Last week we looked at who gets all the money the FED prints and before that we looked at the process the FED uses to get the money "Out of Thin Air" and into the hands of people who can spend it. Today we are going to look at what is "Quantitative Easing" well it sounds cool anyway... ~editor What is Quantitative Easing? Fed’s Perspective & Writings Part 3 in a 6 Part Video Series on Quantitative Easing A Wall Street Journal article (10/27/10) on quantitative easing (QE) hints the Fed will take a middle of the road approach in terms of the size and duration of QE2. As we would expect, the stock and commodity markets’ initial reaction is negative. A middle of the road … [Read more...]
How the FED Prints Money – Part 2
Yesterday we looked at the process the FED uses to get the money "Out of Thin Air" and into the hands of people who can spend it. In other words the "how" they do this magic. Basically, that route is through special dealers and then it goes into a few select hands. Today we are not going to look at the "how" but instead we will look at "Who" gets the money and where it is likely to go from there. Because if we know where it is likely to go we can get there first and profit from the incoming cash flow. ~Tim McMahon, editor Quantitative Easing (QE2): Who Gets the Fed’s Printed Money? Part 2 of a 6 Part Video Series on Quantitative Easing: In Part 1: How the FED Prints Money, we … [Read more...]
How the FED Prints Money
Printing Money: The process of "printing" money is always a kind of mystery to most people since only about 10% of the total money supply is actually in physical currency. Technically most of the money isn't printed so the term should be "money creation" or "money supply expansion" but "printing money" is used euphemistically to include all forms of expanding the money supply. The monetary base (or money supply) is typically controlled by adjusting monetary policy. This is usually done by the central bank (in the U.S. this is the Federal Reserve Bank or FED). The FED changes the monetary base through "open market transactions" (i.e., buying and selling of government bonds). The FED also … [Read more...]
How You Can Help Take Money Creation Out of the Hands of the Government
Updated February 2014 We all whine and complain about it but usually there isn't much we can do about inflation. About our only choice is to vote with our feet, we can move our funds from one doomed currency to another. This is what the Forex industry is all about. The only other alternative to fiat currency is hard assets like gold. As I've said many times, the value of our money is based on the supply and demand fundamentals. Right now the demand for U.S. dollars is falling and the supply is rising because the government has the ability to create them out of "thin air". Based on basic Economics 101 this means that the value of the U.S. Dollar will continue to fall as long as the … [Read more...]
Deflation or Inflation: Can Helicopter Ben Come to the Rescue?
Why the Fed Cannot Stop Deflation Countless people say that deflation is impossible because the Federal Reserve Bank can just print money to stave off deflation. If the Fed’s main jobs were simply establishing new checking accounts and grinding out banknotes, that’s what it might do. But in terms of volume, that has not been the Fed’s primary function, which for 89 years has been in fact to foster the expansion of credit. Printed fiat currency depends almost entirely upon the whims of the issuer, but credit is another matter entirely. What the Fed does is to set or influence certain very short-term interbank loan rates. It sets the discount rate, which is the Fed’s nominal near-term … [Read more...]
The Long Road to Recovery
By David Galland, Managing Editor, The Casey Report Last week the government released the latest unemployment data. Bloomberg, always ready to roll up their sleeves to help its friends in government (get reelected), was running a headline that “Companies in U.S. Added 67,000 Jobs in August.” While I haven’t had time to go through the minutiae of the report, I find myself scratching my head at Mr. Market’s rather positive reaction to the report, given the bullet points: Manufacturing payrolls declined by 27,000. Employment at service-providers fell by 54,000. Retailers cut 4,900 workers. State and local governments gave walking papers to 10,000 people. The federal government … [Read more...]
Video: Bond Issuers Aiming Toward Debt Man’s Curve
By Jason Lureman Thu, 09 Sep 2010 They say a picture is worth a thousand words, so a chart as startlingly clear as our Debt Man's Curve must be worth 10,000 words. EWI analyst Jason Farkas first created and wrote about this parabola that displays different risk levels of bonds in late July 2010. Specifically, the chart plots sovereign, municipal and corporate issuers on the same spectrum. The resulting sharp curve up makes it easier to see why we think that bond issuers are flirting with a bad crash the same way the driver does in Jan and Dean's hit song from the 1960s, "Dead Man's Curve." More recently, Jason recorded this 10-minute video to take his Currency and Interest Rate … [Read more...]
Men Staring at Goats
What Hollywood can teach us about the Washington, DC establishment … and Obamanomics By Rob Carlson On November 3, 2009, a new movie opened in theatres, starring one of America’s favorite sons -- George Clooney. In the film, Men Who Stare At Goats, the government gathers and trains a group of people with “special” mental capabilities. These men of rare ability are to be trained as Top Secret… Psychic Soldiers. The film was, ostensibly, “based in a top-secret true story.” Employing their special “abilities,” these “Jedi” warrior monks would pass through walls, and see into the future. They would fight – not with guns, but with their minds. Directing their gaze at the enemy, they … [Read more...]
Can the Federal Government Really Stop a Deflation?
The Last Bastion Against Deflation: The Federal Government This article is part of a syndicated series about deflation from market analyst Robert Prechter, the world’s foremost expert on and proponent of the deflationary scenario. For more on deflation and how you can survive it, download Prechter’s FREE 60-page Deflation Survival eBook, part of Prechter’s NEW Deflation Survival Guide. The following article was adapted from Robert Prechter’s NEW Deflation Survival eBook, a free 60-page compilation of Prechter’s most important teachings and warnings about deflation. By Robert Prechter, CMT Now that the downward portion of the credit cycle is firmly in force, further inflation is … [Read more...]
A Layman’s Guide to Government Intervention
This article is part of a syndicated series about deflation from market analyst Robert Prechter, the world’s foremost expert on and proponent of the deflationary scenario. For more on deflation and how you can survive it, download Prechter’s FREE 60-page Deflation Survival eBook, part of Prechter’s NEW Deflation Survival Guide. The following article was adapted from Robert Prechter’s NEW Deflation Survival eBook, a free 60-page compilation of Prechter’s most important teachings and warnings about deflation. By Robert Prechter, CMT I am tired of hearing people insist that the Fed can expand credit all it wants. Sometimes an analogy clarifies a subject, so let’s try one. It may … [Read more...]
