The Coming Revolution: Evolutionary Leap or Descent Into Chaos and Violence?

[Lucrum]

buying debt with an electronic notation... is creating money out of thin air.

Ben Bernanke admitted that on camera.

 

[jem]

Here is how money is made... out of thin air (but its not cash) ... in Bernankes words and mouth.
I was stoked to see he presented this at GW at about the 30 second mark.

 

[jem]

I changed my paragraph when I found the video above.
Its the not the video I think you and I watched in the past... but the presentation at gw is dispositive on this issue.

the FED creates money by crediting its member banks accounts... at will.
(by the one... that is only one of the ways it creates money)

Ben Bernanke admitted that on camera.

 

[piezoe]

Have a laugh while you watch.

http://thedailyshow.cc.com/videos/q7hzaa/the-big-bank-theory

The debt wasn't issued for the purposes of QE. It would have been issued regardless, so don't make up silly statements about how every dollar pumped into the economy is linked to new debt. We created dollars to buy the debt which would have been bought by others. The debt has nothing to do with it at all. The QE just simply bought debt. It also bought MBS. That wasn't government issued debt.

As for keeping rates down, sure it did a good job of that - and killed savers, forcing everyone to move into higher risk assets (which they will get burned on down the road - tomorrow, or next week or next year). They inflated a housing bubble (again) and this time an all-asset bubble as well. And all for what? So a few people who would have lost their house because they bought too big a house at stupid rates could refinance? You must be joking.

Now the Fed is frantic because rates aren't rising despite QE ending, and it's because they've gobbled up the bond market, and there's no liquidity out there! How ironic, thwarted by their own stupid policy.

The Fed is not "frantic". It's desirable that rates rise slowly rather than precipitously.

I agree , the debt wasn't issued for purposes of QE. The debt was issued to raise money for recovery programs, and QE was the implement of choice. If at the onset of the recovery period the Treasury had attempted to auction that many bonds that quickly without the Fed being there as a ready buyer in the secondary market, interest rates would have gone up, just the opposite of what is desired in a deep recession. All of that extra liquidity produced by QE will remain out there until the Fed decides it is time to start removing it. It isn't disappearing just because the Fed has decided to suspend bond buying. Some of the extra liquidity is tied up in excess bank reserves however. The potential for higher inflation due to excess liquidity remains. The Fed has a ready tool to deal with it by selling bonds and raising short term rates.

QE is not win-win, rather it is the lesser of two evils. When interest rates are forced down, naturally those who depend on interest, such as some retired persons are hurt. That is an unfortunate consequence, but the alternative is worse.

 

[piezoe]

Here is how money is made... out of thin air (but its not cash) ... in Bernankes words and mouth.
I was stoked to see he presented this at GW at about the 30 second mark.

Thank you, Jem.

 

[Tsing Tao]

but the alternative is worse.

The alternative will occur whether or not we postpone it. The Fed IS worried, despite what you are here pushing, because they've boxed themselves in. But to say QE was a net positive shows a clear biased thinking, rooted deeply in propaganda and misled academics.

 

[AAAintheBeltway]

QE allowed the government to run far larger deficits than the country can sustain. The alternative would have been either downsizing government or rasing taxes. Of course, the only way QE could work is if other countries, ie the euros, adopted similar policies. The fact that both the US and EU bailed out everyone impacted by the financial crisis set the stage. if they had allowed a normal liquidation of bad debts, none of it would have been necessary, and of course, QE would have been impossible, as it would have ignited wild inflation.

Faced with a stark choice, our leaders decided to screw retirees and savers in favor of the irresponsible. What a surprise.

 

[Ricter]

QE allowed the government to run far larger deficits than the country can sustain.

The deficit fell sharply during the QE program.

 

[LEAPup]

The alternative will occur whether or not we postpone it. The Fed IS worried, despite what you are here pushing, because they've boxed themselves in. But to say QE was a net positive shows a clear biased thinking, rooted deeply in propaganda and misled academics.

That's post of the day!

 

[LEAPup]

Here is how money is made... out of thin air (but its not cash) ... in Bernankes words and mouth.
I was stoked to see he presented this at GW at about the 30 second mark.

I wondered if he was going to show the rabbit out of the hat trick at GW.. After all, that's what's been going on.