Bernanke Leaves Fed with Record Balance Sheet of 4.1 trillion

[Texashiker]

How is it extreme?

10% a month? Come on. After a few months an AR would be almost free.

Prices would drop, but the free market would define a real price point. Deflation would level out because that is how a free market works.

Why the free market is not working with housing is because the fed has been dumping so much money into the market. Prices do not have to go down when banks are handing out free money right and left.

 

[First]

How is your money having more buying power catastrophic?

Would you rather a gallon of milk cost $5 or $2?

Personally, I would like to take my wife out to a nice dinner for $20, instead of it costing $50.

Jesus H Christ. There's a difference between asset deflation and actual dollar deflation.

 

[Texashiker]

Jesus H Christ. There's a difference between asset deflation and actual dollar deflation.

Which has nothing to do with the topic of this thread.

 

[nehalem256]

How is your money having more buying power catastrophic?

Would you rather a gallon of milk cost $5 or $2?

Personally, I would like to take my wife out to a nice dinner for $20, instead of it costing $50.

But if my income decreases from $50,000 down to $20,000 I gain nothing. And unfortunately my mortgage payment didnt decrease

Explain to me why deflation is bad.

If homes, food, cars, trucks, clothing,,, all decreased in price, wouldn't that be a good thing? There was a news article several months ago saying the average working family can no longer afford to buy a new car. Home ownership is out of the question for most people.

Not if my income decreases proportionally.

 

[Tango]

Explain to me why deflation is bad.

If homes, food, cars, trucks, clothing,,, all decreased in price, wouldn't that be a good thing?

Would you buy a house today if you expected it to be worth less in a few years?

In deflation holding cash has a real positive rate of return. All investments (and postponable consumption) are discouraged.

But the worst thing is that in deflation debt grows in real terms. Each second your mortgage becomes harder to support. It is a punitive regime for borrowers, which of course depresses investments even more.

Hyperinflation is bad. Very bad. Deflation is even worse.

A whole lot of nonsense has been written on the generalist media about the Fed policies during the last 5 years. The reality is that it has handled the situation extraordinarily well, much better in fact than basically even the most optimistic had foreseen. It was a very, very complicated juncture with so many things that could go wrong, lots of uncertainty and half the world ready to point their fingers at them.

 

[Texashiker]

But if my income decreases from $50,000 down to $20,000 I gain nothing. And unfortunately my mortgage payment didnt decrease

Not if my income decreases proportionally.

Nobody said anything about wages going down.

For the past 30+ years inflation has outpaced wages. We need deflation for a cost of living adjustment.

Would you buy a house today if you expected it to be worth less in a few years?

Chances are no.

See my above post about the past 30 years.

 

[nehalem256]

Nobody said anything about wages going down.

For the past 30+ years inflation has outpaced wages. We need deflation for a cost of living adjustment.

If milk prices go down what will happen to the wages of grocery store employees?

If car prices go down what will happen to the wages of auto workers

If house prices go down what will happen to the wages of construction workers?

 

[fskimospy]

Explain to me why deflation is bad.

If homes, food, cars, trucks, clothing,,, all decreased in price, wouldn't that be a good thing? There was a news article several months ago saying the average working family can no longer afford to buy a new car. Home ownership is out of the question for most people.

Inflation is the worst thing that can happen. This is why working families have less buying power now than they did in the 1970s.

I'm pretty sure this has been explained to you in the past. If something that costs $100 today costs $90 tomorrow, you would be a fool not to wait. Now imagine if that were the case for everyone: commerce grinds to a halt.

As other people have also mentioned you are mistaking the decrease in the price of a specific asset or service for deflation. It is not. Deflation is the decrease in price for all assets and services as a whole.

 

[fskimospy]

Nobody said anything about wages going down.

For the past 30+ years inflation has outpaced wages. We need deflation for a cost of living adjustment.

So your plan is for everything to get cheaper but for everyone to get paid the same. I hope you can see the obvious flaw in your plan.

 

[Texashiker]

If milk prices go down what will happen to the wages of grocery store employees?

If car prices go down what will happen to the wages of auto workers

If house prices go down what will happen to the wages of construction workers?

So your plan is for everything to get cheaper but for everyone to get paid the same. I hope you can see the obvious flaw in your plan.

Guys, we are getting outside the topic of the thread.

Do you wish to discuss the fed or inflation/deflation?

 

[fskimospy]

Guys, we are getting outside the topic of the thread.

Do you wish to discuss the fed or inflation/deflation?

Monetary policy and inflation/deflation are so closely tied as to be nearly indistinguishable.

Do you now accept that deflation is bad?

 

[Tango]

Chances are no.

See my above post about the past 30 years.

And just like you, neither would everybody else. You just described why investments plunge in a deflationary environment.

 

[Texashiker]

Do you now accept that deflation is bad?

Are you going to turn this into another one of your "are you ready to admit you are wrong" threads?

 

[Tango]

Guys, we are getting outside the topic of the thread.

Do you wish to discuss the fed or inflation/deflation?

How can you separate them? Inflation is a monetary phenomenon and the first Fed mandate is targeting a specific inflation rate.

 

[fskimospy]

Are you going to turn this into another one of your "are you ready to admit you are wrong" threads?

This entire thread is based on the fact that you don't understand what the Fed is doing, your ideas about deflation are just one symptom of that. If you are willing to learn about the Fed and what they do, then we can get on to teaching you about the other differences.

 

[Texashiker]

And just like you, neither would everybody else. You just described why investments plunge in a deflationary environment.

Something has to give.

For the past 30+ years inflation has been outpacing wages. Families had more buying power in the 1950s than right now.

Wages are not going up, so what do you suggest?

The only real answer is deflation in certain markets, such as housing.

If you are willing to learn about the Fed and what they do, then we can get on to teaching you about the other differences.

What the fed is doing is helping corner the housing market. Prices are artificially high and not reflective of a free market.

 

[BoberFett]

A whole lot of nonsense has been written on the generalist media about the Fed policies during the last 5 years. The reality is that it has handled the situation extraordinarily well, much better in fact than basically even the most optimistic had foreseen. It was a very, very complicated juncture with so many things that could go wrong, lots of uncertainty and half the world ready to point their fingers at them.

That's being awfully generous. QE has been Fed driven trickle down. And just as with Reagan's trickle down, none of it has done anything but pad balance sheets.

 

[Jhhnn]

He also led them to record profits

More profitable than Apple and Exxon COMBINED. Impressive

For once, we agree. The Fed expanded operations & increased profits tremendously to meet market demand for liquidity. They have a unique ability to do that.

Under the circumstances, it was a wise business move and a wise move wrt the economy.

 

[glenn1]

I'm pretty sure this has been explained to you in the past. If something that costs $100 today costs $90 tomorrow, you would be a fool not to wait. Now imagine if that were the case for everyone: commerce grinds to a halt.

As other people have also mentioned you are mistaking the decrease in the price of a specific asset or service for deflation. It is not. Deflation is the decrease in price for all assets and services as a whole.

Productivity-driven deflation has been a feature of the economy for centuries. Electronics like TVs and computers are a prime example; has commerce in laptops ground to a halt because today's laptop that costs $1,000 will be replaced with faster model next year that only costs $900?

I'll leave to you to defend why the Fed should prop up bubble prices in financial assets rather than letting natural price deflation occur. Feel free to explain why housing should cost $400/square foot rather than $100 or even $1, and why it would the Fed should be taking extraordinary measures to keep it high.

 

[Texashiker]

Under the circumstances, it was a wise business move and a wise move wrt the economy.

Please explain to me how what the fed did helped anyone but wall street?

Tell me how any of that money helped the homeless mom living on the streets get out of poverty. Please tell me anyway those trillions of dollars created tens of thousands of jobs that will last for decades to come.

 

[Throckmorton]

How is your money having more buying power catastrophic?

Would you rather a gallon of milk cost $5 or $2?

Personally, I would like to take my wife out to a nice dinner for $20, instead of it costing $50.

If a gallon of milk costs $1 we'll all be RICH!! WOOHOOOO!!!!

Or maybe our pay would go down by an equivalent amount, meanwhile we'll still OWE the same amount of DOLLARS that we did... That is those of us who aren't independently wealthy and have things like student loans and mortgages.

OH I get it now. People who are pro deflation are trying to screw the working class even more than it is already being screwed. I'm onto you.

 

[Texashiker]

OH I get it now. People who are pro deflation are trying to screw the working class even more than it is already being screwed. I'm onto you.

For at least the past 30+ years, maybe even since the 1950s inflation has outpaced wages.

Working class families are no longer able to even buy a new car.

Home ownership in a dream for most.

We have a record number of people on welfare.

Instead of creating jobs, the fed dumped enough money into the bond market to rebuild our highway system 4 times and provide thousands of jobs for decades.

Thousands of people could have been provided jobs for 2 decades with just one month of that bond market buying, much less 3 years worth.

There will have to be some kind of correction in the market. The fed can not keep shoring up prices to protect investors forever.

 

[Throckmorton]

For at least the past 30+ years, maybe even since the 1950s inflation has outpaced wages.

Working class families are no longer able to even buy a new car.

Home ownership in a dream for most.

We have a record number of people on welfare.

Instead of creating jobs, the fed dumped enough money into the bond market to rebuild our highway system 4 times and provide thousands of jobs for decades.

Thousands of people could have been provided jobs for 2 decades with just one month of that bond market buying, much less 3 years worth.

There will have to be some kind of correction in the market. The fed can not keep shoring up prices to protect investors forever.

If they own "$4 trillion in assets" doesn't that mean they borrowed all that money by selling bonds? They didn't put any money into the economy, they took it out.

But if they did put money into the bond market, isn't that supposed to "trickle down"? Creating jobs is taboo now... The Republicans and Tea Party have deemed that to be socialism--- which it is-- but they made socialism a bad word.

 

[Texashiker]

If they own "$4 trillion in assets" doesn't that mean they borrowed all that money by selling bonds?

I thought the fed was printing money out of thin air.

I am serious on that thin air statement. What is stopping the federal reserve from printing as much money as it wants?

 

[BoberFett]

If they own "$4 trillion in assets" doesn't that mean they borrowed all that money by selling bonds? They didn't put any money into the economy, they took it out.

But if they did put money into the bond market, isn't that supposed to "trickle down"? Creating jobs is taboo now... The Republicans and Tea Party have deemed that to be socialism--- which it is-- but they made socialism a bad word.

I don't think you're understanding the difference between the Federal Reserve and the US Government...