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They've actually been scaling QE back for quite a while now.

by acornax 12y ago

genwin 12y ago
Is that a 1% drop every year? I don't know. I do know that interest rates on savings have stayed near zero.
- refurb 12y ago
  No, the drop has been quite substantial. From what I can tell the Fed was buying $85B worth of bonds monthly at peak. It's down to ~$45B now and they are planning on a final $15B in October.
  - genwin 12y ago
    I wonder if there's a loophole to explain why interest rates haven't budged.
emgeee 12y ago
You are correct, the Fed has said they would be ending this policy sometime this year and they're on track to do that. How I understand it, the big news here is that they've changed their language about raising interest rates from "we'll do it sometime in the future" to "we're going to do it sometime soon".
- JamesBarney 12y ago
  I don't think investors agree with you. If you look at the yield curves for the 1 year to 5 year treasury bonds[0] over the last year they have stayed relatively stable. Which means the investors expectations of future interest rate have been relatively stable. I don't think this supports you're theory that the Fed will be raising interest rates any time soon. [0] http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2014 http://www.treasury.gov/resource-center/data-chart-center/in...
  - genwin 12y ago
    Good info. Supports my theory that the plan is to kick the can down the road until it inevitably falls off a cliff.
    - checker 12y ago
      I really don't have much grasp on the macro-econ stuff. Do you have an idea on what would such a cliff would be? Liquidity trap?
      - genwin 12y ago
        It think it would be a worse version of the 2008 crash. Many of the issues that led to that crash, instead of being fixed, were temporarily bandaged with accelerated borrowing and spending, like a credit card junkie who staves off the inevitable with ever more cards.
  - emgeee 12y ago
    The yield curve has been relatively stable at close to 0. Indeed (as I understand it) that's the entire point of quantitive easing: it artificially keeps interest rates on long term securities down to encourage that money to be lent and spent http://marketrealist.com/2014/03/fed-taper-quantitative-easing-affects-yield-curve/ http://marketrealist.com/2014/03/fed-taper-quantitative-easi....
    - JamesBarney 12y ago
      The short term rate is 0. The yield curve is the curve if you plot interest rates on the y axis, and length of treasury bond on the x axis. This creates a curve that tells you what investors think will happen to the interest rate over the next 3 months to 30 years.

They've actually been scaling QE back for quite a while now.

by acornax 12y ago

They've actually been scaling QE back for quite a while now.

genwin 12y ago

Is that a 1% drop every year? I don't know. I do know that interest rates on savings have stayed near zero.

refurb 12y ago
No, the drop has been quite substantial. From what I can tell the Fed was buying $85B worth of bonds monthly at peak. It's down to ~$45B now and they are planning on a final $15B in October.
- genwin 12y ago
  I wonder if there's a loophole to explain why interest rates haven't budged.

emgeee 12y ago

You are correct, the Fed has said they would be ending this policy sometime this year and they're on track to do that. How I understand it, the big news here is that they've changed their language about raising interest rates from "we'll do it sometime in the future" to "we're going to do it sometime soon".

JamesBarney 12y ago
I don't think investors agree with you. If you look at the yield curves for the 1 year to 5 year treasury bonds[0] over the last year they have stayed relatively stable. Which means the investors expectations of future interest rate have been relatively stable. I don't think this supports you're theory that the Fed will be raising interest rates any time soon. [0] http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2014 http://www.treasury.gov/resource-center/data-chart-center/in...
- genwin 12y ago
  Good info. Supports my theory that the plan is to kick the can down the road until it inevitably falls off a cliff.
  - checker 12y ago
    I really don't have much grasp on the macro-econ stuff. Do you have an idea on what would such a cliff would be? Liquidity trap?
    - genwin 12y ago
      It think it would be a worse version of the 2008 crash. Many of the issues that led to that crash, instead of being fixed, were temporarily bandaged with accelerated borrowing and spending, like a credit card junkie who staves off the inevitable with ever more cards.
- emgeee 12y ago
  The yield curve has been relatively stable at close to 0. Indeed (as I understand it) that's the entire point of quantitive easing: it artificially keeps interest rates on long term securities down to encourage that money to be lent and spent http://marketrealist.com/2014/03/fed-taper-quantitative-easing-affects-yield-curve/ http://marketrealist.com/2014/03/fed-taper-quantitative-easi....
  - JamesBarney 12y ago
    The short term rate is 0. The yield curve is the curve if you plot interest rates on the y axis, and length of treasury bond on the x axis. This creates a curve that tells you what investors think will happen to the interest rate over the next 3 months to 30 years.