Understanding the Fed's "Money Printer" (QE, the Stock Market, and Inflation)

Meet with PWL Capital: calendly.com/d/3vm-t2j-h3p
If asset prices reflect expectations about the future, the market rising should be viewed with optimism, but there might be less optimism, and there may even be pessimism, about a market that is being artificially propped up by a central bank. What if the central bank can’t print any more money and stock prices drop? And how can all of this money printing be good for the country’s currency?
Referenced in this video:
- Money creation in the modern economy www.bankofengland.co.uk/-/med...
- Money, Reserves, and the Transmission of Monetary Policy: Does the Money Multiplier Exist? www.federalreserve.gov/pubs/f...
- Open Letter to Ben Bernanke blogs.wsj.com/economics/2010/...
- Evaluating Asset-Market Effects of Unconventional Monetary Policy: A Cross-Country Comparison www.federalreserve.gov/PUBS/i...
- A General Equilibrium Approach To Monetary Theory www.jstor.org/stable/1991374?...
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Пікірлер: 1 600

  • @jamesb95
    @jamesb953 жыл бұрын

    Ben, what a great video. I commented about three weeks ago that I didn’t think your description was 100% accurate. I stand corrected. This video is worth more that a semester at Harvard Business school on macroeconomics. I’ve always been fascinated by the global financial system, but honestly couldn’t get my head around what QE does. After reading one of the books you recommended and other readings I feel like my eyes have been opened. I know you’re 100% against trying to time the market, however after being enlightened by your description I’m convince more than ever that we are in a massive asset bubble driven by false fears that cash is worthless and the false belief the Fed can fix an economy with this much unemployment. Thank you for the great videos and information. You have a gift!

  • @BenFelixCSI

    @BenFelixCSI

    3 жыл бұрын

    Thanks James. It was good to read this comment. Another book on this topic that I recently enjoyed was _The Case For People's Quantitative Easing by Frances Coppola._

  • @nicola6323

    @nicola6323

    3 жыл бұрын

    Same here: I watched the video and started wondering whether Ben was really right here. As it turns out, he's right. I can also recommend a lecture on Coursera called "Economics of Money and Banking".

  • @newrosnet

    @newrosnet

    3 жыл бұрын

    Amen brother!

  • @raviriyer12

    @raviriyer12

    3 жыл бұрын

    @@BenFelixCSI which was the other book you had recommended

  • @globalbridges8570

    @globalbridges8570

    3 жыл бұрын

    Ben Felix I suggest you look into how QE is actually deflationary. QE sucks funds out of the on-balance sheet M1 funds and forces banks to increase M0 FED reserve account funds. So the funds are stuck in the reserve accounts and therefore deflationary. Also no currency is fiat, every single currency unit has an off ledger book entry only asset attached to the credit, this is each unit of currencies Drawing Right, it will also have an Allocation number which refers to purpose of that units creation, a project or program to ledger the funds onto the front side system. This whole fiat currency nonsense has to end, please go research how the global currency system actually works not how you think it works due to the propaganda you read written by an mystical pseudoscience economist.

  • @SpaceWalkTraveller
    @SpaceWalkTraveller3 жыл бұрын

    Thanks Ben for the video. I'm a CFO I've been studying finance and monetary policy for about 25 years and you have done the best job that I've seen on how QE works. From what I have learned so far, everything you say is correct. I've had to put the jigsaw together from information that I read and learned along the way to understand how QE works and it took me many years. I wish you did this video 10 years ago and you would have saved me a lot of time. If people got their heads around your video, then they would be miles ahead of most bankers, finance professionals and politicians. You've done a great job in explaining the monetary system in a simple manner, thanks again for your great work.

  • @whitemagicsponge7190

    @whitemagicsponge7190

    2 жыл бұрын

    "im an cfo"

  • @loreall.2461

    @loreall.2461

    2 жыл бұрын

    I must agree. It takes time to put much of this information together and have it sink in. This is not “banking 101.” I wonder how many bank clerks even understand this level of finance. Many kudos to Ben on his research and efforts in compiling this video, it is most appreciated here.

  • @slawomirhering3770

    @slawomirhering3770

    2 жыл бұрын

    They know what they are doing always thier decepion and ahead of pesants. The trillion dollar conspiracy. The creature from Jeklly Island. Edward G Griffin 👆⚠️🐍✈🌧🌧🌚☢⚠️ CHEMTRAILS UN is in NY FED ,IMF ,BIS. Banking Cartel runs the show nobody say this the way I do it consumed good portion of my life to know. Once anybody do Lable conspiracy exacly it is all.🤏🧠

  • @slawomirhering3770

    @slawomirhering3770

    2 жыл бұрын

    Don't make it twist even more Banking Cartel own and run the whole world and create war with thier military and secret servis. When SLAVE indebted unable keep on paying or disobey.

  • @glenwolfram1485

    @glenwolfram1485

    Жыл бұрын

    Ah yes, it's complicated stuff this QE magic. And it would need to be to make the trick work. What to do however ahead of the wide spread wreckage caused by this spell? An internationally diversified asset mix across the major asset classes? Sure, better than holding cash ultimately. And apparently better than gold too. Yet, if only there was an enduring inflation hedge and store of value. There is, in its nascent form at least...but one won't learn much about it here given that Ben, (although he gives brief mention to it) doesn't yet fully see that it is at hand. Anticipate that this will change with time perhaps, but ideology may ultimately stand in the way.

  • @yzlrelax1
    @yzlrelax13 жыл бұрын

    This is extremely informative. I am going to watch it 20 times.

  • @bla-ig4bd

    @bla-ig4bd

    3 жыл бұрын

    It is a video spreading wrong information..

  • @hman2912

    @hman2912

    3 жыл бұрын

    @@bla-ig4bd what's wrong about it?

  • @jtonna1624

    @jtonna1624

    3 жыл бұрын

    @@hman2912 All of it. The idea that the FED's monetary policy has not resulted in increase in cost of living is delusional, and only a rich guy who is invested in financial assets would have a vested interest in convincing you that that BS is true

  • @cubeh8331

    @cubeh8331

    3 жыл бұрын

    I'm gonna need to watch it 20 times just to understand it.

  • @sloth_in_socks

    @sloth_in_socks

    3 жыл бұрын

    @@jtonna1624 Do you have proof?

  • @HowMoneyWorks
    @HowMoneyWorks3 жыл бұрын

    Congrats on 100k. You deserve it.

  • @nicolabenigni4490
    @nicolabenigni44903 жыл бұрын

    I say it as Econ PhD student: this video nails it.. it's unfortunate that many economists themselves are not fully aware of how money is created and things started to improve only since the Great Financial Crisis.. the video summarises well the latest academic insights on how (uncoventional) monetary policy works

  • @jtonna1624

    @jtonna1624

    3 жыл бұрын

    And excludes every important detail which renders the entire thesis bogus

  • @brido88

    @brido88

    3 жыл бұрын

    Google User such as?

  • @jtonna1624

    @jtonna1624

    3 жыл бұрын

    @@brido88 Such as the fact that the Federal Reserve has over 7 trillion dollars in government and corporate bonds and other debt securities - securities that were bought on the open market.... and that they have voiced their intention to continue to flood the market with liquidity and keep interest rates artificially suppressed, such that real rates on long-term bonds are negative for the first time in american history.... that the CPI is designed to mask rising consumer prices, as anyone who has studied it knows... need I go on? This video is filled with so much misinformation and outright lies you'd think it came straight out of the FED

  • @brido88

    @brido88

    3 жыл бұрын

    Google User But what does that all mean? What is your crystal ball telling you?

  • @jtonna1624

    @jtonna1624

    3 жыл бұрын

    @@brido88 No crystal ball. I am stating facts that are verifiable by anyone who wishes to investigate, instead of resting on so-called youtube "experts" with an obvious Keynsian slant. But if you want me to make a prediction, I will: over the next 5 years you will see the dollar weaken considerably (already happening) and prices across the board will consequently rise in ways you never thought possible in America. With the purchasing power of the dollar undermined significantly, you will see many American businesses suffer - especially ones dealing in luxury goods, such as Apple for instance. Apple is the biggest bubble in the American stock market at the moment for my money, and I am personally short as of last week. I expect Apple's Market Cap to be half of what it is today in the next 2-3 years

  • @marcelomenezes8488
    @marcelomenezes84883 жыл бұрын

    This is tough. My head is spinning right now. But I've always wanted to understand it, so I'm coming back. Thanks for taking the time to teach that. Everybody talks about it, but no one knows exactly what it is. Here is a suggestion for a later video: MMT; Thanks again.

  • @johnp7739

    @johnp7739

    3 жыл бұрын

    Cliff Notes version: MMT is a crackpot theory.

  • @user-ks1hp2pb5g

    @user-ks1hp2pb5g

    3 жыл бұрын

    @@johnp7739 Based on what though? It not making sense? What within finance capitalism makes sense? None of the financial innovations conjured up make sense to me.

  • @ShehaazSaif

    @ShehaazSaif

    3 жыл бұрын

    Exactly! Yup CNBC doesn’t have the brainpower or patients to explain something like this...

  • @defaultuser9423

    @defaultuser9423

    3 жыл бұрын

    @@johnp7739 If I am not mistaken, MMT dispenses with the notion of gov't debt entirely. Says the gov't can just create the money it needs as long as it has optimum taxation ?

  • @fcamargo84

    @fcamargo84

    3 жыл бұрын

    I’m from Brazil. Ben Felix’s videos are amazing!! I don’t understand very well that video, to be honest. My english is very poor! Maybe a portuguese subtitle will help me.

  • @djason_music
    @djason_music3 жыл бұрын

    This is blowing my mind. I'm going to have to watch this video at least 5 times.

  • @matveyshishov
    @matveyshishov2 жыл бұрын

    Thank you so much, Ben, for great explanation! When I was learning these concepts ten years ago, I could only dream of such a clear, easy to grasp video.

  • @jugzster
    @jugzster3 жыл бұрын

    With the quality and information in your videos, you deserve 10x more subscribers. Insightful and well-researched video as usual, eagerly waiting for the next video Ben!

  • @RavikantRai21490
    @RavikantRai214903 жыл бұрын

    Excellent video and recommendations at the end of it too. Welcome back Ben, I hope we see more and more of your rational, sensible insights in a time of madness.

  • @kadams842
    @kadams8423 жыл бұрын

    I'd been really struggling to understand the money creation process by banks for ages. This is the best explanation I've found. Thank you

  • @duggydugg3937

    @duggydugg3937

    4 ай бұрын

    gibberish.. misdirection.. you borrow you owe

  • @duggydugg3937

    @duggydugg3937

    4 ай бұрын

    gvt let banks invest in derivatives.. you pay their losses ever see rot schild on t v or online ? smug smiling superior.. they own banking.. you don't 😮

  • @williampickett7655
    @williampickett76553 жыл бұрын

    Great job explaining a complicated subject. This is why I always come back for more videos.

  • @user-dm84
    @user-dm843 жыл бұрын

    A man of your word! Thank you Ben, exactly the video I was hoping for. Glad you're back.

  • @financeexplained7930
    @financeexplained79303 жыл бұрын

    The best video by far that I've seen about this topic. You're just a genious.

  • @chefMLI
    @chefMLI3 жыл бұрын

    Thanks Felix. Finally someone who gets the money creation mechanism right, there are to many "experts" on YT who spread misinformation about the topic.

  • @collin8962
    @collin89623 жыл бұрын

    Nice! You are one of the best finance channels on youtube its well deserved!

  • @Pieter2360
    @Pieter23608 ай бұрын

    This explanation is a gem! I passed my A-level exam in economics in 1988 but never understood this topic at this level 😂.

  • @TheSolberg18
    @TheSolberg183 жыл бұрын

    Incredible video, Ben. Glad to see you back. Even if the wait was long, the quality of your content is always a good reward. You deserve a wider viewership in the KZread finance world, as you're simply the best.

  • @GlobusTheGreat
    @GlobusTheGreat3 жыл бұрын

    I just found this channel. This guy is so incredibly good. No-nonsense and provides studies to back up all of his talking points. On top of that, the graphics displayed to reinforce the concepts are so helpful. Watching this video basically completely dispelled some false beliefs I was holding and made me instantly hungry to learn more about how money works. What more could I ask for from a youtube video?

  • @thelawenforcerhd9654

    @thelawenforcerhd9654

    Жыл бұрын

    You don't seem to understand he is mostly perpetuating a self-serving gaggle of establishment theorists and financiers that crashed the global economy in 2008, using circular logic to enrich themselves. Maybe look at the world and see how this stuff is actually working out.

  • @mrh4742
    @mrh47423 жыл бұрын

    Ben. I have been one of the very early supporters/followers of your channel, even one time we talked privately. It is amazing to see how your channel has grown. You are one of the few people who talk about money on KZread, not out of of thin air, but out of knowledge. So lots of respect! This doesn't mean I agree with you all the time, but just appreciate that you are informed and then promote knowledge, rather than just blabla to attract subscribers.

  • @philippemartin7706
    @philippemartin77063 жыл бұрын

    Congrats Ben! Your content is valuable, clear, and helpful. You deserve the recognition!

  • @Dornavver
    @Dornavver3 жыл бұрын

    Hi Felix, I've been keeping myself busy learning as much as I can about Common Sense Investing with Index Funds for the past 2 years. Still, I discovered your channel just a couple of days ago and I can't believe you have so few followers. This is by far the best source of information I found so far. You offer great content! Thank you!

  • @patricknaval6754
    @patricknaval67543 жыл бұрын

    Good to have you back Ben! Been looking forward to your solid insights on investing and personal finance.

  • @RommanysWorld
    @RommanysWorld3 жыл бұрын

    I had been waiting to see a new video from you! Thank you and I appreciate your time. 🙏

  • @googleuser12357
    @googleuser12357 Жыл бұрын

    I like how you draw the dollar bills, so that they have SOS signal on'em :) Good video btw

  • @MrCBunny2
    @MrCBunny23 жыл бұрын

    Glad you're back! Thanks for the amazing and timely video; I love your content. Congrats on 100K subs!

  • @ProfessionalTycoons
    @ProfessionalTycoons3 жыл бұрын

    Such a shame, schools need to be teaching this stuff, so important.

  • @SentinalBais1

    @SentinalBais1

    3 жыл бұрын

    They won't it's international

  • @fredliu168

    @fredliu168

    3 жыл бұрын

    @@SentinalBais1 I learned most of this in second year macro.

  • @lorenzmuller3542

    @lorenzmuller3542

    3 жыл бұрын

    I agree!

  • @jsm530

    @jsm530

    3 жыл бұрын

    Then more conspiracies would be discovered and inquired about hence they dont teach it

  • @gabrielhermesson9926

    @gabrielhermesson9926

    2 жыл бұрын

    @@fredliu168 Second year macro...high school or college?

  • @newrosnet
    @newrosnet3 жыл бұрын

    You Sir are a godsent! You explained in one video what nobody else seem to ever get around to explaining. Thank you. For a finance novice, you really helped me today.

  • @eca3101
    @eca31013 жыл бұрын

    Awesome to see you back! Absolutely love your content

  • @jameshanleyinvesting2296
    @jameshanleyinvesting22963 жыл бұрын

    Fantastic breakdown, mate - very comprehensive. Must've taken a while to pull this all together. Many thanks! 🙏

  • @jonathanb576
    @jonathanb5763 жыл бұрын

    QE isn't strictly printing money, but what if the government is collecting poor performing or risky assets that the government won't be able to collect their value back?

  • @elmateo77

    @elmateo77

    3 жыл бұрын

    Don't worry, that's not what they're doing. They're buying assets from certain people with political influence at inflated prices, to transfer wealth to the elite knowing the public won't complain because they forget we have to cover the cost later through increased taxes.

  • @rof8200

    @rof8200

    3 жыл бұрын

    Then it's money printing because they're effectively transferring reserves to the private banks of the individuals who held the junk debt that they've now sold to the Fed reserve. Same thing happening to equities but the conduit are global central banks and the primary banks.

  • @erfuellte-ehe

    @erfuellte-ehe

    3 жыл бұрын

    would love to hear ben felix on this!

  • @harleyboy5768

    @harleyboy5768

    3 жыл бұрын

    Credit worthy borrowers LOL, is the US credit worthy with 30T in debt going to 150T in 20 years? The signal of higher interest on US bonds is broken if the Fed puts them on their balance sheet.

  • @Hyperpandas

    @Hyperpandas

    3 жыл бұрын

    There is a risk of loss on individual bonds, but consider the scale of the purchase and that the Fed will sell back in a less uncertain environment. This is how the Fed was able to make a net profit off of the commercial paper it bought following 2008. Not to say losses are impossible, but it seems pretty unlikely without some sort of catastrophic economic failure.

  • @liamliam7191
    @liamliam71913 жыл бұрын

    Glad to see you back as I came across your channel last month and I immediately sub cause of your unique content.

  • @LiloUkulele
    @LiloUkulele3 жыл бұрын

    Financial literacy classes teach students the basics of money management: budgeting, saving, debt, investing, and giving. That knowledge lays a foundation for students to build strong money habits early on and avoid many of the mistakes that lead to lifelong money struggles. Thank you for an excellent video.

  • @mattlm64
    @mattlm643 жыл бұрын

    If interest rates are lowered you'd expect more borrowing so there is an inflationary effect of reducing rates even if it only acts to reduce deflation.

  • @michaelluttmer2486
    @michaelluttmer24863 жыл бұрын

    Welcome back! We've missed you! Congrats on 100K subs

  • @booek82
    @booek823 жыл бұрын

    So much useful information in a single video. Great to have you back Ben!

  • @jaeflame9020
    @jaeflame90202 жыл бұрын

    Much love to you Mr. Ben you’ve taught me so much since I’ve found out about your channel recently. Please keep up the good work, I hope to enlighten others just as much as you have. ❤️

  • @trs8696
    @trs86963 жыл бұрын

    Great to see you back ben! I agree with everything you've said here, but it's worth noting the recent trend towards OECD governments and central banks buying up corporate bonds and even investing in ETFs in a bid to shore up asset prices. These actions certainly fall outside the specific topics you're addressing in this video but they're worth bearing in mind when discussing the recent asset price recovery, as well as market confidence in general.

  • @kedartondare
    @kedartondare3 жыл бұрын

    After watching the video I went for your recommended book Pragmatic capitalism by Cullen Roche , am halfway through it and I remember you're explanation while reading the 7th chapter from the book about moneyness, so i come back to watch it only to realise, I understood all that I read in the book after watching this in depth explanation. It is now a much clearer picture for me . Thank you Mr .Felix I genuinely appreciate your efforts . Am a business school student who has probably learned more from teachers as yours then from my school ones.

  • @eightsprites
    @eightsprites3 жыл бұрын

    Best video I seen for a long time. I need to watch it again. Thanks

  • @pipebliss
    @pipebliss3 жыл бұрын

    Thumbs up, Ben. Excellent presentation. I'm nowhere near an expert in this field but I'm not sure I can wrap my head around it not leading to inflation. When I look at real assets, such as houses, cottages, cars, commercial RE, stock valuations... prices have skyrocketed. Look at the average family income in Ontario versus the average price of housing in the last 10-12 years. An experienced teacher was making $85K a year, 12 years ago and the average house was $500K, now that same teacher makes $97K and the average house is $1M. There has been massive inflation the last decade, if it's not due to central bank policy and action, what is causing it? Household debt is rising every year breaking records.

  • @patrickdigby4015
    @patrickdigby40153 жыл бұрын

    He always looks like someone is trying to make him laugh just off camera and, personally, I am all for that!

  • @u105524
    @u1055243 жыл бұрын

    Fantastic video.. happy to see you back with a bang .prob you best one

  • @SkittlesandFiFi
    @SkittlesandFiFi3 жыл бұрын

    Stellar as usual. I love how you break things down. Thanks for educating the masses, Ben!

  • @jasonburford2013
    @jasonburford20133 жыл бұрын

    Just wish I had understood it.

  • @louiejuneyacyac2131

    @louiejuneyacyac2131

    3 жыл бұрын

    When fed printer goes BRRRR, you buy stocks

  • @fcamargo84

    @fcamargo84

    3 жыл бұрын

    I’m brazillian and I wish I could understand better. My english is very poor. 😅

  • @rof8200

    @rof8200

    3 жыл бұрын

    In summary, the Fed reserve has been printing money over the last 50 years by buying mortgage backed securities and junk debt plus equities and property via banks and Blackrock.

  • @YamiPheonix531
    @YamiPheonix531 Жыл бұрын

    Yet here we are in 2022 and 2023 facing a hyperinflation crisis and a banking crisis.

  • @johns4651
    @johns46513 жыл бұрын

    OMG I though you gave up like so many KZreadrs. Very glad you are back!

  • @dav0625
    @dav06253 жыл бұрын

    Thank you Ben, for this very instructive video, that yet requires to be seen 10 times for a beginner like me :) Indeed, it's good to explain what QE means, a mysterious word used every time and everywhere.

  • @tiendoan1333
    @tiendoan13333 жыл бұрын

    Now that I watch this video a third time. It's funny how he hold up the silver award like it means nothing to him while staring deep down onto our souls and thank us. It's kinda creepy and cool at the same time

  • @elliottmiller3282
    @elliottmiller32823 жыл бұрын

    WHEN THE WORLD IS ON FIRE WE THOUGHT HE LEFT US. BUT NOW BEN FELIX RETURNS TO EDUCATE THE MASSES ON THE TRUTH ABOUT QUANTITATIVE EASING!

  • @rubenthijs746

    @rubenthijs746

    3 жыл бұрын

    I was missing my guidances trough these dark times.

  • @Carlos-kv6hx
    @Carlos-kv6hx3 жыл бұрын

    Happy your back. Your pretty much the best econ/finance teacher on the web. Thanks

  • @zhenminliu
    @zhenminliu Жыл бұрын

    To the curious, this is one of the most intellectually satisfying videos on the subject. Many other videos, like most economics textbooks, basically peddle the mistaken theory of fractional reserve banking.

  • @TshepoMoagi
    @TshepoMoagi3 жыл бұрын

    He's alive!

  • @jojoplacide
    @jojoplacide3 жыл бұрын

    I think you make a pretty good case on the neutral impact of the fed's action. But here is a premise that I think you are missing. When the feds acquires assets from the financial banks its only a neutral transaction if you assume a pre-acquisition positive value of said assets. However these assets are usually junk, like the CDLs of the 2008 crisis. So by the fed acquiring these assets, it saves the banks from going down with their junk bonds or assets and in turn failing to fail. On the other hand, you can't deny the impact that governments are having on inflating the stock market, e.g the US treasury has been giving liquidity in the form of loans to companies that would be have struggled or failed with or without the pandemic (among many, Boeing comes to mind). To deny the inflation of the stock market evaluations by governmental policies is to deny the reality and the spirit that is causing these unwavering evaluations in the midst of uncertain future economic performance

  • @arrrryyy

    @arrrryyy

    3 жыл бұрын

    Inflation is not only how much money is out there which of course works towards to spending , but also how much people and companies spend. Yes by indirectly increasing credit Feds increase the money supply which can be spent. Say someone buys $350K house by feds help then refinances and has cash in the bank and can spend. but that's indirectly. While it is contributory it does not mean it creates. Inflation is in general price of consumer basket going up, and it cannot go up if people are in recession or depression because they don't want to spend shit. At the same time feds are coming with their money printing tricks during those recessions and depressions not to allow economy to completely freeze and stock market completely collapse. What else do you want them to do? Yes, let's make bitcoin our money which will become $100K during these times, everyone will start growing their lemon trees and there will be no economy?

  • @jojoplacide

    @jojoplacide

    3 жыл бұрын

    @@arrrryyy I did not make any case for or against inflation at the feds hand. But if you admit that without the feds action the market would have tanked, then inherent in that premise is that the feds have affected (may we say bloated) the current evaluations. And thats all I am saying.

  • @VViatro

    @VViatro

    3 жыл бұрын

    @@jojoplacide I agree with you. There is really naive assumption going on here that all investments which are funded by private banks are good investments. There are tons of zombie giants at this point like Boeing you mentioned. Because will Boeing bounce back? Everyone is taking it for granted - but lets take this example to extreme for the sake of this argument - Boeing stops doing anything. It just exists with it's loans, grants and assets. Now the giganting commercial papers issued by boing are being bounced back and forth between private banks and FED. New bonds are being added to repay old bonds. FED and Private banks keep jugling, consolidating and re-packaging those loans. At the back of it there is Boeing stock which basically is backlog of loans to repay. Gov bails out Boeing so it can pay back the loans which was given basically by the same entity. It only creates illusion of adding value. We have a saying where I come from - stirring tea doesn't make it sweeter.

  • @miketorse

    @miketorse

    3 жыл бұрын

    Fed isn’t buying junk debt. That’s absolutely false

  • @jojoplacide

    @jojoplacide

    3 жыл бұрын

    @@miketorse yes in the literal sense they might not be junk grade bonds. The point is that the fed is buying bonds and assets that would other investment institutions deem less valuable. Otherwise other funds would buy these bonds.

  • @nikhilnanda5922
    @nikhilnanda59222 жыл бұрын

    This video is amazing. Such an articulate video , explaining information in the truest and most applied form. I can't thank you enough. Cheers mate. 👍

  • 3 жыл бұрын

    New video and again high quality. All the best.

  • @sumcse
    @sumcse3 жыл бұрын

    Hi Ben, thank you for the video. I have some questions as it contradicts my current understanding. 1. How is it able to counter deflation if the Feds assets purchage is not inflationary? 2. In 2008 Fed purchased sub prime mortgage backed securities which were toxic. When Fed buys those assets at a value that market is not ready to pay due to their quality being known, is it not more than changing the composition of the reserves? like changing fake gold with real gold seems to me like injecting money.

  • @AForEh

    @AForEh

    3 жыл бұрын

    sumcse wow great second question. Really hope Ben responds to this!

  • @jessesambro9535

    @jessesambro9535

    3 жыл бұрын

    Great second question

  • @Hiraaad

    @Hiraaad

    3 жыл бұрын

    I’ve always been wondering the second question. And now I’m curious to know the answer to the first question too. Ben, if you’re reading this, please answer these 2 questions!

  • @decapoli156

    @decapoli156

    3 жыл бұрын

    Great questions!

  • @danielpate4412

    @danielpate4412

    3 жыл бұрын

    Great question. For the second question, as you would know, we had inflation during and after the 2008 conundrum. Since the loans were being made out to consumers, not in the reserves. Banks had little reserves.

  • @charlesdeschenes8509
    @charlesdeschenes85093 жыл бұрын

    This is probably the most rational financial explanation I have heard since the start of this pandemic. When I speak to colleagues and friends about the situation in the stock market, it seems like everyone else is smarter than the FED and financial experts. I keep hearing ''We are hearing towards inflation doom'' and '' the only reason stock prices are up is because the FED is buying stocks ''. Its nice to have some rationality. Thanks, Ben.

  • @onlychildren857

    @onlychildren857

    3 жыл бұрын

    If you sub to the channel you can call him Ben.

  • @azapray

    @azapray

    3 жыл бұрын

    Yes fed has nothing to do with current stock boom, and there will never be any inflation except when you start looking at houses prices

  • @charlesdeschenes8509

    @charlesdeschenes8509

    3 жыл бұрын

    Alexander Hamilton haha yes, thanks for pointing it out (modified)

  • @Tambaha

    @Tambaha

    2 жыл бұрын

    @@azapray I hope you rethink how you think about the fed and the market =) The repo market almost died in 2019 before corona. Corona save it because it allowed more 'emergency measures' - spending. So now we're kicking bigger cans down the road

  • @robertchaplin
    @robertchaplin3 жыл бұрын

    Your videos are my education tool. Welcome back from your break

  • @paulgrewal4339
    @paulgrewal4339 Жыл бұрын

    Holy man. This is beautiful. Thank you!!

  • @steveantonioni
    @steveantonioni3 жыл бұрын

    A double whammy on this timely topic! The RR podcast episode was great as well. Thanks Ben!

  • @bleacherz7503
    @bleacherz75033 жыл бұрын

    Fantastic - As a lawyer and PhD (abd) in finance I’m combing through the federal reserve act to double check the transparency issues, but as far as I can see, to date, you are spot on and one of the few money managers who understand this. Thanks for sharing!!

  • @farahramadhan5530
    @farahramadhan55303 жыл бұрын

    Ben, I am so glad I came across your channel as well as the Rational Reminder podcast. I am studying for my Wealth Management Essentials, and let me tell you this video has changed the way I view many policies and financial concepts. Greatly appreciated.

  • @fififinance7469
    @fififinance74693 жыл бұрын

    Love hearing the tangible actions that you're implementing to make progress towards your dreams!💪

  • @aaronmartin8620
    @aaronmartin86203 жыл бұрын

    Ben, you are just so good at what you are doing! Keep up the great work.

  • @edwardmauer7442
    @edwardmauer74423 жыл бұрын

    Glad to have you back man! We butted heads over gold a year ago. I'm glad I went all in (plus leverage via options) in April, up big time. Facts, the average lifespan of all fiat currencies that have ever existed is 50 years; no fiat currency has ever lasted for more than 100 years. Meanwhile, gold has always been seen as a store of value everywhere. If you think about the great diversity between all the different societies all throughout the world all throughout history, and the different ethics and values they all hold, one would expect to find very little agreement/consensus among them. Gold as a store of value is one of those few things they all agree on. I think that says something remarkable about its endurance and power that won't change anytime soon. I'm not claiming gold is superior to equities or real estate, only that it's superior to holding fiat which is guaranteed to lose value in the long run. Especially in times like this when governments and central banks become totally unhinged and reckless, hell-bent on destroying the value of their currency. How can you say that all this money printing and deficit spending will lead to deflation rather than inflation? The US government is doing major deficit spending to give out generous unemployment benefits and business loans (that will likely be forgiven) to people and businesses. In other words, we are doling out borrowed money to people who aren't producing anything. More currency units + less production = inflation no? Anyway though we often disagree and have different perspectives, I always find your analysis and perspective invaluable. Keep it up man!

  • @BenFelixCSI

    @BenFelixCSI

    3 жыл бұрын

    Thanks Edric! I have more gold research that I need to turn into a video. We may butt heads again soon :)

  • @logansept

    @logansept

    3 жыл бұрын

    I agree with this comment... Love to hear this new perspective on money printing, but it still doesn't add up for me. This video left me with a lot of questions. If the money the banks recieve when the central bank buys their bonds doesn't get loaned out, then where does it go? Does it get used by banks to buy things? If so, it IS entering the economy and will cause inflation long term. If it just sits there and doesn't get loaned out that just seems unlikely. Is that what you're saying? It just sits in the banks? Personally since covid happened my bank started offering me 2.2% interest (down from 3.7%) on my line of credit so you know what I did? I borrowed a ton of money to buy stocks and precious metals (and have made a great profit doing so). The banks created a bunch of money and I used it to buy things and the prices of those things went up incrementally when I put my bid in (inflation). Please explain what happens to the money that is given to banks in exchange for their bonds cause I'm still confused

  • @DiamondTear

    @DiamondTear

    3 жыл бұрын

    @@logansept The deflationary effect from people getting unemployed (and not borrowing) is greater than the inflationary effect from you borrowing money because the interest rate is lower.

  • @logansept

    @logansept

    3 жыл бұрын

    @@DiamondTear ok that's interesting I could see that making sense short term while there's a recession and job loss, but then once people get their jobs back wouldn't that long term cause inflation? They always try normalizing interest rates but they never get up before the next recession hits and they have to lower them more and more and more each time.

  • @DrRock2009

    @DrRock2009

    3 жыл бұрын

    Logan Sept - yes. Long term inflation is coming as they want it to inflate away the debt...

  • @chaseorosco9017
    @chaseorosco90172 жыл бұрын

    I consider myself a dunce in economics, but you’ve explained the FED like no one has to me. Well done!

  • @leehillaby1706
    @leehillaby17063 жыл бұрын

    Thank you. So much clearer than anyone else I've seen.

  • @stevenpaul4394
    @stevenpaul43942 жыл бұрын

    Someone told me that it's the best time to buy because there will be a huge pump

  • @davidthomas4788

    @davidthomas4788

    2 жыл бұрын

    The cost of living is making people go into different businesses anyways, but my problem is that the rate at which money gets finished on little purchases is so surprising

  • @sergeysokolov9023
    @sergeysokolov90233 жыл бұрын

    Hey Ben, from the sound of it looks like you are referring to QE we've head in the aftermath of 08 crisis. How about the current situation with Covid 19? Do you factor in helicopter money from the government and its effect on inflation? Also, why do you think USD has recently started losing its value to gold and other reserve currencies?

  • @MrKongatthegates

    @MrKongatthegates

    3 жыл бұрын

    The currency reflects the strength of the economy and the US is having virus problems more than europe or Japan. Remember depressions are deflationary events. They print in order to keep prices stable in aggregate. Powel said there should be more ongoing fiscal stimulus (helicopter money)to avoid further contraction and lay offs.

  • @Michael-uo4jj
    @Michael-uo4jj3 жыл бұрын

    Always love your videos very informative.

  • @sebastiandonickler.6715
    @sebastiandonickler.67153 жыл бұрын

    Great to see your videos again. I didn’t knew the way Canada and USA money creation works, I thought they had the usual % retention on deposits like in my country in order to control the multiplier. Great video as always!! 💯

  • @RWAfuture
    @RWAfuture3 жыл бұрын

    Today it's not about return ON capital. Today it is about return OF capital.

  • @mavioz
    @mavioz3 жыл бұрын

    I consider myself to be a fairly smart engineer. I understood zero amount of this video.

  • @azmodaipaul8023

    @azmodaipaul8023

    3 жыл бұрын

    You're not alone

  • @iam4iamWe

    @iam4iamWe

    3 жыл бұрын

    I believe it's a part of your brain you don't exercise often. Therefore, these concepts seem foreign to you. Another analogy is Democracts and Republicans don't understand each other's points of view.

  • @EDH784

    @EDH784

    3 жыл бұрын

    come on guys, make an effort! I have an arts degree and got it all in the first go!

  • @robertracicot7232

    @robertracicot7232

    3 жыл бұрын

    Quite normal, you should read an introduction to modern economy

  • @justStardust940

    @justStardust940

    3 жыл бұрын

    you need some understanding of basic accounting.

  • @liv-oi6vg
    @liv-oi6vg Жыл бұрын

    i really like your style of enunciation, it makes a difficult topic like this much easier to follow by easily maintaining my attention.

  • @DjBaapreB
    @DjBaapreB Жыл бұрын

    So what was the cause of inflation?

  • @MoneyMacro
    @MoneyMacro3 жыл бұрын

    Really well done Ben!! You are one of the few KZreadrs that is not spewing one of the long rejected money multiplier / fractional reserve banking / QE = printing myths. Keep it up!

  • @patman63ify
    @patman63ify Жыл бұрын

    Really informative video! I never realized how in-depth the financial system is until I watched this video! Keep up the great work!

  • @abhishekmore267
    @abhishekmore2673 жыл бұрын

    Great video! Would be great if there is a part 2 of this video addressing some of the concerns in the comments ! Amazing content Ben :)

  • @johnlandau7111
    @johnlandau71113 жыл бұрын

    The error in Mr. Felix's thinking is that money is loaned only to "credit worthy investors." At the present time, this is untrue. Both banks and the Federal treasury directly have made huge loans to credit unworthy companies. These are the "zombie companies that we hear about By buying these "junk bonds," the Federal reserve system acquires credit-unworthy securities from the banks that are extremely unlikely to be paid back. The Federal treasury has also made huge outright "grants" to various companies to develop vaccines, pharmaceuticals, etc. Mr. Felix's assumption that banks are the only entities that are pumping money into the economy, and that banks only lend to "credit worthy" companies, are dangerous fallacies. He also fails to take into account the effect that very low interest rates to depositors that result from the Fed's keeping its interest rate to banks and other financial instituions extremely low. The extremly low interest rates paid to depositors makes savings nearly impossible, which severely hurts people's retirement prospects.

  • @defaultuser9423

    @defaultuser9423

    3 жыл бұрын

    Yes very important points to consider. Maybe it falls outside Mr.Felix's purely economic perspective, but the social and political implications of this should be important to every citizen.

  • @wepopew

    @wepopew

    3 жыл бұрын

    This. If any of the bonds or securities the fed hold gets defaulted on, it will garner inflation as if the fed just gave it away...

  • @wepopew

    @wepopew

    3 жыл бұрын

    They even gave grants (i.e made a loan) to shit tier companies like Kodak, and it's unlikely Kodak will be able to repay that loan in full.

  • @criticalcritic4287

    @criticalcritic4287

    3 жыл бұрын

    Many more errors than that, such as: Currency is not money. Yes, fractional reserve still exists... the reserve is ZERO, So it is even Worse. A word he avoids is Counterfeiting. And the historical fact that the central bank cartel successfully impoverished the world and compromised its governments. Central Banks, fractional reserve, tied to a progressive income tax, is NOT remotely capitalistic, it is marxist (as even Senator Aldrich himself said). Every dollar the FED creates steals value from existing ones, and they then hand it out to whom they chose. It is controlled wealth transfer. A blatant corrupt system and anyone supporting it is either blind, or a criminal... like all the thieves that masterminded it.

  • @s991514

    @s991514

    3 жыл бұрын

    The fed does not generally buy anything below investment grade. The exception to the rule is that they will buy so called "Fallen Angels" which are companies that were downgraded to "High Yield/Junk" status as a result of the pandemic but would otherwise be investment grade.

  • @oldskool1977
    @oldskool19773 жыл бұрын

    *What's stopping any of us from writing a big cheque without any reserves in order to purchase treasury bonds from the government and then collect the interest **_below_** the rate that any central bank can do, effectively undercutting them and getting the government's business in the long run?*

  • @cafelatte1124

    @cafelatte1124

    3 жыл бұрын

    It seems like a lot of these articles and videos about American monetary system are speaking for the banks, saying how printing money is done in the name of "public good and stimulation of economy". But they never mention the beneficiaries of this system who gained money out of thin air on interest.

  • @davebarry333

    @davebarry333

    2 жыл бұрын

    Is people gaining (even to an obnoxious level) a bad thing for the whole economy?

  • @oleglukianchikov3029
    @oleglukianchikov30292 жыл бұрын

    Best explanation of QE on KZread so far! Thank you very much!

  • @TK-ek5kp
    @TK-ek5kp8 ай бұрын

    I rewatch this vid on occasion. Timeless info here. Great work. Thanks you!

  • @SynThenergy
    @SynThenergy3 жыл бұрын

    When is the updated model portfolio coming out? I feel like a kid on Christmas morning! As always, great video! So many misconceptions about how banking works are cleared up from this video.

  • @blizzard762

    @blizzard762

    3 жыл бұрын

    Awaiting the new model portfolio eagerly as well! Any updates Ben?

  • @evanlebzu1

    @evanlebzu1

    3 жыл бұрын

    Where will that be? on this channel?

  • @blizzard762

    @blizzard762

    3 жыл бұрын

    @@evanlebzu1 I believe either on the rationalreminder or pwlcapital websites.

  • @Ryan-nm2si

    @Ryan-nm2si

    3 жыл бұрын

    Just like any other basic KZread channel. Tells the peasants the basic mechanizations of the system but no actual advice on where to use/put your money and no information on what the maker of the video IS doing with there money. They all just repeat the same basic things

  • @user-zl3rb4rg1n

    @user-zl3rb4rg1n

    3 жыл бұрын

    @@Ryan-nm2si joseph carlson has a channel that does exactly what you say is lacking. His portifolio is open and he discusses his choices weekly. I find it extremely helpful, manly to see and observe another investor.

  • @Charlie-qy1fc
    @Charlie-qy1fc3 жыл бұрын

    “Borrowing is the money-creating process that allows for saving, not the other way around”. Really cool concept to understand, thank you so much for this video.

  • @PotatoMan1491
    @PotatoMan14913 жыл бұрын

    I rewatched this several time, full of solid points and insights

  • @godsculptedmeticulously3066
    @godsculptedmeticulously30663 жыл бұрын

    I have already watched this 20x. This is basically a class on economy for me. God Bless You!

  • @gersonadr2
    @gersonadr23 жыл бұрын

    Why is keeping low interest rates so important? Why can’t the FED allow interest rates to naturally go up? My guess is to avoid bankruptcy tsunami of over indebted governments, corporations and households, throwing us back to 1930. The problem is, we can’t solve a debt problem with more debt. At some point, market forces will push today’s artificially low IR to where it needs to go.

  • @BenFelixCSI

    @BenFelixCSI

    3 жыл бұрын

    Fama’s argument in the paper I mentioned at the end suggests that market determines rates and the Fed just follows the market.

  • @BD-me4nk

    @BD-me4nk

    3 жыл бұрын

    @@BenFelixCSI ok, so why are market rates at or near zero and how does "the market" go into negative interest rates?

  • @cosmojg

    @cosmojg

    3 жыл бұрын

    @@BD-me4nk It's all about supply and demand. At present, there is far more institutional will to loan money than there is will to borrow. Rates rise and fall until these things equilibrate.

  • @bobleapyear
    @bobleapyear3 жыл бұрын

    Great video! But I always get stuck on "the Fed buys treasury bills from a bank." WHERE did the bank get the T-bill? From depositors' money, right? What's the bank's motivation to sell to this particular buyer, the Fed?

  • @felipecancian9960
    @felipecancian99603 жыл бұрын

    Hi, I am from Brazil ( the country where everything can happen even the impossible ). Glad you are back. You help me a lot. I watched all your videos, excellents.Thanks.

  • @glowish1993
    @glowish19933 жыл бұрын

    This is one of the best corners of KZread

  • @user-tj3fw1nh8g
    @user-tj3fw1nh8g3 жыл бұрын

    Just discovered you and absolutely loving the in depth expertise holy shit I feel smart after watching this stuff. And trust me I’m dumb as shit

  • @HamiltonRb

    @HamiltonRb

    3 жыл бұрын

    We trust you. 😂

  • @SentinalBais1
    @SentinalBais13 жыл бұрын

    If QE pushes down long term rates by adding liquidity, and you say lower rates results in more money creation then doesn't QE result in more lending indirectly?

  • @AForEh

    @AForEh

    3 жыл бұрын

    Sentinal72 that’s assuming that there is demand for loans. If there is no consumer confidence, a business isn’t going to go to the bank and ask get additional loans to invest in things like capex, even if the interest rate is down to 2%. If anything, they’d be cutting overhead as opposed to adding to their liabilities.

  • @randomchannel50

    @randomchannel50

    3 жыл бұрын

    Well thats the purpose for QE no? Encourage loans and spending

  • @jherc12990

    @jherc12990

    2 жыл бұрын

    @@AForEh But in order to stimulate the economy, by lowering interest rates there will be demand for borrowing. Is that not the case?

  • @joshportnoy8102
    @joshportnoy81023 жыл бұрын

    Great video! Important to keep in mind that QE is still considered a controversial measure by economists. Although there is a neutrality in money, there is a point where prices become fully elastic, when 0 percent real interest rates occur, and that is when there is no difference in terms of liquidity between any of the assets. There is no data to use as a model on how that coupled with large amounts of debt will be handled by the market.

  • @chrisfoster3367
    @chrisfoster33673 жыл бұрын

    Thanks for this! This was a nice reiteration of the podcast topics which helped the slightly more confusing bits click.

  • @I-Know-Best
    @I-Know-Best3 жыл бұрын

    I still don't understand everything clearly but as an economics major, I can only hope Ill get there.

  • @BeepBeep_773

    @BeepBeep_773

    3 жыл бұрын

    The truth about the economy will not ever be taught in a government school. You will be indoctrinated.

  • @user-ks1hp2pb5g

    @user-ks1hp2pb5g

    3 жыл бұрын

    @@BeepBeep_773 Lol, dude he literally cites academic articles to support his explanation...

  • @zygi22

    @zygi22

    3 жыл бұрын

    H The thing is that you should not heavily rely on “scientific data” in economics as it is often misleading or just outright bs. That’s because economics is not the same science as, say, physics or mathematics. You can’t repeatedly perform an experiment to test your hypothesis. That’s why theory and logical reasoning is the best way to understand economics.

  • @user-ks1hp2pb5g

    @user-ks1hp2pb5g

    3 жыл бұрын

    @@zygi22 Ok and people can construct a theory that is pro-MMT & logically rationalize it. People can do the opposite, theory & ones own "logic" may also not be reflected in reality.

  • @hshambaugh

    @hshambaugh

    3 жыл бұрын

    Research the truth about the Federal Reserve.

  • @EJofKC
    @EJofKC3 жыл бұрын

    I'm gonna need to watch this 5 more times and take notes.

  • @JarodM

    @JarodM

    3 жыл бұрын

    It's complicated because it's legal fraud.

  • @thekatephillips
    @thekatephillips3 жыл бұрын

    Thanks-very informative! I appreciate your explanations and also the graphics!

  • @20dawan
    @20dawan Жыл бұрын

    Watching this in Q4 2022 is insane 🤯👌🏾

  • @CaseyBurnsInvesting
    @CaseyBurnsInvesting3 жыл бұрын

    As long as real wages go up those who are losing purchasing power will unduly feel more wealthy.

  • @davidg4512

    @davidg4512

    3 жыл бұрын

    yes, this.

  • @RobTzu

    @RobTzu

    3 жыл бұрын

    Are you sure you don't mean nominal wages?