This is how idiotic these two simpletons are - even though this cartoon has been debunked by experts who point out that the contents are completely incorrect - they think its a great explanation of the "evils" of the Fed and Quantitative Easing. Talk about stupidity - two grown men and they can't even understand a cartoon (and when its wrong) between them. These are the sort of morons the US media puts on TV as "commentators" when all they do is poison the public with their ignorance.
For smart viewers (and I'm sure there won't be many of them), I have included the CORRECT version of the cartoon - which someone kindly made after figuring out that the original one is complete BS.
From Forbes Magazine regarding the original cartoon:
"According to Ogden Nash, "Too clever is dumb." I'm not sure that's true anymore. If so, it should curb the popularity of the "Ben Bernank" cartoon, but it feeds it instead. Too dumb has become clever.
The ridicule centers on the Fed printing money, which it literally doesn't do, by the way, but try telling that to the millions of viewers of this cartoon.
For the record, when the Fed buys government securities in the market (yes, through dealers, of which Goldman Sachs is one), the ultimate seller gives up a highly liquid asset (government securities), which are not classified as money, for bank deposits, only slightly more liquid, which are classified as money. No wealth or pretend-wealth is created--no alchemy takes place. Yes, there is more of something called money put out there in exchange for something of equal value given up voluntarily by individuals or institutions who earned it in exchange for services in the marketplace. The amount of deposit money created matches the amount of government securities taken off the market if banks fail to make use of their new reserves resulting from their new deposits, which has been the case lately.
Now, if someone insists on calling that printing money, okay, but whatever it's called, it is nothing new. It is nothing devious. It is what central banks do. It is how they conduct monetary policy. It has nothing special to do with quantitative easing. The only difference under quantitative easing is that the purchases probably focus on longer-term Treasury securities rather than short-term Treasury securities hoping to push longer-term yields down a bit as well as get credit and money flowing again.
The point is this: It's not new. It's normal. The danger is not in the practice per se, but in the magnitude. Yes, inflation can result if it's over done. But deflation can result if it's under done. The challenge is to get the amount of money growth that results roughly in line with the capacity of the economy to grow in real terms—around 3-4 percent per year at full employment, somewhat faster at 9.6 percent unemployment.
The imagery of QE2—a huge ocean liner—is both misleading and unfortunate. If $600 billion is not needed by next June, then it won't be used.
It's bad enough when critics of the Fed get it wrong. It's maddening when they get it exactly backwards. The Fed doesn't go into the back room with the Treasury to swap pieces of paper or account balances because that practice has traditionally been viewed as subject to potential abuse. I used to call it monetary incest. To reduce that possibility, and the appearance of it, the Fed has traditionally conducted its open market operations at arms length from the Treasury—buying and selling outstanding securities from and to the marketplace rather than new issues directly from the Treasury itself.
Just as you and I would use a broker to conduct such transactions, the Fed does its buying and selling through pre-approved so-called primary broker-dealers. I believe there are 19 of them at last count. Yes, Virginia, Goldman Sachs is one of the 19. The transactions are done through an auction process with the dealers competing on price and the Fed accepting the low bids for buying and the high bids for selling. There is no sweetheart deal with "the Goldman" or anyone else."
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11:21
Robert Kiyosaki Cash is trash - buy Silverby PeterSchiffChannel35,085 views
@alexamasan They are government liabilities insofar as they are IOUs issued by government in exchange for goods and services - mostly labour, offered by government employees. As government liabilities, they can be used to extinguish liabilities that non-government agents owe to the government, ie taxes. In other words,they can be redeemed in exchange for remission of tax liabilities.
Another way of saying this is that dollars are tax credits.
lewicron 4 months ago
@alexamasan I think dollars are government liabilities because you can redeem them for gold.
Oh wait.....I just remembered that ended 40 years ago
MrYawdie 7 months ago
Just think of all the new Mega Malls, millions of new McMansions, and millions of miles of new roads and parking lots can be built with all this new money banks can lend out. Just keep the illegal immigration wide open so workers and people to buy all this keep spilling into America. Print Baby Print always remember the one basic land use law of economics farm land is too valuable to farm on build on all the level dry ground for profit. THis will never change open space must be consumed.
jobedied 9 months ago
Can someone explain how dollars are government liabilities?
alexamasan 1 year ago
Comrade Schitt,
We need QE3,4,5,6,7,8,9 ..... it's social and economic justice!
I'm entitled to an income -- share the wealth.
FGTBOGSAT 1 year ago
To schittreport, why dont you go to Shiffs channel and educate him for the entertainment of us all.
thruid3 1 year ago
Anyone who says the Fed doesn't know ECON 101 clearly missed the whole point of ECON 101. Take some macro, people. It's called monetary policy and mainstream econ has embraced Keynesian stimulus ever since classical theory failed in 1929. Since then Keynesian theory has marked the entry of unprecedented economic prosperity. If you don't like it, we can always go back to the 19th century which may suit some just fine if it means they can get richer at our expense.
MoralMoney 1 year ago
Those of us who worry about the inflationary consequences of policies like QE are well aware that all the money injected into the banks as the result of open market operations are being stockpiled as excess reserves; therefore the price inflation associated with increasing the money supply is absent. However, the excess reserves in the monetary base will leak out into the economy and cause mass inflation (unless the Fed stops this all the while causing another depression). The Fed is trapped.
ElCoun7 1 year ago
@lizardgizard2002 If all that QE does is increase the banks reserves at the fed then how does it keep jobs from vanishing. From what I gather the banks aren't very keen on making new loans. What are the banks doing with those reserves anyway? I hope they aren't blowing any new bubbles ;)
FilipKunc 1 year ago
2 questions: Presumably at some point in the future the fed will sell all the securities it bought - will it be able to do so without making losses, which would be inflationary and result in what people are calling "money out of thin air" being in the economy. Also, why is the fed necessary for this whole process - if the banks need or want more reserves so that they can make more loans, can't they sell their securities to the market instead of the fed?
FilipKunc 1 year ago