International
What Is Quantitative Easing (QE)? How Does It Affect the Economy?
What Is Quantitative Easing (QE) in Simple Terms?In modern finance, when the economy hits a rough patch, central banks often come to the rescue with emergency…
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What Is Quantitative Easing (QE) in Simple Terms?
In modern finance, when the economy hits a rough patch, central banks often come to the rescue with emergency monetary stimulus, known as quantitative easing (QE).
In order to increase liquidity and help spur economic growth, the central bank buys trillions of dollars’ worth of long-term securities, mainly government bonds, although it can also purchase corporate bonds, municipal bonds, mortgage-backed securities, and even stocks.
By purchasing these securities, the central bank drives interest rates lower, which fosters more lending among the banks who, in turn, make it easier for their consumers to take out a mortgage or a business loan, etc.
In the United States, the Federal Reserve is in charge of monetary policy and sets target interest rates. It also manages open market operations when its members meet at its 8 annual Federal Open Market Committee (FOMC) meetings. It is during these meetings that it sets or adjusts the Fed Funds Rate, which is the target interest rate for banks to follow.
But what happens when that rate is already hovering around zero? What are some other tools a central bank can use to spur growth? Quantitative easing is one of them.
What Happens During Quantitative Easing (QE)?
Quantitative easing achieves numerous goals:
- It increases the monetary supply and provides financial markets with more liquidity.
- It drives down long-term interest rates by increasing asset prices. For instance, through its Treasury buybacks, the central bank effectively raises the value of the leftover bonds it did not purchase.
- It increases the supply of financial reserves and expands the central bank’s balance sheet.
The sum of these factors has a tremendous impact on the overall economy, resulting in increased spending and investment from banks, who pass on their expanded credit to companies and households, thus spurring growth.
Is Quantitative Easing Just “Printing Money?”
The term “printing money” is usually uttered with derision, but the central bank is literally doing just that—and that’s not always a bad thing. Through quantitative easing, the central bank is basically swapping out bonds and other fixed-income assets for bank reserves.
The central bank is not buying products or services; it’s not buying cars, for example. Doing so would mean more money chasing fewer goods. Through organized efforts like quantitative easing, the central bank isn’t giving away free money; rather, it’s doing the next best thing and making it more attractive for banks to lend people money—people who are qualified to pay their loans back.
So, by using banks as intermediaries, the central bank is adding safeguards against phenomena like hyperinflation.
Is Quantitative Easing Good or Bad? Does It Work?
Quantitative easing is an unconventional tactic that has been employed by central banks since the 1990s.Its proponents argue that quantitative easing helps. It lowers interest rates, boosts the stock market and can even lift an economy out of a recession.
But critics believe it can actually lead to higher inflation over the long term. And without participation from economic players at every level, it’s not very effective. For example, if banks choose to hold and not lend their excess reserves, or if borrowers don’t feel compelled to take out loans under uncertain market conditions, nobody wins.
In fact, some argue that the excess cash can actually foster higher levels of income disparity, because it rewards certain sectors that not everyone can afford to participate in, such as the stock market, and can also lead to asset bubbles and currency devaluation.
In theory, quantitative easing has tremendously positive effects. But the jury’s still out on just how effective it is in the long term. In 2012, Former Fed Chairman Alan Greenspan admitted that the round of QE undertaken after the 2008 Financial Crisis “had very little effect on the economy.”
Does Quantitative Easing Cause Inflation?
Many say yes. If a central bank puts too much money into circulation, it can cause inflation. One nightmare extreme would be if the resultant inflation is accompanied by little to no GDP growth. Then, a phenomenon called stagflation, a combustible mix of high prices, little growth, and skyrocketing unemployment, would occur.
What Happens When Quantitative Easing Ends?
When a central bank decides to end its infusion of liquidity, the markets usually experience a temporary downturn. It’s called a taper tantrum. Sometimes, the central bank must re-inject another round of QE to get it to settle back down again.
Quantitative Easing vs. Quantitative Tightening
We’ve discussed the concept of quantitative easing to help spur growth, but what happens if an economy becomes overheated too quickly? This rarely happens, but a central bank may institute what is known as quantitative tightening, when it reduces the supply of monetary reserves in order to tighten its balance sheet, basically by letting the bonds it has bought reach maturity. When this happens, the Treasury department would remove it from its cash balance and thus the money it has “created” effectively disappears.
Who Started Quantitative Easing?
The practice of quantitative easing began as early as the 1990s, when Japan’s central bank was desperate to fight decades-long inflation and stimulate the economy, although the experiment was not considered to be successful, since the country’s GDP actually fell during the period. A Japanese economist by the name of Richard Werner coined the phrase “quantitative easing” in an article he wrote describing what was happening at the time.
Examples of Quantitative Easing in the United States
2008–2014: In response to the Financial Crisis that rocked global markets and stemmed from the implosion of U.S. mortgage-backed securities, the Federal Reserve stepped in with emergency capital to prevent banks from reaching insolvency. Congress approved a $700 billion liquidity injection, and the U.S. Treasury added billions more through a program it called the Troubled Asset Relief Program, or TARP. In order to encourage lending and increase the monetary supply, the Federal Reserve also began a series of quantitative easing measures, including investment in the fragile mortgage-backed instruments. In total, the Fed’s balance sheet ballooned from $1 trillion to $4.4 trillion over the timeframe.
March–June 2020: In response to the COVID-19 pandemic, the U.S. economy experienced a global shock-induced correction. In response, the Federal Reserve instituted another round of quantitative easing by buying Treasury securities to increase market liquidity, although critics have argued that doing so also created inflation. TheStreet’s Jim Iuorio details what the Fed must do next.
recession unemployment pandemic covid-19 stimulus economic growth treasury securities municipal bonds bonds government bonds corporate bonds stocks monetary policy fomc open market committee qe fed federal reserve congress gdp interest rates japan
Government
Leftist Media Call Trump-Supporters “Far-Right”… For What?
Leftist Media Call Trump-Supporters "Far-Right"… For What?
Authored by Jack Hellner via AmericanThinker.com,
As far as I can tell, anyone…
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Authored by Jack Hellner via AmericanThinker.com,
As far as I can tell, anyone who supports Trump - say, Jim Jordan - is labeled hard right.
So which policies made Trump far-right, according to the media and other Democrats?
Enforcing border laws that Congress passed and building a wall? The public seems to support that, so that would be a middle-of-the-road policy.
Opposes sanctuary cities and states. It appears that the leftists who claimed they were sanctuaries are rethinking their disastrous policies.
Being tough on crime instead of supporting soft-on-crime D.A.s. That is not unpopular.
Supporting limits on abortion. Two thirds of Americans support limiting abortion to the first thirteen or fifteen weeks, just like Europe.
Supporting lower tax rates and fewer regulations. Those are not unpopular positions. In fact, they lifted up the people at the bottom of the economic ladder. Real wages rose rapidly, and poverty hit a record low at the end of 2019. How can that be hard right?
Opposing the teaching that the U.S. is a racist country.
Trump repeatedly denounced white supremacists just like almost all Americans.
Trump didn’t want people to be fired for refusing to take a vaccine just like most Americans.
Trump moved rapidly to get schools and businesses back open after the initial shutdown. That is certainly not a far-right position.
Trump supports school choice for the poor, just like the majority of Americans, especially minorities.
Trump opposes allowing men to compete against women, just like most Americans. He opposes allowing men to expose themselves in women’s locker rooms.
Trump supported drilling and energy independence. That kept inflation low and helped the poor, the middle class, and small businesses.
Trump does not believe that climate change is the greatest existential threat.
Trump sought to make NATO pay what they were supposed to. Why would that be an unpopular policy or far-right?
Trump moved the U.S. embassy to Jerusalem, just as Congress and previous presidents had promised.
Trump put a squeeze on Iran. Why would it be far-right to cut off funding from a country that pledges death to America and death to Israel?
Trump and his son-in-law made great progress in the Middle East with the Abraham accords. That certainly is not hard-right.
Trump challenged the 2020 election, just like how Democrats challenged the 2000, 2004, and 2016 election. There is nothing far-right about challenging elections.
Trump told people to march peacefully and patriotically to the capital to protest the election. What is far-right about peace and patriotism?
Trump told the Germans they were stupid to rely on Russia for their energy. He was right.
Putin has attacked Ukraine while Obama and Biden were president, not Trump.
Trump asked Ukraine to investigate the Bidens for corruption. It would be a dereliction of duty for a president to learn of corruption and not investigate. Sadly, the media and other Democrats impeached him for doing his job.
Basically, Republicans like Trump and Jordan are called far-right by the media and other Democrats to intentionally mislead the public, just as they did with the fictional Russian collusion story.
Democrats don’t want to debate their leftist policies because they are unpopular so they always go to the same playbook. Call Republicans sexists, bigots, racists, and far- or hard-right. They sure don’t care that the corrupt Clintons and Bidens have lined their pockets with illegal kickbacks for years.
Government
Deadliest day for Jews since the Holocaust spurs a crisis of confidence in the idea of Israel – and its possible renewal
Israel’s foundational social contract – that the government would keep Israelis safe – was severed with the deadly attacks by Hamas on Oct. 7, 2…
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Living for 75 years within a hostile neighborhood has required the state of Israel to provide security against external threats to all its citizens.
That responsibility is a social contract between citizens and the state: The state is obligated to provide security for its people, especially those who live near its borders, that makes living there safe. In return, young Israelis must serve in the army.
That unwritten contract was abruptly shattered for Israelis in the morning hours of Oct. 7, 2023. And with it, the very premise and promise that led to the establishment of the state was suddenly put in doubt.
That Saturday, when a surprise assault by Hamas stunned Israel, has been recognized as a date that will live in infamy – recalling U.S. President Franklin D. Roosevelt’s memorable words about Dec. 7, 1941, when the Japanese bombed Pearl Harbor – in the annals of the state of Israel, indeed even in the annals of much older Jewish history.
Over 1,300 Israelis lost their lives in acts of mass killing on that day, mostly civilians. They were all murdered – executed, slaughtered, tortured, burned – by Hamas terrorists who launched a pogrom-like onslaught on Israeli villages on a scale never seen before. About 150 people, mostly Israeli civilians, were brutally kidnapped on that day by the attackers.
I am an Israeli historian, specializing in Israel’s nuclear history. I believe that to recognize the full meaning of Oct. 7, 2023, for Israel and Israelis, it must be placed in historical perspective, both Israeli and Jewish. There are other perspectives, including historical ones, but this essay is an attempt to portray the events of Oct. 7, 2023 – and their profound significance – as Israelis experienced them.
‘Never again’ was the state’s promise
Almost every Israeli citizen now is only one degree of separation from the victims of Oct. 7, 2023. For Israel, this is truly a national calamity in Biblical terms.
During the Holocaust, the Nazi killing machine executed thousands of Jews every day for years. But since then, there has never been a day in the 75 years of Israeli history that such a large number of Jews were killed, including the most horrific days of the 1973 Yom Kippur War.
Zionism as a national-political movement to establish a Jewish homeland came into being due to the pogroms – violent, usually murderous attacks in Europe – and the antisemitism of the late 19th century. By 1939, nobody could tell whether Zionism would succeed or fail. But it was the Shoah – Hebrew for “Holocaust” – that decisively unleashed the impetus among the Jewish people and internationally to create the state of Israel as a Jewish state, which stood as the triumph of Zionism.
The raison d'être – the purpose, justification, and international legitimacy – of the creation of Israel in 1948 was that it would be a safe homeland for the Jews as a fundamental response to the lesson of the Holocaust: Jews should no longer be victims.
So Israel came into being along with the national avowal “Never Again,” made by both the survivors and their rescuers, as its founding ethos. For Israelis and their supporters around the world, the triumph of Israel is the extraordinary transformation from Holocaust to national revival or, in Hebrew, from Shoah to Tekuma.
Over its life as a new state, Israel has built itself as a blend of the pen and the sword. On the sword side, Israel is the region’s military powerhouse. On the pen side, Israel has become a cultural force both within and beyond its borders, a hub of academic excellence and perhaps most known as a “startup nation,” a center of high-tech innovation.
Government fails its part of the contract
By now it is clear that the multi-faceted surprise Hamas onslaught – by sea, air and land – along the entire 40-mile long Gaza barrier demonstrated the colossal failure of all elements of the vaunted Israeli defense systems, including intelligence collection and warning, military deployment and readiness, command and control systems.
Indeed, Israeli military planners never even considered such an all-out attack as a worst-case scenario, as now openly acknowledged by former senior military officials.
Israel’s supposedly formidable border wall – a ground barrier that cost over a billion dollars and was completed in 2021 – was rendered useless almost instantly. Within minutes, the attackers overwhelmed some 30 sites on the other side of it – civilian settlements, military bases and even an outdoor concert site.
There were almost no Israeli troops deployed in the area in the first place to defend the many points of attack, in part due to the holiday and lack of advanced warning, and in part due to the complacent confidence in the wall and its high-tech support system.
Furthermore, since almost all military communication was cut off by Hamas knocking out the communication towers, Israeli military and political leaders for hours had only a vague idea of the unfolding calamity.
That colossal military failure reminded many Israelis of the dismal shock the country experienced in the 1973 Yom Kippur war. The resemblance seems obvious – then and now, Israelis witnessed catastrophic intelligence and operational blunders that cost so many lives due to complacency and arrogance.
But in some key respects, the catastrophe in 2023 seems even more traumatic – it shakes the very foundations of Israel as the embodiment of Zionism, a safe Jewish homeland. In 1973, the casualties of the blunder were almost all soldiers; the civilians were kept far from the fighting and safe.
Yet on Oct. 7, this was not the case.
‘We are being slaughtered’
If the founding commitment of the state to its citizens was “Never again,” the brutal new reality that emerged on Oct. 7 was “Never before.”
For long hours on that day, countless Israeli civilians were crying for help that in too many cases didn’t arrive in time. Never before in Israeli history had so many civilians been left for so long without the help of the army.
“We are being slaughtered. There is no army. It has been six hours,” one kibbutz resident said in desperation. “People are begging for their lives.”
Never before had Israelis found themselves whispering desperately to TV studios and social media, not knowing who else to call, while terrorists were inside their houses.
Now, Israel has mobilized the largest reserve army it has ever amassed – a response that reflects its attempt to re-commit to the idea, and the reality, of never again being so vulnerable.
Yet this national trauma will be reckoned for in generations to come. How could such a calamity happen? Who is responsible for such a catastrophe? How is it possible that a powerful nation was so complacent?
The official Israeli response to those soul-searching questions is that for now the nation must wage war and those questions must and will be thoroughly studied. But, they say, not now. Investigate this later, after the war is won.
Yet those questions are simmering and boiling within the Israeli psyche; it is impossible to resist them. There is clarity and confidence that once the war is over, professional and judicial investigations will be thoroughly conducted, but some have already accepted moral responsibility. This movement toward both demanding and accepting responsibility demonstrates a renewed faith among Israelis about the future for their country.
Most prominently, the Israeli military’s Chief of Staff, Lt. Gen. Herzi Halevi, has acknowledged publicly the failure of the army and took responsibility for that failure to provide security to the citizens of Israel.
The sole Israeli national figure who has acknowledged nothing about responsibility is the one on whose watch it all happened, Prime Minister Benjamin Netanyahu. Indeed, except for a few taped statements, in the week after the war began, Netanyahu had avoided meeting members of the public as well as taking questions from the press.
The rage against Netanyahu in the Israeli public is mounting.
Avner Cohen does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
army europeInternational
Rent Control Is A Disaster – Don’t Let It Spread Across The Nation
Rent Control Is A Disaster – Don’t Let It Spread Across The Nation
Authored by Betsy McCaughey via The Epoch Times,
America’s renters -…
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Authored by Betsy McCaughey via The Epoch Times,
America’s renters - more than one-third of the nation’s households - are in for trouble.
Left-wing politicians are demanding rent regulation from coast to coast. Wherever it is adopted, the result will be a disastrous reduction in the rental housing supply, leaving renters desperate for places to live.
New York is the poster child for the failures of rent regulation. The U.S. Supreme Court is currently mulling a challenge to the constitutionality of the city’s rent regime.
Whatever the justices decide, the public needs to consider less destructive, more targeted ways to help low-income people pay for housing. The court of public opinion needs to consider these facts.
Fact No. 1: Rent regulation isn’t targeted to the poor.
In New York, there’s no means test. What you need is luck or connections. The mean income of a rent-stabilized apartment dweller is $47,000, but census data show that tens of thousands of them earn more than $150,000 per year. Some occupants use what they’re saving on rent to pay for a weekend place in the Hamptons or New England.
The pols don’t object—a sure sign they’re calling for rent regulation to help themselves politically, not the poor.
In New York, 44 percent of rental apartments are regulated by the Rent Guidelines Board (RGB), established in 1969, which sets the maximum amount by which landlords are allowed to raise the rent. Those limits apply to all buildings of six or more units built before 1974.
In 2022, the RGB set the maximum rent hike at 3.25 percent on one-year leases and this year at 3 percent. Never mind that last year, fuel costs to heat the buildings soared by 19 percent and overall inflation hit 8.3 percent.
The decisions are political, not economic. Many Democratic politicians vilify building owners as “greedy landlords” and depict themselves as the champions of the downtrodden. It’s a scam.
Fact No. 2: Winners and losers.
The winners are the lucky few with rent-regulated apartments and the pols who count on an army of tenant activists to turn out at the polls. The losers are the 56 percent of renters who don’t score a regulated apartment and have to scour neighborhoods for an unregulated place that they can afford. They’re paying more.
Why? Because regulation causes some landlords to walk away, reducing the overall supply of apartments. The laws of supply and demand mean rents go up. New Yorkers in unregulated apartments are paying the highest rents in the United States for a one-bedroom apartment. They're the real victims, and they should be furious.
Yet the left-wing press pretends that rent control offers only benefits. The New Republic warns that the Supreme Court challenge threatens “laws that have benefitted the city’s tenants for generations.” Sorry, untrue—only some tenants, and not always the neediest.
It’s economic madness. The saner way to help those who need assistance paying rent is with a voucher. We offer the needy SNAP debit cards to help them pay for groceries. No one slaps price controls on grocery stores or designates certain stores as “regulated,” forcing them to sell at below cost.
Yet New York forces certain landlords to pay what should be a public cost shared by all, an argument made to the court.
Fact No. 3: The Marxist fantasy that rent regulation will help the poor is spreading across the United States and Europe as well.
Maine and Minnesota have enacted laws allowing municipalities to impose rent regulations. In November 2024, California voters will be asked to approve a proposition allowing local governments to add additional restrictions to the state’s existing rent caps.
The laws of supply and demand are international. Berlin froze rents in 2019, and the rental supply plummeted, according to the Ifo Institute, a think tank.
Yet London Mayor Sadiq Khan is calling for freezing rents for two years. London provides housing vouchers to the poor—a smarter approach—but when the city froze the voucher amounts during the COVID-19 pandemic, fewer apartments were available in the price range. The answer is to raise the voucher amount. Freezing rents will only make the shortage worse.
Ignore the demagogues. The evidence is in: Rent regulation is a political scam. There are better ways to help Americans afford a place to live.
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