Let us get a few things straight – Quantitive Easing
Quantitive Easing (QE) Mystery Solved
The QE processes adopted by countries does nothing more than transfer assets – from the Central Banks – to the Banks – nothing more nothing less.
This in itself is not spending money – it is not money creation – it is a method by which Central Banks strengthen the Balance Sheets of Commercial Banks – large corporations and the rich.
A simple way of saying – if the Commercial Banks and others have shit assets on their books they can swap them for Central Bank bonds. This is nothing more than protecting the Commercial Banks assets and liquidity.
If Mr Joe Blogs or Mr Public has shit assets the Central Bank is not interested in these assets – not interested in the public – they believe in protecting the Banks – Bondholders – Shareholders of the Banks – large corporations – and by definition the elite.
The only linkage between QE and the money supply is described as indirect – Banks can use these replaced reserves to create money – by making loans to the public.
The onus is not on the Banks to lend – if they do not wish to lend and/or borrowers do not wish to borrow – then the reserves are an ‘inactive’ constraint – if one does borrow than one has to repay the debt.
So a vital missing ingredient on the subject of QE is public perception – confidence to borrow and invest for productive assets – not borrow to repay expensive loans.
When banks seek to increase their capital and borrowers strive to pay down their debts, QE does not increase the money supply and therefore does not cause inflation.
When reserves are an inactive constraint on borrowing and lending, a central bank engaged in buying securities is as fruitless as ‘tits on a bull’ – this does nothing more than creates losses for the Banks and creates stagflation – deflation.
There were three academic studies – that found quantitative easing doesn’t work (1) -the massive fund injection by those countries participating in this ruse was to bail out mates – if one takes the time to read these reports they confirm that it was a bailout program which allowed the Bankers and their associates to make immense profits.
Germany’s finance minister, Wolfgang Schäuble, called the decision “clueless” on the Central Banks QE programs.
Need I say more as to the incompetence of those that dictate financial policy.
And no – not a conspiracy by an elite group – just plain incompetent financial policy.