet is intended to accomplish. The Fed balance sheet does not necessarily have to continue growing to have an accommodative policy stance. Even if some of that money went back into US government bonds, the Fed is still reinvesting maturing securities.
    Oct 25 07:49 AM | 1 Like Like |Link to Comment
  • San Francisco Fed Head Hints At A New Round Of QE [View article]
    "Apparently annual budget deficits of nearly a Trillion dollars per year are not enough."

    Yes, it's only apparent because that's what you infer from my comment. Actually, I'd prefer dollars not be parked in government bonds and out taking risk. But when the latter is happening globally leaving the Us mired in sluggish growth and with lowflation, yea, I prefer some of that Fed printed money be diverted to the consumer. Wealth makers will acquire some of it, anyway, when the invest and hire domestically (and even abroad) and be owed by the government to boot. But at least money is circulating the economy.

    You should not worry about the level of outstanding US debt, the Fed holds a good chunk of it to maturity anyway. You act as if government debt is somehow evil when it is, in fact, net financial wealth. The debt clock is not a clock of doom, it's a measure of how financially wealth we are. It only depends on who get's to hold it and in what form: cash or interest bearing bonds the government can always make good on.
    Oct 22 07:00 AM | 1 Like Like |Link to Comment
  • San Francisco Fed Head Hints At A New Round Of QE [View article]
    "The way to stop the dollar flood overseas is to bring some manufacturing back home. That happens with a weak dollar, not a strong dollar."

    You're talking about the economy, I am talking about the global financial markets. If you want to spend lots of toilet paper, feel free to do so...
    Oct 22 06:54 AM | Likes Like |Link to Comment
  • San Francisco Fed Head Hints At A New Round Of QE [View article]
    "If the Fed prints money fast enough, velocity doesn't have to increase."

    It's not printing money to be loaned to consumers where inflation and velocity matter to the consumer price level. There is inflation in the asset markets where the printed money is, not on main street.
    Oct 22 06:51 AM | Likes Like |Link to Comment
  • San Francisco Fed Head Hints At A New Round Of QE [View article]
    Why print more dollars, they just fly out the door. What we need are our own chickens to come home to roost. If they do that, we probably not need any more stimulus .

    Unfortunately, that means a stronger dollar, but more global buying power for the US consumer. A bit higher wages, or real wages at least, and credit worthiness and availability would be nice. It appears the US economy has to kick it into gear to provide aggregate demand, as Bernanke said the world benefits from a strong US economy. EM was supposed to be the engine of global growth, not sure that thesis worked out so well. They grew, but the world was left sluggish.

    It's time for our own Fed accommodation to start accommodating the US economy, for a change, with investment, employment, growth, and finally some demand pull inflation instead of cost push inflation of high input prices due to a debased global currency. There should be plenty enough printed already to do what it needs to do.

    Time to turn off the printing presses and attract some of our own trillions of dollars back home. Not all, but some balance. We still need to earn returns investing abroad. But we need cash to stop flying over the border en mass and we need domestic and global demand to cause costs to rise rather than toss higher prices onto beleaguered domestic consumers thinking they'll take the bait as prices rise and employment and wages lag.

    I am sure the Fed is winding down stimulus for a reason. One of which is they've printed enough to do the job. Friggin' politicians afraid to borrow and spend to apply some demand creating additional work and upward wage pressure in the US. Regardless of stimulus, it's quite possible most of our domestic growth has been pure but strained resilience. Imagine stimulating that just a tiny bit more as our already 'printed' dollars come ashore, well, if they're looking for risk, that is.
    Oct 20 09:03 AM | Likes Like |Link to Comment
  • Low Rates And QE Are Deflationary At The Zero Bound [View article]
    Spot on, Kertch.

    Equities are getting slammed as are commodities. Gold is a bit up and the yen is stronger. You know, it seems like a safety play on world events, such as China's performance, Greece and the EMU generally, and let's see, what else.

    I am not sure falling stocks so much portends a flailing US economy as it does uncertainty over the end of the Fed's balance sheet expansion. I am hoping they will find a price on global performance, especially if the US can kick it into gear. EM was supposed to be the driver for global growth, and it has been for a while. Is the entire world catching Japan's disease?

    The Fed will remain accommodating for some time. So, it seems a lot of money is seeking a place to park itself to sit idle, to some extent, in existing safe havens including US treasuries.
    Oct 16 06:12 AM | 1 Like Like |Link to Comment
  • Low Rates And QE Are Deflationary At The Zero Bound [View article]
    Maybe a rate hike is needed to draw the trillions in QE money back to the US where it can stimulate our own economy for a change instead of everyone else's. I agree, our own QE is deflationary (on main street, anyway) in the absence of consumer spending (fiscal policy, wages, credit availability and worthiness.) It had little trouble bolstering growth abroad where it was already occurring and offering risk returns to those who sold bonds to the Fed. It's time for the US to stop licking the spaghetti stain of it's own monetary policy. Want higher oil prices, generate some grass roots aggregate demand instead of debasing the currency in the asset markets.
    Oct 15 06:30 AM | Likes Like |Link to Comment
  • Understanding The Deposit:Loan Discrepancy And Why It's Not Scary [View article]
    "So the Fed implemented QE to try to get more “money” into the system. This is typical Bernanke Monetarism – increase the money supply and inflation will follow."

    Into what system is important to understand, it was not the main street system. There has been inflation, but it's in the system of earning assets. This is the monetary phenomenon at work in the global financial markets. Main street inflation might follow in the form of higher prices, but not due to the main street version of the monetary phenomenon. The latter is tame due to fiscal drag and just about everything else that puts money in the hands of the consumer, including wages and credit worthiness.
    Oct 15 06:18 AM | Likes Like |Link to Comment