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Old 03-04-2015, 01:30 PM
 
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Quote:
Originally Posted by ContrarianEcon View Post
The FED prints some money by loaning it out. Big banks and big businesses get the cheapest rates. Smaller banks borrow from the bigger banks. Smaller businesses borrow from the smaller banks. Smaller people borrow from the smaller banks.

So who gets their hands on the money last? the minimum wage workers and those on fixed incomes.

The money hurts by driving up the cost of food and energy, health care, insurance, rent etc. Wages lag these things and those on fixed income lag these things.
QE is Fed money creation (printing if you want). That money is then swapped within the banking system for debt.

The Feds also loans money to banks with low overnight rates to cover their temporary needs.

Banks can only sell low interest rate loans these days. No doubt larger entities can get lower rates. But rates being so low it matters little. I pay 3% for an unsecured $250K LOC at my local small bank.

Minimum wage workers and seniors on fixed income tend to get first hand money from central deficit spending for welfare programs. They don't tend to get much from bank loans.

The cost of energy today is of course dropping, having little to do with Fed shenanigans. Inflation is nominal to even sub-nominal today despite all the new money.
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Old 03-04-2015, 03:04 PM
 
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Quote:
Originally Posted by Hoonose View Post
QE is Fed money creation (printing if you want). That money is then swapped within the banking system for debt.

The Feds also loans money to banks with low overnight rates to cover their temporary needs.

Banks can only sell low interest rate loans these days. No doubt larger entities can get lower rates. But rates being so low it matters little. I pay 3% for an unsecured $250K LOC at my local small bank.

Minimum wage workers and seniors on fixed income tend to get first hand money from central deficit spending for welfare programs. They don't tend to get much from bank loans.

The cost of energy today is of course dropping, having little to do with Fed shenanigans. Inflation is nominal to even sub-nominal today despite all the new money.
Rent.


Raw commodities are being overproduced because they can get a loan for the production of them. Over production of raw martials without the demand for them drives the prices down. Lack of demand puts downwards pressure on wages. This puts more of a burden on welfare. That puts more of a burden on the productive base through taxes. Downwards spiral.
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Old 03-05-2015, 06:57 AM
 
Location: Copenhagen, Denmark
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Quote:
Originally Posted by ContrarianEcon View Post
In order to understand it you have to follow the money.

But to answer the Q in the threads title.

Because they couldn't find anyone to loan the bulk of the money too.
Close, but not quite. The banks invested it. That is what is driving the stock market.
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Old 03-05-2015, 08:15 AM
 
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Originally Posted by Frihed89 View Post
Close, but not quite. The banks invested it. That is what is driving the stock market.
That is only partially true. Most QE has sat as excess reserves. That can displace other moneys toward the markets, and there has been some leakage. But by and large the bulk of QE is not directly invested in the stock markets. QE has lowered interest rates, and that has been the most major of driving factors. Better possibilities in stocks along with lower fixed income yields.
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Old 03-05-2015, 11:29 AM
 
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Originally Posted by Hoonose View Post
That is only partially true. Most QE has sat as excess reserves. That can displace other moneys toward the markets, and there has been some leakage. But by and large the bulk of QE is not directly invested in the stock markets. QE has lowered interest rates, and that has been the most major of driving factors. Better possibilities in stocks along with lower fixed income yields.
The money that has been loaned out is something like $4 trillion of new debt directly attributable to QE.
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Old 03-05-2015, 11:35 AM
 
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Most all the $4T has been swapped with banks for fixed income debt paper and/or sitting as excess cash reserves in those banks. This money has not significantly entered into the general circulation through any conventional lending process. If it had been 'loaned out', that would mean our economy would have been by now running at a higher level with all that more business activity. And most likely more inflation. But it hasn't as QE is not an efficient economy moving engine, as it is like pushing on a string.
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Old 03-05-2015, 11:59 AM
 
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Quote:
Originally Posted by Hoonose View Post
Most all the $4T has been swapped with banks for fixed income debt paper and/or sitting as excess cash reserves in those banks. This money has not significantly entered into the general circulation through any conventional lending process. If it had been 'loaned out', that would mean our economy would have been by now running at a higher level with all that more business activity. And most likely more inflation. But it hasn't as QE is not an efficient economy moving engine, as it is like pushing on a string.
QE was about $2.8 trillion, of that About 15% has been loaned out. That 15% multiplies out to about $4 trillion in new debt. That you don't see a roaring economy is just how bad off we were. About 1/4 of the new debt went directly or indirectly into the oil bubble. Houses has recovered in places. So that got some of it. And the stock market.

You want an efficient economy mover? try pushing on the minimum wage. That is a lever that can move an economy. It can change the ratio of debt to income for the whole economy.
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Old 03-05-2015, 01:08 PM
 
8,297 posts, read 3,460,242 times
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Quote:
Originally Posted by ContrarianEcon View Post
QE was about $2.8 trillion, of that About 15% has been loaned out. That 15% multiplies out to about $4 trillion in new debt. That you don't see a roaring economy is just how bad off we were. About 1/4 of the new debt went directly or indirectly into the oil bubble. Houses has recovered in places. So that got some of it. And the stock market.

You want an efficient economy mover? try pushing on the minimum wage. That is a lever that can move an economy. It can change the ratio of debt to income for the whole economy.


Banks certainly would have loaned out money without the QE event. And who can say they loaned out 15% of $4T 'extra' as a result. They certainly have loaned out more money based on low rates, which is the intention of QE. Banks are not limited in lending by reserves. They are limited by willing and sensible borrowers.

If my business overhead were higher I'd go out of business or retire sooner.
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Old 03-05-2015, 02:59 PM
 
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Quote:
Originally Posted by Hoonose View Post
Banks certainly would have loaned out money without the QE event. And who can say they loaned out 15% of $4T 'extra' as a result. They certainly have loaned out more money based on low rates, which is the intention of QE. Banks are not limited in lending by reserves. They are limited by willing and sensible borrowers.

If my business overhead were higher I'd go out of business or retire sooner.
Back the last time we were talking the discussion was that the banks couldn't loan out their excess reserves. Of the $2.8 trillion approximately the FED took on its books as QE about 15% was loaned out. That left $2.5 trillion in the FED as excess reserves. In order to loan out the excess reserves they have to turn into regular reserves. That means they are loaned against, or are limiting the generation of new debt.

That means that about $4 trillion of new debt resulted from QE approximately.

That is a wad of change.
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Old 03-05-2015, 03:54 PM
 
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It didn't cause monetary inflation because the collapse itself was a drastically deflationary event.
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