Quantitative Easing...worked?

[Brickjectivity]

There were supposed to be massive price increases, because they increased our money supply.

MV=PQ means 'Money supply' X 'Velocity of money' = 'Price' X 'Quantity of money demanded'

So, what happened? Why did our economy improve?

 

[metis]

The noser we took was entirely artificial in the making, therefore the real solution as to try and stop the free-fall first by propping up the banks and then stimulating the economy through a series of measures, including q.e. The magician here was Bernanke, who is probably the world's foremost authority on depression economics, and he pretty much saved our collective butts. Thank God Obama was president and not McCain at the time, because the latter, through his own admittance, knows very little about economics. Neither was Obama that familiar with it himself, but he was willing to take the advice that was needed whereas McCain would have a lot of political pressure from the right to take just "let nature take its course", which would have been disastrous.

 

[Nakosis]

There were supposed to be massive price increases, because they increased our money supply.

MV=PQ means 'Money supply' X 'Velocity of money' = 'Price' X 'Quantity of money demanded'

So, what happened? Why did our economy improve?

Our economy improved based on what? Wall Street? 95% of the economic growth was realized by the upper 1%. The other 99% probably not a lot of difference in their lives.

The banks had more money but that doesn't mean they made it any easier to borrow that money. Sure if you are well off, have excellent credit it is pretty easy to make use of that extra money. If not it's near impossible.

Did things really improve? Yes for the well off. For the rest, the gap between the poor and wealthy just increased. So if the masses are still mostly poor, they don't have a lot of buying power, so not a lot of demand.

 

[Brickjectivity]

Our economy improved based on what? Wall Street? 95% of the economic growth was realized by the upper 1%. The other 99% probably not a lot of difference in their lives.

The banks had more money but that doesn't mean they made it any easier to borrow that money. Sure if you are well off, have excellent credit it is pretty easy to make use of that extra money. If not it's near impossible.

Did things really improve? Yes for the well off. For the rest, the gap between the poor and wealthy just increased. So if the masses are still mostly poor, they don't have a lot of buying power, so not a lot of demand.

I agree though that is off topic. This is about the government printing money which was recently called 'Quantitative Easing' which many predicted would tank the economy and bankrupt the dollar$$. Instead, more people have started working again, and the dollar has remained relatively stable. People still keep dollars and prefer them over many other forms of savings.

I definitely agree that the system in its current form is set to fail for other reasons, such as the insane cost of education. I also don't like how difficult it is to build. To build a house a person has to get lots of permits, which means land is only valuable to someone who can afford lots of permits. Some people disagree and say its a safety and fire issue. They have points too but its all off topic.

Thing is, as a child I thought that inflation was caused by printing money. That was what my grownups told me. The country should have stuck with the gold standard, etc. Greece printed too much money and bankrupted itself multiple times. Other countries did the same. Russia did the same. Money printing was a kind of no-no taboo. Now we have experienced an upswing in our economy, and in the presence of quantitative easing the dollar has retained its spend-ability. What gives?

 

[metis]

Money printing was a kind of no-no taboo. Now we have experienced an upswing in our economy, and in the presence of quantitative easing the dollar has retained its spend-ability. What gives?

The single greatest danger when in a recession is to pull money out of the economy, and this can be the effect of cuts in spending. As crazy as it might sound, actually some inflation can actually help a country get out because it tends to put more money into circulation. Trouble is that you don't want to sustain deficit spending over a long period of time, so as the economy hopefully recovers, deficit spending needs to gradually decrease, and then preferably some of the debt needs to begin to paid off.

 

[Brickjectivity]

The single greatest danger when in a recession is to pull money out of the economy, and this can be the effect of cuts in spending. As crazy as it might sound, actually some inflation can actually help a country get out because it tends to put more money into circulation. Trouble is that you don't want to sustain deficit spending over a long period of time, so as the economy hopefully recovers, deficit spending needs to gradually decrease, and then preferably some of the debt needs to begin to paid off.

So we're not out of trouble just yet.

 

[metis]

So we're not out of trouble just yet.

Correct, but we are in at least somewhat better shape in regards to going back into a recession, but not by a wide margin. We now have fewer but larger banks than before, so "too big to fail" is still a problem.

The message that the White House and Congress needs to convey in rather forceful terms to the banks and large investment firms is that if you do it again, and we take another noser, the offending banks and firms will be temporarily nationalized to be sold later, and some people are going to be probably prosecuted if even one speck of the law is violated. So far, at least as far as I can tell, this message hasn't been sent forcefully enough, although it may be sorta understood anyway as this would likely have to be done. The precedent for this was that the Brits did this to the Royal Bank of Scotland somewhere around 2009.

 

[faroukfarouk]

So we're not out of trouble just yet.

In fact you have bigger problems then you taught.Your problems are compounding.In 2009 they discovered a man made hole and all they did is plug the hole with fiat money.That money has not even reached the bottom of the hole and whats more that bottom of the hole has got another hole.
Bottom line all they did was delay the inevitable.If one understands and studied economics then you will agree with me that the entire World is heading for a "depression".Its just a matter of time.
Sorry for sounding so negative but its the truth.
faroukfarouk

 

[esmith]

The noser we took was entirely artificial in the making, therefore the real solution as to try and stop the free-fall first by propping up the banks and then stimulating the economy through a series of measures, including q.e. The magician here was Bernanke, who is probably the world's foremost authority on depression economics, and he pretty much saved our collective butts. Thank God Obama was president and not McCain at the time, because the latter, through his own admittance, knows very little about economics. Neither was Obama that familiar with it himself, but he was willing to take the advice that was needed whereas McCain would have a lot of political pressure from the right to take just "let nature take its course", which would have been disastrous.

So you say neither Obama or McCain knew anything about economics, but I don't see how you came to the conclusion that Obama was willing to take advice yet McCain wasn't. One would have to come to the conclusion that you might be just a slight bit prejudice against McCain and conservatives in general. Of course those of us here on the forum that read your post know you are not a bit prejudice in your political view

Sorry just couldn't help myself

 

[Brickjectivity]

In fact you have bigger problems then you taught.Your problems are compounding.In 2009 they discovered a man made hole and all they did is plug the hole with fiat money.That money has not even reached the bottom of the hole and whats more that bottom of the hole has got another hole.
Bottom line all they did was delay the inevitable.If one understands and studied economics then you will agree with me that the entire World is heading for a "depression".Its just a matter of time.
Sorry for sounding so negative but its the truth.
faroukfarouk

I think that we have to maintain pressure on politicians to keep listening to economics and not to take the economic models for granted, and we have to urge the public towards basic financial literacy. The finance system is always changing, and if somebody doesn't make politicians take responsible steps then they tend to favor political allies over the benefit of society. When financial systems get so complex that no one understands them, that is when we need to really start scrutinizing finance; because we are all part of the financial system. Its one giant organism.

 

[metis]

So you say neither Obama or McCain knew anything about economics, but I don't see how you came to the conclusion that Obama was willing to take advice yet McCain wasn't. One would have to come to the conclusion that you might be just a slight bit prejudice against McCain and conservatives in general. Of course those of us here on the forum that read your post know you are not a bit prejudice in your political view

Sorry just couldn't help myself

I did explain it, and part of the reason is that the Republicans would have put pressure on McCain to not go with the "bail-out", and if you were to remember correctly, most of them voted against it.

Secondly, McCain is hardly an intellectual whereas Obama is, and one of the characteristics of a true intellectual is that they study and are more willing to listen and learn. There's an actual scene that was reported in a bi-partisan emergency session whereas Bush, who was still president, walked out in disgust whereas Obama took over and was able to get both sides to agree on a solution.

Thirdly, is appears that your partisan approach had me taking a partisan approach whereas I actually wasn't-- but then partisans such as yourself only see things the way they want to see things.

BTW, are you aware there's a bird in Australia also referred to as a "laughing *******"? Just saying.

 

[metis]

When financial systems get so complex that no one understands them, that is when we need to really start scrutinizing finance; because we are all part of the financial system. Its one giant organism.

When Greenspan admitted that even he was unable to keep up with all the changes, particularly with the shadow-banking system, you know we're still asking for trouble.

 

[Penumbra]

There were supposed to be massive price increases, because they increased our money supply.

MV=PQ means 'Money supply' X 'Velocity of money' = 'Price' X 'Quantity of money demanded'

Based on back of the envelope calculations ($3.5 trillion quantitative easing over like 7 years vs. $10+ trillion total money supply), the money supply increased by something like 5% per year for roughly seven years.

That doesn't necessarily equate to massive price increases, especially once other components are factored in. For example, the economy could have possibly otherwise seen deflation, and this merely balanced it out, as one possibility.

So, what happened? Why did our economy improve?

Does correlation imply causation?

Countless variables occurred between 2008 and 2015. One of them was time. Others were policies like a moderate stimulus, quantitative easing, bailing out the banks, and keeping interest rates low.