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$600bn into the US economy

by rootX
Tags: $600bn, economy
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turbo
#2
Nov5-10, 05:17 PM
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Quote Quote by rootX View Post
http://www.bbc.co.uk/news/business-11678022

Good time to buy US dollars?
Good time to hide, IMO.
NobodySpecial
#3
Nov5-10, 05:42 PM
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Quote Quote by rootX View Post
Good time to buy US dollars?
Or a good time to sell them !

I'm only a humble physicist but can someone explain how it's good for a country to borrow $500Bn on top of $1.7Tn and hand it out to the people, who are going to have to pay it back one day, so that they can boost demand. Yet it's irresponsible to just give everyone a credit card with a $10,000 limit and tell them to enjoy themselves.

Ivan Seeking
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Nov5-10, 07:32 PM
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$600bn into the US economy

Quote Quote by NobodySpecial View Post
Or a good time to sell them !

I'm only a humble physicist but can someone explain how it's good for a country to borrow $500Bn on top of $1.7Tn and hand it out to the people, who are going to have to pay it back one day, so that they can boost demand.
Yes, this isn't a math equation. It is a matter of momentum.

No stimulus program can buy our way out of a recession. Everyone knows that.

By your logic, no business would ever invest in itself.
mugaliens
#5
Nov14-10, 09:56 PM
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Quote Quote by NobodySpecial View Post
Or a good time to sell them !

I'm only a humble physicist but can someone explain how it's good for a country to borrow $500Bn on top of $1.7Tn and hand it out to the people, who are going to have to pay it back one day, so that they can boost demand. Yet it's irresponsible to just give everyone a credit card with a $10,000 limit and tell them to enjoy themselves.
It's not. At all. Why folks continue to pour lead into the anchor of debt that's capsizing the ship is beyond everything I learned of economics.
talk2glenn
#6
Nov15-10, 02:59 AM
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Quote Quote by rootX View Post
http://www.bbc.co.uk/news/business-11678022

Good time to buy US dollars?
Your missing the point. The Fed isn't interested in inflation or exchange rates. It's concern is the yield curve (the interest rate). I'm guessing your English; the Federal Reserve is not like the ECB. It's mandate goes beyond inflation control - it is responsible for promoting long term economic growth while maintain a healthy inflation rate.

Consumers are still saving. This pushes yields up, which is the worst possible scenario (a so-called unhealthy yield curve has historically been a very reliable indicator of recession). The Fed will do anything it can (including risking significant long term inflation) to keep the yield curves healthy. A healthy yield curve is one which is directly related to coupon term - longer term bonds should have higher yields than shorter term bonds. An unhealthy yield curve has no or an inverse relationship between rate and term. The American yield curve inverted in late 2006. A healthy yield curve returned in 2009, due as much to actions by the Fed as the market.

The Fed's lingering concern is that, if it stops buying short term rates down, the yield curve will steepen and the market will collapse.

If you're interested in speculating on anything, then, it's stocks, but this is not financial advice.

I'm only a humble physicist but can someone explain how it's good for a country to borrow $500Bn on top of $1.7Tn and hand it out to the people, who are going to have to pay it back one day, so that they can boost demand. Yet it's irresponsible to just give everyone a credit card with a $10,000 limit and tell them to enjoy themselves.
This is not how it works. The Federal Reserve is not borrowing money, it's creating it. It is not giving it away, it is selling it (and buying Treasuries). The people who buy those dollars don't have to give them back later.
rootX
#7
Nov15-10, 06:09 PM
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Quote Quote by talk2glenn View Post
Your missing the point. The Fed isn't interested in inflation or exchange rates. It's concern is the yield curve (the interest rate). I'm guessing your English; the Federal Reserve is not like the ECB. It's mandate goes beyond inflation control - it is responsible for promoting long term economic growth while maintain a healthy inflation rate.
No, I was literal; only concerned about the consequences of this on the exchange rates.
WhoWee
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Nov15-10, 07:28 PM
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Quote Quote by Ivan Seeking View Post
Yes, this isn't a math equation. It is a matter of momentum.

No stimulus program can buy our way out of a recession. Everyone knows that.

By your logic, no business would ever invest in itself.
Can you elaborate?
WhoWee
#9
Nov15-10, 07:35 PM
P: 1,123
Here is another description...
http://www.businessinsider.com/dalls...zation-2010-11

"Dallas Fed Chief: The Fed Is Monetizing The Nation's Debt For The Next 8 Months"
"To dwell on a point: Most all the businesses I talk to are expanding investment in productivity enhancement. Far too few of the large companies I talk to report interest in hiring American workers or committing to large-scale CAPEX (capital expenditures) in the United States; they believe their potential for return on investment (ROI) is greater elsewhere. The smaller companies that do not have global options are putting off hiring until the coast is clear on the tax and regulatory fronts. This reticence intensified during the final innings of the election season, which begs the question of whether this will now change with the new Congress."
rootX
#10
Nov15-10, 08:42 PM
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Quote Quote by talk2glenn View Post
Consumers are still saving. This pushes yields up, which is the worst possible scenario (a so-called unhealthy yield curve has historically been a very reliable indicator of recession). The Fed will do anything it can (including risking significant long term inflation) to keep the yield curves healthy. A healthy yield curve is one which is directly related to coupon term - longer term bonds should have higher yields than shorter term bonds. An unhealthy yield curve has no or an inverse relationship between rate and term. The American yield curve inverted in late 2006. A healthy yield curve returned in 2009, due as much to actions by the Fed as the market.
I read it was for inflation, didn't know yield curves could be reliable enough. I cannot recall at this moment, but I remember reading that yield curves are not good indication of future.

This is not how it works. The Federal Reserve is not borrowing money, it's creating it. It is not giving it away, it is selling it (and buying Treasuries). The people who buy those dollars don't have to give them back later
But, it can always take money out of the economy too.
Monique
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Nov16-10, 02:32 AM
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Quote Quote by NobodySpecial View Post
Or a good time to sell them !
Indeed, I'm still regretting that I didn't sell my dollars 7 years ago in 2003. At the time I thought the dollar could rise again to the level of 2002. I also regret not selling them in June this year and taking my money. I'm thinking of getting rid of the dollars now before they devalue even more (I'm already too late), or just sit out the ride and maybe 20 years from now they'll be worth some money again.

edit: inserted a 10Y graph.
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loseyourname
#12
Nov18-10, 09:09 AM
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Quote Quote by NobodySpecial View Post
Or a good time to sell them !

I'm only a humble physicist but can someone explain how it's good for a country to borrow $500Bn on top of $1.7Tn and hand it out to the people, who are going to have to pay it back one day, so that they can boost demand. Yet it's irresponsible to just give everyone a credit card with a $10,000 limit and tell them to enjoy themselves.
This was already mentioned, but just to clarify, the Fed buys existing debt. No new debt is issued for this program.
mheslep
#13
Nov18-10, 02:38 PM
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Whether the Fed directly buys existing or new debt is irrelevant, as when the Fed buys existing debt from some third party seller tomorrow at the beginning of QE2, that seller is then enabled to buy more new debt from the Treasury at the auction of new 10yrs in two weeks.
mheslep
#14
Nov18-10, 02:50 PM
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The Ber-nanke has spoken on the topic:
Quote Quote by February 25, 2010
"We're not going to monetize the debt," Mr. Bernanke declared flatly
http://www.washingtontimes.com/news/...ng-on-us-debt/
WhoWee
#15
Nov18-10, 02:54 PM
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Quote Quote by mheslep View Post
The Ber-nanke has spoken on the topic:

http://www.washingtontimes.com/news/...ng-on-us-debt/
Barney Frank (from your link) doesn't seem to like the idea of reduced spending?
mheslep
#16
Nov18-10, 04:29 PM
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Quote Quote by WhoWee View Post
Barney Frank (from your link) doesn't seem to like the idea of reduced spending?
??? There is no comment from Rep. Frank in the article.
WhoWee
#17
Nov18-10, 04:32 PM
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Quote Quote by mheslep View Post
??? There is no comment from Rep. Frank in the article.
A picture is worth a thousand words?
loseyourname
#18
Nov18-10, 05:48 PM
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Quote Quote by mheslep View Post
Whether the Fed directly buys existing or new debt is irrelevant, as when the Fed buys existing debt from some third party seller tomorrow at the beginning of QE2, that seller is then enabled to buy more new debt from the Treasury at the auction of new 10yrs next Thursday.
It's pretty relevant, man. Buying existing debt takes it off the hands of banks and gives them cash to lend, with the express purpose of putting more money into circulation and driving down bond yields. Issuing new debt adds debt and drives up bond yields since there is a larger supply without any added demand. The Congress isn't sitting around waiting for this so they can now increase the budget by $600 billion without increasing tax receipts over the next eight months with the hopes that the banks will use that cash to buy more debt rather than lend.


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