Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (107664)	9/21/2014 3:45:36 AM
From: Elroy Jetson	1 Recommendation Recommended By 3bar Read Replies (2) \| Respond to of 219606

Jinh - Your view of economics is somewhat different to mine. The Fed has less influence over interest rates than they'd like people to believe, and far less influence over the "growth of the money supply" which the Fed merely monitors as banks and other lenders create or destroy it. Some bozos got scared after 9/11 and began pushing real estate loans without any underwriting as the way to "keep the economy strong". What they created was an economic loss somewhat larger than $2 trillion, and that gave us an economic depression. The loss would have been the same regardless of the interest rates when you're lending without income or asset verification. They last thing an economy with a lending sector needs is deflation, as deflation vaporizes the lending sector as it melts asset prices. So the central bank or Treasury has to create as much money as was destroyed in the real estate bubble through imprudent lending. If you get this right, Inflation remains more than zero and less than 2%. If you create new money too slowly prices begin to fall. If you create new additional money faster than the bad debt is being destroyed, or monetary velocity increases from it's parlous rate, then you get inflation greater than 2% and have to pull money back. So far the Fed has been right or erring on the side of making new money too slowly with their bond buying Quantitative Easing program. Interest rates might be close to zero for another 10 years if Europe or China miscalculate and fall into deflation - which they're both flirting with currently.