Ludwig Von Mises
- Thread starter RCG Trader
- Start date
Yes, but how far back is your analysis going? 
There are plenty of historical examples where it did not work very well at all.
Just because the Fed has carried it out quite well for the last 40 or so years doesn't mean it's working. I think it's just because we had a very long runway. We're reaching the end of that soon (and by soon I mean the next decade).
There are plenty of historical examples where it did not work very well at all. Just because the Fed has carried it out quite well for the last 40 or so years doesn't mean it's working. I think it's just because we had a very long runway. We're reaching the end of that soon (and by soon I mean the next decade).
If we go by Reinhart and Rogoff's analysis, then my analysis goes back to the beginning of western sovereign debt market? And currency debasing has a fairly long history in the east as well.
There are only two (rather major) cost to debasing: (1) being invaded by an angry creditor country (doesn't really happen), or (2) debasing too much and your own people decide to slit your throat.
Either way, the debt problem is solved.
There are only two (rather major) cost to debasing: (1) being invaded by an angry creditor country (doesn't really happen), or (2) debasing too much and your own people decide to slit your throat.
Either way, the debt problem is solved.
Quote from Tsing Tao:
Yes, but how far back is your analysis going?
Just because the Fed has carried it out quite well for the last 40 or so years doesn't mean it's working. I think it's just because we had a very long runway. We're reaching the end of that soon (and by soon I mean the next decade).
Don't need to do that. First of all, the US is the holder of the reserve currency, and needs to increase the supply by at least as much as the global economy increases just to keep prices worldwide even.
You need to go further than that to deliver any sort of stimulus to the US economy. This of course assumes that the supply of money has anything to do with stimulating the US economy, which is not really true.
Strict Keynesianism is strictly fiscal, so what the Fed does with the money supply is of no consequence. As I've noted before, the Fed was tied down after the late thirties and not allowed to do much until Eisenhower began to loosen them up, finally, as the right is more comfy with monetary policy stimulus than fiscal policy stimulus. Monetary policy is ineffectual at best and has been shown to be so over and over, while fiscal policy is in fact effective and has been shown to be so over and over, including right now, as the US delivers its fiscal stimulus via the lamented increase in Federal debt, while the eurozone proves to anyone with eyes to see what the opposite does. As I already posted, the cycle there is to cut, see the tax take fall as economic activity falls off, cut again to balance things and see the tax take fall again as economic activity falls off again, then cut again...
You get the picture.
Devaluation of the currency through printing shows up (like now) in rising asset prices, making their way into the consumer home. It's very nice that the published CPI is tame, especially since energy and food are removed. Those two are pesky aspects of life, however, and as someone once shouted to Dudley "You can't eat an Ipad".
Then there's that old saying that "no country ever debased it's way to prosperity"....
No, not really.
You are simply advocating issuing more debt, buying our own debt and then spending the dollars borrowed in a fiscal orgy designed to add to GDP. If we were starting from a surplus condition, I would be inclined to agree with that process on a temporary basis. But we're not. We're starting that point from deep, deep in uncharted and leveraged territory. The Fed has gone where no Fed has gone before, and has come out to say it will continue to print until unemployment improves. That's amusing, because there's no direct correlation between printing money and hiring. The Fed can't really get business to hire. Money is as cheap as it has ever been and we're still not hiring folks. Hell, Japan is on ...what? QE9 or something? They're still stuck.
The Money supply can be used to control prices (if used wisely) but we're the only country in the world where our central bank as a mandate to control unemployment - something the Congress brilliantly added to it's charter in the 70s, if memory serves.
Right now, the QE is going to making bank balance sheets whole - and for speculative risk taking (as it drives the reach for yield). You think the aging population is all keen on taking that risk?
Reckless central bank action is what we have, and our chickens will be coming home to roost very soon.
Okay, in light of the situation right after Lehman, what should have been done in your opinion? That is the first domino. Which way would you have kicked that domino?
I remember Suze Orman, with her face in her hands saying, "we should never have let Lehman go".
What is your position, how do think it would have played out?
Suze Orman is a twat. We DID let Lehman go, and we're all still here talking about it. No meteor slammed into the planet, no oceans boiled.
We put a number of "emergency" procedures into place, some of them against the charter of the Fed, and never took them off. We never unwound anything and allowed the big banks to get bigger, and even more difficult to unwind when the next crisis comes. No regulation (or wrong regulation) was put in place to prevent or reverse any of the underlying causes that brought about the crash. Instead, we doubled down on the same stupid practices, left the same jackwagon in place who brought us cheap, irresponsible money in the first place and allowed corruption to go unpunished and worse, rewarded it.
I go back to this quote I read in the early days of 2009 - "Someone asked me what I would do...I asked them back: That depends. Do you want to throw up for 6 months straight and feel better after that, or be severely nauseous for 20 years?"