Tapering called off

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murphy_p_t
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Tapering called off

Post by murphy_p_t » Tue Sep 17, 2013 12:53 pm

suppose we find out all this *taper-talk* is just talk...how do our favorite asset classes react? Does Gold and LTT take off?
Kshartle
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Re: Tapering called off

Post by Kshartle » Tue Sep 17, 2013 12:58 pm

I think all three (stocks, bonds, gold) get a boost.
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MediumTex
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Re: Tapering called off

Post by MediumTex » Tue Sep 17, 2013 4:51 pm

I don't think that this is a good time to taper.

The market seems to find QE soothing.

The economy isn't really in that much better shape than it was at the end of previous QE efforts.
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Re: Tapering called off

Post by Kshartle » Tue Sep 17, 2013 5:03 pm

MediumTex wrote: I don't think that this is a good time to taper.

The market seems to find QE soothing.

The economy isn't really in that much better shape than it was at the end of previous QE efforts.
Perhaps redistributing purchasing power away from people who have earned it and giving it to those who have stolen it or just want handouts is actually hurting the economy.

Pehaps it is encouraging consumption by those poor baby birds relying on it and ramapant speculation by others rather than encouraging saving and real investment to improve the economy.

It will always be bad to stop QE because QE has enabled bubbles and unsustainable economic activity. Everyday it continues just further distorts.

The markets will not like it. No one is gonna like it much unless they are sitting on cash (maybe even LTBs though I doubt it) when the party's over. But I don't think they will be ending the party anytime soon. They might just go out on a beer run now and are about to show up with more kegs.

Our children deserve an economy that isn't built on printed paper and can go up in smoke with just a spark.
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Re: Tapering called off

Post by Pointedstick » Tue Sep 17, 2013 5:08 pm

Kshartle wrote: Perhaps redistributing purchasing power away from people who have earned it and giving it to those who have stolen it or just want handouts is actually hurting the economy.
I'm pretty sure this started before QE. :)
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Re: Tapering called off

Post by doodle » Tue Sep 17, 2013 5:58 pm

Pointedstick wrote:
Kshartle wrote: Perhaps redistributing purchasing power away from people who have earned it and giving it to those who have stolen it or just want handouts is actually hurting the economy.
I'm pretty sure this started before QE. :)
How does QE redistribute purchasing power? I thought that all it did was pump banking reserves into the system and possibly lower interest rates.....I don't think your average poor American feels like they have had anything redistributed to them.
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Re: Tapering called off

Post by Kshartle » Tue Sep 17, 2013 7:42 pm

Pointedstick wrote:
Kshartle wrote: Perhaps redistributing purchasing power away from people who have earned it and giving it to those who have stolen it or just want handouts is actually hurting the economy.
I'm pretty sure this started before QE. :)
Yeah but QE is 85 billion additional of it every single month.
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Re: Tapering called off

Post by Kshartle » Tue Sep 17, 2013 7:55 pm

doodle wrote:
Pointedstick wrote:
Kshartle wrote: Perhaps redistributing purchasing power away from people who have earned it and giving it to those who have stolen it or just want handouts is actually hurting the economy.
I'm pretty sure this started before QE. :)
How does QE redistribute purchasing power? I thought that all it did was pump banking reserves into the system and possibly lower interest rates.....I don't think your average poor American feels like they have had anything redistributed to them.
The feelings of the poor have nothing to do with it. Please don't tell me you are denying when someone gets a government handout they haven't actually earned it. You and everyone else knows it was stolen from someone else.

Does QE create additional dollars every month?

Can those dollars be used to buy stuff?

Did the people who make those dollars earn them by producing anything of equal or greater value?

They have redistributed purchasing power away from everyone else with dollars.

They have used it to bid up prices of financial assets.

The owners of financial assets have benefited at the expense of those without.

Some are left with purchasing power they did not earn either through work or investment because the counterfeiting benefited them.

Imagine if instead of buying bonds the FED bought cars with it and gave the cars away. Is it obvious what would happen to car prices, car dealers, car manufacturers, everyone in the car business? Is it obvious that this would misallocate resources and screw the economy up by creating a car bubble? Same thing with the bond buying except that touches everything with the interest rates.

To believe printing slips of paper can improve our standard of living is to believe in magic. To believe counterfeiting is acceptable or sound economic policy is tragic.
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Re: Tapering called off

Post by Mdraf » Tue Sep 17, 2013 8:08 pm

And it bears repeating: The government does not possess resources of its own – every cent it spends must be taken from the private sector in one way or another. The government can not add one iota of new wealth to the economy – it can only dispose of already existing wealth by taking it from the private sector. It matters not if this is done by means of taxation or borrowing – the latter method is merely a means of deferring the former
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Re: Tapering called off

Post by Kshartle » Tue Sep 17, 2013 8:11 pm

Mdraf wrote: And it bears repeating: The government does not possess resources of its own – every cent it spends must be taken from the private sector in one way or another. The government can not add one iota of new wealth to the economy – it can only dispose of already existing wealth by taking it from the private sector. It matters not if this is done by means of taxation or borrowing – the latter method is merely a means of deferring the former
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Re: Tapering called off

Post by dragoncar » Tue Sep 17, 2013 8:28 pm

Kshartle wrote:
Mdraf wrote: And it bears repeating: The government does not possess resources of its own – every cent it spends must be taken from the private sector in one way or another. The government can not add one iota of new wealth to the economy – it can only dispose of already existing wealth by taking it from the private sector. It matters not if this is done by means of taxation or borrowing – the latter method is merely a means of deferring the former
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Re: Tapering called off

Post by Gumby » Tue Sep 17, 2013 8:33 pm

Mdraf wrote: And it bears repeating: The government does not possess resources of its own – every cent it spends must be taken from the private sector in one way or another. The government can not add one iota of new wealth to the economy – it can only dispose of already existing wealth by taking it from the private sector. It matters not if this is done by means of taxation or borrowing – the latter method is merely a means of deferring the former
You keep saying that, as if it's fact, but you still haven't explained how that's true. I wish you would.

It sounds like you are trying to suggest that the government spending beyond its ability to tax in the future would result in unfunded liabilities that can't be paid for. So, for example, Greek government employees were promised large pensions and retirement benefits. No money was set aside, as a currency user nation must do to fund future liabilities. And now, despite tax increases, there is not enough tax revenue to keep those promises, and those Greek government workers and retirees are rioting in the streets because of the higher taxes and because they believe they will not get their promised benefits. So, I would agree that Greece is constrained by it's inability to tax the overspent future.

But, of course, Greece is a currency user — not a fiat currency issuer. A fiat currency issuer doesn't technically even need to tax to fund any of its "unfunded liabilities" (a debt-based fiat currency issuer just issues more and more debt and controls its own interest rates). The Federal government taxing within a fiat country is like a stadium asking football teams to fund their own scoreboard points awarded to them.
Last edited by Gumby on Tue Sep 17, 2013 8:43 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
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