Quantitative Easing Explained

It's hard not to like foul-mouthed cartoons talking about economics.

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15 Responses:

  1. xunker says:

    Funny and sad and true, yes, though it does use the "HAHA TEH FED IS DUM! LOWER PRICES R BETTR!" line gloss over why deflation can be seriously bad thing as well.*

    *: I'm not saying in this particular instance it is good or bad, I'm saying in a discussion of macroeconomics as a general topic it can to be as bad as inflation.

    • inoah says:

      Deflation is great for creditors, bad for debtors. Deflation means that every dollar a debtor owes has a greater concentration of buying power, and since the number of dollars owed does not decrease, their real debt does.

      That said, I sure haven't noticed any deflation lately.

      • mcfnord says:

        nobody's saying we've seen deflation in any real measure, but once it arrives it messes up whole decades, so the policy is to avoid it with prevention, preferring inflation over deflation. is it more likely to sneak up on a near-zero rate environment, or on a high interest one? this video and Sarah Palin believe we're in an inflationary spiral, which is nutso. i am of the camp that says mobs are a poor source of monetary policy decisionmaking. i prefer vanguards!

        • imperator_mei says:

          This video and Sarah Palin believe that no policymaking is better than any policymaking. After all, the Fed has never been right about anything* and is run by people who come from a finance background**, and so the Fed should be abolished.

          Never mind that these folks don't actually know what function Federal Reserve Bank fills in a modern economy. Just like the ensmallening of government by way of disconnecting from the public sewer without a backup plan, what could possibly go wrong?

          * Actual assertion in the vid.

          ** And don't get me started about how the Surgeon General is a doctor!

    • korgmeister says:

      Also, deflation has a tendency to kick the demand side right in the balls. Because if you know prices are going to go down if you wait longer, you're more likely to hold off a purchase and it can quickly become something of a vicious cycle.

      Admittedly, much of the deflation is going on in the luxury goods section of the markets. So if you're a working stiff who doesn't have much discretionary budget then yeah this whole thing is going to screw you over both ways but that's nothing new.

      • terpsichoros says:

        Because if you know prices are going to go down if you wait longer, you're more likely to hold off a purchase and it can quickly become something of a vicious cycle.

        Which is why computer companies, chip makers, and other makers of electronic gear have been shutting down left and right.

        • korgmeister says:

          Certainly a counterexample worth bringing up. It's a little different to most market segments, because there's always something of a Red Queen's Race going on.

          On the one hand, because computing is still an immature technology, new features and capabilities are being created much faster. On the other, things go obselete much faster. My 17 year old car (which doesn't even have fuel injection) is still a very practical if unglamorous means of everyday transport. But a computer even a third of that age is of limited utility indeed.

          Computers depreciate so fast as to offset the deflationary effects caused by Moore's Law. Most goods do not depreciate fast enough to offset deflationary effects (or, indeed, depreciate at all).

  2. dougo says:

    I'm having no problem not liking this nonsense.

  3. gryazi says:

    If people can ever comfortably afford housing in America the economy crumbles.

  4. gryazi says:

    So basically, the American economy will crumble if people can ever comfortably afford housing.

    • paragshah2 says:

      The government introduced an alternate inflation reality when it enacted the findings of the Boskin Commission. They used pseudo-science to make inflation appear less than it really is so they could cut Social Security benefits without people noticing.
      Quantitative easing

  5. taskboy3000 says:

    I don't have high expectations that QE will help kick start the economy. This caveman believes the core problem with the US economy is that not enough people want to buy what America makes. Without demand, industry crumbles. I don't think this is too hard to understand.

    I also don't think QE will matter that much to most Americans. Foreign exporters are understandably perturbed by the sudden price increase their products just got, but that's not my problem.

    The Fed has always been the target of conspiracy theories. I'm pretty sure there are good reasons the Fed can't buy directly from Treasury, but I'm sure I don't know them.

    • strspn says:

      The treasury bond market is fungible, but announcing does allow front-running by all the major players. Slightly negative interest on bank excess reserves would help a whole lot more than quantative easing.