Death comes to us all. Life's but a walking shadow | Why do you think the interest rate on the securities (treasuries etc.) would be 3%? What is the current interest rate on treasuries? Does the Fed's interest rate necessarily need to be the same as the treasuries we would buy?
I don't pretend to understand the mechanics of QE but doesn't it consist primarily of the Fed loaning money to banks which they created (by "fiat"). Any earnings would come from the banks but the interest rate being charged is close to zero. It would seem to me that the danger here is the difference between the interest rate the banks charge (3%) and what they pay (<0.5%) that is being created It might be that 2-3% difference that adds up and appears as bank earnings that might become a problem.
I think that the bonds are just the paper trail for the money the Fed gives banks. Essentially the Fed says, " Give us a piece of paper representing $X at $0.Y% interest and you can claim to have the $X dollars to loan.
But what do I know? |
The 4.5 trillion dollar balance sheet. Continued QE
