Comments on: "Quantitative easing, credit easing and enhanced credit support aren’t working; here’s why"

By: In Debt We Trust

In Debt We Trust — Sun, 05 Jul 2009 22:50:57 +0000

Don't forget unemployment – Q.E. doesn't solve unemployment. Maybe it will create/preserve a few protected staff among govt but the private sector reacts to reality –

when there is a lack of demand for a given product/service, why should business owners rush to stock up on what is essentially excess capacity?

By: Brick

Brick — Sun, 05 Jul 2009 10:10:10 +0000

For me the interesting thing about QE is that it highlights certain weaknesses in the economy and policies of those implementing it. Firstly the ECB action which is questionably QE seems to show a lack of current liquidity or more probably was directly aimed at certain banking sectors like Sweden, Spain, Austria and Italy where banks probably risk insolvency. This seems to me to be a kick the can down the road measure.
The UK QE seems to be mainly about Gilts and the fiscal deficit. Since a large proportion of spending in the UK is the social safety net, I would guess this highlights some of the serious imbalances in the UK safety which the current government is so proud of. A safety net where a one parent family with one child doing part time work gets virtually nothing and a professional claimant with numerous kids get the big house, loads of benefits and all the opportunities going. Targeting child poverty is a good thing, just not when it introduces the level of moral hazard that the UK government has introduced.
The US QE is directed partially at agency debt and partially at treasury debt to keep interest rates low. This is all about sustaining the imbalances in the housing market, and in effect is a way of increasing the subsidy to home owners.
Non of these will really work because they don’t target demand which is most probably best helped with short term tax reductions. This is why the US is in bigger trouble than anywhere else because politicians have an inability to increase taxes in the US when the time is right so they back away from the short term action that is needed.

By: Avl Guy

Avl Guy — Sun, 05 Jul 2009 04:03:56 +0000

To @Cos:
I first came across a "Biblical Debt Jubilee" in Jan-Feb when it was used by the British finance columnist Ambrose Pierce-Evans at the Financial Times.com. As I am 'biblically-challenged', a bud offered up the biblical story of a regularly scheduled debt jubilee mandated every 40 (take or give?) years...when all debts were forgiven. In effect, a hitting of a reset button for that generation(s) who were annually being saddled with more & more debt.

I think domestic and global politics are far too messy for anything as tidy & neat as a debt jubilee. I see a cascade-effect of sovereign defaults begetting commercial defaults begetting sovereign defaults worldwide, culminating in a US sovereign default. EXCEPT, we're far too good at 'wordsmith' so just as our military doesn’t not grant anyone 'permission; to call innocent civilian deaths anything other than 'collateral damage'...I see something similar mandated here...it will be wordsmithed into something clinical and harmless-sounding like mutually-agreed upon quantitative easing of long-term obligation.
Hmm.
On second though, just call it a Biblical Debt Jubilee...it sounds sanctified and much more festive.

By: VG Chicago

VG Chicago — Sun, 05 Jul 2009 02:14:53 +0000

Hooray for the debt jubilee!

Vinny G.

By: Todd Wood

Todd Wood — Sun, 05 Jul 2009 00:01:56 +0000

Taleb's latest video (re: employment number's) is here:

http://www.youtube.com/watch?v=oYaaF3JM3ag

He says that we still have 40 to 70 trillion more to de-leverage. Is he right?

If so, how come committees and committees of committees are not being formed to plan an orderly unwinding? I'm shocked. Obama should use the bully pulpit standing risers and on a pile of phone books to lead us through.

Hey, dye the Potomac red, whatever!

Cheese and crackers…

By: joebhed

joebhed — Sat, 04 Jul 2009 23:06:31 +0000

Thanks, Yves.

May I connect the failures of the Obamadollar legacy, as laid out by both Buiter and yourself, with the latest of Nassim Taleb's findings. He has stated very clearly lately that the economists are making predictions and recommending programs to solve the problem with the same lack of information used by the ratings agencies in the failure of their toxic "investments", if you will.

I know I'm repeating myself, but economists really do not understand the money system, nor consider it an important policy tool. That is why the Non-systemic and actually pro-cyclical Obamadollar programs are destined to fail.
Some day, somebody, and I think Taleb, is going to wake up and declare that it is the money SYSTEM that is insolvent.
The debt-money system is insolvent.
How many folks at the Fed, and how many folks at the BIS, do we think are working on the exit-strategy away from the debt-money system model that we foisted on the world in 1944?
There is not enough debt-money IN the debt-money system to make the payments ON the debt-money that is already out there.
If that ain't the definition of insolvency, I don't know what is.
It's an Achilles Heel kind of thing.
Exit Strategy.

By: skippy

skippy — Sat, 04 Jul 2009 22:46:42 +0000

@emca,

I concur with the gist of your comments, a linguistic would have a field day with the terminology being thrown about today. Have not many Societal Anthropologists commented on peaks in societies and their various degrees of descent, green slope vs double black.

Human perspective in regards to achievement (goals imposed from above), especially short term ones, always seem to bite us in the back side sooner or later. So in our political/economic higher goal orientated benchmark of the last decades, succumbed to the laws of the Universe expansion>contraction to more reasonable/stable/environmentally responsible lifestyles. Some would see this as a reduction in standing, where as I see it as a great opportunity for all. My only real fear is the battles yet to be fought by those that will lament their reduction of power/status/influence over those that carry them on their shoulders (the seagulls from finding Nemo is a fun visual aid>people of monies/power/absolute ownership, I own the property above you, so have total rights to the rivers wealth).

BTW has anyone see the mighty Colorado river by the time it hits Mexico, a pub on Friday night has better effluent out flow.

Skippy...If we do live in a total ownership society, why won't the owners ie: banks, insurance, bond, shareholders et al the Monies Gang and their paid for politician's take ownership of their actions. Whom is more complicit to the crime, the drug dealers or the druggies[?]and was the drug ignorance and their crime perpetrated whilst the unwashed were under its influence, umm sounds kinda like date rape to me, Repressed memory any one.

By: Dave Narby

Dave Narby — Sat, 04 Jul 2009 21:10:44 +0000

We will get that Jubilee, whether "they" want it or not.

The only thing they have control over is how long it takes to get here…

By: emca

emca — Sat, 04 Jul 2009 20:21:12 +0000

The general population (the grunts, as my former boss would say) of the U.S. and the bankers have one thing in common; they secretly aren't buying everything-will-be-alright meme being trumpeted by certain well known cheer leaders to the economy. As our acrobatic friend in the picture, they're squirreling away their nuts for hard times. Bankers won't chance their new found wealth via the taxpayer, households (at least a greater number than previously) won't go into debt to buy won't they don't need. This new-found prudence could in the long term be a plus, against the backdrop of an instant gratification culture, it is disaster.

Steve Ballmer of Microsoft said a little while back that we are heading toward a new paradigm of social/economic activity. His reference was to traditional media advertising per quote

/"I don't think we are in a recession, I think we have reset," he said. "A recession implies recovery [to pre-recession levels] and for planning purposes I don't think we will. We have reset and won't rebound and re-grow."/

This is in no way a blanket endorsement of the wisdom of Microsoft, but Steve Ballmer does run a successful company that does depend on a broader perspective of the times, so I wonder if this particular insight, this 'reset' of the social landscape is appreciated for all the implications suggested if it were painted with a broader stroke. Whether Ballmer actually saw it reaching beyond his reference I don't know; but the thread does keep reappearing, so I'm guessing in time someone somewhere else may explore this theme more fully. Its too bad such a evaluation of the dilemma is coming or will be advocated only from the outside...it will ill serve many to speculate on a project that requires a readjustment of lifestyle and values.

By: Cos

Cos — Sat, 04 Jul 2009 18:33:36 +0000

Never heard the comment "Debt Jubilee." I get the sense its erasing the debts of individuals (or some percentage of.) But if someone else has a better definition, please post it.

Thanks.