Fed announces $300 billion "quantitative easing"

Discussion in 'Economics & Trade' started by kazenatsu, Mar 30, 2020.

  1. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Fed Unveils Unlimited Asset Purchases, $300 Billion Loan Program. What Does It Mean For You?

    On Monday morning, the Fed unveiled a sweeping set of new programs designed to prop up markets: it will buy Treasury securities and mortgage-backed securities in whatever amounts are needed to support "smooth market functioning" and launch new lending programs worth a collective $300 billion to help companies affected by the slowdown.

    So this will allow government to spend more money, because they can (essentially) just borrow it from the Fed, and the Fed orders new money to be printed to pay for it.

    If this was a private bank doing this, they'd be sued by all their shareholders, because obviously the real market value of what they're buying (loans) is lower than the new bank notes (US dollars in this case) they're issuing.
    When a bank expands the supply of their bank notes faster than it expands the value of its Reserve Assets held against those outstanding bank notes, it dilutes the worth of those bank notes. A very similar sort of situation exists when a corporation issues new stock shares at a price below the going market value of already existing shares.


    Opinion:
    This ultimately is not going to end well.
    I don't see any crash happening in the next few years, but someday, this is all going to build up to a head. (Big inflation, economic disaster, a debt crisis, out of control interest rates as no one wants to lend money. And the government won't be able to help during this crisis since it will have to make severe budget cut-backs)

    In the mean time, inflation takes away from the government's purchasing power, meaning they have to tax more and the public does not get as much from their taxes.

    You can't just magically "take" money from one place without it disappearingg from somewhere else.
     
    Last edited: Mar 30, 2020
  2. Reiver

    Reiver Well-Known Member

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    When will the inflation from the Financial Crash QE arrive, or are you perhaps talking guff?
     
  3. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    This has already been explained to you, Reiver. Maybe you were not listening.
    Even though it was repeatedly explained to you multiple times in multiple threads. (I hesitate to waste my time with you again, but here it goes)

    The housing bubble led to inflation in the economy. Then, rather than let it collapse, the Fed propped it up and set that inflation (which had already happened) in concrete, printing more money to replace the housing equity that no longer existed. If the Fed hadn't implemented "quantitative easing" at that time, the economy would have simply deflated back down to the normal healthy level.
     
    Last edited: Apr 2, 2020
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  4. Reiver

    Reiver Well-Known Member

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    This is a lot of wasted words to say that QE didn't actually lead to "Big inflation" (you do come across like the bird in Watership Down here...)
     
  5. squidward

    squidward Well-Known Member

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    :above::above::above::above:wants his buddies through which he derives his economic rent bailed out.
     
  6. Reiver

    Reiver Well-Known Member

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    Please go away troll.
     
  7. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    To put it one way, it resulted in big inflation that filled the hole of big housing deflation, right after the bubble popped.

    That's what "propping up the economy" means. When you have lots of money that isn't there (overinflated housing values), and suddenly that is gone, then you print money to bail out the mortgage lenders.

    What part of this don't you get?
     
  8. squidward

    squidward Well-Known Member

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    Why should one half of a poor business deal get bailed out?
     
  9. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Hey, if it were up to me, I wouldn't have printed money and would have let the housing bubble deflate, along with the rest of the overheated economy.

    But people like Reiver will scream at the sky at the tiniest little prospect of potential deflation.
     
    Last edited: Apr 2, 2020
  10. FreshAir

    FreshAir Well-Known Member Past Donor

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    yes, the Trump economy has been propped up by the fed the last 3 years, and now we have a real need for the feds help, can't lower interest rates any more, so can just dump money into the economy

    the people will also need another stimulus, I think they will get it as it's the carrot the right uses to give the rich another stimulus

    had Trump not of given the mega corps that huge tax cut, he could have gave them a temporary tax cut right now as a stimulus
     
    Last edited: Apr 2, 2020
  11. squidward

    squidward Well-Known Member

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    He has imperical evidence that wealth can be created from nothing
     
  12. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Good, maybe he can join a little community of economic-ideological believers, and they can print all the money for their own little local economy they want.
     
    Last edited: Apr 3, 2020
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  13. squidward

    squidward Well-Known Member

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    It's obvious that his livelihood is dependent on the government/banking financial repression crime syndicate
     
  14. Reiver

    Reiver Well-Known Member

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    Clearly you dont understand what you mean by "big inflation". You've essentially admitted that there wasnt any at all and chosen a neo-Keynesian perspective in demand management. Very amusing!
     
  15. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I've told you that the inflation it caused was neutralized by the housing deflation that was going on at the time, which was basically the whole intended point of the policy.
    Thanks to their quantitative easing, housing prices did not come down (at least not in dollar price amounts, and at least not as much as they otherwise would have). If you think that's a good thing.

    In one sense, the inflation that was caused could be seen leading up to the housing bubble.
    Of course that bubble was not sustainable, but the Fed's policy set that inflation into stone.

    Basically the inflation was hidden within the massive ebb and flow of the economy. (But need I remind you, government policy very much contributed to this bubble in the first place, another topic)
     
    Last edited: Apr 3, 2020
  16. Reiver

    Reiver Well-Known Member

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    Again, you're sounding terrible neo-Keynesian. But heck, let's pretend otherwise. What economic school of thought was your "Big Inflation" summary based on? Good luck!
     
  17. squidward

    squidward Well-Known Member

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    Prices held above true market values by monetary inflation is inflation.

    Now people who didn't make poor business decisions are forced to either pay more for housing or pay high rents, so that those who made poor decisions can maintain their home values
     
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  18. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I know the Left has absolutely no response to that. (Well at least the Left these days)

    It's like their brains can't even comprehend it.
     
    Last edited: Apr 3, 2020
  19. squidward

    squidward Well-Known Member

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    This guy loves government controlled markets. It's how he draws his income
     
  20. Reiver

    Reiver Well-Known Member

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    Don't right wing herd! Try responding to my little request ;)
     
  21. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I predict there's going to be some financial struggling amongst the Millennial generation. They're already squeezed between high housing prices and low wages. What's going to happen when a bout of sudden inflation is added on top of that?
    We know from the experience of many Latin American countries that inflation hurts the poor.

    This "free money" won't ultimately really help all the people in the end, because it is basically being taken out of one part of the economy and put in another part.
     
  22. Reiver

    Reiver Well-Known Member

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    Still peddling a myth. QE didn't lead to your big inflation cobblers. There is no reason to assume the stimulus, to prop up a collapsing economy, will be any different. The only debate is the extent that it will be redistributionary.
     
  23. squidward

    squidward Well-Known Member

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    Bullshit.
    It lead to housing, automobile and education prices that nobody can afford
     
  24. Reiver

    Reiver Well-Known Member

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    Chortle. Chortle! Let's have an empirical study supporting that. Don't hide like the other fellow now
     
  25. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I've already explained to you, the context of this QE is different.

    I don't think there will be hyperinflation, but even 15% inflation will still be a very substantial effect, and will further squeeze younger and poorer people who are already struggling.
     
    Last edited: Apr 7, 2020

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