(09-15-2012 10:28 AM)Handsome Creepy Eel Wrote:  This isn't about inflation per se, but this article provides a fine explanation for the rapid changes in food and oil prices that took place at that time. The demand was supposed to be falling due to both the onset of financial crisis slowing down almost all economies in the world and the increased supply.

But the only reason Goldman and other banks could pump money into Oil futures was because of all the free cash the Fed printed for them in the first place.


Had no bailouts occurred, goldman wouldn't even exist today.

Don't forget price increases of food and metals is not the only thing that increases in an inflationary environment. I bet no ones insurance has gone down in the past decade ? Health care costs are sky rocketing in Canada as I am sure they are in the US. What does it cost to get a vehicle fixed now ? I'm not even talking parts, I am talking labour on it.

I just found this interview with Niall Ferguson where he says he doesn't think there will be hyperinflation. I think Ferguson glorifies Western civilization without speaking enough about its historical or present ills but when it comes to economics I think he seems to know a thing or two.

(09-15-2012 10:52 AM)Samseau Wrote:  

(09-15-2012 10:28 AM)Handsome Creepy Eel Wrote:  This isn't about inflation per se, but this article provides a fine explanation for the rapid changes in food and oil prices that took place at that time. The demand was supposed to be falling due to both the onset of financial crisis slowing down almost all economies in the world and the increased supply.

But the only reason Goldman and other banks could pump money into Oil futures was because of all the free cash the Fed printed for them in the first place.


Had no bailouts occurred, goldman wouldn't even exist today.

Ironically, it used to be illegal for investment banks to bid on oil futures. The big banks then got a loop hole to play with.

http://en.wikipedia.org/wiki/Commodity_F...ct_of_2000

(08-01-2013 08:03 AM)solo Wrote:  I just found this interview with Niall Ferguson where he says he doesn't think there will be hyperinflation. I think Ferguson glorifies Western civilization without speaking enough about its historical or present ills but when it comes to economics I think he seems to know a thing or two.

...or maybe we're just not seeing the effects just yet. Or the governments are manipulating the statistics.

Hyperinflation my ass. THey might be printing money at an alarming rate, but at the same token, they are increasing taxes (vacuuming the money right back) even faster. See Obama Care. See Obama to raise taxes to collect 1.6 trillion. Property taxes, you name it. It is all going up. We are no longer able to "keep" out money safe (unless you convert your fiat currency into good ole physical gold and silver like me...hehehehehe)
Note the Dow is going to 40-45k by Fall 2015.
Get ready.

What does this mean for us Canadians

Also is there any silver lining to the worst case scenarios above. Any way you can turn it into your profit?

(08-01-2013 09:55 AM)frenchie Wrote:  

(09-15-2012 10:52 AM)Samseau Wrote:  

(09-15-2012 10:28 AM)Handsome Creepy Eel Wrote:  This isn't about inflation per se, but this article provides a fine explanation for the rapid changes in food and oil prices that took place at that time. The demand was supposed to be falling due to both the onset of financial crisis slowing down almost all economies in the world and the increased supply.

But the only reason Goldman and other banks could pump money into Oil futures was because of all the free cash the Fed printed for them in the first place.


Had no bailouts occurred, goldman wouldn't even exist today.

Ironically, it used to be illegal for investment banks to bid on oil futures. The big banks then got a loop hole to play with.

http://en.wikipedia.org/wiki/Commodity_F...ct_of_2000

And it's no surprise since then oil prices have skyrocketed, especially around 2008. Today they remain high when oil is not in short supply and demand is down.

(08-01-2013 02:19 PM)GoldenCock Wrote:  Hyperinflation my ass. THey might be printing money at an alarming rate, but at the same token, they are increasing taxes (vacuuming the money right back) even faster. See Obama Care. See Obama to raise taxes to collect 1.6 trillion. Property taxes, you name it. It is all going up. We are no longer able to "keep" out money safe (unless you convert your fiat currency into good ole physical gold and silver like me...hehehehehe)
Note the Dow is going to 40-45k by Fall 2015.
Get ready.

Hahaha The only possible way that is going to happen is through hyperinflation.

I honestly believe our monetary system has already reached the event horizon of collapse in the US. It's not going to be the end of the world, but a lot of people are going to be fucked in a very bad way. You can tax the top 10% of earners 100% of their income and it wouldn't be enough to cover what the federal government spends. The budget is $3.5-$4 trillion, but the off-budget expenditures nearly double that, with only a small chunk covered with other non-income tax sources.

We deserve what we're about to get. And all those nations who tie their currency into the strength of the USD deserve it too. You're doing it right by buying precious metals, but don't be afraid to buy some other shit that is durable and may not be around after an economic collapse.

(09-13-2012 12:33 PM)Samseau Wrote:  Open ended money printing! I hope you guys bought some silver/gold during the summer dip! Because the prices are only going to rise from here on out. I wouldn't be surprised if the AAPL stock rises as well.

VTI an an ETF that tracks the total stock market return. SLV and GLD and precious metals ETFs.

Here's what would have happened to the portfolio of guys who followed doomsday advice.

Zero Hedge has called the collapse for how many years now? Meanwhile there are guys getting nice returns from investing in the markets.

I know what the doomsdayers will say, "But wait until the market finally crashes! Then you'll see!"

Sure one day the market might mean we're eating canned food and shooting at shot guns. In the meantime, I want to make some money. Following the advice of those doomsday blogs is not the way to do it.

To all the doomsday guys. Quick questions.

Are people going to buy alcohol?
Are people going to eat food?
Are people going to have sex?
Are people going to drink water?

If you're supremely risk averse just own assets that have legitimate long term value.

It's not rocket science.

If hyper inflation comes... Own inflation protected assets. Problem solved.

I rarely check my securities accounts (monthly to buy up bonds/stock only). People have to view their lives in percentages and cash flow but instead they read the Wall Street journal and think they know something about the economy.

Eventually there will be another market crash within my lifetime. Do I give a shit? No. Neither should you. I will keep buying, and live off the streams of cash flow even if they move 50-100 bps. Who cares.

Here's a hint, keep low to mid five figures in straight cash in your checkings at all time (or money market account straight liquid). If the market corrects in a massive way (red headlines world is ending). Smile. Load up. Shooting ducks.

Mike: I've always agreed with you on this issue. "Doomsday" is absurd. Hyperinflation isn't even CLOSE to a doomsday, it probably wouldn't last longer than any other recession. Hyperinflation is a mathematical event that must occur the same way prices rise and fall in accordance with demand.

For day trading and short term trading, no one has any clue. The slide in precious metals is probably temporary but who cares? I'm not a trader, and I don't give trading advice. I'm only interested in stuff that will be more valuable 10 years on. That's where I disagree with you: 10 years out from now your gold/silver will have retained it's value better than your dollars will.

I'll tell you right now, the guys who are making the most money are the ones who shorted the silver and gold markets, not the ones who are prepping for the "doomsday." I wish I was those guys, they're the smart ones. They are shorting on the way down and buying on the way up.

(08-03-2013 01:51 AM)Samseau Wrote:  I'll tell you right now, the guys who are making the most money are the ones who shorted the silver and gold markets, not the ones who are prepping for the "doomsday." I wish I was those guys, they're the smart ones. They are shorting on the way down and buying on the way up.

The silver market is being manipulated by J.P. Morgan. A guy who was going to testify got into a "car accident." Then the hearing was cancelled. I don't have a link handy but Google it - very interesting!

The entire market is rigged.

We are all basically fucked. We have to put our money somewhere. The Fed keeps interest rates down, forcing people to buy stocks.

It's a fucked system. That's why saying Gold will go up/down is now a fool's errand.

Unless you're the one rigging the market, it's all guess work.

ETA: The silver rigging story: http://opinionator.blogs.nytimes.com/201...er-lining/

(08-03-2013 01:58 AM)MikeCF Wrote:  

(08-03-2013 01:51 AM)Samseau Wrote:  I'll tell you right now, the guys who are making the most money are the ones who shorted the silver and gold markets, not the ones who are prepping for the "doomsday." I wish I was those guys, they're the smart ones. They are shorting on the way down and buying on the way up.

The silver market is being manipulated by J.P. Morgan. A guy who was going to testify got into a "car accident." Then the hearing was cancelled. I don't have a link handy but Google it - very interesting!

The entire market is rigged.

We are all basically fucked. We have to put our money somewhere. The Fed keeps interest rates down, forcing people to buy stocks.

It's a fucked system. That's why saying Gold will go up/down is now a fool's errand.

Unless you're the one rigging the market, it's all guess work.

ETA: The silver rigging story: http://opinionator.blogs.nytimes.com/201...er-lining/

I've been hearing about the silver manipulating forever. It's not hard for JP to control silver prices when they own like 80% of the world's marketable silver contracts or something like that.

It's pretty outrageous that JP can short silver despite the fact that they own most of the silver. I mean, if that's not a monopoly then what is?

(08-03-2013 02:21 AM)Samseau Wrote:  I've been hearing about the silver manipulating forever. It's not hard for JP to control silver prices when they own like 80% of the world's marketable silver contracts or something like that.

It's pretty outrageous that JP can short silver despite the fact that they own most of the silver. I mean, if that's not a monopoly then what is?

When some regular guys tried manipulating the silver market, they were ruined:

http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt

It's nice to run the country.

Beginner economics lesson coming up: the U.S.A. is recovering from a recession, meaning that it is trying to get closer to full production capacity after experiencing a recessionary gap between the production capacity and present production. Inflation occurs when there is excess production capacity, or an inflationary gap. Maybe there is going to be hyperinflation 10 years from now but implying that there is going to be significant excess production capacity at a time when there is a significant recessionary gap is quite simply wrong. The only way hyperinflation is going to happen otherwise is if the entire Aggregate supply curve of the United States shifts to the left, i.e. a supply shock caused by something in the line of an oil crisis which significantly increases energy costs. Given that that scenario is unlikely for the time being, I say that it is not time for hyperinflation. In fact a second recession, which is caused by a hard landing in china or india or a breakup of the euro is much more likely than hyperinflation.

The gold and silver suppression by the bullion banks practicing fractional reserve banking is an open secret. Whenever the metals fall, that's when people try and judge the bottom and resume buying. I had my first run in with it in mid-April, when gold starting falling from $1540 before stabilizing around $1200, which it is just recently beginning to recover from.

This is how it works (sorry if it's long-winded):

The presstitute financial media lays the groundwork: "Gold is in a bubble": http://blogs.wsj.com/marketbeat/2013/04/...hort-gold/
http://www.businessinsider.com/goldman-s...ain-2013-2
http://www.businessinsider.com/goldman-l...200-2013-1
http://www.businessinsider.com/goldman-s...old-2013-4 - Joe Wisenthal: "Short gold"
George Soros saying "Gold is the ultimate bubble" and so on.

The Top Five holders of GLD as of the beginning of April:

http://www.nasdaq.com/symbol/gld/ownership-summary

Quote:PAULSON & CO INC 21,837,552
JPMORGAN CHASE & CO 10,155,833
BANK OF AMERICA CORP /DE/ 10,021,350
NORTHERN TRUST CORP 6,903,210
MORGAN STANLEY 6,651,476

Fast forward to April 11: http://blogs.wsj.com/washwire/2013/04/11...-thursday/

WSJ Wrote:President Barack Obama is meeting with members of the members of the Financial Services Forum Thursday morning at 11 a.m. They are expected to discuss the economy, the employment picture and the administration’s new budget proposal.

Here is the list of bank executives who will be attending, according to a White House official:

• Lloyd Blankfein, Chairman and CEO Goldman Sachs GS
• Jacques Brand, CEO Deutsche Bank DBK.XE
• Michael Corbat, Chief Executive Officer Citigroup C
• Jamie Dimon, Chairman, CEO and President J.P. Morgan Chase JPM
• Sergio Ermotti, CEO UBS UBSN.VX
• James Gorman, Chairman and CEO Morgan Stanley MS
• Gerald Hassell, Chairman and CEO Bank of New York Mellon Corpo BK
• Jay Hooley, Chairman, President and CEO State Street Corpo STT
• Abby Johnson, President, Fidelity Financial Services, Fidelity Investments
• Steve Kandarian, Chairman of the Board, President and CEO Metlife MET
• Brian Moynihan, President and CEO Bank of America BAC
• John Strangfeld, CEO, Prudential
• John Stumpf, Chairman, President and CEO Wells Fargo WFC
• Jim Weddle, Managing Partner, Edward Jones
• Bob Benmosche, President and CEO American International Group

There was a Reuters article the day before saying there would be a meeting, then on the 11th I saw the full list, and this was the alarm bell to liquidate all GLD holdings, and completely exit the paper markets.

JPM-Chase has trillions in derivatives exposure, much of it due to their short positions in metals. So if margin calls mount to an extent that physical delivery (which the average individual investor doesn't have the privilege to do so) is called on enough of their physical holdings, that pushes them to inventory.

How did this derivative exposure come into being in the first place?

When GLD and SLV were first offered, they were intended to be "as good as gold and silver". An electronic substitute that would save investors the trouble of physical storage, shipping it off, etc... In other words, a piece of paper that was an IOU for gold and silver. Sound familiar?

Now you have something called rehypothecation. This is Investopedia's definition:

Quote:In a typical example of rehypothecation, securities that have been posted with a prime brokerage as collateral by a hedge fund are used by the brokerage to back its own transactions and trades. While rehypothecation was a common practice until 2007, hedge funds became much more wary about it in the wake of the Lehman Brothers collapse and subsequent credit crunch in 2008-09.

In the United States, rehypothecation of collateral by broker-dealers is limited to 140% of the loan amount to a client, under Rule 15c3-3 of the SEC.

The classic example is someone taking out a loan from a bank to buy a house. He makes his payments on his mortgage every month, and he's posted the house as collateral. If he falls behind and defaults, the bank forecloses on him and repossesses the house.

Rehypothecation is when the bank uses that house as collateral in its own trades. If it didn't pan out and the bank loses the house, now there's a double ownership issue with the man who's still on schedule with his mortgage payments.

Theoretically, that's the limit.

However...

http://www.imf.org/external/pubs/ft/wp/2010/wp10172.pdf

IMF Working Paper: The (sizable) role of rehypothecation in the shadow banking system by Prime Minister of India, Manmohan Singh.

A loophole allows institutional investors in the United States to circumvent the 140% rehypothecation cap by using their subsidiary branches based in the United Kingdom, where no regulations at all exist. So you can rehypothecate 200%, 300%, 400%, 500% of the collateral's value. No limits, infinite leverage.

By this mechanism, bullion banks rehypothecate a gold bar into 10x its worth of futures contracts. The same concepts of "a run on the banks" applies to JMP, because this amounts to fractional reserve banking. If at some point enough deliveries are called, and if they ever run out of the underlying securities, they're forced to collateralize their stocks, at which point they're done.

They turned GLD into a fiat currency (how's that for irony).

Anyway. On April 12, they start with the takedown, which continues over the weekend: http://www.bloomberg.com/news/2013-04-15...dings.html

The Comex/CME Group has lax margin standards, so only a small fraction of the futures trading has to be backed by actual gold. The rest is naked short-selling.

This is CME group's year-to-date report on physical deliveries: http://www.cmegroup.com/delivery_reports...Report.pdf



So despite all of its bearishness, despite all of its urging to short gold, Goldman held onto its gold in April.

(Also, if anyone's read Currency Wars by James Rickards, the 5917 means the Deutch Bank called in delivery of 5917 * 100 troy ounces of gold for Germany. They sold some in December and April. For 2013, their net movement in gold is that they acquired ~1500.)

Now for JPM:



So JPM accounted for 99% of all gold sales up till April 26th in 2013. The portrayal by the mainstream media was that everyone was panic-selling their gold holdings, when nothing could have been further from the truth.

This CME year-to-date report tracks the movement of futures contracts:

http://www.cmegroup.com/delivery_reports...Report.pdf

From February 1 of 2013 to April 26:

Quote:Total Net gold deliveries Feb 1 to April 25:

Vision Financial – 1 contract
R J O’Brien – 2
ADM Investor Services INC – 2
Marex – 5
Citigroup Global Markets – 10
ABN AMRO – 110
JP Morgan – 19,660

I count only 130 contracts NOT sold by JPM.

The gold goes back to the Federal Reserve, which leases it out and the cycle begins anew while it still appears on the asset side of its balance sheet. We can't audit the Fed because Ron Paul's HR 1207 is locked down in the Senate by Harry Reid, nor can we audit Fort Knox. Either would be sufficient in exposing the manipulation.

This is all public information, as well as additional info from the U.S. Office of the Comptroller of the Currency.

In January, the OCC issues this cease and desist order against JPM Chase:

Quote:OCC Issues Cease and Desist Order Against JPMorgan Chase, N.A., Related to Derivatives Trading Activity
WASHINGTON — The Office of the Comptroller of the Currency (OCC) announced today the issuance of a cease and desist order, by consent, against JPMorgan Chase, N.A., for unsafe and unsound practices and violations of law or regulation related to derivatives trading activities conducted on behalf of the bank by the Chief Investment Office (CIO).
The OCC found that the bank’s internal controls failed to identify and prevent certain credit derivatives trading conducted by the CIO that resulted in substantial loss to the bank, which has exceeded $6 billion. The OCC has conducted several targeted exams which found the following deficiencies related to the credit derivatives trading practices conducted by the CIO: inadequate oversight and governance to protect the bank from material risk, inadequate risk management processes and procedures, inadequate control over trade valuation, inadequate development and implementation of models used by the bank, and inadequate internal audit processes.
Concurrent with the OCC's enforcement action, the Board of Governors of the Federal Reserve System has issued a cease and desist order upon consent with the bank's parent company, JPMorgan Chase & Co.

Part of it may have been to the $2 billion loss in derivatives trading with London Whale in 2012, but I don't think anything came of it either way.

It's been investigated by the CFTC (Commodities Futures Trading Commission), but the SEC has been stonewalling on acting since 2010, because to take the correct regulatory action would mean ending the masquerade.

I don't know how long this has been going on, because JPMorgan acquired the silver shorts through its acquisition of Bear Stearns, so presumably it's been happening for many years. In 2008 JPM took silver down from $21 an ounce to $9. This, and the suicides it caused among silver investors, was what prompted former Goldman Sachs bullion trader Andrew McGuire to step forward. http://en.wikipedia.org/wiki/Andrew_Magu...tleblower)

This, along with the petrodollar and our military, is what is keeping the dollar alive.

(08-03-2013 03:34 AM)CactusCat589 Wrote:  (Also, if anyone's read Currency Wars by James Rickards, the 5917 means the Deutch Bank called in delivery of 5917 * 100 troy ounces of gold for Germany. They sold some in December and April. For 2013, their net movement in gold is that they acquired ~1500.)

Your post was a great starting point for those unfamiliar with the situation.

I included Currency Wars plus another financial history book in a post on the book recommendations thread, you guys may enjoy checking that out as well:

http://www.rooshvforum.com/thread-25999-...#pid495558

Inflation fear-mongers have been singing the same tune for years and years.

"Hyperinflation! Weimar Republic!"

We have increased the monetary base by several trillions of dollars. Yet, because we're in a liquidity trap, it has not caused runaway inflation or anything like it.

Yet people keep singing the same tune.

"A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels."



For those interested in reading about liquidity traps:

http://en.wikipedia.org/wiki/Liquidity_trap

(08-03-2013 03:17 AM)SexualHarrasmentPanda Wrote:  Inflation occurs when there is excess production capacity, or an inflationary gap.

This is an incomplete definition of inflation. Money value is

money supply x money velocity = total supply of goods and services

Which is to say, the amount of money, and money transfers, is relative to the total supply of goods and services. If money supply goes up, while velocity and total supply holds constant, then prices will rise because there is more money relative to the amount of total supply of goods and services.

If there is an excess production capacity, that should cause prices to fall, not rise, because of a rise in supply over demand. That's not inflation, because inflation causes prices to rise.

Quote:We have increased the monetary base by several trillions of dollars. Yet, because we're in a liquidity trap, it has not caused runaway inflation or anything like it.

Yet people keep singing the same tune.

That's because the low money velocity which is holding back inflation right now. Since 2008, M2 money supply has risen about 50%. (M2 is best track of how much money are in regular people's hands.)



But the velocity of this M2 is at all time lows:



Lower than it was 50 years ago. No one is spending any cash right now. So this creates the liquidity trap. But the conundrum really comes when you actually look at how much money has been created since 2008:



They have tripled the dollar's "base," which are the floating reserves that go between banks for the loans they make to each other. Tripled! That is actual money that could, in theory, be put into circulation. However, most of this money is circulated only between the big banks, such as JPM, BoA, Goldman, etc. The FED is loaning out trillions to these banks. Wouldn't you like to have a bank that loaned you out trillions at a 1% interest rate?

And again, examining how much money has gone into circulation reveals that it only has gone up 50%:



So, the amount of money in circulation has gone up 50% compared to four years ago. The amount of money in regular people's hands has gone up 50% since four years ago. The amount of money in existence has gone way, way, way up since four years ago.

And yet NO ONE is fucking spending! Velocity is at rock bottom. Something has to give! Either regular folks will spend, or the banks will spend, or the FED will inject more cash directly into the economy. Right now it seems like there is a big game of chicken being played, and no one wants to be the first one to spend.

This is why the unemployment and depression is ongoing - without anyone investing their cash or spending it, there is less need for labor, goods, or services. The problem is not the lack of money, the problem is that no one thinks there's anything worthwhile to spend it on.

The big banks don't want to give loans.
The people are saving their money for the next rainy day.
And the FED refuses to give money to anyone except the big banks!

So right now the only entity that is doing any kind of serious spending is the federal government itself! And it only does so by taking on debt!

And to make matters worse, there is a growing underclass who have been choked out of the economy in this low-velocity environment.

What I am betting on, is that this affairs of zero spending will not continue forever. At some point, after people continue to sit on enough cash, someone will feel confident (it will probably be one of the bigger banks) to start buying (or give out loans). The charts above show that money supply of every measure is continuing to rise exponentially, so it's only a matter of time before someone starts spending again.

At some point, one of the major economic players will feel confident enough to spend. And when that happens inflation will take off. There is so much money sitting on the sidelines relative to the total supply of goods and services, that once prices start rising and encourage others to spend we will see inflation rise at an uncontrollable pace.

And because the Federal Govt. has so much deficient spending, on top of their growing burdens (medicare, medicaid, SS, etc), that when prices rise for basic goods and services so too will the Federal Govt be forced to spend more and take on even MORE debt to finance themselves.

Eventually, the Federal Govt goes broke and brings us all down, since their default will destroy confidence in the dollar abroad, and the resulting hyperinflation will usher in the start of the actual Great Depression 2.0.

The real kicker right now, however, is when some of the money on the sidelines get used? That's the next stage of the game.

(08-04-2013 03:08 AM)Samseau Wrote:  That's because the low money velocity which is holding back inflation right now. Since 2008, M2 money supply has risen about 50%. (M2 is best track of how much money are in regular people's hands.)



But the velocity of this M2 is at all time lows:

I'll add out that the velocity of M2 was deliberately lowered as a result of Operation Twist. The Fed sold short-dated bonds (treasuries, MBSes, agency bonds) to remove them from their balance sheet and purchased long-dated bonds to flatten the yield curve:



It pushed down yields, making debt service on treasuries possible and allowing homeowners to refinance at a lower rates on the mortgages within those MBSes. They get to save more, but that directly hurts the banks: the performing mortgages on the asset side of their balance sheets are now bringing in less revenue.

That in turn means that credit availability is low, new businesses that would otherwise start up haven't because entrepreneurs were never able to obtain loans.

Again, this is deliberate on the part of our leaders.

At present, because yields have been suppressed, banks receive more profit by letting their QE money lie fallow at the Fed and pocketing the interest payment on those excess reserves. (Those interest payments aren't done with created money - it comes from our taxes.) When yields rise, the velocity increases and then that money will transition from the excess reserves to M1 (the money within circulation), and that's where inflation comes from.

The Fed has tried to drain the excess reserves through reverse repo operations, but the markets immediately start flatlining everytime they try it, just like when the Fed ended QE 1 and QE 2 and when Bernanke announced taper in May.

There is no exit strategy.

(08-04-2013 03:58 AM)CactusCat589 Wrote:  When yields rise, the velocity increases and then that money will transition from the excess reserves to M1 (the money within circulation), and that's where inflation comes from.

I think M1 has become outdated, because there is such a high percentage of transactions done electronically directly from people's bank accounts.

Quote:The Fed has tried to drain the excess reserves through reverse repo operations, but the markets immediately start flatlining everytime they try it, just like when the Fed ended QE 1 and QE 2 and when Bernanke announced taper in May.

There is no exit strategy.

For certain, the QE must continue or the economy will stop. But it doesn't really matter, now does it? Because even if the money hyperinflates, most of the biggest banks own most of the world's gold and silver.

Even as JPM brings the price of silver down, it doesn't matter. Silver could be $1 per ounce today and $1,000,000,000,000 per ounce tomorrow, and it wouldn't matter to JPM because they win on either side of the bet.

That is the big lesson I learn from this - the pigmen always win. I remember an early ZH commenter named "Robot Trader" always argued, "The pigmen always win. Up or down, the pigmen always come out on top."

(08-04-2013 03:08 AM)Samseau Wrote:  So right now the only entity that is doing any kind of serious spending is the federal government itself! And it only does so by taking on debt!

Indeed, now with interests rates at zero, it is the perfect time for the government to take on debt and spend.

We could use a massive fiscal stimulus to boost the economy and get people spending, because as you said, the only one capable of kick-starting the economy now is the Gov't.

(08-04-2013 03:08 AM)Samseau Wrote:  

(08-03-2013 03:17 AM)SexualHarrasmentPanda Wrote:  Inflation occurs when there is excess production capacity, or an inflationary gap.

This is an incomplete definition of inflation. Money value is

money supply x money velocity = total supply of goods and services

Which is to say, the amount of money, and money transfers, is relative to the total supply of goods and services. If money supply goes up, while velocity and total supply holds constant, then prices will rise because there is more money relative to the amount of total supply of goods and services.

If there is an excess production capacity, that should cause prices to fall, not rise, because of a rise in supply over demand. That's not inflation, because inflation causes prices to rise.

It seems I was mistaken, kudos for correcting me and you have my apologies.

We've had a decade of interest rates below inflation, personal savings have collapsed to zero: http://www.gobankingrates.com/retirement...l-savings/
http://thinkprogress.org/economy/2011/08...s-account/
http://money.cnn.com/2012/06/25/pf/emerg.../index.htm
http://www.huffingtonpost.com/2012/08/06...46862.html
http://americanlivewire.com/most-america...-paycheck/

To the extent that almost half of all Americans don't have a single penny in savings. How much stimulus do you need?

If they listened to the non-interventionists in 2000 when the dot-com bubble burst, the economy would have long since restructured itself (since at least that bubble was inflated when people had the necessary savings to invest in productive ventures), instead of facing an apocalypse scenario where even scaling back on QE means game over.

Maybe stimulus has been what is preventing the economy from recovering?

Also, debasing the dollar initiated a currency war of competitive devaluation where the rest of the world has to respond in kind in order to protect their exports, resulting in the bleeding of manufacturing and replacement by low-wage service sector consumption-based jobs in bars and restaurants:



And most importantly, in 2012 and 2013 Brazil, China, Russia, India, South Africa, France, the UK, Switzerland, Australia, have all signed bilateral free trade agreements to allow direct convertibility between their currencies, circumventing the dollar on the forex markets. The Iranian oil bourse is giving the world another option besides the USD, crumbling the petrodollar that has kept the fraudulent New Keynesians alive. The USD is comprising an ever-shrinking percentage of international trade, and that's yet another buffer against domestic inflation.

It's really simple: the rest of the world has its own poor to feed, they won't continue to import our inflation and inflict it upon their neediest. So this stimulus is coming at the expense of the dollar's world reserve currency status, which is falling every month.

And another fallacy is the suggestion that WWII that got us out of the Great Depression through "massive fiscal stimulus". This is a lie Krugman actively perpetuates. It was the fact we finally liquidated the debt Hoover and Roosevelt refused to and that we finally cut spending that the economy began to recover:

http://www.factcheck.org/2011/04/biggest...s-history/

Quote:Likewise, there was a sharp decline in spending after World War II. Beginning in 1946, Congress cut spending for three straight fiscal years. The biggest drop occurred in 1946, when spending dropped by $37.5 billion or about 40 percent (from $92.7 billion to $55.2 billion). That $37.5 billion would be worth $425.4 billion in today’s dollars — making it the largest cut in adjusted dollars.