[Samseau]

http://www.zerohedge.com/news/fed-folds-...tion-twist

*FED TO KEEP POLICY STIMULATIVE FOR `CONSIDERABLE TIME'
*FED WILL ADD TO PURCHASES IF LABOR MARKET DOESN'T IMPROVE
*FED DOES NOT SAY WHEN MBS PURCHASE PROGRAM TO END
*FED TO BUY $40B MBS MONTHLY, CONTINUE `OPERATION TWIST'
*FED TO BUY MBS, EXTENDS ZERO-RATE POLICY INTO 2015

The endgame is upon us!

Open ended money printing! I hope you guys bought some silver/gold during the summer dip! Because the prices are only going to rise from here on out. I wouldn't be surprised if the AAPL stock rises as well.


But the real takeaway here is that this is the last stop before hyperinflation. They're gonna keep printing $$$$ to fund the US Government's wars and social programs, until the money printed isn't worth the paper it's printed on.


The cheap money is upon us, so have fun!

[presidentcarter]

It's absurd. I'm with Bill Gross on this one.

I'm also losing money as I'm short the market. FUCK YOU HELICOPTER BEN!

[cibo]

People who bought debt just got fucked.

In other news, my student loans just got easier to pay back,

[j r]

(09-13-2012 12:47 PM)cibo Wrote:  

People who bought debt just got fucked.

In other news, my student loans just got easier to pay back,

People who buy debt for a living are essentially making a bet on the future value of that debt. They've long been factoring in the possibility of further easing.

[Screwston]

Does this mean anything for people with student loans and credit card debt?

[Icepasian]

I think a sustained inflation of 10 - 20% over a decade would probably be more likely. It would keep the financial system intact while erasing our debts. Unfortunately, it would also lower our standard of living considerably and our national credit score would drop but it would lead to a revamped export sector as our labor becomes much cheaper(especially when combined with our massive accumulation of capital). I can't imagine the Fed committing suicide by creating +1000% inflation. I don't think it's in the self-interest of the Fed and major banks to completely wreck the largest economy in the world.

[Samseau]

(09-13-2012 12:54 PM)Icepasian Wrote:  

I think a sustained inflation of 10 - 20% over a decade would probably be more likely. It would keep the financial system intact while erasing our debts. Unfortunately, it would also lower our standard of living considerably and our national credit score would drop but it would lead to a revamped export sector as our labor becomes much cheaper(especially when combined with our massive accumulation of capital). I can't imagine the Fed committing suicide by creating +1000% inflation. I don't think it's in the self-interest of the Fed and major banks to completely wreck the largest economy in the world.

See, that's just it... the FED is merely a catalyst. It's setting itself up for failure by being the major US bond buyer.


The USA goes to war in the Middle East and needs an extra trillion dollars?

It's okay, the FED will buy debt.

The world goes into a massive global depression as the Eurozone falls apart, requiring the USA to print an extra 2 trillion in Welfare to keep people alive?

It's okay, the FED will buy that debt.


The bonds the FED purchases then gets sold to their closest friends on wallstreet... Goldman, Bank of America, etc, at firesale prices... which is in essence giving billions of dollars away for free.

The banks then spend this cheap money on various stocks, various companies, and in other ways, pumping money into the economy from the top....

....while the US Goverment uses the cheap money to keep the poor alive at the bottom.

In between the cheap money flooding in from the rich and poor are the middle class, who will literally be crushed as inflation wipes away their savings.


Thus, the idea that the FED will "control" inflation is a load of bullshit. Now that the USA has unlimited cash, they will do everything they want with such a license.

Hyperinflation, therefore, will arise out of unintended consequences, just like the crash of 08' did.




By the way - an inflation rate of 10% means that the value of our money is cut in half in just 7 years. 10% inflation is astronomical. Losing half of your cash is a "small" hyperinflation.

[Caligula]

(09-13-2012 12:52 PM)houston Wrote:  

Does this mean anything for people with student loans and credit card debt?

If we get high inflation it would actually make debt cheaper to pay off.

It's bad for people with cash savings since the value of those savings is reduced.

[Handsome Creepy Eel]

You are vastly overestimating the Fed's power. And besides, a little inflation is not a bad thing to spur thing forward (seeing how the central bank's obsession with keeping inflation at 1% has prevented recovery - at least in the EU). Worldwide speaking, we've been off the gold standard for so long that fears about "printing money with no coverage" are very exaggerated - the entire world has been functioning that way for decades and look - no hyperinflation!

I'll admit that I'm biased because I have no respect for whomever is behind that zerohedge thingy. And I'll also grant that, while I support printing money in this situation, it shouldn't be the giant vulture banks (I'm looking at you, Goldman Sachs) that pump it into the economy, it should be the direct action of the government.

[Parlay44]

(09-13-2012 01:47 PM)Caligula Wrote:  

(09-13-2012 12:52 PM)houston Wrote:  

Does this mean anything for people with student loans and credit card debt?

If we get high inflation it would actually make debt cheaper to pay off.

It's bad for people with cash savings since the value of those savings is reduced.

Take your cash and buy some gold. As the dollar goes in the toilet the price of gold will skyrocket.

[Frost]

If you have student loans, sit on them. Putting 20% down on a mortgage wouldn't be a bad idea right now either. Anything you can do to put yourself in a position of owing someone USD.

Hyperinflation will not come slowly. There will be no 10-20%/ann creep. One day, the market will realize that the US Empire is not bouncing back. The market is slow to realize this, because 99% of people still believe in that the winning tag team of democracy and progressive ideals will save the USA from the brink. Students of history know better, and can make a lot of money off of that knowledge.

[j r]

The effect of inflation on your savings is a little ambiguous. It depends on where you have your money.

Right not, with inflation just under 2 percent, savings accounts are paying around 1 percent and T-bills are paying much less. If inflation were to jump up to 5% or 10%, savings account rate would jump up as well. It's unclear how much, of course, because the rates that banks pay on accounts is related to the rate of savings in the economy and higher inflation tends to make people consume more and save less. When people save less, banks have to pay higher interest rates to get people to keep deposits in the bank.

[Menace]

Where is the proverbial market going to go if not the US dollar? The Euro? One of the Yens? There is nowhere to go but the US dollar, for better or for worse. ZH is the MRA of the financial websites.

[BIGINJAPAN]

(09-13-2012 01:52 PM)Handsome Creepy Eel Wrote:  

You are vastly overestimating the Fed's power. And besides, a little inflation is not a bad thing to spur thing forward (seeing how the central bank's obsession with keeping inflation at 1% has prevented recovery - at least in the EU). Worldwide speaking, we've been off the gold standard for so long that fears about "printing money with no coverage" are very exaggerated - the entire world has been functioning that way for decades and look - no hyperinflation!

I'll admit that I'm biased because I have no respect for whomever is behind that zerohedge thingy. And I'll also grant that, while I support printing money in this situation, it shouldn't be the giant vulture banks (I'm looking at you, Goldman Sachs) that pump it into the economy, it should be the direct action of the government.

Dude for being a red pill guy you are clearly still ignorant in finance. Inflation no matter what percentage is a bad thing. And if you think we have had an inflation rate of anywhere near 1-2%/year in the last 40 years you are so wrong. Name me one commodity that hasn't doubled in the last 10 years ? Nevermind in the last 40 years.

There is a huge difference between inflation and assest appreciation and by your comments you do not understand the difference.

The US hasn't experienced hyper inflation yet because you export your inflation all over the world. But one day cheques will be cashed and the chickens will come home to roost.

[jackson.henley]

I would not worry much about hyperinflation. I would be more concerned this situation turning into a global version of Japan in the 1990's.

Each new QE is having less and less of an effect on global growth and the stock market:

[Icepasian]

(09-13-2012 01:23 PM)Samseau Wrote:  

(09-13-2012 12:54 PM)Icepasian Wrote:  

I think a sustained inflation of 10 - 20% over a decade would probably be more likely. It would keep the financial system intact while erasing our debts. Unfortunately, it would also lower our standard of living considerably and our national credit score would drop but it would lead to a revamped export sector as our labor becomes much cheaper(especially when combined with our massive accumulation of capital). I can't imagine the Fed committing suicide by creating +1000% inflation. I don't think it's in the self-interest of the Fed and major banks to completely wreck the largest economy in the world.

See, that's just it... the FED is merely a catalyst. It's setting itself up for failure by being the major US bond buyer.


The USA goes to war in the Middle East and needs an extra trillion dollars?

It's okay, the FED will buy debt.

The world goes into a massive global depression as the Eurozone falls apart, requiring the USA to print an extra 2 trillion in Welfare to keep people alive?

It's okay, the FED will buy that debt.


The bonds the FED purchases then gets sold to their closest friends on wallstreet... Goldman, Bank of America, etc, at firesale prices... which is in essence giving billions of dollars away for free.

The banks then spend this cheap money on various stocks, various companies, and in other ways, pumping money into the economy from the top....

....while the US Goverment uses the cheap money to keep the poor alive at the bottom.

In between the cheap money flooding in from the rich and poor are the middle class, who will literally be crushed as inflation wipes away their savings.


Thus, the idea that the FED will "control" inflation is a load of bullshit. Now that the USA has unlimited cash, they will do everything they want with such a license.

Hyperinflation, therefore, will arise out of unintended consequences, just like the crash of 08' did.




By the way - an inflation rate of 10% means that the value of our money is cut in half in just 7 years. 10% inflation is astronomical. Losing half of your cash is a "small" hyperinflation.

I understand that the USA is using the Fed as a way to loan itself infinite money(which only contains value for as long as individuals and institutions consider it legitimate).
What I'm saying though is that I do not believe that it will get to the point where they would need to have inflation in the triple digits or higher which is usually considered hyperinflation. The only way I can imagine that kind of scenario playing out would be if they continue the inflation-adjusted increase in pension and social security payments as the baby boomers retire. That would lead to a continuously scaling budget deficit each year as boomer care takes up a larger portion of the GDP. The more likely case though would probably be that the government would freeze those pension/SS increases, thereby getting around their commitment to those retirees along with all other government debt via a sustained double-digit inflation.

I know that 10 - 20% inflation is absolutely horrible for those who save but it's really a double-edged sword. The hit to the middle class for example would be varied depending on how you stand financially. If you have a fixed-rate mortgage, low amount of savings, and a ton of debt(student loans, credit cards, etc), it would actually help you much more than it would hurt you because the inflation would pay your debt off for you. On the other hand, if you're one of the more financially savvy people who save money, have no debt, and have paid off your mortgage, you would be fucked beyond belief. That's what happens with inflation, savers get wiped out while debtors are given a get-out-of-debt-free card. Of course, both would take substantial hits to their wages as they most likely wouldn't rise as fast as the inflation rate.

I agree with you for the most part; the US government and the Fed are taking a path that could have been easily avoided with some forethought in the '90s or even the early '00s.

[j r]

(09-13-2012 02:07 PM)BIGINJAPAN Wrote:  

(09-13-2012 01:52 PM)Handsome Creepy Eel Wrote:  

You are vastly overestimating the Fed's power. And besides, a little inflation is not a bad thing to spur thing forward (seeing how the central bank's obsession with keeping inflation at 1% has prevented recovery - at least in the EU). Worldwide speaking, we've been off the gold standard for so long that fears about "printing money with no coverage" are very exaggerated - the entire world has been functioning that way for decades and look - no hyperinflation!

I'll admit that I'm biased because I have no respect for whomever is behind that zerohedge thingy. And I'll also grant that, while I support printing money in this situation, it shouldn't be the giant vulture banks (I'm looking at you, Goldman Sachs) that pump it into the economy, it should be the direct action of the government.

Dude for being a red pill guy you are clearly still ignorant in finance. Inflation no matter what percentage is a bad thing. And if you think we have had an inflation rate of anywhere near 1-2%/year in the last 40 years you are so wrong. Name me one commodity that hasn't doubled in the last 10 years ? Nevermind in the last 40 years.

There is a huge difference between inflation and assest appreciation and by your comments you do not understand the difference.

The US hasn't experienced hyper inflation yet because you export your inflation all over the world. But one day cheques will be cashed and the chickens will come home to roost.

That's not how inflation works.

[BIGINJAPAN]

Just remember Japanese debt is held by the Japenese. 30% of US debt is held by foreigners. Makes a huge difference how things play out in the end

[BIGINJAPAN]

(09-13-2012 02:12 PM)j r Wrote:  

(09-13-2012 02:07 PM)BIGINJAPAN Wrote:  

(09-13-2012 01:52 PM)Handsome Creepy Eel Wrote:  

You are vastly overestimating the Fed's power. And besides, a little inflation is not a bad thing to spur thing forward (seeing how the central bank's obsession with keeping inflation at 1% has prevented recovery - at least in the EU). Worldwide speaking, we've been off the gold standard for so long that fears about "printing money with no coverage" are very exaggerated - the entire world has been functioning that way for decades and look - no hyperinflation!

I'll admit that I'm biased because I have no respect for whomever is behind that zerohedge thingy. And I'll also grant that, while I support printing money in this situation, it shouldn't be the giant vulture banks (I'm looking at you, Goldman Sachs) that pump it into the economy, it should be the direct action of the government.

Dude for being a red pill guy you are clearly still ignorant in finance. Inflation no matter what percentage is a bad thing. And if you think we have had an inflation rate of anywhere near 1-2%/year in the last 40 years you are so wrong. Name me one commodity that hasn't doubled in the last 10 years ? Nevermind in the last 40 years.

There is a huge difference between inflation and assest appreciation and by your comments you do not understand the difference.

The US hasn't experienced hyper inflation yet because you export your inflation all over the world. But one day cheques will be cashed and the chickens will come home to roost.

That's not how inflation works.

It is an increase in the money supply. Which leads to higher prices. Unfortunately no one looks at M2 and I believe they don't publish M1 or M3 anymore so you have to go off prices

[Icepasian]

(09-13-2012 02:14 PM)BIGINJAPAN Wrote:  

Just remember Japanese debt is held by the Japenese. 30% of US debt is held by foreigners. Makes a huge difference how things play out in the end

If we had a crash of both the Euro and Dollar, most creditors would be quite pissed but their domestic economies would probably take up much more of their attention than how they'd collect from the USA. After all, even if the US military took a 50% cut, it would still be over twice the size and much more powerful than 2nd place. Outside of an economic embargo(which cuts them off from the world's largest consumer market, greatly harming their exports), there's not really much the creditors could do.

On another note, I personally do not trust Zerohedge although I agree with much of what the site puts out. The problem I have with it is that it seems very sensationalist and its message consists primarily of "WHY THE WORLD IS FUCKED! Read our 893274937829048039th report on how buying gold will save you from the inevitable financial apocalypse!(Everyone Will Starve Edition)". I also think that they're getting quite a few kickbacks by their recommended precious metals sellers just as Glenn Beck does with Goldline.

[j r]

(09-13-2012 02:20 PM)BIGINJAPAN Wrote:  

(09-13-2012 02:12 PM)j r Wrote:  

That's not how inflation works.

It is an increase in the money supply. Which leads to higher prices. Unfortunately no one looks at M2 and I believe they don't publish M1 or M3 anymore so you have to go off prices
[/quote]

It depends. Sometimes inflation is driven by a rise in the money supply relative to available goods and services. And sometimes inflation is driven by decrease in available goods and services relative to a stable money supply.

Now, either way, the money supply is important. But increasing the money supply isn't always a bad thing and inflation isn't always a bad thing. In fact, Milton Friedman made a pretty convincing case that the Great Depression was caused by a sharp decline in the money supply.

As for inflation, there's a reason why the consensus is to target a steady rate of inflation somewhere between 1 and 2 percent. Price stability is important, but it isn't necessarily more important than economic growth.

[BIGINJAPAN]

(09-13-2012 02:30 PM)Icepasian Wrote:  

(09-13-2012 02:14 PM)BIGINJAPAN Wrote:  

Just remember Japanese debt is held by the Japenese. 30% of US debt is held by foreigners. Makes a huge difference how things play out in the end

If we had a crash of both the Euro and Dollar, most creditors would be quite pissed but their domestic economies would probably take up much more of their attention than how they'd collect from the USA. After all, even if the US military took a 50% cut, it would still be over twice the size and much more powerful than 2nd place. Outside of an economic embargo(which cuts them off from the world's largest consumer market, greatly harming their exports), there's not really much the creditors could do.

On another note, I personally do not trust Zerohedge although I agree with much of what the site puts out. The problem I have with it is that it seems very sensationalist and its message consists primarily of "WHY THE WORLD IS FUCKED! Read our 893274937829048039th report on how buying gold will save you from the inevitable financial apocalypse!(Everyone Will Starve Edition)". I also think that they're getting quite a few kickbacks by their recommended precious metals sellers just as Glenn Beck does with Goldline.

Dude they won't be coming to collect money. They will be coming and buying up everything with both fists. Meaning they will be buying anything they can get with their USD. Pricing all americans out of any assests. They will not be coming and asking for their money back, they will be buying roads, real estate, harbours, national monuments or whatever they can get there hands on. They can destroy the US( mainly middle class) without firing a gun or threatening anyone.

[BIGINJAPAN]

No doubt the Great depression was exacerbated by the contraction of the money supply. But it was the inflation of the 20's that led to crash and the great depression.

[chyamor]

Im not a finance guy but can someone just tell me this. In terms of forex trading. If I was looking to go long and buy usd/jpy and short eur/usd slowly. When would I see results?

[BIGINJAPAN]

I wouldn't start shorting the eur/usd yet. Let everything recalibrate over the next couple weeks and see what the ECB does. Even though the FED is next to print the ECB will be following shortly. IMF today said greece needs a 3rd bailout. The Euro zone needs a far weaker currency right now than the US. The FED balance sheet vs the ECB balance sheet never lie and if you track who is printing more money you will make money every time. Right not the ECB has a way bigger balance sheet, but with the FED pumping now that is why the pair has moved a 1000 pips lately. The ECB will be forced to start printing again as the EU weakens and more bailout money is needed.

Technically speaking the EUR/USD looks like it has more room to run higher. Depending on your margin requirements and the amount of cash you are ready to invest I would not scale in until at least 1.35

If you know anything about futures you could sell some contracts into the front months to get into a position