Jun

27

 One wonders if there is a economic explanation for how different sectors perform when the Fed is buying bonds and expanding high powered money at high rates. Would it tend to cause small business to do much worse than big business? Would it cause employment to go down? The mechanism might be something like that which often overides our list. Total disgust and loss of incentives that the big boys are getting a free lunch at the expense of the hidden or unintended costs?

This hypothesis would first have to be tested to see if it exists. Many of us are disgusted that the Fed is buying bonds and bailing out banks with printing of money. It has to come from somewhere? Someone has to be paying? But on the other hand as pointed out by Mr. Rocky, the small caps are performing much better than the large caps? And the banks have shown relative lack of performance lately also.

How could these speculations be narrowed into something testable or put into a better framework?

Stefan Jovanovich writes:

The fresh money comes to Europe:

China will continue to work with other countries with common responsibilities. We should make concerted efforts to strengthen the co-ordination of macroeconomic policies, fight protectionism, improve the international monetary system and tackle climate change and other challenges. We should welcome the fast development of emerging economies, respect different models of development, increase help to least developed countries to enhance their capacity for self-development, and promote strong, sustainable and balanced growth of the global economy.

Last time it was Charles Dawes.

UPDATE: 

Mr. Dawes arrives:

China pledged to buy Hungarian government bonds and said it will “consistently” support the euro as Europe battles to fight its way out of a sovereign debt crisis. China will buy a “certain amount” of Hungarian government bonds and remains a “long-term investor” in European debt markets, Chinese Premier Wen Jiabao said in Budapest today. This afternoon, Wen travels to the U.K. and then on to Germany on his three-country European tour. “China is a long term investor in Europe’s sovereign debt market,” Wen said in translated comments at a press conference with Hungarian Prime Minister Viktor Orban. “In recent years we have increased by quite a big margin our holdings of government bonds. We will consistently continue to support Europe and the euro.”


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