Posted on 04/04/2013 12:00:02 AM PDT by bruinbirdman
Readers of the Daily Telegraph were right all along. Quantitative easing will never be reversed. It is not liquidity management as claimed so vehemently at the outset. It really is the same as printing money.
Columbia Professor Michael Woodford, the world's most closely followed monetary theorist, says it is time to come clean and state openly that bond purchases are forever, and the sooner people understand this the better.
"All this talk of exit strategies is deeply negative," he told a London Business School seminar on the merits of Helicopter money, or "overt monetary financing".
He said the Bank of Japan made the mistake of reversing all its money creation from 2001 to 2006 once it thought the economy was safely out of the woods. But Japan crashed back into deeper deflation as soon the Lehman crisis hit.
"If we are going to scare the horses, let's scare them properly. Let's go further and eliminate government debt on the bloated balance sheet of central banks," he said. This could done with a flick of the fingers. The debt would vanish.
Lord Turner, head of the now defunct Financial Services Authority, made the point more delicately. "We must tell people that if necessary, QE will turn out to be permanent."
The write-off should cover "previous fiscal deficits", the stock of public debt. It should be "post-facto monetary finance".
The policy is elastic, for Lord Turner went on to argue that central banks in the US, Japan and Europe should stand ready to finance current spending as well, if push comes to shove. At least the money would go straight into the veins of the economy, rather than leaking out into asset bubbles.
Today's QE relies on pushing down borrowing costs. It is "creditism". That is a very
(Excerpt) Read more at telegraph.co.uk ...
These people are delusional if they think its going to help the economy to behave like the Weimar Republic and Zimbabwe
This article reports people acknowledging reality.
Stopping the QE’s means crashing the stock market, huge unemployment, zero capital, rising interest rates, and the inability of government to borrow and spend. In short, the equivalent of a Great Depression to (maybe) correct the economy and build it back based on sound money and long-term real capital formation.
No politicians can even understand this, much less articulate this well enough to win any votes. Even if they could, in the current moral state of the nation, they would lose handily.
But the QE’s will fail eventually. Question is when.
And how. Since QE printed money is both handed out by politicians and used by big banks for carry trade it has two general ways to fail. The main one is collapse of the bond bubble and massive deleveraging. The second one is that the government gets so many people on the dole along with many corporations that they are able to hyperinflate. That requires a large amount of crony capitalism since the government doesn't yet fund mom and pop businesses.
In order to stop the massive deleveraging the Fed might try to shift QE into some longer term arrangements (e.g. a 100 year bond that the government will never pay back) which the government turns into "loans" for some sort of "new economy" paradigm. In essence Solyndra on steroids. One thing is for sure, the rich will get much richer.
Nothing will be done till inflation p...s of the masses.
One fine morning we will wake up to news of long lines outside of European banks, the banks will not open, and the morning bell at the NYSE will be "delayed."
That's my guess.
“Nothing will be done till inflation p...s of the masses.”
The hyperinflation of the Weimar Republic resulted in the German people embracing the Nazi’s who took care of the problem.
The world and the world economy is vastly different than today's though.
While Cyprus is being used as a warning of things to come, like Greece it may ironically encourage even more US debt and monetary easing because of flight to the dollar.
The article mentions Japan stopping QE and reigniting the massive DEflation they were under.
“He said the Bank of Japan made the mistake of reversing all its money creation from 2001 to 2006 once it thought the economy was safely out of the woods. But Japan crashed back into deeper deflation as soon the Lehman crisis hit.”
This is in stark contrast to the hyper-inflation seen in Germany and Zimbabwe.
ping
I don't know how anyone will thread this needle to print this much money and it not turn the US into Zimbabwe.
Gradual inflation, ie at a rate that doesn’t piss off, is the opiate of the masses. It is also a debt resolver.
As soon as the current labor campaign to raise wages takes hold, the inflation will break free. Wages have trouble growing when there is massive unemployment.
Richard Trumka on the streets of New York this week was trying his damndest to perpetuate the lies needed to raise wages. He was creating negro unrest in NYC
As I perdicted years ago.
All those entitlement benefits will be paid with worthless dollars.
I hope you are correct
I’ve bet that direction, pulling as much equity out of my house as they’d loan me and borrowing for 30 yrs at 3.7% fixed.
Fascistinating. Thanks for the post; ping; thread. Reserve currency with international central bank sociaists backed up by the greatest armed forces in history = masters of the universe toying with the world. Manipulation in the marxist matrix. Arrogance?
The US stock market has a valuation of $15 trillion. Uncle Sugar has been putting $1 trillion every year into to it to keep afloat. So far that means Uncle Sugar has put in over 25% of that $15 trillion.
My guess is that people have been taking their money out as the US has been putting money in. It is a heavily manipulate market and soon the US will own controlling interest in every company.
Communism 101.
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