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May I refer you back to this September post
Ben Bernanke has committed to raising inflation. He has said very clearly when announcing the "Quantitative Easing" Program Part II on Wednesday (QE2) that starts with the Fed buying 600 billion of essentially currently valueless mortgage related paper from the banks who are holding this toxic waste between now and June. In short, he is Printing Money. He will continue to print money to achieve the inflation goal he has set out. He said this. It's not some "try to figure out what Alan Greenspan actually said" game. He says this very clearly. He wants you to know that your cash is trash.
If you have money in a mattress, it will be worth less and less until the ship turns around and that can easily be 10 years, estimated by people a lot smarter than me and who get paid to think about such things 24 hrs a day.
The dollar devalues because of more $100 bills flying out of the sky, and the market and pretty much anything priced in dollars goes up because it takes more dollars to buy the same bar of gold bullion, barrel of oil, share of IBM, whatever.
This has some simple effects with regard to spurring the economy. People make more money in the market and therefore have more money to spend. They spend it on products and services which queues businesses to hire people to handle the increasing demand, which generates more demand as well as tax revenue btw because of more paychecks being handed out each week.. Very simple really, and Ben has laid this out very specifically in these very terms. He has recently made the case to people like China, Japan, and other countries who have bought our treasuries (devaluing dollars) that it is in their best interest to chill while their investment in dollars declines because eventually a hot US economy will once again be the perfect place for them to sell their wares. Quite true.
All of these countries are and have been buying Gold as a way to minimize the current losses.
If China gets mad and revalues their yuan to increase the value of the dollar, Ben Bernanke will simple play Whack-A-Mole with them. it appears to be a can't lose game as long as the economy stays weak and unemployment if high.
Personally, I take this action and these statements to mean that I am a moron if I am not invested in assets that will only increase in value and keep my dollars at least somewhat even with inflation.
The market could take a temporary dive Monday or next week or next month, but in the overall short term - next year, and for years following the market is going up because the Federal Reserve is 100% committed to causing inflation by printing money to rectify the state of the economy. And remember the Dems had jack to do with it as they try to take credit for it whenever it does get better.
For what it's worth.
Good luck to all. Live Long and Prosper and all that stuff.
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Either that or, crash the world economics. The New World Order-New One World Currency. That was in the news last month-some are begging for one kind of bucks for world trading.
ReplyDeleteThen the money in the tin cans buried in the back yard and stuffed in grannies mattress will be worthless. They might try to trick you into turning it in for 2 for 1 for the new bucks, but then tax you on the new found mattress money-how you gonna prove you already payed the tax on all that loose dough. WHY CHANGE THE $10,000 money laundering limit to $5,000? HeheheHaHaHahahahaha you've (we've) been had.
Hope this is a far off-but coming to a day near you soon enough.
They Say, Anything's possible.
ReplyDeleteI can't imagine we'd do it until after the Euro experiment fails though. You know how much libs like to Repeat Failure.
;-)
Printing huge gobs of money is a scary thing to do.
ReplyDeleteOpus, Yes, it is Ben's big adventure. His gamble. Extra money supply Can be destroyed later though
ReplyDeleteI'm not making a case for Ben. There is much about this I don't care for, in particular, that the majority of wall street and banks foreign and domestic are afforded a DO-Over as a result of all this, rather than being punished for making wild irrational bets on the mortgage market and losing(and now not losing), But:
- Ben has declared war on Deflation
- it will help people on fixed income because their cash IS trash. They now have a chance to keep their nose above water with rising asset prices.
- the national debt gets smaller with every tick lower on the dollar value.
- with all the money being stolen from us Productive Taxpaying people, this will result in Lower Mortgage Rates yet, and we will benefit by refinance. Our homes become cheaper and our disposable income goes up. And if we're in the market, our savings keep level with the water level.
On the down side, it can't go on forever. Real demand must take the place of inflationary value. Essentially it's a game of musical chairs and you will want to have a seat when the music stops.
My advice would be to watch interest rates on things like savings and CDs, etc. When they start going up, the market should start heading down as one simple way of looking at it.
I remember when QE2 was the name of a cruise ship. Now it is just another government name for something they think we little people are too stoopid to understand.
ReplyDeleteSoloman, Isn't it interesting how they come up with the nomenclature ?
ReplyDeleteQuantative Easing.....
Like if they want the common man on board - and they most certainly do - why not name it - 'The Federal Reserve Has Declared War on your Cash So Stick it in the Markets'
Ps Soloman, how about back in 2007/2008, when Ben and Paulson said "Sub Prime is Well Contained". HA!
ReplyDeleteInvestments are always tricky, and everyone is asked to take a risk of loss when doing so.
ReplyDeleteThe Fed's move to monetize the debt is bad, but I think its premature to say that this dumb move will be the proximate cause of the Apocalypse, where Mel Gibson's character 'Mad Max' roams the Outback in search of gasoline to put in his Police Interceptor.
But I blather about things off the point: GOLD. The basic rule of investing is this: buy low, sell high. Gold is at an all time high. Gold is a commodity. Us oldsters remember when gold was selling for over $800 per ounce in 1980 (the end of the horrible Carter malaise) to around $300 per ounce in 1984 (Reagan's second term).
If you invest in gold now, you are risking doing exactly the same thing that folks were doing in 1980: 'buy it now, it will only go up.' But it didn't. It tanked.
Sure, put a few bucks into gold, it may pay off, it may not, but don't bet the farm on gold.
I'm just sayin' Kid...
All valid points Fredd.
ReplyDeleteAs an aside though, I head a couple interesting factoids about gold.
In the early 1900's a $20 gold piece would buy you two fine suits. Today, a $20 gold piece will buy you two fine suits. The paper 20 dollar bill is worth around 20 cents or less.
Since gold was 'legalized' in the 1970's, it has out-performed equities.
we are so screwed. I can't believe they're actually printing freaking money. Haven't they ever opened a history book? Or . . . oh, I don't know, thought it through? Good grief. The Fed is way out of control, time for an audit. Big time.
ReplyDeleteFuzzy, yes, this is one of the reasons I think it may be too late to stop the train. On the other side of that, I can't help but believe that life rewards those who do things right. I hope that's true. It hasn't been lately.
ReplyDeleteAnwyay, no sense losing money personally. And of course, no one can guarantee anything in the market, but you do your best to figure things out and dive in eh? ;-)