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The stock market apparently things that QE is a good thing...

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Villiage Idiot
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Seems like almost every time that the market drops, the media is blaming the drop on concerned that the fed will cut back on QE3, and a lot of times when it goes up the media is giving credit to confidence that QE3 will continue for a long time.

Today, CNN said that since the GDP figures for Q1 were lower than expected, the market went up based upon the expectation that QE3 would be continued for a long time.

Apparently, investors like QE and fear that if it ends, our economy will sour. Or at least that's my interpretation. Or maybe the media is just making up reasons for random events.
 

head of joaquin

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At the very least is shows that austerity, imposed by the tea party occupation forces in the House by driving off the fiscal cliff, is a bust. Wall Street understands that and is probably anticipating that the American people do to, especially as the pseudo-debt-crisis recedes with longterm growth.
 

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Your point is???

That investors believe QE to be a good thing, unlike the much of the general public.

I'm not suggesting that QE3 is a good thing or necessary at this point. I think that in our current situation, it is neither helping or harming the economy. If the media is correct in their guesses as to stock market behavior, investors differ from my opinion.

What does befuddle me is why anyone thought that after we increased the tax that is most harmful to the worker/consumer class (ss withholdings), that anyone would have expected growth to be higher in 2013 than in 2012. That tiny two percent comes straight off of GDP. I still expect sub 1% growth for the full year, despite the fact that consumer confidence is now higher than it was prior to the Great Bush Recession. It doesn't matter how how consumer confidence is when their net take home income has been cut by 2% - they can't spend more than they make, unless they borrow, and they aren't borrowing as much as they did 6 years ago (I don't think).
 
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CanadaJohn

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At the very least is shows that austerity, imposed by the tea party occupation forces in the House by driving off the fiscal cliff, is a bust. Wall Street understands that and is probably anticipating that the American people do to, especially as the pseudo-debt-crisis recedes with longterm growth.

I usually don't bother with such nonsense, but perhaps you'd like to enlighten us with a listing of all, or even a small sampling, of the austerity measures that have been imposed by the tea party occupation forces in the House. I refuse to believe you're just blowing wind out your ass, so I'll wait for that listing so we're all informed.
 

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The question is, why is the legislative branch forcing the Fed to do the job that it is elected to do?
 

Fisher

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Seems like almost every time that the market drops, the media is blaming the drop on concerned that the fed will cut back on QE3, and a lot of times when it goes up the media is giving credit to confidence that QE3 will continue for a long time.

Today, CNN said that since the GDP figures for Q1 were lower than expected, the market went up based upon the expectation that QE3 would be continued for a long time.

Apparently, investors like QE and fear that if it ends, our economy will sour. Or at least that's my interpretation. Or maybe the media is just making up reasons for random events.

Probably more an indication that big time market players such as fund managers and insurance companies like QE3 moreso than your regular individual investors who buy Coke stock because they like to drink Coke.
 

Kushinator

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I'm not suggesting that QE3 is a good thing or necessary at this point. I think that in our current situation, it is neither helping or harming the economy. If the media is correct in their guesses as to stock market behavior, investors differ from my opinion.

Well, there is a highly correlated wealth effect with regards to credit easing.

What does befuddle me is why anyone thought that after we increased the tax that is most harmful to the worker/consumer class (ss withholdings), that anyone would have expected growth to be higher in 2013 than in 2012. That tiny two percent comes straight off of GDP. I still expect sub 1% growth for the full year, despite the fact that consumer confidence is now higher than it was prior to the Great Bush Recession. It doesn't matter how how consumer confidence is when their net take home income has been cut by 2% - they can't spend more than they make, unless they borrow, and they aren't borrowing as much as they did 6 years ago (I don't think).

There are more jobs now than there were during any time in 2012. On top of that, improved consumer sentiment means that personal saving (as a percentage of discretionary income) should decline. Therefore, it is completely probable that economic growth will be higher than 2.5% for 2013. Otherwise there would not be tapering talk coming from the Fed.
 

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The question is, why is the legislative branch forcing the Fed to do the job that it is elected to do?
Not that the Fed can do anything in the first place.

This seems relevant.
6jlx.jpg
 

Kushinator

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Not that the Fed can do anything in the first place.

This seems relevant.
6jlx.jpg

Credit easing provides the liquidity necessary to prevent asset deflation. Without adequate fiscal support (not just running deficits, but targeted government expenditure e.g. infrastructure investment) the current credit easing policy will not be a job creator.
 

gavinfielder

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There are more jobs now than there were during any time in 2012. On top of that, improved consumer sentiment means that personal saving (as a percentage of discretionary income) should decline. Therefore, it is completely probable that economic growth will be higher than 2.5% for 2013. Otherwise there would not be tapering talk coming from the Fed.
I think it's all a load of crap.

Things like this don't surprise me at all anymore (The Real Reason 1Q GDP Took a Hit)
 

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Well, there is a highly correlated wealth effect with regards to credit easing.



There are more jobs now than there were during any time in 2012. On top of that, improved consumer sentiment means that personal saving (as a percentage of discretionary income) should decline. Therefore, it is completely probable that economic growth will be higher than 2.5% for 2013. Otherwise there would not be tapering talk coming from the Fed.

The latest savings rate figures that I could find (Jan 2013) showed an average savings rate of just 2.6%. So even if the loss of 2% take home income came 100% from savings, there is still only 0.6% that could be transformed into spending. Also, I believe that I read that during 2012 the average wage increased by only 1.8% while inflation was at something like 2.1%, thus many families lost something like 0.3% of their incomes to inflation. Now with the understanding that two thirds of our GDP is consumer spending, I can't really see how without a substantial increase in borrowing, how GDP could go up much more than 0.3% over whatever our population growth is (maybe something like 2% population growth?). With state and local governments still shedding jobs (and assumably spending), and serious constraints in fed gov spending, I can't really see how our real gdp could increase more than about 2% at the most (in 2013).

Until wage growth exceeds inflation (possibly when the unemployment level comes down to the natural rate of 5-6%), or until taxes for the worker/consumer class are cut, I think that real GDP growth exceeding 2% will be a pipe dream.
 

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The latest savings rate figures that I could find (Jan 2013) showed an average savings rate of just 2.6%. So even if the loss of 2% take home income came 100% from savings, there is still only 0.6% that could be transformed into spending. Also, I believe that I read that during 2012 the average wage increased by only 1.8% while inflation was at something like 2.1%, thus many families lost something like 0.3% of their incomes to inflation. Now with the understanding that two thirds of our GDP is consumer spending, I can't really see how without a substantial increase in borrowing, how GDP could go up much more than 0.3% over whatever our population growth is (maybe something like 2% population growth?). With state and local governments still shedding jobs (and assumably spending), and serious constraints in fed gov spending, I can't really see how our real gdp could increase more than about 2% at the most (in 2013).

Until wage growth exceeds inflation (possibly when the unemployment level comes down to the natural rate of 5-6%), or until taxes for the worker/consumer class are cut, I think that real GDP growth exceeding 2% will be a pipe dream.

Two graphs:

Compensation of Employees: percentage change year over year - CPI: percentage change year over year

fredgraph.png


Compensation of Employees: percentage change year over year - Implicit Price Deflator: percentage change year over year

fredgraph.png
 

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At the very least is shows that austerity, imposed by the tea party occupation forces in the House by driving off the fiscal cliff, is a bust. Wall Street understands that and is probably anticipating that the American people do to, especially as the pseudo-debt-crisis recedes with longterm growth.

Wall Street likes easy money.
 

austrianecon

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There are more jobs now than there were during any time in 2012. On top of that, improved consumer sentiment means that personal saving (as a percentage of discretionary income) should decline. Therefore, it is completely probable that economic growth will be higher than 2.5% for 2013. Otherwise there would not be tapering talk coming from the Fed.

1.8% so far for the year. Might get a 2% this year.
 

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The stock market's volatility depends on Bernanke's mouth.
 

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Seems like almost every time that the market drops, the media is blaming the drop on concerned that the fed will cut back on QE3, and a lot of times when it goes up the media is giving credit to confidence that QE3 will continue for a long time.

Today, CNN said that since the GDP figures for Q1 were lower than expected, the market went up based upon the expectation that QE3 would be continued for a long time.

Apparently, investors like QE and fear that if it ends, our economy will sour. Or at least that's my interpretation. Or maybe the media is just making up reasons for random events.

Oh no you are 100% correct. The problem with QE is that it is designed to buy time for the "markets" to fix their problems. Problem is, the markets are not doing that or are very slow in doing so..., so they have become dependent on QE to keep going and creating profit for their shareholders.

Now if QE is taken away, suddenly the markets will be forced to deal with the crap they have been doing for the last 20-30 years. Problem is, that these problems are so massive that the result of removing QE will mean a credit crunch again because the financial industry will again become defensive as hell, which will hurt the economy even more.

Basically you are damned if you do and damned if you dont.

Fact is the politicians need (needed long ago) to deal with the markets and business but since in the US politicians are nothing but puppets of these very industries... then that has not happened.

A good example... the US banking industry. We all know why the crisis happened in the first place (the real reason, not the "blame Fanny and Freddie" excuse). The banks are even bigger and even more "too big to fail" than they were 5-6 years ago. What Bush and then Obama should have done with Congress, was to simply break up the major banks... but they did not. They should have put in consumer protection systems so that the financial industries could not exploit people again.. they attempted this, but was blocked by the usual puppets from big industry. Basically nothing has happened since the crash.. due to political gridlock and corporatism gone amok.
 
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