QE is permanent, it will never go away...ever. Print it all.

Discussion in 'Economics' started by Grandluxe, Apr 4, 2013.

  1. <B>Helicopter QE will never be reversed

    Quantitative easing will never be reversed. It is not liquidity management as claimed so vehemently at the outset. It really is the same as printing money.</B>

    7:49PM BST 03 Apr 2013

    Columbia Professor Michael Woodford, the world's most closely followed monetary theorist, says it is time to come clean and state openly that bond purchases are forever, and the sooner people understand this the better. "All this talk of exit strategies is deeply negative," he told a London Business School seminar on the merits of Helicopter money, or "overt monetary financing". "If we are going to scare the horses, let's scare them properly. Let's go further and eliminate government debt on the bloated balance sheet of central banks," he said. This could done with a flick of the fingers. The debt would vanish.

    Lord Turner, head of the now defunct Financial Services Authority, made the point more delicately. "We must tell people that if necessary, QE will turn out to be permanent."

    A breakdown of the global trading system might be one, armed conquest or Fascism may be others - or all together, as in the 1930s. There were two extreme episodes of money printing in the inter-war years. The Reichsbank's financing of Weimar deficits from 1922 to 1924 - like lesser variants in France, Belgium and Poland - is well known. The result was hyperinflation.

    Less known is the spectacular success of Takahashi Korekiyo in Japan in the very different circumstances of the early 1930s. He fired a double-barreled blast of monetary and fiscal stimulus together, helped greatly by a 40pc fall in the yen. The Bank of Japan was ordered to fund the public works programme of the government. Within two years, Japan was booming again, the first major country to break free of the Great Depression. Within three years, surging tax revenues allowed Mr Korekiyo to balance the budget. It was magic. Stephen Jen from SLJ Macro Partners says Western analysts have been strangely slow to understand the breathtaking scale of what is under way. The Bank of Japan is already committed to bond purchases of $140bn a month in 2014. This is almost double the US Federal Reserve's net purchases (around $75bn a month), and five times as much as a share of GDP.

    Prof Woodford and Lord Turner both think the Fed has already begun to monetise America's deficits, though Ben Bernanke has been studiously vague whenever pressed in testimony on Capitol Hill. These are early days. It is tentative and deniable. Bondholders across the world may suspect that Britain, the US and other deadbeat states are engineering a stealth default on sovereign debts, and they may be right in a sense. But they are warned. This is the next shoe to drop in the temples of central banking.

  2. zdreg


    it can't happen successfully ,as in japan of the 30's, in the US or Western Europe because the government makes up a much greater part of the economy than in the 30's

    another possible reason is the existence of future markets and other financial instruments to counteract the actions of governments
  3. The fed keeps talking about their"exit strategy". Is this a stalling tactic to buy more time, or some mysterious new "tool"? Rumours are out the Ben will exit by year end and leave the mess for his successor.
  4. For some reason the media keeps trying to say the FED is talking about exiting. It is that a few board members have been voicing growing concerns about the unintended consequences of "QE infinity". However, the majority vote is and has been to continue QE until lowered unemployment to approximately 6.5%. And, they are willing to tolerate more inflation in the ball part of 2.5%. So regardless of how the media tries to explain some recent market move, the FED is still pedal to the medal.

    The expected chairman to be has been Yellen. Nothing will change for a while.
  5. S2007S


    There is no exit plan, they say there is, but there isnt, all they know how to do is keep QE at full capacity and let it run, if they were smart enough they would have done just one QE and said okay thats it, but after 3 QE's they have no clue how to stop the printing, its going to continue for years and years, every time they say they are close to winding it down they end up pumping the economy with even more worthless trillions. Even Japan is now getting into the fun!
  6. Of course. Some of us saw the writing on the wall back in 2008. Their plan is to always incrementally up the ante, while trotting out a few "concerned" members who take a "hawkish" stance in order to keep up appearances. Once a year or so, the "market" is left to consider that there won't be another iteration of quant easing...but when the market drops around 10%, suddenly Ben the Magician appears to announce more easing.

    There are a few fools on this board who do believe that Ben will "tighten" when one of those obscure policy goals have been achieved. It's so ridiculously naive and utterly stupid that anybody would beleive such nonsense. Just as ZIRP was an "emergency measure" and yet we've already been guaranteed 8 years of it. The whole thing is a sham and a bad joke.
  7. S2007S


    Speaking of QE

    Wilbur Ross said this today on cnbc,

    "I think QE has done a few good things," he said. "It's certainly true it's contributed to the stock market bubble and the bond market bubble, but it's also true that it's helped reignite the housing industry which is one of the very few strongly health parts of the economy."

    Least he is one of the few who acknowledges where stock prices have gone to based off of QE!
    Asset bubbles are forming everywhere!

  8. S2007S


    Its seems to be the market controlling the amount and how long QE stays for, like you said once the market starts to cry and starts to sell off they just push more QE straight through the system....thats why this entire rally has nothing but air underneath it. People will realize this after the market falls.
  9. S2007S


    Today is just more of an excuse to keep the worthless money printing going and QE permanent for the next decade!!!

    :p :p :p :p :p
  10. Tsing Tao

    Tsing Tao


    The Fed IS Monetizing the Debt. Just ask the Fed!


    Fisher says it right in that interview. "We are monetizing the debt".
    #10     Apr 5, 2013