Can the Fed stop QE?

[sunskyfan]

Re: Can the Fed stop QE?

I think the chief sign is the collective default rate. A nuclear example would be if the US suddenly defaulted on it debt tomorrow the dollar would be destroyed in totality. When a person walks away from mortgage money is destroyed. When a company can't meet is obligations to service its debt then money is destroyed.

Capital legitimatization via implied network of obligations only and not real productivity is a Ponzi scheme. When the validity of the network comes into question and is tested as obligations are not met the network collapses and all the capital created by the network is destroyed.

A lot of the capital formation that happened in the (at least) ten years is being delegitimized because it was not correctly or accurately mapped to real productivity and thus the money destruction.

[D-Mack]

Re: Can the Fed stop QE?

sure......

New York Fed in hiring spree

By Aline van Duyn in New York

Published: August 10 2009 23:30 | Last updated: August 10 2009 23:30

The Federal Reserve Bank of New York is aggressively hiring traders as it seeks to manage its burgeoning securities holdings, making the central bank one of Wall Street’s most active recruiters of financial talent.

The New York Fed – the arm of the US central bank that implements its monetary policy – plans to increase the staff in its markets group to 400 by the end of the year – up from 240 at the end of 2007.

The Fed, which says that most of its new recruits come from private sector financial firms, is hiring employees as many banks, rating agencies, hedge funds and private equity groups shed staff. New York city officials recently estimated that the sector’s woes would lead to a loss of up to 140,000 jobs.

The Fed’s need for more traders is a direct consequence of the central bank’s efforts to keep credit flowing through the US economy. The Fed has been buying fixed-income securities at such a rate that its assets have more than doubled to $2,000bn in the past year, leading the central bank to conclude that it needs more people to monitor the markets and to manage its credit risks.

...
http://www.ft.com/cms/s/0/0e7071d0-8...44feabdc0.html

[nero3]

Re: Can the Fed stop QE?

The problem to me seems to be to tighten again. Bernanke don't understand how close inflation really is at going through the roof, that's why they will probably overdo it, big time.

[nero3]

Re: Can the Fed stop QE?

One thing I like to add:

Sugar:






It's on the loose, not having been so high since 1981, in nominal terms. I think every sugar bull have ended with the fed tightening. Since Sugar is a recession commodity that have peaked around recession lows in the past, it makes me wonder if the recession really is over. An inflation adjusted high would be around 250 cents. The reason sugar moves, is that it's a commodity that is easy to hoard (the physical), if expectations of a price rise establish itself, in addition demand for sugar goes up in recessions.

[cjppjc]

Re: Can the Fed stop QE?

Can anyone tell me how does an increase in money supply create higher sugar prices. Please don't say the unit of measure (Dollars) has decreased in value.

[blazespinnaker]

Re: Can the Fed stop QE?

I think we have massive pools of money out there, and since the velocity of money is normalizing, those pools will find a home in 'riskier' assets rather than the safety they had been seeking.

Sugar being one of those assets.

All this anti-commodity speculation law proposals going around might be dampening enthusiasm for running up bubbles in various assets, though.

Nero really poses a great question though. I'd love to know the answer myself.

[cjppjc]

Re: Can the Fed stop QE?

The reason sugar moves, is that it's a commodity that is easy to hoard (the physical), if expectations of a price rise establish itself, in addition demand for sugar goes up in recessions.

You just added this right?

[ThePythonicCow]

Re: Can the Fed stop QE?

Can anyone tell me how does an increase in money supply create higher sugar prices. Please don't say the unit of measure (Dollars) has decreased in value.

Imagine you grow sugar cane for the American market. Your farm is in some other country. The Americans have printed so many fiat dollars that dollars have gone into the crapper on the foreign exchange markets. The dollar denominated price you must pay for petro to run your farm equipment has doubled or tripled. Fertilizer, pesticides and seed cost more. The current dollar denominated contract sugar price you are paid is no longer enough to stay in business. You raise your price or you go out of business. Which ever sugar farms survive then charge more. This dollar denominated price increase must be passed through to the American consumer in the price of every food that contains sugar (which seems to be every food except those that just contain corn syrup ;)).

[cjppjc]

Re: Can the Fed stop QE?

Thanks to all of you.

[rjwjr]

Re: Can the Fed stop QE?

The problem to me seems to be to tighten again. Bernanke don't understand how close inflation really is at going through the roof, that's why they will probably overdo it, big time.

EJ has noted a couple of times that the Fed doesn't believe that inflation is a concern in an environment of rising/high unemployment and that the Fed has never previously raised interest rates until unemployment has declined for at least 6 straight months. If this holds true, Bernanke will not be tightening anytime soon.

(Disclaimer: I typed this from memory, I am going to check his actual comments and come back to edit my statement if needed.)

Update: Here is EJ's actual quote..."The Fed has never raised interest rates following recession until after unemployment has declined for at least six months. The Fed is wired with Non-Accelerating Inflation Rate of Unemployment (NAIRU) neoclassical economic orthodoxy to believe that inflation is impossible if unemployment is rising."

[metalman]

Re: Can the Fed stop QE?

EJ has noted a couple of times that the Fed doesn't believe that inflation is a concern in an environment of rising/high unemployment and that the Fed has never previously raised interest rates until unemployment has declined for at least 6 straight months. If this holds true, Bernanke will not be tightening anytime soon.

(Disclaimer: I typed this from memory, I am going to check his actual comments and come back to edit my statement if needed.)

Update: Here is EJ's actual quote..."The Fed has never raised interest rates following recession until after unemployment has declined for at least six months. The Fed is wired with Non-Accelerating Inflation Rate of Unemployment (NAIRU) neoclassical economic orthodoxy to believe that inflation is impossible if unemployment is rising."

google is your friend!

searching for the above i ran across this forgotten tidbit...

The Federal Reserve's use of core inflation measures is harming its credibility, the new president of the St. Louis Fed wrote in an editorial released on Thursday.

James Bullard, who took over from William Poole in April, said focusing on inflation indices that exclude food and energy work well when those prices are rising at rates similar to those of other prices, "but that is not what is happening today.

"It is hurting Fed credibility to say that we are trying to keep inflation low and stable, but at the same time we are not counting some of the prices that are going up at the most rapid pace,"

y'all do remember the great inflation of 2008... a year ago... right?

[pwcmba]

Re: Can the Fed stop QE?

The Fed can stop it anytime it wants. The problem is that it is the only valid money creator in the economy at a time when money destruction is happening at a breath-taking rate. If the Fed stopped the economy would stop.

Blue pill or red pill? How far down the rabitt hole do you want to go?

[metalman]

Re: Can the Fed stop QE?

Blue pill or red pill? How far down the rabitt hole do you want to go?

Inflation versus deflation debate for Red Pill consumers

by Eric Janszen

Inflation versus deflation debate keeps contrarian economics and finance pundits pontificating for ten fabulous years. Fed flushes banks with funds and a fresh flurry of articles fills the blogosphere. Finally, the "financial economy" enters.

I’m glad to see the term “financial economy” enter the vocabulary in this inflation versus deflation discussion with a recent note I got from Aaron Krowne. We didn’t pick up on the idea until Bill Gross started talking about it in The Last Vigilante (Gross, Feb. 2004):“I would argue the most critical reformation in the past twenty years since Volcker’s prime has been the transition of the U.S. from a manufacturing/to a service/to a finance-based economy within the span of two decades. Purists will perhaps rightly quarrel with the chronology or maybe even the logic, but it seems to me in any case that the critical difference between then and now is that profits and employment – 2/3 of the critical constituents that a Fed Vigilante must protect (inflation being the third) – are now primarily a function of the amount of debt/leverage and its cost.”

that rang a bell...

[charliebrown]

Re: Can the Fed stop QE?

agreed. The stinking fed makes us all speculators. hold cash, or low yielding savings accounts, and inflation will eat you alive. inflation numbers are a joke.
In the real world were you have to pay taxes, buy food, insurance, medicine, education, energy, shelter. Your .2% interest rate just doesn't cut it.

I'm dollar cost averaging into the market since april. have stops set. hopefully I won't get whipsawed or gapped for a loss. I'm still really nervous. valuations are too high. I think some catalayst is going to put fear back into the market. large municipal, state or sovereign default, war in the mid-east, peak cheap energy etc.

[blazespinnaker]

Re: Can the Fed stop QE?

great avatar. that's a pretty good relationship between the fed/banking (Lucy) system and joe average (charlie brown).