[Aunche]

Quantitative easing prevents the economy from completely shutting down, which helps everyone, not just the rich. If the Government can issue trillions of dollars in debt that mainly goes into regular people's pockets (stimulus checks, umemployment, 60% of PPP loans/grants, wages for pork jobs), then the Federal Reserve buying off an equal amount of debt shouldn't be seen as a stimulus for the rich.

[hardwaresofton]

> Quantitative easing prevents the economy from completely shutting down, which helps everyone, not just the rich.

Could you describe "the economy completely shutting down"? Certain parts would absolutely shut shut down and be adversely affected, but I'm not convinced of the doomsday scenario here. Yes, lots of restaurants and services would close down (as they have, but in greater numbers), but this is the cost of not being prudent, buying insurance (if it was possible, and it certain was after SARS and MERS, etc), and saving for a rainy day. The economy will start up again, because there is always money to be made, and people are motivated to make that money.

The problem is that it's "helping" everyone, but disproportionately helping the rich, with no return on investment in the government. The highest ROI (in GDP terms) on investment by government usually comes from infrastructure last I checked (there's also been a really weird perturbation of what "infrastructure" means by the Biden administration), so propping up balance sheets for companies that should have saved for a rainy day is absurd.

Let them fire who they need to fire, then help those citizens directly, via the government programs that are literally built to do just that. 2T is enough to pay A LOT of money out to all citizens (again, some % of the full/part-time work force, which is some % of the total population of ~350M), and definitely tide them over for a year. Strategic/truly essential businesses (let's say hospitals, airlines, freight, etc) are given extra help, and that's that. I am a layman to be fair, so of course it's not this simple but I sure would have been more behind 2T given straight to people who became unemployed as a result, and letting that money trickle up back into the economy.

> If the Government can issue trillions of dollars in debt that mainly goes into regular people's pockets (stimulus checks, umemployment, 85% of PPP loans/grants, wages for pork jobs), then the Federal Reserve buying off an equal amount of debt shouldn't be seen as a stimulus for the rich.

This is wrong on it's face, and I think it's due to intentional misinformation by political actors. That first 2T stimulus (a lot of press was made about that number, it was almost fetishized) contained something like ~700B to households/household-adjacent programs, but what people overlooked was that the ~500B that went to businesses was leveraged up to 6x[0]:

> “We’ll have up to $4 trillion of liquidity that we can use to support the economy. And that’s —those are broad-based lending programs under Section 133. We can leverage our equity working with the Federal Reserve,” Mnuchin said on "Fox News Sunday," referring to a section of the Federal Reserve Act that gives the agency broad power to issue loans to borrowers who cannot secure loans.

When you take into account that these loans are going to be given at sweetheart rates, and maybe may not even be repaid (picking good lessees is hard), the popularly cited stat that "more money was allocated to households than businesses" is absolute bullshit. This is absolutely stimulus for the rich, who didn't need it to begin with, and arguably companies should have been just as prudent as we expect people to be.

[0]: https://thehill.com/homenews/senate/488879-fight-over-500-bi...

[Aunche]

I'm a layman too, so to be honest, it might not be productive for us to argue about these things. If the government issues $2 trillion dollars in bonds to fund the stimulus, that dries up the liquidity for businesses. Businesses that otherwise would have been fine weathering the pandemic with a private loan may be unable to receive one. As a result, they would have to furlough or lay off more employees, which further reduces lender confidence and sends us into a spiral that results in another Great Depression. Obviously, this is largely speculative, but my point is that in this case, QE went hand in hand with the stimulus.

> what people overlooked was that the ~500B that went to businesses was leveraged up to 6x

That was the money allocated to this program. How much of it actually went to them? I couldn't find anything super up to date, but the Federal Reserve only bought $10 billion in corporate bonds compared to the $750 billion capacity [1], and businesses only borrowed $3.7 billion of $600 billion capacity of the Main Street Lending Program.

Also, why is it that subsidized debt gets treated like it's a handout when a business takes it, but when it comes to student loans, it's treated as a liability?

[1] https://apnews.com/article/warren-buffett-corporate-bonds-fi...

[2] https://www.investopedia.com/main-street-lending-program-480...

[hardwaresofton]

> I'm a layman too, so to be honest, it might not be productive for us to argue about these things. If the government issues $2 trillion dollars in bonds to fund the stimulus, that dries up the liquidity for businesses. Businesses that otherwise would have been fine weathering the pandemic with a private loan may be unable to receive one. As a result, they would have to furlough or lay off more employees, which further reduces lender confidence and sends us into a spiral that results in another Great Depression. Obviously, this is largely speculative, but my point is that in this case, QE went hand in hand with the stimulus.

Point taken, maybe this is just 2 blind mice. I understand this argument, and agree with it on some level -- steadying the ship so people don't run on the banks is important, but it's just not that simple. Some sectors of the economy imploded and some didn't -- some grew as a result. Some companies needed the help, some arguably did not and should not have had the help extended, the indiscriminate use of this money is putting us on the road to zombie companies. The US has been doing stealth QE since 2008 with no end in sight -- we can't build real financial stability this way.

As an aside, lender confidence is still shaken, credit has not grown and is in decline in the last 1Y period[0]. Lenders aren't buying the V shaped recovery narrative. If I think of this as purely a gambit to slow the process down (i.e. give businesses more time to absorb the shock) then fine, but if the goal is to stimulate the economy policies that enrich a segment of the population that does not spend isn't all that effective. We need worker wage growth.

> That was the money allocated to this program. How much of it actually went to them? I couldn't find anything super up to date, but the Federal Reserve only bought $10 billion in corporate bonds compared to the $750 billion capacity [1], and businesses only borrowed $3.7 billion of $600 billion capacity of the Main Street Lending Program.

My point on this was the messaging, that this point was overlooked, regardless of whether it was used or not. The Fed played the situation masterfully and essentially bluffed the market into buying the corporate bonds (because they believed in the backstop), but it's this backstop-at-any-cost that is a problem in my mind.

The main street lending and PPP programs are not what I'm referring to (though there was some graft there from larger corporations). As far as the PMCCF and the SMCCF, the Fed lent out 750B[1]:

> A related initiative by the Fed was the Primary Market Corporate Credit Facility (PMCCF). Between the two initiatives, the Fed purchased $750 billion in bonds

Also, the PPPLF[2] is a bit of an issue in my mind because of this:

> The PPPLF extends term credit to financial institutions making PPP loans, accepting the PPP loans as collateral. The liquidity provided by the PPPLF helps eligible financial institutions fund additional PPP loans. The PPPLF was established under the Board's 13(3) authority and the extension from March 31 to June 30, 2021, was approved by the Secretary of the Treasury.

So their goal here is to make more money available to financial institutions to make loans but with credit in decline, who is getting these loans? Businesses who arguably do not need them and/or people with cozy access to banks.

> Also, why is it that subsidized debt gets treated like it's a handout when a business takes it, but when it comes to student loans, it's treated as a liability?

Some points on how I see this:

- Student loans are very very hard to discharge, usually persisting through bankruptcy

- The narrative is usually the opposite —- companies are to be protected at all times whereas students should have just studied something else or went to community college instead. Companies are not in the same financial position as random students but the negligence should weigh heavier on a large corporation.

- In terms of generating consumption and economic activity, companies with already-large war chests, or ones that were eager in the past to do leveraged stock buybacks and running on razor thin margins should not be rewarded for doing so. Money spent towards freeing debt for people likely to spend should do more to increase spending and increase the velocity of money (which is down in the dumps still[3]).

[0]: https://fred.stlouisfed.org/series/TOTLL

[1]: https://www.investopedia.com/secondary-market-corporate-cred...

[2]: https://www.federalreserve.gov/newsevents/pressreleases/mone...

[3]: https://fred.stlouisfed.org/series/M2V

[Aunche]

>The US has been doing stealth QE since 2008 with no end in sight -- we can't build real financial stability this way.

I agree, but in my view, the Federal Reserve is about the only institution doing their job to stabilize the economy. The problem is they're only meant to provide short term fixes, much like an ER doctor. Meanwhile, Congress primarily prioritizes bribing their voting base: Republicans through unnecessary tax cuts and Democrats through unnecessary handouts and pork spending. I agree with extending unemployment benefits during a pandemic, but it's ridiculous for single people making $75k to get a handout that comes straight from government debt.

>As far as the PMCCF and the SMCCF, the Fed lent out 750B[1]:

Your source says this, but its source is about their total capacity. If you look at their balance sheet, excluding the Main Street Lending program, they are only holding ~34.5 billion in corporate debt.

https://www.federalreserve.gov/releases/h41/current/h41.htm

[hardwaresofton]

> I agree, but in my view, the Federal Reserve is about the only institution doing their job to stabilize the economy. The problem is they're only meant to provide short term fixes, much like an ER doctor. Meanwhile, Congress primarily prioritizes bribing their voting base: Republicans through unnecessary tax cuts and Democrats through unnecessary handouts and pork spending. I agree with extending unemployment benefits during a pandemic, but it's ridiculous for single people making $75k to get a handout that comes straight from government debt.

I can definitely agree with this, the means test was a bit wonky.

> Your source says this, but its source is about their total capacity. If you look at their balance sheet, excluding the Main Street Lending program, they are only holding ~34.5 billion in corporate debt.

Ahh you're definitely right -- thanks for pointing this out again, I stand corrected.