Quantitative Easing

People, Power, and Money

These posts will be about people, power, and money. Those of you with left-leaning notions will probably immediately buy into the idea that the rich and powerful exploit the poor and powerless, but the purpose of these writings will be to illustrate how exactly this happens. It’s too easy to repeat glib clichés – and many of the standard talking points of the left are distractions from the real issues. I’ll give you better ammunition.

For those of you on the right, perhaps including some of my colleagues from the murky world of finance, these posts will probably make you laugh or sneer. My experience is that many of you are pretty far down the neo-liberal, self-interested, hippy punching rabbit hole. For those of you who aren’t, the ideas and intellectual traditions of the left will add a lot of value to your understanding of the world. Better to understand things as they are, not as you want them to be. Hopefully having these ideas espoused by someone ‘on the inside’ will at least let you get past your phenomenally strong preconceptions, it might even change your mind a little!

So, let’s have the first salvo, the first ammo clip for the left, and the first, ‘Huh, maybe that’s why poor people are so angry at us…’ for the right! Let me start with something finance people know is true, but those on the left may not. The US Federal Reserve (i.e. the US Government)1 is currently handing rich people $85 billion a month. It’s called quantitative easing (QE). They buy bonds from rich people because it’s the only method they’ve got to create new money, which they think they need to do to make up for a lack of demand in the economy. I say rich people because bonds are IOUs that are bought by investors, i.e. those with lots of money to invest, i.e. not you2. They hope that by doing this, the new money will be lent to people who can then buy things or invest it in productive businesses, but let’s be absolutely clear: step one is to hand $85 billion per month to the wealthy and let them decide if they then want to lend it on to anyone else. The central policy that the US is using to try and stimulate recovery could not be better designed to put money and power in the hands of the wealthy.

This is what’s really going on in the world. When was the last time you read about that? When I hear QE described in the news, it’s as an arcane and technical bit of monetary policy that’s necessary to ‘keep the economy moving’. But it is exactly as I have described it above. Challenge an economist/banker to fault that explanation and watch them fumble. So, lefties, get this out any time you need a true and shocking fact about just how unfair our current brand of capitalism is! And, to my fellow financiers, is this really the smart way to run things?

 

1 If you want to play semantics over whether the fed is part of the government, f*ck off to another blog where people like arguing over trivialities.

2 Yes, it’s true that poor people have some savings and may be benefiting, but the vast majority of financial assets are owned by the rich.

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2 thoughts on “People, Power, and Money

  1. sceptic says:

    Surely they are only handing them the amount by which $85m exceeds their purchase price and that depends on when they bought?

    • simplysellside says:

      I’m thinking in sectoral terms here. This represents an increase of investors cash balances. It creates new purchasing power then awards it to a particular sector.

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