Fed Chair Bernanke is channeling his inner Voldemort. The Fed will buy US Treasury Bonds from the Big Banks. Expect an announcement in November. The Federal Reserve will conjure the money to buy its own bonds from thin air. More magical thinking: the imaginary money the Big Banks get for selling the government its own stuff back will supposedly encourage the Big Banks to lend more, and thus encourage people to spend more. Pose the scenario to your favorite 2nd grader. I have no money. I want to buy from you the IOUs that you hold from me. Then I want you to lend the money I pretend to give you to other people. I'm no economics expert, but the economic experts in Japan are. The government tried this move to help recover from their Lost Decade. Read the latest news about how Japan's economy benefited from this hocus pocus.
Friday, October 15, 2010
Quantitative Easing: Magical Thinking
Fed Chair Bernanke is channeling his inner Voldemort. The Fed will buy US Treasury Bonds from the Big Banks. Expect an announcement in November. The Federal Reserve will conjure the money to buy its own bonds from thin air. More magical thinking: the imaginary money the Big Banks get for selling the government its own stuff back will supposedly encourage the Big Banks to lend more, and thus encourage people to spend more. Pose the scenario to your favorite 2nd grader. I have no money. I want to buy from you the IOUs that you hold from me. Then I want you to lend the money I pretend to give you to other people. I'm no economics expert, but the economic experts in Japan are. The government tried this move to help recover from their Lost Decade. Read the latest news about how Japan's economy benefited from this hocus pocus.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment