As we know, Goldman always seems to know that right time to make a profit by shorting, first by shorting the housing market and then by shorting the whole economy.
Quantitative easing isn't magic
It is unrealistic to expect central banks like the Fed and the ECB to solve our deep economic problems
by James K. Galbraith - The Guardian
. . . .
Quantitative easing, the third tranche of which was announced in the US last week (QE3), is just a fancy phrase for buying bonds, notably mortgage-backed-securities, in which operation the Federal Reserve takes assets from the banks and gives them cash. This raises the bond price and lowers the yield. It also tends to boost stock prices – very nice for people who own stock – and it can spur mortgage refinancing, improving the cashflow of solvent homeowners.
And the effect on the economy of all this is? Mostly indirect and quite small. People don't generally spend capital gains as windfalls. Saving on mortgage debt helps to support spending but some of it goes to paying down other debts. People who are already underwater on their mortgages can't refinance anyway, and are not affected. Yes, there is some effect. But powerful stimulus, this is not.
. . . .
As Hyman Minsky used to say: banks are not moneylenders! Banks don't lend reserves, and they don't need reserves in order to lend. Banks create money by lending. They need a client willing to borrow, a project worth lending to, and collateral to protect against risk. If these are lacking, no amount of reserves will turn the trick. And especially not when the government is willing to pay interest on their reserves: the truest form of welfare, income for doing nothing.
. . . .
What we need instead, today, is a candid review of what central banks cannot do. Yes, they can usually forestall panic. Yes, for better or worse they can keep zombie banks alive. No, they cannot bring on economic recovery or solve any of our deeper economic problems, from unemployment and foreclosures in America to unemployment and economic collapse in Greece and elsewhere. The sooner we stop thinking of central bankers as wizards and magicians, the better.
Read the entire article here
1 COMMENTS:
It's magic to some....
TRYING TO STAY SANE IN AN INSANE WORLD – PART 2
In Part 1 of this article I detailed the insane solutions proposed and executed since 2008 by our owners as they attempt to retain and further expand their ill-gotten wealth, acquired through fraud, deceit, swindles, and the brilliant manipulation and exploitation of the masses through Bernaysian propaganda techniques. Madness has engulfed the entire world, with a concentration of power in the hands of a few psychopathic financial elite wielding an inordinate and dangerous expanse of power over the lives of the common man. They are a modern day version of Al Capone, except their weapons of choice aren’t machine guns, but a printing press, peddling debt, creating derivatives of mass destruction, and peddling heaping doses of disinformation. The contemporary criminal class wears Hermes suits, Rolex watches and diamond studded pinky rings, drops $500 to dine at Masa in NYC, travels by chauffeured limo, lives in $10 million NYC penthouse suites, occupies luxurious corner offices in hundred story glass towers, and spends weekends hobnobbing with the other financial elite at their villas in the Hamptons. They have nothing but utter contempt for the lowly peasants who depend upon a weekly paycheck to make ends meet. Why work when you can steal $1 or $2 billion from farmers with no consequences?
http://www.theburningplatform.com/?p=58107
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