Quantitative Easing 101

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The video below puts a humorous spin on the otherwise difficult-to-digest process of quantitative easing. I guess as long as we can laugh, there is a modicum of hope …

The transcript below comes courtesy of FDL Action:

BEAR I:  How does the Fed execute the quantitative easing?

BEAR II:  They buy the Treasury bonds.

BEAR I:  Do they buy the Treasury bonds from the Treasury Department?

BEAR II:  No they buy the Treasury bonds from the Goldman Sachs.

BEAR I:  You must be shitting me.


BEAR I:  So let me get this straight.  If I want to buy the Treasury bonds, with my money, I can buy them directly from the Treasury?


BEAR I:  And if you want to buy the Treasury bonds, with your own money, you can buy them from the Treasury?

BEAR II:  Yes.

BEAR I:  But if the Ben Bernanke wants to buy the Treasury bonds, using the American people’s money, he does not buy them from the Treasury, he buys them from the Goldman Sachs?

BEAR II: Exactly.

BEAR I:  And does the Goldman Sachs give him a good price?

BEAR II:  Of course not, they are the Goldman Sachs, they make their living ripping off the American people.

BEAR I:  But how is the Goldman Sachs able to do this?

BEAR II: The Fed announces when it is going to buy, and what it is going to buy, before it does the trade.

BEAR I:  So the Goldman Sachs can front-run the Fed, and give them the worst possible price on the Treasury bonds?

BEAR II:  Yes, exactly.

BEAR I:  And the Fed is okay with this blatant theft from the American people?

BEAR II: Of course, otherwise the Fed would just buy the Treasury bonds directly from the Treasury Department.

BEAR I: Who inside the Fed is responsible for the buying of the Treasury bonds?

BEAR II:  The buying of the Treasury bonds is conducted by the New York branch of the Federal Reserve.

BEAR I:  And who is in charge of the New York branch?

BEAR II:  The head of the New York branch is the William Dudley.

BEAR I:  And what did the William Dudley do before running the New York Fed?

BEAR II: Before running the New York Fed, the William Dudley was a partner at the Goldman Sachs.

BEAR I: So the guy in charge  the American people’s money when dealing with the Goldman Sachs used to be a partner at the Goldman Sachs?

BEAR II:  Yes.

BEAR I: And nobody has a problem with this?

BEAR II:  Apparently not.

BEAR I:  Is this an episode of the Twilight Zone?

Source: YouTube, November 14, 2010.

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1 comment to Quantitative Easing 101

  • I saw this video yesterday. Interestingly, on Saturday I observed a unique development in the bond market and have discussed this observation at: http://understand-s-thrive.blogspot.com/

    One thing that I have learnt in the market place is that financial markets do not follow the obvious path, and presumed relationships can disappear at any time. That being said, are we witnessing a serious scenario of will buy the rumor of QE2 and sell the news.

    If anything, it is an interesting observation for the time being. Only time will tell, if this observation holds or disappears.

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