Ex-Fed Official: I'm Sorry for QE

[cpwill]

One of several reasons I think that another market correction (albeit, nothing like 2008) is building.

There's a real question as to whether the massive bond-buying program known asquantitative easing was worth the cost, former Federal Reserve official Andrew Huszar said Tuesday."My argument is not that QE was not at all useful," he said on CNBC's "Fast Money."

"I believe that at the time, it was just one more tool that the Fed introduced to try to help the economy," he said. "My point, ultimately, is the idea that very quickly into QE, it started becoming obvious that it wasn't working in the way that it was supposed to."...

"I think the real issue is that the Fed has expanded its tool kit so dramatically, and really there are some real questions as to how potentially it unwinds, when it unwinds," he said. "We saw this past summer there was this announcement of potentially a taper and the markets actually tanked, and after that the Fed backpedaled. What's going to happen if we go on for months, years longer?"...

"I can only say: I'm sorry, America," he wrote. "The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time."....

QE's de facto support of the stock market left out a sizable portion of the people it was supposed to help, Huszar added.
"Let's be honest, 50 percent of Americans don't own stock," he said. "There's a certain amount of trickle-down monetary policy involved here. And there's a real question as to whether that works compared to the huge costs that the program has."...

 

[ChezC3]

I watched this guy on Fast Money, man started choking up...

Poor guy was the executioner, not the policy maker...

 

[Gaugingcatenate]

One of several reasons I think that another market correction (albeit, nothing like 2008) is building.

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Scary, but one knows it has to come.

Not yet of the right mind to get a proper grip as it is too early in the morning and have yet to have my coffee, but while he addresses the addiction, the de facto support for the stock market he leaves out the manner in which this also opens the door to much more government spending, geometrically more than we can ever hope to afford... seems to me... so even scarier.

 

[Moot]

An OP ED about QE in the rightwing editorial section of the WSJ and an interview on CNBC, both on the day before Janet Yellen's confirmation hearing?

Hmmm, something stinks about that OP ED "confession".

 

[RabidAlpaca]

An OP ED about QE in the rightwing editorial section of the WSJ and an interview on CNBC, both on the day before Janet Yellen's confirmation hearing?

Hmmm, something stinks about that OP ED "confession".

So would you like to refute his points? QE is essentially giving free money to rich people. It's intentionally inflating our currency away. Inflation hurts the poor and middle class the most, and greatly benefits the rich.

The fed was created by rich bankers for rich bankers. The fed will essentially lend to banks at near 0% so that those banks can take that very money and reloan it to the little guys at a massive markup. Free money.

It positively blows my mind that liberals, who claim to want to take power away from corporations and put it back in the hands of the little guy, would support such ridiculously bloated handouts to those very corporations.

 

[Moot]

So would you like to refute his points?

Like I said, the timing of the op ed confession and interview on CNBC both on the same day prior to the day of Yellen's confirmation hearing is highly suspect. That is a point that addresses the OP. Anyone who has been following the story knows that Janet Yellen is going to continue Bernake's policy of QE until unemployment falls below 6.5%. So what better time to throw a hissy fit about QE than the day before her confirmation hearing?

QE is essentially giving free money to rich people. It's intentionally inflating our currency away. Inflation hurts the poor and middle class the most, and greatly benefits the rich.

The fed was created by rich bankers for rich bankers. The fed will essentially lend to banks at near 0% so that those banks can take that very money and reloan it to the little guys at a massive markup. Free money.

Really?

It positively blows my mind that liberals, who claim to want to take power away from corporations and put it back in the hands of the little guy, would support such ridiculously bloated handouts to those very corporations.

Would you care to address any of the points that I made or should I leave you alone to argue with your right wing strawman?

 

[Kushinator]

One of several reasons I think that another market correction (albeit, nothing like 2008) is building

What about China?

 

[cpwill]

What about China?

That is another one of those reasons.

 

[JoeTheEconomist]

Like I said, the timing of the op ed confession and interview on CNBC both on the same day prior to the day of Yellen's confirmation hearing is highly suspect. That is a point that addresses the OP. Anyone who has been following the story knows that Janet Yellen is going to continue Bernake's policy of QE until unemployment falls below 6.5%. So what better time to throw a hissy fit about QE than the day before her confirmation hearing?


Really?

Would you care to address any of the points that I made or should I leave you alone to argue with your right wing strawman?

I am going to have to ask. So is the answer you won't refute the man's points or can't?

 

[JoeTheEconomist]

One of several reasons I think that another market correction (albeit, nothing like 2008) is building.

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Why do you say that it will be nothing like 2008. The margin interest on which bubbles depends is now at higher levels than in 2008. The biggest difference is that since 2008 we have printed trillions of dollars, which has replaced the leverage supplied by the shadow banking system.

 

[iguanaman]

So would you like to refute his points? QE is essentially giving free money to rich people. It's intentionally inflating our currency away. Inflation hurts the poor and middle class the most, and greatly benefits the rich.

The fed was created by rich bankers for rich bankers. The fed will essentially lend to banks at near 0% so that those banks can take that very money and reloan it to the little guys at a massive markup. Free money.

It positively blows my mind that liberals, who claim to want to take power away from corporations and put it back in the hands of the little guy, would support such ridiculously bloated handouts to those very corporations.

Where is this inflation that QE is causing? Deflation is the worry and it is already happening in Europe, prices are dropping. Do you have a clue about how bad deflation is for an economy? If you did you would know why the FED was REALLY created.

 

[austrianecon]

Where is this inflation that QE is causing? Deflation is the worry and it is already happening in Europe, prices are dropping. Do you have a clue about how bad deflation is for an economy? If you did you would know why the FED was REALLY created.

Let's address Europe first. EU inflation numbers include energy costs (unlike the US), so if you strip out energy costs, the inflation rate for Oct was 1.1% and still at an annualized 1.8%. A decrease in energy costs is actually GOOD for an economy. Companies and Consumers spend less on energy and spend more on produced goods. But this aside EU's problem has always come down to the value of the Euro. The Euro has to fall in value against the Dollar in the Global Market. Something the ECB refuses to do because the money bags of Europe, Germany, doesn't want to do it. Not that I blame Germany.

Inflation from QE doesn't show up on Main Street first. The "rich" get it first.. The Stock Market has more then doubled since 2009, Bond prices are at all time "highs", some housing markets around the US are up 25% (Southern California) since 2012. That's a 25% gain in 1 year. The top 20 markets are up on avg 12% y/y. Housing markets.

Mises called this “the acme of the short-run principle.” So you understand more clearly.. here is what Mises is explaining ""Credit expansion is the governments' foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous."

The Fed wasn't created for any reason but power because the public reason for the Fed being created has failed every boom and bust cycle the US has gone through since 1913.

 

[iguanaman]

Let's address Europe first. EU inflation numbers include energy costs (unlike the US), so if you strip out energy costs, the inflation rate for Oct was 1.1% and still at an annualized 1.8%. A decrease in energy costs is actually GOOD for an economy. Companies and Consumers spend less on energy and spend more on produced goods. But this aside EU's problem has always come down to the value of the Euro. The Euro has to fall in value against the Dollar in the Global Market. Something the ECB refuses to do because the money bags of Europe, Germany, doesn't want to do it. Not that I blame Germany.

Inflation from QE doesn't show up on Main Street first. The "rich" get it first.. The Stock Market has more then doubled since 2009, Bond prices are at all time "highs", some housing markets around the US are up 25% (Southern California) since 2012. That's a 25% gain in 1 year. The top 20 markets are up on avg 12% y/y. Housing markets.

Mises called this “the acme of the short-run principle.” So you understand more clearly.. here is what Mises is explaining ""Credit expansion is the governments' foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous."

The Fed wasn't created for any reason but power because the public reason for the Fed being created has failed every boom and bust cycle the US has gone through since 1913.

So 401K's doing well means the Fed has failed? I just don't see the correlation at all. There is deflation in Europe already and without the fed's pumping the money supply the same could easily happen here with disastrous long lasting results. No thanks.

 

[Moot]

I am going to have to ask. So is the answer you won't refute the man's points or can't?

Huzar is a hero for helping to save the economy. I'm sorry he's having regrets. But he's wrong that it's not helping Main Street....401k's and mutual funds are back to pre 2008 levels and the only reason they even still exist is because of the Fed's stepping in to save the commercial paper market, which in turn saved the commercial and foreign banks, which in turn kept the entire world economy from collapsing. And too, it helped to stabilize the housing market. So the notion that QE hasn't trickled down is unfounded, imo.

As for continuing QE....compared to EU austerity and relentless recession, at least the US economy is growing and prices are stable.



FWIW, Yellen hinted the Feds might start slowly tapering QE in February...Goldman Sachs thinks it will be March. I don't know anyone who thinks it will or should last forever.

 

[Moot]

Let's address Europe first. EU inflation numbers include energy costs (unlike the US), so if you strip out energy costs, the inflation rate for Oct was 1.1% and still at an annualized 1.8%. A decrease in energy costs is actually GOOD for an economy. Companies and Consumers spend less on energy and spend more on produced goods. But this aside EU's problem has always come down to the value of the Euro. The Euro has to fall in value against the Dollar in the Global Market. Something the ECB refuses to do because the money bags of Europe, Germany, doesn't want to do it. Not that I blame Germany.

Inflation from QE doesn't show up on Main Street first. The "rich" get it first.. The Stock Market has more then doubled since 2009, Bond prices are at all time "highs", some housing markets around the US are up 25% (Southern California) since 2012. That's a 25% gain in 1 year. The top 20 markets are up on avg 12% y/y. Housing markets.

Mises called this “the acme of the short-run principle.” So you understand more clearly.. here is what Mises is explaining ""Credit expansion is the governments' foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous."

The Fed wasn't created for any reason but power because the public reason for the Fed being created has failed every boom and bust cycle the US has gone through since 1913.

The Fed was created because of the 1907 banking panic and all the other panics, booms and busts that came before it.

Panic of 1907 - Wikipedia, the free encyclopedia

 

[RabidAlpaca]

Where is this inflation that QE is causing? Deflation is the worry and it is already happening in Europe, prices are dropping. Do you have a clue about how bad deflation is for an economy? If you did you would know why the FED was REALLY created.

I can assure you thing are not getting cheaper here in Europe, it's still very expensive. Let's say for a minute deflation were so horrible. Why do you believe the best solution is to give that free money to the richest in the country? Why couldn't QE be used to help the poor and middle class?

You're so full of **** with you're anti-corporate whining when you support handing them billions in free cash.

So 401K's doing well means the Fed has failed? I just don't see the correlation at all. There is deflation in Europe already and without the fed's pumping the money supply the same could easily happen here with disastrous long lasting results. No thanks.

Banks can get loans at near zero percent to make investments you can't make for returns you can't get. They'll use that same money to loan to you for 6%, but then turn around and offer you a "high yield CD of 1.1%". They're ****ing us, and you're too blind to notice it. This is why I can't take any of your anti-corporate rhetoric seriously.

The Fed was created because of the 1907 banking panic and all the other panics, booms and busts that came before it.

Panic of 1907 - Wikipedia, the free encyclopedia

And it's done a fine job of continuing that boom bust cycle with greater frequency and worse lows. We've had far worse economic crises with it than we've had without it.

 

[austrianecon]

So 401K's doing well means the Fed has failed? I just don't see the correlation at all. There is deflation in Europe already and without the fed's pumping the money supply the same could easily happen here with disastrous long lasting results. No thanks.

Has the economy been growing at 5%? No? Okay, the Fed has failed. There is no serious deflation in Europe.

 

[Buddha C]

Has the economy been growing at 5%? No? Okay, the Fed has failed. There is no serious deflation in Europe.

Deflation fears stalk eurozone as Spain reports fall in prices | Business | The Guardian

 

[austrianecon]

Deflation fears stalk eurozone as Spain reports fall in prices | Business | The Guardian

Explained in a previous post.. with energy prices.. it's .7%, ex-energy (like in the US), EU is at 1.1%.

 

[Buddha C]

Explained in a previous post.. with energy prices.. it's .7%, ex-energy (like in the US), EU is at 1.1%.

So you provided evidence that it's trailing downwards?

 

[austrianecon]

So you provided evidence that it's trailing downwards?

Due to Energy prices..Good and Bad.. some times economics is a mix bag and not all doom and gloom.

 

[Buddha C]

Due to Energy prices..Good and Bad.. some times economics is a mix bag and not all doom and gloom.

Deflation is good for a country paying 6-8% on bonds? On top of that, EU already has a lower propensity to consume due to the VAT (which is good and bad too)

"Very high rates of unemployment–as much as a quarter of the population in Greece and Spain–suggest that weak domestic demand is substantially behind the downward price trends. The sort of dynamics that lead to a bad deflationary spiral." - Your article

 

[Buddha C]

Conversely, Austro, would you too categorise the substantial increase in energy consumption in Japan to be an exacerbating headwind against Abenomics??

(remember, they used Nuclear power to previously supply their industry, the nucl. reactor companies were private Jap institutions, meaning the money flowed inside of japan. Now that vital sector has taken an enermous hit [are the other plants still closed? I believe Abe Shinzo opened at least a couple])

 

[Kushinator]

Deflation is good for a country paying 6-8% on bonds? On top of that, EU already has a lower propensity to consume due to the VAT (which is good and bad too)

For the sake of clarity: consumption of health care and other social services is in fact very real, and funded by regressive tax schemes like the VAT. A lower propensity to consume arises on the basis of savings, i.e. income - savings = consumption.

 

[austrianecon]

Deflation is good for a country paying 6-8% on bonds? On top of that, EU already has a lower propensity to consume due to the VAT (which is good and bad too)

"Very high rates of unemployment–as much as a quarter of the population in Greece and Spain–suggest that weak domestic demand is substantially behind the downward price trends. The sort of dynamics that lead to a bad deflationary spiral." - Your article

Well, first off.. Spain, Greece and the other PIIGS are not the whole of EU. These trends in Greece and Spain have been there for over 5 years. So these problems aren't new. Which is why I said in my first post on this topic is that the ONLY way the EU's sickly countries can recover is a devaluation of the Euro which isn't gonna happen any time soon. So the only other option is for them to leave the Euro Zone, and revert back to their previous currencies and devalue that currency.