edit: "from making profitable trades" -> "from not making trades"
They're also buying assets, e.g. Treasuries. This is about increasing liquidity, not printing money.
Lets remember what causes slowdowns in productivity, panics, the great depression, the recession etc: people being slammed with too high interest rates for what's feasible for them to repay when times are tough. If the fed offered low interest rates directly it would be a different world. Remember also, the world is an auction house, so when people get these kinds of perks and you don't, your money doesnt go as far.
If I want to give my friend a loan, I need to earn that money first by working hard. FED does not conduct any profitable activity that would earn them any money, they DO PRINT that money from thin air.
I mean you just magically put $15T into circulation?
Won't this lead to inflation?
If you have ever taken a loan from a bank you are aware that you must prove to the bank that you are able to repay the sum. Based on the information they receive they will calculate the default risk and increase the interest rate accordingly.
Warning. Extremely simplified for ease of demonstration.
If you have a 50% default risk then someone else has to cover your missed payments. For every $10k you want to borrow the bank has to ask for another $10k in additional interest to cover the default risk. If your loan lasts 8 years that means $833 additional interest per year or around 8%.
Now, if you are a young poor person with a bad credit score then you might end up paying 5% on top of the actual interest rate. Negative interest: 5% - 0.1% = 4.9%. Positive interest: 5% + 1% = 6%. I'm glossing over compounding interest but the picture is clear. Negative interest rates are not going to meaningfully change the cost of borrowing money for the average person unless they get a mortgage that is backed by the value of the house. Meanwhile for rich people and companies who can get rates as low as 1% lowering the interest rate to -0.1% is almost like a cheat code. At those rates the money might as well be free.
The situation is exactly as kylebenzle inferred; the Fed is injecting new fiat money into the economy and it's going straight into the pockets of rich financial institutions which add no value whatsoever to the economy or society.
The alternative is, the bank collapsing, taking some part of the economy with it.
I remember 2 years ago the market throwing a tantrum because of the fed unwinding it balance sheet. Doesn’t that mean that typical loans are never repaid and the Fed just let the bonds mature?
Financial institutions control who gets levered money (loans). They provide a huge value to an economy and society in a fractional reserve banking system.
You are upset about the Fed, when you should be upset about the government who controls fiscal policy. The government can provide tax holidays and other benefits more directly to people, as is their role, not the Fed.
Both the government and the Fed are to blame; one for designing the whole scheme and the other for implementing it. I'm upset about the idea that the Fed can inject money into the economy based on obscure criteria. From the perspective of an average citizen, who is legally obliged to accept Fed money in exchange for their labor, whatever set of criteria the Fed chooses is going to be inherently inadequate; the mere lack of transparency behind the Fed's operation is by itself sufficient to discredit the validity of the entire operation.
Money backed by gold was good money precisely and fundamentally because everyone understood what gold was and where it came from. Now, essentially nobody knows what fiat money is or where it comes from and yet everyone is legally obliged to accept it.
Even when "money backed by gold" was a slightly less completely inaccurate fiction than it is now, what people "knew" to be money was many, many, many different things, depending on where they were and what they did for work.
Stories like this are like religious narratives, and "money backed by gold" is like the story of the angry god allegedly giving tablets to some dude. It is at BEST an allegory but yall go and read it like it happened.
Money is a much more interesting topic that goldbugs give it...um...credit for.
There is another recent discussion on HN:
https://news.ycombinator.com/item?id=22573204
that has a lot of pointers to good resources from which to begin the discovery process.
Personal finance and monetary policy are not similar even though they both involve money. Money in your bank account is not the same as money in the Federal Reserve or even money printed at a mint.
That's what central banks want you to believe: that what they are doing is something special, "God's work" - as some drunk Goldman Sachs executive put it. Truth is: law of economics are pretty much like laws of physics - they work the same in small and large scale. It is no coincidence that Great Depression happened in 1929, mere 16 years after FED was created - that was just a first of many consequences of central bank's irresponsible actions.