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Yes, of course. An asset swap of newly printed cash for bonds. No offense, but sounds like you don't really understand how the Federal reserve operates. And

Yes, of course. An asset swap of newly printed cash for bonds. No offense, but sounds like you don't really understand how the Federal reserve operates. And re: your link. Talking about wage growth in nominal terms is meaningless. Wage growth has lagged inflation all this year, aside from last month. But rents are up ~15% nationally YoY, while wages only up a few percent. This rent growth has not materialized in the CPI yet, that's coming down the pipeline. So feel free to celebrate a nominally higher number while the poor get poorer. Personally, I'd rather advocate against inflationary policies that harm the poor the most. Unfortunately people who are ignorant of finance cheer on policies due to nominal increases, while the wealth gap grows ever wider.

imtringued 5y ago
"An asset swap of newly printed cash for bonds." What the hell is printed cash? QE just means banks get bank reserves which a have become a claim against the treasury bonds. Whether you own the bonds directly or indirectly via central bank reserves doesn't matter at all. Imagine the fed issues a new currency called the treasury dollars. All you can do with treasury dollars is buy treasury bonds from the fed. That's what QE does except with bank reserves which can also be used to lend out money to businesses and consumers. Really, QE is a nothing burger. It doesn't make consumers, businesses or governments more likely to borrow. It should be stopped because it is completely ineffective. All it really does is tighten the treasury bond market which means technical buyers (money market, insurance and pension funds) who really need the bonds will bid for increasingly lower yields on the bonds. You know that is a huge surprise, the idea behind QE was that people start selling their government bonds and buy higher yielding bonds from corporations. That didn't happen as much as the Fed wanted.
- sokoloff 5y ago
  Lower risk-free rates lower mortgage rates which would increase mortgage affordability and amounts borrowed. That makes me, an existing home “owner” more likely to refinance, possibly with cash-out and makes many new borrowers willing/able to borrow more money than if the risk-free rate was 5% higher. I think QE does increase borrowing; it’s not clear to me that it does it for a net good.
- adam_arthur 5y ago
  Read my reply to the other poster, as it basically addresses this directly. But the TLDR is that it distorts the activity in the treasury markets, reducing treasury yields, and encourages risk taking/juices asset valuations. And they buy 30y treasuries, so you really think in the span of 30 years this money won't get lent out? The Fed played no small part in housing rallying 30-40% nationally in the span of 18 months. Does this seem normal or natural to you? What about the youth that want to own some day? We are multiple standard deviations above the 100yr inflation adjusted mean for housing, well above the 2008 bubble peak now. This is called pulling forward 10 years worth of gains/value to the present, IE a generational transfer of wealth from the young (non-asset owners) to the old (asset owners). For this reason alone, the policy is a total disaster. People claim to care about wealth inequality, but cheer excessively easy money policies on at every turn. The obvious other reason it's a disaster is because of moral hazard and risk taking that can lead to more epic declines than a smoothed business cycle. The Fed played a big part in the psychology around the dotcom and 2008 bubble, for example. Read up on the Greenspan Put. Earlier action from them could have prevented these. The Fed buys 60% of all newly issued treasuries. This is almost banana republic levels of monetization of the debt. Yes, the government pays interest on this debt just the same, but they have a buyer willing to pay any price without concern to fair value.
neilwilson 5y ago
Cash is a bond. From my perspective outside the USA, a dollar note is just a perpetual bond with 0% interest rate. Never a good idea to accuse others of not understanding something.
- adam_arthur 5y ago
  Whether cash is a bond or asset is totally irrelevant. The subject at hand is, is the Federal reserve printing money and increasing the money supply? The answer is yes. Calling cash an asset and thus defining printing money as an asset swap is an irrelevant distinction to make. OP Implies the Fed is not increasing money supply, which is wrong.
  - neilwilson 5y ago
    Everybody increases the money supply everyday. It’s normal - because money is an elastic concept. Trade credit increases the money supply. There is no distinction between any of it. It’s all credit in a unit of account
    - adam_arthur 5y ago
      Yes, credit is another mechanism to alter money supply. But you know the Fed has many levers to control this, such as fed funds rate, bank reserve ratios? It's part of their job to optimize these levers. Yet they choose to create moral hazard and unaffordable housing through excessively easy policy (supply chain disruptions anyone?) Demand has been artificially distorted far beyond baseline, is the core of the supply chain issues. If you looked at the actual economic data and retail sales, personal income numbers. Expansion of the money supply is not some magical thing that just happens in a totally free market fashion. If it were free market, the cost to borrow would be much higher, thus lower effective money supply, I assure you. The distortion of long term treasury rates is much worse than their distortions of short term rates. That's why they're so afraid to end QE. They know, if subjected to free market forces, long term treasury yields will spike and cause valuations to tank. Personally I think the Fed should stop focusing on the market. That's not their job

imtringued 5y ago

"An asset swap of newly printed cash for bonds." What the hell is printed cash? QE just means banks get bank reserves which a have become a claim against the treasury bonds. Whether you own the bonds directly or indirectly via central bank reserves doesn't matter at all. Imagine the fed issues a new currency called the treasury dollars. All you can do with treasury dollars is buy treasury bonds from the fed. That's what QE does except with bank reserves which can also be used to lend out money to businesses and consumers. Really, QE is a nothing burger. It doesn't make consumers, businesses or governments more likely to borrow. It should be stopped because it is completely ineffective. All it really does is tighten the treasury bond market which means technical buyers (money market, insurance and pension funds) who really need the bonds will bid for increasingly lower yields on the bonds. You know that is a huge surprise, the idea behind QE was that people start selling their government bonds and buy higher yielding bonds from corporations. That didn't happen as much as the Fed wanted.

sokoloff 5y ago
Lower risk-free rates lower mortgage rates which would increase mortgage affordability and amounts borrowed. That makes me, an existing home “owner” more likely to refinance, possibly with cash-out and makes many new borrowers willing/able to borrow more money than if the risk-free rate was 5% higher. I think QE does increase borrowing; it’s not clear to me that it does it for a net good.
adam_arthur 5y ago
Read my reply to the other poster, as it basically addresses this directly. But the TLDR is that it distorts the activity in the treasury markets, reducing treasury yields, and encourages risk taking/juices asset valuations. And they buy 30y treasuries, so you really think in the span of 30 years this money won't get lent out? The Fed played no small part in housing rallying 30-40% nationally in the span of 18 months. Does this seem normal or natural to you? What about the youth that want to own some day? We are multiple standard deviations above the 100yr inflation adjusted mean for housing, well above the 2008 bubble peak now. This is called pulling forward 10 years worth of gains/value to the present, IE a generational transfer of wealth from the young (non-asset owners) to the old (asset owners). For this reason alone, the policy is a total disaster. People claim to care about wealth inequality, but cheer excessively easy money policies on at every turn. The obvious other reason it's a disaster is because of moral hazard and risk taking that can lead to more epic declines than a smoothed business cycle. The Fed played a big part in the psychology around the dotcom and 2008 bubble, for example. Read up on the Greenspan Put. Earlier action from them could have prevented these. The Fed buys 60% of all newly issued treasuries. This is almost banana republic levels of monetization of the debt. Yes, the government pays interest on this debt just the same, but they have a buyer willing to pay any price without concern to fair value.

neilwilson 5y ago

Cash is a bond. From my perspective outside the USA, a dollar note is just a perpetual bond with 0% interest rate. Never a good idea to accuse others of not understanding something.

adam_arthur 5y ago
Whether cash is a bond or asset is totally irrelevant. The subject at hand is, is the Federal reserve printing money and increasing the money supply? The answer is yes. Calling cash an asset and thus defining printing money as an asset swap is an irrelevant distinction to make. OP Implies the Fed is not increasing money supply, which is wrong.
- neilwilson 5y ago
  Everybody increases the money supply everyday. It’s normal - because money is an elastic concept. Trade credit increases the money supply. There is no distinction between any of it. It’s all credit in a unit of account
  - adam_arthur 5y ago
    Yes, credit is another mechanism to alter money supply. But you know the Fed has many levers to control this, such as fed funds rate, bank reserve ratios? It's part of their job to optimize these levers. Yet they choose to create moral hazard and unaffordable housing through excessively easy policy (supply chain disruptions anyone?) Demand has been artificially distorted far beyond baseline, is the core of the supply chain issues. If you looked at the actual economic data and retail sales, personal income numbers. Expansion of the money supply is not some magical thing that just happens in a totally free market fashion. If it were free market, the cost to borrow would be much higher, thus lower effective money supply, I assure you. The distortion of long term treasury rates is much worse than their distortions of short term rates. That's why they're so afraid to end QE. They know, if subjected to free market forces, long term treasury yields will spike and cause valuations to tank. Personally I think the Fed should stop focusing on the market. That's not their job