Topic: Global Financial Crisis scenarios - page 4. (Read 15898 times)

Quote from: tee-rex on August 12, 2014, 11:05:26 AM

I'm not very familiar with the effects and aims of QEs, but if I'm not mistaken, one target of the "money printing" campaign was to liquidate toxic assets (read write off). If these funds made their way into the economy that would simply increase inflation rates (now we are heading well into exogenous vs endogenous money debate).

The financial crisis took out a few players (banks / investment banks) in the credit market. The absence of these financial intermediaries would have resulted in lower credit being available to main street. Rates would also have risen, with banks not willing to take on additional risk. QE was supposed to ensure that this did not happen, by making ample liquidity available in the system.

So, in the worst case, QE just didn't work out since there was not much demand for credit from the "main street", but it didn't make it worse either, right?

QE and 0% interest rate are propping up the market but they just postponed a much needed recession to eliminate bad debt, bad players and bad practices

How could zero interest rates be propping up the market if no one is/was willing to take loans? Is this what is called a "liquidity trap"?

No matter what the interest rate is, there's always someone who wants a loan. So it's a question of how much demand there is for loans at the current rate. And of course demand falls off as rates increase. So there may not be a huge demand at 0%, but it would be worse if interest rates were higher. Less demand for loans/credit translates to less economic growth (which could include economic contraction). So 0% rates have kept credit flowing, which is propping up the market.

tee-rex

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Quote from: boumalo on August 13, 2014, 07:24:53 AM

Quote from: tee-rex on August 13, 2014, 05:56:07 AM

Quote from: tee-rex on August 12, 2014, 11:05:26 AM

I'm not very familiar with the effects and aims of QEs, but if I'm not mistaken, one target of the "money printing" campaign was to liquidate toxic assets (read write off). If these funds made their way into the economy that would simply increase inflation rates (now we are heading well into exogenous vs endogenous money debate).

The financial crisis took out a few players (banks / investment banks) in the credit market. The absence of these financial intermediaries would have resulted in lower credit being available to main street. Rates would also have risen, with banks not willing to take on additional risk. QE was supposed to ensure that this did not happen, by making ample liquidity available in the system.

So, in the worst case, QE just didn't work out since there was not much demand for credit from the "main street", but it didn't make it worse either, right?

QE and 0% interest rate are propping up the market but they just postponed a much needed recession to eliminate bad debt, bad players and bad practices

How could zero interest rates be propping up the market if no one is/was willing to take loans? Is this what is called a "liquidity trap"?

boumalo

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Quote from: tee-rex on August 13, 2014, 05:56:07 AM

Quote from: tee-rex on August 12, 2014, 11:05:26 AM

Quote from: tee-rex on August 11, 2014, 03:20:16 PM

Quote from: polynesia on August 10, 2014, 08:44:40 PM

Rising money supply does not necessarily mean inflation. If the additional money supply is not lent and/or spent then it would just be more money sitting in the "bank" (aka the federal reserve). This is one reason why inflation has been so low (apart from the negative inflation prior to QE) as banks have a lot of excess reserves at the federal reserve because there is not enough demand for loans from borrowers that meet an acceptable credit risk.

If in spite of rising money supply and low interest rates, there is not enough demand for loans from borrowers, all it means is that Quantitative Easing has not really been effective. Grin

You can't say so, since they are targeting the inflation rate and have been successful so far while trying to pass between the upper (run-away inflation) and the nether (stifling deflation) millstone.

Has it really been effective? The target was to get the economy moving again. These funds were supposed to make their way into the economy, not into various emerging market assets.

I'm not very familiar with the effects and aims of QEs, but if I'm not mistaken, one target of the "money printing" campaign was to liquidate toxic assets (read write off). If these funds made their way into the economy that would simply increase inflation rates (now we are heading well into exogenous vs endogenous money debate).

The financial crisis took out a few players (banks / investment banks) in the credit market. The absence of these financial intermediaries would have resulted in lower credit being available to main street. Rates would also have risen, with banks not willing to take on additional risk. QE was supposed to ensure that this did not happen, by making ample liquidity available in the system.

So, in the worst case, QE just didn't work out since there was not much demand for credit from the "main street", but it didn't make it worse either, right?

QE and 0% interest rate are propping up the market but they just postponed a much needed recession to eliminate bad debt, bad players and bad practices

If it worked the FED could raise interest rates and stop QE and everything would be fine which is not the case so we are still in recession and heading towards a major financial crisis and probably the fall of the western financial sector as we know it; they will probably hide it behind something else : virus, russia, war, ect. but the problem has been the FED and US government involvement in market, heavy regulation and low interests rates that created bubbles

tee-rex

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Quote from: tee-rex on August 12, 2014, 11:05:26 AM

Quote from: tee-rex on August 11, 2014, 03:20:16 PM

Quote from: polynesia on August 10, 2014, 08:44:40 PM

Quote from: polynesia on August 10, 2014, 08:44:40 PM

Rising money supply does not necessarily mean inflation. If the additional money supply is not lent and/or spent then it would just be more money sitting in the "bank" (aka the federal reserve). This is one reason why inflation has been so low (apart from the negative inflation prior to QE) as banks have a lot of excess reserves at the federal reserve because there is not enough demand for loans from borrowers that meet an acceptable credit risk.

If in spite of rising money supply and low interest rates, there is not enough demand for loans from borrowers, all it means is that Quantitative Easing has not really been effective. Grin

You can't say so, since they are targeting the inflation rate and have been successful so far while trying to pass between the upper (run-away inflation) and the nether (stifling deflation) millstone.

Has it really been effective? The target was to get the economy moving again. These funds were supposed to make their way into the economy, not into various emerging market assets.

I'm not very familiar with the effects and aims of QEs, but if I'm not mistaken, one target of the "money printing" campaign was to liquidate toxic assets (read write off). If these funds made their way into the economy that would simply increase inflation rates (now we are heading well into exogenous vs endogenous money debate).

The financial crisis took out a few players (banks / investment banks) in the credit market. The absence of these financial intermediaries would have resulted in lower credit being available to main street. Rates would also have risen, with banks not willing to take on additional risk. QE was supposed to ensure that this did not happen, by making ample liquidity available in the system.

So, in the worst case, QE just didn't work out since there was not much demand for credit from the "main street", but it didn't make it worse either, right?

Mobius

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Quote from: tee-rex on August 12, 2014, 11:05:26 AM

Rising money supply does not necessarily mean inflation. If the additional money supply is not lent and/or spent then it would just be more money sitting in the "bank" (aka the federal reserve). This is one reason why inflation has been so low (apart from the negative inflation prior to QE) as banks have a lot of excess reserves at the federal reserve because there is not enough demand for loans from borrowers that meet an acceptable credit risk.

If in spite of rising money supply and low interest rates, there is not enough demand for loans from borrowers, all it means is that Quantitative Easing has not really been effective. Grin

The fed is not able to control demand for loans as easily as it can control the supply of capital for loans. In this regard the net effect of QE has not been as great as it otherwise could be but has still somewhat worked.

Mobius

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Quote from: tee-rex on August 11, 2014, 03:20:16 PM

Quote from: polynesia on August 10, 2014, 08:44:40 PM

Quote from: tee-rex on August 12, 2014, 11:05:26 AM

Rising money supply does not necessarily mean inflation. If the additional money supply is not lent and/or spent then it would just be more money sitting in the "bank" (aka the federal reserve). This is one reason why inflation has been so low (apart from the negative inflation prior to QE) as banks have a lot of excess reserves at the federal reserve because there is not enough demand for loans from borrowers that meet an acceptable credit risk.

If in spite of rising money supply and low interest rates, there is not enough demand for loans from borrowers, all it means is that Quantitative Easing has not really been effective. Grin

You can't say so, since they are targeting the inflation rate and have been successful so far while trying to pass between the upper (run-away inflation) and the nether (stifling deflation) millstone.

Has it really been effective? The target was to get the economy moving again. These funds were supposed to make their way into the economy, not into various emerging market assets.

I'm not very familiar with the effects and aims of QEs, but if I'm not mistaken, one target of the "money printing" campaign was to liquidate toxic assets (read write off). If these funds made their way into the economy that would simply increase inflation rates (now we are heading well into exogenous vs endogenous money debate).

The point of QE is to get people/businesses to take more risks with their money, which would mean they would risk hiring more employees.

Poorri

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I would say it can sky rocket easy.

botany

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Quote from: tee-rex on August 11, 2014, 03:20:16 PM

Quote from: polynesia on August 10, 2014, 08:44:40 PM

Rising money supply does not necessarily mean inflation. If the additional money supply is not lent and/or spent then it would just be more money sitting in the "bank" (aka the federal reserve). This is one reason why inflation has been so low (apart from the negative inflation prior to QE) as banks have a lot of excess reserves at the federal reserve because there is not enough demand for loans from borrowers that meet an acceptable credit risk.

If in spite of rising money supply and low interest rates, there is not enough demand for loans from borrowers, all it means is that Quantitative Easing has not really been effective. Grin

You can't say so, since they are targeting the inflation rate and have been successful so far while trying to pass between the upper (run-away inflation) and the nether (stifling deflation) millstone.

Has it really been effective? The target was to get the economy moving again. These funds were supposed to make their way into the economy, not into various emerging market assets.

I'm not very familiar with the effects and aims of QEs, but if I'm not mistaken, one target of the "money printing" campaign was to liquidate toxic assets (read write off). If these funds made their way into the economy that would simply increase inflation rates (now we are heading well into exogenous vs endogenous money debate).

The financial crisis took out a few players (banks / investment banks) in the credit market. The absence of these financial intermediaries would have resulted in lower credit being available to main street. Rates would also have risen, with banks not willing to take on additional risk. QE was supposed to ensure that this did not happen, by making ample liquidity available in the system.

tee-rex

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Quote from: tee-rex on August 11, 2014, 03:20:16 PM

Quote from: polynesia on August 10, 2014, 08:44:40 PM

Quote from: tee-rex on August 11, 2014, 03:20:16 PM

Rising money supply does not necessarily mean inflation. If the additional money supply is not lent and/or spent then it would just be more money sitting in the "bank" (aka the federal reserve). This is one reason why inflation has been so low (apart from the negative inflation prior to QE) as banks have a lot of excess reserves at the federal reserve because there is not enough demand for loans from borrowers that meet an acceptable credit risk.

If in spite of rising money supply and low interest rates, there is not enough demand for loans from borrowers, all it means is that Quantitative Easing has not really been effective. Grin

You can't say so, since they are targeting the inflation rate and have been successful so far while trying to pass between the upper (run-away inflation) and the nether (stifling deflation) millstone.

Has it really been effective? The target was to get the economy moving again. These funds were supposed to make their way into the economy, not into various emerging market assets.

I'm not very familiar with the effects and aims of QEs, but if I'm not mistaken, one target of the "money printing" campaign was to liquidate toxic assets (read write off). If these funds made their way into the economy that would simply increase inflation rates (now we are heading well into exogenous vs endogenous money debate).

botany

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Quote from: polynesia on August 10, 2014, 08:44:40 PM

Quote from: polynesia on August 10, 2014, 08:44:40 PM

Rising money supply does not necessarily mean inflation. If the additional money supply is not lent and/or spent then it would just be more money sitting in the "bank" (aka the federal reserve). This is one reason why inflation has been so low (apart from the negative inflation prior to QE) as banks have a lot of excess reserves at the federal reserve because there is not enough demand for loans from borrowers that meet an acceptable credit risk.

If in spite of rising money supply and low interest rates, there is not enough demand for loans from borrowers, all it means is that Quantitative Easing has not really been effective. Grin

You can't say so, since they are targeting the inflation rate and have been successful so far while trying to pass between the upper (run-away inflation) and the nether (stifling deflation) millstone.

Has it really been effective? The target was to get the economy moving again. These funds were supposed to make their way into the economy, not into various emerging market assets.

tee-rex

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Activity: 742

Merit: 526

Rising money supply does not necessarily mean inflation. If the additional money supply is not lent and/or spent then it would just be more money sitting in the "bank" (aka the federal reserve). This is one reason why inflation has been so low (apart from the negative inflation prior to QE) as banks have a lot of excess reserves at the federal reserve because there is not enough demand for loans from borrowers that meet an acceptable credit risk.

If in spite of rising money supply and low interest rates, there is not enough demand for loans from borrowers, all it means is that Quantitative Easing has not really been effective. Grin

You can't say so, since they are targeting the inflation rate and have been successful so far while trying to pass between the upper (run-away inflation) and the nether (stifling deflation) millstone.

polynesia

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