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QE is proving to be a very inefficient way to inflate the economy. The idea was that the banks would take the capital and lend it to corporations for productive

by sgt101 7y ago

QE is proving to be a very inefficient way to inflate the economy. The idea was that the banks would take the capital and lend it to corporations for productive investment, but I see no sign of this - the money is being laundered through dividends and financial engineering to the 0.1% If I were the next president I would establish a national investment bank and use it to undertake infrastructure improvement / development by US companies in both the US and abroad (because stimulating the economy else where would be pretty useful to the US as well). I would mandate that the fed would have to invest in the national bank first and the national bank would be allowed to bail out other banks (with "liquidity") only if it received substantial near term reward from the investment (therefore definitely only liquidity). The problem with this operation by the fed is that every banks finance department has priced it in for this quarter, so they're all going with the begging bowl now - moral hazard write large!

darawk 7y ago
> QE is proving to be a very inefficient way to inflate the economy. The idea was that the banks would take the capital and lend it to corporations for productive investment, but I see no sign of this - the money is being laundered through dividends and financial engineering to the 0.1% Even if we accept your premise that that is what is happening, what is it that you think the 0.1% are doing with that money? They're doing one of two things: 1. Reinvesting it in other companies, who are then using that capital to invest in their business. 2. Buying goods and services from companies who use that revenue to invest in their business. > If I were the next president I would establish a national investment bank and use it to undertake infrastructure improvement / development by US companies in both the US and abroad (because stimulating the economy else where would be pretty useful to the US as well). Why do we need to establish a national investment bank to undertake infrastructure projects? The federal government undertakes infrastructure projects all the time. > I would mandate that the fed would have to invest in the national bank first and the national bank would be allowed to bail out other banks (with "liquidity") only if it received substantial near term reward from the investment (therefore definitely only liquidity). Are you aware that the US government made a very healthy profit by bailing out the banks in 2008[1]? > The problem with this operation by the fed is that every banks finance department has priced it in for this quarter, so they're all going with the begging bowl now - moral hazard write large! That's...actually exactly the point of it. There is no 'moral hazard' here. The fed wants the market to anticipate its actions, and react to them pre-emptively. This allows the fed to actually do less than they otherwise might have to. If the Fed's goal is to drive rates down to a certain point, and the market knows they'll spend the money to do it, the market will do it for them. That's how arbitrage works. This is the system working exactly as intended. 1. https://www.washingtonpost.com/business/economy/bailout-highly-profitable-for-taxpayers-when-you-look-at-the-right-numbers/2015/01/01/dc2a05a6-8fa5-11e4-a412-4b735edc7175_story.html https://www.washingtonpost.com/business/economy/bailout-high...
- karpodiem 7y ago
  Unemployment is low but wages aren't going up. Then again, wages haven't increased in the last thirty years. Lack of wage growth is where the perception of societal stratification and divergence is coming from.
  - darawk 7y ago
    How is that related to what I said?
    - karpodiem 7y ago
      The point of all of this intervention is to increase the well being of the individual through higher wages (specifically, purchasing power) relative to our global peers. The same sort of wage growth that happened organically in the US for most of the 19th and 20th century.
      - darawk 7y ago
        I agree that that is one of the points of it, sure. I think that's compatible with what I said.
- sulam 7y ago
  This is effectively equivalent to "trickle down economics." Ie, if we give money to the rich, they will use it to buy things or to invest, thereby growing the pie for everyone. Of course, merely saying "trickle down" is enough to get a big laugh out of all but most co-opted of economists. It has repeatedly failed to achieve its stated objectives, and you just have to look at the wealth gap between the 99%, the 1%, and the .01% over the last 10 years to see what the actual effect is.
  - darawk 7y ago
    > This is effectively equivalent to "trickle down economics." Ie, if we give money to the rich, they will use it to buy things or to invest, thereby growing the pie for everyone. Trickle down economics is a theory about who benefits from giving money to the wealthy. I'm not making any statements about who benefits. What I am saying is that when some companies return cash to shareholders, other companies receive that cash in the form of either revenue or investment. This is how the economy works. It is, more or less, a closed system.
avn2109 7y ago
> "QE is proving to be a very inefficient way to inflate the economy." QE was never intended to inflate the economy. It was intended to inflate a price bubble in financial assets, particularly equities. It has been super successful and broadly speaking is working as designed. (At transferring value from society at large to the rich via this asset price bubble).

by sgt101 7y ago

darawk 7y ago

> QE is proving to be a very inefficient way to inflate the economy. The idea was that the banks would take the capital and lend it to corporations for productive investment, but I see no sign of this - the money is being laundered through dividends and financial engineering to the 0.1% Even if we accept your premise that that is what is happening, what is it that you think the 0.1% are doing with that money? They're doing one of two things: 1. Reinvesting it in other companies, who are then using that capital to invest in their business. 2. Buying goods and services from companies who use that revenue to invest in their business. > If I were the next president I would establish a national investment bank and use it to undertake infrastructure improvement / development by US companies in both the US and abroad (because stimulating the economy else where would be pretty useful to the US as well). Why do we need to establish a national investment bank to undertake infrastructure projects? The federal government undertakes infrastructure projects all the time. > I would mandate that the fed would have to invest in the national bank first and the national bank would be allowed to bail out other banks (with "liquidity") only if it received substantial near term reward from the investment (therefore definitely only liquidity). Are you aware that the US government made a very healthy profit by bailing out the banks in 2008[1]? > The problem with this operation by the fed is that every banks finance department has priced it in for this quarter, so they're all going with the begging bowl now - moral hazard write large! That's...actually exactly the point of it. There is no 'moral hazard' here. The fed wants the market to anticipate its actions, and react to them pre-emptively. This allows the fed to actually do less than they otherwise might have to. If the Fed's goal is to drive rates down to a certain point, and the market knows they'll spend the money to do it, the market will do it for them. That's how arbitrage works. This is the system working exactly as intended. 1. https://www.washingtonpost.com/business/economy/bailout-highly-profitable-for-taxpayers-when-you-look-at-the-right-numbers/2015/01/01/dc2a05a6-8fa5-11e4-a412-4b735edc7175_story.html https://www.washingtonpost.com/business/economy/bailout-high...

karpodiem 7y ago
Unemployment is low but wages aren't going up. Then again, wages haven't increased in the last thirty years. Lack of wage growth is where the perception of societal stratification and divergence is coming from.
- darawk 7y ago
  How is that related to what I said?
  - karpodiem 7y ago
    The point of all of this intervention is to increase the well being of the individual through higher wages (specifically, purchasing power) relative to our global peers. The same sort of wage growth that happened organically in the US for most of the 19th and 20th century.
    - darawk 7y ago
      I agree that that is one of the points of it, sure. I think that's compatible with what I said.
sulam 7y ago
This is effectively equivalent to "trickle down economics." Ie, if we give money to the rich, they will use it to buy things or to invest, thereby growing the pie for everyone. Of course, merely saying "trickle down" is enough to get a big laugh out of all but most co-opted of economists. It has repeatedly failed to achieve its stated objectives, and you just have to look at the wealth gap between the 99%, the 1%, and the .01% over the last 10 years to see what the actual effect is.
- darawk 7y ago
  > This is effectively equivalent to "trickle down economics." Ie, if we give money to the rich, they will use it to buy things or to invest, thereby growing the pie for everyone. Trickle down economics is a theory about who benefits from giving money to the wealthy. I'm not making any statements about who benefits. What I am saying is that when some companies return cash to shareholders, other companies receive that cash in the form of either revenue or investment. This is how the economy works. It is, more or less, a closed system.

avn2109 7y ago

> "QE is proving to be a very inefficient way to inflate the economy." QE was never intended to inflate the economy. It was intended to inflate a price bubble in financial assets, particularly equities. It has been super successful and broadly speaking is working as designed. (At transferring value from society at large to the rich via this asset price bubble).