TPS

I would disagree with your first statement. This could have been worse than the Great Depression. Monetary and Fiscal Policies went to levels never before seen to prevent things from worsening. To compare, the Volcker/Reagan recession was engineered by the FED using high interest rates to wring out inflation, and the official unemployment rate hit about 10.5%. For the current recession, official unemployment never went over 10%. So in the former case, they let unemployment go, and in the latter they tried (almost) everythying possible to prevent it from spiralling out of control. Had the FED and federal government not done those actions, the bottom would've been at minimum twice as deep. So, yes, it's partisan to hold her to what she said when faced with the worst crisis in 80 years. And it was a little more than a "bump in the road." No you dolt. I'm trying to explain that it's idiotic to hold someone to something when we experience the worst crisis in 80 years. The Bush example was used to make the point that even the republicans realized something had to be done as early as spring of 2008. And, as someone pointed out, Bush then passed the TARP bill adding $700 billion to the deficit. But you are so myo(pic)-partisan-centric that you accept some right-wing talking point without thinking it through. Once again, I don't give a crap about Pelosi, and it will be a blessing if she loses her majority.

Anyone notice this quote by Stevie Johnson in Mark Gaughan's article?

I'm starting to think that Bernanke's jawboning about QE2 was a ruse in the so-called "currency war." His threat of QE2 helped push the $ lower, and US exports are one of the bright spots in the economy. If indeed he proceeded on QE2, Japan and China would be forced to undertake even more currency intervention. All this is prelude to the G-20 meeting, and lo and behold, there's an agreement to correct imbalances from all parties--deficit AND surplus. The indication of this (a ruse) would be the FED announcing in the very near future that QE2 will not be necessary. If this is the case, it's time to buy some call options on the S&P.

So it has nothing to do with that "Great Recession" thingy? I can't stand the woman, but this is just a petty partisan attack. Even Bush attempted to stimulate the economy with a tax rebate in 2008--before the collapse of Lehman.

Gee, really, you meant me? I never guessed. Maybe you don't read very carefully. You take my disagreement on what we think is driving commodity prices to mean I don't realize there is growth in emerging markets. NO. I simply think at the current time most of the price movements are being driven by speculation (which I think is the greatest. YOu think it's current global demand. We'll see. Your view is that this will lead to a supply-side inflation like the oil price hikes of the 1970s. Maybe. Again, we'll see... I understand how QE has impacted the $ carry trade and funds flowing to EMs. I understand how investors have tied commodity investments to movements in the $. I understand how the falling $ raises import prices. You seem to have a problem dealing with anyone who disagrees with you, as if there is only one possible outcome. The beauty of economics is that the future is uncertain, so we try to make our best guesses as to what that outcome will be. Most of our disagreements have been about inflation and how it occurs. OUr initial disagreements were about the possibility of high inflation, as you state above. I disagree that we will see "higher inflation," rather I beleive that we will again see a return to "inflation normal," the target the FED would like to maintain at 2%. Although, I have said it wouldn't surprise me if the FED let it rise a bit higher (3-4% range). However, the FED will not let it get out of control. So if by higher, you mean > 4%, then we disagree here too.

I can't think of any draft and pick in recent history that made me say WTF!?!? That said, I want to point out that I tried to keep tabs of what he did that first year, and I think in the first game he had an INT for a TD; but overall his stats were not good at all. I wondered at the time if maybe he wasn't all that; but we know now he is. Point of all this rambling: we shouldn't judge Troup by what he does this year either. The good thing is that he is getting experience.

If you really understood it, then you'd understand that when I say banks holding reserves on account at the FED, or money won't be created until banks start lending, or inflation won't kick in until the loans and spending lead to higher growth and lower unemployment, that's all related to velocity. So spare "us" the condescension.

Good thing you said "some of us here," because it's clear you really don't understand the concept. You tell "us" that it will change and bring inflation. Explain it then. And not in vague terms, but explicity how it will change and cause inflation.

Imagine that, we live in a country where you can disagree with your government. I'm with you, that really sucks. We need one God, one party......kind of like Islam....

Get a grip. The US was occupying Iraq. Like most occupiers, if they stay long enough, they become the enemy. As I recall, we went into Falujah after several Blackwater private security members were brutally killed. A lot of people died after the battle, and, as with all wars, many innocents. It's not uncommon for people to try to get humanitarian aid to those affected by the bloodshed. In this case there were even parents of an american serviceman killed in IRaq that was part of that group. Note, the presence of foreign troops led to a protest, then the first skirmish led to the growth of the insurgency. But it was all Boxer's fault, as can clearly be seen....

Well, the tone of your post made me want to delve deeper into this. From what I can tell, a large group went to Iraq after the US offensive into Falujah (which resulted in the death of 71 Americans and 2000 Iraqis) to provide humanitarian aid. This was after the devastation of Falujah. Note the list of aid given to those terrorists listed in bold below. This is also a quote from the article that your source said "disappeared" from an islamic website. Another example of a vast right-wing conspiracy? Yes, those damn liberals need to be put behind bars....

Magox...errr...Schiff responds.. Schiff, It's not a bubble

Editorial in the FT today: FT.com And a letter in response to the creation of ETC's for commodities, which essentially expresses my view on the role of speculators and speculation: Commodity speculation

That was funny.

Finally took a look at the data. Interesting the flows from 2001 to 2008: 01 $11 bil 02 $25 03 $34 04 $101 05 $54 06 $39 Then... 07 -$27 08 -$62 So they were jumping ship after 2006. Came across some other info looking at the Fed's purchase of MBS. Almost all of the $1 trillion purchased in 2009 was from GSE backed securities. It's the sellers I found intriguing: Rest of World (china): $220 bil ABS issuers $190 Brokers and DEalers $132 Private, state and local govt pension funds $85 AND MMF $213. Surprisingly very little came from banks. It looks, for the most part, as if the FED was trying to save the Money Market and keep foreign investors happy.

Bush is back?

If the VAT comes to pass, the details remain to be worked out...of course. Not all households behave the same. Those in the bottom 60-70% save 0. It's not really a choice; they consumer all of what they earn to pay the bills. The way a VAT changes "savings" is to increase "public savings" i.e. tax revenues. Conservatives love to point out that the bottom ??% don't pay any income taxes, so ANY VAT tax will be an increase in the overall taxes they pay. Regardless of whether or not there is a VAT those households will still spend all of their income. If QE crushes savings rates, then why has been rising? I agree with the last point, all that will happen is that we'll import those goods from some other country since we don't produce them. Of course, it will show up in the data that our trade deficit with China fell, "caused by" the appreciating yuan.

Yes, which is why I said it's about who takes the biggest hit--all will be, but some classes more than others.

Lower/middle class households will continue to buy clothes, toys and electronics from asia because we don't mass produce them in the US. A VAT is a way to shift the tax burden onto those lower income households, and yes it will lower consumption as that VAT% of income normally spent on goods is transferred to the government--e.g. a 10% VAT will transfer 10% of the income from households who consume all income to the govt. This will also help the trade def, as these households are consuming less of all goods, including Walmart's. At some point, there will be a day of reckoning for the govt, and the battle right now is to determine who takes the biggest hit--the top 10%, or the rest of us...

I agree the trade deficit thingy is a structural problem, but not in the way you view it--as an over-consumption problem--that's simplifying it as well. The middle/lower classes, especially those with families, won't change consumption based upon a VAT because they spend everything they earn. The structural issue is that we have ensured they shop at place like Walmart, and that's where most of the trade def with China comes from. Why? Because we don't mass produce most of those products domestically anymore. That's the problem I have with the currency issue: even if the yuan appreciates, all that will happen is that Walmart will buy in other asian or Latam countries that haven't appreciated. On a more radical note, why do we need american households to save more? There certainly is NO lack of funds in US financial markets right now, but there is a lack of demand in goods markets.

Either way, investors are making bets. This morning's FinTimes has an article which highlights the current environment and the bets that investors are making: Deflation or Inflation? A quote: What I wrote yesterday:

Cool, we're saying the same thing, we simply use different vocabulary. Everyone understands that commodity prices are based upon global demand. No secret there. We disagree on which factor is currently having the greater impact on prices, global demand or speculative investment flows. I say it's speculators right now; doesn't mean that won't change when globabl growth spreads.

For both, it depends, and you need to work through the processes to understand under what conditions it does happen. You can't simply say the FED has printed money--there is a process (ok, you will still probably say it...). I've tried to explain to you one of the processes of QE's impact, that of swapping banks' dead assets for reserves (and the FED pays interest on those reserves, which is another reason why banks are content to sit on them). Other possibilities of QE: 1. Directly funding the US Treasury. As I said, this directly injects spending into the economy, but the FED, for the most part, has stayed away from this. 2. Buy MBS, T-Bonds or other long term assets in the various markets from "investors" to drive down long term rates. In this case the investor has made a decision to sell because they want to take profits or re-weight their portfolio. In either case the impact depends upon what the investor decides to do with their "cash." Buying more MBS, buying stocks, buying commodity futures, etc. This will drive up prices of those assets. The FED's actions also raise bond prices and lowers yields. With lower rates, those who can afford to, refinance as you indicate. Refinancing substitutes a lower interest rate asset on the bank's balance sheet for a higher one; and raises the discretionary income of the borrower. Households and businesses will have more net income if they refinance. This is one of the transmission mechanisms of monetary policy. However, this mechanism isn't always caused by monetary policy. For example, a recession will reduce long term interest rates without any action by the FED. Your questions: Commodity prices are currently rising mainly from increased investment funds flowing into these markets and the belief that inflation will come back with a vengeance in the not to distant future because of QE. While there have been some supply issues, most of the price increases have come from these speculative guesses. Right now there is a disconnect between true underlying demand (from industry) for commodities and investor speculation based upon expectations about inflation. Actual inflation will depend on how long it takes for the economy to respond to low interest rates. If we experience a Japan-like decade, then those bets will be wrong. If the FED starts directly financing the Treasury, then they'll be a bit closer. To answer your question: for a given supply, commodity prices can increase by 1) investors allocating more funds--speculating--on comodities; or 2) the actual demand for commodities by industry, which is based upon growth. In case 1, there are no new $s created, there is a re-allocation of investors' funds; in case 2, the money supply increases with economic growth--in the first case you will not find an inverse relation; in the second case you will. #2. The dollar. How do dollars get into the hands of foreigners? They run a trade surplus with the US (our deficits). They then have two choices: China can, for example, 1) sell the accumulated $s from their surplus on the FX market, which would cause the $ to depreciate against the yuan; or 2) if they wanted to maintain an artificially higher $ in order to maintain their export-led growth stratey, then they will use the accumulated $s to buy $ assets. This is what a lot of emerging market economies are doing, and it's what Krugman is talking about. This game has been going on for over 10 years, which is why Japan and China both hold some $3-4 trillion in $ assets. As long as they are willing to keep holding them in order to keep their exchange rates under-valued against the $, then the game continues. So, to answer your question: it depends. As long as those countries want the game to continue, it will continue. Which means they could be holding $5 trillion in a few years, and the $ won't fall against those currencies. On the other hand, if they decide NOT to hold $s, then we'll see your "inverse relation." But, once again, it's a process. You seem to think that money falls from trees, but only in the extreme case of the FED directly financing the Treasury is this the case. The majority of FED actions impact financial markets and asset prices, which in turn implies there is an impact on the portfolios of financial institutions and wealth managers (China's sovereign fund is also one), the impact on the real economy depends on whether banks lend and how the economy respondes to lower rates. This is the part you seem to ignore in your analysis.

Find a quote where I said money isn't circulating at all. That's just plain stupid. I guess you fail to see that my statements that the majority of the $1 trillion that went to banks in QEI is sitting as excess reserves is the same thing as saying there is no velocity of circulation for that money. Inflation is within the bounds of the FED's current target. I understand that commodities are used as a hedge against inflation and many investors are betting that QE will have that impact. Their actions are causing commodity prices to rise, that's the point I've made. It's that simple.

Yes, I saw that you finally stated "print doesn't mean actually print." Although I'm not sure why you felt the need to state that after my quote about excess reserves...?? Also, I am not saying there is NO money being created. I am saying that a big chunk of the QE is sitting in the excess reserve account. Look at the FED data. If you need a link I'll provide it. And, what I have said all along, is that until banks start lending to businesses, consumers and governments, that money will not get circulated--which means velocity of circulation. What do you think velocity means? At least you realize it's not a constant. As for inflation, what have I said all along? We will not see inflation until demand, spending by all sectors of the economy, picks up and unemployment falls. My position all along is about describing the process of how reserve creation by the FED (aka QE) actually translates to money in circulation for spending purposeses (which relates to velocity). IT's that simple. You've described a process of how low interest rates and refinancing can stimulate more spending, and I completely agree with that process--for those who can refinance, it reduces expenses and increases available income without increasing one's income. What I've tried to explain is that when the FED swaps reserves for assets with the banking system, money has not been put into circulation yet. When the banking system uses those reserves to lend for spending, that's when it becomes "printed money" (and influences velocity). It's that simple. It works differently if the FED directly buys treasuries from the government, as I've said. It also works differently if the FED buys an asset from an investor. The impact will depend on what that investor chooses to "reinvest in." But that's another story. We disagree about what's driving commodity prices. I think they are being driven more by speculators, you don't. Time will tell on this.