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Not really. QE is a swap. Bonds (or other financial assets) for cash. If I take a bond from you and give you cash, are you going to interpret it as a windfal
by kaonashi 13y ago
Not really. QE is a swap. Bonds (or other financial assets) for cash. If I take a bond from you and give you cash, are you going to interpret it as a windfall and go on a spending spree?
- tesseractive 13y agoAdding demand and thereby liquidity to a market creates a windfall that wouldn't have been there otherwise. Whether it's because you were sitting on a bond that was impossible to sell and now you have money because you sold it, or because you would have gotten $1000 for it and now you got $1200, that's a windfall. Whether that money goes into buying groceries or buying other securities, I assume most of it will continue to circulate in the economy. If it doesn't, then it's pretty much a failure as a quantitative easing.
- kaonashi 13y agoNobody is ever involuntarily sitting on bonds, they are easily liquidated at any point; you sit on bonds because you don't want to spend the money. >If it doesn't, then it's pretty much a failure as a quantitative easing. It doesn't do much of anything, true.
- wintersFright 13y agoCentral Banks sit on bonds because holding USD in their reserve banks does not earn interest.
- kaonashi 13y agoCentral banks sit on bonds because they buy them as part of their open market operations, and they are legally required to make a market for treasuries so the government is funded.
- wintersFright 13y agonormal people, no. USG yes.