I agree, we should let rates go to 5%. It is funny because the fed is supposed to raise and lower rates based on inflation but now we just have a fed that keeps rates at the bottom permanently, so what is the point in even having the fed? We now have a government that keeps the printing presses on full throttle permanently, and a fed that keeps the printing presses on full throttle permanently, wtf is the point of this?!?! Is there any doubt that this will end in disaster? We may as well just set rates to 2.5% and get rid of the fed, since that is where they are going to keep them for the next decade.
I knew that it would come to this..i.e. they'd literally never raise rates again and bury their collective heads in the sand and pretend there were no mal-effects to perpetual ZIRP. It's so utterly predictable, simply because the establishment sees rising asset prices as their only form of cover for the myriad horrific policies they have enacted over the years. Even this past week, literally every media pundit associated a collapsing stock market with the economy...after years of a sluggish economy, it takes the "confirmation" of a market collapse for them to open their eyes. The masses are so completely deluded by this implied correlation between rising stock prices and a robust and "growing" economy.
This is the inevitable end result of Keynesian economics every single time. They start out supposedly trying to get out of a recession, so they print a bunch of money and lower rates, and the economy cant sustain itself unless this new juice remains in it because we have held the economy up at a new unsustainable level instead of letting it retract. Then we get a new recession, so we lower rates further and we print more money, and once again we have to keep the presses going at unsustainable levels, that are a notch higher than the last time. Then we get another recession and we ratchet it up another notch. Now we are at the end game, we have rates permanently as low as they possibly can be, and we are printing money at the maximum rate we possibly can, all to support an unsustinable inflated economy, and we have no more bullets, we cant drop rates any lower, and we cant run even higher deficits. The next stage if we dont turn it around is when we turn into zimbabwe and bankrupt the nation trying to chase this model of inflation. Here is a video someone posted of that dipshit keynes, and I have posted the funniest quote from the video in red below. "Now that we have gotten off the gold standard There is no danger of the exchange falling to far, there is no danger in a serious rise in the cost of living." In other words keynes thought that once we could print our way out of any mess everything would be peachy. And the incredible thing is that there are still tons of liberals who witness what is going on in the entire world and they still support keynesian economics, it blows my mind. <iframe width="640" height="390" src="http://www.youtube.com/embed/U1S9F3agsUA" frameborder="0" allowfullscreen></iframe>
For those who think QE3 is coming. What are the key dates, you reckon? Any opinions backed by some arguments? I've looked at the budget estimate of CBO and Government deficit is over 1 trn USD. That's new money needed and from what I gather foreign players are only to go as far as to not unwind current treasury holdings. Looking at that piece of information in isolation - rates will go up unless Fed buys. There simply won't be any money. My opinion is that QE3 would have to happen within a year (which isn't very narrow at all).
Good synopsis. Where we differ is that I don't view the Keynesian ideology as a sort of naive approach to tackling the impossible. Instead, I believe it to be at the very heart of a deliberate wealth transferance mechanism. It's intended to boost asset values, sustain the "unsustainable" growth in the public sector...all the while tying together some sort of political backing for not "letting the world end". I do think that we've reached a critical point however. The expansion of the Fed's balance sheet from 2009 thru the middle of this year has basically reached the point where they're "crying uncle". Without the same rate of growth, does anybody really believe that the barn burner of a bear market rally off the lows of 2009 can continue? I certainly don't, notwithstanding all the gleefull bullishness off of the market rallying in a liquidity vacuum.
Yeah, I don't really know either. It's easy to become overly cynical with their track record these past few years. The consensus is the Jackson Hole "get together". Even if QE3 never happens, you can mark my words, that some "anonymous source" or a Fed governor, or Bill Gross, or whomever will make a press release intra-day to goose the markets should another slide occur. Probably, a handful of these perfectly timed "QE3 imminent" soundbites if the market's aren't conforming to their "model" (i.e. a 45 degree angle North).
Mathematically speaking, Bubble Ben still can do a change - decrease a rate to negative numbers! Why not, it's not a big difference - let's say , -0.25% interest, meaning you owe 99.75% of what you borrowed 1 year ago. In deflational world, the lender will be more then happy to get back 99.75 of the loan, while purchasing power is raising with deflation.. That opens a lot of ammo boxes for Ben - I don't care even about my comission..