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Lots of people miss the fact that the Fed has intervened in unprecedented ways in the past year, that we may not understand fully for decades.
by DisjointedHunt 5y ago
Lots of people miss the fact that the Fed has intervened in unprecedented ways in the past year, that we may not understand fully for decades.
- acchow 5y agoSince 2008 really. I guess you could say quantitative easing was not unprecedented in human history, but it was unprecedented in the USA.
- imtringued 5y agoWhen banks grant credit, they create a bond on the asset side and credit (bank money) on their liability side. The debt is your liability, the credit is your asset. You can spend that credit on anything you want, it can even be used to repay a different debt than the one you agreed to. Banks took a contract (debt = promise to sell goods and services) and essentially turned it liquid. Each bank dollar is basically a micro bond with no terms written on it. QE basically buys the bond off the bank and gives the bank central bank reserves. It increases liquidity and that is about it. The bank doesn't own the bond it sold, it owns a claim to a small portion of the bonds the central bank has on its balance sheet. It doesn't have to buy the same bond back. (the same way you can use your borrowed money to repay a different debt). It helps banks get bad debt off their balance sheet but in no way does it encourage people to borrow more money.
- atwebb 5y agoI don't think it is missed, at least personally, my thoughts are: "When will it stop?". If the argument is interest rates / incentives, then there really doesn't seem to be much turning back unless there are serious wage increases. The response seems to be "It won't stop."...just like housing always goes up in price (except when it doesn't).