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  • What Is The Purpose of QE?

    From ritholtz.com

    Read Full Story at ritholtz.com

    As detailed earlier in the month, the Federal Reserve announced more stimulus, otherwise known as QE4, at its recent meeting. Lots of the discussion thus far has focused on whether or not QE will happen and not on the purpose of QE. What we discuss below is a good example of economists discussing the probability of QE rather than why QE is necessary or what it will accomplish. So, what is QE supposed to do? Bernanke told us in his speech over the summer in Jackson Hole: “After nearly four years of experience with large-scale asset purchases, a substantial body of empirical work on their ... (full story)

    • pip_trader

      635 posts
    • The purpose of QE is to falsely bolster economies when politicians fight with ideologies instead of working for the people that vote them in every election.

      Hey, Politicians! You continue to be useless, shame on you! "I" continue to vote you in, shame on me!

    • Ill-b-back

        7,098 posts
    • The purpose of QE is to act as a temporary stop Gap from a meltdown as a result of bubble market conditions conspired between Wallstreet and The Fed.

      QE doesn't work in the long run, never has.

      It's purpose I guess is to transfer wealth from the poor/middle to the rich by creating inflation, debt and stock market volatility which can continue to be exploited by the wealthy participating in the market, until the next conspired bubble occurs, at which point they can quietly liquidate their positions while sounding the trumpets through the purchased and now corrupt media.

      And so it goes on for another gullible generation born into this financial cesspool of deception.

    • pip_trader

      635 posts
    • I think we all understand what it is, but it seems those in charge do not realize what it is for, as in not to propeller the F$#King country for five years in stagnation. The US needs to suck it up, take the hurt, or 2009 will be a fecking walk in the park

    • Forexgain

      538 posts
    • The real purpose of QE is to kick out the as* of retails traders like us...

    • pip_trader

      635 posts
    • Quoting Forexgain
      The real purpose of QE is to kick out the as* of retails traders like us...
      Not true. If you knew how to trade it, it would put money in the bank. Markets are up double digits YoY.

    • alexrazon

      229 posts
    • creating more debt owed to the rich, and the poor keeping up to pay.. brutal & cruel

    • alexrazon

      229 posts
    • Uncle Ben: Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

      yep, yes sir-creating more cash (debt) for the mass small/medium class citizens, which the rich will accumulate down the line

      net effect: small/medium class citizens are more indebted to the rich

    • Forexgain

      538 posts
    • Quoting pip_trader
      Not true. If you knew how to trade it, it would put money in the bank. Markets are up double digits YoY.
      It doesn't matter how we trade but what matter most is how market reacts. If you know how to trade then i am sure you would have bought Gold or Silver after announcement of Q3/Q4 & see where they are trading now. Does it makes any sense? I will definitely say - NO

      That's why i have mentioned above "The real purpose of QE is to kick out the as* of retails traders like us...."

    • alexrazon

      229 posts
    • but of course, it has some other good effects also, depends on who's who situation & objective

    • EricKamezou

      122 posts
    • lots of money flowing but no real production/manufacturing activity means nothing.

    • tcsus

      1 posts
    • sell paper and credit to other countries.

    • pip_trader

      635 posts
    • Quoting Forexgain
      It doesn't matter how we trade but what matter most is how market reacts. If you know how to trade then i am sure you would have bought Gold or Silver after announcement of Q3/Q4 & see where they are trading now. Does it makes any sense? I will definitely say - NO

      That's why i have mentioned above "The real purpose of QE is to kick out the as* of retails traders like us...."
      I understand what you are saying. I do not agree with QE, and I think it is misused; however, I don't trade what "makes" since because you will never get a market full of traders agreeing one way or the other unanimously. I trade what is in front of me and as trades present themselves. There is always a market, and it is always binary. I lose here and there, but I cannot blame QE. Hell, if you bought risk assets on each rumor/announcement of QE you'd make money.

      Gold and silver are "fool's gold" trades in my opinion. People make money, but it's like figuring out someone who's mental.

    • clockwork71

        6,527 posts
    • Quoting pip_trader
      Gold and silver are "fool's gold" trades in my opinion. People make money, but it's like figuring out someone who's mental.
      I think it is the leverage that kills most PM traders. After all, its been a hell of a trade for the last decade. If you have physical metals - this has been an easy trade for eleven years now. If you have been buying futures contracts, you have gotten your ass handed to you from time to time. I mean, many traders give Peter Schiff a ton of shit every time the market falls $100. However, they all tend to forget he started buying gold at $250 or so. When that's pointed out, they tend to shut up quickly.

      All of the silver I own is physical, and I don't worry about it at all......

    • pip_trader

      635 posts
    • Quoting clockwork71
      I think it is the leverage that kills most PM traders. After all, its been a hell of a trade for the last decade. If you have physical metals - this has been an easy trade for eleven years now. If you have been buying futures contracts, you have gotten your ass handed to you from time to time. I mean, many traders give Peter Schiff a ton of shit every time the market falls $100. However, they all tend to forget he started buying gold at $250 or so. When that's pointed out, they tend to shut up quickly.

      All of the silver I own is physical, and...
      I get what you are saying as it has been up nearly vertical for the past decade. I also what to say that I trade more than I invest because I am good at that. I do not want to worry about what "may happen" a year or two from now.

      Physical gold and silver I totally agree with to diversify an overall asset portfolio (worse case scenario, I melt it during the apocalypse and make weapons), but I feel that trying to invest in miners or buying stock/ETF/futures at $1,650 a hope it goes up is not helpful to me.

      If you track the SPY (ETF for S&P) and GLD (ETF) for gold, they have a very high correlation of .8-.9+ between '05-'06 and '08-'09 when gold was considered a "risk" asset, but since the crisis gold has been all over. Also interesting, at the end of the year of '05, '09 and '12 it has dipped into negative correlation, so gold decreases when S&P increases, vice versa. Until '09 it has been a great trade, but from the high in '11 it has followed a declining trend line and topped out 3x hitting that $1800 mark. It will take a bit to push it over.

      I agree that to physical metal is useful, but cumbersome and pricey. However, just having it sit in my electronic portfolio (Stocks, options, futures, spot FX) I do not find all that helpful long-term.

      Gold is great when you got in at $500 oz., but it's no longer the case. Every year analysts cries out, "GOLD $5,000 NEXT YEAR!"Getting in at $250 is awesome, but does individuals no good now. Buying $1700 oz. hopping for a few hundred dollar gain seems like a poor use of capital.

    • jaygee

      2,166 posts
    • gold has gone vertical on the monthly chart. there are endless examples of vertical monthly charts that crash. There is no fundamental reason for golds move. look at the 1980 run up for a historical perspective. The problem with this run up is it is mostly a paper move. There is not enough physical metal to cover all of the paper wrote on it. THe monthly chart shows there is little correlation to the S&P until the 2008 stock crash. Then it picks it up and correlates to it. Paper following paper. Bad setup for longs imo.

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