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>And yes, that would have caused inflation Which I believe is the entire point of QE. I find the current incarnation of QE (buying bonds) unimaginative at best
by tormeh 8y ago
>And yes, that would have caused inflation
Which I believe is the entire point of QE. I find the current incarnation of QE (buying bonds) unimaginative at best. I get that helicopter drops are politically hard, but there's gotta be something better than this.
- pdonis 8y ago> Which I believe is the entire point of QE. Not really. The point of QE is to stimulate economic activity. Unfortunately, buying bonds doesn't do that either if banks don't use the newly printed money to make loans.
- sjg007 8y agoprobably went to credit cards, some house price stabilization and the stock market.
- pdonis 8y agoIf you mean the money the Fed printed as part of QE, no, it went into the banks' reserve balances at the Fed, where it has been ever since.
- sjg007 8y agoWhich frees up other money for other things.
- pdonis 8y agoWhat other money?
- pas 8y agoIt allowed them to create more money. Fractional reserve requirement is something like 1/20, no? But usually the capital (bank company equity) requirements (like Basel III) were the harder to meet, so who knows how much new money banks created. (Actually it can be easily looked up, and not much, because inflation did not jump.) Usually QE allowed banks to roll over mark-to-market assets that turned into garbage into sane cash to satisfy solvency and liquidity requirements. And of course this led to price stability.