Quantitative Easing

Anonymous1987

Given the scale that the Fed, ECB and the BoE are increasing the money supply through "quantitative easing" shouldn't they be more concerned about the consequenes of their actions? How big is the threat of inflation following recovery?

Toiletroll

The germans last week told the ECB to stop quantitive easing...

Anonymous1987

I agree with Angela Merkel, I think that the central banks are taking too much of a short term perspective on the recession. The US in particular is especially aggressive. Not only is the Fed planning to inject one trillion dollars into the system but the 787 billion dollar stimulus package will also add to inflationionary pressure. This is unprecedented and it is uncertain how it will effect the economy following recovery. Given that the economy is in such bad shape and the stimulus package is streched over two years, inflation is not likely to emerege until a recovery has taken place however two year bond notes have jumped approximately 40 basis points in the last few days signalling positive sings for bond yields already suggesting the effects of increasing liquidity are already been felt. The danger is that the Fed may have overeacted and rather than solve the crisis it may have set in motion the same bubble cycle again.

I understand the need to support the markets in the recession but the sheer scale of the global response is alarming as far as future inflationary fears are concerned.

eamonnm79

Anonymous1987 wrote: »

I agree with Angela Merkel, I think that the central banks are taking too much of a short term perspective on the recession. The US in particular is especially aggressive. Not only is the Fed planning to inject one trillion dollars into the system but the 787 billion dollar stimulus package will also add to inflationionary pressure. This is unprecedented and it is uncertain how it will effect the economy following recovery. Given that the economy is in such bad shape and the stimulus package is streched over two years, inflation is not likely to emerege until a recovery has taken place however two year bond notes have jumped approximately 40 basis points in the last few days signalling positive sings for bond yields already suggesting the effects of increasing liquidity are already been felt. The danger is that the Fed may have overeacted and rather than solve the crisis it may have set in motion the same bubble cycle again.

I understand the need to support the markets in the recession but the sheer scale of the global response is alarming as far as future inflationary fears are concerned.

Its almost as if they know there will be default, have already accepted it and are just going to keep the show on the road as long as they can. The famous comment by Mises the Austrian School guy where he says depressions cannot be avoided but only delayed, and that the delays make it worse in the end.(obviously paraphrasing due to laziness).

But yeah I agree with Merkel. Someone has to shout stop to this madness.

SLUSK

USA and EU are headed towards hyperinflation if they keep increasing the money supply like this. All attempts at creating money out of nothing in the past has lead to price inflation. Why would it be different this time?

silverharp

SLUSK wrote: »

USA and EU are headed towards hyperinflation if they keep increasing the money supply like this. All attempts at creating money out of nothing in the past has lead to price inflation. Why would it be different this time?

Unlike Zimbabwe etc, this is mostly credit that the central banks are trying to get out the door. Dont understimate the Bond Vigilanties, they can deflate bond pricess faster then gov. can inflate the money supply. I think you will see a lot more deflation over the next few years. The fact that banks have not mark to market their assets should be a good indicator that a lot of credit will have to go to money heaven.

eamonnm79

silverharp wrote: »

Unlike Zimbabwe etc, this is mostly credit that the central banks are trying to get out the door. Dont understimate the Bond Vigilanties, they can deflate bond pricess fater then gov. can inflate the money supply. I think you will see a lot more deflation over the next few years. The fact that banks have not mark to market their assets should be a good indicator that a lot of credit will have to go to money heaven.

Money heaven! I love it
You should right headlines for bloomberg

xOxSinéadxOx

what is quantitive easing?

SLUSK

xOxSinéadxOx wrote: »

what is quantitive easing?

It is just a fancy phrase for creating money out of thin air. Like they did in Zimbabwe