qe2 no new lending , just speculation

NEW YORK (Dow Jones)--U.S. stocks soaring to new heights, commodities booming and higher-yielding currencies smashing through long-held records: Are these signs of an economy roaring back to life, or of bubbles created by cheap central bank money?

"This time it's different," is a refrain oftentimes heard in the go-go times before bubbles burst, said Douglas French, president of the Alabama-based Ludwig von Mises Institute, which advocates for the Austrian School of economics.

Right now, French said, market participants pushing a host of different asset classes to new heights believe "these high prices are justified by some economic fundamentals that likely will be revealed not to be present.

"The Fed just creates more and more money, and that money is gushing," into things such as property in China, commodities and--even after a previous bubble already burst in this sector--technology, French said. Austrian economists typically stand against central banking and argue for hands-off government regulation.

Among the signals that a bubble could be developing in stocks is bank-stock underperformance, even amid U.S. stocks that have gained to near three-year highs. "That is a huge warning sign," said Don Coxe, chairman of Coxe Advisors and a portfolio strategy advisor to BMO Financial in Chicago.

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When the Fed, faced with a cratering U.S. economy in the wake of the financial crisis, pumped money into the system, "we were a very sick patient here in the United States," Mansharamani said.

"We were on our death bed, so the monetary authorities here gave us a serious dose of adrenaline; we got a shot right to the heart." But because China fixes the value of its currency, the yuan, to the value of the U.S. dollar, the Fed's liquidity injection also pumped China full of money, he said.

"They got the medicine, too. The problem was, they weren't sick," he said.

Those cheap dollars--and the cheap money that followed from other central banks that followed suit--has helped fuel a China bubble that reverberates across the entire global economy, Mansharamani said, from direct investments in China's real estate markets to a runup in the commodity prices that form raw materials to feed Chinese growth to shippers of Chinese goods.

As easy money begins to come to an end, the rug could be pulled out from the strongest driver of global growth, Mansharamani said.

http://online.wsj.com/article/BT-CO-20110420-714682.html

Riversider:

1. the bubbles you cite mask much more significant and grimmer domestic and world problems
2. since the mid-1970's real personal service income for most Americans has been negative
3. that trend is now worsening because most US workers have no pricing power
4. during that same period technology advances have destroyed tens of millions of jobs here
5. that trend is accelerating and is a primary cause and driver of real income decline
6. at the same time most cheap sources of commodities and industrial metals have been degraded or depleted
7. from near surface oil, water. farmland, industrial metals, timber
8. the marginal cost of expanding their production generally exceeds average cost of existing supplies
9. the sub-prime lending crisis was not the result of stupid lending but of US income deficiency
10. under-earning Americans used sub-prime borrowing to pay for life's necessities
11. the sub-prime system collapsed because its borrowers continued to suffer income deficiency
12. it is no longer available to help under-earning Americans survive and cope
13. over time the welfare/entitlement state will also shrink or collapse as a means of such support
14. conditions are worse in most non-Western countries, particularly employment and job prospects
15. those ocuntries currently receive over $100 billion/yr in food and other handouts from Western "donors"
16. but the donor nations are mostly insolvent and their own citizens are increasingly destitute
17. the only way to avoid pending collapse abroad - and maybe here - is to generate enormous sources of
new energy and water which is cheap in current market price terms
18. recent shale oil and natural gas production breakthroughs will help
19. cloud computing process management will also: it will save energy and increase operational efficiency
20. but if they are insufficient ....
21. and how do the world's impoverished billions pay their "fair share" towards what they consume
22. where will current world systems generate the food and manufactured goods those people want to consume
23. kinda reduces in significance the choice between fixed rate and adjustable mortgages

WASHINGTON — The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates.

“I wasn’t a big fan of it in the first place,” said Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia and one of the 10 members of the Fed’s policy-making board. “I didn’t think it was going to have much of an impact, and it complicated the exit strategy. And what we’ve seen has not changed my mind.”

A study published in February found that interest rates decreased, but only for companies with top credit ratings. “Rates that are highly relevant for households and many corporations — mortgage rates and rates on lower-grade corporate bonds — were largely unaffected by the policy,” wrote Arvind Krishnamurthy and Annette Vissing-Jorgensen, both finance professors at Northwestern University.

Another indication of its limited success: Borrowing has not grown significantly, suggesting that corporations — which are sitting on record piles of cash — are not yet seeing opportunities for new investments. Until they do, some economists argue that the Fed is pushing on a string.

“What has it done? It has eased credit conditions, it has pumped up the stock market, it has suppressed the dollar,” said Mickey Levy, Bank of America’s chief economist. “But does the Fed think that buying Treasuries and bloating its balance sheet is really going to create permanent job increases?”

http://www.nytimes.com/2011/04/24/business/economy/24fed.html

Riversider:

1. why dont you respond to the points I've made
2. there are many other factors affecting the economy and stock markets other than QE-2

3. if you're looking to make important economic decisions, as people here are, you've got to
adjust your investment strategies for those other conditions

YOU LISTED 23 DESCRIPTIONS. NOTHING JUMPS OUT AS CAUSE & EFFECT.
The reality for now is a Fed increasing liquidity, watching that money flood to stocks, commodities and wall street with little to now increase in real lending. Add to that an uptick of inflation, huge foreclosure backlog and bank which are cooking the book to come up with earnings no one is particularly impressed with(no wonder all the Bank CFO's are resigning or being forced out).
If your looking for investment strategies it is commodities,strong currencies such as the Swiss franc and staying liquid enough with the remainder of one's assets to take advantage of lower asset prices later on. If you need the income low duration high quality bonds.