Comments on: JUST ONE QUESTION http://pragcap.com/just-one-question Fri, 25 May 2012 20:36:23 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Michael http://pragcap.com/just-one-question/comment-page-1#comment-9384 Michael Thu, 26 Nov 2009 20:44:05 +0000 http://pragcap.com/?p=12939#comment-9384 From my point of view the contest is between the Fed printing money and the real economy destroying money. As long as the money multiplier continues to go sideways or contract deflation will win. I own commercial real estate and I have been watching my tenants go out of business. I remember my father taking me along Jefferson Avenue in Detroit (it follow the Detroit River up into Grosse Pointe and was the high rent district in the 1930s) he told me back in 1934 when he moved to Detroit that three out of four stores were vacant. That's my situation today. My situation may be anecdotal but I believe the Fed will lose. Mr. market will kick his butt, and ours. From my point of view the contest is between the Fed printing money and the real economy destroying money. As long as the money multiplier continues to go sideways or contract deflation will win. I own commercial real estate and I have been watching my tenants go out of business. I remember my father taking me along Jefferson Avenue in Detroit (it follow the Detroit River up into Grosse Pointe and was the high rent district in the 1930s) he told me back in 1934 when he moved to Detroit that three out of four stores were vacant. That’s my situation today. My situation may be anecdotal but I believe the Fed will lose. Mr. market will kick his butt, and ours.

]]> By: Shlomo http://pragcap.com/just-one-question/comment-page-1#comment-9107 Shlomo Tue, 17 Nov 2009 21:31:16 +0000 http://pragcap.com/?p=12939#comment-9107 This could be ignorant, but here's what I think 1. Government spending is not really directly correlated to what Ben is doing 2. His goal seems to be to keep short term (Fed funds) and long term (via QE) interest rates low to encourage credit expansion, which seems to be the name of his game. It is true that easy money encourages stock market inflows in the short term, but the hope is that this wealth will reach out and be invested in more useful ventures. I think Bernanke, as he once outlined in a speech in Japan, is saving as his next move something akin to charging banks to store reserves at the Fed. If he can lower the bank reserves and cause credit expansion, it could do some good to the real economy As for the dollar and commodity prices, not sure how much of this is directly related to QE (see the Yen for proof of this). All the talk of printing presses and fiat currency seems to be forward looking/speculative, since M3 has expanded slightly or declined recently. And, if/when the currency really does begin to circulate, it could cause a strengthening of the dollar This could be ignorant, but here’s what I think
1. Government spending is not really directly correlated to what Ben is doing
2. His goal seems to be to keep short term (Fed funds) and long term (via QE) interest rates low to encourage credit expansion, which seems to be the name of his game. It is true that easy money encourages stock market inflows in the short term, but the hope is that this wealth will reach out and be invested in more useful ventures. I think Bernanke, as he once outlined in a speech in Japan, is saving as his next move something akin to charging banks to store reserves at the Fed. If he can lower the bank reserves and cause credit expansion, it could do some good to the real economy
As for the dollar and commodity prices, not sure how much of this is directly related to QE (see the Yen for proof of this). All the talk of printing presses and fiat currency seems to be forward looking/speculative, since M3 has expanded slightly or declined recently. And, if/when the currency really does begin to circulate, it could cause a strengthening of the dollar

]]> By: TPC http://pragcap.com/just-one-question/comment-page-1#comment-9106 TPC Tue, 17 Nov 2009 21:14:28 +0000 http://pragcap.com/?p=12939#comment-9106 That's just the problem though. He is not supposed to be my opponent (nor do I view him as my opponent). He is supposed to help the American economy so that it most benefits everyone. Not a small segment of bankers....He is running a flawed strategy and it is helping a small portion of the economy while hurting a large portion of it. That’s just the problem though. He is not supposed to be my opponent (nor do I view him as my opponent). He is supposed to help the American economy so that it most benefits everyone. Not a small segment of bankers….He is running a flawed strategy and it is helping a small portion of the economy while hurting a large portion of it.

]]> By: Ben Wade http://pragcap.com/just-one-question/comment-page-1#comment-9105 Ben Wade Tue, 17 Nov 2009 21:07:09 +0000 http://pragcap.com/?p=12939#comment-9105 Could the ZIRP play simply be the only one that the Fed has (left)? In other words, Ben Bernanke was thinking the future was either Great Depression 2 or stoke another bubble in the hopes it would revive the economy (the same play Japan ran and lost). What is scary: Mr. Bernanke isn't stupid. He knows what is happening. He is presiding over destructive practices by the Fed with his endorsement. The only rational reason he'd insist on ZIRP (or whatever you want to call it) is if his information indicates the world economy is on the brink of oblivion. Could the ZIRP play simply be the only one that the Fed has (left)? In other words, Ben Bernanke was thinking the future was either Great Depression 2 or stoke another bubble in the hopes it would revive the economy (the same play Japan ran and lost).

What is scary: Mr. Bernanke isn’t stupid. He knows what is happening. He is presiding over destructive practices by the Fed with his endorsement. The only rational reason he’d insist on ZIRP (or whatever you want to call it) is if his information indicates the world economy is on the brink of oblivion.

]]> By: Frito http://pragcap.com/just-one-question/comment-page-1#comment-9104 Frito Tue, 17 Nov 2009 21:07:02 +0000 http://pragcap.com/?p=12939#comment-9104 You're underestimating your opponent. You’re underestimating your opponent.

]]> By: landshark http://pragcap.com/just-one-question/comment-page-1#comment-9102 landshark Tue, 17 Nov 2009 20:45:59 +0000 http://pragcap.com/?p=12939#comment-9102 Another day of higher stock prices! Another day of higher stock prices!

]]> By: TPC http://pragcap.com/just-one-question/comment-page-1#comment-9101 TPC Tue, 17 Nov 2009 20:43:22 +0000 http://pragcap.com/?p=12939#comment-9101 Depends on your definition of "working". What is working: 1) higher commodity prices 2) Higher bank earnings 3) Higher banking bonuses What is not working: 1) Jobs 2) wage growth 3) House prices are down 30% 4) World equity wealth is down 30%. If you're a banker at Goldman Sachs life is quite good. If you're a blue collar worker at U.S. Steel life sucks. Depends on your definition of “working”.

What is working:

1) higher commodity prices
2) Higher bank earnings
3) Higher banking bonuses

What is not working:

1) Jobs
2) wage growth
3) House prices are down 30%
4) World equity wealth is down 30%.

If you’re a banker at Goldman Sachs life is quite good. If you’re a blue collar worker at U.S. Steel life sucks.

]]> By: Uformula http://pragcap.com/just-one-question/comment-page-1#comment-9100 Uformula Tue, 17 Nov 2009 20:37:54 +0000 http://pragcap.com/?p=12939#comment-9100 http://web.me.com/uformula/RCS_Investments/RCS_Investments/Entries/2009/11/16_Dollar_Tanks%2C_Stocks_Up...Surprise_Surprise.html http://web.me.com/uformula/RCS_Investments/RCS_Investments/Entries/2009/11/16_Dollar_Tanks%2C_Stocks_Up…Surprise_Surprise.html

]]> By: landshark http://pragcap.com/just-one-question/comment-page-1#comment-9099 landshark Tue, 17 Nov 2009 20:37:12 +0000 http://pragcap.com/?p=12939#comment-9099 It appears to be working quite well. Where have you been? It appears to be working quite well. Where have you been?

]]> By: TPC http://pragcap.com/just-one-question/comment-page-1#comment-9098 TPC Tue, 17 Nov 2009 20:30:58 +0000 http://pragcap.com/?p=12939#comment-9098 This gets into all sorts of other debates. The unemployment rate in Japan rose steadily throughout the 90's. It recently hit an all-time high. Their stock market has declined for 20 years. I don't know what a "depression" is necessarily, but that sounds pretty close to a modern day "depression". What have they really accomplished? Japan's debts are still massive. Granted, their private sector debts have come down tremendously, but their government debts are more bloated than ever. As for the Fed's role, I wish they were not so involved in all facets of the market. I'd love to see the Fed run by someone with some risk management knowledge rather than some reactive textbook geek, but that's not a realistic expectation. That's like expecting to find a competent mutual fund manager. They need to be less involved in markets and allow the market to work a bit more naturally. We've simply delayed the day of reckoning by tinkering with the market's price discovery mechanism. This gets into all sorts of other debates. The unemployment rate in Japan rose steadily throughout the 90′s. It recently hit an all-time high. Their stock market has declined for 20 years. I don’t know what a “depression” is necessarily, but that sounds pretty close to a modern day “depression”.

What have they really accomplished? Japan’s debts are still massive. Granted, their private sector debts have come down tremendously, but their government debts are more bloated than ever.

As for the Fed’s role, I wish they were not so involved in all facets of the market. I’d love to see the Fed run by someone with some risk management knowledge rather than some reactive textbook geek, but that’s not a realistic expectation. That’s like expecting to find a competent mutual fund manager. They need to be less involved in markets and allow the market to work a bit more naturally. We’ve simply delayed the day of reckoning by tinkering with the market’s price discovery mechanism.

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