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Not surprising.

 

Perhaps troubling, but not surprising.

I'm one of the 3/4. I neither have the income to put much energy into understanding , nor the time to fret about something I can't control. I spend my energy just trying to prepare for the worst, protecting my income the best I can and spending ad wisely as I can. My only investments are in my 401K, and frankly, I only contribute because I want to have something to leave my kids when I die....which I will likely do on my way to or from work, or at my desk. :lol:

I'm one of the 3/4. I neither have the income to put much energy into understanding , nor the time to fret about something I can't control. I spend my energy just trying to prepare for the worst, protecting my income the best I can and spending ad wisely as I can. My only investments are in my 401K, and frankly, I only contribute because I want to have something to leave my kids when I die....which I will likely do on my way to or from work, or at my desk. :lol:

 

Well, it does matter, and not only to investors. It was designed to lift the economy as a whole (and critics fear it will cause inflation). And you can control it a little bit. Obama is about to nominate the next Fed chair, which has to be affirmed by the Senate.

 

Well, it does matter, and not only to investors. It was designed to lift the economy as a whole (and critics fear it will cause inflation). And you can control it a little bit. Obama is about to nominate the next Fed chair, which has to be affirmed by the Senate.

 

I guess I need the QE for Dummies version.

I guess I need the QE for Dummies version.

 

I'll put it this way: The Fed controls the supply of US currency. This matters because if there is too much money circulating, then things become more expensive, which is inflation. Some inflation is good since it means there's money around and it's getting spent. Too much inflation is very bad. If there is too little money circulating, people become very stingy with it and no one buys anything, which is deflation. Some deflation is good because it means each dollar goes farther. Too much deflation is very bad. Since the economy collapsed in '07 growth in the economy has been anemic and inflation has remained very low. On to QE: The Fed decided it could spur the economy by injecting it with more money without creating too much inflation, so it bought a bunch of bonds (bonds go into the Fed, money goes out). It's done this on a massive scale three times.

I guess I need the QE for Dummies version.

"Quantitive easing" sounds like a laxative commercial. (I am not implying any connection to the Federal Reserve.)

 

I'll put it this way: The Fed controls the supply of US currency. This matters because if there is too much money circulating, then things become more expensive, which is inflation. Some inflation is good since it means there's money around and it's getting spent. Too much inflation is very bad. If there is too little money circulating, people become very stingy with it and no one buys anything, which is deflation. Some deflation is good because it means each dollar goes farther. Too much deflation is very bad. Since the economy collapsed in '07 growth in the economy has been anemic and inflation has remained very low. On to QE: The Fed decided it could spur the economy by injecting it with more money without creating too much inflation, so it bought a bunch of bonds (bonds go into the Fed, money goes out). It's done this on a massive scale three times.

 

So...in a nutshell...it can be good OR bad....and I just have to live with whichever is occurring?

"Quantitive easing" sounds like a laxative commercial. (I am not implying any connection to the Federal Reserve.)

 

I would prefer "Qualitative Easing" myself. :lol:

I guess I need the QE for Dummies version.

 

Here it is...

 

You may have heard that the government or the Fed is 'printing money'. That is not technically correct.

 

The US government must fund its debt via bond sales. In a free market without a major overarching player (the Fed) the interest rates on such bonds would be much higher than now. With the government sucking up so much money to fund it debt the interest rate would be higher on these bonds and the cost of money for the entire system would be higher.

 

The Fed has agreed to buy the bonds that funds the government at substancially below market rate. This rate is also available to 'to big to fail' 2nd tier banks. This is what drives almost all interest rates for mortgages, business loans, etc. So everyone who is borrowing money is getting an artificial low rate.

 

If the Fed stops 'quantitative easing' via what is called 'tapering' interest rates will go up. The market forces will take effect and the cost of (borrowed) money will go up. Mortgage rates will rise, other borrowing rates will rise.

 

The Fed is massive central bank formed by the richest families of the US back in 1916. This happens to be the same year that Federal income taxes came about. It is not a government entity - it is a bank. It is THE bank of the US and of much of the world. Its major 'client' is the US government. If it quits buying US bonds (the are sold at auction periodically) at artificially low rates then the interest paid by the US government will rise as bonds auctioned at likely much higher rates since other investors will want better return due to increasing debt and interest load of the Federal government.

 

The Fed makes money for its owners by lending money - as any bank does. Eventually they will want more return for the their money. But with so much of their lending going to the government they can not afford to have the government default - so they keep rates low to 'stimulate' the economy. So now there is a strong interlock between the Fed policies and political policies. If the Fed raises rates or 'tapers' rates will rise for mortgages, the housing market will stagger again, the 'TBTF banks' will suffer (or their profits will suffer), businesses will not be able to afford to borrow money and will stagger - stalling the 'recovery'. People will blame the politicians (of both parties) and the system will go under severe strain. If the strain is bad enough it will cause another recession or worst. So now politicians have a vested interest in what the Fed does and this is why the Fed is now a political entity as much as a financial one.

 

Without QE, the Federal government would be broke or going broke even faster than it is now.

 

What neither the government nor the Fed can allow to happen is for the US dollar to lose its status as a 'reserve currency'. Just as the Fed is the 'central bank' of the world. The 'central currancy' of the world is the US dollar. It is what allows all of this QE to happen. So now the solvency of the Federal government and the Fed and the value of the US dollar as a reserve currency are all inter-weaved and critical - to all of us. It is somewhat of a catch 22 now. If the Federal government defaults, if the Fed quits loaning the Federal government at artificially low rates or if the US dollar loses is status as the worlds reserve currency - we are all in trouble. It would be like Germany in 1930s. Inflation will run rampant and skyrocket and the US economy - and the world economy - will collapse.

Here it is...

 

You may have heard that the government or the Fed is 'printing money'. That is not technically correct.

 

The US government must fund its debt via bond sales. In a free market without a major overarching player (the Fed) the interest rates on such bonds would be much higher than now. With the government sucking up so much money to fund it debt the interest rate would be higher on these bonds and the cost of money for the entire system would be higher.

 

The Fed has agreed to buy the bonds that funds the government at substancially below market rate. This rate is also available to 'to big to fail' 2nd tier banks. This is what drives almost all interest rates for mortgages, business loans, etc. So everyone who is borrowing money is getting an artificial low rate.

 

If the Fed stops 'quantitative easing' via what is called 'tapering' interest rates will go up. The market forces will take effect and the cost of (borrowed) money will go up. Mortgage rates will rise, other borrowing rates will rise.

 

The Fed is massive central bank formed by the richest families of the US back in 1916. This happens to be the same year that Federal income taxes came about. It is not a government entity - it is a bank. It is THE bank of the US and of much of the world. Its major 'client' is the US government. If it quits buying US bonds (the are sold at auction periodically) at artificially low rates then the interest paid by the US government will rise as bonds auctioned at likely much higher rates since other investors will want better return due to increasing debt and interest load of the Federal government.

 

The Fed makes money for its owners by lending money - as any bank does. Eventually they will want more return for the their money. But with so much of their lending going to the government they can not afford to have the government default - so they keep rates low to 'stimulate' the economy. So now there is a strong interlock between the Fed policies and political policies. If the Fed raises rates or 'tapers' rates will rise for mortgages, the housing market will stagger again, the 'TBTF banks' will suffer (or their profits will suffer), businesses will not be able to afford to borrow money and will stagger - stalling the 'recovery'. People will blame the politicians (of both parties) and the system will go under severe strain. If the strain is bad enough it will cause another recession or worst. So now politicians have a vested interest in what the Fed does and this is why the Fed is now a political entity as much as a financial one.

 

Without QE, the Federal government would be broke or going broke even faster than it is now.

 

What neither the government nor the Fed can allow to happen is for the US dollar to lose its status as a 'reserve currency'. Just as the Fed is the 'central bank' of the world. The 'central currancy' of the world is the US dollar. It is what allows all of this QE to happen. So now the solvency of the Federal government and the Fed and the value of the US dollar as a reserve currency are all inter-weaved and critical - to all of us. It is somewhat of a catch 22 now. If the Federal government defaults, if the Fed quits loaning the Federal government at artificially low rates or if the US dollar loses is status as the worlds reserve currency - we are all in trouble. It would be like Germany in 1930s. Inflation will run rampant and skyrocket and the US economy - and the world economy - will collapse.

 

I'll put it this way: The Fed controls the supply of US currency. This matters because if there is too much money circulating, then things become more expensive, which is inflation. Some inflation is good since it means there's money around and it's getting spent. Too much inflation is very bad. If there is too little money circulating, people become very stingy with it and no one buys anything, which is deflation. Some deflation is good because it means each dollar goes farther. Too much deflation is very bad. Since the economy collapsed in '07 growth in the economy has been anemic and inflation has remained very low. On to QE: The Fed decided it could spur the economy by injecting it with more money without creating too much inflation, so it bought a bunch of bonds (bonds go into the Fed, money goes out). It's done this on a massive scale three times.

 

Both these explanation are good. But I don't understand the shock behind the poll. I'm actually shocked 27% actually do know what QE is that is higher than I expected. Economics in general isn't a popular topic with most people are not interested in even some of the basic topics, let a lone a more sophisticated strategy being implemented by the Fed currently.

 

I'm an economics nerd and this topic is my book of choice in my spare time. On that note anyone trying to dip their toes in this topic but don't want a book that is techinical or with many math problems I reccomend "Free to Choose" by Friedman.

Here it is...

 

You may have heard that the government or the Fed is 'printing money'. That is not technically correct.

 

The US government must fund its debt via bond sales. In a free market without a major overarching player (the Fed) the interest rates on such bonds would be much higher than now. With the government sucking up so much money to fund it debt the interest rate would be higher on these bonds and the cost of money for the entire system would be higher.

 

The Fed has agreed to buy the bonds that funds the government at substancially below market rate. This rate is also available to 'to big to fail' 2nd tier banks. This is what drives almost all interest rates for mortgages, business loans, etc. So everyone who is borrowing money is getting an artificial low rate.

 

If the Fed stops 'quantitative easing' via what is called 'tapering' interest rates will go up. The market forces will take effect and the cost of (borrowed) money will go up. Mortgage rates will rise, other borrowing rates will rise.

 

The Fed is massive central bank formed by the richest families of the US back in 1916. This happens to be the same year that Federal income taxes came about. It is not a government entity - it is a bank. It is THE bank of the US and of much of the world. Its major 'client' is the US government. If it quits buying US bonds (the are sold at auction periodically) at artificially low rates then the interest paid by the US government will rise as bonds auctioned at likely much higher rates since other investors will want better return due to increasing debt and interest load of the Federal government.

 

The Fed makes money for its owners by lending money - as any bank does. Eventually they will want more return for the their money. But with so much of their lending going to the government they can not afford to have the government default - so they keep rates low to 'stimulate' the economy. So now there is a strong interlock between the Fed policies and political policies. If the Fed raises rates or 'tapers' rates will rise for mortgages, the housing market will stagger again, the 'TBTF banks' will suffer (or their profits will suffer), businesses will not be able to afford to borrow money and will stagger - stalling the 'recovery'. People will blame the politicians (of both parties) and the system will go under severe strain. If the strain is bad enough it will cause another recession or worst. So now politicians have a vested interest in what the Fed does and this is why the Fed is now a political entity as much as a financial one.

 

Without QE, the Federal government would be broke or going broke even faster than it is now.

 

What neither the government nor the Fed can allow to happen is for the US dollar to lose its status as a 'reserve currency'. Just as the Fed is the 'central bank' of the world. The 'central currancy' of the world is the US dollar. It is what allows all of this QE to happen. So now the solvency of the Federal government and the Fed and the value of the US dollar as a reserve currency are all inter-weaved and critical - to all of us. It is somewhat of a catch 22 now. If the Federal government defaults, if the Fed quits loaning the Federal government at artificially low rates or if the US dollar loses is status as the worlds reserve currency - we are all in trouble. It would be like Germany in 1930s. Inflation will run rampant and skyrocket and the US economy - and the world economy - will collapse.

Good post. Would I be correct in assuming that this practice is "artificially" propping up the economy?

I thought QE stood for Queen's English...which is why I thought the numbers would be much, much lower. I figure Clyde, maybe a couple of others, and that's about it.

Both these explanation are good. But I don't understand the shock behind the poll. I'm actually shocked 27% actually do know what QE is that is higher than I expected. Economics in general isn't a popular topic with most people are not interested in even some of the basic topics, let a lone a more sophisticated strategy being implemented by the Fed currently.

 

I'm an economics nerd and this topic is my book of choice in my spare time. On that note anyone trying to dip their toes in this topic but don't want a book that is techinical or with many math problems I reccomend "Free to Choose" by Friedman.

 

After watching Jay Leno's 'Jay walking segments its almost incredible that 27% have any clue. Most people have no understanding of 'The Fed', its background and why it is such a player.

Good post. Would I be correct in assuming that this practice is "artificially" propping up the economy?

 

Its not organic . But on a macro level not many results are organic. All results are influenced by the

fed or laws passed by congress. The fed creates a lot of extremes or bubbles. It has turned into a necessary evil. I still to this day don't understand why congress does not have more oversee power over such an influential organazation. The secrecy plays a lot into the negative feeling a lot of economists have of the fed.