Quantitative Easing | Marketplace Whiteboard
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- Опубликовано: 2 окт 2024
- If the whole idea of Quantitative Easing is confusing to you, you are not alone. Paddy Hirsch breaks it down in this economic explainer.
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To understand QE it's important to understand that it essentially entails the Fed buying bonds to keep interest rates down, encourage lending and stimulate the economy.
#QuantitativeEasing #Whiteboard #MarketplaceAPM
If the Fed does reduce bond buying short-term interest rates will likely rise. But the Fed doesn’t want the public to think that the Fed is raising the official interest rate. This is really difficult for the Fed because the point of bond buying is to keep interest rates low. Therefore it's logical that by buying fewer bonds the interest rates would go up.
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The FED is NOT Uncle Sam, it is an oligopoly of bankers.
ur blog, web site, or something?
1:45 "You can't bring the rate down to a negative level"
Oh yeah? Just watch that madness unfold eleven years later.
I came here to see this comment.
We once lived in a world where negative interest rates as a joke
Paul Darlington perfect exchange! Thanks all
@@RipDon7 and i came here to see this one.
I was just writing this comment until I noticed it was already here hhh
This is BY FAR the best explanation of quantitative easing I've found. It also explained why it's so risky, since the government is just eating "risky assets" like a debt collector. Long-term it can't be a solution, since the entropy (cost of risky assets vs value recovered) will eventually force a collapse.
QE is an unprecedented concept, and it is hugely controversial on whether or not it will work in the U.S
I'm excited to see what will happen in the future
Quantitative easing is a method for the privately owned Fed to give money, that belongs to the people, to their subordinates, the major banks, free money to buy off American and international companies and interests! To own and control YOU!
Its a scam and anybody who doesn't see that is swallowing fake matrix pill!!!
This guy is the best.
In addition, it would discourage other countries to store and hold USD as reserve currency.
@@15past2 the balance sheet isn't your money...it has nothing to do with taxes collected by the US Treasury.
The banks don't get it for free. They sell assets to the Fed.
You're full of conspiracies and empty on facts. Go watch the video again bro
Where were you bro when I was in school......that was an excellent explanation
QE is legalized cash counterfeiting.
It is a crime no matter who does it, even the Reserve Federal Bank, that is not Federal (it is a private bank) and has got no reserves.
@@ToxicVaccines_HivHoax Brrcccncsvcryvdvr fshbhgrafbvv vvcz b b in N 🎥📹🔶🔳🔳🔷👷🚐🌽🙃⚛️⛹🏾🌳🍃🍥🥧🍥🙋🏾♂️🙋♂️🛵🚟🏍📶🏧♏️♐️☦️🎸🪕⭕️🍓🥦🥔🌽🍆🌋🍇🦮🥕🍆🈲🈹🅾️🇦🇮🇦🇮🛤🍥🔳♉️⚛️📳🥔🛎🎖🇲🇷🚩
"You can't bring the rate down to a negative level..."
XD
ME: You Can't bring a rate down to a negative level.
FED: HOLD MY BEER!!
They already have in other countries..
I've been studying this all day and his explanation is the best I've seen!
After reading on quantitative easing for a month, I finally understand what it is
Do you feel like this is a great example
Your explanations are cristal clear and concise with recurrent use of analogies. I am a University Professor in Computer Science and I know what I am talking about ... You are much more than a Senior Editor. You should teach at the Biggest Universities, sir !
So this is how banks get free money and we borrowed money from bank pay interest like slaves.
Yh. Except it's not even real money....
It's not free money. The banks have to give up valuable assets in exchange for cash. They get to lend out the cash, but they lose the cash flow from the assets they have to give up
@@Erikpdx Banks don't lend cash. They create cash by making a loan.
@@Stewiehleba fair enough. But there are limits and in order to increase the reserve for loans, they have to sell assets to the Fed
@@Erikpdx not really. Canada has 0 reserve policy. Their banks work the same way.
Most epic penthrow finale on finance videosi have seen.
And by the way: Thanks! This is the most clear explanation of quantitative easing i have found of any kind of source!
the video was created in 2008, but it will be helpful forever! thx for your amazing explanation.
Your videos are very important to me... the amount of knowledge transferred in such a simple manner is amazing. I never thought quantitative easing could be so easy. Thanks a lot and please keep it up.
I come from 2019. When he said you can't go to zero.... oh my friends....thats exactly where we are going.
Gota pull your money out b4 2020 elections
@@clopez4280 i dont have any TO pull out...
@@clopez4280 you might want to do that before mid January 2020...
@@CosmicSeeker69 ... who's predicting that?
Pull your money out of what? The market, the bank, the mattress or all of the above?
Incredibly clear explanation, much appreciated!!
Very clever man you are because you not only have great knowledge but able to explain difficult concepts in a simple manner. Love your videos and working my way through all of them 👍😀
So clear and concise. You will never be a politician Sir!
2019: Please re-do some of these tutorials please!
You're amazing. Thank you for creating these types of videos!!
Didn't work because instead of lending banks speculated on asset prices which is why we've seen a rise in gold and other commodities. Now in desperation the government in the UK is trying to engineer a house price bubble. We've had QE1, QE2, QE3 and QE4 even the man who invented QE says it isn't working and it's not going to work. Neoclassical economics is fundamentally wrong and 5 years have been wasted proving it. It didn't predict the crash and it will only make it worse.
Austrian economics ftw
Gold is slowly turning into shit.
didn't expect to see a r6 youtuber on an economic video
EASY AND CLEARLY EXPLAINED
Hey! Your explanations are great. I wonder if you have a order of watching your videos to get the right information step by step?
best explanation I've found so far...good job
Devaluing the dollar effectively raises prices for you and me. Your dollar is worth less and it takes more of them to buy a given item
can you do a video on how the feds are getting rid of those toxic assets off their balance sheet? I have hard time understanding the concept. please :)
Jay Warshavsky I have the same question
Hello, just found your channel...at the beginning of your video you mentioned you cant bring interest rates to 0, or negative. I guess they can and they will...interesting times!
A very clear and factual analysis of the situation.
Bravo, good sir.
A great explanation of the theory behind QE, however, the reality is that the US has so much debt that an increase in interest rates means that the amount of debt owed will increase dramatically. By pumping money into the economy, the fed can keep those interest rates low, meaning we won't incur more debt through interest.
(But that doesn't really matter because our daily deficit is so high that the debt is increasing anyway.)
need a drink!! so fuuny! you managed to show how every aspect in our monetary economy may cause alcoholism! :) :)
could not be any more helpful and simplified. thank you.
Thanks. Good simple explanation.
Great, thanks. I'd love to see another clip about Qualitative Easing! "Qualitative easing is a shift in the composition of the assets of the central bank towards less liquid and riskier assets, holding constant the size of the balance sheet (and the official policy rate and the rest of the list of usual suspects)" (Financial Times definition)
Wow, are you still here mate, its been 11 years. Cant believe how fast it is, right ?
I'm not sure what your point is? I was just trying to clarify what is meant by "economy" and how a pump analogy could be applied. Also, that the economy is NOT a zero-sum game.
"money doesn't generate resources"
Not sure what you're talking about here either. Money IS a resource. Money can also be used to hire people who can be considered a resource. Also, it takes money to drill for "natural resources". So I'm not saying you're wrong, but can you explain what exactly you're talking about?
Excellent lecturer
money and credit are 2 different things. Bernanke said that the money is not actually printed but is transferred electronically into the banks. So his explanation is that if the money is not actually printed, it won't devalue the currency. As of now, only 3% is in the physical form as far as i know. So if in case, there is a bank run, banks would be out of cash in no time and would therefore ask the fed to print the money so that its customers could withdraw it.
I just wanted to point out that the interest rate can go to negative, for example Sweden and Switzerland. Otherwise, very good explanation.
Wonderful explanation. Thanks guys. Expecially you Mr. Neeson.
Wonderful explanation, loved it!
Thank you! We're happy to ease your quantitative curiosities.
"You cant bring the rate down to a negative level"
Bank of Japan -There's where you're wrong kiddo
very easy to understand for a layman like me, and nice shirt
40 straight years of growth and its not allowed a market correction?
Great explanation, one of the best, thanks.
THis what's fucked up about QE. The government should be forcing the banks to lend to those who need it.
Lack of regulation is a huge problem. The banks are in bed with government. This guy won't say anything
because if he did, he'd probably be out of a job.
+Todd Lavigne The government has no right to force a private institution to spend their money on something they don't want. Just like they can't force you to spend all your disposable income on treasury notes. If this is the sort of thing you like, then the USSR might be the right place for you.
+George Costanza There are no such thing as "Private" institutions they are all governed by government regulation. Just go and try to start up your own bank.
Charles Frogg What does that even mean? Burger King needs to abide by FDA regulations, does that means it's a state-owned enterprise? You have a very odd concept of what constitutes a private institution.
What is the difference between the US and Russia??? HOTHING, that's my argument, people in the US think they have a mortage on freedom but they don't!! You can have a private business in Russia just like the US.
No matter what you think if you pay taxes you work for the government.
Charles Frogg That makes zero sense, but thanks for the clarification.
if inflation is running at "5.5 %" and the Treasury is yielding 2%, how is he making money? Should he not be incurring losses???
May be a silly question but what does "uncle same" do with the bad securities? Why would he want the ABS if they're so risky?
Quantitative tightening
It puts the bag in the taxpayer's hands... ie... not their money.. ;)
I'm confused on a point:
I am a business owner. "Barry the Bank Manager" won't lend me money because he is afraid I won't pay it back. But, I am *not* trying to borrow money so that I can expand. *I'm* cutting back in as many places as I can because *I* don't have enough income to cover all my expenses. In fact, I've laid off two employees just so I can keep my business.
How does "freeing the credit market up" fix this?
Wouldn't lowering my expenses (like taxes) work better?
The biproduct of QE is excess reserves. Since reserves are by definition a liability of the central bank and an asset for those with an account at the Central Bank (Namely commercial and business banks as well as credit unions and the government.) Transactions are done when bank A get its balance increased and bank B get its balance increased by the same amount. This means that reserves circulate in a closed system and won't leave it unless tere is a change in demand for cash, transactions made by the state and open market operation.
Bored? well the conclusion is that this special money of uncle Sam won't run rampant and cause Weimar 1923 when banks start lending again as long as the central bank removes excess through its open market operations.
(source Om pengemengden 2013. Sorry it's in Norwegian but the bank of England has a similar paper published in its quarterly bulletin Q1 2014. The basics of central banking is mostly the same. Only main difference is the interest rate corridor and reserve requirements. Reserve requirements are generally low and easy to bypass or in the case of Norway, England, New Zealand Australia and a few more countries nonexistent. America as far as I remember has a 10% on transaction deposits only. Other requirements and regulations are usually copy and paste from the Basel accords.)
1:45
"You can't cut rates to a negative level!"
Wanna bet? Ask the E.U.
1. Its the ECB (Eurosystem) not all of the EU
2. Its not negative its 0,00 % lending rate! (MRO)
3. negative is the deposit rate - its not the same!
You cannot lend somebody money and ask less money back, that wouldn't work.
stick to bitcoin and leave the economics to others ;-)
Yes like now devaluate the dollar. Love your lectures.
Fantastic!
But, why can't people take loans directly from the FED then?
I always been told that QE is printing more money. Never understand how that helps the economy. Until now. You are the best!
Inflation is 5 1/2%? In what country is that?!!! It wasn't even true in 2008 when he said this...remember, inflation figures omit the cost of food and fuel, the only things that experienced price increases at that time...The Federal Reserve does not buy toxic assets from banks except under special programs like TARP...specifically under QE they buy the bonds the banks are holding which typically are at higher yields, so that hopefully the banks will make loans with their increased cash reserves...unfortunately, they still aren't lending - they are still buying bonds to earn on a risk-free, albeit small, margin...they are fine earning 2.5% on 30 year Treasuries rather than making bad loans into the next crisis
I have a questions is QE literally printing money? if the fed doesn't literally print money, how do they paid for all the bonds they brought from the banks? because Bernanke on 60 minutes said the currency in circulations remains the same?
You can pump as much cash as you want into the Banks.
They will continue to lend it to non - productive borrowers because they provide more profits to the Banks.
Banks are only interested in profit and not the state of the economy.
Low interest rates won't solve the problem as well.
The Fed just lowers the cost of credit which the Banks now will lend again to non - GDP investors.
To fix this problem, you have to force the Banks, in some way to lend to productive investments.
Otherwise, nothing will change.
It is independent and they make moentary decisions, the government does have control to reappoint a new chairman and hold hearings. Government technically has the power to abolish it (which could be a disaster because congressmen can't do monetary policy). It was established by government and could be destroyed by government with legislation, but as the law stands now they are an independent quasi-private bank, meaning they determine monetary policy. The Fed is independent and will remain so.
It seems hard to believe that the entire financial system and economy of the United States is in the hands of an independant private bank. What you are telling me is that the united states government pretty much has no control over its economy for the MOST part (the fed). It's hard to believe you, but I just want to know the truth, but it seems everywhere i go i get a different answer. Next week I'll look around campus for an economics prof. to try and find out the truth.
this is great and he's in front of a white board, so you can trust what he says!
I just didn't get one thing, I'd appreciate if anyone cares to answer: why does the yield of the treasuries decrease when the Fed buys plenty of bonds? Isn't the yield a fixed rate that's independent from the bond value?
What banks do is giving loans at cheaper rates to the buyers of stocks. It is done because the whole purpose is to save stock markets and not the national economy. We all know that cheaper or easy money go to inflate stocks
i have question is fed actually print money? people say it's done electronically? how is it used to buy things if it's not money. Bernanke said on 60 minutes said the money supply remained the same?
Ok, the bank won't lend out the cheap money... Basically, regardless of value, QE just wants to artificially maintain the money velocity.
its created out of thin air just like printing. the fact that this is done by entering numbers into a computer rather than turning a printing press is irrelevant. M0 (the monetary base) goes up [reportsfromearth . com / wp-content / uploads / 2011/09 / monetary_base_2011_mises . png]
The threat of inflation will not necessarily motivate lenders to lend, either, since inflation essentially benefits those with fixed-interest debt notes.
@alexamasan you not getting the picture right. The guy explains it in definitive terms, of what should happen, as opposed to what does happen. At the heart of all this is RISK. The bank has made poor decisions in the past and too the risk and ended up with bad securities, so in effect it has lost money. So when the fed come in and buys the bad securities means that the bank is now recovered the money it would have lost. The bank is now again free to risk and lend to make a profit.
I have a crazy suggestion...maybe don't give banks free money
+icaru34 Had you watched the video you would know it's not "free money".
With no interest charges I would say it's free money for the banks
You forgot to say that the debt that is being bought from banks(by the fed) is like a promissory note or iou that the taxpayer eventually has to pay off with more taxes being charged or suffer from even more inflation .
So quantitative easing is rewarding bankers for having junk assets and not lending to the untouchable masses by buying their bad assets and inflating their treasury holdings in hope that will make them behave better.
This guy rocks. Has he done any more videos recently?
My my my. How times have changed. Check out what was said at 1:45 in the video.
Paddy. Now you have to explain how negative interest rates work.
The strategy is correct, only much more needs to be done. The scale of the fall in global consumer demand combined with the rapid deterioration in assets quality (and price) makes banks a) wary of lending to high default probabilty companies and b) highly vulnerable to even a slight price decline in "bad asset" prices (given the sheer quantity the hold). Can you really blame a bank manager for taking a rational commerical decision? The FED & govt are on the right track, but more is needed
Basically, the amount of demand for a treasury and the yield of the treasury have an inverse relationship. When the FED is buying outrageous amounts of treasuries, then the U.S. Treasury has no choice but to lower the yield on their treasuries so that they can pay back the interest (yield is another synonym) on all of these treasuries. This is just how the market works, it's not that the U.S. treasury is a person that decides what its yield should be. I only said it to simplify.
fantastic! very clear. thanks a lot
great video. appreciated. Thank'you very much!
Thanks, good vid. This seems to show that instead of decreasing the risk of loans from the bank the US has increased the risk of its Government Bonds.
@contemporarymonk I understand what you are saying. As I personally see it, banks have to discriminate who they loan to as they want the person to succeed and pay back the loan. Some people asking for loans may simply be incompetent and be unable to pay the loans back, ending up with the bank having either lost all the money loaned or left with collateral that may/may not be toxic and the person who got the loan is now worse off than before because now he's in a debt hole he has to climb out of.
QE4 then QE Infinity followed by a Gold and Silver Standard.
Wow; very interesting
great explanation! did qe work? did they loan businesses?
pls add paypal to your processing sys for donation.tnks. i like your subjects.
Thanks for the explanation. Somewhat more complicated than Jill Stein saying magic is used to create quantitative easing.
What does the Federal Reserve do with the bad securities that have been bought from the bank and are these securities any use to the Federal Reserve?
At last I understand QE . But I've heard that BOE has to pay about £40bn in interest back to the banks when they purchase those toxic assets. But I'm wondering whether that £40bn is added to the National Debt considering the UK govt owns the BOE? I've also heard that the UK are the only one of a few countries who pay this interest and that Switzerland and European Central Bank do not do this. If that is the case , why can't the BOE stop paying this £40bn ? According to Rachel Reeves, the UK government has a Tory inherited 'black hole' of £22bn but wouldn't that become an £18bn surplus if the BOE stopped paying this £40bn interest?
You should republish these videos. They are so relevant today.
The Federal Reserve is a privately held company ! You're confusing Uncle Sam (US government) with the FED ! They are two completely different entities !
+Darryl Catay The FED is a public-private institution.
Thanks ur an genus
+AkiHimura The Fed is independently audited every year.
George Costanza But Congress can't audit the FED?
bob bob granted congress can agree with a large supermajority, congress can do virtually whatever it wants. It’s by far the most powerful branch of the government. It could end the fed tomorrow if they could all agree on it. Would be a bad idea though.
What does the fed do with the bad assets they bought? And who issues treasuries?
And here we are in November 2019 same thing. Banks won't even lend to each other. Now we got hidden quantitative easing.
So quantitative easing is NOT printing money out of thin air?
Thanks for sharing valuable information. Our banking system has been destroyed by greedy banker.
@martketplace, i have some questions for you, 1. How much interest does the goverment pay to create (aka PRINT) 600 billion in QE2. 2. Who does the goverment buy the bonds from? i have been told that the USA goverment purchases bonds from the barry the banker. if so, wouldn't that make a full cycle? Why would barry the banker lend to hiogh risk average joe small business guy when they can sell bond the the USA govrment for profit and also sell thier bad loans, cdo, and mbs to the USA goverment
Thank you very much for your lesson: for the first time I understood the Quantitative Easing and my level of English is upper intermediate. Thanks again your lesson is gold to me. You have the gift for teaching, no doubt about it. Grazie. Antonio from Italy.
You cannot bring the rate down to a negative level apparently - until they did
Finally I get it!
Actually we went negative on rates recently.... Never say never! ;)
@Harry Lagom Never say never! ;)
1. why does qe drive down bond yields? 2. take a t-bill. a bank purchased t-bills from the fed in the first place; now the fed is purchasing t-bills BACK from a bank. what does this mean?
A very clear explaination of Quantitative easing ! good job !
well explained.thanks
Thank you so much! This was super helpful and it really summed it up for me perfectly!
5:53 why does the yield go down when the demand for t bills go up?
I didn't get it, could anyone explain this to me?
The more demand FED creates for these treasuries, the lower the yields becomes if the yield goes down,it means is less incentive for Mister Barry the bank manager to buy those bonds, because he's not to be making any money on the bonds,the yield drops too close to zero,the bank is now making zero money on his investments
my question is why The more demand FED creates for these treasuries, the lower the yields becomes to the bank? thanks