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Quantitative Easing With Misrepresentations


 

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This kind of reminds me of a video called The Creature from Jekyll Island, something you may want to check out on Youtube.

Cute misinformation, but crap. Almost every assertion is based on anecdotal evidence and is false (e.g. grocery prices are actually lower over the past 2 years - http://nyti.ms/d41HQl ). QE2's meager size gives us little hope, but given our current political climate, it may be our only hope. 10% plus unemployment for the next 10 or more years is an alternative.

There is at least one factual inaccuracy in this thing.

The brown bear asks, "Aren't taxes higher than a year ago?"

And the knowledgeable bear answers, "Yes."

But taxes are lower than a year ago.

http://www.cbsnews.com/8301-503544_162-6201911-503544.html

This makes me question some of the other assertions made by this cartoon. For example, is it true that the Federal Reserve is buying the treasury bonds from Goldman Sachs and not the US Treasury? It wouldn't surprise me, but the inclusion of that tax canard causes me to question the other assertions.

Here is a good interview from Democracy Now with former Wall Street economist and current University of Missouri professor, Michael Hudson about the QE2.

Nobel Prize-winning economist Joseph Stiglitz is also critical of QE2.

But neither of these guys address the question of the Federal Reserve buying the treasury bonds from Goldman Sachs. If true, that would mean the idea is more than just a policy blunder; it would also indicate intentional collusion between the Federal Reserve and Goldman Sachs to suck even more money from the middle class.

I think the Fed is buying treasuries on the 'open market' as a way of pumping money directly into the economy. Goldman would be a major seller in that secondary market, but certainly not the only one. It seems there are some half truths in this video, but the major points still seem valid.

What might not be understood by many, is that the Fed was founded with the specific purpose of controlling the money supply. There are several ways to do this, and buying treasuries on the open market is one it has used frequently since it's inception. Another is to lower the reserve requirement of banks (what percentage of deposits must be on hand), so the banks can lend more, but most banks are keeping a larger reserve than the Fed is requiring of them, so that won't work this time. Another is to lower the rate it lends money to banks, and what banks can charge each other, but banks aren't borrowing from each other, and the Fed is already lending to banks at a near zero rate, so that won't help.

It really seems a huge pump like this may be the only way they can control the money supply, but the down sides might be worse than doing nothing at all.

I think a case can be made that raising the Fed's lending rate to banks would spur more lending to the private market (businesses, cars, and houses). As it is right now, banks can borrow from the Fed at near zero, and turn around and buy treasuries (almost no risk of default) and make a nice, safe profit. Banks have no incentive to take risks on home buyers, car buyers, start-up businesses etc..

Another thing that most people don't understand about the Federal Reserve is that it is not a government agency, but rather a cartel of private banks, and that the Treasure Department could issue money if it wanted to, but instead, it borrows the money from the Federal Reserve, which keeps us in a perpetual system of debt.

As Stiglitz mentions in the article I linked to, the original stimulus package would've worked better if more of the money had been spent on infrastructure. And as Hudson mentions, QE2 is meant to revive the housing bubble and therefore help the fraudulent lenders who got us into this mess.

I think the main thrust of the cartoon, that printing money is the last refuge of banana republics, is pretty accurate.

Thank you! I have seen this all over the "reality-based" blog world, so I thought maybe the whole thing was true and that what I'd heard about the taxes was wrong.

As Stiglitz mentions in the article I linked to, the original stimulus package would've worked better if more of the money had been spent on infrastructure. And as Hudson mentions, QE2 is meant to revive the housing bubble and therefore help the fraudulent lenders who got us into this mess.

Right on all counts.

user-pic

Right on all counts? WTF?

There is so much misinforamtion on the Internet it's driving me insane.

We're closer to deflation than inflation.

Your taxes went down, not up.

There are no death panels.

QE2 has nothing to do with "reviving the housing bubble".

Jesus christ.

I think you need to read the whole thread before commenting. The tax question was already addressed. And who said anything about death panels? And as far as reviving the housing bubble goes, that was the assertion made by University of Missouri economics professor, Michael Hudson in the interview I linked to.

He says, "The idea is to flood the economy with credit so the banks will lend out more debt. And if the Fed’s policy works, then housing prices are going to go back up so high that most consumers are going to have to pay 40 percent of their income for housing. They’re going to have to pay more money for credit card debt. The purpose is to help the banks make money at the expense of the economy. It’s not to help the economy at all. That’s the really important thing. When they say the economy, they mean—the Fed means its constituency: the banks. And the banks’ product is debt. And that’s what they’re trying to produce."

I suppose it's possible that you know more than he does on the topic and that he's flat wrong, but I doubt it.

Sorry, I'm already halfway through this animation and it's is completely full of shit.

Mostly conservative talking points that are just factually wrong.

Big Daddy thanks for your links. Syngas is correct with the open market buy/sell/trade.

As for the video, I'm not sure which is more annoying, the way the dialogue is read by the auto readers or the concepts covered in it.

I think after some of the related videos that this was produced by tea partier types.

I think that explains some of the errors like the increased taxes line.

I missed that when i first viewed it.

i am still interested in the video because I think tea party attacking some institutions more than most conservatives will be comfortable with.

One of the big stories that i saw today was Rand Paul was attacked by McCain because Paul advocates for cutting the defense budget.

I think we are entering an era in American politics that will be extremely interesting.

I think we are entering an era in American politics that will be extremely interesting.

Fuck, I hope not. Things are "interesting" enough already, thanks.

There is no doubt. We are cursed.

Truth be told I don't feel very like I entirely understand whether or not QE is the right thing to do or not. But I felt like there were a number of problems with this video.

This video goes on for a bit about how QE is supposed to help avoid a deflation risk, and then goes on to point out that the economy is still experiencing inflation. This is an insincere argument to make, because I don't think anybody is arguing that the economy is not experiencing any inflation. The economy is merely experiencing record low deflation. The purpose here is to avoid there being any deflation, even if it is at the likeliness of increasing inflation a little.

The video claims that "the fed thinks we have the inflation." This is misinformation because the fed does not think we have the deflation, but it does think we have the very low inflation.

The video claims that deflation would be a good thing. That's not a very widely held belief.

Others have already pointed out that claiming taxes has risen in the last year is misinformation.

The video claims that the first QE did not bring the jobs back to the economy. Again, I don't feel comfortable making claims about QE, but the video doesn't seem to consider the idea that the governments financial policy might have prevented additional job losses and did not go far enough.

This video is not an honest poke at QE. It's misleading and has too much of the misinformation.

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