Qe2 and it's relevancy

[Nestor]

More or less a educational thread here...I'm hoping someone will be kind enough to spend a couple of minutes to educate ignorant people like me on the impact of qe2 and it's general relevancy?

Even if it's just to forums/forums threads or sites to read up on.. That will help too

I do know as much that results of qe2 (quantitative easing 2) will affect interest rates, USD strength, money coming into/outof Asia, property prices, inflation (or not), stocks and shares and more but I can't put them together well...

[gfoo]

it means much more liquidity into the system - which might spark a race to the bottom as countries rebalance their currencies to the usd. which means more money in the hands of the rich - widening of the rich-poor divide. which will lead to asset inflation as credit is cheaper and easier with lesser controls, which means property prices esp luxury will boom, which means bullion prices will similarly boom, which makes me a very happy camper

but i think the fed will disappoint the market with their qe2 announcement.
i expect the stock market to plunge Fri (thankfully it's a public holiday so sgx close - early shorts anyone lol? )

[stalingrad]

it means much more liquidity into the system - which might spark a race to the bottom as countries rebalance their currencies to the usd. which means more money in the hands of the rich - widening of the rich-poor divide. which will lead to asset inflation as credit is cheaper and easier with lesser controls, which means property prices esp luxury will boom, which means bullion prices will similarly boom, which makes me a very happy camper

but i think the fed will disappoint the market with their qe2 announcement.
i expect the stock market to plunge Fri (thankfully it's a public holiday so sgx close - early shorts anyone lol? )

the Fed will not disappoint nor surprise the market. Like Greenspan, Bernanke does what the markets expect.

the market on Friday will not plunge. We will be in this holding pattern for many weeks to come.

[gfoo]

see how lah, anybody's guess. i don't have a single cent vested in the stock markets so doesn't impact me directly.

[vboy]

But if the Fed does what the market expects it to, then all the future expectations would have been priced into the financial markets already....

no more upside? then people might wanna take profit off the table if they are already ITM?

[Antz621]

More or less a educational thread here...I'm hoping someone will be kind enough to spend a couple of minutes to educate ignorant people like me on the impact of qe2 and it's general relevancy?

Even if it's just to forums/forums threads or sites to read up on.. That will help too

I do know as much that results of qe2 (quantitative easing 2) will affect interest rates, USD strength, money coming into/outof Asia, property prices, inflation (or not), stocks and shares and more but I can't put them together well...

Gfoo explanation brings you to only first half of the climax. The 2nd half of the theory says that when liquidity such as USD is too much in the market, its currency value will drop and hence help spur the America's competitiveness as its exports get cheaper. That is what the Obama administration is dying to achieve so as to spur growth / demand and create jobs. QE1 had proven that this is not workable. By proceeding with QE2, its just upping the stakes that's all. It's still a gamble. However when the USD value drops, it undermines the attractiveness of other export reliant countries like China, Thai, Viet and of course Singapore as these places becomes more costly to operate or to produce. At the end of the day, investments will reduce and existing corporations will start to relocate; resulting in rising unemployment that brings social problem. Too high of an inflation requires text book approach of injecting high interest rates to counteract it; which in turn will cause loans to be more expensive. When that happens this will cause business op costs to increase as well and coupled with the rising value of the currency of the said country, its a fantastic nightmare in the making. In addition, when interest rates rises, home mortgages get increasingly unaffordable. This will cause the property bubble to burst eventually. In the short term, it will cause assets like property to head north no doubt; but that is just a mirror image of elevating you higher before crashing you down; harder and faster. Bear in mind that PM Lee reiterated yesterday that the property market needs to be watched as he is well aware of the dire consequences of QE2 should it fails to deliver; just like its predecessor. Everyone is just betting that QE2 will indeed kick start the demand and spur growth and hopefully, reignite consumers' confidence to spend again. At least as far as the world sees it now, until the Yanks spend again, the world's economy is still not out of ICU yet...

[Wild Falcon]

In layman terms, it means it make sense to borrow in USD (which is expected to depreciate which means your borrowings is reduced which is a good thing) and invest in other growth economies with currencies that will appreciate against the USD - in particular Asia. Therefore, hot money will start to flow into Asia which means asset inflation and possible asset bubbles will form. Asia governments will likely implement more policies to curb the asset inflation. In Singapore, most people would assume that curbs will only apply to mass market and HDB because our government has traditonally taken a laissez-faire attitude towards the high-end. I personally think the last cooling measure was clearly targeted at HDB - the next round (if any) will be targeting the high-end. Singapore is always 5 steps behind Hong Kong - so you can roughly "guess" what our government will do by observing HK's government actions to cool their market.

And expansionary monetary policy cannot go on forever. It has to unwind one day.

[Laguna]

QE2 : expect around US$500B.

I track HK property market very closely.
The market was in a standstill in Aug and Sept, and fly off after the cooling measures announced in Oct. Many sellers have withdrawn from market or up the price and buyers are in force, some even chasing the price.

I picked up one in HK first week of Sept, the seller was very easy to negotiate, but the situation has now changed drastically. Viewing volume has also gone up a lot.

[Lord Anus]

you are assuming when usd drops, other countries cannot do the same?

like i said, sgd may now be strong. see how long can we tahan such a high sgd. eventually sure must drop to remain competitive. then your char kway teow will cost $10. your condo $5m for 3 room. your salary maybe increase only 10%.

this scenario will be after SG election so even if this happens all of us lan lan suck thumb. kenna conned again! so easy one!

Gfoo explanation brings you to only first half of the climax. The 2nd half of the theory says that when liquidity such as USD is too much in the market, its currency value will drop and hence help spur the America's competitiveness as its exports get cheaper. That is what the Obama administration is dying to achieve so as to spur growth / demand and create jobs. QE1 had proven that this is not workable. By proceeding with QE2, its just upping the stakes that's all. It's still a gamble. However when the USD value drops, it undermines the attractiveness of other export reliant countries like China, Thai, Viet and of course Singapore as these places becomes more costly to operate or to produce. At the end of the day, investments will reduce and existing corporations will start to relocate; resulting in rising unemployment that brings social problem. Too high of an inflation requires text book approach of injecting high interest rates to counteract it; which in turn will cause loans to be more expensive. When that happens this will cause business op costs to increase as well and coupled with the rising value of the currency of the said country, its a fantastic nightmare in the making. In addition, when interest rates rises, home mortgages get increasingly unaffordable. This will cause the property bubble to burst eventually. In the short term, it will cause assets like property to head north no doubt; but that is just a mirror image of elevating you higher before crashing you down; harder and faster. Bear in mind that PM Lee reiterated yesterday that the property market needs to be watched as he is well aware of the dire consequences of QE2 should it fails to deliver; just like its predecessor. Everyone is just betting that QE2 will indeed kick start the demand and spur growth and hopefully, reignite consumers' confidence to spend again. At least as far as the world sees it now, until the Yanks spend again, the world's economy is still not out of ICU yet...

[Nestor]

Gfoo explanation brings you to only first half of the climax. The 2nd half of the theory says that when liquidity such as USD is too much in the market, its currency value will drop and hence help spur the America's competitiveness as its exports get cheaper. That is what the Obama administration is dying to achieve so as to spur growth / demand and create jobs. QE1 had proven that this is not workable. By proceeding with QE2, its just upping the stakes that's all. It's still a gamble. However when the USD value drops, it undermines the attractiveness of other export reliant countries like China, Thai, Viet and of course Singapore as these places becomes more costly to operate or to produce. At the end of the day, investments will reduce and existing corporations will start to relocate; resulting in rising unemployment that brings social problem. Too high of an inflation requires text book approach of injecting high interest rates to counteract it; which in turn will cause loans to be more expensive. When that happens this will cause business op costs to increase as well and coupled with the rising value of the currency of the said country, its a fantastic nightmare in the making. In addition, when interest rates rises, home mortgages get increasingly unaffordable. This will cause the property bubble to burst eventually. In the short term, it will cause assets like property to head north no doubt; but that is just a mirror image of elevating you higher before crashing you down; harder and faster. Bear in mind that PM Lee reiterated yesterday that the property market needs to be watched as he is well aware of the dire consequences of QE2 should it fails to deliver; just like its predecessor. Everyone is just betting that QE2 will indeed kick start the demand and spur growth and hopefully, reignite consumers' confidence to spend again. At least as far as the world sees it now, until the Yanks spend again, the world's economy is still not out of ICU yet...

Thanks to gfoo and antz.... all these explanations are extremely insightful to me... and I wish I have the intelligence to see the big picture myself...

Is it possible to estimate based on experience on when both will happen? I think it's obvious that that 2011-12 might be the year where we see the asset inflation and more gov policies and 2012-2013 or more might be where the bubble starts to burst...

Very interesting! but these are all bad news to me if you read my threads...

gfoo I followed your advice and decided to hold my HDB and not buy any property now...till I can afford a place comfortably (<1.2 mil) sometime next year or so.. but with this inflation coming I think it's not going to happen at all

[gfoo]

Thanks to gfoo and antz.... all these explanations are extremely insightful to me... and I wish I have the intelligence to see the big picture myself...

Is it possible to estimate based on experience on when both will happen? I think it's obvious that that 2011-12 might be the year where we see the asset inflation and more gov policies and 2012-2013 or more might be where the bubble starts to burst...

Very interesting! but these are all bad news to me if you read my threads...

gfoo I followed your advice and decided to hold my HDB and not buy any property now...till I can afford a place comfortably (<1.2 mil) sometime next year or so.. but with this inflation coming I think it's not going to happen at all

Let's see if QE2 is even happening first. some are expecting the fed to disappoint.

[Antz621]

you are assuming when usd drops, other countries cannot do the same?

like i said, sgd may now be strong. see how long can we tahan such a high sgd. eventually sure must drop to remain competitive. then your char kway teow will cost $10. your condo $5m for 3 room. your salary maybe increase only 10%.

this scenario will be after SG election so even if this happens all of us lan lan suck thumb. kenna conned again! so easy one!

I do not assume that My Lord; but rather I feared that! Precisely other countries will be doing the same, that is why everybody is drumming up talks of currency wars. Every country is trying to protect themselves because USA is deliberately devaluing themselves even at the expense of others. China jolly well knows this and is making sure the RMB rise at turtle speed. The Europeans are cursing and swearing but hey, can you imagine the kind of shit that Premier Wen will be facing if the Yuan is so strong that China has to lose its title of "World's Factory"? When currency wars start, protectionist policies will set in. FTAs will be a thing of the past. Every country will be erecting economic trade barriers to protect themselves. What is going to happen to an export orientated country like us?? That is why I am so worried about this QE2 thing. Too much of it is no good. Too less of it, is like burning hell notes with no noticeable effects. With the yanks looking after themselves only; and the fact that they are going to further imbalance (or restabilize) the global financial markets with Benjamin Franklin's notes, it's every country for themselves.

Today 1SGD change USD1.288. At the rate that we are going, I really have no idea how long can the American companies here continue to justify their existence; especially our all-important pharma sector. If we allow our currencies to be weaken, we are effectively making our people poorer and depressing their spending power which will make this a hot topic in the coming GE. Yes, like you said, the inflation will be so serious, we will have to follow the foot path of the Japs to require 3 generations just to pay off 1 house! Now that sucks!!

[amk]

... protectionist policies will set in. FTAs will be a thing of the past.... With the yanks looking after themselves only... it's every country for themselves.

bro I agree with u completely. nothing in this world is fair and free. US is abusing its position and whatever happens to you is your problem. The game has always been "I win you lose". Screw china for your trillion USD Treasuries. Volatile ccy market is going to be the norm. Capital control will reappear soon. (Who said Mahathir was crazy when he imposed capital control ?)

[Antz621]

bro I agree with u completely. nothing in this world is fair and free. US is abusing its position and whatever happens to you is your problem. The game has always been "I win you lose". Screw china for your trillion USD Treasuries. Volatile ccy market is going to be the norm. Capital control will reappear soon. (Who said Mahathir was crazy when he imposed capital control ?)

Yeah man. A simple google on "currency wars" and all articles will tell you that it only benefits the joker who started it by dumping the $. If Singapore is forced into currency control; what's gonna happen to our economy? "Ho Sey" liao lor

[Antz621]

Thanks to gfoo and antz.... all these explanations are extremely insightful to me... and I wish I have the intelligence to see the big picture myself...

Is it possible to estimate based on experience on when both will happen? I think it's obvious that that 2011-12 might be the year where we see the asset inflation and more gov policies and 2012-2013 or more might be where the bubble starts to burst...

Very interesting! but these are all bad news to me if you read my threads...

gfoo I followed your advice and decided to hold my HDB and not buy any property now...till I can afford a place comfortably (<1.2 mil) sometime next year or so.. but with this inflation coming I think it's not going to happen at all

If QE2 fails, inflation is bound to set in. Also bear in mind the mind-blogging numbers of developments which will TOP in the next 3-5 years. If the government injects drastic measures during that timing, you need not possess a diploma in rocket science to figure out where the property market is heading... The prop mkt is crazy enough; and its gonna get worst.

BEFORE THE SUNSHINE APPEARS, WE GONNA NEED TO GO THROUGH THE STORM. BUT PROBLEM IS: IT'S NOT EVEN RAINING YET

*Side Note in answering your question: Nobody knows when is it going to happen. QE2 may not fail after all. It may just be another fruitless attempt to jump start the economy without wreaking havoc to others. That is why the key point now is just how much is the QE2 package worth. If it is pegged at the unthinkable figure of 500B or so, god helps us all

[Antz621]

Today 1SGD change USD1.288.

Correction on my earlier thread. It should read 1USD change SGD1.288. Paiseh paiseh

[Nestor]

If QE2 fails, inflation is bound to set in. Also bear in mind the mind-blogging numbers of developments which will TOP in the next 3-5 years. If the government injects drastic measures during that timing, you need not possess a diploma in rocket science to figure out where the property market is heading... The prop mkt is crazy enough; and its gonna get worst.

BEFORE THE SUNSHINE APPEARS, WE GONNA NEED TO GO THROUGH THE STORM. BUT PROBLEM IS: IT'S NOT EVEN RAINING YET

*Side Note in answering your question: Nobody knows when is it going to happen. QE2 may not fail after all. It may just be another fruitless attempt to jump start the economy without wreaking havoc to others. That is why the key point now is just how much is the QE2 package worth. If it is pegged at the unthinkable figure of 500B or so, god helps us all

So you mean to say if qe2 fails, there will be inflation... if it works.. there will still be assets inflation.. so either way we're shooting to the sky?

I'm an idiot when it comes to these things... if there is inflation, and we have a lot of properties TOP in 3-5 years time, that will mean that there will be excessive supply at a very high price.. that along with the drastic measures gov put in place to curb the buying... where will the demand come from? That will mean the property bubble will burst no?

Apologies if the above sound idiotic... I do need a diploma in rocket science to understand simple stuff like that....

[Antz621]

So you mean to say if qe2 fails, there will be inflation... if it works.. there will still be assets inflation.. so either way we're shooting to the sky?

I'm an idiot when it comes to these things... if there is inflation, and we have a lot of properties TOP in 3-5 years time, that will mean that there will be excessive supply at a very high price.. that along with the drastic measures gov put in place to curb the buying... where will the demand come from? That will mean the property bubble will burst no?

Apologies if the above sound idiotic... I do need a diploma in rocket science to understand simple stuff like that....

If QE2 fails to kick start the US economy; where did all the Benjamin notes went to? Asia. And we are one of the most stable economy to invest in. Everything will be on the rise; hence Inflation. Exuberant Inflation will result in price runaways. And Lord Anus's prophecy may just come true: You need to pay 5mil for a 3 bedder or 1 mil (or above) for resale HDBs but guess what; the wealth you accumulated is smaller than a peanut; thanks to the currency war.

If QE2 works, consumer confidence will be restored and healthy consumption will be regained. Theoretically, it should benefit economies like ours as genuine demands functions like HDL Cholesterol. This enables the economy to grow optimally which will help in keeping a tab on the rate of inflation.

The worst case scenario that can happen and may happen is the influx of hot liquidity from the States triggering a massive hike in asset prices; relegating the property market into a punter's gambling den for the riches and thereby partly contributing to a high rate of inflation. And if all these are not supported by a healthy GDP, there will be no consumption power from the ground and this will cause the whole bubble to further inflate. If the interest rates are high, supply aplenty and coupled with zero demands for properties (because their prices are so sky high that the average Joe cannot afford), either the whole thing collapse by itself or the government would have to step in with the appropriate measures. Whether to prick the bubble or just to vent the air out a little, depends on how crazy the market had developed till at that stage. Nobody can say anything for sure now. What most people can say for sure now is that the prop mkt is bound to rise further soon; thanks to QE2.

[jitkiat]

There is something called the capital gain tax

[kane]

a weaker USD today does less for its exports than it would 10 years ago, cos of the dispersion of production facilities across the countries.

And if their real economy languishing, QE will result in greater asset inflation in Asia. the million dollar question though is when will the music stop, 10% up from here? 30%? 50%? or 70%??

[Antz621]

a weaker USD today does less for its exports than it would 10 years ago, cos of the dispersion of production facilities across the countries.

And if their real economy languishing, QE will result in greater asset inflation in Asia. the million dollar question though is when will the music stop, 10% up from here? 30%? 50%? or 70%??

If you have the answer, MBT wants you! His job is on the line!!

[kane]

If you have the answer, MBT wants you! His job is on the line!!

i don't think the music will stop in a stubbornly low interest rate environment. that's my take. as for the %, the odds of getting that right is as good as flipping a coin.