Japan vs US

[scriabinop23]

Let a chart speak a thousand words,although I put in a few myself just to help it speak.

 

[Renegen]

Here's the thing in the eternal QE debate. The Central Bank alone cannot raise the money supply. It must encourage the banks to lend.

So if they are buying MBS and treasuries to make look the bank balance sheets better, how come the banks are not lending? Maybe the central bank actions are merely replacing destroyed, phony wealth. The banks are also lowering their leverage.

 

[scriabinop23]

Quote from Renegen:

Here's the thing in the eternal QE debate. The Central Bank alone cannot raise the money supply. It must encourage the banks to lend.

So if they are buying MBS and treasuries to make look the bank balance sheets better, how come the banks are not lending? Maybe the central bank actions are merely replacing destroyed, phony wealth. The banks are also lowering their leverage.

Yes agreed. Everything in finance is self-reinforcing, though. Banks will lend once they have minimal underwater exposure on their assets, once commercial lending is back up (look to recent TALF revisions), etc. I think ultimately this chart shows that the BOJ was relatively impotent vs the Fed with regards to the amplitude of invoking the policy.

As confidence concerning valuations and cashflows returns (helped by Fed price supports), the multiplier will jump back up.