Peter Schiff: How Can Reinflating Real Estate Prices Be All You've Got?

The Federal Reserve Bank "has checked into the Roach Motel of monetary policy," says Peter Schiff in a new rant about Fed Chairman Ben Bernanke's latest harebrained scheme. 

Variously called Operation Twist, Quantitative Easing 3, and (by Schiff) Operation Screw, the new Fed plan to buy $40 billion worth of high-risk debt at low interest rates each month until morale improves is, Schiff says, the kind of thing that should make Bernanke a figure of fun for all Americans. 

"How can reinflating a housing bubble be all that you've got?" asks the investment broker and doomsaying financial commentator. "I mean how long did it take you to come up with this idea? How many brains at the Federal Reserve? Apparently there was only one guy that dissented. It was almost unamimous. Can you imagine everybody at the Fed sitting around this big table. 'How do we revive the economy? What's the plan?' And somebody comes up with, 'Let's create a housing bubble, so we can create a bunch of wealth, and people will go out and spend it, and we can get people to speculate on real estate prices because they're going up, and all this is gonna create jobs in the housing sector, it will cause more home building, more home remodeling, we'll be able to consume more.' Somebody came up with that, and then somebody else said 'Great idea!' Didn't they see that movie? Don't they know how it ends?"

Because I make fun of alarmist and apocalyptic language whe it is used by Keynesian interventionists, it's fair to point out that Schiff calls the QE3 decision "a day that will live in infamy," announcing that the Fed has "sealed its fate"  and put "the final nail in U.S. dollar and the entire American economy." I keep my deep longing for the apocalypse in check by remembering that central planners can hurt but not really control an American population that has been getting broker every year since 2007. 

But monetary expansion, whether it's done through QE, the fed funds rate or a handcranked printing press, was achieving one of Bernanke's goal's even before Thursday's announcement: It's making personal wealth formation impossible again. According to the Bureau of Economic Analysis' latest monthly Personal Income and Outlays report [pdf] "Personal saving — disposable personal income less personal outlays — was $506.3 billion in July, compared with $516.2 billion in June. The personal saving rate — personal saving as a percentage of disposable personal income — was 4.2 percent in July, compared with 4.3 percent in June."

Here's Schiff: 

Comments

[Palin's Buttplug]

"High risk debt"?

Agency debt is the lowest risk next to Treasuries.

[Corning]

Hey shrike i have been meaning to ask you:

You have been telling us the economy is doing great...if it is doing so great why the need for QE3?

[Palin's Buttplug]

I said the economy is doing great relative to 2007-09.

[Paul.]

So why the need for QE3?

[CE]

Let me be clear, the private sector is doing fine.

[darius404]

Which is TOTALLY why QE3 is being proposed!

[Ted S.]

There are people who say the economy isn't doing well.

[shake]

but its got electrolytes!

[Palin's Buttplug]

And when did Bernanke say he was reinflating the housing bubble? This is a tell-tale sign of wingnuttery - ridiculous straw houses.

[The Hammer]

To people who can actually think beyond 3-word talking points, the entire point of keeping interest rates stupidly low is to induce people into buying houses that aren't worth as much as they will pay for them, thus reinflating the housing market. You're still a fucking moron.

[Overt]

That has nothing to do with QE3. The recent plan is for the fed to buy risky assets that financial institutions would otherwise have to sell at a deep discount or write off at losses. This gives the institutions new cash to loan out or otherwise invest.

Basically it absolves these firms of all the stupid shit they did in the past, and gives them the cash to do so again.

[Pro Libertate]

It's one of an increasingly long line of bailouts.

LET THEM FAIL.

[Palin's Buttplug]

You make the same mistake others here do. The Fed is not buying bank debt thus bailing out no one.

[Cytotoxic]

Exxcept you're wrong you fucktard that's exactly what they're doing.

[Palin's Buttplug]

Fuck off, dipshit.

http://www.bloomberg.com/news/.....text-.html

[Ptah-Hotep]

Do you know what a MBS is?

[Palin's Buttplug]

Cytotoxic is too stupid to know what a security is.

[Ptah-Hotep]

Actually I was speaking to you. You understand, from your own link, that they are buying MBSs. This allows the companies to buy more mortgages. It is a round-about way to prop up the banks by keeping interest rates low.

[Cytotoxic]

Shriek is too stupid to think beyond sucking Bernanke's cock.

[Palin's Buttplug]

Interest rates are not low on new non-conforming mortgages if they occur at all. Risk aversion is back into vogue today. Go try to buy a home with a shitty FICO.

Really, you don't know this market at all.

[Cytotoxic]

Which just makes the fed action even stupider and more dangerous.

[Paul.]

The recent plan is for the fed to buy risky assets that financial institutions would otherwise have to sell at a deep discount or write off at losses. This gives the institutions new cash to loan out or otherwise invest.

The words are coming out of your keyboard, but yet I get a sense you can't see the folly of them.

[Palin's Buttplug]

So only housing benefits from low interest rates?

[Cytotoxic]

Apparently. That's why the economy is in the shitter.

[Jordan]

Plenty of Wall Street cronies benefit from it, until the bubble bursts. Joe Schmoe gets screwed the entire time.

[Corning]

Business loans have interest rates of about 10%, credit cards are at like 17%, banks will not give loans for raw land, same with commercial construction, real estate contract are at about 7%.

So it isn't really housing cuz you can't get a loan to buy land, subdivide it, and build houses on it.

You can get a loan to buy a built house to live in and that is about it.

[Romulus Augustus]

10% really? My business just got a $7million loan for Libor plus 250bp and no pg.

[Marshall Gill]

So the "libertarian" shriek thinks that QE3 is more classical liberalism?

[Francisco d Anconia]

Ever notice he won't respond to comments calling him on being a libertarian?

He's a left wing shill. At least Tony is honest about it.

[Corning]

The Fed is buying mortgage backed securities (loans on houses) from banks. $40 billion per month.

How is it possible to raise value of home loans without encouraging banks to loan more money on houses?

[Corning]

How is it possible to raise value of home loans without encouraging banks to loan more money on houses?

Put another way:

How is it possible for the Fed to increase demand for home loans without encouraging banks to generate more loans on homes?

[Hugh Akston]

Why should the Fed care about the demand for home loans?

[Corning]

Why are you asking me?

[Palin's Buttplug]

The Fed is not buying bank debt - they are buying agency (GSE) debt.

http://www.bloomberg.com/news/.....text-.html

Big difference.

[Paul.]

Why does this not make me feel better?

[Cytotoxic]

It's the difference between death by burning kerosene and death by burning gasoline.

You're retarded.

[Tulpa Doom]

The agencies in question are Fannie Mae and Freddie Mac. Last seen begging for bailouts to avoid insolvency.

[Fist of Etiquette]

"Our mortgage-backed securities purchases ought to drive down mortgage rates and put downward pressure on mortgage rates and create more demand for homes and more refinancing," [Bernanke] said.

More here.

[Corning]

Fist that is a direct quote of Bernanke!!!

Everyone knows to directly quote Bernanke is right wing propaganda!!

[Palin's Buttplug]

I specifically inquired about this "reinflating the bubble" nonsense and where it came from.

We now have credit standards again and Moody's can be sued for misrating AAA's thanks to Obama. There won't another bubble.

[Paul.]

There won't another bubble.

According to administration rhetoric, the lack of a bubble is also known as a market failure.

[Cytotoxic]

I think we all know what Obama really means by 'misrating'.

[califernian]

OMFG what a moroon

[CE]

Ummm, buying mortgage backed securities sure seems like it's meant to reinflate the housing bubble. Why not buy corporate debt? Or invest in startups? Or just give the cash away?

[Fist of Etiquette]

"Ben Bernanke's plan to revive the U.S. economy and create jobs is to inflate another housing bubble. That's it. That's what the Fed's got."

Give them a break. They're just trying to get past November.

[The Derider]

Here's Milton Friedman supporting quantitative easing in Japan in the 90's.

http://www.forbes.com/sites/ti.....e-for-qe3/

[Paul.]

Interesting. Looks like Milton fucked up, because QE3 failed spectacularly in Japan. I wonder if there's anything we can learn from this?

[Palin's Buttplug]

Milton = Paul Krugman?

They both fail the LP Purity Test.

[Cytotoxic]

Yes we can learn something from this. Milton was not perfect, and PB is retarded.

[Paul.]

That's the key difference between past rounds of quantitative easing?which involved fixed dollar amounts for limited periods of time?and yesterday's open-ended commitment to buy assets until the economy recovers.

Smilez. Beatings will continue until morale improves!

[Jordan]

Lost Decade(s) here we come!

[Corning]

In 1989, the Bank of Japan stepped on the brakes very hard and brought money supply down to negative rates for a while. The stock market broke. The economy went into a recession, and it's been in a state of quasi recession ever since. Monetary growth has been too low. Now, the Bank of Japan's argument is, "Oh well, we've got the interest rate down to zero; what more can we do?"

It's very simple. They can buy long-term government securities, and they can keep buying them and providing high-powered money until the high powered money starts getting the economy in an expansion. What Japan needs is a more expansive domestic monetary policy.

The Japanese bank has supposedly had, until very recently, a zero interest rate policy. Yet that zero interest rate policy was evidence of an extremely tight monetary policy.

When exactly did the US bring "money supply down to negative rates"?

Also where does Friedman say we should bail out failed banks by buying their toxic assets enabling them to go out and generate more?

[Corning]

Also Joe you forgot to mention the first part:

Milton Friedman: Yes, indeed. As far as Japan is concerned, the situation is very clear. And it's a good example. I'm glad you brought it up, because it shows how unreliable interest rates can be as an indicator of appropriate monetary policy.

During the 1970s, you had the bubble period. Monetary growth was very high. There was a so-called speculative bubble in the stock market.

Again when did the US bring the money supply to negative rates? When did it put on the breaks? There was no point at which this happened in the past 90 years in the US. So how can you claim our situation is similar?

[hotsy totsy]

Brakes, dammit, BRAKES!!

[Bill]

Some of the words had the same letters?

easing?

It's exactly the same. Plus it worked for Japan. Aren't they the country we are so worried about overtaking our economy in size?

Oh, sorry that's China. I always get those two confused.

The good news is that this is a purely non-partisan move and there is absolutely no intention of influencing the election or temporarily driving up the stock market to near 1500.

[Invisible Finger]

OOOOOO!!! joe puts up the "Milton Friedman Defense Shield"! As if that is some sort of indisputable fact or logical conclusion.

Those poor old bosses need all the help they can get.

[cthorm]

I'm really getting tired of the Austrian view of monetary policy. No, hyperinflation is not coming. Think otherwise? Then make a killing on mispriced TIPS options, Gold, or other real assets. The Fed made a good move by making monetary policy LESS DISCRETIONARY and signaling that QE would continue until growth catches up, not at an arbitrary date.

[The Hammer]

Right, just keep hitting it harder! That'll fix it!

[Hugh Akston]

Needs moar caps lock.

[Paul.]

You know what I'd like to hit harder?

[Heroic Mulatto]

Dat ass?

[wef]

that's a useful site

thanks

[Heroic Mulatto]

Did the Fed also remember to sacrifice a virgin so we'll have a good harvest this year?

[Cytotoxic]

Gold's price is moving up and up.

LESS DISCRETIONARY. As in more discretionary.

[Joe R.]

My gold mining company stock (IAG) went up nearly 20% in two weeks, and about 7% on Friday alone. So, yeah.

[Jordan]

I'm sorry that reality offends you. Be sure to stop by again after this bubble bursts.

[Corning]

No, hyperinflation is not coming.

That is only because it is already here.

Household wealth dropped 40% over the past 4 years. The lack of demand generated from such a collapse in wealth should have deflated prices. Instead we have seen prices rise 10% over that same period.

A drop in purchasing power due to massive expansion of currency in the market is inflation. No way around it.

[R C Dean]

Asset prices down. Consumable prices up. Personal income declining. Workforce shrinking. Bond markets rolling over as interest rates rise.

Oh, but the stock market is up.

This is a recovery?

[Corning]

Oh, but the stock market is up.

Not so fast.

SP had a bubble in 2000 that burst then in 2007 which burst and it has built another one...

How soon until that one bursts? 1 year? 2?

[Palin's Buttplug]

You're saying we would be in a deep depression now without fiscal and monetary stimulus.

We agree.

[Corning]

Deflation would increase purchasing power. In other words; recovery.

The fiscal and monetary policy of the past 4 years has stopped that from happening.

[Palin's Buttplug]

Only those of the monied class would benefit from increased purchasing power.

The distressed would be out of luck with forced asset disposal.

[Corning]

The distressed would be out of luck with forced asset disposal.

What you mean the poor unmonied TARP recipients who would have had their assets auctioned off to to those rich evil smaller banks and investors who did not over-invest in mortgage backed securities and sub-prime loans.

The absolute horror this would bring upon the People's Wall Street Mega banks is unthinkable!!

[Cytotoxic]

Only those of the monied class would benefit from increased purchasing power.

And you know anybody with savings or other monies.

My goodness you are awe-inspiringly retarded.

[hotsy totsy]

Shit, I'm buyin' gold.

[sasob]

A rise of 10% in prices over a four year period is not hyperinflation. Even 10% per year is not hyperinflation. As a matter of fact, Israel had an annual inflation rate of 100% or more back in the late 70s - early 80s, and even that was not hyperinflation. Under hyperinflation prices change daily - even hourly; it becomes a panic situation. Not that it couldn't happen here, of course, but we are a long ways from that extreme.

[Butts Wagner]

Is there an upper limit to inflation? Can the dollar consistently lose value over time forever? What global conditions are required for this to be good for citizens of the US who are paid in dollars?

[sasob]

Can the dollar consistently lose value over time forever?

It depends - forever is a long time. But as long as other currencies are even crappier I suppose the dollar will remain the "prettiest girl at the dance." It's better to be paid with even a pig in a poke for your services than to not be paid at all.

What global conditions are required for this to be good for citizens of the US who are paid in dollars?

I can't imagine any conditions ever under which it is good to lose purchasing power. But if global conditions are such that other countries' currencies are losing value even faster, then it is probably good to be paid in dollars - as long as they remain the world's reserve currency and are widely accepted, of course.

[sasob]

with even a pig in a poke for your services

Or a poke in a pig - whichever - your milage may vary. 😉

[Tim Cavanaugh]

I think it's low playing of the game to keep pointing to the point where you made the correct prediction, but I'd like point out that I have never predicted hyperinflation, and I did note that there was reason to believe in deflation right around the two quarters (in 2009) when CPI actually went down.

My point is that you don't need hyperinflation to screw up household balance sheets. "Under control" inflation has been doing that just fine. If you are making the same as or less than you were in 2007 (which is my case, and the case for the average American, per the Fed's household income study) and if your household net worth is down by more than a third (which is also the case for the average American, per the Fed's Flow of Funds data), then it is an additional cornholing that your dollar is now only worth 90 cents, having lost 10 percent of its value since 2007. (This again is per an official source: the BLS' CPI figure.)

The crime is not hyperinflation. It's the prevention of deflation. The strongest period of growth in this country's history, from the founding of the republic until 1913, was a period of gradual overall deflation. Americans do not fear deflation. Americans like deflation. That's something that's obvious to anybody who's ever held or shopped at a two-for-one sale. It's only a mystery to monetarist morons.

[Palin's Buttplug]

I read you and agree that you have never hyped hyperinflation.

The crime is not hyperinflation. It's the prevention of deflation.

Aren't journalists salaries suffering from market forces? How can you knock anything macroeconomic (non regulatory) that prevents your salary from falling and still support markets?

Maybe there should have been a great "capitulation" of journalists where few survive today?

[Corning]

Maybe there should have been a great "capitulation" of journalists where few survive today?

Matt and Tim have written extensively about this very subject.

and yes i think they agree that MSM does need a market shakedown...though they would probably say it is happening anyway like it or not.

[Tim Cavanaugh]

Not sure what you're asking. Have I knocked something that prevents my salary from falling? Clearly, journalism as a profession should be paying steadily less, because productivity gains have been massive in the last 15 years. My experience in the mainstream media is that it is not paying steadily less. At the L.A. Times, the lowest-paid ed board member was making more than $82,000 a year. I think that is absurdly high for what they produce, and the fact that I managed to lock in an even higher salary for a few years only proves that I know how to maximize my self-interest. I'm not arguing for or against anything. I just want to let the market take its course.

[Cytotoxic]

Not sure what you're asking.

Neither is Shriek.

[darius404]

I believe PB is implying that people should only support things that raise their own salaries. That is, he doesn't seem to understand that people would support certain ideas because they believe in them, and not because those ideas benefit them alone.

A breakdown:

Aren't journalists salaries suffering from market forces?

He seems to be implying you should oppose market forces because they're bad for your salary.

How can you knock anything macroeconomic (non regulatory) that prevents your salary from falling and still support markets?

An implication that the only way for your salary to stay steady is to repudiate market forces, and that it is the only reasonable thing to do: supporting things that don't directly benefit you doesn't make sense to PB.

Maybe there should have been a great "capitulation" of journalists where few survive today?

PB seems to have not read any of the numerous blog posts and articles on Reason about the decline of establishment media.

[VG Zaytsev]

I think that Shriek's poorly stated thesis is that deflation would result from a rapidly shrinking money supply, decrease in velocity and collapsing economic activity. Ala the end of the beginning of the Great Depression (Q3 31-Q1 33).

With that cycle hitting journalists particularly hard since they are involved in a previously declining sector that would see accelerating declines in the GD-2 paradigm at the same time that a retarded economy offered little if any opportunities for the newly unemployed journalists.

Of course, he ignores the fact that a rapid contraction of the money supply is only possible with widespread failures of commercial banks, something that is literallly impossible today. Deflation today would be like the slow deflation of the eighteenth century which corresponded with every rising living standards.

He's also assuming that debt levels would remain constant with rapid deflation putting an ever increasing burden on consumer-debtors.

[TheZeitgeist]

Established favor the debtor at expense of the saver with modern money.

When the government is in the hole $trillions$ and banks are in the hole $trillions$ and neither can make good on those payments, eviscerating what a 'trillion' is before the bill is due makes perfect sense. Everybody knows it. Even Keynes-clowns like Krugman admit as much from time-to-time in candid moments.

Conversely, if deflation - moderate in prices for things going down much as they've gone up - were to occur today, it would crush the government's balance sheet in several years.

[Tulpa Doom]

Think otherwise? Then make a killing on mispriced TIPS options, Gold, or other real assets.

Done. I made a return of just over 100% in gold over five years.

[Bill]

My prediction has never been hyperinflation but rather inflation over 10% per year and a misery index as bad or worse than under Carter.

Since every president since Carter has changed the way inflation or unemployment is calculated, we may already be there. But, it is not on the 24/7 news cycle because a "progressive" is in office and because the fake unemployment and inflation data no longer correspond to the ones in the 70's.

[Invisible Finger]

LESS DISCRETIONARY

Yeah, discretion is a bad thing, especially when offering credit. Why, it had to be DISCRETION that caused the housing collapse, not lack of discretion.

[CE]

How does making housing more expensive help the economy?

Wouldn't we be better off if our basic shelter expenses were much lower, so we could spend money on other stuff, or you know, save and invest some?

[Cytotoxic]

Judge throws out Wisconsin's labor reform as it pertains to local employees.

http://news.nationalpost.com/2.....on-rights/

[darius404]

Yeah, isn't that nuts? To say that not dealing collectively with employees violates their rights to free speech and association? Does the judge also think if I cover my ears, I'm violating people's right to free speech?

[Cytotoxic]

THIS.

[Tulpa Doom]

Reading further it turns out that the judge in question is one step above justice of the peace. The state supreme court already ruled the law constitutional, so this is just some loose cannon getting street cred with the unions before he gets slapped down by his superiors.

[Cytotoxic]

Thanks. I didn't have time to go through all of it. Walker will appeal and should win. Anything that can be done about this judge?

[Tulpa Doom]

He's elected by Milwaukee voters. So, probably not. Basically, the union-bought judges can keep striking the law down over and over with no consequences.

[Cytotoxic]

Never elect your judges.

[darius404]

Is appointing them any better? I'm not sure there are any good options here.

[Cytotoxic]

It's the only way for judicial independence until we have JUDGE HAL AI do it for humans.

[darius404]

It's the only way for judicial independence until we have JUDGE HAL AI do it for humans.

But it's NOT judicial independence; we're just making sure whoever we elect is the one appointing judges, which ensures whoever is appointed as justice will side with the state in most matters. And I don't have great confidence that we'll elect people who will appoint good judges. I don't have a personal preference, but I'm not seeing the argument for making them appointees.

[hotsy totsy]

Good!

[Jerry on the road]

You can't have hyperinflation when you have 1 billion Chinese workers willing forced to work more for less.

[johnl]

How much oil or food does a typical Chinese factory worker make?

[Tulpa Doom]

Six hundred million screaming Chinamen, to be exact.

[Francisco d Anconia]

Last I heard, there were a billion screaming Chinamen.

/Darryl Bates

[hotsy totsy]

There was at one time 400 million subsistence level farmers in China, who added nothing to the economy but perhaps subtracted a bit. They barely maintained themselves.

[sasob]

They may have added little or nothing to the economy, but they were harvested just the same.

[John C. Randolph]

Ben Bernanke's purpose in life is to show us all that academic credentials are no indication of competence.

-jcr

[Da worm]

Discussions like these are the main reason why I'm embarrassed to call myself "libertarian".

In the 1930s, when interest rates were at zero, people were pretty fuckin' sure money was easy. Turns out, they were wrong - it was insanely tight.

And nowadays, NGDP is somewhere 10% below trend, inflation expectations are slightly below 2%, unemployment is high ... And yet, all I see is hyper-ventilation about non-existent inflation and screeds against Bernanke, that money-printing Satan.

You people are ignorant or retarded (or both). And when confronted with the facts, you flippantly dismiss them - after all, why should you bother with them, when the really important thing is toeing the libertardian line ? We wouldn't want any dissent, would we ?

As for the author of this piece of drivel ... you should be ashamed of yourself.

[VG Zaytsev]

What's you point?

That QE directed efforts to reinflate the housing sector will improve the economy?

Or that QE in general is beneficial because it will prop up insolvent financial institutions a little longer?

Are you missing the fact that the whole point of all the QE including this most recent one is to cause inflation?

The fact that it has not happened to date demonstrates the incompetence of Bernanke and the looseness of the tools available to the Fed.

Furthermore, the high powered money created by QE does exist and is only temporarily sequestered as excess reserves which at some point in the future will be multiplied via lending. And that is likely to happen at the same time that velocity rebounds.
Meaning very high inflation.

The old joke of the guy that jumped off the roof of the Empire State building saying every things ok so far as he passes the 40th floor is analogous to our current situation.

[Da worm]

I was actually trying to make several (related) points

1. The "libertarian" discourse on monetary matters is stupid, ignorant and misguided - a point which you (along with pretty much everyone else on this thread) have managed to prove, thank you very much.

2. Economics is not a morality play (no matter how much the sadistic neo-calvinists who choose to label themselves "austrians" would like it to be so).

Sometimes, when the economy is running below capacity due to a shortage of aggregate demand - a bit of inflation is exactly what's needed to fix things

This happens to be one of those times.

So no, I am not "missing the fact that the whole point of all the QE including this most recent one is to cause inflation" - that is the very reason why I am cheering for it.

3. Anyone who things a clown like Schiff have any authority whatoever on monetary policy is a moron - I'm looking at you, Tim Cavanaugh.

And since I'm dealing with very simple minds here, here's an explanation of monetary matters even you should be able to comprehend

http://www.businessinsider.com.....orm-2012-9

As for the coming hyper-inflation you knuckle-draggers love to hyper-ventilate about - well why the fuck doesn't it register in the TIPS spreads ?

I mean, I thought markets knew best. I thought markets were efficient at aggregating information.

And yet, the markets expect little inflation over the next decade.

[Da worm]

(continued from above)

So who's wrong ?
You or your beloved markets ?
Choose wisely, since you can't have it both ways.

PS I am fully aware that I will be labeled as a troll, even though the facts seem to be on my side.

But since humans are tribal by nature, I understand why you value your loyalty to the libertarian tribe (even when it is in the wrong) over the cold facts.

But just like the liquidationists of the 1930s were proven wrong - so will you.

[BakedPenguin]

You or your beloved markets ?

Thanks for your input, Mary, now fuck off.

[Da worm]

You know what I was saying about you morons dismissing facts out of hand ?

[sasob]

Thanks for your input, Mary, now fuck off

I don't think that's Mary, BP. Sounds more like someone who goes by the handle Robert M., whom I encountered on Yahoo. I wonder if the M. stands for Mugabe - it would certainly fit. 🙂

[VG Zaytsev]

He's coming across like a half assed disciple of Scott Sumner.

[Da worm]

And that's bad because ... ?

[VG Zaytsev]

But just like the liquidationists of the 1930s were proven wrong - so will you.

Apparently you believe the myth that Hoover followed Mellon's advice, instead or rejecting it out of hand.

[Da worm]

I never mentioned anything about Hoover.

I was just saying that you morons are making the same argument Mellon was making, namely that the "rotteness should be purged, and everything will be better".

[Cytotoxic]

Which it did in the 1920-1921 economic correction.

[Da worm]

http://krugman.blogs.nytimes.c.....-all-that/

Ya know, I really hate quoting Krugman, since I consider him one of the reasons we are in this mess.

But when the man is right ...

[Cytotoxic]

there's a big difference between inflation-fighting recessions, in which the Fed squeezes to bring inflation down, then relaxes ? and recessions brought on by overstretch in debt and investment. The former tend to be V-shaped, with a rapid recovery once the Fed relents; the latter tend to be slow, because it's much harder to push private spending higher than to stop holding it down.

And he never gives an example of either.

[VG Zaytsev]

Citing someone as inherently dishonest as Krugman destroys all of your credibility.

Who's your next expert, Ezra Klein?

[Da worm]

Like I previously said - I have a few reasons to dislike Krugman (his writing tone, his politics, even some of his economic ideas - like that "liquidity trap" nonsense).

But that doesn't mean everything he says is wrong.

And if you can't get past your personal animosity to appreciate the valid points that he makes ... well that says more about yourself than about him.

[VG Zaytsev]

Yes, it says that my time is to valuable to wade through thousands of words of ad hominem attacks, straw men and outright intentional misrepresentations to find his few valid points.

Come to think of it, he's a lot like you.

[Da worm]

Right, my bad. I forgot what I was dealing with.

Maybe this will be more palatable

http://uneasymoney.com/2012/02.....f-1920-21/

Of course, the very simple fact that I'm arguing with people who claim that the story of 1921 proves that you can quickly exit a recession without resorting to monetary policy (when, in reality, the opposite is true) is irrefutable proof that I'm some sort of masochist ...

[darius404]

Oh, are we playing the "link to someone else's argument" game? Sounds like fun, let me play: http://mises.org/Community/forums/t/22126.aspx

[Da worm]

Thank you for confirming my point. So it would seem that 1921 is indeed proof that you do need to use monetary policy to quickly exit a recession 🙂

[darius404]

Actually, it disputes Kuehn's conflation of Keynesian and non-Keynesian theories, and notes that Kuehn never refutes the Austrian idea that the recession was turned into the Great Depression by distorting prices and misallocating resources via trying to control the money supply. Which is exactly what the Fed is doing now.

[Cytotoxic]

So who's wrong ?
You or your beloved markets ?

Neither. Gold and I agree: the USD is being debased.

You lose.

[Da worm]

A certain amount of debasing is desirable - that was my point all along.

[Cytotoxic]

And your point is wrong. This is ever the economic equivalent of bloodletting. If it were true, Estonia and other Baltic states would not be leading Europe.

[Da worm]

You might want to ponder the real-world implications of this

http://en.wikipedia.org/wiki/Sticky_(economics)

As for the Baltics, please let me know when you return to Earth. I have many interesting things to show you.

Like this

http://www.forbes.com/sites/ma.....-is-wrong/

Also, remind me why I'm wasting my time with people with zero intellectual honesty (like yourself).

I mean, really ? The Baltics are a success story ? By what possible standard ?

[gulo gulo]

The Baltics are a success story ? By what possible standard ?

In 2010 economic situation stabilized and in 2011 the Baltic states were the fastest growing economies in the European Union again. Estonia had 7.6% growth in 2011, giving it the highest growth rate in the EU. The Lithuanian GDP grew by 5.9% and the Latvian GDP by 5.5%.[6]

http://en.wikipedia.org/wiki/Baltic_Tiger

[Da worm]

Yeah, and 4 years later they're still worse off than they were in 2008.

If that's what "success" looks like to you people, I don't want to know what disaster looks like.

But by all means, please continue grasping at straws. Who knows, maybe you'll manage to get a single fact right.

[gulo gulo]

If that's what "success" looks like to you people

Fastest growing economies in Europe isn't success?

The fuck does 2008 have to do with anything, you asked "By what possible standard" you disingenuous fuck, and "rate of growth" is a standard, which they are having success at.

It is absolutely no surprise that you move the goalposts when given exactly what you asked for after it made you look stupid.

Who knows, maybe you'll manage to get a single fact right.

You mean like the fact that you were wrong?

Yeah.

[Da worm]

Yeah, "fastest growing economies in Europe" is like saying "having one eye is better than being blind".

Technically, it is correct. That doesn't mean it's desirable path to take.

And the whole point of this conversation, you pathetic retards, is to find an answer to the question - "so recession struck - What's the quickest way out of it ?"

Standard textbook macro answer would be a one-time currency devaluation - ya know, kinda like Poland did - and guess what, they avoided the recession ENTIRELY !

Why don't I hear much discussion about the Polish example ? Gee, maybe because it doesn't fit your preconceptions ?

You people, on the other hand, argue that currency devaluation is for pussies - and that the way forward is to tough it out through a lengthy and painful period of "internal devaluation". And your example in favor of that is THE BALTICS ??

Have we learned nothing from happened in the 1930s ?

[0073735963]

Yeah, "fastest growing economies in Europe" is

A standard. Which is what you asked for and got.

Technically, it is correct.

Which means that you were wrong in your implication. Extrapolate the accuracy of your bloviation on that subject, and one realizes you're sloppy with facts and arguments, and dishonest. That destroys your credibility.

At that point, you're a proven troll and then it's just about how much time one wants to waste pointing out what you are.

Instead of simply admitting your own ignorance, you couldn't resist trolling more and ending any hope you had of ascending from the self imposed basement of irrelevance you've doomed yourself to.

Fuck off now Mary.

[gulo gulo]

That doesn't mean it's desirable path to take.

Is this the part of the performance where you contort yourself to argue that being the fastest growing economy in Europe is not desirable?

Cause you don't need to, the hole's plenty deep already.

[Da worm]

No, actually that would the part of the performance where someone explains to me by what standard are the Baltics - which, in case you forgot, 4 years later are still worse off than when the recession started - supposed to be the shining example of how to quickly exit a recession without devaluing your currency.

I look forward to the coming intellectual gymnastics and cherry-picking of quotes.

[Cytotoxic]

Thanks for bringing up Poland. One of the more reformed economies in Europe and it did NOT engage in QE. It did have a drop in the currency. Nobody here is arguing against normal currency devaluations. Not that I expect a tard like you to stop fornicating the strawmen.

[Da worm]

I said

"Da worm| 9.15.12 @ 5:03PM

A certain amount of debasing is desirable - that was my point all along."

The response to that was

"Cytotoxic| 9.15.12 @ 7:29PM

And your point is wrong. This is ever the economic equivalent of bloodletting."

And then ..

"Cytotoxic| 9.15.12 @ 9:31PM

[...] Nobody here is arguing against normal currency devaluations."

Isn't that cute ...

[Sam Grove]

Of all the people around, libertarians are least tribal, which is why tribalists of both stripes dislike them.

[VG Zaytsev]

The "libertarian" discourse on monetary matters is stupid, ignorant and misguided - a point which you (along with pretty much everyone else on this thread) have managed to prove, thank you very much.

Great argument.

[VG Zaytsev]

Economics is not a morality play (no matter how much the sadistic neo-calvinists who choose to label themselves "austrians" would like it to be so).

Where do I imply any such thing?

[VG Zaytsev]

Sometimes, when the economy is running below capacity due to a shortage of aggregate demand - a bit of inflation is exactly what's needed to fix things

This happens to be one of those times.

So everything will be great if we can just get back to the appropriate level of aggregate demand of 2006.
Setting aside that it was driven by an unsustainable level of accelerating indebtedness.

So no, I am not "missing the fact that the whole point of all the QE including this most recent one is to cause inflation" - that is the very reason why I am cheering for it.

Fine, then why does your stating such position require insulting people that disagree with you. Setting aside the fact that inflation is not means to prosperity. How could it be one, in your belief system?

[Da worm]

"driven by an unsustainable level of accelerating indebtedness"

You were saying something about not making moralistic arguments ?

"inflation is not means to prosperity"

That is correct, however a stable path for nominal GDP (per capita, if we are to be accurate) is a requisite.

See this graph ?

http://oregoneconomicanalysis......trend1.jpg

See that gap ?
That is the source of (some of) our macroeconomic problems (of course, I'm assuming that you people understand the real-world implications of "stickiness" - and that is very doubtful)

And the whole point of QE is to make up for that shortfall.

[Cytotoxic]

"driven by an unsustainable level of accelerating indebtedness"

You were saying something about not making moralistic arguments ?

Yes. And VG's accurate statement has nothing to do with 'morality play.

And the whole point of QE is to make up for that shortfall.

Because it worked so fucking great last time, fucktard.

[Da worm]

"it worked so fucking great last time"

Define "it" and "last time", so that I may proceed to shoot fish in a barrel.

[VG Zaytsev]

See that gap ?

Yes

I've been describing this situation as Obama's depression for a couple of years now.

Now explain why 2 rounds of QE have not closed it, instead it's widening.

[Da worm]

Funny, I thought it was the central bank that controlled the amount of nominal spending in the economy - thus making it Bernanke's depression, brought about by TIGHT MONEY.

Now I learn it's actually Obama who's in control ... the man must be some sort of super-villain ...

As to "why 2 rounds of QE have not closed it, instead it's widening" I have already provided an explanation - in easy-to-understand .gif form.

But since even that seems to be too complicated for the likes of you, let me repeat what the article said.

QE has not worked so far because Bernanke has not made an actual commitment to do something substantial. And the markets (in their infinite knowledge) have called his bluff on it.

Monetary policy works mainly by setting expectations - and Bernanke is doing a disastrous job at it.

So, in other words, we are still in the hole because Bernanke is not actually committed to printing money ... I would call it "ironic", but I'm afraid you'd fail to grasp it.

[VG Zaytsev]

"driven by an unsustainable level of accelerating indebtedness"

You were saying something about not making moralistic arguments ?

That is not a moral argument dumbass.

It's an observation that the debt has decreasing marginal utility as can be seen by the every shrinking amount of gdp growth per unit of new debt during the 00s.

Further that economic growth from 1995-2007 was driven by ever increasing levels of debt that were unsustainable. As proven by the crash of 2008.

"inflation is not means to prosperity"

That is correct, however a stable path for nominal GDP (per capita, if we are to be accurate) is a requisite.

So you think that nominal, not real GDP growth leads to prosperity.

9% nominal GDP with 13% inflation would leave people better off than say 2% GDP growth with 1% deflation.

That's fucking retarded.

[Da worm]

In the real world, nominal GDP growth drives real GDP growth.

When nominal GDP contracts, so does real GDP (due to aforementioned "stickiness").
And when nominal GDP rises, so does real output (of course, to the degree to which there is room for actual improvement to the economy's ability to supply REAL goods and services).

And just who is in charge of nominal matters ? Why, the central bank !

And these are the cold facts. If you have a problem with them, take it up with your deity - I'm just stating them.

[Da worm]

(continued)

Of course, when setting a nominal growth path for an advanced economy like the US, you have to take into account the fact that secular productivity growth tends be somewhere around 3%. So you want a nominal figure close to that.

An up-and-coming economy (like Brazil, for example) should aim higher - since they have a lot of catching up to do.

[Da worm]

(continued)

As for your strawmen - I won't stoop to your level, since you'd defeat me with experience.

I will just say this - 1% demand-driven (as opposed to supply-driven - and I am making the very generous assumption that you are able to tell the difference) deflation would be VERY BAD !

In fact, that's what happened in 2008 - and wasn't it lovely ?

[VG Zaytsev]

Jesus Christ you're an idiot.

[Cytotoxic]

And just who is in charge of nominal matters ? Why, the central bank !

In America. In Canada and most other countries the CB's mandate only extends to inflation. You don't see us Canuck's with your problems.

In fact, that's what happened in 2008 - and wasn't it lovely ?

Two things happened at the same time! One must have caused the other! /derp

So, in other words, we are still in the hole because Bernanke is not actually committed to printing money

You're fucking dumb.

[Da worm]

All central banks have absolute power over nominal spending. Whether they choose to use that power is a different question.

As for Bernanke-the-great-debaser - I posted a graph which showed nominal GDP being some 10% below trend, without any tendency to catch up.

So it would seem that expanding the monetary base doesn't actually do anything without the central bank actually signalling its intention to inflate.

So I ask you again - where the fuck is this inflation you people hyper-ventilate about ?

And if, in fact, there's no inflation - what the fuck are you foaming at the mouth about ?

[VG Zaytsev]

So in Da worm's universe central banks have absolute power over nominal spending and nominal GDP growth drives real GDP growth...

And just who is in charge of nominal matters ? Why, the central bank !

So the only problem with the Soviet Union or Cuba was inadequate inflation by their Central Banks.

If only they knew.

[Da worm]

I take it nuanced thinking really isn't your forte 🙂

[darius404]

I take it nuanced thinking really isn't your forte 🙂

That isn't an argument. As your comments consist mainly of insults and false assertions ("where... is this inflation"), it suggests your actual arguments can't stand on their own.

[Da worm]

So I'm supposed play along with strawmen arguments (like the one above, where it is implied that the failure of communist command economies is somehow an indictment of monetary economics) lest I be the actual troll ?

And yes, where is this inflation ?

[VG Zaytsev]

And since I'm dealing with very simple minds here, here's an explanation of monetary matters even you should be able to comprehend

http://www.businessinsider.com.....orm-2012-9

That's like totally like this awesome picture like that.

Idiot.

[Da worm]

Predictable - when confronted with unfamiliar arguments, they are dismissed out of hand.

[darius404]

Predictable - when confronted with unfamiliar arguments, they are dismissed out of hand.

When you can compose an actual argument, rather than just linking to what appears to be the product of an ADD-riddled child, come back to us. Your "argument" reminds me of Christian "arguments" that consist entirely of quoting Bible verses.

[Da worm]

It was supposed to be simple and amusing so that even ignorant retards could get the point.

Apparently, I overestimated you.

[gulo gulo]

Apparently, I overestimated you.

Well, you asked by what standard the Baltic states are a success, and when given the fact that they lead Europe in Economic growth, you said something stupid about 2008 and ran off, so you don't get to talk shit anymore.

[darius404]

It was supposed to be simple and amusing so that even ignorant retards could get the point.

It's annoying and makes it exceedingly difficult to concentrate on the actual content. It's the most ridiculous way of formatting an argument I've ever seen.

Apparently, I overestimated you.

What you overestimated is my willingness to wade through a morass of annoying animated pictures linked to by someone who continually insults me, made by people who obviously think their audience is too vapid and so lacking in attention span that they can't explain anything without bobbing heads and flashing text.

That, by the way, has nothing to do with intelligence. If you have an argument, type it. It you can't communicate like an adult, I'm not interested in your argument.

[Da worm]

I have made my argument over and over.

And that is - while the US has its share of structural problems, what must take priority is solving its macroeconomic problem. Namely, that the economy is being held back by a tight monetary policy (and I have actually given arguments in favor of this view of things).

Furthermore, I argue that the quickest way out of the mess is a one-time currency devaluation (which also happens to be the standard macro textbook answer) - since the alternative of "internal devaluation" tends to be a lengthy and painful affair (not to mention that it tends to bring all sort of unsavory extremist elements to power).

If you want to proceed further along this line of reasoning, by all means - please do so.

[Cytotoxic]

The USD has already devalued and nope that's not helping. You have given no evidence of tight monetary policy. You suck at this even by HR troll standards.

[VG Zaytsev]

And that is - while the US has its share of structural problems, what must take priority is solving its macroeconomic problem. Namely, that the economy is being held back by a tight monetary policy

But elsewhere you admit that is a net effect where expansionary policies are being overwhelmed by contractionary ones.

Yet, your solution is not to revised the contractionary policies but to increase the expansionary ones.

You seem to believe that each set of policies only effects the other and not that they all have their own unintended consequences. You also seem to believe that they can be finely calibrated with no delayed response time.

Furthermore, I argue that the quickest way out of the mess is a one-time currency devaluation (which also happens to be the standard macro textbook answer)

How exactly does the Fed accomplish anything like this? You're talking about some kind of hard peg.

- since the alternative of "internal devaluation" tends to be a lengthy and painful affair

Oh bullshit.

The alternative is to restructure the financial industry and have emergency bankruptcy reform to speed deleveraging.

Both could happen simultaneously and get us out of 'the mess' within a couple of years.

That would primarily be painful for those individuals that caused and profited from the credit bubble.

The alternatives, yours, Bernanke's, Sumner's etc all boil down to protecting those interests at the expense of the average person.

[Da worm]

Wow. Oh wow. That's so bad, I don't even know where to begin. But let's give it a shot anyway.

"expansionary policies are being overwhelmed by contractionary ones."

Yes, I already said that's true. The fiscal efforts are being more than countered by the Fed. I do believe people are starting to call it "the Sumner critique".

http://www.slate.com/blogs/mon....._hype.html

"How exactly does the Fed accomplish anything like this?" [currency devaluation, that is]

Ummmm ... isn't that the whole point of QE ? Ya know, the original reason for all this "vitriol" ?

[Da worm]

(continued)

"The alternative is to restructure the financial industry and have emergency bankruptcy reform to speed deleveraging."

So "the alternative" to currency devaluation is ... structural reform ?

Before I am (once again) accused of things I never said - structural reform is indeed high on the list of priorities. Moral hazard has been institutionalized - and that is indeed VERY BAD.

However, we are talking about different things.

I am talking about fixing the nominal side of the economy (yes, I know you seem to think that what happens on the nominal side has no effects on real output - and that alone is a clear sign of your ignorance) - ya know, to fix the problem caused by "stickiness" (as in "sticky wages" - but why do I have a feeling you don't have a grasp on that ?).

Last time I checked, the Fed was all-powerful on the nominal side. But implementing structural reforms really isn't their prerogative.

[Da worm]

"The alternatives, yours, Bernanke's, Sumner's etc all boil down to protecting those interests at the expense of the average person."

Ah yes, because "the average person"'s interests are so well protected in a depressed economy where unemployment is high, return on savings is zero, etc.

Why don't you cut the crap and admit the truth.

You don't want a bit of devaluation (even though it would greatly help with employment) because you think it would allow the people you deem guilty to escape without "punishment".

The unemployed? Fuck 'em. We have sinners to smite !

Oh, and if you're so sure nominal GDP has no effect on real output - you might want to explain why (demand-driven, of course) deflation and high inflation are seen as things to be avoided.

[VG Zaytsev]

Why don't you cut the crap and admit the truth.

You don't want a bit of devaluation (even though it would greatly help with employment) because you think it would allow the people you deem guilty to escape without "punishment".

The unemployed? Fuck 'em. We have sinners to smite !

This is just flat out shameless shilling.

Does not address my contention that deleveraging can be addressed statutorily with fewer negative consequences than endless QE.

You also flip it as my advocating punishment for borrowers and the unemployed (the poor?). which is a completely retarded argument as it would primarily benefit those groups where as your devaluation by QE would harm them.

As far as "We have sinners to smite !". Nice moralistic spin on my saying that people must face the consquences of their actions for markets and capitalism to function properly. Specifically, the individuals and institutions that engaged in sloppy lending must be allowed to fail. Your alternative is to prop up failure so that it can be repeated endlessly.

Yeah it might seem a little harsh, but it is an essential part of a free market system. And don't worry, you can collect food stamps and welfare the same as the unemployed.

[VG Zaytsev]

Show me a central bank that was committed to causing inflation and found itself unable to do so.

Oh really?

So the Fed is incapable of ending IOER?

Has no regulatory discretion?

No influence on new bank formation?

[VG Zaytsev]

"How exactly does the Fed accomplish anything like this?" [currency devaluation, that is]

Ummmm ... isn't that the whole point of QE ? Ya know, the original reason for all this "vitriol" ?

Nice goal post shifting.

You know that I was responding to your assertion that

I argue that the quickest way out of the mess is a one-time currency devaluation

QE, especially QE 3 is not a one-time event. Unless by one time you mean continuous.

[Red Rocks Rockin]

Namely, that the economy is being held back by a tight monetary policy (and I have actually given arguments in favor of this view of things).

Your arguments are bullshit posturing. The economy isn't being held back by a lack of liquidity, it's being held back by systemic debt at 350% of GDP.

How the FUCK are people supposed to buy goods when they're in hoc for things like a car payment, a mortgage, student loan debt (which is damn near $1 trillion now), credit cards--when they were already using those credit instruments in the last 30 years to buy goods in the first place? And then insure that those debts aren't passed on to their kids? Get the hell out of here with your math-free self.

[Red Rocks Rockin]

Furthermore, I argue that the quickest way out of the mess is a one-time currency devaluation (which also happens to be the standard macro textbook answer) - since the alternative of "internal devaluation" tends to be a lengthy and painful affair (not to mention that it tends to bring all sort of unsavory extremist elements to power).

Here's an idea--how about letting the banks EAT every single bad loan they've given out, and let people who spent beyond their means go bankrupt? "Oh," you say, "But this will collapse the economy!!!"

Well guess what, moron--collapse is coming regardless. Bernanke just admitted by instituting this particular flavor of QE3 that he doesn't have a fucking clue how to fix this. He's admitting that the only thing the US economy is built on is a mountain of debt that can't be paid off. He's throwing a Hail Mary that this policy will encourage people to do the same fucking thing they've done the last 30 years--substitute debt for real income in the economy, and leave future generations to clean up the mess.

Take your "macroeconomics textbook answer" and shove it up your ass. People like you arguing for and instituting this shit on a national--hell, even global--scale is the reason we are where we are today.

[VG Zaytsev]

And yet, the markets expect little inflation over the next decade.

You know this because you spoke to the markets?

You're making the common mistake of anthropomorphising aggregated activity. The market doesn't expect anything. Individuals transacting in the market are responding to their own expectations and desires.

Specifically the Fed is is buying bonds in sufficient quantities to raise their sell price and thereby drive interest rates lower. To rephrase that for a simpleton such as yourself, low interest rates are an effect of the FED creating new money.

Conversely private lending does involve inflation expectations. No private person or bank will lend money at an interest rate below the expected rate of inflation. And guess what. Private lending is very tight right now, for a number of reasons, not least that interest rates are artificially low.

[Da worm]

So let me get this straight - "private lending is very tight" - and that is a sign that monetary policy is too easy ?

Wow, you should be the poster child for cognitive dissonance.

But who knows, maybe you live in a world were twisting open the faucet results in less water ...

[Cytotoxic]

Geez maybe paying IOF and other market interventions have unexpected consequences. GOSH.

[VG Zaytsev]

Sure, if the pipes are broken.

You know, like a completely unprecedented situation where banks are sitting on a couple of trillion in excess reserves.

But by all means keep pumping more water, it'll never flood the house.

[Da worm]

Interest on reserves is a very misguided and CONTRACTIONARY policy. So yes, it should be done away with.

But, in typical retard fashion, you have completely failed to address (and unwittingly bolstered) my main argument - namely, that monetary policy is too tight and should be loosened up until NGDP is back on track (on employment recovers - it's all closely related)

[VG Zaytsev]

So let me get this straight - "private lending is very tight" - and that is a sign that monetary policy is too easy ?

It's a sign that interest rates are too low. It's also a sign that various monetary policies of the federal government are working in opposite directions.

Maybe, just maybe, the solution is to clear out insolvent institutions instead of QE to infinity.

[Da worm]

In typical retard fashion, you are unable to grasp the difference between REAL and NOMINAL interest rates.

You know what happens when the real interest rate goes negative and the nominal one is stuck at zero (since it can't go lower) ?

I'll tell you what happens - ignorant morons pop out of the woodwork and start yelling that money is too easy (when, in fact, it's tight) and that nominal rates should be higher.

[Da worm]

(continued)

And yes, spoken like a true liquidations. Too bad the kind of internal devaluation you seem to clamor for has, whenever it's been actually attempted, proven to be a painful and drawn-out process (when it hasn't failed outright due to political factors).

But hey, you wouldn't want those pesky facts get in the way of a beautiful fairy tale.

[gulo gulo]

And yes, spoken like a true liquidations.

And yes, written like an incoherent asshole.

[VG Zaytsev]

Nice vitriol.

Of course you didn't address my point that various current monetary polices are working in opposition to each other.

[Da worm]

You are correct in saying that "current monetary polices are working in opposition to each other".

But guess what ? The details are irrelevant, what matters is the overall outcome - namely, that current monetary policy is too tight.

And I have yet to see a single coherent argument against that - other than "nuh-huh", "can't be so", "retard", etc.

I even provided you with a graph showing NGDP growth (or, rather, lack thereof) - it failed to register at all !

[gulo gulo]

Um, why would anyone waste time with you after you proved you're a disingenuous asshole with your Baltic state stupidity?

If you had the slightest shred of dignity, you'd admit you shot off your idiot discksucker and made a fool of yourself, even though it leaves a bad taste.

Instead you double down.

That was your "troll shibboleth" and you failed.

[VG Zaytsev]

You are correct in saying that "current monetary polices are working in opposition to each other".

But guess what ? The details are irrelevant, what matters is the overall outcome - namely, that current monetary policy is too tight.

And this is the idiocy of of over aggregation of information.

Here's an admittedly imperfect analogy for you.

You're managing a power plant and the output begins to fall. In the past that was caused by a lack of fuel, so you order more fuel to fire the boilers. But the output continues to fall, so you order even more fuel, because that is your experience. The problem is that output is falling because pipes that deliver steam to drive the turbines are seriously cracked and much of the steam is lost in route. By increasing the energy in the boilers (adding more fuel) you stabilize the output, but at the cost of further damaging the pipes and causing new damage to the boilers. As well as creating a potentially dangerous situation by overloading the boilers. But when the power output starts to decline again you order even more fuel for the boilers. The plant hasn't blown up yet so what's to worry about.

[Da worm]

"output is falling because pipes that deliver steam to drive the turbines are seriously cracked and much of the steam is lost in route."

Show me a central bank that was committed to causing inflation and found itself unable to do so.

I'll be waiting here, with my crickets. Yes, I enjoy their music. But I'm afraid they might get tired.

[VG Zaytsev]

Show me a central bank that was committed to causing inflation and found itself unable to do so.

In the long term, none.

In the short term, the FED.

Or as you said, the whole point of QE is to create inflation. Which as you also have said did not succeed with QE1 or 2.

And lets remember that this all began with your mocking the austrian / libertarian pov that the FED's actions would lead to inflation.

Do you realize that your arguing in circles?

[Cytotoxic]

Oh no not liquidation! Lets keep all of our capital structured just the way it is regardless of whether it makes any sense or not.

[Da worm]

http://www.clevelandfed.org/re...../index.cfm

Deal with it, imbeciles.

[Cytotoxic]

I have some subprime loans from the year 2005 to sell to you. Expectations are that the property values they are collateralled against are only going up. So please buy them imbecile.

[Da worm]

So I take it that when the market disagrees with you, it's the market that's at fault ?

What are you, some sort of central planner ?

[VG Zaytsev]

Ironic, coming from a guy that cites central planners expectations to bolster his argument.

But they do have a sterling track record so far.

[Da worm]

If you weren't a moron, you'd have noticed I'm quite critical of the Fed.

For reasons different than your stupid arguments, but I am critical nonetheless.

And if you really think those inflation expectation have nothing to do with reality - well why don't you put your money where your mouth is - with your knowledge, you should be able to make a killing in the TIPS market.

[gulo gulo]

If you weren't a moron, you'd have noticed I'm quite critical of the Fed.

When you're not sucking them off, which says everything that anyone needs to know about the coherence of your arguments.

[VG Zaytsev]

The only critique of the FED that you've made is that you're not running the joint.

[Cytotoxic]

Apparently Mary thinks Shriek is awesome and now wants to be like him, so she's posting as da dumbass.

[Da worm]

Funny, everything I've said is textbook macro (of the monetarist, not keynesian bent).

And yet you morons get your panties in a twist. I wonder why that is.

[VG Zaytsev]

Because you are being intentionally offensive and combative.

[Da worm]

That is true.

But let me tell you another thing that is equally true - your ignorance on monetary matters.

And the assurance with which you comment on subjects you are ignorant of is ... well ... quite offensive.

[gulo gulo]

But let me tell you another thing that is equally true - your ignorance on monetary matters.

So far, all of your arguments have been addressed/debunked, and the best response you've forwarded is to pour on the vitriol.

If we're ignorant on money matters, you should be pretty ashamed at how easily you got shot down.

[VG Zaytsev]

Yeah, I've never crashed an economy, so what the fuck do I know.

[Cytotoxic]

Go home Steve Chapman.

[Cytotoxic]

ITT monetarist/keynesian assholes come out with their shitty non-arguments and get buuhurt upon being FACTPWND.

[OldMexican]

Re: Da Worm,

Discussions like these are the main reason why I'm embarrassed to call myself "libertarian".

Stop lying to yourself, then. You're not one.

In the 1930s, when interest rates were at zero, people were pretty fuckin' sure money was easy.

Oh? You polled them all?

Turns out, they were wrong - it was insanely tight.

So? That does NOT mean the effort from the Fed was to reinflate the economy. The fact that banks were not lending (like today) only means people still has that nagging thing (which the economics illiterate conveniently ignore) called "self-interest."

And nowadays, NGDP is somewhere 10% below trend, inflation expectations are slightly below 2%, unemployment is high ... And yet, all I see is hyper-ventilation about non-existent inflation and screeds against Bernanke, that money-printing Satan.

First of all, who cares about "inflation expectations"? Expectations from whom? The same government that provides the "official" inflation rate? Inflation IS the constant increase in the money supply, which is what the Fed has been doing. Keep putting your head in the sand.

You people are ignorant or retarded (or both).

Yeah, keep it classy.

[OldMexican]

"That does NOT mean the effort from the Fed was not to reinflate the economy."

Correction.

[OldMexican]

Re: Da Worm,

In the real world, nominal GDP growth drives real GDP growth.

Both are metrics, made up by men. So you're not saying anything that makes sense economically speaking.

And when nominal GDP rises, so does real output (of course, to the degree to which there is room for actual improvement to the economy's ability to supply REAL goods and services).

Yeah, GDP conjures up goods and services, as if by magic. There's no difference between this and saying that throwing money out of a bus will make burger joints instantly more productive.

And just who is in charge of nominal matters ? Why, the central bank!

Ah, magical thinking.

And these are the cold facts. If you have a problem with them, take it up with your deity - I'm just stating them.

You clearly stated the revelation from yours.

[darius404]

And when nominal GDP rises, so does real output

Isn't it the other way around? GDP is used as a measure of growth. So it would be more accurate to say, "And when real output rises, so does nominal GDP".

And just who is in charge of nominal matters ? Why, the central bank!

I believe he claimed they have "absolute power" over it.

[VG Zaytsev]

Yes he did.

And he responded mockingly (without admitting his error) when asked if bad central bank policy was the problem with communism.

Which is a tacit acknowledgement on his part that they do not have "absolute power".

[Da worm]

Since, apparently, I'm not smart enough (or retarded enough) to understand your thought processes - please enlighten me.

How does the failure of communism disprove my assertion that a central bank has absolute power over nominal matters ?

[darius404]

How does the failure of communism disprove my assertion that a central bank has absolute power over nominal matters ?

It's sort of like claiming that the Large Hadron Collider gives CERN "absolute power" over particle physics. When you claim that any person or group has "absolute power", you're merely outing yourself as an idiot.

And we don't really need to "disprove" your claim: you only made a (laughable) assertion, without providing evidence it's true. It's like crowing that I haven't "disproved" the existence of invisible pink unicorns.