/biz/ - Business & Finance

posting from prev thread:

>>23191842
The fed doesn't create money, it creates bank reserves. And just because bank reserves are created doesn't mean any new cash is circulating in the economy. There are 2 ways money can circulate in the economy:

1) Member banks can buy treasuries to give loans to the government which is as good as fiat since the government doesn't have to pay it back (technically they do but in reality they don't). The fed delivers reserves to the member banks in exchange for the treasuries, and it's up the congress to actually spend the treasury's new funds for it to circulate in the economy. As we know, congress/senate is holding up additional stimulus.

2) The fed issues reserves to member banks *in the hopes* that member banks will issue new loans against it. As you can see in pic related, those banks and the entire commercial banking sector in general is not lending.

The reason why the stock market is receiving any of the benefits of the Fed minting reserves is because by directly/indirectly purchasing bank corporate bonds, they are providing capital that is being used to purchase equities/etfs as opposed to being lent into general circulation.

https://www.barrons.com/articles/blackrock-is-biggest-beneficiary-of-fed-purchases-of-corporate-bond-etfs-51591034726

Of course that's just a drop in the bucket. The majority of the reason why the market went through a price recovery is because the Fed convinced the markets that it has taken action to hold up asset prices; the bulk of the buying in the stockmarket was investors playing musical chairs.

There's alot of moving part here. It's not as simple as

>money printer go brrr haha inflation go up

>>23191842
The fed doesn't create money, it creates bank reserves. And just because bank reserves are created doesn't mean any new cash is circulating in the economy. There are 2 ways money can circulate in the economy:

1) Member banks can buy treasuries to give loans to the government which is as good as fiat since the government doesn't have to pay it back (technically they do but in reality they don't). The fed delivers reserves to the member banks in exchange for the treasuries, and it's up the congress to actually spend the treasury's new funds for it to circulate in the economy. As we know, congress/senate is holding up additional stimulus.

2) The fed issues reserves to member banks *in the hopes* that member banks will issue new loans against it. As you can see in pic related, those banks and the entire commercial banking sector in general is not lending.

The reason why the stock market is receiving any of the benefits of the Fed minting reserves is because by directly/indirectly purchasing bank corporate bonds, they are providing capital that is being used to purchase equities/etfs as opposed to being lent into general circulation.

https://www.barrons.com/articles/blackrock-is-biggest-beneficiary-of-fed-purchases-of-corporate-bond-etfs-51591034726

Of course that's just a drop in the bucket. The majority of the reason why the market went through a price recovery is because the Fed convinced the markets that it has taken action to hold up asset prices; the bulk of the buying in the stockmarket was investors playing musical chairs.

There's alot of moving part here. It's not as simple as

>money printer go brrr haha inflation go up