Explanation needed

Hi all,
Like others I've been following the economic roller coaster that greets us daily. I'll admit my complete understanding of economics especially on a global scale is a work in progress, I'm hoping someone with a better grasp of the big picture can shed some light on a big question that looms for me. With the recent announcement of QE2 why would Bernake knowingly try to devalue the USD. Is it basically to keep interest rates so low that money/debt owed results in smaller interest payments. Obviously a huge swing in interest rates would, presumably, increase debt obligations on a huge scale (to the tune of perhaps the same amount being issued as stimulus). Bernake is an educated man and as much as it pains me to say this not an idiot. He has allegedly studied the depression era and admits to being an expert on this specific subject. So why then would he take this route considering many other established and noted economists differ with his strategy. Is this really the last bullet in the chamber?

Please, I get the angle that the NWO/TPTB are in this for the global domination. I would rather focus this thread on trying to understand Bernakes motives if that's even possible. Enlighten me.

brill

reply to post by brill


Hello brill. A couple of missives I read earlier today. Hopefully they can help shed some light. I apologize for the brief nature of my contribution this evening.

Comstock Partners: Why Bernanke Is Gambling

Ambrose: Doubts grow over wisdom of Ben Bernanke 'super-put'

reply to post by brill


Strong currencies do not equate a strong economy, the objective is to find an equilibrium based on the economies general performance.. For us, right now, the best goal is to lower the value of the Dollar so that exports are viewed as more attractable. This in turn helps our biggest international corporations generate extra wealth .. or rather I suppose I should say, it lets them give the appearance of such a thing.

The downside is that if the Dollar is devalued to much it will spark stronger Deflation here at home in the general economy, our pricing is not reflecting the strengthening of the economy but weakening of the Dollar, so our good cost more while wages stagnate.

On the flip side, make the Dollar to strong and exports are to expensive, and while our consumer goods are cheaper, there's no way of ensuring the money is re filtered into the economy, which would generally occur as exports increased with a weaker dollar..

But I wouldn't expect to see it go to any extreme up or down .. they are seeking that sweet spot that will hopefully spur economic growth.

No, I do not have faith they will succeed .. but hey, they haven't burnt the house down yet I suppose..

If there was a meeting
with conspiracy theorist on one side of the table
and TPTB on the other side, Bernanke would be the guy
that TPTB would not let into the room. You have invited him to
the place of honor seated at our right hand side, and he has accepted.

It should be obvious, by now, that if every news channel agrees something is bad
then there is some reason that the elites are certain it is against their interests.
This alone should give us reason to look deeper and ask why demonize him?

But Benanke is on our side, he is doing the maths, he is not being
manipulated by magical words or trendy ideas. He is not
the banking industry. No matter what people tell you.
All those voices are coming from the very bankers
sitting across the table from us. And right now
they are trying to shame us into chasing
him out of the room. Failing that,
at least replacing him.

Hasn't anyone noticed that the stock market was
frozen at around 11,100 for two weeks straight?
The circuit breaker was kicking in every day.
The bankers are locked up in counter law
suits over mortgages while Bernanke
has been buying the stocks they
were trying to dump. Without
the crash no one is taking
their eyes off foreclosures.

And now TPTB have
realized that most
of Wall Street is
in the hands
of a very
loyal
American.

Fear, Uncertainty and Doubt
is what they are attacking us with now.
Don't be fooled. We have just won the first round,
and they are trying to get our star player ejected by crying foul.


David Grouchy

reply to post by brill


Economists are notoriously inaccurate with assumptions. That is why they remain at institutions of learning and not on Wall St.

If the Federal Reserve wants to accomplish something, it will accomplish it. The results 5-10 years down the line will make most likely for another boom/bust scenario. Are you seeing a pattern?

Ride the wave.

Originally posted by Rockpuck
reply to post by brill

 

Strong currencies do not equate a strong economy, the objective is to find an equilibrium based on the economies general performance.. For us, right now, the best goal is to lower the value of the Dollar so that exports are viewed as more attractable. This in turn helps our biggest international corporations generate extra wealth .. or rather I suppose I should say, it lets them give the appearance of such a thing.

The downside is that if the Dollar is devalued to much it will spark stronger Deflation here at home in the general economy, our pricing is not reflecting the strengthening of the economy but weakening of the Dollar, so our good cost more while wages stagnate.

On the flip side, make the Dollar to strong and exports are to expensive, and while our consumer goods are cheaper, there's no way of ensuring the money is re filtered into the economy, which would generally occur as exports increased with a weaker dollar..

But I wouldn't expect to see it go to any extreme up or down .. they are seeking that sweet spot that will hopefully spur economic growth.

No, I do not have faith they will succeed .. but hey, they haven't burnt the house down yet I suppose..

You are correct that a balance needs to struck however they will never accept the
medicine that needs to be taken to ensure that the economy remains viable. Greed
has become their norm and needs to be purged from our society, Lead by example.
Some of US always have and others would try to be as us.

reply to post by Mr. D


I agree with you.. their tactics right now are not a solution but a .. gum filling the holes of a leaking ship so to speak. Better to keep the boat afloat for just a while longer so the captain can make his escape.

Some good insight and reading thanks all. Rockpuck, is deflation or stagflation more in line with the near future ? I may be splitting hairs because either way yes our purchasing power is dwindling fast. I stepped into precious metals (silver) in September by purchasing physical about 70lbs. Wish I had done so a lot sooner and I don't foresee the crazy levels of 200/ounce coming to fruition(wouldn't mint it though ). If those levels were ever hit there would be so much else wrong on a grand scale. I am tempted to enter physical gold as well but that ship might have sailed by now. No question that commodities are moving up quickly now.

I guess the inevitable question now is how soon will we see QE3. I think at that level a lot of foreign governments that are making their concerns public now would be outraged and pose action of some form. Bottom line is that it has to be paid back at some point.

brill

reply to post by Dance4Life


I am beginning to think you are as stupid as you sound.

reply to post by brill


I'll put this as succinctly and clearly as I can.

The US economy BOOMED with low interest rates and easy money. EVERYONE and their dogs, cats, and goldfish got into debt.

Because money is lent out AT INTEREST, this guarantees that some people will never be able to pay back their debts. Think of it this way (an overly-simplified example): if there is $100 total in an economy, every cent of which is lent out at interest, the total all the debtors will owe back to the people who loaned them the money will be greater than $100, so some people will default - guaranteed. This is a DEFLATIONARY situation.

Knowingly devaluing a currency will make it easier for people to pay back their loans. So if in our example above, the currency was devalued to 50% of its worth, people wages would (in theory) increase with the devaluation of the currency, thus making the money owed back easier to pay off.

There are some very serious negatives to this, and this is severely negative to anyone who has spent the last 20 years saving money. www.reuters.com...

Bernanke may be an educated man, but I have never, in my 29 years on this planet, been able to directly correlate education with intelligence.

Devaluing the currency in this manner causes people who hold loans LOSE MONEY on them. This means, any foreign nation who holds a substantial amount of US$ will end up losing money, just for holding on to it. Think of it this way (again, overly simplifying): around the world OIL is sold in US$, so if a country could purchase 50 barrels of oil with what they have today, in 6 or 12 months they may only be able to buy 40. That would be a 20% reduction in the value of the money they have, SIMPLY FOR HOLDING US$.

The risk is that people will want to offload their US$, and the TRILLIONS of dollars that foreigners hold around the world will make their way back into the USA (because nobody will want to hold on to something that is guaranteed to lose value). This would further exacerbate the problem and could potentially lead us to a Zimbabwe like situation.

The serious problem is, that the economy exploded on an massive binge of cheap credit. Not only was the rate of growth unsustainable, but even hoping to maintain what that growth created was unreasonable. The Fed is, in essence, trying to prevent a MASSIVE correction in the size of the economy.

reply to post by brill

Rockpuck, is deflation or stagflation more in line with the near future ?

Speaking as the economy as a whole, stagnation.

Speaking as monetary wise Inflation.

Speaking as purchasing power (our perceived wealth in relation to purchasing vs wealth earned) deflation.



The only reason it's this confusing is because they are screwing with the numbers, and taking the entire system, turning it upside down, spinning it in circles, turning it inside out, blow it up, sew it back together and tell us everything is normal.

IMO, it's impossible to hold off deflation for to long.. the nature of the beast says that during the economic cycle, you HAVE to hit bottom before you can level out.. our bottom, true bottom, has never been seen, because before we could get their artificial inflation boosted the economy. The Keynesian Theory says that when your economy cannot expand based on it's own birth death model, use credit. When you cannot use credit any longer use immigrants. When immigrants cannot purchase any longer, give them credit. When their credit runs dry, print money. When you can't print money any longer, take over another economy and create a new population of consumers.

The important thing to remember with the Western ideology here, this Keynesian mindset, is that you cannot ever, ever, ever give up .. you cannot except an economic downturn, you have to keep the economy expanding by whatever means possible, regardless of the cost.

And good job on the silver, much easier to buy and sell and has higher return rates than Gold. And it's purdy.