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The Fed goes all-in on QE

By Patrick   Follow   Sat, 15 Sep 2012, 11:01am   2,887 views   35 comments
In Menlo Park CA 94025   Watch (0)   Share   Quote   Permalink   Like (1)   Dislike  

Schiff is not actually a great investor from what I hear, but his ideas are presented clearly.

The geniuses at the Federal Reserve have concocted a bold new plan to revive the U.S. economy -- print a bunch of money, loan it to Americans at super low interest rates so they can speculate on rising real estate prices, extract the appreciated equity and spend it on consumer goods. In other words, build an economy of real estate, by real estate, and for real estate. The only problem is we've been there and done that. The last time it almost destroyed the U.S.economy. I guess almost isn't quite good enough for the Fed, so now it's determined to...

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1. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

   1   4:54pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (1)   Dislike   Protected   Yup, it will blow up like any other bubble, but we'll get a nice ride out of it while it's happening and it might take a decade to resolve. It's not a bad solution actually.

2. Strategic Renter Follow Befriend 31 threads 98 comments

   2   5:02pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (2)   Dislike   Housing is only 2% of the economy. Whatever they do will have little effect on the economy.

3. curious2 Follow Befriend (5) 31 threads 2,239 comments Premium

   3   5:06pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (2)   Dislike   Protected   QE3 is a strong argument for abolishing the Fed. The Fed is, expressly, controlled by bankers: member banks control 5/12 of the votes directly, and the rest indirectly. They have decided to lend to banks at zero interest, and buy mortgages from banks, including mortgages up to 97% of principal and yielding zero after inflation. Instead of maintaining a stable currency, as required by law, they have now an express policy of promoting inflation. Fed member banks are essentially paying themselves $500 billion/year, in plain sight, by printing the currency that the global economy depends on. The nonsense about "helping the economy" is at best incidental, and probably the opposite of reality. Ron Paul was right.

4. JodyChunder Follow Befriend (3) 16 threads 1,371 comments Victorville, CA Premium

   4   5:12pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (2)   Dislike   Protected   iwog says It's not a bad solution actually. It's pretty inelegant. A debt jubilee would be better.

5. curious2 Follow Befriend (5) 31 threads 2,239 comments Premium

   5   5:25pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (2)   Dislike   Protected   JodyChunder says A debt jubilee ...would reward debtors at the expense of savers. If you want to print funny money to "stimulate" the economy, at least share it evenly with everyone.

6. Patrick Follow Befriend (54) 5,188 threads 6,157 comments 46 male Menlo Park, CA

   6   5:39pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (4)   Dislike   I suspect the underlying forces are still not clearly understood by anyone, and definitely not by the Fed. It's a twisty recursive issue. There's too much debt, especially mortgage debt, and it just cannot be paid back in the sense of providing more labor than actually exists, which is what has been promised. So the Fed tries to get the debt nominally paid back in the sense of providing free cash, but this just breaks the connection between money and labor, wedging the system further. The debt holders see that they are being cheated out of the labor was promised to them, so they want to demand higher interest rates to compensate for that, but the Fed prevents them from charging higher rates by providing cash at ultra-low rates. So no lender really wants to lend, and most borrowers are already over-indebted, and nothing happens.

7. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

   7   6:57pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (1)   Dislike (1)   Protected   The more I think about it, the more I like it. Republicans will not allow wealth redistribution of any kind, and consumers desperately need cash. Therefore the fed has a method of providing a direct cash subsidy to consumers that mostly bypasses the aristocracy. Of course I will directly benefit so I'm hopelessly biased to the tune of over a million dollars in mortgages, but I do think this is going to be far more useful than QE1 and QE2 in accomplishing stated goals. I would rather Ben printed up checks and sent them to every wage earner, but this is similar although again temporary.

8. Patrick Follow Befriend (54) 5,188 threads 6,157 comments 46 male Menlo Park, CA

   8   7:53pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (3)   Dislike   iwog says Republicans will not allow wealth redistribution of any kind, and consumers desperately need cash. Therefore the fed has a method of providing a direct cash subsidy to consumers that mostly bypasses the aristocracy. Of course I will directly benefit so I'm hopelessly biased to the tune of over a million dollars in mortgages But it's not a direct subsidy to consumers. It's a direct subsidy to banks which are the first to get the newly printed cash. Maybe borrowers then find it easier to get a loan, or get a lower rate, but it puts cash directly into the pockets of the banker aristocracy. No bypass at all. You don't directly benefit either. Maybe you'll get a lower interest rate when you refinance, but maybe not, it's indirect. I've heard that the most effective way to increase the purchasing power of the middle class is unemployment checks. Close to 100% of unemployment checks get spent immediately.

9. mell Follow Befriend (5) 55 threads 1,309 comments Premium

   9   8:13pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (5)   Dislike   Protected   You can check out Schiff's EuroPac funds by their tickers and they actually do pretty well. The criticism came from a prediction to short/abandon the dollar which then temporarily gained value mostly due to the weakening of the Euro. QE3 is crap since the money will continue to trickle up. Bought consumer goods benefit companies but become mostly worthless immediately after purchase, very bad for the consumer. Companies will not go on a hiring binge due to temporarily increased consumer spending as they are carefully monitoring long-term outlook and it doesn't look pretty. QE is actually harming the middle-class and poor way more on the long run than spending cuts. Furthermore it is akin to counterfeiting and should be illegal. Money or value isn't created, credit is, backed by nothing, anybody advocating this criminal nonsense needs their head checked.

10. StillLooking Follow Befriend 27 threads 233 comments Skokie, IL

    10   8:13pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (3)   Dislike   iwog says The more I think about it, the more I like it. Republicans will not allow wealth redistribution of any kind, and consumers desperately need cash. Therefore the fed has a method of providing a direct cash subsidy to consumers that mostly bypasses the aristocracy. Of course I will directly benefit so I'm hopelessly biased to the tune of over a million dollars in mortgages, but I do think this is going to be far more useful than QE1 and QE2 in accomplishing stated goals. I would rather Ben printed up checks and sent them to every wage earner, but this is similar although again temporary. In general the wealthy own the assets and the real estate. So if anything this sends more to the wealthy and steals from the poorest the most.

11. HeadSet Follow Befriend 4 threads 1,477 comments Hampton, VA

    11   8:36pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (3)   Dislike   StillLooking says Therefore the fed has a method of providing a direct cash subsidy to consumers that mostly bypasses the aristocracy. Direct cash subsidy? How? Do you expect wages to go up, or are you refering to an increased ability to borrow against ones home? All the Fed did was cheapen the dollar - thus the shoot up in gold, stocks, and forex. Globalization and high unemployment will keep wages where they are, but the price of food, fuel and most merchandise will increase. To add insult to injury, the Fed is deliberately trying to increase the price of homes to bail out holders of mortgages. The banks and the top 20% who collectively own over 90% of the stocks gain, while savers, pensioners, and wage earners lose. This QE3 is in effect a transfer of wealth from lower and middle class to bail out losses by the wealthy.

12. HeadSet Follow Befriend 4 threads 1,477 comments Hampton, VA

    12   9:18pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (3)   Dislike   Patrick says I've heard that the most effective way to increase the purchasing power of the middle class is unemployment checks. I believe that the most effective way to increase the purchasing power of the middle (and lower) classes would be jobs. That would mean doing politically difficult tasks like finding ways to have Americans pick produce and build iPhones, as opposed to using our global currency status (and debt) to subsidize American consumption of goods produced by what we would consider nearly slave labor. I know what you meant, though - unemployment checks beat buying $40 billion in mortgage paper every month.

13. JodyChunder Follow Befriend (3) 16 threads 1,371 comments Victorville, CA Premium

    13   9:23pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (1)   Dislike   Protected   curious2 says ...would reward debtors at the expense of savers. If you want to print funny money to "stimulate" the economy, at least share it evenly with everyone. That is what I meant by debt jubilee -- in the 21st century model proposed by MMT types, a bailout for consumers would be disseminated to everyone -- debtors and savers alike. The stipulation being that the debtors would have to use their bailout to pay down any debt they carried at the time, whereas savers could keep/spend/invest their money. A win-win.

14. JodyChunder Follow Befriend (3) 16 threads 1,371 comments Victorville, CA Premium

    14   9:28pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (4)   Dislike   Protected   StillLooking says n general the wealthy own the assets and the real estate. So if anything this sends more to the wealthy and steals from the poorest the most. It is absolutely a handout to the oligarchy.

15. Homeboy Follow Befriend 13 threads 1,483 comments

    15   9:51pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (1)   Dislike   iwog says It's not a bad solution actually. You must be high.

16. Nobody Follow Befriend 10 threads 274 comments San Jose, CA

    16   10:18pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (2)   Dislike   More money for rich.

17. Dan8267 Follow Befriend (16) 763 threads 7,702 comments Boca Raton, FL Premium

    17   10:22pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (1)   Dislike   Protected   Patrick says The Fed goes all-in on QE

18. BoomAndBustCycle Follow Befriend 28 threads 351 comments

    18   10:31pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (1)   Dislike   I just bought some GLD recently... This isn't going to end pretty in the long run. I'm not very diversified... I'm probably 95% in Apple and 5% in gold currently.. oh and i recently bought a house.... So far the Apple stock investment has been genius... House is actually up since purchase or flat at worst... But, not sure when to get off that train. don't trust many other companies. I love Amazon and everyone uses Facebook.. but i hate the ridiculously high PE's on those stocks. Atleast Apple is fairly priced... Starting to hedge though and plan to add to my gold position steadily

19. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

    19   11:19pm Sat 15 Sep 2012   Share   Quote   Permalink   Like   Dislike   Protected   Patrick says But it's not a direct subsidy to consumers. It's a direct subsidy to banks which are the first to get the newly printed cash. It might seem that way, but it's not. What will happen is similar to the fraudulent bonds sales of 2005 and 2006 however with tighter lending standards. We have a buyer of mortgage bonds with infinitely deep pockets. What will happen is that lending companies will spring up like mushrooms and take the cheap fed money and lend it at lower and lower rates as they trip over each other trying to refinance everyone's mortgage. They will actually hurt the bottom line for major banks in two ways. One by taking away loans, and two by refinancing existing higher interest loans, which banks now hold in their investment portfolios, to lower rates.

20. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

    20   11:21pm Sat 15 Sep 2012   Share   Quote   Permalink   Like (1)   Dislike   Protected   StillLooking says In general the wealthy own the assets and the real estate. So if anything this sends more to the wealthy and steals from the poorest the most. The top 1% are not big investors in residential real estate, although that might be changing. Individuals are currently limited to a maximum of 10 mortgage loans that have any connection to public or pseudo-public funding or guarantees. I'm not going to argue that this helps the working poor, in fact it will probably raise rents, however it will certainly help the middle class.

21. curious2 Follow Befriend (5) 31 threads 2,239 comments Premium

    21   1:02am Sun 16 Sep 2012   Share   Quote   Permalink   Like (3)   Dislike   Protected   JodyChunder says That is what I meant by debt jubilee -- in the 21st century model proposed by MMT types, a bailout for consumers would be disseminated to everyone -- debtors and savers alike. The stipulation being that the debtors would have to use their bailout to pay down any debt they carried at the time, whereas savers could keep/spend/invest their money. A win-win Thanks for clarifying that. I have a particular peeve with the divide and misrule policies that seem all too common. Even in this thread, one post says give $ to wage earners, another says give $ to people who have recently lost their jobs, and of course the Fed gives $$$ to bankers. Ultimately we are all subject to both the laws and the debts of this country, and the consequences of any government policy. So, if "stimulus" $ is to be printed, I think it should be distributed as evenly as possible. Decades ago some Democrats and some Republicans (including Nixon IIRC) proposed a national minimum income. The idea was, it would be cheaper than the current bloated budgets of "social service" agencies (sometimes called "the homeless industrial complex," because they can make $500k/yr off each homeless person, as long as they keep that person homeless). If $ is given directly to people, with the caveat that debtors must first use it to pay off their debts before incurring new ones, it might do more good than much of what we spend $ on currently, and it would do a lot more good than QE/TARP.

22. JodyChunder Follow Befriend (3) 16 threads 1,371 comments Victorville, CA Premium

    22   4:10am Sun 16 Sep 2012   Share   Quote   Permalink   Like   Dislike   Protected   curious2 says So, if "stimulus" $ is to be printed, I think it should be distributed as evenly as possible. Agreed -- payments would need to be metered and adjusted according to incomes (and capital gains!) -- but yes, the wealthy or top 1% would have to get a chunk of the bailout too, if for no other reason than to squelch any fantasies of them 'carrying' the unwashed .

23. JodyChunder Follow Befriend (3) 16 threads 1,371 comments Victorville, CA Premium

    23   4:16am Sun 16 Sep 2012   Share   Quote   Permalink   Like (1)   Dislike   Protected   Helloeeze says I think Peter Schiff has been wrong in most of what he says, but he was right once about the economy crashing once back in 2008. Still, he speaks with such passion and clarity what he says almost makes sense (at least some of it). The fact he has a book coming out says a lot about his motives. One thing I agree with is this manipulation of interest rates to raise prices for homes makes me NOT want to buy a home. What happens when the interest rates go up? That's when you find out you were in a contrived false real estate bubble. That is scary. Peter might be an unmitigated turkey, but I took nothing much amiss with anything he said in that video. A lot of it was just common sense. Hell, I was finishing his sentences. The idea of blowing another bubble to create wealth effect is not only the wrong move, it is the least imaginative of any of the wrong moves at his disposal. Honestly, randomly drop shipping palettes of cash around the nation would be better than this.

24. Patrick Follow Befriend (54) 5,188 threads 6,157 comments 46 male Menlo Park, CA

    24   11:39am Sun 16 Sep 2012   Share   Quote   Permalink   Like (2)   Dislike   iwog says It might seem that way, but it's not. What will happen is similar to the fraudulent bonds sales of 2005 and 2006 however with tighter lending standards. We have a buyer of mortgage bonds with infinitely deep pockets. What will happen is that lending companies will spring up like mushrooms and take the cheap fed money and lend it at lower and lower rates as they trip over each other trying to refinance everyone's mortgage. They will actually hurt the bottom line for major banks in two ways. One by taking away loans, and two by refinancing existing higher interest loans, which banks now hold in their investment portfolios, to lower rates. When I worked at Wells Fargo for a year, someone explained to me that a little-known but powerful way that the Fed influences lending is via its control over lending standards. Apparently the Fed can choose to examine banks' lending closely, or not. If they're not looking closely, that's a tacit signal that it's OK to make crap loans. Not sure how to measure this, but it's important, maybe more important than interest rates. Has the Fed agreed that it's open season on idiot borrowers again? I don't see how the Fed's buying mortgage backed bonds is going to take away loans from banks. Also, refinancing does not necessarily hurt banks. They get the refi fees, and they perhaps get the same spread on the new loan, since they can borrow at lower rates as well as lend at lower rates. The spread is what counts. And don't forget pre-payment penalties. That's exactly what they are for -- to discourage refinancing in cases where the bank might lose.

25. FortWayne Follow Befriend (13) 102 threads 3,763 comments

    25   11:48am Sun 16 Sep 2012   Share   Quote   Permalink   Like   Dislike   iwog says Yup, it will blow up like any other bubble, but we'll get a nice ride out of it while it's happening and it might take a decade to resolve. It's not a bad solution actually. How do you figure that?

26. 37108605 Follow Befriend 1 threads 1,055 comments

    26   12:19pm Sun 16 Sep 2012   Share   Quote   Permalink   Like   Dislike   iwog says The more I think about it, the more I like it. Republicans will not allow wealth redistribution of any kind, and consumers desperately need cash. Therefore the fed has a method of providing a direct cash subsidy to consumers that mostly bypasses the aristocracy. Of course I will directly benefit so I'm hopelessly biased to the tune of over a million dollars in mortgages, but I do think this is going to be far more useful than QE1 and QE2 in accomplishing stated goals. I would rather Ben printed up checks and sent them to every wage earner, but this is similar although again temporary. Aristocracy? Please, let's not go off into the bizarre.

27. 37108605 Follow Befriend 1 threads 1,055 comments

    27   12:21pm Sun 16 Sep 2012   Share   Quote   Permalink   Like   Dislike   Patrick says Has the Fed agreed that it's open season on idiot borrowers again? I don't see how the Fed's buying mortgage backed bonds is going to take away loans from banks. Agreed 1000%

28. 37108605 Follow Befriend 1 threads 1,055 comments

    28   12:22pm Sun 16 Sep 2012   Share   Quote   Permalink   Like   Dislike   StillLooking says In general the wealthy own the assets and the real estate. You would be surprised to know what the TRULY wealthy really own, tons of real estate isn't it. Don't let media play with your head there is old money and there is new money then there are greedy whores. Three different groups.

29. tatupu70 Follow Befriend (3) 15 threads 5,627 comments

    29   1:16pm Sun 16 Sep 2012   Share   Quote   Permalink   Like   Dislike   Patrick says When I worked at Wells Fargo for a year, someone explained to me that a little-known but powerful way that the Fed influences lending is via its control over lending standards. Apparently the Fed can choose to examine banks' lending closely, or not. If they're not looking closely, that's a tacit signal that it's OK to make crap loans. Not sure how to measure this, but it's important, maybe more important than interest rates. Has the Fed agreed that it's open season on idiot borrowers again? I'm not sure I understand what your friend is saying. Making crap loans is bad business for Wells Fargo. Why would they do it even absent any Fed watching?

30. Patrick Follow Befriend (54) 5,188 threads 6,157 comments 46 male Menlo Park, CA

    30   1:32pm Sun 16 Sep 2012   Share   Quote   Permalink   Like (2)   Dislike   tatupu70 says I'm not sure I understand what your friend is saying. Making crap loans is bad business for Wells Fargo. Why would they do it even absent any Fed watching? Making crap loans is wonderful business for Wells Fargo if Wells can then turn around and dump the loan on someone else. Now let's see, who has infinite money and seems to be publicly saying it will buy vast quantities of crap loans? Ah, the Federal Reserve fits that bill.

31. tatupu70 Follow Befriend (3) 15 threads 5,627 comments

    31   1:41pm Sun 16 Sep 2012   Share   Quote   Permalink   Like   Dislike   Patrick says Making crap loans is wonderful business for Wells Fargo if Wells can then turn around and dump the loan on someone else. Now let's see, who has infinite money and seems to be publicly saying it will buy vast quantities of crap loans? Ah, the Federal Reserve fits that bill. OK--that's a bit different than what you said earlier, and to be honest, I have a hard time believing it. You're implying that the FED is tacitly instructing banks to make poor loans and then is buying them? I'm not saying it's impossible, but just doesn't seem likely to me..

32. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

    32   10:18pm Sun 16 Sep 2012   Share   Quote   Permalink   Like   Dislike   Protected   Patrick says Making crap loans is wonderful business for Wells Fargo if Wells can then turn around and dump the loan on someone else. Now let's see, who has infinite money and seems to be publicly saying it will buy vast quantities of crap loans? Ah, the Federal Reserve fits that bill. I think sub-prime and liar loans are gone for good. It's inconceivable to me that the banks would tempt fate on this a second time in less than 10 years. Oh they will find another way to bring down the economy, but not this particular method and I think Bernanke is going to be very careful too.

33. freak80 Follow Befriend (4) 52 threads 4,416 comments Corning, NY Premium

    33   7:00am Mon 17 Sep 2012   Share   Quote   Permalink   Like (4)   Dislike   Protected   iwog says It's inconceivable to me that the banks would tempt fate on this a second time in less than 10 years. Whoa whoa whoa....are you suggesting the American public has the ability to remember recent history?

34. TMAC54 Follow Befriend (9) 70 threads 930 comments San Leandro, CA

    34   9:04pm Wed 19 Sep 2012   Share   Quote   Permalink   Like   Dislike   Helloeeze says One thing I agree with is this manipulation of interest rates to raise prices for homes makes me NOT want to buy a home. What happens when the interest rates go up? That's when you find out you were in a contrived false real estate bubble. That is scary. Raising Real Property prices has got nothing to do with interest rates. He wants to soften the landing. While the markets were inventing new products & peripherals for the new I.T. industry, housing was appreciating SO fast the term FLIP evolved. Never before & probably never again will "Short term house flipping" be enjoyed by so many. BENBEN seems to have his head up his ass only because there is NO other mitigation in the forseeable future. WHAT DO YOU GET when you flip a house ? A house that's upside down !

35. freak80 Follow Befriend (4) 52 threads 4,416 comments Corning, NY Premium

    35   7:02am Thu 20 Sep 2012   Share   Quote   Permalink   Like   Dislike   Protected   At first I thought that pic was tsunami damage...