Can someone explain what this article is about? I don't get it but would love to know Keneysian economists' perspective on QE in order to know how the general public reacts, cheers
When the economy is deflating as people pay down debt and asset prices fall money printing won't lead to hyperinflation. Problem I see is when things finally start to turn around if you base money if highly inflated and a recovery comes you will find that's when it bites and you have to do something. The other scenario is no one buys your bonds any more so you have to keep printing and your currency falls to the floor.
Debt deleveraging FAR outweighs "money printing"...by an order of magnitude or more. Hence deflation.
bank robbers buried the notes, then after some time has past, they take out to use them. same principle being applied here, then banks got paid interest while the general public get 0 percent, but banks are not using their money - to lend to small businesses, when the bank take out their money, just like now, every where are looking for the dollars, and the USD suddenly strengthen. no hyperinflation so far, but once the public starting to withdraw their savings, and using credits then we will have hyperinflation...
Silver thorn is on the money IMO, this much money printing under normal circumstances would lead to hyperinflation immediately. But it is basically going straight to banks and staying there to shore up their losses. Some is being flipped to places like Australia to get a better yield but that cash is just papering over bank bad assets. The inflation will come once everything unfolds or sovereign countries finally fall over.
thing is bernanke thinks if he buys government bond that hes avoiding deflation, the guy is a half wit the world needs a serious financial cleanse so we can create an economic model for our future genrations to learn by. this will be hard on all of us but I am willing to make the sacrifice
Well he kind of can in the short term. Him buying bonds pushes traditional traders out and down the risk curve push the prices of everything up. That doesn't stop people paying down debt and spending less, it just papers over and makes everything look more rosey until the smoke clears.
i suspect Bernanke knows EXACTLY what he is doing his greatest skill is convincing people he is doing the right thing while he leads them down the path of financial destruction
Money printing by itself does not lead to hyperinflation. Money printing leads to high inflation. There is a world of difference between high inflation and hyperinflation. Hyperinflation is A TOTAL LOSS OF CONFIDENCE IN THE CURRENCY and its associated bonds etc. This is the difference. Gonzalo Lira has some good blog posts on this topic.
thats a good point rbaggio i would say if Fort Knox gets audited and its bad news i would say that would represent a shortcut to a loss of confidence in the currency keep bluffing Bernanke .... and maybe contain the USA to high inflation instead
Hyperinflation will not give a warning signal, In this environment all it will take is a change in sentiment towards US Treasuries, once the run is on no one will want to be left holding the bag. At the moment Hedge funds see T's as a safe haven as they know the fed will step in and buy if yields move up giving them time and liquidity to move out of T's, but the point will come when the Fed's balance sheet is seen as toxic and its ability to buy unlimited amounts of T's compromised. It is then when Hedges, Banks and Countries holding T's will run for the exit.
