November 18, 2010
Posted by on
A student sent me a clever YouTube video cartoon trying to explain QE2. It scores some points on Bernanke, the Fed, and Goldman Sachs but either intentionally or unintentionally confuses demand-pull and cost-push inflation to push its point of view. It is nevertheless very entertaining.
QE Explained / A Response
I was left left with the question that is the title of this post and found this, which seemed to sum it up nicely: (From: Quora.com)
Why does the Fed buy treasury bonds through Goldman Sachs instead of from the treasury? How did this happen?
Vince de Baca, AB Econ from Princeton, Wharton MBA
AB Econ from Princeton, Wharton MBA Economics
- The Fed buys securities from banks to inject liquidity into those institutions to ensure a low cost credit supply and bank liquidity.
- If the Fed bought from the Treasury, the funds could only be used to close fiscal deficits, not having the same benefits to the financial sector and economy at large (eg lower interest rates, bank solvency).
- Also if the Treasury exclusively sold bonds to the Fed, it would diminish market confidence in the dollar and likely create inflationary expectations.
January 16, 2010
Posted by on
1/14/2010 – From the testimony of four of the nation’s top bankers before the Financial Crisis Inquiry Commission charged with determining the causes of the nation’s financial debacle.
Whatever we did, whatever the standards of the time were, it didn’t work out well.
– Lloyd Blankfein, CEO – Goldman Sachs
Somehow we just missed that, ah, you know, that home prices don’t go up forever.
– Jamie Dimon, CEO – JPMorgan Chase
These guys either take us for fools or are willing to look stupid themselves. They did get ot climb ack into their limos and laugh all the way back to their banks and bonuses. You can see these statements and more in a segment of the Colbert Report from Thursday night. It leads into a satire on derivatives. Very funny and clever.
The Word – Honor Bound (7 minutes)
Your honor was so precious to the banks that they bundled it with other people’s honor, cut that into securitized honor derivatives, and sold it to Wall Street honor speculators…until the honor bubble burst…but, that doesn’t mean that they are responsible.