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Why the Federal Reserve is pouring money into the financial system

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Re: Why the Federal Reserve is pouring money into the financial system

#91

Post by grandridge »

michalu wrote: post #85
29_29 wrote: post #81

Earlier quoted context omitted.

I was talking about the two levers the Fed has to guide the economy at work - Printing Money and Lowering interest rates (as described by Ray Dalio https://youtu.be/PHe0bXAIuk0 ). My coworker starry eyed, looked at me and said, "What about Quantitative Easing?". I responded that is printing money. I think the issue is, these concepts are given difficult sounding names, so people do not question their ethics. I'm not…

Except that "Quantitative Easing" is NOT "printing money"... it's just media who dubbed it "printing money" as it is a more clickbaity term that works better for driving traffic to the advertisement infested pages.

It is exactly printing money, just the amounts are so large they just skip the paper and ink

Re: Why the Federal Reserve is pouring money into the financial system

#92

Post by [deleted] »

29_29 wrote: post #88
29_29 wrote: post #87

Earlier quoted context omitted.

Quantitative Easing could not exist without creating money. Its literally the Fed creating money to buy bonds to reduce interest rates.

https://www.investopedia.com/terms/q/quantitative-easing.asp > Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to increase the money supply

[deleted]

Re: Why the Federal Reserve is pouring money into the financial system

#93

Post by drjesusphd »

meddlepal wrote: post #67
thiago_fm wrote: post #40

Earlier quoted context omitted.

Because if FED and US can't do a good job to keep their currency and country running properly, doing austerity when it is needed, not bailing out banks etc. Nobody will trust that currency anymore. No country in the world can run a $1 trillion deficit or 5%(?) of their GDP every year and not have consequences. This might be "okay" now, but this will create an effect that when people finally start to move away from th…

Ah so you want to see America collapse? That'll turn out great for everyone I'm sure.

This is nonsense. Predicted is not the same thing as wanting. If the economy runs on everyone clapping for Tinkerbell, we have more problems.

Re: Why the Federal Reserve is pouring money into the financial system

#94

Post by ls612 »

LatteLazy wrote: post #79
freejulian85 wrote: post #30

The money absolutely impacts the economy and the individual. If the fed were not providing this printed money to the banks, the banks would need to do some combination of the following to increase liquidity: 1) Increase interest rates to attract new deposits 2) Sell assets — such as foreclosed homes now in the banks possession With house prices at all time highs and interest rates at all time lows, both 1&2 sound gre…

The majority of people already own houses and have mortgages. That means they don't want interest rates to go up. So the Fed will not allow that. That's it, that is the reason banks were bailed out in the first place. That's the reason they're being subsidised now (plus lots of cheap money pushes up the stock market and spurs investment and looks good at election time). This isn't about economics. It's about politics…

The vast majority of mortgages out there today are fixed rate, not adjustable rate. That means that the interest homeowners are paying is locked in regardless of the rates in the market today.

Re: Why the Federal Reserve is pouring money into the financial system

#95

Post by geggam »

grandridge wrote: post #91
michalu wrote: post #85

Earlier quoted context omitted.

Except that "Quantitative Easing" is NOT "printing money"... it's just media who dubbed it "printing money" as it is a more clickbaity term that works better for driving traffic to the advertisement infested pages.

It is exactly printing money, just the amounts are so large they just skip the paper and ink

And it's easier to move around, for a fee.

Think of this business opportunity.

Start a company where you imagine wealth into existence then loan it to others. Then you setup partner systems where you charge folks who use that wealth. A charge for each transaction.

Zero overhead with a profit layer...

Re: Why the Federal Reserve is pouring money into the financial system

#96

Post by thorwasdfasdf »

Is there no limit at which point the Fed will stop printing money? In theory, once all that money printing hits the actual economy and inflation starts going up, they'll have increase interest rates. I'm not sure I believe that 100%. I wonder how complacent they will be once inflation does start to raise, and eventually spiral out of control.

Re: Why the Federal Reserve is pouring money into the financial system

#97

Post by wutbrodo »

ls612 wrote: post #94
LatteLazy wrote: post #79

Earlier quoted context omitted.

The majority of people already own houses and have mortgages. That means they don't want interest rates to go up. So the Fed will not allow that. That's it, that is the reason banks were bailed out in the first place. That's the reason they're being subsidised now (plus lots of cheap money pushes up the stock market and spurs investment and looks good at election time). This isn't about economics. It's about politics…

The vast majority of mortgages out there today are fixed rate, not adjustable rate. That means that the interest homeowners are paying is locked in regardless of the rates in the market today.

Most homeowners still have a substantial amount of leverage though, and you can refinance every X years. On top of that, rising rates reduce house values.

Most of my parents' net worth is in either residential or investment real estate, and low rates are very much good for them.

Re: Why the Federal Reserve is pouring money into the financial system

#98

Post by mindslight »

robk wrote: post #86
freejulian85 wrote: post #30

The money absolutely impacts the economy and the individual. If the fed were not providing this printed money to the banks, the banks would need to do some combination of the following to increase liquidity: 1) Increase interest rates to attract new deposits 2) Sell assets — such as foreclosed homes now in the banks possession With house prices at all time highs and interest rates at all time lows, both 1&2 sound gre…

Your mortgage rate would go up though unless you're an all cash buyer

Which is exactly what you want. Expected monthly payments are fixed, so your principle would go down. This increases your ability to pay off the loan earlier, and lowers your property taxes.

(This may not sound causal until you consider the larger feedback loop that has gotten us to here in the first place.)

Re: Why the Federal Reserve is pouring money into the financial system

#99

Post by mindslight »

jhayward wrote: post #36
freejulian85 wrote: post #30

The money absolutely impacts the economy and the individual. If the fed were not providing this printed money to the banks, the banks would need to do some combination of the following to increase liquidity: 1) Increase interest rates to attract new deposits 2) Sell assets — such as foreclosed homes now in the banks possession With house prices at all time highs and interest rates at all time lows, both 1&2 sound gre…

> If the fed were not providing this printed money to the banks I'm pretty sure you don't actually mean "printed money", since the Federal Reserve doesn't do that. No currency was created for this market operation, just balances in books kept by the Federal Reserve Bank of New York.

Yes, it is not literally "printing money" in the way that the US Mint physically does. The term is appropriate though, as the result of translating from the paradigm banks operate in into the paradigm natural persons are bound by. We can only give away what we have received - I cannot give a friend $20 in exchange for an IOU, and then transmute that IOU into a crisp new $20 bill.

Re: Why the Federal Reserve is pouring money into the financial system

#100

Post by jhayward »

freejulian85 wrote: post #37
jhayward wrote: post #36

Earlier quoted context omitted.

> If the fed were not providing this printed money to the banks I'm pretty sure you don't actually mean "printed money", since the Federal Reserve doesn't do that. No currency was created for this market operation, just balances in books kept by the Federal Reserve Bank of New York.

The money which the fed gave to the banks did not previously exist. The fed increased the balance sheet of the banks to indicate they had cash they would not otherwise have had. Fits my definition of “printed.”

Currency is printed. Money is created as bits in a ledger. Money is not synonymous with currency.

Thats the difference I'm pointing out.

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