Topic: Quantitative Easing - page 5. (Read 6686 times)

Ketchup is starting to buy a lot more dollars...

There has been no major inflation as yet, that is correct. Although, it usually lags and sneaks up on you.

CNY and AUD both rose as they didn't play ball with devaluing. Australia due to mining exports and lowering from a substantially higher base. Both countries have ridden out the crisis on the back of China. Australian retail is awful as is manufacturing, it is mining keeping it together but even that is slowing now. Both countries have also seen a massive increase in RE prices.

The Reais on the other hand had a period of devaluation when Brazil imposed tariffs, briefly, in 2010 or 2011. Inflation rose and they soon fell in line with the rest of the world. Montego, I believe, announced a currency war on the back of this.

In the major economies if you look at stock prices, they have mostly doubled from lows. RE is also heading back up. That is inflation of assets as a result of speculation encouraged by negative interest rate returns.

Another point is that it has been mentioned that inflation in food prices was a factor in the Arab Spring. In Tunisia, it was a protest against this that kicked the whole thing off...

But the reasons there has been no inflation, briefly, to my understanding, are such

- deflation and inflation are battling it out. Increased QE is designed in part to keep the deflation at bay. The deflation wants to happen (market forces) as the system is riddled with bucketloads of toxic debt. If QE stops, what happens?

- there has been inflation countries that buck the devaluating trend, see Brazil in 2011 when they imposed tariffs and announced a currency war was in progress.

- no recognised inflation in US as the US exports its inflation to emerging markets. The inflation in the US occurs when US dollars return home. One example being if CHina begins buying up large parts of US land/infrastructure etc. Other eg's are a loss of confidence in the USD or someone dumping USD.

I'd like to reiterate that I havent studied economics. This is simply my understanding from my reading habits.

Since there was no major inflation, on the contrary, in certain countries we saw limited cases of deflation, there was no clear loss of purchasing power in front of goods. Some went up until 2008-2009, like oil and other commodities, but many returned to their usual prices.

yes, some currencies ended up at higher value (the CNY, the real, AUD, etc.), but on the major ones there wasn't big changes.

Well on a currency v currency basis it is pretty easy to see. The large majority of currencies around the world have been depreciated by their govts / central banks since 08.

Its a beggar thy neighbor situation. In order for your exports to remain competitive against the depreciating USD, you need to lower the value of your currency equally.

So, when the USD depreciates, so does China due to its peg to the USD. Japan then also has to depreciate so their markets remain competitive (and they also are desperate for inflation). Because Japan devalues, then Korea has to as they compete with Japan and China in the electronics market. This is what is known as a currency war.

Then you add too "big to fail" to the mix and with no apparent risk people get stupid. Poor choices are very easy when someone else protects you from the consequences.

That but QE also attempts to get people to take greater risks with their money then they normally would. Both in time to maturity as well as risk of principle investment. For example if someone were to (prior to QE) invest in a 6 month CD then (during QE) they would invest in a 12 month CD, or maybe a 12 month investment grade corporate bond. The people who would normally invest in a 12 month investment grade corporate bond would invest in something that carries more risk and more time to maturity. This extends all the way out of the risk spectrum until you reach alternate investments (where Bitcoin lies).

The 30 plus percent return that the stock market had last year was not the result of strong economic policy, nor strong economic performance, it was investors taking on more risk.

I try to think of it that way all ready. That doesn't stop me from near constant price checking though. 

There was indeed a run up on bitcoin price. The increase in its price wasn't only (or even mostly) because of a depreciation of the value of the dollar.

That depreciation would have to be confirmed not only against bitcoin but in front of any other currency or good.

if by runup in btc price you really mean the lowered buying power of the USD which "appears" to make the BTC price higher then you are probably right.

a declining dollar = increasing BTC price.

maybe one day we will collectively stop referring to btcs value in dollars and rather refer to the dollars value in BTC.

as of this writing;

$1.00 is worth a measly  0.0016 BTC

QE is likely the cause of at least the initial runup in the price of BTC.

The initial runup in the price of BTC likely caused media hype that caused other people to see what an awesome idea that BTC is, causing even more increases in price.

That lifeline comes with a long term cost in exchange for addressing the needs of the present
In other words money controls possibilities with the future held as collateral.
The goal of financial stability is to not sacrifice and throw away that future but to fix and solve the problems that need to be addressed today.

Yes, it truly is amazing how ungrateful some of the people around here can be after they've been thrown a lifeline.

Here are some empirical analysis of Quantitative Easing in Japan

http://wwwdev.nber.org//papers/w15565

http://econpapers.repec.org/article/imeimemes/v_3a25_3ay_3a2007_3ai_3a1_3ap_3a1-48.htm

http://www.federalreserve.gov/PubS/ifdp/2011/1018/ifdp1018.pdf

http://www.esri.go.jp/en/workshop/060914/mihira03_a.pdf

Some of these are very hard to understand if you don't have background in economics

If someone's actually interested in learning about QE and money creation in the modern banking system, here's an excellent read:
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

no ...he used the term Ponzi scheme very correctly - I disagree with you vehemently.

Its only brilliant to you because you don't know about economics.  I never even said I disagreed w what he said.  I only said he used the term "Ponzi scheme" incorrectly

Then I explained why Bernanke probably had no choice but to do QE.  Go back and read my posts

+1

instead of responding like an exposed nerve you really need to think about what he said because it's a brilliant observation.

Of course it is grow that an economy needs in a recession. But how is it possible to get grow in the middle of a banking crisis, a crunch of credit and a negative grow of the monetary mass? QE can't be an easy panacea, but on an emergency and with inflation controlled...