Thank God Our Systems Protect Us From Idiots

[Franco]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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