11–20 of 131 posts
The graphs offered as evidence seem to have very carefully picked axes to fit the story. e.g. looking at the first MSCI graph with the x axis extended back to the 60s[1] it is hard to draw the same conclusions [1] https://en.wikipedia.org/wiki/MSCI_World#/media/File:MSCI_Wo...
Earlier quoted context omitted.
QE is effectively creating money, which is then used to purchase financial assets in the hope that the person selling it will use the proceeds for something that is economically stimulative. It also reduces borrowing costs along the way. Most central banks buy government bonds. As a result of this buying, the returns on these bonds are reduced and supposedly less attractive to the investors that previously would have…
> …Heavily indebted governments around the world are borrowing money for free… I don't disagree with any of what you say, but this part in particular makes me think that at the end of the day, governments around the world (esp "developed") ones are having a hard time allocating their ability to acquire resources (with their fiat currency effective "infinite money") in a way that will appease their respective populous…
I do wonder what the end game is. In the absence of meaningful levels of inflation, central banks are confident in maintaining and increasing QE in the belief that if it's not working, it must be because it's not enough.
The problem is that at some point (perhaps already), governments and corporates wont be able to tolerate higher borrowing costs.
US government debt is double what it was in 2007 (~USD 18 trillion vs 9) and yet the annual interest cost is around the same. The Japanese government would need to spend every dollar of income and corporate tax revenue just to pay the interest if the interest rate on their debt rose to just 4.5%.
QE generally has the bonus effect (and some would say it's the primary motivation) of devaluing your currency. The problem though is that this only works if noone else is doing it. From Kyle Bass:
I had a fascinating out of body experience meeting with one of the world's top central bankers in a private meeting about three years ago. And he said, "You know Kyle, quantitative easing only works when you're the only country doing it."
[1] http://finance.yahoo.com/news/thing-top-central-banker-told-...
So, the article says dotcoms caused first bubble in 2000, houses in 2008, but this one is driven by central banks printing money. And there is no way they will stop printing so this is an infinite bubble There is sooo much wrong with that. As @rtpg says, that s stops not when Fed stops printing money but when market realises that the high asset prices "globally" become obviously unsustainable. The issue is that when…
To quote Charles Dickens's Pickwick Papers(1837) "Never say never."
Inflating assets via QE doesn't really address the real underlying problem.
The only long-term solution I have seen is Debt for Equity swaps. It won't work everywhere, but it does help.
For example, when the Banks were technically insolvent then the opportunity should have been taken to forcibly re-arrange their financial underpinnings rather than shoring up the existing rickety structures by using taxpayer monies to in effect bail out the rich.
https://en.wikipedia.org/wiki/Debt_restructuring#Bondholder_...
So my vague understanding is that QE and stuff is technically printing money, but the resulting money isn't really being used for anything. Is a bubble a bubble if the extra bubbly-ness is from stuff that doesn't get used? EDIT: actually, answered my own question. QE raises asset prices (even if the sellers aren't really doing anything with the money), and at one point people will be like "wait, none of this is worth…
QE is effectively creating money, which is then used to purchase financial assets in the hope that the person selling it will use the proceeds for something that is economically stimulative. It also reduces borrowing costs along the way. Most central banks buy government bonds. As a result of this buying, the returns on these bonds are reduced and supposedly less attractive to the investors that previously would have…
What's even scarier is that the ECB has started buying corporate bonds (https://www.ft.com/content/e551c28e-457a-3b62-a8b0-a8e8ca4e5...) directly, which I personally find crazy. I won't even comment on the financial situation in Japan, which I find even more crazy, and where I think that the economic system is partly nationalized "de facto". Under these circumstances the FED policy seems the more rational, which would have been crazy to think that would happen just after 2008.
So, the article says dotcoms caused first bubble in 2000, houses in 2008, but this one is driven by central banks printing money. And there is no way they will stop printing so this is an infinite bubble There is sooo much wrong with that. As @rtpg says, that s stops not when Fed stops printing money but when market realises that the high asset prices "globally" become obviously unsustainable. The issue is that when…
I don't think they say it's an infinite bubble, but one that may continue much longer than non central bank driven bubbles. I guess the hope is that real economy growth starts improving and QE can be tapered and prices auto correct over time, rather than a sudden pop in inflated asset prices and adverse effects to real economy from that. Where the growth is supposed to come from (within next 5 years) I'm not sure, so…
Regardless, I don't see how the dependency on constant growth is sustainable.
The financial problems originated with excess debt, but debts that are so large that they cannot be paid back - will not be paid back. Inflating assets via QE doesn't really address the real underlying problem. The only long-term solution I have seen is Debt for Equity swaps. It won't work everywhere, but it does help. For example, when the Banks were technically insolvent then the opportunity should have been taken…
The graphs offered as evidence seem to have very carefully picked axes to fit the story. e.g. looking at the first MSCI graph with the x axis extended back to the 60s[1] it is hard to draw the same conclusions [1] https://en.wikipedia.org/wiki/MSCI_World#/media/File:MSCI_Wo...
So, the article says dotcoms caused first bubble in 2000, houses in 2008, but this one is driven by central banks printing money. And there is no way they will stop printing so this is an infinite bubble There is sooo much wrong with that. As @rtpg says, that s stops not when Fed stops printing money but when market realises that the high asset prices "globally" become obviously unsustainable. The issue is that when…
>As @rtpg says, that stops not when Fed stops printing money but when market realises that the high asset prices "globally" become obviously unsustainable.
So my vague understanding is that QE and stuff is technically printing money, but the resulting money isn't really being used for anything. Is a bubble a bubble if the extra bubbly-ness is from stuff that doesn't get used? EDIT: actually, answered my own question. QE raises asset prices (even if the sellers aren't really doing anything with the money), and at one point people will be like "wait, none of this is worth…
Yes, i feel the same when I look at houses in San Francisco. The shittiest houses are valued at almost 1mio. I'm just saying, nope, I'm not buying that. ;)