Fed weighing new form of bond buying

Discussion in 'Economics' started by Banjo, Mar 10, 2012.

  1. Banjo


  2. Isn't that an oxymoran increasing economic growth through stimulus without inflation?

    Surely any introduction of money supply will increase inflation. Regardless the liability of the central bank will make it more volatile.
  3. FED is hoping that sheeple will be too mesmerized to realize this is more quantitative easing.

    Today in America you have 2 kinds of people

    #1 The true idiots who will swallow literally any kind of lie forever.

    #2 Woken up Americans who won't buy lies of any kind anymore.



  4. The Fed is doing these QEs for one simple reason: to fund US budget deficits. We are at interest rate levels where rate changes are negligible to incentive impacts. In fact, the trade is so carried out and frontran that an increase in the interest rate (the opposite of what the fed proposes) would signal an end to easing and an urgency to get out of treasury bonds and into more risky assets.
  5. I suppose the trick will be figuring out when the curve starts to shift, how much that shift needs to move before we get an inverted market or rising rates.

    My bet is if there's ever a 25 basis point parallel shift up, that should be the exit signal for a lot of people, but, admittedly, that'll be way too late.
  6. What I want to know is why inflation is so low. I know you are going to say because the market has declined because of wage deflation but the ability to purchase foreign goods and other issues should have created a much higher level of inflation.

    Any thoughts.
  7. zdreg


    official statistics are fudged i.e. lies
  8. Other countries printing money at a relatively faster pace than even our money printing. Too many euros, euro drops, too many pounds, pound drops. But it isn't that they're printing any larger amounts of currency than ours but that the rate of printing or monetary expansion rate is significantly faster.

    The inflation rate is ex-food and energy. Both of these are at a 10% clip, but don't show up in the basket of consumable goods typical of the average American household as weighted in the cpi. Hedonics, numerical cheating through geometric weighting, allows governments to be less than honest about any absolute level of price increase.

    Because the price is distorted by hedonics especially, which is an indeterminable value of how much more pleasurable it is to use an item, think efficiency, or how people substitute cheaper goods when prices increase, therefore economists keeping track of CPI argue that those items be given more weight rather than less.

    I think the post 1980 or 82 method is a structural change in economic data, but I think the average American basket of goods is much different. Maybe not food wise, but food doesn't count for inflation anyway, and neither does gas. Both of these deplete discretionary income when they rise, but aren't included in the measures of inflation supposedly due to their volatility.

    I look at all commodities and they appear all to have risen the past 5 years, but these figures aren't included since the average American doesn't really own very much in the way of precious medals.

    If I had to say, the true rate of inflation is approaching 10-15% when accounting for the increases in food and energy on any commodity you want to look at for the past two years, where if we see another 10% inflation in these discluded items the US anticipated hyperinflation of a 2 year average inflation rate of 25% is now manifest, but not reflected in the data. Give it another 6 months and I have no serious doubts energy will rise, and with it the cost of food primarily tied to the cost of corn.

    These are all factors that will lead to price increases (inflation), but they aren't accounted for in the data for those reasons.

    Hyperinflation's already here.

    This video's kind of dated, but explains hedonic and geometric weighting audibly so that you don't have to think about the implications of these statistical indiscretions.


    <iframe width="560" height="315" src="http://www.youtube.com/embed/eb1n1X0Oqdw" frameborder="0" allowfullscreen></iframe>
  9. This would be a dummy answer, zdreg.

  10. We have had a lot of defaults..?

    Defaults = destruction of money

    Inflation will have it's turn.
    #10     Mar 10, 2012