do you think the FED will do QE3 sometime this year?

I'll believe it when I see it.

 

Log in or Sign up to hide this ad.

Indeed. The notion is pure nonsense. If a government could simple "wish" down interest rates then loans would be free for everyone. The idea was rooted in a vast misunderstanding of the role of government, currency and that of the Federal Reserve and why it's really there.

 

The best solution, of course, would have been to never get into this situation. But it's too late for that and there is probably no good way out of the present situation. The derivatives are a problem. But the zero interest rates might turn out to be more of a problem even if it takes longer to develop. Eventually, a zero interest rate will destroy much of the accumulated capital in the US. A lot of damage has already been done. My personal opinion is that there will be a debt default at some point, although they won't call it that. It might start with the cancellation of the Treasury securities held by the Social Security administration. Jon Stewart jokingly suggested that we get rid of our debt to China by giving them Idaho. It seems that much higher tax rates and a much smaller military will be necessary regardless of political philosophy or even need. The America we grew up in isn't coming back.

 

I'm just going by history. In nations where irresponsible government spending has led to economic collapse, things didn't go well for the ruling class [e.g., Imperial Russia and France]. The US political class knows thsi history well, and when push comes to shove they will vote for their own survival over their political philosophy.

 

When was the last time the USA voted not to spend money because interest rates were too high? Imagine if FDR had said after Pearl Harbor "Oh we can't go to war because the banksters will charge us too much money". Haha.

 

And you will recall that tax rates were much higher in the 1950s and 60s than they are now to fund the debt. I'm suggesting that this will probably be necessary again regardless of what politicians say about the tax issue. I'm also suggesting that if they continue to spend beyond the means to fund the debt after taxes are raised to the max [whatever that may turn out to be], they will choose to lessen spending rather than face the consequences of economic ruin.

 

^You didn't answer the question and are now avoiding it. You gave a reason why rates were being held low which was simply wrong. Only someone who doesn't understand how the system works, which I said above, would make such a statement.

 

Another "nobody is smarter than fatima" moment....

I understand the system. The direct answer to your question is that I can't think of any time the US government failed to spend money because interest rates were too high. But I also can't say it didn't happen since I wasn't in every budget meeting since the founding of the Republic. What I am suggesting is that such a moment might be reached in the future even if it was not in the past. It's happened to other nations and it would be the height of folly to imagine that the US is completely immune. Nobody knows the future, not even you, fatima, so everyone is free to examine whatever economic scenario they might think is probable and invest with that outcome in mind.

 

We are talking about the US currency system under the Federal Reserve so you don't need to worry about the century plus that existed before that. Anyone who says such a thing continues to prove they don't understand our system today. It simply doesn't work as it did under the gold standard. Most people know this.

Since you made a direct claim that governments can "will" down interest rates just so they can borrow lots of money, but you have no examples or proof that it has ever happened in the USA, then your contention at best was your opinion not based in any fact. As I said, you have no idea how it works as any theory on interest rates should be very easy to test in practice. Yet you can't think of any at all for yours. It speaks for itself and calling me names doesn't change this.

I recommend doing a little reading on the subject.

 

Listen to yourselves in here, should be ashamed of yourselves cloudsweeper and fatima. Everyone is so busy trying to argue over the system, we as Americans have lost sight of what it means to be wealthy. Since when did money start making some people more valuable? Since when has it been acceptable to be enamored by reality shows that are totally fake? Since when is it acceptable for our children to listen to rap stars that promote nothing but drugs and violence? Since when has it been acceptable to destroy our planet and its inhabitants for the sake of profit and greed? You live free, you have access to clean water and healthy food. The amount of money the government is printing is of no concern to me because if you can grow and raise food and have fresh water what else is really necessary. The quality of your life will be determined by your connection with your family and friends. The earth will give you all that you need to survive. Cloudsweeper and fatima should just agree that they have different perceptions of the system and stop trying to be right because in the end you both are wrong.

:dead-horse:

 

Another "nobody is smarter than fatima" moment...

Think of it this way. The Fed effectively put a floor under Treasury securities [or a ceiling on interest rates, whichever you prefer] with their QE efforts. The market can take whatever portion they wish at the rate supported by the Fed. If the Fed wasn't in the market, interest rates would rise to the point needed to absorb all of the securities offered, but the Fed intervention is preventing this through their purchasing of securities. Now, if you believe this is some sort of magic or act of "will" by the government to keep interest rates low, then you don't know nearly as much as you pretend. And if you think the Fed is doing this without coordinating with the Treasury Dept., then you are naive. No matter what goes on in fatima's imaginary world, this is how monetary policy is opertating in the 21st century. I don't know if this is budget related or not budget related, and neither do you since you have offered no evidence beyond your opinion.

 

You may consider that it is your who are wrong also. I have no problem with wealth, and I don't believe it makes people "better." But concentrations of wealth throughout history have generally ended badly for the majority of people. I don't watch reality shows or listen to rap. It would be wrong for you to says so, and a bit judgmental of you to look down on those who enjoy it or impose your values on them. I do not destroy the planet or any of its inhabitants, and I don't believe fatima does either. While you live relatively free, you can't fly without being scanned or groped, or travel very far without a passport. You can drink clean water, but it probably contains chlorine or comes in a plastic bottle contaminated with Bisphenol A. You may be the exception, but not everyone can grow 100% of their own food and are required to buy at least some GMO products or processed food. So you might want to get down from your high horse and stop criticizing others.

 

First you said:

Then you said

So not only do you contradict yourself, by your own definition, you are naive. (I'm only using your standard.) I recommended to you earlier to go and do some reading on QE so you don't keep digging a deeper hole for yourself. You absolutely don't know how it works and the reason for it, else you would not make these mistakes.

 

Celebrating ignorance is not an attractive trait. Money printing would be a concern for you if you were a student of history and understood how a monetary death spiral will likely affect an economy that depends too much on specialization and energy (for transportation). Please don't ask the government to help should the supermarkets and gas stations run bare (or unaffordable).

 

The statements are congruent. I know you don't understand this, and I have no desire to teach someone unwilling to learn. "Nobody is smarter than fatima." I also know that it tears you up inside when something happens here to suggest there are explanations other than yours for what is going on. There are many people like you floating around internet chat rooms who have read a few blogs about how the federal reserve system really works, and you enjoy believing that you know some deep secret that other poeple don't understand, but your internet economics doesn't cut it, and the posts above prove it.

 

What about those negative yield bonds the super committee was talking about. I think this house with floors and ceilings is made of glass.

 

This is precisely what im saying because if you can not learn to rely on your self to meet your needs, then who are you going to turn to in a crisis. The Government? i think not. More people should be worried about the depletion of our natural resources than how much money we are printing because in the end i would rather be holding sustainable water and food when things go down hill. Im not celebrating ignorance im simply suggesting there is another way of living.

 

I was referring to America as a whole i never suggested your taste in television and music. Although you are right because i cannot fly without being scanned and groped. I am not on any horse of any kind, i was just simply suggesting that there are other ways of living life.

 

It might turn out that way in the long run if the federal government insists on perpetual annual deficits of $1T or more.

 

Apologies... I misunderstood the context of your earlier post. Unfortunately, the vast majority of the population here will not see the self-sufficiency light in time and when they get desperate, it is going to impact you, me and anyone who tried to secure access to basic resources.