QIRP Does Not Work And Rebutting Bernanke’s Defense Of Himself

[Tsing Tao]

Not at all. Even some good economists occasionally refer to expansion the of Fed Balance sheet as "printing" but they know, of course, it isn't really printing. It is lending, and the operation is reversible. The money created is borrowed, not just created out of thin air unattached to debt. This operation does not fit the economist's definition of printing. I corrected Fhl because he obviously is thinking that QE is actually printing, whereas when an economist says "printing" they are usually using the term loosely to mean "effectively printing."

Did you notice that when the interviewer says, "You've been printing money" Bernanke answers "Well, effectively."

But he did not say, "yes, we have been printing." Why? Because, while what the Fed was doing was "effectively", for the moment, like printing, it was of course not actually printing.

In a hearing before the Senate banking committee someone accused Bernanke of "printing" and Bernanke was quick to correct them. He said, and I quote, "I'm not printing." In this official setting where semantics mattered, Bernanke was very careful not to use the term "printing" incorrectly, or loosely.

You would not generally, I hope, refer to bank lending in fractional reserve baking as "printing" even though "effectively" it is at the moment the loan is made. But in net terms it is nothing like printing, because it is money created out of debt, and that's a transaction that goes in the reverse direction when the loan is paid back.

The Federal reserve can not "print" . Only, the U.S. Treasury could do that, and if it is done without restraint, it will quickly destroy the value of a currency. When a country "prints" it is doing so out of desperation, and this is invariably caused by a collapse in credit worthiness to the point that no one will lend to the treasury.

LOL...so funny to watch you dance around semantics when it amounts to essentially the same thing. Oh, sure, they're not printing actual dollars - no one thinks that. The money the Fed "creates" goes into the bank system and drives up asset prices. Same thing, really, with the exception that it doesn't make it's way into the greater economy (but the Fed wanted it to).

Thanks for posting that good interview with Ben Bernanke. I think it will be obvious, to anyone who takes the time to watch that video, what a genuine and honest person he is. I can't think of anyone more competent, level headed, or smarter to lead the Fed during a Financial crisis than Bernanke. We were extremely fortunate to have him as Fed Chair during the crisis. (I can think of others equally competent, but no one more competent. Yellen is also very good, by the way!)

Oh sure, the hero of our times. That's the ticket.

What's obvious (if it wasn't before) to everyone "watching" is what a complete and total shill you are for the Fed.

 

[Tsing Tao]

I did not say that they should not have been bailed out. I would never say that! that would be irresponsible..

In general, it's a bad idea, in a capitalist society, for the government to bailout failing businesses.

Then why not answer the question instead of dancing around it all the time? Should AIG have been bailed out? Should GM? Was that a good use of stimulus dollars?

 

[piezoe]

LOL...so funny to watch you dance around semantics when it amounts to essentially the same thing. Oh, sure, they're not printing actual dollars - no one thinks that. The money the Fed "creates" goes into the bank system and drives up asset prices. Same thing, really, with the exception that it doesn't make it's way into the greater economy (but the Fed wanted it to).

Oh sure, the hero of our times. That's the ticket.

What's obvious (if it wasn't before) to everyone "watching" is what a complete and total shill you are for the Fed.

You are intent on remaining ignorant when all of the information you would need to understand the difference between QE and printing is at your fingertips. You are revealing yourself as too lazy to do the least amount of reading, or study.

I have made myself clear. I simply add for your benefit that when the central bank adds a billion dollars to bank reserves, they remove a billion dollars of assets from the economy!!! This doesn't happen in money printing.

I don't care how many ignorant traders think the Fed is printing money, nor how many idiot bankers there are at fed branch banks that refer to QE as printing, which they should desist from, since there are people out there listening, such as yourself, who haven't a clue.

Then why not answer the question instead of dancing around it all the time? Should AIG have been bailed out? Should GM? Was that a good use of stimulus dollars?

This is the second time I have answered the question for you. the answer is the same as last time. YES! and the money used was not for stimulus. In the case of AIG the money was loaned against collateral to prevent the collapse of the financial markets! (It's been paid back at a profit to the tax payers.) (See Bernanke's comments re AIG. Or are you too lazy to watch the video you posted?) In the case of GM, the government took an equity position, essentially putting GM temporarily in receivership. (The government has since divested itself of most of the stock , perhaps all, at a profit to the tax payers.)

Now get off your lazy ass and start paying attention, asshole.

 

[eurusdzn]

The fed can unwind reserves in the case of both Open Market Operations and QE.
However the money created from those reserves prior to the fed reducing those reserves remains. Sort of like a plumber stopping a leak in the basement and calling it done without dealing with the 6 feet of water in the basement.
Money will be malinvested, levered outrageously, chase yield and quanted/calculated into a model that is "easy" and makes perfect sense. Again and again.
Who cares if they can erase an accounting liability, or, is it an asset. The better question may
be .....Do you think the fed been wise and prudent over the last 30 years?
As a layman, i can agree with the liquidity and bailout ops because i think most individuals and
all beaurocracies are incompetent so at least error on the cautious side. Qe1 ok as well for low rates and restoration of capital and employment. Maybe QE should have ended with that.

 

[Tsing Tao]

You are intent on remaining ignorant when all of the information you would need to understand the difference between QE and printing is at your fingertips. You are revealing yourself as too lazy to do the least amount of reading, or study.

I have made myself clear. I simply add for your benefit that when the central bank adds a billion dollars to bank reserves, they remove a billion dollars of assets from the economy!!! This doesn't happen in money printing.

When the "assets" are debt created by the Treasury, sold to the banks and then purchased by the Fed (plus a commission paid to the bank) then it's virtually the same thing as printing money! It's not like the Fed is buying $1B of farm land or something. They're buying freshly created debt and providing freshly created money for it. The debt is putting cash into the economy through the government.

Wow. You really believe the nonsense you're throwing out, don't you.

If the total "money" in the economy is X, and the treasury creates $1B new debt to spend on...whatever...and then the Fed goes any creates money to buy that newly created debt, the total "money" in the economy is now X + $1B. I know this is a simple example and you'll try to play semantics all day, but that's essentially what happens. Technically, retiring new debt removes "a billion dollars of assets" in your example, but you're ignoring that it was just created in the first place.

In the case of AIG the money was loaned against collateral to prevent the collapse of the financial markets! (It's been paid back at a profit to the tax payers.)

Wrong.

Its December 11, 2012 sale of stock resulted, we are told, in the full recovery of the government’s commitment along with an approximately $22.7 billion combined return for the Treasury and the FRBNY, marking an incredible reversal of the original expectation of catastrophic losses. Sadly, the Treasury’s statements are highly misleading. In its accounting for the AIG bailout, the Treasury simply left out a number of salient facts when it announced that American taxpayers made a profit. Stated simply, we did not.

The Treasury claims to have achieved a return of $5.0 billion, but neglects to mention that the Federal Reserve gifted them more than 500 million shares of AIG. Moreover, they simply ignored the unique and preferential tax treatment accorded to the company that is estimated to have inflated its share price by at least $5. Additionally, its estimates fail to compensate taxpayers for the true cost of capital or the risk assumed in its investments. After adjusting for the aforementioned factors, we find that the Treasury’s investment in AIG was actually very costly for taxpayers.​

In the case of GM, the government took an equity position, essentially putting GM temporarily in receivership. (The government has since divested itself of most of the stock , perhaps all, at a profit to the tax payers.)

Wrong again!

GM has earned a stunning $22.6 billion since the dark days of the financial crisis, when the automaker was bailed out by the U.S. government. Taxpayers didn't fare nearly as well. They'd lost $10.6 billion by the time the U.S. Treasury department closed the books on the $49.5 billion bailout in December.​

Now get off your lazy ass and start paying attention, asshole.

Perhaps I'm not the asshole who needs to start paying attention, asshole. A quick tip - if you stop drinking the kool-aid and put down the pom-poms, you might find that it opens your eyes.

 

[Tsing Tao]

https://www.scribd.com/doc/261749671/Einhorn-Grants-Pres-Abbreviated

Einhorn's latest presentation. Some tidbits...Oh, wait...let me guess, you don't know who David Einhorn is, either, piezoe?

• In a recent blog post, Mr. Bernanke wrote: “the best way to improve the returns attainable by savers was to do what the Fed actually did: keep rates low, so that the economy could recover and more quickly reach the point of producing healthier investment returns.”This is circular reasoning: He is assuming that which he seeks to prove, namely that ultralow rates actually help the economy. But, that is the open question.

• I last spoke here three years ago and talked about what I dubbed the Fed’s Jelly Donut monetary policy. I observed that accommodative policy has diminishing returns that had long since passed the point of being productive and was now actually slowing the recovery. I compared it to eating a 36th Jelly Donut.

• By keeping rates too low, the Fed sought to create a stock market wealth effect. I suggested that while this would increase income inequality, the wealth effect would not likely translate to enough additional consumption to offset the even bigger drain from lost income to savers.

• Policy makers and mainstream economists are stuck in GroupThink that easy money always helps the economy, despite basic economic principles that suggest diminishing or negative marginal returns.
• Swiss Re recently calculated that from 2008?2013, U.S. households lost $470 billion of income due to excessively low interest rates. Because savers perceive interest income as more recurring than volatile stock market gains, and because interest income is spread more broadly than equity gains, it’s fair to assume that a much greater proportion of interest income would be spent.
• Low interest rates make workers save more, as they can’t anticipate earning safe income on savings. They also make retirees spend less, as they have less current and future income and need to stretch savings over their remaining lives. Both dynamics create less spending and a slower recovery.
• The question is who benefits from the harm to savers? Of course, it is governments who are able to borrow more cheaply.
• I remain of the view that higher rates will surprise by improving the economy on Main Street even though it is quite possible they would create some turbulence on Wall Street, as most equities are now highly priced and a select group are in a bubble.

There is more in the presentation whose selected slides we have shown below, but here is the punchline:

We have passed the point where Jelly Donut policy is merely slowing the recovery. Distortions are now adding risk to the banking and insurance markets and leading to poor incentives for the largest players in the financial system.

Monetary policy and regulations have combined like a failed chemistry experiment to create a potentially destructive force that should not exist outside of fiction. ​

 

[piezoe]

Much of the assets removed by the Fed were MDSs. These are NOT created by Treasury.

None of Einhorn's analysis takes into account the cost of not doing those things.

In your own analysis, you have ignored the reversibility of money created out of debt. You have analysed money created out of debt as though debt is never paid down. You have reached conclusions that would only be valid if the Fed only bought assets and never sold them.

 

[Tsing Tao]

Much of the assets removed by the Fed were MDSs. These are NOT created by Treasury.

MDS? You mean Mortgage Backed Securities? I don't know what MDS is, unless it's a spelling error. I'm going to make the assumption you were trying to say that "much of the assets removed by the Fed were MBS".

About a third were MBS. The majority was not.

Once again, you are incorrect. We won't go into how even Mortgage Backed Securities create money through the aspect of fractional reserve lending, however. But two-thirds of the Fed's balance sheet was money provided to purchase debt creation - created by the Treasury. "Printing", in other words, in the aforementioned example.

None of Einhorn's analysis takes into account the cost of not doing those things.

Ah, that ol' gag. Like the "Jobs Saved and/or Created if we launch the stimulus program", right? The cost of not doing something is such bullshit. How do you know?

Remember this chart? LOL!

In your own analysis, you have ignored the reversibility of money created out of debt. You have analysed money created out of debt as though debt is never paid down. You have reached conclusions that would only be valid if the Fed only bought assets and never sold them.

I have analyzed it as if debt is never paid down? You're damned right I have. Please post the last time the US paid down it's debt, and I'll correct myself. Take your time.

As for the Fed only buying assets and not selling them, when did they sell them? The balance sheet at the Fed has been maintaining it's level since QE ended, with Yellen herself admitting the Fed replacing maturity with new issuance.

Also, are you ever going to acknowledge being completely wrong about the bailout crap you spewed earlier, or are you just hoping we'll gloss over that? This thread is becoming quite the exhibit of calling you out on all your ridiculous commentary. I'll have to bookmark it.

 

[piezoe]

Yes MBSs. Sorry its a typo. The Fed both Buys and Sells bonds through their bond trading desk. It's the every day means of implementing monetary policy. Selling decreases the money supply, buying increases it. They also buy and sell for other reasons, to adjust the mix of assets, or maturities, for example. They implement both qualitative and quantitative alterations in their balance sheet by this means. You can follow these transactions at the NY Fed's website if you care to.

Government Debt is constantly being both paid down and being newly acquired.

 

[Tsing Tao]

Yes MBSs. Sorry its a typo. The Fed both Buys and Sells bonds through their bond trading desk on a regular basis. It's the every day means of implementing monetary policy. Selling decreases the money supply, buying increases it.

Right, and if they were net sellers, their balance sheet would decrease. If they were net buyers, it would increase. And since 2009, they've increased their balance sheet approximately $4 Trillion.

Now would you care to respond to any of the other dozen or so points where I've shown you proof of your incorrect statements, or shall we just accept that you've admitted yourself in error, and we'll move on from here?