The Danger of Quantitative Tightening

Discussion in 'Markets & Economies' started by Cinvalo, Jun 17, 2017.

  1. Cinvalo

    Cinvalo Member

    Joined:
    Mar 19, 2010
    Messages:
    643
    Likes Received:
    18
    Trophy Points:
    18
    Location:
    NSW
    [​IMG]
    Source: http://www.corruptionofrealmoney.com/education.php

    [​IMG]
    Between 2008 and 2014, the Federal Reserve had created $3.5 trillion USD during the three rounds of Quantitative Easing (QE) and saved the world from collapsing into a new depression. These newly created money were used to buy government bonds and bonds from GSE(s) – (e.g. Fannie Mae). At the beginning of 2018, however, the Federal Reserve was talking about normalization of its balance sheet through Quantitative Tightening (QT). What does this mean? This article will explore QT, the normalization of Fed’s balance sheet and its implication to the markets around the world.

    READ MORE:
    http://www.corruptionofrealmoney.com/displayfullarticles.php?id=60#.WUUHA1z2Ix_
     
  2. Pirocco

    Pirocco Well-Known Member

    Joined:
    May 24, 2011
    Messages:
    4,872
    Likes Received:
    149
    Trophy Points:
    63
    Location:
    EUSSR
    According to the Federal Reserves balances / data, the so-called "Quantitative Easing" was actually a "Tightening" instead. The Federal Reserve PAID its system member banks to NOT lend that new money to people. Remember the general prices runup ahead of the 2008 crisis? THAT were the real "Easing" years.
    The motivation for this false suggestion of easy money is not hard to think. What do people do when they expect higher general price risings? They become willing to pay higher prices for speculated upon products. And waste their savings in the process. Which is exactly the Federal Reserves goal. They created AND lend out alot money ahead of the crisis, bought lotsa goods with it, and now want existing savings gone, as to not face that purchasing power competition anymore.

    The 2000+ story in a nutshell.
     
    Cinvalo likes this.
  3. Pirocco

    Pirocco Well-Known Member

    Joined:
    May 24, 2011
    Messages:
    4,872
    Likes Received:
    149
    Trophy Points:
    63
    Location:
    EUSSR
    Another balance that support aboves statement:
    http://research.stlouisfed.org/fred2/series/REQRESNS
    http://research.stlouisfed.org/fred2/data/REQRESNS.txt
    Required Reserves of Depository Institutions
    2001-01-01 38.346
    7 years later
    2008-09-01 43.411
    2009-09-01 62.708
    2010-09-01 67.032
    2011-09-01 92.478
    2012-09-01 108.066
    2013-09-01 119.978
    2014-09-01 137.094
    2015-09-01 149.298
    2016-09-01 167.612
    2017-05-01 178.630
    The Federal Reserve central bank demands higher reserves from its member banks.
    How does that fit in the "easy money / easy lending" story?
    I'd say NOT.
     
  4. leo25

    leo25 Well-Known Member Silver Stacker

    Joined:
    Jun 8, 2010
    Messages:
    3,585
    Likes Received:
    1,937
    Trophy Points:
    113
    A great open talk about quantitative easing. Stick around for the talks after Ben Bernanke.

     

Share This Page