Can the Fed stop QE?

[sunskyfan]

Re: Can the Fed stop QE?

I am a red pill kind of dude. Illusion went out the door for me a long time ago. I am no fan of the Fed. I don't have faith in secrecy. But, I also an analyst and if the FED stopped QE the current economy would come to a full stop. If you think you got problems with the town halls over health care.

[nero3]

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.

I think there is enough money out there already to drive sugar to the moon. I think it's the amount of breweries that have a capacity to store sugar and increased demand during recession for alcoholic beverages, even some hoarding in anticipation of further price increases that drive the trend, at least for now. I don't think it's a pure speculative move.

[flintlock]

Re: Can the Fed stop QE?

Double post

[flintlock]

Re: Can the Fed stop QE?

I don't disagree with any of your reasons.

However, those are the reasons to enter the stock market when it is under valued or at least properly valued as measured by historical yardsticks such as p/e ratio, dividends, and the inflation-adjusted real return (or the performance vs a barrel of oil or an ounce of gold). Today's market, even at it's lows, was still over valued based on those historical benchmarks. Now that it has bounced up 40% (especially while corporate earnings have declined precipituously), I simply fear that it is, again, a very risky time to be long.

So, we agree on your reasons for using the market as an investing vehicle, but disagree on the timing and/or the risk of the investment at it's current levels. I simply believe the market will correct to more historical valuation norms (after a period of over correction, actually), especially in this recessionary and uncertain economic environment.

I agree with SS's reasons also, but I think you are right, the market is overvalued and we will see a correction. I think it will be sharp and before the end of the year. The market can only go so long on MSM cheerleading before real economic growth has to occur. High unemployment and broke local governments don't make for something they can just sweep under the rug. This will all become apparent soon.

On Fox news tonight they were literally declaring the recession over! Near 10% U3 unemployment and no recession, how about that!:rolleyes:

[snakela]

Re: Can the Fed stop QE?

Correct me if I'm wrong, but wasn't the whole idea of QE to allow the fed to buy any old crap like MBSs at par instead of just UST? That's where the money for the markets came feom.

[blazespinnaker]

Re: Can the Fed stop QE?

Correct me if I'm wrong, but wasn't the whole idea of QE to allow the fed to buy any old crap like MBSs at par instead of just UST? That's where the money for the markets came feom.

Yeah, 1.2T for those MBS is a lot of money. Still, I think all that MBS were sold at a loss. In theory, if the fed plays its cards right (pretty easy when it can rig the deck), they'll be able to sell all those MBSs for a profit at some point in the future. Nominal profit, of course, doubt it'll be a real one.

[nero3]

Re: Can the Fed stop QE?

What worries me a lot is that, to get the economy going good now, I think you need much stronger stimulus than before, due to the heavy debt load. I think it's impossible not to overshoot with inflation, cause if aiming for low inflation, you won't get the economy moving. It's like if you drive a car up a steep hill on a icy road, you want more speed than you need to get over to the other side. However, Bernanke might worry about his academic credentials, and think he can satisfy both inflation and employment targets, and not do enough to get things rolling, with the economy stalling, before there really is a new boom. That's why Larry Summers would be better. Even I suspect none of them understand it. I would prefer a guy like Krugman. I think he would be even more likely to go all in, and even raise the inflation target into the 5-8 % range. That's what they need. A new, higher inflation target.

[dummass]

Re: Can the Fed stop QE?

Who puts the descriptive tags on the avatars? nero3 is now our "iTulip Ambassador" :confused: Ya, I know, Ambassador is not an elected position, but shouldn't there be some accountability? :rolleyes:

[cjppjc]

Re: Can the Fed stop QE?

Who puts the descriptive tags on the avatars? nero3 is now our "iTulip Ambassador" :confused: Ya, I know, Ambassador is not an elected position, but shouldn't there be some accountability? :rolleyes:

Post count. You too can be an Ambassador some day. Of course to become a High Commissioner you will need to step up your game.:rolleyes:

[D-Mack]

Re: Can the Fed stop QE?

Who puts the descriptive tags on the avatars? nero3 is now our "iTulip Ambassador" :confused: Ya, I know, Ambassador is not an elected position, but shouldn't there be some accountability? :rolleyes:

I think it's the post count, over 500 posts or so, over 1000 is High Comi..

[snakela]

Re: Can the Fed stop QE?

How many posts do I need to become some sort of Czar?

[GRG55]

Re: Can the Fed stop QE?

Correct me if I'm wrong, but wasn't the whole idea of QE to allow the fed to buy any old crap like MBSs at par instead of just UST? That's where the money for the markets came feom.

The Fed calls its version of QE "Credit Easing", and if I recall correctly it was intended to extend the Fed's liquidity injections beyond the banks directly into the auto, credit-card, student and small-business loan markets [the centrepiece was the Term Asset-Backed Securities Loan Facility - TALF].

[sn1p3r]

Re: Can the Fed stop QE?

I thought default left the money and payback destroyed it?

[tacito]

Re: Can the Fed stop QE?

I thought default left the money and payback destroyed it?

I used to think that too. Bart corrected me in the sense that private debts and treasuries are "money like" and can be used to bet on prices too. I don't understand exactly how. Maybe because it can be used as collateral, or sold to a third party.

So when a 1000$ debt is created you have 1000$ in new cash and 1000$ in a new money like asset. Payback destroys both and default destroys the asset.

I'm not sure I've got it right. Could someone comment?

[FrankL]

Re: Can the Fed stop QE?

I used to think that too. Bart corrected me in the sense that private debts and treasuries are "money like" and can be used to bet on prices too. I don't understand exactly how. Maybe because it can be used as collateral, or sold to a third party.

So when a 1000$ debt is created you have 1000$ in new cash and 1000$ in a new money like asset. Payback destroys both and default destroys the asset.

I'm not sure I've got it right. Could someone comment?

I'd say that the theoretical value of the assets to include the total rent to be paid by the person borrowing. And the mark to market for the assets would be the money + rent expected to be paid back by the highest bidder on the assets on the market.

Then agian, what do I know about economy?