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QUANTATATIVE EASING IN THE US - WALTER BAGEHOT'S LEGACY?
Bernanke being interviewed
http://www.bloomberg.com/video/bernanke-on-quantative-easing-bubble-risks-_1_iD6nzTWa1t6G~6rQ0uA.html
He stated that his guide was Walter Bagehot's dictum that in times of financial crisis central banks should lend freely to solvent depository institutions, only against good collateral and at interest rates that are high enough to dissuade those borrowers that are not genuinely in need.
This all sounds reasonable but where has this policy taken the USA and UK to date? We all tend to tune out when we hear these very large figures and how many voters really know what has been done and what the consequences will be.
Bernanke at the the helm of the Federal Reserve has increased Treasury securities held by the Federal Reserve from under $500 billion in 2009 to over $2 trillion to date, and has bought $1.2 trillion mortgage backed securities over the same period.
(See attached chart from wikipedia drawn from Federal Reserve database "FRED")
To date the UK QE ( called the asset purchasing program ) has totalled £375 billion ( source Bank of England website )
Could Bagehot ever have envisioned such vast sums?
http://www.bloomberg.com/video/bernanke-on-quantative-easing-bubble-risks-_1_iD6nzTWa1t6G~6rQ0uA.html
He stated that his guide was Walter Bagehot's dictum that in times of financial crisis central banks should lend freely to solvent depository institutions, only against good collateral and at interest rates that are high enough to dissuade those borrowers that are not genuinely in need.
This all sounds reasonable but where has this policy taken the USA and UK to date? We all tend to tune out when we hear these very large figures and how many voters really know what has been done and what the consequences will be.
Bernanke at the the helm of the Federal Reserve has increased Treasury securities held by the Federal Reserve from under $500 billion in 2009 to over $2 trillion to date, and has bought $1.2 trillion mortgage backed securities over the same period.
(See attached chart from wikipedia drawn from Federal Reserve database "FRED")
To date the UK QE ( called the asset purchasing program ) has totalled £375 billion ( source Bank of England website )
Could Bagehot ever have envisioned such vast sums?
