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  1. #601
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    The reserve banks of the world have requirements to keep inflation between 1-3% and will achieve this using any tools at their disposal. Deflation is not something they consider to be desirable.

    Some people always think hyperinflation is going to arrive but it never does. It replaces lost capacity for the most part and does not create new growth. It would be great for reducing debt though.

  2. #602
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    Quote Originally Posted by Panda-NZ- View Post
    The reserve banks of the world have requirements to keep inflation between 1-3% and will achieve this using any tools at their disposal. Deflation is not something they consider to be desirable.

    Some people always think hyperinflation is going to arrive but it never does. It replaces lost capacity for the most part and does not create new growth. It would be great for reducing debt though.
    I think high inflation is already here and has been for years. Equities have been in a bubble for some time now, and they've had to keep up QE in fear of a crash.. but they are only digging a deeper hole.

    If we take a look at NZ, the RBNZ can never raise interest rates because they can't afford to have the housing bubble collapse.
    Last edited by GOAT; 19-05-2020 at 06:01 PM.

  3. #603
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    A 2017 article about QE before coronavirus came on the scene. The story that QE was about encouraging investment and boosting employment and growth was always a fantastical yarn designed to disguise what was really going on - a massive transfer of wealth to the rich.

    The reason banks were not funneling money into productive investment was not because they were short of cash - on the contrary, by 2013, well before the final rounds of QE, UK corporations were sitting on almost £1/2trillion of cash reserves - but rather because the global economy was (and is) in a deep overproduction crisis. Put simply, markets were (and are) glutted and there is no point investing in glutted markets.

    This meant that the new money created by QE and ‘injected’ into financial institutions - such as pension funds and insurance companies - was not invested into productive industry, but rather went into stock markets and real estate, driving up prices of shares and houses, but generating nothing in terms of real wealth or employment.
    Where does this additional wealth come from? The answer is simple. The wealth which QE has passed to asset-holders has come, first of all, directly out of workers’ wages. QE, by effectively devaluing the currency, has reduced the buying power of money, leading to an effective decrease in real wages.

    Much of the money went, as we have seen, into buying up commodity stocks (making basic items such as food unaffordable for the poor) rather than investing in new production, and much also went into buying up stocks of currency, again causing an export-damaging appreciation.
    https://www.rt.com/op-ed/397197-quan...g-money-banks/

  4. #604
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    So 3 months on from the start of this thread, we are back to where we were. Does that mean around 70% of voters in this poll were wrong ?? Me thinks so.

  5. #605
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    Quote Originally Posted by iceman View Post
    So 3 months on from the start of this thread, we are back to where we were. Does that mean around 70% of voters in this poll were wrong ?? Me thinks so.
    I didn’t vote, I don’t like these polls very much. They are binary, one ends up looking like a soothsayer or an idiot. Neither of which are true, as no one has a crystal ball insight into the future.

  6. #606
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    If I am wrong I am still happy as I have crystalized many years of fabulous gains and the market was already very stretched so is extremely unlikely to go materially higher from its current level in the foreseeable future.
    Its early days Iceman. Lets see where we are at the end of the 2020.
    Extract from opening post on 28 February 2020 above. I have to concede I am very surprised by the extent of the bounce-back from the low of 23 March. We are back to where we started the year on the NZX50 before anyone had a clue about Covid 19 and the consequent serious economic fallout, which on the face of it doesn't make much sense. A lot of this can be explained by the mega caps FPH, MFT and ATM having a very good year, which I think amount to about 40% of the NZX50 if my memory serves me correctly and from the same article from Craigs a few days ago the rest of the market is still in correction territory, down just on 15%.

    All you can do is call it as you see it at the time. The current level of the market makes me quite nervous. The extent of the disconnect between the market per se and the underlying economy is something I have never seen before. The market appears to be pricing in a vaccine by the end of the year or very early 2021 for world-wide distribution in later in 2021. FOMO appears to be rampant on the market at present. It will be interesting to see how long that lasts for.

    Reserve Banks around the world are engaging in what ostensibly amounts to infinite quantitative easing...what could possibly go wrong
    Last edited by Beagle; 04-06-2020 at 08:42 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  7. #607
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    Quote Originally Posted by Beagle View Post
    Reserve Banks around the world are engaging in what ostensibly amounts to infinite quantitative easing...what could possibly go wrong
    I think that is the interesting question. What could go wrong? Loss of yield seems to be the only visible effect yet?

  8. #608
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    Quote Originally Posted by Biscuit View Post
    I think that is the interesting question. What could go wrong? Loss of yield seems to be the only visible effect yet?
    Its very early days and definitely a case of stay alert. My sense is the US and others who already started this process with a very high debt : GDP ratio are trying to rebuild their economic house but are ostensibly doing so with sand under the foundations. One more good storm and then the "fun" really starts...

    None of this experimental approach was in any of the textbooks I studied at University in the 1980's on economics. It seems to me they're just making this all up as they go along. What we do have have now however is the knowledge of what happened in Zimbabwe https://en.wikipedia.org/wiki/Hyperi...on_in_Zimbabwe
    Last edited by Beagle; 04-06-2020 at 09:00 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  9. #609
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    Quote Originally Posted by Beagle View Post
    Its very early days and definitely a case of stay alert. My sense is the US and others who already started this process with a very high debt : GDP ratio are trying to rebuild their economic house but are ostensibly doing so with sand under the foundations. One more good storm and then the "fun" really starts...
    I think the big picture is very interesting. The big boys like the US can "print" unlimited money it seems. But someone has to pay for that - nothing is free. So who pays when the US prints money? I guess the rest of us do because in effect they buy "our" assets which overall must lower yield. We are all paying to fix the US economy. They are effectively taxing everyone elses passive income. Now that is a clever scheme (for them).

  10. #610
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    Quote Originally Posted by Biscuit View Post
    I think the big picture is very interesting. The big boys like the US can "print" unlimited money it seems. But someone has to pay for that - nothing is free. So who pays when the US prints money? I guess the rest of us do because in effect they buy "our" assets which overall must lower yield. We are all paying to fix the US economy. They are effectively taxing everyone elses passive income. Now that is a clever scheme (for them).
    A lot of US debt is owned by the Chinese. Things could get very interesting if the makings of a cold war turn into a full blown cold war between them, (if we're not getting to that stage quite quickly already). Sooner or later people have to pay for the trillions they are printing, its inevitable but the question is who is going to pay ? At this stage it looks likely that's going to be future generations of Americans but if they print money ad nauseum the chooks could come home to roost a lot earlier. I'm not sure we're paying much yet but who really knows where this could end ?
    Last edited by Beagle; 04-06-2020 at 09:08 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

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