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Joined: 16 Dec 2009
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PostPosted: Fri Sep 14, 2012 12:19 pm    Post subject: Question Reply with quote

How can Bernanke justify QE of any kind, at a time when the stock market is at a 5 year high, and unemployment is at a 5 year low?

Joined: 03 Sep 2006
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PostPosted: Sat Sep 15, 2012 9:27 am    Post subject: Reply with quote

Not sure it was QEIII, given the conditionality attached to it. They are essentially continuing the so-called Operation Twist, but they have added the MBS buying if certain conditions are met. The Fed had to do something after the ECB announced their measures last week, which were not quite as "bold" as the press reports suggested. The fact of the matter is that the central banks have not much ammunition left, given that short-term rates are already at zero.

Joined: 16 Dec 2009
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PostPosted: Thu Sep 20, 2012 10:18 am    Post subject: Reply with quote

I've been thinking about this ... and I am coming down on a position that this is a big deal, after all. For one thing, it is open-ended, destined to continue until the jobs start coming back.

It means another half a $trillion a year will be created and used to bail out the banks, while transferring more toxic assets to the Fed's balance sheet. On top of two more years of zero interest rates.

Will there be inflation? Apparently not. I am a skeptic, but I see the point -- if the economic activity is low, there is no pressure on prices. At least domestically. But the inflation appears in commodities that are traded on the world market, in US dollars. Food prices in third world countries sky-rocket ... and thus ... the so-called Arab Spring.

And inflation appears in real estate markets in other countries, of course, thanx to the cheap money ...

My point is ... how can they stop this continuing flow of subsidies without precipitating a monster crash? Their steps only allow more debt to accumulate, and thus make the final reckoning more wrenching.

But what democratically elected politician is going to knowingly precipitate a crash?

Any ideas, anyone?

Joined: 25 Jun 2007
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PostPosted: Thu Sep 20, 2012 1:22 pm    Post subject: Reply with quote

Well there are no democratically elected politicians in charge of the Federal Reserve. There hasn't even ever been a real audit of the Fed by the Government. The Fed as an organization is essentially a black box to us, all we know about internal activities is whatever they tell us.

To get this out of the way... At this point I think we can all admit/agree the Federal Reserve is a private organization. Just a few years ago someone would have called me a conspiracy theorist for that statement, but today it is a well known fact.

The process of deflating and inflating the economy causes wealth to transfer upwards.

First... in a crash(deflation period) the poor and middle class are forced to sell assets, while the wealthy have the opportunity to by up assets and still be wealthy... They hold onto these assets for a better day.

Next... During an inflation period the poor and middle class suffer again because when they have the least savings, so changes in currency value affect their standard of living. Slight increases in food prices, gas, real estate take away any income surplus they may have had. Mortgages go sky high, lots of debt is created, and inflation rate increases...

Last... Rinse and repeat. Cause a crash or deflation period. Inflation has reached a climax, income does not keep up with inflation rate, loans are being defaulted on, and banks stop lending. Less lending means less liquidity, no one has buying power except rich. Further encouraging deflation.

Summary: It is an economic roller coaster, it has very little to do with the change in value of goods, services and real estate. The value of these things remains relatively constant with maybe slight fluctuations. The problem is in manipulation of currency value and interest rates. It is the fractional reserve banking system, anyone who understands it knows that recessions are a natural part of it.

The question is, is it pure incompetence or is someone pulling the strings? Well I say both. The purpose of any company it to make a profit, so if the central bank(Federal Reserve) is controlled by shareholders that are private banks we have both motive and opportunity. Combine that with the fact that there is no Government oversight of the Federal Reserve and now they also have very low risk. The incompetence is with the politicians who take small bribes and are unknowing selling their country to banks.

The incompetence of the people further aids to the problem, I had a republican tell me yesterday they didn't vote for Ron Paul because he was old and ugly. This was his criteria for selecting policy makers... I guess he just liked Mitt Romney's hair cut.

Joined: 25 Jun 2007
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PostPosted: Thu Sep 20, 2012 1:42 pm    Post subject: Reply with quote

Here is a great video I found on YouYube that pretty much explains fractional reserve banking. It is a short explanation of how borrowing/lending causes inflation, even when the government isn't printing.

So every time you take out a loan you cause inflation, and whenever you put money in the bank you devalue your own investment. Such a perfect scam.

When this process for creating inflation took a kicking, the government used the other method of causing inflation. Borrowing from Federal Reserve(Printing money) and creating stimulus/bailouts. In hopes the natural inflation process would recover.

Welcome to the failed system of fractional reserve banking, combined with government incompetence! It's ok to start shaking your head now.

Joined: 25 Jun 2007
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PostPosted: Thu Sep 20, 2012 1:53 pm    Post subject: Reply with quote

I also, forgot to mention...

Think of all the money loaned out that was created out of thin air. Remember all these loans come with interest rates. So now all of us including the government have to pay interest back on money that never existed.

It is pretty easy to predict the end game here, if more money is owed than exists that means it can't all be paid back. The only way to liquidate debt is bankruptcy. The Americans can kick the can down the road and raise debt ceiling for many years to come, but bankruptcy is coming...

Even with a Libertarian Government it will be hard to avoid, and the Libertarians have a snow balls chance in hell of winning.
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