I'm curious about Bernanke's definition of the word 'little'. He uses that on the Wapo op-ed saying QE1 had little effect on the broad money supply. Bank credit has shrunk by almost $700b, QE1 was $1.7T with $1T in excess reserves, $700b went out to circulate in the economy as M1 M2 M3. Essentially the Fed prevented a collapse in the broader measures of significant magnitude yet he refers to that as 'little', that is curious to say the least
I suspect this has to do with iexpectations again, they are back to the range the Fed wants it to be so he is trying to anchor them there by telling people that QE1 has 'little' effect on the money supply and did not cause high inflation. He is conveniently expanding his definition of the word 'little' in order to have his cake and eat it too M2 yoy expanded from 5% yoy to 11% yoy back when the Fed decided to not sterilize their lending programs(Q4 2008), I wouldn't call that 'little' I suppose its like 'extended period', when things are bad, this means they are promising no rate hike for many months, when things improve they keep reminding people its not a time table and they will look at the data If the Japanese expectations were really bad right now I bet he would not say they had 'little' impact on the money supply
My residual fed futures position is quite small at this point and upside potential is limited. I also trimmed a bit of gold and silver during the rally(Plus I had cut gold by 50% a while back). At this point I have no big bets, have a long in GGP(Which is out of BK, I will probably sell soon) some shorts GCI( newspaper business in decline), MBI(ABK is going bankrupt soon and if the courts dont save them they might go there as well), UTA(fake chinese airline that is not as big as their site make it seem, check bronte capital blog), PPD(ponzi scheme still squeezing) but those positions are small. The only more significant one is the XHB short, which didn't participate in the rally much(showing relative weakness). I have a short in the EUR against JPY and CHF which is in the red I wouldn't be excited about buying USTs, US stocks(or foreign for that matter) and commodities at these levels so I will have to stick with cash. But overall I feel like my next big bet has to be shorting the EU, I dont want to venture in the equity land so it will probably be the EUR against the USD when people stop selling the USD for the 154th day on the same old QE news
How can you find it repulsive, and then advocate stock holders and creditors seeing a single dime? No, the stocks, bonds and trade debts should have been allowed to go to zero, and then they should have been nationalized and then IPOd when conditions favoured it (most likely this year). The rewards would then have been 100% to the taxpayer, who created 100% of the returns. Stock holders and creditors, who caused 100% of the calamity, would have lost 100% of their dumb money. The idea that bond holders did not lose 100% is morally obscene. To even contemplate a single cent for stockholders, let alone 500%+ returns in 18 months, is nothing but a legalised grand theft taxpayer.
ALL libertarians HAVE to disagree (whereas a reasonable conservative or socialist can agree with you), because monetary policy violates core libertarian principles - legal tender laws are coercive; fractional-reserve banking is fraudulent; quantitative easing is theft. Coercion, fraud, and theft committed against innocent people, are all prohibited under basic libertarian ethics. You cannot be classed as libertarian if you support these kinds of measures. You are trying to justify monetary policy by claiming that it would prevent certain outcomes which you view as undesirable, or worse than the alternatives. Even if your claims are totally correct, they are based on utilitarian reasoning i.e. on an appeal to consequences. But the whole point of rights-based philosophies like libertarianism is that ethics is not about trying to optimise outcomes; it is about not doing wrong. Under that system, it is wrong to fuck over one person to benefit 1 billion people, even if that would on balance provide a "net improvement" to society. It is not sufficient to just assert that something is "a critical function of government". Some people think that slaughtering millions of innocent civilians in aggressive wars is a "critical function of government" too. That doesn't mean that any libertarians agree with it. So, your entire line of reasoning is flawed. You can't say "all reasonable libertarians" and then follow it up with something that totally violates multiple core tenets of libertarian ethics. No person who would support that could possibly be libertarian, any more than someone who supported war could be a pacifist.
How is my happiness relevant to anything? The point I was making is that there was no systemic stability argument for bailing out shareholders or bond holders. There was only a systemic stability argument for keeping banks going on an operational level - depositors, borrowers, and users of ATMs don't care if the money goes or comes from the government or a private corporation, they only care that their money is handled efficiently and doesn't disappear in smoke. Changing the recipient of profit from the likes of David Tepper and Bill Gross to the taxpayer who has to pay for the whole mess, would not have altered the system's stability one iota (actually in the long run it would massively improve it). Secondly, it would clearly have been a far less unjust outcome. I realise that ideas like injustice, unfairness, and gross infringement of rights of hundreds of millions of people may seem irrelevant to a utilitarian like yourself, but most people with ethical principles are sick to their stomach at the idea of hiking taxes and selling our children into generational debt bondage when the primary beneficiaries are a bunch of multi-millionaire speculators. Hence the recent US election results, shortly to cause frayed nerves at a Hamptons resort near you.
In terms of considering outcomes, that is correct. But we can definitely have a discussion about the *means* that were employed, rather than the outcomes that may or may not have happened. And the means that were employed, and are now being employed, are clearly sickening and exploitative no matter which way you slice it. Things like bailing out rich speculators using money provided by working stiffs on 30k a year, and stealing from dollar holders by printing money, are morally wrong *even if they work* in bringing about the consequences that their architects desire. That is the point you seem to be missing - luckily the US voting public are not so easily strung along by the technocrats as you and Daal appear to be. One further thing that the Bernanke crowd are not considering is how far this public reaction might go. We recently saw results at the ballot box - a clear expression of US public will against "bailout nation". Yet the Fed, in typical tone deaf technocratic fashion, shows no apparent signs of realising that a seismic shift has just taken place. If voting does not get the desired results, then certain elements of the US public may well take matters into their own hands. Bernanke needs to seriously consider that if he keeps up with this course of action, he may end up suffering something a lot worse than a hostile Congressional committee. Let's put it this way - if intrade started offering a Bernanke assassination market, I'd be tempted to buy. The Tea Party crowd are mad as hell and I'm sure that more than a few of them would seriously considering bumping off the Fed chief if they feel that voting hasn't gotten them anywhere.
Well I'm not a libertarian, as I said I dont like to put labels on myself. I dont find them useful at all. As far as QE goes its a policy choice so it doesnt affect the argument I made(Then the government ought be in control of monetary policy, the choices and how they go about surely but can debated but my main point is that the control needs to be there). As far as fractional reserve banking goes I dont believe its fraudulent, it leaves banks illiquid but as a long they dont advertise that they can redeem all deposits at once I dont see any fraud there, only illiquidity. As far as legal tender laws goes well it doesn't affect my argument because if it IS a government function to run monetary policy then they have the right to use force to do it(As a long voluntary arrangements are not available). Its like the government facing war in the homeland and running out of voluntary soldiers, they will have to draft even though its not a preferred choice Its not that just I would view it as undesirable, its that most people. If people had to choose between and 1930's style depression with a strong dollar(25% UR and 33% less real GDP) and a slugglish economy but with a weaker dollar(10% UR 4% less GDP) they would choose the later(If they had any brains). I understand you argument that sometimes its better to fuck everyone in order to protect the right of a few. I dont believe it applies here, I mean who can possibly defend that its better to have NGDP cut in half but have a strong fx value of the dollar as compared to sluglish NGDP growth but a weak dollar? I fail to see a rational ethics code saying that the domestic and foreign purchasing power of a currency should be valued above living standards to the detriment of society. Specially because in my scenario the net of currency debasement is a boost to living standards and the hard money way is a net decline. At the end of the day the hard money way will be theft as well, theft of jobs and incomes
As I said I dont believe there are a lot of things that are worth a 50% decline in NGDP(In any reasonable ethics code). Its not like I'm saying we need to kill jews to prevent a depression. I can accept an argument against QE on technical grounds but not on philosophical grounds because in this case it seems clear to me that the best choice for the government is to maximize living standards given that most people being debased are going to benefit anyway(from the stronger economy, incomes and jobs). This is not to say that there aren't losers but the net is positive to such extent that it is the right choice