What?? The Fed can energize the economy???

Discussion in 'Economy' started by EdwardBaiamonte, Sep 12, 2012.

  1. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    11:02 a.m. EST, September 12, 2012|Leah Schnurr, Reuters

    NEW YORK (Reuters) - Odds are mounting that the Federal Reserve could take action as soon as Thursday to energize a U.S. economy

    Can someone tell me what new products the fed has invented????
     
  2. expat_panama
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    expat_panama Silver Member

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    Sounds stupid.

    There's a reason it sounds stupid, and the reason is that that nonsense you're quoting is not the Fed. You're quoting Reuters. Reuters is stupid and the Fed is smart. We're better off with the Fed and we're worse of when we read what Reuters has to say.
     
  3. Nova78
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    Nova78 Silver Member

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    What?? The Fed can energize the economy???


    No,but they can de-energize your wallet,Obama is a pro at it......
     
  4. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    How can the Fed be good when it flooded the market with money, watched the bubble form, and had no clue what was happening.


    "We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though"-Bernanke

    "With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly."-Bernanke

    March 28, 2007
    "At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency."-Bernanke

    Jan. 10, 2008
    "The Federal Reserve is not currently forecasting a recession."-Bernanke
    Jan. 18, 2008
    (Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) "They will make it through the storm."
    July 20, 2008
    "The GSEs are adequately capitalized. They are in no danger of failing."


    "House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals"-Bernanke

    Now that should be terrifying. Realistically, Bernanke shouldn't have 100 percent confidence that he can control his toaster. I mean, he might turn the dial up too high, or someone might spill water on it. It could happen.

    By the same token, there are all sorts of scenarios where the natural "unwinding" of the Fed's extraordinary policies won't work as planned. In particular, if even official CPI inflation starts creeping above 4 and 5 percent on an annual basis, while unemployment remains above (say) 8 percent, then it will become apparent that Bernanke's "exit strategy" leads into a brick wall.

    "Well, If the Fed Started Monetizing the Debt, Then I'd Worry About Inflation …" One of the more absurd stances rejecting the inflationist warnings comes from people who think Federal Reserve policy is completely divorced from the Treasury's fiscal position. Such na├»ve analysts think that Bernanke's decision to soak up more than one trillion in government debt had nothing to do with the massive deficits that the government has been and will continue to run.

    Those pooh-poohing our current situation will concede that interwar Germany or modern Zimbabwe got into trouble all right, but those were situations where the central bank "monetized the debt." This supposedly stands in sharp contrast to the scientific monetary policies of the "independent" Federal Reserve.

    To put these claims in context, note that in the 2nd quarter of 2009, the Fed's absorption of Treasury debt amounted to 48 percent of the new debt issued in that period. And ZeroHedge posted the following chart showing that the Fed is currently the world's largest single holder of Treasury securities, surpassing China:

    Conclusion

    No one knows the future for certain. But given the economic and political realities, I still remain confident that prices quoted in US dollars will continue to escalate, not only in commodities and certain asset classes, but eventually in most consumer goods. At some point it will be so obvious that not even Ben Bernanke will be able to deny it.

    When will the breakout occur? Again, no one can know such things for sure, but there are growing signs that "the market" will soon recognize that Bernanke & Co. have painted us into a very tight corner.

    1) trying to predict erratic Fed behavior adds to economic instability

    2) when economy does grow Fed will have to pull back and we'll have to again guess ad Fed actions

    3) buy buying bonds the Fed allowed the liberals to spend an extra $1 trillion dollars

    4) when the Fed sells the bonds to public the government will then have to pay interest on them at the same time the government is trying to sell new debt thus driving interest rates higher and higher causing recession

    5) in the long run Fed actions may well lead to the inflation everyone has feared for so long
     
    Last edited: Sep 12, 2012

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