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Old 03-08-2015, 03:13 AM
 
4,174 posts, read 2,782,365 times
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Quote:
Originally Posted by NYer23 View Post
Concerns that might stop the fed from increase rates would be:
1. Wages have not significantly increased yet
2. Questionable job quality on new hires (low paying jobs).
3. Strong dollar will hurt our export and Europe has a negative saving right now due to central bank charging bank holding EUR (want them to lend).

I too look forward to being able to earning decent return on my deposit from the bank, but at the same time I am concern with the increase cost of lending (given how cheap it currently is).

Very good points. There are headwinds too. I share your concerns, but as the economy seems to be doing well overall and a strong dollar is a mixed blessing and I believe the FED will act with patience, I remain cautiously optimistic.
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Old 03-08-2015, 03:58 AM
 
535 posts, read 513,644 times
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QE didn't cause hyperinflation because real money was not entered into the economy. The fed purchased mortgage backed securities and purchased treasuries. Essentially they kept mortgage rates down and liquidity in the mortgage market and kept interest rates down. Low interest rates were good for businesses as they were able to borrow cheaply and over two years or so the unemployment rate dropped a sizable amount. Everyone is involved in the stock market whether through 401ks, Iras, pension, mutual funds or individual stocks so a rise in net worth made people feel more secure and they started spending hence the higher gdp. Low mortgage rates allowed more people to buy homes and that increased home prices.

None of this caused hyperinflation because home prices returned to normal (not overvalued like they were before the crisis) as did stocks. We didn't see much inflation because banks still didn't give out that much credit and people are more responsible nowadays. Lending and loan standards are higher and people save more and buy less. People spend money on little things like coffee or casual fast food instead of big ticket items.
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Old 03-08-2015, 08:27 AM
 
1,923 posts, read 1,325,614 times
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The article linked by the OP explains very well why hyperinflation didn't happen in America. The crisis of 2008 was largely a deflationary problem.

"Hyperinflation is an exponential rise in prices and tends to occur not when countries print too much money, but is instead associated with a collapse in the real underlying economy."

This matches what economists saw in the decade of QE in Japan, starting in 2001, to combat deflation. Their pioneering experiment with QE was not applied there boldly enough and for long enough, and so Japan remains mired down 15 years later. Declining wages and prices are killing them. Japan's 'lost decade" featured the decline in population and productivity. The U.S., in contrast, has a growing population and rising productivity.

As the OP's linked article points out:

The US economy remained productive during the Great Recession of 08 with little inflation. The American people kept producing, and that made the difference.
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Old 03-08-2015, 10:02 AM
 
7,846 posts, read 5,032,768 times
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Quote:
Originally Posted by Led Zeppelin View Post
The article linked by the OP explains very well why hyperinflation didn't happen in America. The crisis of 2008 was largely a deflationary problem.

"Hyperinflation is an exponential rise in prices and tends to occur not when countries print too much money, but is instead associated with a collapse in the real underlying economy."

This matches what economists saw in the decade of QE in Japan, starting in 2001, to combat deflation. Their pioneering experiment with QE was not applied there boldly enough and for long enough, and so Japan remains mired down 15 years later. Declining wages and prices are killing them. Japan's 'lost decade" featured the decline in population and productivity. The U.S., in contrast, has a growing population and rising productivity.

As the OP's linked article points out:

The US economy remained productive during the Great Recession of 08 with little inflation. The American people kept producing, and that made the difference.
Actually the US doesn't have a real growing populaltion. Our population growth is strictly from immigration. We are below replacement.
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Old 03-08-2015, 10:43 AM
 
Location: South Seattle Suburbs
3,348 posts, read 5,811,009 times
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Quote:
Originally Posted by texdav View Post
Even in the stock markets retail investor has never really returned to markets. Many corporations are not spending ;they are buying their own stocks which drives the price higher. GDP is growing slowly and flat lining some months. The markets are volatile and will be hanging on FEDs every word.
Yes. This "recovery" is a very flimsy one. Companies are giving the illusion of success by buying back stocks and increasing dividend payouts, masking a lack of real growth. You have companies like Apple literally sitting on tens of billions of dollars in cash. Companies simply aren't spending. The dip in unemployment is largely illusory. When you consider that the number of adults in the workforce is at a multi-decade low, it starts to become clear that there is no economic recovery for the ordinary person. Ordinary people are drowning in debt just to get by, and those who haven't given up looking for work sometimes have to work two or three jobs because the only things being offered are part-time jobs with poverty wages.

I have a bad feeling this is all going to collapse like a house of cards.
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Old 03-08-2015, 11:18 AM
 
Location: Ruidoso, NM
5,170 posts, read 4,730,147 times
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Quote:
Originally Posted by Adrian71 View Post
Companies simply aren't spending.
Yes, and these guys are smart. We kept the economy "juiced" for decades with escalating private and public debt, but it wasn't spent on investment, rather to keep consumption high. Investment spending leads to future earnings. Consumption just disappears.

It's the same thing that would happen if you kept buying on credit while your income was falling.
Your living standard would be fine, but eventually your credit would max out. When that happened you'd experience a decrease in living standard that you won't recover from for a long time.

That's where we are now. The debt burden and lack of prior investment make the US consumer a bad bet.
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Old 03-08-2015, 11:20 AM
 
8,277 posts, read 3,452,461 times
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Quote:
Originally Posted by Adrian71 View Post
Yes. This "recovery" is a very flimsy one. Companies are giving the illusion of success by buying back stocks and increasing dividend payouts, masking a lack of real growth. You have companies like Apple literally sitting on tens of billions of dollars in cash. Companies simply aren't spending. The dip in unemployment is largely illusory. When you consider that the number of adults in the workforce is at a multi-decade low, it starts to become clear that there is no economic recovery for the ordinary person. Ordinary people are drowning in debt just to get by, and those who haven't given up looking for work sometimes have to work two or three jobs because the only things being offered are part-time jobs with poverty wages.

I have a bad feeling this is all going to collapse like a house of cards.
It surely will be ugly, but most likely not on the scale of 2008.

2008 was so bad since it directly affected so many homeowners and communities, as well as major negative effects on investments all over the world.

IMO most of what will crash if we indeed have a crash in the not too distant future, will be from over extended investments and leverage encouraged by recent low interest rates. A large part at the corporate level, especially the oil related sectors. So yes a big deal, but not to the extent that every main street across the country ends up on the short end like 2008.
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Old 03-08-2015, 01:31 PM
 
3,792 posts, read 1,769,164 times
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Quote:
Originally Posted by Led Zeppelin View Post
The article linked by the OP explains very well why hyperinflation didn't happen in America. The crisis of 2008 was largely a deflationary problem.

"Hyperinflation is an exponential rise in prices and tends to occur not when countries print too much money, but is instead associated with a collapse in the real underlying economy."

This matches what economists saw in the decade of QE in Japan, starting in 2001, to combat deflation. Their pioneering experiment with QE was not applied there boldly enough and for long enough, and so Japan remains mired down 15 years later. Declining wages and prices are killing them. Japan's 'lost decade" featured the decline in population and productivity. The U.S., in contrast, has a growing population and rising productivity.

As the OP's linked article points out:

The US economy remained productive during the Great Recession of 08 with little inflation. The American people kept producing, and that made the difference.
Japan's lost decade turned into two lost decades. Our economy would largely be in the same shape as theirs but for a couple of things. We had an oil boom. This dramatically reduced our trade imbalance, put a large amount of people to work, and provided something to loan against.

We ran our house prices down faster than they did. Theirs did a smooth gradual decline. Ours did a precipitous drop. The faster drop we went through cleared out a lot of bad debt. Now the expectation is for sustained growth. That expectation may well not line up with reality but it is there.
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Old 03-08-2015, 01:35 PM
 
3,792 posts, read 1,769,164 times
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Quote:
Originally Posted by Hoonose View Post
It surely will be ugly, but most likely not on the scale of 2008.

2008 was so bad since it directly affected so many homeowners and communities, as well as major negative effects on investments all over the world.

IMO most of what will crash if we indeed have a crash in the not too distant future, will be from over extended investments and leverage encouraged by recent low interest rates. A large part at the corporate level, especially the oil related sectors. So yes a big deal, but not to the extent that every main street across the country ends up on the short end like 2008.
Houses are still over extended somewhat, and they have been re-inflated. The stock market could very well come down a lot. P/E ratios may look good but...

On the other had the G-20 group met and decided to all do QE at the same time. This may just soften the blow to our economy by a correction.
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Old 03-08-2015, 01:43 PM
 
Location: Ruidoso, NM
5,170 posts, read 4,730,147 times
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Quote:
Originally Posted by ContrarianEcon View Post
Japan's lost decade turned into two lost decades.
Japan hasn't done that badly. If you start at 1980, their growth has been quite good. It just doesn't look that great from 1990 til ~2000. Since then though, they've done as well as other developed countries. Obviously there were some huge bubbles generated during the 80's and it takes a long while to correct that.



Also, when a country reaches the upper echelons of industrialization and technology, further growth becomes more difficult. Japan is clearly as technologically advanced as anyone, but they have some real negatives where natural resources are concerned. Inefficient cultural habits and rent seeking also limit growth.
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