Originally Posted By: fdcg27
Originally Posted By: Drew99GT
The problem is that QE does nothing. zilch, zip, notta, to increase economic growth. The Fed simply bought treasuries on the open market which IS NOT MONEY PRINTING at all. It is an asset swap. They bought your treasury bond, now you have cash. Same amount of net assets in the economy. It can't be money printing by accounting identity. The only time the government "prints money" in any kind of form is when they run a budget deficit at the federal level and in some circumstances, when they buy mortgage backed securities.
The problem is the exponential rise in private debt. It is called debt deflation. The majority of people now adays have to finance their day to day living beyond anything imaginable 50 years ago. That reaches a point where it stunts economic growth and leads to slowing CPI. I'm even seeing slowing price rises at the grocery store. Gas is under 3 bucks a gallon now.
Umm, no.
You're right in stating that net assets may not change, but you're wrong in ascerting that QE does nothing to encourage economic growth.
The whole point of QE has been to release dollars locked up in federal debt for other investment or expenditure. Creating reserves to buy debt is printing money.
I'm not sure where you get the idea that the majority of people nowadays need to finance their daily living expenses.
We certainly don't and we don't know anyone who does, but we've always been prudent (maybe cheap) folks.
It is not money printing! How many times have I shown this on this board? By definition, money printing would mean a net increase in financial assets in the private sector of the economy. That is not what happens with QE. The Fed doesn't create reserves, it credits the accounts of primary dealers for treasuries.
http://pragcap.com/mechanics-qe-transaction
Now I will agree that markets think it's stimulus and therefor stocks go up and rates rise when they do implement QE. But the money never reaches main street, it does nothing to further lending since banks don't need deposits or reserves to fund loans as loans are what create deposits.
As far as people financing things with debt, it's good your and your family don't, but the median worker in the US does. Look at private debt; it's at record highs relative to GDP growth. That is the phenomenon of debt deflation.
http://www.theatlantic.com/business/arch...debt-is/379865/