And the Nobel in Economics Goes To.....

[EdwardBaiamonte]

.There was another solution and we've already discussed it, so I am not going to discuss it again.

don't discuss it dear, just tell us what it was unless you are afraid??

Odd that you're too stupid to know we've already discussed the subject one million times. Freedom versus govt is as old as Plato and Aristotle. We have to keep discussing it because you lack the IQ to understand it as a typical liberal.

 

[Pksimon2007]

What a smug liberal ass. If true sell your house and short the stock and real estate markets!!

I do realize you're the lib fool who wants to ban international trade so we have to grow our own bananas at 50 times the cost.

Smarter even : buy my mortgage from the bank , sell it to the fed as triple A asset and then default on it.
That's QE mostly.

Smarter even : buy my mortgage from the bank , sell it to the fed as triple A asset and then default on it.

They can't default on your mortgage, only you can do that.

That's what I meant. I've got the capital now ( as I sold the "asset" ) , now I can default on it.

More importantly,
1) QE was part of the monetary policy that prevented Depression.
2) Culturalarse has no better monetary solution better than Friedman and Bernanke.
3) QE generally will make money since real estate has real value and prices are up now from low point.

See why we are positive that liberalism is based in pure ignorance?

I do not allways agree with economist from the Austrian school, and tend to agree with the view points of keynessian economics.
But , in this case I can certainly see why they think QE was a mistake.There was another solution and we've already discussed it, so I am not going to discuss it again.

- Keynesians think QE was a mistake. You should see the vitriol against QE on the db's where I hang out with fellow Keynesians.

QE was a New Keynesian program. New Keynesians aren't Keynesian at all. The name is a misnomer - they call themselves the "saltwater" school, not Keynesians. Keynesian is a name that Austrians and the like give them. They are monetarist, non-free market neoclassicals. Krugman is an example.

 

[EdwardBaiamonte]

- Keynesians think QE was a mistake. .

oh?? Did it cause the depression it was designed to avoid? What is the evidence of a mistake???

 

[Pksimon2007]

.There was another solution and we've already discussed it, so I am not going to discuss it again.

don't discuss it dear, just tell us what it was unless you are afraid??

Odd that you're too stupid to know we've already discussed the subject one million times. Freedom versus govt is as old as Plato and Aristotle. We have to keep discussing it because you lack the IQ to understand it as a typical liberal.

- You're obviously in your own world, Ed.

That's probably a good thing for the rest of us.

What's really interesting about watching you post is the certain knowledge that this sneering keyboard warrior is, in real life, someone that nobody notices.

 

[Pksimon2007]

- Keynesians think QE was a mistake. .

oh?? Did it cause the depression it was designed to avoid? What is the evidence of a mistake???

- It didn't do much of anything.

 

[EdwardBaiamonte]

- Keynesians think QE was a mistake. .

oh?? Did it cause the depression it was designed to avoid? What is the evidence of a mistake???

- It didn't do much of anything.

you mean banks were not happy to get rid of toxic securities??

 

[oldernwiser]

What a smug liberal ass. If true sell your house and short the stock and real estate markets!!

I do realize you're the lib fool who wants to ban international trade so we have to grow our own bananas at 50 times the cost.

Smarter even : buy my mortgage from the bank , sell it to the fed as triple A asset and then default on it.
That's QE mostly.

Smarter even : buy my mortgage from the bank , sell it to the fed as triple A asset and then default on it.

They can't default on your mortgage, only you can do that.

That's what I meant. I've got the capital now ( as I sold the "asset" ) , now I can default on it.

More importantly,
1) QE was part of the monetary policy that prevented Depression.
2) Culturalarse has no better monetary solution better than Friedman and Bernanke.
3) QE generally will make money since real estate has real value and prices are up now from low point.

See why we are positive that liberalism is based in pure ignorance?

I do not allways agree with economist from the Austrian school, and tend to agree with the view points of keynessian economics.
But , in this case I can certainly see why they think QE was a mistake.There was another solution and we've already discussed it, so I am not going to discuss it again.

Of course QE was less than desirable. But the alternative - infusing the economy with cash directly in the form of jobs programs - was dismissed out of hand. QE was imposed in lieu of full employment.

 

[CultureCitizen]

.There was another solution and we've already discussed it, so I am not going to discuss it again.

don't discuss it dear, just tell us what it was unless you are afraid??

Odd that you're too stupid to know we've already discussed the subject one million times. Freedom versus govt is as old as Plato and Aristotle. We have to keep discussing it because you lack the IQ to understand it as a typical liberal.

Easy. Let the banks bankrupt. Uso those billions ( trillions really if we consider QE) to form new small banks which would start with a reasonable amount of equity, and transfer the saver's accounts to the new banks ( only those covered by the FDIC).

 

[Toddsterpatriot]

Perfectly correct to use either term.

Really, next time you go to the store to buy a loaf of bread and a gallon of milk try paying with bonds.

reserves.......cash
Not bonds.

OK, try reserves instead then. Either way I think you'd come home empty handed.

My debit card and checkbook both involve reserves.
Mmmmm....toast and milk.

One could also use the same logic with dollar bills. Personal "reserves" isn't quite the same thing.

Hmmm... still hungry and thirsty

Personal "reserves" isn't quite the same thing.

Bank reserves, not personal reserves.

 

[Toddsterpatriot]

- Keynesians think QE was a mistake. .

oh?? Did it cause the depression it was designed to avoid? What is the evidence of a mistake???

- It didn't do much of anything.

you mean banks were not happy to get rid of toxic securities??

you mean banks were not happy to get rid of toxic securities??

The Fed didn't buy any toxic securities for QE.
Strictly Treasuries and guaranteed MBS.

 

[Pksimon2007]

Really, next time you go to the store to buy a loaf of bread and a gallon of milk try paying with bonds.

reserves.......cash
Not bonds.

OK, try reserves instead then. Either way I think you'd come home empty handed.

My debit card and checkbook both involve reserves.
Mmmmm....toast and milk.

One could also use the same logic with dollar bills. Personal "reserves" isn't quite the same thing.

Hmmm... still hungry and thirsty

Personal "reserves" isn't quite the same thing.

Bank reserves, not personal reserves.

- Keynesians think QE was a mistake. .

oh?? Did it cause the depression it was designed to avoid? What is the evidence of a mistake???

- It didn't do much of anything.

you mean banks were not happy to get rid of toxic securities??

- First, nice non sequitur.

Second, the Fed wasn't buying securities which were "toxic". They bought Treasuries, which are basically riskless, and MBS, which weren't toxic. These were GSE securities, and quite safe. The issue is that they were hard to valuate.

Third, the reason QE didn't do much of anything is that it had no objective which was ever achieved. Initially, the objective was to prevent deflation. Then the objective morphed into "freeing up bank lending".

Krugman believed that QE would be inflationary, but that's because he doesn't understand how banking works. He can't be bothered to learn. QE results in the creation of reserves, which Krugman believes enables banks to lend. He could have asked Greenspan when he came up with the idea, and Greenspan would have told him "uhm no, Paul. Fail. Banks can't lend reserves nor can they leverage them into loans".

By the time of QE 1, Bernanke of course knew that about banks, but hoped that a truly massive program might have some marginal effect. Did it? Who knows?

Bernanke then refined his theory, believing that the cleanup of the banks' balance sheets would make them more comfortable lending (the "wealth effect"), but recognized, again, that even a truly massive program would have only weak effects. And true to form, it did. Bank lending is better predicted by a whole host of factors other than QE.

So no effect - except, perhaps, for some unintended ones which Bernanke either didn't think about or figured were acceptable risks.

We have had an amazing recovery in capital and financial markets, but that has zip to do with the creation of reserves by QE. It MAY partially have been caused by a shortage of Treasuries and rMBS created by QE. Shortages drive up prices, and one expects arbitrage effects. Or, maybe the asset boom just reflects a continuing lack of opportunities in real markets. Hard to say.

And finally, QE may have been counterproductive in two ways. First, the shortage of Treasuries created demand for other sorts of substitute securities, and we should have learned from 2008 that those sorts of substitutes can be, well, systemically risky. And we HAVE seen a ballooning of those sorts of products, and it may trace back to QE. It's even possible, though I'm not going to bet on it, that the uptick we've seen in forward fails after QE may have been a result of a shortage of short-term funding tools, which may have been created or exacerbated by QE.

Second, the loss of all of those Treasuries from private markets removed all of that interest income from the private sector as well. Removing income from the private sector is essentially the same as raising taxes - probably not what we needed to be doing.

 

[Toddsterpatriot]

reserves.......cash
Not bonds.

OK, try reserves instead then. Either way I think you'd come home empty handed.

My debit card and checkbook both involve reserves.
Mmmmm....toast and milk.

One could also use the same logic with dollar bills. Personal "reserves" isn't quite the same thing.

Hmmm... still hungry and thirsty

Personal "reserves" isn't quite the same thing.

Bank reserves, not personal reserves.

- Keynesians think QE was a mistake. .

oh?? Did it cause the depression it was designed to avoid? What is the evidence of a mistake???

- It didn't do much of anything.

you mean banks were not happy to get rid of toxic securities??

- First, nice non sequitur.

Second, the Fed wasn't buying securities which were "toxic". They bought Treasuries, which are basically riskless, and MBS, which weren't toxic. These were GSE securities, and quite safe. The issue is that they were hard to valuate.

Third, the reason QE didn't do much of anything is that it had no objective which was ever achieved. Initially, the objective was to prevent deflation. Then the objective morphed into "freeing up bank lending".

Krugman believed that QE would be inflationary, but that's because he doesn't understand how banking works. He can't be bothered to learn. QE results in the creation of reserves, which Krugman believes enables banks to lend. He could have asked Greenspan when he came up with the idea, and Greenspan would have told him "uhm no, Paul. Fail. Banks can't lend reserves nor can they leverage them into loans".

By the time of QE 1, Bernanke of course knew that about banks, but hoped that a truly massive program might have some marginal effect. Did it? Who knows?

Bernanke then refined his theory, believing that the cleanup of the banks' balance sheets would make them more comfortable lending (the "wealth effect"), but recognized, again, that even a truly massive program would have only weak effects. And true to form, it did. Bank lending is better predicted by a whole host of factors other than QE.

So no effect - except, perhaps, for some unintended ones which Bernanke either didn't think about or figured were acceptable risks.

We have had an amazing recovery in capital and financial markets, but that has zip to do with the creation of reserves by QE. It MAY partially have been caused by a shortage of Treasuries and rMBS created by QE. Shortages drive up prices, and one expects arbitrage effects. Or, maybe the asset boom just reflects a continuing lack of opportunities in real markets. Hard to say.

And finally, QE may have been counterproductive in two ways. First, the shortage of Treasuries created demand for other sorts of substitute securities, and we should have learned from 2008 that those sorts of substitutes can be, well, systemically risky. And we HAVE seen a ballooning of those sorts of products, and it may trace back to QE. It's even possible, though I'm not going to bet on it, that the uptick we've seen in forward fails after QE may have been a result of a shortage of short-term funding tools, which may have been created or exacerbated by QE.

Second, the loss of all of those Treasuries from private markets removed all of that interest income from the private sector as well. Removing income from the private sector is essentially the same as raising taxes - probably not what we needed to be doing.

They bought Treasuries, which are basically riskless, and MBS, which weren't toxic. These were GSE securities, and quite safe. The issue is that they were hard to valuate.

They weren't hard to evaluate. They were guaranteed, principal and interest.
It was the private label MBS that were hard to value.

 

[Pksimon2007]

OK, try reserves instead then. Either way I think you'd come home empty handed.

My debit card and checkbook both involve reserves.
Mmmmm....toast and milk.

One could also use the same logic with dollar bills. Personal "reserves" isn't quite the same thing.

Hmmm... still hungry and thirsty

Personal "reserves" isn't quite the same thing.

Bank reserves, not personal reserves.

- Keynesians think QE was a mistake. .

oh?? Did it cause the depression it was designed to avoid? What is the evidence of a mistake???

- It didn't do much of anything.

you mean banks were not happy to get rid of toxic securities??

- First, nice non sequitur.

Second, the Fed wasn't buying securities which were "toxic". They bought Treasuries, which are basically riskless, and MBS, which weren't toxic. These were GSE securities, and quite safe. The issue is that they were hard to valuate.

Third, the reason QE didn't do much of anything is that it had no objective which was ever achieved. Initially, the objective was to prevent deflation. Then the objective morphed into "freeing up bank lending".

Krugman believed that QE would be inflationary, but that's because he doesn't understand how banking works. He can't be bothered to learn. QE results in the creation of reserves, which Krugman believes enables banks to lend. He could have asked Greenspan when he came up with the idea, and Greenspan would have told him "uhm no, Paul. Fail. Banks can't lend reserves nor can they leverage them into loans".

By the time of QE 1, Bernanke of course knew that about banks, but hoped that a truly massive program might have some marginal effect. Did it? Who knows?

Bernanke then refined his theory, believing that the cleanup of the banks' balance sheets would make them more comfortable lending (the "wealth effect"), but recognized, again, that even a truly massive program would have only weak effects. And true to form, it did. Bank lending is better predicted by a whole host of factors other than QE.

So no effect - except, perhaps, for some unintended ones which Bernanke either didn't think about or figured were acceptable risks.

We have had an amazing recovery in capital and financial markets, but that has zip to do with the creation of reserves by QE. It MAY partially have been caused by a shortage of Treasuries and rMBS created by QE. Shortages drive up prices, and one expects arbitrage effects. Or, maybe the asset boom just reflects a continuing lack of opportunities in real markets. Hard to say.

And finally, QE may have been counterproductive in two ways. First, the shortage of Treasuries created demand for other sorts of substitute securities, and we should have learned from 2008 that those sorts of substitutes can be, well, systemically risky. And we HAVE seen a ballooning of those sorts of products, and it may trace back to QE. It's even possible, though I'm not going to bet on it, that the uptick we've seen in forward fails after QE may have been a result of a shortage of short-term funding tools, which may have been created or exacerbated by QE.

Second, the loss of all of those Treasuries from private markets removed all of that interest income from the private sector as well. Removing income from the private sector is essentially the same as raising taxes - probably not what we needed to be doing.

They bought Treasuries, which are basically riskless, and MBS, which weren't toxic. These were GSE securities, and quite safe. The issue is that they were hard to valuate.

They weren't hard to evaluate. They were guaranteed, principal and interest.
It was the private label MBS that were hard to value.

- Their cash flows were not guaranteed, nor was the value of the underlying collateral. They had a backstop. That backstop wasn't going to provide them with a valuation under FAS 157 that was helpful.

 

[CultureCitizen]

The bonds are US Treasuries and guaranteed MBS.

Guaranteed by what exactly ?

Fannie and Freddie MBS are guaranteed by the US Treasury.

Sure , yea , that was QE1, and QE2.
The big mistery is what went into QE3 (no , it wasn't just freddie and fannie ). There's already 4T of QE alchemy with rather dubious results.

 

[oldernwiser]

Krugman believed that QE would be inflationary...

I have been following Krugman for a few years, and have backfilled my working knowledge of his theories right from his blog. I wondered if I had maybe missed something so I did a little digging.

"Just to be clear, I have supported QE in both Britain and the US, on the grounds that (a) central bank purchases of longer-term and riskier assets may help and can’t hurt, and (b) given political paralysis in the US and the dominance of bad macroeconomic thinking in the UK, it’s all we’ve got. But the view I used to hold before 1998 — that central banks can always cause inflation if they really want to — just doesn’t hold up, theoretically or empirically." -- Paul Krugman blog

"Asked if he is concerned a splurge of borrowing will trigger a repeat of the financial bubbles that caused the crash and spur inflation as too much money chases too few goods, he is dismissive. "As far as planting the seeds of the next crisis, bear in mind that leverage is still falling, so I don't see the problem at this point," he says.

In Krugman's view, concerns about ageing populations, looming health costs, the changing nature of the workforce in a digital age and competition from Asian economies for jobs, are for another time. "Should we be having more spending? The answer must be yes. Why? Because there is plenty of slack in the labour market and investment needs to increase. To me it is clear that there is plenty of room to increase spending without increasing inflation." -- Paul Krugman in a Guardian interview

Seems that I didn't miss anything at all - Krugman really HAD been saying all along that QE wasn't inflationary. And since 1998, he had Japan to prove it.

 

[Pksimon2007]

Krugman believed that QE would be inflationary...

I have been following Krugman for a few years, and have backfilled my working knowledge of his theories right from his blog. I wondered if I had maybe missed something so I did a little digging.

"Just to be clear, I have supported QE in both Britain and the US, on the grounds that (a) central bank purchases of longer-term and riskier assets may help and can’t hurt, and (b) given political paralysis in the US and the dominance of bad macroeconomic thinking in the UK, it’s all we’ve got. But the view I used to hold before 1998 — that central banks can always cause inflation if they really want to — just doesn’t hold up, theoretically or empirically." -- Paul Krugman blog

"Asked if he is concerned a splurge of borrowing will trigger a repeat of the financial bubbles that caused the crash and spur inflation as too much money chases too few goods, he is dismissive. "As far as planting the seeds of the next crisis, bear in mind that leverage is still falling, so I don't see the problem at this point," he says.

In Krugman's view, concerns about ageing populations, looming health costs, the changing nature of the workforce in a digital age and competition from Asian economies for jobs, are for another time. "Should we be having more spending? The answer must be yes. Why? Because there is plenty of slack in the labour market and investment needs to increase. To me it is clear that there is plenty of room to increase spending without increasing inflation." -- Paul Krugman in a Guardian interview

Seems that I didn't miss anything at all - Krugman really HAD been saying all along that QE wasn't inflationary. And since 1998, he had Japan to prove it.

I was unaware that Krugman had changed his position on inflation and QE since he helped design the program.

Thanks for the info.

 

[Toddsterpatriot]

The bonds are US Treasuries and guaranteed MBS.

Guaranteed by what exactly ?

Fannie and Freddie MBS are guaranteed by the US Treasury.

Sure , yea , that was QE1, and QE2.
The big mistery is what went into QE3 (no , it wasn't just freddie and fannie ). There's already 4T of QE alchemy with rather dubious results.

The big mistery is what went into QE3

There is no mystery. It was longer term US Treasuries and guaranteed MBS.
No trash. No toxic loans.

The Fed's statement announcing its third round of quantitative easing is out. The big story is that they will buy $85 billion in new assets, including $40 billion in mortgage-backed securities every month until the end of the year......

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.

QE3 is on Fed to buy 85b through December and then keep going - The Washington Post

Agency, that means Fannie and Freddie.

 

[Toddsterpatriot]

My debit card and checkbook both involve reserves.
Mmmmm....toast and milk.

One could also use the same logic with dollar bills. Personal "reserves" isn't quite the same thing.

Hmmm... still hungry and thirsty

Personal "reserves" isn't quite the same thing.

Bank reserves, not personal reserves.

oh?? Did it cause the depression it was designed to avoid? What is the evidence of a mistake???

- It didn't do much of anything.

you mean banks were not happy to get rid of toxic securities??

- First, nice non sequitur.

Second, the Fed wasn't buying securities which were "toxic". They bought Treasuries, which are basically riskless, and MBS, which weren't toxic. These were GSE securities, and quite safe. The issue is that they were hard to valuate.

Third, the reason QE didn't do much of anything is that it had no objective which was ever achieved. Initially, the objective was to prevent deflation. Then the objective morphed into "freeing up bank lending".

Krugman believed that QE would be inflationary, but that's because he doesn't understand how banking works. He can't be bothered to learn. QE results in the creation of reserves, which Krugman believes enables banks to lend. He could have asked Greenspan when he came up with the idea, and Greenspan would have told him "uhm no, Paul. Fail. Banks can't lend reserves nor can they leverage them into loans".

By the time of QE 1, Bernanke of course knew that about banks, but hoped that a truly massive program might have some marginal effect. Did it? Who knows?

Bernanke then refined his theory, believing that the cleanup of the banks' balance sheets would make them more comfortable lending (the "wealth effect"), but recognized, again, that even a truly massive program would have only weak effects. And true to form, it did. Bank lending is better predicted by a whole host of factors other than QE.

So no effect - except, perhaps, for some unintended ones which Bernanke either didn't think about or figured were acceptable risks.

We have had an amazing recovery in capital and financial markets, but that has zip to do with the creation of reserves by QE. It MAY partially have been caused by a shortage of Treasuries and rMBS created by QE. Shortages drive up prices, and one expects arbitrage effects. Or, maybe the asset boom just reflects a continuing lack of opportunities in real markets. Hard to say.

And finally, QE may have been counterproductive in two ways. First, the shortage of Treasuries created demand for other sorts of substitute securities, and we should have learned from 2008 that those sorts of substitutes can be, well, systemically risky. And we HAVE seen a ballooning of those sorts of products, and it may trace back to QE. It's even possible, though I'm not going to bet on it, that the uptick we've seen in forward fails after QE may have been a result of a shortage of short-term funding tools, which may have been created or exacerbated by QE.

Second, the loss of all of those Treasuries from private markets removed all of that interest income from the private sector as well. Removing income from the private sector is essentially the same as raising taxes - probably not what we needed to be doing.

They bought Treasuries, which are basically riskless, and MBS, which weren't toxic. These were GSE securities, and quite safe. The issue is that they were hard to valuate.

They weren't hard to evaluate. They were guaranteed, principal and interest.
It was the private label MBS that were hard to value.

- Their cash flows were not guaranteed, nor was the value of the underlying collateral. They had a backstop. That backstop wasn't going to provide them with a valuation under FAS 157 that was helpful.

These agency bonds weren't hard to value.
Treasury guaranteed and heavily traded, they were probably the easiest to value.
They traded above par throughout.

 

[oldfart]

Krugman believed that QE would be inflationary...

I have been following Krugman for a few years, and have backfilled my working knowledge of his theories right from his blog. I wondered if I had maybe missed something so I did a little digging.

"Just to be clear, I have supported QE in both Britain and the US, on the grounds that (a) central bank purchases of longer-term and riskier assets may help and can’t hurt, and (b) given political paralysis in the US and the dominance of bad macroeconomic thinking in the UK, it’s all we’ve got. But the view I used to hold before 1998 — that central banks can always cause inflation if they really want to — just doesn’t hold up, theoretically or empirically." -- Paul Krugman blog

"Asked if he is concerned a splurge of borrowing will trigger a repeat of the financial bubbles that caused the crash and spur inflation as too much money chases too few goods, he is dismissive. "As far as planting the seeds of the next crisis, bear in mind that leverage is still falling, so I don't see the problem at this point," he says.

In Krugman's view, concerns about ageing populations, looming health costs, the changing nature of the workforce in a digital age and competition from Asian economies for jobs, are for another time. "Should we be having more spending? The answer must be yes. Why? Because there is plenty of slack in the labour market and investment needs to increase. To me it is clear that there is plenty of room to increase spending without increasing inflation." -- Paul Krugman in a Guardian interview

Seems that I didn't miss anything at all - Krugman really HAD been saying all along that QE wasn't inflationary. And since 1998, he had Japan to prove it.

I was unaware that Krugman had changed his position on inflation and QE since he helped design the program.

Thanks for the info.

I don't think Krugman has changed his position on inflation much in the last twenty years. I think your confusion is the result of his comments about the ineffectual attempts to stimulate an economy in a liquidity trap through quantitative easy or traditional monetary policy. The idea that very low inflation could be as bad as deflation didn't really start to gather a lot of support until 2011-2012. Krugman was in the same boat as everyone else in not really connecting the dots on this, but had the advantage of his work on the Asian crisis and the Japanese economy, so he got up to speed a lot quicker than most of us.

 

[EdwardBaiamonte]

Easy. Let the banks [go]bankrupt.

100% stupid and liberal as always. It would cause instant worldwide depression!!