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by rhino369
3933 days ago
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>playing with the supply side of money while having absolutely no effect on the demand side. This is a strange position to take on a website that glorifies start ups. Cheap capital can unlock demand by lowering barriers to entry. People looking for investment opportunities fund companies like Uber. And uber turns around an creates massive demand for private adhock drivers. That sort of incentivize won't reverse a recession like deficit spending can. But it has a real effect. The critiques of QE never really panned out. >The Fed has dug itself into a hole with QE, where it is losing the ability to control anything in the economy due to the lower 0 bound of the FFR and the economy's inability to handle an interest rate hike. The fed always has the option of last resort. Actually printing money and buying debt from government directly. |
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And yes, easy money can help unlock demand, but it can't generate it in a sustainable manner.
> "Actually printing money" - and then what? Dropping it to the eager consumers out of helicopters? [1] They've given banks all the money they need, and then some. Banks act as the gate keepers of loans and investments within the economy, vetting those who are likely to pay back. That is their business.
They are not finding enough demand within the economy to push out more money, even with short-term interest rates near 0 for the past 6 years. So they sit on it, earning 0.75% on their reserves.
The Fed does not have the power to solve this problem, in my opinion.
[1] http://www.investopedia.com/terms/h/helicopter-drop.asp