Boeing's gonna need to put their heads in the full downward position and kiss their asses good-bye after this : (

Instead of spending $1.5 trillion just to watch the Dow go up for an hour before crashing right back down again, it seems like giving every American a check for $4500 would have done far more to benefit the economy and society in general.

@2 New rims!

@2 -- "... it seems like giving every American a check for $4500 would have done far more to benefit the economy and society in general.

In any Consumer-Driven Economy, Ad, it certainly Would have; but the thing is, when you give all the leetle peeple Free Money, it pretty much Ruins them for just about anything else. They get all fat, and lazy, setting around, everywhere drinking their drinks and frankly, waiting -- for their next gottdamm Handout.

And we'd be Fools to do that, wouldn't we?

See how that works?

@2 -- "... it seems like giving every American a check for $4500 would have done far more to benefit the economy and society in general."

In any Consumer-Driven Economy, Ad, it certainly Would have; but the thing is, when you give all the leetle peeple Free Money, it pretty much Ruins them for just about anything else. They get all fat, and lazy, setting around, everywhere drinking their drinks and frankly, waiting -- for their next gottdamm Handout.

And we'd be Fools to do that, wouldn't we?

See how that works?

edited for clarity
apologies

Hey Stranger give us a fucking
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@3,

I'm assuming you believe you one-upped @2, but you know you actually proved his/her point.

The economy flourishes when capital changes hands, for example, when people buy new rims for their chevy caprice. It moves capital, boosts the business of the rim store, allowing the business owner to hire someone else, or maybe expand the business. That's capitalism when it's healthy.

The economy does not flourish when capital is squirreled away in reserve and kept out of the free market. For example, when you give it to banks and they lock it in their vaults.

The money will end up in the banks anyway, but instead of giving it to them directly, why not give it to Joe Sixpack, who will spend it at the rim store, who will invest it in their company, where such investment will end up in the bank.

I could be wrong here -- I'm no economist -- but my understanding is that the government isn't really giving money away. Here is a little blurb from https://en.wikipedia.org/wiki/Repurchase_agreement:

A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and buys them back shortly afterwards, usually the following day, at a slightly higher price.

The repo market is an important source of funds for large financial institutions in the non-depository banking sector ...

In 2007-2008, a run on the repo market, in which funding for investment banks was either unavailable or at very high interest rates, was a key aspect of the subprime mortgage crisis that led to the Great Recession. ...

[End Quote]

So, basically, if I understand this correctly, the Federal Reserve is simply acting like a very large, fearless and generous bank, willing to happily join in this market. Unlike a bank, it does not get anything out of this. Not even a tiny percentage (which is what banks usually get, I assume) but more importantly, it is fearless. Because fear within the banking system can screw everything up in much the way that runs on a bank did before FDIC.

This is why Charles calls it "grease", which is a very good analogy. This market is part of the underlying financial system. You can argue (and I believe Charles is arguing) that it is too large, and unregulated. I agree. But it is important to understand that the government expects to get back every dime that they are spending on this. Whether that is the case likely depends on the long term health of the economy, something that Republicans haven't been focused on at all. This is essentially putting oil in the car, after you realize it is low. You better put it in there, otherwise the car will cease up.

But it doesn't fix the underlying problem with the car. As with the Great Recession (misnamed, because it really was a depression) banks may stop lending money to individuals, as they doubt that people will pay it back. In the meantime, we may see massive layoffs in the service sector (and various other sectors) which make up a big part of the economy. Consumer confidence may be shot, which is why the stock market it falling, and this will little to fix it. When the wheels fall off, it is cold comfort to know you have enough oil in the engine.

Just to continue my analogy: Why does the car keep needing oil? I get it -- when you drive it into a ditch (as the asshole financial-instrument gamblers did in 2007-2008) it makes sense. It also makes some sense now. But why six months ago, which is the point Charles is making? Why do you need quantitative easing, if the stock market is doing so well?

Obviously there is a problem. My guess is it is a combination of a lack of regulation, along with a fundamentally weak economy caused by disparity of income (the basic problems that caused the Great Recession).

"The financial system" means "all of the borrowing and lending that there is."

A repurchase agreement is a form of collateralized loan. The borrower has an asset. The lender buys the asset, with the agreement that the borrower will buy the asset back for a slightly higher price after a set period. The price difference is effectively the interest on the loan. These agreements in aggregate are called "the repo market," which by dollar volume make up the majority of "the financial system" today.

"Quantitative Easing" is the term used to describe a central bank buying assets. Any kind of assets, any central bank, for any reason. That's it.

The central bank in the US, the Federal Reserve, does not print money. Money in the US is printed (or conjured into electronic being) by the Department of the Treasury, not the Federal Reserve. The two institutions are independent of each other.

It might help readers if Our Bumbling Mudede knew enough about "the financial system" to include quick definitions of jargon like this, instead of copying and pasting a few random phrases from the Wall Street Journal then blasting off in his little toy Politics Rocket, bound directly for empty space.

@10 Perry Mehrling is great on this, try "New Lombard Street."

The long short version:

The Fed (and other central banks) traditionally acted as the "lender of last resort." But the bulk of the basic banking function -- borrowing and lending -- has moved out of the banks, as firms use repo and other instruments to borrow money instead of traditional bank loans. All of these forms of borrowing and lending outside of traditional bank loans, taken together, were called "shadow banking" for a while, though now it's usually just called "nonbank lending."

Central banks support traditional banks by acting as clearinghouses, and extending credit at a pre-fixed rate when a clearing partner doesn't have funds to cover a net negative balance at the end of each day. This used to provide stability in a crisis, because banks knew they could always borrow from the clearinghouse -- the central bank -- to balance their books at the end of each day, even if no other banks were willing to lend to them (or to anyone at all, as can happen in a crisis where risk levels spike suddenly, or when there's a general bank run).

With borrowing and lending shifting away from banks, however, this lending at the point of overnight clearing becomes less and less effective. And when a crisis occurs, the biggest immediate threat in non-bank lending is typically not insovency, but illiquidity. That is, firms typically do not suddenly find themselves in positions where the liabilities on their balance sheets exceed their assets, they find themselves in a position where their nonbank borrowing and lending is frozen because suddenly nobody, not even dealers, are willing to buy (or roll over, more commonly) the borrowing instruments or underlying assets. So even though their balance sheets are fine, they suddenly can't make expected payments, and have to close up shop unless someone steps in.

Enter the central banks. Their new role, Mehrling argues, is to act as "dealers of last resort" in addition to "lenders of last resort," i.e. to step in and buy "toxic" assets when the markets freeze up (at a steep discount-- just enough to get the flows of payments restarted). That, he argues, is what's been driving the successive rounds of QE over the past decade or two.

To put it into simple terms, the stock market has been riding a sugar high of cheap ass money, but now that money has gotten more expensive, the market is coming down.

So The Fed just dumped in 1.5 trillion Pixie Sticks hoping to make money cheap enough again to stimulate more activity. Of course like all central banking moves, this basically just moves money from the public trust into the hands of bankers, which is how "central banking" keeps entire nations enthralled permanently to people whose names the public is not allowed to hear and not supposed to know about.

Ever wonder why the Rothschilds never show up on any "World's Richest" lists? Isn't it kind of odd?

@13 Jesus H Christ, Teddy.

Do go on. Tell us more about the Jewish bankers secretly ruling the world.