Comments on: Quantitative Easing: It’s So Simple!

By: fuguez

fuguez — Mon, 05 Oct 2009 19:15:55 +0000

No this is not QE.
It is simply the settling of accounts.
It could have been done with a simple IOU from the Hotelier and passed around.

By: joe suzuki

joe suzuki — Fri, 02 Oct 2009 22:04:44 +0000

The cycle is complete other than the interest owed to the Russian while he looked at the rooms. Yes, the injection of capital went around and settled all debts and the hotelier was ultimately able to have the cash in his hand to repay the Russian when he returned to collect it, but the two 800 pound gorillas are that the interest on the money is also due and as someone mentioned earlier, the receivable was liquidated and lost. It seems like this cycle would have effected at least one person in the chain in a bad way. Also, no new work was completed (no economic growth) while this cash was around. the only winner was the Russian (central bank) – unless the hotelier charges a fee for the opportunity cost of not being able to sell the rooms to other patrons while he looks around (maybe the interest rebates the Central Bank refunds to the general fund). Its interesting, but a public credits system will always beat a Central Bank from the average Joe nuckle head perspective.

By: r cohn

r cohn — Thu, 03 Sep 2009 03:16:19 +0000

Each party has netted an account receivable for an account payble.QE however involves the Treasury incurring debt while the other arm of the government (FED) buys this debt by printing money electronically.The Treasury then receives its money but the Fed has also created an equal liability

Treasury FED

Assets electronic money Treasury debt

Liabilities debt electronic money

The debt is netted out,but because the Treasury has spent the electronic money ,the balance sheet is unbalaned with the Fed incurring a liability (electronic money).this electronic money just increases the money supply.

By: bidu

bidu — Sat, 22 Aug 2009 02:04:42 +0000

This is not QE. This is clearing of mutual debts through a peculiar medium (money).
QE maybe clearing but is foremost transformation of valueless assets into good ones through an external agency that become holder of valueless claims: the FED, meaning ultimately the public.

By: asdf

asdf — Thu, 20 Aug 2009 00:23:33 +0000

@12 you’re right, but that’s what @6 was saying is you need to get the whole story, wherein goods and services are traded and wealth is created – this would then make (at least some of) that debt serviceable.

By: s

Mon, 17 Aug 2009 00:14:48 +0000

the parable assumes that the debt load is servicable. In the case of the US it is not. Circular yments are the same thng as circular arguments..to borrow aline from excel: “circular function”

By: biofuel

biofuel — Sat, 15 Aug 2009 23:02:43 +0000

cmc,

All I am saying is that the story is too simplistic and misleading and does not reflect what is. We are all prisoners of our circumstances and the math. Pitchforks is just another variable in this equation, although I never had in mind pitchforks when I wrote the comment. Things are the way they are, and not the way the story tells us. If you would like to believe the story, it’s up to you…

By: cmc

cmc — Sat, 15 Aug 2009 20:30:28 +0000

@ biofuel, don’t you have a pitchfork to be sharpening ;)

By: biofuel

biofuel — Sat, 15 Aug 2009 16:52:30 +0000

The thing is that things don’t work this way anymore. The hotel, a small business, borrowed on revolving credit from a bank to pay the butcher, so the 100 is in the mail to pay past due monthly payment. The bank takes 25 as a penalty for missing the due date and applies the rest to cover the interest at 9-33% APR and whatever left the principal. The banker pays himself a hefty bonus and hires the hooker and bangs her a room in the hotel. Good for the hotel and the hooker, but not good enough because most rooms and hookers are not used. If the baker were a man enough, then he would hire every hooker in town and occupy every room in the hotel; alas he is not…

By: jck

jck — Sat, 15 Aug 2009 07:56:03 +0000

everyone has an asset and liability, for ex the hotel owes the butcher and is owed by the pro. the introduction of (temporary) liquidity allows everyone to settle and reduce their balance sheet.