Easings Aren't Easy
Paul Volcker: QE3 "Will Fail" ... Paul Volcker, the former Federal Reserve chairman credited with taming the inflationary threat of the 1970s, has warned that further quantitative easing will fail to repair economies in Europe and the US. Mr Volcker, addressing a conference at Gleneagles in Scotland, said the decision by the Fed to begin a third round of asset buying — nicknamed QE3 — amounted to the "most extreme easing of monetary policy" he could recall. Mr Volcker's comments came as the World Trade Organisation intensified the economic gloom by slashing its global growth forecasts. – Reason.com
Dominant Social Theme: Easing will save the economy.
Free-Market Analysis: Paul Volcker does not believe that QE3 will salvage the economy. There are others such as TrimTabs CEO Charles Biderman who do not believe that easings will inevitably bolster stock markets.
In this video below, Biderman explains why the benefits of such easings cannot last forever. Biderman points out what is increasingly evident to most people following the market – that these programs have swelled the stock market without appreciably affecting employment.
The other benefit has been to banks' bottom lines. Big banks especially have fattened on these easings even though the money pouring into bank coffers has not flowed out again as bank loans.
This brings us back to the old puzzle of why central bank money creation is not simply aimed at people who can use it. Why does it have to flow through banks?
This is actually quite a big issue. But it is not one you will see addressed in the mainstream media because it has no good answer.
The system of money creation is a very simple one in the central banking era. Money is printed by the Fed and distributed via commercial banks.
The reason for the distorted process now taking place is because money is NOT reaching people who need it. With a different distribution money would be helping small businesses and individuals instead of just swelling banks and stocks.
Of course, we hope the whole system somehow goes away and that money is privatized once again.
In this we probably disagree with people like Biderman, though we do agree with him that the easings are a failure given their stated purpose – and that they will not prop up the stock market forever. Trees don't grow to the sky ...
See the video here:
(Video from TrimTabs's YouTube user channel.)
Posted by dave jr on 10/11/12 08:00 AM
"This brings us back to the old puzzle of why central bank money creation is not simply aimed at people who can use it. Why does it have to flow through banks?"
How would you propose it to be aimed at people DB? Nothing has changed except people are not creating any demand for loans. Anyone with collateral can certainly get one, just like the good ol days. There is a huge difference between banks holding back loans and banks unable to push loans.
What has changed is the fact that our economy has been hijacked/outsourced/regulated to death by centralist elites and a planned widespread lower standard of living is in the making.
The natural result of this should be a corresponding deflation in value to the fiat currency, where prices crash on the rocks, where producers can pick up the pieces and still afford to expand, where the predatory financial institutions wither and blow away.
But we will get no such relief needed for a recovery. QE goes to the predators so they can stay healthy and continue to hold up prices and the foreclousures continue.
Click to view link
Reply from The Daily Bell
It was a rhetorical question ...
Posted by mava on 10/11/12 10:36 AM
Volker says so and so. Who is this Volker? The Volker who was at the head of the FED? The Volker that DID NOT END the FED? The Volker that doesn't have anything to back himself up, besides his SO FEARED aggression? The Volker that SAVED counterfeit monetary system by carefully raising the rates, instead of keeping those rates low and allowing the FED to commit suicide?
This is they guy who says something, and I am, like a stupid ponzi that he thinks, supposed to sit up and listen? This Paul Volker is NOT on my side. He saved the FED once, he would do it again in a heartbit.
This means that this Paul Volker is against the people. This means that this Paul Volker intends on having the people using the paper money, so that they forever remain the easy targets of confiscation thru inflation.
So, no he says something. Wow. He may understand what he is talking about. I am not sure. But one thing is I am sure about - that Volker will say what needs to be said to help the FED. To listen to Volker is the same as to listen to mass media talking head, - you may or may not be getting the truth, but whatever it is you are getting told , - is for someone else's best.