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Trade Trends with Bollonger Bands and Twiggs Money Flow

Bank Of England

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colin_twiggs
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Username: colin_twiggs

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Registered: 06-2009

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The BOE announced plans to expand its balance sheet by a further £50 billion, increasing inflationary pressures: BOE.


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ingot54
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Colin

The dreaded Quantitative Easing that precedes inflationary outbreak:

As I understand it (I may be wrong) while the economy is contracting in deflationary phase, liquidity/equity is being destroyed. The selling of Bonds to supply much needed liquidity by governments simply replaces the shrinking money supply.

But QE is another situation, designed to counter the deflationary forces. In short, it appears that as long as Bonds are bought by external players, the money supply is neutral.

However, under QE, the Government BUYS ITS OWN BONDS, which is simply printing money and putting it into circulation. Or propping up toxic debt held by Banks and other credit agencies.

But what happens when the banks and "other" credit agencies finally decide to loosen up and begin lending this printed money out into the community? This is the tipping of the balance ... the end of stability ... the beginning of inflation.

Can it be controlled?


Keep Smiling - Don't look back

Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison

Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead


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colin_twiggs
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Ingot,

Be careful of how you use the term "money supply". What we are experiencing is a debt contraction. Deflation may occur even though the money supply remains constant.

You are right that offshore funding is neutral, while acquisition of bonds by the central bank is inflationary -- unless offset by contracting debt. When debt levels stop contracting is when we should start worrying.

Regards,
Colin







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ingot54
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Hopefully a lot more congressmen will wake up to the issues of preserving toxic debt before then.

Apparently many in congress on both side s of the house are beginning to resist the ideas of bail-out. It is easy for we who pontificate in our arm-chairs about what should be done and not done. But in their shoes they must be worried sick about "do-we-or-don't-we".

I believe Australia need not have used the tool of stimulus the way they did - I am certain we could have gotten a much better flow-on for the dollar spent than by running up a larger foreign account as we have.

ie - the stimulus went into Chinese pockets (hopefully it went around a bit first.)

But certainly in countries where toxic assets are still held on the books of "too-big-to-fail-banks" stimulus packages might have been justified - if only to generate some rebuilding of the balance sheet for the badly-hit banks.

I am on the side of those that believe the US Fed should not have bailed out the failed banks - but should have allowed market forces to prevail - despite the cost. How else are the lessons of bubble-capitalism to be learned?

Having said that - I would not like to be living in a country that had such banks and institutions falling like dominoes - the tragedy that would ensue would leave an indelible scar on the psyche of two generations at least - not unlike the flow-on from the last great depression.

I really like your Thomas Jefferson quotes Colin - pity the yanks couldn't bring the man back - what we have today is a mob of gimmee's who want-what-they-want-when-they-want-it. Jefferson would have scorned them to a man!

A darned good depression wouldn't hurt - we would still have life - and probably a far better one as relationships are rediscovered outside of the need to turn a dollar.

What would you be doing if you didn't spend so much time running this site?

What would I be doing if I didn't spend so much time in my office trading and following newsletters and ideas?

Food for thought, n'est ce pas?

Is this what life has come down to? Dollars?


Keep Smiling - Don't look back

Hell, there are no rules here - we're trying to accomplish something ~ Thomas A. Edison

Never believe that a few caring people can't change the world. For, indeed, that's all who ever have ~ Margaret Mead

Trade the Bollonger Band Squeeze

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