How can you consider a change to qe, without considering what caused that change, what the effects of that change will be on the us economy and consequently on the world economy. As far as I am aware, the world has never been in this position before. So how can you predict exactly what will happen. I have seen inflationary and deflationary theories. Maybe nothing will happen. But I don't think anyone bar you really knows.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
How can you consider a change to qe, without considering what caused that change, what the effects of that change will be on the us economy and consequently on the world economy. As far as I am aware, the world has never been in this position before. So how can you predict exactly what will happen. I have seen inflationary and deflationary theories. Maybe nothing will happen. But I don't think anyone bar you really knows.
I know what will happen be size I have made the effort to understand the mechanics. The fed is encouraging holds of us bonds and other securities to swap their assets for cash. This mainly involves the us banks. This means us banks are accumulating reserves which pay fuck all. This has zippo effect on australia. I would also argue it has zippo effect onthe us.
Most of the tapering fear monger g comes from people who have not made the effort to understand qe. You shouldn't base your expectations on ignorance.
I know what will happen be size I have made the effort to understand the mechanics. The fed is encouraging holds of us bonds and other securities to swap their assets for cash. This mainly involves the us banks. This means us banks are accumulating reserves which pay fuck all. This has zippo effect on australia. I would also argue it has zippo effect onthe us.
Most of the tapering fear monger g comes from people who have not made the effort to understand qe. You shouldn't base your expectations on ignorance.
I think you are confusing economics and science.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
Call it what you like. I think it is just some basic research and logic.
Closer to psychology. Qe shouldn't affect anything. But it does. Discuss in 3000 words or less.
QE has a marginal effect on the US economy. The Fed is collecting a yield spread on its asset purchased from the private sector (ie: they are making a profit on QE). The Fed annual profits have quadrupled to $100bn since the beginning of QE. The spread gained by the Fed did not come from outerspace. It has been lost by the private sector, so it is no different to a tax.
So in the US at least, QE is acting like a tax. And the result? Well, so far this year, US GDP growth remains below 2% per annum - 5 years after the crisis.
The "money printing" aspect of QE really relates to the Fed printing "inside money". That is, money the banks have on deposit to the Fed. This money is never "lent out" (credit growth in the US was at its highest without QE). Inside money represents funds used by the banks to settle transaction on behalf of their customers, so the quantum is irrelevant. Households and businesses keep their money on the liability side of a bank's balance sheet. And QE barely changes that at all.
So starting QE is really akin to a very mild tax on the US economy. Ending Qe will be like removing a tax (ie: it will be slightly stimulatory). The market's reaction to QE is no different to a patients reaction to a placebo. The reaction is real, but the underlying condition remains the same.
There you go. Only 245 words needed. Let me know if anything remains unclear.
Call it what you like. I think it is just some basic research and logic.
Closer to psychology. Qe shouldn't affect anything. But it does. Discuss in 3000 words or less.
QE has a marginal effect on the US economy. The Fed is collecting a yield spread on its asset purchased from the private sector (ie: they are making a profit on QE). The Fed annual profits have quadrupled to $100bn since the beginning of QE. The spread gained by the Fed did not come from outerspace. It has been lost by the private sector, so it is no different to a tax.
So in the US at least, QE is acting like a tax. And the result? Well, so far this year, US GDP growth remains below 2% per annum - 5 years after the crisis.
The "money printing" aspect of QE really relates to the Fed printing "inside money". That is, money the banks have on deposit to the Fed. This money is never "lent out" (credit growth in the US was at its highest without QE). Inside money represents funds used by the banks to settle transaction on behalf of their customers, so the quantum is irrelevant. Households and businesses keep their money on the liability side of a bank's balance sheet. And QE barely changes that at all.
So starting QE is really akin to a very mild tax on the US economy. Ending Qe will be like removing a tax (ie: it will be slightly stimulatory). The market's reaction to QE is no different to a patients reaction to a placebo. The reaction is real, but the underlying condition remains the same.
There you go. Only 245 words needed. Let me know if anything remains unclear.
b_b - most of what you wrote there makes sense to me. But it raises one question: - *why* does the Fed think it is doing QE then? I mean if it has no actual impact other than a tax/impost on the private sector?
I always thought it was to encourage lending by banks by a) pushing down the long term government bond yields (and thus borrowing rates), and b) ensuring that the banks all have plenty of cash/ES reserves to settle inter-bank transactions, in order to avoid (or lower the risk of) a GFC / Lehmans brother collapse style liquidity crisis like that of late 2008?
For Aussie property bears, "denial", is not just a long river in North Africa.....
b_b - most of what you wrote there makes sense to me. But it raises one question: - *why* does the Fed think it is doing QE then? I mean if it has no actual impact other than a tax/impost on the private sector?
I always thought it was to encourage lending by banks by a) pushing down the long term government bond yields (and thus borrowing rates), and b) ensuring that the banks all have plenty of cash/ES reserves to settle inter-bank transactions, in order to avoid (or lower the risk of) a GFC / Lehmans brother collapse style liquidity crisis like that of late 2008?
Firstly, QE1 (TARP) served a real economic benefit IMO. During 2008, the banks were not dealing with each other, which mean some banks were hoarding reserves, while others suffered a shortgage. A bank with no reserves can not settle their client's transactions which means deposits get frozen and the monetary system grinds to a halt. The banks were not dealing with each other because they did not trust each other's credit worthyness / asset quality. SO the Fed bought the crap and printed cash. This gave the banks the reserves they wanted/needed without a full blown banking crisis.
QE2/3 is different to QE 1 as I explained to Newjez. The addition of reserves it not really neded for the payment system. So why are they doing it? I guess you would have to ask the Fed, but i have a couple of thoughts - What else are they going to do at 0% interest rates and US congress unwilling to spend or reduce taxes yet asking the Fed to do more? - Benanke is a monetarist, so he probably beleives in the money multiplier - I have read a few a Benanke's academic papars, and it is clear he is a big beliver in the wealth effect. So the Palacebo may have "knock-on" effects as people borrow against rising equity values and this restarts the whole economy. - He has mentioned he is trying to lower the long end bond rate, but QE has generally done the reverse (because the punters see QE as a stimulus). I think this frustrates the Fed. He could set the ten year bond rate to 0.5% or lower if he wanted, by simply standing in the market at the appropriate price (which is what all CB's do at the short end anyway).
Catweasel
7 Aug 2013, 10:32 AM
b_b
6 Aug 2013, 10:15 PM
Call it what you like. I think it is just some basic research and logic.
Catweasel say interesting.
A basic the research not a same as a empirical the truth.
And a logic no the more than be the able to string along narrative that make a sense to itself and a peer group.
So chin scratch use that to put its the faith in nutty theory?
Is it high school teacher?
b_b say interesting.
Weasle has no the faith in nutty theory?
Yet over 3 years Weasle has yet to provide any critique.
Maybe Weasle need more high school teacher in life?
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