When will normal service be resumed? Frances Coppola at Seeking Alpha warns that ending QE doesn't mean any change in the "unconventional" way in which monetary policy is conducted.
"A policy designed by the rich for the rich". Devastating analysis by the FT (paywall):
Did QE only raise the price of Warhols?
The IMF's Global Financial Stability Report looks at the effects of exiting QE. Chapter 1 is particularly interesting and contains some beautiful charts in glorious technicolour.
As far as I am concerned there is a very important new approach to QE, et. Here, I refer to a futuristic form of economics. The following link may be of interest. http://www.p2pfoundation.net/Transfinancial_Economics
ReplyDeleteIt goes beyond Basic Income, and is far more advanced. But it is good to see people discussing BI. It is a starting point.....
Phil Gramm and Thomas R. Saving have an op-ed in today's WSJ, which is essentially a recycled version of another WSJ op-ed published in December of 2017. They share their belief that the Fed, by paying interest on reserves, is paying banks not to lend. They also share their concerns about inflation, should banks start lending too much of their excess reserves. I use a couple of your Forbes articles as references to counter Gramm's and Saving's ideas, as well as research from the Federal Reserve, the Bank of England, and Standard & Poor's. I decided to do a Google search on the question of banks lending excess reserves and easily found links to articles exposing that idea as a myth - but I also found an article from the Federal Reserve Bank of Minneapolis (in 2015) that supports the notion of banks lending reserves, even stating that "the nation’s fractional banking system allows banks to convert excess reserves held at the Federal Reserve into bank loans at about a 10-to-1 ratio." That researchers from different branches of the Federal Reserve banking system hold such different views on this crucial operational aspect of modern banking is both fascinating and troubling.
ReplyDeleteBanks can't literally lend their excess reserves, other than to each other via the Fed Funds market.
ReplyDeleteWhat they can do is make loans and convert excess reserves into required reserves that they have to hold against loans.
The short of it is they haven't done that. I wrote about this here: https://macrohive.com/why-qe-doesnt-really-work-4-min-read/
The primary way QE proceeds get into the real economy is via bank lending. If banks don't lend QE proceeds remain in the financial system. Good for asset inflation but not much else.