Rand Paul is a LYING PIG! " Will quantitative easing fuel the next bubble?

[Joanne98]

As a result of yesterday’s mid terms, Republicans now dominate the US House of Representatives, meaning any attempt by Barack Obama to try and get approval for further fiscal stimulus will be vetoed. Later today will almost inevitably see more quantitative easing in the US, and the result of yesterday’s poll means even more QE will probably follow on from that. The consequence of this won’t be inflation. Instead, we are seeing the next great bubble, and when it bursts, it won’t be pretty.

Consumer demand is everything for the economy. It matters not what companies invest, or what asset prices do; if consumers are not buying stuff, then everything else will eventually grind to a halt. There is no debating this. Production and investment, and buying frenzies and investment crazes, count for nothing if, beneath it all, consumer demand is not there to support the activity.

It is obvious. In the UK, VAT is founded on this principle. One business sells to another and charges VAT. The business that buys this product claims the VAT back, adds a bit to the product and sells it on to another, and charges VAT. And so the process continues until we reach the end of the line, the consumer. This is where VAT is charged but not claimed back. This is where value is no longer added, and the consumer pays the tax on the entire production process. All production will eventually soak through the economy and reach the consumer.

And yet the importance of the consumer gets forgotten. During the boom of the noughties, consumers got forgotten as GDP soared, but in the UK, discretionary disposable income shrunk. In the US in 2007, corporate profits as a percentage of GDP hit an all-time high, pushing up equity prices, but the rise in profitability did not filter through to consumers in sufficient quantities. Growth was propped up during this period because consumers ran up ever greater debt, which was never going to be sustainable. In the noughties, the fruits of globalisation and new technology were not distributed from company coffers to consumers. Recession should have occurred sooner as a result, but instead, rising consumer debt delayed the inevitable correction, making it far worse when it finally came.

http://www.investmentandbusinessnews.co.uk/us-economy/will-quantitative-easing-fuel-the-next-bubble/11662

[Crazy Dave]

1. Ummm....all politicians lie

Where's our single-payer, government option healthcare? Why is Gitmo still open?

[barb162]

5. The healthcare is going to be phased in as announced many times

Where have you been?

Gitmo should be closed but I think the President is working on where to put those prisoners. There are a lot of objections that they be imprisoned anywhere in the USA and I think Obama has listened to the objections, putting it on hold.

[Crazy Dave]

6. Where have you been?

Obama promised us a public option while campaigning but caved in to the republicans and the insurance companies. All he did was sign a law that mandates everyone will have health care or pay a penalty.

That's not what they have in Canada and Europe. They don't force people or employers into buying "for profit" health insurance.

Want to try again?

[barb162]

10. You don't have to look at other countries and say it has to be that

way. Yes, Obama did cave to get something going. That's politics in the US these days.

[Crazy Dave]

14. And that's all Obama is, another politician playing "politics"

And by your own admission. Since a lot people can't afford and/or don't like for profit health insurance he is going to force them into buying it.

Obama ran as a progressive and he won in a big way. Now he is acting like a regular politician and forgetting what he promised everyone just to get elected and that will be his downfall in 2012.

It's also funny now with the mid-term elections over with where we got our asses handed to us in the congress and lost seats in the senate. Obama played so nice with big business and Wall Street these past two years, giving them anything they wanted yet they still threw all their money at the republican candidates.

It reminds me so much of the "The Scorpion and the Frog" story that it makes a normal person want to puke.

[ixion]

13. Where to 'put' them? How about charging them, for starters

Or is that not part of the so-called 'change'. :eyes:

Oh, and we're still in Iraq, and we're building new bases in Afghanistan, and we've expanded the incursion to Yemen and Pakistan. How's that for 'change'?

Again: :eyes:

[howaboutme]

12. Not only do they lie

but they kowtow to the moneyed interests on K street, Wall Street and US Chamber of Commerce that generously bribe them. Bernie Sanders is one that I thoroughly trust.

The obvious fact that bonuses still thrive on a corrupt Wall Street, and at AIG proves that money still talks and rich bankers and CEOs control the agenda of Congress and its representatives.

As an example - instead of a 10 page health care bill providing a public option with Medicare for all, and paid for with a surtax on Wall street transactions and/or social security/payroll tax that covers all income from the mega rich, we have a 2000 page health bill that no one understands, with more loopholes (and exceptions) than a piece of old burlap.

[northernlights]

2. so which assets are booming

and when will they go bust?

"Today, the assets that are booming are different, but something similar is happening, and tears will follow."

[DoctorK]

3. what does this have to do with Rand Paul?

Rand Paul opposes QE, right? I only assume this because of his father's feelings toward the Federal Reserve system.

"Consumer demand is everything for the economy."

No, it is one half of the same coin - Production. You can't have consumption without production. Everyone trades their production for the goods and services they want to consume.

"It matters not what companies invest, or what asset prices do; if consumers are not buying stuff, then everything else will eventually grind to a halt."

No, if consumers are not buying stuff then prices will fall, desired and undesired lines of investment and production will be highlighted by profit and loss. The system doesn't 'grind to a halt' unless the price mechanism is distorted by interventions in the money pool.

Krugman, Bernanke, etc. promote a government policy of inflating the money supply to push up prices and create illusory profits. These policies must be ended before they create more bubbles and more wealth destruction by misleading entrepreneurs and investors as to where real profits can be generated.

[barb162]

4. In that last paragraph of yours, aren't you describing 8 yrs of Bush?

[westerebus]

7. Not at all.

Bush's eight years are better characterized as his best supporters plundering the middle class while he diverted attention to non existent nuclear armed terrorists in Iraq. Only to find the true terrorists were hard at work here nuking the American economy.

[DoctorK]

8. yes

and Obama and the Democrats worst mistake was re-appointing Bernanke and ramping up the deficit.
We've made it 10 years of that policy, and that mistake needs to be corrected. That's where we need change.

[barb162]

11. I think the biggest mistake was helping out big business

with no restraints to the money they were given and then leaving the middle class floundering/ paying off the bailouts of the banks and others practicing jungle capitalism. We need big time regulation of the financial markets and an SEC that truly enforces it.

[westerebus]

9. Like the illusionary housing bubble, perchance?

The current POMO intervention in the stock market, perhaps?

Or the stimulus into the shovel ready projects of infrastructure, possibly?

So far nothing is moving but shimmering numbers across digital displays.

You really can't invest in this kind of market, you can trade it.

Many do. Betting with the house of FED. Or counter the house of Goullem.

Inflating the money supply has done little.

It hasn't bought confidence. It hasn't disrupted the flow of oil. Banks are still insolvent.

The debtors are still in debt. The creditors can't lend.

And we are headed into a deflationary cycle last seen in 1935 or there about.

We have impending political grid lock for the next two years.

That's if we don't go ballistic next year. Second quarter is my guess.

Mean while there's the massive fraud waiting to blow up the world's economic system. Again.

And to think, 85 million Americans took time out of their day to say, It's the economy stupid!

All for naught.

That's why I'm optimistic.

[elleng]

15. Thanks for the article.

Was looking to learn something about 'quantitative easing,' in light of my skepticism. Didn't make sense to me, no economist here, as appears to disregard the consumer economy, which I thought was our 'be all and end all,' whether or not it should be.

'The US and UK economy may be growing, but households are suffering a nasty hit, while the US and the UK economies expand, households in both economies are becoming worse off.

It seems to us that QE is not shoring up inflationary problems for the future, simply because the money being created is not reaching households. Instead, it is fuelling an asset bubble. This is why the likes of Nobel winners Paul Krugman and Joseph Stiglitz say QE on its own is ineffective, and instead, governments need to control how the money that is created is spent via fiscal policy. The results of the US mid terms mean this won’t happen.'