It looks like the dollar is losing value

[loosecannon]

"you've cuddled up to denial on the matter."

I luv you too, sweet cheeks

But I still disagree. We see the effects of computer programs causing volatility all the time. But within 5-6 days the programmers usually notice it......

 

[antagon]

my brother happens to sell programmers into trading firms in london; i'm left with the impression that they're on to compu-shenanigans faster than a few days. the fact is, if your position is in an ostensible free-fall, the wise thing to do is to bear back from that position. software knows how much to do so and what to call a free-fall, but the net result is that the downward trend is exacerbated by this demonstration of low confidence. under a certain threshold, the dollar, for example, will look like a good buy. software can appraise that, too, but the surge of confidence from all investors will stabilize the decline.

the point is that swings in the market are rarely the result of poor judgment or a computer problem, but instead the aggregate of the participants perceived self-interest -- even as perceived by an algorithm.

 

[loosecannon]

"i'm left with the impression that they're on to compu-shenanigans faster than a few days"

I was being facetious, antagon

The dollar fell 1% within 30 minutes days ago, since then it has dropped another 2.5%

If software was overreacting I think they'da caught their mistake by now.

 

[william the wie]

"i'm left with the impression that they're on to compu-shenanigans faster than a few days"

I was being facetious, antagon

The dollar fell 1% within 30 minutes days ago, since then it has dropped another 2.5%

If software was overreacting I think they'da caught their mistake by now.

It depends on how the software is written and the weightings of inputs plus what other trading computers are doing. Since all of that is proprietary only the players partially know what is going on because Morgan does not tell Goldman or vice versa.

 

[Norman]

it may wreck the economy but it allegedly is the only thing that makes it possible to:

>pay down our debts
>rescue the housing markets
>install a stealth wage cut making American exports more attractive

therefore "rescuing" our economy.

Recessions require corrections usually in the form of dramatic inflation. But like you said, being locked into low interest rates 10 years out is gonna be harsh on the Fed.

Yeah but at the same time US is growing government and raising taxes and regulations so employment costs become bigger. Quiet mad policy.

Sure you can pay debt this way, but at some point the debtor is going to notice what is happening and not buy US debt/ get rid of it, since reducing government spending and raising taxes is not really an option, the treasurie is going to have to print the money to buy the debt. Which will result in inflation that could well be a bit over the feds mandates.

I don't really see how this rescues the housing markets (unless the FED specifically buys housing debt - but even then there is still excess supply). Sure the inflation will make houses cost more, but in relative to everything else they will still fall in real terms.

Maybe I am missing something. I am trying to get into economics university next year so I am hanging around here to learn stuff...

 

[KissMy]

There was enormous inflation & money creation under Bush. That did not quite fully recover us from the 1998-1999 Tech Bubble Crash & 9/11. If these fools think they can stimulate, print, spend & grow their way out of debt. They have got another thing coming & its called hyper-inflation. Gold was $715per oz when Obama was elected. I bought a huge pile of it after seeing the election results. FDR only took gold from $20 to $35. These idiots are well beyond that & still flat-lined. As I suspected on election day they would try to re-inflate the bubble by pumping in more money. I was not wrong, big time inflation is headed our way if you have a brain in your head you would buy & hold gold until they are forced to jack up interest rates higher than the true rate of inflation which is 8%. They will have to take interest to 10%-12% to stop gold from rising. Jimmy Carter returns.

 

[loosecannon]

it may wreck the economy but it allegedly is the only thing that makes it possible to:

>pay down our debts
>rescue the housing markets
>install a stealth wage cut making American exports more attractive

therefore "rescuing" our economy.

Recessions require corrections usually in the form of dramatic inflation. But like you said, being locked into low interest rates 10 years out is gonna be harsh on the Fed.

Yeah but at the same time US is growing government and raising taxes and regulations so employment costs become bigger. Quiet mad policy.

Sure you can pay debt this way, but at some point the debtor is going to notice what is happening and not buy US debt/ get rid of it, since reducing government spending and raising taxes is not really an option, the treasurie is going to have to print the money to buy the debt. Which will result in inflation that could well be a bit over the feds mandates.

I don't really see how this rescues the housing markets (unless the FED specifically buys housing debt - but even then there is still excess supply). Sure the inflation will make houses cost more, but in relative to everything else they will still fall in real terms.

Maybe I am missing something. I am trying to get into economics university next year so I am hanging around here to learn stuff...

A) the fed is already monetizing the debt, see Quantitative Easing.

B) it is beyond the Fed's mandate, but they do what they gotta do to keep their gig. I am sure they aren't happy about it.

C)It rescues the housing market if the dollar loses a lot of value because prices will rebound, being priced in dollars. It's just like the effect of the dollar losing value and driving up stocks and commodities usually within a day.

D) "Yeah but at the same time US is growing government and raising taxes and regulations so employment costs become bigger. Quiet mad policy." This must end. It can't be sustained. Nobody in DC reads the memos. They are all crooks.

"I don't know as I want a lawyer to tell me what I cannot do. I hire him to tell me how to do what I want to do." ~J.P. Morgan

If you replaced the word lawyer in that statement with "economist" it could have been the utterance of any congressmen from either party.

 

[Norman]

There was enormous inflation & money creation under Bush. That did not quite fully recover us from the 1998-1999 Tech Bubble Crash & 9/11. If these fools think they can stimulate, print, spend & grow their way out of debt. They have got another thing coming & its called hyper-inflation. Gold was $715per oz when Obama was elected. I bought a huge pile of it after seeing the election results. FDR only took gold from $20 to $35. These idiots are well beyond that & still flat-lined. As I suspected on election day they would try to re-inflate the bubble by pumping in more money. I was not wrong, big time inflation is headed our way if you have a brain in your head you would buy & hold gold until they are forced to jack up interest rates higher than the true rate of inflation which is 8%. They will have to take interest to 10%-12% to stop gold from rising. Jimmy Carter returns.

Yeah they would. But that actually did happen back in 1980s, the fed actually started selling. But then US had half the debt and problem wasn't as big as far as I know. They deinflated a bubble. This rose interest rates to something like 17%.

Anyway I don't believe fed will intentionally cause hyper inflation. It will only come about if US can't get more debt. But with the high rate of inflation and ever growing debt, that might happen. TBH it is quiet crazy to invest in US debt, long term.

 

[loosecannon]

As I suspected on election day they would try to re-inflate the bubble by pumping in more money.

That is what monetarism does. That is it's core nature.

They will have to take interest to 10%-12% to stop gold from rising. Jimmy Carter returns.

I wish it would begin today and continue for 7 years above 13%, that is what happened under Reagan and Carter (to a lessor degree) and the economy recovered like a rocket afterwards. Until that happens our economy won't recover.

Inflation is the correction that most recessions demand.

 

[KissMy]

As I suspected on election day they would try to re-inflate the bubble by pumping in more money.

That is what monetarism does. That is it's core nature.

They will have to take interest to 10%-12% to stop gold from rising. Jimmy Carter returns.

I wish it would begin today and continue for 7 years above 13%, that is what happened under Reagan and Carter (to a lessor degree) and the economy recovered like a rocket afterwards. Until that happens our economy won't recover.

Inflation is the correction that most recessions demand.

We just had inflation & wars under Bush for years & we still did not fully recover. It is going to take innovation or inflation beyond the Bush years.

 

[loosecannon]

or just a whole lot more inflation.....Double digits for 7 years minimum.

 

[william the wie]

We just had inflation & wars under Bush for years & we still did not fully recover. It is going to take innovation or inflation beyond the Bush years.

Inflation won't work either. Social security outgo will keep climbing until 2026-31 without reform and with proposed reform until 2020, those projections assume that the bio-tech revolution will not increase life expectancy greatly and I wouldn't bet that way. With Social Security COLA increases any savings on medicare/medicaid would be wiped out by the increase in outgo in pension payments. Then there also federal, state, local, ERISA and private pensions to consider. Inflation ain't going to work.

As to innovation DARPA and the X foundation are driving the innovation not other public and private payments for progress reports. Until and unless a complete switch to prize money (payment for results) is seen innovation will be repressed.

 

[loosecannon]

Inflation can work, if there is enough of it.

Imagine if we had 25% inflation for 7 years or 10% inflation for 25 consecutive years.

When asked what was the most powerful force in the universe Albert Einstein replied "compound interest".

Inflation is compound interest expressed as -y.

 

[KissMy]

Inflation only helps the irresponsible debt ridden get rich scheme gamblers. It penalizes the workers, savers & responsible people. It forces everyone to recklessly spend money as soon as they get paid resulting in a nation of pay check slaves who can never afford to retire but for government Social Security rations. It is nothing but Marxist wealth redistribution. People can't save enough to start a business, have a dream or even buy a home without borrowing money enslaving themselves.

The answer is for groups like ACORN to teach financial responsibility instead of how to make banks loan money to irresponsible idiots.

 

[loosecannon]

Inflation only helps the irresponsible debt ridden get rich scheme gamblers. It penalizes the workers, savers & responsible people. It forces everyone to recklessly spend money as soon as they get paid resulting in a nation of pay check slaves who can never afford to retire but for government Social Security rations. It is nothing but Marxist wealth redistribution.

are you talking about inflation or government?

I agree but given the system that we have inflation is a prerequisite that allows for the federal reserve to stay afloat and still pay 6% dividends each year to it's 1300 member banks.

If we don't suffer inflation ordinarily or during recessions in large gulps then our monetary system chokes the economy to death. See: today.

 

[william the wie]

Inflation only helps the irresponsible debt ridden get rich scheme gamblers. It penalizes the workers, savers & responsible people. It forces everyone to recklessly spend money as soon as they get paid resulting in a nation of pay check slaves who can never afford to retire but for government Social Security rations. It is nothing but Marxist wealth redistribution. People can't save enough to start a business, have a dream or even buy a home without borrowing money enslaving themselves.

The answer is for groups like ACORN to teach financial responsibility instead of how to make banks loan money to irresponsible idiots.

So true "Animal Spirits" by Ackerlof and Shiller heavily recommended tax law changes that would encourage 20+% savings/investment rates to stimulate growth. Add in an opt out provision for hapless idiots and that policy would get my vote despite the fact that the authors are advocating pure Keynesianism.

 

[Norman]

it may wreck the economy but it allegedly is the only thing that makes it possible to:

>pay down our debts
>rescue the housing markets
>install a stealth wage cut making American exports more attractive

therefore "rescuing" our economy.

Recessions require corrections usually in the form of dramatic inflation. But like you said, being locked into low interest rates 10 years out is gonna be harsh on the Fed.

Yeah but at the same time US is growing government and raising taxes and regulations so employment costs become bigger. Quiet mad policy.

Sure you can pay debt this way, but at some point the debtor is going to notice what is happening and not buy US debt/ get rid of it, since reducing government spending and raising taxes is not really an option, the treasurie is going to have to print the money to buy the debt. Which will result in inflation that could well be a bit over the feds mandates.

I don't really see how this rescues the housing markets (unless the FED specifically buys housing debt - but even then there is still excess supply). Sure the inflation will make houses cost more, but in relative to everything else they will still fall in real terms.

Maybe I am missing something. I am trying to get into economics university next year so I am hanging around here to learn stuff...

A) the fed is already monetizing the debt, see Quantitative Easing.

B) it is beyond the Fed's mandate, but they do what they gotta do to keep their gig. I am sure they aren't happy about it.

C)It rescues the housing market if the dollar loses a lot of value because prices will rebound, being priced in dollars. It's just like the effect of the dollar losing value and driving up stocks and commodities usually within a day.

D) "Yeah but at the same time US is growing government and raising taxes and regulations so employment costs become bigger. Quiet mad policy." This must end. It can't be sustained. Nobody in DC reads the memos. They are all crooks.

"I don't know as I want a lawyer to tell me what I cannot do. I hire him to tell me how to do what I want to do." ~J.P. Morgan

If you replaced the word lawyer in that statement with "economist" it could have been the utterance of any congressmen from either party.

Yeah, but the QE still won't help the housing market, prices are dictated by supply and demand. And the QE will make every american that much poorer (in real terms), so the real price of houses will go even lower, as the poorer you are, the less you are going to pay for house and the more you are going to pay for commodities (demand decreases). Sure in nominal terms housing will go up, but it will go up much less than commodities, gold etc. It will be still a poor investment, just better than the dollar. Meanwhile government is still subsidizing construction, which increases the supply of houses.

The spending pinch that inflation causes is not going to go towards housing, but something else. The inflation if high enough could cause a gold and commodities price to go very high, even in real terms. Right now it may be going to US government which causes a bubble there, once it pops, fed doesn't have much choice but to cause a huge inflation to pay all the debt, possibly even hyperish inflation.

Anyway my point is, FED can't legislate less houses or more demand for them (unless they buy the houses). Sure last time they inflated in early 2000s it went mostly towards housing, but now everyone knows house is poor investment, real price of housing is just as screwed with or without the fed IMO.

By the way, where does this term QE come from? I mean it's just the same as monetizing debt, or "lowering interest rates" or creating money. I am just interested is there some specific reason why there is a new name for it? Or is QE somehow different?

 

[william the wie]

All same-same. Bernancke just wanted to use a fancy term to sound less desperate.

 

[antagon]

"i'm left with the impression that they're on to compu-shenanigans faster than a few days"

I was being facetious, antagon

The dollar fell 1% within 30 minutes days ago, since then it has dropped another 2.5%

If software was overreacting I think they'da caught their mistake by now.

like i said, it is not a mistake to sell off plummeting positions for more stable ones. if everyone does that, the position will descend with even higher velocity. it doesn't make any difference whether a computer or a bunch of traders are making the decisions, cannon. there's no mistake in market swings, it is just a trend compounding on itself. i dont think anything can substantiate your software overreaction. it is more likely the response of the market to a steep decline in the dollar followed by investors rushing back to get a deal on an undervalued buck. despite your -2.5% 5-day, if you rushed out 10 minutes into the decline, and got back in at the trough you've not made a mistake at all. you would have contributed along, with a half trillion other dollars, to the trend you've observed.

no mistake: just the way markets seem to work to me in reaction to stimulii.

 

[antagon]

We just had inflation & wars under Bush for years & we still did not fully recover. It is going to take innovation or inflation beyond the Bush years.

Inflation won't work either. Social security outgo will keep climbing until 2026-31 without reform and with proposed reform until 2020, those projections assume that the bio-tech revolution will not increase life expectancy greatly and I wouldn't bet that way. With Social Security COLA increases any savings on medicare/medicaid would be wiped out by the increase in outgo in pension payments. Then there also federal, state, local, ERISA and private pensions to consider. Inflation ain't going to work.

As to innovation DARPA and the X foundation are driving the innovation not other public and private payments for progress reports. Until and unless a complete switch to prize money (payment for results) is seen innovation will be repressed.

i would think innovation in public finance and expenditure -- the government's very participation in the economy -- will need to be revisited. our economy has cycled through a number of different faces based on innovations up this alley. the new deal and reaganomics had their role to play and could only really be knocked when they had run their course as economic technology. reaganomics has run it's course, now pleading to be put out its mysery. debt-stimulus and monetization has its application just like the fiscal methodology that was popular before it. we will have to reinvent capitalist public policy again, taking to heart what works from these systems and trying to purge what doesn't.