Qe2

[zeitgeist]

IMO it looks like it is working somewhat.
Not all the goals are going the way we would hope, but inflation expectations have raised

+1 for a Bernanke. Came into a shitstorm and has done a good job handling it.

[axiomatik]

ah, Quantitative Easing.......came into this thread thinking it was about the cruise ship.

[zeitgeist]

hahaha

guess nobody cares about it lol

[TheWolf]

how much money has the fed pumped into the market? no one knows for sure..

when congress takes up debt ceiling issues because they've climbed from 12 to 14.3 trillion in a couple of years... they won't be talking about how much more of that is shadow debt from the fed..

debt simply is a commitment of future earnings and both groups are hustling the same line because they have yet again maxed out their credit cards.

[axiomatik]

shadow debt from the fed? The Fed doesn't have debt, it is a central bank, and as such, has the power to create or destroy dollars. The Fed isn't secretly getting loans from India to finance QE2, it is creating money. The financial crash caused a large contraction in the money supply as wealth was destroyed. The QE2 is intended to fill in some of that gap and try to jumpstart commercial activity.

[TheWolf]

you are correct. not debt but inflationary pressures that mirror debt.

wealth "destroyed". where did it go?

[axiomatik]

Actually, inflation reduces debt by decreasing the value of outstanding debt in real dollars. If the US were magically able to balance the budget starting this year, and not make any payments towards the debt, the value of the debt would decrease 2-3% each year simply due to inflation, since the debt is denominated in dollars.

As for destroyed wealth, it's everywhere. People who owned a home that dropped in value saw their net worth decreased, as they once had an asset valued at x dollars, but now is worth only y dollars. Banks that counted mortgages as assets have seen those values drop as people have fallen behind in payments or been foreclosed on. The expansion of the money supply due to fractional lending has decreased as banks have greatly reduced the amount of loans they write. etc etc.

[kingkilburn]

Inflation is real debt as far as your wallet is concerned. You can't simply print money forever to cover your costs.

How the hell am I supposed to ever become financially stable and be in a position to save when what I have saved becomes meaningless because of purposeful inflation?

When I finally can save they drop the interest rates to keep me working.



I am left perpetually fighting against their current of inflation.

[axiomatik]

Inflation is real debt as far as your wallet is concerned. You can't simply print money forever to cover your costs.

As I mentioned, inflation cuts both ways. Sure, it reduces the value of your money over time, but it also reduces the value of your debt. And frankly, most people have more debt than cash lying around (ie, their mortgage). I personally have about $10k sitting in savings, but I also have a $190k mortgage. Inflation will help me over the long run by reducing the value of that mortgage. In fact, it will have a far larger effect on my mortgage than any cash I have sitting around.

Second, the key to wealth is not trying to accumulate cash. You will not become rich by sticking money under your mattress, even if there were 0 inflation. The key is to put that money to work, investing it so that it makes a return. Earning a return on investments insulates you from inflation. Sure, there is risk, but that is why high-risk investment has higher opportunity for returns.

Or, you can just buy Government I-Bonds. They are savings bonds, but unlike traditional EE-Bonds, I-Bonds are tied to the CPI, and earn CPI+1%, so that they are pretty much guaranteed to not lose value due to inflation.



How the hell am I supposed to ever become financially stable and be in a position to save when what I have saved becomes meaningless because of purposeful inflation?

If you can't save enough to outpace inflation (2-3%/year), then you need to re-evaluate your spending habits.

When I finally can save they drop the interest rates to keep me working.

I am left perpetually fighting against their current of inflation.

This just sounds paranoid, as if there is an international cabal following your every personal move, and manipulating world markets to keep you personally down.

[axiomatik]

how much money has the fed pumped into the market? no one knows for sure..

I just heard part of this radio program the other day, where they visited the Federal Reserve and talked about QE2 and what the Fed did in the past. IIRC, at the height of the meltdown, when the banks were on the verge of collapsing, the Fed purchased about $1.5 Trillion worth of securities on the private market (mortgage-backed securities, etc).

EDIT: just realized that I forgot to copy the link to the radio program:
http://www.thisamericanlife.org/radio-archives/episode/423/the-invention-of-money

Just click on "Play Episode" next to the picture to listen to it for free.

[sw20>>s14]

in lieu of this thread and some of the timid responses regarding savings and wealth, i would highly encourage anyone who hasnt already to read, "the richest man in babylon" by George Clason (among a few others if interested)...