More on Quantitative Easing Explained
Omid Malekan produced a great video called “Quantitative Easing Explained” which we posted here a little over a week ago. The video has really hit a nerve because it resonates with people’s sense of outrage. Kevin Depew, the Editor-in-Chief of Minyanville sat down with Malekan to discuss with him what the video is all about and why he thinks it’s received such attention. The video of their conversation is below.
For a more in-depth but equally populist take on QE, see these remarks by Michael Hudson in his interview with Eric Janszen.
I have written a lot on this topic. My best take is probably, “(Don’t Fear) The Reaper, The Fed Says ‘More Cowbell’. The line you should remember is this:
Every single time the U.S. is met with an economic downturn (is met by the figurative Grim Reaper), the policy response is always the same: monetary easing (more cowbell). And with interest rates as low as they can go, the Fed has turned to printing money and monetizing debt. This excess liquidity is an economic hazard washing up on the shores of South Korea, Brazil and India, causing policy makers there to consider barriers to reduce the floods from the incoming waves of U.S. money. The excess liquidity is pumping up commodity prices, raising the price of gasoline and food for average American citizens and reducing their purchasing power.
And let’s be clear, this money printing does not have direct effects on the real economy. This is not a helicopter drop either. In that case, the money would actually go to consumers instead of the banks who are primary dealers of U.S. government bonds. It is about interest rates and asset prices.