Are you buying the recovery story in the US?

[Rambo35]

I know the debate goes back and worth and some believe the US is in recover mode (albeit at a much slower pace than the historical norm) while others don’t believe the US economy is recovering at all. It appears that there are conflicting signs, at least in my opinion, but I read this post over at a blog operated by Paxforex where they discuss Signals of U.S. Economic Recovery.

I am not quite sure if I can agree with the points raised there. One element to consider is that since the start of QE3 GDP has weakened and not gained momentum, the labor market is very weak and filled with temporary and part-time jobs and the fiscal situation is terrible.

What do you guys think?

 

[ecg]

Can't comment for the US... but here in the UK there are 'signs of recovery' ... you just have to want to see them REAL BAD!

eg. A building contractor I was talking to today claimed to be 'turning away work' ... however when you realize that he is one of only a small number of independent building companies in my area that have made it through the last few years... and that the bulk of his competition are simply no longer in business (along with all the supporting firms lost in the same period) its no surprise that as soon as demand picks up a little, the surviving businesses are now able to choose their work.

Could this 'recover mode' just be the last few inches in the bottom of the barrel? The surviving businesses finally benefiting from orders that can be delayed no longer. We have a new shopping mall with empty units... the older malls are ghostly quiet (lots of empty units and low footfall). The only retailers that are busy are budget operators (Pound Land) and Supermarkets (people always need food right?).

An astute guess: Things will bounce along from crisis to crisis ... just as they always do!
We will see a recovery in real assets (land infrastructure artwork) as people try and hedge against 'QE' in the long term.

If you fancy a laugh ... ring the Bank of England and ask them 'How much sterling is in circulation including electronic money' ... they will point you to our national audit office (who keep a record of all the new banknotes issued but not electronic currency). With a little gentle pressure BoE will admit that they don't know how much electronic sterling is out there! I'd be surprised if it were any different in the 'States.

 

[Pharaoh]

Personally, I love the whole QE strategy. First, throw money at banks. Then, have the government magically create "money" that it then used to buy bonds.

THINK ABOUT THIS - The government is creating money out of thin air and then loaning the money to . . . the very same government that created it.

Wow! I should do this. I could make some money out of nothing but the desire to create it, loan it to myself so that I have more spending money, and then hope that I have enough money to pay back the loan.

But, what if I can't afford to pay off the loan? I'm worried.

Oh wait! I don't need to worry. If I'm short on cash to pay off the loan, I can always make more money magically appear and then loan it to myself so that I can pay myself back for the old loans. This way I can spend all the money I like to Quantitatively Ease my personal economic desires and still be certain to be able to pay the loans.

 

[ecg]

Just think about the market for UK bonds. All this time this perceived safe haven is being artificially pumped up by treasury purchases of the same bonds they are supposed to be issuing ... in effect slanting the marketplace against 'honest' investors and violating (repeatedly and not gently) the entire idea of a market for government debt.

 

[Pharaoh]

What? The UK's also into self-bonding?

Damn. How many other countries are pulling the same stunt?

 

[ecg]

It's difficult to tell.. I suspect many countries with developed markets for their debt would be tempted to try this. Of course, it can only work where the country in question 'owns' its own currency.... eg Greece ... no play, hence the implosion of their bonds.

There's a fair explaination of the process at the bottom of the following linked article.
Notice that the author has missed the fact that this process is tantamount to having your cake and eating it!

http://www.ft.com/cms/s/0/ca6c4e16-2a65-11e2-99bb-00144feabdc0.html

 

[dkami]

Nope not buying it, not until US has payed off their debt and starts running a surplus which wont happen in my lifetime

 

[Pharaoh]

Nope not buying it, not until US has payed off their debt and starts running a surplus which wont happen in my lifetime

Call a constitutional convention and pass one amendment. It reads:

Pharaoh is now granted full power to temporarily or permanently alter the Constitution. He also has full power to override any decisions made by the President, Congress, or the Supreme Court. Further, he may order Congress and the President to pass whatever laws he sees fit. His primary mission is to balance the budget and put the nation on the path to paying off the national debt. Although this will cause many hardships, in the long run, the prosperity that will follow will more than make up for the pain his actions will cause many citizens of the country.

 

[dkami]

Call a constitutional convention and pass one amendment. It reads:

Pharaoh is now granted full power to temporarily or permanently alter the Constitution. He also has full power to override any decisions made by the President, Congress, or the Supreme Court. Further, he may order Congress and the President to pass whatever laws he sees fit. His primary mission is to balance the budget and put the nation on the path to paying off the national debt. Although this will cause many hardships, in the long run, the prosperity that will follow will more than make up for the pain his actions will cause many citizens of the country.

CON-GRESS must only have the intelligence of a puppy if they don't pass that amendment

 

[RahmanSL]

I believe both the U.S of A and the EZ don't have to print any more money.
All they have been doing in the past few months or so is to beg/steal/borrow money (not necessarily in that order)....dump the money in the forex market (spread among various forex brokers of course).......open their mouth to either make the USD or EUR to go up or down (that explains all the none nonsensical market movements of the currency pair).....close out their positions.....and hey presto....real money from virtual money. Problems solved and no need for any QE2.