RED ALERT!:- BBC News/its a war !

[Mega]

http://www.bbc.co.uk/blogs/newsnight...at_doesnt.html

Oh My
Mike

P.s Where EJ ?

[ASH]

Re: RED ALERT!:- BBC News/its a war !

http://www.bbc.co.uk/blogs/newsnight...at_doesnt.html

Quoth Paul Mason:

The problem is that some 12% of GDP has been pumped into the economy but we're not sure how much that has translated into demand. If we are now looking at QE2, you would have to ask whether the stated aim - getting the banks to lend instead of hoarding money - could not have been achieved by some more hands on measure.

Could have fooled me. I thought the aim was to mop up a bunch of bum MBS to recapitalize banks, keep mortgage rates low, and support asset prices. Of course, Mason is writing about both the BoE and the Fed, and as I understand it, the BoE just bought gilts.

[vinoveri]

Re: RED ALERT!:- BBC News/its a war !

Could have fooled me. I thought the aim was to mop up a bunch of bum MBS to recapitalize banks, keep mortgage rates low, and support asset prices. Of course, Mason is writing about both the BoE and the Fed, and as I understand it, the BoE just bought gilts.

Right.
The plan is really not that hard to understand (infuriating to your truly as it may be).
"Print" via buying treasuries and other paper assets thereby retiring the bad debt while allowing banks to "earn" themselves back to solvency (this has been going on for almost 2 years now).
Once banks are solvent and the bad debt transferred or retired, the Fed ceases QE and the banks then go back to lending as usual and we start again ..... speculation baby ...another bubble and dow much much higher.
The big question of course is when will this occur, next year or in 5 years? If the US can avoid recession until then, I think the oligarchs can pull it off.
Gold is a hedge for if it doesn't work or something goes wrong, but if and when the CONfidence game is successful and commercial lending starts taking off, it will be back to the leveraged speculation game, and I for one am not going to sit out the next bubble. If they're going to socialize the losses, better to be a speculator than a saver IMO.

[Jay]

Re: RED ALERT!:- BBC News/its a war !

Could have fooled me. I thought the aim was to mop up a bunch of bum MBS to recapitalize banks, keep mortgage rates low, and support asset prices. Of course, Mason is writing about both the BoE and the Fed, and as I understand it, the BoE just bought gilts.

That's pretty much how I see it too. They want to give the pig as much time as possible to work its way through the python without unleashing something they can't control.

[Adeptus]

Re: RED ALERT!:- BBC News/its a war !

The plan is really not that hard to understand (infuriating to your truly as it may be).
"Print" via buying treasuries and other paper assets thereby retiring the bad debt while allowing banks to "earn" themselves back to solvency (this has been going on for almost 2 years now).
Once banks are solvent and the bad debt transferred or retired, the Fed ceases QE and the banks then go back to lending as usual and we start again ..... speculation baby ...another bubble and dow much much higher..

Yes, and this scenario also has 2 serious implications:
1) Announcements of QE by the Fed or investigations by blogosphere only causes said currency to devalue and gold to rise
2) As soon as the banks start to loan out that printed money at a 12:1 fractional reserve ratio, as you mentioned, further inflation & bubbles will ensue.

Adeptus

[ASH]

Re: RED ALERT!:- BBC News/its a war !

Following up on my initial reaction: I admit that undercapitalized and failing banks won't lend, so one could argue that saving the banking system from its losses is a necessary pre-condition for "getting the banks to lend". Necessary but not sufficient -- and I see an important distinction of emphasis. Quite clearly, they're not printing money in such a way that puts it directly in the hands of folks who would spend it, although I don't doubt they'd like to get credit expansion and credit-fueled consumption going again. It's just that they can justify (to themselves) bailing out "the system" but not individual consumers. They see their job as preserving the system, so that the system can start lending when consumers are ready and able. However much they profess to detest the moral hazard created by bailing out financial companies, bailing out borrowers is even more distasteful. I think this is the attitude that underlies Charlie Munger's recent comments. Yet, most of us realize that "the system" isn't a machine, but is a collection of businesses owned and run by... individuals. So the distinction between bailing out the system, and bailing out individuals, is false.

[Jay]

Re: RED ALERT!:- BBC News/its a war !

Yet, most of us realize that "the system" isn't a machine, but is a collection of businesses owned and run by... individuals. So the distinction between bailing out the system, and bailing out individuals, is false.

The distinction became bailing out rich reckless individuals and not bailing out poor reckless ones, unless you count extending unemployment benefits and letting mortgage deadbeats stay in their homes a bailout. The fiscally prudent laborers pay for it all.

I saw your post somewhere about diverting your income stream from labor to capital; I have been thinking the same way for a long while. Plus working nights gets old when you have a few kids.