Βι¶ΉΤΌΕΔ

And oil prices rose

Could someone explain please?

Fed Reserve buying Treasury bills.


Is that not money going around in a circle?

'The bottom line is that the Fed is launching a massive new offensive against the financial crisis - at no small risk to itself - because it wants to prepare for the worst, and it's the only part of the US government that is free to act. No wonder the dollar fell.'

Staphanie, the US Federal Reserve is not a US Federal Government entity, it is a cartel of private banks created in 1913. Woodrow Wilson commented; 'I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit.
Our system of credit is concentrated. The growth of the nation,
therefore, and all our activities are in the hands of a few men.
We have come to be one of the worst ruled, one of the most completely
controlled and dominated governments in the civilized world.
No longer a government by free opinion, no longer a government by
conviction and the vote of the majority, but a government by
the opinion and duress of a small group of dominant men.'

hi Stephanie

Although the Dow etc saw this as good news - 'a shot in the arm' as you say - that is because they are a type of addict and are looking for any short-term reason to play the market

If they are anyone looked at the latest overall economic news in the US then they would only see bad news and the $1.2tn QE suggests to this pirate that the captainand crew of that large galleon is nearing a BLIND PANIC

politicians can't wait for good news, even very popular, newly-elected presidents; not when the general public are getting into a very ugly mood (see yesterday's AIG Senate hearings and the protests outside); not when unemployment is increasing by 650,000 a month (a conservative estimate that does not take into account part-time working, discouraged workers and all those who have given up); not when exports continue to slump; not when GM and Chrysler have 10 days left on their latest deadline to come up with a rescue plan or go into Chap 11 Bankruptcy and still have no idea whatsoever what to do except ask for $2bn a month to remain zombies

News of a surprise upturn in housing starts in the US was also seized upon - like a drowning man grabbing your hand - but it was an increase from virtually no activity in January and is actually 47% below the comparable months a year ago!

I'm sorry to be gloomy but I fear that we remain deep in the woods and without a compass.

Any ideas on how the Chinese may react to this, given that it begins to devalue their mountain of USD and the Chinese PM was pointedly voicing his worries just last week; his comments elicited friendly noises from both Clinton and Bernanke that everything would be fine.......

generally accepted that Japan took far too long getting both interest rates to zero and easing to any level to have an impact. the issue with qe is doing too little too late (japan) than doing too much. the fed has spent a huge amount of money trying to bring the long end of the curve down and largely failed. it has suddenly shifted the far end down relatively drammatically for a relatively small amount of money (it hasnt yet bought anything merely announced the intention and yeilds down 50bps - hows that for bang for the buck). the reality here is the housing market - unless the fed can put a bottom under it we have only just started started to see the scale of this depression. Simple. Get US 30 year mortgage rates down to a few percent and every american who can will bite your hand off - they have a totally different mentality from the japs who, once they crawled back inside the shell would not come out again. You tell an american they can borrow a million dollars at 250 bps for 30 years and they will but a new house, a new car, a boat, and worry about tomorrow, well the day after tomorrow. what's more, do not under appreciate quite how sensitive the US is to it's equity markets, they are hugely politicised. If the fed had come out and done nothing yesterday, which without the QE was ostensibly more of the same (buying toxic nonsense) then the markets would have tanked and the shallow pockets that have bought in over the last week and a half would have walked and the s&p / dow and friends would soon be testing new lows.

cant say the qe move was a surprise to me, made good money buying treasury on the spread betting account prior to the announcement, thanks Ben.

mrsbloggs13c2>
"And oil prices rose"

With oil prices being quoted in dollars (which is actually a factor that may keep the dollar artificially higher than the US economy merits; peopel requiring dollars to buty oil) and the dollar falling this is pretty much inevitable.

The only real significance of oil price changes is if they change in terms of currecnies generally; and to the UK in terms of sterling (although increase in that may be due to sterling also losing value).

Why is it I get the feeling that something as seemingly unimportant as the Bee problem will ultimately have a bigger impact on us because we fail to foresee or accept where the future danger to us is developing. Who is doing QE for bee's, type thinking?

Sorry if I have said this before but too much credit caused this crisis so using quantitative easing to free up credit will only delay the inevitable. The only way to solve this crisis is back to basics you buy something when you need it and can afford it, if you don’t have the money you don’t buy it. Don’t replace things when you don’t need to or just because there is a new one on the market. Greed is bad prudence is good, it is going to be painful but until the world realises this we will be in a continuing cycle of boom and bust each bust be longer and deeper.

***OIL***

2. At 11:43am on 19 Mar 2009, Toldyouitwould wrote:

Could someone explain please?

Fed Reserve buying Treasury bills.


Is that not money going around in a circle?

Nope. The Federal Reserve is a privately owned company, not a branch of the US government. The US government appoints the board, but the FED itself is owned by the major wall street banks... Though the actual ownership details are secret.

Stephanie.

If you knew that your dollars or pounds were being diluted, would you hold on to them? No. You would exchange them for something that cannot quite so easily be diluted.

The S&P 500 hasn't gone up. Oil hasn't gone up. Gold hasn't gone up. The dollar has gone down.

#3 - According to Wikipedia, the Fereral reserve 'is a quasi-public (government entity with private components) banking system'.

I thought everything had gone a little too quiet. Now we get this.
"Shock and awe" they call it.

I agree with No.4. somali_pirate_SP500

Desperation is in the air.....

Private debt becomes government debt. Government spending eventually becomes increased taxation. Increased taxation stifles private enterprise.....

I'm sorry if this seems a bit simplistic, but surely like any other commodity, if you make more of it (US Dollars in this case) available - which is what, in crude terms I understand quantative easing to do, then the value (cost) of it on the open market will fall.

Surely this is just the market working, as it does for potatoes, oil, or whatever else. Reduce the supply of the commodity (money) then it's value ought to rise.

My principal concern is the end game here is too much money supply, leading to a dose of good old fashioned (1970s) inflation. Can anyone explain why this should not be the logical outcome.

So the US has launched the "nuclear option".

Lets hope it works cos otherwise we will all be turning to privateering.

Mr pirate, is there any turnover in your crew at the moment?

I can hand,reef and steer!

#6 - inevitable, yes

Does it affect anything? If you are paid in dollars, it does. My american friends totally changed their behaviour when petrol hit $4 per gallon from $2. It affected everything. Consumption reduced. Heating oil rose too. At one point gas prices were impacted.

Some here might say, shame.... $4 a gallon but $7.5 per hour is what you might get paid in retail, there isn't much public transport, health care has to be paid for and actually taxes aren't very different.

#10 true-liberal:

Thanks.

I thought you had made things clear until I read #11 rhysgp

#11 rhysgp:

"#3 - According to Wikipedia, the Fereral reserve 'is a quasi-public (government entity with private components) banking system'."

+++++++++++++++++++++==


So the cartel of private banks are all sound ones?

We need not worry then.

#11 - And who wrote the entry in wikipedia? Ben Bernanke perhaps....

Your opening line says it all, Steph.

What the UK does by itself is an irrelevance, a pimple on the global financial front.

I suppose with one of the Big Boys now opting for QE, there must be some comfort in knowing that we're not alone.

"If you thought the US economy needed another shot in the arm, this could do the trick."

I think you have too much faith in human nature Stephanie. Or at least to much faith in international bankers. The actions of these people are beyond serious discussion and logical reasoning.

They are corrupt. Their system is corrupt and everything they do is for their own benefit.

I will admit, I do admire the people on this "blog" who treat you with respect and try their hardest to deliver a reasoned argument against the stupidity and injustice of it all.
Alas, although I am trying, I doubt that I am going to be one of them. I am just too fed up now listening to correspondents simply repeating government doublespeak and banker jargon.

I've come to the conclusion now that this is not a blog anyway ! The only difference between what we read here and what we can read elsewhere on the Βι¶ΉΤΌΕΔ website is that we get a few personal pronouns thrown in to make it sound
personal and chatty ! Isn't that the case ?

The real difference between blog and blab is one of personal openess.

It seems to me that most Βι¶ΉΤΌΕΔ correspondents lack the courage to say what they believe. They sit on the fence trying to be all things to all people. That's my perception of it anyway !


Characteristics of a Pseudo blog...

If you thought.... (We are wrong ? )
We had thought... (How do you know what we think ? )

As I've mentioned..

We return to the bigger question... (You haven't answered any of my big questions yet so is it we or do you mean you ? )

If you buy all these arguments... (How nice that you realise that most of us probably don't)


Characteristics of an effective blog...

I believe it is wrong that...

I believe it is unfair that....

The people that benefit from this are likely to be....

The people that lose out enormously in this are....

It any other situation this would be regarded as a crime.

This makes me angry because....



Please be more open Stephanie. We need it right now.

All this printing of money means only one thing. Assets are now completely valueless and like the paper money will end up not worth the paper they are written on.

That's the reason they are unable to value the assets they are purchasing.

The price of houses and other assets down the line will only be worth what someone is prepared to pay for them

We're all in for the very long haul and optimistic noises about this being over by the end of this year are just stalling tactics.

Brown has nothing to lose now so he just plays the game and ignores everyone around him.

In fact they are all playing the game to try to keep us quiet until someone can come up with a solution.

In the meantime we'll be flooded with banknotes so we won't realise what's really been going on until well down the line. By that time all those responsible will have nicely disappeared from the ensuing mayhem.

Quantitative Appeasing?

Has quantitative easing ever worked?










* Whilst the Federal Reserve is an independent institution, it is still accountable to Congress. The Constitution gives Congress the power to coin money and set its value. Congress delegated this power to the Federal Reserve in the 1913 Federal Reserve Act, but still maintains oversight authority.

Sic transit gloria mundi.

Imagine, the IMF didn't know that Britain was " best placed of all the industrialised nations to ride out the recession " ( G. Brown ). They seem to think wer'e not, considering our bebt is now higher than anyone elses and stands at around 11% of GDP. Maybe they do know, maybe the grand master of world economics Gordon Brown didn't know. How much longer will he keep his head in the sand (or wherever he keeps it ) and admit that his government has completely lost control of what is happening and wants to do the honourable thing and resign.

Today so far the S&P500 has fallen almost as much as it rose yesterday. The focus on indices daily, hourly or even weeklyis not helpful. In fact I have written to complain on more than one occasion about Βι¶ΉΤΌΕΔ articles referring to rises or slumps in indices which are totally out of date by the time I read them.

I have thought for some time that 24/7 news is disruptive and indeed encourages the PR and spin machines.

On another note, I was sitting in the sun talking to my grownup up kids about the potty situation we find ourselves in and they said....

so what if everything had little value, in number terms, how bad would that be

which made me think about the time when I said we should work in pounds not dollars, it won't seem so expensive....

Unlike some on here, I thought your piece was good in giving us former economic students the "between the lines" on what is driving the markets from the policy actions taking place on a daily basis. It does depress me to see so many still lashing out. We all know deep down the policy makers are pulling the few levers available to them to see if this or that policy works. If anyone had the 'silver bullet' answer we wouldn't be in this position teetering on the cliff edge or on a ledge some way down.

jolo13 # 23

"The Federal Reserve System virtually controls the nation's monetary system, yet it is accountable to no one. It has no budget; it is subject to no audit; and no Congressional Committee knows of, or can truly supervise, its operations."

Murray N Rothbard

tonyparksrun # 27

The problem that we face today is a government fiat monetary problem, at the heart of which lies central banking and fractional reserve lending. That is where your "silver" or preferably "gold bullet" needs to be aimed at.

The kernel of any economic system is money. And if the control of money lies in the hands of a few powerful government sponsored central bankers, then, to paraphrase, we will always be teetering on the edge of the abyss.

Ms Flanders wrote:

Wall Street certainly saw the bright side - the S&P 500 rose 1.6%.

----- ----- ----- -----

So, a 1.6% gain yesterday, followed by a 1.3% loss today. What say you now, Ms Flanders?

The mood in the United States has suddenly turned dangeously ugly. All you hear about these last few days is the 168 million in bonuses that are to be paid to the execs of AIG including their Financial Products unit which was in large part responsible for the crisis and completely responsible for bringing down this huge insurance company with its invention and mareketing of CDSs. The Congress is livid. Many opposed the bail out last fall and they all feel that they and the American taxpayer have been duped. This is putting future tranches of the bank bailout and the stimulus package in serious jeopardy. The mood is to just let the banks fail and damned the consequences. The CEO Liddy of AIG has suggested in sworn testimony before Congress that he may refuse to comply with subpoenas by both the Attorney General of New York State and by a Congressional Committee for release of the names of the individuals receiving large bonuses. He says there have been anonymous death threats against them already. Meanwhile Geitner is looking none too secure in his job. Some suggest he will be out of work by late spring or summer. This would be a disaster for Obama who doesn't have a Treasury department yet, just a Secretary of the Treasury. If the recovery plan in the US is aborted or even delayed, it probably won't matter what the rest of the world does. Nothing will help then, it will be over. So far the best plan Congress has come up with is to tax those bonuses at a rate of 90% with the states probably taxing the rest.

"The Rothschild-Casino-Lodge Theory of Banking & Finance" (aka "The Casino Theory") does not appear inappropriate here :

Well then you go away - and things DON'T change!!!

I'm now siting in the sun (well it's dark now but...) and feeling happier that the Β£ is rising aganst the $.

But i agree with somli-pirate the whole thing stinks of panic. Even Obama is now saying that he doesn't know when the economy will turn round - he only knows it will AT SOME POINT.

I dread to think what the panic will look like when the "experts" finally start to admit to the D word!

If this gains traction, we can expect a rapid decoupling of oil to USD and a fall in the value of the USD.

Pavlov2009 (#20) Good post. Bet it doesn't change her behaviour. Stephanie interviewed Flynn and Mackintosh instead of Lynn, Jensen, Murray and Rushton.

Stephanie:
QE & THE USA It happen because of the ongoing economic downturn, and, the parties decided to make more useful in funneling money into the markets...

~Dennis Junior~

FrankSZ

"If this gains traction, we can expect a rapid decoupling of oil to USD and a fall in the value of the USD."

The sooner the US dollar beings to fall, the faster the depression will end, but not in the way most people think. With mortgates in serious jeopardy of default or already defaulted amounting to 9 trillion dollars and a government debt of 10 trillion, my calculations suggest that the US dollar needs to be diluted by around 90% through printing of money. That is about 1000% inflation of prices and wages say over 2 to 4 years. This will make it possible to pay off all that debt with new easily available cheaper minted dollars. The debts will be written down and a new level of wage price relationships will exist much as they did in the past, only prior incurred debts will then be payable. Until that happens, there will be little if any credit as these unpayable debts represent a disappearance of wealth. There will be people badly burned. Anyone holding these debts, anyone on a fixed income. The government should consider help for anyone on a fixed income of less than about $500,000 a year. The old $50,000 will become the new $500,000. If and when this happens (it appears to have already started) other nations will have to follow suit or be priced out of the US market. You can also be sure that the price of food, America's number one export will shoot through the roof. Additionally, a cap and trade carbon system in the US which allows farmers to sell their carbon credits to power companies will likely result in massive worldwide starvation because US farm output will drop sharply. The diversion of just a small percentage of output to alcohol producton to add to gasoline (gasoline in the US is now 10% alcohol) has already caused food prices worldwide to rise sharply.

MarcusAureliusII (#37) Here's another way of looking at what has led to this 'crisis'. For decades, predatory lenders have been encouraging easily fooled, impulsive people (who can't plan very far ahead), that they can afford things which they can not. Βι¶ΉΤΌΕΔs, Buy-To-Let homes, homes abroad, cars, second cars, cars for kids, electrical gadgets for kids, gadgets for themselves, holidays, Higher Education, fancy food, ethereal 'service' based businesses - it goes on and on. All of that's going to have to contract as credit (securitized and passed off to unwitting others like Unit Trust fillers of old) contracts dramatically now he risks can't be dumped elsewhere. There are millions of people in the USA and UK who have been having larger families that they could not afford which insidiously compounded the problem whilst swelling the accounts of predatory lenders. All of that has to be cut back dramatically, and with it, all the businesses which fed off and reinforced a delusional, irresponsible way of life.

It will be better for all in the end. Just don't let verbose economists fond of coining neologisms by the day and all the self-interested/centred persuade anyone otherwise.

JadedJean, If you made $15,000 a year hashing hamburgers at MacDonalds and could barely rent an apartment and someone made it possible for you to live in a $300,000 house just by signing a piece of paper you know is a complete lie, wouldn't you do it? Wouldn't you enjoy it for however long you could? Don't blame the borrower, it's the lender who made the mistake. In the old days, you had to prove you stood a very good chance of paying back that loan and banks did not usually sell mortgages to other banks, they were stuck with the consequences of their own mistakes. The deregulation of the credit markets the Republicans and Democrats conspired to for entirely different reasons opened the floodgates. There is plenty of blame to go around. Credit rating agencies, investment banks who didn't do their "due dilligence." You don't hear them use that term anymore. When was the last time you heard anyone in the world of finance talk about due dilligence? Not all that long ago, that was their favorite catch phrase. But the root of the blame goes to Mr. Greenspan and his friends and to the US Congress and at least President Clinton and President Bush II who went along with this scheme believing that 1929 would not happen again. Santyana was proven right again, those who do not learn the lessons of history are condemned to repeat them. And now we are at the mercy of the same people to solve the crisis who got us into it in the first place. When I see the outrage of Representative Barny Frank or Senator Christopher Dodd in Congressional hearings on C-SPAN I want to puke. Where were they when this scheme to make it possible for their poorer constituents to buy houses they couldn't possibly pay for was proposed? I'll tell you where they were, they were championing it along with their Republican conterparts who saw huge quick profits for their banker type constituents.

To paraphrase Senator Dirkson's comments of about 40 years ago, a trillion here, a trillion there, before you know it, it adds up to real money. I've heard a lot of talk about the mortgages at risk in the US being around two trillion dollars. President Clinton used that number recently in an interview. Now the number nine trillion is being bandied about. If that is true, the problem is far worse. I hear talk that the good times are just around the corner (President Hoover said the same thing after the stock market crashed.) Is it true or are they whistling past the graveyard? In public they are fairly confident. But many say that privately they are so scared they are soiling their pants. Have they capped the problem and started turning it around or are they fighting a hopeless battle against an incoming tidal wave? There is no one who will not be affected by the answer.

MarcusAureliusII (#39) Perhaps you have not understood what I have been explaining? Behaviour is controlled by its consequences and the delay between an action and its consequence is critical here. Lobbying for unrestricted immigration of low skilled (lowish IQ) Hispanics into Califirnia (and NY see the change in demograohics over the decades) made it easier for predatory lenders to profit from these people's inability (like kids), to turn down offers which were sold to them as too good to be true. One only sees this if one understands the way diversity in ability demands something other than caveat emptor to protect them, i.e. it demands regulation. The relevant Operant behaviour economic principle here is the hyperbolic discounting function (see impulsivity).

This had nothing to do with caring about housing for the poor and needy, or redistributing wealth, it was all about brokers making easy money out of the vulnerable with the banks and USA/UK governments colluding, as I see it. They just hoped that through securitization they could slice and dice or 'cut' the bad risk and offload it onthe international money markets, with the large population of China (and post WWII asset Japan etc) being the main accessories, or should that be, (if one thinks about their savers) victims?