The Fed’s $600 Billion Statement, Translated Into Plain English

This topic has 235 replies, 17 voices, and was last updated 14 years ago by NotCranky.

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November 4, 2010 at 5:03 PM #18160

jpinpb
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Don’t know if anyone posted this yet. Please disregard if someone has.

The economy still sucks. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Companies are buying more stuff, for now, but they’re not building new factories or offices. Nobody’s hiring. Nobody’s building. Inflation has gone from low to super low.

The Fed has two main jobs: Keep unemployment low and prices stable. At the moment, as you may have heard, unemployment is really high. And inflation is so low that it’s making us nervous. We keep saying that unemployment’s going to fall. And it keeps not falling.

So to give the economy a kick in the ass—and to pump up inflation a little bit—we decided to go on a shopping spree. First of all, we’re going to keep buying new stuff when our old investments pay off. Second—and this is the big news for today—we’re going to create $600 billion out of thin air and use it over the next eight months to buy bonds from the federal government. We hope this will make interest rates go so low that people will borrow and spend more money, and companies will start hiring. By the way, this is an experiment, and we don’t really know how it’s going to work out. We reserve the right to change our plans at any time.

Of course, we’ll continue our policy of letting banks borrow money for free. If you’re worried this is going increase inflation and destroy the dollar, please reread everything we’ve said to this point. We plan to keep rates near zero for as long as it takes, but we won’t tell you how long that is. In the meantime, we’ll keep an eye on things

November 4, 2010 at 5:04 PM #626883

jpinpb
Participant

Thomas M. Hoenig. He’s the president of the Kansas City Fed, and he’s voted against Fed policy at every one of our meetings this year. He thinks this whole creating-$600-billion-out-of-thin-air thing is going to do more harm than good. He also thinks that all this money we’ve pumped into the economy could inflate another bubble and create widespread worries about inflation. That could lead us right into another crisis

Feds 600 billion statement translation

November 4, 2010 at 5:04 PM #626962

jpinpb
Participant

Thomas M. Hoenig. He’s the president of the Kansas City Fed, and he’s voted against Fed policy at every one of our meetings this year. He thinks this whole creating-$600-billion-out-of-thin-air thing is going to do more harm than good. He also thinks that all this money we’ve pumped into the economy could inflate another bubble and create widespread worries about inflation. That could lead us right into another crisis

Feds 600 billion statement translation

November 4, 2010 at 5:04 PM #627516

jpinpb
Participant

Thomas M. Hoenig. He’s the president of the Kansas City Fed, and he’s voted against Fed policy at every one of our meetings this year. He thinks this whole creating-$600-billion-out-of-thin-air thing is going to do more harm than good. He also thinks that all this money we’ve pumped into the economy could inflate another bubble and create widespread worries about inflation. That could lead us right into another crisis

Feds 600 billion statement translation

November 4, 2010 at 5:04 PM #627641

jpinpb
Participant

Thomas M. Hoenig. He’s the president of the Kansas City Fed, and he’s voted against Fed policy at every one of our meetings this year. He thinks this whole creating-$600-billion-out-of-thin-air thing is going to do more harm than good. He also thinks that all this money we’ve pumped into the economy could inflate another bubble and create widespread worries about inflation. That could lead us right into another crisis

Feds 600 billion statement translation

November 4, 2010 at 5:04 PM #627951

jpinpb
Participant

Thomas M. Hoenig. He’s the president of the Kansas City Fed, and he’s voted against Fed policy at every one of our meetings this year. He thinks this whole creating-$600-billion-out-of-thin-air thing is going to do more harm than good. He also thinks that all this money we’ve pumped into the economy could inflate another bubble and create widespread worries about inflation. That could lead us right into another crisis

Feds 600 billion statement translation

November 4, 2010 at 5:23 PM #626893

Arraya
Participant

http://www.oftwominds.com/blognov10/asset-deflation11-10.html
Asset Inflation/Deflation: The Fed’s QE2 vs. $15 Trillion in Losses (November 2, 2010)

Given that the economy faces $15 trillion in writedowns in collateral and credit, the Fed’s $2 trillion dollars in new credit/liquidity is insufficient to trigger either inflation or another speculative bubble.

November 4, 2010 at 5:23 PM #626972

Arraya
Participant

http://www.oftwominds.com/blognov10/asset-deflation11-10.html
Asset Inflation/Deflation: The Fed’s QE2 vs. $15 Trillion in Losses (November 2, 2010)

Given that the economy faces $15 trillion in writedowns in collateral and credit, the Fed’s $2 trillion dollars in new credit/liquidity is insufficient to trigger either inflation or another speculative bubble.

November 4, 2010 at 5:23 PM #627526

Arraya
Participant

http://www.oftwominds.com/blognov10/asset-deflation11-10.html
Asset Inflation/Deflation: The Fed’s QE2 vs. $15 Trillion in Losses (November 2, 2010)

Given that the economy faces $15 trillion in writedowns in collateral and credit, the Fed’s $2 trillion dollars in new credit/liquidity is insufficient to trigger either inflation or another speculative bubble.

November 4, 2010 at 5:23 PM #627651

Arraya
Participant

http://www.oftwominds.com/blognov10/asset-deflation11-10.html
Asset Inflation/Deflation: The Fed’s QE2 vs. $15 Trillion in Losses (November 2, 2010)

Given that the economy faces $15 trillion in writedowns in collateral and credit, the Fed’s $2 trillion dollars in new credit/liquidity is insufficient to trigger either inflation or another speculative bubble.

November 4, 2010 at 5:23 PM #627961

Arraya
Participant

http://www.oftwominds.com/blognov10/asset-deflation11-10.html
Asset Inflation/Deflation: The Fed’s QE2 vs. $15 Trillion in Losses (November 2, 2010)

Given that the economy faces $15 trillion in writedowns in collateral and credit, the Fed’s $2 trillion dollars in new credit/liquidity is insufficient to trigger either inflation or another speculative bubble.

November 4, 2010 at 5:54 PM #626903

faterikcartman
Participant

How often do models get their nose rubbed in it by the real world?

November 4, 2010 at 5:54 PM #626982

faterikcartman
Participant

How often do models get their nose rubbed in it by the real world?

November 4, 2010 at 5:54 PM #627536

faterikcartman
Participant

How often do models get their nose rubbed in it by the real world?

November 4, 2010 at 5:54 PM #627661

faterikcartman
Participant

How often do models get their nose rubbed in it by the real world?
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