Forum Post: QE3- I don't get it
Posted 11 years ago on Sept. 22, 2012, 9:41 p.m. EST by Orwellwuzright
(-84)
from Lockeford, CA
This content is user submitted and not an official statement
The Feds are going to Start printing a butt load of money again and flood the country with it. Is this a good thing? I'll admit I dont understand it.
QE3 isn't going to "flood the country" with money. The money injected by the Fed is used to buy financial assets. Since those assets are then effectively removed from the economy by the Fed when they are purchased, along with their future yields, the purchase really amounts to a swap of one kind of financial asset (dollars), for other kinds of financial asset (securities, which are commitments for future payments of dollars). What they are trying to do is bring down long-term interest rates even further than they already are to try to spur business investment and goose the home mortgage market The impact is likely to be marginal.
the financial institutions are being given a free sale to the governmet
How is this going to spur business investment and goose the home mortgage market? It won't - businesses are on hold because of the economy.
People can't buy homes because they can't afford them - they are receiving government assistance just to survive - 47% of them are.
Yes, they are hoping that if they lower long term interest rates - including mortgage rates - even further, this will stimulate the housing market and that some people who can't buy homes will then be able to afford them. But I agree the effect is likely to be minimal, because it doesn't effect the deeper problems of economic dysfunction and inequality.
So it is a good thing. Cool!
No, it's used to buy debt, not assets. It's specifically buying foreclosures and mortgages that have gone bad and making the tax payer the backstop (responsible party) for them. Those aren't assets, they're debt.
It's buying mortgage-backed securities, not mortgages - but close enough. But debts and financial assets are the same thing. If X has a legal debt obligation to Y, then that obligation represents a debt and liability of X, and an asset of Y.
This has nothing to do with the "taxpayer". The Fed's purchases are not funded by tax revenues. The Fed creates money by spending it into existence. The more important question is why the Fed - which is a branch of the government - is spending money into the financial sector, but not into the sector of households and small businesses.
"This has nothing to do with the "taxpayer"
Maybe not the taxpayer, but it certainly does have to do with the value of the dollar that every taxpayer receives in wages or uses to buy goods and services. All dollar denominated assets will be depreciated, in other words, higher inflation. In essence an invisible tax.
No, that is unlikely to happen. The money is going straight into the financial sector, where it will mostly be bottled up among financial types. Little of it will make its way out into the real economy. Even if it did, economic performance is so far below capacity that it will take way more that QE3 to generate a significant boost in prices.
Pour a gallon of water into the protected waters of San Francisco Bay and eventually the Atlantic ocean will rise as a result.
A half trillion dollar a year increase in the money supply for the next 3 years eventually gets paid by someone.
If there is significant inflation, the Fed will just raise interest rates and drain reserves.
QE3 is them trying to scramble to do anything but what they should be doing. They SHOULD be using fiscal stimulus. Instead, they are using monetary policy to keep interest rates down.
Stiglitz on QE3: http://www.youtube.com/watch?v=oMFz1nLnkmQ
Stiglitz: Only thing that can be done for economy now is fiscal stimulus http://www.youtube.com/watch?v=rzMOD-JONNU&feature=relmfu
Michael Hudson explanation of QE3 http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=8853
Well apparently some bankers seem to think so...
[Deleted]
I thought Keynesian economics would put the money in the hands of the people
QE3 is not Keynesian, it's monetary policy not fiscal policy.
Bernanke is a follower of Lizardarian Milton Friedman.
No real answers?
I wasn't aware that the money was going to be given to the people
Would that make a difference?
someone calculated the amount be given to the banks per US individual and came up with $132 a month
if the populous received that money, there'd be more spending on non essentials
business would pick up, Jobs could be created to collect the peoples money
makes a lot more sense than giving money to banks. But its still a bandaid on a bullet hole.
$132 doesn't pay rent
No, it's a bad thing. What gives money it's value is it's scarcity. The more you print, the less scarce dollars become. Hence, inflation follows, because more dollars are required to purchase a good or service because the dollar is worth less.
Everyone complaining here about how things are getting more expensive or that we should raise the minimum wage knows that there's inflation happening.
"The more the plans fail, the more the planners plan." - Ronald Reagan
In an economy with 8% official unemployment and tremendous underutilized capacity, an expansion of money is not likely to cause inflation. You only get inflation when the demand for products at current prices begins to exceed the capacity of the economy to supply it. But we are a long way from there.
inflation happens when we are willing to pay more
The government takes the "we" out of the loop and pays more regardless of what the citizens want. It does that by printing more and more fiat currency and buying whatever the elected asssssholes want, not what the citizens want to get more votes from specific special interest groups. That's what causes inflation.
In this case the government isn't creating money to buy anything but more financial assets. It's a meaningless swap of assets. If the government actually did use the money to buy things - or to hire the unemployed directly to produce things and take on the many tasks we are neglecting - that would be much better. But they are not doing that. They are just shuffling financial assets around with the big boys in the financial sector.
Please don't listen to Ron Paul. He's a boob.
we are dependent on driving to work
First you say willing, then you say dependent. Make up our minds for us, will ya?
I'm lonely too