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Although people think that the Fed buying bonds is "printing money", it is actually mistaken for liquidity events. If you provide cash to someone for an asset,
by epa 6y ago
Although people think that the Fed buying bonds is "printing money", it is actually mistaken for liquidity events. If you provide cash to someone for an asset, the second party loses an asset and gains cash. Its a zero-sum trade, assuming the asset is worth its price (which with a corporate bond is undeniably true). Banks are the ones who create money, by creating loans to multiple parties and using leverage.
- tempsy 6y agothis is incorrect.
- epa 6y agoI highly recommend anyone who is interested in this topic listen to this talk: https://m.youtube.com/watch?v=14I1BdncYVo https://m.youtube.com/watch?v=14I1BdncYVo
- dannyw 6y agoBoth banks AND the Fed create money. The Fed this year has also directly made loans (from newly printed money) and purchased ETFs on the open market (from newly printed money). If you think the Fed isn’t doing anything when they QE, then ask yourself why they do it.