Comments on: Fed is banking on phony wealth effect

By: Roadhouse

Roadhouse — Fri, 25 Feb 2011 12:03:26 +0000

Couple of things…

The only two people I trust to tell it like it is are David Rosenberg – and James Saft. Great job in cutting through the propaganda and lies James.

Let’s do more than whisper – I think we should be screaming Buy Gold!!!

Those who say you cant eat gold miss the point.

When the global economy unravels – and it will and soon – currencies wont even be good enough for toilet paper (not soft enough).

People will still need an easily transported store of wealth and throughout history – in times of strife – it has been gold.

Tell me. If you have a couple of hundred grand liquid or even 50 grand what are you going to do with that? Buy canned tuna?

What if you liquidate a one million dollar portfolio. Or 5 million. What are you going to do with the cash? Buy sacks of rice?

Of course not.

And that is why gold is going to be king. Because people of high nett worth need some way to store their wealth.

They will own gold.

By: RogerLoomis

RogerLoomis — Mon, 08 Nov 2010 16:32:05 +0000

I have to agree with the MekhongKurt. The faith in the economy is weak and limited almost entirely to gold, silver, Mining Stocks, oil and commodities. The fact that people continue to scoop up gold in the face of these prices is revelatory of how little they believe in the dollar.

By: PCL1

PCL1 — Fri, 15 Oct 2010 00:29:07 +0000

Moss_GR missed one important point: We, ehh, relieved ourselves of our WWII debt pretty much the same way. The dollar lost between 2/3 and 3/4 of its value (in real terms) between 1945 and 1980. PT Barnum was right; “sucker born every minute”.

By: PCL1

PCL1 — Fri, 15 Oct 2010 00:08:06 +0000

The most significant effect of QE is the increase in the overall money supply, not the “wealth effect” if there even is one at this point. To increase the money supply, the FED could theoretically buy up anything, but it should be ready to withdraw this stimulus if/when inflation becomes a problem, so hard, fungible, liquid assets should be preferred over things like junk bonds, rare coins, or fresh vegetables. The author has a point that pumping all this stimulus into the bond market distorts it and could lead to a spectacular backlash if inflation gets out of hand and the FED tries to liquidate its position. I’ve been arguing that the FED should be stocking up on whatever hard commodities are not presently peaking, a special program to build up the strategic petroleum reserve would have been a great option 20 months ago and might still be worth doing now. Non-ferrous metals should also be considered as well as vacant land in distressed areas. On the former, some would argue that gold is at a peak, but it’s way below its record high; given the desperate fiscal state of most of the western world, I’m still bullish in the long term. The one thing the FED should avoid is foreign currency and bonds, such purchases could easily be canceled out with similar activity by foreign governments, not to mention the long term risk of inflation and default. The main aim should be to get dollars into the economy; even if they first land oversees, each one will eventually find its way back here in one form or another. Scary as all this sounds, it’s far saner than the alternative, following Japan down the bankruptcy hole with more fiscal stimulus, though both countries are probably headed there in the long run whatever the FED does.

By: cpv1022

cpv1022 — Wed, 13 Oct 2010 17:10:21 +0000

The free market doesn’t need the Fed to prop it up. What the Fed is doing is preventing the free market from working naturally, from going through its natural cycle of cleansing. Fortunately, the Fed can only get in the way for so long; it cannot forestall the eventual and inevitable rise in interest rates. The Fed is trapped by its lower bound of zero in its monetary policy, and soon it will be trapped by the lower bound of zero in market interest rates. Interest rates, already at historic lows, can’t go much lower. And what will happen to real estate values when interest rates begin to rise? Yes, that’s right, there will be downward pressure on prices and a reduction in wealth. There is no easy way out. The sooner we accept the pain and work through the difficult market readjustments, the sooner we can return to natural free market growth.

By: garrisongold

garrisongold — Wed, 13 Oct 2010 14:18:48 +0000

Well, I guess that “free market-global economy” thingey they preached about for so many years isn’t so “free” after all. Seems it won’t work without the “not so invisible hand” (a.k.a the fed) doing a few slight of hand tricks behind the scenes.

How ironic that this so called “free market global economy” requires the micro-management services of a central planning agency such as the fed to prop it up. I thought that was a feature of communism. And what’s even worse, their chief objective is the continued bail out and protection of the interests and investments of our country’s elite.

I think we need to revisit and reconsider just who the characters of Orwell’s “Animal Farm” represented.

By: jde10

jde10 — Wed, 13 Oct 2010 10:27:39 +0000

It appears that most comments have come from America and yet we have gone through the same thing in the UK and appear to be following the same path forward with QE also. It seems that fiscal and monetary policies have been designed to create the maximum incentive to go into debt and push up asset prices along the way that let you go even more into debt. Living life prudently seems to be a losing strategy as you simply end up (via massive tax increases or zero returns on your savings) bailing out all those who went along for the ride. With each bubble bursting our policy makers create a larger one to bail us out. Given how big the previous one was I dread to think about how large the next one will be – the one we are in the process of creating now.

By: g11427

g11427 — Fri, 08 Oct 2010 17:33:42 +0000

Everybody knows what the problem is but nobody knows how to solve it, with any degree of certainty. Pointing the finger of blame at one person or one party is futile. We just have to hope that our Federal Reserve and our Government does its best to stimulate the economy without unleasing inflation and without burdening future generations with excessive debt. Can any one claim how to do this with any degree of certainty?

By: Tiu

Tiu — Fri, 08 Oct 2010 15:48:32 +0000

and yes, it should have said “they’re addicted to”.

By: Tiu

Tiu — Fri, 08 Oct 2010 15:47:10 +0000

Moss_GR in answer to your question: usually addicts loose the ability to do anything other than continue to consume the product their addicted to… until it kills them or they go cold turkey.