Comments on: Sailing QE2 around Charybdis A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: robb1 Thu, 04 Nov 2010 20:50:16 +0000 Make us more competitive with lower corporate rates, like Singapore. Gives us a multiple year tax credit for each new employee hired. Give tax incentives for foreign corporation to start manufacturing here, instead of going away. Impose a tax, or make it less tax deductible to outsource labor. Impose tariff on finished goods from country that do not have adequate labor laws. The jobs will come back and inflation too, ultimately curing the debts.

By: Ananke Thu, 04 Nov 2010 20:31:43 +0000 TFF – to explain simply: $4-5 a gallon and most of the American households will be underwater, regardless the service based economy. That will be the soonest thing happen, and I mean in a month or two, and we will be very lucky if the prices just stay at $4-5 levels.

“Green economy” doesn’t exist in America :), and even if high energy costs make it feasable, it will benefit Chinese companies and create almost zero employment in the US.

Either FED is crazy, or they are pumping inflation in China to break the yuan peg, targeting political unrest there. This is very very dangerous game…

Btw, Wall Street transactions go towards “Services” in GDP, but apparently that doesn’t translate into positive news to the average person. Neither are postive the GDP “services” in the ever rising healthcare costs…The average American just affords neither or less of these services, but statisticly they are increasing share in GDP, since their cost is rising with double digit % annually…And please people don’t just focus on “unemployment”, it means nothing. You may have low unemployment and decreasing income, which was America for the last couple years.

My point is that FED initiated money pumping, and there is no meaningful fiscal policy. All these printed money will just pour into capital and commodity markets, when the US economy is structurally consumer based. With effectively regressive income taxes, it will correspond to even higher deficits – hence the effect will be stagflation.

By: TFF Thu, 04 Nov 2010 18:04:30 +0000 “commodities’ cost will double, and hence we will end within 6 months with extreme material costs and lowered demand for goods. That means higher unemployment, personal bankruptcies all over and hyperinflation.”

While true to some extent, it is the “material goods” that will be most impacted by the higher material costs. At this point our domestic economy is heavily slanted towards services. Inflation will result in reduced wealth (as goods will cost more) and reduced demand for goods (as people will not be able to afford as much), but I’m not sure that translates into another wave of domestic unemployment.

Rather, I would expect unit imports to decrease. The dollar value of imports might actually INCREASE, but simply because each unit costs more.

By: TFF Thu, 04 Nov 2010 17:57:46 +0000 tk2, commodity inflation is picking up some steam HOWEVER that is only part of the CPI. Wages (and the cost of services) aren’t increasing at all, and will continue to stay flat as long as unemployment is high.

Rising costs (at least for material goods).
+ Flat wages
= Hard times

By: stanrich Thu, 04 Nov 2010 17:30:49 +0000 There have to be some very smart, very well-informed people out there looking at this issue. So why are we seeing all this negative, finger-pointing, hand-wringing, weeping-and-wailing over the Fed policy?
Why aren’t we seeing better/fresh/different ideas or approaches being reported on and discussed in the media? Is it because NOBODY out there HAS a clue or a better idea of what to do?

If so, that is even scarier than what Bernanke is doing. Bernanke is either a genius or the dumbest guy on the planet. Either way, until the verdict is in, I’ll bet we see no change in employment, job growth or any other economic indicators that might point to better times.

Hunker down folks, it looks like it is going to be a very rough ride…

By: Ananke Thu, 04 Nov 2010 17:20:01 +0000 This is non an experiment. It was done in the 1980s in exactly the same manner by the Soviet Union, and you all know how it ended. I see no reason it won’t bring the same catastrophoc collapse in America too. There is no Kaneysian mechanism implemented, neither will be with the current GOP majority in the Congress, to guide all the money from QE to a consumption, so commodities’ cost will double, and hence we will end within 6 months with extreme material costs and lowered demand for goods. That means higher unemployment, personal bancrupcies all over and hyperinflation. The house market has another 60% down, in my opinion, unless the inflation spikes first – which I never have seen historically. Great Depression number 2, my guess, almost for sure now, is coming spring 2011. Cheers!

By: tk2 Thu, 04 Nov 2010 15:00:38 +0000 Inflation, is actually not very low – around 2 percent. And even this figure is “saved” by the rather weird way the Fed accounts the “core” inflation. I wonder what exactly are the mechanisms the Fed is hoping for. Since no reasonable person could hope for another real estate bubble to employ people I can see only one – through depreciating currency and exporting inflation to other countries. Smart, of course, the problem is that that is exactly what the 30s crisis was all about: countries acting unilaterally and trying to “export chaos”. The US has lost their card in the multilateral discussions: she can no longer point at others calling them “currency manipulators” since they are doing the same. I think now all emerging markets feel that their reluctant attempts to introduce capital controls have been justified and will do it with a renewed zeal… The ECB will be the last to fall. But they will. Remember, in the 30s it was the same. It was Germany, which refused to participate in the FDRs global inflation strategy, and, as a result, closed their trade down, relying on bilateral trade agreements. History rarely repeats itself but if countries base their actions on flawed economic concepts and misunderstood historical experience – it does.

By: Gotthardbahn Thu, 04 Nov 2010 13:21:10 +0000 It’s hard to believe a buncha bright guys with degrees can sit around and honestly think that printing money is the answer. All that cash will end up in bank reserves and/or invested in Treasury bonds, certainly not in the real economy. Expanded payrolls? It is to laugh at such naivete.

Mr. Hoenig has it right; this whole QE II business is ill-advised and will backfire, badly, at some point.

If any finger-pointing is required, best to aim at the White House, where fiscal policy – if indeed there is ANY fiscal policy at all in the Obama administration – resembles a massive train wreck.

By: Waubay Thu, 04 Nov 2010 12:11:04 +0000 Yet again the same falsehood that if businesses have extra money they will expand and hire more people. If there is no/low demand for a business’s product they will not expand and will not hire. Just like giving the banks a bunch of extra money will not in itself stimulate lending. If there are little to no people wanting to borrow money there won’t be any lending. So where does all this extra money go? Big bonuses for these CEOs who are doing such and excellent job.

By: minipaws Thu, 04 Nov 2010 10:42:51 +0000 The good news is surely they are done effing up the world.