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Quantitative Easing
Old 03-15-2009, 05:19 PM   #1
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Quantitative Easing

What exaclty does the fed do when it "prints money". Does the fed actually print money or electronically transfer money somewhere. Where?
The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of misery.

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Old 03-15-2009, 05:57 PM   #2
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Originally Posted by mark500 View Post
What exaclty does the fed do when it "prints money". Does the fed actually print money or electronically transfer money somewhere. Where?

I would say it's large transfer of credit/money to institutions participating, electronically, or through large banks to be doled out to smaller banks. It could also be in electronic dribs and drabs in the form of a line of credit such as to AIG.

In any case, it increases the amount of money/credit out there and the Fed has to balance it out by selling more bonds/securities/debts instruments. China buys this stuff up since they need a safe place to stash all the bucks we've been sending them, but they are even worried now.

So no, it would not be an actual printing press, that is done when there comes a time where more hard cash is need to be circulated, but in this electronic world, less printed cash is need, so it's simply book entries.

As an interesting note, people are worried that Obama was going to spread the wealth around. Well, when you think about it, he is spreading something around, but not the wealth, more like the losses. There is no wealth, it evaporated.

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Old 03-15-2009, 07:25 PM   #3
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They don't literally dole it out to banks, they purchase securities from banks and credit their accounts with newly 'minted' cash (in return for the securities). So its not a gift to banks in that sense.
Money's just something you need in case you don't die tomorrow.
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