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QE is NOT "printing up money". It's just an asset swap.
Ken
The Fed is purchasing Treasury Notes and Mortgage Backed Securities (you know those toxic instruments) and giving the Banks the full value when they would be lucky to get anything on the open market.
So yes, it is still giving money to the banks that they would not get the full value of if they sold those MBS on the market.
Almost! The fed is only going to pump $800 billion a year, instead of a trillion. I'd still like to know which lucky Obama crony is handling the money transfers for the fed, because they are earning billions a year.
The Fed is purchasing Treasury Notes and Mortgage Backed Securities (you know those toxic instruments) and giving the Banks the full value when they would be lucky to get anything on the open market.
So yes, it is still giving money to the banks that they would not get the full value of if they sold those MBS on the market.
It is still propping them up.
Why are you against Free Market Capitalism?
Ken is more interested in saving the corrupt institutions that caused this mess instead of working to build a more honest economy.
The Fed is purchasing Treasury Notes and Mortgage Backed Securities (you know those toxic instruments) and giving the Banks the full value when they would be lucky to get anything on the open market.
So yes, it is still giving money to the banks that they would not get the full value of if they sold those MBS on the market.
It is still propping them up.
Why are you against Free Market Capitalism?
There is nothing intrinsically "toxic" about MBSs any more than any other type of investment. The only reason MBS became "toxic" in the days leading up to the credit crash is because lending standards became overly lax (or more to the point, those lending standards were NOT INFORCED) and appraisers (under pressure from lenders anxious to have lots of sale go through) consistantly overappraised homes - NEITHER of which is the case today (in fact, lending standards are quite high by historical comparison).
There is little evidence that banks would not get full value for MBS today so consequently there's little evidence that the Fed is "propping up the banks" and little evidence the process is propping up the stock market.
Large-scale totally "Free Market Capitalism" doesn't exist anywhere on the planet. There's a REASON for that - it's full of wild fluctuations and continuous booms and busts (WAYYYYYYYY more than we have today).
Ken is more interested in saving the corrupt institutions that caused this mess instead of working to build a more honest economy.
A "more honest economy"????
LOL
The Libertarian vision of an "honest economy" doesn't exist anywhere on earth.
There's a REASON for that - it DOESN'T WORK.
Libertarianism is no more realistic or workable than Communism.
NEITHER exist anywhere on earth, and NEITHER ever will because BOTH go against basic human nature.
There is nothing intrinsically "toxic" about MBSs any more than any other type of investment. The only reason MBS became "toxic" in the days leading up to the credit crash is because lending standards became overly lax (or more to the point, those lending standards were NOT INFORCED) and appraisers (under pressure from lenders anxious to have lots of sale go through) consistantly overappraised homes - NEITHER of which is the case today (in fact, lending standards are quite high by historical comparison).
There is little evidence that banks would not get full value for MBS today so consequently there's little evidence that the Fed is "propping up the banks" and little evidence the process is propping up the stock market.
Large-scale totally "Free Market Capitalism" doesn't exist anywhere on the planet. There's a REASON for that - it's full of wild fluctuations and continuous booms and busts (WAYYYYYYYY more than we have today).
Ken
If they can get full value on the open market, then why don't they?
Why are they offloading it onto the fed?
If they can get full value on the open market, then why don't they?
Why are they offloading it onto the fed?
The Fed is buying them up to keep interest rates low (which helps spur the overall economy) - NOT to "prop up the banks". Banks COULD sell them elsewhere but interest rates would not be kept as low under those conditions.
For years now, the wingnuts have been telling us how it was just the administrations' QE propping up the stock market - that the recovery of the stock market was just an illusion, that US companies were not doing well enough to justify the higher stock prices, and that once QE ended stocks would crash back to where they were 5 years ago because "the economy was not recovering".
Well, the Fed announced today that they were starting scale back QE in January - and, the stock market shot up - ending the day in record territory with the DOW up nearly 300 points, the S&P up nearly 30 points and the NASDAQ up nearly 50 points.
Oppps!
Gold, on the other hand got clobbered - as I said it would.
Hmmmm.... could it be that all the nonsense about the stock market simply being propped up by QE was just that - nonsense?
Yup.
Ken
I do not think that such disproves what naysayers have been naysaying about the economy. I actually tend to agree with a lot of what they are saying. Everything that I know and understand about economic and economic models tells me that prolonged zero interest rate policies, money printing and a GDP maintained and grown ONLY via the increase the rate of debt, is not only untenable, but can produce calamitous repercussions depending on how long such behavior exists. I had a minor in economics while in college.
The thing is this. We do not know how counties and foriegn central banks are colluding to keep the US economy afloat. If the US economy tanks, given that the dollar is the worlds reserve currency and so many economies are dependent upon exports to our market, it would drag down the world economy right with our own. Thus, countries and central banks around the world might be acting in a way that seems counter intuitive for their interest, which in turn is helping to keep the US economy propped up.
The world knows that if we go down that the world goes down and if they do not know that......you can be sure it has been communicated to other countries in the tone of a threat.
The Fed is buying them up to keep interest rates low (which helps spur the overall economy) - NOT to "prop up the banks". Banks COULD sell them elsewhere but interest rates would not be kept as low under those conditions.
Ken
Sure, yeah, with one hand the government keeps interest rates low to prop up the economy, presumably so companies will borrow, expand and grow. But with the other hand government increases tax rates and writes new laws and regulations like the ACA which punish companies that grow.
Nothing is gained without something else being lost, in a closed system.
Thus, the question is what are the reactions and what is being lost from the recent actions to keep the economy afloat?
Progress or growth if often the illusion created from getting the benefit of something, before having to pay the compete cost. Time is the facilitator of the illusion of growth.
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