Qe3

Discussion in 'Politics, Religion, Social Issues' started by mcrain, Sep 13, 2012.

  1. mcrain macrumors 68000

    mcrain

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    #1
    Fed Reserve enacting stimulative purchasing of long term bonds to stimulate the economy.

    (edit) Sorry, took a bit to find updated info:

    WSJ Liveblog

    http://blogs.wsj.com/economics/2012/09/13/live-blog-fed-decision-and-bernanke-press-conference-2/
     
  2. jnpy!$4g3cwk macrumors 65816

    jnpy!$4g3cwk

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    #3
    QE3 is what they should have done with QE2. On the other hand, I'm also worried, because, when inflation picks up, they need to start unwinding gradually right away, not wait until inflation is roaring. But, there will be a lot of pressure not to act "too soon" and "slow the recovery".
     
  3. classicaliberal macrumors regular

    classicaliberal

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    #4
    What the FED (and all Keynsians) fail to understand, is that it's not the crash that's the problem. The problem is the bubble. It's the misallocation of capital.

    This misallocation of capital when a natural part of the economy (tech bubble), is both manageable and cureable by the free market.

    When the misallocation of capital is expanded and made possible through government intervention (housing bubble via low interest rates, fannie, freddie, ownership-society legislation), the problem is far deeper and far worse than could exist in a natural setting.

    Then, the keynsians decide that the best way to protect against the bubble from bursting, is to inflate the bubble further. The same core problems exist, the same misallocation of capital remains on the books, they just double down and pump more money into the system so it can be spend more unwisely making the problem worse and worse until it burts.... only this burst won't just take your bonus or your savings account, it'll take your home, it'll take your retirement, it'll take your livelihood.

    QE3 is nothing more than an inflation of the bubble. The problem isn't being solved, it's being kicked down the road. Meanwhile, the core problem grows larger because government makes it so.

    Thanks to the FED, we, our kids, and grandkids will be paying for this problem, years down the road!
     
  4. Dmunjal macrumors 65816

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    #5
    They'll never get it. Who ever said that an economy has to only go in one direction forever? Economies are supposed to pause (recessions) to purge itself of malinvestments. Even Keynes said that if there was stimulus, it was to be balanced over the business cycle. That is, that stimulus was to be put into the system during bad times and drawn out during good times. This never happens as politicians will not allow it to happen.

    Keyenesian theory might work in practice but the way it is implemented by the Fed and by the government is a bastardized version of it that only benefits the elite. Both parties are culpable as well.
     
  5. Ugg macrumors 68000

    Ugg

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    #6
    You're right that the misallocation of capital is the problem, but what you and your ilk fail to recognize is that the capital is now in fewer and fewer hands. By concentrating wealth in the 1%, the economy is held hostage. What's needed are broader labor protections and corporate tax policies that encourage growth, not wealth accumulation.

    Forest for the trees...
     
  6. oscillatewildly macrumors 68000

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    #7
    Wirelessly posted

    USA keeps digging the hole.
     
  7. classicaliberal macrumors regular

    classicaliberal

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    #8
    I think there's some truth to that - but I differentiate between different approaches to wealth production. I have no problems, zero, (in fact I think they're the most valuable asset to society) with entrepreneurs who make their wealth through their own hard work, risk, and capital. I DO have problems with those who make their wealth through cronyism. These people use government as their weapon to defeat their enemies and corner the market. Capitalism is healthy, efficient, and moral. Crony-capitalism is evil, dangerous, and immoral. My own perspective is that an individual's willingness to utilize whatever advantage they can to get the upper hand, is a universal human characteristic... and it's big-government which makes crony capitalism possible. Without the bureaucrats at the top handing out money, the playing field would be more even, and more opportunities would exist for everyone regardless of the dispersement of capital.
     
  8. Dmunjal macrumors 65816

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    #9
    Why do you think the 1% has accumulated all the capital over the last few decades? The Fed and it's QE policy benefits the 1% first. They get access to the money first and the 99% is left with a lower standard of living. Get rid of the Fed and you get rid of this disparity. That's the real forest.
     
  9. mcrain thread starter macrumors 68000

    mcrain

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    #10
    Misallocation of capital and a failure of regulation of certain industries certainly led to an untenable situation. The bubble was artificially inflated and the problem made far worse when you had banks betting in the derivitive market (and those in the market cheating the system). Wall St. reform and banking regulations, along with some degree of institutional memory, will forestall a repeat of those problems.

    The problem I see with the economy being so slow to recover is that so much money is concentrated in the hands of a very small number of people who have zero incentive to pull that money out of "safe" investments and shift it to job creation, invention, and other activities that actually stimulate the economy.

    Higher taxes have the effect of changing investment strategies and siphoning money out of stagnant investments for investment by government in the economy. QE3 is an end-run around the problem. If you can't get those who have the wealth to "use" their wealth, and their politicians can block tax increases, just devalue their money and pump more into the economy, especially into the hands of those who need it.

    It's a very aritificial way of "growing the pie."
     
  10. localoid macrumors 68020

    localoid

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    #11
    Thank goodness we've got this whole economics thing down to a science.
     
  11. Dmunjal macrumors 65816

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    #12
    I can't believe I'm reading this. Are you saying this QE policy cheapens money so the rich will use it? How's that been working for the middle class this past decade?

    Let me tell you something. The 1% love QE. They get access to the money quickly. They speculate with it. Drive prices higher for commodities, stocks, and other financial vehicles. This doesn't ever help the middle class because by the time they get in, the prices are already higher and are left holding the bag when it crashes. Like housing.
     
  12. mcrain thread starter macrumors 68000

    mcrain

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    #13
    I'm saying QE is a incredibly imperfect and flawed way of stimulating the economy, but when you can't increase taxes to generate revenue (and thus economic circulation), it is at least something.

    (edit) What's ironic is that your argument applies to lower taxes for the wealthy too.
     
  13. Dmunjal macrumors 65816

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    #14
    I'm not arguing tax policy. The fact is that tax policy is dictated by Congress. If our representatives only want to tax the populace a certain amount, then it's incumbent on the government to find ways to live within those means without resorting to borrowing or depending on the Fed for a bailout.

    I'll also mention that this country grew substantially for over a hundred years without the income tax or the Fed while lifting millions from poverty.
     
  14. classicaliberal macrumors regular

    classicaliberal

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    #15
    Dmunjal is correct, QE helps those at the top far more than those at the bottom. Inflation is THE BIGGEST TAX on the poor in this country (in any country). Inflation caused by QE (printing of digital money) results in the bankers and those with the best governmental connections to get access to the dollars before they are diluted and devalued.

    If a poor man and a rich man wake up one morning and their dollars are each worth 20% of what they were the day before, the poor person a substantial chunk (perhaps an essential chunk) of their wealth stolen from them. The rich man loses money, but also gains opportunities to loan money at a low rate for investment in capital projects. Other than the bankers, those at the top make out the very best from any type of quantitative easing.

    IMHO, yet another example of how artificially manipulating the market, even with the best of intentions, tends to hurt those you're trying to protect.
     
  15. mcrain thread starter macrumors 68000

    mcrain

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    #16
    So, the best thing to do is tax the wealthy and spend the money domestically on infrastructure and other things that funnel money back down to the bottom? I think so too!
     
  16. classicaliberal macrumors regular

    classicaliberal

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    #17
    Taxing one group to excess in order to pay for the social services of another would be another example of said manipulations. My own preference would be a dramatically smaller federal budget, funded by a small and flat consumption based tax which doesn't pick winners and losers. I think the government should cover our basic defense, our basic infrastructure, leaving free people to live freely without unnecessary and burdensome intervention. I believe most predatory regulations could be eliminated by simply carrying out the law, sending individuals and managers of companies who commit fraud or theft or damage to another person's property... to jail, and eliminating all potential for bailouts. 'Too big to fail' is a mindset, nothing more.
     
  17. mcrain, Sep 13, 2012
    Last edited: Sep 13, 2012

    mcrain thread starter macrumors 68000

    mcrain

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    #18
    How on earth would that correct the massive redistribution and accumulation of wealth our monetary policy over the last 30+ years has created. Right now we have a stagnant economy because there is no liquidity. There are plenty of things to do, but the money to pay for those things is sitting on the sidelines. Taxes are the oil pump for the economy. Taxes pump money from where it naturally accumulates.

    I don't want the government to pick winners and losers. I don't want the government to overreach and pay for "everything." I would rather have a functioning economy where poverty was minimized and government only had to provide a basic safety net, not massive entitlements.

    I think we agree as to what the end result should look like, I just don't see how cutting taxes and regulations gets us there. In fact, history has shown us that would do nothing more than make the problem worse.

    (edit) I'm not naive enough to think changing tax rates or anything else is a magic fix, but bad things happen when the wealth distribution gets too far out of whack.

    [​IMG]
     
  18. Dmunjal macrumors 65816

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    #19
    How did we survive before 1913? Before the income tax and the Fed? Plenty of infrastructure was built.
     
  19. Ugg macrumors 68000

    Ugg

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    #20
    It sounds like you want our roads to be gravel, our airports to have dirt runways our ports to be undredged, our children to be uneducated ant the poor dying in the street.

    Capitalism has never been healthy, moral or efficient unless it is kept in check by strong government. It's our 200+ year old political process that is the problem. It was designed for 13 colonies and a couple of million people, not 50 states and 300+ million people.

    Why should Alaska's two senators have the same power as California's? That's cronyism at its worst.

    ----------

    Because of Reaganomics. Trickle down has never worked. How many failed attempts does it take?

    Exactly. What's needed is more money in the hands of the 99% who are the true job creators. The 1% is only interested in the preservation of capital, not economic growth.

    Yeah, that's a big problem, people voting against their self interests. The post Reagan dumbing down of America is tragic.

    Let's see, what was the life span of people during your mythical century of substantial growth?

    But if the 1% have cut wages, exported jobs, created debt traps, eliminated affordable health care and housing, their wealth is really ill-gotten, don't you agree? If the only way to balance things out is to tax the rich, then so be it.
     
  20. Eraserhead macrumors G4

    Eraserhead

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    #21
    Agreed, too much of it is in the hands of the rich.

    True, but the railway companies were given a lot of land in compensation.

     
  21. Dmunjal macrumors 65816

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    #22
    You know how to get rid of the 1% wealth and even the playing field?

    1. Stop QE. No more easy money. Speculation goes away. Prices drop and so do most assets owned by the rich.
    2. Get rid of all personal and corporate tax loopholes that are set up for the rich. Side benefit: no more lobbyists.
    3. Decentralize power back to the states making it harder for the rich to corrupt policy in their favor.

    Taxing the rich doesn't work. They'll just take their marbles away (Switzerland).

    The Fed has provided almost $3T of monetary easing. The Congress has provided another trillion in stimulus. Why are the rich richer and the middle class poorer these past four years?

    Can we at least try something different now? And I don't mean Romney/Bush borrow and spend on defense either.
     
  22. Eraserhead macrumors G4

    Eraserhead

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    #24
    That is getting much harder.
     
  23. Dmunjal macrumors 65816

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    #25
    I'm sorry. They'll just go the Caymans. Plenty of countries willing to take rich people's money. It's a thrving business.
     

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