The Fed to push harder on the rope?

[Tilted]

FRB: Press Release--FOMC statement--November 3, 2010

A further $600 Billion worth of longer-term Treasury securities purchases by the end of Q2 2011. That's on top of the ongoing re-investment from expiring held securities. In other words, they're gonna expand the balance sheet by another $600 Billion over the next 8 months.

Woohoo! Print, baby, print!

Fed balance sheet, September 2008: less than $1 Trillion
Fed balance sheet, July 2011: about $3 Trillion

 

[Tilted]

This is kinda like Captain Kirk calling down to engineering and saying 'Damnit Scotty, I need more speed!' And, Scotty answering back 'I'm giving you all she's got Captain!' And, instead of the resourceful Captain Kirk figuring something else out or accepting the Enterprise's fate, he just tells Scotty, 'Well then, just get a pencil and where it says Warp Speed 9.8, write 11.2 over it!'

 

[Larry Gude]

This is kinda like Captain Kirk calling down to engineering and saying 'Damnit Scotty, I need more speed!' And, Scotty answering back 'I'm giving you all she's got Captain!' And, instead of the resourceful Captain Kirk figuring something else out or accepting the Enterprise's fate, he just tells Scotty, 'Well then, just get a pencil and where it says Warp Speed 9.8, write 11.2 over it!'

 

[Tilted]

US Policy 'Clueless': German Finance Minister

These are being worsened by reckless policy in part from the the United States, [German Finance Minister Wolfgang] Schaeuble said, sharpening his criticism of the Federal Reserve's program to buy an additional $600 billion worth of U.S. government bonds.

Pumping more money into the economy will not solve the country's problems, he said, adding that the world needed U.S. leadership that was currently lacking.

"With all due respect, U.S. policy is clueless," Schaeuble said. "(The problem) is not a shortage of liquidity. It's not that the Americans haven't pumped enough liquidity into the market."

 

[Tilted]

So, are you saying that Spinal Tap is actually smarter than our leadership, or just that they're about as smart as our leadership?

 

[Larry Gude]

So, are you saying that Spinal Tap is actually smarter than our leadership, or just that they're about as smart as our leadership?

No.

I am saying that it goes to 11. :shrug:

 

[Tilted]

With this new round of quantitative easing from the Fed, look for increased usage of the term Beggar They Neighbor to describe the potential risks of this monetary policy in popular discourse. In this case, it refers to nations intentionally devaluing their own currency in order to gain advantages over other nations and to try to stimulate their own stagnate economies. The risk is that it leads to tit for tat policies from other nations and sets up a spiraling global race to devaluation that ends up hurting everyone.

 

[Larry Gude]

With this new round of quantitative easing from the Fed, look for increased usage of the term Beggar They Neighbor to describe the potential risks of this monetary policy in popular discourse. In this case, it refers to nations intentionally devaluing their own currency in order to gain advantages over other nations and to try to stimulate their own stagnate economies. The risk is that it leads to tit for tat policies from other nations and sets up a spiraling global race to devaluation that ends up hurting everyone.

Idiot World Tour;

GLOBAL ECONOMY-Obama returns fire after China slams Fed's move | Reuters

"I will say that the Fed's mandate, my mandate, is to grow our economy. And that's not just good for the United States, that's good for the world as a whole," Obama said during a trip to India.

"And the worst thing that could happen to the world economy, not just ours, is if we end up being stuck with no growth or very limited growth," he said.

That is simply not true. Growth is not the be all end all, especially when this policy is ROBBING Jane and Joe where we are most vulnerable; at the gas pump and the home. All this for the goal of making mortgage rates cheaper when housing prices are still not corrected. All this because of the bumbling, fumbling and play leadership at the top.

This is really starting to irk me.

 

[Tilted]

I post this because the author of this opinion piece just happens to be a member of the Fed's Board of Governors, and thus a member of the FOMC which issued last week's FOMC monetary policy statement announcing the $600 Billion planned expansion of the Fed's balance sheet. He was one of the 10 who voted for that action. Only one voted against it.

Kevin W. Warsh: The New Malaise and How to End It - WSJ.com

After a cyclical boost early this year, the current state of the U.S. economy is unimpressive: modest growth, high levels of unemployment, stagnant wages, low levels of consumer and business sentiment, and volatile financial markets. Extrapolating from recent data, many predict only a middling recovery in the next several years. They call it "the new normal." I call it the new malaise.

The prevailing theory has it that U.S. policy makers should not deny our foregone fate. We should accept smaller improvements in output and employment and productivity. We should resign ourselves to the new normal and conduct policy accordingly. That is the last best hope, they argue, to preserve the remaining vestiges of a golden age that is no more.

I reject this view. I consider this emerging ethos to be dangerous and defeatist and debunked by America's own exceptional economic history. Our citizens are not unwitting victims of some unavoidable fate. The current period of subpar growth and high unemployment is real, but it need not persist. We should not lower our expectations. We should improve our policies.

 

[Larry Gude]

I post this because the author of this opinion piece just happens to be a member of the Fed's Board of Governors, and thus a member of the FOMC which issued last week's FOMC monetary policy statement announcing the $600 Billion planned expansion of the Fed's balance sheet. He was one of the 10 who voted for that action. Only one voted against it. [/URL]

The steep correction in housing markets, while painful, lays the foundation for recovery, far better than the countless programs that have sought to subsidize and temporize the inevitable repricing. It is these transitions in our market economy—and the adoption of pro-growth fiscal, regulatory and trade policies—that lay the essential groundwork for greater, more sustainable prosperity.

This is EXACTLY what TARP prevented from happening.

 

[Larry Gude]

Lower risk-free rates and higher equity prices—if sustained—could strengthen household and business balance sheets,

HOW???? I don't give a crap how cheap money is if I owe more than the house is worth! The business, the bank, (the owner) must take the hit on the balance sheet and give me a loan on what the house is worth if you wanna improve my balance sheet.

Jesus. This stuff is so simple.

 

[Larry Gude]

But if the recent weakness in the dollar, run-up in commodity prices, and other forward-looking indicators are sustained and passed along into final prices, the Fed's price stability objective might no longer be a compelling policy rationale. In such a case—even with the unemployment rate still high—we would have cause to consider the path of policy.

He says this as though he had nothing to do with this. Like the surge in oil and gold and the attendant 'passing along' of the cost is some sort of natural phenomena

 

[Larry Gude]

As the Fed's balance sheet expands, it becomes more of a price maker than a price taker in the Treasury market. If market participants come to doubt these prices—or their reliance on these prices proves fleeting—risk premiums across asset classes and geographies could move unexpectedly.

Oohhhh...this guy is good.

 

[Larry Gude]

I post this because the author of this opinion piece just happens to be a member of the Fed's Board of Governors, and thus a member of the FOMC which issued last week's FOMC monetary policy statement announcing the $600 Billion planned expansion of the Fed's balance sheet. He was one of the 10 who voted for that action. Only one voted against it.

Kevin W. Warsh: The New Malaise and How to End It - WSJ.com

I read ZERO prescription for ending this.

A little help?

 

[Tilted]

I read ZERO prescription for ending this.

A little help?

Ending these kinds of policies or the economic 'malaise'?

I'm lost as to the former and I'm still pushing this solution for the latter:

They keep trying to get blood sugar into the economy's blood stream by way of a crimped peripheral IV line. They should just use a central IV line and pump that stuff in at full speed. They could exchange all the single dollar bills in circulation for newly minted hundred dollar bills and everyone could pretend they were rich for a while.

 

[Tilted]

Meanwhile, China is having to go the opposite direction - raising interest rates and reserve requirements (again).

This is the problem with using such extreme monetary policy to stimulate the economy, rather than just using subtle monetary monetary policy to control inflation and deflation. Eventually, you have to undo whatever you did (or accept the inflative monetary consequences thereof). The standard line is 'we'll withdraw the liquidity when things heat up and avoid hyper-inflation'.

Hello, McFly! That's right - if the stuff works, you have to undo it! After all the effort to push the rope, when it actually starts moving, you have to start pulling on it so it doesn't.

Monetary policy only works as a subtle suggestion. If monetary policy has to be a sledgehammer to work, it doesn't work.

China's Inflation Jump Points to More Tightening

 

[Tilted]

And then there's this. Who's he think he's kidding? It's one thing to lob a few rounds at the enemy, but another to insult their intelligence by denying that you did (or would). And we have the audacity to criticize the Chinese for currency manipulation?

Let the currency wars begin.

Geithner: US Won't Seek to Weaken Dollar to Spur Growth

 

[Larry Gude]

Meanwhile, China is having to go the opposite direction - raising interest rates and reserve requirements (again).

This is the problem with using such extreme monetary policy to stimulate the economy, rather than just using subtle monetary monetary policy to control inflation and deflation. Eventually, you have to undo whatever you did (or accept the inflative monetary consequences thereof). The standard line is 'we'll withdraw the liquidity when things heat up and avoid hyper-inflation'.

Hello, McFly! That's right - if the stuff works, you have to undo it! After all the effort to push the rope, when it actually starts moving, you have to start pulling on it so it doesn't.

Monetary policy only works as a subtle suggestion. If monetary policy has to be a sledgehammer to work, it doesn't work.

The above, and the immense foundation of unassailable logic it rests on, logically leads to only one question; Why?

TARP
UAW
Chrysler
Bernankes latest folly.

Why do they do things that, even if they do work they still have to be basically be undone equally, ie, if you rob Peter to pay Paul then borrow from Paul to make Peter whole, why do they do it?

I am increasingly seeing people like Paulson, Geithner, Bernanke, Bush, Obama, as concerned with one and only one thing; themselves. They want to be seen as having done something, made some momentous decision even though the next energy out will, at best, equal net return.

Todays leaders seem to have no interest in actual gain and are simply focused on going in circles.

If I am right, I wonder why? Who go through all the effort to get into position to lead to then only, essentially, punt?

 

[Tilted]

The above, and the immense foundation of unassailable logic it rests on, logically leads to only one question; Why?

TARP
UAW
Chrysler
Bernankes latest folly.

Why do they do things that, even if they do work they still have to be basically be undone equally, ie, if you rob Peter to pay Paul then borrow from Paul to make Peter whole, why do they do it?

I am increasingly seeing people like Paulson, Geithner, Bernanke, Bush, Obama, as concerned with one and only one thing; themselves. They want to be seen as having done something, made some momentous decision even though the next energy out will, at best, equal net return.

Todays leaders seem to have no interest in actual gain and are simply focused on going in circles.

If I am right, I wonder why? Who go through all the effort to get into position to lead to then only, essentially, punt?

Why? The answer is pretty simple, but a lot of people don't want to accept it.

Our political system (i.e. a high participation representative democracy with fairly short election cycles) fosters decision making with eyes to only the next election cycle. Our system shows contempt for the practice of considering, and acting in the best interests of, the big picture.

 

[Tilted]

Why Fed Bond-Buying Plan Is Raising Global Tensions

I also think it's worth noting that 30 year German sovereign debt is trading at a yield that is 1-1/4% below that which 30 year U.S. sovereign debt is trading at. In relative terms, 'the full faith and credit ...' doesn't mean quite what it used to.