OT Bernanke's QE explained

There have been a lot of direct and oblique references lately in this NG to monetary issues re: China, the US, interest rates etc., and their effect on respective economies. Perhaps this will help explain the Fed's new "Quantitative Easing" policy and what it means to us all.
http://market-ticker.org/akcs-www?post 2126
--
Work is the curse of the drinking class.

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This would be hilarious if it wasn't so terrifying. On the bright side, no one seems to bitching about welfare mothers, anymore.
nb
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As a plumber among other things I wrote this on September 22 of 2008 and posted it on alt.politics; that was when Bush was still in office.
The problem with positive thinking or the secret as it is currently called.
The art of Karate is based on positive thinking. If you truly believe that your hand will go through four concrete blocks it will. If you doubt it even in the slightest then you will hesitate and break your hand. There are however limitations even to Karate. What if for example it wasnt four concrete blocks but ten, or a steel bar instead of concrete blocks? You cannot change the law of physics no matter how much you believe. All the positive thinking in the world will not help you; you will break your hand. Karate is a little like religious fundamentalism. Faith or a trusting belief may be fine when God and heaven is concerned but in our relatively short inconsequential little lives here on earth we need to heed the laws of physics. The $700 billion bail out plan will not work. It will not work because it is not enough. All the gold in Fort Knox would not be enough. The same mistake was made with Iraq. There was too much positive thinking. All the U.S. troops and all the money will not change the minds of the Iraqis. Sooner or later they will have traded one tyrant for another that is all. We will however have lost many thousands of our soldiers and trillions of our dollars. Wall street has been gambling for a long time but as a good gambler has to know when to quit and go home. As the song says "know when to hold them, know when to fold them". That is the law of physics at work here. The Bush administration will break our hand.
http://groups.google.com/group/alt.politics/browse_thread/thread/774a1ad92e18238c/92a7062d5d541fcd?hl=en&ie=UTF-8&q=%22The+problem+with+%E2%80%9Cpositive+thinking%E2%80%9D%22
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On 11/16/2010 7:40 AM, Caesar Romano wrote:

No big deal. It's just the stagflation that a lot of us have anticipated from the liberals economic policies.
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Frank wrote:

We wouldn't need so much monetary easing if we had more fiscal solutions available. Inflation is not and will not be the problem because we have too much idle industrial capacity and absolutely no wage pressure from labor (high unemployment, no unions, lots of foreign workers). We really have to worry more about deflation, which can be a much more serious problem. Actually this recession is fairly easy to fix, and conventional measures can fix it without causing the pain required to fix stagflation.
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On Tue, 16 Nov 2010 13:12:21 -0500, Frank

I'm a liberal. I don't support the economic policies that have the wealthiest Americans now owning 29% of our total wealth. That's up from 8% prior to Reagan. Trickle down (that would be the conservative solution to everything) doesn't seem to be working here.
Of course, the Bush tax cuts certainly did stimulate job growth. Mmm. Maybe not.
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about by many others including Bush) took it all away.
--
"Even I realized that money was to politicians what the ecalyptus tree is to
koala bears: food, water, shelter and something to crap on."
  Click to see the full signature.
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On Fri, 19 Nov 2010 06:24:28 -0500, "Robert Green"

Well said.
--
Work is the curse of the drinking class.

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-snip-

Got some graphics for that? I spent a little time looking and the first place I came up with a cite it was in an article written in 1999 referencing a 1995 article. http://www.hks.harvard.edu/inequality/Seminar/Papers/GoldinKatz.pdf "Estimates of the percentage of wealth held by the top 1% or 5% of the wealth distribution show wealth inequality to be as high at the present time as it was in the late 1930s (Wolff 1995, 1998)"
If nothing else that 48 page article points out the myriad of ways you can measure things- so I guess it is likely someone can draw comparisons between now and pre-depression--- but I haven't heard any mainstream economists still painting that picture.
Jim
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wrote:

The site with the original charts seems to be broken now. Perhaps you can get to the charts referenced at the top of the following page. My browser now just returns a Whoops.
http://www.businessinsider.com/us-wealth-inequality-2010-7
This one below is at least accessible, and was fairly easy to find:
http://seekingalpha.com/article/189649-wealth-disparities-in-u-s-approaching-1920s-levels
but it's got a blip (data missing for 50 years!) in the horizontal axis that makes the suspension bridge tower effect somewhat less noticeable, but if you look at the 1923/9 and 2002/7 bars for the top 1% it's pretty obvious that the concentration of wealth is back with the one percenters. This last one:
http://www.infiniteunknown.net/wp-content/uploads/2009/08/income-inequality.gif
Shows the two towers quite clearly. This site:
http://en.wikipedia.org/wiki/Thomas_Piketty
has information about the economist who created that chart and who specializes in economic inequality. He built statistical series based on a similar method to that which he used in his studies of France, working with other economists, particularly Emmanuel Saez. This research led to reports on the evolution of inequalities in the USA.
The other author of the chart above is:
http://en.wikipedia.org/wiki/Emmanuel_Saez
As far as I know, they are both world-famous economists. Saez is Professor of Economics at the University of California, Berkeley. He received the John Bates Clark Medal in 2009 and was named a MacArthur Fellow in 2010.
IIRC, Nobel Prize winner Paul Krugman is supportive of their work. They may or not be mainstream in your estimation, but they are in mine.
The immensely rich can afford to wait out bad economic times, and their vast wealth does little to stimulate the economy. It's a pretty easy concept that in a consumer-based economy, concentrating wealth outside the hands of the middle-class consumer is a bad, bad thing. Yet that's where we are sitting. When one of the wealthiest men in America, Warren Buffet, comes flat out and says the rich aren't paying their fair share, it's probably a vast understatement of the way things are.
-- Bobby G.
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That led me to here- http://www.businessinsider.com/plutocracy-reborn Showing 2 charts. One is "The average income of the top 0.01% as a multiple of the average income of the bottom 90 percent of US families"
It does show a huge spike in the late 20's- (897), it stayed below 400 from 1937 to about 1985. Spiked to above 897 in about 2000 - dropped to about 500 in 2001- and at the end of the chart, 2006, it was well over 1000 and rising.
The other chart there is tracking the top income tax rate. the author makes the case that the higher the income tax on the top bracket- the more equity there is. If you squint a bit I suppose-- but I know how much would be gained by going back to a 94% top bracket.

Much better chart. I still don't think we're in for another depression-- but that one clearly shows how well economics 'trickle down'.

first chart- and with an extra spike in the late 30's-- but otherwise pretty much follows it.

And I'll add Robert Reich to those who cite their data and respect them. But I have seen both Krugman and Reich in the past few weeks and neither thinks we are headed for a depression. They both have said that it is a drawn out recession and one of the problems is that all the money is at the top. But there is a world of difference between recession and depression.

We're in total agreement on most everything except in predicting a depression. But since humans are historically poor in seeing into the future- we'll have to wait and see who is right.
Jim [here's a Reich article that has some thoughts http://www.nytimes.com/2010/09/03/opinion/03reich.html ]
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-snip-

Speaking of Warren- did you see this? http://www.nytimes.com/2010/11/17/opinion/17buffett.html
"Thank you Uncle Sam"
I like the line ". . . I did have a pretty good seat as events unfolded. . "
Jim
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wrote:

Yes, it's actually open in another window. Are you spying on me!? (-:
Buffet explained the big government payouts of late quite nicely when the TARP was first proposed, saying that the Feds are the only force great enough to counterbalance the sometimes bad effects of capitalism and we should be thankful that they're able to otherwise we would be deep in Great Depression II.
-- Bobby G.

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Typical republican claptrap. Some truth, a lot of made up BS. If you're not an economist and you want to learn more about quantitative easing in terms you can understand, try this link instead <http:// www.npr.org/blogs/money/2010/10/07/130408926/quantitative-easing-explained>. This one is also great - you can "translate" the Fed statement into plain english <http://www.npr.org/blogs/money/2010/11/03/131043062 / federal-reserve?ft=1&f=93559255>. An example: The first sentence ofthe Fed statement "Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow" translates to "The economy still sucks."
Planet money gives you the facts and BOTH sides of the argument without the partisan BS.
-J
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Those links seem to have got messed up a bit.
Just google:
planet money quantitative easing
-J
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