Quote:
Originally Posted by Tyrone Slothrop
The policy is a macro one, aimed at the value of money, and it should affect everyone's behavior on the margin. It's aimed at the economy as a whole.
The point is that it's not BofA's $50 billion anymore. The Fed buys those bonds, and it essentially creates money to do so. But if your point is that the delta to the global money supply is rather small, I agree. It seems like the policy is aimed more at political critics who say the Fed isn't doing anything.
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It's too blunt an instrument for the reasons I noted. Businesses won't expand until they see sustained demand. Hence, unemployment will remain high. We know what that does in terms of foreclosures and consumer spending. Banks will naturally lend where they can get the best return on risk. That's emerging markets.
I'm confused on your second point. The Fed buys $50bil in bonds from BOA. How is that $50bil not BOA's money?
ETA: I hope your final point is wrong. If the Fed is doing this just to do give the appearance of engagement and control, Bernanke has lost his mind.
