• IP addresses are NOT logged in this forum so there's no point asking. Members are encouraged to install GOM or HOLA or TUNNELBEAR for an added layer of protection.

    The SEX forum is HERE so please stop asking.

Does quantitative easing really work?

bic_cherry

Alfrescian
Loyal
#1
Does quantitative easing really work
sogo (SGtalk) said:
How come when US engaged QE 2008, the recovery speed is unlike the previous recovery cycles? Until now US economy is not that great also.

If quantitative easing works why were there recessions in the past since money printing can solve all issues?

Like 2000 tech bubble, 2001 911? All those can be avoid via money printing isn't it? :biggrin:
Works in the short term, where people don't know about the excess money being printed, until people discover it, then there will be hyper inflation in prices (depending on the degree of excess currency released) and then social chaos can take place: e.g. German Weimar republic that printed excessive $$$ to fund war, economy and especially corrupt politicians till they were discovered by both locals and foreign individuals alike (ditto Zimbabwe and somewhat Greece in last decade): sparks hyperinflation as foreigners refuse payment for goods in your country's worthless currency (but demand another more trustworthy currency that u don't have) resulting in inability to pay for imported any goods and thus food shortages and exponential price rises when paying in worthless native currency.

German Weimar republic photos showing a time when by WEIGHT, firewood costed MORE than dollar bills so people used dollar bills as cooking and heating fuel:

 

bic_cherry

Alfrescian
Loyal
#2
sogo(SGtalk) said:
but USA printed so much and no inflation seems to be taking place leh.
Edited quoted (my)post since.

Think its because their rate of Quantitative easing isn't as bad (excessive) as German Weimar republic or Zimbabwe and also because they own a huge amount of wepons production secrets and weapons.

Also, China willingly buys USA gahmen treasuries meaning that many people in the world actually think the USD has value, cos they think that China cannot be wrong...

Also, many countries, including Singapore also print not insignificant amounts of $$$, thus as central bankers balance their currency against other countries, it seems that nobodys currency is depreciating when it is just the case of all sinking together... which is why people buy gold, properties, world famous paintings, some say bit coin to preserve their wealth over time, simply because gahmen cannot easily replicate these things unlike fiat currency which last I heard, costs just 3cents each piece for gahmen to bulk print.

Inflation in USA is definitely present, in fact, their central bank (FED) has said that about 2% inflation p.a. is their target. In reality, it is MORE than 2%. Firstly because the improved productivity has been omitted and products today are inferior (more insecticide, preservative, additives laden foods, lousy quality food that is machine mass processed, cheaper ingredients from unknown sources etc) as well as (Secondarily) since inflation is pegged to costs of basket of goods consumed by median quotile of population by wealth (which is falling [read worsening wealth divide]), there is implicit (invisible) down rating of inflation rates : an inherent structural under-estimation in contemporary inflation calculation methods.

On a side note, inflation in prices can be obscured by deflation in value. Some might say that by weight, inflation in price of 5 apples has occurred if their weight has been halved (half sized apples) but price unchanged, others might say that there is zero inflation because the price per apple remains unchanged (despite the apples becoming smaller now)... this is just a simple example but as I understand, much of the road/bridge infrastructure in USA is poorly maintained and possibly unsafe : this disamenity is discounted inflation figures reported despite citizens now having new hidden private costs consequent of this disamenity (psychological stress for instance from fear of mishap from using unsafe transport infrastructure)... these costs are presently excluded from contemporary national inflation figures reporting: thus the inherent significant under eatimation/reporting of gahmen inflation numbers which remains an INTERNATIONAL problem.
 

bic_cherry

Alfrescian
Loyal
#3
Justice(SGtalk) said:
sogo(SGtalk) said:
how come usa now kept talking about hiking rates? might as well continue printing and fools will keep on buying their UST.
There will come a time when the banks, institutions and the rich are loaded and can no longer able to take more money even though the interest rate is low. Continue "printing" will causes liquidity traps rendering money policy no longer effective as a control. This is when they will have to stop "printing" and raise the interest rates so that the banks etc will return the excess to prevent such "printed money" flowing into the economy to cause havoc. Think that is part of the money control policy.
Agreed, even fools can come to their senses and stop buying USD treasury bonds ('treasuries/ UST') sooner or later ... These bonds can also be traded between parties and on exchanges/ vz international banks which provide such 'exchange/ middleman' service... actually the yield in UST would already be creeping up as holders get spooked/ saturated and thus start unloading on UST on exchanges worldwide resulting in lower prices on UST equating to an increased yield (e.g. Par value = 100USD, interest(/coupon) 5%, maturity in 2yrs, offered at 90USD means 10% p.a. yield over 2 yrs if bond is redeemed at par value of USD100). Of course, this is extreme example because US FED borrowing rate is far less than 10% but in a way, FED knows that excessive QE will quite reflexively cause yield to increase in open market trade... I.e. FED has no choice but to pay higher coupon on future treasury bond issuance ... however, FED now says that higher coupon (interest ) rate is because of inflation : FED is just in propaganda overdrive to mislead people into thinking that they have good credit score and are in control of their accounts / debts by pre-emptively announcing increase in interest rates; but truth be told, FED is pressured by increasing trend in yield on UST traded open market, with fund managers who will NOT accept any new UST whose coupon is lower than the contemporaneous yield on UST open market: thus US FED has painted itself into a corner and its hands are now TIED... unless FED can genuinely improve its reputation / credit score amongst international investors; FED propaganda and brainwashing efforts aside, the FED will just have to borrow at increasing coupon / interest rates like any other less advanced economies like Lebanon, Ukraine, S Africa, Venezuela etc where gahmen bond coupon (interest) rates remain in double digits e.g. 12% or so in line with the risk of default + historic speed at which the $$$ printing presses in these respective countries roll.
 
Top