patrick.net

Bernanke should just buy the gold, oil, and stock.

That will be more direct, and more profitable too.

QE2 is all about monetizing the government’s newly issued debt because the Chinese and others won’t buy it

While it is true that the Chinese have been on a buyer's strike since Oct 2010 and are now only letting their interest payments roll over, it is not true that noone is buying our debt, in total we're up another $600B in hock over the TTM, a decent 15% rate of growth.

The Chinese have run up $250B in trade surplus against us in that time, so I guess they've decided they have more worthwhile investments to make with their dollars.

You blame Bernanke and "Keynesian" stuff, but the true difficulties we face go a lot deeper than all that.

The simplest way to put it is that the 2000s doubled-down on the mistakes we started making in the 1990s, in addition to creating new problems like cutting $2.5T in tax revenue while starting two rather costly wars.

It was 2001-2003 when we as a nation decided we could have our cake and eat it too.

Right now we're very far away from coming to grips with the stuff we got to fix. We've got to raise taxes, cut the defense budget in half, get our per-capita health care cost down from $8000 to $4000, and find another $300B or so in cuts to get our spending back to 2007 levels (~$2.1T ex-Social security).

And if left unchecked, in the end it will lead to hyperinflationary disaster.

Assertion not in evidence. There's a big difference between 5% inflation and Zimbabwe.

During St Raygun's second term the CPI was over 5%.

Granted, we can't inflate our way out of medicare, social security, or our oil production deficit, so things are a lot more serious now.

But a deflationary collapse is just as "wealth" destroying as a inflationary spiral, for this simple reason:

http://research.stlouisfed.org/fred2/series/CMDEBT

you wanna play deflation, you're going to see that curve get cut in half, the hard way.

The gold, stock, oil, bond and whatever markets are ALL predicting another QE.

Bernanke has no backbones. He will do whatever to please his boss. At the end, we will see hyperinflation stopping the music.

He already bought all the crapy derivatives, whatever they were called that banks were trading with housing. Now we have federal government that has an incentive to keep those as highly priced as possible.

I prefer fed stays out of buying anything.

xenogear3 says

Bernanke should just buy the gold, oil, and stock.

That will be more direct, and more profitable too.

Thats what all municipalities thought of GSE's until they crashed.

And will it be called Q3 or something else (when and if)? ...

QE3 is necessary because the last round and the round before that failed to create the illusion of prosperity and get the Greater Fool Theory into play. And, the government did not fix the underlying causes of this credit-driven recession.

Until those who forged documents using somebody else's (Linda Green) name are sitting in prison, until the government makes BAC, C, etc. sort out the servicing/noteholder issues, QE will not have the intended effect.

It COULD work AFTER these problems are sorted out, because there is still an attitude of no confidence and extreme skepticism in the economy's mechanisms.

I really don't understand why people are so afraid of inflation. It's the best way to debts under control while simultaneously weakening our position relative to the Chinese.

Yeah, if it gets out of control things could go bad, but the worst case isn't really any worse than what will happen if we default on our debt.

And then there is this view...

http://www.marketwatch.com/story/bernanke-says-inflation-means-no-qe3-2011-04-27

hmmm...