Dollar pressured on rising speculation of US easing
The dollar fell to a one-month low against the yen on Monday after ... speculation the Federal Reserve may launch another round of quantitative easing.
We're disproving the old adage:
..Fool me once, shame on you.
..Fool me twice, shame on me.
..Fool us thrice .... (must we go there? again? no term limits on our own stupidity?)
The message being? "We're gonna do nothing ... again, and see if it works this time. Now don't everyone run for the exits all at ... [where'd everyone go?]"
Keep saying nothing until it stops working?
Weepin Buddha on an incline!
Is that the best we can do?
15 comments:
Another example of causality mixed up.
Quantative easing is notice from the Fed the economy is expected to weaken. The dollar is pressured by fear of a weakening economy not an outcome of QE.
I thought this is what MMTers wanted.
What is wrong with QE from an MMT perspective?
"I thought this is what MMTers wanted.
What is wrong with QE from an MMT perspective?"
@Major, I know you are relatively new to this site and MMT but a smart guy like you should have picked it up pretty quick.
QE can only change the composition of assets held by the public.
It can't add direct spending to stimulate the economy and it can't force people to borrow, what we call "pushing on a string"
The Fed has no ability to do anything for the economy in this situation other than "open-mouth operations", which clearly haven't worked.
Major_Freedom
Are you thinking from the Austrian perspective.....QE is printing money which will soon rain down on us in an unstoppable torrent of spending and hyperinflation?
Nobody who reads the literature on MMT would think that. Bonds are converted to money, but this does nothing to increase the propensity of banks to lend and savers to spend. The data is in and the facts agree with the MMT analysis.
Facts DO NOT support the Austrian fear mongering claims.
(turns to audience: "this will,keep him busy for a while")
Andrew said: "Quantative easing is notice from the Fed the economy is expected to weaken."
We don't need the Fed to tell us that. The Fed is the last to know of developing trends.
Best to look elsewhere for the cause of the sinking $US.
Either there's some entirely different cause, or half the market is actually ignorant enough to still believe QE does something.
QBS
Roger -- I think "half the market" may indeed be that stupid...
Maybe OT, but worth reading, another effort to get the right info out to the public, Marshall Auerback has a new post up on Alternet:
http://www.alternet.org/economy/156304/so-called_fiscal_cliff_is_baloney%3B_our_economy_can_recover_if_obama_focuses_on_what_we_really_need%3A_jobs!/?page=entire
Thanks, John. Posted.
I have read this at ZH regarding QE effectiveness, interesting...
Does QE Really Work? The Evidence To Date
A Credit Suisse study.
Paul:
QE can only change the composition of assets held by the public.
That's true for every dollar of every inflation. Every dollar the Fed creates, is used to purchase something owned in the market, some "asset", be they MBSs, or Treasuries, or whatever else. Inflation is always a "swap" in this respect.
QE is inflation. It is the Fed increasing the money supply by purchasing treasuries. Why is this particular "swap" no good?
It can't add direct spending to stimulate the economy and it can't force people to borrow, what we call "pushing on a string"
Why can't it add to spending?
People have more money. Isn't that how spending is increased? By people having more money? Or will spending only increase if the Fed purchases something other than Treasuries? If they can't increase spending by buying Treasuries, then how do you explain the massive increase in spending from 1913-2008 whereby the Fed purchased Treasuries pretty much exclusively the whole time?
If I own a government bond that matures in 5 years, and the Fed buys that bond from me, I now have cash and no bond. Why wouldn't I use the money to invest or spend on my consumption? Sitting on cash does no good for me.
You might ask well why are the banks sitting on cash? They not exactly are sitting on cash, because the Fed is now paying interest on reserves. Banks are lending the "idle cash" to the Fed. They're not just sitting on it.
The Fed has no ability to do anything for the economy in this situation other than "open-mouth operations", which clearly haven't worked.
How do you know it hasn't worked? Bank lending has increased since the 2010 bottom, and NGDP growth has been 4-5% per year since 2010. Plus the IOR has made banks more prone to lend to the Fed instead of to the market.
You can't say it won't work because it's merely an "asset swap." Inflation entails an "asset swap." The Fed doesn't just give people free money, or maybe they do, like when they sent $40 billion to Iraq to finance the war 2003-2008. Probably literally zero interest.
Andrew:
Are you thinking from the Austrian perspective.
No. I have my own perspective.
QE is printing money which will soon rain down on us in an unstoppable torrent of spending and hyperinflation?
I don't make scientific predictions of people's choices based on any constants.
Nobody who reads the literature on MMT would think that. Bonds are converted to money, but this does nothing to increase the propensity of banks to lend and savers to spend.
Why not?
The data is in and the facts agree with the MMT analysis.
Are you sure you have all the relevant data? The Fed pays interest on reserves don't forget.
Facts DO NOT support the Austrian fear mongering claims.
What fear mongering claims? Which Austrian has predicted hyperinflation?
(turns to audience: "this will,keep him busy for a while")
I don't even know what that means.
"QE is inflation."
You have to remember that most people (and MMT) don't define inflation as an increase in the money supply. It is a general increase in the price level.
MMT is mainly concerned with Net Financial Assets (NFA) which is dollars that exist without an off-setting liability plus bonds (government debt) held by the public.
Credit can't increase the level of NFA's in the non-government. Every dollar of credit is offset by an equal liability, netting to zero.
The rate of inflation (price inflation) has been declining for 30 years and if it maintains that trend it will hit zero within a decade.
There has been no up-tick in inflation since the QE's.
Further, the QE's removed net money from the economy because they reduced the portfolio rate on the National Debt. Don't see how removing dollars from the economy can cause inflation.
If the government printed $10 Trillion and shot it into outer space would that cause inflation?
@Major_Freedom
Article today by an Austrian-school journalist you might find interesting…
http://www.cnbc.com/id/48211008
Thanks Paul.
Paul:
You have to remember that most people (and MMT) don't define inflation as an increase in the money supply. It is a general increase in the price level.
OK, then what do you call the increase in the money supply?
MMT is mainly concerned with Net Financial Assets (NFA) which is dollars that exist without an off-setting liability plus bonds (government debt) held by the public.
Credit can't increase the level of NFA's in the non-government. Every dollar of credit is offset by an equal liability, netting to zero.
The rate of inflation (price inflation) has been declining for 30 years and if it maintains that trend it will hit zero within a decade.
I disagree.
http://research.stlouisfed.org/fredgraph.png?g=8RY
Price inflation for consumer goods has been a roughly stable 2.5% since the early 1980s.
Further, the QE's removed net money from the economy because they reduced the portfolio rate on the National Debt. Don't see how removing dollars from the economy can cause inflation.
I disagree. Debt securities are not dollars. Removing debt is not removing dollars.
If the government printed $10 Trillion and shot it into outer space would that cause inflation?
Not sure what the point of this question is.
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