Lazar Cartu Reports Real Estate Corner | The Wave - Jonathan Cartu Residential & Industrial Construction Services
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Lazar Cartu Reports Real Estate Corner | The Wave

Real Estate Corner | The Wave

Lazar Cartu Reports Real Estate Corner | The Wave

THE FED

During the 2009 economic crisis, the Feds pumped money into the system via a method called Quantitative Easing (QE). It bought bonds for its own account from broker-dealers. This raised bond prices and lowered bond yields. The Fed paid for the bonds by crediting the broker-dealers’ accounts – just bookkeeping.

The Fed ended up owning a lot of bonds and the dealers ended up with large cash balances which they spent, thus stimulating the economy. The Fed earned interest payments (which went into the US Treasury) from the purchased bonds. Lower interest rates reduced the “cost” of money, making it more “useful”. This was a means of “printing” money – putting more money into circulation.       

Currently, the Fed has a bunch of stimulative programs similar to the QE programs of 2009, but with different names, and slightly different methodologies. Thus far, about 4 TRILLION dollars have been injected into the system during the past few months through programs designed to shore up the economy in order to fight the effects of the pandemic. Note: Congressional stimulus action is different from Fed action. The Fed actions are especially visible in the 30-year mortgage rate which is now below 3%.

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Jonathan Cartu