The Explanation of Quantitative Easing Revisited

I acknowledge a limited scope and some simplifications. I am aware that evidence shows that government money creation lags credit money creation. I am attempting to understand these issues and to foster debate. My goal is to encourage people to learn and stay informed. There are many important issues and we are at an important time in our nation's history. Let us not immediately succumb to fear-mongering; let us maintain informative debate.

(edit to add links that contain far more lucid explanations that were released subsequent to my video)

http://www.creditwritedowns.com/2010/11/qe2-is-equivalent-to-issuing-treasury...
http://moslereconomics.com/2010/11/17/qe-dynamics-one-more-time-its-about-pri...

Category:

Film & Animation

Tags:

• xtranormal
• QE
• QE2
• quantitative
• easing
• bernanke
• inflation

[swift4grizz]

Was this made by the Ben Bernank?

[hungrybill]

If $600 billion is not inflationary, then let the Bernanke issue $600 trillion and we can all live like the Goldman Sachs.

[MultiShadow1969]

You need to explain this shit to China.

[dsgraphita]

Apparently there are not enough buyers of Treasury bonds -so to avoid the interest rate going up, the Fed has decided to print money to buy the bonds. Essentially, the Treasury bonds are our collective national debt, and printing more currency devalues the currency in the system - so we are paying down our debt by making the money less valuable - so in effect, everyone with money is essentially paying, which includes foreign governments who hold currency. Still why does the Fed buy from Goldman?

[Samatt281]

Good answer Mukansamonkey. Taxes are paid to give value to the dollar. The debt is "rolled over" and refinanced on a regular basis. Theoretically, if there were enough goods and services to meet the demand of deficit spending, there would not be any inflation. But some inflation is good for the debt. If there is 3% inflation, the amount owed on a fixed rate treasury note is reduced by 3% in real dollars.

China and others with US dollars buy our treasuries at $50 Billion to $60 billion per WEEK.

[mukansamonkey]

No, rocking, you don't understand. Nobody is ever paying this money back, ever. Because "this money" is simply the dollars that exist in your wallet and in your bank account. If it was all "paid back", the dollar wouldn't exist, as there wouldn't be any left in use. $600 billion isn't inflationary as long as unemployment is high and interest rates are so low. It's called a liquidity trap. Also, China won't want their money back anytime soon because it'd create inflation for them.

[rockingForever17]

@Samatt281 What???????????????????? if tax payers dont have to pay back this money then why do politicians raise taxes to fix the deficit? If this were who in the heck is paying back this money??? Do you really think china wont ever want the money its lent us back?

[Samatt281]

The Federal Reserve does NOT need revenue or has to borrow to spend.

The Federal Reserve creates the money by aggreement and spends by crediting bank accounts.

The Federal Reserve does NOT owe itself. It is NOT taxpayer's money.

The ONLY negative of deficit spending is the possibility of inflation.

[AroundSun]

@supernatural890098 The Federal Reserve can't be audited by congress. They are allowed to maintain their secrecy. They don't buy bonds from the treasury if they don't want to. It is all private. No more federal than FEDEX. PRIVATE BANK CONTROLLING US CURRENCY. Tell me where the constitution authorizes private banks to play god with the economy. The FED is nothing more than a revolving door between the government and big business. It is the 4th branch of government. It is corruption.

[AroundSun]

@supernatural890098 Yes, to tax for and spend on anything WITHIN its enumerated powers. Yes, they must coin money backed by gold or silver. The founders feared central banks more than they feared armies. Necessary and proper clause, yes, once again, to perform the functions necessary WITHIN the enumerated powers. If you think QE is stimulating our economy, you're in a dreamland! The FED caused the current mess we are in. We have been off of the gold standard for decades!

[supernatural890098]

@AroundSun The Constitution gives Congress the power to lay and collect taxes, and to coin money and regulate its value. The constitution also gives the government the power to make any and all laws which are necessary and proper to carry out the execution of any of its powers. The courts have also stated, a long time ago, that it is constitutional for the US to have a national bank. Things that the constitution allows cannot be unconstitutional just because someone doesn't like them.