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and you know it didnt work at this stage because????????????? i cant tell what worked or didnt at this stage. only thing i can say is we missed a financial collapse and another great depression so far. as far as why we missed it ? who cares . most of america is working and holding on to their houses. like medicine when your sick there is no real way to know if its yourself or the medicine that got you better its only the end result that counts and its to early to tell a thing at this stage.
The first round of QE? It did work, has your hand been in the sand? The credit markets froze, the FED along with the treasury successful prevented a collapse of the entire financial system. Just look at any measure of the health of the credit markets, for example:
I know that I shall kick myslef for asking this but:
What is QE2 ?
I know it has something to do with money and politics, but that's all.
When is it supposed to take place?
As mentioned, quantitative easing, round two. The Federal Reserve will buy up to USD 600 billion in Treasury notes through to June 2011.
It has to do with money and politics.
In the past decade or so, mainly for reasons of (misguided) social policy, the US housing stock has accounted for an increasing proportion of the US money supply (mismanaged at best, or criminally managed at worst).
As the prices of real estate, now largely held by banks and some half-baked government mortgage entities, have contracted, so has the money supply. The latest foreclosure fiasco is further contracting the money supply.
The main purpose of QE II is to make up for this further contraction and ensure banks' solvency. From that perspective, I have to say that programs like TARP and QE I have worked: the main US money-center banks have, technically and legally, remained afloat and there has been no collapse in the real economy.
However, loose credit policy and interest rates near or at zero send utterly confusing signals as to the most efficient allocation of resources. I doubt that any meaningful portion of this QE II money will be channeled from banks to businesses with plans for productive investment on US soil; there is too much stupidity and corruption competing for it and winning, and there is greater opportunity outside the US.
Since the thread is "dumb question" I wonder if I might ask...
So really, there are better opportunities outside the US? Like where? I mean do you really believe that if you were to plunk down money in say China or India or some other alleged "high growth" area you will get a nice return on your investment? You really think that the court systems over in those pplaces will look out for foreign investors? You really think the political systems in those places are sat le enough that they won't re-nationalize any firm that gets too big?
In terms of "dumb questions" how come the US has a stupid INTERNAL DEBATE about illegal immigrants? The poor bastards that risk their life to cross our borders or just stay put when their tourists visas expire are here because this country is AWESOME compare to the **** holes they were born in. Don't get me wrong, Mexico is beautiful country, and the bastards that have big money down there live like kings, but they also channel money to corrupt politicians that protect drug lords, have no interest in improving the quality of life / education / healthcare / opportunity for the have- nots in there countyr and are perfectly happy to export their huge population onto our doorstep. We don't have illegal immigration from Canada because their government is not so dysfunctional! Why do wr waste time being crordial with coin tries in SE Asia that don't give two hoots about us when we ought to be pounding daily on helping Mexico give it's natural born citizens a reason to stay in their sun backed paradise...
... do you really believe that if you were to plunk down money in say ... or some other ... area you will get a nice return on your investment? You really think that the court systems over in ... will look out for ...? You really think the political systems in ... are safe enough ... ?
... the bastards that have big money ... live like kings, but they also channel money to corrupt politicians that protect drug lords, have no interest in improving the quality of life / education / healthcare / opportunity for the have-nots in ... ...
My view - and I would hope that I am wrong - is that the period of US exceptionalism in history is over, it is increasingly just like any other country now and going forward, you take your chances.
In my experience, US courts and politicians are just as corrupt as in any other country, you take your chances.
In my experience, the US education system, though it may be superior in some advanced areas at the graduate level, on the basic level is just as mediocre as in any other country, you take your chances.
In my experience, the US health system, though it may be superior on some advanced levels requiring high technology solutions (but maybe not), is the absolute worst among countries of early industrialization in terms of how it is financed, and the results in terms of basic medical care are about as hit and miss as in any other country, you take your chances.
The essence of life is movement and risk, you spread your risk and you take your chances.
"Borrowing money" plays a very important role in the economy, not so much from consumers, but rather businesses.
You're wasting your time because they'll never understand. Businesses operate entirely on credit. If you need to buy $2 Billion in raw materials or semi-finished goods and import or deliver them to your production facility and you have to pay in cash, I guess you're just supposed to lay off all of your employees indefinitely until $2 Billion in cash falls out of the sky and lands in your lap.
I'm sure the laid off employees won't mind. After all, it will be like reality TV collecting unemployment benefits for 99 weeks then getting foreclosed and evicted.
Businesses operate entirely on credit. If you need to buy $2 Billion in raw materials or semi-finished goods and import or deliver them to your production facility and you have to pay in cash, I guess you're just supposed to lay off all of your employees indefinitely until $2 Billion in cash falls out of the sky and lands in your lap.
I'm sure the laid off employees won't mind. After all, it will be like reality TV collecting unemployment benefits for 99 weeks then getting foreclosed and evicted.
The sad thing is that these productive businesses over the past decade or so have had to compete for credit with riff-raff for whom executive-class housing and gas-guzzling cars just, ostensibly, fell out of the sky and landed in their laps.
Truly productive enterprises can overcome the hurdle of interest rates at, say 5%-8%, and that used to/should be the measure of money supply growth, not a wish list.
Just as sad, the housing stock built in the past decade or so is often in the wrong places and/or poorly designed, destroying value (of raw materials, for example) rather than adding value to the economy.
Hence QE II, and the like, to cover the hole, and to help those types of businesses described above.
But we could have achieved the latter anyway without a crisis and a lot of pencil-pushers could have stayed home, receiving food stamps and watching reality TV, among other drugs, and the illegals could have stayed home too.
Hence QE II, and the like, to cover the hole, and to help those types of businesses described above.
No, the purpose of QE2 is a lot different than QE1. QE1 was implemented to save the credit markets, which by any measure were collapsing. It wasn't just that companies couldn't get loans at ultra loan rates, but rather they were having trouble getting loans at all. On the other hand, currently the credit markets are functioning, the primary issue that motivated QE2 is that the economy has been in the dumps for almost 3 years now. One of the FED's mandates is to keep the economy at maximum employment, it wouldn't be doing its job if it did nothing. Although we can only imagine what was discussed in closed doors, I think a big part of what motivated QE2 is other nations refusal to deal with global imbalances. QE2 makes life more difficult for the Chinese, Germans, etc
Anyhow, we do run the risk of the economy getting addicted to low rates like the Chinese and Japanese economies. But the best way to avoid this is to get the economy back up to full-employment and start increasing rates, increasing rates now would just further depress the economy.
I'm primarily talking about the GOP, which claim to be fiscal conservatives. But in terms of pure philosophy, there isn't anything about fiscal conservativism that is anti-QE or monetarism in general.
Why is that? So people like Milton Friedman were fake conservatives, despite being highly influential in the conservative movement?
Anyhow, in terms of the out-cry against QE, its primary by people that are political in nature rather than apolitical conservatives.
No. Not fake conservatives. But "conservative" is a relative term. Ironically, in this day and age, many people refer to followers of classical liberalism as fiscal conservatives, and these are the people of whom I speak. We can play semantics all day, but I'm pretty sure you are smart enough to know what I am talking about without resorting to that.
Ironically, in this day and age, many people refer to followers of classical liberalism as fiscal conservatives, and these are the people of whom I speak.
If those are the people you speak of, then you should refer to them using the correct term. "fiscal conservative" is far more general.
Quote:
Originally Posted by AnesthesiaMD
We can play semantics all day, but I'm pretty sure you are smart enough to know what I am talking about without resorting to that.
No, I'm not smart enough to know what you mean Y when you say X.
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Since the thread is "dumb question" I wonder if I might ask...
