If you're going to print money, why spend it all on bonds specifically?I think they are buying federal bonds, which the government can then use to fund itself If the fed didn't buy those bonds, other people would, but the interests rates the government would need to pay would end up being slightly higher.
My personal feelings about this is that Bernanke's move is going to have a much stronger, far-reaching impact than anything that actually took place during November 2nd's elections, for most U.S. citizens.Remember, it's not just Bernanke, but rather the entire Federal Reserve board. Matt Yglesias talks about this a lot but there are two seats on the fed board and Obama hasn't even bothered to nominate anyone. According to Yglesias, this is Obama's biggest political mistake. If the fed had done this 18 months ago, the economy would look vastly different - and probably for the better. How do you think the last election would have gone if unemployment was 5% instead of 10%?
No, we have an excess of debt that can't be carried by the American economy anymore. We have a debt problem, and printing money is just fighting a debt problem with more debt.Are you talking about government debt, or "Debt" in abstract? Lots of these amateur hour economists love to talk about that in an totally ambiguous way, and I wonder if some don't even realize the difference.
"By the way, this is an experiment, and we don't really know how it's going to work out."Not entirely true, this is the second time they do Quantitative Easing (QE), but the first time was to ease the strain on frozen money markets in 2008, this one is known as QE2. The concept is simple enough: a weakened dollar boosts exports which leads to increased growth. The supposed risk if QE2 is not applied is deflation that would make it harder for Americans to pay down debts (sound familiar?)
I know nothing about how the supply works, but couldn't they just stop issuing bonds instead of "buying them all", which, as far as I've heard, isn't the goal anyway.You mean just give money directly to the treasury? I think the thing to remember is that the Fed is supposed to be independent from the government, and legally they can't just hand money out, they have to buy assets. They may not particularly care if the assets get paid back (look at buying up 'toxic' assets in order to get them out of the banking system).
delmoi, I'm gonna bookmark that, and I'm looking forward very much to reminding you, in another five years or so, about your mockery.Five years out now? I remember two years ago you were warning about hyperinflation, and so far we've had the exact opposite. According to you we were headed to Zimbabwe.
Don't we actually need inflation right now?Yes.
Once that bubble bursts everyone, and I mean absolutely EVERYONE will be moving into commodities.
Are sugar and wheat inflation or speculation combined with bad harvests? Or does the inflation cause the speculation?Global Warming! Actually, buying long-term options on Ag commodities might be a good way to profit off climate change. Hmm... You could even look for regions that would be more likely to be affected by climate change, and invest there.
Are Rising Commodity Prices An Inflationary Signal?Here's his conclusion in the actual article:
No, they aren't.
Right now everyone seems to believe that rising commodity prices are telling us to beware of inflation. I think that’s dead wrong.In other words, high commodity prices were driven by increasing economic activity. Since the economy is coming back prices are going up.
...
Where, in all this, is evidence of huge inflationary pressures? The basic story seems, again, to be one of a secular upward trend reflecting real factors, with more or less the kinds of fluctuations around that trend that you’d expect given the business cycle.
It’s also worth pointing out that the commodities price spike of 2007-2008 was seen by some as a harbinger of major inflation; they were wrong.
There’s really nothing here to shake my view that deflation, not inflation, is the threat.
Or who is not a foreign government holding US notes. They are decidedly not happy with us just now and will make their displeasures known. Which may be bad news for we non-millionaire Americans. -- IndigoJonesAnd how exactly are they going to do that? Did you miss what this was? We are buying our own notes with money we just printed -- and therefore we don't need them. Yes, the U.S. government
Those countries are trying to tighten their belts and pay down their debts. America - not so much. -- IndigoJonesIn the case of China, that's completely false. They did a massive stimulus and they don't even have any debt - instead they have massive savings. I'm not sure what's going on in Germany, but the government there has always been far more generous with benefits then the U.S, and on top of that they are instituting work sharing programs to keep unemployment low. In fact, the German unemployment rate is lower then it's been since 1993, and has been dropping since July of 2009.
Meanwhile, where is the QE2 money going?Yes, it's going into the economy, which is what we want. Doing QE when up against the zero bound is the equivalent of reducing the interest rate, which always makes the stock market pop in normal times. (zero bound being when the fed's interest rate for lending to banks is nearly zero)
The little pop in the stock market should give you a clue. -- IndigoJones
BUT--if commodity prices rise due to money having no where else to go...doesn't it mean people without a lot of money suffer at the gas pump and grocery store?Rising incomes is what inflation is. If commodity prices rise relative to other expenses, that's something else.
And why will incomes necessarily rise because of this? -- The ____ of Justice
But what I see here is a worldwide financial system that's been operating out of control for the past two years. Central banks are throwing everything they can at it, and they're increasingly unsure if any of it will work. -- TrialByMediaI dunno, Krugman hasn't exactly been happy with the Fed/Congress's response. And he was actively bitching about the EU austerity mania. I wouldn't call what the Central banks have been doing "throwing everything they can at it"
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posted by furiousxgeorge at 12:43 PM on November 6, 2010 [1 favorite]