Quantitative Easing explained...
Quantitative Easing explained...
"Man has not the power to change the categories of human action. He must adjust his conduct to them."
Brilliant and on the money.
haha great find i loved it
Keynes said quantative easing is like trying to get fat by buying a bigger belt.
It was tried under Franlin Roosevelts Presidency and was a huge failure.
If the USA keep going on this path they will force Europe to provide trade barriers and encourage China to reverse their decision to depreciate against the dollar and other countries may set up trade barriers.
Theses are the sort of things that caused the Great Depression.
Can the US Fed get some other opinions not based on their neo-classical fallacies before it is too late? Its all groupthink.
I agree it's funny, but it's also scary that we go along with this.
I guess we went along with the weapons of mass destruction too.
So how do we profit off this US printing, is it as simple as buying gold, or should we be shorting the US markets and the US dollar, what else?
I have read that things in the past quarter are looking up in the US, good profit reporting, pickup in employment. Is this just a blip?
Well, Murdochs backing Sarah Palin for President.
I reckon the way to make money is go short USA. In fact in hindsight that would have worked over the last 5 years.
One of the many very good articles on QE by John Hussman in recent weeks.
Bubble, Crash, Bubble, Crash, Bubble...
Given that interest rates are already quite depressed, Bernanke seems to be grasping at straws in justifying QE2 on the basis further slight reductions in yields. As for Bernanke's case for creating wealth effects via the stock market, one might look at this logic and conclude that while it may or may not be valid, the argument is at least the subject of reasonable debate. But that would not be true. Rather, these are undoubtedly among the most ignorant remarks ever made by a central banker.
Let's do the math.
Historically, a 1% increase in the S&P 500 has been associated with a corresponding change in GDP of 0.042% in the same year, 0.035% the next year, and has negative correlations with GDP growth thereafter (sufficient to eliminate any effect on the long-run level of GDP). Now, even if one assumes - counter to reasonable analysis - that the GDP changes are caused by the stock market changes (rather than stocks responding to the economy), the potential benefit to the economy of even a 10% market advance would be to increment GDP growth by less than half of one percent for a two year period.
Now, as of last week, the total capitalization of the U.S. stock market was at about the same as the level as nominal GDP ($14.7 trillion). So a market advance of say, 10% - again, even assuming that stock prices cause GDP - would result in $1.47 trillion of market value, and a cumulative but temporary increment to GDP that works out to $11.3 billion dollars divided over two years. Moreover, even if profits as a share of GDP were to hold at a record high of 8%, and these profits were entirely deliverable to shareholders, the resulting one-time benefit to corporate shareholders would amount to a lump sum of $904 million dollars. In effect, Ben Bernanke is arguing that investors should value a one-time payout of $904 million dollars at $1.47 trillion. Virtuous circle indeed.
Cheers gav that's funny stuff.
I also had to have laugh at Richard Quest's example on CNNNNN.
You know that guy they picked up in Central Park, New York a couple of years ago.
At least in this vid, his substance of choice is grog.
Here's another great example
"That's straight up, Gangster" ROTFLMAO
Unfortunatley my silly computer/internet connection wouldn't play the audio for those U-tube media files.
I have a vague understanding of the concept 'quantative easing' refering to the 'Fed'.
Could someone give me a brief description of what this really means?
Also, I've been watching Glen Beck on foxtel, and he's also been bang'n on about the above, & also how E.U. is also in dire-straits, with Greece,Ireland,Italy,Portugal & Spain all crying poor & how this might spell big problems for Europe?
Where does this leave & potentially effect Australian economy?
So this mysterious entity called the "federal reserve" just keeps printing out money to give to the banks, who in turn buy treasury bonds yes, which is really like printing out money & loaning it to yourself? [funny money]
well it appears their economy is really living on borrowed time [pardon the pun].
What's stopping their dollar from becoming cheaper than wall-paper, like the paso...Nukes? Military interventions in oil rich states?
What are your predictions for the next year or so, with regard to the potential implications of this behaviour?
quod bonum tenete [caveat emptor] allcheckpestcontrol lol. [in vino veritas]
The whole thing basically works like a giant asset swap, with the end result is that banks end up with large increases in their reserves and the fed attempts to manipulate longer term yields to try and spur demand.
Essentially you are really only going to see that money filtering into the real economy if people are willing to borrow money and banks are willing to lend a lot of it out. So far that doesn't really seem to be happening.
Most of that is largely unimportant for the short term though, the video that agentm posted up largely sums up the mentality of the markets at the moment. The market is currently trending up, riskier assets like the nasdaq, small caps, commodities, etc are leading the way higher, and the fed wants higher asset prices, so if you are trading the short term moves at the moment, then buy the dips!