Fed is buying treasuries
- Thread starter RiceRocket
- Start date
True, but it's difficult (for us) to determine what portion of that buying was driven by foreign demand vs local demand.
Hey Rocket. IMO the first steps should be to fix the broken and unsustainable US trade model, partly because that is likely the easiest (not easy, but easiest) path politically.
#1 Limit imports to the same dollar value as exports. Not by classifying exempt/tariffed goods classes, but by aggregate, because the market will figure it out cheaper and quicker than a bureaucrat in DC.
#2 No trade with any significant economy that does not have a fully convertible currency.
I do not accept the argument that these are protectionist measures. There are no limits on trade, there is merely the recognition that a sustainable economy needs a balance between imports and exports. The details of who, what, where are left to market mechanisms.
This would almost certainly trigger a resurgence in US manufacturing. For all the doom and gloom, Americans as a whole are educated, motivated and very adaptable. Investment would flood in from overseas as I am absolutely certain many others also perceive America's formidable strengths.
If trade can't be fixed, there isn't much point in worrying about other measures. If something like the above can be done - and it would probably require coordination with rest of G8 - then I would look at
#3 a coordinated sovereign default amongst the G8.
Virtually everybody is getting caught in the same debt trap - there is an opportunity for a large scale reset that can buy breathing room for other measures to take hold. Kill the zombie banks in the process, too.
And then, finally, it is time to deal with America's love affair of government services paid for by "someone else".
#4 The federal budget needs to be brought into something resembling a balanced state.
I personally don't care much whether the change is a shift towards current level of services and higher taxes, or fewer services and current taxation levels, so long as the shift is begun.
Well, I do care, but it's a secondary concern and frankly American's have been living on the dole for so long I'm not convinced most people really understand what the services they think they want actually cost. Until the understanding is there, it's probably better to defer that part of the conversation because we'll all just be blowing smoke rings out our asses.
To take just one example - mortgages. It should be clear to everyone by now that mortgage rates at anything resembling current levels reflect a massive implicit subsidy. We now have some idea of the subsidy cost, and it is staggering. So now the question can be put frankly to the American public - do you want 5% 30 year mortgages and a new tax to cover the bailout....errrr....subsidy, or do you want no extra taxation and market-based mortgages rates that will be much higher?
And then,
#5 either formally adopt a "too big to fail" model and increase monitoring/regulation, or make it very clear that failed companies/industries will be left to die a natural death and don't let anyone get "systemically large".
I personally favor the latter alternative, as it will minimize regulation to a revamp of antitrust-like legislation. And when the inevitable mistakes are made (we are all human, after all
), the damage is likely to be smaller and recovery quicker.
These are all IMO and I am open to suggestions on improvement. I hope it's clear that these suggestions would cause heart attacks with both Dem and GOP leadership, which makes them inherently non-partisan.
Finally, and this is probably most contentious,
#6 Remove barriers on labor between "like-minded" countries.
Monetary capital moves relatively freely. Labor is a form of capital and should be treated similarly. But this can only be done with other countries who have similar standards and expectations as eg. US/Canada.
#1 Limit imports to the same dollar value as exports. Not by classifying exempt/tariffed goods classes, but by aggregate, because the market will figure it out cheaper and quicker than a bureaucrat in DC.
#2 No trade with any significant economy that does not have a fully convertible currency.
I do not accept the argument that these are protectionist measures. There are no limits on trade, there is merely the recognition that a sustainable economy needs a balance between imports and exports. The details of who, what, where are left to market mechanisms.
This would almost certainly trigger a resurgence in US manufacturing. For all the doom and gloom, Americans as a whole are educated, motivated and very adaptable. Investment would flood in from overseas as I am absolutely certain many others also perceive America's formidable strengths.
If trade can't be fixed, there isn't much point in worrying about other measures. If something like the above can be done - and it would probably require coordination with rest of G8 - then I would look at
#3 a coordinated sovereign default amongst the G8.
Virtually everybody is getting caught in the same debt trap - there is an opportunity for a large scale reset that can buy breathing room for other measures to take hold. Kill the zombie banks in the process, too.
And then, finally, it is time to deal with America's love affair of government services paid for by "someone else".
#4 The federal budget needs to be brought into something resembling a balanced state.
I personally don't care much whether the change is a shift towards current level of services and higher taxes, or fewer services and current taxation levels, so long as the shift is begun.
Well, I do care, but it's a secondary concern and frankly American's have been living on the dole for so long I'm not convinced most people really understand what the services they think they want actually cost. Until the understanding is there, it's probably better to defer that part of the conversation because we'll all just be blowing smoke rings out our asses.
To take just one example - mortgages. It should be clear to everyone by now that mortgage rates at anything resembling current levels reflect a massive implicit subsidy. We now have some idea of the subsidy cost, and it is staggering. So now the question can be put frankly to the American public - do you want 5% 30 year mortgages and a new tax to cover the bailout....errrr....subsidy, or do you want no extra taxation and market-based mortgages rates that will be much higher?
And then,
#5 either formally adopt a "too big to fail" model and increase monitoring/regulation, or make it very clear that failed companies/industries will be left to die a natural death and don't let anyone get "systemically large".
I personally favor the latter alternative, as it will minimize regulation to a revamp of antitrust-like legislation. And when the inevitable mistakes are made (we are all human, after all
), the damage is likely to be smaller and recovery quicker.These are all IMO and I am open to suggestions on improvement. I hope it's clear that these suggestions would cause heart attacks with both Dem and GOP leadership, which makes them inherently non-partisan.
Finally, and this is probably most contentious,
#6 Remove barriers on labor between "like-minded" countries.
Monetary capital moves relatively freely. Labor is a form of capital and should be treated similarly. But this can only be done with other countries who have similar standards and expectations as eg. US/Canada.
Those stupid traders that sold the dollar today now nothing about the velocity of money. They will get burned soon. It is the velocity of money that generates inflation, not quantitative easing and the velocity is down at this point, negative slope, not even sign of turning up. Stupid suckers.
Soon the EU central bank will be forced to do quantitative easing and EUR will fall balancing things out. In the G20 summit the US tried to convince Europeans to go along with them and the British with quantitative easing and they will have to sooner or later if they want to keep the union together. Three nations will be forced out pretty soon based on the spreads they get for their bond issues relative to German bonds.
Monies created from quantitative easing are NOT printing money in the traditional meaning of the words. These monies can be withdrawn from the economy as easily if the central banks see signs of inflation.
Everything working as planned to get the new long term economic cycle in progress. It will take a few years though. First deflation, then moderate inflation, then stagflation, then recession and afterwards a boom.
Soon the EU central bank will be forced to do quantitative easing and EUR will fall balancing things out. In the G20 summit the US tried to convince Europeans to go along with them and the British with quantitative easing and they will have to sooner or later if they want to keep the union together. Three nations will be forced out pretty soon based on the spreads they get for their bond issues relative to German bonds.
Monies created from quantitative easing are NOT printing money in the traditional meaning of the words. These monies can be withdrawn from the economy as easily if the central banks see signs of inflation.
Everything working as planned to get the new long term economic cycle in progress. It will take a few years though. First deflation, then moderate inflation, then stagflation, then recession and afterwards a boom.
It was pretty obvious when they started buying Nov./Dec. of last year. But then it came right out of Bernanke's mouth around the top in treasuries late Dec., Paulson gave his two cents that it was a brilliant idea to bring rates down. Surely you are not going to find any truth at all in any Fed "data" you are looking at!!!
So Bernanke stated on sunday on 60 minutes, that he felt the recession would be over by Q4.
Did know that the plan is now to continue printing and this is going to force the recovery.
Or did Something else just happen in the last 3 days since that testimony that required this action.
This seems like a very aggressive move and doesn't match at all with the testimony from last week and the previous comments that we were on track for recovery.
I think this quote sum up the fed action
Still, some market watchers were saying that the euphoria in the wake of the announcement might not last long.
âThe markets love it, but I'm personally scared as the Fed still doesn't understand that itâs not the cost of money that is the problem and they keep getting themselves deeper and deeper into this,â said Peter Boockvar of Miller Tabak in a research note. âI shudder at the thought of the unwind of all of this.â
http://www.foxbusiness.com/story/ma...---announced-plan-buy-b-long-term-treasuries/
Did know that the plan is now to continue printing and this is going to force the recovery.
Or did Something else just happen in the last 3 days since that testimony that required this action.
This seems like a very aggressive move and doesn't match at all with the testimony from last week and the previous comments that we were on track for recovery.
I think this quote sum up the fed action
Still, some market watchers were saying that the euphoria in the wake of the announcement might not last long.
âThe markets love it, but I'm personally scared as the Fed still doesn't understand that itâs not the cost of money that is the problem and they keep getting themselves deeper and deeper into this,â said Peter Boockvar of Miller Tabak in a research note. âI shudder at the thought of the unwind of all of this.â
http://www.foxbusiness.com/story/ma...---announced-plan-buy-b-long-term-treasuries/
thin air - it is just an accounting entry on the liabilities side....the corresponding entry is a treasury security on the asset side.
with respect to stimulus during the autumn; they did not have to sell treasuries but they wanted to do so. this way they avoided inflationary effects. basically they were just replacing illiquid ABS shit on banks balance sheets with treasuries. the idea was that this alone would suffice to unfreeze the system and restart the economic recovery...that was then.
with respect to stimulus during the autumn; they did not have to sell treasuries but they wanted to do so. this way they avoided inflationary effects. basically they were just replacing illiquid ABS shit on banks balance sheets with treasuries. the idea was that this alone would suffice to unfreeze the system and restart the economic recovery...that was then.