This QE really drove these oil prices

[piezoe]

Really? Then why all the arguments in this very thread about how the price of oil falling isn't related to a pause/cessation of QE, but is instead being driven by demand being outpaced by supply?

You have misinterpreted the remarks here. I myself have specifically pointed out that the appreciating U.S. dollar is one factor affecting oil prices. I have done this in at least two threads now, and maybe more. but evidently you don't bother to read my posts. Furthermore, when someone says that oil is dropping because supply is greater than demand that doesn't mean, necessarily, that that is the only factor.

Another point, that you probably won't read, is that I agreed with those that maintained that QE was a factor in oil pricing. Going into QE the dollar futures dropped and naturally put upward pressure on oil prices. Coming out of QE dollar futures rose, and naturally this would put downward pressure on oil prices, and commodity prices in general, I might add. You have to consider both what the dollar is doing AND what's going on with supply and demand to get the overall picture. Oil prices have fallen dramatically . We have BOTH supply out stripping demand and a rising dollar at the same time! This is NOT rocket science.

Wildchild maintained that "we" were told that QE wouldn't affect prices. I asked him who said that, because I couldn't imagine anyone maintaining that the kind of massive QE we had coming out of the Great Recession would not affect prices. Of course QE affects prices. I never got an answer from Wild child.

 

[piezoe]

Paul Krugman and the Obama Recovery

• NEW YORK – For several years, and often several times a month, the Nobel laureate economist and New York Times columnist and blogger Paul Krugman has delivered one main message to his loyal readers: deficit-cutting “austerians” (as he calls advocates of fiscal austerity) are deluded. Fiscal retrenchment amid weak private demand would lead to chronically high unemployment. Indeed, deficit cuts would court a reprise of 1937, when Franklin D. Roosevelt prematurely reduced the New Deal stimulus and thereby threw the United States back into recession.
  
  Well, Congress and the White House did indeed play the "austerian" card from mid-2011 onward. The federal budget deficit has declined from 8.4% of GDP in 2011 to a predicted 2.9% of GDP for all of 2014. And, according to the International Monetary Fund, the structural deficit (sometimes called the “full-employment deficit”), a measure of fiscal stimulus, has fallen from 7.8% of potential GDP to 4% of potential GDP from 2011 to 2014.
  
  Krugman has vigorously protested that deficit reduction has prolonged and even intensified what he repeatedly calls a “depression” (or sometimes a “low-grade depression”). Only fools like the United Kingdom’s leaders (who reminded him of the Three Stooges) could believe otherwise.
  
  Yet, rather than a new recession, or an ongoing depression, the US unemployment rate has fallen from 8.6% in November 2011 to 5.8% in November 2014. Real economic growth in 2011 stood at 1.6%, and the IMF expects it to be 2.2% for 2014 as a whole. GDP in the third quarter of 2014 grew at a vigorous 5% annual rate, suggesting that aggregate growth for all of 2015 will be above 3%.
  
  So much for Krugman’s predictions. Not one of his New York Times commentaries in the first half of 2013, when “austerian” deficit cutting was taking effect, forecast a major reduction in unemployment or that economic growth would recover to brisk rates. On the contrary, “the disastrous turn toward austerity has destroyed millions of jobs and ruined many lives,” he argued, with the US Congress exposing Americans to “the imminent threat of severe economic damage from short-term spending cuts.” As a result, “Full recovery still looks a very long way off,” he warned. “And I’m beginning to worry that it may never happen.”
  
  I raise all of this because Krugman took a victory lap in his end-of-2014 column on “The Obama Recovery.” The recovery, according to Krugman, has come not despite the austerity he railed against for years, but because we “seem to have stopped tightening the screws: Public spending isn’t surging, but at least it has stopped falling. And the economy is doing much better as a result.”
  
  That is an incredible claim. The budget deficit has been brought down sharply, and unemployment has declined. Yet Krugman now says that everything has turned out just as he predicted.
  
  In fact, Krugman has been conflating two distinct ideas as if both were components of “progressive” thinking. On one hand, he has been the “conscience of a liberal,” rightly focusing on how government can combat poverty, poor health, environmental degradation, rising inequality, and other social ills. I admire that side of Krugman’s writing, and, as I wrote in my book The Price of Civilization, I agree with him.
  
  On the other hand, Krugman has inexplicably taken up the mantle of crude aggregate-demand management, making it seem that favoring large budget deficits in recent years is also part of progressive economics. (Krugman’s position is sometimes called Keynesianism, but John Maynard Keynes knew much better than Krugman that we should not depend on mechanistic “demand multipliers” to set the unemployment rate.) Deficits were not increased enough in 2009 to escape from high unemployment, he insisted, and were falling dangerously fast after 2010.
  
  Obviously, recent trends – a significant decline in the unemployment rate and a reasonably high and accelerating rate of economic growth – cast doubt on Krugman’s macroeconomic diagnosis (though not on his progressive politics). And the same trends have been apparent in the United Kingdom, where Prime Minister David Cameron’s government has cut the structural budget deficit from 8.4% of potential GDP in 2010 to 4.1% in 2014, while the unemployment rate has fallen from 7.9% when Cameron took office to 6%, according to the most recent data for the fall of 2014.
  
  To be clear, I believe that we do need more government spending as a share of GDP – for education, infrastructure, low-carbon energy, research and development, and family benefits for low-income families. But we should pay for this through higher taxes on high incomes and high net worth, a carbon tax, and future tolls collected on new infrastructure. We need the liberal conscience, but without the chronic budget deficits.
  
  There is nothing progressive about large budget deficits and a rising debt-to-GDP ratio. After all, large deficits have no reliable effect on reducing unemployment, and deficit reduction can be consistent with falling unemployment.
  
  Krugman is a great economic theorist – and a great polemicist. But he should replace his polemical hat with his analytical one and reflect more deeply on recent experience: deficit-cutting accompanied by recovery, job creation, and lower unemployment. This should be an occasion for him to rethink his long-standing macroeconomic mantra, rather than claiming vindication for ideas that recent trends seem to contradict.

I'm aghast. Who wrote this? Did you give us the author. In a recession you need to be concerned with spending not deficits. As long as spending is adequate to replace falling private-sector demand, than a falling deficit is likely caused by increasing revenue due to recovery. That isn't necessarily bad. But if spending is cut prematurely in order to reduce deficits, than there is a risk of tipping the economy back into recession. This would depend on where the cuts come. When Christine Romer was on the CEA she expressed an opinion that increasing the tax rate by 4% in the top bracket would not have a significant adverse affect on the recovery. Assuming she was right and that increase had been put into effect, than with spending held constant, or even increased some, a reduction in the deficit could be expected. That would be an example of a deficit reduction not necessarily incompatible with recovery.

 

[piezoe]

Not hyper inflation, but persistent inflation in rents and food prices with stagnant wages...Not to mention an entire generation of underemployed recent college grads with staggering student debt that will drag down future demand for housing and all sorts of traditional consumer spending...

You call it a success, but I'd call it a respite from the realities of 2008.

I don't think anyone in their right mind would think we could recover from all of the excesses leading up to the Great Recession unscathed. It is annoying to think that those of us who had nothing to do with creating the mess had to pay towards repairing the damage.

 

[der_kommissar]

Wildchild maintained that "we" were told that QE wouldn't affect prices. I asked him who said that, because I couldn't imagine anyone maintaining that the kind of massive QE we had coming out of the Great Recession would not affect prices. Of course QE affects prices. I never got an answer from Wild child.

Then you might want to stop the back slapping with your leftist buddy Ricter...because he has spent the past five years denying that QE has/had anything to do with asset prices.

 

[der_kommissar]

I don't think anyone in their right mind would think we could recover from all of the excesses leading up to the Great Recession unscathed. It is annoying to think that those of us who had nothing to do with creating the mess had to pay towards repairing the damage.

And the vast majority of those excesses were created by the very same institution that you applaud at every turn. I've read your opinions on Greenspan, but I'm very confident that back in 2004-05, you would have been writing with the same enthusiasm about him as you do about Bernanke...something along the lines of "following the tech crash in 2000, Greenspan had no choice but to lower rates for a prolonged period to stimulate growth"....

 

[wildchild]

Wild, just to clarify, my "Huh" is not because QE does not affect prices -- of course it does! But who told you "this whole QE program would not have any affect on prices"? Who would say such a ridiculous thing?

Not a single one of these people said the people would have to pay over a dollar more for a gallon of gas. They tried to downplay the whole damn thing. Here are just two examples of jackasses running their mouths. I can get a whole list of statements from a lot of other clowns, but we would be here a looooooooooooooonnnnnnnggggggg time.

http://www.cnbc.com/id/101254010#

Stephen Williamson, an economist at the St. Louis Fed, has conjured up quite a storm of controversy with his claim that quantitative easing could be deflationary.

http://www.wsj.com/articles/SB10001424052748704893604576199113452719274

So Mr. Dudley tried to explain that other prices are falling. "Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful," he said. "You have to look at the prices of all things."

Reuters reports that this "prompted guffaws and widespread murmuring from the audience," with someone quipping, "I can't eat an iPad." Another attendee asked, "When was the last time, sir, that you went grocery shopping?"

 

[piezoe]

That is a bizarre statement by Williamson. But he is not claiming QE doesn't affect prices.

 

[piezoe]

And the vast majority of those excesses were created by the very same institution that you applaud at every turn. I've read your opinions on Greenspan, but I'm very confident that back in 2004-05, you would have been writing with the same enthusiasm about him as you do about Bernanke...something along the lines of "following the tech crash in 2000, Greenspan had no choice but to lower rates for a prolonged period to stimulate growth"....

I was critical of Greenspan when he failed to use margin rates to cool the market during the "irrational exuberance" of the tech bubble. He did belatedly start raising the Fed funds rate, but in my opinion adjusting the margin rate would have been more focused and more effective. He was asked about this once in a hearing and I heard him say he didn't think adjusting margin rates would be effective. i don't know why he said that. I think he was wrong.

I was also critical of him when he keep reducing the Fed Funds rate all the way into mid 2003 when there was already strong signs that the economy was well on its way out of the mild recession it had been in. It wasn't time yet to start raising the rate, but the last two 25 basis point lowerings were wrong in my opinion, certainly the last was, and I said so at the time. I have always suspected it was for political reasons. I think he wanted to goose the economy to help Bush, who wasn't doing that well, get re-elected. I have always thought Greenspan was smart, and a very good politician, but not a very creative economist and too wedded to classical economics. He more or less ingratiated himself with Nixon by helping on Nixon's campaign, and he new the right people in graduate school, some of whom ended up in Washington. That's how he came to get his job first on the CEA, and then Reagan put him in charge of the Fed. White House economic theory reached its zenith of screwiness during Reagan's time, and Greenspan, being always the politician, didn't seem to object. I suppose it was because it wouldn't have been politic to do so. Greenspan could carry on a conversation just fine until it came to economics, then only mumbo jumbo came out, which has to make one a bit suspicious that the man really didn't know what he was doing. As far as I'm concerned Bernanke and Yellen are far superior economists. I don't know that much about Yellen, other than she has a very strong academic background and great depth of experience. She has the potential to be a wonderful Chairman.

It is true that I have been very critical of Greenspan following the 2007-9 financial collapse, but it is not true that I thought he was great before that.

 

[fhl]

ECB determined to get on with qe and start buying bonds, if only they can get agreement from the German deniers.

The lunatics on the left want you to believe that zero to one percent yields are far too high and need to be brought down by what they insist are nothing but open mkt operations which will later be reversed.

Rational thinkers realize they are monetizing the debt. And that all that will be accomplished is to slow down private debt unwind while building a mountain of public debt and bloated fed balance sheets.

How this will lead to a different experience than Japan has not been adequately explained.

 

[Tsing Tao]

"To be clear, I believe that we do need more government spending as a share of GDP – for education, infrastructure, low-carbon energy, research and development, and family benefits for low-income families. But we should pay for this through higher taxes on high incomes and high net worth, a carbon tax, and future tolls collected on new infrastructure. We need the liberal conscience, but without the chronic budget deficits."

Love it. We don't need Krugman anymore if common sense is going to manifest anyway.

I posted that entry to show that even Keynesians think Krugman is a joke.