Understanding the Fed’s “Money Printer” (QE, the Stock Market, and Inflation)

Comments (31) on “Understanding the Fed’s “Money Printer” (QE, the Stock Market, and Inflation)”

1. Congrats Ben for your silver plate and another great video! Just one thing. Interest rates are a market mechanism to price investments. Agents are willing to pay less (that is, only accept a larger rate) for the same future income if it is more uncertain and further in time to the present . By arbitrarily reducing interest rates, central banks manipulate this mechanism and allow lower quality investments to be executed, like if agents were willing to take bigger risks and wait longer than they actually would.

   If in certain circumstances private banks deteriorate their liquidity (and that can happen not only by not owning enough deposits but also owning poor quality debt titles for poor investments) so as to reach a point where the more liquid ones can’t lend to the more iliquid ones in the overnight money market, in the abscence of a central bank they would have to clear some of their assets to increase their liquidity and account losses. That way bad investments, coming first, would lack funding and the more profitable businesses would remain. Since central banks exist and behave like they do, this clearance never takes places and a zombification of the economy takes place, producing long term scenarios like the one we see in Japan.

   How can this process not worsen expected market returns for indexed investors? It appears like the only future we are heading at. Thanks again for your work and effort Ben! I would love to hear your answer for this.

2. Good to have you back Ben! Been looking forward to your solid insights on investing and personal finance.

3. Great to see you back ben! I agree with everything you’ve said here, but it’s worth noting the recent trend towards OECD governments and central banks buying up corporate bonds and even investing in ETFs in a bid to shore up asset prices. These actions certainly fall outside the specific topics you’re addressing in this video but they’re worth bearing in mind when discussing the recent asset price recovery, as well as market confidence in general.

4. Thanks Felix. Finally someone who gets the money creation mechanism right, there are to many “experts” on YT who spread misinformation about the topic.

5. Thanks for taking the time to go deep into the details!
   This was a challenging video. I had to pause often to think back on what was said, but still got very confused understanding the various mechanisms.
   That said, I can see how this system therefore ties into the ‘long term debt cycle’ (as described by Ray Dalio) in which extended periods of short term lending and inflation eventually slip into deflationary phases.

6. Congrats Ben! Your content is valuable, clear, and helpful. You deserve the recognition!

7. Fantastic breakdown, mate – very comprehensive. Must’ve taken a while to pull this all together. Many thanks! 🙏

8. Stellar as usual. I love how you break things down. Thanks for educating the masses, Ben!

9. Incredible video, Ben. Glad to see you back. Even if the wait was long, the quality of your content is always a good reward. You deserve a wider viewership in the Youtube finance world, as you’re simply the best.

10. Fantastic video Ben, great to see you back and congrats on the YouTube milestone.

    Do you think you would be able to create a similar video as it relates to the mechanics and theories out there on Modern Monetary Theory? There was an interesting note I saw which spoke about governments ‘capacity to spend’ and how central banks could ‘buy’ the new debt/bonds as issued by its government. Seen also lots of confusion on it, I feel it would be a hit!

11. Hi Ben, thank you for the video. I have some questions as it contradicts my current understanding.

    1. How is it able to counter deflation if the Feds assets purchage is not inflationary?

    2. In 2008 Fed purchased sub prime mortgage backed securities which were toxic. When Fed buys those assets at a value that market is not ready to pay due to their quality being known, is it not more than changing the composition of the reserves? like changing fake gold with real gold seems to me like injecting money.

    1. I’ve always been wondering the second question. And now I’m curious to know the answer to the first question too. Ben, if you’re reading this, please answer these 2 questions!

    2. Great questions!

    3. Great question. For the second question, as you would know, we had inflation during and after the 2008 conundrum. Since the loans were being made out to consumers, not in the reserves. Banks had little reserves.

    4. Iirc, with respect to the second question, the value of much of the assets at the time wasn’t in the toilet because they were inherently toxic but because nobody could tell what was and wasn’t toxic, plus people had the jitters about the market generally. Over time, the value of much of it returned and the Fed was able to sell them back at a profit. So what the Fed did was temporarily asuume risk that others couldn’t tolerate. Because of that, it wasn’t like trading fake gold for real gold, not injecting money. What it did was inject stability.

    5. The Fed did not purchase the toxic loans. They were purchased by The Treasury under the TARP program, bc the Fed was allowed to buy those commercial assets.

12. Great video! Important to keep in mind that QE is still considered a controversial measure by economists. Although there is a neutrality in money, there is a point where prices become fully elastic, when 0 percent real interest rates occur, and that is when there is no difference in terms of liquidity between any of the assets. There is no data to use as a model on how that coupled with large amounts of debt will be handled by the market.

13. Ben, thank you so much for your informative and comprehensive videos regarding an increasingly misunderstood topic.

    I have a request for you and I hope you do come across this comment. Is it possible for you to explain to us economic uncertainty as a systematic risk? There have been multiple academics who attempted to quantify economic uncertainty using news-based or market-based approaches but this is a hot topic that is quite relevant these days. What are the implications for businesses in an environment of increasing uncertainty?

14. Great video! Would be great if there is a part 2 of this video addressing some of the concerns in the comments ! Amazing content Ben 🙂

15. Ben, what a great video. I commented about three weeks ago that I didn’t think your description was 100% accurate. I stand corrected. This video is worth more that a semester at Harvard Business school on macroeconomics. I’ve always been fascinated by the global financial system, but honestly couldn’t get my head around what QE does. After reading one of the books you recommended and other readings I feel like my eyes have been opened. I know you’re 100% against trying to time the market, however after being enlightened by your description I’m convince more than ever that we are in a massive asset bubble driven by false fears that cash is worthless and the false belief the Fed can fix an economy with this much unemployment. Thank you for the great videos and information. You have a gift!

    1. @Chris Robbins i could be happier. I work on funding infrastructure projects and love building things. A lot more would be get built, business would grow faster and therefore humanity move forward quicker once more people grasp how the money magic trick actually works. We are only controlled by the elites because they had this knowledge hidden and controlled by mind control (govern mind/ment).

       The actual asset we build like a bridge, tunnel, motorway, factory, house, office etc creates the value that therefore creates the fictional numbers (currency). The people that control the creation of currency are supposed to be acting as trustees of the Global-Common-Wealth, that’s how they originally justified their divine right to do so. When the trustees create the currency to fund projects they are not supposed to charge the trust interest (usury), as that would not be acting in the interest of the trust for the beneficiaries (us, all of us).

       However with the introduction of Corpus Juris (fictional jurisdictional law of the sea, aka the matrix) the elites have created a construct that instead inverts the world around us. They’re stealing from us directly via taxation, they have re-introduced usury to create indentured servitude and most of all they have hidden the Global-Common-Wealth from us, which is our birthright (garden of Eden, the earth). No one can own the earth, we are only supposed to be guardians/trustees of the earth for the next generation. The whole ownership system is the beast system. By being told the elites are trying to implement the New World Order in all these conspiracy theories your being conditioned to think it’s coming instead of it’s already here.

       Once people realise that the Global-Common-Wealth is magnitudes greater than all the fictional debts, mortgages, bonds, treasuries etc is when we finally see the matrix and walk out from under its control/authority , by no longer understanding (Stand under) Corpus Juris.

       So I would be a lot happier if more people comprehended the way the world/matrix actually works rather than argue about the fictional nonsense designed to distract and deceive most intelligent people.

    2. @jerel42 not as a crazy as the people who think current sea (currency) is backed by nothing, or what about the ones that think viruses exist without ever seeing proof.

       Too many people just accept what they are told by the programming on the Tell a Vision and never look at the source material.

    3. @Ben Felix is it correct to say that money isn’t necessarily created when the loan is issued but rather when the loan is paid back? The way I see it, at the time the loan is issued it is just transferring money from the bank to the borrower. The new supply of money would come when the borrower makes payments on the loan.

    4. What was the other book?

16. I just found this channel. This guy is so incredibly good. No-nonsense and provides studies to back up all of his talking points. On top of that, the graphics displayed to reinforce the concepts are so helpful. Watching this video basically completely dispelled some false beliefs I was holding and made me instantly hungry to learn more about how money works. What more could I ask for from a youtube video?

17. Thanks Ben for the video. I’m a CFO I’ve been studying finance and monetary policy for about 25 years and you have done the best job that I’ve seen on how QE works. From what I have learned so far, everything you say is correct. I’ve had to put the jigsaw together from information that I read and learned along the way to understand how QE works and it took me many years. I wish you did this video 10 years ago and you would have saved me a lot of time. If people got their heads around your video, then they would be miles ahead of most bankers, finance professionals and politicians. You’ve done a great job in explaining the monetary system in a simple manner, thanks again for your great work.

    1. “im an cfo”

    2. I must agree. It takes time to put much of this information together and have it sink in. This is not “banking 101.” I wonder how many bank clerks even understand this level of finance.

       Many kudos to Ben on his research and efforts in compiling this video, it is most appreciated here.

18. I’d been really struggling to understand the money creation process by banks for ages. This is the best explanation I’ve found. Thank you

19. Much love to you Mr. Ben you’ve taught me so much since I’ve found out about your channel recently. Please keep up the good work, I hope to enlighten others just as much as you have. ❤️

20. Thank you so much, Ben, for great explanation!
    When I was learning these concepts ten years ago, I could only dream of such a clear, easy to grasp video.

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