Gyroscopic Investing

Pointedstick wrote: Where's the option for "I don't know and I don't care?" Isn't that what Harry Browne probably would have said?

moda0306 wrote: Can we add an option:

"When unemployment and core inflation fall into a tighter balance."

This would be my vote.  I just don't know exactly where "tight" is, or when they will occur.

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

Gumby wrote: With regards to your poll, you're basically you're asking us to call the beginning of the end of the Great Recession and only giving us a two year window. We could just as easily muddle along for years.

TennPaGa wrote:

Kshartle wrote:

Gumby wrote: With regards to your poll, you're basically you're asking us to call the beginning of the end of the Great Recession and only giving us a two year window. We could just as easily muddle along for years.

No I'm asking when you think the FED will reduce it's monthly asset purchases. If you believe it will occur only when the Great Recession is beginning to end so be it. If you believe it might not happen for many more years I have to ask how you can believe that the QE can actually help if 7 years into it it still hasn't worked?

When you understand the effects of QE you understand it can never get the US out of recession. The QE has to stop first.

FWIW, I agree with Gumby: the Fed will reduce asset purchases when they see the economy (and employment) improving to their satisfaction.  After all, that is what they have said they would do.  And in the Bernanke era, communication about expectations seems to be a big part of the Fed's tools.

Whether or not QE actually helps the economy much is a different question.  Once you understand what QE is, you will know it is simply an asset swap that serves to help drive down long term interest rates.  As PS mentioned in a great post somewhere out in the ether, QE certainly helps the financial economy: lower interest rates drives some into the stock market in search of higher returns.  And, so the theory goes, when stocks go up, people feel wealthier, and when they feel wealthier, they spend more.

Lower long term interest rates are certainly helpful to people who borrow money for things like homes (when banks actually lend).

I personally don't believe very much in the wealth effect.  I am more inclined to think that, in the aggregate, people who have lived through the roller coaster of 2000-2013 are well aware of the nebulous aspects of financialized wealth, and, in fact, don't feel very secure.  Their propensity to spend is more a function of income, and that has been stagnant for quite a while.

And while more bank lending puts more money into the economy, the downside is that there is more debt.  And a debt/credit-based money system, which is what we have, is very unstable.

Gumby wrote: KShartle, did you watch the Ray Dalio video on deleveraging, that Mdraf posted? It's all explained in that video and it will clear up a lot of your confusion.

Gumby wrote: You are clearly confused about when policy makers will end QE. Dalio is simply describing how policy makers view the world and what they use to determine when to start/stop QE. You don't have agree with those policy makers, or their policies, but understanding their perspective will allow you to understand when QE will end. If you watched the video, you know that it could be years from now.

Kshartle wrote:I believe it will continue for years.

You believe it will happen when the economy improves.

Kshartle wrote: Since QE damages the economy this will not happen.

Gumby wrote: Then why did you give us these ridiculous poll choices? The only choices are less than two years or an economic meltdown. Many of us believe that the economy can eventually improve and the Fed will taper at that point.

Gumby wrote: this isn't the first time QE has been used in history and there is little evidence that QE has ever caused irreparable damage to any economy. If anything history has just proven QE to be ineffective and a non-event.

Kshartle wrote:

Gumby wrote: Then why did you give us these ridiculous poll choices? The only choices are less than two years or an economic meltdown. Many of us believe that the economy can eventually improve and the Fed will taper at that point.

so you think it will be past 2015?

I don't know is not an acceptable answer. This is a guess and if your answer is "I don't have a guess" then abstain.

Ridiculous? They said they would taper in Sept. Nov they are saying Oct. I gave you Oct' 13 - Dec 2015.

7+years is not enough and you still think it will be when the economy improves?

What year would you like added? How do you do a poll about when you think something will happen and have "I don't know" on the list?

Kshartle wrote:

Gumby wrote: this isn't the first time QE has been used in history and there is little evidence that QE has ever caused irreparable damage to any economy. If anything history has just proven QE to be ineffective and a non-event.

Many, many governments have printed money and spent it in some hope to improve the economy. Has it ever worked? It's usually tha last desperate act of theives.

Bean wrote: QE is taking money away from you with money supply inflation.

Bean wrote: The treasury market increased in size and that asset swap will someday hit the open market directly via a sale or indirectly via new debt to pay debt. So the Fed buys that debt indefinitely with interest or the music stops and there are not enough buyers to support these low rates.