US Quantitative Easing

pablo_escobar

2 years since the TARP bailout, is the US economy any healthier?

The federal reserve are planning to start inflating the USD again with the so-called QE2 and this will inevitably push up the cost of living for most people in the US, so who really benefits?

This action will also affect Ireland and other EU member states because OPEC are talking about an increase in oil prices to compensate for the devaluation of the USD.

So as the US devalue the dollar, other countries will follow in order to keep their exports competitive, end result is the cost of living will go up.

Can those who believe in Keynesian policies explain how it will change anything for the better?

Maybe i'm missing something here, how will paying off debt with more debt work?

All I see are more record bonuses for bank executives and CEOs next year...all courtesy of the docile tax payer.

And when stocks go up, the government will tell us "look! the economy is recovering" :pac:

ei.sdraob

Keynesians think that printing money solves all the problems
well if thats the case why not print a million units of currency for everyone?
printing money reduced confidence in the unit of exchange, which is playing with fire IMHO.
all currencies that are not backed up by anything physical (that's all of them nowadays) depend on confidence, without confidence currency collapses and hyper-inflates

the question to be asking with US$ or POUND or euro being printed is the amount being magicked into existence large enough to remove all confidence in the currency?


edit: some might argue that in a world where China are artificially holding currency low, things like this are justified, and they could be right, mercentalism is not nice. Previous crises ended up with trade disputes and wars, this could be the start of a race to the bottom by major currencies (some say its already underway), this will only result in more investment in commodities and physical assets like land.

pablo_escobar

the question to be asking with US$ or POUND or euro being printed is the amount being magicked into existence large enough to remove all confidence in the currency?

Since the FED will buy US government bonds, that's indicative to me nobody else wants them or atleast isn't willing to buy enough of them.

edit: some might argue that in a world where China are artificially holding currency low, things like this are justified, and they could be right, mercentalism is not nice. Previous crises ended up with trade disputes and wars, this could be the start of a race to the bottom by major currencies (some say its already underway), this will only result in more investment in commodities and physical assets like land.

I see China being used more and more as a scapegoat for US financial problems.

China aren't running a trade deficit and aren't spending $1 trillion a year running pointless wars overseas.

IMO, the only reason China are being attacked is because they're reluctant to buy anymore US public debt which is why the FED are having to do it now instead.

"China aren't buying anymore of our debt, it's their fault our country's financial system is collapsing" :rolleyes:

With TARP, the banks simply kept all the money for themselves or invested somewhere else instead of in the local economy which is where it was supposed to go.

If OPEC want $100 a barrel before QE2, how much will they want afterwards? ... this can't end well.

catbear

Something doesn't make sense. OPEC want oil at $100 but for the Euro area oil at the pumps will still be the same as oil will be bought in a devalued currency. So to OPEC there's no real gain, it's just fiddling with dollar values.

There are plenty of graphs with oil in $ but anyone got one with oil in €?

ei.sdraob

@pablo i am not blaming or scape-goating China, just noting that's what some people (like Krugman) bang on about. China the country is acting as one big corporation looking after itself, whether that's right or wrong I am not going to comment.

pablo_escobar

No, I know. Just acknowledging the popularity of blaming other countries for irresponsible policies.

But let's say China did allow the RMB to appreciate..what could the US export to China that couldn't be made cheaper domestically?