OMG they cut my interest rate!

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silva

Über Member
Location
Belgium
Yeeeees, but now I am at loss
It would mean anyone putting money in sp500 or nasdaq companies in the past decade is speculator

One more question, how different end result would cb buying bonds from companies have on the financial markets, compared to qe?
Every storage of value is a speculation on the storage. Dollar, euro, stocks, bonds, gold.
It's all speculation - the sole condition is an existing risk on the moment. For ex, playing a slot machine is gambling no speculation - there is no risk existing when pulling the lever..
 

silva

Über Member
Location
Belgium
One more question, how different end result would cb buying bonds from companies have on the financial markets, compared to qe?
Bonds are like any debt: it is spending money on a moment. The difference between spending and saving is just time - nobody throws away money/value.
Adding to that: when a central bank "buys" government/who-/whatever bonds, its goal is not to give/loan money to spend, its goal is to manipulate the interest rate of the bond down, after it was driven up by speculators that refuse to buy or even sell instead.
So, the goal of the central bank is not spending of new money, but PREVENT that the government would have to pay a higher interest rate on borrowing money. Take for ex that "operation Twist" of the US governments Federal Reserve central bank some years ago: in basis it was just an interest swap between long and short term bonds. Again a shift, in time.
Another example: the 50% "erasing" of Greece State debt some years ago, the goal of interest rates and differences among them, is precisely, and still, just that: erasing obligations to pay back.
See: the only thing it's all about is time. Everything that national/central governments banks do, their real existence reason, is to allow governments to spend without having to pay back. A central bank is just a strawman for a government.

Not the total figures of "quantitative easing" were inflationary, just a (very low) interest rate on them. If the governments manage to make existing money owners / savers / speculators lose along buying temp driven higher prices and/or sell at lower prices, then they can achieve the money growth rate they strive for. The days that governments just created money to buy other peoples production, without caring about existing money, are long gone.
 
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