[Repealthe17thAmendment]

I thought the fact that 80% of the QE money being held by banks as excess reserves had something to do with keeping inflation in check, and when that ends, all bets are off.

Aren't the banks buying government bonds with the QE money?

The way I understand it, is that the US essentially prints the money for the FED to loan at zero interest; the banks borrow the money (at no interest) to buy US bonds (which pays a low, but very safe interest rate).

It's almost like a check kiting scheme-except it's being done BY the banks and the gov't. The government puts the money back out to sustain the growing non-working class.

Inflation is not so much an issue because it's counteracting the deflation that would normally accompany high unemployment and a shrinking labor force. There is a sort of equilibrium that will exist for who knows how long.

I know people say that the debt is unsustainable; but when you have the luxury of printing money that still has value, the cycle can continue in perpetuity. The balance sheet looks bad, but who cares?

[andyk]

I've read variations of this analysis in a few different places. This was the first that turned up when I Britannica'd it.

[Toddsterpatriot]

Aren't the banks buying government bonds with the QE money?

No. The Fed is buying bonds from the banks with the QE money.

The way I understand it, is that the US essentially prints the money for the FED to loan at zero interest

No. The current discount rate is 0.75%.

the banks borrow the money (at no interest)

No.

to buy US bonds (which pays a low, but very safe interest rate).

No.

The Fed is buying bonds from the banks and giving them cash yielding 0.25%.

It is a money making scheme, just the reverse of your claim. The Fed (Treasury) is making tens of billions of dollars that would have been earned by the bond holders.