President Obama Re-Elected - Page 1167

On November 04 2012 04:01 johny23 wrote:






Well, I highly doubt anyone here is able to understand the ramifications of everything that has happened and the possible consequences(MYSELF INCLUDED).

My opinion is that, the system were on is not sustainable. We had QE, QE2, QE3, Operation Twist and etc. The Fed is now buying MBS's and our bonds. We've done all this and we've barely kept our head above water. I am seriously interested to here how you think this can go on forever without serious ramifications. Not to mention interest rates cannot go lower. Are you saying to quadruple down and do even more stimulus?

I haven't even began to touch on the pro debt policies that other countries are starting to and have already enacted. My question to you is what are you proposing? You're saying we can do this forever?

No one is saying that QE will go on forever. The Fed isn't stupid, it wouldn't have done QE if they didn't have an exit strategy, and they do have an exit strategy, they can hold the debt until it mature or sell it off as the economy recovers.

On November 04 2012 04:14 jdseemoreglass wrote:

When I say "treat them well," note that I include "charging them lower prices" as a potential factor. For most people, it is the most important factor.

On November 04 2012 04:25 jdseemoreglass wrote:
Illegal immigrants can't vote, or at least shouldn't be able to. Criticizing illegal immigration has nothing at all to do with hispanics/latinos. It's a straw man to extrapolate illegal immigration policies to racism, and a despicable extrapolation at that.

On November 04 2012 03:50 paralleluniverse wrote:

Are you an Austrian economist? This is a popular Austrian theory, just let the entire economy crash and hit rock bottom, and somehow, inflicting this massive pain will fix everything. It's like Germany's masochistic obsession that economic pain is the solution to the Eurozone 's woes, meanwhile unemployment in Spain and Greece hits 25%. Enough pain yet?

But why should we believe any of it is true? What's so wrong with the economy that nothing short of destroying it, so that it can be rebuilt, can fix it? After all, the Great Depression wasn't fixed because people had suffered enough economic pain, it was WW2.

There is no reason why we can't have endless growth and endless debt as long as babies are born, technology improves and people work. Maybe endless growth won't be so endless when all the resources on the planet are depleted., but no one expects that to happen anytime soon.

On November 04 2012 04:27 DoubleReed wrote:


Uhm, a lot of illegal immigation policies involve Racial Profiling. By definition that's racist.

On November 04 2012 04:30 jdseemoreglass wrote:

It's not correct at all to say "a lot of illegal immigration policies involve Racial Profiling." It's just factually inaccurate.

On November 04 2012 04:11 johny23 wrote:






I am not disagreeing with what you're saying. However, I disagree with your time frame(even you admit at some point we would peak out if for no other reason then physical resources), as I think we are starting to hit that plateau of growth that we are not ready to push past for multiple reasons.

I point to all the extreme measure we're taking to try and push ourselves over this hump and from what I see it's not working to well. Even if you want me to concede and say the economy is slightly improving (which I disagree with) it took so much debt, so many "QE's' and so many pro debt policies just to get this slight improvement. The diminishing returns should be enough alone to show you we've hit a plateau.

I am not saying the world CAN NEVER grow past the level it has now, I am simply stating it's not going to happen without a fairly substantial correction first. It's just what I see, I am no genius.

On November 04 2012 04:37 Feartheguru wrote:


How is calling the language spoken by most Latinos, "The language of living in a ghetto" not racist.

On November 04 2012 04:39 jdseemoreglass wrote:

That isn't an illegal immigration policy. Please read more carefully and stay on topic.

On November 04 2012 04:24 paralleluniverse wrote:

The Fed has always maintained that monetary policy is not a panacea and cannot solve the problem alone. So I don't see why you're so shocked to learn that QE1, 2 and 3 hasn't sparked a massive recovery. You're overestimating it's anticipated effects. Not so surprising since the best part about QE is that it keeps disproving the claims that hyperinflation is just around the corner. Any day now.

No one is saying that QE will go on forever. The Fed isn't stupid, it wouldn't have done QE if they didn't have an exit strategy, and they do have an exit strategy, they can hold the debt until it mature or sell it off as the economy recovers.

Yes, stimulus is the answer. Government should increase spending as households increase savings and pays off debt, because if no one spends, there's no demand. No, borrowing money isn't evil. Interest rates are at historic lows, basically negative real interest rates, because investors and companies have so much idle capital that they are willing to pay the government to take their money.

Put it this way: If the market isn't signaling to the government, "shut up and take my money", then why are the yields on government bonds so low?

On November 04 2012 04:40 RvB wrote:


Solvency is actually a huge part of the reason why. In Europe atleast banks have to up their equity by law and Basel III. Well anyway the equity a bank has to hold is based on their risk weighted assets and for government bonds rated highly ( US, Germany, Netherlands etc.) you don't have to hold any equity.
So basically banks have money that they can't really use since it would increase their risk weighted assets and that would in turn decrease their solvency so they buy bonds to get atleast some return on their money. Add to this that the US still has an underlying economy and that nobody believes they will default very soon you get low interest rates.

http://en.wikipedia.org/wiki/Risk-weighted_asset
http://en.wikipedia.org/wiki/Basel_III

On November 04 2012 04:38 paralleluniverse wrote:

Your argument seems to be that we've done so much, yet we're still stuck in a slow economy.

You need to note that the output gap is about $1 trillion a year. While it would have been higher without the stimulus, we shouldn't expect spending $787 billion once off, and buying $40 billion in MBS each month as QE3 does, to be enough to close it.

On November 04 2012 04:30 jdseemoreglass wrote:

It's not correct at all to say "a lot of illegal immigration policies involve Racial Profiling." It's just factually inaccurate.

On November 04 2012 03:40 ZeaL. wrote:


I dunno man. The game plan seems to be "when in doubt, shift to the right".

On November 04 2012 04:45 coverpunch wrote:

This is quite a series of mischaracterizations.

Ben Bernanke has been insistent that quantitative easing was a necessary and vital policy to stave off disaster and kick off growth, and he's been forced to admit subsequently after each round that its effect has been smaller than he thought and MUCH smaller than economic theory has suggested. Which he already knows because he spent the 90s criticizing Japan for doing too many rounds of QE. It doesn't work. The banks aren't asking for liquidity but for some reason the Fed is giving it to them anyways.

Stimulus is NOT the answer. Who the hell is the government going to give money to? People who can't afford their standard of living? That's a moral hazard. Companies that lose money? That's stupid and crazy. Companies that make money? Maybe, but companies that make money already get money. People that can afford their standard of living? Possibly, but that's a hard sell to the public (see, tax cuts).

Interest rates that are low isn't an indication that the government has a blank check to create massive debt. There are many different reasons why that can happen. If you don't see the folly in that, you shouldn't be allowed anywhere near debt, especially not debt that you want other people to help pay off. If a debt crisis comes, we won't see a long period of warning signs, it will be a sudden massive ballooning of the problem.

How effective are balance sheet policies? After nearly four years of experience with large-scale asset purchases, a substantial body of empirical work on their effects has emerged. Generally, this research finds that the Federal Reserve's large-scale purchases have significantly lowered long-term Treasury yields. For example, studies have found that the $1.7 trillion in purchases of Treasury and agency securities under the first LSAP program reduced the yield on 10-year Treasury securities by between 40 and 110 basis points. The $600 billion in Treasury purchases under the second LSAP program has been credited with lowering 10-year yields by an additional 15 to 45 basis points.12 Three studies considering the cumulative influence of all the Federal Reserve's asset purchases, including those made under the MEP, found total effects between 80 and 120 basis points on the 10-year Treasury yield.13 These effects are economically meaningful.

Importantly, the effects of LSAPs do not appear to be confined to longer-term Treasury yields. Notably, LSAPs have been found to be associated with significant declines in the yields on both corporate bonds and MBS.14 The first purchase program, in particular, has been linked to substantial reductions in MBS yields and retail mortgage rates. LSAPs also appear to have boosted stock prices, presumably both by lowering discount rates and by improving the economic outlook; it is probably not a coincidence that the sustained recovery in U.S. equity prices began in March 2009, shortly after the FOMC's decision to greatly expand securities purchases. This effect is potentially important because stock values affect both consumption and investment decisions.

While there is substantial evidence that the Federal Reserve's asset purchases have lowered longer-term yields and eased broader financial conditions, obtaining precise estimates of the effects of these operations on the broader economy is inherently difficult, as the counterfactual--how the economy would have performed in the absence of the Federal Reserve's actions--cannot be directly observed. If we are willing to take as a working assumption that the effects of easier financial conditions on the economy are similar to those observed historically, then econometric models can be used to estimate the effects of LSAPs on the economy. Model simulations conducted at the Federal Reserve generally find that the securities purchase programs have provided significant help for the economy. For example, a study using the Board's FRB/US model of the economy found that, as of 2012, the first two rounds of LSAPs may have raised the level of output by almost 3 percent and increased private payroll employment by more than 2 million jobs, relative to what otherwise would have occurred.15 The Bank of England has used LSAPs in a manner similar to that of the Federal Reserve, so it is of interest that researchers have found the financial and macroeconomic effects of the British programs to be qualitatively similar to those in the United States.16

To be sure, these estimates of the macroeconomic effects of LSAPs should be treated with caution. It is likely that the crisis and the recession have attenuated some of the normal transmission channels of monetary policy relative to what is assumed in the models; for example, restrictive mortgage underwriting standards have reduced the effects of lower mortgage rates. Further, the estimated macroeconomic effects depend on uncertain estimates of the persistence of the effects of LSAPs on financial conditions.17 Overall, however, a balanced reading of the evidence supports the conclusion that central bank securities purchases have provided meaningful support to the economic recovery while mitigating deflationary risks.

Source: http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm

In a hard-hitting 2000 paper titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” Bernanke declared that “far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.” He proceeded to lay out a number of actions the Bank of Japan could take. And he called on Japanese policy makers to act like F.D.R. and do whatever it took: “Japan is not in a Great Depression by any means, but its economy has operated below potential for nearly a decade. Nor is it by any means clear that recovery is imminent. Policy options exist that could greatly reduce these losses. Why isn’t more happening? To this outsider, at least, Japanese monetary policy seems paralyzed, with a paralysis that is largely self-induced. Most striking is the apparent unwillingness of the monetary authorities to experiment, to try anything that isn’t absolutely guaranteed to work. Perhaps it’s time for some Rooseveltian resolve in Japan.”

Bernanke had some specific proposals that could serve as advice for the Fed today. One set of options would have it take a larger role in financial markets. Short-term interest rates may be zero, unable to go lower, but longer-term rates aren’t. So the Fed, which typically buys only short-term U.S. government debt, could expand its portfolio, buying long-term government debt, bonds backed by home mortgages and so on, in an effort to drive down the interest rates on these assets. This is the strategy that has come to be known, unhelpfully, as quantitative easing.

Source: https://www.nytimes.com/2012/04/29/magazine/chairman-bernanke-should-listen-to-professor-bernanke.html