Fed says economy needs $600B bond-purchase program...haha

[sjfan]

(1) Why do think the demand for UST will now not remain if rates go up to 3%?
(1b), When the Fed does hike rates, everyone who bot the USTs at 30bps will have a principal loss on their balance sheet; Hey - we can now buy back the debt at below par if we want to draw down the debt load.
(2) Why do you make the simplified assumption the GDP isn't rising? If the Fed hikes, then in all likelihood the GDP has risen;

I think your stress case uses too little stress. I don't think the US will be unable to pay its debt if rates go to 3% or 10%. Crisis level stress will come from elsewhere.

Quote from kashirin:

it works exactly as I think
most of debt short term 2 years or less
in addition to new 1.7 trillion US needs to roll 5 trillion of old debt
now short term debt is below 0.1-0.5% which is basically free
now let's pretend Fed raises rates to 3%
so expenses go up 150 billion in the first year and 500 billion in 3 years

if rates go up 5% it will be 750 billions every year in 3 years
if current deficit is not reduced dramatically interest will be north of 1 trillion in 5 years
which will make deficit 2.5 trillion or 16% of GDP

there is no way out - print a trillion every year or default
first result in hyperinflation the second one depression

 

[Martinghoul]

Quote from zdreg:
with you no action seems to ever matter. perhaps if you familiarize yourself with the concept of tipping point you would be not so blase about the effects of the Fed action which parallels the action of central banks in 3rd world countries...

Firstly, when did I say that "no action ever matters". For example, I think what Congress and the White House do matters a lot. I just think that what the Fed is doing with QE2 doesn't really matter and I have already mentioned why. Secondly, I am quite familiar with the whole "tipping point" concept and find it somewhat overrated and impractical.

 

[jueco2005]

Quote from sjfan:

Of course, you are right; but growth in consumption -> rise in aggregate demand -> growth;

That is some Keynesian cheap talk.

You keep on being wrong. But hey.......I am not in the business of correcting you.

 

[sjfan]

Milton Friedman didn't disagree with this either; In any case, why don't you go back to that momentum thread; that's probably a little more of your speed.

Quote from jueco2005:

That is some Keynesian cheap talk.

You keep on being wrong. But hey.......I am not in the business of correcting you.

 

[jueco2005]

600 b bond purchase is typical.

New debt money will began circulating soon.

The Fed is a champion at monetizing us debt. The proceeds are kept by our great banks, like Goldman-Sachs.

some mainstream economists will began addressing the multiplier effect of these new salvation 600b.

AT THE END this is nothing more than a bookkeeping entry. Hardly any real positive effect.

Moreover, it signals to the outside world that the US economy and its currency are weak.

 

[jueco2005]

Quote from sjfan:

Milton Friedman didn't disagree with this either; In any case, why don't you go back to that momentum thread; that's probably a little more of your speed.

Obviously your personal library is very small. If you ever read him read him again. And go to www.mises.org

 

[sjfan]

How does that work? I mean, regardless of whether you think QE is a good idea or not (which you clearly don't; and I don't either), how is GS benefiting from it? I trade govt debt institutionally - I have no idea how GS or anyone is making money from the buy backs (in anything, it's the pension funds that are making cash from it).

Quote from jueco2005:

The proceeds are kept by our great banks, like Goldman-Sachs.

 

[jueco2005]

Quote from sjfan:

How does that work? I mean, regardless of whether you think QE is a good idea or not (which you clearly don't; and I don't either), how is GS benefiting from it? I trade govt debt institutionally - I have no idea how GS or anyone is making money from the buy backs (in anything, it's the pension funds that are making cash from it).

Look my friend. I am not in the business of lecturing anyone nor debating my points of view. I come to these forums because their are FREE and you can find all kinds of thoughts and information. Most of the time blind people do choose to be blind. If you don't like my replies, ignore them.

 

[sjfan]

I'm actually interested why you think that's the case; I hear it a lot, and I get that it's somewhat convenient to believe the great big assholes of the Street are benefiting from everyone's misfortune. Just want to know why you think it's the case. Don't think I'm telling you not to talk or anything because I disagree with you.

Quote from jueco2005:

Look my friend. I am not in the business of lecturing anyone nor debating my points of view. I come to these forums because their are FREE and you can find all kinds of thoughts and information. Most of the time blind people do choose to be blind. If you don't like my replies, ignore them.

 

[jueco2005]

Quote from sjfan:

I'm actually interested why you think that's the case; I hear it a lot, and I get that it's somewhat convenient to believe the great big assholes of the Street are benefiting from everyone's misfortune....................................

I think the past few years have given an IRREFUTABLE evidence that this is the case. (Help yourself finding them; there books, movies, endless internet pages on the matter)

Every year we have bigger and bigger TOO BIG TO FAIL enterprises. In other words MONOPOLIES.

We have a great corporate system in place. Privatize gains and socialize losses. So, socialism is good after all. It all depends you are socialism things for.

That's why I (despite being Cuban by birth) don't reject certain forms of social programs that protect society. But this I live to my personal discretion.

I'm actually interested why you think that's the case; I hear it a lot, and I get that it's somewhat convenient to believe the great big assholes of the Street are benefiting from everyone's misfortune....................................[/QUOTE]

I wonder what makes you dont believe it or otherwise NOT SEE IT.