Is anyone else as shocked as I am that the Fed is going to continue QE?

[Libertarian666]

I'm shocked!!!!! 

[notsheigetz]

You mean you don't believe them when they say they might begin "tapering" in September? Apparently the markets did.

[Libertarian666]

I don't believe them when they say they might begin tapering... ever.

[MediumTex]

Did the Fed say that it was going to continue QE?

[Libertarian666]

Did the Fed say that it was going to continue QE?

Yes. According to NBCNews.com:

"Minutes of the U.S. central bank's July 30-31 meeting, released on Wednesday, showed that almost all of the 12 members of the policy-making Federal Open Market Committee agreed a change to the stimulus was not yet appropriate. "

[l82start]

much like like budget cuts in spending... tapering probably just refers to a reduction the amount they had planned to increase QE by...

[MediumTex]

much like like budget cuts in spending... tapering probably just refers to a reduction the amount they had planned to increase QE by...

You mean that the Fed's QE activity is going to start "increasing at a decreasing rate"?

[dragoncar]

I'm shocked at the effect on my portfolio. 

[l82start]

much like like budget cuts in spending... tapering probably just refers to a reduction the amount they had planned to increase QE by...

You mean that the Fed's QE activity is going to start "increasing at a decreasing rate"?

  exactly... 
MT you will never get yourself elected to government or gain a position at the fed using such un-obfuscated language.. 

[moda0306]

I am not shocked.  Even talk of "taper" sends us into thoughts about how poor our balance sheets look, which, after GDP immediately falls as a result, reminds the fed that they are miserably failing at only one of their dual mandates.

Not that QE directly will do much... what the fed could do is raise the inflation target... the mere knowledge that they wouldn't allow rates to rise until we have 3% inflation instead of 2% would probably do more than all these bouts of QE could ever hope to accomplish, from a monetary policy standpoint anyway.

[MediumTex]

I think that people may have forgotten that what we have is still basically a "Weekend at Bernie's" economy.

You can't take away any support from a situation like that without the whole ruse crumbling.

[Mdraf]

I think that people may have forgotten that what we have is still basically a "Weekend at Bernie's" economy.

You can't take away any support from a situation like that without the whole ruse crumbling.

LOL LOL !!

[WiseOne]

I think that people may have forgotten that what we have is still basically a "Weekend at Bernie's" economy.

You can't take away any support from a situation like that without the whole ruse crumbling.

Bingo.

According to CNN, there was no consensus on ending QE:

http://money.cnn.com/2013/08/21/news/ec ... ?iid=HP_LN

However - I wonder whether jacking up the federal funds rate would actually be more important than ending the asset purchases.  No idea when that might happen.

[moda0306]

I think that people may have forgotten that what we have is still basically a "Weekend at Bernie's" economy.

You can't take away any support from a situation like that without the whole ruse crumbling.

So what about what our economy produces is a ruse?  I mean maybe too many boxed cereals, flat tv's and plastic toys, but is there something particularly unnatural about the health of our productive capacity?

[MediumTex]

I think that people may have forgotten that what we have is still basically a "Weekend at Bernie's" economy.

You can't take away any support from a situation like that without the whole ruse crumbling.

So what about what our economy produces is a ruse?  I mean maybe too many boxed cereals, flat tv's and plastic toys, but is there something particularly unnatural about the health of our productive capacity?

Without a favorable demographic situation to facilitate structural economic expansion, you're simply not going to get that "rocking" sort of economy that we had in the 1980s and 1990s.

The ruse is imagining that such rocking economic conditions could be possible without favorable demographics.

There are, of course, other economic headwinds such as high oil prices, high debt levels and a dysfunctional government, but I would say that bad demographics are the most serious headwind to the kind of economic expansion that we would probably like to be seeing right now.

The economy is very productive.  There is no question about that.  The question is whether this economy can expand at a desirable rate from current levels.

[Mdraf]

I think that people may have forgotten that what we have is still basically a "Weekend at Bernie's" economy.

You can't take away any support from a situation like that without the whole ruse crumbling.

So what about what our economy produces is a ruse?  I mean maybe too many boxed cereals, flat tv's and plastic toys, but is there something particularly unnatural about the health of our productive capacity?

Without a favorable demographic situation to facilitate structural economic expansion, you're simply not going to get that "rocking" sort of economy that we had in the 1980s and 1990s.

The ruse is imagining that such rocking economic conditions could be possible without favorable demographics.

There are, of course, other economic headwinds such as high oil prices, high debt levels and a dysfunctional government, but I would say that bad demographics are the most serious headwind to the kind of economic expansion that we would probably like to be seeing right now.

The economy is very productive.  There is no question about that.  The question is whether this economy can expand at a desirable rate from current levels.

Europe which is about a decade ahead of us in this demographic situation are attempting to solve it with massive immigration. They felt that young productive immigrants would provide the stimulus to the stagnant economy as well as a whole new tax base.  Unfortunately it hasn't worked out. instead of what they had hoped the immigrants are placing additional strain on the welfare state.

[WiseOne]

Europe which is about a decade ahead of us in this demographic situation are attempting to solve it with massive immigration. They felt that young productive immigrants would provide the stimulus to the stagnant economy as well as a whole new tax base.  Unfortunately it hasn't worked out. instead of what they had hoped the immigrants are placing additional strain on the welfare state.

Which, as Craig has so eloquently pointed out, is also happening here - but it's worse, because neither productivity nor English proficiency (a big barrier to getting a useful job) is a criteria for many immigrants.

[doodle]

The economy is very productive.  There is no question about that.  The question is whether this economy can expand at a desirable rate from current levels.

Economic expansion is a word that confuses me. What does it mean exactly? It seems that most of the economic expansion that happened over the last few decades was primarily caused by an expansion of FIRE sector and government deficit spending. What does this mean? How does this lead to real improvements in living standards?

[MediumTex]

The economy is very productive.  There is no question about that.  The question is whether this economy can expand at a desirable rate from current levels.

Economic expansion is a word that confuses me. What does it mean exactly? It seems that most of the economic expansion that happened over the last few decades was primarily caused by an expansion of FIRE sector and government deficit spending. What does this mean? How does this lead to real improvements in living standards?

Don't misunderstand me, I'm not saying that building an economy around the concept of endless expansion is necessarily a great idea, I'm just saying that this is the economy that we have built.

In a debt based economy, you really always have to be expanding, or else there isn't any coherent rationale for loaning anyone any money.