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Video: Quantitative Easing Explained

November 24, 2010 Leave a comment Go to comments

Quantitative Easing Explained

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Categories: The Economics Profession, The Economy
  1. Dave Raithel
    November 24, 2010 at 3:55 pm | #1
    Reply | Quote

    Ok, that is amusing, but let me get to my suspicions directly: Is an “Austrian” behind it?

    E.g. at 25 seconds in there is the “conflation”, if you will, of QE2 with…Zimbabwe. Then at 40 seconds in, there is a false argument that deflation is good. I am not going to go tit-for-tat on the list of goods/services the video alleges ALL of which have gone up – some are, some are not – at least where I live in the heart of the heartland. Here’s one: My family’s taxes (spouse, two kids) ARE down, mostly due to the Fed Gov under Obama. (Whether the Republicans screw that up playing “chicken” is a different question come January). Gas is cheaper. Groceries are pretty constant – what cutting back we’ve done is for MY having become unemployed in October. (So “The Ben Bernank” is not wrong about everything.)

    I’m a spectator autodidact on these matters. I am aware of those whose politics are NOT “Austrian” and who critique QE2, e.g, people associated with the Levy Institute and the Econ Dept at UMKC:

    http://www.newdeal20.org/2010/10/18/qe2-wont-save-our-sinking-ship-23653/

    http://neweconomicperspectives.blogspot.com/2010/11/just-what-is-bernanke-up-to.html

    But they are “Minksy-ites” – Since capitalism is inherently unstable, government must be the employer of last resort (monetary policy won’t fix what only fiscal policy can fix.)

    So then also: http://neweconomicperspectives.blogspot.com/2010/11/keep-deficit-ditch-doves.html

    And then to distinguish us from Zimbabwe: http://neweconomicperspectives.blogspot.com/2010/10/fiscal-sustainability-teach-in-and.html

    Especially: http://www.netrootsmass.net/fiscal-sustainability-teach-in-and-counter-conference/marshall-auerback-inflation-and-hyper-inflation/

    Nobody here in America seems happy with FedRes Policy; but be advised that those recently acquiring more power – The Tea Party people (I call them Teabaggers, but we’re more serious here) ARE Austrians – Armey, The Pauls – they quote Von Mises and Rothbard and those parts of Hayek that don’t let you get to some kind of social democracy. They still believe in a gold standard….believe it or not.

    Point being: The enemies of your enemies aren’t always your friends.

    I made a reference to “mathematical bullies” in a different post -Is Economics a Science? – Here the strategy of persuasion is cutesy amusement.

    And people wonder why I sense a scam, everywhere, always….So I’ll not dispute that “The” Goldman Sachs makes its living ripping off the rest of us.

  2. Stephan
    December 3, 2010 at 10:21 am | #2
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    Here we go. It seems to me no sane economics blog can resist the temptation to link to this video. Granted it’s cute. But in regard to QE this character is wrong in every single sentence. If your new mission is to disseminate ideological propaganda please let me know.

    In the meantime here are the same cute characters but this time they lightened up and explain what QE really is:

    The Explanation of Quantitative Easing Revisited

    • Dave Raithel
      December 3, 2010 at 7:53 pm | #3
      Reply | Quote

      I think I get it when I say: The Fed Res prints nothing. Treasury prints currency. When the Fed Res takes an asset onto its balance sheet, the party handing over the asset gets a credit to their account at the Fed Res. This is what banks do.

      Now, to prove how pedestrian I am should anyone remaining doubts, please clear up this part of the story:

      1. Commercial banks cannot “spend” T-securities, but they can “spend” Federal Reserve Notes. They “spend” them by making loans? How do I square that with people who say banks make loans based on their capital, not their reserves at the Fed?

      2. At what point must Treasury print more currency to make it available to the Fed Res, so that IT can supply currency to its members banks? I don’t mean when the Fed Res hands over old worn currency for new paper money; I mean that at some point, if QE2 DID succeed in shoving the economy into second gear, people are going to get paid checks from employers and go cash them for currency. And since more people would/should be working, there’d be more demand for currency? No?

      I am trying to get into the paradigm, I want the scales to fall from my eyes, I know I am haunted by false consciousness, but I got to make sense of the picture to myself to succeed making the point to others.

      • Dave Raithel
        December 6, 2010 at 9:15 pm | #4
        Quote

        Sure, I talk to myself. Somebody asked Mr. Bernanke some of the same question I asked (#2). He said:

        “We’re not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way.”

        http://www.nytimes.com/2010/12/06/business/06bernanke.html?ref=todayspaper

        The man’s taken a lot of flack from people whose politics are really less extremely left than my own, but it could be that he’s genuinely a good guy (for having identified inequality as part of our problem in the above story) who knows his Clint Eastwood: A man’s got to know his limitations.

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