World economy talk

[uls]

And now Bernanke is trying to the same as Greenspan. After the bubble bursted they try to artificially re-inflate. People have no 9/11 now though so there is no more "sympathy" for the economy so to speak unlike during 9/11 Bush used that as an excuse to make people spend and help the economy and their country...

the thing about the debt based fiat currency system is that it has to keep on inflating to function properly

debt is created, more debt has to be created to service the previous debt created, so forth and so on

if less debt is created than previous amount created, previous debt doesnt get paid, the system gets screwed (disinflation, deflation)

which is what's happening now

there's a lot of debt not getting serviced coz not enough new debt is being created

so they have to create more inflation to keep the whole thing going

they're still trying to create a bubble big enough to replace the housing bubble

so far, ZIRP and QE not working

[tidus1203]

Yeah but its not functioning properly as they plan. Keynesian techniques are screwed!

[safeorigin]

well... they're too stubborn to do the alternative because they deemed it as an "unscientific" approach.

[Monseratto]

Is QE supposed to be encouraging inflation? Why are retailers doing the opposite to encourage consumers to buy?

[tidus1203]

DETROIT (AP) -- General Motors' employees, retirees and car dealers will get a chance to invest in their company when the automaker's stock is sold to the public.

http://finance.yahoo.com/news/GM-wor...&asset=&ccode=

Fool me once, shame on me. Fool me twice, shame on you!

[uls]

Mons:

Is QE supposed to be encouraging inflation? Why are retailers doing the opposite to encourage consumers to buy?

retailers would naturally prefer to sell high to make a larger profit but if sales are slow, they have to lower their prices to increase sales

but falling prices can destroy an economy

in an environment of falling prices, nobody will want to spend

everybody will wait for prices to fall further before buying

if you knew real estate prices are falling, you won't buy immediately

you'll wait until prices stop falling (hit bottom) before buying

when asset prices fall, wealth is destroyed

like what's happening to real estate prices in the States

keep in mind that in a debt based fiat currency system, positive inflation has to be maintained

there always has to be more money (debt) created than previous amount created

ever since the credit bubble burst in 2007, commercial banks are creating less money (less lending, less borrowing by the private sector)

even if the USG increased spending, it still isnt enough to fill the hole left by private sector

US inflation:


the Fed has 2 mandates -- price stability and full employment

they're failing on both

the Fed wants inflation at 2% (maybe even higher)

and we all know about US unemployement

so they're maintaining zero rates to create inflation

lower rates = cheap money = encourage borrowing

but there isnt much borrowing coz US consumers are already buried in debt

they can't or aren't willing to take on more debt

the Fed uses QE to increase liquidity

but the problem is not supply (the banks already have tons of reserves held at the Fed)

the problem is demand

[uls]

i was talking about the Fed wanting to create inflation...

the Fed wants people to EXPECT inflation

when people expect inflation, they'll spend money now rather than later

Fed Considers Raising Inflation Expectations to Boost Economy
http://www.bloomberg.com/news/2010-1...t-economy.html

Federal Reserve policy makers may want Americans to expect inflation to accelerate in the future so they spend more of their money now.

Central bankers, seeking ways to boost flagging growth after lowering interest rates almost to zero and buying $1.7 trillion of securities, are weighing strategies for raising inflation expectations as well as expanding the balance sheet by purchasing Treasuries, according to minutes of the Fed’s Sept. 21 meeting released yesterday.

Some Fed officials are concerned that expectations of lower inflation will become self-fulfilling, damping demand by increasing borrowing costs in real terms, the minutes said. By encouraging Americans to believe prices will start rising at a faster pace, the Fed would reduce inflation-adjusted interest rates and stimulate the economy. Chairman Ben S. Bernanke said in 2003 that Japan could beat deflation by using a “publicly announced, gradually rising price-level target.”

[Monseratto]

How can people spend willingly if there is still so much uncertainty?

[safeorigin]

partly because that's their culture...

spend now, never worry tomorrow...

they're people with at least 5 credit cards after all...

they have TV ads about buying something using credit cards as "priceless"...

there are also ads that encourage taking loans to pay for the house...

tells a lot about what kind of people they are...

[tidus1203]

EUR/USD closing in at 1.40... Pero more on EUR strength than overall USD weakness... Axel Weber the German head of the Bundesbank and a voting member of the ECB does not seem to believe asset purchases will help solve the problem...

[uls]

How can people spend willingly if there is still so much uncertainty?

exactly

that's why individuals and companies are hoarding cash

coz of the uncertainty

i'm sure you've come across reports that US companies are currently sitting on huge amounts of cash

they're holding cash coz they're not confident about the future

they're not expanding or hiring

millions of people are unemployed

others are afraid of losing their jobs

baby boomers are beginning to retire

people are trying to pay off debt

people are trying to save

and the Fed wants people to spend?

the Fed is punishing savers with ZIRP

the Fed is destroying the USD with QE

the Fed wants to force money out of hiding

the Fed wants people to spend

the Fed wants inflation

their goal is to keep the debt based fiat currency Ponzi system going

[safeorigin]

reminds me of them telling China to spend...

[uls]

reminds me of them telling China to spend...

China sells more stuff than it buys

the US buys more stuff than it sells

the US wants rebalancing

the US wants China to let the yuan rise

China cannot just let the yuan rise

it will destroy its economy

[uls]

EUR/USD closing in at 1.40... Pero more on EUR strength than overall USD weakness... Axel Weber the German head of the Bundesbank and a voting member of the ECB does not seem to believe asset purchases will help solve the problem...

China reported selling at 1.400

that kept the EUR from going higher

[uls]

spot gold

[uls]

AUD/USD passes .99

[uls]

USD index


EUR/USD

[tidus1203]

2008 FX markets here we go again!!!! Basta short USD against anything sure money!

[uls]

asset price reflation

thanks to Uncle Benny

[ghosthunter]

AUD/USD passes .99

I just checked BDO's foreign currency exchange rates.

AU$ is now over US$.

Shocking...