While watching a masterpiece on RV from October the 7th, the interview Featuring Jeffrey Snider and Steven Van Metre, I have come across really nice comment by Rob S. Bonds are not my expertise, thus I beg you to teach me. I understand Steven's thesis, how QE is basically deflationary and is pushing yields lower, but I'd love to find somebody who would help me figure out, what parts of the comment Rob S. has written are false:
"#1 - The conversation focused on QE limited to bank reserves. However, below are a number of examples that sure look like the Fed is directly or indirectly infusing money outside of bank reserves. I would appreciate if each of these items were addressed.
1.a – Mortgage Backed Securities. Roughly speaking, a bank creates money, lends it as a mortgage, then sells the mortgage which eventually ends up on the Fed balance sheet. The bank sold an asset, didn’t they receive money?
1.b – Bond ETF. Roughly speaking, the Treasury gave the fed ‘capital’ which the Fed leveraged by 10x and purchased Bond ETF in the general public (not limited to bank reserves) which ended up on the Fed balance sheet. Technically, whoever sold the ETF indirectly received Fed money.
1.c – PPP. This appears to be a two-step process. First step, roughly speaking, is Congress told the banks to create money, give out a loan, forgive the loan, get reimbursed by the Fed. Second step, roughly speaking, the Treasury gave the... (More)