Posted on 09/07/2014 3:22:37 PM PDT by hripka
A credit-based financial economy (as opposed to pure cash) depends on an ever-expanding outstanding level of credit for its survival. Without additional credit, interest on previously issued liabilities cannot be paid absent the sale of existing assets, which in turn would lead to a vicious cycle of debt deflation, recession and ultimately depression. It is this expansion of private and public market credit which the Fed and the BOE have successfully engineered over the past five years, while their contemporaries (the ECB and BOJ) have until now failed, at least in terms of stimulating economic growth.
(Excerpt) Read more at pimco.com ...
Here’s Kasriel’s analysis and he’s calling for inflation to surge in 5-9 quarters from now.
http://www.ritholtz.com/blog/2014/09/seeds-of-u-s-inflation-are-sprouting/print/
Comments?
I've said all along that I agree with Bernanke (and now Yellen) that QE was the exact right thing to do... BUT exit timing is going to be imperative and difficult.
Ironically I actually think the slow churn pace of the economic recovery is helping them. If we had had a Reaganesque recovery boom the exit/unwind timing would be much much harder to get right.
So what you really mean is that QE coupled with Obama’s anti-business policies is the right balance, no?
Otherwise, I suspect they’re going to get it wrong. We already have asset bubbles in specific markets. At the same time, I pity whoever is running the Fed. You essentially inherit decades of policy that deserves to be unwound, but isn’t politically feasible to do. Worse, you’re hostage to both Congress and the WH and their conflicting policies and meddling. I’m not unsympathetic individually to the Chairs’ challenges, but I think the FED just gives more cover to the politicians to ruin everything.
Accidentally yes.
QE was the exact right prescription for deflation which is what we were facing.
The Fed, Bernanke and Fisher specifically, have been scathing in their criticism of Congress and Obama’s fiscal and regulatory policies.
IMHO the economy would be significantly worse without QE. Congress and Obama have gotten away with more because QE disguised it but QE was not meant to disguise it. It was the absolute right thing to do.
“BUT exit timing is going to be imperative and difficult.”
I agree it was the right thing to do but it’s a little like unprotected sex. Pulling out at the wrong time can have lasting consequences.
+1
LMAO! That is the best Fed analogy I’ve heard.
What exactly do you think would have happened without QE1 and you don't have to be humble about it.
Think Japanese deflationary spiral.
Totally different causes, totally different demographics, economy and government. Wouldn’t happen here, ever. Worse for the pro-QE argument, the Japanese deflationary spiral is a direct result of government...wait for it...intervention.
surging?
excusing the last blip,
150/7250 = 2% in a year.
Dude...I can’t remember ever reading something like this (credit expansion being necessary for interest payments) from a mainstream source.
That’s why I posted it.
And where would I find if bank reserve requirements have increased?
Looks like it hasn't been done yet. Even if it when/if it is done, the banks will find a way to screw the general populace.
Is all the boarding of cash what is prompting central banks to contemplate negative interest rates?
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