Found this - a simplified version of the explanation of the QE2. Quite comical.
http://www.youtube.com/watch?v=PTUY16CkS-k
Cheers !
PersianCat (Meoooowwwww!)
Sunday, November 21, 2010
Monday, November 08, 2010
9 Reasons Why Quantitative Easing Is Bad For The U.S. Economy
(extracted from thetradingreport.com)
The Fed says that the plan is to purchase $600 billion of U.S. Treasury securities by the middle of 2011. In addition, the Federal Reserve has announced that it will be “reinvesting” an additional $250 billion to $300 billion from the proceeds of its mortgage portfolio in U.S. Treasury securities over the same time period.
#1 Quantitative Easing Will Damage The Value Of The U.S. Dollar
Each time you add a new dollar to the system, it decreases the value of each existing dollar by just a little bit. Now the Federal Reserve is pumping 900 billion dollars into the system and that is going to have a significant impact. Bill Gross, the manager of the largest mutual fund in the entire world, said on Monday that he believes that more quantitative easing could result in a decline of the U.S. dollar of up to 20 percent….
Already, investors have been fleeing from the U.S. dollar and other paper currencies and have been flocking to commodities, precious metals and oil. That means that the price of food is going to go up. The price of gasoline is also going to go up. American families are going to find their budgets stretched even more in the months ahead.
#3 Once An Inflationary Spiral Gets Going It Is Really Hard To Stop
The Federal Reserve is playing a very dangerous game by flirting with inflation. Once an inflationary spiral gets going, it is really difficult to stop. Just ask anyone who lived through the Weimar Republic or anyone who lives in Zimbabwe today. If the Federal Reserve is now going to be dumping hundreds of billions of fresh dollars into the system whenever the economy gets into trouble it is inevitable that we will see rampant inflation at some point.
#4 Inflation Is A Hidden Tax On Every American
Tens of millions of Americans have worked incredibly hard to save up a little bit of money. These Americans are counting on that money to pay for a home, or to pay for retirement or to pay for the education of their children. Well, inflation is like a hidden tax on all of those savings. In fact, inflation is a hidden tax on every single dollar that all of us own. We have been taxed more than enough – we certainly don’t need the Federal Reserve imposing another hidden tax on all of us.
#5 The Solution To The Housing Bubble Is Not Another Housing Bubble
Today, approximately a third of all U.S. real estate is estimated to have negative equity. The Federal Reserve apparently believes that by flooding the system with gigantic sacks of cash banks will start making home loans like crazy again and home prices will rise substantially once again – thus wiping out most of that negative equity.
But the solution to the housing bubble is not another housing bubble. The kinds of crazy home loans that were made back in the middle of the decade should never be made again. Market forces should be allowed to bring the housing market to a new equilibrium where ordinary Americans can actually afford to purchase homes. But that is not how our system works anymore. Today, everything has to be manipulated.
#6 More Quantitative Easing Threatens To Destabilize The Global Financial System
We have already entered a time of increasing global financial instability, and the Federal Reserve is not going to help things by introducing hundreds of billions of new dollars into the game. Over the past two decades, bubble after bubble has caused tremendous economic problems, and now all of this new money could give rise to new bubbles. Already, we see financial institutions and investors pumping up carry trade bubbles, engaging in currency speculation and driving up commodity prices to ridiculous levels.
#7 Quantitative Easing Is An Aggressive Move In A World Already On The Verge Of A Currency War
Quantitative easing will likely help U.S. exporters by causing the value of the U.S. dollar to sink. However, this gain by U.S. exporters will come at the expense of foreigners. It is essentially a “zero sum” game. So all of those exporting countries that are already upset with us will become even more furious as the U.S. dollar declines. Could we witness the first all-out “global currency war” in 2011?
#8 Quantitative Easing Threatens The Status Of The Dollar As The World Reserve Currency
As the Federal Reserve continues to play games with the U.S. dollar, quite a few nations around the globe will start evaluating whether or not they want to continue to trade with the U.S. dollar and use it as a reserve currency.
#9 It Is Going To Become More Expensive For The U.S. Government To Borrow Money
Right now, the U.S. government has been able to borrow money at ridiculously low interest rates. But as the Federal Reserve keeps buying up hundreds of billions in U.S. Treasuries, the rest of the world is going to start refusing to participate in the ongoing Ponzi scheme.
Peter Schiff, the CEO of Euro Pacific Capital, says that one of the big reasons for more quantitative easing is because the U.S. government is already starting to have difficulty finding enough people to borrow from….
Most Americans have absolutely no idea how fragile the world financial system is right now. Once the rest of the world loses faith in the U.S. dollar and in U.S. Treasuries this entire thing could completely unravel very quickly.
The Federal Reserve is playing a very dangerous game. They are openly threatening the delicate balance of the world financial system. Once the toothpaste is out of the tube, it is really hard to put it back in again. Cross your fingers and hold on tight, because things are going to get really bumpy ahead.
The Fed says that the plan is to purchase $600 billion of U.S. Treasury securities by the middle of 2011. In addition, the Federal Reserve has announced that it will be “reinvesting” an additional $250 billion to $300 billion from the proceeds of its mortgage portfolio in U.S. Treasury securities over the same time period.
#1 Quantitative Easing Will Damage The Value Of The U.S. Dollar
Each time you add a new dollar to the system, it decreases the value of each existing dollar by just a little bit. Now the Federal Reserve is pumping 900 billion dollars into the system and that is going to have a significant impact. Bill Gross, the manager of the largest mutual fund in the entire world, said on Monday that he believes that more quantitative easing could result in a decline of the U.S. dollar of up to 20 percent….
#2 Inflation Is Going To Hit Already Struggling U.S. Consumers Really Hard
Already, investors have been fleeing from the U.S. dollar and other paper currencies and have been flocking to commodities, precious metals and oil. That means that the price of food is going to go up. The price of gasoline is also going to go up. American families are going to find their budgets stretched even more in the months ahead.
#3 Once An Inflationary Spiral Gets Going It Is Really Hard To Stop
The Federal Reserve is playing a very dangerous game by flirting with inflation. Once an inflationary spiral gets going, it is really difficult to stop. Just ask anyone who lived through the Weimar Republic or anyone who lives in Zimbabwe today. If the Federal Reserve is now going to be dumping hundreds of billions of fresh dollars into the system whenever the economy gets into trouble it is inevitable that we will see rampant inflation at some point.
#4 Inflation Is A Hidden Tax On Every American
Tens of millions of Americans have worked incredibly hard to save up a little bit of money. These Americans are counting on that money to pay for a home, or to pay for retirement or to pay for the education of their children. Well, inflation is like a hidden tax on all of those savings. In fact, inflation is a hidden tax on every single dollar that all of us own. We have been taxed more than enough – we certainly don’t need the Federal Reserve imposing another hidden tax on all of us.
#5 The Solution To The Housing Bubble Is Not Another Housing Bubble
Today, approximately a third of all U.S. real estate is estimated to have negative equity. The Federal Reserve apparently believes that by flooding the system with gigantic sacks of cash banks will start making home loans like crazy again and home prices will rise substantially once again – thus wiping out most of that negative equity.
But the solution to the housing bubble is not another housing bubble. The kinds of crazy home loans that were made back in the middle of the decade should never be made again. Market forces should be allowed to bring the housing market to a new equilibrium where ordinary Americans can actually afford to purchase homes. But that is not how our system works anymore. Today, everything has to be manipulated.
#6 More Quantitative Easing Threatens To Destabilize The Global Financial System
We have already entered a time of increasing global financial instability, and the Federal Reserve is not going to help things by introducing hundreds of billions of new dollars into the game. Over the past two decades, bubble after bubble has caused tremendous economic problems, and now all of this new money could give rise to new bubbles. Already, we see financial institutions and investors pumping up carry trade bubbles, engaging in currency speculation and driving up commodity prices to ridiculous levels.
#7 Quantitative Easing Is An Aggressive Move In A World Already On The Verge Of A Currency War
Quantitative easing will likely help U.S. exporters by causing the value of the U.S. dollar to sink. However, this gain by U.S. exporters will come at the expense of foreigners. It is essentially a “zero sum” game. So all of those exporting countries that are already upset with us will become even more furious as the U.S. dollar declines. Could we witness the first all-out “global currency war” in 2011?
#8 Quantitative Easing Threatens The Status Of The Dollar As The World Reserve Currency
As the Federal Reserve continues to play games with the U.S. dollar, quite a few nations around the globe will start evaluating whether or not they want to continue to trade with the U.S. dollar and use it as a reserve currency.
#9 It Is Going To Become More Expensive For The U.S. Government To Borrow Money
Right now, the U.S. government has been able to borrow money at ridiculously low interest rates. But as the Federal Reserve keeps buying up hundreds of billions in U.S. Treasuries, the rest of the world is going to start refusing to participate in the ongoing Ponzi scheme.
Peter Schiff, the CEO of Euro Pacific Capital, says that one of the big reasons for more quantitative easing is because the U.S. government is already starting to have difficulty finding enough people to borrow from….
At the end of the day, all this deflation talk is a red herring. The true purpose of QE 2 is to disguise the decreasing ability of the Treasury to finance its debts. As global demand for dollar-denominated debt falls, the Fed is looking for an excuse to pick up the slack. By announcing QE 2, it can monetize government debt without the markets perceiving a funding problem.But the truth is that foreigners are not stupid. They can see the shell game that is being played. As Bill Gross noted on Monday, U.S. government debt will soon become a lot less attractive to foreign investors….
QEII not only produces more dollars but it also lowers the yield that investors earn on them and makes foreigners, which is the key link to the currencies, it makes foreigners less willing to hold dollars in current form or at current prices.As foreigners begin to balk at all of this nonsense, the U.S. government will either have to start paying higher interest rates on government debt in order to attract enough investors, or the Federal Reserve will just have to drop all pretense and permanently start buying up most of the debt. Either way, once faith has been lost in U.S. Treasuries the financial world will never, ever be the same.
Most Americans have absolutely no idea how fragile the world financial system is right now. Once the rest of the world loses faith in the U.S. dollar and in U.S. Treasuries this entire thing could completely unravel very quickly.
The Federal Reserve is playing a very dangerous game. They are openly threatening the delicate balance of the world financial system. Once the toothpaste is out of the tube, it is really hard to put it back in again. Cross your fingers and hold on tight, because things are going to get really bumpy ahead.
Wednesday, November 03, 2010
3 scenarios after the Fed Decision today
What's QE2? It is not Queen Elizabeth the 2nd. It did remind me of a cruise liner called the QE2.
The U.S. Federal Reserve will be making an announcement of its meeting today at 2:15pm EST. QE2 or the 2nd round of printing more money had been priced in by the various markets such as stocks and forex.
The stock market major indices such as Dow Jones 30, S&P 500 and Nasdaq Composite, had been hovering at or near the 2010 April Highs (a strong resistance level).
In the forex market, the U.S. currency had been weaken against most of the currencies such as European dollars, British pound and Australian dollars.
In brief, the following scenarios could happen today:
1. The Fed will say nothing new and continue delivering the message that if they see the economy weaken they will step in with quantitative easing (i.e. printing more money). Then it is likely that the U.S. stock market will drop significantly. The U.S. dollar could possibly significantly strengthen against the Euros, pound and Australian dollars.
2. The Fed does take action and announces QE2 but less than the expected plan where the Fed will buy about $100 billion in Treasuries a month, possibly for the next 12 months. Then it is likely that the U.S. stock market will drop significantly (may be not as drastic as the above scenario). The U.S. dollar could possibly significantly strengthen against the Euros, pound and Australian dollars.
3. The Fed takes action and comes in line with what Wall Street is expecting or maybe even more. The outcome is trickier as the market could either rally or sell off. It could rally because of the size and scope of $100 billion a month is so inflationary, everyone will want to put their money into stocks and commodities. We could see a market sell-off as the market had "bought the rumour and is now selling the news". It is then likely that the market is extremely volatile for the 1st half hour after the Fed announcement. The forex market could react the same way.
It would be a very interesting night.
Cheers !
PersianCat (Meow!!!)
The U.S. Federal Reserve will be making an announcement of its meeting today at 2:15pm EST. QE2 or the 2nd round of printing more money had been priced in by the various markets such as stocks and forex.
The stock market major indices such as Dow Jones 30, S&P 500 and Nasdaq Composite, had been hovering at or near the 2010 April Highs (a strong resistance level).
In the forex market, the U.S. currency had been weaken against most of the currencies such as European dollars, British pound and Australian dollars.
In brief, the following scenarios could happen today:
1. The Fed will say nothing new and continue delivering the message that if they see the economy weaken they will step in with quantitative easing (i.e. printing more money). Then it is likely that the U.S. stock market will drop significantly. The U.S. dollar could possibly significantly strengthen against the Euros, pound and Australian dollars.
2. The Fed does take action and announces QE2 but less than the expected plan where the Fed will buy about $100 billion in Treasuries a month, possibly for the next 12 months. Then it is likely that the U.S. stock market will drop significantly (may be not as drastic as the above scenario). The U.S. dollar could possibly significantly strengthen against the Euros, pound and Australian dollars.
3. The Fed takes action and comes in line with what Wall Street is expecting or maybe even more. The outcome is trickier as the market could either rally or sell off. It could rally because of the size and scope of $100 billion a month is so inflationary, everyone will want to put their money into stocks and commodities. We could see a market sell-off as the market had "bought the rumour and is now selling the news". It is then likely that the market is extremely volatile for the 1st half hour after the Fed announcement. The forex market could react the same way.
It would be a very interesting night.
Cheers !
PersianCat (Meow!!!)
U.S. Mid-term election results
In brief (as at Wednesday, 3am EST or 3pm SG time):
Cheers !
PersianCat (Meow!!!)
- House (Republican majority)
- Democrats 180 (before 256)
- Republicans 233 (before 179)
- Senate (Democrats majority)
- Democrats 49 (before 57)
- Republicans 46 (before 41)
- Governor
- Democrats 15 (before 26)
- Republicans 27 (before 24)
Cheers !
PersianCat (Meow!!!)
