Biderman on QE to Infinity!
Then, in May 2010 and again in May 2011, the stock market started a sell-off that lasted several months. Will that happen again this year? I actually do think we are at the start of another stock market decline.
Why? Because the ups and downs of the stock market are all due to the actions of the Federal Reserve. It is their money we are playing with.
Before the Fed took over control of the stock market, new money for stocks used to come from the amount of wages and salaries and other income not spent, also called savings. But no, not anymore.
In March 2009, the Fed announced an $800 billion QE1. Stock prices, which were cut more than half to a $9 trillion low from a $22 trillion peak in 2007, soared back to $17 trillion by April 2010, recouping 70% of the top to bottom decline in stock market prices.
On the other hand, how did the overall economy do during QE1? Nowhere near as well. While stocks recouped 70% of the decline, taxpayers after tax income, including capital gains, barely rose by the end of QE1.
QE1 ended in March 2010, From May 2010 stock prices dropped from $17 trillion, to just over $15 trillion by August 2010. Then in August 2010, the Fed announced stimulus package two, a $600 billion QE2. Stocks took off again and peaked at just over $19 trillion at the end of April 2011; two months before QE2 ended.
Renewed Hope that Jon Corzine, President Obama’s Top Tier Campaign Bundler, Will Face Criminal Charges-Tavakoli
Up until now, President Obama’s campaign has given the appearance of an endorsement of Jon Corzine, the former CEO of MF Global, a former New Jersey governor, a former New Jersey U.S. senator and major campaign contribution bundler for President Obama. At least this is the interpretation of many who viewed the list (as of April 30, 2012) of President Obama’s money raisers through the first quarter of 2012. With no clarification or footnote, Jon Corzine is shown as having raised more than $500 thousand in the roster of 2012 Volunteer Fundraisers. The re-election campaign has not disclosed the exact number. I requested further information from the campaign and received this response:
“Corzine’s money was returned but the money he raised a year ago was not and thus it qualifies him to be on the bundler list. He is not part of the campaign any longer, this [Obama for America and Obama Victory Fund 2012 Volunteer Fundraisers] list is cumulative.”
That may be. The campaign responded it told the press this in January, and the press has forgotten. Really? It told the press in January and now the campaign is blaming the press for its interpretation of a list released in April titled “2012 Volunteer Fundraisers.” If the campaign wants to eliminate ambiguity, it can put it’s assertion that Corzine “is not a part of the campaign any longer” on the list in writing for all to see. But that would make it clear it is distancing itself from Corzine. It seems to me that President Obama’s campaign is trying to have it both ways: deniability as it gives the appearance of support for Jon Corzine. Both President Obama and Vice President Biden have publicly praised Corzine during Corzine’s previous campaigns:
- The current acceleration of credit via central bank policies will likely produce a positive rate of real economic growth this year for most developed countries, but the structural distortions brought about by zero bound interest rates will limit that growth and induce serious risks in future years.
- Not suddenly, but over time, gradually higher rates of inflation should be the result of QE policies and zero bound yields that will likely continue for years to come.
- Focus on securities with shorter durations – bonds with maturities in the five-year range and stocks paying dividends that offer 3%–4% yields. In addition, real assets/commodities should occupy an increasing percentage of portfolios.
Know your hyperinflation. Must read by Bill Mitchell.
Zimbabwe is the new Weimar Republic. Not! Zimbabwe is the front-line evidence that shows that government deficits will generate hyper-inflation. Not! Zimbabwe is the demonstration of the folly of a fiat monetary system. Not! Zimbabwe is an African country with a dysfunctional government. Yes!
First we should make sure what we are talking about. The right think that when the workers get a pay rise it is inflation. It is not. The left think that when the corporate sector increase the price of a good or service it is inflation. It is not. It is also not inflation when the exchange rate falls pushing the price of imports up a step. It is also not inflation when the government increases a particular tax (say the GST) by x per cent to some new level.
So while a price rise is an essential pre-condition – a necessary condition – for what we call inflation it is not a sufficient condition. That is, the observation of a price rise will be required to define an episode as being inflationary (at some point) but observing a price rise alone will not be sufficient to categorise the phenomena that you are observing as being an inflationary episode.
Inflation is the continous rise in the price level. That is, the price level has to be rising each period that you observe it. So if the price level or a wage level rises by 10 per cent every month, then you have an inflationary episode. In this case, the inflation rate would be considered stable – a constant rise per period. If the price level was rising by 10 per cent in month one, then 11 per cent in month two, then 12 per cent in month three and so on, then you have accelerating inflation. Alternatively, if the price level was rising by 10 per cent in month one, 9 per cent in month two etc then you have falling or decelerating inflation.
If the price level starts to continuously fall then we call that a deflationary episode.
Hyper-inflation is just inflation big-time!