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> 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 enorm

> 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QE was an attempt to equalise the total (broad) money supply, and price inflation can be expected if QE money is not withdrawn as new loans are made, or rather, as the total amount of debt increases, creating broad money through fractional reserve banking.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
        I agree. In fact if they inflate the money supply they devalue the currency that the debts are denominated in, so there's an incentive to inflate and there's no money to spare to reverse QE anyway, so the bonds remain in existence forever, and all of those legal bindings I mentioned become somewhat academic. Well, technically bonds have a fixed term, but in reality they just issue new bonds to replace the old ones as they reach maturity, so again we're back to smoke and mirrors.
    - gozur88 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. But this is already a normal part of the process. The government rolls over its debt as bonds mature, so the Fed can just take the money when the bond matures and not buy new bonds. That would force the government to borrow existing money from individuals and other countries instead of creating new money through the Fed, effectively taking that cash out of circulation at the cost of an increase in interest rates. Also, the Fed bought corporate bonds under QE, so this isn't just a question of the government printing money to cover budget shortfalls.
CyberDildonics 10y ago
Seems people don't believe you for whatever reason. Here is a graph: https://fred.stlouisfed.org/graph/?s%5B1%5D%5Bid%5D=AMBNS https://fred.stlouisfed.org/graph/?s%5B1%5D%5Bid%5D=AMBNS
- DominikR 10y ago
  You know it's funny how Socialists complain about evil businesses and IT professionals with their high income/profit being the cause for the insane real estate prices in San Francisco and other places when it is really their beloved government (I don't buy for a second that central banks are really independent) causing this by handing out free money to those who held stocks by artificially inflating the stock markets. Of course these people are going to diversify because they can see the writing on the wall. So what are they going to invest in? Tangible assets like real estate. Here in the EU real estate has basically doubled in price during the last 4 years and people complain that they can't afford the rent anymore, yet the governments have been successful in convincing the majority that it's actually these evil Capitalists who are the cause for this.
  - John23832 10y ago
    Other than ranting, what was your point?
    - DominikR 10y ago
      If you don't like my viewpoint you can engage in a conversation, I'm not someone that ignores people with other opinions. But I am going to make my case that governments should stop manipulating the markets whenever I want because it hurts the majority. (not me though, I've actually profited greatly from this. I'd still prefer it to be fair for everyone because I do not fear competition - competition actually gives me great pleasure whether I win or lose)

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
      I agree. In fact if they inflate the money supply they devalue the currency that the debts are denominated in, so there's an incentive to inflate and there's no money to spare to reverse QE anyway, so the bonds remain in existence forever, and all of those legal bindings I mentioned become somewhat academic. Well, technically bonds have a fixed term, but in reality they just issue new bonds to replace the old ones as they reach maturity, so again we're back to smoke and mirrors.
  - gozur88 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. But this is already a normal part of the process. The government rolls over its debt as bonds mature, so the Fed can just take the money when the bond matures and not buy new bonds. That would force the government to borrow existing money from individuals and other countries instead of creating new money through the Fed, effectively taking that cash out of circulation at the cost of an increase in interest rates. Also, the Fed bought corporate bonds under QE, so this isn't just a question of the government printing money to cover budget shortfalls.

CyberDildonics 10y ago

Seems people don't believe you for whatever reason. Here is a graph: https://fred.stlouisfed.org/graph/?s%5B1%5D%5Bid%5D=AMBNS https://fred.stlouisfed.org/graph/?s%5B1%5D%5Bid%5D=AMBNS

DominikR 10y ago
You know it's funny how Socialists complain about evil businesses and IT professionals with their high income/profit being the cause for the insane real estate prices in San Francisco and other places when it is really their beloved government (I don't buy for a second that central banks are really independent) causing this by handing out free money to those who held stocks by artificially inflating the stock markets. Of course these people are going to diversify because they can see the writing on the wall. So what are they going to invest in? Tangible assets like real estate. Here in the EU real estate has basically doubled in price during the last 4 years and people complain that they can't afford the rent anymore, yet the governments have been successful in convincing the majority that it's actually these evil Capitalists who are the cause for this.
- John23832 10y ago
  Other than ranting, what was your point?
  - DominikR 10y ago
    If you don't like my viewpoint you can engage in a conversation, I'm not someone that ignores people with other opinions. But I am going to make my case that governments should stop manipulating the markets whenever I want because it hurts the majority. (not me though, I've actually profited greatly from this. I'd still prefer it to be fair for everyone because I do not fear competition - competition actually gives me great pleasure whether I win or lose)