Theo_Fidel wrote:
Are you kidding me? It was well worth the price. In fact USA got off cheap IMHO. Rest of the developed world would kill to get this sort of benefit ratio.
In 10 years at 3% inflation, that 17 Trillion will be worth less than 10 Trillion.
Exactly, the US got off cheap because the rest of the world paid the price. The price has been paid and continues to be paid in the form of:
1. Loss of control over domestic monetary policies.
2 Constant adjustment of domestic monetary policies to account for the sequential flooding in and flooding out of US dollars.
3. Equity markets meddling with banks such as the SNB openly have 10%-15% of their portfolio in equities. Are you kidding me? Where does the average investor have the firepower to go against moves initiated by Central Banks?
4. The rest of the world's savings are being used as a giant piggy bank so that the US money managers can continue their disastrous policies.
5. If you have studied Eco 101, this is the tail wagging the dog. Equity markets are supposed to respond to corporate earnings, PE multiples are supposed to reflect profitability or lack of it. But such fundamentals have been suspended since 2008. Today the only thing that matters is how much hot money generated by the Fed or the ECB or the Bank of Japan sloshes its way into any specific market, whether it be oil, other commodities, equities, bonds or mortgages. And the only way you can get that money is if you are a FRB dealer or a big EU bank i.e. you are then a direct beneficiary of exchanging worthless crap on your balance sheet with shiny new dollars or euros ready to go and play in the casinos, whether it be equity or oil futures, mortages or government bonds. That is all that bank's and traders today bet on. Yes, even in India, where before Modi, a $ 10 Billion FII inflow would see the Sensex take off.
Finance should always play a supporting function to industry. Today in the US and by extension because of the reserve role of the US dollar in the rest of the developed world certainly, finance takes an outsize portion of income and uses it only to play the game of asset appreciation. Remember, the reason there are problems today is because income is no longer sufficient to service debt and this is inspite of interest rates having been gradually reduced close to zero. The point is that monetary expansion since 2008 has been horribly inefficient in creating the right kind of GDP growth. QE is doing nothing to increase incomes and without an increase in incomes, just look at Japan since 1990, they know what QE is about, they are in round 10-12 of continous QE and yet the Japanese economy has been sick and contracted over the last 25 years. Incomes have stagnated, the once fabled savings rate is below 5%, their frontline companies are making losses. And yet today the Fed and ECB have this endearing faith in QE. In reality they are just kicking the can down the road. The pyramid is dangerously inverted.
There is asset inflation i.e. real estate, bonds, commodities until about 6 months ago, but there is no CPI inflation. That will not happen until either China which is the global factory stops exporting deflation to the rest of the world or unless they helicopter drop money which Bernanke once famously threatened to do. However if there is CPI inflation, interest rates will have to go up. Good luck then servicing the mountains of growing debt.
Made my day. The rest of America realty is not remotely like the bay. Myt neigbhor who owns 17 properties for rent in the midwest has some pithy comments about the west coast market....
