Bernanke's Play = Monetizing the Debt

Discussion in 'Economics' started by gnome, Mar 12, 2008.

  1. Today, it's "AAA paper" [wink, wink].

    Soon it will be junk bonds.

    Then, title to foreclosed mortgages.

    Eventually, it will become.. "Got a non-performing asset? Bring it to the Fed and we'll print some more money and take it off of your hands... the tax payer will buy all of your mistakes".

    For "the good of the banking system", or "for the good of the country", or "for the good of the people".

    You CAN connect the dots on this one, right?

    I suspect the Fed has also taken similar actions covertly with T-Bonds... printing money and buying bonds to keep bond yields ridiculously low.
  2. Daal


    inflation is a problem no doubt about it, but just let a few major players collapse and a spirals of margin calls take place and you would see inflation risk turn to dust. credit could collapse staggering amounts and deflation would prevail no matter what oil did, m3 would sink like a stone and the economy would freeze. you dont want that to happen even if it means a weaker currency
  3. Actually, I DO want to see that happen. We'd get over a "deflationary adjustment" + there would be significant changes in how we do business. The path we're on now is not simply "a weaker currency" but rather ruination for almost all Americans. :mad:
  4. Daal


    that sounds like what the austrians economists recommended in the 30's 'dont provide liquidity the bottom is coming'
  5. "Provide liquidity"? For years we were told that the market was rising on the "floodwaters of liquidity"... Fed's been money-pumping at about 15% for the last 5 years (closer to 20% right now).

    Too much liquidity created the problems we're having.

    Monetizing bad debts is the "ultimate liquidity".... in fact, we're on the path to "liquidity-fy" ourselves right into bankruptcy.
  6. Bazooka Ben obviously is trying to inflate out of this mess. He will gladly accept $200 oil and $2000 gold as long as his banker friends keep their fat bonuses and Wall Street remains prosperous.

    Of course, middle class has no clue that they are being inflated away into oblivion. Only when they no longer can live the same lifestyle that they did a few years ago will they realize that they've been robbed and inflation is killing them.

    There will be no deflation with this kind of money growth, it is impossible. All these knuckleheads worried about deflation and what happened to Japan in the 90s are clueless. With all this debt that the government has, that is clogged up in the banks, the only way to relieve it is to inflate the currency and make future debts smaller in real terms. The Fed is pumping $100 billion here, $200 billion, there, it quickly adds up to massive inflation.

    With each Fed desperation liquidity splurge will come another surge higher in commodities. Commodities are going to be king for many years to come, Jim Rogers called it to a T, that man is a genius.
  7. Excellent Commentary All

    One way to look at what is happening is to view the world as if has already gone through the adjustments for total globalization....

    Total Globalization would mean that all effective labor pools have been tapped...

    All energy resources have come into line as costs divide their relative usages...

    One currency has been formed out of necessity and fairness....

    Most information has been centered on the 7th generation internet....

    Localized government pools of money have been formed via consumption taxes....and allocated via public internet vote....

    No taxes...just consumption taxes....products are priced as to their cost to the environment and resources....

    It no longer pays to migrate as all pay is equal for labor....

    A universal language is adopted....

    All companies are trading electronically as stocks.....all employess own shares to enforce decent productivity and well as the better distribution of wealth....

    Medicine is controlled by a universal medical collective paid by/ from consumption taxes....

    Education is centered on the 7th generation internet where total immersion, virtual reality, career reality information, etc.....are made available....

  8. this is what happens when you have "D" students in charge,

    they take the overly simplistic view of things, and then demand it be so,

    they turn to the Mozillo's of the country to create artificial monetary assets,,,

    they dupe the average citizen into buying new homes, new durable goods, new consumer goods, new HDTV's and the like,,,

    then they arrange to Nafta their jobs and stable manufacturing, construction and other hard asset work,,,,

    they then replace it with stupid discussions on the notion that we are becoming a service economy,,,,

    then they remove the budgets behind the legal and federal enforcements to protect the consumers / citizens,,,,

    essentially they have removed all the supports for all classes, not just the middle class, lower class and upper-lower class rich...

    then they talk about no child left behind, while they abandon their parents along the highway of commerce,,,,

    and then they raid the Treasury to give tax breaks to their wealthy friends,,,, which has caused Municipal, State, Quasi-Federal and other First Responder budgets to go unfunded and overtax their local citizens,,

    and you wonder WHY we're in the fix we're in?

    people around the country, including elected officials of all ranks are not collectively stupid as to believe all these events are a result of globalization.... or the other excuses that are offered...

    in a word, Bernake proved to be exceptionally wise in getting in front of this band wagon, and limiting this monetizing the debt for 28 days.

    this may be his finest hour, but its eclipsed by those that are in the other branch...
  9. Who is the watchdog to make sure the loans are for ONLY 28 days? Maybe "rolled over"... maybe rolled "again and again"... maybe rolled so many times they just become permanent, then "fuggetaboutit".

    The Pandora's Box of monetizing bad debts has been opened... for anything and everything they "need" to or "want" to... "for the good of the people", you know... :mad:

  10. very good point!

    very good!

    hope springs eternal
    #10     Mar 13, 2008