Steve Keen has an interesting piece up over at Forbes that describes the folly of QE and how it doesn't actually do what people thing it does.
The central points are correct. The amount of reserves in aggregate existing in the banking system is determined largely by the Central Bank, they don't get lent out and overall they can't really go anywhere other than back and forth.
However there are few things in there that perhaps could be misinterpreted.…3spoken
Accounting for the Folly of QE
Neil Wilson
5 comments:
http://www.theguardian.com/world/2016/feb/16/refugees-are-becoming-russias-weapon-of-choice-in-syria
"Turkey sees targeting of civilian hubs as a deliberate attempt to create mass outflow of people and vacuum for pro-Assad forces to fill"
Did Bernanke actually say that commercial banks lend out reserves, as claimed by Keen? It’s not 100% clear to me from the quote at the start of Keen’s article that that’s what Bernanke meant to say. Though he could have been a lot clearer.
Just after the above quote, Bernanke says, “Such purchases should in principle both raise asset prices and increase the growth of broad measures of money, which may in turn induce households and businesses to buy nonmoney assets or to spend more on goods and services.”
That’s very much the standard explanation as to why QE supposedly works. So all in all my guess is that Bernanke’s explanation as to why QE works is the standard one, not the “lend out reserves” one.
That's very possible Ralph. These short pieces lead to loads of misinterpretation.
Ralph-
Bernanke most definitely said that:
http://www.wsj.com/news/articles/SB10001424052970203946904574300050657897992
sorry its behind WSJ paywall, here's the quote:
"
“But as the economy recovers, banks should find more opportunities to lend out their reserves.”
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