Hi mindmeld; Re: "So you can keep play the game a long time by keeping the price of money high through QE."
In this one sentence you're (a) admitting that they can keep playing the game a long time and (b) confusing high priced bonds with high priced money. No, they're reversed. QE is an "easy money" intervention. QE increases the amount of money available to chase bonds.
Now you're complaining that QE forces private investors out of the bond market. This is quite exactly the intent. This is not a side effect. The problem with the economy is that investors are not investing enough. Instead they're parking their money. QE contributes to making investors spend their money on stuff that helps the economy rather than mortgages or bonds.
Re: "If it does, then you are building up excess capacity in the economy and a bubble will form. This will eventually lead to inflation and a serious contraction. Already, signs of inflation are everywhere in our economy, on all the things that matter to the 99%.";
I'm sure that, right now, the politicians, the Fed and most of the 99% who are worried about their jobs would love to have a bubble. Bubbles are what people like, a booming economy.
As far as the signs of inflation, sorry but I'm not seeing them. Hey, someday you'll be right (like the broken watch). But right now, gold is around $1200 down 26% over the last year. Have you seen the inflation adjusted long-term chart for the price of gold from www.goldprice.org? Gold has magnificent potential to the upside:
In other words, at this time, you may be worried about inflation but the vast majority of the investing public is not. And I think they're right.
Hey, I'd love to see some inflation. And gold has climbed since the bottom around 2000. But we are *not* in any sort of an inflationary period (yet).
The time for tight money (ending QE) will come. And I have no doubt you'll still be in favor of tight money. And I will switch sides then. But not until then. It's too early.
Gold is mostly an investment metal. A metal that follows the economy better, and one that gives somewhat earlier warning of a bubble in the economy is silver. Here's the (not inflation adjusted) medium term silver price chart:
In the above, you can see the fall in metals prices when the financial collapse happened in 2008. Then there was some inflation fears. And now silver is falling.
Few people are worried about inflation.
The overall economy is not in a bubble.
So I disagree with your assertion that too much money is being printed. You can look at the above charts and see that there is no excessive underlying inflation.
I agree that a few assets are over priced. That would definitely include the dollar, long US bonds. And very low interest rate financial instruments that assume companies are going to pay them back are ridiculously expensive, given their risk.
But having these assets over priced is not a risk to the economy.
What will happen to these assets when inflation makes interest rates rise is the same thing that has happened a half dozen times in the last 100 years. Bonds will go down in value, LOL. This is no big deal. US bonds are not the economy. Bonds go up and down in price all the time and they've been doing it for most of 1000 years. It's like the climate. The lefties are all worried about a couple decades of warm weather and now you're all worried about a few years of low interest rates. Quit worrying about it. The economy is cyclic. If someone is telling you that they have a cure for the cyclicity of the economy just ignore them, they are clueless. The economy has huge positive feedbacks built into it and there is nothing anyone can do to stop the cycles. Not the government and not the Fed.
-- Carl |
