View Single Post
      04-04-2012, 02:20 AM   #802
Vanity
Private First Class
Vanity's Avatar
Canada
252
Rep
123
Posts

Drives: BMW E90 LCI
Join Date: Feb 2010
Location: BC, Canada

iTrader: (0)

Quote:
Originally Posted by Hisam135i View Post
Fun facts about gas prices:
every 10 cent rise in gas prices = 12 billion out of consumer spending
every $10 rise in price of crude oil = -.25% effect on US GDP.


As you stated there are many factors that make me also find it hard to believe that QE3 is going to happen this year; well unless there is a severe hit to the market. The markets are doing fine now, no need for QE yet were close to all time highs! It would be a definite waste in my opinion as well as lead to a rise in the price of pretty much everything (inflation) as you said.

Also, QE is pretty much our last defense from a catastrophe since interest rates are already scraping rock bottom, cant exactly go any lower. Meaning if something, such as the drop in 08, were to happen again our only way to stop it would be to dump money in the economy using QE, which would most likely lead to hyper inflation! So QE isnt something that should be used lightly and only should be used in a time of need not for just creating the wealth effect to hopefully get the economy back rolling which it hasnt exactly done so far.

this is also food for thought a bit on the extreme side though for the last paragraph
Some more fun facts about gasoline price gouging:
-Every $10 increase per barrel of crude oil = an extra 45 cents added per gallon.
- When crude comes back down $10/barrel, only 3 cents are shed off per gallon.

This is why I really question how trigger-happy Bernanke is going to be with QE3. And glad we come to the same conclusions, I myself do believe that QE3 will likely happen after a large decline, rather than before it. The history of QE's shows it is an post-crisis response, not by any means a "preventative" policy.

Bernanke will likely wait several months after a correction in the markets before new liquidity is dumped in, similar to what we always see after a crash. Liquidity comes in after a lot of carnage has occurred. Last year we declined -22% over 3-4 months before Twist came into effect. Makes you wonder, why a -22% decline only warranted Twist (a very ineffective QE policy, relative to others, imo). You have to logically argue whether QE3 would warrant a larger decline (would make sense, as per arguments described above about more "room" for liquidity to come in).

But if you look at 1961, the last time Twist was introduced, it was a policy that went on for many years. In 1965 when Twist came to an end, the markets tanked -25%.

However I don't believe Hyperinflation is a real problem, just yet. Money velocity is steeply declining which indicates this liquidity is not finding itself into the actual economy (as evident by where unemployment stands after a multi-trillion dollar liquidity policy).
__________________
Appreciate 0