I never thought I would say this but Palin is right and Obama is wrong

[Cali_Democrat]

regarding QE2.

QE2 is the fancy name given to the Fed's money printing scam that will be used to buy US treasury bonds. Got that? They will be printing money to buy bonds in an attempt to jump start the economy. There will be an extra $600 billion floating around. It's a joke and I would actually laugh if it wasn't so serious.

By printing money to buy treasuries, the Fed is actually hurting the poorest of Americans. It will cause commodity prices to rise dramatically because of the extra liquidity in the economy. Commodity prices have already spiked. Food and energy costs make up more than 50% of the expenses for poor Americans and this will only go up.

Who benefits? The wealthy of course. Ben Bernanke stated himself in is op-ed that the main goal was to pump up the stock market. The problem is that the increase in value of the market only increases wealth for the rich. Poor Americans aren't going to go out and buy new stuff because the Dow Jones hit a new 52-week high.

Yet Obama came out in support of this. Who the fuck is advising Obama? He's clueless.

[Dreamer Tatum]

1. Don't doubt your instincts just because an enemy agrees with you

QE2 is a terrible, inflationary idea that is effectively a tax. You are correct that it burdens those who rely on rely on raw currency, aka the poor and working people.

[rfranklin]

2. It's free money for the banksters who are doing nothing...

but enriching themselves. They are so blinded by greed they never think beyond the next bonus check.

[Lord Magus]

32. Inflation is at about 1% right now.

That's ludicrously low. Lower than it should be for a healthy economy. Increasing inflation a bit would be a good thing.

[Hollywood_Zack]

51. Inflation is MUCH higher than 1% Don't listen to Government Propaganda

Like devaluation of our currency is a hidden tax there's a new one that effects everyone in a hidden way.

producers are reducing packing quantities, weights, volumes. So when Uncle Sam says a bag of Potato Chips hasn't changed, take a look at that bag of chips that used to be 16oz a few years ago to 11oz today.

I'm a regional distributor I've see the price increases and quantity decreases... and inflation on the cores prices are much higher than what the government tells you to believe.

Don't believe the BS government numbers.

[mkultra]

52. but listen to your propoganda right?

the grocery shrink ray is included in inflationary calculations.

[Lord Magus]

69. Interesting. Kind of like a Republican budget proposal for the last couple of years.

You provide no actual facts or figures.

[monmouth]

3. I heard Palin thought the QE2 reference was about a ship....n/t

[dgibby]

12. DUzy! n/t

[wallwriter]

4. Even a broken clock is right twice a day n/t

[DemocratSinceBirth]

5. I Disagree

I will defer to Nobel Prize winner, Paul Krugman, before I defer to Glenn Beck, Sarah Palin and Rush Limbaugh. Inflation is caused by too much money chasing too few goods. How can you have inflation when nearly one in five workers are unemployed, underemployed, or too discouraged to look, one in six homeowners are underwater, and manufacturing utilization capacity is less than seventy percent.

The Republicans are against anything to improve the economy because they can not win in 012 if the economy improves. Conversely we can't win if it doesn't

[Cali_Democrat]

10. Think of it like this....

1) The Fed prints money to buy treasuries

2) The people currently holding the treasuries now have the cash. Mostly institutional investors, banksters.

3) Interest rates are so low that they chase after risk assets to get a higher rate of return. Risk assets in this case being commodities and equities.

4) Commodity and equity prices spike because of the extra liquidity,


Too much money chasing after too few good is exactly what we will get.

[ProSense]

15. Even if one thinks about it that way

it's your opinion. As you see, reasonable people, including Krugman, disagree with you.

Yet, while you are the one agreeing with Palin, you are making comments like this:

"Who the fuck is advising Obama? He's clueless."

The answer to the the question: Not Palin.

[doc03]

11. What are they doing? (printing money 24/7). You apparently

never heard of stagflation, that's what we had back in the 70's when inflation was double digits and the unemployment was was also high. Inflation is the worst tax there is especially for poor people and people on a fixed income. The price of a car doubled between 1973 and 1977. Can you imagine paying $40,000 for a Ford focus in 2014.

[DemocratSinceBirth]

21. Yes, I Have Heard Of Stagflation

I have also heard of deflation where people defer purchases because they know that the cost of goods will go down in the future.

[Lord Magus]

31. Inflation barely exists right now.

In fact, if nothing changes, we'll be seeing deflation before the next election.

[DemocratSinceBirth]

42. Wasn't This The First Time In History That SS Recipients Didn't Get A COLA?

How can you have inflation when folks don't have any money to run up the price of goods?

[Lord Magus]

68. Second year in a row of no COLA for SS.

Because it's pegged to inflation and inflation is incredibly low.

Of course this didn't stop the Teanuts from sowing the Internet with lies about it, pretending that COLA is something Congress votes on each year and claiming they gave themselves a pay raise this year (they didn't) instead of giving SS recipients a COLA.

[golfguru]

16. so simple, money is falling from helicopters (Helicopter Ben)

while less goods are produced because 17% of adults do not have a job and do not produce any thing, and factories are running at sub-capacity.

[DemocratSinceBirth]

19. On The One Hand We Have Such Economic Luminaries As Sarah Palin, Glenn Beck, Rush Limbaugh,

On the one hand we have such economic luminaries as Sarah Palin, Rush Limbaugh, Glenn Beck, Newt Gingrich, and Rand Paul. On the other hand we have Nobel Prize winner,Paul Krugman:

http://krugman.blogs.nytimes.com/2010/11/06/bernanke-and-the-shibboleths/

Wow. This is a tough one.

[farrar]

59. Here is how I see it.

There is also noble prize winner Fredrick Von Hayek.

Just because Sarah, Rush, Glenn, and Newt put there name on something doesn't make it wrong. It makes prejudiced people assume it is wrong.

Obviously it doesn't make them right either.

You need to look at Austrian Economics for what it is before you dismiss it just because someone pinned their name to it last minute.

Austrian Economics is very capitalistic, and you would probably disagree with it. But if you read many of the proponents you will realize many of the concerns are founded on morality. They have concern for inflation and often criticize modern economists for intentionally driving inflation and hurting poor people and other's life savings. They believe that economics based on voluntary exchange is the most efficient and moral economics. Some would say the efficiency is just a perk.

Central banking requires no competing currency. This means people are limited in what they can receive and take in exchange. They have no say in what they can trade their labor for. Whats worse is this is required so that the bank can have control of the money and manipulate it at will. While we can argue how effective or ineffective that is to macroeconomic goals, I don't believe thats the point. Neither is it entirely for Austrian Economists. I think we can see the moral hazard in allowing an assortment of men in some marble palace to decide that taking 2% off the top of your savings (mostly hurting poor people), is a sacrifice they are willing to make for the greater good. Then there is the hope that they were right. Because in this new world where the ends justify the means... you'd better hope your end was right... because then you have nothing:

Central banking and its tools such as QE2 are amoung

the same utilitarian thinking that allowed Truman to drop the atomics on japan (for their own good!)...
the same utilitarian thinking that allowed FDR to put the Japanese is concentration camps...
the same utilitarian thinking that allowed Lincoln to imprison reporters who spoke out against the war...
the same utilitarian thinking that allowed John Adams to pass the alien and sedition acts
And Finally it is the same utilitarian thinking that allowed George W. Bush to invade Iraq...

Even if Glenn Beck and them don't truly understand it, and as such why it maybe right... I do believe they have it right this time.

Also Ron Paul is an Austrian Economist, and I am not sure how much Rand knows but he is probably acquainted with it well enough.

[Uzybone]

6. leftists for Palin!

[butterfly77]

7. She is not right..

because she doesn't know shit,the CONS sent her out with this and they will send her out with more pretending that she knows something and is presidental material.

[DemocratSinceBirth]

8. I Will Go With Krugman

He said it's a small net plus.

[mkultra]

53. meaning its helpful.

[ProSense]

9. Palin is

a dimwit

[Demeter]

13. Yes. She Is

Proving that even a blind pig can find an occasional truffle.

She just opposes Obama in toto. I'm beginning to think there are worse positions.

[Kurt_and_Hunter]

14. Nope, Palin is wrong on this

[sally cat]

17. Evaluate upside vs downside. UP: Wall street, bankers win. Downside: inflation or stagflation, every

one else loses.

[DrToast]

18. You picked a bad time to agree with Palin (although I'm not sure there's ever a good time)

QE2 is necessary because inflation is below the long-term target of 2%.

There will be an extra $600 billion floating around.

For now. The money supply isn't constant. The money will eventually be extracted when the economy recovers.

If you're concerned about it impacting people negatively, 10% unemployment is pretty awful, too.

[Fruittree]

20. What you say makes sense to me..

I think we have to be careful not to jump on everything being done to try to save the economy and assume the worst and please let's not have pro-Palin items on here - I'm pretty open-minded but that's just a tad too depressing..

[DemocratSinceBirth]

22. At This Moment In American History

At this moment in American history worrying about incipient inflation makes as much sense as a patient with stage 4 lung cancer worrying about a cavity.

[Kurt_and_Hunter]

23. +1

[Cali_Democrat]

24. You're referring to the core inflation rate that DOES NOT take into account food and energy prices

Just like how the government doesn't like into count many unemployed people, they also don't like to count the true rate of inflation. The rate will only go up.

[DrToast]

27. No, I'm referring to the regular inflation rate

Although it wouldn't matter much since they're roughly the same right now.

[Lord Magus]

30. Kind of blows up the fearmongering about inflation, doesn't it?

Not only is inflation incredibly low, it is (despite the Fed continuing to print huge amounts of money) going DOWN. If things continue at the current rate, we'll be into deflation within 2 years.

[karynnj]

25. You forget the other impact - it causes a cheaper dollar

As most wealthy people have their assets in dollars, if the dollar falls 10% internationally - while the dollar value of their assets may stay the same or rise - their true value falls with the dollar. The poor are hurt even more by a stagnant economy with insufficient jobs and falling pay checks. The cheaper dollar should help in selling American products abroad.

I would prefer a jobs program or direct spending, but it is completely impossible for Congress to pass one. That limits what can be done to stimulate the economy, which needs stimulating.

[Hawkowl]

41. Declining dollar increases the price of commodities

The QE2 will increase the price of food, oil, etc because the rest of the world's currency will appreciate and outbid the US for them. This will be the real source of inflation. I look forward to $4 gasoline and increased food prices just so the bankers can pump up the stock market.

[karynnj]

46. I was not questioning that

Anything that is an international commodity will go up.

[mkultra]

54. a huge portion of our economy it retail goods

which are almost all imported.

[DemocratSinceBirth]

44. Monetary Policy Is The Only Tool We Have Left To Fight This "Recession"

There will be no more stimuluses out of this Congress but tax cuts for the rich which will be pocketed because the more money you have the more money you save. And conversely the less money you have the more of it you spend.

This is elementary. The Republicans don't want the economy to improve; at least not before 2012.

[karynnj]

45. Sadly you are right

The tax cuts for the wealthy is likely the least effective stimulus for the cost that has been considered.

[ShadowLiberal]

26. I still don't understand how buying your own debt can even accomplish anything, or how it's possible

Seriously, the whole idea just sounds like a joke making up a fake scam.

I mean the fed is part of the US federal government, and the US federal government prints the money, so how can they give themselves money?

Even more screwed up is how can you owe yourself interest? Because that's why people loan the US government money, to make a profit off of the interest.

And how exactly do you pay yourself back, do you collect $600 billion US dollars and burn it (after all if we're printing money to pay ourselves shouldn't we burn money to pay ourselves back?), or do you just decide 'oh we have $100 billion in the bank, so lets say we paid ourselves $100 billion back on those loans to ourselves, and then we took that $100 billion we paid ourselves with to pay off another $100 billion on those loans to ourselves'?

Seriously, there's no limits to the comedy one can make about this 'solution'.

Inflation isn't the problem that's causing people not to spend, it's the bad state of the market, it's the uncertainty about the future that's making everyone hold back right now. $600 billion dollars would do a heck of a lot more good in the form of a stimulus program to repair broken broken roads/bridges/etc. That would get some unemployed people a job and pump money into the economy into local businesses/etc.

[mkultra]

55. well, ok, let me try here

We recently had a credit metldown which has slowed the economy. Usually, economic recovery is led by housing but this time, housing was the cause. The end result is that even after the banking industry has been saved from complete collapse, they are still skittish about lending on both housing and commercial. So what are those banks doing with all that liquidity?

They are making money the safe way, tbonds. Since tbond rates are up and interest rates are down, buying tbonds is more profitable than lending money.


Buy buying up tbonds, the fed reduces federal debt "risk" which essentially lowers the return value of tbonds. Pushing tbond rates down essentially makes lending more appealing which is pretty much the last step in getting this economy going.

as far as getting the money "back", you have to realize that when the fed "prints money" they really don't print money, they electronically add liquidity. Since our currency is fiat, its value is based on our GDP and our stability. Removing debt and spurring the economy would help with value.


Inflation could happen if the measure fails to produce any growth. It does have its risks.

[angrychair]

65. Your core premise is incorrect

The Federal Reserve is NOT part of the federal government and it is not part of the federal government for a reason. The Federal Reserve regulates monetary policy by controlling the flow of currency to the central banks and the interest rates which the central banks lend money to other banks which in turn effects the interest rates for which businesses and people borrow money. You don't want that kind of power to become a political football that can be manipulated by Congress or a president's whim. The Reserve controls the flow of money, they don't make it. QE2 creates money because they bought back their securities, therefore "creating" excess capital in the banking system. This is turn give the banks more money to lend, at cheaper rates, and in principal, businesses will expand, people will start new small businesses, people will refinance their homes, buy homes, buy cars and so on.

[mkultra]

28. wrong, please read some books

Buying debt has two effects. Its stabilizes the dollar improving imports which lowers the cots of retail goods. Second, it forces banks which have been refusing to lend back into lending.

[Dawson Leery]

29. +1

[Dreamer Tatum]

34. Printing money to buy that debt, however, has the opposite effect.

As you say...read some books.

[mkultra]

35. actually, thats not true

printing money has one effect, and buying Tbonds has a counter effect. If the counter effect is greater than the former, then a net positive is created. If GDP increases because of the increased money supply, the value of the dollar will increase even if there is more currency in the system.


again...books.

[Dreamer Tatum]

38. Oh my lord.

Nevermind.

[mkultra]

49. your understanding of economics is two dimensional.

Its always more than "single cause/single effect"

[golfguru]

39. The problem is NOT lack of capital !!!!

Corporations are already sitting on 2,000 Billion cash.

There are basically 2 methods to spur business activity.
1. The FED loans money to borrowers or banks.
2. The FED buys US Bonds which makes money available for the government to spend.

Business activity does not increase unless some one is willing to borrow the money
FED is willing to loan out. If FED buys the bonds instead, US Treasury will have
$600 Billion cash to spend.

So where will the $600 Billion cash US Treasury will acquire by selling bonds go?
It will go for federal spending which does not create PERMANENT jobs. They plan to
build a bridge, workers are hired. Bridge is finished, workers are laid off.
And now US Treasury debt is higher by $600 Billion.

If the $600 billion is used instead to start or expand businesses, it creates
permanent jobs. It produces goods & services to absorb the excess cash, thus
not spiking inflation much.

Instead if the money is just spent by the government, the extra $600 cash in circulation
cheapens the dollar and creates inflation.

[ProSense]

40. Krugman: QE Madness

QE Madness

It has been really interesting to watch some of the commentary over quantitative easing by the Fed: while people like me see the Fed’s actions as way too timid, there’s a substantial faction out there that sees them as the end of Western civilization. Right now the most popular story on Bloomberg is Jim Rogers saying that Bernanke doesn’t understand economics, that he’s “debasing the currency.”

I’ve seen Rogers in action; he seemed to me to be confused about issues like the difference between assets and liabilities. And please note that inflationistas like Rogers have been wrong about absolutely everything this cycle (and the last cycle, and the cycle before that).

But they have their devotees. And this means that monetary policy, our only real hope at this point, must climb a wall of stupidity.

To think, Krugman believes $600 billion isn't enough.

[DemocratSinceBirth]

43. Please

Everybody knows that Rush Limbaugh, Glenn Beck, Sarah Palin, Rand Paul, and Newt Gingrich know more about monetary policy than Paul Krugman. After all, look at all the Nobel Prizes in Economics that gang has been awarded compared to Krugman


:sarcasm:

[mkultra]

48. yes, Krugman agrees with the method, he just thinks it wont be enough

IN truth, he is generally right on issues of magnitude such as the stimulus but his opinion is unconstrained by politics.

[mkultra]

47. No, there is a third way

When they fed buys Tbond debt, the tbind rate dropes. When banks have plenty of liquidity, but aren't lending(which is definitely the case right now) its because they are using their liquidity to earn Tbond interest. Tbonds are safe and the current tbind yield is higher than the yield they can get from lending. By dropping the rate, you effectively scare the banks out of the tbond market and force them to lend. This is a proven historical method. The only question unanswered is regarding the potency of the action.

They aren't selling tbonds to raise capital, they are "printing money" to buy back debt owned by the public. I know that scares plenty of people, but you must remember that the US dollar is fiat and is backed by the full faith of the US government. Buying back debt creates stability.

[golfguru]

61. Your interest numbers are incorrect

Banks are lending out mortgages at between 5.5 & 6% whereas
5 year T-bond is yielding only 1.15% & even 30 year is yielding only 4.25%.

[mkultra]

62. banks dont make the full interest that they charge, its layered

Besides, your numbers are actually wrong. the current prime rate, which is directly influenced by the federal discount rate and the overnight rate is 3.25% right now, the current 30 year tbond is 4%

I refinanced two months ago at 4.15% and it was like pulling teeth just to get them to do the loan. The rate wasn't the problem, I was just like they didn't really want to write the loan. The ended up using FHA to underwrite which means that they could not find a conventional underwriter.

Right now, the only home lending that is occurring is backed by the federal government and BoA is buying up all the servicing.

[golfguru]

63. 3.25% may be for AAA rated outfit, a small business will be lucky

to get a business loan under 7%. That is the rate my golf club had to pay to the
bank for refurbishing the club house kitchen.

[mkultra]

70. yeah, like i said, the bank isnt getting the full interest

they are charging you as they themselves borrow money to do it. Nothing i have explained here is ground breaking. Its all well known economic principle.

feel free to read up on the issue on wikipedia. the facts remain that the banks are hold up on tbonds.

[Exilednight]

50. You're right, you need to read some books ............

The dollar needs to weakened in order to increase exports.

But buying T Bonds will have no effect to lending. Banks are sitting on piles of money, but just aren't lending it. If they borrow even more money, there is no guarantee that they will lend it out. To be honest, recent history suggests that they a) won't even bother borrowing the money from the fed, or b) borrow and use it for something else besides lending.

[mkultra]

56. i guess you just dont know WHY the banks aren't lending

if you did, you would understand why buying tbonds will help. When the fed buys tbonds, they are not "lending money" to banks or making more available for lending.


The reason banks aren't lending is because they are in the business of making money safely. the current tbond rate makes buying tbonds more profitable than lending and its safer. When the fed buys tbonds, the rate for tbonds drops. This squeezes the banks out of their safe money tbond market and forces them to seek profit through lending.

[Exilednight]

57. Quantitative easing does not take T-Bonds out of the market ............

Basically, the fed is printing money out of thin air. If they print $600 billion in money, they only buy the same $600 billion in T-Bonds.

They're just buying the same bonds for the same money they are offering to lend. There is no evidence that suggests this will work. In fact, most of the evidence goes against the Fed's logic.

Another lesson from recent history, banks are not in the business of making money safely, they're in the business of making as much money as they can in the shortest amount of time. It's the banks who create artificial bubbles and then cashes out just before they pop.

The next big bubble? Cap & Trade carbon emissions, IF the bill passes as it is currently written - which it probably will.

[mkultra]

58. THIS QE is about TBond purchases

RISMEDIA, November 8, 2010—(MCT)—The Federal Reserve has announced a new “quantitative easing” plan aimed at bolstering the economy. So what’s quantitative easing? The term is a mouthful, but is simple in execution: The central bank plans to boost its purchases of U.S. Treasury bonds in the open market, hoping to push longer-term interest rates lower, or at least keep them from rising significantly.
http://rismedia.com/2010-11-07/quantitative-easing-what-it-may-mean-for-the-economy-and-financial-markets/

They are exchanging Interest bearing TBonds for added liquidity which does take TBonds out which will lower their rate.

There is evidence to support this move. It was used in japan and it is a well known method.
http://en.wikipedia.org/wiki/Quantitative_easing

You sound like one of these kooks that thinks we should be buying gold to prep for the coming collapse. Your claim that "most" of the evidence goes against the fed is cut from whole-cloth.

[angrychair]

66. read some more books

The Federal Reserve doesn't print money. It regulates the flow of money and the interest rates that the Central Banks charges regional banks to borrow money.

[Cali_Democrat]

74. So where's the Fed getting the money to buy the treasuries?

Thin air?

[kentuck]

33. Then he could raise the interest rates and get the $600 billion back.....

...and put a damper on any inflated prices, right??

[farrar]

60. Not a great idea.

Raising interests rates right now will put us into a depression. Lowering them at 0% is impossible. The Fed is going to find that things like QE2 cannot be done forever, but to not do them would hurt the economy.

The scenario is this:

Raise interest rates and hurt the economy.

Do much more quantitative easing, that will eventually trigger high inflation, and hurt the economy... possibly more.

Do nothing, and we will hurt the economy because suddenly all the problems we put off using option two would crash down on us.

When we artificially lower interest rates in order to boost economic growth, we soon find that the money pumped into the system is finite. Once it disappears and it is revealed that resources were not as plentiful as earlier thought we have a bubble burst.

This happened with the Housing bubble.

Of course this is theory (The Austrian Business Cycle... won a noble prize). Many of the people who think this, predicted the housing bubble as late as 2000, unlike other economists who predicted it as early as 2007-08. (was that sarcasm?)

However, I will admit. I am a bit lost when those same people talk about a Dollar bubble. But considering China's recent hints at stopping to buy out dollars... It certainly doesn't look like whatever will happen is going to be good.

[mkultra]

72. he wont need to. there is no garuntee that inflation will occur

[DemocraticPilgrim]

36. As said a broken clock is right twice a day and trying to sure up the middle for 2012 don't mean...

that's where they'll govern. Just remember compassionate conservatives and think how comapssionate it turned out to be. This is here Palin distresses us becase she knows how to come across in a harmless way but it's still the same outcome.

[ProSense]

37. Palin is a broken clock without arms

Would be really stupid to try to use her to guage the time of day.

[joshcryer]

64. Fiat currency only has value because of interest paid to it.

If it did not gain interest it would have absolutely no value whatsoever.

[angrychair]

67. Good thought but not actually correct

Fiat money has value because the country that created that fiat currency says it has worth. Meaning that the value of a fiat currency is directly tied the perception of its worth by those that would seek it out and use it to purchase goods and services.

[mkultra]

71. correct. Our money has value because people know

that America will be here for the foreseeable future protected by our military and managed by our government. That means that American merchants(those that accept the dollar) will exist for some time.

[Ikonoklast]

73. OK. I'll stick with Obama, you can have Palin.

Deal.

[Cali_Democrat]

75. Nah

[Honeycombe8]

76. The stock market benefits the middle class and the economy as a whole, I think.

Millions of Americans' 401Ks, pension plans, and other retirement accounts are invested in the stock market.

When people feel like they are more secure financially, they are more confident in teh economy, and they spend more. Right now, one of the problems, I understand, is that people are saving like crazy, scared of what will happen with the economy. They are not spending.

So it seems to make sense that having a strong stock market lifts up the economy as a whole.

Now, whether we should be printing more $$$, I don't know. That does concern me.

OTOH, China isn't happy about it. Which makes me think that maybe Bernanke is on to something.