Quantitative easing | Money, banking and central banks | Finance & Capital Markets | Khan Academy
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- Опубликовано: 9 май 2011
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Overview of quantitative easing. Created by Sal Khan.
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Finance and capital markets on Khan Academy: You know that the Federal Reserve (or central banks in general) controls the money supply and short-term interest rates. But how exactly do they do this. Even more, how is "quantitative easing" different than regular open market operations. This tutorial explains it all in the context of the Federal Reserves attempts to stave off deflation during the 2008-2012 recession.
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Not a bad explanation, but I still don't get it, and I've scoured youtube for an explanation I can understand. So much repetition, but all explanations seem to either move too fast, or slough over the ambiguous steps, or use catch phrases that fly over my head.
Audit the FED
Great tutorial, thank you for this video.
I love you Sal this series is genius thank you so much God bless u!
Great job! Keep it up.
Nice video. I had a pretty good understanding of the video. Nice work,guys.
thanks for this clear explanation
And, as a side note, it should be added that the real interest rate - as measured by TIPS - only began to seriously spike after the interest on reserves policy was announced, and that the stock market only began to severely crash when the interest on reserves policy was announced, in early October 2008 (not in mid-September 2008 when Lehmans collapsed as most commentators have presumed).
Wow this video was amazing
Sal! I think you should make a video titled 'money creation'. Make it really explicit
It all comes true now Sal 🤯
QUESTION: Why does purchasing long term bonds, and thus lowering their yield, have a different effect on the economy than purchasing short term bonds? They both increase the money supply, so what difference does it make?
The FED creates bank reserves and gives it to private banks in return for treasury bills and other fixed income. The FED does not print actual money nor does it insert cash into the private banks. When the FED buys, or "bids up" the treasury bills/fixed income assets from private banks, the yield of the assets decreases. This decrease in yield conversely affects the overnight lending rates for the private bank. Which in turn results in the private banks decreasing their interest rates for business loans/individuals.
Your first statement sounds a lot like money printing. But alas, it's this mechanism that allows private banks to increase the money supply
OMg is exactly what the FED is doing!
However, if the Fed pays interest on reserves, as it began to do in early October 2008, the money that it injects through quantitative easing will be neutralized, as banks hold on to excess reserves.
What if people who own treasuries don't want to sell them? Also, how do you know those people are going to deposit the cash they receive from selling treasuries in the bank? What if they spend it or invest it somewhere else?
"What if people who own treasuries don't want to sell them?"
They DO want to sell them because, just like with commodities, the supply and demand of bonds determines their price. To put it another way, if the price was so low that people were reluctant to sell bonds, the price will automatically rise until they are no longer reluctant.
"What if they spend it or invest it somewhere else?"
I understand that the idea of QE is that people would spend it, because when people spend on the real economy (=buy commodities, instead of, for example, shares or bonds) that makes the economy go faster, i.e. increases production of commodities and hence the GDP, and lowers unemployment. This should also create inflation, which further incentivizes people to spend. I think that is the purpose of QE.
sounds like the problem is?????? the fed and the open market..
Why does the FED not let these banks to lend money at high rates ?
Why would anyone lend at 0% interest?
So the feds just say okay let interest rate be 5% then it'll be at 5%? Do they have to print money or buy bonds in order to do that? If so do they lower the rate first then buy or buy first then lower the rate? Also are they generating money in any way from doing this? Where does the money go?
Say the fed wants to lower fed funds rate. It first sets a target range for fed funds rate, then estimates the quantity of money needed to be released in the primary market (the market place consists of primary dealers, the eligible counterparties for open market operations) that achieves the target and conducts open market operations, in which the fed purchases bond assets. As funding increases, costs of interbank borrowing will decline, and fed funds rate will fall. Financial institutions which receive money could lend it out in credit market (issuing loans) or invest it in other financial assets such as commercial bills and stocks. Open market operations definitely generate money but money doesn't necessarily flow to real economy and may circulate within the financial market instead.
@@zhengyue24 wow great information! Thank you for the reply!
Do you give a lesson on how the FED steals from us?
My bad I said derivatives I meant
4x?
Quantitative easing-QE for short-is a monetary policy strategy used by central banks like the Federal Reserve. so... there
buy silver.
「どうやってやるの？」、
@CollectiveCheckup
I do: it doesn't.