AuthorTopic: QEverlasting?  (Read 1811 times)

Offline Mister Roboto

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QEverlasting?
« on: October 26, 2014, 10:21:29 PM »
Okay, I know this about Quantitative Easing:  It's an extended program where the Federal Reserve buys dodgy financial paper from the big banks and finance-firms with money it essentially creates out of thin air.  This has been keeping the financial markets propped up for the past few years.  In fact, it has become a sort of monetary heroin that the markets would flame out badly without, from what I understand.

But now the Fed is talking about cutting back the supply of smack, and the markets reacted badly, recovering only when the Fed basically said, "JK!  ;D"  Can anyone explain to me like I'm five years old ("Explain Like I'm Five" began as a Reddit.com phenomenon) what adverse consequences of QE prevent the Fed from doing it forever if the financial markets need it so badly now?  I tried posing this question on a thread at TAE and got vague, mumbly pieties that actually explained nothing.  I'm looking for an economic nuts-and-bolts explanation of why QE is unsustainable.
« Last Edit: October 26, 2014, 10:39:02 PM by Mister Roboto »

Offline RE

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Re: QEverlasting?
« Reply #1 on: October 26, 2014, 11:40:14 PM »
Okay, I know this about Quantitative Easing:  It's an extended program where the Federal Reserve buys dodgy financial paper from the big banks and finance-firms with money it essentially creates out of thin air.  This has been keeping the financial markets propped up for the past few years.  In fact, it has become a sort of monetary heroin that the markets would flame out badly without, from what I understand.

But now the Fed is talking about cutting back the supply of smack, and the markets reacted badly, recovering only when the Fed basically said, "JK!  ;D"  Can anyone explain to me like I'm five years old ("Explain Like I'm Five" began as a Reddit.com phenomenon) what adverse consequences of QE prevent the Fed from doing it forever if the financial markets need it so badly now?  I tried posing this question on a thread at TAE and got vague, mumbly pieties that actually explained nothing.  I'm looking for an economic nuts-and-bolts explanation of why QE is unsustainable.

QE Infinity is probably theoretically possible, but the problem is that QE has less and less effectiveness in making any changes to the real economy as time goes by.  The money doesn't make it into the real economy because the TBTF banks aren't loaning it out into the real economy.  Asset prices get inflated, but retail sales disappear, jobs disappear, etc.

The second problem is that QE depends on energy exporting countries to continue accepting the TP in exchange for Oil.  This will not continue in perpetuity, if for no other reason than the fact many energy exporters are flipping over to be energy importers, Egypt, Syria, Mexico soon enough if they are not already there.  Besides that though, the continuing financial war with the Ruskies will make accessing that Oil with Dollars impossible, no matter how many Da Fed issues out.

You have to remember all this TP is Debt money, and all they are doing is multiplying up more claims on existing real wealth, which is disappearing here.  if you issue Credit to someone to buy Oil, you actually have to HAVE Oil to sell.

The mitigating factor here is Demand Destruction, which appears to be moving faster than Supply Destruction, but DD just means the population as a whole is getting poorer and this eventually results in Civil and Political upheavals, which of course are ongoing all over Europe as we speak, and will migrate here in due time.

Da Fed pushing out QE infinity does nothing to resolve these basic problems, and eventually it fails because the society around it fails.

RE
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Offline Mister Roboto

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Re: QEverlasting?
« Reply #2 on: October 27, 2014, 04:53:31 AM »
I suppose since QE is essentially an indirect form of old-fashioned money-printing, it debases the value of the US$, which in turn makes it incumbent upon the Fed to buy even more USTreasury TP because the debasement makes other bond-buyers shy away more from buying US goobermint debt, which is a pretty serious thing because there's a lot of debt to "roll over" every month.  And of course, I'm sure the Fed is buying those Treasuries with money conjured out of thin air just like it has been buying that dodgy financial paper with the same kind of "money".  It really is a wonder that the US Dollar Index has been able stay up in the eighty-range with all this money-printing, albeit indirect, going on right now.

I would also venture a guess is that QEverlasting has created something of a bubble in the financial markets, and bubbles always, always, always have to pop eventually in order to restore balance, and so the proverbial Masters of the Universe hope they can "taper" instead of going "cold turkey".  But the addiction to the bubble financing is so bad at this point, that even attempts at tapering off produce potentially lethal withdrawal symptoms.
« Last Edit: October 27, 2014, 05:47:29 AM by Mister Roboto »

Offline WHD

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Re: QEverlasting?
« Reply #3 on: October 28, 2014, 09:08:47 AM »
I submit that QE is outright THEFT, insofar as effectively giving unlimited amounts of free money to a financially connected few, while systematically impoverishing the many; as example, allowing the few to outbid the many for fundamental necessities, like land and water. QE is entrenchment of elite oligarchs, plutocrats and assorted uber-scumbags, empowering the few at the expense of ALL.

QE is "trickle-down" theory squared, after forty years of proof that trickle-down theory is a power grab lie, told by money changers and assorted power freaks, who above all seek to control everything. Money is influence and influence is power and those who have the most money have the most power, and isn't it awesome that such assholes get to print as much money as they want? 

If Fed agents actually printed money, and delivered that money by truck, under the cover of darkness, to Jamie Dimon et al, and carted it through the back doors of JP Morgan to Blackstone, people would call it criminal. Instead, game the housing market, hand out tens of millions of loans to people who cant afford the interest, then "sell" the "assets" to the Fed, when the many default, and call it official business. Sweep up the hard capital (houses) AND "print" money out of nothing, to buy the houses with! EVIL GENIUS! It would be LESS criminal if they just printed the god-damned money, handed it around amongst themselves. It otherwise amounts to criminal conspiracy; all the more so that they maintain the cover of darkness, casting a propaganda veil over it all, about what they are really up to, what QE actually does.

WHD

Offline Surly1

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Re: QEverlasting?
« Reply #4 on: October 28, 2014, 06:02:13 PM »
I submit that QE is outright THEFT, insofar as effectively giving unlimited amounts of free money to a financially connected few, while systematically impoverishing the many; as example, allowing the few to outbid the many for fundamental necessities, like land and water. QE is entrenchment of elite oligarchs, plutocrats and assorted uber-scumbags, empowering the few at the expense of ALL.

QE is "trickle-down" theory squared, after forty years of proof that trickle-down theory is a power grab lie, told by money changers and assorted power freaks, who above all seek to control everything. Money is influence and influence is power and those who have the most money have the most power, and isn't it awesome that such assholes get to print as much money as they want? 

If Fed agents actually printed money, and delivered that money by truck, under the cover of darkness, to Jamie Dimon et al, and carted it through the back doors of JP Morgan to Blackstone, people would call it criminal. Instead, game the housing market, hand out tens of millions of loans to people who cant afford the interest, then "sell" the "assets" to the Fed, when the many default, and call it official business. Sweep up the hard capital (houses) AND "print" money out of nothing, to buy the houses with! EVIL GENIUS! It would be LESS criminal if they just printed the god-damned money, handed it around amongst themselves. It otherwise amounts to criminal conspiracy; all the more so that they maintain the cover of darkness, casting a propaganda veil over it all, about what they are really up to, what QE actually does.

WHD

Well said. See knarf's related article, above.

Nice to hear your voice agin.
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