What central banks such as the Federal Reserve and federal governments are doing to counteract the negative impact of the pandemic related economic shutdown. What are the risks of this massive monetary and fiscal stimulus and how to mitigate those risks. Topics covered include: How central banks have the capacity to create an infinite amount of money.How the Federal Reserve is using its money-printing ability to stabilize the financial system and reduce the negative impact of the … [Read more...]
What European Quantitative Easing Means? Plus A Portfolio Change
The European Central Bank (ECB) announced today they are launching a quantitative easing (“QE”) program beginning March 2015. The ECB will coordinate with its member countries’ central banks to purchase 60 billion euros of bonds per month until at least September 2016. As I discussed in Episode 29, quantitative easing is a financial placebo because its impact is less about its size and more about the stories individuals believe about it. … [Read more...]
MNY029 Plus: Quantitative Easing
In this week's Money For the Rest of Us Plus episode, I discuss: Quantitative easing as it pertains to repurchase agreement collateral and its impact on interest rates. Will the Federal Reserve sell its holdings of bonds? The Fed's reverse repo program. Nassim Nicholas Taleb's precautionary principle as it applies to QE and GMOs. Karl Popper's concept of the piecemeal engineer. Feedback from listeners on the interlude music experiment. The episode length is 17 minutes. … [Read more...]
29: Quantitative Easing—A Big, Fat Placebo
Why quantitative easing is both a financial placebo and an unpredictable game of musical chairs. Photo by David Maddison In this episode, you'll learn: What is a financial placebo.What is confirmation bias.How quantitative easing is like a game of musical chairs.How inflation can occur both with and without QE.How banks create money.Why QE is a failed and foolish policy. Show Notes Placebos by Seth Godin Bank of England paper - Money Creation In The Modern Economy by … [Read more...]
