Posted on 10/26/2014 7:02:25 PM PDT by blam
By Michael Snyder
October 26th, 2014
It is widely expected that the Federal Reserve is going to announce the end of quantitative easing this week. Will this represent a major turning point for the stock market? As you will see below, since 2008 stocks have risen dramatically throughout every stage of quantitative easing. But when the various phases of quantitative easing have ended, stocks have always responded by declining substantially. The only thing that caused stocks to eventually start rising again was a new round of quantitative easing. So what will happen this time? That is a very good question. What we do know is that the the performance of the stock market has become completely divorced from economic reality, and in recent weeks there have been signs of market turmoil that we have not seen in years. Could the end of quantitative easing be the thing that finally pushes the financial markets over the edge?
After all this time, many Americans still don't understand what quantitative easing actually is. Since the end of 2008, the Federal Reserve has injected approximately 3.5 trillion dollars into the financial system. Of course the Federal Reserve didn't actually have 3.5 trillion dollars. The Fed created all of this money out of thin air and used it to buy government bonds and mortgage-backed securities.
If that sounds like "cheating" to you, that is because it is cheating. If you or I tried to print money, we would be put in prison. When the Federal Reserve does it, it is called "economic stimulus".
But the overall economy has not been helped much at all. If you doubt this, just look at these charts.
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(Excerpt) Read more at theeconomiccollapseblog.com ...
I could explain the difference between US debt and MBS.
>>Math makes you cry?<<
No...arrogance makes me cry. Know it all attitudes kinda make me weepy as well.
So hey, Todd...find some humility will ya.
“the Federal Reserve has injected approximately 3.5 trillion dollars into the financial system. Of course the Federal Reserve didn’t actually have 3.5 trillion dollars. The Fed created all of this money out of thin air”
Simple.
You start with $0.
In the “Debits” column of your ledger, you write “-$3,500,000,000,000”.
In the “Credits” column of your ledger, you write “$3,500,000,000,000”.
They add up to $0, so that’s OK.
Now you have 3.5 trillion dollars to buy all kinds of things with.
Yeah, you’ve got 3.5 trillion dollars of debt, but hey - you’ll pay that off later.
You can leverage that funny money into real money by buying treasury bonds - real ones - as “investments” which have a real return with real fresh-minted cash.
Buy $3.5T of treasury bills at a paltry 0.07%, hold them for one year, return them, receive a tidy $2,450,000,000 in real money on top of your investment.
Take your returned virtual $3,500,000,000,000, write “$3,500,000,000,000” in the “Debits” column, “$-3,500,000,000,000” in the “Credits” column, both resolve to $0, and you’ve got a couple billion in cash.
Keep posting errors, I’ll keep correcting them. Even if it makes you sad.
You the go to guy.
QE ping
The bank's balance sheet is now at a historic high of $4.5 trillion, nearly six times higher than when it first started buying bonds in 2008. The key fed funds short-term interest rate has been at zero since then. The Fed vote was nine to one, with Narayana Kocherlakota dissenting.
I dunno Toddster, they are punkin you again with this 4 Trillion fed balance sheet again. Hurry, give us some wisdom there fella.
Figure out the difference between Treasuries and MBS yet?
Nope and don’t care, but I’m absolutely sure....you have the answer!
They don't hold that much U.S. debt.
Should I help you with the math?
>>Should I help you with the math?<<
Nope, got it covered. I stayed in a Holiday Inn Express last night.
Feelin like a Trillion Bucks.
You’re only 60% over, close enough for government work.
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