Quantitative Easing?

[airdvr 210]

Lot's of talk about the Fed buying back another $600 billion in notes with newly printed money. This is part 2. The first buy-back was over a trillion last spring.

Not a very sexy subject. One thing is for sure. The rest of the world isn't happy with us over this. Why?

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The term quantitative easing (QE) describes a form of monetary policy used by central banks to increase the supply of money in an economy when the bank interest rate, discount rate and/or interbank interest rate are either at, or close to, zero.

A central bank does this by first crediting its own account with money it has created ex nihilo ("out of nothing").[1] It then purchases financial assets, including government bonds and corporate bonds, from banks and other financial institutions in a process referred to as open market operations. The purchases, by way of account deposits, give banks the excess reserves required for them to create new money by the process of deposit multiplication from increased lending in the fractional reserve banking system. The increase in the money supply thus stimulates the economy. Risks include the policy being more effective than intended, spurring hyperinflation, or the risk of not being effective enough, if banks opt simply to pocket the additional cash in order to increase their capital reserves in a climate of increasing defaults in their present loan portfolio....

Quantitative easing runs the risk of going too far. An increase in money supply to a system has an inflationary effect by diluting the value of a unit of currency. People who have saved money will find it is devalued by inflation; this combined with the associated low interest rates will put people who rely on their savings in difficulty. If devaluation of a currency is seen externally to the country it can affect the international credit rating of the country which in turn can lower the likelihood of foreign investment. Like old-fashioned money printing, Zimbabwe suffered an extreme case of a process that has the same risks as quantitative easing, printing money, making its currency virtually worthless

http://www.businessinsider.com/what-is-quantitative-easing-2010-8#ixzz14QqDC4lN

Please don't dent the planet.

Destinations by Roxanne

[skyrider 0]

So , the banks are following obama's lead, pulling money out of thin air?

[BillyVance 35]

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So , the banks are following obama's lead, pulling money out of thin air?

Or another way of passing off debts to our descendents?

"Mediocre people don't like high achievers, and high achievers don't like mediocre people." - SIX TIME National Champion coach Nick Saban

[airdvr 210]

From the little bits of info I've read I see it as a way to force investors out of their 'safe' investments and into some other more risky lines that have the potential to improve the economy. Of course, the downside is that your money is worth less (not worthless) and if you keep it in the bank it takes a real hit. Biggest downside is inflation and hyper-inflation.

Please don't dent the planet.

Destinations by Roxanne

[Amazon 7]

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From the little bits of info I've read I see it as a way to force investors out of their 'safe' investments and into some other more risky lines that have the potential to improve the economy. Of course, the downside is that your money is worth less (not worthless) and if you keep it in the bank it takes a real hit. Biggest downside is inflation and hyper-inflation.

For the last two years.. people who have been sitting on their cash to make the economy worse made their wet dream come true on Tues night. It was well played from their standpoint .. it did what was intended.. to hurt the scary black guy in the White House.

Republicans first... Americans second.. Patriotic ... not so much when you hurt your fellow Americans for political gain.

[airdvr 210]

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From the little bits of info I've read I see it as a way to force investors out of their 'safe' investments and into some other more risky lines that have the potential to improve the economy. Of course, the downside is that your money is worth less (not worthless) and if you keep it in the bank it takes a real hit. Biggest downside is inflation and hyper-inflation.

For the last two years.. people who have been sitting on their cash to make the economy worse made their wet dream come true on Tues night. It was well played from their standpoint .. it did what was intended.. to hurt the scary black guy in the White House.

Republicans first... Americans second.. Patriotic ... not so much when you hurt your fellow Americans for political gain.

Quite a leap...even for you.

Please don't dent the planet.

Destinations by Roxanne

[skyrider 0]

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From the little bits of info I've read I see it as a way to force investors out of their 'safe' investments and into some other more risky lines that have the potential to improve the economy. Of course, the downside is that your money is worth less (not worthless) and if you keep it in the bank it takes a real hit. Biggest downside is inflation and hyper-inflation.

For the last two years.. people who have been sitting on their cash to make the economy worse made their wet dream come true on Tues night. It was well played from their standpoint .. it did what was intended.. to hurt the scary black guy in the White House.

Republicans first... Americans second.. Patriotic ... not so much when you hurt your fellow Americans for political gain.

Sorry that cructh is totally worn out, please find another....that one simply supports nothing!

[Amazon 7]

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From the little bits of info I've read I see it as a way to force investors out of their 'safe' investments and into some other more risky lines that have the potential to improve the economy. Of course, the downside is that your money is worth less (not worthless) and if you keep it in the bank it takes a real hit. Biggest downside is inflation and hyper-inflation.

For the last two years.. people who have been sitting on their cash to make the economy worse made their wet dream come true on Tues night. It was well played from their standpoint .. it did what was intended.. to hurt the scary black guy in the White House.

Republicans first... Americans second.. Patriotic ... not so much when you hurt your fellow Americans for political gain.

Sorry that cructh is totally worn out, please find another....that one simply supports nothing!

Careful he may assign another New Black Panther to go hide under your bed.

[dj123 0]

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So , the banks are following obama's lead, pulling money out of thin air?

Bankers have been doing this far longer than before Obama was born, if he ever was.

DLJ

[skyrider 0]

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From the little bits of info I've read I see it as a way to force investors out of their 'safe' investments and into some other more risky lines that have the potential to improve the economy. Of course, the downside is that your money is worth less (not worthless) and if you keep it in the bank it takes a real hit. Biggest downside is inflation and hyper-inflation.

For the last two years.. people who have been sitting on their cash to make the economy worse made their wet dream come true on Tues night. It was well played from their standpoint .. it did what was intended.. to hurt the scary black guy in the White House.

Republicans first... Americans second.. Patriotic ... not so much when you hurt your fellow Americans for political gain.

Sorry that cructh is totally worn out, please find another....that one simply supports nothing!

Careful he may assign another New Black Panther to go hide under your bed.

Your ignorance provides me with endless laughs!

[againsthumanity 0]

http://www.youtube.com/watch?v=PTUY16CkS-k&feature=player_embedded

I love BASE because cliffs don't crash
A nation of sheep will beget a government of wolves

[ManagingPrime 0]

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So , the banks are following obama's lead, pulling money out of thin air?

Or another way of passing off debts to our descendents?

Not so much. Inflation can be a debt killer. Lets say you owe $100K on your mortgage and you make $40K/yr. Inflation comes along (more money chasing same amount of goods and services) and wages tend to rise....debt can be retired sooner.

The move is mostly to spur our exports and this is why other countries are pissed. It forces them to make similar moves...which could cause a viscious cycle resulting in hyper inflation. The Germans have a had a taste of hyper inflation and they are one of the most vocal opponents of this move.

[futuredivot 0]

There's a really neat cartoon that talks about this

You are only as strong as the prey you devour

[airdvr 210]

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So , the banks are following obama's lead, pulling money out of thin air?

Or another way of passing off debts to our descendents?

Not so much. Inflation can be a debt killer. Lets say you owe $100K on your mortgage and you make $40K/yr. Inflation comes along (more money chasing same amount of goods and services) and wages tend to rise....debt can be retired sooner.

The move is mostly to spur our exports and this is why other countries are pissed. It forces them to make similar moves...which could cause a viscious cycle resulting in hyper inflation. The Germans have a had a taste of hyper inflation and they are one of the most vocal opponents of this move.

Problem with increasing wages is it comes hand in hand with increasing prices. Might be great for debt but it takes the wind out of your paycheck. And the price increases always precede the advancing wages. I saw this move as a way to force people off their safe investments and into something a bit riskier by forcing the interest rate down.

Please don't dent the planet.

Destinations by Roxanne

[ManagingPrime 0]

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So , the banks are following obama's lead, pulling money out of thin air?

Or another way of passing off debts to our descendents?

Not so much. Inflation can be a debt killer. Lets say you owe $100K on your mortgage and you make $40K/yr. Inflation comes along (more money chasing same amount of goods and services) and wages tend to rise....debt can be retired sooner.

The move is mostly to spur our exports and this is why other countries are pissed. It forces them to make similar moves...which could cause a viscious cycle resulting in hyper inflation. The Germans have a had a taste of hyper inflation and they are one of the most vocal opponents of this move.

Problem with increasing wages is it comes hand in hand with increasing prices. Might be great for debt but it takes the wind out of your paycheck. And the price increases always precede the advancing wages. I saw this move as a way to force people off their safe investments and into something a bit riskier by forcing the interest rate down.

Agreed. The destruction of the debt is not without a lot of pain. But, as you noted as well it does not seem to be the motivation nor the move to really trigger that kind of inflation.

I can see the motivation to get capital moving into small and mid-size companies (the ones that do the hiring), but a lot of the startup companies that the govt has been trying to get the money to don't tend to last. It seems to me that the main driver is to weaken the dollar so that our exports (in established industries) can compete (in the short term) and the administration can then throw up some nice numbers come election time.

NOTE: The last statement could seem a bit political, but I have no affiliations. The FED has been used as a political tool since it's inception.