"Quantitative Easing"...QE1...QE2...

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  #1  
Old 04-26-2011, 03:59 PM
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Default "Quantitative Easing"...QE1...QE2...

...these are the terms of the day on all the news shows. But do you know what these terms mean?

Simply put, these fancy terms mean printing money.

There are lots of reasons for the Fed to print money...increase the money supply...do quantitative easing. One of the reasons is that foreign governments like China are stepping back from buying the Treasury securities that our government has issued to finance our runaway federal spending. The Fed has little other choice because it's clear that Congress is simply not going to slow down spending, balance the budget and begin to pay off the national debt. Short of declaring national bankruptcy and defaulting on the debt we've already issued the Fed has little choice but to keep issuing more and more bonds, but because no one is there to buy them, the Fed has to print money and buy the bonds themselves.

How much have this has the Fed done you ask? Lots. The asset side of the Fed balance sheet, much of which represent the bonds they bought from themselves with printed money, amounted to about $1 trillion at the end of 2007. The number at the end of last week was $2.8 trillion!

Put a different way, we have financed almost a half year of the total federal spending done in the last four years with money we simply printed to buy bonds which we ourselves issued..

So what's the effect of the Fed printing more money...oops, the fancier term is "quantitative easing"? I'd say there are three major results...
  • The value of the U.S. dollar continues to sink. Dollars are worth less because the Fed just keeps printing more and more, making the exisisting supply of dollars worth less. For crying out loud, the Canadian dollar, formerly known as the Canadian looney because it was so disrespected as a currency, is now worth more than the U.S. dollar! Isn't anyone watching??
  • Inflation will increase. It's a slow process, but it will increase to levels that will make us all very uncomfortable. Once inflation "gets on a roll" upwards, it is a trend that is very hard to slow down or stop.
  • Buyers of U.S. debt become less enamoured with the investment. They get paid back wirth dollars not worth as much as those they loaned us in exchange for our bonds. Plus the risk that the U.S. can't or won't repay it's debts is increasing. Standard & Poors issued a "credit warning" to that effect just last week.
So, my friends, when you hear the talking heads throwing fancy terms like "quantitative easing", QE2, QE3 and the like, don't get confused. They're not describing a good thing. They're describing a situation that will have very bad results for both us as well as our children and grandchildren.

Why is it happening, you ask? Same old reason--we're spending waaay more than we're taking in in taxes, then borrowing the difference. It can't continue. It won't continue. Do the arithmetic....

Then throw the bums out!!
  #2  
Old 04-26-2011, 05:01 PM
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[QUOTE=Villages Kahuna;349832]...these are the terms of the day on all the news shows. But do you know what these terms mean?

Simply put, these fancy terms mean printing money.

There are lots of reasons for the Fed to print money...increase the money supply...do quantitative easing. One of the reasons is that foreign governments like China are stepping back from buying the Treasury securities that our government has issued to finance our runaway federal spending. The Fed has little other choice because it's clear that Congress is simply not going to slow down spending, balance the budget and begin to pay off the national debt. Short of declaring national bankruptcy and defaulting on the debt we've already issued the Fed has little choice but to keep issuing more and more bonds, but because no one is there to buy them, the Fed has to print money and buy the bonds themselves.

How much have this has the Fed done you ask? Lots. The asset side of the Fed balance sheet, much of which represent the bonds they bought from themselves with printed money, amounted to about $1 trillion at the end of 2007. The number at the end of last week was $2.8 trillion!

Put a different way, we have financed almost a half year of the total federal spending done in the last four years with money we simply printed to buy bonds which we ourselves issued..

So what's the effect of the Fed printing more money...oops, the fancier term is "quantitative easing"? I'd say there are three major results...
  • The value of the U.S. dollar continues to sink. Dollars are worth less because the Fed just keeps printing more and more, making the exisisting supply of dollars worth less. For crying out loud, the Canadian dollar, formerly known as the Canadian looney because it was so disrespected as a currency, is now worth more than the U.S. dollar! Isn't anyone watching??
  • Inflation will increase. It's a slow process, but it will increase to levels that will make us all very uncomfortable. Once inflation "gets on a roll" upwards, it is a trend that is very hard to slow down or stop.
  • Buyers of U.S. debt become less enamoured with the investment. They get paid back worth dollars not worth as much as those they used to buy the bonds. And the risk that the U.S. can't or won't repay it's debts increases. Standard & Poors issued a "credit warning" to that effect just last week.
So, my friends, when you hear the talking heads throwing fancy terms like "quantitative easing", QE2, QE3 and the like, don't get confused. They're not describing a good thing. They're describing a situation that will have very bad results for both us as well as our children and grandchildren.

Why is it happening, you ask? Same old reason--we're spending waaay more than we're taking in in taxes, then borrowing the difference. It can't continue. It won't continue. Do the arithmetic....

Then throw the bums out!![/QUO

I don't always understand your posts due to my many limitations and I don't always agree with your politics, but as I have told you before I always learn something and on this one I agree with you totally. We sure are loaded with Politicians in Washington and not many, if any, statesman !
  #3  
Old 04-26-2011, 06:04 PM
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Here is everything you need to know about THE Quantitative Easing.
"http://www.youtube.com/watch?v=PTUY16CkS-k"

JJ
P.S. When QE2 ends, the stock market will go down and the Fed will be "forced" into QE3, but ONLY until the economy recovers. Ya Right..
God help us.
 

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