If and when will the money printing stop?

[FlyingFox]

The US and Europe have a pretty big debt problem, not only in the public sector but private sector too. Whether you believe in the theory of cycles and debt deflation or not it is becoming increasingly obvious that some of this debt will never get paid. Also seems like both the US and Europe have taken different paths to solving their respective crisis.

On the one hand, Europe has chosen austerity to pay down it's debt. This means a lot of hardships for it's citizens, cuts in spending and a real threat of deflation (if it is not happening already). If deflation does happen it also means an increase in the debt burden of public and private debt. The need for austerity is being championed by the likes of Ron Paul.

US has been essentially printing its way out of the GFC. The easier solution one might argue. The debt burden decreases but you get inflation and your currency goes down (the drain....). So far this has not caused any major bubbles or inflation (debatable, see some of Peter Schiff's comments on this). This is being championed by the likes of Paul Krugman and even Steve Keen (although to be correct he is against austerity as a means of getting out of this).

Given that Europe is finding austerity very hard and the demographic models of old public debt system are no longer valid in many places, if and when will the money printing stop in the US? Will Europe start printing?

 

[young-gun]

The US and Europe have a pretty big debt problem, not only in the public sector but private sector too. Whether you believe in the theory of cycles and debt deflation or not it is becoming increasingly obvious that some of this debt will never get paid. Also seems like both the US and Europe have taken different paths to solving their respective crisis.

On the one hand, Europe has chosen austerity to pay down it's debt. This means a lot of hardships for it's citizens, cuts in spending and a real threat of deflation (if it is not happening already). If deflation does happen it also means an increase in the debt burden of public and private debt. The need for austerity is being championed by the likes of Ron Paul.

US has been essentially printing its way out of the GFC. The easier solution one might argue. The debt burden decreases but you get inflation and your currency goes down (the drain....). So far this has not caused any major bubbles or inflation (debatable, see some of Peter Schiff's comments on this). This is being championed by the likes of Paul Krugman and even Steve Keen (although to be correct he is against austerity as a means of getting out of this).

Given that Europe is finding austerity very hard and the demographic models of old public debt system are no longer valid in many places, if and when will the money printing stop in the US? Will Europe start printing?

No bubbles? have you seen the US bond yields??

It's hard to say where it's going to end. I personally don't think it will until we have a black swan event. The whole idea of the Fed is to expand the money supply when times are tough, and then contract it when times are good(bring in inflation). Problem is they are trying to expand the money supply heavily, and not seeing the desired effects, unless barely keeping their heads above water was what they were going for. Hence the reason for low rates for another 5 years, and indefinite printing.

imo there shouldn't be austerity, or printing, everyone should just default, plunge into a huge depression, rid the system of all these in-inefficiencies, and we would be onto a path of prosperity much faster. Instead the entire world is going to follow Japan, and we'll wind up with 1,2 maybe even 3 lost decades at this rate. Hopefully we can develop a better model while that plays out.

Governments need to be made smaller, much smaller, free markets allowed to flourish, and not so much god dam spending.

 

[FlyingFox]

No bubbles? have you seen the US bond yields??

Quoting the general media / lay persons / governments viewpoint. Completely agree with you and Peter Schiff.

 

[sydboy007]

Financial repression will occur for many more years. The debt boom was unprecedented over so many countries for such an extended period.

Debt will be devalued through a combination of low yields and inflation. Savers are to bear the brunt of the profligacy of the 20-30 years.

The Romans shaved coins, modern Govts QE to infiniteeeeeeeeeee.

Best to buy shares in companies paying reliable dividends that increase at least with inflation, or be lucky enough to be a wholesale bond investor able to access those tasty 7 to 8% tier 1 or 2 bonds. Peeves me no end to not be able to get access to these great yields.

nb: as Mr Buffet says, buy shares that you wouldn't care if the sharemarket closed down for 10 years. The daily and monthly share price fluctuations aint terribly important if the income holds up and increases year to year. That's how I invest anyways.

 

[FlyingFox]

No bubbles? have you seen the US bond yields??

It's hard to say where it's going to end. I personally don't think it will until we have a black swan event. The whole idea of the Fed is to expand the money supply when times are tough, and then contract it when times are good(bring in inflation). Problem is they are trying to expand the money supply heavily, and not seeing the desired effects, unless barely keeping their heads above water was what they were going for. Hence the reason for low rates for another 5 years, and indefinite printing.

imo there shouldn't be austerity, or printing, everyone should just default, plunge into a huge depression, rid the system of all these in-inefficiencies, and we would be onto a path of prosperity much faster. Instead the entire world is going to follow Japan, and we'll wind up with 1,2 maybe even 3 lost decades at this rate. Hopefully we can develop a better model while that plays out.

Personally I think Japan's problem's are deeper than printing money/asset bubbles. Japan will probably never recover because they won't a have demographics base to push a recovery. There might be similar issues with parts of Europe as well.

Governments need to be made smaller, much smaller, free markets allowed to flourish, and not so much god dam spending.

Some of the leading economists (Paul Krugman for example) are arguing exactly the opposite (and getting their way from the looks of it).

 

[young-gun]

Personally I think Japan's problem's are deeper than printing money/asset bubbles. Japan will probably never recover because they won't a have demographics base to push a recovery. There might be similar issues with parts of Europe as well.

Some of the leading economists (Paul Krugman for example) are arguing exactly the opposite (and getting their way from the looks of it).

Agreem on Japan, never heard of krugman but obviously a keynesian.

 

[white_goodman]

Agreem on Japan, never heard of krugman but obviously a keynesian.

Krugman is a nobel laureate for his work in trade economics but is heavily tainted by his leftist leanings and looks highly stupid when arguing for broken window fallacy like ideas... digging ditches etc... he is becoming more ideologue than economist

if people want a good idea of how things will play out with regard to debt, inflation, deflation... read Cochranes' paper on "Inflation and Debt (2011)"

also Ron Paul isnt calling for austerity* he is arguing for a reduction in taxation but a higher reduction in spending, which could be stimulative based on history. It would appear to be dependent on type of tax reform and spending cuts


*austerity isnt meant to 'work' its a purge of bad debts, and a do-over of sorts. Its isnt an attempt at reverse Riccardian equivalence or anything of the sort. Also Europe hasnt got the inflation option, Greece, Spain etc are 'trapped' in the Euro, a gold standard of sorts and the only way to get competitive is for reduction in wages/prices.

 

[white_goodman]

also on Fed policy from one of the greats..

 

[Gringotts Bank]

If the following is correct, what will be the implications?

"Let's see, what is really going on? What kind of game are central bankers playing?

Central banks give their friends and favourites access to almost unlimited amounts of money at nearly zero rate of interest. What do they do with the money? They buy valuable assets - houses, office buildings, companies, gold and silver.

Ordinary households aren't getting the money; it's locked up in the hands of the 1%... or even the one tenth of 1%. And there aren't enough of these rich insiders to move consumer markets. Toilet paper and gasoline move up slowly. But prices for stocks, bonds, Manhattan real estate and expensive works of art go up fast.

Meanwhile, home ownership, by the people who live in them, is going down.

Stock ownership, by the middle class, is also on the decline.

Powerful, well-financed groups are buying. Middle America - short of funds - is not.

The elegance of this scam is breathtaking. Central banks print money to 'stimulate the economy'. It doesn't stimulate the real economy. It just makes it look as though there is real growth. Asset prices go up... just as they would in a real boom.

But in a real boom, most people would become wealthier and better off. In a phoney boom, only a few become wealthier. A phoney boom does not create wealth, it just transfers existing wealth. Central bankers give new money to their friends. The friends use it to capture a larger share of the real wealth in the nation".

Regards,

Bill Bonner
for The Daily Reckoning Australia

 

[Aussiejeff]

*snip*.... Central bankers give new money to their friends. The friends use it to capture a larger share of the real wealth in the nation".

Regards,

Bill Bonner
for The Daily Reckoning Australia

This in spades. Those with unlimited control of the money presses are on a roll. Double or nothing. Winner takes all. They will play this game until the Big Bust. There is no-one apparently who can stop this end-scenario from happening.

The power of money obviously over-rules all other considerations.

Have fun while it lasts.

 

[tech/a]

There is just so much to this topic.
The complexity of the topic is such that the consequences of
Continually printing money to ponzie debt,requires books to
Adequately paint a picture of where we are at and where we are
Highly likely to go.

I've just finished 2 great reads

(1) The Great Crash Ahead Harry Dent.

This will give you a broad idea of where we are at and where we are going. What many fail to include in their debt discussion is UNFUNDED liabilities Social security/Health Care/Pensions.

(2) The Crisis of Crowding.Ludwig Chincarini

This is a must read in culmination with (1) as it will describe why they keep printing money.
The unwinding of manufactured derivatives with no physical is frightening.
You can bet this current bull run before May when it is likely there will be no further Q/E is about unwinding.
Smart money selling into Dumb Money.


This is an fantastic topic and one which I'm glad I will live to see.
As hard as it is it won't happen again for another lifetime.

 

[McLovin]

(1) The Great Crash Ahead Harry Dent.

This will give you a broad idea of where we are at and where we are going. What many fail to include in their debt discussion is UNFUNDED liabilities Social security/Health Care/Pensions.

I never understood this unfunded liability hysteria. It's such a long dated liability (75 years or infinite depending on which measure you take), it's not going to go bang overnight. The tax system will adjust sometime between now and 2087.

It's just another way for Harry to sell his rubbish.

 

[tech/a]

I never understood this unfunded liability hysteria. It's such a long dated liability (75 years or infinite depending on which measure you take), it's not going to go bang overnight. The tax system will adjust sometime between now and 2087.

It's just another way for Harry to sell his rubbish.

There are more baby boomers than ever retiring or un able to continue to work
As it gets more difficult they are likely to be the ones retrenched.
The liability is NOW. Dont know where you get the 75 yrs from?? They will be retiring En mass over the next 10 yrs.
Only about 3% are self funded. So they go from TAX PAYERS to SOCIAL SECURITY TAKERS/ PENSIONERS.
Same goes for Medicare. This isnt some fictitious amount--this IS the liability which ISNT FUNDED.
In the USA its is trillions and it just isnt there!

Print more money eh!!

Seriously you think Dent is writing Rubbish?
Have you read it?

 

[waza1960]

I have read Harry's book and it is hard to argue against his logic......

 

[sptrawler]

On the news today, there is a push to raise the minimum wage in the U.S by $2/hr.
Obviously we are moving into stage 2, inflation on the way to a house near you.

 

[DB008]

On the news today, there is a push to raise the minimum wage in the U.S by $2/hr.
Obviously we are moving into stage 2, inflation on the way to a house near you.

sp, people have been talking about inflation (and hyper inflation) since the GFC.....

 

[tech/a]

On the news today, there is a push to raise the minimum wage in the U.S by $2/hr.
Obviously we are moving into stage 2, inflation on the way to a house near you.

That's ok their $2 represents less that 1% increase
The jump in commodity prices is on average around 30 %
Page 137 Dents book.

So no inflation here.

 

[tech/a]

So let's think about this
The fed prints trillions knowing that will flood the market with money
Interest rates fall great so does the dollar.
So US goods look more attractive so increase in demand.--- all good.
But wait imports like fuel,oil,clothes toyotas --- the list is endless --- now cost more---not good.
But worse Chinas currency is based on USD so when the UDS falls so does Chineese currency
Making them even more competitive in a market the US want to increase market share---- Good?

So just with this evidence what do you think? Working?

 

[banco]

Krugman is a nobel laureate for his work in trade economics but is heavily tainted by his leftist leanings and looks highly stupid when arguing for broken window fallacy like ideas... digging ditches etc... he is becoming more ideologue than economist

Seems like Krugman has a better record than his detractors. According to many of them the US should already be experiencing high inflation and interest rates on US bonds should have spiked.

 

[FxTrader]

There are more baby boomers than ever retiring or unable to continue to work
As it gets more difficult they are likely to be the ones retrenched.

And, I might add, the ones least likely to get re-employed. Agism is rife in most industries and this employer mindset seems unlikely to change much in the future.

The liability is NOW. Dont know where you get the 75 yrs from?? They will be retiring En mass over the next 10 yrs.

And I will be one of them. The GFC has briefly delayed this trend somewhat but many will likely be cashing out of super, having a good time for awhile and then counting on that government pension check later on. I hear this kind of talk frequently enough.

Only about 3% are self funded. So they go from TAX PAYERS to SOCIAL SECURITY TAKERS/ PENSIONERS.
Same goes for Medicare. This isnt some fictitious amount--this IS the liability which ISNT FUNDED.

Just a bit harsh but it's true enough to say that the pension budget will be a huge drag on the remaining taxpayers in the near future.

In the USA its is trillions and it just isnt there! Print more money eh!!

Something like 70 trillion when you look and future state and federal unfunded liabilities. The money creation experiment will likely go down in history as one of the great, probably the greatest, financial follies of all time. It can only end in misery. Enjoy the party while it lasts.