{"id":7851,"date":"2013-06-03T00:32:17","date_gmt":"2013-06-03T04:32:17","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=7851"},"modified":"2013-06-03T00:32:17","modified_gmt":"2013-06-03T04:32:17","slug":"impact-of-qe-or-lack-thereof-is-reflected-by-excess-reserves","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2013\/06\/03\/impact-of-qe-or-lack-thereof-is-reflected-by-excess-reserves\/","title":{"rendered":"Impact of QE (or lack thereof) is reflected by excess reserves"},"content":{"rendered":"<p>JKH at Monetary Realism writes:<\/p>\n<blockquote><p>&#8230;.there is a systematic tendency in the blogosphere and elsewhere to misrepresent the impact of QE in a particular way in terms of the related macroeconomic flow of funds&#8230;&#8230; Most descriptions will erroneously treat the macro flow as if banks were the original portfolio source of the bonds that are being sold to the Fed, obtaining reserves in exchange. This is not the case. A cursory scan of Fed flow of funds statistics will confirm that commercial banks are relatively small holders of bonds in their portfolios, especially Treasury bonds. The vast proportion of bonds that are sold to the Fed in QE originate from non-bank portfolios&#8230;&#8230;. Many descriptions of QE instead erroneously suggest the strong presence of a bank principal function in which bonds from bank portfolios are simply exchanged for reserves. In fact, for the most part, while the banking system has received reserve credit for bonds sold to the Fed, it has also passed on credits to the accounts of non-bank customers who have sold their bonds to the banks. This is integral to the overall QE flow of bonds.<\/p><\/blockquote>\n<p>There is a simpler explanation of what happens when the Fed purchases bonds under QE. Bank balance sheets expand as sellers deposit the sale proceeds with their bank. In addition to the deposit liability the bank also receives an asset, being a credit to its account with the Fed. Unless the bank is able to make better use of its asset by making loans to credit-worthy borrowers, the funds are likely to remain on deposit at the Fed as excess reserves &#8212; earning interest at 0.25% per year. Excess reserves on deposit at the Fed currently stand at close to $1.8 trillion, reflecting the dearth of (reasonably secure) lending\/investment opportunities in the broader economy.<\/p>\n<p>Read more at <a href='http:\/\/monetaryrealism.com\/the-accounting-quest-of-steve-keen\/'>The Accounting Quest of Steve Keen | Monetary Realism<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>JKH at Monetary Realism writes: &#8230;.there is a systematic tendency in the blogosphere and elsewhere to misrepresent the impact of QE in a particular way in terms of the related macroeconomic flow of funds&#8230;&#8230; Most descriptions will erroneously treat the macro flow as if banks were the original portfolio source of the bonds that are &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2013\/06\/03\/impact-of-qe-or-lack-thereof-is-reflected-by-excess-reserves\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Impact of QE (or lack thereof) is reflected by excess reserves&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,34],"tags":[380,1313,1352,2831],"class_list":["post-7851","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-us-canada-countries-regions","tag-banking-system","tag-excess-reserves","tag-fed","tag-quantitative-easing"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Impact of QE (or lack thereof) is reflected by excess reserves - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Impact of QE (or lack thereof) is reflected by excess reserves - the patient investor\" \/>\n<meta property=\"og:description\" content=\"JKH at Monetary Realism writes: &#8230;.there is a systematic tendency in the blogosphere and elsewhere to misrepresent the impact of QE in a particular way in terms of the related macroeconomic flow of funds&#8230;&#8230; 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The red line on the graph below shows how the Fed expanded its balance sheet by $3.5 trillion between 2008 and 2014, injecting new money into the system\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"Fed Assets and Excess Reserves on Deposit","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-10-01-fedassets-reserves.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-10-01-fedassets-reserves.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-10-01-fedassets-reserves.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":8778,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/11\/22\/why-does-qe-taper-spook-the-market-if-it-will-have-no-real-impact\/","url_meta":{"origin":7851,"position":1},"title":"Why does QE taper spook the market if it will have no real impact?","author":"ColinTwiggs","date":"November 22, 2013","format":false,"excerpt":"Question received from CG about the impact of QE and Fed taper: I'm not arguing against the data presented on the graph, but if true that most of the QE bond purchases are being parked by banks in interest-bearing, excess reserve deposits at the Fed, why do the markets get\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"US Household Debt","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2013\/2013-11-18-us-excsresns.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2013\/2013-11-18-us-excsresns.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2013\/2013-11-18-us-excsresns.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":25928,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/05\/21\/rrp-a-fed-taper-by-stealth\/","url_meta":{"origin":7851,"position":2},"title":"RRP: A Fed taper by stealth","author":"Colin Twiggs","date":"May 21, 2021","format":false,"excerpt":"We will try to keep the jargon to a minimum, so that we do not get lost in the maze of financial markets. On May 20th, Tyler Durden published an article headed \"Fed Alert: Overnight Reverse Repo Usage Soars Above Covid Crisis Highs\" What is Overnight Reverse Repo? Overnight Reverse\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":19322,"url":"https:\/\/thepatientinvestor.com\/index.php\/2019\/10\/23\/fed-losing-control\/","url_meta":{"origin":7851,"position":3},"title":"S&#038;P 500 bearish as Fed forced to expand","author":"Colin Twiggs","date":"October 23, 2019","format":false,"excerpt":"Juliet Declercq at JDI Research maintains that the normal business cycle has been replaced by a liquidity cycle, where market conditions are dictated by the ebb and flow of money from central banks. Risk will remain elevated for as long as natural price discovery is suppressed and risk-reward decisions are\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":11324,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/11\/12\/will-the-stock-market-collapse-when-qe-is-withdrawn\/","url_meta":{"origin":7851,"position":4},"title":"Will the stock market collapse when QE is withdrawn?","author":"ColinTwiggs","date":"November 12, 2014","format":false,"excerpt":"This chart in Westpac's Northern Exposure chart summary implies that US stocks rely on Fed balance sheet expansion (QE) for support. The curve shows an almost perfect fit. There are just two things wrong with it. First, the scales on the left and right sides of the chart are not\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"Fed Securities Held Outright v. S&P 500","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-11-12-westpac-spx.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-11-12-westpac-spx.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-11-12-westpac-spx.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":9227,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/02\/16\/declining-us-commercial-bank-loans\/","url_meta":{"origin":7851,"position":5},"title":"Declining US commercial bank loans?","author":"ColinTwiggs","date":"February 16, 2014","format":false,"excerpt":"Sober Look highlights the sharply declining ratio of commercial bank loans and leases to bank deposits. Its only when we examine the detail, however, that we note cash reserves have ballooned in the last 10 years. And most of those cash reserves are deposits at the Fed which now (post-GFC)\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2014\/02\/0b553-loantodepositratio.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2014\/02\/0b553-loantodepositratio.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2014\/02\/0b553-loantodepositratio.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/7851","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=7851"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/7851\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=7851"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=7851"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=7851"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}