What do you mean by this comment:
"Unless value goes back to a measure of physical output (which is the real GDP) there will be no recoveries."
Lucky you, this must cut down on your treatment costssomeone recently attempted to label me as a lunatic (ie insane). my father in law is a psychologist and one of his definitions of insane is "doing the same thing over and over and expecting a different outcome/result"
The theory that this money is simply being sat in banks, to keep them comfortable, and is not 'entering circulation', and will be withdrawn from the banks when they are comfortable - has issues.Just on the QE comment explod, QE hasn't really created any new money IMO, all it's done is create a bucketload of excess reserves in the banking system. Whilst the fed is paying interest on excess reserves, it's most likely going to stay that way too.
Lucky you, this must cut down on your treatment costs.
OK maybe your not insane, but 'excessively excitable', if you will.
.
The theory that this money is simply being sat in banks, to keep them comfortable, and is not 'entering circulation', and will be withdrawn from the banks when they are comfortable - has issues.
Firstly, on the evidence side, from where is the money coming to cause the huge rise in the s&p500? From where is the money coming to bid up the price of commodities (across the board) to these levels? Why are Chinas USD reserves ballooning, as they maintain their loose peg? I suspect those funds are being lent out by banks - that's how they make money after all.
Secondly, how does the fed create these reserves? The fed purchases government debt (lends the money to the government). The government spends this straight away, effectively putting the fresh money straight into the markets. What happens when people have received this money, and put it in their bank accounts (increasing the banks reserves), is secondary.
My Marxist bent "A fair(productive) days work for a fair (and equal) days pay" or, not making money by going short in a falling property market for example. Or money being made from nothing, or that's how it seems to me..
The theory that this money is simply being sat in banks, to keep them comfortable, and is not 'entering circulation', and will be withdrawn from the banks when they are comfortable - has issues.
Firstly, on the evidence side, from where is the money coming to cause the huge rise in the s&p500? From where is the money coming to bid up the price of commodities (across the board) to these levels? Why are Chinas USD reserves ballooning, as they maintain their loose peg? I suspect those funds are being lent out by banks - that's how they make money after all.
Secondly, how does the fed create these reserves? The fed purchases government debt (lends the money to the government). The government spends this straight away, effectively putting the fresh money straight into the markets. What happens when people have received this money, and put it in their bank accounts (increasing the banks reserves), is secondary.
“What the purchases do… is… if you think of the Fed’s balance sheet, when we buy securities, on the asset side of the balance sheet, we get the Treasury securities, or in the previous episode, mortgage-backed securities. On the liability side of the balance sheet, to balance that, we create reserves in the banking system. Now, what these reserves are is essentially deposits that commercial banks hold with the Fed, so sometimes you hear the Fed is printing money, that’s not really happening, the amount of cash in circulation is not changing. What’s happening is that banks are holding more and more reserves with the Fed. Now the question is what happens the economy starts to grow quickly and it’s time to pull back the monetary policy accommodation. There are several tools that we have”
Another rally on Wall Street. But why? They are really living in a world of their own. Quantitative Easing, and yes, even the thought of QE (before it actually happens) was/is positive for stocks. But there is no word yet of whether there will be another QE (or something equivalent). Tonight's Fed 'press conference' might give us some indication as to what the Fed might do in the foreseeable future.
All this kind of reminds me of one of the best films ever made, The Wizard of Oz in 1939, where Dorothy and her friends went to see the Wizard himself with all the hype and expectations of having their problems solved, only to be disappointed to find that the Wizard was nothing more than an old guy frantically trying to control machines, levers, strings etc.
Going back to QE or the Fed's thoughts. The removal of QE might mean that the Fed might not back Wall Street's thirst for more. So why would the rally continue? Why did they rally last night when we might be at some crossroads?
No matter what is suggested or said tonight, it will all be forgotten in a week. It will be up to the current or next President to move things in the 'right' direction. I see no real easy fix by the Wizard tonight.
I wonder if the Fed will lay some of the blame at China? A possible interest rate move up and more than 25 basis points in the foreseeable future? Disastrous for stock markets and his Wall Street mates will once again dislike him. But I can see Bernanke raving-on about what the Fed does technically and hypnotising us with his fancy terms and spin.
konkon,
your posts don't make any sense whatsoever. What on earth are you trying to say here
I personally wouldn't consider "utilities" to be a form of manufacturing. Technically I suppose a power station is a factory, but it doesn't really fit with what most would think of in terms of manufacturing and there's little direct international trade in electricity (though there's a lot of indirect trade via the choice of location for smelters etc).ok then I see where you are going now. You might find the chart below interesting. Comments that the US doesn't actually make anything anymore isn't entirely true and just a little exaggerated. It's not exactly growing at a rapid clip at the moment, but the country is still a long way away from not actually making anything.
I personally wouldn't consider "utilities" to be a form of manufacturing. Technically I suppose a power station is a factory, but it doesn't really fit with what most would think of in terms of manufacturing and there's little direct international trade in electricity (though there's a lot of indirect trade via the choice of location for smelters etc).
I make this point because with utilities included, Americans buying Chinese plasma TV's would be pushing up the "manufacturing" figures simply by using more electricity.
Of course they make sense.
I'm glad they make sense to someone then!
Re: SILVER
"Personally I think the Silver story is just as much about rampant speculation these days as USD weakness" from professor_frink
professor_frink, your comments don't make sense. Are you aware of what is going on in the US, Europe etc?
yes.
Of course they make sense.
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