Ben Felix
2 HN recommenders · recommended in 4 months, 2020–2024
18:01 · 438K views · Jul 31, 2020
Ben Felix explains how central bank money creation and quantitative easing actually work, and what they do and do not imply for asset prices and currency. He addresses the common belief that the Fed prints unlimited money and props up markets.
HN users point to it to correct the 'money printer go brrr' view and as a clear explanation of how banks create money through loans.
7 comments from Hacker News
The modern banking system does not use fractional reserve lending. Highly recommend this video to understand and this channel in general: this video Skip to 1:14.
> the willingness of the Federal reserve to print money (create debt). Without restraint nowadays. Ben Felix, a portfolio manager at PWL Capital in Canada, just released a video explaining why this is completely wrong: * this video > Quantitative easing is a monetary policy whereby a central bank buys government bonds or other financial assets in order to inject money into the economy to expand economic activity. But what exactly does that mean? In today’s episode, Benjamin and Cameron are going to address this topic, avoiding highly politicized aspects, like whether or not central banks should be involved in the economy in the first place, and focusing purely on the operational perspective of quantitative easing – what is it, how it works, and what the intended transmission mechanisms are. * [LINK] > For instance, house flipping or starting a business. You can get better than the 5% or whatever you get after inflation in stocks. If you're really good at what you do, your odds of getting a better return go up. That's nice if you want a different/second career or something. But there are those of us who are happy with our careers/jobs, and simply want something to do with our retirement savings… ain't nobody got time for that. Of course the half-life on any new business is quite abysmal, so I'm not crazy/ambitious enough to take on that kind of risk.
Strictly speaking, in the modern era, it is not "a government" that decides to print money, but rather the central bank, which are considered independent on government and do (should) not follow the orders of politicians. The central bankers are hired for a fixed-term (though renewable) and are given a mandate: > The Federal Reserve works to promote a strong U.S. economy. Specifically, the Congress has assigned the Fed to conduct the nation’s monetary policy to support the goals of maximum employment, stable prices, and moderate long-term interest rates. When prices are stable, long-term interest rates remain at moderate levels, so the goals of price stability and moderate long-term interest rates go together. As a result, the goals of maximum employment and stable prices are often referred to as the Fed’s “dual mandate.” * [LINK] If 'printing money' helps to accomplish that mandate they will do so, but they will (theoretically/ideally) not print money just because it would be convenient for political purposes. It should also be noted that in most/may modern economies, private banks actually create the money the supply through issuing loans: * PDF: [LINK] Good video by Ben Felix on the topic: * this video
> Savings in a bank account will be loaned by the bank to another business. This has not been how banks have worked for decades: * [LINK] Banks create loans typing something into a computer screen and money shows up in the businesss' account. No savings required. 99% of money created is not by the Fed "printing money", but rather by private bank loans. A twenty minute video summarizing the above paper: * this video Interview with the paper's author: * [LINK]
> Is the landscape of 1991 the same as the landscape of 2020, with its 10% of the s&p in just a few companies Yes, it is the same: * [LINK] * [LINK] * [LINK] * [LINK] * [LINK] That's the definition of the S&P 500: the largest five hundred companies publicly traded companies. > with money printing, I do not think this actually does what you thinks it does: * this video * [LINK] > […] Talk shows about stocks and news algorithms pumping stocks to the masses? Please see the 1990s and "irrational exuberance". I live in Canada: ask anyone here above a certain age (40s) about Nortel and Bre-X. > Are fund managers (who have clients) compared to the likes of you and me ? Fund managers have more resources than you and me, and thus probably have better information to base decisions on. Unless, of course, you are using satellite imagery in your investing workflow: > Currie’s prediction proved correct. As word spread that satellite images were a reliable predictor of corporate profits, a range of investment funds began buying retail-traffic data from RS Metrics. In the following years, the company expanded, tracking not just parked cars but solar-panel installations, lumber inventory at sawmills, and the mining of metals worldwide. * [LINK]