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It’s not really QE, the banks loaned the government money when they bought the bonds, the government would still repay them exactly the same amount as before.
by dogma1138 4y ago
It’s not really QE, the banks loaned the government money when they bought the bonds, the government would still repay them exactly the same amount as before.
The only thing that changed is the market value of these securities since people have other safe places to put their money in for even better returns due to the interest rate hike.
So this would be the government either repaying the loan early or issuing a new loan as a bridge which when repaid would bring the balance back to zero there is no need to create new money here.
- light_hue_1 4y ago> It’s not really QE, the banks loaned the government money when they bought the bonds, the government would still repay them exactly the same amount as before. It's literally QE. Like, it's the textbook definition of quantitative easing. Where the government buys back bonds it gave out without taking into account the current interest rate. The government is giving banks more money than the bonds are worth, raising their prices. That's QE.