Hacker News Reader

Comment by pmorici | Hacker News Reader

In the case of economics it seems there might also be large conflicts of interest at play. The 2010 documentary, "Inside Job" http://en.wikipedia.org/wiki/Inside_Job_(film) about the economic crises talks about how several prominent academic economists are essentially paid to author studies that amount to not much more than puff pieces supporting a political view point of a political party or corporation.

On another note, given that the Fed has been "quantitatively easing" (seems to be a polite term for printing money) since the financial crisis and currently holds over 3 Trillion in government and mortgage debt those actions have to be keeping interest rates lower than they otherwise might be. It's kind of burying the lead to say interest rates are super low we should borrow a bunch of money when they are being intentionally kept that way through government action.

View on HN

As far as the rates that the feds have to pay to borrow money -- that's set by the market. They can issue bonds at 0.25% and people will buy them, therefore the interest rate is that low. It's not like they're forcing people to buy. The feds aren't setting the price for that interest rate -- well, they are, but what people are willing to pay is actually what sets the price.

Quantitative easing actually should, in theory, lead to inflation and higher interest rates. It's basically printing money. I think you have it confused with counter-cyclical fed reserve short-term lending rates which, by virtue of being very low, induce banks to lend money at only a little higher.

It'd be one thing if "people" were buying the debt they're issuing as you suggest. But a lot of the Treasury debt is being purchased by the Fed. So they're keeping it all in-house. Can you say, corruption? It's an artificially low rate which few people in their right mind would pay. Which is why the only taker is another arm of the government. Currently the Federal Reserve holds $1.825 TRILLION of US debt (Treasury Securities). I.e., the Fed owns more US debt than anyone else. China holds $1.22 Trillion, Japan hold $1.097 Trillion. http://research.stlouisfed.org/fred2/series/TREAST?cid=32218 http://www.treasury.gov/resource-center/data-chart-center/ti...

If you look at the data, QE announcements and expectations have caused interest rates to rise, probably due to implied inflation.

It's alarming how people think low rates -> loose money. This has never been true in the history of central banking. Nobody would suppose Japan has loose money, or that the 70s had tight money.

Is there a way to quantify QE in personal finance terms? Like, can I saw "QE is an X% inflation" for some X, so I can apply that to my personal understanding of the purchasing power of my savings once people try spending their inflated dollars and send ripple through the economy?

Reply on news.ycombinator.com