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menmon
11-08-2010, 03:48 PM
The Eskimo Bimbo is on the campaign trail bashing quanitative easing (QE) and the Fed Chairman.

First observation is that she doesn't know what QE is nor how it works, and it is obvious she is listening to Glenn Beck who probally does not know how it works but can make big statements about inflation and scare everybody into tuning in and helping him sell ads.

Second observation is that she does not understand the function of the Fed Chairman nor the Federal Reserve, but is telling the people we need to fire him. My guess again is she is listening to Glenn Beck who know everyone is looking for someone to blame and it keeps them tuned in when he tell them how he screwed everything up.

Now I challenge you to prove to me that you more qualified than Eskimo Bimbo to be President.

gman0046
11-08-2010, 04:06 PM
Eskimo Bimbo???? What an intelligent Man. She couldn't do worse then Obongolo. You Sambo are the idiot

menmon
11-08-2010, 04:12 PM
Eskimo Bimbo???? What an intelligent Man. She couldn't do worse then Obongolo. You Sambo are the idiot

Prove it...explain QE and tell me why it is not the right thing for the Fed to do?

Franco
11-08-2010, 04:20 PM
Sambo, are you talking about the Fed's plan to print more money to pay down debt?

road kill
11-08-2010, 04:21 PM
The Eskimo Bimbo is on the campaign trail bashing quanitative easing (QE) and the Fed Chairman.

First observation is that she doesn't know what QE is nor how it works, and it is obvious she is listening to Glenn Beck who probally does not know how it works but can make big statements about inflation and scare everybody into tuning in and helping him sell ads.

Second observation is that she does not understand the function of the Fed Chairman nor the Federal Reserve, but is telling the people we need to fire him. My guess again is she is listening to Glenn Beck who know everyone is looking for someone to blame and it keeps them tuned in when he tell them how he screwed everything up.

Now I challenge you to prove to me that you more qualified than Eskimo Bimbo to be President.

I agree, you are guessing!

Nice name calling....is that page 6??


RK

menmon
11-08-2010, 04:25 PM
Sambo, are you talking about the Fed's plan to print more money to pay down debt?

That is not how it works, but that is what Glenn is telling you. You might be qualified to run as a republican for president. You are clearing unqualified.

menmon
11-08-2010, 04:29 PM
I agree, you are guessing!

Nice name calling....is that page 6??


RK

So are you implying she knows the function of the Fed Chairman and the Federal Reserve?

RT you are a pretty straight shooting guy, so be careful answering this question.

road kill
11-08-2010, 04:42 PM
So are you implying she knows the function of the Fed Chairman and the Federal Reserve?

RK(fixed) you are a pretty straight shooting guy, so be careful answering this question.

I am implying YOU don't.
And to me, that would put you, me, Obama, Biden, Pelosi, Reid and Palin all on the same level in regard to this.

Do you deny money is being printed??


RK

YardleyLabs
11-08-2010, 04:57 PM
Sambo, are you talking about the Fed's plan to print more money to pay down debt?
Quantitative Easing (round 2 or QE2) actually involves "printing more money" to purchase private sector bonds. The theory (right or wrong) is that this will increase liquidity in the credit markets, thereby lowering interest rates, hopefully encouraging lenders to extend more loans, and producing an overall expansion of economic activity. It is not clear to what extent that will happen. It is also possible that lenders will simply use the new cash to purchase more treasury notes instead. Most economists believe that the economy needs additional stimulus. Normally, this would come by reducing the Fed Fund Rate and reduce the cost of the money loaned out by banks. Given that the rate is already almost zero, that arrow has lost its power. In fact, many banks are profiting by borrowing Fed funds at little to no interest and using the funds to buy treasury notes that pay a greater interest. The banks, and their shareholders, profit at the direct expense of taxpayers (sort of high end welfare). The more effective stimulus tool now would be to put money into the pockets of those who would immediately spend it on goods and services rather than use it to pay down debt or add to savings (neither of which does anything to stimulate the economy, even while making sense for the individual). There are two problems with that.

First, the elections have made it highly unlikely that anything further will be done to stimulate the economy, rightly or wrongly.

Second, the assumption implicit in further stimulus efforts is that the downturn is transitory and that spending will increase once the economy returns to "normal". If the downturn simply reflects the reality of what our economy will be if we live within our means, we should be learning to live with the pain rather than thinking of new band aids. We may eventually grow back economically, but it will be based on true increases in productivity and will likely take years.

While many recognize this possibility, no one wants to be the person who tells the American people that current housing prices reflect the real value of their homes and that those prices will remain depressed for years because the boom resulted in over supply. And no one wants the be the person telling the unemployed that they are likely to remain unemployed until American salaries, measured by value of economic output, are more competitive with salaries in other parts of the world.

Our own businesses are sending the jobs they produce to other countries because that is the best way to remain competitive and increase profits. What our own businesses are NOT doing is increasing investments in the US to improve the productivity of American labor. That is the real challenge that government needs to address. Over the next decade, I suspect that immigration will decline not because of improved enforcement, but because America will no longer be such an attractive destination for those wanting jobs. That is a trend that has already started.

PS: I doubt that Palin has the slightest notion of how the Fed operates.

road kill
11-08-2010, 04:59 PM
Quantitative Easing (round 2 or QE2) actually involves "printing more money" to purchase private sector bonds. The theory (right or wrong) is that this will increase liquidity in the credit markets, thereby lowering interest rates, hopefully encouraging lenders to extend more loans, and producing an overall expansion of economic activity. It is not clear to what extent that will happen. It is also possible that lenders will simply use the new cash to purchase more treasury notes instead. Most economists believe that the economy needs additional stimulus. Normally, this would come by reducing the Fed Fund Rate and reduce the cost of the money loaned out by banks. Given that the rate is already almost zero, that arrow has lost its power. In fact, many banks are profiting by borrowing Fed funds at little to no interest and using the funds to buy treasury notes that pay a greater interest. The banks, and their shareholders, profit at the direct expense of taxpayers (sort of high end welfare). The more effective stimulus tool now would be to put money into the pockets of those who would immediately spend it on goods and services rather than use it to pay down debt or add to savings (neither of which does anything to stimulate the economy, even while making sense for the individual). There are two problems with that.

First, the elections have made it highly unlikely that anything further will be done to stimulate the economy, rightly or wrongly.

Second, the assumption implicit in further stimulus efforts is that the downturn is transitory and that spending will increase once the economy returns to "normal". If the downturn simply reflects the reality of what our economy will be if we live within our means, we should be learning to live with the pain rather than thinking of new band aids. We may eventually grow back economically, but it will be based on true increases in productivity and will likely take years.

While many recognize this possibility, no one wants to be the person who tells the American people that current housing prices reflect the real value of their homes and that those prices will remain depressed for years because the boom resulted in over supply. And no one wants the be the person telling the unemployed that they are likely to remain unemployed until American salaries, measured by value of economic output, are more competitive with salaries in other parts of the world.

Our own businesses are sending the jobs they produce to other countries because that is the best way to remain competitive and increase profits. What our own businesses are NOT doing is increasing investments in the US to improve the productivity of American labor. That is the real challenge that government needs to address. Over the next decade, I suspect that immigration will decline not because of improved enforcement, but because America will no longer be such an attractive destination for those wanting jobs. That is a trend that has already started.

PS: I doubt that Palin has the slightest notion of how the Fed operates.

But you do??



RK

Franco
11-08-2010, 05:14 PM
That is not how it works, but that is what Glenn is telling you. You might be qualified to run as a republican for president. You are clearing unqualified.

I never listen to Glen Beck, try again!

So, why don't you tell us how it works?

Franco
11-08-2010, 05:19 PM
Quantitative Easing (round 2 or QE2) actually involves "printing more money" to purchase private sector bonds. The theory (right or wrong) is that this will increase liquidity in the credit markets, thereby lowering interest rates, hopefully encouraging lenders to extend more loans, and producing an overall expansion of economic activity. It is not clear to what extent that will happen. It is also possible that lenders will simply use the new cash to purchase more treasury notes instead. Most economists believe that the economy needs additional stimulus. Normally, this would come by reducing the Fed Fund Rate and reduce the cost of the money loaned out by banks. Given that the rate is already almost zero, that arrow has lost its power. In fact, many banks are profiting by borrowing Fed funds at little to no interest and using the funds to buy treasury notes that pay a greater interest. The banks, and their shareholders, profit at the direct expense of taxpayers (sort of high end welfare). The more effective stimulus tool now would be to put money into the pockets of those who would immediately spend it on goods and services rather than use it to pay down debt or add to savings (neither of which does anything to stimulate the economy, even while making sense for the individual). There are two problems with that.

First, the elections have made it highly unlikely that anything further will be done to stimulate the economy, rightly or wrongly.

Second, the assumption implicit in further stimulus efforts is that the downturn is transitory and that spending will increase once the economy returns to "normal". If the downturn simply reflects the reality of what our economy will be if we live within our means, we should be learning to live with the pain rather than thinking of new band aids. We may eventually grow back economically, but it will be based on true increases in productivity and will likely take years.

While many recognize this possibility, no one wants to be the person who tells the American people that current housing prices reflect the real value of their homes and that those prices will remain depressed for years because the boom resulted in over supply. And no one wants the be the person telling the unemployed that they are likely to remain unemployed until American salaries, measured by value of economic output, are more competitive with salaries in other parts of the world.

Our own businesses are sending the jobs they produce to other countries because that is the best way to remain competitive and increase profits. What our own businesses are NOT doing is increasing investments in the US to improve the productivity of American labor. That is the real challenge that government needs to address. Over the next decade, I suspect that immigration will decline not because of improved enforcement, but because America will no longer be such an attractive destination for those wanting jobs. That is a trend that has already started.

PS: I doubt that Palin has the slightest notion of how the Fed operates.

I agree with you on Palin.

I've never seen interest rates this low in my life! 4.5%arp for one's primary residence.

Low interest rates are good but what we really need to work on is reducing debt and I've never seen where printing more money will accomplish that.

YardleyLabs
11-08-2010, 05:29 PM
I agree with you on Palin.

I've never seen interest rates this low in my life! 4.5%arp for one's primary residence.

Low interest rates are good but what we really need to work on is reducing debt and I've never seen where printing more money will accomplish that.
On the balance sheet, it has no impact. To the extent that the bonds purchased pay higher yields than the treasury notes used to buy them, the investments could actually produce a profit. However, the Fed's objective in these transactions would be to remain neutral -- that is, to earn no more than they pay. The low interest rates are a direct product of these actions, but ultimately what goes down will come back up again.

dnf777
11-08-2010, 05:42 PM
Second, the assumption implicit in further stimulus efforts is that the downturn is transitory and that spending will increase once the economy returns to "normal". If the downturn simply reflects the reality of what our economy will be if we live within our means, we should be learning to live with the pain rather than thinking of new band aids. We may eventually grow back economically, but it will be based on true increases in productivity and will likely take years.

PS: I doubt that Palin has the slightest notion of how the Fed operates.


Thanks for the lecture in a nutshell. I've spent hours in an economics class and not had that explained as succinctly as the above. But what productivity do you foresee recovering in America? Surely not manufacturing. (sorry to call you Shirley) Can economic and banking services provide enough jobs to mount a full recovery? It takes more factory workers to make a lightbulb, than accountants to change one! (I think)

It seems that our economy is evolving into a ruling royalty class of corporate executives who oversee their overseas production facilities....and the rest of us take care of them and their needs, filling a limited number of jobs in the process.

As for your comment about Palin...that would be the ONLY thing she and I have in common. :(

sandyg
11-08-2010, 05:54 PM
Quantitative Easing (round 2 or QE2) actually involves "printing more money" to purchase private sector bonds. The theory (right or wrong) is that this will increase liquidity in the credit markets, thereby lowering interest rates, hopefully encouraging lenders to extend more loans, and producing an overall expansion of economic activity. It is not clear to what extent that will happen. It is also possible that lenders will simply use the new cash to purchase more treasury notes instead. Most economists believe that the economy needs additional stimulus. Normally, this would come by reducing the Fed Fund Rate and reduce the cost of the money loaned out by banks. Given that the rate is already almost zero, that arrow has lost its power. In fact, many banks are profiting by borrowing Fed funds at little to no interest and using the funds to buy treasury notes that pay a greater interest. The banks, and their shareholders, profit at the direct expense of taxpayers (sort of high end welfare). The more effective stimulus tool now would be to put money into the pockets of those who would immediately spend it on goods and services rather than use it to pay down debt or add to savings (neither of which does anything to stimulate the economy, even while making sense for the individual). There are two problems with that.

First, the elections have made it highly unlikely that anything further will be done to stimulate the economy, rightly or wrongly.

Second, the assumption implicit in further stimulus efforts is that the downturn is transitory and that spending will increase once the economy returns to "normal". If the downturn simply reflects the reality of what our economy will be if we live within our means, we should be learning to live with the pain rather than thinking of new band aids. We may eventually grow back economically, but it will be based on true increases in productivity and will likely take years.

While many recognize this possibility, no one wants to be the person who tells the American people that current housing prices reflect the real value of their homes and that those prices will remain depressed for years because the boom resulted in over supply. And no one wants the be the person telling the unemployed that they are likely to remain unemployed until American salaries, measured by value of economic output, are more competitive with salaries in other parts of the world.

Our own businesses are sending the jobs they produce to other countries because that is the best way to remain competitive and increase profits. What our own businesses are NOT doing is increasing investments in the US to improve the productivity of American labor. That is the real challenge that government needs to address. Over the next decade, I suspect that immigration will decline not because of improved enforcement, but because America will no longer be such an attractive destination for those wanting jobs. That is a trend that has already started.

PS: I doubt that Palin has the slightest notion of how the Fed operates.

Thanks, Cliff Clavin. You are truly an erudite person. Unfortunately you are also a know-it-all.

"Most people who suffer from the know-it-all syndrome—whether a Webster who actually knows what he's talking about or merely a Clavin who pretends to know—have one personality trait in common: narcissism. Hiding behind the need to let the world know exactly how smart, how funny, how interesting or how great they are, is the need to convince themselves of their own value. All know-it-alls suffer from a lack of self-esteem, and what they seek, through their tireless attempts to impress, is usually approval and validation. As a result, the know-it-all usually chooses to surround herself with friends and mates who are appreciative—and maybe even admiring—of his "knowledge." AKA dnf777.
Exercise patience and avoid encouraging a interminable flow of information and remember there is a little Clavin in all of us, in a sense that we all need to be listened to..."

menmon
11-08-2010, 06:04 PM
I am implying YOU don't.
And to me, that would put you, me, Obama, Biden, Pelosi, Reid and Palin all on the same level in regard to this.

Do you deny money is being printed??


RK

Yes I'm dening that money is being printed. What is happening is T-bonds are being purchased with money from the treasury which adds money to the money supply. When the government issues bonds it takes money from the money supply. Last I looked, the government has been issuing equally as many bonds or more.

So big broad statements of printing money and causing inflation are not correct. Too much money in the money supply is inflationary but that is not mutually exclusive..too little is just as bad. Look at what the dollar is doing today and ask why. It is all relative to the rest of the world. You guys have been shouting inflation since President Obama (I didn't use one of those nice names yall do) took office and you have not got it right yet. But since we are on the subject of inflation, please look back at CPI and PPI for the last year of the past administration. See keeping the fed funds rate low when the enconomy is on fire creates inflation. Right now they can't lower it enough.

Now what I want you guys to agree on is the definition of a monterist. This is monetary policy at it finest. Albeit every republican president in my lifetime have been Keynesians.

menmon
11-08-2010, 06:09 PM
Quantitative Easing (round 2 or QE2) actually involves "printing more money" to purchase private sector bonds. The theory (right or wrong) is that this will increase liquidity in the credit markets, thereby lowering interest rates, hopefully encouraging lenders to extend more loans, and producing an overall expansion of economic activity. It is not clear to what extent that will happen. It is also possible that lenders will simply use the new cash to purchase more treasury notes instead. Most economists believe that the economy needs additional stimulus. Normally, this would come by reducing the Fed Fund Rate and reduce the cost of the money loaned out by banks. Given that the rate is already almost zero, that arrow has lost its power. In fact, many banks are profiting by borrowing Fed funds at little to no interest and using the funds to buy treasury notes that pay a greater interest. The banks, and their shareholders, profit at the direct expense of taxpayers (sort of high end welfare). The more effective stimulus tool now would be to put money into the pockets of those who would immediately spend it on goods and services rather than use it to pay down debt or add to savings (neither of which does anything to stimulate the economy, even while making sense for the individual). There are two problems with that.

First, the elections have made it highly unlikely that anything further will be done to stimulate the economy, rightly or wrongly.

Second, the assumption implicit in further stimulus efforts is that the downturn is transitory and that spending will increase once the economy returns to "normal". If the downturn simply reflects the reality of what our economy will be if we live within our means, we should be learning to live with the pain rather than thinking of new band aids. We may eventually grow back economically, but it will be based on true increases in productivity and will likely take years.

While many recognize this possibility, no one wants to be the person who tells the American people that current housing prices reflect the real value of their homes and that those prices will remain depressed for years because the boom resulted in over supply. And no one wants the be the person telling the unemployed that they are likely to remain unemployed until American salaries, measured by value of economic output, are more competitive with salaries in other parts of the world.

Our own businesses are sending the jobs they produce to other countries because that is the best way to remain competitive and increase profits. What our own businesses are NOT doing is increasing investments in the US to improve the productivity of American labor. That is the real challenge that government needs to address. Over the next decade, I suspect that immigration will decline not because of improved enforcement, but because America will no longer be such an attractive destination for those wanting jobs. That is a trend that has already started.

PS: I doubt that Palin has the slightest notion of how the Fed operates.

You have my vote for president!

However, printing money is just saying they are adding money to the money supply and that is done with the monetary base, different that the money supply.

menmon
11-08-2010, 06:13 PM
I never listen to Glen Beck, try again!

So, why don't you tell us how it works?

See by the goverment buying a bond from you they give you dollars so that adds to the money supply. Now when they sell you a bond, they take money out of the system.

So think about how easy it is to take this moeny out. All they have to do is turn around and sell you bonds.

The risk here is that when the economy heats up that they want remove it by selling bonds.

menmon
11-08-2010, 06:21 PM
Thanks, Cliff Clavin. You are truly an erudite person. Unfortunately you are also a know-it-all.

"Most people who suffer from the know-it-all syndrome—whether a Webster who actually knows what he's talking about or merely a Clavin who pretends to know—have one personality trait in common: narcissism. Hiding behind the need to let the world know exactly how smart, how funny, how interesting or how great they are, is the need to convince themselves of their own value. All know-it-alls suffer from a lack of self-esteem, and what they seek, through their tireless attempts to impress, is usually approval and validation. As a result, the know-it-all usually chooses to surround herself with friends and mates who are appreciative—and maybe even admiring—of his "knowledge." AKA dnf777.
Exercise patience and avoid encouraging a interminable flow of information and remember there is a little Clavin in all of us, in a sense that we all need to be listened to..."

I'm not on your hit list, but my goal is to show at least one blind follower a day that Glenn Beck is not their savior and to think for themselves.

See you definition is so wrong when you talk to field trialers. We are people that enjoy losing. Some one that plays this game can't need to win, because might be years coming. But it feels really good when it happens!!!!!

road kill
11-08-2010, 07:04 PM
Yes I'm dening that money is being printed. .


However, printing money is just saying they are adding money to the money supply and that is done with the monetary base, different that the money supply.

Ambiguous, are they printing money or not??

Yardley says yes and he know everything!!!


RK

Buzz
11-08-2010, 07:57 PM
You asked what the job of the fed is. No one answered you, so I went and cribbed off of them:


Today, the Federal Reserve’s duties fall into four general areas:

•conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates

•supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers

•maintaining the stability of the financial system and containing systemic risk that may arise in financial markets

•providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system

They haven't done such a great job in certain areas, and I think that our last chairman admitted that to congress.

For the fools that think that the risk right now is inflation, I wonder what they think of this curve? It's a trace of Japan's fall into deflation with the US situation superimposed over it. Glenn Beck and Sara Palin are dangerous. Sambo, your title says thank God our system protects us from idiots. I'm not as sure about that as you seem to be. How much you wanna bet that Sara Palin will be our next president? How about a nice dinner? I'll be happy to buy if I'm wrong.

http://www.princeton.edu/~pkrugman/deflation_us_j.gif

caryalsobrook
11-08-2010, 07:59 PM
Quantitative Easing (round 2 or QE2) actually involves "printing more money" to purchase private sector bonds. The theory (right or wrong) is that this will increase liquidity in the credit markets, thereby lowering interest rates, hopefully encouraging lenders to extend more loans, and producing an overall expansion of economic activity. It is not clear to what extent that will happen. It is also possible that lenders will simply use the new cash to purchase more treasury notes instead. Most economists believe that the economy needs additional stimulus. Normally, this would come by reducing the Fed Fund Rate and reduce the cost of the money loaned out by banks. Given that the rate is already almost zero, that arrow has lost its power. In fact, many banks are profiting by borrowing Fed funds at little to no interest and using the funds to buy treasury notes that pay a greater interest. The banks, and their shareholders, profit at the direct expense of taxpayers (sort of high end welfare). The more effective stimulus tool now would be to put money into the pockets of those who would immediately spend it on goods and services rather than use it to pay down debt or add to savings (neither of which does anything to stimulate the economy, even while making sense for the individual). There are two problems with that.

First, the elections have made it highly unlikely that anything further will be done to stimulate the economy, rightly or wrongly.

Second, the assumption implicit in further stimulus efforts is that the downturn is transitory and that spending will increase once the economy returns to "normal". If the downturn simply reflects the reality of what our economy will be if we live within our means, we should be learning to live with the pain rather than thinking of new band aids. We may eventually grow back economically, but it will be based on true increases in productivity and will likely take years.

While many recognize this possibility, no one wants to be the person who tells the American people that current housing prices reflect the real value of their homes and that those prices will remain depressed for years because the boom resulted in over supply. And no one wants the be the person telling the unemployed that they are likely to remain unemployed until American salaries, measured by value of economic output, are more competitive with salaries in other parts of the world.

Our own businesses are sending the jobs they produce to other countries because that is the best way to remain competitive and increase profits. What our own businesses are NOT doing is increasing investments in the US to improve the productivity of American labor. That is the real challenge that government needs to address. Over the next decade, I suspect that immigration will decline not because of improved enforcement, but because America will no longer be such an attractive destination for those wanting jobs. That is a trend that has already started.

PS: I doubt that Palin has the slightest notion of how the Fed operates.

you are right to say that by the FED buying treasury notes, the primary goal is to increase siquidity and thereby lower interest rates, making borrowing for investment more attractive. That is probably the only reason to take such an action during a recession, but alas, the interest rate is for all intent and purposes and still we have no investment and corresponding growth. WHY?? Could it be that investors are unwilling to borrow or invest is the political climate of today? With a 2000 page healthcare bill which no one knows the cost(surely you will accept the fact that all econimic forcasts are highly speculative (President Obama said that the American public would see their healthcare premiums go down but they have gone up at least 20% since the bill was passed). With a finantial reform bill of at least 2000 pages which Obama said that credit card interest and fees would go down(Credit card interest went up 11% after the bill passed). With a stimulus bill that he said had to be passed or unemployment would go up to 8.5%(now 9.6% and that does not count those who are no longer looking for a job), is it not understandable that no investors would be willing to expand their business. Why would you thnk that there would be increased investment by increasing the money supply would increase investment if the effective interest rate is alreade near 0%? If investors are unwilling to borrow and expand because of the massive uncertainty caused by the government. If the is no increase in investment and a corresponding economic growth, would you not expect to see more dollars chasing the available goods and services and as a result an increase in inflation?? I don't think you have to look very far to find the answer. You like statistics so I will give you some. Gold up around $100.00 per ounce since the the FED announcement. Soybeans up about $0.50 per bushel since. Crude oin up 11.5%. Corn up about $0.20 per bushel. Silver up at least $3.00 per ounce. What does that tell you about investment and what does that tell you about what will happen to interest rates befor there is any real investment?
Today Federal Governmentspending aproaches 15% of GDP, almost as high as it was during WWII but at that time people understood that the very existence ofthe country was at risk and were willing to tolerate rationing using coupons.

Germany tried to expand their money supply to pay reparations to England and France but the only thing the got was a currency that no one would accept as a medium of exchange for goods and services. FDR tried it to a lesser extent along with increased taxes and protectionism and we had a depression of almost 15 years.
Unfortunately if we continue with this political and economic policy, 15 years of depression will look good compared to what happened to Germany. I sincerely hope I am wrong.

Franco
11-08-2010, 08:26 PM
you are right to say that by the FED buying treasury notes, the primary goal is to increase siquidity and thereby lower interest rates, making borrowing for investment more attractive. That is probably the only reason to take such an action during a recession, but alas, the interest rate is for all intent and purposes and still we have no investment and corresponding growth. WHY?? Could it be that investors are unwilling to borrow or invest is the political climate of today? With a 2000 page healthcare bill which no one knows the cost(surely you will accept the fact that all econimic forcasts are highly speculative (President Obama said that the American public would see their healthcare premiums go down but they have gone up at least 20% since the bill was passed). With a finantial reform bill of at least 2000 pages which Obama said that credit card interest and fees would go down(Credit card interest went up 11% after the bill passed). With a stimulus bill that he said had to be passed or unemployment would go up to 8.5%(now 9.6% and that does not count those who are no longer looking for a job), is it not understandable that no investors would be willing to expand their business. Why would you thnk that there would be increased investment by increasing the money supply would increase investment if the effective interest rate is alreade near 0%? If investors are unwilling to borrow and expand because of the massive uncertainty caused by the government. If the is no increase in investment and a corresponding economic growth, would you not expect to see more dollars chasing the available goods and services and as a result an increase in inflation?? I don't think you have to look very far to find the answer. You like statistics so I will give you some. Gold up around $100.00 per ounce since the the FED announcement. Soybeans up about $0.50 per bushel since. Crude oin up 11.5%. Corn up about $0.20 per bushel. Silver up at least $3.00 per ounce. What does that tell you about investment and what does that tell you about what will happen to interest rates befor there is any real investment?
Today Federal Governmentspending aproaches 15% of GDP, almost as high as it was during WWII but at that time people understood that the very existence ofthe country was at risk and were willing to tolerate rationing using coupons.

Germany tried to expand their money supply to pay reparations to England and France but the only thing the got was a currency that no one would accept as a medium of exchange for goods and services. FDR tried it to a lesser extent along with increased taxes and protectionism and we had a depression of almost 15 years.
Unfortunately if we continue with this political and economic policy, 15 years of depression will look good compared to what happened to Germany. I sincerely hope I am wrong.

Interesting observations.

I agree that the climate for major investments has never been worse. Major corporations have lost trust in our leadership, both sides of the isle. The smaller businesses are scared too and that is where many new jobs are created.

The old saying that Cash Is King may have passed with time. Put a bullet in me because that will always be my mantra! Seems like the only buisnesses and indivudals benefiting in today's economy are those that owe large chucks of money and can't pay it back! Therein lies the problem. I also agree with you that inflation is inevitable if we continue on the same course of mismangement.

The Fed's new proposed Shell Game is just that, a shell game and not a viable solution. More big government gone wild.

Buzz
11-08-2010, 08:29 PM
All the prices you mentioned are commodity prices. Here are commodity prices over time, they are extremely volatile.

http://www.princeton.edu/~pkrugman/commodity.PNG


If you believe that hyper inflation is around the corner, you should be borrowing every penny you can latch on to and spend it like a drunken sailor.

Large corporations are sitting on HUGE, I mean f'ing HUGE cash reserves.

If they thought that hyper inflation was around the corner, do you think they would be stupid enough to do that? Do you think that saving in an extremely inflationary environment is a good idea?

Franco
11-08-2010, 08:35 PM
If you believe that hyper inflation is around the corner, you should be borrowing every penny you can latch on to and spend it like a drunken sailor.



Why?

That would be the conditions under which I would cutoff all unneeded spending.

That is exactly the mindset in DC and the reason we have the economic problems we have. Big Gov has been spending money like drunken sailors, allowing Wall St to legally steal from tax payers, idiots & crooks in charge of the Fed and other gov institutions. No one in power either knows what the tough decisions are or they are too weak to make them!

Buzz
11-08-2010, 08:42 PM
Why?

That would be the conditions under which I would cutoff all unneeded spending.

Because it would be the 1 chance in your lifetime to screw the banker. He's gonna lose has arse, and you're going to pay an effective negative rate on those loans. If you're smart enough to get a fixed rate that is... ;-)

Franco
11-08-2010, 08:49 PM
Because it would be the 1 chance in your lifetime to screw the banker. He's gonna lose has arse, and you're going to pay an effective negative rate on those loans. If you're smart enough to get a fixed rate that is... ;-)

A business looking at a long term loan, fixed interest as you state, that's fine.

But for individuals, it is a disaster. Refinance you home at 4.5 APR but buy everything else with cash. Screw the Credit Card Companies and all the other money users/changers. Close your accounts and don't use short term credit!

Buzz
11-08-2010, 09:04 PM
A business looking at a long term loan, fixed interest as you state, that's fine.

But for individuals, it is a disaster. Refinance you home at 4.5 APR but buy everything else with cash. Screw the Credit Card Companies and all the other money users/changers. Close your accounts and don't use short term credit!

I didn't mean use credit cards, I meant fixed rate credit.

I use cards, but I don't carry balances...

depittydawg
11-08-2010, 09:04 PM
Interesting observations.

I agree that the climate for major investments has never been worse. Major corporations have lost trust in our leadership, both sides of the isle. The smaller businesses are scared too and that is where many new jobs are created.

The old saying that Cash Is King may have passed with time. Put a bullet in me because that will always be my mantra! Seems like the only buisnesses and indivudals benefiting in today's economy are those that owe large chucks of money and can't pay it back! Therein lies the problem. I also agree with you that inflation is inevitable if we continue on the same course of mismangement.

The Fed's new proposed Shell Game is just that, a shell game and not a viable solution. More big government gone wild.

I don't think political leadership has anything to do with investment. Their are many reasons investment is low in the US. Not the least of which is demand is diminishing. It has nothing to do with debt instruments. It has to do with wages. The fed, the administration, and congress are all barking up the wrong tree. The supply of money in the US is not the problem. It is all about DEMAND. Which equals JOBS and middle class wages.

caryalsobrook
11-08-2010, 09:11 PM
All the prices you mentioned are commodity prices. Here are commodity prices over time, they are extremely volatile.

http://www.princeton.edu/~pkrugman/commodity.PNG


If you believe that hyper inflation is around the corner, you should be borrowing every penny you can latch on to and spend it like a drunken sailor.

Large corporations are sitting on HUGE, I mean f'ing HUGE cash reserves.

If they thought that hyper inflation was around the corner, do you think they would be stupid enough to do that? Do you think that saving in an extremely inflationary environment is a good idea?

If you think investors aresitting on their cash then why are there these record highs in commodities?? For the most part HUGE RECORD HIGHS!! I didn't mention cotton -$1.49 a pound and I don'tthink that I have seen it over a $1.00 a pound in my lifetime. All the commodities are at record highs for the most part and most of them ar at record highs. You are right they do fluctuate but not to such record highs and as I said huge record highs. Silver was less that $10.00 an ounce when Obama came to office which was quite high now it is over $26.00 an ounce. Just trying to put perspective on it. Also when there is inflation then commodities is the first place it shows up.. Maybe Paul Volker will live long enough to come back as head of the FED and institute 20 plus interest rates again. If I had borrowed money before that, I would probably have been broke now. Glad I didn't take your advice and borrow a lot of money then.

Buzz
11-09-2010, 10:38 AM
If you think investors aresitting on their cash then why are there these record highs in commodities?? For the most part HUGE RECORD HIGHS!! I didn't mention cotton -$1.49 a pound and I don'tthink that I have seen it over a $1.00 a pound in my lifetime. All the commodities are at record highs for the most part and most of them ar at record highs. You are right they do fluctuate but not to such record highs and as I said huge record highs. Silver was less that $10.00 an ounce when Obama came to office which was quite high now it is over $26.00 an ounce. Just trying to put perspective on it. Also when there is inflation then commodities is the first place it shows up.. Maybe Paul Volker will live long enough to come back as head of the FED and institute 20 plus interest rates again. If I had borrowed money before that, I would probably have been broke now. Glad I didn't take your advice and borrow a lot of money then.

I figured I may as well post the links up here that I sent you this morning by PM. I thought it was interesting that I ran across them in the print edition of "The Economist" that I got in my mailbox yesterday just after we had this discussion online. I doubt there will be any interest among commenters here on POTUS, but you never know. I'll also include a paragraph from one:


So why is gold, a classic anti-inflation hedge, still doing so well? The answer to this enduring puzzle may lie in the level of real interest rates. As Chris Watling of Longview Economics points out, gold’s last great bull run was in the 1970s, when real yields were negative. Positive real rates in the 1980s and 1990s had bullion trading sideways for 20 years. In a world of negative yields, owning gold has no opportunity cost.



The Fed's big announcement
Down the slipway
“Quantitative easing” is unloved and unappreciated—but it is working

http://www.economist.com/node/17417742


Buttonwood
Accentuate the negative
A very unusual sign of confidence in economic policy

http://www.economist.com/node/17420106

menmon
11-09-2010, 10:54 AM
Ambiguous, are they printing money or not??

Yardley says yes and he know everything!!!


RK

The treasury prints money everyday as they take old money out of circulation. The truth is we probablly have less printed dollars today than we had 10 years ago because of the increased velocity of money...ACH, Wires, Debt Cards...etc.

But back to your question, no they are not printing money. They are buying up debt with money they have already borrowed which they had taken out of the monetary base when they issued the debt thus strengthening the dollar based on dollars to the overall basket of goods. Now by buying debt with money they had borrowed puts more money into the monetary base. The money supply is then determined by the velocity of money.

Long in short of it is a weak dollar increase exports but hurts imports. But I think to create jobs exports are good, but its a fine line because we are so depended on other countries resources.

I agree with the feds actions here and enjoy the run in gold but be carefull because at some point they will take this money out and tighen interest rates and your precious gold will tarnish. It's going to be awhile but pay attention.

menmon
11-09-2010, 10:59 AM
you are right to say that by the FED buying treasury notes, the primary goal is to increase siquidity and thereby lower interest rates, making borrowing for investment more attractive. That is probably the only reason to take such an action during a recession, but alas, the interest rate is for all intent and purposes and still we have no investment and corresponding growth. WHY?? Could it be that investors are unwilling to borrow or invest is the political climate of today? With a 2000 page healthcare bill which no one knows the cost(surely you will accept the fact that all econimic forcasts are highly speculative (President Obama said that the American public would see their healthcare premiums go down but they have gone up at least 20% since the bill was passed). With a finantial reform bill of at least 2000 pages which Obama said that credit card interest and fees would go down(Credit card interest went up 11% after the bill passed). With a stimulus bill that he said had to be passed or unemployment would go up to 8.5%(now 9.6% and that does not count those who are no longer looking for a job), is it not understandable that no investors would be willing to expand their business. Why would you thnk that there would be increased investment by increasing the money supply would increase investment if the effective interest rate is alreade near 0%? If investors are unwilling to borrow and expand because of the massive uncertainty caused by the government. If the is no increase in investment and a corresponding economic growth, would you not expect to see more dollars chasing the available goods and services and as a result an increase in inflation?? I don't think you have to look very far to find the answer. You like statistics so I will give you some. Gold up around $100.00 per ounce since the the FED announcement. Soybeans up about $0.50 per bushel since. Crude oin up 11.5%. Corn up about $0.20 per bushel. Silver up at least $3.00 per ounce. What does that tell you about investment and what does that tell you about what will happen to interest rates befor there is any real investment?
Today Federal Governmentspending aproaches 15% of GDP, almost as high as it was during WWII but at that time people understood that the very existence ofthe country was at risk and were willing to tolerate rationing using coupons.

Germany tried to expand their money supply to pay reparations to England and France but the only thing the got was a currency that no one would accept as a medium of exchange for goods and services. FDR tried it to a lesser extent along with increased taxes and protectionism and we had a depression of almost 15 years.
Unfortunately if we continue with this political and economic policy, 15 years of depression will look good compared to what happened to Germany. I sincerely hope I am wrong.

Most of what you just mentioned is why to be long this market. Obviously the smart money is not concerned about the reasons you just mentioned. Please quit listening to the political side of this because they all have agendas that are so for from reality.

menmon
11-09-2010, 11:00 AM
Why?

That would be the conditions under which I would cutoff all unneeded spending.

That is exactly the mindset in DC and the reason we have the economic problems we have. Big Gov has been spending money like drunken sailors, allowing Wall St to legally steal from tax payers, idiots & crooks in charge of the Fed and other gov institutions. No one in power either knows what the tough decisions are or they are too weak to make them!

Wrong answer!

Borrow with rich dollars and pay it back with cheap.

Buzz
11-09-2010, 11:16 AM
Mike, congrats on Sam's 2nd in the 100+ dog open at Metro.:cool:

menmon
11-09-2010, 11:20 AM
I don't think political leadership has anything to do with investment. Their are many reasons investment is low in the US. Not the least of which is demand is diminishing. It has nothing to do with debt instruments. It has to do with wages. The fed, the administration, and congress are all barking up the wrong tree. The supply of money in the US is not the problem. It is all about DEMAND. Which equals JOBS and middle class wages.

Government can only make jobs immediately by spending money. They can encourage spending with lower interest rates and tax cuts but that is not necessarily immediate.

Example: I could put $100 in Sara Palins G-String and the next day it buys a pair of shoes and the shoe merchant makes $50 and then pays his wholesaler that make $25 dollars and then the wholesaler pays the leather company that makes $12.50 and the cowboy makes $6.25.

Taxes then get payed on $93.75 at 35% so the fed gets $32.81 back. That is how it works and works well. So many of our jobs are the result of government spending. Now if you cut taxes, they have less to spend so they have to cut spending, which eliminates jobs, but maybe makes a few somewhere else as long and who got the savings spends.

Low interest rates lower debt cost and give people more money to spend as long as they don't cause other varibles cost to increase.

Our problem right now is that we had been employing many buy building houses and commercial buildings. That has stopped and until this market digest the surplus, these jobs are not coming back and the people displaced are going to struggle to find work and probablly need to recreate their skills. Right now based on our current real estate portfolio here at my bank, my guess is that it needs 2 more years to get on solid footing and then maybe 2 more years before any notable new constrution will occur and Houston is the least damaged by this fallout. The truth sucks and no polititian can fix it.

We have a president that feels the pain and knows that now is not the time to cut spending and providing assistance with unemployment insurance buys time for people to recreate their skills, and yes there is abuse but not near as much as you think. Their is a lot of people hurting and we all enjoyed the last 20 years but now we paying up and some are more than others. So it makes me sick when I listen to some spin doctor spin the blame at people that are trying to help and it makes me sicker when those than are more fortunate don't get it or better yet ignore it.

menmon
11-09-2010, 11:23 AM
Mike, congrats on Sam's 2nd in the 100+ dog open at Metro.:cool:

Dave thanks!!! I'm still high as a kite!!! Sam has put all together and I'm looking forward to 2011!

Roger Perry
11-09-2010, 11:41 AM
Eskimo Bimbo???? What an intelligent Man. She couldn't do worse then Obongolo. You Sambo are the idiot

Look, the pot calling the kettle black:rolleyes:

Cody Covey
11-09-2010, 11:59 AM
Look, the pot calling the kettle black:rolleyes:

Thats racist :)

Roger Perry
11-09-2010, 02:07 PM
Thats racist :)

What? little black sambo:confused:

menmon
11-09-2010, 02:51 PM
What? little black sambo:confused:

Sam and Bo both are yellow;)

road kill
11-09-2010, 04:33 PM
.

Example: I could put $100 in Barney Franks G-String and the next day it buys a pair of shoes and the shoe merchant makes $50 and then pays his wholesaler that make $25 dollars and then the wholesaler pays the leather company that makes $12.50 and the cowboy makes $6.25.

Taxes then get payed on $93.75 at 35% so the fed gets $32.81 back. That is how it works and works well. So many of our jobs are the result of government spending. Now if you cut taxes, they have less to spend so they have to cut spending, which eliminates jobs, but maybe makes a few somewhere else as long and who got the savings spends.

Low interest rates lower debt cost and give people more money to spend as long as they don't cause other varibles cost to increase.

Our problem right now is that we had been employing many buy building houses and commercial buildings. That has stopped and until this market digest the surplus, these jobs are not coming back and the people displaced are going to struggle to find work and probablly need to recreate their skills. Right now based on our current real estate portfolio here at my bank, my guess is that it needs 2 more years to get on solid footing and then maybe 2 more years before any notable new constrution will occur and Houston is the least damaged by this fallout. The truth sucks and no polititian can fix it.

We have a president that feels the pain and knows that now is not the time to cut spending and providing assistance with unemployment insurance buys time for people to recreate their skills, and yes there is abuse but not near as much as you think. Their is a lot of people hurting and we all enjoyed the last 20 years but now we paying up and some are more than others. So it makes me sick when I listen to some spin doctor spin the blame at people that are trying to help and it makes me sicker when those than are more fortunate don't get it or better yet ignore it.

FIXED!!!;-)


RK

menmon
11-09-2010, 04:59 PM
FIXED!!!;-)


RK

Funny!!!!!

Franco
11-09-2010, 07:26 PM
Wrong answer!

Borrow with rich dollars and pay it back with cheap.


Of course you would say wrong answer, you are in the business of lending money!

Money has been cheap for most of this decade and look what it has done to housing in many parts of the country.

Oh, an congrats on the Open fouth in a large trial, I know the feeling.;-)

luvmylabs23139
11-09-2010, 07:55 PM
Why the heck should the gov't get any of the money?? Give me one good reason.
Redistribution of wealth= theft is not a good answer.

JDogger
11-09-2010, 08:10 PM
Why the heck should the gov't get any of the money?? Give me one good reason.
Redistribution of wealth= theft is not a good answer.

Luvy... you do drive on the Interstate system somewhere don't you? You want the Gov to fight the terrorists there, rather than here, don't you?
So just Imagine ... thats where yer money goes. :rolleyes:
I know mine goes many places I don't agree with.
Try to lighten up a little...try to forget that at one time you lived in a bad situation. You don't anymore. It's not worth the apoplexy.

JD

menmon
11-10-2010, 10:27 AM
Of course you would say wrong answer, you are in the business of lending money!

Money has been cheap for most of this decade and look what it has done to housing in many parts of the country.

Oh, an congrats on the Open fouth in a large trial, I know the feeling.;-)

Thanks! It was a Open Second though.

menmon
11-10-2010, 10:44 AM
Why the heck should the gov't get any of the money?? Give me one good reason.
Redistribution of wealth= theft is not a good answer.

Let's spend a minute on redistribution of weath. If everyone could keep everything they earned, in a very short time only a few would have all the wealth. Furthermore, many of the things we enjoy would not exist because no one would pay for them because the cost of interstare hwy, airports, military are so massive that people would not build them. The system is set of progressivly because the higher earners use these public works more that the lower income earners. Sounds fair. Obviously being able to keep more of ones earnings is a good thing. However, most of us don't see any direct benefit, so it angers us when we see someone else get it. However, we see it inderectly when we purchase food that came from farmers that received assistance, jobs that were created from that assistance, money spent on things that created more jobs from that assitance. Most times it does not seem fair.

It is like running field trials. Many times you get bad breaks given the time your dog runs, wind changes, poor visability, etc., but the judges do their best to make it fair. However, if you play enough, you will get some of the lucky breaks.

This is how you need to look at it. Someone down on their luck is getting help with your tax dollars, but there might come a time, hopefully not, that you need a hand.

Franco
11-10-2010, 11:39 AM
Thanks! It was a Open Second though.

Oops, I meant 2nd place. Ours was a second place in a 110 dog Open(Special) at N Dakota a couple of Summers ago. I just wish the dog didn't have a bad hip and retired early.

menmon
11-10-2010, 11:49 AM
Oops, I meant 2nd place. Ours was a second place in a 110 dog Open(Special) at N Dakota a couple of Summers ago. I just wish the dog didn't have a bad hip and retired early.

That is hard part about this game. They finally get it all together and then the injuries start happening. But given what we put them through, I'm suprised there aren't more injuries.

Thanks for the kudos! I'm still on cloud nine!

Buzz
11-19-2010, 05:38 PM
Knowing how much Hew loves him some Paul Krugman, I figured I'd throw some red meat out there for him.:)


http://www.nytimes.com/2010/11/19/opinion/19krugman.html?partner=rss&emc=rss&src=ig



Republicans, however, will have none of it, raising objections that range from the odd to the incoherent.

The odd: on Monday, a somewhat strange group of Republican figures — who knew that William Kristol was an expert on monetary policy? — released an open letter to the Fed warning that its policies “risk currency debasement and inflation.” These concerns were echoed in a letter the top four Republicans in Congress sent Mr. Bernanke on Wednesday. Neither letter explained why we should fear inflation when the reality is that inflation keeps hitting record lows.

And about dollar debasement: leaving aside the fact that a weaker dollar actually helps U.S. manufacturing, where were these people during the previous administration? The dollar slid steadily through most of the Bush years, a decline that dwarfs the recent downtick. Why weren’t there similar letters demanding that Alan Greenspan, the Fed chairman at the time, tighten policy?

Meanwhile, the incoherent: Two Republicans, Mike Pence in the House and Bob Corker in the Senate, have called on the Fed to abandon all efforts to achieve full employment and focus solely on price stability. Why? Because unemployment remains so high. No, I don’t understand the logic either.

So what’s really motivating the G.O.P. attack on the Fed? Mr. Bernanke and his colleagues were clearly caught by surprise, but the budget expert Stan Collender predicted it all. Back in August, he warned Mr. Bernanke that “with Republican policy makers seeing economic hardship as the path to election glory,” they would be “opposed to any actions taken by the Federal Reserve that would make the economy better.” In short, their real fear is not that Fed actions will be harmful, it is that they might succeed.

Hence the axis of depression. No doubt some of Mr. Bernanke’s critics are motivated by sincere intellectual conviction, but the core reason for the attack on the Fed is self-interest, pure and simple. China and Germany want America to stay uncompetitive; Republicans want the economy to stay weak as long as there’s a Democrat in the White House.

And if Mr. Bernanke gives in to their bullying, they may all get their wish.



And what do the Chinese do? Can you imagine them making a move to keep their currency value down in relationship with the US dollar? Say it isn't so.



HONG KONG — China’s central bank unexpectedly announced on Friday night that it would require commercial banks to set aside a bit more money. It was the second such move by Beijing this month and the clearest sign yet that China means to counter the Federal Reserve’s monetary easing in the United States.

A Bank of China branch in Beijing. The government has ordered commercial banks to set aside more reserves.

Commercial banks were ordered to transfer an additional 0.5 percent of their assets by Nov. 29 to very low-yielding accounts at the central bank, the People’s Bank of China. The central bank relies mainly on these reserves for the renminbi it requires to buy about $1 billion a day worth of dollars, euros and other currencies — purchases that prevent the renminbi from appreciating.

Most Western economists, and even some Chinese economists, had been predicting that the Chinese central bank would raise interest rates instead of raising reserve requirements.

Higher interest rates would help cool activity in a Chinese economy that may be overheating. Consumer prices rose 4.4 percent in the 12 months through October, and broadly measured money supply is up 54 percent in the last two years.

Higher interest rates would also reward depositors, many of whom are elderly Chinese. And higher rates would increase costs for borrowers, particularly the state-owned enterprises that account for up to 90 percent of the borrowing in China because of their political clout.

But raising interest rates would also make it even more attractive for international investors to buy renminbi and invest them in China, which would very likely lead to a strong renminbi. The Chinese government is already struggling to continue holding down the value of the renminbi; its relative weakness against the dollar has been crucial to China’s emergence as the world’s largest exporter.

China’s large trade surpluses have created millions of jobs in China, although critics point out that this has been at the expense of employment in its trading partners.

I imagine the Republicans are privately cheering the Chinese on...

Buzz
11-30-2010, 12:49 PM
Since Franco likes Friedman so much, I was curious what he'd have to say about this.

http://macromarketmusings.blogspot.com/2010/11/case-closed-milton-friedman-would-have.html



The debate over what Milton Friedman would say about QE2 can now be closed.

Below is a Q&A with Milton Friedman following a speech he delivered in 2000. In this excerpted exchange with David Laidler, we learn that Friedman's prescription for Japan at that time is almost identical to what the Fed is doing now with QE2:

David Laidler: Many commentators are claiming that, in Japan, with short interest rates essentially at zero, monetary policy is as expansionary as it can get, but has had no stimulative effect on the economy. Do you have a view on this issue?

Milton Friedman: Yes, indeed. As far as Japan is concerned, the situation is very clear. And it’s a good example. I’m glad you brought it up, because it shows how unreliable interest rates can be as an indicator of appropriate monetary policy.

During the 1970s, you had the bubble period. Monetary growth was very high. There was a so-called speculative bubble in the stock market. In 1989, the Bank of Japan stepped on the brakes very hard and brought money supply down to negative rates for a while. The stock market broke. The economy went into a recession, and it’s been in a state of quasi recession ever since. Monetary growth has been too low. Now, the Bank of Japan’s argument is, “Oh well, we’ve got the interest rate down to zero; what more can we do?”

It’s very simple. They can buy long-term government securities, and they can keep buying them and providing high-powered money until the high powered money starts getting the economy in an expansion. What Japan needs is a more expansive domestic monetary policy.

The Japanese bank has supposedly had, until very recently, a zero interest rate policy. Yet that zero interest rate policy was evidence of an extremely tight monetary policy. Essentially, you had deflation. The real interest rate was positive; it was not negative. What you needed in Japan was more liquidity.
So Milton Friedman said in 2000 that the Bank of Japan should do what the Federal Reserve would be doing 10 years later! In fact, if names, dates, and places were changed in the above excerpt one could get a 2010 Ben Bernanke Q&A. Friedman's belief that a zero policy interest rate could be contratctionary and thus required the central bank to buy long-term securities shows that he understood unconventional monetary policy long before it was vogue. He truly was a great economist.

Note, though, that his emphasis is still on expanding the monetary base as much as needed to start and maintain an economic expansion. This implies he saw an excess money demand problem in Japan, just as there is one today in the United States. He understood, though, the need to expand the monetary base through purchases of long-term securities rather than short-term ones. This is because short-term securities are close to a perfect substitute for the monetary base at a zero percent policy rate. Swapping perfect substitutes does not change anything in one's portfolio of assets and therefore has no effect on spending. Thus, Friedman saw the need for purchasing long-term securities, which are not perfect substitutes with the monetary base.

Although Milton Friedman probably would have preferred a rule-based approach to QE2, this excerpt is the smoking gun that ends all debate on whether he would have supported QE2. The case is closed.

Thanks to Doug Irwin for locating this gem.

Franco
11-30-2010, 02:35 PM
If Uncle Miltie says this is a good policy, then who am I to agrue with that?;-)

However, I don't think we have the same situation nor mentality of the Japanesse.

Thier debt is just a small fraction of ours. They didn't have to deal with Medicare/SS and fighting a War On Terror.

In my book, too many differences between thier situation and ours.

We need to return mfg. jobs, curtail many entitlements, end the wars by fighting a smarter war on terror and cut the pork.

Last but not least, DRASTICALLY REDUCE THE SIZE OF THE FEDERAL GOOBERMENT!

caryalsobrook
11-30-2010, 06:10 PM
Since Franco likes Friedman so much, I was curious what he'd have to say about this.

http://macromarketmusings.blogspot.com/2010/11/case-closed-milton-friedman-would-have.html

Buzz, I think that if you had read Friedman more extensively, you would see that you have greatly distorted him. Friedman believed that the use of monetary policy (the supply of money) to control cyclical economic health did not work. In fact he stated that in hindsight, the FED invariably took the opposite action that would have been appropriate for the conditions. To put if simply, he has said that the FED always gets it wrong. Friedman believed that the best policy was a steady growth of the money supply commerate with a healthy and sustainable growth inthe economy, not a manupilation of the money supply in order to stimulate the economy. Take a look at the interview you have cited. Friedman very carefully said that quantitative easing was necessary due to Japan's central bank's failure to allow the money supply to necessarily grow for a healthy ecconomy in the past. Again, many times he advocated a constant growth of the money supply regardless of ecconomic conditions. His arguement was that invariably monetarists got it wrong and made the ecconomy worse.
Ecconomic policy today is that of the Keynesians and Milton Friedman was certainly no Keynesian.

Cary Alsobrook

caryalsobrook
11-30-2010, 06:12 PM
Sorry I meant to quote Buzz not Franco

menmon
12-01-2010, 12:08 PM
Buzz, I think that if you had read Friedman more extensively, you would see that you have greatly distorted him. Friedman believed that the use of monetary policy (the supply of money) to control cyclical economic health did not work. In fact he stated that in hindsight, the FED invariably took the opposite action that would have been appropriate for the conditions. To put if simply, he has said that the FED always gets it wrong. Friedman believed that the best policy was a steady growth of the money supply commerate with a healthy and sustainable growth inthe economy, not a manupilation of the money supply in order to stimulate the economy. Take a look at the interview you have cited. Friedman very carefully said that quantitative easing was necessary due to Japan's central bank's failure to allow the money supply to necessarily grow for a healthy ecconomy in the past. Again, many times he advocated a constant growth of the money supply regardless of ecconomic conditions. His arguement was that invariably monetarists got it wrong and made the ecconomy worse.
Ecconomic policy today is that of the Keynesians and Milton Friedman was certainly no Keynesian.

Cary Alsobrook

Friedman did not believe in managed float. Friedman did strongly believe in a float system. I'm a student of the University of Chicago and have discussed this with much better experts on this subject than Friedman and basically the flaw of Friedman's work is that it is like putting someone in a car without a stirring wheel.

Basically what has been done twice now is cheap money has been used to bailout the banks. However, I can't argue that it was not the thing to do both times. The smarter thing would have been not to let the banking system get us in these situations.

caryalsobrook
12-01-2010, 07:43 PM
Friedman did not believe in managed float. Friedman did strongly believe in a float system. I'm a student of the University of Chicago and have discussed this with much better experts on this subject than Friedman and basically the flaw of Friedman's work is that it is like putting someone in a car without a stirring wheel.

Basically what has been done twice now is cheap money has been used to bailout the banks. However, I can't argue that it was not the thing to do both times. The smarter thing would have been not to let the banking system get us in these situations.

Correct me if I am wrong but it appears to me that we said exactly the same thing in describing Milton Friedman's concept of the proper functions of the central band(FED). You used the example of a car with no steering wheel as the flaw of his work. Maybe you should have gone further with your example by saying that having no steering wheel was better because invariably the man behind the wheel was too drunk to drive and was always on the wrong side of the road at the wrong time. Isn't the arguement today that the FED got it wrong in the 90's and 2000's and unnecessarily restricted the growth of the money supply and now it required massive intervention to increase the money supply?? When it comes to monetary policy, it seems like it is always said that they got it wrong in the past and now we have to correct it now. Just asking.
Congratulations on your association with the Univ. of Chicago but I am a little confused. "Student of Univ. of Chicago?" Did you mean student "at the University of Chacago?" I assume that it was just a typo error.
While you are at it, maybe you would like to explain why China and Russia will no longer use the American dollar as a medium of exchange and its economic effects to the US. Then maybe you can carry it to the very end with no countries using the US dollar as a medium of exchange in the future. You can correct e if I am wrong but I always thought that the most important requirement of a medium of exchange in foreign trade was a stable currency. If that is so then do both china and Russia feel that their currencies are or will be more stable than the US dollar? You might try to refrain spewing how stupid they are- it doesn't matter if they are. Their actions willhave an effect on the US so what are they?

Franco
12-02-2010, 07:58 AM
Correct me if I am wrong but it appears to me that we said exactly the same thing in describing Milton Friedman's concept of the proper functions of the central band(FED). You used the example of a car with no steering wheel as the flaw of his work. Maybe you should have gone further with your example by saying that having no steering wheel was better because invariably the man behind the wheel was too drunk to drive and was always on the wrong side of the road at the wrong time. Isn't the arguement today that the FED got it wrong in the 90's and 2000's and unnecessarily restricted the growth of the money supply and now it required massive intervention to increase the money supply?? When it comes to monetary policy, it seems like it is always said that they got it wrong in the past and now we have to correct it now. Just asking.
Congratulations on your association with the Univ. of Chicago but I am a little confused. "Student of Univ. of Chicago?" Did you mean student "at the University of Chacago?" I assume that it was just a typo error.
While you are at it, maybe you would like to explain why China and Russia will no longer use the American dollar as a medium of exchange and its economic effects to the US. Then maybe you can carry it to the very end with no countries using the US dollar as a medium of exchange in the future. You can correct e if I am wrong but I always thought that the most important requirement of a medium of exchange in foreign trade was a stable currency. If that is so then do both china and Russia feel that their currencies are or will be more stable than the US dollar? You might try to refrain spewing how stupid they are- it doesn't matter if they are. Their actions willhave an effect on the US so what are they?

Great question! I'd love to read a logical answer to it.:cool:

YardleyLabs
12-02-2010, 09:09 AM
Great question! I'd love to read a logical answer to it.:cool:
I agree that they are great questions. However, the issue is hardly the Fed. There is a difference between artificial currency stability, as existed with the gold standard, and currency stability that reflects basic economic stability. The usefulness of the dollar as a global medium of exchange was a direct product of our economic stability. However, somewhere along the way we began to assume that economic stability was a uniquely American nationright, rather than something for which we had to work and sacrifice. Problems began under Reagan when massive deficit spending became politically acceptable among conservatives as long as the deficits financed things that conservatives liked: lower taxes and higher defense spending. GHW Bush tried to get deficits under control and was abandoned by his own party as a result.

Clinton, to the dismay of his own party, became the ultimate champion of balanced budget and the dollar grew in value as a consequence. GW Bush decided that deficits were actually a good thing and that the stability of the dollar wasn't important (a number of administration officials noted that devaluation would stimulate demand for US goods and should be encouraged). That resulted in a doubling of our debt and a halving of the value of our currency.

While the record of the Obama administration is incomplete, it seems to be sticking with Bushian economics more than sanity. Given that, any nation holding American debt or American currency is sacrificing its own national interest to support our profligacy. The only things preventing a mass migration away from the dollar are the lack of a strong alternative currency and the fact that no one wants to buy those dollar reserves. In the eyes of the world, we are bankrupt, and the value of our currency and debt will decline accordingly.

Buzz
12-02-2010, 10:06 AM
That resulted in a doubling of our debt and a halving of the value of our currency.

Given that, any nation holding American debt or American currency is sacrificing its own national interest to support our profligacy.


Good thing that our debt is in dollars huh? I wonder if this makes the Chinese nervous at all. Last night I was reading that they hold around $2.6 billion in US dollars in reserve, and soon they'll be holding over $3 trillion. :rolleyes:

menmon
12-02-2010, 12:13 PM
Correct me if I am wrong but it appears to me that we said exactly the same thing in describing Milton Friedman's concept of the proper functions of the central band(FED). You used the example of a car with no steering wheel as the flaw of his work. Maybe you should have gone further with your example by saying that having no steering wheel was better because invariably the man behind the wheel was too drunk to drive and was always on the wrong side of the road at the wrong time. Isn't the arguement today that the FED got it wrong in the 90's and 2000's and unnecessarily restricted the growth of the money supply and now it required massive intervention to increase the money supply?? When it comes to monetary policy, it seems like it is always said that they got it wrong in the past and now we have to correct it now. Just asking.
Congratulations on your association with the Univ. of Chicago but I am a little confused. "Student of Univ. of Chicago?" Did you mean student "at the University of Chacago?" I assume that it was just a typo error.
While you are at it, maybe you would like to explain why China and Russia will no longer use the American dollar as a medium of exchange and its economic effects to the US. Then maybe you can carry it to the very end with no countries using the US dollar as a medium of exchange in the future. You can correct e if I am wrong but I always thought that the most important requirement of a medium of exchange in foreign trade was a stable currency. If that is so then do both china and Russia feel that their currencies are or will be more stable than the US dollar? You might try to refrain spewing how stupid they are- it doesn't matter if they are. Their actions willhave an effect on the US so what are they?

Sorry about the idom error, maybe why I only made a 690 on the GMAT. Graduate of the Graduate School of Business at the University of Chicago.

First of all, everyone is trying to blame the Fed when the fed only reacted to the cards being played. Deregulation and a securitization market gone wild is the reason for the financial collaspes, nothing more. All this other stuff is noise.

It is good to see countries using their own currencies. Russia has tried it before and fail, but hopefully they get it right this time. Also, if these other countries don't hold as much of our currency, liquidity injections will have the effect we want.

Buzz
12-02-2010, 12:35 PM
Also, if these other countries don't hold as much of our currency, liquidity injections will have the effect we want.


As I am sure you are aware, the Chinese recently required their banks to keep more money in reserve at their central bank at very low rates of return. The central bank uses those reserves to buy foreign currency.

Your comment here is why I keep asking if the Chinese will be willing to quit buying dollars.

I'll keep asking the question, but I remain convinced that the message will continue to fall on deaf ears.

menmon
12-02-2010, 12:46 PM
As I am sure you are aware, the Chinese recently required their banks to keep more money in reserve at their central bank at very low rates of return. The central bank uses those reserves to buy foreign currency.

Your comment here is why I keep asking if the Chinese will be willing to quit buying dollars.

I'll keep asking the question, but I remain convinced that the message will continue to fall on deaf ears.

The logical answer to your question is that they believe the US dollar is cheap and that the dollor will appreciate in the future. If they thought anything else, they would not be buying dollars.

Buzz
12-02-2010, 02:02 PM
The logical answer to your question is that they believe the US dollar is cheap and that the dollor will appreciate in the future. If they thought anything else, they would not be buying dollars.


You mean it has nothing to do with subverting our liquidity injections?

menmon
12-02-2010, 03:15 PM
You mean it has nothing to do with subverting our liquidity injections?

That is correct! It all about the money

Marvin S
12-02-2010, 05:32 PM
First of all, everyone is trying to blame the Fed when the fed only reacted to the cards being played. Deregulation and a securitization market gone wild is the reason for the financial collaspes, nothing more. All this other stuff is noise.

Maybe someone can explain creating T-Bonds to support spendthrift ways & then purchasing them with Monopoly money (meaning recently created with no value added to system) is a good thing :confused:? I am referring to the QE actions. Remember KISS is good ;-).

caryalsobrook
12-03-2010, 07:47 AM
Great question! I'd love to read a logical answer to it.:cool:

No Answers?? Let me try to answer my own question of "What will be the effect on the US and the value of the US dollar if China and Russia no longer use the dollar as the medium of exchange but instead use their own currency and additionally what will be the further effect if other countries follow suit." Try these for answers.

1. The won't do that.
2. They are idiots.
3. THey can't do that.
4. I've talked to smarter experts than them.
5. I went to a good graduate school and had a good graduate entrance exam score. I tell you this because nobody would believe it unless I told them.
6. What was the question again???

Cary Alsobrook (one of the idiots)

menmon
12-06-2010, 11:19 AM
No Answers?? Let me try to answer my own question of "What will be the effect on the US and the value of the US dollar if China and Russia no longer use the dollar as the medium of exchange but instead use their own currency and additionally what will be the further effect if other countries follow suit." Try these for answers.

1. The won't do that.
2. They are idiots.
3. THey can't do that.
4. I've talked to smarter experts than them.
5. I went to a good graduate school and had a good graduate entrance exam score. I tell you this because nobody would believe it unless I told them.
6. What was the question again???

Cary Alsobrook (one of the idiots)

Why do you think it is so important that these countries use our currency. I'm sure they will accept it. I'm all for them having a creditable currency, aren't you? The rest of the modern world have their own currency. During the Clinton years, what helped us keep rates so low and not have inflation was that because Russia was using our money it absorbed the excess money.

menmon
12-06-2010, 11:24 AM
Maybe someone can explain creating T-Bonds to support spendthrift ways & then purchasing them with Monopoly money (meaning recently created with no value added to system) is a good thing :confused:? I am referring to the QE actions. Remember KISS is good ;-).

To begin with, QE is not something new. It is a tool used regularly by the fed. This difference now is the fed is using it to talk down the dollar, because they want a weak dollar. Furthermore, since most major corporation are cash rich right now, they are buying lots of treasuries, so the long end of the yield curve is not moving upward like the fed wants it to. But keep talking it down, you doing exactly what the fed wants and didn't even know it.

Marvin S
12-07-2010, 12:01 PM
To begin with, QE is not something new. It is a tool used regularly by the fed. This difference now is the fed is using it to talk down the dollar, because they want a weak dollar. Furthermore, since most major corporation are cash rich right now, they are buying lots of treasuries, so the long end of the yield curve is not moving upward like the fed wants it to. But keep talking it down, you doing exactly what the fed wants and didn't even know it.

So the fact that all our CD's have matured & are now paying a verRRRRRRRRRRRRy low return has nothing to do with this monopoly money scheme. Guess it should have been used when treasuries were paying 10-15%, or can't you remember back that far :rolleyes:.

But thanks for nothing except your supposed credentials - at least I'll know where my grandkids should avoid going to advance their education. You never did tell anyone where you got your bachelor's degree, might be another place to avoid :).

caryalsobrook
12-07-2010, 03:55 PM
Why do you think it is so important that these countries use our currency. I'm sure they will accept it. I'm all for them having a creditable currency, aren't you? The rest of the modern world have their own currency. During the Clinton years, what helped us keep rates so low and not have inflation was that because Russia was using our money it absorbed the excess money.

I didn't say it was important or unimportant only there must have been a reason that they were using our currency and now were going to use their own currency. There must have been a reason for this change and a reason that they originally used our currency, don't you think?? I'll bet there was for the first and is now don't you think?? Surely if Milton friedman knew the answer and you talk to experts you know are smarter that he was then surely you would know the answer. Then if unimportant then you could explain why.

menmon
12-07-2010, 05:21 PM
I didn't say it was important or unimportant only there must have been a reason that they were using our currency and now were going to use their own currency. There must have been a reason for this change and a reason that they originally used our currency, don't you think?? I'll bet there was for the first and is now don't you think?? Surely if Milton friedman knew the answer and you talk to experts you know are smarter that he was then surely you would know the answer. Then if unimportant then you could explain why.

They use our currency because people in other countries will not accept theirs. Many countries use our currency for that reason. Given the fact that Russia's is oil rich now, they have more creditablity. The reason their currency failed in 1998 was they could not get people to pay taxes so they printed money to pay their bills.

Since Obama extended the tax cuts the dollar has weakened and interest rates are going up, same senerio, just not as server.

menmon
12-07-2010, 05:55 PM
One more thing, Friedman was smart, but they also are human and move agenda's with their reputations. All of these theories are flawed. But think about having a float system that is not managed. If the basket of goods grows and their is not enough dollars, it is deflationary just like if the basket of goods does not grow and their are too many dollars it is inflationary. So by holding the money supply static you create a bigger problem than if you under or over estimate a little bit. Same can be said for the gold standard. Currency is a debt obligation to the us treasury, so if you peg the dollar with gold you in essence are securing the obligation. Problem with that is that gold values change, so the gold could be worth more or less than the printed value. This is one major flaw but there are many more.

The managed float sytem, must be managed correctly are it problimatic but I think it is the best of all evils.

Clint Watts
12-08-2010, 01:30 AM
Clinton, to the dismay of his own party, became the ultimate champion of balanced budget and the dollar grew in value as a consequence.

I believe he was dragged kicking and screaming, lets be honest here.

troy schwab
12-08-2010, 10:27 AM
Sambo,
Ive already explained my position on this on an earlier thread..... but just want to remind the group of my point. Inflation is coming...... PERIOD!!!! It is inevitable.... Oil is priced in dollars..... dollar goes down, oil goes up. The cost of energy is gonna increase dramatically, therefore driving up manufacturing costs, and transportation costs....... Higher priced goods will be the result. Corporations do not absorb these costs, they get passed to the consumer. Gas went up 20 cents in the last month here...... how about your area? Just wondering...... Snowball rolling down a hill regards...........


Disclaimer: I do not have a degree as a graduate of a graduate school........

menmon
12-08-2010, 10:31 AM
Clinton, to the dismay of his own party, became the ultimate champion of balanced budget and the dollar grew in value as a consequence.

I believe he was dragged kicking and screaming, lets be honest here.

No politician neither democrat nor republican can take credit for that period. The bottomline is that the economy was so strong and the tax receipts outpaced their spending. What should have been done during that period is have curtailed spending too, and we would be better off for it now. No we wouldn't, we had to go throw away a few trillion in the middle east.

caryalsobrook
12-08-2010, 06:15 PM
They use our currency because people in other countries will not accept theirs. Many countries use our currency for that reason. Given the fact that Russia's is oil rich now, they have more creditablity. The reason their currency failed in 1998 was they could not get people to pay taxes so they printed money to pay their bills.

Since Obama extended the tax cuts the dollar has weakened and interest rates are going up, same senerio, just not as server.

Finally, an answer that at least touches on point. Countries have used our currency because of its relative stability over the years. This meant one who purchased goods and services from another country was relatively confident in the cost in terms of his domestic currency. The same was true if he sold goods or services to another contry, he was relatively certain of the price he would be paid in his domestic currency.
Now each country will have to deal with three currencies in trading. I can imagine the complexity and games that can be played with the exchange rete between the 3 curencies, especially given the perception that the dollar is no longer stble enough to justify it excllussive use by them in trade.
Would you not agree that if they actually implement such a system hat their need to hold dollars in order to conduct foreign trade will decrease, causing an increase in the number of dollars chasing the remaining available goods? You can carry the progrssion to mare contries and its effect on the value of the dollar and the effect on the US economy.

caryalsobrook
12-08-2010, 06:50 PM
One more thing, Friedman was smart, but they also are human and move agenda's with their reputations. All of these theories are flawed. But think about having a float system that is not managed. If the basket of goods grows and their is not enough dollars, it is deflationary just like if the basket of goods does not grow and their are too many dollars it is inflationary. So by holding the money supply static you create a bigger problem than if you under or over estimate a little bit. Same can be said for the gold standard. Currency is a debt obligation to the us treasury, so if you peg the dollar with gold you in essence are securing the obligation. Problem with that is that gold values change, so the gold could be worth more or less than the printed value. This is one major flaw but there are many more.

The managed float sytem, must be managed correctly are it problimatic but I think it is the best of all evils.

Reading your post make me suspect that you have a misconception of Milton Friedman's beliefs of monetary policy on the economy. In fact you will find very little difference between Friedman or any other economist concerning the economic effects of monetary policy given accurately evaluating the status of an economy. He never advocated the gold standard nor did he advocate a stagnant money supply- God forbid. He advocated, given a constant velocity of money(I know that the velocity of money has increased in recent years but have not seen any research on the any significanat effects as a result) in both times of healthy economic expansion and contraction that the best policy was a CONSTANT growth of the money supply. He advocated this because after examining historical actions of the central bank that they invariably took the wrong action or they took proper action too late. He would have been the first to say that if you were capable of taking correct action consistantly, then a policy of managing the economy using monetary policy would work well. In simple terms he said, looking at previous histry that the FED invariably got it wrong and took action detrimental to the economy.
Therefor he advocated a STEADY CONSTANT GROWTH of the money supply consistant with a healthy growing economy regardless of the status of the economy. I will remind you of one of your statements of a previous post. "The FED has to play the cards that it was dealt.", and say when it comes to monetary policy, then the FED is the one that dealt the hand in the first place and if the cards are bad then they are the one that dealt a bad hand.

road kill
12-08-2010, 07:20 PM
They use our currency because people in other countries will not accept theirs. Many countries use our currency for that reason. Given the fact that Russia's is oil rich now, they have more creditablity. The reason their currency failed in 1998 was they could not get people to pay taxes so they printed money to pay their bills.

Since Obama extended the tax cuts the dollar has weakened and interest rates are going up, same senerio, just not as server.

When did that happen??

I mean talk is cheap, nothing is passed yet until Nancy gets her cut!!!


RK

dnf777
12-08-2010, 07:32 PM
When did that happen??

I mean talk is cheap, nothing is passed yet until Nancy gets her cut!!!


RK

Yeah, boy! I don't know what to think anymore. Can both sides and the middle agree that the upshot of this entire "deal" is that both sides got their goodies, and we added a trillion dollars in unfunded debt to our balance sheet?

this just solidifies what my friend said about our two parties:
The dems like to tax and spend.
The GoP likes to borrow and spend.

Buzz
12-08-2010, 09:06 PM
Can both sides and the middle agree that the upshot of this entire "deal" is that both sides got their goodies, and we added a trillion dollars in unfunded debt to our balance sheet?


.

Unfortunately, I think it's much worse than that. I think what Sam o was saying was that the expectation of the deal passing was impacting bond markets. But obviously some are at the ready to slip in the knife and give it a twist. I was against the government borrowing money to finance my tax cut when Bush did it and I'm against it now. Last week everyone was talking a out our dire future and the austerity required to save us from becoming a banana republic. This week it's Christmas again, compliments more borrowing from China Inc.

Buzz
12-08-2010, 09:09 PM
I'm curious. What is worse for the dollar? QE2 or compete and utter fiscal irresonibility?

Clint Watts
12-10-2010, 01:28 AM
No politician neither democrat nor republican can take credit for that period. The bottomline is that the economy was so strong and the tax receipts outpaced their spending. What should have been done during that period is have curtailed spending too, and we would be better off for it now. No we wouldn't, we had to go throw away a few trillion in the middle east.

Is there a chance of this ever happening? Spend, spend, spend, thats all politicians are good at (Rep & Dem's).

caryalsobrook
12-10-2010, 08:59 AM
I'm curious. What is worse for the dollar? QE2 or compete and utter fiscal irresonibility?

Maybe some people believe QE2 is complete and utter responsibility:)