QE2 and recession policy

[doctor100]

So it seems to me that everyone here is against quantitative easing, or other policies that devalue the dollar.

me, I don't yet have an opinion about it, and find the decision would be very difficult to make. Let me quote a couple thing about currency wars from wikipedia

According to economist Richard N. Cooper writing in 1971 a substantial devaluation is one of the most "traumatic" policies a government can adopt, and almost always led to cries of outrage and calls for the government to be replaced.[3] Devaluation can lead to a reduction in citizen's material standard of living as their purchasing power is reduced both when they buy imports and when they travel abroad. It can add to inflationary pressure. Devaluation can make international debt servicing more expensive if debts are denominated in a foreign currency, and it can discourage foreign investors. At least until the 21st century, a strong currency was commonly seen as a mark of prestige while devaluation was associated with weak government.

However when a country is suffering from high unemployment or wishes to pursue a policy of export led growth, a lower exchange rate can be viewed as a potential solution. Devaluation has been advised by the IMF from the early 1980s as a potential solution for developing nations that are consistently spending more on imports than they earn on exports. A lower value for the home currency will raise the price for imports while reducing the price for exports.[5] This encourages more production to occur domestically, which raises employment and GDP. Devaluation can be especially attractive as a solution to unemployment when other options like increased public spending are ruled out due to high public debt and also when a country has a balance of payments imbalance which a devaluation would help correct. A reason for preferring devaluation common among emerging economies is that maintaining a relatively low exchange rate helps them build up their foreign exchange reserves, which can protect them against future financial crises.

So first off it's a long term policy: not short term.

"everybody here" seems to be against a trade deficit, but QE is one way to address that-one of the surest, if slowest.

And of course "everyone" is against high unemployment rates . . .this is a long term solution for that.

Quantitative easing can act to devalue a country's currency in two indirect ways. Firstly it can encourage speculators to bet that the currency will decline in value. Secondly, the large increase in the domestic money supply will lower domestic interest rates, often they will become much lower than interest rates in countries not practicing quantitative easing.

so this also increases foreign reserve, but also lowers interest rates on loans.

Which has a nasty trade off. reduced spending power (value of the dollar) which translates into inflation/lower QOL. that's the big one.

it also declines emotional "prestige" and further has a risk of (in America's case) bringing home all the dollars everyone is holding on to-both increasing the money supply domestically even more, and reducing our 'economic super power' status that makes it easy to do business with other countries.

Is the trade off worth it? Why not? or Why? what would be a better policy?

Obama has promised to raise out exports, Obama has promised to stabilize the economy, and to lower unemployment . . .and this policy has his paw prints all over it (i used to think it was Bernanke, but not since learning this wasn't just bank favoritism). With this policy he is doing that. Good or bad? if bad, what would be better?

 

[waltky]

Say what??...

Obama on Recession: ‘Less Money Coming In,’ So We Had to ‘Spend Even More’
Tuesday, July 26, 2011 – When speaking to the nation in a primetime television address on Monday, President Barack Obama said that because less money was “coming in” during the recession, the federal government had to “spend even more.”

“The deficit was on track to top $1 trillion the year I took office,” said Obama. “To make matters worse, the recession meant that there was less money coming in, and it required us to spend even more -- on tax cuts for middle-class families to spur the economy; on unemployment insurance; on aid to states so we could prevent more teachers and firefighters and police officers from being laid off. These emergency steps also added to the deficit.” Obama then went on to make his argument for a “balanced approach,” with tax increases as part of a deal to increase to debt limit.

According to the non-partisan Congressional Budget Office (CBO), the American Recovery and Reinvestment Act (ARRA), known as the economic stimulus, was passed by the Democrat-led Congress in February 2009 and has cost the taxpayers $821 billion. The CBO projects that the federal budget deficit will reach $1.5 trillion by the end of the fiscal year 2011. The current national debt limit is $14.29 trillion. Official debt figures from the U.S. Treasury show that the 111th Democrat-led Congress added $3.22 trillion to the national debt.

Following the president’s remarks, House Speaker John Boehner (R-Ohio) called for a reduction in federal spending and no tax increases as part a deal to increase the debt limit. “The solution to this crisis is not complicated: if you’re spending more money than you’re taking in, you need to spend less of it,” said Boehner. “There is no symptom of big government more menacing than our debt,” he said. “Break its grip, and we begin to liberate our economy and our future.”

Boehner also mocked the economic stimulus package signed by President Obama. “Here’s what we got for that spending binge,” said Boehner, “a 'stimulus' bill that was more effective in producing material for late-night comedians than it was in producing jobs and a national debt that has gotten so out of hand it has sparked a crisis without precedent in my lifetime or yours.”

Obama on Recession:

See also:

Obama: ‘We Can’t Just Close Our Deficits By Cutting Spending’
Monday, July 25, 2011 -- President Barrack Obama today said that the federal deficit and the national debt could not be reduced solely “by cutting spending.”

During a speech at the National Council of La Raza (NCLR) Conference in Washington, D.C., the president said, “If we don’t address the debt that’s already on our national credit card, it will leave us unable to invest in things like education, to protect vital programs. So I’ve already said I’m willing to cut spending that we don’t need by historic amounts to reduce our long-term deficit -- make sure that we can invest in our children’s future.”

“I’m willing to take on the rising costs of health care programs like Medicare and Medicaid to make sure that they’re strong and secure for future generations,” he said. “But we can’t just close our deficits by cutting spending. That’s the truth and Americans understand that.”

Obama continued: “Because if all we do is cut, then seniors will have to pay a lot more for their health care and students will have to pay a lot more for college, and workers who get laid off might not have any temporary assistance or job training to get them back on their feet. And with gas prices this high we’d have to stop much of the clean energy research that will help us free ourselves from dependence on foreign oil.”

Obama went on to say that middle class and poor families would bear the burden of fixing the federal government’s fiscal problems if only spending cuts were part of a debt ceiling plan. “It may sound good to save a lot of money over the next five years, but not if we sacrifice our future for the next 50,” said Obama.

More http://cnsnews.cloud.clearpathhosting.com/news/article/obama-we-can-t-just-close-our-deficits-c

 

[iamwhatiseem]

Government must get smaller.
Any questions?

 

[KissMy]

We can't continue to print money to support the overpaid corrupt government employees.

Printing money is socialism & since the government is doing it anyhow they should have to pay it equally to every citizen, not just their cronies. The government cronies are living large like kings while the rest of us suffer. We must fire them all & take their cushy pensions so they can get a taste of what they have done to the rest of us. Then hire the current unemployed to fill their positions.

Printing money devalues the dollar & makes prices rise on everyone, but it will eventually help out exports & slow our imports.