What the Fed did and why: supporting the recovery and sustaining price stability

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SteveW's picture
SteveW
Status: Gold Member (Offline)
Joined: Jan 21 2010
Posts: 490
What the Fed did and why: supporting the recovery and sustaining price stability

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html?hpid=topnews

Quote:

Ben S. Bernanke: Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

What planet is this guy living on? Lower mortgage rates make it easier to refinance for those whose homes are being repossessed in foreclosure by the banking fraud? Lower corporate bond rates encourage investment when capacity under utillization is at a multi-year low? Higher stock prices increase perceived wealth in those devalued dollars but how does this increase confidence and spending? The only spending increase I see is from those who want to get rid of their rapidly degrading paper as soon as possible and buy real stuff.

HarryWanger's picture
HarryWanger
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Joined: Nov 4 2010
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Re: What the Fed did and why: supporting the recovery and ...

Seriously, you people need to leave your computers and go out into the real world.

Rest removed by staff for displaying the emotional maturity of a 5 year old.

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Re: What the Fed did and why: supporting the recovery and ...

Lower mortgage rates allow higher housing prices at the same degree of affordability; affordability is not increased. 

Higher stock prices increased perceptionof wealth and spending in the past, but our home equity lines are tapped out and wages haven't kept up with inflation, so we have no money to increase spending.

Corporations won't want to invest if they have no demand for their products.

Even if we could, increased spending just puts us in a visious circle back to the root cause of our current dilema; too much debt and living beyond our means.

That's how I see it really.

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: What the Fed did and why: supporting the recovery and ...

In retrospect, I believe Ben Bernanke will be reviled as 'the Great Satan.'

After all, the Ayatollah Khomeini was another Time man of the year. Undecided

Time has an unassailable record of being hopelessly, 180-degrees wrong. They picked Hitler as Man of the Year in Jan. 1939, eight months before he marched on Poland. Nice timing!

http://www.time.com/time/covers/0,16641,19390102,00.html

Looks like about the same lead time in Bernanke's case. Cry

 

jumblies's picture
jumblies
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Joined: Jun 13 2010
Posts: 244
Re: What the Fed did and why: supporting the recovery and ...

Given that QE2 was widely expected I rather expected the gold price to continue to rise to offset the declining dollar value. That this didn't happen over the last month and after the announcement yesterday the price tanked, but is recovering. This seems contrarian to me.

Is this likely because of market speculators, or market manipulation (by the Fed/IMF/lizardmen)?

 

mainecooncat's picture
mainecooncat
Status: Gold Member (Offline)
Joined: Sep 7 2008
Posts: 488
Re: What the Fed did and why: supporting the recovery and ...
jumblies wrote:

Given that QE2 was widely expected I rather expected the gold price to continue to rise to offset the declining dollar value. That this didn't happen over the last month and after the announcement yesterday the price tanked, but is recovering. This seems contrarian to me.

Is this likely because of market speculators, or market manipulation (by the Fed/IMF/lizardmen)?

 

I think Chris mentions this in his blog post about QEII yesterday, at least I think it was there. Check it out.

And as far as gold recovering today, it most certainly is. How about platinum up almost fifty bucks!

SteveW's picture
SteveW
Status: Gold Member (Offline)
Joined: Jan 21 2010
Posts: 490
Re: What the Fed did and why: supporting the recovery and ...
jumblies wrote:

Given that QE2 was widely expected I rather expected the gold price to continue to rise to offset the declining dollar value. That this didn't happen over the last month and after the announcement yesterday the price tanked, but is recovering. This seems contrarian to me.

Is this likely because of market speculators, or market manipulation (by the Fed/IMF/lizardmen)?

 

No, the NYMEX opened this morning just as you posted and we've seen about $20 to the upside to the $1380 level.

The crash in gold yesterday was perhaps the last chance for the shorts to push it down to $1325 and the quick bounce back over $1350 suggests that it has strong support at that level.

dshields's picture
dshields
Status: Platinum Member (Offline)
Joined: Oct 24 2009
Posts: 599
Re: What the Fed did and why: supporting the recovery and ...
HarryWanger wrote:

Seriously, you people need to leave your computers and go out into the real world.

Rest removed by staff for displaying the emotional maturity of a 5 year old.

I do not want to meet the same fate as HarryWanger - LOL...

However, it strikes me that the best way to actually put money in people's pockets, real money - not debt, is to cut government back and lower taxes in a meaningful way.  If taxes, fed, state, and local, were cut then people really would have more money to spend and they just might go and spend some.  Charging up a credit card may give you more to spend now but reduces your future spending.  Cutting your taxes actually gives you more real money.  Cutting back the gov and letting people keep more of what they earn would boost the economy for sure.  Cutting back government in a meaningful manner will be very difficult.  We will have to cut the military, the entitlement programs, the class of dependency will take a hit - everyone will take some kind of hit.  The road in front of your house might not be as good and the high school might have to cut the sports programs but if it put more real money in people's pockets it would be worth it.  I have to admit that I am not sure we have the sheer guts to do it though.  Recent history has proved that we are not good at doing difficult political things in America.  Maybe that will change with the repub party midterm election win and the coming 2012 repub wins - or maybe not.  I keep hoping...

 

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