At 01:29 25/01/2013, Arthur wrote:
<http://www.globalspeculations.com/2012/09/the-sterilization-hoax/>http<http://www.globalspeculations.com/2012/09/the-sterilization-hoax/>://www.globalspeculations.com/2012/09/the-sterilization-hoax/
Superb blog!
Keith
From: Arthur Cordell [mailto:[email protected]]
Sent: Thursday, January 24, 2013 8:25 PM
To: 'RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION'
Subject: RE: [Futurework] There's no moral basis for QE either
<http://blogs.wsj.com/eurocrisis/2012/09/06/the-ecb-sterilization-and-money-supply/>http://blogs.wsj.com/eurocrisis/2012/09/06/the-ecb-sterilization-and-money-supply/
From:
<mailto:[email protected]>[email protected]
[mailto:[email protected]] On Behalf Of de Bivort Lawrence
Sent: Thursday, January 24, 2013 3:18 PM
To: RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION
Subject: Re: [Futurework] There's no moral basis for QE either
Wouldn't "neutralizing" a currency overhang have to be done by cutting
back on the printing of new currency until the desired balance of
currency-to-productivity ratio had bee attained? Of course, that would
mean governmental spending cutbacks.
In the USSR, "neutralizing" the currency overhang could have been done by
selling off government-owned assets (incl. factories) to the private
sector, but instead Russia opted to distribute ownership shares to
workers (who went on to quickly sell them to the oligarchs-to-be. In the
Republic of Georgia, the ruble overhang was successfully "neutralized" by
the strategy I mentioned.
Is there any other way to "neutralize" excess currency? Or does the
excess currency get simply absorbed by the growth in the economy that it
allegedly creates?? That is, the currency-to-productivity ratio is
restored to balance through an increase in production rather than a
corralling of the currency overhang?
Cheers,
Lawry
On Jan 24, 2013, at 2:26 PM, Keith Hudson wrote:
There are two fallacies concerning quantitative easing (QE). It's the
second one that fascinates me more. This is that when QE is supposed to
have done its good work in reviving a jaded economy a la Krugman, a la
Bernanke, a la Keynes (mid-life Keynes, anyway), then the excess money can
be "easily neutralised". I've heard that phrase used more than once. I'd
like to know how to neutralise money. Once it comes into existence then it
exists forever, I'd have thought. Can it be stuffed into a central bank
vault and allowed to rot? Can it be set fire to? Can it be placed on
ships and sunk? Can it be rocketed into space? More to the point, would
the owner of the money at the time agree to the money being "neutralized"?
Of course not.
Keith
<<<<
Daily Telegraph 24 January 2013
Money printing 'amounts to theft from our children'
Money printing amounts to theft from our children and may be merely
storing up problems for an even bigger crisis, top economists and
investors have warned.
Philip Aldrick
Speaking at the World Economic Forum in Davos, Davide Serra, founder of
leading hedge fund Algebris, and Nouriel Roubini, the head of Roubini
Economics known as Dr Doom for predicting the financial crisis, set out
the case against those who think quantitative easing (QE) and low rates
are benign policy tools.
When governments borrow, they are taking money from our children. QE is
the same we are lowering returns for future generations. QE creates an
inter-generational dilemma, Mr Serra said.
Mr Roubini warned that central bankers need to think about turning off the
cheap money tap or risk creating another, possibly even worse, bubble.
He argued that policymakers have encouraged markets and individuals to
take on crippling levels of debt by leaving asset bubbles unchecked in a
boom and coming to borrowers rescue in a crisis.
"Ten years ago we had the Greenspan put, now we have the Bernanke put.
What are the long term economic consequences?" he asked.
He said loose monetary policy is creating a system biased to creating
bubbles, "that's why we've been moving to more unconventional territories"
in policy responses - from low rates to QE to credit easing.
"Central bankers have affected the behaviour of the private sector. They
have to think about that," he said. "As you do a slow exit out of QE you
may create another bubble and make another crisis.
At some point, the consequence of postponing deleveraging is that you end
up with zombie banks, zombie companies, zombie households, and zombie
governments.
The warnings came after the Bank of Japan caved into political pressure
and pledged to buy government debt in potentially unlimited quantities in
an attempt to stimulate growth.
The move prompted accusations that Japan had launched a fresh attempt to
debase its currency and improve the competitiveness of its exports.
As an investor, Mr Serra said QE had led to a misallocation of capital,
echoing concerns voiced by the Bank of England and others that QE might be
distorting markets and creating new risks.
Both Mr Roubini and Mr Serra agreed that QE had been essential at the
start of the crisis but, by protecting governments from attacks in the
bond markets, it was now making it difficult for the bond vigilantes to
do their job force fiscal reform.
For Mr Serra, the time to stop increasing QE had come. "QE just buys time.
When you buy time, you must use it. I'd follow the ECB [European Central
Bank] model and not the Bank of Japan and US Federal Reserve model, he said.
Defending QE in the panel debate, Adam Posen, director of the Peterson
Institute for International Economics and a former UK rate-setter, argued
that QE was merely an extension of normal monetary policy and has been
used throughout history. The decision on whether to use the tool depended
on the balance of growth and inflation, he added.
Will the economy in two to three years be below where it should be, and
is there an inflation risk? Thats the question. And its the same if
youre using interest rates or QE.
He added that the current problems regarding the effectiveness of QE were
less to do with monetary policy and more to do with investor behaviour.
The same investors who blamed the crisis on central banks keeping rates
low are now saying low rates are reducing risk appetite, he pointed out.
We should shift the focus to investor behaviour.
>>>>
_______________________________________________
Futurework mailing list
<mailto:[email protected]>[email protected]
https://lists.uwaterloo.ca/mailman/listinfo/futurework
_______________________________________________
Futurework mailing list
[email protected]
https://lists.uwaterloo.ca/mailman/listinfo/futurework
_______________________________________________
Futurework mailing list
[email protected]
https://lists.uwaterloo.ca/mailman/listinfo/futurework
