Debate House Prices


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Federal Reserve unlimited bond purchases, what does it mean?

From what I can surmise is that the fed is just printing trillions of dollars and flooding the market to try and keep the economy afloat, but isn't this exactly the kind of action that causes rapid inflation like in Venezuela?

Can someone more knowledgeable who understands about bonds, balance sheets, quantitative easing etc please tell if if this kind of action has been done in the past, to what scale and if it's perfectly normal in times of need? Or is it the first stepping stone that typically results in rapid inflation?

Comments

  • Thrugelmir
    Thrugelmir Forumite Posts: 89,546
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    You are witnessing first hand an event that's never been seen before. This is a crisis on a global scale. 
  • GangBusters
    GangBusters Forumite Posts: 39
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    You are witnessing first hand an event that's never been seen before. This is a crisis on a global scale. 
    Not sure if you're trolling or if you think I'm trolling but I honestly have no clue about QE, bond purchases etc so that's why I'm asking. 

    The US economy has survived a lot of things in the past and I'm sure it will survive these things too but back then USD was backed by gold so printing unlimited money wasn't a possibility. But now USd isn't backed by anything... Can you please explain in a little more detail?
  • Thrugelmir
    Thrugelmir Forumite Posts: 89,546
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    The US has never faced a crisis of this kind. Will expose the lack of universal healthcare for sure and poor health standards of many. Without money people cannot afford the basic essentials of survival. 
    To understand monetary policy better. Grab a copy of 

    The Ascent of Money: A Financial History of the World

    by Niall Ferguson
    QE = money printing
    Bond purchases = Debt is effectively taken back onto the Governments books. Which reduces the cost of Government borrowing. 
    The bottom line is that we are all poorer. 
  • GangBusters
    GangBusters Forumite Posts: 39
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    The US has never faced a crisis of this kind. Will expose the lack of universal healthcare for sure and poor health standards of many. Without money people cannot afford the basic essentials of survival. 
    To understand monetary policy better. Grab a copy of 

    The Ascent of Money: A Financial History of the World

    by Niall Ferguson
    QE = money printing
    Bond purchases = Debt is effectively taken back onto the Governments books. Which reduces the cost of Government borrowing. 
    The bottom line is that we are all poorer. 
    I'm not talking about the virus. I'm talking about QE, unlimited bond purchasing, cash handouts to every working American etc. Has this ever happened before in the US (and is it normal) when catastrophe strikes? World war 2, dotcom crash, 2008 crash etc.
  • phillw
    phillw Forumite Posts: 5,585
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    GangBusters said:
    Has this ever happened before in the US (and is it normal) when catastrophe strikes? World war 2, dotcom crash, 2008 crash etc.
    After the great depression they paid people to build roads. Not because they needed the roads particularly but because they needed people to do something so they could pay them. I suspect most people these days wouldn't be able to build a road to the standard that we demand now.

  • Thrugelmir
    Thrugelmir Forumite Posts: 89,546
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Forumite
    The US has never faced a crisis of this kind. Will expose the lack of universal healthcare for sure and poor health standards of many. Without money people cannot afford the basic essentials of survival. 
    To understand monetary policy better. Grab a copy of 

    The Ascent of Money: A Financial History of the World

    by Niall Ferguson
    QE = money printing
    Bond purchases = Debt is effectively taken back onto the Governments books. Which reduces the cost of Government borrowing. 
    The bottom line is that we are all poorer. 
    I'm not talking about the virus. I'm talking about QE, unlimited bond purchasing, cash handouts to every working American etc. Has this ever happened before in the US (and is it normal) when catastrophe strikes? World war 2, dotcom crash, 2008 crash etc.
    That's why I suggested that book as an introduction to a complex subject. 
    If that's to light for you. There's a heavyweight piece of reading
    This Time Is Different: Eight Centuries of Financial Folly - by Carmen Reinhart and Kenneth Rogoff

    History unsurprisingly does repeat itself in various guises. 
  • Crashy_Time
    Crashy_Time Forumite Posts: 13,386
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    From what I can surmise is that the fed is just printing trillions of dollars and flooding the market to try and keep the economy afloat, but isn't this exactly the kind of action that causes rapid inflation like in Venezuela?

    Can someone more knowledgeable who understands about bonds, balance sheets, quantitative easing etc please tell if if this kind of action has been done in the past, to what scale and if it's perfectly normal in times of need? Or is it the first stepping stone that typically results in rapid inflation?
    They have been doing versions of this since 2008, basically it doesn`t work very well after the first hit, although they have managed to stop markets going to the basement floor (or being shut, which further damages already weak sentiment) this week it seems. The PTB wish they could have "rapid inflation", can`t see it happening though TBH, too many negative sentiment triggers out there at the moment.
  • Crashy_Time
    Crashy_Time Forumite Posts: 13,386
    10,000 Posts Seventh Anniversary Name Dropper
    Forumite
    The US has never faced a crisis of this kind. Will expose the lack of universal healthcare for sure and poor health standards of many. Without money people cannot afford the basic essentials of survival. 
    To understand monetary policy better. Grab a copy of 

    The Ascent of Money: A Financial History of the World

    by Niall Ferguson
    QE = money printing
    Bond purchases = Debt is effectively taken back onto the Governments books. Which reduces the cost of Government borrowing. 
    The bottom line is that we are all poorer. 
    I'm not talking about the virus. I'm talking about QE, unlimited bond purchasing, cash handouts to every working American etc. Has this ever happened before in the US (and is it normal) when catastrophe strikes? World war 2, dotcom crash, 2008 crash etc.
    Great Depression they (Gov) made a floor on the price farmers got for catttle/crops I seem to remember, and this was one of the QE like methods that worked back then?
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