Selasa, 13 Maret 2012

Zero Interest Rate and Quantitative Easing (QE) Effect tend to make a the Potential of US Economic Deflatoir even Great Depression

By : Edmond F. La’lang

       Monetary Policy that is less calculation by cutting interest rate agrresively (zero rate) and Quantitative Easing to stimulate economic growth would likely lead to a potential decline in the economic real sector that make a Potential Deflation even Great Depression. Although is good for financial sector but full with bubble, speculation and Ponzy giant schemes. Interest rates are similar to "say with flower" to express love, appreciation and generosity of the lender / creditor to the donor / debtor. If interest rates further lower to zero rate (0 - 1.0%), it is not emerging new flowers or plants grow stronger, but it is increasingly shed their leaves and the flower itself, because of the overdose. This is experiences by farmers if the land had been given instead of excesss fertilizer will produce a lot of grains or fruits, but it will reduce the level of productivity. Because of nutrient fertilizers, particularly inorganic fertilizers can be toxic to plants. Similarly, the zero interest rate will not be able to provide a stimulus for developing business opportunities for the low cost of funds / money, because of very sluggish economic conditions, frozen and chilled because the purchasing power and low consumption levels will reduce the level of industrial production, sales and services and finally to increased number of layoffs, unemployment and corporate bankruptcies. This condition gives domino effect "deflationary spiral" of increasingly heavy and severe Japan also has experience from 1992 - 2010 and until now the interest rate is still low at between 0.10 - 0.25 % for 18 years.

        The reason of monetary policy by the Fed (Ben Bernanke) is to provide a kind of stimulus and strengthening the US economy does not fall into the abyss of deflation but it did not catch fire. Then perform the QE program to lift economic growth in the US so as not to stagnate, but n was also not a major impact, because the funding of printing money is actually to buy assets foul and poisonous of major banks and instead give it to the real sector in order to bounce back after getting fresh funds. It can not be done because the Fed just print new money only from thin air (thin water) without the support of a good financial condition in which the US government debt increasingly soared, the progress of real economic growth is very small even decreases causing the condition deflatoir. Thus what happens is the condition of the opposite where the condition of the real economy growing pains where the middle class US become poor and the poor get poorer to continue to depend on government assistance are also derived from a variety of debt to finance it. Conversely in the money market, such as the stock market, bonds, forex and derivative financial actually skyrocketed price (this is called financial experts US as inflation finansil rather than real inflation which is always reported by the Bureau of Statistics in the form of CPI: index of consumer inflation and PPI: inflation index producers) to continue to speculate funds QE (hot money) to the rest of the world that led to skyrocketing various world stock markets without the support of the fundamentals of the real economy strong will eventually lead to the collapse of monetary and real economic sector will become as fragile building its economy.

          Thats why many speculators come to Japan for Carry Trade and invest this fund on high yield return without making the real sector will be recovery. And now too in US, where the Fed rate is 0.25 % and much more printing money for QE1 - 2 as US$ 1,4 Trillion goes to emerging market and commodities market to speculate and rocketing the stocks and commodities price and finally make US and world peoples being more weak buying power for living. And make emerging market being funerable by bubble and overheating economy to be downturn again if they are not smart to manage their economic growth with wisely economic and monetary policies..

          Progress to December 2008, shows the trend of increasingly aggressive European and world central banks cut rates by 0.5 - 1.0% and will continue to 1.0% and eventually will go Zeo rate as was experienced by Japan, followed by the U.S.(1.0%) Progress to December 2008, shows the trend of increasingly aggressive European and world central banks cut rates by 0.5 - 1.0% and will continue to 1.0% and eventually will go Zero Rate as was experienced by Japan, followed by the U.S.(1.0 %) Will cut by the Fed to 0.25 to 0.50 % as well as other world central banks. I also predict that BI will ultimately continue to decrease towards zero SBI rate after a contraction of inflationary toward deflatoir in 2010 - 2011 later. Prices will fall dramatically, although like in Indonesia apply a by word that "strong downward price" that we experienced for 30 years, which continued inflationary conditions characterized by permanent high level of SBI since the 1970s.

          U.S. financiail crisis has spread with systemic symptoms and cause a domino effect on all lines of business from banking, manufacturing and other services including the creative industries in the future. Finansil crisis has caused huge losses for investment banking, general banking, securities, insurance, hedge funds and retail investors a liquidity drought caused the banking world by withdrawing U.S. funds in the entire world back to its parent company to cover losses and pay debts and bill customers withdraw funds. This condition also catastroph in world stock markets and commodities that add to the panic of investors around the world and the shift of these funds into speculative forex USD. In addition to U.S. funds which have invested in both developed and emerging markets caused USD getting stronger against the hard currency and currency others, including the rupiah continued to weaken and had penetrated the level of Rp. 13 400 (Indonesia) at the end of November 2008.

         This effect will be make Cenrtal Bank of Indonesia would be difficult to aggressively reduce SBI anticipates his economic weakness due to recession and the threat of deflation for the business world still goes on. The spread between the SBI with inflation for the inflation rate can suppress effectively is about 1.5 - 2.5%, where the rate of inflation in 2008 was around 11.5 - 12.5%, mean SBI is the optimal level of about 9,5 to 10.5%. If the BI tends to follow the decline in interest rates as other central banks in the world, of course, we face the potential weakening of rupiah in the future. But why the Fed in economic recession even make a strange policies to lower the Fed rate with aggressively to zero rate at 0.25 % to anticipated the inflation rate by import inflation, where US$ will be depreciated condition ? And furthermore the Fed after bail out many banking and other financial institution as Too Big To Fail tend to make more US$ depreciation with Quantitative Easing on QE1, QE2 and maybe continued to QE3 – QE6 ?

         This is make much funerable condition for healthy of economic growth in sector but advantage for growth in financial sector, where we knows that the Big Four Investment Banking and other Richman will be advantaged, but that impoverish lower and middle class ? So, how can you calmly the inflation on food, gasoline and raw materials for industries, just by cutting the employees salary and add the work hours ?    

Foot Note : 

This is shorterm and longterm fluctuation which will be happen in naturally that drive by mood and psychological global mass to take trading positions in crowded market. But if there are a very urgent fundamental data or news, the fluctuation in graphic maybe happen in turbulence fluctuation move up or move down more than shorter forecasting.  And a part of big fluctuation dynamic on biorhythmic and biocycle in midterm and longterm cycle. So you may not being only Globalize with Internet but now you must be have vision as GALAXIZATION with GALAXINET    

Where we can know the strains and the condition of the Universe Kingdom in the short term (10 years), medium term of 50 years and long term 100-200 years), which will also be evident in a "Certainty of Life (certainty) rather than uncertainty (uncertainty) "who always complained of many parties, including the leaders of the state policy makers, leaders of business policy (industrialists and traders) as well as experts in various fields of life. The power and influence of Universe Law (Universe Kingdom) this will always affect every aspect of our lives on this planet, either consciously or unconsciously to anticipate properly.  

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