Quote:
Originally Posted by Tyrone Slothrop
I'm not getting why you think QE is about mortgage rates. It's like saying that raising the gasoline tax is about deterring people from going out to eat at restaurants. The two are not completely unrelated, true.
eta: I see now that the confusion comes from the Washington Post. Expecting that paper to explain economic or business concepts is a fool's errand. NPR's Planet Money does a better job:
It's worth pointing out that while it sounds like a lot of money, it really isn't when you compare it to the size of the economy. |
I think you have it backward:
1. Big companies don't need loans (they have huge reserves [$1.8 trillion worth]);
2. Small to mid sized ones don't want to take on added debt, even at low rates, given the volatile economic climate.
The policy is geared toward freeing consumer dollars because those are the ones that need to be unlocked first to create demand necessary to raise revenues justifying borrowing, expanding and hiring by businesses. You have to start with the consumer and let their dollars trickle up. What's monopolizing most of the consumer's money right now? Mortgages.
But we shouldn't waste too much time discussing this because ultimately it's an academic disagreement. In the end, BofA's $50bil is going to go where most of the money the Fed has created since this crisis started has gone: Asia, to seek better, lower risk returns. Hence, all the talk of Asian bubbles.
