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Post by walnut on Jun 9, 2022 1:45:23 GMT
OK some contrary views. QE was needed the damage of a full meltdown is to great but its addictive. We have filled the world with zombie companies able to survive because their leverage has a negative cost if real inflation is considered, its not currently. I hold the opinion that 4% inflation and consequent interest rates between 5% and 10% reflecting risk and term is good for business. When we get there, and we will, the M&A market will fire up to reallocate the assets and market share that is currently in play. I predict a lot of opportunity, a fool of a president is probably fine in this mix so long as the Congress and House are blocking everything, remember Bill Clinton great president because he could not do anything, that is, what can be written here. I was never particularly against QE in the first place. It worked, and as a strange side benefit allowed the US to print money to repay foreign bondholders (yet bond prices went to all-time highs). The populist goldbug people said it could never work. Well, it more less did, beautifully, somehow.
Like everyone else, I was just waiting to see what would happen.
I think that the inflation came lately, as a result of excessive covid stimulus and lockdown supply constraints. Also, I believe that the tariffs on Chinese goods have been raising prices on many key industrial inputs.
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Post by walnut on Jun 9, 2022 1:54:46 GMT
One day they tell us that Ukraine is slowing the economy down and causing inflation too, then we hear that the economy is running so hot, causing inflation.
Raising rates to cure inflation which was actually caused by money printing is a mistake IMO. We could end up with prolonged 70's style stagflation. The money supply is going to shrink anyway as the Fed sells off their bond portfolio. Interest rates should be the market cost of rent on the money plus a risk premium. Anything beyond that is government meddling in the free market. (Yes I know that QE was government meddling in the free market).
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Post by nonentropic on Jun 9, 2022 4:21:35 GMT
I did economics as a by study but remember a bit here and there.
The time I studied was the onset of the novel concept of inflation and monetarism was the word dejour and I remember a lecturer arguing that it would never work because the money velocity would compensate for the tightening of the money supply, he was wrong but I suspect only partially.
Low interest rates have in my view reduced money velocity thus generating the impression that inflation is decoupled from supply.
What if interest rates rise
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Post by gridley on Jun 9, 2022 10:44:27 GMT
OK some contrary views. QE was needed the damage of a full meltdown is to great but its addictive. We have filled the world with zombie companies able to survive because their leverage has a negative cost if real inflation is considered, its not currently. I hold the opinion that 4% inflation and consequent interest rates between 5% and 10% reflecting risk and term is good for business. When we get there, and we will, the M&A market will fire up to reallocate the assets and market share that is currently in play. I predict a lot of opportunity, a fool of a president is probably fine in this mix so long as the Congress and House are blocking everything, remember Bill Clinton great president because he could not do anything, that is, what can be written here. Say whatever bad things you will about Clinton (I certainly have), he was in office before the recent trend of executive orders unrestrained by any pretense of separation of powers.
The question "what is Constitutional" has been increasingly irrelevant since at least 1934 (a case could be made for an earlier date). The real question is "what can they get away with" - and the list of what they can get away with has been getting longer and longer. Whatever you think of the efficacy of the so-called Covid "vaccines", mandating them was a horrifying overreach. But in the time it took some of those measures to be struck down by the courts a lot of good people left the public sector. Most of them won't be back. I can't and don't fault a single one of those people (I did the same thing, just in the private sector), but their collective loss swings the .gov even further to the left, and even further toward being an unthinking, unreasoning machine that crushes individuals who express dissent (OK, those two things are pretty much the same at the present time).
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Post by glennkoks on Jun 9, 2022 13:11:12 GMT
I think QE was probably one of the only things that kept The Great Recession from becoming a depression. It absolutely worked and easy money fueled the V shaped recovery.
Where we went wrong is in 2009-2010 when the economy got rolling again we never tightened. Cheap money fueled the great decade we had and QE became a permanent part of our monetary policy.
In common layman’s terms if you are broke, the car is broke and the babies need formula, it makes perfect sense to put the repairs and formula on a credit card. Get back to work, tighten the belt and pay off the credit card.
As a nation we put everything on the card, never paid it off and then started putting everything else on the card.
Then Covid hit. We shut down the economy for a year, put everything on the card and the party continued…
Now our debt is 125% of our GDP. We have runaway inflation, we have to tighten, removing the only thing that has fueled our economy.
I think this is very predictable. We kicked the can down the road as long as we could and it’s time to pay the piper.
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Post by missouriboy on Jun 9, 2022 20:14:14 GMT
I think QE was probably one of the only things that kept The Great Recession from becoming a depression. It absolutely worked and easy money fueled the V shaped recovery. Where we went wrong is in 2009-2010 when the economy got rolling again we never tightened. Cheap money fueled the great decade we had and QE became a permanent part of our monetary policy. In common layman’s terms if you are broke, the car is broke and the babies need formula, it makes perfect sense to put the repairs and formula on a credit card. Get back to work, tighten the belt and pay off the credit card. As a nation we put everything on the card, never paid it off and then started putting everything else on the card. Then Covid hit. We shut down the economy for a year, put everything on the card and the party continued… Now our debt is 125% of our GDP. We have runaway inflation, we have to tighten, removing the only thing that has fueled our economy. I think this is very predictable. We kicked the can down the road as long as we could and it’s time to pay the piper. The poor can't hold a candle to the rich when it comes to social welfare. Everyone with their hands in the public purse should have them chopped off. No prisoners. It is time for those who received the majority of government handouts to pay it back ... to the point of bankruptcy and procesecution. |
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Post by walnut on Jun 10, 2022 0:51:24 GMT
I think QE was probably one of the only things that kept The Great Recession from becoming a depression. It absolutely worked and easy money fueled the V shaped recovery. Where we went wrong is in 2009-2010 when the economy got rolling again we never tightened. Cheap money fueled the great decade we had and QE became a permanent part of our monetary policy. In common layman’s terms if you are broke, the car is broke and the babies need formula, it makes perfect sense to put the repairs and formula on a credit card. Get back to work, tighten the belt and pay off the credit card. As a nation we put everything on the card, never paid it off and then started putting everything else on the card. Then Covid hit. We shut down the economy for a year, put everything on the card and the party continued… Now our debt is 125% of our GDP. We have runaway inflation, we have to tighten, removing the only thing that has fueled our economy. I think this is very predictable. We kicked the can down the road as long as we could and it’s time to pay the piper. I agree with all of that, and very well said! But, what happens to the market over the rest of the year? Is this going to be the 'big one'? No one knows, including Powell and Yellen themselves. |
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Post by nonentropic on Jun 10, 2022 3:40:33 GMT
the addition is the risk.
In hospitals opiates are carefully monitored and controlled that also has gone wrong.
The generation of instant gratification
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Post by duwayne on Jun 10, 2022 14:03:37 GMT
Glennkoks, you asked me whether I thought we were headed for a repeat of 2008. I explained why I didn’t think so. You repeated my arguments so I’ll presume we are in agreement.
You indicate we are headed towards a repeat of the 1970’s. Can you be specific about why the market fell by 50% in the 1970’s? I believe there is a reasonably simple explanation, but I prefer that you go first this time since you’ve already reached a conclusion.
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Post by Sigurdur on Jun 10, 2022 17:28:18 GMT
This event will be worse than the 1970's.
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Post by flearider on Jun 10, 2022 18:49:12 GMT
petrol in nw uk just went up to £2 a ltr .... wife works in a petrol station
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Post by glennkoks on Jun 10, 2022 20:39:13 GMT
Glennkoks, you asked me whether I thought we were headed for a repeat of 2008. I explained why I didn’t think so. You repeated my arguments so I’ll presume we are in agreement. You indicate we are headed towards a repeat of the 1970’s. Can you be specific about why the market fell by 50% in the 1970’s? I believe there is a reasonably simple explanation, but I prefer that you go first this time since you’ve already reached a conclusion. duwayne, I think this downturn will have similarities to the downturn in the 1970’s. I don’t think it will necessarily be a repeat. We had inflation in the 1970’s but it was not caused by years of QE, out of control deficit spending, helicopter money and an intentional shutdown of the economy in a response to a pandemic. Prior to 2007 QE had never been tried before. The term in vogue then was “non-traditional monetary policy”. Which is a really nice way of saying we have no idea WTF will happen but we are in a real pickle and we got to try something or were in The Great Depression II. Well many economists warned that QE had consequences. Flash forward 14 years and we are seeing those consequences. I have no idea what the market will do, my best guess is a 40-50% fall from the highs, a moderate to deep recession possibly some really bad stuff. That is why I moved to safety last September and I’m not riding this one down. If I miss some gains, I’m good with it. |
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Post by blustnmtn on Jun 10, 2022 21:44:19 GMT
I think some MMT enthusiasts are getting red pilled.
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Post by walnut on Jun 11, 2022 12:54:35 GMT
I think some MMT enthusiasts are getting red pilled. I'm not a fan, I like real money. But, we have to admit that QE has been running full steam for over 20 years. Inflation did not appear until about last Fall. It was all of the covid stimulus, unrepaid covid loans, and forced covid logistical and supply constraints which have caused inflation IMO. Too much cash. QE had the effect of increasing asset prices artificially, for better or worse.
They are about to pay the bill for all that QE right now. Wasn't this the first month of QT? and the market will unwind to 2020 levels in nominal terms, maybe 2017 levels in real terms.
The cash inflation which we are all complaining about was more fiscal than monetary in nature I think.
Oops- QE was run for 13 or 14 years, don't know where I came up with 20.
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Post by Sigurdur on Jun 11, 2022 16:34:43 GMT
Why we are in serious trouble:
1. Level of National Debt today
2. Service costs of the National Debt, just interest
3. People are soft. Planning ahead for the future has taken a back seat. As so aptly noted earlier, instant gratification.
4. $5.00 for a cup of coffee. $1.50 for bottled water. These are luxuries, yet they fly off the shelf.
5. The current administration which refuses to accept that Fossil Fuels are a necessity.
6. Labor: People just don't really want to work anymore. Only office type jobs, which as a rule consume, don't produce
7. Lack of personal responsibility. Shucks, if I screw up, the government will bail me out.
8. Basement residents who have no concept of fiscal responsibility.
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