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Pimco's Gross: Employment Gains Show QE2 Is Working
Bloomberg News ^ | Friday, 01 Apr 2011 10:35 AM | Bloomberg News

Posted on 04/02/2011 11:39:18 AM PDT by DannyTN

Link Only - Bloomberg News was author.

(Excerpt) Read more at moneynews.com ...


TOPICS: Business/Economy; Government
KEYWORDS: billgross; economy; fed; pimco; qe2
There has been a constant drumbeat of Anti-Federal Reserve articles posted on FR by Ron Paul supporters and others. And Pimco's action of getting completely out of US treasuries has been offered up repeatedly as a harbinger of doom.

Pimco often gets out of US treasury because their fund chases the highest yield not because they are pessimistic on the U.S.

And here you see the alleged harbinger of doom actually praising the Federal Reserve's quantitative easing program.

1 posted on 04/02/2011 11:39:22 AM PDT by DannyTN
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To: DannyTN
This is pure horse manure.
2 posted on 04/02/2011 11:43:09 AM PDT by mulligan
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To: DannyTN

horse crap

It’s simply inflation. It makes things look better for a short time before the real effects kick in.


3 posted on 04/02/2011 11:44:10 AM PDT by GeronL (The Right to Life came before the Right to Happiness)
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To: GeronL; mulligan
You don't buy that easier money lowers the cost of making new investments and consequently spurs job growth?

Pimco's Gross believes it. I believe it. The Federal Reserve believes it.

High unemployment is worse than inflation. And the Fed can sell the treasuries they bought (so called printing money) on the market to soak up excess money supply, just as easily as they bought them, if inflation becomes to severe.

The inflation that we are seeing now and will see in the next few months is not so much from QE2 but from the oil price shock that is a result of our government's "do nothing" energy policy that we have had for the last 30 years.

4 posted on 04/02/2011 11:51:28 AM PDT by DannyTN
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To: DannyTN

117,000 of the 216,000 workers gains were from the Birth and Death Model.

The BLS projects a gain of ~100,000 per month and we import 125,000 new legal workers per month. That’s 225,000 net new jober per month to tread water.


5 posted on 04/02/2011 11:57:06 AM PDT by algernonpj (He who pays the piper . . .)
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To: GeronL
"It’s simply inflation. It makes things look better for a short time before the real effects kick in."

Very perceptive of you in the macro or long run outcome of QE2. Employment is improving -- the old multiplier effect from the massive printing of money works every time.

The downside is that payback will be a bear (inflation) and an improving employment situation, as artificial as it may be, does enhance the Ascended One's reelection chances.

6 posted on 04/02/2011 11:58:07 AM PDT by buckalfa (Confused and Bewildered With a Glass Half Empty)
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To: DannyTN
Your two post make a great deal of sense. I talked to an Uber Liberal today that noted they wrote Boehner to be a statesman and not Shutdown. His reason well we have to keep the Illusion that everything is ok going....

Agghhh !!!!! We know and Bill Gross does that this is all unsubstainable via the accounting equation. We are reaching a tipping point, and as much as this is for Bill not to get wip sawed owning old paper, is he potentially trying to "nudge" Fedzilla into the hard choice they have to make?

7 posted on 04/02/2011 12:01:54 PM PDT by taildragger (( Palin / Mulally 2012 ))
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To: GeronL

And the markets ( i.e. the S & P etc ) will rise as well and have historically done that with inflation if my memory is correct...


8 posted on 04/02/2011 12:03:26 PM PDT by taildragger (( Palin / Mulally 2012 ))
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To: DannyTN

The short-term easy way out for bond investors is for the U.S. Taxpayer to suck it up and keep paying taxes and the Treasury keep rolling it’s bonds over.

I don’t think the “powers that be” in investing are admitting to themselves just what the U.S. losing first place means to the portfolios they manage and their own portfolios.


9 posted on 04/02/2011 12:03:44 PM PDT by PieterCasparzen (Huguenot)
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To: buckalfa

The economy doesn’t improve in actuality, it only appears to for a short while.


10 posted on 04/02/2011 12:04:48 PM PDT by GeronL (The Right to Life came before the Right to Happiness)
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To: taildragger

Zimbabwe’s stock market soared while their country was crashing and burning through hyperinflation


11 posted on 04/02/2011 12:05:44 PM PDT by GeronL (The Right to Life came before the Right to Happiness)
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To: DannyTN
Right.........

And GE is all bubbly over MaObama’s “Green” Renewable Energy plan because they are making Billions on it and not paying any taxes.

Pimco is like JP Morgan, they are in bed with the administration and are getting rich and powerful on the backs of average hard working people. They are also getting massive kickbacks from their covert involvement in the Bond Market. Like the Federal Reserve, they are the epitome of “Smoke and Mirrors”.

12 posted on 04/02/2011 12:11:55 PM PDT by PSYCHO-FREEP (Patriotic by Proxy! (Cause I'm a nutcase and it's someone Else's' fault!....))
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To: DannyTN

Rock and a hard place.

Retail price inflation cannot gain a foothold in the broader economy with stagnant to falling incomes and massive unemployment. We’ve seen it in the necessities, those basics that people literally must buy. Nowhere else for any length of time.

As for these other nonessential items? Those manufacturers, importers and distributors who have felt compelled to give in to upward pricing pressure in nonessentials have experienced a loss of sales. There is no support because there is no market for a given discretionary purchase at a higher price, due to the aforementioned income and employment situation.

An improved employment picture will make retail price inflation more of a possibility across the broader economy. Should this occur, it will kill the nascent recovery that is being fuelled by quantitative easing, sending us right back to square one.

We’re looking at a “lost” decade or two a la Japan, at best.


13 posted on 04/02/2011 12:13:56 PM PDT by RegulatorCountry
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To: DannyTN

“Employment Gains Show QE2 Is Working”

Working to do what? Destroy the country? I agree then.


14 posted on 04/02/2011 12:24:43 PM PDT by WKUHilltopper (Fix bayonets!)
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To: DannyTN

“Employment Gains Show QE2 Is Working”

or ...

“Just keep dancin there medicine man - it’s bound to rain eventually.”


15 posted on 04/02/2011 12:51:18 PM PDT by crescen7 (game on)
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To: DannyTN

“You don’t buy that easier money lowers the cost of making new investments and consequently spurs job growth?
Pimco’s Gross believes it. I believe it. The Federal Reserve believes it.”

The Weimar Republic and Zimbabwe also believed it...


16 posted on 04/02/2011 1:19:11 PM PDT by Qbert ("I seem to smell the stench of appeasement in the air" - Margaret Thatcher)
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To: DannyTN
You don't buy that easier money lowers the cost of making new investments and consequently spurs job growth? Pimco's Gross believes it. I believe it. The Federal Reserve believes it. High unemployment is worse than inflation. And the Fed can sell the treasuries they bought (so called printing money) on the market to soak up excess money supply, just as easily as they bought them, if inflation becomes to severe. The inflation that we are seeing now and will see in the next few months is not so much from QE2 but from the oil price shock that is a result of our government's "do nothing" energy policy that we have had for the last 30 years.

I would not take what Gross says at face value, ever. He is the big fish in a big pond, and it serves him well to be somewhat deceptive. As far as the Fed goes ... there is probably little to no correlation between what they believe and what they say, to say the least.

More importantly, I seriously doubt that the Fed can sell off Treasuries "as easily" as they bought them. They have created an artificial market. If they start selling, then that artificial market is removed. Given our debt level, if the Fed starts selling, it will start a cascade of selling, with few buyers.

And easier money doesn't always result in job growth. Ask Japan. In a healthy economy, it does create growth. But in a non-healthy economy, it does just the opposite.
17 posted on 04/02/2011 1:21:12 PM PDT by jjsheridan5
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To: DannyTN

QE2 is working?

Well, that’s relative to how short your perspective is.

Juicing up the economy for the moment? Yes. Enough to start getting some positive private sector employment started? Yes. Enough to grease the skids on Wall Street with growing (actual or inflated?) profits? Yes.

And, enough to build some big inflationary pressures into the economy? Yes. Big enough that they are already showing - big time - in basic food stuffs and basic consumables, before QE2 even ends? Yes. Big enough that the consumer “basket” of goods is rising rapidly while wages are flat? Yes. Which is going to very soon erupt in wage pressures? Yes. Which is going to add to domestic production costs? Yes. Which is going to slow employment growth again? Yes. Which will take some of the grease out of Wall Street? Yes.

So, it’s really a matter of perspective - short term or long range.

The only cure for an inflated currency bubble is to start deflating the bubble and wait until you’re done. Blowing up another cheap money-led bubble is not a cure but a curse that will make the final deflation worse.


18 posted on 04/02/2011 3:18:45 PM PDT by Wuli
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To: Wuli
Again, I think the inflation we are seeing is more related to oil price and the result of 30 years of "do nothing" energy policy, than QE2.

The total M3 money supply is $13 trillion. Only 2/3rds of the $600 billion QE2 has taken place, so we are talking about $400 billion addition to the $13 trillion money supply. That's enough to cause a one time 3% inflation if everybody expected the FED to never undo what they've done. I expect them to at least partially undo what they have done. (And if they complete the entire $600 billion that should bump it to 4.5%).

The inflation we are seeing is oil related. And is basic supply and demand. We've sat on our hands and not secured ourselves a supply of energy. And that is foolish.

19 posted on 04/02/2011 3:33:05 PM PDT by DannyTN
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To: DannyTN
The inflation we are seeing is oil related.

If we had a stronger dollar, the price of oil wouldn't be quite as bad. A week dollar didn't help matters back in 2008.

20 posted on 04/02/2011 4:25:08 PM PDT by EVO X
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To: EVO X
"If we had a stronger dollar, the price of oil wouldn't be quite as bad. A week dollar didn't help matters back in 2008."

While true, but it would still be bad. the dollar's fall can account for only a 20% increase in the price of oil.

If we had a stronger dollar, the price of oil wouldn't be quite as bad. A week dollar didn't help matters back in 2008.

Dollar vs Euro

21 posted on 04/03/2011 1:22:02 PM PDT by DannyTN
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To: DannyTN

“The inflation we are seeing is oil related.”

Nonsense.

The inflation we are seeing in the supermarket is not oil related. It’s global demand on all commodities, fed in part by the Fed’s pump priming and money printing, and continued massive U.S. borrowing.

U.S. consumption continues to extend so far above production that only cheap money and leverage sustains it, and with that cheap money and massive borrowing, U.S. thirst for imported consumables inflates world production, which inflates world commodities demand. That’s cheap fiat money at work, not oil. Oil prices are just another symptom of it, not a prime cause.


22 posted on 04/03/2011 2:30:38 PM PDT by Wuli
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To: DannyTN

Feel the economy at about the end of the first quarter, next year, and see what it’s like then.


23 posted on 04/03/2011 4:25:45 PM PDT by familyop ("Dry land is not just our destination, it is our destiny!" --"Deacon," "Waterworld")
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To: DannyTN
While true, but it would still be bad. the dollar's fall can account for only a 20% increase in the price of oil.

Of course there are other factors, such as world wide demand for oil. The Chinese are adding 10 million cars a year. In a few years, they are likely to surpass US auto sales..

24 posted on 04/03/2011 5:40:06 PM PDT by EVO X
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