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QE is debatable, in a sense it's 'printed' loans that need to be returned, there's no direct influence on the exchange rate. If the US ends up having inflation

QE is debatable, in a sense it's 'printed' loans that need to be returned, there's no direct influence on the exchange rate. If the US ends up having inflation as a result, it'll be damaging and countries will need to find a way to deal with it by switching their reserve currencies away somewhat. Russia is doing this with gold, but who knows that could be political. All in all, full employment matters more than currency perception overseas, at least if its done using free market forces, such as the purchase of bonds in the secondary market for QE.

John23832 10y ago
I was addressing this: >It's also that the US doesn't play games with it's currency, Let's call a spade a spade. Sure, the US wasn't directly affecting rates. But a the time the financial world was burning, and people were flocking to (and holding) the Dollar for shelter. QE 1 2 and 3 were 600B, 600B and a monthly 85B. That much money put into the market keeps rates down simply because of supply influx.
- akhatri_aus 10y ago
  Yes that's not good, but there's been no inflation as a result and the bonds the fed buys are freely tradable on the open market. Further the fed only trades on the secondary market so they wont directly bid in a Treasury auction. This isn't too bad picturing it. I assume if there is inflation there will be a problem so long as its not overdone like in the late 1970s. There's more vexing things that would affect this perception such as the credit rating, especially with so much debt. Yet History says the managers in government, and the Fed are good at their jobs. So even despite the QE perception on money printing the issues with this haven't been much of an issue, or it would have shown up with a weaker dollar/diversification away from USD on central bank's balance sheets
  - DominikR 10y ago
    > Yes that's not good, but there's been no inflation as a result and the bonds the fed buys are freely tradable on the open market. There is certainly an enormous inflation of the money supply but you don't see and feel it because it is sitting idly in bank accounts or is invested in bonds, the stock market or real estate. (here we actually see inflation) Once the holders of this money decide to move it out of these asset classes you are going to see inflation, because all of this money created by the FED does actually exist now.
    - redcalx 10y ago
      > There is certainly an enormous inflation of the money supply Of M0 or 'narrow' money, yes. But the broader money supply was shrinking as loans defaulted. Arguably QE was an attempt to equalise the total (broad) money supply, and price inflation can be expected if QE money is not withdrawn as new loans are made, or rather, as the total amount of debt increases, creating broad money through fractional reserve banking.
      - DominikR 10y ago
        How do you withdraw the QE money that is already out there? Erase it from the books?
        redcalx 10y ago
        Reverse the creation process... creation consists of the central bank creating new money, and the government creating a new bond. Central bank buys the bond and the gov gets the money and can spend it on welfare or whatever. To reverse the gov must buy the bond back with money from general taxation, on doing so the bond is redeemed and destroyed, and the central bank erases the money it received back in tandem with the bond. Basically it's all smoke and mirrors, the various obligations (to redeem the bond, to do so with real money, etc. are all legal bindings and mechanisms that can be signed away with sufficient political support, thus reducing the whole process to good old fashioned money printing).
        DominikR 10y ago
        > To reverse the gov must buy the bond back with money from general taxation, on doing so the bond is redeemed and destroyed, and the central bank erases the money it received back in tandem with the bond. Which is never going to happen. (at least in this political system) Currently Western governments can barely keep things running by increasing their debt at an almost exponential rate.
        redcalx 10y ago
  - dilemma 10y ago
    The effect of QE on inflation can be seen on Bay Area housing prices. Isn't it roughly a 20% increase YoY? That's the inflation rate.
    - akhatri_aus 10y ago
      Tbh that's the effect of a low interest rate, not inflation. The inflation component would be the portion on your rent and even by that measure other items have decompensated more so than the rises in rent. Don't forget Oil was hovering around $150 just under a decade ago, and now its less than a 1/3rd of that.
gozur88 10y ago
>QE is debatable, in a sense it's 'printed' loans that need to be returned, there's no direct influence on the exchange rate. People have this idea that with QE officially over the Fed's balance sheet will shrink over time, but it's not true. Bonds that were purchased under QE are replaced with new bonds as they mature, so it's effectively printed money. This is just the kind of fiddling you don't want to see when you're holding currency.
- akhatri_aus 10y ago
  That's their process of rolling over. They've specifically will at one point stop using the phrase in their monthly meetings, which means the bonds will be left to mature - thereby destroying the money they created & shrinking the balance sheet - the bonds get taken off, as does the reserve balance created to buy them. It's nothing new in fact its near bog standard. This process is done with the lower maturity instruments when interest rates are higher by matching it up to the federal funds rate by purchasing or selling them & rolling them over in the exact same fashion (with this 'printed'/reserve money as well). It's just this is done using longer term assets instead.
  - gozur88 10y ago
    >That's their process of rolling over. They've specifically will at one point stop using the phrase in their monthly meetings, which means the bonds will be left to mature... That's the theory. I doubt it will ever actually happen, though, since whoever makes that decision will be blamed for any poor economic performance that follows.
    - akhatri_aus 10y ago
      This is why the Fed is apolitical. Their concern isn't with economic performance it's simply with full employment and inflation most and foremost. Even if it is at the cost of poor economic performance - infact that is the goal, thereby reducing inflationary pressure.
      - 10y ago

John23832 10y ago

I was addressing this: >It's also that the US doesn't play games with it's currency, Let's call a spade a spade. Sure, the US wasn't directly affecting rates. But a the time the financial world was burning, and people were flocking to (and holding) the Dollar for shelter. QE 1 2 and 3 were 600B, 600B and a monthly 85B. That much money put into the market keeps rates down simply because of supply influx.

akhatri_aus 10y ago
Yes that's not good, but there's been no inflation as a result and the bonds the fed buys are freely tradable on the open market. Further the fed only trades on the secondary market so they wont directly bid in a Treasury auction. This isn't too bad picturing it. I assume if there is inflation there will be a problem so long as its not overdone like in the late 1970s. There's more vexing things that would affect this perception such as the credit rating, especially with so much debt. Yet History says the managers in government, and the Fed are good at their jobs. So even despite the QE perception on money printing the issues with this haven't been much of an issue, or it would have shown up with a weaker dollar/diversification away from USD on central bank's balance sheets
- DominikR 10y ago
  > Yes that's not good, but there's been no inflation as a result and the bonds the fed buys are freely tradable on the open market. There is certainly an enormous inflation of the money supply but you don't see and feel it because it is sitting idly in bank accounts or is invested in bonds, the stock market or real estate. (here we actually see inflation) Once the holders of this money decide to move it out of these asset classes you are going to see inflation, because all of this money created by the FED does actually exist now.
  - redcalx 10y ago
    > There is certainly an enormous inflation of the money supply Of M0 or 'narrow' money, yes. But the broader money supply was shrinking as loans defaulted. Arguably QE was an attempt to equalise the total (broad) money supply, and price inflation can be expected if QE money is not withdrawn as new loans are made, or rather, as the total amount of debt increases, creating broad money through fractional reserve banking.
    - DominikR 10y ago
      How do you withdraw the QE money that is already out there? Erase it from the books?
      - redcalx 10y ago
        Reverse the creation process... creation consists of the central bank creating new money, and the government creating a new bond. Central bank buys the bond and the gov gets the money and can spend it on welfare or whatever. To reverse the gov must buy the bond back with money from general taxation, on doing so the bond is redeemed and destroyed, and the central bank erases the money it received back in tandem with the bond. Basically it's all smoke and mirrors, the various obligations (to redeem the bond, to do so with real money, etc. are all legal bindings and mechanisms that can be signed away with sufficient political support, thus reducing the whole process to good old fashioned money printing).
        DominikR 10y ago
        > To reverse the gov must buy the bond back with money from general taxation, on doing so the bond is redeemed and destroyed, and the central bank erases the money it received back in tandem with the bond. Which is never going to happen. (at least in this political system) Currently Western governments can barely keep things running by increasing their debt at an almost exponential rate.
        redcalx 10y ago
- dilemma 10y ago
  The effect of QE on inflation can be seen on Bay Area housing prices. Isn't it roughly a 20% increase YoY? That's the inflation rate.
  - akhatri_aus 10y ago
    Tbh that's the effect of a low interest rate, not inflation. The inflation component would be the portion on your rent and even by that measure other items have decompensated more so than the rises in rent. Don't forget Oil was hovering around $150 just under a decade ago, and now its less than a 1/3rd of that.

gozur88 10y ago

>QE is debatable, in a sense it's 'printed' loans that need to be returned, there's no direct influence on the exchange rate. People have this idea that with QE officially over the Fed's balance sheet will shrink over time, but it's not true. Bonds that were purchased under QE are replaced with new bonds as they mature, so it's effectively printed money. This is just the kind of fiddling you don't want to see when you're holding currency.

akhatri_aus 10y ago
That's their process of rolling over. They've specifically will at one point stop using the phrase in their monthly meetings, which means the bonds will be left to mature - thereby destroying the money they created & shrinking the balance sheet - the bonds get taken off, as does the reserve balance created to buy them. It's nothing new in fact its near bog standard. This process is done with the lower maturity instruments when interest rates are higher by matching it up to the federal funds rate by purchasing or selling them & rolling them over in the exact same fashion (with this 'printed'/reserve money as well). It's just this is done using longer term assets instead.
- gozur88 10y ago
  >That's their process of rolling over. They've specifically will at one point stop using the phrase in their monthly meetings, which means the bonds will be left to mature... That's the theory. I doubt it will ever actually happen, though, since whoever makes that decision will be blamed for any poor economic performance that follows.
  - akhatri_aus 10y ago
    This is why the Fed is apolitical. Their concern isn't with economic performance it's simply with full employment and inflation most and foremost. Even if it is at the cost of poor economic performance - infact that is the goal, thereby reducing inflationary pressure.
    - 10y ago