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Fed, worried about recovery, will buy US debt

finance.yahoo.com

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Re: Fed, worried about recovery, will buy US debt

#51

Post by startuprules »

nanairo wrote: post #46
startuprules wrote: post #6

Earlier quoted context omitted.

Deflation is dangerous only for the entities that own large amounts of real estate/stocks. For normal people, deflation allows their buying power to increase. The government printing is akin to stealing from your labor right then and there.

True, it allows people to buy more tomorrow with the money they have today. So what happens? They don't spend the money today waiting for tomorrow. But then tomorrow they realise that if they wait a little longer they'd spend even less. The end result is that nobody spends for anything that is not absolutely necessary. Hence most companies have an excess of supply: they fire people, and discount they current producti…

Yes, and we are going to have economic correction regardless of whether the government print or not. Printing just makes the correction even greater and the suffering more pronounced.

Re: Fed, worried about recovery, will buy US debt

#52

Post by startuprules »

cynicalkane wrote: post #45
startuprules wrote: post #39

Earlier quoted context omitted.

"we still haven't gotten that worthless dollar and inflation" Oh yeah? Dollar is at 85 vs the yen, from 115 three years ago. Food prices doubled (food portions also got smaller), healthcare costs doubled, gas prices doubled, and so on. Are you using the old trusty government CPI for your inflation stats?

You're filling up at the wrong gas station, man. Oil is about half the price it was before the recession.

Please read the post. The poster was talking about the bailout. The average gas price after the bailout in LA is around 1.69. The average gas price right now in LA is 3.13

Re: Fed, worried about recovery, will buy US debt

#53

Post by nanairo »

startuprules wrote: post #51
nanairo wrote: post #46

Earlier quoted context omitted.

True, it allows people to buy more tomorrow with the money they have today. So what happens? They don't spend the money today waiting for tomorrow. But then tomorrow they realise that if they wait a little longer they'd spend even less. The end result is that nobody spends for anything that is not absolutely necessary. Hence most companies have an excess of supply: they fire people, and discount they current producti…

Yes, and we are going to have economic correction regardless of whether the government print or not. Printing just makes the correction even greater and the suffering more pronounced.

I am not arguing that a correction is not needed. Is the speed with which you do it that creates problems.

Re: Fed, worried about recovery, will buy US debt

#54

Post by startuprules »

nanairo wrote: post #53
startuprules wrote: post #51

Earlier quoted context omitted.

Yes, and we are going to have economic correction regardless of whether the government print or not. Printing just makes the correction even greater and the suffering more pronounced.

I am not arguing that a correction is not needed. Is the speed with which you do it that creates problems.

So no printing (let the market correct itself) or printing (let the government siphon off taxpayer money to rich, pretend it's for the good of people)

Re: Fed, worried about recovery, will buy US debt

#55

Post by mechanical_fish »

cynicalkane wrote: post #44
anamax wrote: post #37

Earlier quoted context omitted.

> Incidentally, foreigners have awesome faith in the US government, as evidenced by the fact that interest rates are as low as they have ever been, and -- frighteningly -- perhaps as low as they can be. Interest rates reflect relative opportunities, not absolute value. The fact that the US is seen as a better investment than, say, China, does not tell you that the US is a good investment. > "zero lower bound". 0 is n…

0 is a lower bound for interest rates because almost nobody would make that loan. The "rational actor" theory has some flaws, but it's a safe economic assumption that actors are rational enough to not throw away money like that.

Though, in fact, the US government can loan people $100 in exchange for $90 in ten years.

Or, equivalently, they can print $10 bills and hand them out to people. Simpler that way.

In practice, of course, it is preferable to give people jobs to do in exchange for their $10 bills, like fixing our broken roads or sewers, or building nice public infrastructure. That way we keep our workers and factories in practice, and we don't waste productive capacity, and we distribute the money according to fair rules, and we get some nicely paved streets.

But when you have to stimulate the economy and you're desperate you could literally "fire up the helicopter" (as the metaphor goes) and start dropping dollar bills from the sky.

Unfortunately, the Federal Reserve may not be able to do this. Deficit spending takes an act of Congress, and for various terrifying structural and political reasons the US Congress has punted on the problem of managing the economy.

Re: Fed, worried about recovery, will buy US debt

#56

Post by mechanical_fish »

yummyfajitas wrote: post #28
mechanical_fish wrote: post #21

Earlier quoted context omitted.

No, I believe it has almost nothing to do with foreign investment. (Incidentally, foreigners have awesome faith in the US government, as evidenced by the fact that interest rates are as low as they have ever been, and -- frighteningly -- perhaps as low as they can be.) No, the government buying its own debt is a very famous accounting trick designed to create more money in the economy. This act is the basis of the fr…

(Incidentally, foreigners have awesome faith in the US government,... This could also reflect a lack of faith in other governments rather than faith in the US government. If assorted European debt became 10x more risky but US debt only became 5x more risky, that would cause a flight into US debt.

True, but when you find a Martian index fund that pays better than anything you can find on Earth, be sure to give me a call.

It would actually be a good sign at this point if investors lost interest in buying government debt (from the US or from other governments). Because then they would find something else to invest in... like maybe something that promised some gain, something that would put people to work and make use of idle capacity. The fact that everyone is anxious to hoard cash or cash equivalents, even at miserable interest rates, is an ominous sign: When deflation comes, hoarding cash for as long as you can is a paying proposition, and the economy spirals to a halt as everyone tries to wait through as much deflation as possible before buying anything.

Re: Fed, worried about recovery, will buy US debt

#57

Post by MaysonL »

anamax wrote: post #37
mechanical_fish wrote: post #21

Earlier quoted context omitted.

No, I believe it has almost nothing to do with foreign investment. (Incidentally, foreigners have awesome faith in the US government, as evidenced by the fact that interest rates are as low as they have ever been, and -- frighteningly -- perhaps as low as they can be.) No, the government buying its own debt is a very famous accounting trick designed to create more money in the economy. This act is the basis of the fr…

> Incidentally, foreigners have awesome faith in the US government, as evidenced by the fact that interest rates are as low as they have ever been, and -- frighteningly -- perhaps as low as they can be. Interest rates reflect relative opportunities, not absolute value. The fact that the US is seen as a better investment than, say, China, does not tell you that the US is a good investment. > "zero lower bound". 0 is n…

Interestingly, recently 2 year Treasury TIPS (Inflation Protected Securities) were yielding -0.02%.

see: http://krugman.blogs.nytimes.com/2010/08/11/why-we-need-an-i...

Re: Fed, worried about recovery, will buy US debt

#58

Post by fondue »

MichaelSalib wrote: post #42
startuprules wrote: post #39

Earlier quoted context omitted.

"we still haven't gotten that worthless dollar and inflation" Oh yeah? Dollar is at 85 vs the yen, from 115 three years ago. Food prices doubled (food portions also got smaller), healthcare costs doubled, gas prices doubled, and so on. Are you using the old trusty government CPI for your inflation stats?

Your data seems...wrong. Or at least not consistent with my observations. Currency fluctuates significantly and one currency comparison tells us nothing. I've seen no evidence that food portions are smaller. Food prices don't seem to have doubled. Gas prices have definitely not doubled. I've seen no indication that health care costs have doubled. If you want to claim that the CPI numbers are full of lies (because of…

> I've seen no evidence that food portions are smaller.

You need to pay more attention then, it's been nick-named the 'Grocery Shrink Ray' and practically all companies are doing it now. The strategy is basically either change the shape of the container (smaller) and keep the same price or to raise the price. Here is a good link to follow;

http://consumerist.com/tag/grocery-shrink-ray/

Oh, and my favorite one yet, "Now with 25% more!" while not actually offering any more.

Re: Fed, worried about recovery, will buy US debt

#59

Post by nerfhammer »

ww520 wrote: post #11
nerfhammer wrote: post #7

Earlier quoted context omitted.

Deflation allows personal buying power to increase holding income constant. Deflation is defined as a decrease in prices. You know what else counts as a price? The price of labor. I.e., wages. Average wages decreases under deflation, just like any other price. Deflation is not a magical money machine that makes us all richer.

But the real average wage adjusted for inflation has decreased for a long time. Deflation has in fact happened in labor cost. Now it's the time to bring the rest in line. It's unsustainable to have ever increasing asset price but lower labor cost. No one can afford to buy them at the end.

Your premise seems to be that deflation will affect labor cost less than other prices, thus bringing them into "line".

It's pretty obvious that average income has decreased at a greater clip that CPI (see all those people have their income set to 0?) so I don't see how this is a valid premise.

Re: Fed, worried about recovery, will buy US debt

#60

Post by stretchwithme »

istari wrote: post #50
itsgoats wrote: post #17

Earlier quoted context omitted.

I'd like to say thank you, stretchwithme, for all of us who saved enough to buy a house, responsibly, in what just happened to be the middle of last decade and now have cause to sell (moving jobs because the economy stinks). We so deserve to seriously be screwed over because of our timing. Thank you US government. Thank you stretchwithme, your sentiments help the situation tremendously. Surprisingly, there were actua…

You seem to think because you had a down payment, had a job, bought a house you could afford, you "deserve" to be screwed over less by a falling housing market, because you were "responsible". Just the opposite! The migrant field worker who got a 0% down interest only loan on a 500K house is far less "deserving" of the screw than you, because he has no money to be screwed out of.

sorry, I didn't mean to be insensitive. you don't deserve this mess, but we own the risks we take on. There's simply no other way to run a society.

When the dot com bubble burst and I lost a lot of paper profits, that was unfortunate and unforeseen and I was responsible for the choices that got me there. It would have been nice if someone sent me a check for my losses, but how could the government do such a thing without making someone more responsible pay for my mistakes?

And we don't deserve to have our government doing this to us, again and again, but we own that until we make it clear that they should stop.

Its not China's responsibility or Saudi Arabia's. It ours.

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