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Thread: Itís Now Clear That QE Was a Colossal Policy Mistake

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    Quote Originally Posted by Peter1469
    Unless you are taught Modern Monetary Theory like AOC.
    In the wake of the Lehman collapse, followed by Bear Stearns, it was a necessary evil for a few years. Then, they came up with Modern Monetary Theory when it didn't lead to massive inflation immediately. The mistake, I think, was institutionalizing QE with a monetary theory that was clearly wrong. Whereas, in 2000 during the dotcom collapse, the government could just blow another bubble--the real estate bubble that led to QE. Today, we have the "everything bubble," because it's about currency debasement rather than channeling money into particular market sectors. So the government made its debt worth less by inflating the currency. Everyone who understands market forces and math should have known axiomatically that this was coming at some point.
    Quote Originally Posted by carolina73
    And now the markets expect US monetary policy to be designed satisfy them.
    Well, 2008 was 14 years ago. So you have some professionals in their mid-30s who still haven't been through a market meltdown. My first as an adult was 1987's stock market crash. Basically, the Fed doesn't really have a choice right now except to deliver a hard landing.
    Quote Originally Posted by carolina73
    Crypto is failing and no one in our government is looking at the ones that are destroying hundreds of billions of wealth.
    Samuel Bankman-Fried is going to be the government's effort to get into crypto to control it. The only one that's truly open source and decentralized is Bitcoin, from what I can see. Everything else seems to have some sort of scam or angle associated with it.

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    Quote Originally Posted by blackjack21 View Post
    In the wake of the Lehman collapse, followed by Bear Stearns, it was a necessary evil for a few years. Then, they came up with Modern Monetary Theory when it didn't lead to massive inflation immediately. The mistake, I think, was institutionalizing QE with a monetary theory that was clearly wrong. Whereas, in 2000 during the dotcom collapse, the government could just blow another bubble--the real estate bubble that led to QE. Today, we have the "everything bubble," because it's about currency debasement rather than channeling money into particular market sectors. So the government made its debt worth less by inflating the currency. Everyone who understands market forces and math should have known axiomatically that this was coming at some point.Well, 2008 was 14 years ago. So you have some professionals in their mid-30s who still haven't been through a market meltdown. My first as an adult was 1987's stock market crash. Basically, the Fed doesn't really have a choice right now except to deliver a hard landing. Samuel Bankman-Fried is going to be the government's effort to get into crypto to control it. The only one that's truly open source and decentralized is Bitcoin, from what I can see. Everything else seems to have some sort of scam or angle associated with it.
    Failure was the option and it would ave been a far better option.
    All QE did was lengthen the pain by spreading it out and created the unnecessary debt with it.
    Imagine how strong our economy would have been with aour debt to GDP under 70%.
    We recovered from WWII's debt because we were the only industrial power remaining. If you wanted a new car or refrigerator in 1950 then you bought USA made. 1975 was our last trade surplus.
    Let's go Brandon !!!

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    Quote Originally Posted by Peter1469 View Post
    Unless you are taught Modern Monetary Theory like AOC.

    I wasn't aware she was taught anything.


    One or two lumps?

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    Quote Originally Posted by carolina73 View Post
    Failure was the option and it would ave been a far better option.
    All QE did was lengthen the pain by spreading it out and created the unnecessary debt with it.
    Imagine how strong our economy would have been with aour debt to GDP under 70%.
    We recovered from WWII's debt because we were the only industrial power remaining. If you wanted a new car or refrigerator in 1950 then you bought USA made. 1975 was our last trade surplus.
    And that is why Obama's recovery was flaccid. Better to let the malinvestment (underperforming companies) die off so they can be quickly replaced by the market. Why prop up failure?
    ΜOΛΩΝ ΛΑΒΕ


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    Quote Originally Posted by Peter1469 View Post
    And that is why Obama's recovery was flaccid. Better to let the malinvestment (underperforming companies) die off so they can be quickly replaced by the market. Why prop up failure?
    Easy.

    The gubmint issued the money ...$12,000,000,000,000.00 give or take, oddly enough the debt since QE has risen by roughly the same amount ... and gave it to the EEEVILLL banks. to protect the people from the EEEVILLL banks.

    The EEEVILLL banks used the free money to buy gubmint debt, lets use 1% as the return for argument sake, to protect the people from the EEEVILLL banks.

    The EEEVILLL banks took this free 'PROFIT' and used it to buy key politicians off, so that they could continue protecting us from the EEEVILLL banks.
    "Buy a man eat fish, the day, teach a man to a life time! "
    "As one computer said, if
    you're on the train and they say 'PORTAL BRIDGE' you know you better make other plans."
    - Joseph Robinette Biden -

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    Quote Originally Posted by carolina73 View Post
    Failure was the option and it would ave been a far better option.
    All QE did was lengthen the pain by spreading it out and created the unnecessary debt with it.
    Imagine how strong our economy would have been with aour debt to GDP under 70%.
    We recovered from WWII's debt because we were the only industrial power remaining. If you wanted a new car or refrigerator in 1950 then you bought USA made. 1975 was our last trade surplus.
    Agreed.

    As an addendum ... the 2008 debacle was created from the 'FIX' of the dot dumb debacle.

    Just think of the wonders that might have been had the state not stepped in to 'FIX' their prior monstrosities?
    "Buy a man eat fish, the day, teach a man to a life time! "
    "As one computer said, if
    you're on the train and they say 'PORTAL BRIDGE' you know you better make other plans."
    - Joseph Robinette Biden -

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    This article discusses both QE and the artificially low interest rates.

    An Economic Candle Burning From Both Ends

    Some facts of our times follow. As you read, consider your own household and portfolios and how they measure up.
    Disposable personal income per capita has been in decline in real terms for 19 straight months. This is not just dollar amounts but dollars adjusted for purchasing power. We are just now level with 2019, which is to say that Americans have lost three years of financial progress.
    Savings has hit a new low of 3.2 percent, which is where it stood just after the 2008 financial crisis, and this contrasts with 6 percent rates after 1980 and 10 percent average rates in the postwar period.
    Credit card debt just jumped to a 20-year high and is still soaring.

    ***


    What’s unfolding before our eyes is a confirmation of a business cycle theory pushed in the 1920s and 1930s by Ludwig von Mises and F.A. Hayek. The so-called Austrian theory observes the distortions in the production structure that result from central bank attempts to suppress interest rates, which is exactly what the Fed has done.
    While the results are not manifested in higher overall prices (think of 2008–2020) such a policy pushes resources out of shorter-term investments into longer-term speculative ventures. The problem is that speculative capital investment in this case is not justified by the existing pool of savings. Indeed, the central bank policies have caused “forced savings” with the result of unsustainable business empires.
    Hayek uses ferocious language to describe the wealth transfer that is happening here: “This causes a part of the social dividend to be distributed to individuals who have not acquired legitimate claim to it through previous services, nor taken them over from others legitimately entitled to them. It is thus taken away from this part of the community against its will.”
    When things become shaky or prices start to shift, and the central bank starts to back off its pillaging policies, the house of cards starts to fall apart, as resources are drained from long-term speculation to shorter term consumption and the restarting of real savings.
    That is precisely where we are in the cycle.

    ***

    To be sure, we should all in a macroeconomic sense look forward to a new age of more honest finance. The disaster of zero interest rate policy is finally coming to an end. Ben Bernanke’s Nobel Prize notwithstanding, this policy massively distorted capital allocation in the economy, and around the world, for the better part of 14 years. With its end, we are going to get a taste of some economic and financial rationality.
    ΜOΛΩΝ ΛΑΒΕ


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    Quote Originally Posted by Peter1469 View Post
    And that is why Obama's recovery was flaccid. Better to let the malinvestment (underperforming companies) die off so they can be quickly replaced by the market. Why prop up failure?
    Propping up failure is the lib motto.

    F**kJoeBiden

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    Quote Originally Posted by carolina73
    Failure was the option and it would ave been a far better option.
    Lehman did fail. So did Bear Stearns. The last budget surplus was with Newt Gingrich as Speaker of the House. At that point, the government became concerned about deflation. That's when the Republicans abandoned fiscal conservatism. That happened in line with Jack Kemp leading the Republicans to the Democrat position of extending credit to poor people. So it wasn't necessarily the private sector that led the market to failure.

    Quote Originally Posted by carolina73
    All QE did was lengthen the pain by spreading it out and created the unnecessary debt with it.
    As I said, it would have been okay for a few years, but we still had it in 2015.
    Quote Originally Posted by carolina73
    Imagine how strong our economy would have been with aour debt to GDP under 70%.
    Debt-to-GDP is not all because of quantitative easing. ObamaCare screwed the job market up, because restaurant chains, big box retailers, and small businesses ended up having to cut people's hours to get out of the ObamaCare mandates. That made the economy less efficient, and the excessive government spending that continued is a big part of why debt continued to grow. The Republicans frankly are not much better than the Democrats in that regard.
    Quote Originally Posted by carolina73
    We recovered from WWII's debt because we were the only industrial power remaining.
    Yes, and everyone else owed us money. Britain didn't finish paying off debt to the US for WWII until 2006.
    Quote Originally Posted by carolina73
    If you wanted a new car or refrigerator in 1950 then you bought USA made.
    Indeed. I used to argue this on StratFor when George Friedman was running it. Peter Zeihan picked up my argument--"we bribed up an alliance"--and does a very good job of delivering it. We opened our markets to West Germany and Japan to thwart the Soviet communists. It worked, but it not only continued after the fall of the Soviet Union, our moron leaders ended up selling out to China who benefited mightily from trade with the US while remaining totalitarian.
    Quote Originally Posted by carolina73
    1975 was our last trade surplus.
    Indeed. The United States doesn't calculate economic growth with GNP anymore. We use GDP, which kind of hides who owns the means of production.
    Quote Originally Posted by Peter1469
    And that is why Obama's recovery was flaccid. Better to let the malinvestment (underperforming companies) die off so they can be quickly replaced by the market. Why prop up failure?
    2008-2009 was a systemic failure. The market itself was failing. The entire system was going to go down, which would probably have lead to political instability and the overthrow of the US government. I knew we would have a real estate crash. Back in before the crisis, I was arguing--somewhat rightly and somewhat wrongly--that the US was exporting financial instability by selling off mortgage-backed securities overseas. What had not occurred to me was that they would repackage mortgage paper as collateralized debt obligations with different levels of risk tranches, and then resold them to the US banks, pension funds and insurance companies too. The real estate bubble had to pop. However, we were facing a complete loss of confidence in the financial system itself. Remember, fiat money is just paper.

    Bailing out GM is one thing. I'm inclined to agree that GM has been poorly managed for a long time, and a lot of it is due to unions and the mid-20th Century Democrats continuing with policies well beyond their useful lives. Take it out of an American context for a moment and watch this 20-minute video for how union power in the UK effectively destroyed the British automotive industry.



    So the UK still makes cars, but not a single brand is majority-owned by the British. Not Jaguar, not Rolls-Royce, not Mini.
    Quote Originally Posted by LWW
    As an addendum ... the 2008 debacle was created from the 'FIX' of the dot dumb debacle.
    I don't agree there. I think it was because of the bi-partisan banking reform and the repeal of Glass-Steagal without any other regulatory framework to replace it, while simultaneously pushing mortgages on to poor people who could not afford them. We ended up with 70% of mortgage originations being ARM and neg am loans. Today, it's only 5%. So we're going to have a hard landing now, but look at Britain in comparison. They still have 26% of their loans as ARM loans with interest rates and inflation through the roof. The energy crisis in Germany is an existential crisis for them.

    How some of this came about in the 1990s was in part due to the collapse of the Soviet Union, and the mistaken idea that capitalism is a political philosophy and not just a brutally efficient economic philosophy. So they continued with outsourcing to a communist government when there was no legitimate political or ethical reason to do so. Simultaneously, they were revisiting some of the failures of the welfare state, such as public housing. The people who made it through the 1970s inflation were people who owned their own homes. The people who lived in public housing or section 8s were screwed. So the "thinking" in Washington at the time was that poor people were poor, because they didn't have access to credit--not realizing that access to credit involves having access to gainful employment. Today, they still haven't realized it and that's why they talk about "equity," which is basically embracing inefficiency by hiring people with little or no skill to perform jobs they can't do. Economic equality is still their dream/utopia.

    At any rate, that's why the RichardMZhlubbs of the world must be fought tooth and nail, because they are nowhere near as intelligent as they think they are. The establishment is failing for good reason.

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    Quote Originally Posted by blackjack21 View Post
    In the wake of the Lehman collapse, followed by Bear Stearns, it was a necessary evil for a few years. Then, they came up with Modern Monetary Theory when it didn't lead to massive inflation immediately. The mistake, I think, was institutionalizing QE with a monetary theory that was clearly wrong. Whereas, in 2000 during the dotcom collapse, the government could just blow another bubble--the real estate bubble that led to QE. Today, we have the "everything bubble," because it's about currency debasement rather than channeling money into particular market sectors. So the government made its debt worth less by inflating the currency. Everyone who understands market forces and math should have known axiomatically that this was coming at some point.Well, 2008 was 14 years ago. So you have some professionals in their mid-30s who still haven't been through a market meltdown. My first as an adult was 1987's stock market crash. Basically, the Fed doesn't really have a choice right now except to deliver a hard landing. Samuel Bankman-Fried is going to be the government's effort to get into crypto to control it. The only one that's truly open source and decentralized is Bitcoin, from what I can see. Everything else seems to have some sort of scam or angle associated with it.
    QE was never needed. It was always harmful to save losers. The vacuum would be quickly filled. Government could have bought and blew up every property in arrears for less than they created in debt in the Obama years. But Obama was in debt to the banks as their largest recipient of campaign funds to that date.
    Let's go Brandon !!!

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