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Federal Reserve and Quantitative Easing (QE)
Posted on 6/28/13 at 7:01 pm
Posted on 6/28/13 at 7:01 pm
I always understood QE involved the Federal Reserve actually printing money. Current QE rate is set at $ 85 billion (I believe) monthly. Apparently that's not the case. If I understand this correctly, the Fed does not actually print money, it's a digitalized transaction. Further, the folks who really benefit from this practice is Wall Street. I always assumed the 'funny money' found its way to mortgage lenders and banks, and we the consumer (home buyers, borrowers) benefit from the availability of huge pots of money. Thus the influx of capital = stimulation of the economy = drop in unemployment rate. Right?
Ben Bernanke announced last week Fed was halting QE. Following his announcment the Stock Market took a major dive. This week he comes back and announces the Fed will continue QE at the present rate, and the market rebounds. So I'm here thinking this 'funny money' the Fed is supposedly printing is, 1) running up the deficit, 2) hastening the onslaught of hyperinflation, 3) artifically creating the illusion of Wealth, and, 4) threatening the dollar as the World Reserve Currency.
But to my surpirse....it's just a form of creative economics.....like creating a digitalized transaction out of thin air. I mean somebody is left with the bill....right? Looks like to me all QE is doing is propping up Wall Street!
Does anybody have any idea where this will all lead us to?
Can somebody explain this to me? Maybe one of you guys in Finance.
Inquiring minds want to know?
Ben Bernanke announced last week Fed was halting QE. Following his announcment the Stock Market took a major dive. This week he comes back and announces the Fed will continue QE at the present rate, and the market rebounds. So I'm here thinking this 'funny money' the Fed is supposedly printing is, 1) running up the deficit, 2) hastening the onslaught of hyperinflation, 3) artifically creating the illusion of Wealth, and, 4) threatening the dollar as the World Reserve Currency.
But to my surpirse....it's just a form of creative economics.....like creating a digitalized transaction out of thin air. I mean somebody is left with the bill....right? Looks like to me all QE is doing is propping up Wall Street!
Does anybody have any idea where this will all lead us to?
Can somebody explain this to me? Maybe one of you guys in Finance.
Inquiring minds want to know?
This post was edited on 6/28/13 at 8:02 pm
5
Posted on 6/28/13 at 7:19 pm to Matrixman
we're screwed, buy silver coins, build a bunker, and buy lots of canned food and water
Posted on 6/28/13 at 8:26 pm to Matrixman
The Fed has a variety of options at it's disposal when it comes to QE. Currently, they are purchasing bonds in the open market in droves.
In a theoretical sense, QE is supposed to drive interest rates down, urging investors to spend money now, instead of sitting on their hands, thus stimulating the economy.
What's actually happening?
1. Banks are sitting on large stockpiles of cash. The cash that is supposed to be getting to consumers hands to spend and stimulate isn't getting there, for a variety of reasons.
2. Since open market bond buying drives down the yield on bonds, to get returns, then investors must put their money into equities to gain returns.
3. Our dollar weakens as the M2 supply increases at huge rates.
4.
Once again, Ben has said this is what he wants. He wants people to "feel richer" because the more wealthy people feel, the more money they spend.
In a theoretical sense, QE is supposed to drive interest rates down, urging investors to spend money now, instead of sitting on their hands, thus stimulating the economy.
What's actually happening?
1. Banks are sitting on large stockpiles of cash. The cash that is supposed to be getting to consumers hands to spend and stimulate isn't getting there, for a variety of reasons.
2. Since open market bond buying drives down the yield on bonds, to get returns, then investors must put their money into equities to gain returns.
3. Our dollar weakens as the M2 supply increases at huge rates.
4.
quote:
3) artifically creating the illusion of Wealth
Once again, Ben has said this is what he wants. He wants people to "feel richer" because the more wealthy people feel, the more money they spend.
Posted on 6/28/13 at 8:27 pm to Matrixman
quote:
Ben Bernanke announced last week Fed was halting QE
Uh...no, he didn't.
quote:
This week he comes back and announces the Fed will continue QE at the present rate
Uh....no, he didn't.
I'm not sure if your questions are serious or if you're just trolling.
Posted on 6/28/13 at 9:29 pm to Matrixman
It seems to me that he is saying that he will be doing what he is doing for the foreseeable future. However, the market seems to want to call him a liar.
ETA: corrections,cause I type like a monkey.
ETA: corrections,cause I type like a monkey.
This post was edited on 6/29/13 at 6:04 am
Posted on 6/29/13 at 10:16 pm to Matrixman
quote:Did you actually listen to Ben? If you did, I think we can establish that you are a terrible listener.
Ben Bernanke announced last week Fed was halting QE.
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