|
On October 27 2012 06:33 JonnyBNoHo wrote:Show nested quote +On October 27 2012 06:17 sam!zdat wrote:On October 27 2012 06:13 JonnyBNoHo wrote:On October 27 2012 05:34 sam!zdat wrote:On October 27 2012 05:29 JonnyBNoHo wrote:On October 27 2012 05:21 Holy_AT wrote:
Money does not exist it is just a program running in the heads of people.
And the way Money is being distributed is utter nonsense, the meaning of money and the reasons why it was introduced are no longer the reasons why it is being used to day and for what reasons.
People are programmed in a way that they can not see reality.
Is money here to exchange goods and services ?
How is the relation between money and a certain service ?
Is hard exhausting work rewarded ? Is complicated work rewarded, where you have to think allot until you cant and just blank out on the evening ?
How is it possible that someone earns 1000 times or more then someone else ? Is he doing work that is 1000 x times more exhausting or complicated ? This aint humanly possible.
And because of these malfunctions in the system that work/service is in no relation to the money being earned this system can not endure long term without being destroyed over and over again. Well with technology you can easily be 1000X more productive. Ex. Compare an actor live on stage to an actor in a movie. The actor in the movie can be far more productive because technology will enable one performance to be repeated multiple times at little added cost. But see that analogy is terrible because you are talking about art! An actor on a stage is different than an actor in a movie. It's totally disingenuous to think about it as "production" which can be compared in this way. Fair enough. It's just an example, don't be too hard on it  Haha sorry Jonny I keep criticizing your examples :D But there's a philosophical strategy here, which is that I feel like people always talk about economics in abstract terms, and then they give examples that are just examples and so we shouldn't criticize them, but all the examples seem to leave themselves open to criticism... I just want people to think about the real world and give compelling examples I know, its hard because real life examples are complicated. Like the stage / movie actor comparison, you can explain it with "supply and demand" but then breaking down why supply and demand lead to that wage difference is complicated. Technology plays a factor, as does the public's preferences for leisure activities, as does the actor's opportunity costs (what else they could be doing for a living) etc, etc.
Exactly... that's why I don't listen when economists tell me they know everything and I should shut up and let them run the moneez
|
On October 26 2012 12:33 TheRabidDeer wrote:![[image loading]](http://i.imgur.com/Lc2XV.jpg) Picture taken from my economics text I was wondering if somebody could educate me on this. Up until the huge collapse, banks kept the bare minimum required by the government stored up in their vaults. And this makes sense, why keep money in your vaults when you can invest it to make more money? I mean, banks have over a trillion dollars waiting to be spent (and using the money multiplier that is significantly more than that which could be on the market for basic economic growth). So, why arent they spending? Why is the government STILL printing money if there is still all of this unused money? Will interest rates automatically rise if printing stops? Why are the banks collecting interest on this money too?
Normally, if banks have more money, they will start loaning more to make even more money. However, in the current liquidity trap we are in, interest rates are very low. This makes lending out unattractive. Furthermore, banks have a pile of debt they want to get rid of. The result is the graph.
|
On October 27 2012 05:58 Kontys wrote:
I am fairly confident we shouldn't just dismiss free market economy because of it's apparent faults. It has great strengths too.
I am fairly confident we shouldn't just dismiss controlled market economy because of it's apparent faults. It has great strengths too.
I think i like the way you think.Capitalism has its victims too.They just are not lined up in concentration camps or stall queues.
It is all "quantitative easing" and "recapitalisation" and "structural optimization" , but not those people that are fired and have nothing to eat.Or are mutilated by some machine .Or how Earth is going to hell becouse of...you know.
On October 27 2012 06:17 Kontys wrote:
The circumstances, as in elevated unemployment, and low income growth are short term most definitely. Unemployment is short term, simply because the economy doesn't just throw away factors of production. Low income growth because there is nothing to suggest worker productivity would depreciate in the short term: Income growth will pick up once the growth gets going again.
This.Can you explain how exactly It is going to pick up?I do not understand how this cycle : low demand - less jobs - lower demand - even less jobs- is going to get going again.Becosue to me,this way is dead end.
thanks.
|
On October 27 2012 06:02 sam!zdat wrote:Show nested quote +On October 27 2012 05:58 Kontys wrote:On October 27 2012 05:43 sam!zdat wrote:On October 27 2012 05:39 Kontys wrote:On October 27 2012 05:11 sam!zdat wrote:
@Kontys: Yeah, I understand all this actually. I understand what a crisis of effective demand is.
But what I don't believe is that the entire problem is "fictional," in the sense that if only the way the money worked worked better, then everything would be great. Everybody seems to assume this and I think it's a bad assumption. I don't think the entire thing can be written off as some sort of negative feedback cycle in financial system.
edit: I just feel like people who talk about economics and finance and stuff forget that there is a real world out there and that the graphs about interest rates and stuff is just a little back of the envelope model, basically, compared to the real thing. And then you get stuff like the negative feedback cycle explanation, which essentially tells me "there's a financial crisis because there's a financial crisis" and this one remains unconvinced What would you direct human activity toward if you got to decide? How could you be certain that this direction is what's best, or what others want? Yeah, it's a hard problem, isn't it? Why don't we spend some time talking about that, hmmm?
Wall street cooked it up. The details are many and terrifying, but if I had to point to the most crucial, I'd pick a practice called shadow banking.
Yeah I read the book by Posner and he explained all about the shadow banks. I am fairly confident we shouldn't just dismiss free market economy because of it's apparent faults. It has great strengths too. Yeah. Me and Marx both agree with you. (one difference possible is that I don't think the faults are merely "apparent.") Show nested quote +
There have been times in American history too, when it has worked for "everyone". And there have been times when it has only worked for the few entitled rich people. What it really boils down to, I observe, is how political power is distributed in society. The ones who can rig the rules of the free market are going to benefit, others will suffer.
Yes, good, how does this occur? Show nested quote +
I am quite pleased with how social democracy works here in Finland, and I am assured it works fine in other nordic countries as well. The thing to do right, is for the state to exploit the business' greed, not deny them their ambitions.
Interesting, well, I'll have to take a look at how they do things in Finland. Do you have any thoughts about why things have worked well there (assuming they have) and about the overall sustainability of the system? I certainly agree with your proposition about greed and ambition. Show nested quote +
America was also a fine, just society to live in for many decades following the 2nd world war, but the Reagan revolution unfortunately disembowelled the worker union movement, which not only became unable to fight for worker rights, but also lost it's political power, unable to any longer be a major funder for parties and candidates in the political process. 12 years of republican rule came to an end under only after the election of the decidedly "business-friendly" President Clinton.
It's not clear that organized labor is coming back. I'm not sure that a return to social democracy is possible in America.
I recall Dr Paul Krugman (a man well worth your time) suggesting that organized labour would come back even without any changes to law, if the political establishment favored it.
Finland and the Nordics have a large public sector funded by steep progressive taxation. Free healthcare, education, higher education, mothers'/children's services and a strong social safety net. Strong social mobility, to the extent that we have been described "classless". All the Nordic countries are also small, which helps. Combined population a 1/10th of the US. A perhaps negative effect of the power of the state is that business is somewhat over-regulated, which is not nice.
|
Quantitative Easing policies have failed- all that money that's supposed to go to consumers to borrow at low interest rates are instead given to banks to make them richer.
|
On October 27 2012 06:36 Kontys wrote:Show nested quote +On October 27 2012 06:02 sam!zdat wrote:On October 27 2012 05:58 Kontys wrote:On October 27 2012 05:43 sam!zdat wrote:On October 27 2012 05:39 Kontys wrote:On October 27 2012 05:11 sam!zdat wrote:
@Kontys: Yeah, I understand all this actually. I understand what a crisis of effective demand is.
But what I don't believe is that the entire problem is "fictional," in the sense that if only the way the money worked worked better, then everything would be great. Everybody seems to assume this and I think it's a bad assumption. I don't think the entire thing can be written off as some sort of negative feedback cycle in financial system.
edit: I just feel like people who talk about economics and finance and stuff forget that there is a real world out there and that the graphs about interest rates and stuff is just a little back of the envelope model, basically, compared to the real thing. And then you get stuff like the negative feedback cycle explanation, which essentially tells me "there's a financial crisis because there's a financial crisis" and this one remains unconvinced What would you direct human activity toward if you got to decide? How could you be certain that this direction is what's best, or what others want? Yeah, it's a hard problem, isn't it? Why don't we spend some time talking about that, hmmm?
Wall street cooked it up. The details are many and terrifying, but if I had to point to the most crucial, I'd pick a practice called shadow banking.
Yeah I read the book by Posner and he explained all about the shadow banks. I am fairly confident we shouldn't just dismiss free market economy because of it's apparent faults. It has great strengths too. Yeah. Me and Marx both agree with you. (one difference possible is that I don't think the faults are merely "apparent.")
There have been times in American history too, when it has worked for "everyone". And there have been times when it has only worked for the few entitled rich people. What it really boils down to, I observe, is how political power is distributed in society. The ones who can rig the rules of the free market are going to benefit, others will suffer.
Yes, good, how does this occur?
I am quite pleased with how social democracy works here in Finland, and I am assured it works fine in other nordic countries as well. The thing to do right, is for the state to exploit the business' greed, not deny them their ambitions.
Interesting, well, I'll have to take a look at how they do things in Finland. Do you have any thoughts about why things have worked well there (assuming they have) and about the overall sustainability of the system? I certainly agree with your proposition about greed and ambition.
America was also a fine, just society to live in for many decades following the 2nd world war, but the Reagan revolution unfortunately disembowelled the worker union movement, which not only became unable to fight for worker rights, but also lost it's political power, unable to any longer be a major funder for parties and candidates in the political process. 12 years of republican rule came to an end under only after the election of the decidedly "business-friendly" President Clinton.
It's not clear that organized labor is coming back. I'm not sure that a return to social democracy is possible in America. I recall Dr Paul Krugman (a man well worth your time) suggesting that organized labour would come back even without any changes to law, if the political establishment favored it.
that seems totally circular...
Finland and the Nordics have a large public sector funded by steep progressive taxation. Free healthcare, education, higher education, mothers'/children's services and a strong social safety net. Strong social mobility, to the extent that we have been described "classless". All the Nordic countries are also small, which helps. Combined population a 1/10th of the US. A perhaps negative effect of the power of the state is that business is somewhat over-regulated, which is not nice.
Sure, I wish I could live in a country like that, it sounds really nice. I'm not sure that large social democratic states are the end of history, but it's probably the most strategic move for the moment. but the problem is no way we accomplish that in the US as it's currently organized...
|
I'm not sure how to convince you other than to say look at the pace technology moves. As the world digitizes more and more, and science crawls on, there will be horizons that open up that we can't even imagine yet. Maybe in 2050 we start needing "fusion engineers", because we've perfected fusion and now we need people to run the reactors. Maybe in 2030, we need "moon miners", trained engineers who can go mine the moon of minerals. There are nearly infinite possibilities of where we may need skilled workers in the future, and some we can't even imagine yet (no one could imagined we would need computer programmers 75 years ago, not even von Neumann himself, who said in 1948 that we had reached the logical limit of what the digital circuit could do for us....and he was a pretty smart dude).
As far as the comments about what I do for a living, I don't think you really appreciate how difficult being a senior software engineer is. It's not something some random Chinese or Indian kid (or any nationality really) is just going to pop up one day and challenge my seniority. They'll need the same schooling and years of experience it took me to get there. Hopefully, I'll be the one teaching them how to get there, so I can retire when they are ready I actually have a plan for where to take my career if my job ever stops dropping in demand, just like everyone else should.
|
Blazinghand
United States25550 Posts
On October 27 2012 06:35 NeedsmoreCELLTECH wrote:Show nested quote +On October 26 2012 12:33 TheRabidDeer wrote:Picture taken from my economics text I was wondering if somebody could educate me on this. Up until the huge collapse, banks kept the bare minimum required by the government stored up in their vaults. And this makes sense, why keep money in your vaults when you can invest it to make more money? I mean, banks have over a trillion dollars waiting to be spent (and using the money multiplier that is significantly more than that which could be on the market for basic economic growth). So, why arent they spending? Why is the government STILL printing money if there is still all of this unused money? Will interest rates automatically rise if printing stops? Why are the banks collecting interest on this money too? Normally, if banks have more money, they will start loaning more to make even more money. However, in the current liquidity trap we are in, interest rates are very low. This makes lending out unattractive. Furthermore, banks have a pile of debt they want to get rid of. The result is the graph.
Throw away your preconceptions. The Federal Reserve is currently paying banks to hold on their money-- Interest on Excess Reserves. This makes is profitable for banks to sit on their money rather than lend it. This is a contractionary monetary policy, and is bad for the economy, but is being done to provide safe assets for banks.
|
On October 27 2012 06:43 Brainling wrote:
I'm not sure how to convince you other than to say look at the pace technology moves. As the world digitizes more and more, and science crawls on, there will be horizons that open up that we can't even imagine yet. Maybe in 2050 we start needing "fusion engineers", because we've perfected fusion and now we need people to run the reactors. Maybe in 2030, we need "moon miners", trained engineers who can go mine the moon of minerals. There are nearly infinite possibilities of where we may need skilled workers in the future, and some we can't even imagine yet (no one could imagined we would need computer programmers 75 years ago, not even von Neumann himself, who said in 1948 that we had reached the logical limit of what the digital circuit could do for us....and he was a pretty smart dude).
But maybe none of them create jobs...
We've only had information technology for half a century or so, very hard to make any extrapolation about future trends based on this. I think there's no compelling reason to be an optimist and think that there will always magically be something new.
As far as the comments about what I do for a living, I don't think you really appreciate how difficult being a senior software engineer is. It's not something some random Chinese or Indian kid (or any nationality really) is just going to pop up one day and challenge my seniority. They'll need the same schooling and years of experience it took me to get there. Hopefully, I'll be the one teaching them how to get there, so I can retire when they are ready I actually have a plan for where to take my career if my job ever stops dropping in demand, just like everyone else should.
Not trying to belittle your work, I wouldn't be able to do it. but educational paradigms are changing dramatically right now and all my friends in that industry basically learned how to program themselves when they were kids and built careers on that. Tech jobs are still built on pre-tech educational infrastructure, and that is all changing as I say right now
|
On October 27 2012 06:43 Brainling wrote:As far as the comments about what I do for a living, I don't think you really appreciate how difficult being a senior software engineer is. It's not something some random Chinese or Indian kid (or any nationality really) is just going to pop up one day and challenge my seniority. They'll need the same schooling and years of experience it took me to get there. Hopefully, I'll be the one teaching them how to get there, so I can retire when they are ready I actually have a plan for where to take my career if my job ever stops dropping in demand, just like everyone else should.
course not,becosue these random "chinese and indian kids" are slaving in factory.
|
we're still spending because we need to pump money into the economy so that there are jobs and because of the recession people are saving more, spending less, meaning even less customer demand for products. theres a lot of stuff dealing with aggregate demand, etc, but that's the VERYYYYY GENERALLLLLLLL reason, and thinking. it's all theorycrafting and depending on which side you speak to, they will give different ideas based on this theory.
|
On October 27 2012 06:47 sam!zdat wrote:
Not trying to belittle your work, I wouldn't be able to do it. but educational paradigms are changing dramatically right now and all my friends in that industry basically learned how to program themselves when they were kids and built careers on that. Tech jobs are still built on pre-tech educational infrastructure, and that is all changing as I say right now
The current educational structure for computer science is fuck all horrendous, of that there is no doubt. As I've said previously, current CS programs don't even prepare people for the work force correctly. This is why you see so many "self taught" programmers, because they tend to be the ones with actual experience writing software. Unbeknownst to most people, software is an experience discipline as much or more than a knowledge discipline.
I am actually involved in helping a local school beef up their CS curriculum, because it's so horrendous. I hope to parlay that in to eventually teaching that curriculum, as I would love to wind down my career preparing the next generation of programmers.
|
I appreciate a good economics discussion, but ironically the answer to the question is in the picture, and is not that complicated. Reserves spiked because the Fed started paying interest on reserves, as an incentive to not over leverage, and increase reserves to bring some stability to the banking sector. In an uncertain economic climate these returns were low, but they were risk free so banks took it.
|
Blazinghand
United States25550 Posts
On October 27 2012 07:03 TeCh)PsylO wrote:
I appreciate a good economics discussion, but ironically the answer to the question is in the picture, and is not that complicated. Reserves spiked because the Fed started paying interest on reserves, as an incentive to not over leverage, and increase reserves to bring some stability to the banking sector. In an uncertain economic climate these returns were low, but they were risk free so banks took it.
This is 100% correct. It is rather straightforward.
|
Just FYI, I skipped every post in here because my current state can't take any gold bug/modorn monetary theory/money is a bubble posts (although I do appreciate the MMT posts, I just don't have the energy to argue hehe). Anyway, two explanations I really really like (which go together in diagnosis but diverge in cure). Firstly, the Brad Delong one, IMO the prime monetary historian currently (mainly because he's one of the only, if not the only, economic historian who publishes into the mainstream right now), to be short:
Ideal economy: currently produced goods and services = currently offered goods and services, sadly someone invented money. As such, CPGS +money demand = COGS. When peoples AAA rate shit becomes C, they hoard money, so money demand increases and CPGS goes down, the reserves on banks balance sheets dont matter one bit until there are enough AAA assets/money to satisfty peoples increased demand for these (terrible explanation, check http://delong.typepad.com (for the people who prefer circular reasoning, i.e. the ones I referenced in my first few lines, hes quite keynesian + he's in love with larry summers (gasp!) but there is no reason you would not enjoy him as a historian (an example of a good post, i can't find his summaring posts :http://delong.typepad.com/sdj/2011/11/yes-the-us-government-ought-to-own-the-banks-now.html, basically google his blog for Shumpeter, Minsky, Bagehot, ...
Anyway, second good explanation (first one was history, this is the present) is the market monetarist view. Basically, they follow the orthodox monetarist/keynesian view that the current crisis is so deep that it hit the zero lower bound (i.e. due to rent modalities and shit we do not use the concept of negative interest rates) and that regular (i.e. based on keynesian principles ==> "lowering interest rates") is not enough to hit the NAIRU. BUT they completely disagree with both old school monetarists (target the money supply, M1, M2, M3, Friedman hated this when he got older) and keynesians (in some strange universe low interest rates are the cure instead of a symptom) on how to manage monetary policy. Instead the focus (completely accurately) on Nominal GDP. They argue that every serious crisis was caused by central banks allowing NGDP to fall below its normal long term growth (~5% for NA, ~4% for EU, reflecting NA's superior entrepreneurial .. climate). As such, they believe that central banks should target the long term growth rate of NGDP by usin the Chuck Norris method (http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/10/monetary-policy-as-a-threat-strategy.html). Anyway, explaining all this is way beyond my capabilities, just want to say that their view on this and past zero lower bound crises is so completely accurate and their suggestions would be a huge step forward for the world (well, the part that cares about the unemployed atleast) so I'll just link some things, firstly: http://www.themoneyillusion.com/ Scott Sumner's blog, who is up there with Krugman, Mankiw and Summers as one of the monst influental economists of the world solely thanks to his blog (just check out the latest Fed minutes). http://worthwhile.typepad.com/worthwhile_canadian_initi/about-nick-rowe.html for the Canadians, probably the strongest market monetarist from a technical point of view (DSGE shit) together with http://marketmonetarist.com/. And just cuz we like internet phenomena here, http://esoltas.blogspot.be/ this high school student who constantly manages to be spot on.
To finish this completely incoherent post, there is a huge demand shortage in the Western economies, leading to/caused by a huge demand for money (as other safe assets give almost the same return). As we are the zero lower bound currently, extraordinary solutions are necessary to restore full employement (as unemployment is destroying the social fabric of countries like Portugal and Spain and is polarising the US even further), such solutions need to be found in the monetary sphere, either via higher inflation (keynes), or via promising/demanding higher NDGP growth (back to the original NGDP growth path) by the central banks. All this demand for cash and high reserves on banks balance sheets is awesome for conspiracy theorists, randroids and goldbugs but its completley beside the point
|
Afaik it's just that the banks have to hold in an economic crisis. In Sweden the banks haven't gotten any extra funds, but there are new requirements (such as that the customer has to have 15% of a mortgage to loan the remaining 85% etc), and banks in the EU have to have 15% of their total funds in store for a crisis situation.
Afaik it's just so that banks don't have to be bailed out if for instance tonnes of customers lose their jobs and can no longer pay their loans.
As of right now, the biggest income for the Swedish banks are from lending, so if that got disrupted without money in store, the banks go bankrupt, which turns society upside down.
The government came up with a solution that they guarentee the banks that they will go in with tax money if they go bankrupt. This means that Swedish banks are always safe to lend money to, as it's a no-risk investment, which in turn means that they won't have any problems with cash and no tax money is actually spent.
That's what I've picked up from working at a bank for a couple of years. I'm just a private advisor so take it for what it is.
|
On October 27 2012 06:47 sam!zdat wrote:Show nested quote +On October 27 2012 06:43 Brainling wrote:
I'm not sure how to convince you other than to say look at the pace technology moves. As the world digitizes more and more, and science crawls on, there will be horizons that open up that we can't even imagine yet. Maybe in 2050 we start needing "fusion engineers", because we've perfected fusion and now we need people to run the reactors. Maybe in 2030, we need "moon miners", trained engineers who can go mine the moon of minerals. There are nearly infinite possibilities of where we may need skilled workers in the future, and some we can't even imagine yet (no one could imagined we would need computer programmers 75 years ago, not even von Neumann himself, who said in 1948 that we had reached the logical limit of what the digital circuit could do for us....and he was a pretty smart dude).
But maybe none of them create jobs... We've only had information technology for half a century or so, very hard to make any extrapolation about future trends based on this. I think there's no compelling reason to be an optimist and think that there will always magically be something new.
It's called creative destruction, and it has been happening even before the information age. There are enough compelling reasons to be an optimist, like every invention since fire...
|
On October 27 2012 08:02 Flyingdutchman wrote:Show nested quote +On October 27 2012 06:47 sam!zdat wrote:On October 27 2012 06:43 Brainling wrote:
I'm not sure how to convince you other than to say look at the pace technology moves. As the world digitizes more and more, and science crawls on, there will be horizons that open up that we can't even imagine yet. Maybe in 2050 we start needing "fusion engineers", because we've perfected fusion and now we need people to run the reactors. Maybe in 2030, we need "moon miners", trained engineers who can go mine the moon of minerals. There are nearly infinite possibilities of where we may need skilled workers in the future, and some we can't even imagine yet (no one could imagined we would need computer programmers 75 years ago, not even von Neumann himself, who said in 1948 that we had reached the logical limit of what the digital circuit could do for us....and he was a pretty smart dude).
But maybe none of them create jobs... We've only had information technology for half a century or so, very hard to make any extrapolation about future trends based on this. I think there's no compelling reason to be an optimist and think that there will always magically be something new. It's called creative destruction, and it has been happening even before the information age. There are enough compelling reasons to be an optimist, like every invention since fire...
Really? You should re-examine the history of the last two centuries more closely. There are far more reasons to be frightened of this kind of situation than to be optimistic. We do NOT want the kind of "creative destruction" that came out in the late 1910s or the late 1930s.
|
On October 27 2012 08:44 coverpunch wrote:Show nested quote +On October 27 2012 08:02 Flyingdutchman wrote:On October 27 2012 06:47 sam!zdat wrote:On October 27 2012 06:43 Brainling wrote:
I'm not sure how to convince you other than to say look at the pace technology moves. As the world digitizes more and more, and science crawls on, there will be horizons that open up that we can't even imagine yet. Maybe in 2050 we start needing "fusion engineers", because we've perfected fusion and now we need people to run the reactors. Maybe in 2030, we need "moon miners", trained engineers who can go mine the moon of minerals. There are nearly infinite possibilities of where we may need skilled workers in the future, and some we can't even imagine yet (no one could imagined we would need computer programmers 75 years ago, not even von Neumann himself, who said in 1948 that we had reached the logical limit of what the digital circuit could do for us....and he was a pretty smart dude).
But maybe none of them create jobs... We've only had information technology for half a century or so, very hard to make any extrapolation about future trends based on this. I think there's no compelling reason to be an optimist and think that there will always magically be something new. It's called creative destruction, and it has been happening even before the information age. There are enough compelling reasons to be an optimist, like every invention since fire... Really? You should re-examine the history of the last two centuries more closely. There are far more reasons to be frightened of this kind of situation than to be optimistic. We do NOT want the kind of "creative destruction" that came out in the late 1910s or the late 1930s.
or you can re-examine what I exactly replied to. As far as I know the late 10's and 30's weren't caused by some new invention making other industries obsolete
|
ContralSol thanks for the great informative posts. But I wish you would have written create money rather than print money. As I don't believe the Fed was/is just printing or coining physical money to buy assets.
Additionally the quantitative easing used by the Fed didn't just consist of buying bank assets with money, they also used treasury securities for purchases.
Also thanks to XoXiDe for linking to the Fed pdf it was also really informative.
I must admit, I'm impressed by the performance of the Fed. They do seem to have prevented a deflationary collapse.
On the other hand offering interest on reserves to banks does seem like giving the banks free money, which comes at the expense of everyone else. So yes a crash was prevented but at the expense of making the entire financial system less efficient, which reduces long term growth.
|
|
|
|
|
|
EPT
