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Old 06-13-2020, 07:16 AM
 
Location: Dude...., I'm right here
1,355 posts, read 864,304 times
Reputation: 910

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Going through my newsfeed this morning when I cam across this headline Federal Reserve holds power beyond what we can imagine in The Hill.

The author is professor of economics at NYU but this is beside the point. There is a widely held belief, even on this forum, that the Fed has unlimited powers (read $$$$) to stabilize the economy. Even worse, the Feds monetary powers are almost unchecked and hence the belief that Fed indeed has unlimited tools. Thus with each economic crisis, the Fed wades deeper into uncharted waters as we have seen in the past few months and there are no signs of the Feds pulling back. If anything, they are signalling their ability to dig deeper into their magic tool box.

With the lack of regulation of the Feds mandate, your guess is as good as mine as to how this is going to end especially if we see another bigger wave in the absence of a covid 19 therapy. If you ask me the Feds cure may be worse than the shutdown and if you combine both the effect might be a lethal combination.
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Old 06-13-2020, 07:57 AM
 
10,547 posts, read 4,580,802 times
Reputation: 2153
Quote:
Originally Posted by 1ondoner View Post
Going through my newsfeed this morning when I cam across this headline Federal Reserve holds power beyond what we can imagine in The Hill.

The author is professor of economics at NYU but this is beside the point. There is a widely held belief, even on this forum, that the Fed has unlimited powers (read $$$$) to stabilize the economy. Even worse, the Feds monetary powers are almost unchecked and hence the belief that Fed indeed has unlimited tools. Thus with each economic crisis, the Fed wades deeper into uncharted waters as we have seen in the past few months and there are no signs of the Feds pulling back. If anything, they are signalling their ability to dig deeper into their magic tool box.

With the lack of regulation of the Feds mandate, your guess is as good as mine as to how this is going to end especially if we see another bigger wave in the absence of a covid 19 therapy. If you ask me the Feds cure may be worse than the shutdown and if you combine both the effect might be a lethal combination.
I think after the federal gov't and Fed are done with this recession, many more people will understand the power and nature of our fiat currency.

Sure it could be abused. But it also can afford we the people significant relief during downswings or improvements in our standards of living. So policy is key to a proper balance of function.

My guess is this will end well, like it did after the 2008 crash. At that time the Fed created a huge amount of temporary new money and we got over the crash without causing undue inflation or loss of value of our USD.

https://www.google.com/search?source...4dUDCAg&uact=5
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Old 06-13-2020, 08:36 AM
 
9,609 posts, read 10,231,140 times
Reputation: 8396
Quote:
Originally Posted by 1ondoner View Post
Going through my newsfeed this morning when I cam across this headline Federal Reserve holds power beyond what we can imagine in The Hill.

The author is professor of economics at NYU but this is beside the point. There is a widely held belief, even on this forum, that the Fed has unlimited powers (read $$$$) to stabilize the economy. Even worse, the Feds monetary powers are almost unchecked and hence the belief that Fed indeed has unlimited tools. Thus with each economic crisis, the Fed wades deeper into uncharted waters as we have seen in the past few months and there are no signs of the Feds pulling back. If anything, they are signalling their ability to dig deeper into their magic tool box.

With the lack of regulation of the Feds mandate, your guess is as good as mine as to how this is going to end especially if we see another bigger wave in the absence of a covid 19 therapy. If you ask me the Feds cure may be worse than the shutdown and if you combine both the effect might be a lethal combination.
There is nothing important in common, macroeconomically speaking, between Mugabe's, "Land Reforms" and other idiotic ideas like price controls, an expensive war with The Congo etc. Mugabe managed to morph Zimbabwe from a significant net food exporter into a significant net food importer in a few years. He similarly wrecked manufacturing output. Those two key actions against the backdrop of an otherwise fragile economy were just too much.

Mugabe's ideas were based around literally stripping land, farms, businesses etc. from whites and giving the same to black Zimbabweans as political payback. Of course nearly all recipients had no relevant experience and it all cratered fast.

_____________________

Further, that piece does not read anywhere near as negatively as your summation and editorial imply.
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Old 06-13-2020, 09:11 AM
 
Location: Heart of flyover America
643 posts, read 253,951 times
Reputation: 1222
America may not be a third world nation just yet, but we certainly have the finances of a third world nation. At this point, we're a banana republic masquerading as a superpower.

The one and only thing a central bank can do is issue debt. Yet, all economic crises are, fundamentally, debt crises. Trying to solve a debt crisis with more debt is like trying to extinguish a fire with gasoline.

What the Federal Reserve is doing has never worked for any nation in the history of man. I believe that the Fed is creating a currency crisis and sovereign debt crisis for the history books. We'll probably end up with the biggest currency and sovereign debt crisis in history.
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Old 06-13-2020, 09:38 AM
 
10,547 posts, read 4,580,802 times
Reputation: 2153
Quote:
Originally Posted by Taggerung View Post
America may not be a third world nation just yet, but we certainly have the finances of a third world nation. At this point, we're a banana republic masquerading as a superpower.

The one and only thing a central bank can do is issue debt. Yet, all economic crises are, fundamentally, debt crises. Trying to solve a debt crisis with more debt is like trying to extinguish a fire with gasoline.

What the Federal Reserve is doing has never worked for any nation in the history of man. I believe that the Fed is creating a currency crisis and sovereign debt crisis for the history books. We'll probably end up with the biggest currency and sovereign debt crisis in history.
Gov'ts, communities, corps and other entities issue debt. Central banks can create money and buy that debt.
And since that debt can be neutralized, we are much less likely to encounter a debt crisis. Inflation of course remains a possibility. But when the central bank has to act at such high and serious levels, preservation of businesses and jobs and the health and standards of living of we the people is more important.
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Old 06-13-2020, 01:13 PM
Status: "Mi amigo es mi fan." (set 3 days ago)
 
2,830 posts, read 796,773 times
Reputation: 4071
I know this is going to go counter to a lot of the popular narrative about the Fed right now, but I actually don't believe they fully appreciate the enormous deflationary pressures that presently exist in the world. I think we get back to record highs in short order across the board with stocks because of all of the record liquidity floating around right now, as the Main Street vs. Wall Street discord continues to heat up. The Fed will have a false sense of "mission accomplished/back to normal" coupled with fears of over-heating and they will back off. That will be the fatal policy mistake that sets a massive deflationary unwind into motion starting later this fall into the middle of 2021.
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Old 06-13-2020, 07:14 PM
 
1,659 posts, read 384,594 times
Reputation: 1787
It’s a myth that QE didn’t cause inflation. While QE didn’t cause inflation in the U.S. hot QE money flows into Asia, Australia and New Zealand caused enormous run ups in asset prices in those areas. Now those asset bubbles are poised to burst because buyers have dried up along with the torrent of Ben dollars.
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Old 06-13-2020, 07:39 PM
 
10,547 posts, read 4,580,802 times
Reputation: 2153
Quote:
Originally Posted by mathlete View Post
It’s a myth that QE didn’t cause inflation. While QE didn’t cause inflation in the U.S. hot QE money flows into Asia, Australia and New Zealand caused enormous run ups in asset prices in those areas. Now those asset bubbles are poised to burst because buyers have dried up along with the torrent of Ben dollars.
QE did not cause general inflation in the USA. QE caused asset inflation, stocks and homes for example. Low interest rates do that.
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Old 06-13-2020, 08:37 PM
 
9,609 posts, read 10,231,140 times
Reputation: 8396
Quote:
Originally Posted by heart84 View Post
I know this is going to go counter to a lot of the popular narrative about the Fed right now, but I actually don't believe they fully appreciate the enormous deflationary pressures that presently exist in the world. I think we get back to record highs in short order across the board with stocks because of all of the record liquidity floating around right now, as the Main Street vs. Wall Street discord continues to heat up. The Fed will have a false sense of "mission accomplished/back to normal" coupled with fears of over-heating and they will back off. That will be the fatal policy mistake that sets a massive deflationary unwind into motion starting later this fall into the middle of 2021.
It amazes me when people, not just you, think they see things The Fed. does not see or understand.
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Old 06-13-2020, 08:42 PM
 
9,609 posts, read 10,231,140 times
Reputation: 8396
Quote:
Originally Posted by mathlete View Post
It’s a myth that QE didn’t cause inflation. While QE didn’t cause inflation in the U.S. hot QE money flows into Asia, Australia and New Zealand caused enormous run ups in asset prices in those areas. Now those asset bubbles are poised to burst because buyers have dried up along with the torrent of Ben dollars.
Where did you get the bit about US QE money flowing in Australia etc.?
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