tag:blogger.com,1999:blog-14963913.post7627340944259332970..comments2023-10-27T20:27:57.900-04:00Comments on Kid Dynamite's World: Blah Blah Blah Quantitative Easing Blah Blah Blah - "I Want a New Drug"Kid Dynamitehttp://www.blogger.com/profile/17475987512856310577noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-14963913.post-84441249149928192132010-11-09T11:10:17.476-05:002010-11-09T11:10:17.476-05:00Dawg:
For one, QE2 hasn't really even begun ...Dawg:<br /><br /><i><br />For one, QE2 hasn't really even begun yet. And second, even when it does begin, I highly doubt the banks will be putting their excess reserves into equities or gold because the capital requirements are higher AND because big banks like BofA are facing potential capital hits from putbacks.<br /></i><br />The banks very well may decide to put "their" excess cash in gold. Why not ? It can be counted as Tier 1 capital with more substance than any other assets during these uncertain QE2 times.<br /><br />Also, as I wrote at TPC, commercial banks are not the major holders QE2 targeted paper -- they perhaps hold about 5% of the total. The institutional investors, foreigners and other private parties account for the rest. It is this group behavior, rational or irrational decisions that will influence asset price trajectory during the nearest future.vjknoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-89337859613737152292010-11-08T18:39:01.009-05:002010-11-08T18:39:01.009-05:00sure - but you need to keep in mind that we are al...sure - but you need to keep in mind that we are all speculators.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-85170744288071936772010-11-08T18:06:04.126-05:002010-11-08T18:06:04.126-05:00And I'd say that it's the speculators doin...And I'd say that it's the speculators doing most of that, thinking they are front running banks who will have cash to put to work shortly. For one, QE2 hasn't really even begun yet. And second, even when it does begin, I highly doubt the banks will be putting their excess reserves into equities or gold because the capital requirements are higher AND because big banks like BofA are facing potential capital hits from putbacks. <br /><br />Of course, it might not be JUST the speculators. The economy is improving in select areas. S&P 500 and MSCI World earnings are still growing year over year. Certain commodities like wheat are facing supply issues. Etc...Dawgnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-656692742750116232010-11-08T17:41:18.332-05:002010-11-08T17:41:18.332-05:00Dawg - right. and yet if we just look at the tape ...Dawg - right. and yet if we just look at the tape we'll see what's actually happening (shit is RIPPING!). and I agree with TPC that it's not sustainable.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-45318505630615551262010-11-08T17:39:28.382-05:002010-11-08T17:39:28.382-05:00Right, you're saying that the inflationary eff...Right, you're saying that the inflationary effect will mainly come from previous treasury holders putting their cash back to work (despite being no wealthier than before). <br /><br />What I'd contend is that it depends on whether the money getting put back to work gets concentrated into a specific asset class (such as ag commodities). If it goes into global equities, it's unlikely that it will cause prices to soar since global equities as an asset class is multiples the size of the Treasury market. <br /><br />What I was also trying to point out to you was that you were correct in your analysis that QE2 "creates" money, but that the way it could potentially create inflation is less well understood by you and many others. Newly created dollars, unless transmitted widely and in very large quantities, may not necessarily create widespread inflation.Dawgnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-38560747594966985852010-11-08T17:18:11.696-05:002010-11-08T17:18:11.696-05:00dawg - if you're talking about my lengthy comm...dawg - if you're talking about my lengthy comments over at TPC, that is in reference to asset allocation. Cash, currently, at 0%, really isn't an acceptable asset for a lot of people. So when the Fed converts their longer duration positive yield instruments (which may have already reeked of desperation in terms of needing more return) into zero duration zero yielding cash, IN THE REAL WORLD, people will eventually reallocate that. If they fail to, Bernanke will buy more bonds. and more bonds. until they do.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-67700547016797725682010-11-08T17:15:39.067-05:002010-11-08T17:15:39.067-05:00Also, you are right that debt monetization creates...Also, you are right that debt monetization creates money. But it is interesting to think about how the money is transmitted into society. If the Fed bought every Treasury in existence then the national debt would go away. All Treasury holders would now have cash, but they would be no more wealthy than before. So where did all the printed dollars go? Who did they make richer? The money would have in fact been "created" over several centuries via deficit spending by the federal government. It is the federal government who received the free lunch of dollars to spend without ever "earning" those dollars. They made everyone who has ever received federal dollars slightly richer at the expense of those that did not. In the example, it was merely a wealth transfer over a long period of time, despite the monetization happening at one discrete point in time.Dawgnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-48822497162651245812010-11-08T16:38:26.191-05:002010-11-08T16:38:26.191-05:00dawg - indeed - the policies can be reversed in th...dawg - indeed - the policies can be reversed in the future - the Fed can sell the stuff it bought. I said nothing about that.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-30002024103130383672010-11-08T16:19:54.987-05:002010-11-08T16:19:54.987-05:00KD, you rightfully argue that deposits created fro...KD, you rightfully argue that deposits created from Fed Treasury purchases under QE2 can all of a sudden start getting spent/lent. HOWEVER, you also forget that the Fed has ways of reversing this flow of money into the general economy (capital requirements, asset sales, etc).Dawgnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-68929646605599667482010-11-06T19:29:58.553-04:002010-11-06T19:29:58.553-04:00KD,
great thread over at TPC, what a mess!
Off to...KD,<br />great thread over at TPC, what a mess!<br /><br />Off topic;<br />dug up an old CD from a band my friends had in college and posted a tune from it tonight. What's better than aspiring scientists rocking out? Hee hee.EconomicDisconnecthttps://www.blogger.com/profile/02802078645713106743noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-86772620419325208192010-11-06T07:44:54.211-04:002010-11-06T07:44:54.211-04:00well done, Anonwell done, AnonKid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-68897880039866287302010-11-06T02:32:54.330-04:002010-11-06T02:32:54.330-04:00"In '87, Huey released this, Fore, their ..."In '87, Huey released this, Fore, their most accomplished album. I think their undisputed masterpiece is "Hip to be Square", a song so catchy, most people probably don't listen to the lyrics. But they should, because it's not just about the pleasures of conformity, and the importance of trends, it's also a personal statement about the band itself."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-58899760000650436342010-11-05T23:26:13.277-04:002010-11-05T23:26:13.277-04:00Blurtman,
um....No.Blurtman,<br />um....No.EconomicDisconnecthttps://www.blogger.com/profile/02802078645713106743noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-64263145907139560372010-11-05T14:24:52.008-04:002010-11-05T14:24:52.008-04:00QE2 has gotta be better than the truth.
Does anyo...QE2 has gotta be better than the truth.<br /><br />Does anyone think Bernanke may soon step dowm to "spend more time with his family?"Blurtmanhttps://www.blogger.com/profile/04997520846655923035noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-30996797827681883002010-11-04T22:08:55.122-04:002010-11-04T22:08:55.122-04:00Look all I can say is this is wild to watch but my...Look all I can say is this is wild to watch but myself and others have covered how no one but big boys have any real touchable money in stocks; if somehow this works I cant see it but I am open to suggestions. 8 months of cant lose is too tempting, I am polishing off the trade cap!EconomicDisconnecthttps://www.blogger.com/profile/02802078645713106743noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-50505603868448154852010-11-04T21:55:56.250-04:002010-11-04T21:55:56.250-04:002007-2020 will be fertile ground for alt-reality f...2007-2020 will be fertile ground for alt-reality fiction 50-100 years from now. <br /><br />The Fed shouldn't be in the business of incentivizing/de-incentivizing asset classes. That's the role of legislative policy enactments and the tax codes. This is some gonzo shit we're witnessing.Transor Znoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-27105010610940507172010-11-04T21:48:44.279-04:002010-11-04T21:48:44.279-04:00Nice quote from PragCap, and it does raise the que...Nice quote from PragCap, and it does raise the question of why high asset prices are considered better than low asset prices--they are better for sellers, but worse for buyers. For the workers who are accumulating money in their 401K's, BB's money drop is bad news because they are going to purchase those "investments" at prices which are "higher than they otherwise would be." If someone made us buy gasoline, or clothes, or food, or houses at artificially inflated prices, there would be hell to pay.<br /><br />The only people who permanently benefit from goosing the stock and bond markets are the people who are going to cash out--why should the Fed wish to do them any favors?But What do I Know?noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-12288486220389417582010-11-04T18:57:16.995-04:002010-11-04T18:57:16.995-04:00scharfy - it's an ECONOMIC non-event, but buy...scharfy - it's an ECONOMIC non-event, but buying assets creates asset price inflation - I don't know how people can argue against that.<br /><br />i was thinking of your "lighter fluid swap" example this morning: the Fed can come to your house and buy all of your stuff at market value - that's an asset swap - they take your stuff and give you cash - but that doesn't mean there's no effect! You now have to take your cash and go out and spend it.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-80160351084759513862010-11-04T18:49:46.550-04:002010-11-04T18:49:46.550-04:00Good post man. You haven't forgiven the MMT cr...Good post man. You haven't forgiven the MMT crowd for classifying QE as a non-event? <br /><br />Holy cow, they had that wrong. Uncle Ben has started a friggin stampede. Who knows how long this can continue? Hot money is pouring everywhere. Emerging markets, stocks, bonds, gold.... <br /><br />These 'virtuous cycles' have real life consequences.<br /><br />There's no theory that can distill 6 billion dynamic, interconnected people as it relates to goods and services - into a simple outcome.<br /><br />Dangerous territory we are pushing into.<br /><br />I have QE fatigue.scharfyhttps://www.blogger.com/profile/18309882331114382248noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-39041098618150882362010-11-04T15:52:23.390-04:002010-11-04T15:52:23.390-04:00Wow, really interesting in context with Grantham&#...Wow, really interesting in context with Grantham's piece you recently recommended (http://fridayinvegas.blogspot.com/2010/10/grantham-and-gross.html). <br />It is a bit shocking (and disappointing) to read Bernanke opine such contradictory ideals from Grantham's piece, which indicates debt doesn't equal long term growth and the dangers of manipulating market rates (page 3-5).J Johnsonhttps://www.blogger.com/profile/00426395043622946832noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-60781086366724702872010-11-04T15:52:17.110-04:002010-11-04T15:52:17.110-04:00Very well written and very well all too true.Very well written and very well all too true.Taylorhttps://www.blogger.com/profile/07713988433215125181noreply@blogger.com