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How are raising interest rates going to make people spend more?
If anything they'll move from the savings into bonds, or encourage more savings...
Thoughts? His premise makes sense to me. But he sure is alone on an island with this idea.
How are raising interest rates going to make people spend more?
If anything they'll move from the savings into bonds, or encourage more savings...
If the asset buying isn't going to work, and the second sentence I quoted certainly seems like a good reason to believe that it wont, then why do it given the inflation risk?
And who knows, maybe if people start to see their savings accounts actually start earning them some money again maybe they'll start to feel a little better about things.
Here's a take on cheap US credit, aka QE2, aka flooding the planet with cheap dollars.
Why the U.S. Has Launched a New Financial World War -- and How the Rest of the World Will Fight Back
On the deepest economic lane, the present global financial breakdown is part of the price to be paid for the Federal Reserve and U.S. Treasury refusing to accept a prime axiom of banking: Debts that cannot be paid, won't be. They tried to "save" the banking system from debt write-downs in 2008 by keeping the debt overhead in place. The resulting repayment burden continues to shrink the U.S. economy, while the Fed's way to help the banks "earn their way out of negative equity" has been to fuel a flood of international financial speculation.
http://www.alternet.org/module/printversion/148481
Great article Boutons. Thanks.
I know that this is unpopular thinking, but I believe that the public generally has the right idea, i.e., do NOT start buying things again until it looks like we can AFFORD to start buying things again. Right now, we are still too fragile to do so.
Thus, I believe that it is good that the economy is slow to recover this time, because I fear that if we came back too quickly, we would repeat the same behaviors that got us into this mess. Paying down debt is what we should be doing, and we need to take however much time is required to get our personal and national balance sheets back in balance.
Of course, politically, not having a 'v' shaped recovery is fatal. I just think it is the right thing in the long term.
It's absolutely the right thing in the long term. We had a good binge and the hangover hurts. Another bottle of Tequila isn't the cure for a hangover. All they are doing is delaying the bigger pain if they do QE2.
This is really weird for the political forum.
We are all involved political thinkers even though we may be radically and passionately on the opposite side of some issues.
This one seems to be unanimous from B_D on the left all the way to the far right.
QE2 sucks. The only people that are gonna benefit from it short term are the predatory big banks with their foreign arbitrage deals.
Long term, Average Americans will pay for their ridiculous profits through inflation and seeing their dollar savings and wages devalued.
gfy, cc.
I'd say it's because the general public sees that the stimulus DID save some jobs, but bankers still seemed to be stupid as and careless with taxpayer money, saving their own hides first.
Given that, the average American is probably getting his own house in order first. Given all the fraud the financial industry's been spewing up, I wouldn't want to take out a big-time loan now.
Good read. Thanks for posting.
On the contrary, I'm trying to refinance and go long with the debt I have.
I wouldn't bet the house on a devalued dollar though. Could happen? Yes.
Actually, that's exactly what I'm gonna do. I think I'm safe. I've got probably 50% equity and want to refinance about 200K at 30 fixed. That will be like free money if we hit 5% inflation rate which is lower than I anticipate.
I figured you meant betting on inflation and paying back with a cheap dollar.
It's a plan, but make sure you can pay it off regardless. Should China decide to actually revalue their currency, the dollar will shoot up. So have your bases covered.
Slightly off topic, but I heard on the radio today that banks will be buying US debt. I just wonder if they are doing this with the zero interest loan money congress is giving them to loan to businesses?
Short term the dollar might get squirrelly but I'm pretty confident of the long term trend. I'm OK. I'll basically have a 200K 30 year mortgage at 5-6% on house/property that's pretty unique (2 acres, huge oaks, reasonably nice totally renovated 100 year old rock home with horse barn and riding arena 5 minutes from the med center) that I could probably short sell for $350K in this ty economy.
hey, full of , they line up at the Fed window, suck out the billions, then turn around and buy T-bonds, absolutely no risk, sucking more wealth out of the taxpayers. They won't lend to The Real Economy. Do you have Internet access?
Oh yeah. That's free money for them. Borrow at basically 0% and make 150 basic points on the spread.
Gotta love what the liberals in congress do for their banker buddies.... NOT!
Sadly WC, it's not just liberals. I don't really expect much change even if the Republicans take the house and senate.
o TARP!!!
GOP and Dems are both in bed with these guys.
Does anybody even buy at this point that these predators really needed liquidity?
Well, anyone, including republicans who play these power plays with our money need to be ousted. I know some republicans are involved too, but most are democrats. Most from both parties I bet are liberal, meaning democrats and RINO's. I can see some just being misguided, but I'll bet the bulk of them who vote for such policies are corrupt. In both parties.
You have seen me state on numerous times I am not affiliated with either party, right? I generally vote 3rd party, republicans 2nd, and on a rare occasion I will vote for a democrat.
I think they need to fail if they cannot stay alive by merit.
WC, sadly you still don't get it. Virtually every politician in the US is talking "jobs" and the only bullet they have left is QE2. Then QE3. Etc... I fear the tipping point has been reached.
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