What happened yesterday to make gold jump fifty dollars!

[Mark F. Barnes]

Somebody care to explain what made gold do this erratic behavior it's done in the last 24 hrs?

http://goldprice.org/live-gold-price.html

Was it just the announcement of the intent of the Fed to buy up all this bad debt, with an IOU yesterday? Something like $1.18 trillion dollars worth of debt! If this is so we are in for an inflationary flash fire, like we've never seen before. I really need some of you economic gurus to chime in on this deal. This could get ugly pretty quickly. I think this has been tried a dozen times in world history, and has failed every single time. So Bernanke is printing money, after all that smooth talk on 60 Minutes the other night. Have they driven the interest rates so low, that this is all there is left to do? I don't think so. The way it looks now the dollar is worth about twenty-five cents. What in the @%#$& are these idiots thinking?

[barracuda]

Somebody care to explain what made gold do this erratic behavior it's done in the last 24 hrs?

http://goldprice.org/live-gold-price.html

If this is so we are in for an inflationary flash fire, like we've never seen before.

That's what I've heard. The dollar is weakening, so people are investing in gold. It's also worth noting how stocks have risen recently. I thought Sirius (SIRI) was on the brink of bankruptcy, but now I wish I'd put all my money in them a few weeks ago as their dirt-cheap stock is up over 200%.

[RedScare]

What in the @%#$& are these idiots thinking?

The simple answer is that during a recession, you pump money into the economy, and you don't worry about inflation. Once you stabilize the economy, you combat inflation.

The long answer I'll leave to TheNiche.

[Mark F. Barnes]

Problem though is they aren't pumping money in they are pumping debt in. Robbing Peter to pay Paul. It's one thing to borrow money from China, but they just printed money from nothing. This never ever works, anywhere in the civilized world is there ever a record of it ever working. Just the opposite as a matter of fact. I am surprised they aren't running the old German newsreels of them burning the money for heat and croaker sacks full of money to buy bread. Our vouchers just got slammed to near nothing, how do you combat that? I just can't fathom this possible scenario.

[TheNiche]

The simple answer is that during a recession, you pump money into the economy, and you don't worry about inflation. Once you stabilize the economy, you combat inflation.

The long answer I'll leave to TheNiche.

I don't have the patience tonight for a long answer, but I'd point out that pumping money into an economy without worrying about inflation has been tried numerous times and is never--under any circumstances--a good idea. Read up.

There is such a phenomenon as having too much of a good thing.

[TheNiche]

Problem though is they aren't pumping money in they are pumping debt in. Robbing Peter to pay Paul. It's one thing to borrow money from China, but they just printed money from nothing. This never ever works, anywhere in the civilized world is there ever a record of it ever working. Just the opposite as a matter of fact. I am surprised they aren't running the old German newsreels of them burning the money for heat and croaker sacks full of money to buy bread. Our vouchers just got slammed to near nothing, how do you combat that? I just can't fathom this possible scenario.

This is the other extreme, also not a good idea. The idea of printing money compensates for a deceleration of the velocity of money, which is characteristic of recessions and contributes to a downward spiral effect.

And since the alternatives (progressive taxation and national debt) could be viewed in the same light as your "robbing Peter to pay Paul" notion, printing money is a continuation of the same practice with a slightly different technique. Same difference, more or less, but one that is preferable in times like these. ...albeit not to excess.

The method by which government pays for its expenses should be less of an issue than should be the government's expenses, IMO.

[Mark F. Barnes]

This may not appear to be progressive taxation now, but they just taxed three or four generations to come. I have been talking all evening to some real bean counters, and they all have the same consensus, this is bad, real bad. I mean under the smoke screen of all the political posturing of this AIG fiasco, the Fed just dumped a trillion dollars into the system, unchecked. Those chickens will come home to roost in the form of an elephant. It almost looks like a bait and switch game, and they are doing it with our futures. I just cannot see the logic in this, in a year we will be dealing on the Peso scale. They might as well go back to printing $100,000 notes for circulation, they are going to be needed. If you can get a loan now, you best lock something in at a low rate if you need it, because all I see is high interest rates in the near future. They have got to try and balance this out somehow, and that's not even going to do it. You might as well buy your next car on your Visa Card.

[RedScare]

It's not a done deal that inflation happens and it ruins us. As a percentage, we ran up far more debt at other times in our history. IF it is manage badly, inflation could take hold, and we could have a replay of the 70s, a decade, by the way, that we recovered from. If the Fed takes steps to keep inflation in check once the recession has eased, we might never even see the rampant inflation that you and your bean counters have guaranteed.

Here's an article that lays out both scenarios.

http://www.msnbc.msn.com/id/29781573/

Oh, and you know that mortgage rates are under 5% now, don't you.

[Subdude]

I understand why they're doing it, but I'm just waiting for the law of unintended consequences to kick in. It's easy to print money to inflate your way to wealth, but I wonder whether there will be the same willingness or ability to turn off the spigot when the time comes. Along with an increase in the price of gold, there has predictably been a sharp drop in the value of the dollar. Expect the price of oil to start increasing very shortly.

At a time when Americans are starting to save more, inflation is an incentive to stop saving and start spending more, so you can likely expect savings rates to drop off again.

I'm curious as to China's reaction. In effect we're telling them "We're going to run a bigger deficit but offer lower yields. You don't mind paying, do you?" It's kind of a bet that we can screw them over and they'll still invest in dollar debt.

[RedScare]

No doubt it's a minefield, with all manner of potential pitfalls, and of course, no guarantee that it works. However, Mark's twin statements that it is a guaranteed failure that has never worked in history, and that everyone knows it, INCLUDING the Fed, is more than a bit overwrought. The fact is, neither Mark, his bean counters, me, Niche, Subdude or the Fed knows exactly what the outcome of this will be. But, it is a safe bet that they know a bit more than we do...though possibly not much more...and that they aren't intentionally torching the financial system or the economy. It is also a safe bet that doing nothing is far worse than the inflationary armageddon that Mark is predicting, and at any rate, given the choice, I think I'd rather fight inflation later than do nothing now. It should also be noted that every other country is doing the same thing, dulling some of the effect of our printing spree.

[cottonmather0]

Bernanke's been threatening to purchase treasuries - monetize a portion of the debt - for some time now and he finally did it. Except for the fact that I am about to get a mortgage with a 4-handle interest rate, I don't like this one bit. They can't lower interest rates any further so they're going to try printing a little bit of money instead. Not cool.

[Mark F. Barnes]

Bernanke's been threatening to purchase treasuries - monetize a portion of the debt - for some time now and he finally did it. Except for the fact that I am about to get a mortgage with a 4-handle interest rate, I don't like this one bit. They can't lower interest rates any further so they're going to try printing a little bit of money instead. Not cool.

Yeah just a little bit....just to put it in perspective though.

$100.00

$10,000.00

$1,000,000.00

$100,000,000.00 (just a normal freight pallet)

$1,000,000,000.00 (Ten pallets)

$1,000,000,000,000.00 (Ten Thousand Pallets and notice those pallets are double stacked.)

Red I hope you are right, frankly everyone better. But I just think they are playing with fire. In turn I also think there has been a lot of inflation in the fear factor, and panic, they have instilled in the public. With every other word out of their mouths, doom and gloom, crisis, the great depression, and so on and so forth. I really don't think people reacted in the manner that they expected. Instead of running out and buying up everything, and getting ready for the end of the world, they sat on their money and flow stopped. Now to stir the pot and get money flowing, they intend to hyper-inflate the economy so a lot of money has to flow around, just to do everyday business? I am bot buying it was the thing to do. Some people are calling it a last ditch effort.

Humor me for a minute. Are we really that close to the great depression? I really think not. Grocery stores are full of food, during the depression they weren't. Sure a lot of people have lost their jobs, but nothing near the great depression, percentage wise. Believe me I fully understand, I have received no less than a hundred resumes in the past two months from engineers that have been laid off. Some really desperate, because they were living on credit, like there was no tomorrow. I have managed to keep my ignorant brother bust in upstate NY so I don't have to pay his house notes. But right now the crunch is being felt all over, but it is nothing close to the 1930's, and as far as I am concerned, not even the 1980's. We were due another contraction, it just came a little early this time, it just seems people are less willing to make sacrifices this time, and people are so spoiled anymore, can't really survive, the way our parents did. I really think this doom in gloom is not as bad as they want us to believe. We are wounded, that's a fact, but nothing fatal. I just feel like some are taking advantage of the wounded and doing their laundry in the muddied up water. And now one will know who crapped in the wash water, and won't even know it's done, until a turd floats to the top.

maybe I am full of crap, and we did shut down Papa's last night, but we all left there with the same consensus, they are bankrupting the country, and it's going to be hard to borrow from foreign investors, when we are driving drunk, with no real destination in sight. Think I am overwrought if you want my friend, but I think I'm not.

[rgr]

not totally related, but in the same ballpark, but have you guys seen i.o.u.s.a.:the movie? i think you'd find it interesting. (david walker and his wife were our dinner companions on our cruise to antarctica last december, btw)

[Mark F. Barnes]

[TheNiche]

Now to stir the pot and get money flowing, they intend to hyper-inflate the economy so a lot of money has to flow around, just to do everyday business? I am bot buying it was the thing to do. Some people are calling it a last ditch effort.

It is by no means clear that they intend to hyper-inflate the economy. Hyper-inflation is usually accidental, and it is nobody's interests.

[Mark F. Barnes]

But can it be argued, that if you do something that has a known result, could it be possibly viewed as intent? They've already ingested our system with about $1.4 trillion in bailouts, on borrowed money, and then they inject another trillion in bogus paper, what else could they be expecting to happen. See I really think all these witch hunts over bonuses and expenditures involving this radioactive bailout money, that they didn't get the participation they expected out of the hedge funders, so the great master plan is stagnant, so they intentionally wanted to stir the pot with this latest influx, to force someones hand into moving in one direction or the other, instead of just sitting on their hands, as we have seen as of late. Problem here as I see it, is they chopping off their nose despite their face. Throwing they baby out with the wash water, so to speak. Are they that willing to killing the dollar, due to inflationary fallout, just to cover their butts? It looks like a lot of white wash to me, to cover the stains of corruption.

[N Judah]

Actually I'm really not sure what they're doing. This inflation thing can't possibly be good except in the short term. I think it is a larger version of the Bush tax cuts which caused a commodities spike and that's it.

[RedScare]

But can it be argued, that if you do something that has a known result, could it be possibly viewed as intent? They've already ingested our system with about $1.4 trillion in bailouts, on borrowed money, and then they inject another trillion in bogus paper, what else could they be expecting to happen. See I really think all these witch hunts over bonuses and expenditures involving this radioactive bailout money, that they didn't get the participation they expected out of the hedge funders, so the great master plan is stagnant, so they intentionally wanted to stir the pot with this latest influx, to force someones hand into moving in one direction or the other, instead of just sitting on their hands, as we have seen as of late. Problem here as I see it, is they chopping off their nose despite their face. Throwing they baby out with the wash water, so to speak. Are they that willing to killing the dollar, due to inflationary fallout, just to cover their butts? It looks like a lot of white wash to me, to cover the stains of corruption.

Perhaps a HAIF record for metaphors used in a single post.

[GREASER]

"to SPITE your face"

[Mark F. Barnes]

Well Greaser thanks for telling me what I meant. However using the word "despite" would seem to be an action done without regard to the effect it causes to others, or to oneself. And on the other hand using "to spite" would indicate an action done maliciously to intentionally cause the collateral damage aforementioned. Perhaps either could be correct, depending on what the author intended to express in context.

I know of no government which stands to its obligations, even in its own despite, more solidly

[RedScare]

Well Greaser thanks for telling me what I meant. However using the word "despite" would seem to be an action done without regard to the effect it causes to others, or to oneself. And on the other hand using "to spite" would indicate an action done maliciously to intentionally cause the collateral damage aforementioned. Perhaps either could be correct, depending on what the author intended to express in context.

I know of no government which stands to its obligations, even in its own despite, more solidly

[Mark F. Barnes]

Are you suggesting that it is six of one, a half dozen of the other?

ROTFLMAO!

[TheNiche]

But can it be argued, that if you do something that has a known result, could it be possibly viewed as intent? They've already ingested our system with about $1.4 trillion in bailouts, on borrowed money, and then they inject another trillion in bogus paper, what else could they be expecting to happen. See I really think all these witch hunts over bonuses and expenditures involving this radioactive bailout money, that they didn't get the participation they expected out of the hedge funders, so the great master plan is stagnant, so they intentionally wanted to stir the pot with this latest influx, to force someones hand into moving in one direction or the other, instead of just sitting on their hands, as we have seen as of late. Problem here as I see it, is they chopping off their nose despite their face. Throwing they baby out with the wash water, so to speak. Are they that willing to killing the dollar, due to inflationary fallout, just to cover their butts? It looks like a lot of white wash to me, to cover the stains of corruption.

There's a big difference between high inflation and hyperinflation. I do believe that they intend to achieve a temporarily higher level of inflation, and that's smart, in and of itself. It'll increase the velocity of money, counteract deflationary pressures on asset prices, and will help to recapitalize banks as their existing debts are discounted even as they become flush with cash from new deposits. And certainly, to the extent that government is printing money rather than taxing or issuing new debt, that makes pro formas look better for startup businesses.

Don't get me wrong, they can still muck it up (and probably will). But in and of itself, higher inflation--not hyperinflation--would be helpful.

[IronTiger]

I thought I was hearing rumblings of hyperdeflation.

Right now the government's doing a pretty shoddy job of fixing the economy, if you ask me.

[TheNiche]

I thought I was hearing rumblings of hyperdeflation.

Right now the government's doing a pretty shoddy job of fixing the economy, if you ask me.

Hyperdeflation isn't plausible except in a very narrow range of circumstances. It won't ever apply to the U.S. Dollar. Deflation was very plausible last year when it was still questionable whether the government would step in to unfreeze the credit markets.

[memebag]

If you have more debts than assets (and most of us do), then inflation is your friend. It means you get to pay those suckers who loaned you money with money that's worth less than when you borrowed it. Yippee!

[TheNiche]

If you have more debts than assets (and most of us do), then inflation is your friend. It means you get to pay those suckers who loaned you money with money that's worth less than when you borrowed it. Yippee!

I would challenge your assumption. Most of us have more assets than debts; we use liabilities in the form of debt to purchase assets, dollar for dollar. Surely there are exceptions, and they are a problem, but they are not the norm.

Nevertheless, I agree with your conclusion.

[memebag]

I would challenge your assumption. Most of us have more assets than debts; we use liabilities in the form of debt to purchase assets, dollar for dollar. Surely there are exceptions, and they are a problem, but they are not the norm.

We do what?

Nevertheless, I agree with your conclusion.

Well then, nevermind.

[TheNiche]

We do what?

Look at a credit card transaction where someone buys a $10 hammer. At the register, they take on $10 of debt to their credit card company, and they also receive ownership of a hammer. The debt is a liability, the hammer is an asset. When someone uses debt to make a purchase, they get both. If they pay off their credit card bill in full at the end of the month, then they reduce another category of assets, in the form of cash, and also reduce their liabilities.

These are pretty basic accounting rules.

[memebag]

Look at a credit card transaction where someone buys a $10 hammer. At the register, they take on $10 of debt to their credit card company, and they also receive ownership of a hammer. The debt is a liability, the hammer is an asset. When someone uses debt to make a purchase, they get both. If they pay off their credit card bill in full at the end of the month, then they reduce another category of assets, in the form of cash, and also reduce their liabilities.

These are pretty basic accounting rules.

But what does it have to do with inflation? If the inflation rate passes their credit card interest rate, they come out ahead by not paying for that hammer.