Fed buys exactly $0 gov debt at issuance. You say Feds balance sheet is $3T but gov issues $8T a year in gross debt. Who's buying the difference? Didn't know of this holding period you speak of, but perhaps the gov is sick of robo foreclosures. Never heard of shadow stat but disagree with your premise that they could only exist because government publishes faulty data. Inflation has been well contained on balance.
Anyway, lots of conspiracy here. Two questions:
1) equities are sold via paper certificates - are they worthless? 2) what would you do with your gold if society fell apart? Gold is a way to facilitate exchange (I guess) if there is no production there isn't much to exchange. And certainly who would trade food for gold in this scenario. That's why gold fell hard in 2008 just like everything else.
Trade deficits don't cause expansion on the balance sheet. By definition, it is money spent on foreign goods above what foreigners spend on US goods. Ask yourself, if you lived in China and had US money that you didn't spend on US goods what would you do? You give it to the Chinese Central bank and they lend it or trade it for other currencies who then lend it. Most foreigners lend it by buying US assets like Bonds. On balance this decreases interest rates. I'm not sure why you think we finance a trade deficit thru the fed. Other countries finance our trade deficits.
Folks like yourself have been predicting inflation for 4 years. Now you are making the argument that less QE will cause inflation. The fed will capture the excess reserves when needed by offering sufficiently high interest on deposits. Not that it needs to but it will finance those short term rates with interest from long term MBS and Bonds. Overtime the assets will fall off and government will crowd out productive and speculative alternatives through increased rates on new Bonds slowing the long term growth of the economy. So lets hope Congress takes this respite and addresses the future deficits. Regardless, the fed could screw up but equal chance of recession as over heating. Prolonged high inflation is not realistic.
"Do you really think risk-averse central bankers are going to try and catch the knife," asks Credit Suisse commodity research chief Ric Deverell about gold. "No" is his answer as this crowd only buys when the price is headed higher. Of reports of heavy physical buying, he's unimpressed, noting investment demand (ETFs) is the gorilla in the gold market. The metal's (GLD -1.6%) within a few dollars of taking out the 26-month low hit in April. [View news story]
Yes, I agree. But what about the Chinese and Russians that are apparently determined to buy all the world's gold for reasons only known to them?
The stronger dollar has precious metals resuming their decline in force (or is the decline in precious metals strengthening the dollar), with gold (GLD) off 2.3% and silver (SLV) off 2.2%. Crude oil (USO) pulls back a bit from its recent big rally, -0.9% to $95.53. [View news story]
We are not in a deflationary environment rather the rate of inflation is slowing. So we still have some inflation just less. But when gold was on that massive run we didn't have a lot of inflation either? In fact, we haven't had a lot of inflation since the early 80's. But we've had lots of different asset classes get hot and pop. So none of this has anything much to do about inflation.
Very reasonable approach. Too many people don't use common sense approaches but instead think they will be the one to strike it rich with their market beating insight.
Why Gold Won't Protect You From Inflation: What History Tells Us [View article]
My house kept up my purchasing power until it didn't. My stocks routinely beat CPI until sometimes they don't. Corporate bonds always beat CPI unless the company gets into trouble.
Hope you get the point. There is no reason to believe gold is any different. Besides, history tells us it isn't.
Be reasonable folks. Gold should be a small part of every portfolio but not the entire portfolio.
Oh yes, I almost forgot, don't buy bullion or gold bars that's just foolish.
Central Banks Are An Unlikely Cause Of The Crash In Gold [View article]
Why would the fed sell gold? The fed doesnt want to crush investors!
Perhaps the world just realized that there has been a massive bubble in gold? I feel bad for those who bought into the gold is safe story. I feel worse for those who think the dollar is going to ruin so they buy gold bullion from ads on FOX believing that they will be king Midas. Foolishly, they failed to consider that you can't eat gold.
Can't say you didn't see this coming. QE ain't going forever and so gold isn't either.
Good article. Especially the analysis. Couple of counter points: apple can't in reality do better things with cash than you and just because they aren't going bankrupt don't make it a good investment. Finally, I find it very bizarre that you don't like their products. I could understand it if you said Samsung was superior or you prefer XYZ... But you said you just don't care for them. Seems emotional
China has begun a week and a half of political pageantry that will complete the handover of power to new leadership, with Xi Jinping set to replace Hu Jintao as President and Li Keqiang to take over from Wen Jiabao as Premier. Observers will be watching the extent of any bureaucratic reorganization as an indicator of Beijing's appetite for reforms. The hugely powerful railways ministry, for example, could broken up and folded into the transport department. [View news story]
What does Paul Krugman have to do with this? What does Chelsea Clinton, Michelle Obama, bullet trains, the Pope Mobile, Arkansas, and Tinker Bell have to do with the article? Tony?
The Debt Paradox That Everyone Should Be Aware Of [View article]
WMarkW,
You can't be serious. To start with you have to understand that savings generate a return only if loaned. So the government is not sucking money, it actually pays interest and puts the money to use. That increases employment. If the government printed 16T it would cause lots of inflation. Even worse, businesses would stop investing, hiring and expanding because of uncertainty.
The Debt Paradox That Everyone Should Be Aware Of [View article]
Bravo EK. You are spot on in both posts
Viewpoint, no idea what you're going on about. Tax what? Do you mean stop taking your FICA?
Anyway, here's the deal, the gov is required to pay your benefits. We don't invest SS in the market for obvious reasons so the gov reduces its borrowing costs instead. Plain and simple, no tricks here. This has been well known for decades.
The real discussion is far more interesting. The Gov has been subsidizing private consumption/savings by accruing unfunded liabilities. Those liabilities will soon come due in the form of benefit payments financed by public debt.
I suggest we must phase out the subsidy over time otherwise sustainability will always be an issue. But don't worry VP I'm sure you'll still get back more than you contributed.
Bernanke Semiannual Monetary Policy Report: The benefits of easing continue to outweigh the costs and risks, says Bernanke in his prepared testimony. Maybe putting to rest the kerfuffle from last week's FOMC minutes, he says QE will continue until there are substantial labor market gains. Watch live here. [View news story]
Chow,
I asked for problems. A weakening dollar increases GDP on balance and bolsters corporate earnings. Before you say it has eroded your purchasing power please check the inflation numbers. Also, exchange rates are very transitory and the dollar is now appreciating a bit.
Gas prices were high before the recession. They went low and are high again. Don't blame QE. QE doesn't consume gas. I hate to say it but blame the regulations, tight refining capacity, greedy refiners & speculators hijacking a futures market that is intended to hedge risk to suppliers and consumers.
No QE would have significantly deepened the recession perhaps to the point of a depression. We were lucky to escape.
Bernanke Semiannual Monetary Policy Report: The benefits of easing continue to outweigh the costs and risks, says Bernanke in his prepared testimony. Maybe putting to rest the kerfuffle from last week's FOMC minutes, he says QE will continue until there are substantial labor market gains. Watch live here. [View news story]
We are lucky to have a guy like Bernanke running the Fed. I don't think most can comprehend what the economy would look like without the fed's QE.
It has taken $3 trillion to just stabilize prices - 2% per year. Besides creating millions of jobs what has QE done to hurt anything? Seriously? I want to know one issue QE has caused.
Gold Liquidation Now Accelerating [View article]
Anyway, lots of conspiracy here. Two questions:
1) equities are sold via paper certificates - are they worthless?
2) what would you do with your gold if society fell apart? Gold is a way to facilitate exchange (I guess) if there is no production there isn't much to exchange. And certainly who would trade food for gold in this scenario. That's why gold fell hard in 2008 just like everything else.
Gold Liquidation Now Accelerating [View article]
Trade deficits don't cause expansion on the balance sheet. By definition, it is money spent on foreign goods above what foreigners spend on US goods. Ask yourself, if you lived in China and had US money that you didn't spend on US goods what would you do? You give it to the Chinese Central bank and they lend it or trade it for other currencies who then lend it. Most foreigners lend it by buying US assets like Bonds. On balance this decreases interest rates. I'm not sure why you think we finance a trade deficit thru the fed. Other countries finance our trade deficits.
Gold Liquidation Now Accelerating [View article]
Folks like yourself have been predicting inflation for 4 years. Now you are making the argument that less QE will cause inflation. The fed will capture the excess reserves when needed by offering sufficiently high interest on deposits. Not that it needs to but it will finance those short term rates with interest from long term MBS and Bonds. Overtime the assets will fall off and government will crowd out productive and speculative alternatives through increased rates on new Bonds slowing the long term growth of the economy. So lets hope Congress takes this respite and addresses the future deficits. Regardless, the fed could screw up but equal chance of recession as over heating. Prolonged high inflation is not realistic.
"Do you really think risk-averse central bankers are going to try and catch the knife," asks Credit Suisse commodity research chief Ric Deverell about gold. "No" is his answer as this crowd only buys when the price is headed higher. Of reports of heavy physical buying, he's unimpressed, noting investment demand (ETFs) is the gorilla in the gold market. The metal's (GLD -1.6%) within a few dollars of taking out the 26-month low hit in April. [View news story]
seriously though, what's your price target
The stronger dollar has precious metals resuming their decline in force (or is the decline in precious metals strengthening the dollar), with gold (GLD) off 2.3% and silver (SLV) off 2.2%. Crude oil (USO) pulls back a bit from its recent big rally, -0.9% to $95.53. [View news story]
5 Good Ways To Sell In May [View article]
Why Gold Won't Protect You From Inflation: What History Tells Us [View article]
Hope you get the point. There is no reason to believe gold is any different. Besides, history tells us it isn't.
Be reasonable folks. Gold should be a small part of every portfolio but not the entire portfolio.
Oh yes, I almost forgot, don't buy bullion or gold bars that's just foolish.
Central Banks Are An Unlikely Cause Of The Crash In Gold [View article]
Perhaps the world just realized that there has been a massive bubble in gold? I feel bad for those who bought into the gold is safe story. I feel worse for those who think the dollar is going to ruin so they buy gold bullion from ads on FOX believing that they will be king Midas. Foolishly, they failed to consider that you can't eat gold.
Can't say you didn't see this coming. QE ain't going forever and so gold isn't either.
Apple Is Not Worth $460 [View article]
China has begun a week and a half of political pageantry that will complete the handover of power to new leadership, with Xi Jinping set to replace Hu Jintao as President and Li Keqiang to take over from Wen Jiabao as Premier. Observers will be watching the extent of any bureaucratic reorganization as an indicator of Beijing's appetite for reforms. The hugely powerful railways ministry, for example, could broken up and folded into the transport department. [View news story]
The Debt Paradox That Everyone Should Be Aware Of [View article]
You can't be serious. To start with you have to understand that savings generate a return only if loaned. So the government is not sucking money, it actually pays interest and puts the money to use. That increases employment. If the government printed 16T it would cause lots of inflation. Even worse, businesses would stop investing, hiring and expanding because of uncertainty.
The Debt Paradox That Everyone Should Be Aware Of [View article]
Viewpoint, no idea what you're going on about. Tax what? Do you mean stop taking your FICA?
Anyway, here's the deal, the gov is required to pay your benefits. We don't invest SS in the market for obvious reasons so the gov reduces its borrowing costs instead. Plain and simple, no tricks here. This has been well known for decades.
The real discussion is far more interesting. The Gov has been subsidizing private consumption/savings by accruing unfunded liabilities. Those liabilities will soon come due in the form of benefit payments financed by public debt.
I suggest we must phase out the subsidy over time otherwise sustainability will always be an issue.
But don't worry VP I'm sure you'll still get back more than you contributed.
Bernanke Semiannual Monetary Policy Report: The benefits of easing continue to outweigh the costs and risks, says Bernanke in his prepared testimony. Maybe putting to rest the kerfuffle from last week's FOMC minutes, he says QE will continue until there are substantial labor market gains. Watch live here. [View news story]
I asked for problems. A weakening dollar increases GDP on balance and bolsters corporate earnings. Before you say it has eroded your purchasing power please check the inflation numbers. Also, exchange rates are very transitory and the dollar is now appreciating a bit.
Gas prices were high before the recession. They went low and are high again. Don't blame QE. QE doesn't consume gas. I hate to say it but blame the regulations, tight refining capacity, greedy refiners & speculators hijacking a futures market that is intended to hedge risk to suppliers and consumers.
No QE would have significantly deepened the recession perhaps to the point of a depression. We were lucky to escape.
Bernanke Semiannual Monetary Policy Report: The benefits of easing continue to outweigh the costs and risks, says Bernanke in his prepared testimony. Maybe putting to rest the kerfuffle from last week's FOMC minutes, he says QE will continue until there are substantial labor market gains. Watch live here. [View news story]
would look like without the fed's QE.
It has taken $3 trillion to just stabilize prices - 2% per year. Besides creating millions of jobs what has QE done to hurt anything? Seriously? I want to know one issue QE has caused.
Sorry Bears, We're In A Secular Bull Market [View article]