View Poll Results: Is QE Socialism for the Rich and Bankers?

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Thread: Is QE Socialism For the Rich and Bankers?

  1. #31
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    Re: Is QE Socialism For the Rich and Bankers?

    Quote Originally Posted by OrphanSlug View Post
    "Solely" the intention, no. But it was a listed intention based on how QE1 was to be handled and it ended up being a key reason that banks did not lend it all out. The sobering truth is banks do not lend out reserves they have held as deposits at the Fed gaining interest.
    So again, the question is that if the intention of the Federal Reserve was to stimulate bank lending, then why did they keep doing it when it was obvious that the banks were not doing that, but rather parking the reserves at the Fed as you indicated, and earning interest? One could legitimately conclude that the purpose at the very least, when it became apparent that the strategy was not working, became solely to prop up bank balance sheets in this way and not to stimulate lending.

  2. #32
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    Re: Is QE Socialism For the Rich and Bankers?

    Quote Originally Posted by MildSteel View Post
    So again, the question is that if the intention of the Federal Reserve was to stimulate bank lending, then why did they keep doing it when it was obvious that the banks were not doing that, but rather parking the reserves at the Fed as you indicated, and earning interest? One could legitimately conclude that the purpose at the very least, when it became apparent that the strategy was not working, became solely to prop up bank balance sheets in this way and not to stimulate lending.
    You are giving the Fed slightly too much credit here. The Fed entirely on their own cannot force lending, but they can encourage it. Our issue for this thread is that effort was submarined by competing economic policy that suggested Banks pass "liquidity" regulations *and* competing Fed policy that relied more on increased reserves over increased currency. This was further compounded by lack of economic action from Congress to effect aggregate demand. Lending itself faced both headwind from competition policy and lack of reason to lend, business models did not suggest going into debt for economic growth which was not there anyway.

    It was not quite as sinister as you are making it out to be, but it was at least purposeful in propping up the banks by design. What we cannot forget is how unhealthy the financial system was plagued by a level of "bad debt" taking down institutions that were over 100 years old. The economy was in complete free fall looking for a floor, and we did hear about "run on the bank" concerns. If that had happened the floor would have been much further down. All the Fed really did was exchange "bad debt" for reserves held as deposits, and extension of phantom money in a Fiat Money system such as ours. The point being, stop the bleeding before it took down our entire monetary system.

    QE's net effect was slightly different than purpose, but in combination with low interest rates and a lack of economic policy from DC the only plausible outcome was inflated equity markets. We got that, and it explains well why financial stocks themselves are still not too attractive yet every other sector of the market is overbought and well into bubble territory. Or, why wealth won and everyone else raced to the bottom. Aggregate demand was not addressed well enough with the Recovery Act of 2009 (and subsequent spending bills.) Again, aggregate demand cannot be handled exclusively by the Fed dealing with monetary policy.
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  3. #33
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    Re: Is QE Socialism For the Rich and Bankers?

    Quote Originally Posted by mildsteel View Post
    the federal reserve engaged in qe by bailing out the big banks and keeping interest rates low. The fed literally took trillions of dollars in bad debt from the big banks and place it on its books where it sits to this very day. It did not take any debt from ordinary consumers. Not only that, but keeping interest rates low has artificially driven up asset prices, which is where the rich have their wealth. This has resulted in the rich getting richer, while at the same time middle class wages have basically remained stagnant.

    Is the fed engaging in socialism for the rich and bankers?
    yes!!!
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  4. #34
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    Re: Is QE Socialism For the Rich and Bankers?

    Quote Originally Posted by OrphanSlug View Post
    It was not quite as sinister as you are making it out to be, but it was at least purposeful in propping up the banks by design. What we cannot forget is how unhealthy the financial system was plagued by a level of "bad debt" taking down institutions that were over 100 years old. The economy was in complete free fall looking for a floor, and we did hear about "run on the bank" concerns. If that had happened the floor would have been much further down. All the Fed really did was exchange "bad debt" for reserves held as deposits, and extension of phantom money in a Fiat Money system such as ours. The point being, stop the bleeding before it took down our entire monetary system.
    The bolded part is right. That "exchange "bad debt for reserves held as deposits" is socialism for bankers. When bankers got in trouble, the Fed stepped in and took the bad debt off of their hands. But when consumers get in trouble, they are told to be responsible and face the consequences of their decisions. Socialism for the bankers and rich, capitalism for the middle class and poor.

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    Re: Is QE Socialism For the Rich and Bankers?

    Quote Originally Posted by MildSteel View Post
    The bolded part is right. That "exchange "bad debt for reserves held as deposits" is socialism for bankers. When bankers got in trouble, the Fed stepped in and took the bad debt off of their hands. But when consumers get in trouble, they are told to be responsible and face the consequences of their decisions. Socialism for the bankers and rich, capitalism for the middle class and poor.
    Not really. Socialism in the economic sense is about the function of ownership, a government method to organizing both labor under social ownership of the industries.

    The Fed is not the government, but rather an independent central bank whom can come up with monetary policy without approval of the President (or any executive department) and they also have no funding appropriated by Congress. The Fed has authority under Congress but not at Congress' micromanagement, which is why the Fed reports to Congress on matters but without seeking approval of future Fed decisions made. Just a back and forth on explanation, or the collision of monetary policy with the politics of economic policy. While not a private owned organization as such, the Fed hardly qualifies as government owned or some function of social ownership. For example, Debt held by the Fed is not Intergovernmental Debt. Another, Assets held at the Fed are not owned by the government. Even though the Treasury is the recipient of most of the Fed's profits, there is stock issuance to member banks (thus profit to member banks.) It is convoluted I know, but it is not socialized in terms of government ownership.

    If anything, what has become realized is the Fed is an oligarchical organization protecting wealth.

    What *did* become "socialized" was financial institution losses, in the form of bailouts (that some banks did not even want.) In that case, the Treasury was authorized to purchase toxic assets and even put conditions on the banks in the exchange. That was a direct cash infusion into the banks (not reserves from the Fed through QE,) and is a good example of socialized losses when the business model for privatized gains failed for whatever reason. In some cases, there was a stock swap in lieu of the bailout cash. Meaning government ownership stake in these companies. Or, an element of socialized ownership. But, it still was not full on socialism.

    The consumer on the other hand was not handled by either Fed actions with QE (any version of,) nor Treasury actions authorized under the Emergency Economic Stabilization Act of 2008 (110th Congress and signed by Bush 43.) Socialism for bankers occurred at the moment they got cash from the Treasury (government,) but that is not quite what the Fed did.

    I think your judgement is being clouded by wanting your theory to be true. But in all fairness, you were close.
    "Every time something really bad happens, people cry out for safety, and the government answers by taking rights away from good people." - Penn Jillette.

  6. #36
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    Re: Is QE Socialism For the Rich and Bankers?

    Quote Originally Posted by OrphanSlug View Post
    What *did* become "socialized" was financial institution losses, in the form of bailouts (that some banks did not even want.) In that case, the Treasury was authorized to purchase toxic assets and even put conditions on the banks in the exchange. That was a direct cash infusion into the banks (not reserves from the Fed through QE,) and is a good example of socialized losses when the business model for privatized gains failed for whatever reason. In some cases, there was a stock swap in lieu of the bailout cash. Meaning government ownership stake in these companies. Or, an element of socialized ownership. But, it still was not full on socialism.
    That's right, it was not full socialism. It was socialism for the rich and bankers and capitalism for the middle class and the poor.

  7. #37
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    Re: Is QE Socialism For the Rich and Bankers?

    QE has nothing to do with socialism. It is however the wrong answer for the structural problems facing Western economies.

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