And the USD no one knows whether it should be worth something or
close to nothing as precious metals are trying to tell us. but on
the other hand all those treasury auctions going so
well....something will have to break!!but if inflation wins what
should happen to the markets from here??
Yes, we're in an inflationary environment, but it's different
this time. Historically, inflation hasn't been great for
stocks because traders speculated at some point the fed
would eventually tighten monetary policy and raise rates,
thus the market fell. However, this time the fed has
told us it's not going to raise rates any time soon and they
told us they're continuing with their pomo activities for the
forseeable future. This means they're clearly intent on
reflating the asset bubbles. My guess is they realize
unsophisticated folks are happiest when their homes
and their 401k's aren't losing value as measured by price
and likely counting on the ignorance factor when it comes
to understanding what these actions are doing to buying
power in real dollar terms.
alseq - yes printing tons of money is inflationary
however it has to be lent out and spent in order to cause
inflation, it's called 'Velocity of money' as long as the banks
horde the money and don't lend it out, inflationary pressures are
subdued. Banks have to lend the money out in order to cause
inflation, as of right now, Banks are still hording cash and not
being loose on lending.
As an example, if the Fed printed 10 trillion dollars and then
gave it to you, if you then burred it in a deep hole (would have to
be a huge hole), it would not cause inflation, it has to to
spent. The same for the banks, they need to release all this
money
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inflation/deflation-part 2
Posted by alseq on 10th of Nov 2009 at 02:19 pm
And the USD no one knows whether it should be worth something or close to nothing as precious metals are trying to tell us. but on the other hand all those treasury auctions going so well....something will have to break!!but if inflation wins what should happen to the markets from here??
Yes, we're in an inflationary
Posted by steever on 10th of Nov 2009 at 03:02 pm
Yes, we're in an inflationary environment, but it's different this time. Historically, inflation hasn't been great for stocks because traders speculated at some point the fed would eventually tighten monetary policy and raise rates, thus the market fell. However, this time the fed has told us it's not going to raise rates any time soon and they told us they're continuing with their pomo activities for the forseeable future. This means they're clearly intent on reflating the asset bubbles. My guess is they realize unsophisticated folks are happiest when their homes and their 401k's aren't losing value as measured by price and likely counting on the ignorance factor when it comes to understanding what these actions are doing to buying power in real dollar terms.
alseq - yes printing tons
Posted by matt on 10th of Nov 2009 at 03:00 pm
alseq - yes printing tons of money is inflationary
however it has to be lent out and spent in order to cause inflation, it's called 'Velocity of money' as long as the banks horde the money and don't lend it out, inflationary pressures are subdued. Banks have to lend the money out in order to cause inflation, as of right now, Banks are still hording cash and not being loose on lending.
As an example, if the Fed printed 10 trillion dollars and then gave it to you, if you then burred it in a deep hole (would have to be a huge hole), it would not cause inflation, it has to to spent. The same for the banks, they need to release all this money