Bernanke Leaves Fed with Record Balance Sheet of 4.1 trillion

[Texashiker]

http://www.cnsnews.com/news/article/ali-meyer/bernanke-leaves-fed-record-balance-sheet-4102138000000

(CNSNews.com) - Retiring Federal Reserve Chairman Ben Bernanke, who was replaced by Janet Yellen as of today, is leaving the Federal Reserve with an unprecedented $4,102,138,000,000 in total assets on its balance sheet, up 391 percent from the $834,663,000,000 in total assets the Fed showed on its balance sheet when Bernanke took over as chairman in February 2006.

I also wonder how this has affected the ability of the working class to buy a home? With few homes on the market surely prices have stayed artificially high.

Where did all of this money come from? Was it printed out of thin air with the sole purpose of propping up the housing market?

Ben said the fed was making these purchases to stimulate the economy. But how did this help working class families?

 

[nehalem256]

He also led them to record profits

More profitable than Apple and Exxon COMBINED. Impressive

 

[Newell Steamer]

Thats 4.1 trillion dollars of buying and giving away:
- illegal drugs
- tattoos
- 60 inch OLED HD TVs
- monthly cable & internet
- abortions
- iPhones
- iPads
- iPods
- oversized rims
- loud speaker upgrades to assault sane citizens just looking to get some gas and pizza
- home invasion training classes

 

[Texashiker]

Thats 4.1 trillion dollars of buying and giving away:

That 4.1 trillion is enough money to rebuild our interstate highway system like 9 times?

http://en.wikipedia.org/wiki/Interstate_Highway_System

$425 billion in 2006 dollars

 

[glenn1]

Ben said the fed was making these purchases to stimulate the economy. But how did this help working class families?

LOL, you poor naive bastard that you believed him on the first statement and could even think the second.

 

[fskimospy]

That 4.1 trillion is enough money to rebuild our interstate highway system like 9 times?

http://en.wikipedia.org/wiki/Interstate_Highway_System

$425 billion in 2006 dollars

This is a pretty serious misunderstanding of what the Fed's balance sheet is. Hint: they eventually sell these things back and get their money back, unlike what happens when you build a highway system.

 

[BoberFett]

This is a pretty serious misunderstanding of what the Fed's balance sheet is. Hint: they eventually sell these things back and get their money back, unlike what happens when you build a highway system.

Depends on what the Fed buys with that $4T. Buying US bonds could be used to build infrastructure. Buying mortgage securities frees up capital for banks to buy up smaller banks and further consolidate the industry, while simultaneously reinflating the housing market and it's unsustainable home prices.

 

[fskimospy]

Depends on what the Fed buys with that $4T. Buying US bonds could be used to build infrastructure. Buying mortgage securities frees up capital for banks to buy up smaller banks and further consolidate the industry, while simultaneously reinflating the housing market and it's unsustainable home prices.

While I am a big supporter of QE, I agree that its efficacy can depend on what the Fed does with it.

Regardless, the Fed buying assets is not the same as building roads. The idea that we could build our national highway system 4 times with the money is based on a fundamental misunderstanding of the transactions that took place.

 

[Texashiker]

This is a pretty serious misunderstanding of what the Fed's balance sheet is. Hint: they eventually sell these things back and get their money back, unlike what happens when you build a highway system.

With the banking and real estate collapse of 2008, who says the fed was not buying junk bonds? As far as we know the fed was buying junk bonds that real investors would not buy.

When you build a nice highway, or maintain roads, you allow businesses to open, you make it easier for goods to be transported. You connect a market with a supplier.

The fed could have dumped that 4 trillion into upgrading our technology infrastructure, or building more colleges.

 

[fskimospy]

With the banking and real estate collapse of 2008, who says the fed was not buying junk bonds? As far as we know the fed was buying junk bonds that real investors would not buy.

When you build a nice highway, or maintain roads, you allow businesses to open, you make it easier for goods to be transported. You connect a market with a supplier.

The fed could have dumped that 4 trillion into upgrading our technology infrastructure, or building more colleges.

No. For the second time, buying assets is not the same as spending money on infrastructure.

You have no idea what you are talking about.

 

[Texashiker]

No. For the second time, buying assets is not the same as spending money on infrastructure.

Where did I say it was the same?

You have no idea what you are talking about.

You are assuming I said something I did not.


Instead of using that money to better the general public, the fed has helped bankers corner the housing market.

With the fed bond buying program the banks were free to loan money to whoever and with no consequences to the lender. Now the fed is one of the largest property owners in the United States, but at what cost?

By keeping home prices artificially high, the fed is keeping who knows how many families from home ownership.


With the same amount of money the fed has dumped into the mortgage backed bond market, we could have had our entire highway system rebuilt, we could have built colleges, hospitals,,,, stuff that benefited everyday working people.

 

[fskimospy]

Where did I say it was the same?

You are assuming I said something I did not.


Instead of using that money to better the general public, the fed has helped bankers corner the housing market.

With the fed bond buying program the banks were free to loan money to whoever and with no consequences to the lender. Now the fed is one of the largest property owners in the United States, but at what cost?

By keeping home prices artificially high, the fed is keeping who knows how many families from home ownership.

With the same amount of money the fed has dumped into the mortgage backed bond market, we could have had our entire highway system rebuilt, we could have built colleges, hospitals,,,, stuff that benefited everyday working people.

You said that for that amount of money we could have rebuilt our highway system 4 times. If you understand the nature of those transactions you would understand that is hilariously wrong.

 

[Texashiker]

You said that for that amount of money we could have rebuilt our highway system 4 times. If you understand the nature of those transactions you would understand that is hilariously wrong.

Is my math wrong? $425 billion multiplied by 4 equals what?

The goal of the quantitative easing was to stimulate the economy.

How is cornering the housing market and keeping prices artificially high helping the economy? And all of this by printing money out of thin air? Where did the money come from for the banks to corner the housing market?

 

[fskimospy]

Is my math wrong? $425 billion multiplied by 4 equals what?

The goal of the quantitative easing was to stimulate the economy.

How is cornering the housing market and keeping prices artificially high helping the economy? And all of this by printing money out of thin air? Where did the money come from for the banks to corner the housing market?

Because asset purchases aren't the same as infrastructure spending. The cost to the Fed is nowhere even remotely near the same, nor are the effects on the economy.

That's the last time I'm telling you. Yet again you have no understanding of what you're talking about.

 

[Tango]

The goal of the quantitative easing was to stimulate the economy.

Not really. QE is an alternative instrument of monetary policy particularly useful when you get close to the zero lower bound. The extraordinarily accommodative monetary policy used in the past few years was necessary to avoid the risk of spiraling into deflation, which is consistent with the first mandate of every central bank, maintaining price stability by targeting a specific narrow range of inflation rates (in the case of the FED around 2%).

 

[Texashiker]

That's the last time I'm telling you. Yet again you have no understanding of what you're talking about.

Tell me how everyday working people are supposed to buy a home when the fed is helping the banks corner the real estate market.

Tell he how a working class family is supposed to buy a home when the fed is keeping prices artificially high.

The extraordinarily accommodative monetary policy used in the past few years was necessary to avoid the risk of spiraling into deflation,

Deflation is a good thing. People might be able to buy a home.

 

[Capt Caveman]

Tell me how everyday working people are supposed to buy a home when the fed is helping the banks corner the real estate market.

Tell he how a working class family is supposed to buy a home when the fed is keeping prices artificially high.




Deflation is a good thing. People might be able to buy a home.

:biggrin:

 

[fskimospy]

Deflation is catastrophic.

 

[Texashiker]

Deflation is catastrophic.

How is your money having more buying power catastrophic?

Would you rather a gallon of milk cost $5 or $2?

Personally, I would like to take my wife out to a nice dinner for $20, instead of it costing $50.

 

[Genx87]

Deflation is an issue in a consumer driven economy. During times of deflation it is advantageous to hold onto money instead of spending it as it gains value. This further drives down economic output and drives up deflation. Hence the deflation spiral. If I got this wrong I am sure somebody will be by to correct me.

 

[Texashiker]

During times of deflation it is advantageous to hold onto money instead of spending it as it gains value.

Really? People hold onto their money instead of buying stuff their could not afford?

After the Sandy Hook shooting AR15 parts tripled and quadrupled and more in price. Magazines went from $10, to $75.

Now that magazines and parts are back to their normal prices, are people not buying AR15 parts? No, they are buying as many parts as they are getting their hands on.

I am in the process of building my 4th rifle, when just a year ago I could not afford to buy magazines.

So tell me how people hold onto their money when they can suddenly afford to buy stuff.

If homes went from $750k to $100k, working class people might be able to afford to buy.

 

[Genx87]

Imagine you have 10,000 dollars in the bank. Deflation is occurring at 4%. Why would you spend money when it is earning 4% by sitting? Why spend money when that AR-15 is deflating in cost by 10% or more monthly? You would wait until you felt it was at the bottom.

A good example of this is the housing market. How many people were out buying houses while that market was deflating? It took in some places a 50-60% deflation in price before it hit rock bottom and people entered the market again. And that was while the govt was printing money in an attempt to reinflate the bubble.

Look I do agree that the markets should sort themselves out. But unfortunately there are also realities when it comes to monetary policy that I cant pretend dont exist.

 

[Tango]

Deflation is a good thing. People might be able to buy a home.

Deflation is THE worst thing that can happen to an economy. It is the very reason why central banks target a contained but strictly positive inflation rate.

 

[Texashiker]

Imagine you have 10,000 dollars in the bank. Deflation is occurring at 4%. Why would you spend money when it is earning 4% by sitting? Why spend money when that AR-15 is deflating in cost by 10% or more monthly?

Your example is a little extreme.

Deflation is THE worst thing that can happen to an economy. It is the very reason why central banks target a contained but strictly positive inflation rate.

Explain to me why deflation is bad.

If homes, food, cars, trucks, clothing,,, all decreased in price, wouldn't that be a good thing? There was a news article several months ago saying the average working family can no longer afford to buy a new car. Home ownership is out of the question for most people.

Inflation is the worst thing that can happen. This is why working families have less buying power now than they did in the 1970s.

 

[Genx87]

Your example is a little extreme.




Explain to me why deflation is bad.

How is it extreme?