More stimulus from the Federal Reserve

[maple_leafs182]

Inflation does not solve the problem...but it is an indicator that consumer spending has rebounded for an economy that depends on the velocity of money (one of the variables for inflation). Still lower interest rates should spur more purchases of durable goods, housing, automobiles, etc.

Shocking a patient with paddles is not routine medical procedure, but sometimes it is necessary to get a pulse and vitals back.

I really think your economy needs to focus more production then consumption in order to fix the economy. I don't think you will be able to spend your way out of this one.

[Moonlight Graham]

Hilarious that this was announced the day after the mid-term elections. Coincidence? Ha!

I guess Obama didnt want this to screw up the Dem election hopes even more.

[bush_cheney2004]

I really think your economy needs to focus more production then consumption in order to fix the economy. I don't think you will be able to spend your way out of this one.

The USA is one of the most productive countries in the world. Worker productivity is higher than in Canada....has been for many years.

http://247wallst.com/2010/06/28/72005/

[maple_leafs182]

The USA is one of the most productive countries in the world. Worker productivity is higher than in Canada....has been for many years.

http://247wallst.com/2010/06/28/72005/

Do you not see any problems with your economy?

[bush_cheney2004]

Do you not see any problems with your economy?

Compared to what? When? The US economy is in a post recession period with slow growth, just as it has been many times before. Having lived through the 1970's and a "Misery Index", it is hard to get excited about very very low interest rates, negligble inflation, and lower unemployment.

When should I begin to worry?

[maple_leafs182]

Because the Federal Reserve is buying $100 billion worth of government debt a month. They are paying for the deficit by printing money.

I think rising prices will hurt the economy. Many people can't afford to pay more for food and gas.

The Federal Reserve is playing a dangerous game with these inflationary policies.

Honestly, I can't see many foreign countries like China buying very many more bonds. I think the Fed will end up having to buy more.

There will probably be QE3 which will be significantly larger then QE2.

[bush_cheney2004]

....Honestly, I can't see many foreign countries like China buying very many more bonds. I think the Fed will end up having to buy more.

That's what they said last time. Yet they still keep buying at auctions.

All countries are "foreign" by definition!

[Pliny]

Maybe not directly, but you have certainly lived through deflation elsewhere, as in the case of Japan.

Canada's deflation psychology is already here:

http://www.cbc.ca/money/story/2008/11/21/f-pittis-deflation.html

That article is full of holes. Firstly, the CPI is not an indication of deflation, it doesn't include food prices and energy costs which have both increased. A period of deflation is marked by a general lowering of prices on all goods and services. Housing is down, yes. It is called a price correction, not deflation. The only way deflation can occur is by not adding "money" or currency to the economy with the resultant drop in the general price level. Vast amounts of money are being created so it is impossible to be in a period of deflation.

Deflation is painted as the big bogeyman with housing as an example. Who wants to buy a house that is going to be worth less in six months than the mortgage. It's true no one would want that but without a period of inflation or speculation, that is to say an artificially created boom, that would not occur. Supply and demand would be more of a governor in housing prices. The article suggests that demand will be zero in a period of deflation. While it will be less it is only a matter of time before the price level is reached that someone will be buying. The market will adjust the price and it will generally be fairly stable dependent upon supply and demand. When the supply is too great then a period of growth is halted until demand catches up. What governments wanted to accomplish with the central banking theory and Keynesian interference in the monetary supply was end the cycle of price adjustments in a macroeconomic way and stabilize them. Unfortunately when they have a printing press they do not tend to stay within the bounds they set for themselves some crisis or war sets in and they start the printing presses.

Our dollar buys only 5% of what it bought a century ago and as governments keep promising more and more to their citizens and as crisis after crisis occurs the inevitable return of the value of our fiat currency to zero is a short interval away.