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1:45 "You can't bring the rate down to a negative level" Oh yeah? Just watch that madness unfold eleven years later.

This is BY FAR the best explanation of quantitative easing I've found. It also explained why it's so risky, since the government is just eating "risky assets" like a debt collector. Long-term it can't be a solution, since the entropy (cost of risky assets vs value recovered) will eventually force a collapse.

Where were you bro when I was in school......that was an excellent explanation

Your explanations are cristal clear and concise with recurrent use of analogies. I am a University Professor in Computer Science and I know what I am talking about ... You are much more than a Senior Editor. You should teach at the Biggest Universities, sir !

After reading on quantitative easing for a month, I finally understand what it is

ME: You Can't bring a rate down to a negative level. FED: HOLD MY BEER!!

"You can't bring the rate down to a negative level..." XD

I always been told that QE is printing more money. Never understand how that helps the economy. Until now. You are the best!

Most epic penthrow finale on finance videosi have seen. And by the way: Thanks! This is the most clear explanation of quantitative easing i have found of any kind of source!

I come from 2019. When he said you can't go to zero.... oh my friends....thats exactly where we are going.

I've been studying this all day and his explanation is the best I've seen!

Thank you very much for your lesson: for the first time I understood the Quantitative Easing and my level of English is upper intermediate. Thanks again your lesson is gold to me. You have the gift for teaching, no doubt about it. Grazie. Antonio from Italy.

Why is this video so much under valued to the public. People should be watcing this kind of videos so that the awareness will be increase. And can avoid mistakes in the future. The video looks super simple because he uses real examples with no difficult words involve. Great job for this channel. :)

the video was created in 2008, but it will be helpful forever! thx for your amazing explanation.

could not be any more helpful and simplified. thank you.

A very clear and factual analysis of the situation. Bravo, good sir.

2019: Please re-do some of these tutorials please!

Your videos are very important to me... the amount of knowledge transferred in such a simple manner is amazing. I never thought quantitative easing could be so easy. Thanks a lot and please keep it up.

WOW. this is the first demonstration that actually made sense. If it isnt bad enough that our country is in the position of having to resort to quantitative easing, risk hyperinflation, and print money to revive an unsustainable economic model, now I have to have a foreigner be the only one who can adequately explain the process to by which my own government taxes me by denigrating my purchase power. THANKS!

11 years old, still the best explanation ever of quantitative easing.

Very good video. It's all about the marketing really. Imagine we called a spade a spade, instead of Quantitative Easing, we used the term "counterfeiting". When it's QE, a gullible public focuses on CEO bonuses. Call it Counterfeiting, and you have a revolution on your hands.

So clear and concise. You will never be a politician Sir!

As dated as this is--EVERY single investor and STUDENT of Finance --this should be MANDATORY watching, learning and YES --- there will be a TEST! If you do not get 80% competency on passing the test of this video---- you JUST KEEP REPEATING it --- until it is INGRAINED in your mind!~

Ah, finally an explanation that makes sense... by someone who really understands it.... Thank you

Very clever man you are because you not only have great knowledge but able to explain difficult concepts in a simple manner. Love your videos and working my way through all of them 👍😀

these videos are from back in the day but hey they explain the concept very well. thank you!

Wonderful explanation. Thanks guys. Expecially you Mr. Neeson.

Best explantation of QE on KZfaq and I've watched countless. A 2009 video... 🤔 Thank you!

hahaha... love your unique signature at the end of your videos. Excellent! I have learned so much from you. The whole storyline is that we live in an era where no one trusts no one or anything. It's hard to understand how comes that living in a era of advance technology Humans still can't communicate properly. With no TRUST any transaction or relationship is pointless and as a result too risky. This is when a holistic and functional finance approach could end the chaos. No wonder why wall street traders end up like Buddhist monks. We must accept that the best options are to introduce a more holistic approach in finance to generate TRUST, we could start by ending economy colonialism, imperial WARS, and aggressive interventions with iligal economic sanctions to other nations that are trying to fix their own problems without the piracy threats. NO MORE WARS - NO MORE IMPERIAL COLONIALISM - NO MORE WILD CAPITALISM - NO MORE DENIAL!!!! WE MUST INVEST IN ****TRUST***** AS IN THE WARRANTY AND SECURITY THAT NO ONE ELSE IS A THREAT TO OTHERS. NO MORE PSYCHOPATHS DREAMING WITH THE DOMINATION AND THE ONE WORLD ORDER. NO MORE SECRETIVE SOCIETIES. NO MORE TAX HEAVENS. NO MORE SPIDER WEBS. kzfaq.info/get/bejne/jLeqeZWInbmUZKM.html kzfaq.info/get/bejne/pNaPrM-nyJ6-mmw.html

Devaluing the dollar effectively raises prices for you and me. Your dollar is worth less and it takes more of them to buy a given item

What's up with all the poindexters here..? This guy does an excellent job on explaining QE in a way that non-economists MAY be able to understand. And of course it's not totally accurate. What did you expect in 7:37 minutes, a full MBA class in advanced monetary policy?

Incredibly clear explanation, much appreciated!!

Thanks, good vid. This seems to show that instead of decreasing the risk of loans from the bank the US has increased the risk of its Government Bonds.

So this is how banks get free money and we borrowed money from bank pay interest like slaves.

Hey! Your explanations are great. I wonder if you have a order of watching your videos to get the right information step by step?

This the first time i understood this term QE....thanx..

A very clear explaination of Quantitative easing ! good job !

Hi, Paddy, I had my drink , bit of red wine and french blue cheese. Your lessons are so nice and clear and easy and presentable. you should come to Kaplan singapore and teach Uni. Of Bedfordshire. Special lecturer. Most of my lecturers part time sucks.!

You cracked it. I am fond of your method of teaching

A great explanation of the theory behind QE, however, the reality is that the US has so much debt that an increase in interest rates means that the amount of debt owed will increase dramatically. By pumping money into the economy, the fed can keep those interest rates low, meaning we won't incur more debt through interest. (But that doesn't really matter because our daily deficit is so high that the debt is increasing anyway.)

Thank you mate!! Love how simplified and animated your examples are. Finally i get it!

This is the best explanation of qe i've ever seen, and i've seen alot.

Excellent and well done video explanation of what quantitative easing is. This is Fed Chief Bernake's latest attempt [folly] to stimulate the economy.

By God, that was immensely complicated. Thanks for the simplified explanation.

Thank you so much! This was super helpful and it really summed it up for me perfectly!

And here we are in November 2019 same thing. Banks won't even lend to each other. Now we got hidden quantitative easing.

Finally some simple clear explanation.

can you do a video on how the feds are getting rid of those toxic assets off their balance sheet? I have hard time understanding the concept. please :)

May be a silly question but what does "uncle same" do with the bad securities? Why would he want the ABS if they're so risky?

Good video. The only issue here and it is a glaring one is of the topic of bond prices. You'd think the ultra low yields would decrease their demand but in the recent years that has not been the case. So much so that the yield to maturity on a lot of sovereign bonds is now negative. Bond prices go up as yields decrease and theoretically speaking the price of a bond can increase much further than the zero or even much more negative yields possible.

Didn't work because instead of lending banks speculated on asset prices which is why we've seen a rise in gold and other commodities. Now in desperation the government in the UK is trying to engineer a house price bubble. We've had QE1, QE2, QE3 and QE4 even the man who invented QE says it isn't working and it's not going to work. Neoclassical economics is fundamentally wrong and 5 years have been wasted proving it. It didn't predict the crash and it will only make it worse.

Thank you for explaining this complex topic

Hello, just found your channel...at the beginning of your video you mentioned you cant bring interest rates to 0, or negative. I guess they can and they will...interesting times!

You're amazing. Thank you for creating these types of videos!!

The biproduct of QE is excess reserves. Since reserves are by definition a liability of the central bank and an asset for those with an account at the Central Bank (Namely commercial and business banks as well as credit unions and the government.) Transactions are done when bank A get its balance increased and bank B get its balance increased by the same amount. This means that reserves circulate in a closed system and won't leave it unless tere is a change in demand for cash, transactions made by the state and open market operation. Bored? well the conclusion is that this special money of uncle Sam won't run rampant and cause Weimar 1923 when banks start lending again as long as the central bank removes excess through its open market operations. (source Om pengemengden 2013. Sorry it's in Norwegian but the bank of England has a similar paper published in its quarterly bulletin Q1 2014. The basics of central banking is mostly the same. Only main difference is the interest rate corridor and reserve requirements. Reserve requirements are generally low and easy to bypass or in the case of Norway, England, New Zealand Australia and a few more countries nonexistent. America as far as I remember has a 10% on transaction deposits only. Other requirements and regulations are usually copy and paste from the Basel accords.)

Please don't kill the messenger. Great video. Thank you for posting. It's good to understand about "danger of deflation" before watching this video.

My my my. How times have changed. Check out what was said at 1:45 in the video. Paddy. Now you have to explain how negative interest rates work.

You are the best explaining this!

The other solution is economic growth without quantitative easing lower tax rates and lower regulations to do business, Treasuries are bought internationally as the US is being looked as safe haven and yields will drop even more, so more investment and more economic growth

I just wanted to point out that the interest rate can go to negative, for example Sweden and Switzerland. Otherwise, very good explanation.

I know this is aimed at the Fed's QE programme, but it's important to distinguish this from the ECB's QE-- as far as I'm aware, they were squarely buying government bonds from the secondary market, injecting liquidity into capital market and...well, not much at all for the real economy. Then they started buying investment-grade corporate bonds, again a huge benefit to massive corps but not general society. Fat lot of good it did, the programme hasn't even finished yet and the Eurozone economy is already seriously dipping! These were the Public Sector Purchase Programme (PSPP) and Corporate Sector Purchase Programme (CSPP). There were other programmes before this (covered bonds and ABS) but they seem marginal in comparison.

Finally I understand QE! Thanks :) KeepSmiling

money and credit are 2 different things. Bernanke said that the money is not actually printed but is transferred electronically into the banks. So his explanation is that if the money is not actually printed, it won't devalue the currency. As of now, only 3% is in the physical form as far as i know. So if in case, there is a bank run, banks would be out of cash in no time and would therefore ask the fed to print the money so that its customers could withdraw it.

What banks do is giving loans at cheaper rates to the buyers of stocks. It is done because the whole purpose is to save stock markets and not the national economy. We all know that cheaper or easy money go to inflate stocks

What a goldmine channel this is. Thank you!

Great explanation of QE the only thing it left off was why it will fail. Because QE does not address the real problem, credit worthiness. It only addresses the symptom.

I know this is an old video, but I'm hoping somebody can confirm my understanding of the concept. Mr. Hirsch said in the video that the government buying treasuries will drive down the yield. Does this happen through an increase in the price of the treasuries driven by higher demand? If that's the case, then Barry the banker is not being forced to sell the treasuries he has already bought. He is being incentivized to sell because the price of the treasuries is now higher than what he has paid for them. Did I get it right?

EASY AND CLEARLY EXPLAINED

QUESTION: This seems to state that when the FED funds rate is close to zero, banks are unwilling to issue business loans, even though businesses are willing to loan, because loaning to businesses at a low rate means that credit risk makes loaning unprofitable for the banks. That being the case, shouldn't the interest rate of those loans automatically adjust (rise) to a level where supply (banks) meets demand (businesses) so that lending would occur? To put it another, why can't interest rates of banks loaning to businesses rise appreciably higher than the FED funds rate, so that loaning would be profitable to banks?

Bloody excellent sir. Thank you for explaining in laymen’s terms.

Put it another way, the Government wants Mr Average to do something so he taxes the opposite, (makes it more expensive to do different) but when the government wants the big business to do something, they make it cheaper for them to do what he wants. Business gets help, Mr Average gets pressure.

The only issue I see with this is as Richard Koo (Economist) correctly points out that whilst QE is trying to encourage banks to loan... The everyday businesses and households stop borrowing money in order to pay off their debt. It happened in Japan whereby there was money to be borrowed but they just wanted to pay off their debts even at 0% interest rate. In that case the government needs to borrow money to keep the economy stable until such time businesses and households start borrowing again which is when the government can start paying off their debt. Basically QE doesn't work but yet they keep doing more and more of it causing a huge problem in the long term and now it's doing nothing in the short term. They have so much money in reserves that when they start borrowing again, interest rates will sky rocket.

The sad thing is, not only is there nowhere to go once nominal short-term interest rates reach zero %, but adjusted for inflation, the REAL interest rate becomes a negative interest. No doubt why when Bernakie talks about ceasing QE, the stock market takes a dive.

Love this guy and his Chanel.

best explanation ive seen yet

2 thumbs up good and reliable content From this host consistently videos recommended.

At last I understand QE . But I've heard that BOE has to pay about £40bn in interest back to the banks when they purchase those toxic assets. But I'm wondering whether that £40bn is added to the National Debt considering the UK govt owns the BOE? I've also heard that the UK are the only one of a few countries who pay this interest and that Switzerland and European Central Bank do not do this. If that is the case , why can't the BOE stop paying this £40bn ? According to Rachel Reeves, the UK government has a Tory inherited 'black hole' of £22bn but wouldn't that become an £18bn surplus if the BOE stopped paying this £40bn interest?

excellent explanation of quantitative easing

You can pump as much cash as you want into the Banks. They will continue to lend it to non - productive borrowers because they provide more profits to the Banks. Banks are only interested in profit and not the state of the economy. Low interest rates won't solve the problem as well. The Fed just lowers the cost of credit which the Banks now will lend again to non - GDP investors. To fix this problem, you have to force the Banks, in some way to lend to productive investments. Otherwise, nothing will change.

1. why does qe drive down bond yields? 2. take a t-bill. a bank purchased t-bills from the fed in the first place; now the fed is purchasing t-bills BACK from a bank. what does this mean?

Man I love your videos. 10 years too late I suppose. I was still in middle school 10 years ago.

Great video !!! After showing this to high school students. I now need a drink.

This is GREAT!!! thank you so much! I was having a lot of trouble, and you couldn't have explained this better!!

Yea and in 2019 QE = stock buy backs not capital investments that grow the economy.

Amazing content. Clear and very easy to understand

Excellent lecturer

Great explanation, and more relavant than ever, now that we are seeing the consequences of too agressive qe.

How does purchasing securities in the market lower the yield of the bond?

Basically, the amount of demand for a treasury and the yield of the treasury have an inverse relationship. When the FED is buying outrageous amounts of treasuries, then the U.S. Treasury has no choice but to lower the yield on their treasuries so that they can pay back the interest (yield is another synonym) on all of these treasuries. This is just how the market works, it's not that the U.S. treasury is a person that decides what its yield should be. I only said it to simplify.

"You cant bring the rate down to a negative level" Bank of Japan -There's where you're wrong kiddo

@mikejadoti actually if you want to get technical about it, the federal reserve isn't one bank at all, but a highly hybridized system consisting of classical government body (board of governors), twelve reserve banks (public-private hybrid), several private banks, and a few more details. The government body determines how much money the reserve banks can create, and the profit of those reserve banks is owned by the government. Yes, there are private components, but not quite how you imagine.

40 straight years of growth and its not allowed a market correction?

thanks for the explanation... i have a better understanding of QE now...

great explanation though, I was having trouble understanding it, now I get it. Thanks

Thanks. Good simple explanation.

2:00 Etymology _and_ financial education, love it!

Quantitative Easing is just controlled hyperinflation within a gridlocked economy.

Because in a market economy, as we still have it here, you cannot force private enterprise into making business decisions; hence quantitative easing as a viable system based solution...

best explanation I've found so far...good job