There are times when I'd like to share something with you but my Voice in the Garden site does not seem the appropriate place, thus, this blog.

There are experiences, thoughts, views... and for anyone lurking/waiting to pounce (as has occurred on several occasions), please do not attempt to turn what I post into a political statement. This is NOT a political site, but IS about occurrences, reality, and personal opinion concerning what I see in the world around me and my family. There are many excellent writers whose works "speak" to me, and I shall include some of them. At times it may be
something I think you would enjoy or simply whatever ails you (me).
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Friday, November 5, 2010

QE2

No, I am not an economist, but have varied interests, am a student of learning, have been blessed with common sense and logic (at least most of the time... wink), and understand the basic principle of economics: if you make more of something, you increase supply, and therefore the value is lowered.

In October, Caroline Baum, Bloomberg, wrote: Gold prices continue to set new highs. The U.S. dollar, the global reserve currency, keeps sinking amid expectations the Federal Reserve will dilute the existing stock starting at its Nov. 2 to 3 meeting.

And so they did! The Federal Reserve announced another round, nearly $1 Trillion dollars more of Quantitative Easing, QE2 they call it: buy $600 billion of Treasuries through mid-2011 and another $250-300 billion of coupon reinvestment via the Desk.

QE1, you ask?
When completed, the Fed had repurchased about $1.7 trillion in Treasury and MBS/Agency securities (Mortgage Backed Securities).

Cotton futures surged to $1.392 a pound yesterday in New York, the
highest price in 140 years of trading, on signs that dwindling global supplies won’t meet mounting demand from China, the biggest user. Cotton’s 79 percent gain this year was the biggest on the Standard & Poor’s GSCI Index of 24 commodities. So what happens now to the cost of fabric and clothing?

Silver hit a new all time record of $26.03. Gold is currently trading to the level of $1394 dollars per ounce, and oil is heading back toward $100 a barrel.

Here is a chart of interest supplied by Casey Research showing year-over-year prices, The Real Cost of Living.

Some say we are facing hyperinflation, others stagflation.

There are 40 + countries pegged to our dollar and already countries have begun to counter inflation by raising interest rates: Australia and India have done so and yesterday morning the BOE (Bank of England) said they will NOT follow the U.S. Are countries beginning to decouple from the U.S. dollar?

The printing presses roll, and with a Fed induced stock market rally, Wall Street speculates, pushing up the price of industrial and agricultural commodity prices while people struggle with a higher cost of living, unemployment, and foreclosures amidst the dwindling of the dollar. Think of what the high cost of commodities does to countries less fortunate than we.

Mohamed El-Erian, CEO of PIMCO, the world's largest bond investor, addresses the unintended consequences of this Fed's actions and the reasons QE2 blunderbuss likely to backfire.

And if you haven't been entertained enough, here is a Wall Street Journal article on translating some of the Fed speak.

2 comments:

Betsy from Tennessee said...

Scary stuff, Di.... Everything is going to cost us more --yet the liberals just don't get it... I had 2 blog friends talk about the election today from a 'liberal' point of view... VERY ugly--especially one of them... I am not following her anymore. The other one is a friend --and we can be friends even if we are on two sides of the fence. We just don't talk about it --and I did not even respond to her blog post today.

One thing is for sure: Liberals tend to be much more NASTY when it comes to saying things about us Conservatives... They make us out to be total idiots... I won't argue back (been there --done that)--but I surely am wondering who the real idiots are....

Hugs,
Betsy

Diana (Di) said...

You know Betsy, I don't understand people arguing and the fact that another cannot have an opposing point of view. What happened to debate? And how is it that serious discussion is reduced to name calling when someone is emotional and cannot look at facts?

What is happening to us is really not a liberal/conservative issue but one of economics: overspending, entitlements, printing too much money, inflating.. a problem that is not being acknowledged. Do each of us continue to spend when we don't have the money? NO. We cut back, try to save, but this Fed chairman, purely an academician who has spent his life in education, is flooding the world in what may soon be worthless $$, wanting everyone to BORROW and SPEND, and the world is saying NO.

The majority of countries understand what the Fed is doing to our currency and are unhappy as their is being inflated.