Posted on 05/24/2012 7:54:29 AM PDT by TigerLikesRooster
QE3 Likelihood Still ‘Pretty Good’: Jan Hatzius
Published: Tuesday, 22 May 2012 | 6:55 PM ET
By: Lee Brodie
With the latest existing homes sales data looking relatively strong and other economic data suggesting the US recovery is stable, many investors believe further Fed intervention is off the table.
But Goldman Sachs chief economist Jan Hatzius says not so.
Although he admits, “The Fed hasn’t made up its mind,” Hatzius believes if you list out the pros and cons - the scales are starting to tip in favor of further monetary easing and the Fed knows it.
“Given the financial conditions and given where we see the economy – the lost ground that needs to be made up – we think the case for additional monetary stimulus is still pretty good,” says Hatzius on CNBC’s Fast Money.
(Excerpt) Read more at cnbc.com ...
P!
On what planet?
We keep electing idiots that spend what we don’t have.
EVERY candidate is saying they will cut taxes, none of them are saying they will cut expenditures or eliminate programs.
Well — stock prices will go up.
(Anyone want to explain why? It’s econ 101 stuff.)
>Why stock prices are up?
If you are holding dollars you can only buy goods/services that are traded in dollars. Thus these options:
a)Land in USA: Nope market still falling
b)US Treasuries: Nope, interest rates are less than inflation
c)US stocks:Yes, some companies are doing well and paying dividend
d)other?
Not just bound to happen, they’re probably already doing it, just not telling us in so many words.
It's like a family going broke from credit card debt. In desperation 'the Mom' decides to put on the dog for visiting 'family' - - by charging an additional $12,000 worth of 'stuff'. In the short run, she'll look great. In the long run she's made things much worse.
Lookin' good for a few weeks - before crashing and burning... It's not the way to run a country.
Actually, the answer is simple.
Any asset — whether real estate, physical assets, or a corporation — represent a fraction of the value of the total economy. The money supply — no matter how large or small it is — is also a measure of the total economy.
If the government only issued 1 billion zloties then a corporation that represented 1/1000th of the total economy would be worth 1 million zloties. Since each share of stock represents a fraction of the value of a corporation, if the company issued 1 millon shares, each share of would be worth 1 zloty.
Now the government runs the presses and prints up an addtional billion zloties. There are now 2 billion zloties in circulation, but that company still represents 1/1000th of the total value of the economy. So the value of each share jumps to 2 zloties. (And the company could double its dividend without endangering the company’s cash flow.)
Mind, that a loaf of bread that cost 1 centizloty before the quantitative easing would now cost 2 centizloties (and the price of everything else would go up similarly, and so after a time would wages).
The only people that win are those owing money or those owning overvalued assets. Someone who borrowed 10 zloties pre-QE would still owe 10 zloties. But they are paying the loan back with centizloties that buy half of what they did when the money was borrowed.
Similarly, that guy that bought tulip bulbs or comic books or houses during a speculative bubble that has burst would be able to sell that asset at close to the same price (in zloties) at which it was purchased — because a zloty buys have as much as it did when the overvalued asset was purchased.
Since the US government is the country’s biggest borrower (and ultimately hold paper on most of the undewater real estate), it will be the big winner from devaluation of the dollar. But if you own assets that are actually worth something — whether gold coins or shares in a profitable company — you will at least retain the value of those assets, because they will increase in price as the dollar inflates.
But if you hold your assets in dollars — whether as passbook savings or US Treasuries — you are hosed.
As Dick Cheney would say: “Big time.”
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