Wednesday, November 3, 2010

U.S. “Quantitative Easing” is Fracturing the Global Economy


 (snippet)
Mr. Wolf cites New York Federal Reserve chairman William C. Dudley to the effect that Quantitative Easing is primarily an attempt to deal with the mortgage crisis that capped a decade of bad loans and financial gambles. Economic recovery, the banker explained on October 1, 2010, “has been delayed because households have been paying down their debt – a process known as deleveraging.” In his view, the U.S. economy cannot recover without a renewed debt leveraging to re-inflate the housing market.
            By the “U.S. economy” and “recovery,” to be sure, Mr. Dudley means his own constituency the banking system, and specifically the largest banks that gambled the most on the real estate bubble of 2003-08. He acknowledges that the bubble “was fueled by products and practices in the financial sector that led to a rapid and unsustainable buildup of leverage and an underpricing of risk during this period,” and that household debt has risen “faster than income growth … since the 1950s.” But this debt explosion was justified by the “surge in home prices [that] pushed up the ratio of household net worth to disposable personal income to nearly 640 percent.” Instead of saving, most Americans borrowed as much as they could to buy property they expected to rise in price. For really the first time in history an entire population sought to get rich by running to debt (to buy real estate, stocks and bonds), not by staying out of it.
            But now that asset prices have plunged, people are left in debt. The problem is, what to do about it. Disagreeing with critics who “argue that the decline in the household debt-to-income ratio must go much further before the deleveraging process can be complete,” or who even urge “that household debt-to-income ratios must fall back to the level of the 1980s,” Mr. Dudley retorts that the economy must inflate its way out of the debt corner into which it has painted itself. “First, low and declining inflation makes it harder to accomplish needed balance sheet adjustments.” In other words, credit (debt) is needed to bid real estate prices back up. A lower rather than higher inflation rate would mean “slower nominal income growth. Slower nominal income growth, in turn, means that less of the needed adjustment in household debt-to-income ratios will come from rising incomes. This puts more of the adjustment burden on paying down debt.” And it is debt deflation that is plaguing the economy, so the problem is how to re-inflate (asset) prices.
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Fed To Buy $600 Billion In U.S. Debt To Cut Rates 


From Jim Sinclair: 

Dear CIGAs,
The real number is not $600 billion in QE but $900 billion when you add present in place programs. This is QE to infinity with the number larger and in the face of massive criticism . It is only logical to assume that after the Fed’s announcement of QE to $900 billion by June 0f 2011 you would see intervention in the US dollar and Gold markets.This is QE to infinity.

4 comments:

  1. Told you so last year

    " to infinity and beyond ! "

    And; unbelievably - they have kept this whole leaking vessel on top of the water thru it all.

    It is giving us a whole new chapter on fiat money and how it can be manipulated.

    Stay tuned

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  2. Yeah, QE that bitch!

    As long as gold and silver become wealth multipliers, it's cool by me.

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  3. Hudson is one of the few sane economic voices around.

    Exporting trillions of dollars worth of of Dud sub prime ,Fannie and Freddie bonds to the rest of the world in recent years has not only destroyed the US economy already ,but the export of dud debt as assets has fractured the world economy in a sea of american debts.
    So huge they can never be repaid.

    The victims are not only the American people but other countries too.

    America and its failed, insolvent, ponzi capitalism has created a worldwide economic crisis for billions of people

    The sheer criminality and extent and scope of the trillions of US financial fraud facilitated by the government, the Fed,SEC,the banksters and the official ratings agencies is astounding the civilized world.

    The “good name” of the American finance sector including the US government and the dollar is being destroyed .

    And that good name the 'credit rating 'and the ability of the US and Americans will not recover for decades at least.

    Legal property titles for millions of Americans houses appear to be non existent or questionable because of tax evasion scams of the banksters in setting up their dud bond scams.

    But nobody important at the center of all this criminality, is bought to account by RICO laws , justice and normal capitalist criminal and commercial law and order is non existent in America after a financial coup by the banksters to capture the revenues of the US treasury itself.

    The US government as bi-partisan partners in crime not only bails out the racketeering criminals as their Ponzis collapse in turn .
    But to add insult to injury for the US people , the same the US banksters are being handed billions of dollars in fresh , newly minted ,interest free money from the fed ,so that they can buy up other countries assets cheaply , as long as the illusion that American paper dollars still represent real wealth lasts .

    So, in the meantime America attempts to save itself from the internal effects of the Ponzi system and dollar hegemony now collapsing in world finance and trade , by again trying to export its economic crisis debts for the rest of the world to pay , by the massive export of mountains of fast devaluing printed paper.
    And therefore creating currency wars against other countries currencies and peoples .

    This is the ‘hot money’ sloshing round the world looking for a home destroying other peoples economies.

    ReplyDelete
  4. I wish I could print money and borrow from myself! What a scam!

    ReplyDelete

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