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It is what Bob Higgs calls regime uncertainty.
Along with that the seed corn keeps getting et.
But paradoxically splain the ISM report?
Me wonders if we is seeing some of that on shoring we keep hearing about?
This person from the Fed believes that the problem is that the average consumer is hoarding money? What money? Are they really that out of touch with what is happening on the ground?
People (those who can) are hoarding money because, with interest rates at 0, people are forced to save more for retirement and and save more to buy more expensive houses.
Deflationists on this board should wonder what will happen when $4Trillions start circulating in the economy and being multiplied by banks.
Printing money is painless when it is hoarded. Controlling it when it starts being spent is what hurts.
How can people be "hoarding money" when so many people are so far into debt?
Deflationists on this board should wonder what will happen when $4Trillions start circulating in the economy and being multiplied by banks.
There are deflationary pressures as well, i.e. look at Japan
There are deflationary pressures as well, i.e. look at Japan
There are large deflationary pressures right now. Hence the printing.
And we probably have time for one more bubble bust and deflationary contraction.
But all this doesn't mean money will get accumulated forever.
How can people be "hoarding money" when so many people are so far into debt?
Many people in debt means other people have the cash. Some have both.
People (those who can) are hoarding money because, with interest rates at 0, people are forced to save more for retirement and and save more to buy more expensive houses.
Deflationists on this board should wonder what will happen when $4Trillions start circulating in the economy and being multiplied by banks.
Printing money is painless when it is hoarded. Controlling it when it starts being spent is what hurts.
Factor in the dollars held by foreign sovereigns who may scale back their holdings as they will need them less as countries begin to accept currencies other than dollars.
These dollars will either be spent or their T-bonds sold putting pressure on the value of the dollar and raising the price of imports to the US
Factor in the dollars held by foreign sovereigns who may scale back their holdings
You worry too much about this. China doesn't it's currency to appreciate so it keeps its dollars. You think money matters. China doesn't. China thinks having a working economy is more important. At the end of the day money is just paper. The economy is the life of the nation.
You worry too much about this. China doesn't it's currency to appreciate so it keeps its dollars. You think money matters. China doesn't
Not thinking about China- China has no interest in dumping its dollars -it has too many of them. Don't disagree that the economy of china is more important to it than "money"
I am thinking about countries that hold dollars for the purpose of doing international trade. If they don't need as many dollars they will sell them, no drama, just makes economic sense to trim their dollar holding.
Russia, however will dump its treasuries as a counter to economic sanctions. This won't be an ongoing problem, the ongoing decline in dollar demand internationally will
Huh. So I am less likely to save my money if interest rates were higher and I would be paid more for my savings?
More likely
Huh. So if interest rates were higher houses would be less expensive?
Yes, higher rates drive down home prices because it makes them harder to finance because the interest payment is greater so you can't pay as much for the house
Huh. So I am less likely to save my money if interest rates were higher and I would be paid more for my savings?
Huh. So if interest rates were higher houses would be less expensive?
Of course. If you compound less interests, it means you need to save more to compensate, right? As a retiree, if you get less interests, it means you need a bigger principal, right?
People who have nothing and forced to spend are not the question.
The question is what about everyone else - who actually has money. Lots of people facing a difficult path to retirement, and facing large mortgages. They need to save everything they can.
Also why aren't people with cash investing it? Because either there is no return or assets are perceived as dangerously inflated.
For every dollar you earn in this country , equal to that is someone looking to SWIPE that dollar from you....do you blame them?
There are large deflationary pressures right now. Hence the printing.
And we probably have time for one more bubble bust and deflationary contraction.
But all this doesn't mean money will get accumulated forever.
Keep it in perspective, there is 12 trillion in money supply, but there is 60 trillion in credit.
Even though the Fed has printed 4 trillion, it is not necessarily a show stopper.
People (those who can) are hoarding money because, with interest rates at 0, people are forced to save more for retirement and and save more to buy more expensive houses.
Deflationists on this board should wonder what will happen when $4Trillions start circulating in the economy and being multiplied by banks.
Printing money is painless when it is hoarded. Controlling it when it starts being spent is what hurts.
Right. But how do you propose that the $4 trillion will get circulated? Wages are flat. Folks have exited the labor force. Many workers are underemployed.
A small fraction of society can be allowed access to the money, but not most folks. Somebody has to help control inflation, after all, and so unemployment, underemployment and crappy wages are an expression of patriotism.
Somebody has to help control inflation, after all, and so unemployment, underemployment and crappy wages are an expression of patriotism.
This is a consequence of devaluing the dollar as well, as imports become more expensive. It forces savings at the consumer level and at the government level. It has to do with the current account, as the dollar is devalued American products become cheaper to foreign countries. Which drives down imports and drives up exports.
If the goal is to circulate money in the economy, cut the hell out of taxes for the lower and middle class.
What will be the catalyst for that 4 trillion to get circulating?
Right. But how do you propose that the $4 trillion will get circulated? Wages are flat. Folks have exited the labor force. Many workers are underemployed.
A small fraction of society can be allowed access to the money, but not most folks. Somebody has to help control inflation, after all, and so unemployment, underemployment and crappy wages are an expression of patriotism.
True.
To some extent all that is needed is that people start spending a bit more. Then inflation takes off and everyone (who has cash) rushes to spend before prices go up, pushing prices even more.
I don't think this would happen. It will take a long time for money to circulate, but it will.
I don't know if I would call it hoarding but yes, I'm not buying a lot of things right now.
The Feds' Keynesian mumbo-jumbo is seriously broken.
They honestly do believe that they can stimulate an economy by bringing forward demand by devaluing savings and using inflation pressure to get people to buy stuff right now.
This can work for a little while, but it's not sustainable, you can't bring demand forward forever, and we've reached the point where ZIRP and QE are no longer working. People are tapped out. No matter how low the interest rate, you're not going to get more credit if you're in debt up to your ears already. There is simply very little creditworthy demand to bring forward anymore. We're in for a crash.
As for inflation, that's a hard thing to predict for a reserve currency. If we were Zimbabwe, we'd probably have a similar monetary trajectory, but we're not. The value of the dollar is driven by supply and demand, like any other commodity. The Fed has certainly increased supply, but international economic problems have also increased demand, since the dollar is still respected worldwide. Losing 97% of its value in a century is a lot better than losing that much in a few years (Argentina, Venezuela, for example).
Whether we have inflation is tied a lot to the trade deficit as well. America is a net importer of stuff, and a net exporter of dollars. People all over the world are taking our paper in exchange for goods. If I ever see the deficit start decreasing, that's when I'll start to worry about inflation, because those dollars are no longer exported and they'll drive prices up at home.
No, money is held, in whatever form, because it's possessed in quantity by less and less of us. Those who have virtually no choice but to spend everything they have are great in number but low in aggregate ownership.
For me, this is true: I save more because what I save earns less. I really want to retire at some point in this life.
I also completely agree that many people don't have the option of saving. I guess I think that both of these can be true.
So what if we have low interest rates if only a small percentage of people can take advantage of them. I don't see how this is helping the majority of folks.
For me, this is true: I save more because what I save earns less. I really want to retire at some point in this life.
This desire to retire sometime is actually what drove the creation of Social Security _after_ the Fed's policy of inflation. Social Security wasn't needed pre-fed, since increasing efficiency drove prices down, and things like housing were priced as shelter, not as investments. Once the evil fuckers at the Jekyll Island meeting which created the Fed started devaluing the dollar, the public saw their future livelihoods in peril, and so, the time was ripe for the government to fix a problem it had created.
I'm so pissed at those political motherfuckers. I'm well past the halfway point of my working life, and I'm seeing it more difficult to provide the basics for my family. Sure, I live in an expensive area, but I drive a 20-year old car that I fix myself because I have no alternative, and as cost of living goes up, I've been unable to save as much as when I was younger and earning less.
This is another thing about official inflation - the numbers are bullshit. My housing costs, food costs, energy costs, and transportation costs have increased a good 5x in the time I've been working. My income has about tripled.
So what if we have low interest rates if only a small percentage of people can take advantage of them. I don't see how this is helping the majority of folks.
It's not supposed to help folks, at least not directly. It helps business, as their cost of capital is lower. In olden times, that would help people as businesses would hire. It would also expand consumer borrowing theoretically as interest rates would be lower. But things are a bit broken now. Companies are borrowing cheaply to buy back stock. Created jobs can be overseas. A lot of consumers are tapped out plus have dodgy credit histories which matters unless you are a company. And cheap money means more Wall Street speculation.
So what if we have low interest rates if only a small percentage of people can take advantage of them. I don't see how this is helping the majority of folks.
It's not supposed to help folks, at least not directly. It helps business, as their cost of capital is lower. In olden times, that would help people as businesses would hire. It would also expand consumer borrowing theoretically as interest rates would be lower. But things are a bit broken now. Companies are borrowing cheaply to buy back stock. Created jobs can be overseas. A lot of consumers are tapped out plus have dodgy credit histories which matters unless you are a company. And cheap money means more Wall Street speculation.
So what is wrong with the following suggestion?
cut the hell out of taxes for the lower and middle class
So what is wrong with the following suggestion?
cut the hell out of taxes for the lower and middle class
Nothing, but the GOP will insist on doing it for the wealthy as well, and that will worsen the deficit. The wealthy have to pony up if tax relief is to come to the lower and middle class, but the wealthy own the GOP, and Tea Party terrifies the GOP, so the deficit will keep the tax cuts from coming until the GOP wins the WH, at which point deficits will once again not matter. But they'll probably do tax reform for businesses instead, trying a new round of trickle down in truer conservative fashion.
Why do you hate the job creators? :>)
As to buying, if, as most do, I need to borrow in order to purchase a house, an increase in borrowing costs makes the house more expensive, not the other way around. I don't see it as driving down the cost of the house, I see it as forcing a different (cheaper, smaller, etc.) house to be bought.
In that scenario, the higher priced homes would come down in price and the smaller homes might increase in price as the demand would shift to them because of the higher interest rates
This can work for a little while, but it's not sustainable, you can't bring demand forward forever, and we've reached the point where ZIRP and QE are no longer working. People are tapped out. No matter how low the interest rate, you're not going to get more credit if you're in debt up to your ears already. There is simply very little creditworthy demand to bring forward anymore. We're in for a crash.
Commercial and Industrial Loans are up:
http://research.stlouisfed.org/fred2/series/CIBOARD?cid=100
Overall bank credit is up:
http://research.stlouisfed.org/fred2/series/TOTBKCR?cid=101
There is a reason the feds are tapering.
There is a reason the feds are tapering.
Because the majority of people are hoarding money?
cut the hell out of taxes for the lower and middle class.
Agree.
No one with income under $100K or assets below $1M should pay taxes.
How can people be "hoarding money" when so many people are so far into debt?
How about Gates, Buffet, etc start spending their hoards first?
cut the hell out of taxes for the lower and middle class.
Agree.
No one with income under $100K or assets below $1M should pay taxes.
I am reasonable, lets just start with 1 year of no income taxes. These people need to have some guts to try something out of the box. It is undeniable that more money would be flowing in the economy as the result.
I am reasonable, lets just start with 1 year of no income taxes.
I'm against income taxes and business taxes of any kind.
I am reasonable, lets just start with 1 year of no income taxes.
I'm against income taxes and business taxes of any kind.
Capital gains, estate, death taxes are a complete joke and a form of robbery.
Capital gains, estate, death taxes are a complete joke and a form of robbery.
Taxing someone with $100K of income and no assets is insane.
Capital gains, estate, death taxes are a complete joke and a form of robbery.
Taxing someone with $100K of income and no assets is insane.
How do these rich law makers look themselves in the mirror?
How do these rich law makers look themselves in the mirror?
They have a servant polish it with a baby seal skin chamois, while serving them caviar from a solid gold platter.
How do these rich law makers look themselves in the mirror?
They have a servant polish it with a baby seal skin chamois, while serving them caviar from a solid gold platter.
Great, I knew it had to be different from how we do it.
The fed is filled with a bunch of morons.
It is obvious that wealth inequality is growing in the U.S.-
http://economix.blogs.nytimes.com/2014/04/02/the-wealth-gap-is-growing-too/?_php=true&_type=blogs&_r=0
That means that the rich are getting even richer. The rich do not need to spend 80% of their paycheck as a middle class family does.
This the fed calls "consumers" are hoarding.
This QE experiment shows that a interventionist monetary policy often causes more harm than good and that the goals of monetary policy are far more elusive than the central planners claim.
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http://finance.yahoo.com/news/fed-us-consumers-decided-hoard-191919676.html
They print $4 trillion give it to the banks and wonder why people aren't spending money they don't have!
#investing