edward hugh: qe2 might be about devaluing the dollar

[ASH]

Re: edward hugh: qe2 might be about devaluing the dollar

I agree except it is broader than governments and fiscal policy. I kind of see the next round is about forcing entities (countries, corporations, hedge funds ect ... mostly china ) to repatriate dollars from the financial sector to the real world economy. Spend it or lose it is the implied threat. It is less about devaluing the dollar but more about devaluing the parking of dollars hedging the uncertainty in the world economy. Think less about inflation as the focus and more about the idea of the FED targeting devaluation of dollar denominated storage of money. The danger is that is a forced decision under duress better than waiting for the murky waters to clear. Evidently the powers that be have decided that the patience of "the people" is getting short.

Thanks for reminding me of that angle. I think you're right.

[herbkarajan]

Re: edward hugh: qe2 might be about devaluing the dollar

I agree except it is broader than governments and fiscal policy. I kind of see the next round is about forcing entities (countries, corporations, hedge funds ect ... mostly china ) to repatriate dollars from the financial sector to the real world economy. Spend it or lose it is the implied threat. It is less about devaluing the dollar but more about devaluing the parking of dollars hedging the uncertainty in the world economy. Think less about inflation as the focus and more about the idea of the FED targeting devaluation of dollar denominated storage of money. The danger is that is a forced decision under duress better than waiting for the murky waters to clear. Evidently the powers that be have decided that the patience of "the people" is getting short.

can you expand, seems the main 'dollar denominated storage of money' is fixed income, ex. corporate bonds. so what's the strategy? jack up rates and see the money really move. Or have foreigners give up and devalue

[sunskyfan]

Re: edward hugh: qe2 might be about devaluing the dollar

http://www.forecasts.org/30yrT.htm

Not sure what the specifics of the strategy would be. First, I would think, would be to drop yields on long term treasuries which has been happening since the spring. Perhaps QE2 is about dealing with that uptick about to happen at the beginning of next years forecast.

[jk]

Re: edward hugh: qe2 might be about devaluing the dollar

the idea, i think, is to lower rates further out on the curve, at least as far at the 10year. for one thing, mortgage rates key off the 10year, so that lends some support to house prices. further, any homeowners who are still creditworthy will be able to refi and improve their cash flow. corporations will float even more bond issues to lock in cheap money. perhaps they will even spend some.

the primary dealers will find it slightly less lucrative to play the yield curve as it will be flatter. perhaps they'll find other uses for the funds. the lower dollar will help american exporters- and there are american exporters- both agricultural products and industrial ones like airplanes and tractors and machinery. the lower dollar will also raise the price of imports, especially oil. gasoline prices are up significantly in the last few weeks, have you noticed?

[herbkarajan]

Re: edward hugh: qe2 might be about devaluing the dollar

http://www.forecasts.org/30yrT.htm

Not sure what the specifics of the strategy would be. First, I would think, would be to drop yields on long term treasuries which has been happening since the spring. Perhaps QE2 is about dealing with that uptick about to happen at the beginning of next years forecast.

Agreed, QE2 is all about 'defending' the yields on the bond. "Markets" say time to tighten the screw, austerity is in store, no more 10% budget deficits, U.S is going the way of Britain, Ireland and hopefully not Latvia

“You need” austerity, said Greenspan, a paid speaker at the event. “We’re going to have to start to cut”
http://www.bloomberg.com/news/2010-1...-increase.html

[Starving Steve]

Re: edward hugh: qe2 might be about devaluing the dollar

Greenspan finally spoke in plain and simple English, not Greenspanese? I don't believe it. That is news!

Alan Greenspan ran the U.S. economy on deficits, bubble-economics, de-regulation, growth at all costs, faking the data, using homes as an ATM, anything goes, creative finance, creative data, creative book-keeping, trust the markets, trust the banks, "grow our way out of deficits", growth at any cost, econometric magic, bail-out nation, easy-money, crony-capitalism, faith, trust-deeds, debt-is-money, cloudy-titles, derivatives, top-down control, central-planning authority, higher math, and lower and lower and lower and lower and then, still lower interest rates. But don't tell anyone of the "Grand Plan" except for "our boys" at Goldman-Sachs in NYC.

Alan Greenspan, also dubbed by Bob Brinker and Wall Street, "The Maestro" ( the teacher in Spanish and the orchestra-conductor in English ). To-day, Dr. Alan Greenspan is known as "Dr. Bubbles". His economic reputation is in disgrace.

And Ben Bernanke was working in the background with Alan Greenspan at the U.S. Fed. They were both in on this zero interest rate policy ( the ZIRP ), but we don't exactly have all of the details on how they worked together. Did one teach the other?

Keynesian-economics >>>> to Bubble-economics >>>> to Bail-out nation >>>> to the ZIRP >>>> to welfare for the banks and the government. Unbelievable!

And Marc Carney at the Bank of Canada was chosen by Ben Bernanke. Marc Carney came from Goldman-Sachs, so he was the best man for the job in Ottawa. Oh, if I could have been a fly on the wall at the Fed when Marc Carney was selected! The little details are what make this the story of our times.

I never want to see this Obama-bunch ever again in power.