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Is there a historic precedent for Quantitive Easing? Is there a historic precedent for Quantitive Tightening? We have been at it since 2008 that means there i

Is there a historic precedent for Quantitive Easing? Is there a historic precedent for Quantitive Tightening? We have been at it since 2008 that means there is little historic data to draw any preemption from, we are on unchartered waters at this point.

joycian 4y ago
Not that uncharted, perhaps. You can look up the Amsterdam banking crisis of 1763. https://en.m.wikipedia.org/wiki/Amsterdam_banking_crisis_of_1763 https://en.m.wikipedia.org/wiki/Amsterdam_banking_crisis_of_...
pphysch 4y ago
A major aspect of QE is creating artificial demand for USTs (the Fed becomes a buyer), i.e. price support in the wake of the GFC. That is intimately related to the USD as global reserve currency, which is not something there is much historical precedent for. In the past, reserve currencies died for many compounding reasons. QE is a novel scheme to prolong the USD's life as a reserve currency, and is only possible due to modern financial technology. It's definitely not sustainable and can only prolong the inevitable crash in demand for USTs as faith in Washington continues to wane globally. Kicking the can down the road.
blevin 4y ago
It depends on your admissible vintages for historic precedents. The Bank of Japan has been doing Quantitative Easing for over 20 years and has also extended it to include ETF share purchases.
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Rury 4y ago
QE and QT aren't really anything new. They're mostly just modernish terms given to old ways of doing things. What is unprecedented is hitting 0% interest rates nearly everywhere worldwide. When things hit this point, economies are forced to deleverage, to which economists refer to as an 'economic deleveraging'. National economies have gone through deleveragings in the past, and has so far played out in 3-4 ways: -a period of high inflation (which sometimes lead to the collapse of the currency) -a period of deflation (either via a bear market, or a rapid crash) -a long period of almost 0 economic growth (stagnation - AKA 'the soft landing'). -some degree and combination of the above 3 scenarios.

joycian 4y ago

Not that uncharted, perhaps. You can look up the Amsterdam banking crisis of 1763. https://en.m.wikipedia.org/wiki/Amsterdam_banking_crisis_of_1763 https://en.m.wikipedia.org/wiki/Amsterdam_banking_crisis_of_...

pphysch 4y ago

A major aspect of QE is creating artificial demand for USTs (the Fed becomes a buyer), i.e. price support in the wake of the GFC. That is intimately related to the USD as global reserve currency, which is not something there is much historical precedent for. In the past, reserve currencies died for many compounding reasons. QE is a novel scheme to prolong the USD's life as a reserve currency, and is only possible due to modern financial technology. It's definitely not sustainable and can only prolong the inevitable crash in demand for USTs as faith in Washington continues to wane globally. Kicking the can down the road.

blevin 4y ago

It depends on your admissible vintages for historic precedents. The Bank of Japan has been doing Quantitative Easing for over 20 years and has also extended it to include ETF share purchases.

deleted 4y ago

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Rury 4y ago

QE and QT aren't really anything new. They're mostly just modernish terms given to old ways of doing things. What is unprecedented is hitting 0% interest rates nearly everywhere worldwide. When things hit this point, economies are forced to deleverage, to which economists refer to as an 'economic deleveraging'. National economies have gone through deleveragings in the past, and has so far played out in 3-4 ways: -a period of high inflation (which sometimes lead to the collapse of the currency) -a period of deflation (either via a bear market, or a rapid crash) -a long period of almost 0 economic growth (stagnation - AKA 'the soft landing'). -some degree and combination of the above 3 scenarios.